```

[Senate Hearing 110-69]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 110-69
 
                             FUTURE OF COAL

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   TO

 RECEIVE TESTIMONY ON THE ``FUTURE OF COAL'' REPORT RECENTLY PUBLISHED 
              BY THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY

                               __________

                             MARCH 22, 2007

                       Printed for the use of the
               Committee on Energy and Natural Resources

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
36-142                      WASHINGTON : 2007
_____________________________________________________________________________
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          RICHARD BURR, North Carolina
MARIA CANTWELL, Washington           JIM DeMINT, South Carolina
KEN SALAZAR, Colorado                BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel
                         Michael Carr, Counsel
          Frank Gladics, Republican Professional Staff Member

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     1
Deutch, John M., Institute Professor, Department of Chemistry, 
  Massachusetts Institute of Technology, Cambridge, MA...........     5
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............    34
Hannegan, Bryan, Vice President, Environment, Electric Power 
  Research Institute, Palo Alto, CA..............................    12
Lashof, Daniel A., Ph.D., Climate Center Science Director, 
  Natural Resources Defense Council, New York, NY................    21
Moniz, Ernest J., Cecil and Ida Green Professor of Physics and 
  Engineering Systems, Co-director, Laboratory for Energy and the 
  Environment, Massachusetts Institute of Technology, Cambridge, 
  MA.............................................................    11
Salazar, Hon. Ken, U.S. Senator from Colorado....................     4
Sanders, Hon. Bernard, U.S. Senator from Vermont.................     5

                                APPENDIX

Responses to additional questions................................    49

                             FUTURE OF COAL

                              ----------                              

                        THURSDAY, MARCH 22, 2007

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:33 p.m., in 
room SD-364, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. Thank you all very much for being here. Why 
don't we go ahead with the hearing? I should tell everyone that 
Senator Domenici is coming in a few minutes. He's involved, 
with several other members of the committee, in the mark-up of 
the supplemental Appropriation Bill, which they're doing in the 
Appropriations Committee, and so that's a priority item that's 
going to make some of them late.
    But, the purpose of this hearing today is to try to clarify 
people's thoughts about the future of coal. The basis for the 
discussion, of course, is the recently-released report from 
MIT, giving conclusions and recommendations about the future of 
coal, based on an extensive review of the literature describing 
the current state of coal technology.
    As the title to this report makes clear, the underlying 
premise of the report is that we are quickly entering a period 
where greenhouse gas emissions will be a primary determining 
factor in choosing our energy sources. The concept was also 
reflected in the recent report of the Electric Power Research 
Institute, Electricity Technology in a Carbon-Constrained 
Future.
    Both of these reports reflect a growing sentiment in the 
public, both here and abroad, that the current path that we are 
on is not sustainable. The final shape of the policy that we 
are going to employ to control greenhouse gases is not clear. 
I've been working with others here in the Senate to flesh out 
ideas about how we can go forward. But, I do think that the 
discussion has moved beyond the question of whether we should 
constrain carbon, to more important questions of how we should 
do so, and when.
    What we lack, so far, in this area is not technological 
ability or investment interest, but the political will to move 
ahead and develop a framework that will allow these 
technologies to flourish. As I see it, a policy framework for 
coal needs to have as a minimum of two things. First, we need 
to give a clear price signal to markets on the value of adding 
greenhouse gases to the atmosphere, or the cost of adding those 
greenhouse gases to the atmosphere. Without this, it will never 
make good economic sense to spend the extra capital in emission 
controls or to invest in the necessary control technology.
    Second, I believe we need to accelerate the research and 
development, and importantly the demonstration, of large-scale 
carbon capture and storage technologies. This report explains, 
in some depth, this topic of carbon capture and storage and how 
central it is to the future of coal in the United States and in 
our future energy policy.
    Several of us here on the committee have been trying to 
take the lead in the Senate to outline some practical steps 
that can be taken to begin answering these questions. Earlier 
this month, Senator Salazar and Bunning introduced a bipartisan 
bill, S. 731, The National Carbon Dioxide Storage Capacity 
Assessment Act. There are five other Senators, including myself 
and Senator Tester, who are on the committee, as cosponsors.
    That bill outlines a process for determining potential 
geologic formations for the storage of carbon dioxide. I want 
to thank both of them for their leadership and their 
initiative.
    Today, Senator Domenici and I are introducing a bill that 
would complement that earlier bill, and this bill is called the 
DOE Carbon Capture and Storage Research, Development, and 
Demonstration Act. The bill will improve and expand carbon 
capture and storage program that we created as part of the 2005 
Energy Bill. Specifically, it will build on DOE's regional 
carbon sequestration partnerships, to ensure that we have the 
answers that we need for this key part of our energy future. We 
have a number of cosponsors on that legislation. I'm told 
Senators Tester, Bunning, Salazar, Obama, and Webb have all 
cosponsored the bill.
    I'd like to inform colleagues that we will hold a 
legislative hearing on those two carbon sequestration bills in 
the reasonably near future, both to examine their specific 
provisions and to hear from experts on what other steps we 
should be taking in the Senate to deal with these issues. It's 
obviously an important piece of the puzzle, and I hope a good 
first step toward even more legislation to set us on a 
sustainable path forward in a carbon-constrained world.
    So, this hearing should be a very good introduction to the 
issues and a basis upon which we can begin legislative work 
here in the committee. Again, I thank our very distinguished 
panel of witnesses for their presence here today. Why don't we 
go right ahead and start with testimony? Then when Senator 
Domenici comes, he may have an opening statement at that point.
    But I'll start on my left with Professor John Deutch who is 
co-chair of this study, a Professor of Chemistry at MIT and a 
former high-ranking official here in the Government in various 
important capacities. I've had the good fortune to work with 
him in many of those capacities and welcome him back to the 
Congress.
    With him is Ernie Moniz who is, of course, also co-chair of 
the study and a professor of physics and engineering systems at 
MIT, and former Deputy Secretary of Energy.
    Bryan Hannegan, who's the vice president for environment at 
EPRI, the Electric Power Research Institute in Palo Alto, thank 
you very much for being here.
    Dan Lashof, who is a frequent testifier to our committee, a 
welcome one, the deputy director of the climate center for the 
Natural Resources Defense Council in New York, thank you very 
much for being here.
    Professor Deutch, why don't you go right ahead? We will 
hear from each of you, if you can summarize your comments, and 
then we will have some questions.
    [The prepared statements of Senators Bingaman, Salazar, and 
Sanders follow:]
 Prepared Statement of Hon. Jeff Bingaman, U.S. Senator From New Mexico
    Thank you all for coming here to testify today and give us your 
thoughts on the future of coal. The basis for our discussion today is a 
recently released report by MIT giving their conclusions and 
recommendations based on an extensive review of the literature 
describing the current state of coal technology.
    The title of the report is, ``The Future of Coal; Options for a 
Carbon Constrained World.'' As this title makes clear, the underlying 
premise of this report is that we are quickly entering a period where 
greenhouse gas emissions will be a primary determining factor in 
choosing our energy sources. This concept also was reflected in the 
recent report from the Electric Power Research Institute, ``Electricity 
Technology in a Carbon-Constrained Future.''
    It seems to me, that both of these reports reflect a growing 
sentiment among the public, both here and abroad, that the current path 
we are on is unsustainable. The final shape of the policy we will 
employ to control greenhouse gases is unclear. I, and others here, have 
some ideas about how we might go forward, but we seem to have moved 
beyond the question of ``if,'' to the more important questions of 
``how'' and ``when.''
    What we have lacked so far in this area is not technological 
ability or investment interest but the political will to develop a 
framework that will allow these technologies to flourish. And there are 
clearly opportunities in coal technologies. Considering the abundant 
coal resources we have here and the scale of the energy challenge we 
face in the future it is imperative that we do all we can to stimulate 
innovation to make coal use compatible with our carbon constrained 
world.
    As I see it, a policy framework for coal must, at a minimum do two 
things: First, we must give a clear price signal to markets on the 
value of adding greenhouse gasses to the atmosphere. Without this, it 
will never make economic sense to spend the extra capital in emissions 
controls or to invest in control technologies. Second, I believe we 
need to accelerate the research, development, and--importantly--the 
demonstration of large-scale carbon capture and storage technologies.
    As this report explains in some depth, the topic of carbon capture 
and storage is central to the future of coal in the United States and 
our future energy policy. That is why a number of Members of this 
Committee have been taking the lead here in the Senate to outline the 
practical steps that we must take to answer the questions that surround 
carbon capture and storage technologies and to develop a consensus on 
how they should be implemented.
    Earlier this month, Senators Salazar and Bunning introduced a 
bipartisan bill, S. 731, the National Carbon Dioxide Storage Capacity 
Assessment Act of 2007, with 5 other Senators, including myself and 
Senator Tester on this committee. That bill outlines a process for 
determining potential geological formations for the storage of carbon 
dioxide. I want to thank them both for their leadership and initiative. 
Today, Senator Domenici and I are introducing a bill to complement the 
Salazar-Bunning bill. Our bill is called the DOE Carbon Capture and 
Storage Research, Development, and Demonstration Act of 2007.
    This bill will improve and expand the carbon capture and storage 
program that we created at the Department of Energy in the Energy 
Policy Act of 2005. Specifically, it will build on DOE's regional 
carbon sequestration partnerships to ensure that we have the answers we 
need for this key element of our energy future. I am pleased to have a 
number of co-sponsors from both sides of the aisle on this bill, as 
well.
    I would like to inform my colleagues here that we will hold a 
legislative hearing on those two carbon sequestration bills in the near 
future, both to examine their specific provisions and to hear from 
experts what other steps we should be taking here in the Senate to 
advance the technology and utilization of carbon sequestration.
    This is obviously an important piece of the puzzle and I hope a 
good first step towards even more legislation to set us on a 
sustainable path forward in a carbon constrained world.
    Today's hearing provides a good introduction to the issues and an 
informational base for that legislative work here in the committee. I'd 
like to thank all of you for your efforts in bringing us this 
information and I look forward to your views as we develop policy for 
the future use of coal.
                                 ______
                                 
   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado

    Thank you Mr. Chairman and Ranking Member Domenici.
    My home state of Colorado is endowed with many natural resources, 
including vast coal resources. Coal is our most abundant domestic 
energy source. It provides more than 50% of our nation's electricity 
needs, and America has enough coal to last more than 200 years. 
Unfortunately, CO2 pollution from coal combustion is a main 
cause of global warming, which threatens my state's water resources, 
our economy, and our quality of life.
    Fortunately, as the MIT ``Future of Coal'' Study shows, there seems 
to be more than one way to reconcile coal use with protecting our 
climate, through new technologies such as Integrated Gasification 
Combined Cycle (IGCC) with Carbon Capture and Storage. I am proud of 
the work this Committee did in the Energy Policy Act of 2005 to promote 
new advanced coal technologies. We need low-carbon technologies like 
coal gasification and ultra-supercritical generation, with carbon 
capture and storage, to continue to power our homes and businesses 
without exacerbating the problems associated with global warming.
    Mr. Chairman, I believe that even in a carbon constrained economy, 
our use of coal from domestic sources will continue to grow. Indeed, 
the MIT Study suggests (as the Energy Information Administration has 
previously reported) that even with a price on carbon (starting at $25 
per ton of CO2 emitted) coal use over the study period 
(through 2050) would go up by between 20% and 60% if carbon capture and 
storage technologies are deployed. Corresponding CO2 
emissions from coal plants would be reduced by a half from today's 
levels. In short, the new coal technologies that are the subject of 
this report offer a way to secure the future of coal in a carbon 
constrained world.
    My understanding is that all the elements of IGCC are known--there 
are dozens of gasification plants in operation in several industries. 
Likewise, companies are already doing geologic carbon sequestration. 
For example, in the oil fields we're using CO2 for enhanced 
oil recovery.
    As the MIT report indicates, there is sufficient scientific 
evidence to conclude that carbon sequestration is a viable option. To 
ensure that it is technically feasible, several large-scale 
demonstrations must be conducted. Simultaneously, liability issues must 
be addressed and a regulatory structure developed to insure the success 
of this technology.
    The report also recommends, and together with Chairman Bingaman and 
several of our colleagues on this Committee, I have introduced 
legislation that would start us on the path to large-scale 
sequestration by directing the U.S. Geological Survey to conduct a 
national assessment of our sequestration capacity. Specifically, this 
national assessment would evaluate the potential capacity and rate of 
carbon sequestration in all possible sites throughout the United 
States, and would evaluate the various risk levels involved.
    Carbon sequestration also has the potential to enhance the recovery 
capabilities of certain oil, gas, and coal-bed reservoirs, increasing 
the efficiency with which we extract these important fossil resources.
    The Department of Energy has already established seven regional 
carbon sequestration partnerships. These partnerships have vital 
experience and understanding about the potential for storing carbon 
dioxide. Our legislation will build upon the existing work of these 
partnerships, and create a national database accessible to the public 
on the potential storage sites across the United States--enabling 
companies to make cost-effective decisions needed to make sequestration 
a viable option.
    Last month in the Finance Committee Montana's Governor, Brian 
Schweitzer, also endorsed the future of coal. Montana has one-third of 
all the coal deposits in America--8 percent of all the coal in the 
world. But the Governor recognizes the signs of global warming in the 
west. ``We don't get as much snow in the high country as we used to . . 
. and the runoff starts sooner in the spring. The river I've been 
fishing over the last 50 years is now warmer in July by five degrees 
than 50 years ago, and it is hard on our trout population.''
    Governor Schweitzer knows the only way we'll be able to use our 
coal reserves is if we can burn coal without emitting the 
CO2. I agree and look forward, Mr. Chairman, to working with 
you and our colleagues in the Congress to help American companies--in 
partnership with government--take advantage of opportunities to lead 
the world in developing new clean coal technologies.
    The report states that one of the major challenges we face is to 
develop, deploy and demonstrate commercially viable technologies for 
CCS. The report recommends federal spending of $500 to $550 million per 
year for 10 years on R&D and another $300 million per year over 10 
years on ``first of a kind'' demonstrations of carbon capture and 
storage technologies. I will work with Senator Dorgan and you, Mr. 
Domenici, to make sure DOE has the necessary funding to invest in low- 
or zero-emission gasification and liquefaction technologies, and in 
developing the technologies necessary to sequester the carbon dioxide. 
Working together, we can identify the best technologies and move down 
the innovation curve faster to ensure coal is a part of this country's 
clean energy future.
                                 ______
                                 
 Prepared Statement of Hon. Bernard Sanders, U.S. Senator From Vermont

    Chairman Bingaman, Ranking Member Domenici, we now live in a 
carbon-constrained world, or one in which carbon should be constrained 
in our production of energy. I thank the authors of this MIT study that 
is the topic of today's hearing for educating us on this issue.
    Vermonters look forward to a world where we are not addicted to 
fossil fuels, including coal, because coal brings with it mountain top 
removal, acid mine drainage, and air pollution, including global 
warming gases. It also results in the concentration of wealth and power 
in the hands of corporations that for over a century have been known 
for their ruthless disregard for human dignity. We look forward to a 
country and a world where energy efficiency and renewable energy are 
the principal, if not the only, ways we power our society. To the 
extent that this study assists in bringing that cleaner future to our 
people, it is welcomed.
    I am concerned that many of the coal plants that are in the process 
of being permitted/constructed today are using old technology which is 
not easily retro-fitted with Carbon Capture and Storage (CCS) 
technology. Therefore, we may be locking ourselves into a more 
expensive solution when we should be requiring Integrated Gasification 
Combined Cycle (IGCC) technology, now, even without CCS, so that when 
this technology is better demonstrated, we can easily install it on 
coal plants equipped to accept it.
    I also want to thank the other witnesses from the Electric Power 
Research Institute and the Natural Resource Defense Council for their 
analyses of this study and their perspectives on coal and CCS.

STATEMENT OF JOHN M. DEUTCH, INSTITUTE PROFESSOR, DEPARTMENT OF 
CHEMISTRY, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, CAMBRIDGE, MA

    Mr. Deutch. Thank you very much, Mr. Chairman.
    As I came here this afternoon, I realized that it was 
almost to the day and certainly to the month, that I first 
appeared in front of this committee, 30 years ago. That's how 
old I am. So, I want to tell you, it's good to be back, but it 
started 30 years ago, and Senator Domenici was here for that 
hearing.
    Let me very briefly point to six or seven main conclusions 
or points about our Future of Coal in a carbon-constrained 
world. These are the main conclusions that I think should be of 
interest to the committee, and I know that my friend, Ernie 
Moniz, will add a few points after that.
    The first is that a significant carbon charge is required 
to give the market signals to permit us to stabilize greenhouse 
gas emissions, let's say, by mid-century. That market signal, 
whether it's in the form of a carbon charge through attacks or 
through a capture-rate system, has three effects.
    The first effect, is it reduces demand significantly for 
energy, for electricity. It shifts from carbon-rich carbon, 
high-carbon sources of electricity and other fuels to low-
carbon fuels--for example, wind or nuclear power.
    Very importantly, it opens the door to new technologies, 
which make coal use a carbon-free emissions, so it has those 
three effects. Less demand, a shift to lower carbon-intensity 
fuels, and new technologies such as carbon capture and 
sequestration. Our estimate is the level of charge necessary is 
about $30 per ton of CO2, which would add 20 to 25 
percent to the retail price of electricity for U.S. consumers.
    Our second principle conclusion is that carbon capture and 
sequestration is the critically-enabling technology to prepare 
coal for the future. Carbon capture and sequestration permits 
the use of coal to capture the CO2 that is used, 
that is formed in combustion, its pressurization, and 
transportation to a sequestration or storage site.
    Our highest priority recommendation and objective is to 
recommend three to five at-scale--that means 1 million ton per 
year--sequestration projects in different geologies in the 
United States, managed in such a manner that they demonstrate 
the practical--the practical, the practical--practical 
demonstration of this technology with respect to economics, 
with respect to technical performance, and very importantly, an 
accompanying regulatory framework that will command public 
confidence.
    Each one of those projects would cost about $15 million a 
year, if they are properly instrumented with the appropriate 
monitoring and verification, plus the cost of CO2, 
but in our minds, doing that now, immediately, provides a 
practical option for coal, going forward in the future. If 
carbon capture and sequestration is available, our estimate is 
there will be more coal use, even with a very, very severe 
carbon-control policy, because carbon capture and sequestration 
will be economically viable.
    Our third point is that it is too early to pick a 
technology winner for coal use. As you know, Mr. Chairman, 
there are two leading technologies for use in coal today. One 
is pulverized coal--you would have oxygen-driven pulverized 
coal plants if there was carbon capture and sequestration--or 
integrated gasification-combined cycle. These are the two large 
alternatives that are presently on the menu today.
    In our view these technologies should be pursued, and there 
are other interesting technologies as well, that should be 
pursued, and it is too early for anyone--an investor--to pick a 
technology winner. Depending upon coal type and upon 
circumstances, depending upon how much technology advance there 
will be, depending about all these matters, one project or 
another may choose to use a particular gassifier or a 
particular pulverized coal plant.
    The next point, Mr. Chairman, is that the 2005 Energy Act 
authorizes Government assistance to a wide range of coal 
technology projects. We believe that Federal assistance should 
only be given to coal projects with CO2 capture and 
sequestration. That whether it's pulverized coal plant, whether 
it's an IGCC fuel plant, whether it's a synthetic fuels plant, 
whether it's a retro-fit of some kind of plant, no matter how 
it's done, we think it's appropriate and necessary for the 
Government to provide such assistance to show the private 
investment community that these technologies are practical, but 
it is important that it be done with carbon capture and 
sequestration. There is not the same justification for Federal 
assistance to these kinds of technologies where there is not 
carbon capture and sequestration.
    This leads me to my next point, that it is our engineering 
judgment that the prospects for retro-fitted plants, which are 
designed for one purpose--to later do carbon capture and 
sequestration, or to do pre-investment for plants that you're 
building today for one purpose, assuming that you can easily 
retro-fit them for carbon capture later--but that window of 
opportunity is very narrow, indeed. It is likely to be quite 
expensive and difficult to do the retro-fit. The reason is 
quite easy to explain--a plant with a carbon capture and 
sequestration is a very different plant than a plant that has 
been built for optimum performance without carbon capture and 
sequestration. The notion that you can just bolt on a device 
which will do the carbon capture for you ignores the many other 
changes in the processes that have to take place to make it 
work.
    So, our view is the push for Government assistance today 
should be where there is unknown. The unknown is in the 
integration of carbon capture and sequestration to the 
efficient operation of a carbon capture, fishing operation to 
that conversion, coal-conversion plant.
    Mr. Chairman, there's also another problem which we see and 
draw to your attention, and that is the possibility of a 
perverse incentive today for man, many people, to commit to a 
coal-conversion plant, without CO2 capture today 
under the expectation that such plants will be grandfathered, 
that they will not be subject to any future carbon constraints 
that may be placed, they will be granted, for example, granted 
emission allowances, or granted waivers from emission taxes in 
the future. We believe that such grandfathering loopholes 
should be closed, with enough notification to the industry, so 
that you don't catch people unaware, or else you're going to 
find people building many plants in anticipation of a carbon-
control regime.
    My final remark has to do with the worldwide prospects for 
stabilization of carbon emissions. We want to recognize that 
dealing with global warming requires global adherence to 
emission constraints. The real issue here is what will be 
happening going forward, not in the United States or in Europe 
or the developed world where we see the economies, but what 
will happen in the large, emerging, rapidly growing economies, 
which are projected to be the biggest users of coal, and the 
biggest emitters of greenhouse gases in the future.
    I will remind you that, last year, China put online the 
equivalent of 80 large coal plants. None of them, of course, 
with carbon capture and sequestration. Their electricity use is 
projected to grow at three or four times the rate of increase 
of the United States or of Europe, or OECD countries, in 
general.
    So some way must be found of reaching an accommodation with 
these emerging economies, or else the actions that we take will 
have no significant effect on greenhouse gases, on global 
warming worldwide. We are making very slow progress at that 
step of engaging those countries, and finding a way to come to 
some sort of an agreement with them about what will be the 
control of these emissions going forward.
    Our study did a particular in-depth look about the 
challenges facing China, if they were even to consider doing 
such a CO2 constraint policy, adopting them and then 
implementing them. There are very good reasons why they believe 
they should be given a much longer, a different set of rules 
for the developing countries, but if we don't come together 
about some set of incentives for these countries to adopt 
carbon capture and sequestration, the actions we take will not 
prove productive in controlling greenhouse gas emissions.
    The central message of this study is that the demonstration 
of technical, economic and institutional features for carbon 
capture and sequestration at commercial scale and coal 
combustion and coal-conversion plants will give policymakers 
and the public the confidence that practical carbon mitigation 
options exist. It will shorten the deployment time and reduce 
the costs of carbon capture and sequestration to occur, should 
a carbon emission and coal policy be adopted, and I think 
inevitably it's going to be. Third, it will maintain 
opportunities for the lowest cost, and most widely available 
energy form, coal, to be used to meet the world's pressing 
energy needs in an environmentally acceptable manner.
    Thank you very much, Mr. Chairman. I look forward to your 
questions, and the questions from the members.
    [The joint prepared statement of Mr. Deutch and Mr. Moniz 
follows:]

   Joint Prepared Statement of John M. Deutch, Institute Professor, 
   Department of Chemistry, and Ernest J. Moniz, Cecil and Ida Green 
Professor of Physics & Engineering Systems, Co-director, Laboratory for 
  Energy and the Environment, Massachusetts Institute of Technology, 
                             Cambridge, MA

    Mr. Chairman, and members of the committee, thank you for the 
opportunity to appear before you today to summarize some of the key 
findings and recommendations in the MIT study on the future of coal. We 
carried out the study with eleven colleagues from various disciplines, 
over a three-year period, with the benefit of advice from an external 
group with diverse perspectives. We request that the Executive Summary 
of the report be entered into the record.
    The study examines the role of coal as an energy source in a world 
where constraints on carbon emissions are adopted to mitigate global 
warming. Our first premise is that the risks of global warming are real 
and that the United States and other governments should and will take 
action to restrict the emission of carbon dioxide and other greenhouse 
gases.
    Our second and equally important premise is that coal will continue 
to play a large and indispensable role in a greenhouse gas constrained 
world.
    Our purpose is to identify the measures that should be taken to 
assure the availability of demonstrated technologies that would 
facilitate the achievement of carbon emission reduction goals while 
continuing to rely on coal to meet a significant fraction of the 
world's energy needs.
    Carbon dioxide capture and sequestration (CCS) is the critical 
technology enabler for this purpose, and the priority objective with 
respect to coal should be the successful large-scale demonstration of 
the technical, economic, and environmental performance of the 
technologies that make up all of the major components of a large-scale 
integrated CCS system--capture, transportation, and storage.
    The United States and other nations may need a vast scale of carbon 
dioxide sequestration. By mid-century, annual sequestration of several 
gigatonnes of carbon dioxide is the scale needed for a major impact on 
climate change mitigation, given the expectation that coal use will 
grow substantially. This translates into sequestration of the 
CO2 emissions from many hundreds of utility scale plants 
worldwide.
    Each plant will need to capture millions of metric tonnes of 
CO2 each year. Over a fifty-year lifetime, one such plant 
would inject about a billion barrels of compressed CO2 for 
sequestration. We have confidence that megatonne scale injection at 
multiple well-characterized sites can start safely now, but an 
extensive program is needed to establish public confidence in the 
practical operation of large scale sequestration facilities over 
extended periods and to demonstrate the technical and economic 
characteristics of the sequestration activity.
    An important additional objective of the demonstration program is 
to create an explicit and rigorous regulatory process that gives the 
public and political leaders confidence in effective implementation of 
very large scale sequestration. A regulatory framework needs to be 
defined for sequestration projects including site selection, injection 
operation, and eventual transfer of custody to public authorities after 
a period of successful operation.
    Present government and private sector sequestration projects are 
inadequate to demonstrate the practical implementation of large scale 
sequestration on a timely basis.
    Thus we believe that the highest priority should be given to a 
program that will demonstrate CO2 sequestration at megatonne 
scale in several geologies, following ``bottom-up'' site 
characterization. For the United States, this means about three 
megatonne/year projects with appropriate modeling, monitoring and 
verification (MMV), focusing on deep saline aquifers. Each 
demonstration project should last about eight to ten years. We estimate 
the cost for the total program to be about $500M over a decade, not 
including the cost of CO2 acquisition. The CO2 
costs are likely to be considerable and highly variable depending on 
the acquisition strategy (natural reservoirs, capture from existing 
plants, supply from large scale demonstrations of new coal combustion 
and conversion plants).
    In addition to the value of the scientific and engineering data 
that will emerge from this sequestration demonstration program, we 
should not underestimate the value of demonstrating the ability to 
successfully manage the program over an extended time. Such practical 
implementation experience will be important for public confidence in 
committing to very large sequestration over many decades.
    To explore the prospect of very large scale sequestration, our 
study employed the Emissions Prediction and Policy Analysis (EPPA) 
model, developed at MIT, to prepare scenarios of global coal use and 
CO2 emissions under various assumptions about the level and 
timing of CO2 emissions pricing, whether through a tax, a 
cap and trade system, or some other mechanism.
    An important threshold is the CO2 price that leads to 
economic choices that result in stabilization of CO2 
emissions. The economic adjustments caused by a CO2 charge 
are reduced energy use, a shift to lower-carbon emitting technology, 
improved efficiency of new and existing coal power plants, and 
importantly introduction of CCS. The EPPA model and our engineering 
analysis of alternative coal technologies suggests that a carbon charge 
of approximately $30/tonne-CO2 is needed (most of this comes 
from capture, not sequestration). However, if the CO2 
emissions price remains low compared with this threshold price for an 
extended period, CO2 emissions are significantly higher and 
CCS plays a minor role in reducing cumulative CO2 emissions 
in this half-century. The CCS demonstration program needs to be carried 
out with urgency or the United States runs the danger of adopting a 
carbon constraint policy without a practical alternative for use of 
coal.
    Our highest priority recommendation is that the Congress, the 
Department of Energy, and other private and public sector entities work 
to launch as soon as possible a sequestration demonstration program 
with the characteristics identified above, including those associated 
with development of the regulatory system. A sense of urgency has been 
absent and this needs to change.
    Our second recommendation is for the U.S. government to provide 
incentives to several alternative coal combustion and conversion 
technologies that employ CCS. At present, Integrated Gasification 
Combined Cycle (IGCC) is the leading candidate for electricity 
production with CO2 capture because it is estimated to have 
lower cost than pulverized coal with capture. However, neither IGCC nor 
other coal technologies have been demonstrated with CCS at large scale.
    It is critical that the government RD&D program not pick a 
technology ``winner'' for several reasons. First, technology advances 
will undoubtedly lower the cost of all coal utilization technologies 
with capture--IGCC, pulverized coal, and potentially novel approaches. 
Some advances, such as much lower cost oxygen separation from air, 
could remove the IGCC cost advantage. Second, there are very different 
coal types (high ash content, high moisture content, . . . ) and local 
conditions for specific projects that affect technology choice.
    Indeed, the DOE program needs considerable strengthening and 
diversification in looking at a range of basic enabling technologies 
that can have major impact in the years ahead, particularly in lowering 
the cost of coal use in a carbon-constrained world. This work needs to 
be done at laboratory or process development unit scale, not as part of 
large integrated system demonstrations.
    Both industry and the government would benefit from an extensive 
modeling and simulation effort in order to compare alternative 
technologies and integrated systems as well as to guide development. A 
significant increase in the DOE coal RD&D program is called for, as 
well as some restructuring.
    Government assistance is needed for a portfolio of coal combustion 
and conversion demonstration projects with CO2 capture--
IGCC; oxyfuel retrofits; coal to synthetic natural gas, chemicals and 
fuels are examples. Given the technical uncertainty and the current 
absence of a carbon dioxide emissions charge, there is no economic 
incentive for private firms to undertake such projects at any 
appreciable scale. The DOE coal program is not on a path to address our 
priority recommendations--enabling technology, sequestration 
demonstrations, coal combustion and conversion demonstrations with 
capture. The level of funding falls far short of what is required and 
the program, perhaps as a result, is imbalanced.
    The flagship project FutureGen is consistent with our priority 
recommendation to initiate integrated demonstration projects at scale. 
However, we are concerned that the project needs more clarity in its 
objectives. Specifically, a project of this scale and complex system 
integration should be viewed as a demonstration of commercial viability 
at a future time when a meaningful carbon policy is in place. Its 
principal call on taxpayer dollars is to provide information on such 
commercial viability to multiple constituencies, including the 
investment community. To provide high fidelity information, it needs to 
have freedom to operate in a commercial environment.
    We believe that the Congress should work with the Administration to 
clarify that the project objectives are commercial demonstration, not 
research, and reach an understanding on cost-sharing that is grounded 
in project realities and not in arbitrary historical formulas. In 
thinking about a broader set of coal technology demonstrations, 
including the acquisition of the CO2 needed for the 
sequestration demonstration projects, we suggest that a new quasi-
government corporation should be considered.
    The 2005 Energy Policy Act contains provisions that authorize 
federal government assistance for coal plants containing advanced 
technology projects with or without CCS. We believe this assistance 
should be directed only to plants with CCS, both new plants and 
retrofit applications on existing plants.
    There is the possibility of a perverse incentive for early 
investment in coal-fired power plants without capture, whether 
pulverized coal or IGCC, in the expectation that the emissions from 
these plants would potentially be ``grandfathered'' by the grant of 
free CO2 allowances as part of future carbon emission 
regulations and that (in unregulated markets) they would also benefit 
from the increase in electricity prices that will accompany a carbon 
control regime. Congress should act to close this ``grandfathering'' 
loophole before it becomes a problem.
    Success at capping CO2 emissions ultimately depends upon 
adherence to CO2 mitigation policies by large developed and 
developing economies. We see little progress to moving towards the 
needed international arrangements. Although the European Union has 
implemented a cap-and-trade program covering approximately half of its 
CO2 emissions, the United States has not yet adopted 
mandatory policies at the federal level. U.S. leadership in emissions 
reduction is a likely prerequisite to substantial action by emerging 
economies, and recent developments in the American business sector and 
in Congress are encouraging.
    A more aggressive U.S. policy appears in line with developing 
public attitudes. Our study has polled the American public, following a 
similar poll conducted for the earlier MIT study on nuclear power. 
Americans now rank global warming as the number one environmental 
problem facing the country, and seventy percent of the American public 
think that the U.S. government needs to do more to reduce greenhouse 
gas emissions. Willingness to pay to solve this problem has grown 50% 
over the past three years.
    The situation faced by large, rapidly growing, emerging economies 
is difficult. We studied a number of cases in China, looking at the 
``real'' decision-making process for construction and operation of coal 
plants in several provinces.
    These case studies suggest that it will be some time until China 
(or India) is willing and able to mitigate CO2 emissions. We 
examined, with the EPPA model, the consequences of a lagged compliance 
with CO2 mitigation measures by non-OECD countries. While a 
long lag, say 40-50 years, precludes any realistic possibility of 
meeting prudent global greenhouse gas concentrations, we found that a 
more modest lag, say 10 years, is potentially manageable from the point 
of view of incremental accumulated emissions. That is, the challenge of 
stabilizing emissions is exacerbated but not qualitatively altered.
    This suggests a step-by-step international approach to the climate 
challenge, one that requires U.S. leadership both in advancing 
meaningful carbon policy and in demonstrating as early as possible the 
effectiveness and cost performance of technologies such as 
sequestration.
    Absent substantial reductions in CO2 emissions relative 
to ``business-as-usual'' expectations, substantial global warming will 
occur. At some point, nations would then face accepting the high 
economic cost and social disruption of adapting to climate change or 
the more problematic prospect of geo-engineering the climate by active 
measures. We do not dismiss the possibilities of adaptation and/or geo-
engineering. But we do believe that it is less risky and ultimately 
less costly for the U.S. to lead the way in adopting emissions 
constraints today and in developing and demonstrating the technologies 
that will constrain emissions without significantly impacting economic 
development.
    Mr. Chairman, thank you again for inviting our testimony. We 
appreciate the leadership of this committee in moving forward our 
nation's approach to global warming risks, and we welcome further 
discussion.

    The Chairman. Thank you very much.
    Professor Moniz, we're glad to have you here, thank you.

STATEMENT OF ERNEST J. MONIZ, CECIL AND IDA GREEN PROFESSOR OF 
 PHYSICS AND ENGINEERING SYSTEMS, CO-DIRECTOR, LABORATORY FOR 
    ENERGY AND THE ENVIRONMENT, MASSACHUSETTS INSTITUTE OF 
                   TECHNOLOGY, CAMBRIDGE, MA

    Mr. Moniz. Thank you, Mr. Chairman.
    I cannot claim this is my 30th-year anniversary, only my 
10th.
    Mr. Deutch. Not bad, not bad.
    Mr. Moniz. Given the obvious conclusion about John and me.
    Mr. Chairman and members of the committee, thank you for 
the opportunity. What I will do is, since John has given this 
kind of overview of the report, just emphasize three features, 
briefly.
    One is there is sometimes some confusion over the words 
``large-scale'' and ``sequestration.'' And I think that's 
partly because, there are in some senses, three different uses 
of the word. One is of the mega-ton per-year scale, associated 
with a utility-sale plant, one plant. Another is the lifetime 
accumulation of emissions from one utility-scale plant, which 
is then on the 100-mega-ton scale, or equivalently, billion 
barrels of compressed CO2 sequestration. The third 
is the giga-ton scale, which is where we have to get to, say, 
by mid-century, for sequestration to be one of the technologies 
making a large impact in mitigating climate change risks.
    I think the important thing to emphasize, so there's no 
confusion, is that we feel very, very confident about the 
wisdom of going ahead now with those mega-ton per-year 
projects. And while the program described in the Report, and by 
John, practical implementation will be essential for generating 
public confidence, generating the regulatory regimes needed to 
reach those other very large cumulative scales for large 
plants, and for the globe.
    Second point would be a brief statement about the 
Department of Energy RD&D program. First, we believe that the 
program is under-funded, and perhaps as a consequence, rather 
unbalanced. We need a much more aggressive, what I would call, 
basic science and engineering effort, in terms of looking for 
the breakthrough technologies, at bench-scale, and at process 
development unit-scale. That could be transforming in the 
future.
    These are things like oxygen separation, advanced capture 
technologies, to give a whole list of them--these are not 
getting the attention that we will need, to really get new 
ideas and new cost reduction some decades down the road.
    Second is that the sequestration program that John just 
described, is of course, in some sense, our highest priority 
for immediate implementation, and we welcome the bill that you 
just announced, that you filed today for sequestration, and of 
course would be delighted to help in any way that we can to 
help shape those programs, to address the key issues.
    Third, is we also recommend that we need a portfolio of 
coal technology-demonstration programs. Starting with IGCC--I'm 
sorry, always with capture--starting with IGCC, it makes 
perfect sense. But we also need to be thinking about a 
demonstration program, for example, of an oxygen-firing retro-
fit of an existing plant; of a coal-to-synthetic natural gas 
plant, or a coal-to-chemicals plant. We need a portfolio.
    Those demonstration projects themselves may be the sources 
of the possibly very expensive carbon dioxide needed for the 
sequestration demonstrations. On the other hand, we should not 
have the sequestration demonstrations hostage to exquisite 
timing of these demonstration projects to the sequestration 
projects.
    We believe these large projects should have a clear focus 
on demonstration of commercial viability as the point of these 
demonstration programs. Large, billion dollar-integrated 
programs are not the place for ``research,'' they are for 
demonstrating commercial viability, and as one supports those 
programs, it will be very important to provide high-fidelity 
information, which means having the projects run in as 
commercial a manner as possible. We can delve into that in more 
detail.
    Finally, my third point, very briefly, is that another 
aspect of the study was to look at a continuation of our 
polling of the American public, that started with our earlier 
report, and there we would just note one fact that emerged, and 
that is that in 3 short years between the two polls, climate 
change went from the bottom of the list to the top of the list 
in terms of environmental concerns of the American public, and 
that was associated as well, with the public's willingness to 
contemplate, frankly, paying a somewhat larger amount than they 
were several years ago for addressing climate change.
    Consequently, of course, we look forward to the continued 
leadership of you, Mr. Chairman, and the committee as you move 
forward on climate change legislation. Thank you. We also look 
forward to questions.
    The Chairman. Thank you very much.
    Mr. Hannegan, we're glad to have you here.

   STATEMENT OF BRYAN HANNEGAN, VICE PRESIDENT, ENVIRONMENT, 
        ELECTRIC POWER RESEARCH INSTITUTE, PALO ALTO, CA

    Mr. Hannegan. Thank you, Mr. Chairman, and members of the 
committee.
    I'm Bryan Hannegan, vice president, environment at the 
Electric Power Research Institute, a non-profit, collaborative, 
R&D organization, headquartered in Palo Alto, California.
    EPRI appreciates the opportunity to provide testimony to 
the committee on the MIT report, and it's a great personal 
honor for me to be back in this committee room, and on this 
side of the witness table.
    My comments today reflect our Institute's work with our 
talented scientists and engineers who are working on the many 
issues associated with electric power generation and use.
    But today I want to focus my comments on two subjects. 
First, I want to provide to you EPRI's view on the MIT report 
which, at the outset, I want to say we believe is an important 
foundation on which to consider future energy policy.
    Second, I want to highlight some of the recent work that 
we've done. You mentioned in your opening statement, Mr. 
Chairman, emphasizing the importance of CO2 capture 
and storage, as part of an overall low-cost, low-carbon 
portfolio of options that we'll need to address climate change.
    As you're well aware, coal currently provides half or over 
half of the electricity used in the United States, and most of 
the forecasts show that this will continue to be dominant in 
our energy future. By displacing otherwise-needed imports of 
natural gas or fuel oil, coal plays a critical role in our 
energy security, and it helps address our trade deficit with 
respect to energy.
    The challenge is this, though. By 2030 EIA projects that 
total electricity demand in the United States will go up by 40 
percent. At the same time as we think about dealing with 
climate change, we're looking at a substantial reduction in our 
future greenhouse gas emissions, and we want to do that in a 
way that allows for continued economic growth, and the benefits 
that all of the energy that we use, provides.
    I want to stress to the committee, that this is not a 
trivial matter. It implies a substantial change in the way that 
we produce and consume electricity, all throughout our economy. 
The technologies like we'll discuss today on carbon capture and 
storage from coal are just one part of a necessarily economy-
wide solution that includes greater efficiency at the end-use, 
increasing renewables, more efficient use of natural gas, and 
expanded role for nuclear power and similar transformations in 
all of our other sectors from transport to commercial and 
residential use.
    It's this context in which I encourage you to consider the 
MIT study that my colleagues here just recently summarized. 
EPRI agrees with many of the study's main points, but we differ 
on a couple.
    In particular, we agree that carbon capture and storage is 
going to be a critically enabling technology for coal going 
forward, and as Professor Deutch noted in his comments, the key 
will be the successful demonstration of CCS at the large-
scale--one million tons of CO2 per year. We believe 
this is important for both pre-combustion, as well as post-
combustion technologies. Both pulverized coal as we know it 
today in the United States, and IGCC technologies going 
forward. We also must demonstrate storage in a variety of 
geologies, to take advantage of the full richness that we have 
available here in the United States.
    As I mentioned, we agree with MIT's view that we should 
avoid choosing between coal technology options. While the 
technology for pulverized coal is well-established, the method 
for capturing and storing the CO2 from those plants 
is not, and needs significant demonstration work.
    But, in contrast, while there are proven methods for 
capturing and storing the CO2 from IGCC, the plants 
that we're thinking about building, going forward, will have 
larger components, and a degree of integration that has not yet 
been demonstrated affordably and reliably at a commercial 
scale. In that vein, we disagree with comments in the MIT 
Report, limiting the application of your DOE programs to just 
IGCC; we think there's a role for pulverized coal for capture 
and storage going forward.
    Both of these areas are going to require work to reduce the 
cost penalty and energy demands associated with current coal 
technologies, and we view the existing FutureGen programs, and 
the regional carbon sequestration programs at DOE, as good 
examples in this regard.
    But others are needed, and we also think that many of the 
programs at DOE do need to significantly increase their scope, 
and accelerate the schedules of the work that they're doing to 
enable CCS capability as soon as possible.
    In our view, however, an even greater impediment than the 
technology, than the financing, the even greater impediment to 
expanded CCS may be the development of public acceptance and 
the regulatory and legal frameworks going forward. Absent a 
consistent and predictable approach to siting and permitting 
facilities that have carbon capture and storage, the capital 
costs and the risks associated with these projects will simply 
be too large to allow them to move forward.
    There are also questions of ownership of the stored 
CO2, the liability when it leaks--if it leaks--back 
into the atmosphere, and questions regarding the environmental 
fate of the CO2 once you put it in the ground. These 
issues bear further study and work at EPRI is underway, but 
more work needs to be done.
    Let me make another point about the MIT study--we disagree 
with their view that pre-investment in capture-ready features 
is categorically un-economic. In many ways, whether or not 
you're retro-fitting an existing plant or you're building a new 
plant with an eye toward capture and storage, that's going to 
be a decision that's dictated by the availability of the 
technology, how soon you think limits on CO2 
emissions will come--in the event that the limits become more 
likely, the prospect of pre-investment could become worthy of 
consideration. But if you do it in the near future, it's a 
higher-cost option of compliance with CO2 limits 
going forward.
    Let me turn now to the recent work that we've done at EPRI 
that illustrates the promise of CCS as part of the solution to 
satisfying our energy needs in an environmentally responsible 
manner. Mr. Chairman, you mentioned our electricity technology 
in a carbon-constrained future work, and it does suggest that 
with aggressive R&D, demonstration, and deployment of advanced 
energy technologies, and more importantly, with aggressive 
assumptions on how those technologies can be deployed, we can 
slow down and halt the increase in CO2 emissions 
from the electric sector, and then eventually reduce them, even 
as we simultaneously meet the increased demand for electricity.
    However, as shown on this chart, I note that the pace at 
which we can do so, using EPRI's professional judgment and 
technical expertise, is substantially slower than some of the 
proposals that have been discussed in this body, and some that 
have been envisioned by this committee.
    The chart to my right shows the net change in 
CO2 emissions, relative to EIA's base case in their 
2007 annual energy outlook, that results from specific 
technology deployment targets identified in seven areas, from 
NG sufficiency at the top in blue, down to plug-in hybrid 
vehicles and distributed energy resources at the bottom, in 
purple.
    As I mentioned, the most encouraging aspect of the study 
is, that as we move toward 2030, we see CO2 
emissions from the electric sector can be falling fairly 
dramatically. However--and I must stress this--it will require 
a long-term commitment of billions of dollars in energy 
research, development, and deployment in every aspect of 
electric generation, transmission and consumption. It will not 
be cheap, and it will not be easy to accomplish.
    As you see on the chart, the largest area there is in 
orange, and that's carbon capture and storage. We believe that 
those technologies offer the greatest promise, particularly 
if--as we assume in our work--you apply them to every new coal 
plant coming online after 2020.
    As my colleagues from MIT have just pointed out, this is 
not an all-assured, given the technology development that we're 
engaged in, and the pace at which we expect things to come 
about.
    Let me make one final point about our work. We've done some 
preliminary economic analysis, looking at the cost of achieving 
the emissions trajectory implied by the grey area both with, 
and without, capture and storage and advanced nuclear 
technologies, and we estimate that the cost to the U.S. economy 
without those technologies roughly triple, to a total of $2 
trillion over 50 years, if you don't have capture and storage, 
and if you don't have advanced nuclear. They triple relative to 
the cost that would be incurred if you did have those 
technologies. Instead of having carbon capture and storage, and 
nuclear at the ready, you would instead meet the grey emissions 
requirement, by massive fuel-switching to natural gas, and 
price-induced conservation, driven by very large carbon prices, 
in our economic model.
    The bottom line of this work suggests that as you consider 
legislation going forward, you should probably take into 
account the pace at which you expect technologies to be 
deployed realistically and cost-effectively in the economy. If 
you have a constraint before technology, you may incur larger 
costs than if you had the technology before you applied the 
constraint.
    In summary, we're continuing with further technical and 
economic analysis on this work, and I'd be pleased, Mr. 
Chairman, to update the committee as our work evolved in the 
weeks and months ahead. I want to thank you and Senator 
Domenici, and your colleagues on the committee for the 
opportunity to speak, and I look forward to your questions.
    [The prepared statement of Mr. Hannegan follows:]

  Prepared Statement of Bryan Hannegan, Vice President, Environment, 
                   Electric Power Research Institute

    Thank you, Mr. Chairman, Ranking Member Domenici, and Members of 
the Committee. I am Bryan Hannegan, Vice President--Environment for the 
Electric Power Research Institute (EPRI), a non-profit, collaborative 
R&D organization headquartered in Palo Alto, California. EPRI 
appreciates the opportunity to provide testimony to the Committee on 
the MIT ``Future of Coal'' report, and it is a great personal honor for 
me to be back in this Committee room on this side of the witness table. 
My comments today reflect the work of the talented scientists and 
engineers we have working across our Institute on the many issues 
associated with electric power generation and use.
    I want to focus my comments today on three subjects: (1) EPRI's 
views on the MIT report, which we believe provides an important 
foundation on which to consider future energy policy; (2) a detailed 
view from EPRI on the principal challenges facing coal-based generation 
in the decades ahead; and (3) highlights of some recent analytical work 
that EPRI has published emphasizing the importance of advanced coal 
technologies as part of an overall low-cost, low-carbon portfolio of 
options to reduce carbon dioxide emissions associated with climate 
change.

                               BACKGROUND

    Coal currently provides over half of the electricity used in the 
United States, and most forecasts of future energy use in the United 
States show that coal will continue to have a dominant share in our 
electric power generation for the foreseeable future. Coal is a stably 
priced, affordable, domestic fuel that can be used in an 
environmentally responsible manner. Through development of advanced 
pollution control technologies and sensible regulatory programs, 
emissions of criteria air pollutants from new coal-fired power plants 
have been reduced by more than 90% over the past three decades. And by 
displacing otherwise needed imports of natural gas or fuel oil, coal 
helps address America's energy security and reduces our trade deficit 
with respect to energy.
    By 2030, according to the Energy Information Administration, the 
consumption of electricity in the United States is expected to increase 
by approximately 40% over current levels, at the same time, to 
responsibly address the risks posed by potential climate change, we 
must substantially reduce the greenhouse gas emissions intensity of our 
economy in a way which allows for continued economic growth and the 
benefits that energy provides. This is not a trivial matter--it implies 
a substantial change in the way we produce and consume electricity. 
Technologies to reduce CO2 emissions from coal will 
necessarily be one part of an economy-wide solution that includes 
greater end-use efficiency, increasing renewable energy, more efficient 
use of natural gas, expanded nuclear power, and similar transformations 
in the transportation, commercial, industrial and residential sectors 
of our economy. In fact, our work at EPRI on climate policy has 
consistently shown that non-emitting technologies for electricity 
generation will likely be less expensive than technologies for limiting 
emissions of direct fossil fuel end uses in other sectors. 
Paradoxically, as we seek greater limits on CO2 across our 
economy, our work at EPRI suggests we will see greater amounts of 
electrification--but only if the technologies to do so with near-zero 
emissions are at hand.

                             THE MIT STUDY

    Let me first make some general remarks about the MIT study which is 
the topic of today's hearing. I should note that while none of the EPRI 
staff were formally involved in the development of the report, we did 
comment on earlier drafts of it provided to us by the study's authors. 
In addition, our former President and CEO, Kurt Yeager, served on the 
study's Advisory Committee.
    We agree with many of the main points of the MIT study:

   In particular, we agree with the study's main finding that 
        CO2 capture and sequestration (CCS) will be the 
        critical enabling technology that provides for continued coal 
        use even as we reduce our CO2 emissions.
   We agree that the key to proving CCS capability is the 
        demonstration of CCS at large-scale (>1 million tons 
        CO2/year) for both pre-and post-combustion capture 
        with storage in a variety of geologies. The scope of the 
        program described in the MIT report is appropriate.
   We share the view expressed by the MIT report that absent 
        these successful demonstrations at the large scale, CCS will be 
        confined to a narrow set of uses for enhanced oil recovery, and 
        coal's share of future electricity production will decline 
        dramatically as a result.
   We concur with the MIT report that we should avoid choosing 
        between coal technology options--rather, we should foster a 
        ``portfolio of technology options''.

    --While there are well proven methods for capturing CO2 
            resulting from coal gasification, IGCC plants will have 
            larger components and a degree of integration that has not 
            been demonstrated at the commercial scale.
    --In contrast, PC technology is well proven commercially in the 
            power industry, and here the need is for demonstration of 
            post combustion capture at a commercial and affordable 
            scale.

   We agree that there will inevitably be additional costs 
        associated with CCS. EPRI's latest estimates suggest that the 
        levelized cost of electricity (COE) from new coal plants (IGCC 
        or supercritical PC) designed for capture, compression, 
        transportation and storage of the CO2 will be 50-80% 
        higher than the COE of a conventional supercritical PC (SCPC) 
        plant.
   EPRI's technical assessment work indicates that the 
        preferred technology and the additional cost of electricity for 
        CCS will depend on the coal type, location and the technology 
        employed.

    --Without CCS, supercritical pulverized coal (SCPC) has an 
            advantage over IGCC. However, the additional CCS cost is 
            generally lower with IGCC than for SCPC.
    --Some studies show an advantage for IGCC with CCS with bituminous 
            coal, but with lignite coal SCPC with CCS is more generally 
            preferred. With sub-bituminous coals, SCPC with CCS and 
            IGCC with CCS appear to show similar costs.

   At the same time, our initial work with post-combustion 
        CO2 capture technologies suggests we can potentially 
        reduce the current 30% energy penalty associated with CCS to 
        something closer to 10% over the longer-term. Improvements in 
        IGCC plants offer the same potential for reducing cost and 
        energy penalty as well.
   We also concur with MIT's assessment of the need to consider 
        the entire integrated system for capture, transportation and 
        storage of CO2 at scale, and note that the existing 
        FutureGen program is one good example of how this can be done. 
        FutureGen is recognized around the world as a meaningful carbon 
        sequestration project, and it has become a model for similar 
        projects in other parts of the world. Others are needed, and we 
        welcome the recent 10 MW pilot plant and the 200-MW plant 
        announcement by AEP in that regard.
   We believe that the greater impediment to expanded CCS may 
        be the development of public acceptance and suitable regulatory 
        and legal frameworks. Absent a consistent and predictable 
        approach to siting and permitting facilities for the transport 
        and storage of CO2, the capital costs and risks 
        associated with these projects will likely prevent them from 
        moving forward. The question of ownership of the stored 
        CO2 and the liability for any release or leakage is 
        also not well understood. And most notably, the environmental 
        fate of the captured and stored CO2 is also an open 
        scientific area worth further study.
   We see value in the approach taken by the various DOE 
        Regional Carbon Sequestration Partnerships and do not agree 
        with MIT's assessment that these existing programs are 
        ``completely inadequate''. However, we do see the need to 
        significantly accelerate the schedules and increase the scope 
        of these programs to allow large scale tests and demonstrations 
        of the full range of CCS technologies.
   We view the question of whether to retrofit an existing 
        coal-based plant for CCS as a matter of economics and 
        reliability: if the technologies exist to do so at a cost low 
        enough to keep the plant in operation reliably, the owner may 
        incorporate CCS retrofits particularly as they make additional 
        modifications to the system to meet new stringent air pollution 
        controls. EPRI is initiating analytical work in this area to 
        better understand the potential for retrofits on existing coal-
        based generation units.
   With respect to the construction of new coal-based 
        generation units, we disagree with the MIT report's categorical 
        conclusion that pre-investment in ``capture-ready'' features is 
        uneconomic. EPRI views this as a matter of perception on when 
        and how restrictions on CO2 emissions may occur: as 
        the prospect of limits becomes more likely, such pre-investment 
        becomes more worthy of consideration.
   The rapid pace of expansion in global coal generation 
        capacity (105 GW added in China last year alone) underscores 
        the need to focus on enabling large-scale CCS technology as 
        soon as possible, regardless of discussions on domestic or 
        international policy frameworks to reduce CO2 
        emissions.

    In the paragraphs that follow, we provide further detail on EPRI's 
view of the critical needs for coal-based generation in a carbon-
constrained world.

                    INCREASING COAL PLANT EFFICIENCY

    In the 1950s and '60s, the United States was the world's pioneer in 
power plants using thermodynamically efficient ``supercritical'' and 
``ultra-supercritical'' steam conditions. Exelon's coal-fired Eddystone 
Unit 1, in service since 1960, still boasts the world's highest steam 
temperatures and pressures. Because of reliability problems with some 
of these early units, U.S. designers retreated from the highest 
supercritical steam conditions until the 1980s and '90s when 
international efforts involving EPRI and U.S., European, and Japanese 
researchers concentrated on new, reliable materials for high-efficiency 
pulverized coal plants. Given the prospect of potential CO2 
regulations (and efforts by power producers to demonstrate voluntary 
CO2 reductions), the impetus for higher efficiency in future 
coal-based generation units has gained economic traction worldwide. In 
fact, the majority of new pulverized coal (PC) plants announced over 
the last two years will employ high-efficiency supercritical steam 
cycles, and several will use the ultra-supercritical steam conditions 
heretofore used only overseas (aside from Eddystone).
    EPRI is working with the Department of Energy, the Ohio Coal 
Development Office, and major equipment suppliers on an important 
initiative to qualify a whole new class of nickel-based 
``superalloys,'' which will enable maximum steam temperatures to rise 
from an ultra-supercritical steam temperature of 1100 F to an 
``advanced'' ultra-supercritical steam temperature of 1400 F. Combined 
with a modest increase in steam pressure, this provides an efficiency 
gain that reduces a new plant's carbon intensity (expressed in terms of 
CO2 emitted per megawatt-hour (MWh)) by about 20% relative 
to today's state-of-the-art plant. If capture of the remaining 
CO2 is desired, improved efficiency will also reduces the 
required size of any necessary equipment.
    However, realization of this opportunity will not be automatic--in 
fact, it will require a renewed, sustained R&D commitment and 
substantial investment in demonstration facilities to bring new 
technologies to market. The European Union has embraced such a strategy 
and is midway through its program to demonstrate a pulverized coal 
plant with 1300 F steam conditions, which was realistically planned as 
a 20-year activity.
    Efficiency improvements will also be important for other coal power 
technologies. The world's first supercritical circulating fluidized-bed 
(CFB) plant is currently under construction in Poland. The greatest 
increase in efficiency for integrated gasification combined cycle 
(IGCC) units will come from increases in the size and efficiency of the 
gas turbines and improvements in their ability to handle hydrogen rich 
``syngas'' that would be produced in IGCC plants designed for 
CO2 capture.

                   CO2 CAPTURE TECHNOLOGY

    Carbon capture and storage (CCS) technologies can be feasibly 
integrated into virtually all types of new coal-fired power plants, 
including IGCC, PC, CFB, and variants such as oxy-fuel combustion. For 
those constructing new plants, it is unclear which type of plant would 
be economically preferred if it were built to include carbon capture. 
All have relative competitive advantages under various scenarios of 
available coal types, plant capacity, location, sales of by-products, 
etc.
    Although carbon capture appears technically feasible for all coal 
power technologies, it poses substantial engineering challenges 
(requiring major investments in R&D and demonstrations) and comes at 
considerable cost. However, analyses by EPRI and the Coal Utilization 
Research Council suggest that once these substantial investments are 
made, the cost of CCS becomes manageable, and ultimately coal-based 
electricity with CCS can be cost competitive with other low-carbon 
generation technologies.
    Post-combustion CO2 separation processes (placed after 
the boiler in the power plant) are currently used commercially in the 
food and beverage and chemical industries, but these applications are 
at a scale much smaller than that needed for power producing PC or CFB 
power plants. These processes themselves are also huge energy 
consumers, and without investment in their improvement, they would 
reduce plant electrical output by as much as 30% (creating the need for 
more new plants). CO2 separation processes suitable for IGCC 
plants are used commercially in the oil and gas and chemical industries 
at a scale closer to that ultimately needed, but their application 
necessitates development of modified IGCC plant equipment, including 
additional chemical process steps and gas turbines that can bum nearly 
pure hydrogen.
    EPRI's most recent cost estimates suggest that for PC plants, the 
addition of CO2 capture using the currently most developed 
technical option, amine solvents, along with drying and compression, 
pipeline transportation to a nearby storage site, and underground 
injection, would add about 60-80% to the net present value of life-
cycle costs of electricity (expressed as levelized cost of electricity, 
or COE, and excluding storage site monitoring, liability insurance, 
etc.). This translates into a potentially large hike in consumers' 
electric bills.
    The COE cost premium for including CO2 capture in IGCC 
plants, along with drying, compression, transportation, and storage, is 
about 40-50%. Although this is a lower cost increase in percentage 
terms than that for PC plants, IGCC plants initially cost more than PC 
plants. Thus, the bottom-line cost to consumers for power from IGCC 
plants with capture may be comparable to that for PC plants with 
capture.
    A utility's choice between these technologies will depend on 
available coals and their physical-chemical properties, desired plant 
size, the CO2 capture process and its degree of integration 
with other plant processes, plant elevation, the value of plant co-
products, and other factors. For example, IGCC with CO2 
capture generally shows an economic advantage in studies based on low-
moisture bituminous coals. For coals with high moisture and low heating 
value, such as sub-bituminous and lignite coals, a recent EPRI study 
shows PC with CO2 capture being competitive.
    It should be noted that IGCC plants (like PC plants) do not capture 
CO2 without substantial plant modifications, energy losses, 
and investments in additional process equipment. As noted above, 
however, the magnitude of these impacts could likely be reduced 
substantially through aggressive investments in R&D. Historical 
experience with the development of environmental control technologies 
for today's power plants suggests that technological advances from 
``learning-by-doing'' will likely lead to significant cost reductions 
in CO2 capture technologies as the installed base of plants 
with CO2 capture grows. An International Energy Agency study 
led by Carnegie Mellon University suggested that overall electricity 
costs from plants with CO2 capture could come down by 15% 
relative to the currently predicted costs after about 200 systems were 
installed. Furthermore, despite the substantial cost increases for 
adding CO2 capture to coal-based IGCC and PC power plants, 
their resulting cost-of-electricity is still usually less than that for 
natural gas-based plants at current and forecasted natural gas prices.
    Engineering analyses by EPRI, DOE, and the Coal Utilization 
Research Council suggests that costs could come down faster through 
CO2 capture process innovations or, in the case of IGCC 
plants, fundamental plant improvements--provided sufficient RD&D 
investments are made. EPRI pathways for reduction in capital cost and 
improvement in efficiency are embodied in two companion RD&D 
Augmentation Plans developed under the collaborative CoalFleet for 
Tomorrow program. Efforts toward reducing the cost of IGCC plants with 
CO2 capture will focus on adapting more advanced and larger 
gas turbines for use with hydrogen-rich fuels, lower-cost oxygen 
supplies, improved gas clean-up, advanced steam cycle conditions, and 
other activities.
    For PC plants, the progression to advanced ultra-supercritical 
steam conditions will steadily increase plant efficiency and reduce 
CO2 production. Improved solvents are expected to greatly 
reduce post-combustion CO2 capture process. EPRI is working 
to accelerate the introduction of novel, alternative CO2 
separation solvents with much lower energy requirements for 
regeneration. Such solvents--for example, chilled ammonium carbonate--
could reduce the loss in power output imposed by the CO2 
capture process from about 30% to about 10%. A small pilot plant (5 MW-
thermal) is being designed for installation at a power plant in 
Wisconsin later this year; success there would warrant a scale-up to a 
larger pilot or pre-commercial plant. An EPRI timeline (compatible with 
DOE's timeframe) for the possible commercial introduction of post-
combustion CO2 capture follows.
    The introduction of oxy-fuel combustion may allow further 
reductions in CO2 capture costs by allowing the flue gas to 
be compressed directly, without any CO2 separation process 
and reducing the size of the supercritical steam generator. Boiler 
suppliers and major European and Canadian power generators are actively 
working on pilot-scale testing and scale-up of this technology.
    EPRI stresses that no single advanced coal generating technology 
(or any generating technology) has clear-cut economic advantages across 
the range of U.S. applications. The best strategy for meeting future 
electricity needs while addressing climate change concerns and economic 
impact lies in developing multiple technologies from which power 
producers (and their regulators) can choose the one best suited to 
local conditions and preferences.
    Assuring timely, cost-effective coal power technology with 
CO2 capture entails simultaneous and substantial progress in 
RD&D efforts on improving capture processes and fundamental plant 
systems. EPRI sees the need for government and industry to pursue these 
and other pertinent RD&D efforts aggressively through significant 
public policy and funding support. Early commercial viability will 
likely come only through firm commitments to the necessary R&D and 
demonstrations and through collaborative arrangements that share risks 
and disseminate results.

                  TRANSPORTATION AND GEOLOGIC STORAGE

    Geologic sequestration of CO2 has been proven effective 
by nature, as evidenced by the numerous natural underground 
CO2 reservoirs in Colorado, Utah, and other western states. 
CO2 is also found in natural gas reservoirs, where it has 
resided for millions of years. Thus, evidence suggests that depleting 
or depleted oil and gas reservoirs, and similar ``capped'' sandstone 
formations containing saltwater that cannot be made potable, are 
capable of storing CO2 for millennia or longer. Geologic 
sequestration as a strategy for reducing CO2 emissions is 
being demonstrated in numerous projects around the world.
    Three relatively large projects--the Sleipner Saline Aquifer 
CO2 Storage (SACS) project in the North Sea off of Norway; 
the Weyburn Project in Saskatchewan, Canada; and the In Salah Project 
in Algeria--together sequester about 3 to 4 million metric tons of 
CO2 per year, which approaches the output of just one 
typical 500 megawatt coal-fired power plant. With 17 collective years 
of operating experience, these projects suggest that CO2 
storage in deep geologic formations can be carried out safely and 
reliably. Furthermore, CO2 injection technology and 
subsurface behavior modeling have been proven in the oil industry, 
where CO2 has been injected for 30 years for enhanced oil 
recovery (EOR) in the Permian Basin fields of west Texas and Oklahoma. 
Regulatory oversight and community acceptance of injection operations 
are well established.
    In the United States, DOE has an active R&D program (the ``Regional 
Carbon Sequestration Partnerships'') that is mapping geologic 
formations suitable for CO2 storage and conducting pilot-
scale CO2 injection validation tests across the country. 
These tests, as well as most commercial applications for long-term 
storage, will compress CO2 to a liquid-like 
``supercritical'' state to maximize the amount stored per unit volume 
underground. As a result, virtually all CO2 storage 
applications will be at least a half-mile deep, helping reduce the 
likelihood of any leakage to the atmosphere, which would defeat the 
purpose of sequestering the CO2 in the first place.
    DOE's Regional Carbon Sequestration Partnerships represent broad 
collaborative teaming of public agencies, private companies, and non-
profits; they would be an excellent vehicle for conducting larger 
``near-deployment scale'' CO2 injection tests to prove 
specific U.S. geologic formations, which EPRI believes to be one of the 
keys to commercializing CCS for coal-based power plants. Evaluations by 
these. Regional Partnerships and others suggest that enough geologic 
storage capacity exists in the United States to hold several centuries' 
worth of CO2 emissions from coal-based power plants and 
other stationary sources. However, the distribution of suitable storage 
formations across the country is not uniform: some areas have ample 
storage capacity whereas others appear to have little or none.
    Thus, CO2 captured at some power plants would be 
expected to require pipeline transportation for several hundred miles 
to suitable injection locations, which may be in other states. While 
this adds cost, it doesn't represent a technical hurdle because 
CO2 pipeline technology has been proven in oil field FOR 
applications. As CCS is applied commercially, EPRI expects that early 
projects would take place at coal-based power plants near sequestration 
sites or an existing CO2 pipeline. As the number of projects 
increases, regional CO2 pipeline networks connecting 
multiple sources and storage sites would be needed.
    There is still much work to be done before CCS can implemented on a 
scale large enough to significantly reduce CO2 emissions 
into the atmosphere. In addition to large-scale demonstrations at U.S. 
geologic formations, many legal and institutional uncertainties need to 
be resolved. Uncertainty about long term monitoring requirements, 
liability, and insurance is an example. State-by-State variation in 
regulatory approaches is another. Some geologic formations suitable for 
CO2 storage underlie multiple states. For private companies 
considering CCS, these various uncertainties translate into increased 
risk.

                           THE PROMISE OF CCS

    Recent EPRI work has illustrated the necessity and the urgency to 
develop carbon capture and storage (CCS) technologies as part of the 
solution to satisfying our energy needs in an environmentally 
responsible manner. Our ``Electricity Technology in a Carbon-
Constrained Future'' study, which I am pleased to have led, suggests 
that with aggressive R&D, demonstration, and deployment of advanced 
electricity technologies, it is technically feasible to slow down and 
stop the increase in U.S. electric sector CO2 emissions, and 
then eventually reduce them over the next 25 years while simultaneously 
meeting the increased demand for electricity. However, even under the 
most aggressive technology assumptions, the pace at which we can do so 
is substantially slower than that envisioned under several of the 
pending bills currently before this Committee and the Congress as a 
whole.
    To develop this analysis, we compiled data on the currently and 
likely future cost and performance of various electricity technologies 
from our Technical Assessment Group work, various public-private 
technology R&D roadmaps, and expert opinions from academia, industry, 
and the NGO community in the published literature. From this 
information, EPRI established specific technology deployment targets in 
seven areas: efficiency, renewables, nuclear generation, advanced coal 
generation, carbon capture and storage (CCS), plug-in hybrid electric 
vehicles (PHEV) and distributed energy resources. We then calculated 
the net change in CO2 emissions from the electric sector 
which would result from achieving each of those technology targets 
compared to the underlying assumptions in the Base Case of the 2007 
Annual Energy Outlook published by the Energy Information 
Administration (EIA). The results are shown in Figure 1.*
---------------------------------------------------------------------------
    * Graphic has been retained in committee file.
---------------------------------------------------------------------------
    The most encouraging aspect of the study is that, as we move toward 
2030, CO2 emissions levels from the U.S. electric sector can 
begin falling fairly dramatically. However, this will require the long-
term commitment of billions of dollars in energy research, development 
and deployment in every aspect of electric generation, transmission and 
consumption. It will not be cheap, nor will it be easy to accomplish. 
While one could argue that CO2 reductions from some of these 
targets could be slightly higher or somewhat lower, the overall picture 
is clear--we can get to a low-carbon future, but only with substantial 
consistent investment, smart policy choices and a realistic timeline.
    Of the seven options we analyzed, we believe that the greatest 
reductions in future U.S. electric sector CO2 emissions are 
likely to come from applying CCS technologies to nearly all new coal-
based power plants coming on-line after 2020. In fact, the longer we 
delay in developing the capability to deploy CCS technologies that can 
be deployed at a commercial scale, the longer we will have to wait for 
the resulting substantial reductions in CO2 and 
correspondingly, reductions in the risk of future climate change.
    Furthermore, preliminary economic work conducted by EPRI to extend 
this study shows that absent both CCS and advanced nuclear 
technologies, achieving these aggressive CO2 emissions 
reductions would be extremely costly. We estimate that the costs to the 
U.S. economy would roughly triple--to nearly $2 trillion over the next 
50 years--compared to costs if CCS and advanced nuclear technologies 
were commercially available. This large difference in economic cost 
arises from the lack of low-cost, low-carbon technologies to reduce 
future CO2 emissions growth on a large scale: in a world 
without CCS and nuclear, we rely instead on massive fuel switching to 
natural gas (with attendant price increases and import dependence) and 
on price-induced conservation driven by very large carbon prices (which 
would more than likely trigger any ``safety valve'' set in 
legislation). Our preliminary economic work suggests that the timeline 
for any cost-effective program of CO2 emissions reductions 
should be dictated by our expectation of technology development and 
deployments in the decades ahead.
    We are continuing with further technical and economic analysis, and 
we expect to release our final economic analysis later this year. I 
would be pleased to update the Committee as our work evolves in the 
weeks and months ahead.

    The Chairman. Thank you very much.
    Mr. Dan Lashof is our final witness on this panel, and 
we're glad to have you here.

 STATEMENT OF DANIEL A. LASHOF, PH.D., CLIMATE CENTER SCIENCE 
   DIRECTOR, NATURAL RESOURCES DEFENSE COUNCIL, NEW YORK, NY

    Mr. Lashof. Thank you very much, Mr. Chairman. It's a 
pleasure to be back before the committee.
    Members of the committee, I am Daniel Lashof, I am the 
science director, and deputy director of the Climate Center at 
the Natural Resources Defense Council.
    Mr. Chairman, I went to school at the other end of 
Massachusetts Avenue from the esteemed professors from MIT, so 
I dare not really question the technical judgments that they 
make about the readiness of carbon capture and storage 
technology. I do have some questions about the completeness of 
their policy recommendations, which I'll come to in a minute.
    But, indeed, I agree strongly with their first premise, 
which is simply that the risks of global warming are real, and 
the United States and other countries need to take action to 
restrict emissions of carbon dioxide and other global warming 
pollutions, that certainly is essential.
    They're finding that retro-fitting existing coal plants 
with carbon capture and storage, whether they be integrated 
gasification plants, or more conventional pulverized coal 
plants, would be very complex and expensive, and unlikely to 
occur. It is also a very important finding in my view.
    Third, I agree with their conclusion that mega-ton scale 
injection at multiple wealth characterized sites can happen 
safely now. Indeed, that conclusion is also shared by Dr. Julio 
Friedman of Lawrence Livermore National Lab, who testified 
before the House Energy & Commerce Committee last month, that 
the technology, the understanding of the geology for doing 
carbon capture is at a stage where we should really start 
learning more by doing it, rather than just doing research in a 
laboratory mode.
    Fourth, I agree strongly with many of their policy 
conclusions, including one that Profession Deutch mentioned, 
which is that Federal assistance for coal projects should only 
go to projects that actually incorporate carbon capture and 
storage, as a central part of their design.
    But I do have some issues with the policy recommendations; 
in particular, I believe that they are incomplete. In my view, 
the most important policy recommendation stemming from their 
technical analysis is that Congress should immediately require 
that any new coal-fired power plants be designed and operated 
with carbon capture and storage, starting right away. Their 
analysis shows that is technically feasible, and it is very 
important to establish that as a policy matter.
    The reason it's so important is that if you take a typical 
500-megawatt coal plant, and build it without carbon capture 
and storage, emissions are about 4 million tons of 
CO2 a year--that plant can be expected to operate 
for 50 years or more. That means it's a commitment to emitting 
200 million tons of CO2 into the atmosphere over its 
lifetime. Simply put, the 100 or so conventional coal plants 
that are on the drawing board in the United States and the 
thousands or more that are on the drawing boards worldwide--if 
they are built without carbon capture and storage, it will make 
it impossible to meet the climate protection goals that I know 
you share, Mr. Chairman.
    In one conclusion of the MIT Report that I think has been 
widely misinterpreted, their analysis finds that the private 
sector does not now have the incentive to build plants that 
have carbon capture and storage technology built into them, and 
that's true. But that's precisely why Congress needs to act. It 
needs to create a legal requirement that future coal plants 
have this technology.
    Some may suggest that we don't need to have a specific 
performance standard for new coal plants if we have an overall 
cap-and-trade system--let the price go in there, and if people 
want to build plants without carbon capture, they have to pay 
for the permits, that should be enough. But the MIT study shows 
why I don't think that is enough. They conclude that the price 
of carbon allowances has to reach about $30 per ton of 
CO2, before carbon capture and storage technology 
would be the economic choice. That's a relatively high number.
    Indeed the EIA analysis, which was the last time I was 
before the committee, considering their analysis of your 
discussion draft proposal, concluded that because of the price 
caps that were built into that proposal, at least through 2030, 
there would be no investment in carbon capture and storage, 
driven economically by the private sector. So, even with more 
stringent caps, there's no guarantee that the price of 
CO2 allowances would quickly reach the point where 
the private sector would choose to build new plants with carbon 
capture and storage built in.
    So, I think there would be a large risk that we would see 
dozens, if not hundreds, of additional plants built in the 
United States that would then commit us over 50 years or more 
to excessive levels of CO2 emissions that would be 
very difficult to control in the future.
    Certainly, your leadership with Senator Boxer in putting 
developers on notice that shouldn't expect to get any 
grandfathered allowances if they go ahead and build plants 
without carbon capture and storage, I think, has been very, 
very important. But, I don't think that, by itself, is enough. 
Because even without the expectations of grandfathered 
allowances, without a carbon price of $30 a ton or higher, many 
utilities may conclude that they should just go ahead and try 
to build plants quickly, and get their money out before the 
price of allowances goes very high.
    An additional policy idea, I would suggest, to go along 
with a CO2 new source performance standard for new 
power plants, is a low-carbon generation obligation. This would 
require that an increasing fraction of all of the electricity 
generated by coal, come from plants that employ carbon capture 
and storage. The idea behind this, as a complement to a new 
source performance standard, is to spread the cost and the risk 
of building this new technology across the coal-based industry, 
rather than concentrating only on the developers of new plants. 
So, I think that's an idea I would urge you to consider.
    Finally, to address Professor Deutch's point about the need 
to deal with the many power plants that are being built in 
China and at a somewhat slower pace in India, but a really, 
truly dizzying pace in China, building conventional coal 
plants. I think it's really essential for the international 
community to step up and develop a dedicated fund that would 
pay for the incremental costs of building those plants with 
carbon capture and disposal as soon as possible, so as they're 
building out that infrastructure, it's built in a way that's 
consistent with where we need to go on global warming.
    It's actually a commitment that the international community 
made, in principle, back in 1992 at Rio, and it's never been 
fulfilled. Now is the time to step up, we have the technology 
that this report and others show that we know how to keep the 
CO2 out of the atmosphere, by putting it 
underground, starting now. So in my view, there's no time like 
the present--let's get started. Thank you.
    [The prepared statement of Mr. Lashof follows:]

 Prepared Statement of Daniel A. Lashof, Ph.D., Climate Center Science 
       Director, Natural Resources Defense Council, New York, NY

                              INTRODUCTION

    Thank you for the opportunity to share my views regarding MIT's 
``Future of Coal'' report.\1\ My name is Daniel A. Lashof, and I am the 
science director of the Climate Center at the Natural Resources Defense 
Council (NRDC). I was a coauthor (with David Hawkins and Robert 
Williams) of a September 2006 Scientific American article titled ``What 
to do about Coal.'' David Hawkins of NRDC served on the advisory 
committee for the MIT study and NRDC has prepared a brief response to 
the MIT report, which is attached to my testimony and available 
online.\2\
---------------------------------------------------------------------------
    \1\ Online at http://mit.edu/coal/.
    \2\ Online at www.nrdc.org/globalWarming/coal/contents.asp.
---------------------------------------------------------------------------
    NRDC is a national, nonprofit organization of scientists, lawyers 
and environmental specialists dedicated to protecting public health and 
the environment. Founded in 1970, NRDC has more than 1.2 million 
members and online activists nationwide, served from offices in New 
York, Washington, Los Angeles and San Francisco.

          CAPTURING AND SEQUESTERING CARBON IS POSSIBLE TODAY

    MIT's report on the Future of Coal correctly recognizes the 
imperative for prompt action on global warming and the critical role 
that use of carbon dioxide (CO2) capture and geologic 
storage (CCS) must play in reconciling protection of the climate with 
expected global dependence on coal. Yet the report's examination of 
policies to promote immediate deployment of CCS systems is incomplete 
and it fails to address the most urgent problem facing U.S. 
policymakers: what CO2 performance requirements should be 
applied to proposed new coal power plants?
    While the facts set forth in the report provide ample justification 
for a recommendation to require all proposed new coal plants to capture 
CO2 for geologic disposal, the report is silent on this 
question.
    Rather than recommending performance requirements to capture and 
store CO2 from all new coal plants, the report proposes an 
incomplete policy response that would likely fail to prevent the 
construction of new high-emitting coal plants and result in much larger 
taxpayer costs and higher abatement costs when climate protection 
policies are adopted. The report recommends that government grants be 
made to energy companies to fund use of CO2 capture at a few 
new coal plants, that government fund several large-scale geologic 
injection projects, and that Congress not ``grandfather'' new proposed 
power plants from future CO2 control legislation. While each 
of these recommendations is a useful complement to a direct requirement 
for new coal plants to use CCS, by themselves they are inadequate.
    Some industry proponents of old-technology coal plants that will 
not capture CO2 have claimed that the MIT study suggests 
that CCS systems are not ready for use at proposed new coal plants. In 
contrast, the report itself states that there is no reason for Congress 
to delay adoption of a carbon emission control policy and finds that 
construction of new supercritical pulverized coal plants without CCS 
``will raise the cost of future CO2 control.'' One reason is 
that retrofits of plants built without CCS are not likely. The MIT 
report finds that: ``[ . . . ], retrofitting an existing coal-fired 
plant originally designed to operate without carbon capture will 
require major technical modification, regardless of whether the 
technology is SCPC or IGCC.'' (Executive Summary, p. xiv) Yet the 
report fails to recommend (or even discuss) the most obvious direct 
policy measure a requirement that new coal plants employ CCS.

             IS CCS READY FOR NEW COAL PLANTS TO USE TODAY?

    While the Findings and Recommendations chapter of the MIT report 
states there is no reason for Congress to delay adoption of a carbon 
emission control policy and finds that construction of new 
supercritical pulverized coal plants without CCS ``will raise the cost 
of future CO2 control,'' the report's Executive Summary 
discusses the choice of whether to apply CCS from the point of view of 
private sector developers, concluding that it is difficult to choose 
between Integrated Gasification Combined Cycle (IGCC) technology and 
supercritical pulverized coal (SCPC) technology.
    The critical flaw in this discussion, which I expect will be widely 
quoted by conventional coal plant developers, is that it implies that 
the only rational approach to new coal plant investments is to permit 
private developers to choose between two different types of coal 
plants, both of which release their CO2 rather than 
capturing it. However, the premise of significantly delayed 
requirements to control CO2 emissions that underlies this 
discussion is inconsistent with other findings in the report that CCS 
is ready for application today and that there is no reason for Congress 
to delay adoption of limits on CO2 emissions.
    Is it technically feasible for new coal power plants to capture and 
sequester their carbon? The MIT study itself supports an affirmative 
answer. The study finds that commercial capture systems exist:

          Of the possible approaches to separation [with pulverized 
        coal plants], chemical absorption with amines, such as 
        monoethanolamine (MEA) or hindered amines, is the commercial 
        process of choice. (page 24)
          In applying CO2 capture to IGCC [ . . . ] a weakly 
        CO2-binding physical solvent, such as the glymes in 
        Selexol, can be used to separate out the CO2. 
        Reducing the pressure releases the CO2 and 
        regenerates the solvent, greatly reducing the energy 
        requirements for CO2 capture and recovery compared 
        to the MEA system. (page 34)

    The study also finds that ``large-scale CO2 injection 
projects can be operated safely'' (Executive Summary, p. xii). Dr. 
Julio Friedman of Lawrence Livermore National Laboratory agrees. 
Testifying before the House Energy and Commerce Committee on March 6, 
2007, Dr. Friedman concluded that:

          Opportunities for rapid deployment of [geological carbon 
        sequestration] GCS exist in the U.S. There is enough technical 
        knowledge to select a safe and effective storage site, plan a 
        large-scale injection, monitor CO2, and remediate 
        and mitigate any problems that might arise (e.g., well-bore 
        leakage). This knowledge derives from over 100 years of 
        groundwater resource work, oil and gas exploration and 
        production, studies of geological analogs, natural gas storage 
        site selection and operation, and hazardous waste disposal. A 
        careful operator could begin work today at a commercial scale 
        and confidently select and operate a site for 30 to 50 years. 
        (pages 6-7)

    The MIT study notes that existing projects do not employ the 
rigorous monitoring that is needed for a fully implemented CCS program 
and that permitting regulations need to be written. However, if begun 
now, these requirements can be developed in a few years, shorter than 
the period required to plan, finance, and build new coal plants now in 
preliminary development stages. Such requirements will need to be 
adopted to carry out the large demonstration injection projects 
recommended by the report in any case. As the report states, ``What is 
needed is to demonstrate an integrated system of capture, 
transportation, and storage of CO2, at scale. This is a 
practical goal but requires concerted action to carry out'' (Executive 
Summary, p. xi) Rather than carry out a set of demonstrations 
unconnected to newly built coal plants, the obvious alternative is to 
integrate the construction of new coal plants with the initial large-
scale injection projects.

                               CONCLUSION

    The MIT study does not examine in any detail the key issue 
surrounding new coal plant construction: would it be better to vent 
CO2 from new coal plants in the next decade or two rather 
than capture it. The report notes that if significant new coal capacity 
without CCS is built the costs of CO2 control programs would 
increase for all. Another outcome, not discussed in the report, is that 
such new coal investments will be cited by their owners as reasons to 
delay the pace of programs to limit CO2 emissions. That 
result would foreclose options to stabilize CO2 
concentrations at adequately protective levels.
    While the authors of the MIT report decline to say so directly, the 
information presented in the report supports a straightforward policy 
recommendation: Congress should require planned new coal plants in the 
United States to employ CCS without further delay.
                                 ______
                                 
         Natural Resources Defense Council's Response to MIT's 
                        `Future of Coal' Report
 By David Hawkins and George Peridas, Natural Resources Defense Council

                               ABOUT NRDC

    The Natural Resources Defense Council is an international nonprofit 
environmental organization with more than 1.2 million members and 
online activists. Since 1970, our lawyers, scientists, and other 
environmental specialists have worked to protect the world's natural 
resources, public health, and the environment. NRDC has offices in New 
York City, Washington, D.C., Los Angeles, San Francisco, and Beijing. 
Visit us at www.nrdc.org. NRDC President: Frances Beinecke; NRDC 
Director of Communications: Phil Gutis; NRDC Publications Director: 
Alexandra Kennaugh; NRDC Editor: Lisa Goffredi.

                                SUMMARY

    MIT's report on the Future of Coal correctly recognizes the 
imperative for prompt action on global warming and the critical role 
that use of carbon dioxide (CO2) capture and geologic 
storage (CCS) must play in reconciling protection of the climate with 
expected global dependence on coal. Yet the report's examination of 
policies to promote immediate deployment of CCS systems is incomplete 
and it fails to address the most urgent problem facing U.S. 
policymakers: what CO2 performance requirements should be 
applied to proposed new coal power plants?
    While the facts set forth in the report provide ample justification 
for a recommendation to require all proposed new coal plants to capture 
CO2 for geologic disposal, the report is silent on this 
question.
    Rather than recommending performance requirements to capture and 
store CO2 from all new coal plants, the report proposes an 
incomplete policy response that would likely fail to prevent the 
construction of new high-emitting coal plants and result in much larger 
taxpayer costs and higher abatement costs when climate protection 
policies are adopted. The report recommends that government grants be 
made to energy companies to fund use of CO2 capture at a few 
new coal plants, that government fund several large-scale geologic 
injection projects, and that Congress not ``grandfather'' new proposed 
power plants from future CO2 control legislation. While each 
of these recommendations is a useful complement to a direct requirement 
for new coal plants to use CCS, by themselves they are inadequate.
    Based on leaks of early drafts of the report's executive summary, 
industry proponents of old-technology coal plants that will not capture 
CO2 are already claiming the MIT study suggests that CCS 
systems are not ready for use at proposed new coal plants. MIT's Howard 
Herzog, one of the MIT study participants, in a November 2006 
presentation, provides a more accurate summary of the facts:

          Is CCS feasible? Yes, all major components of a carbon 
        capture and sequestration system are commercially available 
        today. Why is CCS use limited today? It is almost always 
        cheaper to emit to the atmosphere than sequester. Therefore, 
        opportunities are limited to niche areas until carbon policies 
        are put in place.

    The report states there is no reason for Congress to delay adoption 
of a carbon emission control policy and finds that construction of new 
supercritical pulverized coal plants without CCS ``will raise the cost 
of future CO2 control.'' Yet the report fails to recommend 
(or even discuss) the most obvious direct policy measure--a requirement 
that new coal plants employ CCS.
Is CCS Ready for New Coal Plants to Use Today?
    While the Findings and Recommendations chapter of the MIT report 
states there is no reason for Congress to delay adoption of a carbon 
emission control policy and finds that construction of new 
supercritical pulverized coal plants without CCS ``will raise the cost 
of future CO2 control,'' the report's Executive Summary 
inconsistently suggests that the choice of whether to apply CCS should 
be left to private sector developers:

          From the standpoint of a power plant developer, the choice of 
        a coal-fired technology for a new power plant today involves a 
        delicate balancing of considerations. On the one hand, factors 
        such as the potential tightening of air quality standards for 
        SO2, NOX, and mercury, a future carbon 
        charge, or the possible introduction of federal or state 
        financial assistance for IGCC would seem to favor the choice of 
        IGCC. On the other hand, factors such as near-term opportunity 
        for higher efficiency, capability to use lower cost coals, the 
        ability to cycle the power plant more readily in response to 
        grid conditions, and confidence in reaching capacity factor/
        efficiency performance goals would seem to favor the choice of 
        super critical pulverized coal (SCPC). Other than recommending 
        that new coal units should be built with the highest efficiency 
        that is economically justifiable, we do not believe that a 
        clear preference for either technology can be justified. 
        (Executive Summary, p. xiv)

    The critical flaw in this excerpt, which we expect will be widely 
quoted by conventional coal plant developers, is that it implies that 
the only rational approach to new coal plant investments is to permit 
private developers to choose between two different types of coal 
plants, both of which release their CO2 rather than 
capturing it. However, the premise of significantly delayed 
requirements to control CO2 emissions that underlies this 
discussion is inconsistent with other findings in the report that CCS 
is ready for application today and that there is no reason for Congress 
to delay adoption of limits on CO2 emissions.
    Is it technically feasible for new coal power plants to capture and 
sequester their carbon? The MIT study itself supports an affirmative 
answer. The study finds that commercial capture systems exist:

          Of the possible approaches to separation [with pulverized 
        coal plants], chemical absorption with amines, such as 
        monoethanolamine (MEA) or hindered amines, is the commercial 
        process of choice. (page 24)
          In applying CO2 capture to IGCC [ . . . ] a weakly 
        CO2-binding physical solvent, such as the glymes in 
        Selexol, can be used to separate out the CO2. 
        Reducing the pressure releases the CO2 and 
        regenerates the solvent, greatly reducing the energy 
        requirements for CO2 capture and recovery compared 
        to the MEA system.'' (page 34)

    The study also finds that ``large-scale CO2 injection 
projects can be operated safely'' (Executive Summary, p. xii). The 
study notes that existing projects do not employ the rigorous 
monitoring that is needed for a fully implemented CCS program and that 
permitting regulations need to be written. However, if begun now, these 
requirements can be developed in a few years, shorter than the period 
required to plan, finance, and build new coal plants now in preliminary 
development stages. Such requirements will need to be adopted to carry 
out the large demonstration injection projects recommended by the 
report in any case. As the report states, ``What is needed is to 
demonstrate an integrated system of capture, transportation, and 
storage of CO2, at scale. This is a practical goal but 
requires concerted action to carry out'' (Executive Summary, p. xi) 
Rather than carry out a set of demonstrations unconnected to newly 
built coal plants, the obvious alternative is to integrate the 
construction of new coal plants with the initial large-scale injection 
projects.
          capturing and sequestering carbon is possible today
Capture of Carbon From Power Plants
    The 2005 Intergovernmental Panel on Climate Change (IPCC) special 
report on Carbon Dioxide Capture and Storage groups processes to 
capture or separate CO2 from power plant gas streams into 
three categories: post-combustion, pre-combustion and oxyfuel 
combustion. Today pre-combustion capture is the most economic option 
but other approaches show promise as well.
    Pre-combustion capture is applicable to processes that gasify coal. 
Coal gasification is widely used in industrial processes, such as 
ammonia and fertilizer production around the world. Hundreds of such 
industrial gasifiers are in operation today. Integrated Gasification 
Combined Cycle (IGCC), used for electric power production, is a 
relatively recent development--about two decades old and is still not 
widely deployed.
    Commercially demonstrated systems for pre-combustion capture from 
the coal gasification process are used in industrial plants to separate 
CO2 from natural gas and to make chemicals such as ammonia. 
Due to lack of CO2 control policies, most such systems 
simply release the separated CO2 to the air. An example 
where the CO2 from coal gasification is actually captured 
rather than vented is the Dakota Gasification Company plant in Beulah, 
North Dakota, which captures and pipelines more than one million tons 
of CO2 per year from its lignite gasification plant to an 
oil field in Saskatchewan. ExxonMobil's Shute Creek natural gas 
processing plant in Wyoming, which strips CO2 from sour gas 
and pipelines several million tons per year to oil fields in Colorado 
and Wyoming, is another large industrial example.
    Today's pre-combustion capture approach is not applicable to the 
installed base of conventional pulverized coal in the United States and 
elsewhere. However, it is ready today for use with IGCC power plants. 
The oil giant BP has already announced an IGCC project with pre-
combustion CO2 capture at its refinery in Carson, 
California. The MIT executive summary statement that ``[t]here is no 
operational experience with carbon capture from coal plants and 
certainly not with an integrated sequestration operation.'' (Executive 
Summary, p. xiii), is not correct as the Dakota Gasification plant 
shows.
    The principal obstacle for broad application of pre-combustion 
capture to new power plants is not technical, it is economic: under 
today's laws it is cheaper to release CO2 to the air rather 
than capturing it. The MIT report states that ``at present Integrated 
Gasification Combined Cycle (IGCC) is the leading candidate for 
electricity production with CO2 capture because it is 
estimated to have lower cost than pulverized coal with capture'' 
(Executive Summary, p. xiii). This is backed up in the main body of the 
study, which quotes the respective costs of electricity from a 
supercritical pulverized coal plant with capture and an IGCC with 
capture as 7.69 cents/kWh and 6.52 cents/kWh (p. 30).
    Commercial post-combustion CO2 capture systems have been 
applied to very small portions of flue gases from a few coal-fired 
power plants in the United States that sell the captured CO2 
to the food and beverage industry. However, industry analysts and the 
MIT report state that today's systems, based on publicly available 
information, involve much higher costs and energy penalties than the 
principal demonstrated alternative, pre-combustion capture. New and 
potentially less expensive post-combustion concepts have been evaluated 
in laboratory tests and some, such as ammonia-based capture systems, 
are scheduled for small pilot-scale tests in the next few years. Under 
normal industrial development scenarios, if successful such pilot tests 
would be followed by larger demonstration tests and then by commercial-
scale tests. These and other approaches should continue to be explored.
    Oxyfuel combustion is also in the early stages of development. 
Pilot studies for oxyfuel processes have been announced. As with post-
combustion processes, absent an accelerated effort to leapfrog the 
normal commercialization process, it could be significant number of 
years before such systems begin to be deployed broadly in commercial 
application.
    Capturing emissions from new power plants is perfectly feasible. Is 
it possible then to sequester the CO2 in geologic 
formations? We examine that question below.
Sequestration of Carbon in Geologic Formations Is Possible
    We have a significant experience base for injecting large amounts 
of CO2 into geologic formations. For several decades oil 
field operators have received high pressure CO2 for 
injection into fields to enhance oil recovery, delivered by pipelines 
spanning as much as several hundred miles. Today in the United States a 
total of more than 35 million tons of CO2 are injected 
annually in more than 70 projects. In addition to this enhanced oil 
recovery experience, there are several other large injection projects 
in operation or announced. The longest running of these, the Sleipner 
project, began in 1996. But the largest of these projects injects on 
the order of 1 million tons per year of CO2, while a single 
large coal power plant can produce about 5 million tons per year. And 
of course, our experience with human-made injection projects does not 
extend for the 1,000-year or more period that we would need to keep 
CO2 in place underground for it to be effective in helping 
to avoid dangerous global warming. Accordingly, the public and 
interested members of the environmental, industry, and policy 
communities rightly ask whether we can carry out a large-scale 
injection program safely and assure that the injected CO2 
will stay where we put it.
    Do we have a basis today for concluding that injected 
CO2 will stay in place for the long periods required to 
prevent its contributing to global warming? The IPCC report concluded 
that we do, stating that ``[o]bservations from engineered and natural 
analogues as well as models suggest that the fraction retained in 
appropriately selected and managed geologic reservoirs is very likely 
to exceed 99 percent over 100 years and is likely to exceed 99 percent 
over 1,000 years.''
    The MIT study itself states that:

          [although substantial work remains to characterize and 
        quantify these mechanisms, they are understood well enough 
        today to trust estimates of the percentage of CO2 
        stored over some period of time--the result of decades of 
        studies in analogous hydrocarbon systems, natural gas storage 
        operations, and CO2-EOR. [ . . . ] Additional work 
        will reduce the uncertainties associated with long-term 
        efficacy and numerical estimates of storage volume capacity, 
        but no knowledge gaps today appear to cast doubt on the 
        fundamental likelihood of the feasibility of CCS. [ . . . ] Our 
        overall judgment is that the prospect for geologic 
        CO2 sequestration is excellent. We base this 
        judgment on 30 years of injection experience and the ability of 
        the earth's crust to trap CO2. (p. 44)

    Although the report notes the existence of open issues about large-
scale deployment, meaning a sequestration program on the order of 
billions of tons per year, Chapter 4 of the report makes clear that 
these issues are not obstacles to commencing numerous multimillion 
tonne per year injection projects today. Rather, the issues mentioned 
are ones that should be addressed to allow a large-scale program to be 
implemented in an economically optimized fashion.
    The report makes recommendations that include a comprehensive 
nationwide survey by the United States Geological Survey to map out 
storage capacity, the development of a regulatory framework for CCS, 
the adoption of long-term liability regimes for storage sites, and the 
acceleration of large-scale sequestration projects of at least 1 
million tonnes of CO2 annually. All of these recommendations 
can be implemented before the commissioning of new coal power plants 
now in the development stage.
The Cost of CCS
    CCS costs more than conventional power generation. Significantly 
more capital and equipment is required and the energy penalty that 
accompanies plants that capture and sequester their carbon is not 
trivial. However, deployment of CCS will have a minimal effect on the 
power sector, end-consumers, and the economy as a whole.
    With today's off-the-shelf systems, estimates are that the 
production cost of electricity at a coal plant with CCS could be as 
much as 40 percent higher than at a conventional plant that emits its 
CO2. But the impact on average electricity prices of 
introducing CCS now will be very much smaller due to several factors.
    First, power production costs represent about 60 percent of the 
price that end-consumers pay for electricity--the rest comes from 
transmission and distribution costs. Second, coal-based power, which 
would initially be the source that would utilize CCS, represents just 
over half of U.S. power consumption. Third, and most important, even if 
we start now, CCS would be applied to only a small fraction of U.S. 
coal capacity for some time. Thus, with a properly designed trading 
approach, the incremental costs on the units equipped with CCS could be 
spread over the entire coal-based power sector or possibly across all 
fossil capacity depending on the choices made by Congress. Based on CCS 
costs available in 2005 we estimate that a low-carbon generation 
obligation large enough to cover all forecasted new U.S. coal capacity 
through 2020 could be implemented for about a 2 percent increase in 
average U.S. retail electricity rates.
    The MIT study notes that absent a value for carbon there is no 
economic reason from the firm's perspective to employ CCS outside niche 
markets like enhanced oil recovery. However, the study does not 
demonstrate, or even argue, that a prompt deployment program would 
result in economically infeasible impacts on electricity prices. The 
added costs of CCS therefore do not constitute an argument that prompt 
deployment for new capacity now in the planning pipeline would be 
economically infeasible.
Regulations Needed for CCS
    A regulatory framework is absolutely necessary to assure that CCS 
does not pose any significant risk to human health or the environment, 
to assure it is performed to high standards, and to enable the 
widespread adoption of the technology.
    The MIT study clearly calls for such a framework to be developed, 
and should be commended for doing so:

          An explicit and rigorous regulatory process that has public 
        and political support is prerequisite for implementation of 
        carbon sequestration on a large scale. This regulatory process 
        must resolve issues associated with the definition of property 
        rights, liability, site licensing and monitoring, ownership, 
        compensation arrangements and other institutional and legal 
        considerations. Regulatory protocols need to be defined for 
        sequestration projects including site selection, injection 
        operation, and eventual transfer of custody to public 
        authorities after a period of successful operation.[ . . . ] 
        These issues should be addressed with far more urgency than is 
        evidenced today (Executive Summary, p. xii).

    With concerted effort by an agency with jurisdiction and 
capability, which we believe is the U.S. EPA, a regulatory framework 
for CCS can be in place in a few years. For new plants that are closer 
to construction, there will likely be a need for interim requirements 
and those should be set forth without further delay.

                        POLICIES TO PROMOTE CCS

    The MIT study recommends government grants to support installation 
of CO2 capture at several new coal plants (p. 100).
    Although this policy recommendation may make sense as a complement 
to a requirement for new coal plants to use CCS, by itself it is 
inadequate and likely to lead to wasted taxpayer expenditures.
    Research and development funding as well as direct government 
subsidies can be useful in assisting a technology's widespread 
adoption, but cannot substitute for the incentive that a genuine 
commercial market for CO2 capture and storage systems will 
provide to the private sector. Government assistance needs to go hand 
in hand with policies that will make the adoption of low-carbon 
generation technologies mandatory. The amounts of capital that the 
private sector can spend to optimize CCS methods will almost certainly 
always dwarf what government will provide with taxpayer dollars. To 
mobilize those private sector dollars, Congress needs a stimulus more 
compelling than the offer of modest handouts for research.
    We have a model that works: intelligently designed policies to 
limit emissions cause firms to invest money to find better and less 
expensive ways to prevent or capture emissions.
    Where a technology is already competitive with other emission 
control techniques, for example, sulfur dioxide scrubbers, a cap and 
trade program like that enacted by Congress in 1990, can result in more 
rapid deployment, improvements in performance, and reductions in costs. 
However, a CO2 cap and trade program by itself may not 
result in deployment of CCS systems as rapidly as we need. Many new 
coal plant design decisions are being made literally today. Depending 
on the pace of required reductions under an emissions cap, a firm may 
decide to build a conventional coal plant and purchase credits from the 
cap and trade market rather than applying CCS systems to the plant. 
Although this may appear to be economically rational in the short term, 
it is likely to lead to higher costs of CO2 control in the 
mid and longer term if substantial amounts of new conventional coal 
construction leads to ballooning demand for CO2 credits.
    Moreover, delaying the start of CCS until a cap and trade system 
price is high enough to produce these investments delays the broad 
demonstration of the technology that the United States and other 
countries need if, as seems likely, we continue substantial use of 
coal. The more affordable CCS becomes, the more widespread its use will 
be throughout the world, including in rapidly growing economies like 
China and India. But the learning and cost reductions for CCS that are 
desirable will come only from the experience gained by building and 
operating the initial commercial plants. The longer we wait to ramp up 
this experience, the longer we will wait to see CCS deployed here and 
in countries like China.
    Accordingly, we believe the best policy package is a hybrid program 
that combines the breadth and flexibility of a cap and trade program 
with well-designed performance measures focused on key technologies 
like CCS. One such performance measure is a CO2 emissions 
standard that applies to new power investments. California enacted such 
a measure in SB1368 in 2006. It requires new investments for sale of 
power in California to meet a performance standard that is achievable 
by coal with a moderate amount of CO2 capture.
    Another approach is a low-carbon generation obligation for coal-
based power. Similar in concept to a renewable performance standard, 
the low-carbon generation obligation requires an initially small 
fraction of sales from coal-based power to meet a CO2 
performance standard that is achievable with CCS. The required fraction 
of sales would increase gradually over time and the obligation would be 
tradable. Thus, a coal-based generating firm could meet the requirement 
by building a plant with CCS, by purchasing power generated by another 
source that meets the standard, or by purchasing credits from those who 
build such plants. This approach has the advantage of speeding the 
deployment of CCS while avoiding the ``first mover penalty.'' Instead 
of causing the first builder of a commercial coal plant with CCS to 
bear all of the incremental costs, the tradable low-carbon generation 
obligation would spread those costs over the entire coal-based 
generation system. The builder of the first unit would achieve far more 
hours of low-carbon generation than required and would sell the credits 
to other firms that needed credits to comply. These credit sales would 
finance the incremental costs of these early units. This approach 
provides the coal-based power industry with the experience with a 
technology that it knows is needed to reconcile coal use and climate 
protection and does it without sticker shock.

                  MISINTERPRETATIONS OF THE MIT REPORT

    Some have misread the MIT to suggest that additional research and 
development is required before we could apply CCS to coal plants now 
being designed. For example, a recent press report cited a leaked draft 
of the report's executive summary as follows: ``[the study] concludes 
in a draft version that it is not clear which technology--the so-called 
integrated gasification combined cycle or pulverized coal--will allow 
for the easiest carbon capture, because so much engineering work 
remains to be done''. This reference confuses two different issues: is 
CCS demonstrated today versus which approach to CCS may ultimately 
prove to be most effective and economical. As discussed above, the MIT 
report makes clear that demonstrated CCS methods exist today although 
private firms will not employ them absent a subsidy or a CO2 
emissions performance requirement.
    The report urges that no single approach like IGCC should be 
anointed as the ultimate best system for use of coal with CCS. Adoption 
of policies that set a CO2 performance standard now for new 
plants will not anoint IGCC as the technological winner since 
alternative approaches can be employed when they are ready. If the 
alternatives prove superior to IGCC and pre-combustion capture, the 
market will reward them accordingly. Setting the policy now will create 
the market that will stimulate competition among competing approaches.
    Some industry developers who are seeking approval to build 
conventional CO2 emitting coal plants already have misstated 
the report's conclusions as justifying their attempts to build new 
plants without CCS. For example, Sithe Global Power LLC, the developer 
of the proposed Desert Rock power plant, in a January 2007 brochure, 
cites the then unreleased report to imply that the report raises 
questions about ``the viability of sequestration technologies''.

          Even if carbon capture technologies become available and 
        affordable, many unanswered questions remain about the 
        viability and impacts of sequestering carbon dioxide. While 
        some technologies in the oil and gas industries use carbon 
        sequestration today for additional development, no long-term 
        storage data is currently available. An upcoming study from 
        energy experts at the Massachusetts Institute of Technology 
        (MIT) to be released in February 2007 is likely to cast further 
        doubt on the viability of sequestration technologies. While 
        Sithe Global and other developers believe the future is 
        promising, carbon sequestration issues still remain a largely 
        unknown factor because of these concerns.

    In fact, the MIT report states the authors' ``confidence that 
large-scale CO2 injection projects can be operated safely,'' 
even though current modeling, monitoring, and verification methods do 
not resolve all relevant technical issues. (Executive Summary, p. xii). 
Chapter 4 of the report, which discusses geologic storage in detail, 
states that

   geologic trapping mechanisms ``are understood well enough 
        today to trust estimates'' made by the IPCC that more than 99 
        percent of injected CO2 will likely be retained for 
        at least 1,000 years; and
   ``no knowledge gaps today appear to cast doubt on the 
        fundamental likelihood of the feasibility of CCS.'' (p. 44)

                   CONCLUSION: TIME IS OF THE ESSENCE

    The study does not examine in any detail the key issue surrounding 
new coal plant construction: would it be better to vent CO2 
from new coal plants in the next decade or two rather than capture it. 
The report notes that if significant new coal capacity without CCS is 
built the costs of CO2 control programs would increase for 
all. Another outcome, not discussed in the report, is that such new 
coal investments will be cited by their owners as reasons to delay the 
pace of programs to limit CO2 emissions. That result would 
foreclose options to stabilize CO2 concentrations at 
adequately protective levels.
    The report does state that there is no reason for Congress to delay 
action to limit CO2 emissions during the CCS demonstration 
program recommended by the study authors. There are ample reasons to 
avoid any such delay. If CO2 performance standards for U.S. 
coal plants were to be delayed until after the completion of the three 
to five recommended large-scale sequestration demonstrations, and other 
countries followed suit, it is likely that broad CCS would not happen 
until another 20 years of coal capacity had been constructed--an amount 
of new capacity about as large as current global coal capacity. If that 
amount of sunk investment in non-capture coal capacity is made, either 
CO2 control programs will be much more costly, as the study 
notes, or worse, politicians will simply fail to put in place effective 
programs to protect against a climate catastrophe.
    The die is being cast for that catastrophe today, not decades from 
now. Decisions being made today in corporate board rooms, government 
ministries, and congressional hearing rooms are determining how the 
next coal-fired power plants will be designed and operated. Power plant 
investments are enormous in scale, more than $1 billion per plant, and 
plants built today will operate for 60 years or more. The International 
Energy Agency (IEA) forecasts that more than $5 trillion will be spent 
globally on new power plants in the next 25 years. Under IEA's 
forecasts, more than 1,800GW of new coal plants will be built between 
now and 2030--capacity equivalent to 3000 large coal plants, or an 
average of ten new coal plants every month for the next quarter 
century. This new capacity amounts to 1.5 times the total of all the 
coal plants operating in the world today.
    The astounding fact is that under IEA's forecast, 7 out of every 10 
coal plants that will be operating in 2030 don't exist today. That fact 
presents a huge opportunity--many of these coal plants will not need to 
be built if we invest more in efficiency; additional numbers of these 
coal plants can be replaced with clean, renewable alternative power 
sources; and for the remainder, we can build them to capture their 
CO2, instead of building them the way our grandfathers built 
them.
    If all 3,000 of the next wave of coal plants are built with no 
CO2 controls, their lifetime emissions will impose an 
enormous pollution lien on our children and grandchildren. Over a 
projected 60-year life these plants would likely emit 750 billion tons 
of CO2, a total, from just 25 years of investment decisions, 
that is 30 percent greater than the total CO2 emissions from 
all previous human use of coal.
    The MIT report concludes that retrofits of plants built without CCS 
are not likely: ``[ . . . ], retrofitting an existing coal-fired plant 
originally designed to operate without carbon capture will require 
major technical modification, regardless of whether the technology is 
SCPC or IGCC.'' (Executive Summary, p. xiv)
    The IPCC stated in February 2007 that the warming of the plant's 
climate system is ``unequivocal'', and that it is attributable to 
anthropogenic greenhouse gas emissions with more than 90 percent 
probability. Meanwhile, in its April 2007 release, the Panel reportedly 
will warn of starvation, water shortages, disease, floods, extinctions, 
and increased death rates, claiming that ``[c]hanges in climate are now 
affecting physical and biological systems on every continent.'' We must 
begin decreasing our greenhouse gas emissions now. The modest costs of 
deploying CCS today are completely overshadowed by the costs and risks 
of not doing so.
    While the authors of the MIT report decline to say so directly, the 
information presented in the report supports a straightforward policy 
recommendation: Congress should require planned new coal plants in the 
United States to employ CCS without further delay.

    The Chairman. Thank you very much. Thank you all.
    We'll do 5-minute rounds here, and let me start and ask a 
few questions.
    Let me ask Professor Deutch and Professor Moniz: on the 
issue of whether or not there's going to be the capacity to 
actually capture and sequester--the capturing, I guess, is not 
the tough part, it's the sequestering that's more difficult, as 
I understand it. We have, as you said, Professor Deutch, 80 new 
coal plants constructed in China last year. We've got lots of 
coal plants ourselves, there are lots of coal plants around the 
world. Is it realistic to think that once this technology is 
perfected and commercialized on a large scale, that we then 
have the capacity, and geologic formations, to really sequester 
all of this carbon? It just strikes me that you've got a lot of 
carbon going into the atmosphere now, and I'm just wondering if 
all of that's going to be going into geologic formations in the 
future, and do we have enough of them?
    Mr. Deutch. Mr. Chairman, the first point is, that we 
believe there is a vast capacity in deep saline aquifers in the 
United States for the foreseeable storage of this 
CO2 material. One of the recommendations of our 
study is, however, to do a bottom-up review, in this country, 
and elsewhere in the world, to really tie down what these 
capacities are. Our expectation is that the same will be found 
for China. India, on the other hand, has less-capable geology. 
But, we do think in the United States that storage capacity 
exists, and through some accidental piece of good fortune, 
which I don't usually encounter, the places where we have coal 
plants, the places where these deep saline aquifers exist, are 
more or less close by. So, it's not vast distances.
    The second point I would like to make is that I don't think 
it is only the process of injection and monitoring the storage 
cites in this report. We need practical experience with the 
capture part, where we really haven't done any work on capture 
from a coal plant. We need experience with the pressurization 
and transportation, and we need the coal-integrated system put 
together, in a regulatory framework. That practical experience 
is important.
    What about the pace? Yes, it's a huge scale, as Ernie 
emphasized; yes, it will take time to make those investments; 
but I want to remind you that since the Congress put in new 
source performance standards on criteria pollutants, the coal 
industry and the utilities have shown a tremendous capacity to 
meet those more stringent environmental requirements. I am 
convinced that given time, and given the support, that the coal 
industry will gradually be able to introduce this into the 
operation of the United States.
    The Chairman. Let me just to try to better understand what 
people are recommending going forward here.
    As I understand, in the MIT Report that you've described, 
the recommendation there is that we should immediately, or as 
soon as we can, change the law or provide that Federal 
assistance will only go to projects that incorporate this 
capture and sequestration technology, coal projects.
    Mr. Deutch. That's correct, Mr. Chairman, but let me 
emphasize, that we think it should be an array of projects.
    The Chairman. Right.
    Mr. Deutch. It should not just be IGCC----
    The Chairman. Right, it----
    Mr. Deutch. It should be all sorts of projects.
    The Chairman. Yes, use all possible technologies, but use 
capture and sequestration.
    Mr. Deutch. Each one of them would have to have capture and 
sequestration----
    The Chairman. Right.
    Mr. Deutch [continuing]. Integrated in their design and 
operation.
    The Chairman. That's your recommendation for what we do 
right now.
    Now, I understand that we've got a different set of ideas, 
Dr. Hannegan. You said that EPRI's view was that beginning in 
2020, you would anticipate we would have in place a requirement 
that carbon capture and sequestration be used if additional 
coal plants are to be constructed, as I understood it. Is that 
right?
    Mr. Hannegan. Actually, Mr. Chairman, it was one assumption 
that we made under the scenario here to the right. It was not--
EPRI is a 501(c)(3) non-profit, it doesn't make policy 
recommendations per se--it was just one element of assuming, as 
would be assumed in the case of the MIT study, that if we 
invest substantially in the carbon capture and storage 
technologies, and we work on deploying them and developing them 
at a commercial scale, our technical work shows that the 
earliest that they could be within the range of economic 
assistance to be commercializable on their own, is in the 2020 
timeframe. Once you start from moving at the current pilot 
scale that we're seeing today, through to some of the new 
announcements by AEP and others of a 200-megawatt project, just 
within the last week, to by the time you get to a commercial 
scale where you've tested and run that, and you develop the 
supporting regulatory structures, the earliest that we see it 
could be widespread, in terms of its availability, is by 2020.
    Let me say one other thing, and that is: we disagree with 
MIT's view that you should only limit support to those projects 
that have carbon capture and storage built in. Those certainly 
should be preferred, because CO2 capture and storage 
is a necessary option, as we've demonstrated going forward, but 
there are issues associated with so-called Ultra Super Critical 
Pulverized Coal Plants, which are pushing temperatures and 
pressures that we've never done in the real world. Also with 
respect to IGCC at scale--I mentioned in my testimony--there's 
a level of sophistication and integration that hasn't been 
demonstrated above the two pilot programs at DOE.
    The Chairman. My time has run out, maybe I'll come back and 
ask some additional questions in the second round.
    Senator Domenici, did you want to go ahead with a 
statement, or questions, or did you want me to skip over and 
call someone else? What's your preference?
    Senator Domenici. I'm going to do what's most accommodating 
to you all.
    The Chairman. I think we're happy to hear your statement 
and questions at this point, if you're ready.
    Senator Domenici. I won't have any questions, but I do have 
a statement.

   STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM NEW 
                             MEXICO

    Senator Domenici. First of all, I don't know what it is, 
Senator Bingaman, I don't get to see these two guys--Deutch and 
Moniz very often. One would think that they are actually hiding 
out in some foreign country and just show up every now and then 
and peek at us, because they look so different. I mean, they're 
getting grey, bald-headed----
    [Laughter.]
    Senator Domenici. I mean, the whole thing, huh?
    Mr. Moniz. Shall we go?
    Senator Domenici. Do you guys work together or at different 
places?
    Mr. Deutch. Senator, I remember how you looked 30 years 
ago, too.
    [Laughter.]
    Senator Domenici. Well, Senator Bingaman tells me I still 
look pretty good.
    [Laughter.]
    Senator Domenici. Anyway, I have been waiting for an 
occasion to express myself the way I'm going to here in just a 
little bit, and I thought it might be good to do it today, 
where you guys could come down hard on me, and when you go 
outside afterwards, you can say, ``That's really bad, what he 
said,'' but----
    First, I want to thank Senator Bingaman for scheduling this 
hearing on this very important topic. Make no mistake about it: 
we must recognize that the use of American coal in electricity 
generation is essential to our Nation's energy independence and 
security. At present, half of our electricity is generated from 
coal, and the EIA estimates that by 2030, 57 percent of our 
electricity will be derived from coal. Nobody can be sitting 
around that's worried about the products that come from burning 
coal, and be cavalier about that reality.
    With these numbers in mind, it is clear that for us to make 
progress, we must make significant advancements in clean coal 
technology. I believe it would be unwise for the United States 
to move forward without also working to get China and India as 
full partners in the capture and sequestration of carbon 
dioxide. That includes getting their financial support for 
these efforts.
    When the technology is proven at the scale needed to 
capture and sequester carbon dioxide, it will be critical for 
them to fully participate in the implementation of that 
technology. To do otherwise could negatively impact the U.S. 
economy and our global competitiveness. I don't think one can 
see that any other way.
    The United States has led the effort, but unless China, and 
the other coal-using countries participate in this work with 
both human capital and financial resources, it is unlikely that 
we will be able to address global climate change in a 
reasonable, fair and effective manner.
    China controls the world's third-largest coal reserves, and 
is expected to account for more than half of the global growth 
in coal over the next 25 years. I want to read that again. 
China controls the world's third-largest coal reserves, and is 
expected to account for more than half the global growth in 
coal supply and demand over the next 25 years.
    In approximately 2 years, China will pass us as the world's 
leader in carbon dioxide emissions. By 2025, China will emit 
twice as much carbon dioxide as the United States. Remember, it 
is not American Climate Change we are facing, it is Global 
Climate Change, and it requires global cooperation and 
participation for a global solution.
    I expect that Professors Deutch and Moniz will tell us that 
it makes a significant difference in reducing the world's 
carbon emissions, but other major coal-using and -producing 
countries have to participate in finding solutions. I find The 
Future of Coal Report interesting, and I'm ready to support 
major research, development, and development projects in this 
area. It is clear that we need to gain a better understanding 
of how to best enhance the efficiency of our future, and our 
future coal-fired power plants, to reduce carbon dioxide 
emissions.
    We also need to better understand how to best capture and 
sequester carbon, and to deal with the technological, 
economical, and potential infrastructure and liability 
challenges that we face in large-scale carbon sequestration.
    All of these are issues that the MIT Report can help us 
better understand. Having the answer to these questions will be 
important so we don't put our country at economic risk or at 
competitive disadvantage.
    I believe the Report does a good job of pointing out many 
of the issues that need to be addressed to help Congress 
thoughtfully address coal and its future. I thank the Chairman 
for holding the hearing. I look forward to working with him and 
others as we move forward in a very, very formidable task ahead 
of us.
    Thank you very much.
    The Chairman. Professor Deutch, did you want to respond?
    Mr. Deutch. Thank you very much, Mr. Chairman, I'll be very 
brief.
    Senator, in my opening remarks I made it very clear, and 
the report is quite clear, that you're quite right, this is a 
global problem, and if there's not a way of finding the large, 
emerging economies, like India and China, have them constrain 
their CO2 emissions, climate change doesn't get 
better. It is a judgment question on which I have my own view--
very, very great reservations about: should the United States 
or Europe or the developed world, in general, go forward--when 
should it go forward?--unless you have it locked up tight when 
the emerging economies will go forward. We have some 
information about what would happen if there was a lag-time. 
You must find a way to lock up the emerging economies on this 
question as well, or else you're only going to be paying money, 
and not improving the climate.
    The Chairman. Senator Bunning, why don't you go ahead?
    Senator Bunning. Thank you very much, Mr. Chairman. Thank 
you all for being here. Since you have two of the largest coal-
producing States in the United States here represented in 
Senator Thomas and myself--Kentucky and Wyoming--we have a deep 
and abiding interest in what's going on with coal. We 
appreciate your report.
    Your report emphasizes demonstration of new technologies. 
One of the technologies I believe that is most promising is 
coal-to-liquid fuels. I have introduced legislation to provide 
Government incentives in the form of tax credits and planning 
loans for the first few coal-to-liquid facilities. I believe 
these plants, aside from easing our dependence on foreign oil, 
will help push gas, coal gasification technology into the 
mainstream, much like that which has been done in South Africa.
    Would you support this kind of a demonstration program?
    Mr. Deutch. Senator, our Report and our comments here are 
quite clear that synthetic fuels--gases or liquids--would 
certainly be candidates for us in these early demonstration 
projects, but with carbon capture----
    Senator Bunning. Carbon sequestration--oh, yes.
    Mr. Deutch. I might say in this regard that there's an 
advantage----
    Senator Bunning. We have that in the bill.
    Mr. Deutch. But, it's an advantage with synthetic liquids, 
because you're making oxygen in the--you have to make the 
oxygen to do the synthetic fuel, so you don't have that extra 
cost that you have in electricity generation.
    Senator Bunning. I'm also one of the co-sponsors of the 
bill for the other program where we find out how we can store 
and place the carbon that we sequester.
    Mr. Deutch. Yes, Senator.
    Senator Bunning. I have a question for, is it Don or Dan?
    Mr. Lashof. Dan.
    Senator Bunning. I know the NRDC has opposed coal-to-liquid 
technology, but I see your organization supports coal 
gasification for electricity. Is that correct, or incorrect?
    Mr. Lashof. Well, Senator, we believe that carbon capture 
and storage is a critical technology, if coal is going to be a 
viable energy technology in the electric sector, and we support 
Government funding for carbon capture and disposal associated 
with electricity generation.
    The problem we have with coal-to-liquids is that, when 
we're looking at the need to reduce the CO2 
emissions that cause global warming by, on the order of 80 
percent over the next 50 years, we need to be moving from 
transportation fuels that rely on petroleum to fuels that have 
fundamentally lower greenhouse gas emissions over the fuel 
cycle, from well to wheels.
    The problem with coal-to-liquids is, even with carbon 
capture and storage, you still end up, at best, with a fuel 
that has about the same emissions, or a little bit higher 
emissions, than from conventional gasoline. The reason for that 
is that the tailpipe emissions are basically the same, you're 
producing a hydrocarbon fuel that is essentially equivalent to 
diesel.
    Senator Bunning. The Air Force would disagree with you.
    Mr. Lashof. No, I don't think so. I know the Air Force is 
very interested in using Fischer-Tropes liquids derived from 
coal in their jets, and the emissions from the jets would be 
about the same as--their CO2 emissions would be 
essentially identical----
    Senator Bunning. They have testified before me, or have 
come to visit with me, and that is not their position.
    Mr. Lashof. Well, and----
    Senator Bunning. Because the fuel burns cooler, it's better 
for the engines, and with a mixture of some type of petroleum, 
it doesn't emit near the emissions that a regular jet would 
emit if it used petroleum-based fuel.
    Mr. Lashof. Well, I'd be happy to review their testimony 
and----
    Senator Bunning. That's all right.
    Mr. Lashof [continuing]. Further to the record, but the, my 
understanding----
    Senator Bunning. You ought to visit with them.
    Mr. Lashof. Yes, well, we've talked to them, and I know 
that they also say that we should have carbon capture and 
storage with that technology.
    Senator Bunning. Yes, they have.
    Mr. Lashof. I think that's very helpful.
    With respect, Senator, I think that the bill, as it was 
introduced, allows for support for the carbon capture and 
disposal portion, but does not require that that be 
incorporated----
    Senator Bunning. Well, we've changed it to require it.
    Mr. Lashof. I think that's definitely a step in the right 
direction. I certainly appreciate that.
    Senator Bunning. Well, we appreciate all of you being here.
    My time is expired, Mr. Chairman, go right ahead.
    The Chairman. Thank you very much.
    Senator Salazar.
    Senator Salazar. Thank you very much, Chairman Bingaman, 
for holding this very important hearing. I would just make a 
comment that I, too, come from a State that is a coal-producing 
State--Colorado--and I know that on our Western slope, we 
produce some of the high-quality coal that is very important to 
our economy. We share that same interest with Wyoming and 
Kentucky and other States that are coal-producing States.
    I also think that inevitably what's going to happen is we 
will continue to grow in how much coal we ultimately use, 
simply because of the fact that it is so available, and I think 
your report shows that.
    I would ask you to comment, and I know you did this on your 
report--in terms of the possibilities that we have with respect 
to both IGCC, as well as with respect to carbon sequestration. 
This committee has been very supportive of moving forward with 
demonstration projects, IGCC--I know there are a number of 
projects out there that are already up and running, and a 
number that are being planned.
    I also would like you to comment on how it is that we can 
move the ball further forward, in terms of carbon 
sequestration. There's legislation which Senator Bunning, and 
I, and others on this committee are moving forward with to try 
to get a good assessment of the geologic formations of the 
country, so that we can determine where the best places are for 
us to be able to do carbon sequestration.
    So, I'd like, really, a comment from the panel on two 
issues--one, how far along are we on IGCC, and is there 
anything that we can do here in the Congress to try to speed up 
that effort for the United States, and two, what more can we do 
in terms of the carbon sequestration programs that we've talked 
about?
    Mr. Moniz. Senator Salazar, first of all, I'd like to 
respond as a person who spends time on the banks of the 
Conejos, in your part of the country.
    Senator Salazar. I will say, if I was to ask anybody here 
where that river is, you and I probably are the only ones who 
know where that river is.
    Mr. Moniz. Twenty-five miles west of Antonito.
    Senator Salazar. It's a beautiful river.
    Mr. Moniz. The first question on IGCC: first, I do want to 
repeat something that my colleague, John Deutch said earlier, 
and that is that we feel it's very important to explore 
alternative technologies, but with what we know today, and with 
some more experience, IGCC right now does look to be the lowest 
cost technology with capture, so the idea of moving forward 
with a major integrated demonstration of IGCC and carbon 
capture is one we endorse.
    We would add, in terms of what the Congress can do--we 
would note that the current plans with FutureGen are moving 
along too slowly, and I believe the Congress should provide 
clarity that the object of that, and other, large-scale, 
integrated demonstrations, is to demonstrate commercial 
viability and one should guide the project execution along 
those lines. There are various issues, in terms of reliance, on 
historical formulas, for cost-sharing, that I think deserve re-
examination, but that would certainly help that go forward, 
while one also, hopefully, plans for a broader portfolio of 
integrated demonstration projects with capture, with other 
technologies.
    For example, the issues of retro-fitting pulverized coal 
plants with oxygen firing could be a very interesting and 
important demonstration, given our large installed base.
    Senator Salazar. Let me ask you, just in terms of moving 
forward to the point where we have commercial viability with 
respect to these demonstration projects: I know that there are 
a number of demonstration projects out there, including one 
that is being planned for Colorado, that I very much support. 
From your point of view, are those demonstration projects 
headed in the direction that we will be able to examine the 
commercial viability of IGCC?
    Mr. Moniz. Well, I think first of all, of course, there is 
no operating large-scale coal plant with carbon capture and 
sequestration. We believe that this is a technical challenge, 
to demonstrate that integrated system of IGCC with capture. We 
believe there should be public funding to support it. The 
question will be in the practical implementation: is the 
project going to be executed in the way that provides, if you 
like, high-fidelity information, let's say, to the investment 
community?
    Senator Salazar. Which is the best of the IGCC 
demonstration projects currently underway?
    Mr. Moniz. Well, I would not cast judgment on that----
    Senator Salazar. Give me two or three that you would 
recommend that some of us might go----
    Mr. Moniz. If we talk about FutureGen as the obvious 
candidate right now, with Federal support, we would say that we 
need to have fewer chefs in the kitchen--streamline it, and 
focus it on commercial viability. There's some very good people 
involved in that project--I mean, Mike Mudd, who is heading 
that, is a terrific person. I believe we have to, for example, 
make sure we're not falling into a trap of lots of Federal 
procurement rules, et cetera, that can compromise the value of 
the commercial information.
    We can discuss that in more detail. If I may just answer 
briefly, the sequestration part--I'd just say that I think in 
our report, I believe we provide the elements of an aggressive, 
appropriate road map to really resolve the key issues of 
sequestration, including site characterization, monitoring, 
verification, modeling, support for a regulatory regime, and 
demonstration of practical implementation, on about a 10-year 
time period with, what I would consider to be relatively modest 
funds. That, I think, is something that, on this panel, we have 
all agreed with. It calls for a relatively small number of 
focused projects, at well-characterized sites.
    Senator Salazar. Thank you, Professor.
    My time is up.
    Mr. Hannegan. Mr. Chairman, if I may offer a slightly 
different view to the Senator's question regarding IGCC, we at 
EPRI, the Electric Power Research Institute, published a study 
just within the last year for the city of San Antonio that 
looked at the comparison in cost between an IGCC using Powder 
River Basin coal, against a supercritical pulverized coal 
plant, and we actually found that the costs for each are 
comparable within the margin of uncertainty.
    So, one of the messages out of that study, which I'd be 
happy to add to the record, if that's desirable, is that we 
ought not to get caught up just necessarily on IGCC when it 
comes to carbon capture and storage. That in some cases, 
particularly for lignite coals, pulverized coal technologies 
are actually more affordable and just as effective in terms of 
creating a CO2 stream that can be scrubbed out and 
stored. The choice of a technology between IGCC, oxy-fuel, and 
pulverized coal is really a horse race. In that IGCC technology 
itself is not quite mature, but capturing the CO2 
is. Pulverized coal technology is mature, but capturing the 
CO2 is not. So there are different aspects of those 
problems that should both be advanced as part of a 
comprehensive research program.
    Senator Salazar. All right. Thank you.
    The Chairman. Senator Corker.
    Senator Corker. Mr. Chairman, thank you for this testimony, 
and thank all of you for being here. You know, our State, the 
State of Tennessee has had companies who have shown tremendous 
leadership in clean coal technologies, and we're obviously very 
supportive of that, and hope it'll continue.
    As I listen to the complexities that are going to be with 
us in the future--capture and sequestration, and just the 
unknowns that we have in that regard--and then we talk about 
the projected percentage of electricity that's going to be 
generated through coal, which is already a huge factor here in 
our country now--as you look at these additional requirements 
and complications, if you will, to make sure that it's 
environmentally friendly, how does it compare with this 
additional expense--sequestration and capture--to nuclear 
power?
    Mr. Deutch. Senator, if we had a carbon charge, or an 
additional price for the capture and sequestration as we 
estimate it, it would make nuclear power--if it works as well 
as it's supposed to--cheaper, and our expectation would be in 
the presence of a carbon charge, nuclear power would become 
more economical than coal with carbon capture as a base load 
generation source.
    Nevertheless, the amount of nuclear power that will be used 
here and elsewhere in the world is not limitless, and will be 
both, for many reasons, will be only part of the mix, and so 
coal will still have a role to play.
    Senator Corker. What are some of the reasons that it won't 
be more expensive? The use of nuclear, after all this is done, 
and if, in fact there's some policy put in place to limit 
carbon--why is nuclear not going to be more pervasive?
    Mr. Deutch. In 2003, we did a similar study at MIT in the 
future of nuclear power, and we looked very, very carefully at 
the rate at which nuclear power might penetrate between now and 
mid-century, that's for the next 50 years, we didn't try and go 
beyond that.
    There are a variety of reasons--including the length of 
time it takes to construct these plants, the kind of skills 
that are available for doing it, which would, in our judgment, 
limit the amount of nuclear power, you might say, to the most 
favorable circumstances to about a factor of three between now 
and mid-century. That's a great expansion, that would be an 
expansion from roughly 100 big-scale plants in the United 
States, to 300, and we think that that's about as much as you 
can expect from nuclear power. We'd be delighted if it was 
more, but right now, we're still just talking about adding that 
first nuclear power plant.
    I might mention in the case of China, which is very 
aggressively pushing nuclear power, they're expecting, I think, 
about 20 plants over the next 10 years; meanwhile they're 
putting in 80 coal plants a year. So, I think we would like to 
move forward on nuclear, but we shouldn't overestimate the 
speed at which it's going to happen. We still need to have 
progress on waste management, sir. We still have to assure that 
everybody has the highest safety standards. We have to assure 
that the non-proliferation considerations are kept in 
worldwide.
    So, we're all for nuclear power in my world, but I think we 
have to be realistic about how fast it can come in.
    Mr. Hannegan. Senator, I actually have a couple of charts 
over here that go directly to your question of competitiveness 
between the two fuels.
    We actually did a study about a year ago looking at the 
different generation options that face a utility CEO when they 
start thinking about siting their next plant. In fact, the 
premise of your question--if I could get the other one, the 
2010 one, just put that up--the chart that's being shown now, 
along the bottom axis, the cost of carbon moves from zero 
dollars, where it is today, to $10, $20, $30 on over to $50, 
and you can see how--for each of the colored curves on the 
chart, the costs of factoring in carbon constraints into those 
technologies, change the levelized cost of electricity and 
simply divide by 10 there to get a sense of cents per kilowatt 
hour.
    We show that once you get even a modest carbon charge on 
the coal technologies--pulverized coal in red, and IGCC in sort 
of the purple--that nuclear line, which is the flat line at 
about 5.5 cents per kilowatt hour, really begins to be the most 
economic.
    That raises a point that I wanted to make, with respect to 
my colleagues' comment that carbon capture and storage is here 
and you can do it today. You certainly can, and if you do it at 
$30 per ton, which is the figure in the MIT study, you see 
quickly that the red and the purple line curves are even above 
natural gas combined cycle at $6 per million cubic feet. 
They're certainly beginning to become comparable with wind 
power at today's technologies. So there's no guarantee that if 
we were to start pricing carbon at that level, people would 
necessarily continue to build coal. They might actually fuel 
switch to other things, and I think you have to take that into 
account.
    The second chart that I have here, actually reflects what 
we think these costs will look like in 10 or 15 years' time. If 
you invest in an aggress of about $2 billion per year in 
addition to over what you see today, research program that 
develops and deploys these new technologies, and in contrast to 
the previous chart, you see how all of those pixie sticks--if 
you will--collapse onto the relatively the same low-cost, low-
carbon portfolio and that's even including the cost of capture.
    This just goes to our main point, that if you allow time 
for the RD&D to go forward, as the MIT report describes, and 
you don't force the implementation of CO2 capture 
and storage immediately, you'll actually get more emissions 
reductions later on, at a lower cost, and that will be better 
for the economy.
    Mr. Moniz. May I just add one point, Senator Corker? That 
is that I agree with what Bryan has said, but should also be 
cautious that, for example, these projections of, let's say, 
nuclear power costs, do have assumptions built in about, for 
example, a reduction of capital costs that has not been 
demonstrated, as well as issues about how it's financed. So, 
really our view is, I think, well as John said, our view is 
that we're going to have multiple technologies deployed, they 
will be site-specific, regulatory-specific, choices that will 
affect cost. These are going to be--what we see today--they're 
all going to be in the mix, if we can solve the key problems.
    The Chairman. Senator Thomas.
    Senator Thomas. Thank you, Mr. Chairman.
    Thank you, gentlemen. I certainly appreciate your work on 
this.
    Mr. Deutch and Mr. Moniz. Your report calls for three to 
five large demonstration power plants, and this and that. The 
Energy Bill we passed in section 413 calls for ones in the 
West. Do you share our opinion, on the advantage of mine-mouth 
generation, and how do you think these technologies would work 
in the West?
    Mr. Deutch. We're certain that these technologies, again 
choosing from the menu of available technologies, would work in 
the West. There's a lot to be said for mine-mouth facilities.
    Once again, we're not trying to specify technologies, we're 
not trying to specify locations, we're saying that the key 
thing is, to make coal usable, if there are carbon constraints, 
and the key step to take is to do the sequestration piece. The 
kind of technology you'd use on Western coals or at the mine-
mouth, we don't know how that's going to turn out.
    Senator Thomas. No.
    Mr. Deutch. It should go forward as the markets set.
    Senator Thomas. Yes, well, the market's currently setting 
the price of shipping coal to the East more than the value of 
the coal. So, that gets a little difficult.
    You emphasized the importance of not picking technological 
winners and losers. But, you recommend no Federal assistance be 
provided unless it has carbon sequestration involved. There are 
some technologies that are closer to commercial availability 
rather than that. Isn't your study exactly warning the 
Government against moving forward with these other 
technologies, as well?
    Mr. Deutch. No, Senator, I think that the point is that we 
don't believe that the taxpayer dollars should be used to 
subsidize technologies which are commercial, or very close to 
commercial. We believe that the technologies without carbon-
captured sequestration, such as IGCC without carbon capture, or 
even supercritical pulverized coal are sufficiently close to 
commercialization, that private industry and private investors 
will go forward with those projects without Government 
assistance, assuming that the regulatory uncertainty of the 
carbon charge is not present.
    But there's no amount of money that you can spend of the 
taxpayer to get rid of that regulatory uncertainty in their 
mind. Where we do see Government assistance justified is when 
there is technology uncertainty; you have to show and 
demonstrate its technical performance, its economic cost, and 
environmental acceptability. Then we think the assistance----
    Senator Thomas. I think there's a real question, and I've 
talked about this at the White House and this and that. I don't 
think anyone quarrels with the notion that down the road we're 
going to see some alternative sources and all these kinds of 
things. But that's a ways down the road. We're going to have 
10, 15 years of demand for energy.
    So, it seems to me we have to sort of balance between 
encouraging and giving incentives to the production of power 
that we'll have in this shorter term, as we wait for the longer 
term. We get so wrapped up in research that we won't be able to 
turn on the lights, if we aren't careful. Do you agree with 
that, Dr. Hannegan?
    Mr. Hannegan. Well, there's a certain role for both, 
Senator. We see a very valuable role for the Federal Government 
to be involved in things that are very much at the pilot scale, 
at the ``can we do it'' scale. Then, the role of the public-
private partnerships, like FutureGen, to say, ``OK, we've done 
it in the laboratory, now can we do it at the real-world at 
some scale, which is not quite commercial, but it's larger than 
the bench top?''
    Then, the question is, at what point does that partnership 
segue way into private-only funding and commercialization of 
the technology? I think EPRI's view is slightly different than 
that of the MIT report, in that we don't see IGCC and 
supercritical pulverized coal technologies, yet, at commercial 
scale as reliable and affordable as, you know, I think you 
would like them to be for folks on Wall Street not to put a 
risk premium on the investments, for State regulators to see 
them as the low-cost alternatives when companies come to make 
proposals, as they have. They've been turned away in favor of a 
tried-and-true technology.
    So, I think there's still some barrier there between where 
we see those coal technologies today, and where you would want 
them to be to call them fully commercializable. I mean, there's 
a role for research, but there's also a role for incentives. I 
think the Energy Bill got that right.
    Mr. Moniz. Senator.
    Senator Thomas. I hope so, because there's a demand that's 
going to be there.
    Yes, sir.
    Mr. Moniz. I'm sorry, I just wanted to add a comment. One 
is to clarify something which, to make it absolutely clear in 
terms of the MIT report, makes it very clear that our statement 
about the issue of subsidies, of assistance only for plants 
with capture. I just want to emphasize: that applies to 
commercial projects or large-scale integration demonstrations. 
It certainly does not apply to research and development, which 
needs to go across a very broad set of technologies.
    Then the issue is one of, frankly, prioritization of what 
is not an issue of taxpayers' dollars, and we certainly do not 
believe that there are technical grounds for arguing for 
additional public subsidy of plants without capture. I remind 
you, the taxpayers have paid for development of these 
technologies, Tampa Bay, IGCC, etc. So, it's really a question 
of--and certainly costing too much is not a valid argument for 
public assistance. So, I think we need to be just very hard-
nosed in our prioritization of where these public dollars go.
    Senator Thomas. Yes, I understand it's really saying we 
have to balance between research in the future and meeting the 
needs of the next 5 years, 10 years from now.
    Thank you, Mr. Chairman.
    The Chairman. Senator Domenici.
    Senator Domenici. I just want to depart from what would be 
the most directed kinds of questions, to discussion with any of 
you about the technology of sequestration.
    First, am I right in assuming that large-scale 
sequestration, including in the definition that this includes 
putting the CO2 away, permanently? Am I right in 
assuming that that is a very difficult technology to achieve, 
and that it may be awhile before we can get our hands around 
that and get it applied? John Deutch?
    Mr. Deutch. Senator, my answer to that would be, no, it is 
not a difficult technology. It is, however, extremely demanding 
because of the scale of it to implement it successfully and 
responsibly and have it work. This is not magnetic fusion. This 
is making sure that you have the process in place to capture, 
transport, and do it right. So, you need examples of that.
    Mr. Moniz. May I add a comment, Senator?
    That is that I do think it's important, personally, that we 
not think in terms of the word permanent. I mean, permanent is 
good, but we should also keep in mind that, you know, one might 
have percent, per-century ``leakages.'' Well, that buys us an 
enormous amount of time, in terms of the CO2 budget. 
In the 23rd century, we are likely to have a very different set 
of options, maybe even fusion, in terms of carbon-free 
technology. So, I think it's very important that we not fall 
into the trap of thinking that it must be ``proved'' to be 
permanent forever.
    Mr. Lashof. If I could----
    Senator Domenici. Yes.
    Mr. Lashof [continuing]. A couple things. All right, 
Senator Domenici. You know, I think it's worth noting a couple 
things in terms of the way the technology is.
    First of all, and we haven't mentioned, the U.S. oil 
industry is putting 30 million tons of CO2 a year 
underground right now for enhanced water recovery. They have a 
very good track record of safety in doing that over the last 20 
or 30 years. Now, they haven't done that with the idea of 
keeping the carbon underground permanently, or for a century 
time scale, but the incremental monitoring and verification 
requirements that are needed to ensure that that CO2 
is staying underground are not that challenging.
    There's also three large-scale CO2 
sequestration--geologic sequestration projects going around the 
world, one Weyburn, Saskatchewan, one in Sleipner, as the 
Norway project, and one in Algeria. So, there is, at scale, 
some already significant experience. So, in my view, you know--
the oil industry spent 100 years perfecting the technology to 
understand those reservoirs and get oil out of the ground. And 
what we're really asking them to do is turn their seismic 
technology upside down and figure out how to put some 
CO2 back underground.
    It's a technically challenging thing to do, but it's not 
something that is beyond what we can do, starting right away. 
So, I think the way to move forward on this is to get 
experience, to actually do this at scale, at commercial plants. 
BP for one, is proposing to do this in California with a fully 
integrated system, with a power plant that would generate 500 
megawatts. It's using petroleum coke, rather than coal, but the 
technology is essentially the same.
    Mr. Moniz. Senator, I'll be brief. I wish it were as easy 
as my colleague from NRDC indicates. We have a handful of 
projects that are currently sequestering a million tons per 
year, or so, of CO2. One 500-megawatt coal-fire 
power plant, releases on the order of three to four times that 
amount. That's one plant. Over the next 25 years, EIA's 
forecast expects to add, I've roughed out some numbers here, 
300-gigawatts, so about 600 new coal-fired power plants under 
their base forecast. If I take that 4 million tons per year and 
I multiply it by 600 plants, I get 2.4 billion tons of carbon 
that has to go in, compared to the 30 million that the oil and 
gas industry is using today. It's a vastly different order of 
magnitude and it's that scale of the challenge which I think is 
really daunting in terms of bringing this technology to market.
    Senator Domenici. That's how you see it, too?
    Mr. Deutch. No, it's not the way I see it. First of all, I 
think that the comparison with the EOR, with Enhanced Oil 
Recovery, is a poor one for a variety of reasons. The 
regulatory requirements for doing EOR injection are done under 
the water; it's completely different.
    The fact of the matter is, if you look at some of these--
and it's a subject I know a little bit about--these fields have 
been crunched up a lot. So while you learn something from these 
projects, the fact is you should get no comfort from EOR in 
terms of the large scale that we have to anticipate. You get no 
comfort because the capacity's not there. Worldwide, you could 
do all the EOR, you aren't going to do anything, you're going 
to have to use saline aquifers.
    The second thing is, one of the best tables in our report 
is a report that looks at these three projects--Weyburn, 
Sleipner, and In Salah in Algeria--and it says, ``Here's the 
instrumentation that is present in those three sites. And, here 
is the instrumentation we think would be needed to have a 
proper sequestration project.'' They're vastly different, 
vastly different. So to get this, the instrumentation to do the 
monitoring, just not seismic, it is a lot of other instruments 
that you want, and the modeling and simulation to make sure you 
know what's going on, it is a demanding job. Since we don't--we 
want to make sure we get public confidence that this is working 
right, we're going to do it right, and you can not work off of 
these things. You've got to do these projects carefully.
    Mr. Moniz. That monitoring, that John described, must be 
used in these projects to inform the regulatory development.
    Mr. Hannegan. Senator, one last point, as hard as this 
sounds to go from three projects at 1 million tons each to 2.4 
or so billion by 2030, we absolutely have to do this if we're 
going to address CO2 emissions from the electric 
power sector in a significant way. It's the largest contributor 
in the work that we've done at EPRI, and I don't think anybody 
out there disagrees that it's got to play a significant role. 
The sooner we're able to prove up these technologies, the 
sooner we're able to realize the benefits with respect to 
climate change.
    Senator Domenici. Thank you very much.
    The Chairman. Senator Corker had one final question, and 
then we will dismiss the panel and conclude the hearing, but go 
right ahead.
    Senator Corker. Many of your assumptions--all of your 
assumptions, I think--have talked about a carbon charge. You 
don't have to worry about winners and losers. We do, but what 
is the most efficient way to, if a carbon charge is 
implemented, to implement one, the most efficient way to not 
have unintended consequences. Many of the cap-and-trade 
policies that we look at, you know, they can have a lot of 
unintended consequences. What is the most efficient way, in 
your estimation, to have a carbon charge that has the desired 
outcome?
    Mr. Hannegan. Senator, let me be clear about the work that 
we've done. We don't make any assumptions in EPRI's analysis 
about how the cost comes about. But there is going to, 
inevitably, be an extra cost associated with capturing and 
storing the CO2 from a coal-fired power plant 
compared to just venting it into the atmosphere. There will 
always be a cost, that will be unavoidable. Through technology 
we can reduce that cost from about 50 to 80 percent extra 
today, down to a much more manageable level and that's what we 
think we can do with R&D.
    While we didn't envision the kinds of policies that would 
get you there, you can choose from a range of things from tax 
incentives and loan guarantees and the other, sort of, 
assistance that we've seen in the past, to things like a cap-
and-trade program. We at EPRI have done some work looking at--
if you went a certain direction, how would you design it 
economically in an optimal sense--but I think that's probably a 
topic that deserves a full hearing in and of itself.
    Mr. Deutch. Senator, my goofy economist colleagues tell me 
that the clear answer to this question is a cap and trade 
system. Assuming that you tell me how you're going to allocate 
the allowances initially. Having been in that world, I know how 
hard that is. There are winners and losers in that and there 
are plenty of people I've spoken to who have strong views about 
their rights to have allowances and the other guys' rights not 
to have allowances. So, that's the first thing.
    But, I want to say that we should remember that this is a 
global problem and what will work for us is going to be a lot 
harder to do in India or China where they don't have an 
internal market structure to make this go through. So, we have 
to keep in mind exactly the point you make, what works for us 
isn't necessarily going to work for the rest of the world, 
especially the emerging world, which Senator Domenici quite 
points out has to be a player. So, this is a complicated 
process.
    I, personally, believe for a lot of reasons, that we would 
be much better advised to have a tax, rather than a cap-and-
trade system. It might evolve over time into a cap-and-trade 
system, but I think your life would be easier if we had a tax, 
and in our world.
    Mr. Moniz. I would just add a comment that, first of all, 
we should stress that the MIT report specifically avoids 
talking about how a carbon policy would be implemented, so----
    Senator Corker. It keeps you more popular.
    Mr. Moniz. However, I will put myself in your colleagues' 
camp of certainly feeling that a tax system, a carbon tax 
system is more straightforward, more easily implementable. I 
would just add one other point. That is, there's a lot of 
merit, although it does not resolve, certainly, all of your 
distributional problems. Nevertheless, a revenue neutral tax--
--
    Mr. Deutch. Yes.
    Mr. Moniz [continuing]. Would be the thing to consider. My 
personal--this is purely personal--favorites would be that that 
revenue neutrality would come from some combination of payroll 
taxes and corporate taxes.
    Mr. Lashof. Senator, if I can----
    The Chairman. Let's take one more view and then we'll----
    Mr. Lashof. Senator Bingaman's had days-long workshops on 
this topic, so we won't go into great detail. But, I just want 
to state, for the record, that my view is that a cap-and-trade 
system is the most efficient way to do it, because it puts the 
emphasis on where it needs to be, which is the quantity of 
global warming pollution going into the atmosphere, which we 
need to drive down over time in order to prevent dangerous 
global warming.
    Certainly, there are issues about the impacts of that, and 
who would win and who would lose, and I think those do have to 
be carefully considered and addressed through the way in which 
the emission allowances are allocated and, probably the most 
efficient way to do that is to auction the allowances and use 
the revenue from that to potentially reduce other taxes, or to 
help put some of this new technology that's needed to meet the 
cap, effectively, into the field.
    Again, there's, you know, we could spend a long time 
talking about how to design that, but I think the basic concept 
is, if you want to solve global warming, you need to reduce the 
amount of global warming pollution, so, putting a cap on how 
much goes into the atmosphere and allowing trading of 
allowances is an efficient way to do that.
    Mr. Hannegan. Mr. Chairman, if I may make one quick point? 
If you do the R&D to get to a point where you've got those 
technologies, like we show on the chart over there, you'll 
notice those curves are relatively flat. In other words, 
they're insensitive to the carbon price that you're charging. 
Because they're non-emitting, and so, one of the things I'd 
argue is that, ultimately if you're investing in the R&D, how 
you choose amongst those technologies--be it coal, wind, 
nuclear, what have you--will now become more of a function of 
what makes sense for you at your site and for your utilities; 
you're making investments in the electric sector. And, some of 
the design issues that have come up may, perhaps, be less 
important with a robust technology program.
    The Chairman. Well, thank you all very much. This is very 
useful testimony and we thank you for the report and the, both 
reports, the EPRI report as well.
    We will conclude the hearing with that. Thank you.
    [Whereupon, at 4:06 p.m., the hearing was adjourned.]

                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

    Responses of Daniel A. Lashof to Questions From Senator Bingaman

    Question 1. You believe that carbon capture technology is available 
today to such an extent that Congress should require it on any new 
power plant. This raises two issues:
    Who should bear the risk associated with including these 
technologies that have not yet been demonstrated at the scale of a 
commercial power plant?
    Answer. All elements of CO2 capture, compression, 
transportation and storage have been demonstrated individually, and in 
some cases in combination. Even though capture of CO2 at a 
power plant at the scale required has not yet taken place, the 
technology is for all intents and purposes the same as that deployed at 
synthetic fuels plants where it is currently commercially deployed. 
Consequently, we believe that the owner(s) or operator(s) of the 
capture, transportation and storage facilities should be respectively 
responsible for assuring that the facility operates in compliance with 
regulations during their lifetime. After site closure and 
decommissioning, separate provisions may be appropriate, bearing in 
mind that the transient nature of corporations may not allow them to 
hold responsibility in perpetuity.
    Question 2. Who should pay the additional capital costs or energy 
costs of capture and sequestration if there is not yet a market price 
for greenhouse gasses?
    Answer. The additional costs should be spread over the coal-fired 
power-generation sector. This could be accomplished through a Low 
Carbon Generation Portfolio Standard, whereby a small and increasing 
portion of coal-fired generation would be required to meet an emissions 
level equivalent to an advanced CO2 capture plant. A credit 
trading program would allow generators to meet the standard in the most 
cost-effective way.
    Question 3. The study authors indicate that a regulatory framework 
is needed to oversee site selection for CO2 injection, 
injection operations, and for long term monitoring and management. At 
what level, state, federal, or a combination, do you see this framework 
being introduced?
    Answer. USEPA should regulate CCS. The agency has authority under 
the Safe Drinking Water Act, and has already issued guidances for small 
scale injection projects. However, a much more comprehensive framework 
is needed. We believe that the existing Underground injection Control 
Program model is a good one: USEPA sets federal requirements and 
minimum standards, allowing states to tailor or implement these by 
requesting primacy with administrative and financial support from 
USEPA. A common federal framework is essential to steer the 
regulations. Moreover, some states will have neither the ability nor 
the desire to regulate CCS. However, some issues such as pore space 
ownership and liability are bound to differ from state to state. State 
frameworks are therefore also necessary, as long as they adhere to the 
minimum federal standards.

     Response of Daniel A. Lashof to Question From Senator Sanders

    Question 4. If the Congress adopts your suggestion that no new coal 
plants be built unless they incorporate Carbon Capture and Storage, 
what practical effect would that have on coal plants now in the 
permitting queue?
    Answer. The plants in the permitting phase would need to 
incorporate capture technologies into their design. For proposed 
gasification plants this would be a significant but reasonable 
modification. For proposed conventional pulverized coal plants this may 
require a complete redesign. Utilities and regulators would need to 
evaluate the added costs of the new design and determine whether energy 
efficiency and/or renewable energy investments would be more cost 
effective than continuing with plans to build coal-fired generation.

     Response of Daniel A. Lashof to Question From Senator Salazar

    Question 5. The U.S. Climate Change Technology Program Strategic 
Plan shows that capturing CO2 emissions from fossil fuel 
plants and disposing of it in deep geologic formations is a critical 
technology for preventing global warming. For this to become a 
commercially and legally viable option for mitigating greenhouse gas 
emissions, a robust and transparent regulatory framework for 
CO2 injection deep underground will need to be put in place 
in the immediate future. Is EPA currently devoting the resources 
necessary to develop this framework in a timely manner? And what is the 
timeframe in which this should be developed?
    Answer. USEPA has only dealt with small-scale injections so far. A 
more robust regulatory framework is needed for commercial scale 
projects. The agency is not moving at a pace that we consider 
satisfactory, nor devoting the necessary resources. Large, commercial-
scale CCS projects are imminent. The development of regulations is 
likely to span several years. If we start now, we have a chance of 
having workable regulations by the time the first CCS plants are 
commissioned. We are already late in commencing the regulatory process. 
Congress should direct EPA to devote the resources necessary to 
complete the regulations in a timely fashion.

    Responses of Daniel A. Lashof to Questions From Senator Domenici

    Question 6. A recent NRDC press release on the Future of Coal in a 
Carbon Constrained World Report said:

          The report's examination of policies to promote immediate 
        deployment of CCS systems is incomplete and it fails to address 
        the most urgent problem facing U.S. policymakers: what 
        CO2 performance requirements should be applied to 
        proposed new power plants.

    Mr. Lashof, am I correct to say that traditionally the Natural 
Resources Defense Council has been an ardent supporter of the 
environmental laws of this country?
    Answer. Absolutely--For more than three decades, NRDC has fought 
successfully to defend wilderness and wildlife and to protect clean 
air, clean water and a healthy environment.
    Question 7. Am I also correct to say that the Natural Resources 
Defense Council would expect the government to complete a full National 
Environmental Policy Act assessment before it undertakes a proposal to 
transport and inject the amounts of CO2 recommended for 
injection in the MIT report?
    Answer. Yes, we would expect an environmental impact assessment to 
be carried out before the injections of large volumes of CO2 
in the subsurface.
    Question 8. Given your organization's historic stance that ground 
disturbing activities be fully analyzed, how is it that the NRDC can 
conclude that Congress should direct all new coal fired power plants 
include CCS in the face of MIT's statement that: ``The central message 
of our study is that demonstrations of technical, economic, and 
institutional features of carbon capture and sequestration at 
commercial scale coal combustion and conversion plants, will give 
policymakers and the public confidence that a practical carbon 
mitigation control option exists''?
    Answer. NRDC has been following CCS technology for many years now. 
Consensus exists among experts that, although we need to amass 
additional knowledge and clarify certain areas, no major technical 
barriers exist in deploying this technology in a way that safeguards 
human health and the environment. The barriers are economic and 
regulatory and policy related. Indeed, the MIT states in the same 
report:

          Although substantial work remains to characterize and 
        quantify these [trapping] mechanisms, they are understood well 
        enough today to trust estimates of the percentage of 
        CO2 stored over some period of time--the result of 
        decades of studies in analogous hydrocarbon systems, natural 
        gas storage operations, and CO2-EOR. Specifically, 
        it is very likely that the fraction of stored CO2 
        will be greater than 99% over 100 years, and likely that the 
        fraction of stored CO2 will exceed 99% for 1000 
        years. Moreover, some mechanisms appear to be self-reinforcing. 
        Additional work will reduce the uncertainties associated with 
        long-term efficacy and numerical estimates of storage volume 
        capacity, but no knowledge gaps today appear to cast doubt on 
        the fundamental likelihood of the feasibility of CCS.

    The key words in your question and the MIT statement that you quote 
are ``give policymakers and the public confidence''. The experts have 
already made up their mind on the matter: they see no showstoppers in 
the way of large-scale deployment. They are simply recommending a 
handful of demonstrations with federal involvement to illustrate this 
to the wider public. We second the suggestion and stress the urgency 
with which these should be carried out.
    If performed under adequate regulatory oversight and according to 
best practices (which emphasizes USEPA's role in preparing a regulatory 
framework), we are confident that the risks associated with CCS are 
dwarfed by the risks associated with venting to the atmosphere 100% of 
the CO2, produced by coal plants for the foreseeable future.
    Question 9a. If a utility came to Congress today and said they are 
willing to include CCS, untested as it is, to a proposal for a new 
Integrated Gasification Combined Cycle (IGCC) or Supercritical 
Pulverized Coal (SCPC) plant would the Natural Resource Defense Counsel 
support full sufficiency from all federal environmental laws to get the 
carbon capture and sequestration technology implemented?
    Answer. No.
    Question 9b. If the answer is no:
    Given your unwillingness to provide sufficiency to speed the 
process of CCS and NRDC's longstanding demands that the National 
Environmental Policy Act be strictly adhered to, why should Congress 
legislate a Carbon Sequestration standard without really knowing what 
the environmental impacts of such a standard might be?
    Answer. The NEPA process is site-specific. We do not believe that 
the safety or efficacy of CCS in general will be proved or disproved 
following NEPA review. We believe that a great deal is known about the 
potential environmental impacts of a CCS standard if it is implemented 
and overseen properly. While we have high confidence that CCS can be 
conducted in an environmentally sound manner, it is still essential to 
adhere to existing laws and to examine projects on a case-by-case basis 
to understand local impacts. The NEPA process is also essential in 
reassuring local and other stakeholders about the merits and safety of 
a project. Earning public acceptance is crucial in siting CCS projects, 
and attempting to avoid the NEPA process would likely lead to hostile 
reactions that would actually slow the process of implementing CCS.

    Responses of Daniel A. Lashof to Questions From Senator Bunning

    Question 10. I know the NRDC has opposed coal-to-liquid technology. 
But I have also seen your organization support coal gasification for 
electricity. I understand that your position is coal-to-liquid 
technology will increase CO2 emissions ``well-to-wheels'' or 
``mine-to-wheels'' as is more appropriate and you recommend moving to 
hydrogen and ethanol transportation fuels. But I believe America can 
not transition to a zero-carbon economy overnight. And as corn prices 
have shown us, we can not fuel the entire country on corn ethanol. 
Coal-to-liquid technology will be a bridge for the next decades until 
we have a new, cleaner technology. For example, a coal-to-liquid plant, 
using off-the-shelf carbon capture and sequestration technology and a 
10 percent cellulosic biomass blend in the coal feedstock, would reduce 
carbon emissions compared to gasoline by 30 percent. This is a huge 
reduction. Not to mention that it will provide coal-based electricity 
with carbon capture technology already built in and a gasification 
system ready to promote cellulosic fuels. Given all these advantages, 
what will it take for you to support coal-to-liquid fuel?
    Answer. Liquefying coal to turn it into transportation fuels is an 
inefficient and extremely carbon intensive process. Without carbon 
sequestration it would result in well-to-wheel emissions that are 
double those of petroleum-derived fuels. Even with carbon 
sequestration, the most authoritative studies show that emissions would 
still be higher than from conventional diesel fuel or gasoline. The 
process is also very costly, and a liquid coal industry cannot develop 
without federal support. We consider this an unwise use of taxpayers' 
money, particularly because it is incompatible with the need to curb 
greenhouse gas emissions. Analyses show that the development of a 
liquid coal industry would make carbon mitigation under a cap & trade 
regime much more expensive, and also start using underground 
CO2 storage capacity at rapid rates. We also have no 
evidence that developers are intending to use biomass feedstocks or 
carbon capture AND sequestration from the outset in these plants. There 
are cheaper, cleaner and easier ways to break our oil addiction than 
liquefying coal. If coal is to be used to replace gasoline, generating 
electricity for use in plug-in hybrid vehicles (PHEVs) can be far more 
efficient and cleaner than making liquid fuels. In fact, a ton of coal 
used to generate electricity used in a PHEV will displace more than 
twice as much oil as using the same coal to make liquid fuels, even 
using optimistic assumptions about the conversion efficiency of liquid 
coal plants.\1\ The difference in CO2, emissions is even 
more dramatic. Liquid coal produced with CCS and used in a hybrid 
vehicle would still result in lifecycle greenhouse gas emissions of 
approximately 330 grams/mile, or ten times as much as the 33 grams/mile 
that could be achieve by a PHEV operating on electricity generated in a 
coal-fired power plant equipped with CCS.\2\
---------------------------------------------------------------------------
    \1\ Assumes production of 84 gallons of liquid fuel per ton of 
coal, based on the National Coal Council report. Vehicle efficiency is 
assumed to be 37.1 miles/gallon on liquid fuel and 3.14 miles/kWh on 
electricity.
    \2\ Assumes lifecycle greenhouse gas emission from liquid coal of 
27.3 lbs/gallon and lifecycle greenhouse gas emissions from an IGCC 
power plant with CCS of 106 grams/kWh, based on R. Williams et al., 
paper presented to GHGT-8 Conference, June 2006.
---------------------------------------------------------------------------
    NRDC does not support coal gasification as an end in itself. Rather 
we believe that coal gasification can facilitate CCS, which is an 
essential technology for reducing CO2 emissions from 
powerplants.
    Question 11. The Air Force testing program has shown that because 
of the properties of fischer-tropsch fuel, such as lower burn 
temperature and weight, jets that use that fuel will emit less 
CO2 compared to existing jet fuels. This is on top of their 
confirmation of a significant reduction of other pollutants such as 
sulfur and particulate matter. Are you aware of these beneficial 
characteristics of CTL fuel compared to existing fossil fuels?
    Answer. We are aware of these characteristics, but they do not take 
into account the CO2 emissions associated with these fuels 
over their entire life cycle. These are still far worse than petroleum 
based fuels.
    Question 12. The MIT study indicates that with new technologies, we 
could reduce the CO2 emissions of our current coal power 
fleet by 20%. Yet the study recommends that no government funds for 
used for Research for existing coal power plants. Given the long life-
cycle of a plant and the report's conclusion that coal will continue to 
be used well into the future, do you think it makes sense to 
incentivize technology retrofits that reduce CO2 emissions?
    Answer. The most pressing need is to ensure that no NEW plants get 
built without capturing their CO2 emissions from the outset. 
As the MIT report points out, retrofitting requires major overhaul and 
large expenses. By building conventional plants we risk locking 
ourselves into several decades' worth of new emissions, and into added 
costs of CO2 control. In the case of very old and 
inefficient plants, a new plant might be economically preferable to a 
retrofit. In the case of a more recent build, this might not be the 
case. We do believe research to reduce the costs of all types of carbon 
capture should be funded, but under no circumstances should it be used 
as an excuse for postponing action and not utilizing technologies that 
are available to us now.
    Question 13. The report also highlights that China and India will 
be building hundreds of new coal-fired generation units in the coming 
decade using old technology. Regardless of whether of not these 
countries agree to limit CO2 emissions, they will have a 
huge need for retrofit emissions technology. The report, however, 
recommends no government support for developing this technology. Why do 
you oppose the government supporting emission reducing technology for 
use here in America and abroad?
    Answer. Although we do not speak for MIT, it is not our 
understanding that the report recommends that no funds be spent on 
retrofit technology research--on the contrary, the report states that:

          The U.S. 2005 Energy Act contains provisions that authorize 
        federal government assistance for IGCC or pulverized coal 
        plants containing advanced technology projects with or without 
        CCS. We believe that this assistance should be directed only to 
        plants with CCS, both new plants and retrofit applications on 
        existing plants.

    We agree with this statement, and stress the need to fund research 
that leads to real and measurable emission reductions. In the case of 
CCS, sequestering CO2 is a necessary requirement. Federal 
money needs to be used wisely, and as a trigger for much larger private 
sector investment.
    Question 14. The MIT Study indicates that China alone will account 
for more than half of the global growth in coal supply and demand in 
the next 25 years. Why do you think China would be willing to 
participate in a carbon capture and sequestration scheme like the one 
the report proposes within the next ten years?
    Answer. As we understand it, the report proposes ``negotiating a 
global agreement featuring delayed adherence to a carbon charge for 
developing economies'', not a carbon capture and sequestration scheme. 
In other words, developed countries should lead by legislating 
comprehensive carbon policies and specific emission limits. We believe 
that developed countries will need to transfer their technological 
know-how to developing countries in a concerted way if emissions are to 
be curbed in time. China understands that global warming is a serious 
threat to its food supply and water supply, among other concerns. With 
effective leadership by the United States and active engagement with 
China we believe that China and other developing countries will 
participate appropriately in international efforts to prevent dangerous 
global warming.

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