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S. HRG. 110–826 

DEPARTMENT OF ENERGY’S DECISION TO 

RESTRUCTURE THE FUTUREGEN PROGRAM 

HEARING 

BEFORE A

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SPECIAL HEARING 

MAY 8, 2008—WASHINGTON, DC 

Printed for the use of the Committee on Appropriations 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 
(II) 

COMMITTEE ON APPROPRIATIONS 

ROBERT C. BYRD, West Virginia, Chairman 

DANIEL K. INOUYE, Hawaii 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

BARBARA A. MIKULSKI, Maryland 

HERB KOHL, Wisconsin 

PATTY MURRAY, Washington 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

RICHARD J. DURBIN, Illinois 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

JACK REED, Rhode Island 

FRANK R. LAUTENBERG, New Jersey 

BEN NELSON, Nebraska 

THAD COCHRAN, Mississippi 

TED STEVENS, Alaska 

ARLEN SPECTER, Pennsylvania 

PETE V. DOMENICI, New Mexico 

CHRISTOPHER S. BOND, Missouri 

MITCH MCCONNELL, Kentucky 

RICHARD C. SHELBY, Alabama 

JUDD GREGG, New Hampshire 

ROBERT F. BENNETT, Utah 

LARRY CRAIG, Idaho 

KAY BAILEY HUTCHISON, Texas 

SAM BROWNBACK, Kansas 

WAYNE ALLARD, Colorado 

LAMAR ALEXANDER, Tennessee 

CHARLES KIEFFER, Staff Director 

BRUCE EVANS, Minority Staff Director 

SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT

BYRON L. DORGAN, North Dakota, Chairman 

ROBERT C. BYRD, West Virginia 

PATTY MURRAY, Washington 

DIANNE FEINSTEIN, California 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

DANIEL K. INOUYE, Hawaii 

JACK REED, Rhode Island 

FRANK R. LAUTENBERG, New Jersey 

PETE V. DOMENICI, New Mexico 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

ROBERT F. BENNETT, Utah 

LARRY CRAIG, Idaho 

CHRISTOPHER S. BOND, Missouri 

KAY BAILEY HUTCHISON, Texas 

WAYNE ALLARD, Colorado 

Professional Staff 

DOUG CLAPP

ROGER COCKRELL

FRANZ WUERFMANNSDOBLER

SCOTT O’MALIA (Minority) 

BRAD FULLER (Minority) 

Administrative Support 

MICHAEL BAIN
(III) 

C O N T E N T S 

Page 

Opening Statement of Senator Byron L. Dorgan .................................................. 1 

Opening Statement of Senator Pete V. Domenici ................................................. 3 

Prepared Statement of Senator Mitch McConnell ................................................ 3 

Statement of Senator Christopher S. Bond ........................................................... 4 

Statement of Senator Larry Craig ......................................................................... 5 

Statement of Senator Richard J. Durbin ............................................................... 6 

Statement of Senator Wayne Allard ...................................................................... 8 

Statement of Hon. Samuel W. Bodman, Secretary, Department of Energy ....... 9 

Prepared Statement ......................................................................................... 11 

Commitment to Clean Coal ..................................................................................... 11 

Original FutureGen Approach ................................................................................ 12 

Changing Technology, Markets, and Regulations ................................................. 12 

Decision to Restructure FutureGen ....................................................................... 13 

Retrofitting Existing Coal Plants ........................................................................... 14 

CCPI Round Three Solicitations ............................................................................. 15 

Revised FutureGen Project ..................................................................................... 16 

Coal Policy Issues .................................................................................................... 17 

FutureGen Revision ................................................................................................. 18 

Coal Technology ....................................................................................................... 19 

Loan Guarantees ..................................................................................................... 20 

Original FutureGen Project .................................................................................... 21 

FutureGen Cost Increase ........................................................................................ 21 

Increase Cost of Projects ......................................................................................... 23 

Project Management ................................................................................................ 24 

Project Management Cost Increases ...................................................................... 25 

New Initiatives ......................................................................................................... 26 

Prepared Statement of Senator Richard J. Durbin .............................................. 27 

Introduction—A Commitment to FutureGen at Mattoon ..................................... 27 

FutureGen as Originally Conceived ....................................................................... 27 

DOE Abandons Mattoon ......................................................................................... 28 

The Efforts of Illinois .............................................................................................. 28 

DOE’s Inadequate Explanations ............................................................................ 28 

DOE and the United States Have Lost Credibility .............................................. 29 

The FutureGen Alliance is an Unprecedented Industrial Partnership ............... 29 

Climate Change and the Need for Coal ................................................................. 29 

FutureGen at Mattoon Should Proceed ................................................................. 29 

Statement of Paul W. Thompson, Chairman of the Board, FutureGen Industrial Alliance, Inc. ................................................................................................ 29 

Prepared Statement ......................................................................................... 32 

Benefits of FutureGen at Mattoon ......................................................................... 33 

Project Costs and Financing ................................................................................... 34 

History of DOE Interactions ................................................................................... 37 

DOE’s Proposed Restructuring ............................................................................... 40 

Additional Committee Questions ............................................................................ 54 

Questions Submitted to Hon. Samuel W. Bodman ............................................... 55 

Questions Submitted by Senator Robert C. Byrd ................................................. 55 

Questions Submitted by Senator Wayne Allard ................................................... 57 

Questions Submitted by Senator Richard J. Durbin ............................................ 57 

Questions Submitted to Paul W. Thompson .......................................................... 59 

Questions Submitted by Senator Wayne Allard ................................................... 59 

(1) 

DEPARTMENT OF ENERGY’S DECISION TO 

RESTRUCTURE THE FUTUREGEN PROGRAM 

THURSDAY, MAY 8, 2008 

U.S. SENATE, 

SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT, 

COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 9:34 a.m., in room SD–192, Dirksen 

Senate Office Building, Hon. Byron L. Dorgan (chairman) presiding. 

Present: Senators Dorgan, Domenici, Craig, Bond, and Allard. 

Also present: Senator Durbin. 

OPENING STATEMENT OF SENATOR BYRON L. DORGAN

Senator DORGAN. We’ll call the hearing to order. This is a hearing of the Senate Appropriation Committee, the Subcommittee on 

Energy and Water. We have called a hearing today to discuss the 

Department of Energy’s FutureGen project and the development as 

a result of the announcement by the Department of Energy of that 

project and the advancement of other related issues on carbon capture and storage. 

In June we will be taking up climate change legislation on the 

floor of the United States Senate. It underlines once again, the urgency that all of us feels about the need to have technology capable 

of allowing us to continue to use our coal resources and capture 

carbon and sequester carbon in order to protect our environment. 

Even as we pass climate change legislation, I don’t think climate 

change legislation is likely to go to the President for a signature 

this year. But we will take it up on the floor of the Senate. 

And I think all of us understand that the three remaining candidates in the race for the presidency all believe there needs to be 

legislation enacted. So it’s very likely that, at the very least, next 

year climate change legislation will be enacted. And the question 

seems to me for a good many of us is with 50 percent of the electricity coming from coal and with climate change legislation being 

enacted calling for targets and time tables and so on. 

How do we continue to use our coal resource without causing 

damage to our environment? The answer to that is through technology and through learning. Through demonstration projects and 

going from demonstration to commercial application of projects that 

will capture carbon and sequester carbon or use carbon for beneficial use, financed oil recovery or perhaps producing algae and 

therefore diesel fuel and so on. 
2 

I mention all of that only because I think this is a critical area 

and a very important issue. And the timeline is becoming much 

tighter than previously. Some long while ago the concept of a 

FutureGen was created and the FutureGen project was—I kind of 

see it as a big bang project where you put together a number of 

different technologies with a coal-fired IGCC plant that brings together many different technologies which includes on the back end 

capture and sequestration, of carbon. 

And the FutureGen project, when announced, was announced 

with great excitement. Then as time moved on and various selections were made and sites were established and so on, the Department of Energy announced the costs of the FutureGen would be increasing and their estimated cost to completion would increase. 

And ultimately the Department of Energy announced that they 

were abandoning the FutureGen project as we know it with one 

large project and going to reformulate that to several smaller 

projects. 

Even as that is working with the announcement by the Department of Energy the Clean Coal Power Initiative, I think has been 

suffering for money. And in part, perhaps because of FutureGen, 

but for whatever reasons the Clean Coal Power Initiative which I 

view just as urgent because it’s the initiative that will move out the 

funding for various projects around the country that will give us 

also information about technology and capability of carbon capture. 

And we have, I think, short changed the Clean Coal Power Initiative. 

Now I don’t know what we should do about FutureGen frankly. 

I’m not an expert in this area, but I do think this. I think that the 

ultimate decision about FutureGen should probably be made in 8 

or 10 months by the next administration. 

In the meantime that should not be meant to express that we 

can tread water or waste time. I’m going to emphasize in the mark 

up of our bill this year a substantial amount of income necessary 

to be applied to the Clean Coal Power Initiative. We’ve got to move 

ahead. And move ahead with urgency. 

We need to understand what we’re doing here. We need to get 

these projects out. We need to understand the capability with both 

demonstration and also the potential commercialization of opportunities to capture carbon. 

And ultimately we’ve got to have targets and time tables in the 

climate change legislation that meets the technology capability because if we don’t, we’re in big trouble. As I said with half of our 

electricity coming from coal if we’re not going to decide one day by 

the way there’s going to be no coal used. And so the question is 

how do we use coal. And much of the answer to that is in the bowels of the Department of Energy’s projects and the projects that we 

will fund here in this subcommittee. 

So we’re holding a hearing today to better understand what the 

Secretary has announced with respect to his judgment about 

FutureGen. And what he would like to do moving forward. And 

what I’m saying is that I believe that ultimately the fate of the 

FutureGen project, as we know it, will likely be made by a new administration. 
3 

But in the meantime the Secretary’s judgment about what we do 

with respect to other resources that are vitally necessary to allow 

us to continue to use coal and do so while we protect the environment. It’s just very important. And there’s a much greater urgency 

about that now than there was previously. 

So I’m going to call on my colleague, Senator Domenici, for an 

opening statement. And then if we can very brief statements from 

the other members of the subcommittee because we want to move 

on. We’re going to have a rather lengthy hearing, I think. 

Senator Domenici. 

OPENING STATEMENT OF SENATOR PETE V. DOMENICI

Senator DOMENICI. Thank you very much, Mr. Chairman. Thank 

you for attending, Mr. Secretary. And let me suggest that it has 

been this Senator’s impression that our country has been rather 

fortunate that you have become our Secretary. 

More things are being done at the Department than ever before 

in history. And that there’s more prospects for good things to happen, coming forth from your management of that Department. That 

I’m very hopeful, whatever your goals are for completion before you 

leave, that you will be able to achieve them. 

Obviously it is not a good thing that happened to FutureGen because there was a lot of expectation that will not be achieved at 

least in the time span and pursuant to the ideas that were originally put forth. But I believe it’s important that we hear and pay 

attention carefully to your views as to why what happened happened. Now there seems to be, some people seem to be talking 

about Congress issuing this contract on FutureGen. 

I don’t believe we can do that. I don’t believe we’re in the business of issuing contracts. I think we’re in the business of providing 

authority for the executive branch to do that. 

PREPARED STATEMENT

I hope we have an honest evaluation from both sides, good discussion and that perhaps as a result of openness and indication of 

grave concern on all parts that some good will come of this hearing. 

I thank you for coming. And I thank you for calling the meeting, 

Mr. Chairman. 

Senator McConnell has submitted a statement to be inserted in 

the record. 

[The statement follows:] 

PREPARED STATEMENT OF SENATOR MITCH MCCONNELL

Thank you, Mr. Chairman, for convening this hearing of the Subcommittee on Energy and Water Development to discuss FutureGen and carbon capture technologies. 

This is an issue that is very important to my State. 

First, I would like to recognize Paul Thompson, who will testify on behalf of the 

FutureGen Industrial Alliance. Paul is a resident of Louisville, Kentucky, and he 

currently serves as the chairman of the board of the FutureGen Industrial Alliance. 

In addition to his duties on the FutureGen board, Paul serves as senior vice president of Energy Services at E.ON U.S. Paul is also a leader in his local community, 

dedicating his time to the University of Kentucky Center for Applied Energy Research, Greater Louisville Inc., as well as the Louisville Free Public Library Foundation and the March of Dimes. I am pleased to have him here today to receive an 

update on the FutureGen Alliance. 
4 

Each time a Kentuckian turns on their favorite television show or uses their computer they likely owe the ability to do so to coal. That is because Kentucky derives 

over 90 percent of its electricity from coal. While coal is a vital part of Kentucky’s 

economy, it also provides over half the country’s electricity and constitutes over 90 

percent of America’s fossil-fuel resources. The truth is we have enough coal in America to supply our Nation for more than 250 years. 

The use of this abundant resource in local power plants has played no small part 

in economic development in my home State. We have some of the lowest power rates 

in the Nation, which helps attract new industries and bring high-paying jobs to local 

communities. We must maintain that competitive advantage by ensuring incentives 

for the development of clean coal and carbon capture technologies. 

Kentucky, along with the rest of the Nation, can and will be a leader in working 

toward producing clean coal energy. I have met with many leaders in the coal industry as well as other Kentuckians who are excited about the possibility of continuing 

to provide America’s power in an innovative and environmentally responsible manner. I look forward to working with them to make sure we reach that goal. 

Senator DORGAN. Senator Domenici, thank you very much. Let 

me also echo my colleague’s comments. Secretary Bodman, you’ve 

had kind of a unique position of being well qualified for the position that you’ve been appointed to. That doesn’t always happen in 

the Congress. And I’ve enjoyed working with you. 

Senator Bond. 

Secretary BODMAN. Thank you, sir. 

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Mr. Chairman, Senator 

Domenici, Secretary Bodman. The chair and the ranking member 

have already said the nice things that you deserve to have said 

about you. I’m very happy to endorse them. 

The one little area where we have discussed previously, I’ve 

talked with the White House. I’ve talked with the leadership of the 

Congress. The leadership of this subcommittee is about FutureGen, 

the importance of FutureGen at Mattoon. But as you can tell, it’s 

important to me and I’m excited to hear the chairman’s proposal 

to make major contributions towards speeding up clean coal technology. 

We’ll hear about all these things in FutureGen. Then we’ll hear 

most of all about the need to avoid further delay in this area. 

These are all important points. 

But I think we ought to look at it in the big picture. We’re all 

here because we’re committed to making our energy cleaner, our 

families, our children, our climate, all demanding cleaner energy. 

And on their behalf, I think we stand at the edge of a new era of 

clean energy which produces little or no pollution or energy production will emit nothing more than clean, pure water in the environment. 

It’s a long way to go towards zero pollution. Unfortunately, I 

think we’re doing far too little to enter this era. Now don’t get me 

wrong, I agree with what Senator Domenici said with the executive 

branch, your Department, with the leadership of Congress, the 

scores of bright and dedicated professionals that you have at DOE. 

You’re researching and developing these technologies. In the area 

of coal we need to find ways to make current plants pollute less. 

Capture carbon emissions and sequester them. The problem is they 

have too few resources which limit them to too few projects. 

They have the technology they’ve developed in the labs, but they 

can only afford small pilot scale testing. And it’s a whole lot easier 
5 

to make up, do something in a lab than to demonstrate it and to 

apply it in a commercial setting. And I think that’s where we have 

a slightly different focus. 

Only when these technologies become proven, reliable, affordable, 

will they become widespread. Only when we can export proven and 

affordable technologies to big polluters like China and India will 

they be willing to join us. I happen to think that President Bush 

is Asia Pacific partnership, sharing these clean coal technologies 

with our late, large Asian nations. 

It’s not only the best hope we have for getting worldwide air 

cleaner and improving it, but it means jobs for American workers. 

But this era will take money every year, not tens or hundreds of 

millions, but billions of dollars. Not 5 or even 10 years, but perhaps 

20 years. And we’ll not be getting there by fighting over little 

pieces of the small pie. We’ll not get there by trying to convince 

ourselves that three little projects are better than one. 

It’s not how we put a man on the moon. It’s not how we ended 

a world war. It’s not how we’ll usher in a new clean energy era. 

Embracing clean energy means providing resources and order of 

magnitude more than we ever have before for everything from 

clean coal to nuclear, solar, wind, clean cars, energy efficient buildings and homes and we need the technology not in test plants, but 

in every plant. We need hybrid cars, not in yuppie garages, but in 

every garage. We need the technology that someday is affordable 

for rich countries, made affordable for all countries. Then all of us 

can enter the clean, new, clean energy era. 

That’s not going to happen today. We need to start it. And I appreciate so much the leadership of the chairman and ranking member of this subcommittee. And I’m pleased to be one of the ones 

supporting as best we can their efforts. Thank you, Mr. Chairman. 

Senator DORGAN. Senator Bond, thank you very much. Senator 

Durbin is a member of the full committee and has asked to join us 

this morning. I’m pleased to extend that courtesy on this subcommittee. Senator Durbin, thank you. 

Senator DURBIN. Thank you very much. 

Senator DORGAN. Let me call on Senator Craig for a brief opening comment and then I’ll call on you Senator Durbin. We’re trying 

to keep comments as short as we can. And then we’ll call on Secretary Bodman for his statement. 

But Senator Craig, would you proceed. 

STATEMENT OF SENATOR LARRY CRAIG

Senator CRAIG. Thank you very much, Mr. Chairman. Secretary, 

we’re pleased to have you with us this morning. Idaho doesn’t 

produce one modicum of coal. So from a passionate point of view, 

I may be less concerned about FutureGen. But I still remain extremely concerned about FutureGen or future technologies as it relates to coal. 

And it’s quite simple, Mr. Secretary, crude on the world market 

hit $124 today. It is $3.65 headed for $4 at the pump. The news 

is saying it could go to $7 a gallon? I mean there are long list of 

things out there that are frustrating Congress and the American 

people at this moment relating to energy. 
6 

We’re debating climate change. And my guess is within the next 

year this Congress will stumble into and a President may sign a 

climate change bill that will or won’t distort a market. We don’t 

know yet what is happening. 

What we do know is critically necessary. And this country has 

the unique opportunity to lead, to lead the world in areas of technology using public resources, well directed for the purpose of 

maximizing that. I find it almost unforgivable that the politics of 

this country would tumble us into a cap and trade and market control system when we could lead the world in technologies that 

would make us cleaner. 

We never dreamed that last June, China would surpass us in 

carbon emissions into the environment. But they did. We expected 

it down the road a good number of years. 

But it’s now happening. So there is a world out there crying for 

a need for change and a reasonable supply of cost effective energy. 

And in the area of electrical generation there is no question in my 

mind that coal must play a role. 

So I hope this is not an opportunity lost. For if it is, then shame 

on us and shame on you. And so I’m anxious to hear your point 

of view this morning on what it does represent. Because opportunities lost when we passed EPACT 5 and we said that in that field 

in which we knew not where to go we would provide loans and opportunities to push technology out to the edge. Some would win 

and some would lose. 

That was 2005. It’s 2008 and not a loan has been yet issued. And 

so I’ll chat about that in my question and answer period. 

Am I frustrated? Yes. I am. 

And a Congress that wants to get something done 20 years later 

than they should have started. And an administration that clearly 

wants to get something done too. And that we can’t harmonize on 

some of these key issues that take us into the future with the kind 

of leadership and technology that will be critical. Thank you. 

Thank you, Mr. Chairman. 

Senator DORGAN. Senator Craig, thank you very much. Senator 

Durbin. 

STATEMENT OF SENATOR RICHARD J. DURBIN

Senator DURBIN. Senator Dorgan, thanks to you and Senator 

Domenici, my colleagues, for giving me an opportunity to join you 

this morning to speak about the FutureGen project. I welcome Secretary Bodman, as I’m sure you already have and I’m certain that 

his testimony and mine may be at variance. And I would like to 

explain my point of view about what happened with the FutureGen 

project. 

We face a challenge in this country. And I think each of us understand it, how to come up with energy sources to fuel our economy and serve our country and do it in an environmentally, responsible way. 

And so over 5 years ago President Bush came up with a novel, 

creative and innovative approach. He suggested that we would 

build an electric powered generating facility, powered by coal that 

would have zero emissions. It was a source of great pride for the 

administration when they announced this over 5 years ago. This is 
7 

the website of the U.S. Department of Energy up to and through 

the day when they made the site selection, when the FutureGen 

Alliance made its site selection. 

In fact this continued to be on their website with great pride long 

after that selection had been made. Well, as a result of the announcement by the Bush administration about this new, exciting, 

research project, seven States took this administration and its word 

and got into fierce competition to win this site. The States included: North Dakota, Wyoming, Texas, Illinois, Kentucky, Ohio 

and West Virginia. 

The competition went forward with great expense, great investment by each one of these States. It wasn’t a casual commitment. 

They had to prove that theirs was the best site in the Nation for 

this groundbreaking technology that would finally allow us to sequester carbon dioxide so it wouldn’t get into the environment and 

cause environmental damage. And at the same time we could unleash the potential of coal as an energy source. 

My State went into this competition with great excitement and 

enthusiasm. Illinois is part of the Illinois Basin Coal Reserve. It is 

a huge energy reserve smack dab in the middle of the United 

States. And we decided we want to be sure that we were well represented and that our communities went in competition. 

We first went to southern Illinois. The natural place where most 

of the coal mines originally were located and then realized because 

of seismic concerns, which we learned about a few weeks ago, we 

couldn’t qualify. But we found another place in the State, two communities in the central part of the State including Mattoon, Illinois. 

And I want to just tell you, members of the committee; they put 

their heart and soul in this effort. Mr. Secretary, every member of 

those communities from the chamber of commerce, working people 

and businesses. I mean they really believed in what this administration said that this was the promise of the future and they want 

to be part of the future. 

And they went to their State legislatures and said to them, we 

need your help too. We need loan guarantees. We need to make 

sure we are competitive so that this project will work. 

On a bipartisan basis in the Illinois general assembly they got 

that cooperation. They passed that legislation. They went to the 

Governor and the administration at the State level. I haven’t seen 

an effort by this administration to try to win a Federal grant the 

way they did. And it went forward. 

And of course the field was narrowed in terms of site selection 

until December of last year when it came down to two States, 

Texas and Illinois. And the FutureGen Alliance was to make the 

selection. The Illinois site had been endorsed by more than just Illinois. In fact, the States of Indiana, Kentucky, Michigan, Ohio, 

Pennsylvania, West Virginia, Wisconsin and Wyoming all endorsed 

this effort. Saying they thought Mattoon, Illinois, the Illinois site 

was the right place to go. 

Now I understand, Mr. Secretary, this wasn’t your idea. 

FutureGen preceded your arrival here in Washington as Secretary 

of Energy. But that website and that proposal and all of this effort 

went on for a full 2 years after you became Secretary. 
8 

It wasn’t until the FutureGen Alliance chose Mattoon, Illinois 

over the Texas site that a few weeks later you came to my office 

and said that’s the end of the project. We’re killing it. That will be 

the end of FutureGen. Saying at the time we’re concerned about 

the cost. 

You know, I understand that. We should be concerned about cost. 

The longer you wait on a project, you know it’s going to cost more 

each year. 

FutureGen Alliance represents international and national private 

sector partners who are willing to share in the cost of that. Did you 

negotiate with them? No. You walked away from it. You pulled the 

plug on this project and left these people hanging after 5 years of 

effort. 

Well, the good news is that a new administration is on the way. 

And I hope that administration will have a more enlightened and 

positive view toward the opportunity that FutureGen will provide 

for us. I think what you did, what the administration did, not only 

to my State, but to the seven States that in good faith competed 

for this, was unfair and unfortunate. For the good and future of 

coal as an energy source, I hope that we can keep FutureGen alive 

after you’re gone. 

Senator DORGAN. Senator Durbin, thank you. I want you to save 

some for questions, if you’re able to stay around. But thank you 

very much. 

Senator Allard, did you wish to make a brief opening statement? 

STATEMENT OF SENATOR WAYNE ALLARD

Senator ALLARD. Just a brief one if I might, Mr. Chairman. 

Senator DORGAN. Yes, please. 

Senator ALLARD. Mr. Chairman, thank you for holding this hearing. Coming from the State of Colorado I’m a strong proponent of 

the use of coal for electrical generation. The FutureGen concept is 

one that I’ve been looking forward to seeing come to reality. So I 

was concerned about reports of restructuring the proposal and deviating from the original intent of research and development. As a 

scientist I’m strongly supportive of basic science. 

Once the new proposal was clear however, I was very interested 

to hear that the administration has chosen to focus on multiple 

commercial demonstrations of carbon capture and storage capabilities rather than taking the more narrow approach of a single research and development facility. I happen to believe that competition between scientists serves us best. I think it also helps save the 

taxpayer dollars. And I was equally concerned when we saw the 

high cost of this particular project evolve as it developed. 

So I think that you’ve taken a responsible approach. So I look 

forward to hearing your testimony and to engaging a dialogue with 

you on this matter. Thank you. 

Senator DORGAN. Senator Allard, thank you very much. Mr. Secretary, thank you for being with us. Again, I thank you for your 

work. This issue is a controversial issue as you know. And we 

asked you to come and give us your perspective. 

What we have heard so far is really only the public announcements. Although, we’ve, a number of us have had some phone calls 

from you. But you may proceed with your statement. 
9 

Your entire statement will be made a part of the permanent 

record and you may summarize. 

STATEMENT OF HON. SAMUEL W. BODMAN, SECRETARY, DEPARTMENT OF ENERGY 

Secretary BODMAN. I’ll do that, sir. I do appreciate the opportunity to discuss this matter with you. Also to discuss the FOA or 

the Funding Opportunity Announcement that occurred yesterday 

related to the restructured program. 

In the beginning of my remarks I’d like to make one thing clear. 

I made a very difficult decision to restructure the FutureGen 

project. And I did it in order to save it from itself. 

Without this intervention I do not believe the originally structured project was sustainable either politically or economically. 

And that in order to bring the vitally important technology of commercial scale carbon capture and storage or CCS as we call it, to 

the marketplace a change in the project structure simply had to be 

made. Understanding the series of events which led us to this decision is fundamental to appreciating the need for restructuring and 

to fostering support for the path forward. 

To begin I believe that it is necessary to acknowledge that America’s energy production, as you know, is heavily reliant on coal. 

Coal powered electricity generation accounts for roughly half of our 

domestic electricity mix. And it is the most abundant of our domestic fossil fuels with some estimates accounting for recoverable reserves of roughly 240 years at current use. 

However coal powered electricity also accounts for a significant 

release of carbon dioxide emissions into the atmosphere. It was 

with those realities in mind that the President proposed the concept of FutureGen. The project was originally envisioned as a large 

scale engineering laboratory for testing new, clean power, carbon 

capture and coal to hydrogen technologies. It was originally conceived of as a $950 million public/private 

venture. Using escalation factors at the time the program was conceived the original estimate was roughly $1.1 billion instead of 

$950 million. I think that’s a fair number to use. 

However by early 2007 the escalated estimated cost of the project 

increased to roughly $1.8 billion. With the taxpayers responsible 

for 74 percent of the total cost and the private sector partners responsible for 26 percent. That means the taxpayer was being asked 

to shoulder at least $1.3 billion of a projected total project cost 

which we anticipated would only continue to escalate in the future. 

The Alliance, for its part, almost doubled the number of companies involved in the project between 2005 and 2007. Even though 

the American taxpayer was being asked to fund $1.3 billion instead 

of $700 million or almost double, an individual company participating in the Alliance actually was investing less money than they 

were before. Something in my judgment was profoundly wrong with 

this deal. 

These problems did not go unnoticed by Congress. In fact this 

very subcommittee issued report language during the debate over 

fiscal year 2008 appropriations process that stated ‘‘the subcommittee has emphatically stated its intent and has warned that 

this R&D project (that is to say FutureGen) must not be funded at 
10 

the expense of the balance of the coal R&D program.’’ The House 

Appropriations Committee went even further calling on DOE last 

summer to restructure FutureGen in a fashion that is quite similar 

to what we have already done. 

Concurrent with the reexamination of the project and the cooperative agreement significant changes in the marketplace began to 

occur. And they continue to this day. When FutureGen was first 

announced, few proposals for the construction of the highly technical, integrated gasification and combine cycle or IGCC coal plant, 

they hardly existed. 

Today there are three operating IGCC plants with two more in 

the permitting process and nearly an additional 30 in various 

stages of planning. Carbon capture and storage technology has also 

made important strides since the original FutureGen program was 

launched in 2003, largely through the efforts of DOE’s carbon sequestration program. 

Adding to these changes is the recent trend of regulatory uncertainty. More and more we are seeing States and communities say 

no to the construction of new coal-fired plants. As a result we’ve 

seen 36 powerplant cancellations, 14 postponements between January 2007 and March of this year. 

Collectively these plants would have produced an estimated 37 

gigawatts of electricity. Depending on how much a typical house 

would use that’s about 37 million houses in America. So it’s a sizable amount. As you can tell from these statistics the need to demonstrate CCS technology on a commercial scale is now. And we believe that FutureGen is the appropriate program to get it done. 

This brings me back to the decision to restructure the program. 

After 7 months of discussions between DOE representatives and 

the FutureGen Alliance it became evident to me that we could not 

reach agreement on the amount of cash that would be contributed 

to the project by the Alliance along with an allocation, a change in 

the allocation of risk in the future. A number of you I’ve spoken 

to about this personally. 

Recognizing that our failed attempts at limiting taxpayer exposure required us to change course, we undertook a formal effort 

last December to build upon our previous work. While taking into 

account the technology advances and the new market conditions to 

restructure the project. The goal of demonstrating system integration of CCS technologies in our restructured FutureGen program 

remains the same as the original FutureGen approach announced 

in 2003. 

The difference is that under the restructured program our plan 

with current cost estimates will support funding for multiple commercial demonstrations of integrated advanced CCS technologies 

that will operate commercially from the start. While also harnessing the power of the private sector innovation, capping taxpayer exposure and maximizing the impact of Federal investment. 

To move this restructured FutureGen program forward DOE 

launched an aggressive schedule for its implementation including 

a request for information issued last January which resulted in a 

significant amount of input from over 50 parties that responded to 

that. Yesterday the Department issued a draft funding opportunity 

announcement or FOA which will allow perspective proposers an 
11 

opportunity to provide the Department with additional input before 

we release the final FOA by mid summer with an announcement 

of selections targeted for December of this year. 

As I explained at the start, coal is a strategic energy resource for 

America. Our commitment to coal cannot waiver. But to be successful in confronting the energy and environmental challenges before 

us, we cannot continue the business as usual approach. 

We must continually ask if we are efficiently using our taxpayer 

investments to achieve a cleaner, more sustainable, more affordable and more secure energy future. Where we are not, we must 

make changes. That is the difficult responsibility of leadership. And 

that is exactly what we are doing with the FutureGen program. 

PREPARED STATEMENT

Mr. Chairman, I know that you and the other Senators have 

questions for me. So at this time I would like to enter my written 

statement for the record. Thank you. 

[The statement follows:] 

PREPARED STATEMENT OF HON. SAMUEL W. BODMAN

Chairman Dorgan, Senator Domenici, members of the subcommittee, I appreciate 

the opportunity to discuss with you the status of the Department of Energy’s 

FutureGen program. Today I will summarize how we have restructured the program, describe the reasons for the restructuring, and then discuss in greater detail 

how we intend to carry out the program. 

COMMITMENT TO CLEAN COAL

The United States Government is on an ambitious course to develop and deploy 

clean energy solutions that are technologically feasible, commercially scalable, and 

economically sustainable to increase America’s energy security while reducing 

greenhouse gas emissions. 

America’s energy production, as you know, is heavily reliant on coal. Coal powered 

electricity generation accounts for roughly half of our domestic electricity mix and 

it is the most abundant of our domestic fossil fuels, with some estimates accounting 

for recoverable reserves of roughly 240 years at today’s usage rates. Of course, the 

burning of this tremendous resource for electricity generation results in a release 

of emissions, including carbon dioxide, which is widely identified as contributing to 

climate change. 

Last month President Bush announced a national goal to stop greenhouse gas 

emissions growth by 2025. This is a major step forward in the United States’ ongoing efforts to address global climate change. Deploying advanced technology, including carbon capture and storage (CCS), will play a vital role in U.S. efforts to meet 

this goal. And advancing CCS technology in a commercial setting at an accelerated 

pace is a key objective of the restructured FutureGen initiative that I am here today 

to discuss. 

The focus of our restructured FutureGen program remains the same as the original FutureGen approach announced in 2003—to maximize the effectiveness of our 

national investment in clean coal research through demonstration of cutting-edge 

system integration of CCS technologies. The difference is that under the restructured program, our plan aims to support not just a single R&D testing laboratory, 

but rather to provide funding for commercial demonstration of integrated, advanced 

CCS technologies. 

FutureGen is one of a suite of initiatives in our broad portfolio to advance clean 

coal technology. We are spurring investment in advanced fossil energy technology 

by supporting not only robust research and demonstration, but also making available nearly $10 billion in publicly-backed incentive measures through 2010, including: 

—Up to $8 billion in loan guarantees to support advanced fossil energy projects 

that deploy the most promising new or significantly improved technology. In addition, the Department identified three integrated gasification combined cycle 

(IGCC) projects during its first round of loan guarantee solicitations that we 
12 

have invited to submit a full application, on which we expect to begin our thorough financial and technical review this year. —Portions of $1.65 billion in clean coal tax credits to reduce risks of early commercial deployment of advanced clean coal technologies. 

U.S. investments to demonstrate the potential of clean coal technology, including 

carbon sequestration, are leading the world. Since 2001, the administration has invested more than $2.5 billion in clean coal technology, including carbon sequestration projects and IGCC research that have advanced our understanding of the potential for clean coal technology. In addition, our budget request for next year is the 

largest amount requested for DOE’s coal program in more than 25 years. This $648 

million request will further the development of more efficient gasification turbine, 

and carbon capture technologies, drive innovations for existing coal power plants, 

and support large-scale CCS injection tests that are critical to demonstrating the 

safe and permanent storage potential in domestic geologic formations. 

ORIGINAL FUTUREGEN APPROACH

As announced in 2003, the FutureGen program was originally envisioned as a 

large-scale engineering laboratory for testing new clean power, carbon capture, and 

coal-to-hydrogen technologies. It was conceived as a $950 million public/private venture with the taxpayers responsible for 74 percent of the total project cost and the 

private sector partners responsible for 26 percent. In December 2005, the Department formally entered into a Cooperative Agreement with the FutureGen Alliance 

to build and operate the facility. 

In 2007 the estimated cost of the project had increased roughly to $1.8 billion, 

of which, the Department would be responsible for at least $1.3 billion of the total 

cost, which we believed would only continue to escalate and would ultimately threaten funding for our other ongoing coal research and development projects. As such, 

Deputy Secretary Clay Sell and others immediately made our concerns known to the 

Alliance in a meeting in April 2007; we began internal deliberation on changing the 

scope of the project that spring and summer; and we engaged Congress on the cost 

escalation issue relative to the fiscal year 2008 appropriations process. In fact, report language issued by this subcommittee stated, ‘‘the subcommittee is concerned 

about maintaining adequate funding for the core fossil energy research, development, and demonstration programs. The subcommittee has emphatically stated its 

intent and has warned that this R&D project must not be funded at the expense 

of the balance of the coal R&D program.’’ 

By the end of the summer, we began formal negotiations with the Alliance to limit 

taxpayer exposure, change the scope of the project, and ultimately restructure the 

terms of the Cooperative Agreement to make the project sustainable and viable. 

CHANGING TECHNOLOGY, MARKETS, AND REGULATIONS

At the same time that the FutureGen project was experiencing dramatic cost escalation, significant changes were occurring (and continue to this day) within the technology field, the marketplace, and the regulatory environment. When FutureGen 

was first announced, few proposals for the construction of the highly technical IGCC 

coal plants existed. Today, in addition to the two IGCC plants currently operating 

on coal in Florida and Indiana, and one operating on pet-coke in Delaware, two 

newly proposed IGCC power plants have passed the permitting process (an AEP 

plant in Illinois and a Duke plant in Indiana), and nearly 30 additional clean-coal 

plants of this type have been publicly announced and are in various stages of planning. 

Carbon capture and storage technology has also made important strides since the 

original FutureGen program was launched in 2003. DOE’s Carbon Sequestration 

program has developed a network of seven Regional Carbon Sequestration Partnerships to help demonstrate the technology, infrastructure, and basis for regulations 

necessary to implement large-scale carbon dioxide (CO2) sequestration projects in 

different regions and geologic formations across the Nation. The Partnerships have 

estimated that U.S. geologic formations have the technical potential to store more 

than 600 billion metric tons of CO2, the equivalent of more than 200 years of emissions from stationary fossil energy sources in the United States. The large-scale 

tests are a continuation of the 25 small-scale geologic storage tests that the Partnerships are implementing today and the characterization phase for these large scale 

injections that was successfully completed in 2005. 

Those marketplace changes and technological advances are important, as is the 

recent trend of regulatory uncertainty. More and more, we are seeing States and 

communities say ‘‘No’’ to the construction of new coal-fired plants because of concerns over the carbon dioxide emissions they will produce, in addition to cost consid-
13 

erations. Further, some companies have become concerned about investing in coal 

plants, even those utilizing advanced technology, citing uncertainty about future 

regulations. 

As a result of regulatory, economic and environmental concerns, we’ve seen 36 

power plant cancellations and 14 postponements between January 2007 and March 

2008. Collectively, these plants would have produced an estimated 37 gigawatts of 

electricity. 

The marketplace is showing increased interest in beginning the deployment of 

commercial scale IGCC plants that could be coupled with carbon capture and storage technologies. As I see it, we need to use the FutureGen program to spur the 

use of this advanced technology and at a faster rate. 

DECISION TO RESTRUCTURE FUTUREGEN

Returning to our decision to restructure FutureGen, after several months of discussions between DOE representatives and the FutureGen Alliance, it became evident that we could not reach agreement to revise the cost sharing arrangement for 

cost escalations in a manner that would limit in a reasonable way the Government’s 

financial exposure on this project. Moreover, the Alliance insisted on leveraging 

major portions of its 26 percent contribution as debt against the entire project. Recognizing that our efforts to limit taxpayer exposure had been unsuccessful, we undertook a formal effort last December to reconsider the direction of the FutureGen 

Project, with the intent to build upon the technology advances in CCS and respond 

to the new market conditions, while retaining and accelerating the original goal of 

finding a way to produce electricity from coal with dramatically lowered emissions 

into the atmosphere. 

After much thought and consideration, I chose to restructure the FutureGen 

Project in order to improve the prospect of success for the commercial introduction 

of this technology within the increasingly urgent timeframe that the global situation 

requires. Without this intervention, I believe that the originally structured project 

would not have been sustainable—either politically or economically—and that, in 

order to bring the vitally important technology of commercial-scale CCS to the marketplace, a change in the project structure simply had to be made. 

Unlike the original approach, the new plants are expected to operate commercially 

from the start and will provide a significant amount of electricity to our Nation’s 

electric grid. This should help meet the Nation’s rapidly growing demand for energy, 

while also demonstrating the commercial viability of permanently and safely storing 

carbon dioxide deep underground. These commercial plants should be able to be replicated around the world. The power sector should be able to plan and to finance 

new state-of-the-art coal facilities based upon cutting-edge system integration of 

CCS technologies at commercial plants under the restructured FutureGen program. 

The restructured approach harnesses the power of private sector innovation, caps 

taxpayer exposure, and maximizes the impact of the Federal investment while substantially increasing our likelihood of success. 

—Projects collectively will sequester at least double the amount of CO2 expected 

from the original FutureGen program. The CO2 generated by each plant will be 

sequestered in a saline formation. 

—Projects will build on technological R&D advancements that have been made 

since the FutureGen concept was announced in 2003, which include laboratoryscale and small-scale carbon sequestration projects, through the Regional Carbon Sequestration Partnerships. 

—Projects aim to hasten the timeframe for full-scale commercial operation of 

IGCC or other advanced technology coal power plants with CCS, enabling market use as soon as the plants are commissioned. 

—This approach allows us to join industry in an effort to build clean-coal plants 

by providing funding for the addition of CCS technology to multiple plants. 

—Projects will demonstrate the integration of CCS technology with advanced coalpower electricity generation, and seek to clear hurdles associated with early 

technology demonstration, thereby increasing the likelihood of rapid commercial 

deployment after 2015. 

—Projects will help provide the technology basis to inform regulatory and technology development to the next generation of coal plants, many of which are facing cancellations due to concerns about the statutory and regulatory situations 

relating to greenhouse gas emissions. 

To move this restructured FutureGen program forward, DOE launched an aggressive schedule for its implementation. The Department initiated this schedule with 

a Request for Information (RFI) to secure industry input in advance of a competitive 

solicitation to provide financial assistance for CCS demonstrations integrated with 
14 

market-ready, commercial IGCC or other clean technology coal power plants. The 

deadline for the public to submit comments was March 3, 2008. I am pleased to report to you that many of the approximately 50 parties that responded to the RFI 

expressed strong interest in conducting coal-based projects using CCS. The comments we received from the RFI provided valuable input into the development of 

a draft Funding Opportunity Announcement (FOA), the next stage of moving forward with the restructured FutureGen program. 

This week the Department issued a draft FOA, which will allow prospective applicants an opportunity to provide the Department additional input before we release 

the final FOA this summer. Following the issuance of the final FOA, we will evaluate the applications received, and hope to announce selections in December 2008. 

After successful completion of National Environmental Policy Act (NEPA) analyses, 

commercial operations could begin in 2015. 

CONCLUSION

As I explained at the start, coal is a strategic, energy security resource. It is the 

most abundant, lowest-priced fossil fuel in the United States and will remain a 

major source of energy both at home and abroad well into this century. In 2007 

alone, the United States consumed 1.1 billion tons of coal, and that figure is expected to grow to an estimated 1.5 billion tons by 2030, a 37 percent increase, according to DOE’s Energy Information Administration. 

The United States must continue to use coal, and we are committed to doing so 

more cleanly and efficiently while, at the same time, reducing its environmental impacts. 

Our commitment to coal cannot waver, but to be successful in confronting the energy and environmental challenges before us, we cannot continue the business-asusual approach. We must continually ask if we are using our taxpayer investments 

efficiently to achieve a cleaner, more sustainable, more affordable and more secure 

energy future. Where we are not, we must make changes. That is the difficult responsibility of leadership and that is exactly what we are doing with the FutureGen 

program. Understanding the series of events which led us to this decision is fundamental to appreciating the need for the restructuring and to cultivating and engendering support for the path forward. I hope that my testimony before this subcommittee will help shed light on these issues and illustrate the vital need to support and proceed with the revised project. 

The Department appreciates the support we have received from Congress in our 

efforts to advance clean coal technologies, and we look forward to continuing that 

partnership. We hope you will join us in supporting the restructured FutureGen 

program. 

I thank you, Mr. Chairman, for scheduling this hearing and for your interest in 

the new FutureGen program, and I look forward to answering any questions that 

you and members of the subcommittee may have. 

RETROFITTING EXISTING COAL PLANTS

Senator DORGAN. Secretary Bodman, thank you very much. I 

think from the opening statements you understand that most of us 

feel there is an urgent need to move and move quickly. You indicated that in your statement. And I indicated in my opening statement that the need for us to pursue the Clean Coal Power Initiative and do that aggressively. 

You know when the President announced at the start of his term 

a $2 billion pledge for clean coal technology which then has 

morphed into a Clean Coal Power Initiative. The seven plus, now 

8 years of the administration has come up far short of that pledge. 

I mean, and that includes FutureGen. 

If you take a look at what’s been requested for the clean coal 

technology or Clean Coal Power Initiative and the money that’s 

gone out the door and include FutureGen with that which I understand you define as part of the Clean Coal Power Initiative. It’s far 

short of what the President said should be done. And now we come 

to the tip of the pyramid with climate change and all of these 

issues. It makes it even more urgent that we be more aggressive. 
15 

Now let me ask a question about—I know that you don’t put together the final budget. You ask for the money you think is necessary. You then send it to OMB and then you’re not able to tell 

us what you ask OMB for. And then OMB sends the President. 

And so, you know we have this annual spring ritual where you 

can’t answer the questions that we ask. 

But let me ask a question. 

Secretary BODMAN. I think that is accurate, sir, if I may say. 

Senator DORGAN. Yes, well, as I said, I think, at the last hearing, 

I said former Congressman Parker was sitting at the table. And he 

in a moment of great candor in response to Senator Bond actually 

told us an answer to the question and the next morning he was 

fired. 

The answer to the question was; are you getting the money you 

need. The answer is no. This budget is short of that. And the next 

morning he was no longer working. So we understand the pain on 

the chair on which you sit. 

But let me ask about the annual EIA outlook. I have a graph 

from March 2008 that you’re, no doubt, are familiar with. It shows 

that 79 percent of the CO2 generated by coal-fired plants in 2030 

will come from coal-fired plants that exist today, so about 80 percent of that which will be emitted by these plants in 2030 in terms 

of CO2 will come from plants that exist today. 

That seems to me to indicate an urgency to work on retrofitting 

existing plants with new technology and that that is as much or 

perhaps even more critical than building new plants. Now I’m not 

suggesting we shouldn’t have a new plan. I’m not suggesting I oppose FutureGen. I am saying, however, that we’ve got a range of 

things to deal with. 

And I guess the first question is why are we not addressing the 

retrofitting of existing plants? 

Secretary BODMAN. I think we are, I mean. 

Senator DORGAN. How are we doing that? 

Secretary BODMAN. We’re doing that through CCPI. That’s what 

differentiates CCPI from FutureGen and from other programs. It is 

meant to deal with the question of retrofitting. 

Senator DORGAN. But I just described the under funding of that 

by the administration. 

Secretary BODMAN. Well, it’s $85 million, the research. 

Senator DORGAN. This year. Last year was—— 

Secretary BODMAN. Last year was somewhat less than that. 

Senator DORGAN. But my point is it doesn’t, that none of this meets the President’s objective of saying we’re going to do $2 billion in 10 years. 

Secretary BODMAN. I think that we’ve done over $2.5 billion during the 8 years that this President has been in office. And so—— 

Senator DORGAN. Well, we’ll compare notes, but—— 

Secretary BODMAN. I’d be happy to go through all that with you. 

CCPI ROUND THREE SOLICITATIONS

Senator DORGAN. Sure. On the Clean Coal Power Initiative 

you’re about 44 percent of what was pledged at near or the end of 

the term. So let me ask about the Round Three solicitations. 

Secretary BODMAN. Right. 
16 

Senator DORGAN. It seems to me that is the best existing program for demonstrating the addition of these existing plants to this 

approach. And yet, Round Three is lagging and tell me what’s happening with Round Three. 

Secretary BODMAN. We need about $300 million, my recollection is. And with the 2009 request which is about $85 million, best 

memory serves, that would put us at $300 million and we would 

be able to proceed with Round Three. 

Senator DORGAN. So when do you think the administration will 

make an announcement on Round Three? 

Secretary BODMAN. It’s going to be a function of budget matter 

when we get the money. 

Senator DORGAN. And so if there’s? 

Secretary BODMAN. I believe I think we’re required to have 

enough money in the till at the time we solicit the input. And so 

it’s going to be whenever we get the budget done, hopefully this 

summer. 

Senator DORGAN. Mr. Secretary, you called me when you were 

about to make your announcement. And you described most of the 

announcement, I think, to cost increase. 

Secretary BODMAN. That was what originally got me started, I 

think, in terms of thinking about this. The question of going in 2 

years time from roughly 2005 we had the number verified by the 

way in early 2005 or early to mid 2005. And by the time 2 years 

had passed we saw a scale up from $1 billion, $1 billion to $1.8 billion. 

There was a meeting that occurred with all of the chiefs following my talking to Mike Morris who is the chairman of American 

Electric Power. And I talked with him about the need for changing 

this. This whole thing where we were funding 74 percent of it yet 

the Alliance had the opportunity to continue to enlarge their membership. 

They actually saw a decline having doubled the total cost of the 

program and the report I got back from the meeting of the CEOs 

was no one in the room believed that this project could be built for 

$1.8 billion, no one. That said to me that we had a major cost 

issue. 

Senator DORGAN. Now the Federal commitment for that was $1.1 

billion as I understand it, given the cost. Is that correct? Federal 

commitment? 

Secretary BODMAN. It was a—well, it would have been $1 billion. 

We were committed to 74 percent according, on the original 

FutureGen. And that’s roughly $1.3 billion out of $1.8 billion. 

REVISED FUTUREGEN PROJECT

Senator DORGAN. So your call for the follow on projects is about 

equivalent then, $1.3 billion? You’re talking about the smaller 

FutureGen project? 

Secretary BODMAN. Well, exactly. I mean that was—when I 

talked to Morris, I said, look, I will live with the $1.3 billion. And 

I will go to OMB to try and get the $1.3 billion. But I will ask you 

to make a commitment to change the Alliance’s future cost allocation because I wanted there to be some pressure on them since 

they were making all the decisions on this project. And I was put-
17 

ting up all the money. It didn’t—there was a loss of connection 

there. 

Senator DORGAN. Do you believe there should be additional 

FutureGen like projects including the integrated projects of the 

type that the Department originally announced in 2003? 

Secretary BODMAN. Of course, that’s what the revised the adjusted FutureGen is. 

Senator DORGAN. Just not this project. 

Secretary BODMAN. That’s what it is. 

Senator DORGAN. Just not this project you’re saying. 

Secretary BODMAN. It is more modest spending. It is, you know, 

roughly one-third of the cost of the total project. And there are limits as to how far we can go. 

Senator DORGAN. Right. 

Secretary BODMAN. That’s what the issue is. 

Senator DORGAN. Right. I have some additional questions, but let 

me turn to Senator Domenici. 

COAL POLICY ISSUES

Senator DOMENICI. Mr. Secretary, we have worked together on a 

lot of projects, for instance, nuclear power starting from a position 

where we were down and out to a position where nuclear power 

may indeed be undergoing a renaissance. And you in your position 

and we in ours up here, we all saw it as something urgent that had 

to be done. 

Secretary BODMAN. Right. 

Senator DOMENICI. Now, I’m going to state for myself that probably the aspect of the United States Government’s energy policy 

that has least affected me, affected me the least has been our coal 

policy. The implementation of our coal policy has, you know, it borderlines a dud from this Senator’s standpoint. We just don’t seem 

to be getting it done. 

We don’t seem to be cleaning up the coal sufficiently which we’ve 

had a lot of money poured into clean coal technology. We don’t 

seem to be getting our act together with reference to using coal in 

other ways, coal to liquid. 

We don’t seem to be getting our act together in terms of cleaning 

up coal in ways that we know are necessary for the climate change 

issue. We don’t seem to be making great strides, and you correct 

me on this one, in terms of sequestration, are we? 

Secretary BODMAN. No, sir. I mean, I think that’s fact. 

Senator DOMENICI. Yes, I do too. Thank you very much. Now 

having said that I guess I would ask before I get to this program 

do you have a couple of sentences or a couple of observations as to 

why that’s the case? 

Secretary BODMAN. I think the—it’s very difficult for the Government to get itself organized to effect massive change. Having said 

that, I do believe we are, at long last, on the right path, on the 

right track. I think this FutureGen project as we have redefined it 

will build hopefully two or three competing CCS programs that will 

be connected to IGCC or other type of electricity generation. That’s 

what the hope is and the goal. 

Senator DOMENICI. And you’re suggesting that FutureGen was 

going to solve one of these problems of fumbling around and not 
18 

knowing exactly where we’re going and not having control because 

of what you described. Is that right? 

Secretary BODMAN. Well, I think, look, what I think happened 

was the world changed as we were working on this. 

Senator DOMENICI. Yes. 

Secretary BODMAN. We didn’t have IGCC plants that were built 

and operating heretofore. We do now. And I think the goal has 

been to try to respond to those changes. That’s what this new this 

revised CCS program is all about, about the FutureGen program. 

FUTUREGEN REVISION

Senator DOMENICI. Now, Mr. Secretary, having said these few 

preliminary things. There’s lots of blame to go around. I, myself, 

think we haven’t spent enough time in oversight over this. 

We keep pouring money into so-called clean coal technology for 

at least the last 12 years. I don’t know if Senator Craig thinks that 

it’s been weak, as I do. But I think it’s been a weak effort. I think 

I know why. But I haven’t spent enough time to get it on the 

record. 

FutureGen was intended to be a workable program in terms of 

the application of technology to the solution of a big American 

problem regarding coal. Is that right? 

Secretary BODMAN. That’s correct. 

Senator DOMENICI. That’s what FutureGen was. 

Secretary BODMAN. That’s correct. 

Senator DOMENICI. Now from my standpoint I’m not going to— 

I want you to tell us one more time as brief as you can, why you 

cancelled it. What is the outcome going to be for America in terms 

of the utilization of our coal in some programmatic way by you as 

you push for the alternative? Could you do that one more time? 

Secretary BODMAN. Sure. Look, I think this is a critically important program that is to say using coal. It’s very important to the 

country that we find a way to use the coal that we have available. 

FutureGen, as we have revised it, I believe is current and that it 

deals with the current marketplace, that is to say, the existence of 

IGCC projects which are three in number that exist today. There’s 

some 30 more that are in various stages of planning. 

There seems to be, I hesitate to say it, because we don’t know 

it yet, but there seems to be a commitment on the part of the industry that if we fund CCS they will build the IGCC plant. And 

I believe we will get the support of States. We have had a number 

of States, Florida, Kansas, the State of Washington, the State of 

Minnesota, the State of California, all of which have got either legislation or have outright turned down coal based projects based on 

the carbon dioxide emissions. 

This, I think, is a reflection of—and that’s only during this last 

year that we’ve sort of seen that occurring. 

Senator DOMENICI. Yes, sir. 

Secretary BODMAN. And so that’s the reason that we have 

changed the program. It would have been a lot easier for me not 

to suffer Senator Durbin’s criticisms and been a lot easier for me 

personally to have let this thing slip by and to go forward with the 

Alliance and have everyone be happy. In my judgment it was not 

the right thing to do. 
19 

And so I have acted in the way that I have acted and made the 

decisions that I have decided. But they were done in good spirit. 

They were done with good intentions. And they were done in order 

to try to protect the American taxpayer. 

Senator DOMENICI. Now what’s the result going to be the way 

you’re doing it? 

Secretary BODMAN. The result is going to be multiple projects, 

multiple programs. We don’t have funding yet from Congress, but 

assuming we get funding and get the $1 billion, $1.3 billion over 

time, we’ll have multiple programs, multiple projects in different 

geographical areas that will demonstrate on a commercial basis 

that this approach works. 

Senator DOMENICI. Thank you very much. 

Senator DORGAN. Senator Bond, or Senator Craig? I’m sorry. 

COAL TECHNOLOGY

Senator CRAIG. Thank you, Mr. Chairman. Well, Mr. Secretary, 

I’ve listened with great interest because it’s an issue that I have 

not focused on with the intensity that I might have had I been a 

coal producing State. But I do reflect some concern. 

And the concern is we’re about ready here in Congress to produce 

a climate change bill. 

Senator DOMENICI. Right. 

Senator CRAIG. And that more than likely will have a cap and 

trade scheme in it that is beyond the imagination of human kind 

to create, but we will create it. We’ll create a board and we’ll redistribute wealth in an unprecedented way. That may happen. 

But something else could happen if the technology of coal isn’t 

advanced as rapidly as we can advance it. We may set in motion 

a fuel switching reality in the utility industries of our country that 

could chase gas out of the stratosphere. We’ve already seen a huge 

relocation of gas affected industries into the Middle East. 

Secretary BODMAN. I agree with you. 

Senator CRAIG. Billions of dollars of investment going there now 

because it won’t come here. 

Secretary BODMAN. That’s correct. 

Senator CRAIG. And that’s a tragedy. It is a tragedy of our economy. It is a reality of the markets. 

Secretary BODMAN. You bet. 

Senator CRAIG. What are we going to do if we are politically so 

stupid as to create a scheme we cannot even begin to proceed. And 

we create in the marketplace an anomaly of fuel switching before 

the technology gets to coal to make it clean. Now, I don’t know that 

you can answer that question. 

But let me tell you of my frustration because you just hit on it 

a moment ago when you said, it’s very difficult to get a government 

organized. Government is about as nimble as a turtle with its head 

buried. And I’m not going to suggest that DOE has been much different. I think you reflected that in your statement of frustration 

a moment ago. 

And I’m going to tell you that my frustration is that I sat down 

with a fellow by the name of Brian Foody, the CEO of Iogen Corporation a week ago after I had been up to Ottawa to look at the 

facility. And a sense that we’re at the verge of dislocating the food 
20 

chain by the phenomenal acceleration of corn based ethanol and it 

was critically important that we bring to the market cellulosic 

based ethanol. 

Secretary BODMAN. Right. 

LOAN GUARANTEES

Senator CRAIG. They’re not coming to the lower 48 now because 

they can’t get the loan guarantee in a timely fashion. So they’re 

going to build their first out of laboratory, commercial facility in 

Canada. And I and others had worked a long time to nurture this 

and move it rapidly starting in 2005. 

But because those loan guarantees didn’t come in 2007 and 

aren’t out yet in 2008 their investors, Shell and Goldman Sachs 

said do it. Don’t wait for the Government of the United States. 

Move. And they’re moving. 

Now we’re going to get the technology in time, I suspect. But it’s 

not going to be in the lower 48 to begin with. And of course I was 

excited about it. I was focused on it because it was Idaho. 

Secretary BODMAN. Sure. 

Senator CRAIG. Because they had found the kind of base of fuel 

of substance they needed, if you will, the cellulosic materials. 

Again, the nimbleness of government today in a time of urgency is 

to me, frustrating. And that’s why I’m here today to listen with 

great detail about decisions made as it relates to where we’re headed. 

At a time when CEOs of utilities are telling me, we’ll put some 

money up. Government can partner with us. We’ve got to get to the 

technology because if we don’t and if you do, meaning if you do create a climate change policy, than we’re going to see the escalation 

of power rates beyond our greatest imagination if we have to start 

fuel switching to meet the needs. 

Any general comment you want to make on that? 

Secretary BODMAN. Well, first of all on Iogen, the—and to defend 

my colleagues who are working on the loan guarantee office. 

Senator CRAIG. Now, I agree, you’re working now. 

Secretary BODMAN. At the time the loan guarantees were first 

talked about we put out a request. I think there were 16 positive 

responses, one of which was Iogen. 

Senator CRAIG. That’s correct. 

Secretary BODMAN. Iogen has never responded, sir, to my knowledge with a loan application. And so they are well down on the list 

in terms of where their problems are, at least as a—I asked because I, anticipating your question I asked that this morning. And 

so to my knowledge Iogen is not even considering coming here. So 

I can’t respond to that other than saying in terms of the loan guarantee issue. 

Senator CRAIG. Well it’s my reaction based on my conversation 

with them and will not take this any further than to say the timeliness of where they are and where we are here with loan guarantees. And yes, they’re in the 16. And they did make that final 

project sponsor group. Is the reality of timing that has been almost 

4 years now in the making and yet not a loan. Are you prepared 

to make loan guarantees before the end of 2008? 

Secretary BODMAN. Yes, sir. 
21 

Senator CRAIG. Ok. So that’s—you’re going to make it in a window of 3 years. And, you know, I and a good many members of this 

subcommittee have been terribly frustrated by that. 

And my reaction is quite simple. Because we could not be nimble, 

we lost potentially, a substantial project for the lower 48. It is in 

the hemisphere. It will ultimately come if its technology is proven. 

And it appears that it can be. I’ve been there to see it. I’m no scientist, but it appears to be working. 

And there’s going to be heavy investment made in it now. 

Secretary BODMAN. I hope that’s the case. 

Senator CRAIG. Enough said. Enough said. A frustration, let me 

say, registered. Thank you. 

Secretary BODMAN. Thank you, sir. 

Senator DOMENICI. What was that comment, sir? What was your 

comment? What was your comment? You said something. 

Secretary BODMAN. I was just agreeing with the Senator, that’s 

all. 

Senator DORGAN. Thank you, Senator Craig. Senator Durbin. 

ORIGINAL FUTUREGEN PROJECT

Senator DURBIN. Thank you, Mr. Chairman. Secretary, when you 

opened you said that the FutureGen project in your words in your 

written statement was unsustainable, politically and economically. 

You used an example, 37 communities resisted the construction of 

new coal-fired plants. I can tell you there was no resistance to the 

idea of building FutureGen in Mattoon, Illinois. 

Secretary BODMAN. I’m glad to hear it, sir. 

Senator DURBIN. Well, I think you’re well aware they worked 

hard to bring that plant. There’s no NIMBY involved here. So the 

political resistance to locating the plant, I don’t know how that 

would apply to this circumstance at all. 

The second point about whether this is economically sustainable. 

I’d like to take you back in history to February 2003 when President Bush announced this project. Now you weren’t the Secretary 

at that time, but I’m sure you’ve reviewed what he had to say. 

Secretary BODMAN. Right. 

FUTUREGEN COST INCREASE

Senator DURBIN. He said that it would cost about $1 billion. And 

he said that the Department of Energy, the Federal Government 

was going to carry about 80 percent of the cost. 

You come to us today and say well, another reason why I ended 

FutureGen was the Federal Government was going to have to carry 

74 percent of the cost. From the President’s initial announcement 

the Federal Government was prepared to cover 80 percent of the 

cost. 

Second, you say there was a scale up in cost. Mr. Secretary, 

when the President announced the $1 billion, he announced it in 

2004 constant dollars. He didn’t build inflation into the estimated 

cost of the project. He knew. We knew. Everyone knew. The project 

would take time to build. And inflation would add to its cost. 

Now there is an assumption moving from $1 billion or $1.1 billion to $1.8 billion of an inflation rate for construction projects of 

5.2 percent over the period of time to 2017. Do you dispute that? 
22 

Secretary BODMAN. Yes, sir. 

Senator DURBIN. Do you think that any project that you are 

going to fund that involves construction will not face the same inflation rate of somewhere near 5.2 percent over a similar period of 

time? 

Secretary BODMAN. No, I do dispute that. I think the issue of— 

first of all, we had that cost estimate verified in, I think I mentioned, in the middle of 2005. So, and it was $1.1 million, pardon 

me, $1.1 billion. 

In 2 years time this escalated from $1.1 billion to $1.8 billion. 

Senator DURBIN. Well let me stop you there and ask you—— 

Secretary BODMAN. And—— 

Senator DURBIN. So was there a change in the project? Had they 

somehow or another changed the scope of the project in that period 

that resulted in this increased estimate as to its cost? 

Secretary BODMAN. In fact we talked to them about reducing the 

scope of the project. 

Senator DURBIN. But was there a change in the original scope of 

the project? 

Secretary BODMAN. No. 

Senator DURBIN. I know there wasn’t. 

Secretary BODMAN. No. 

Senator DURBIN. And you make that point in your letter—— 

Secretary BODMAN. Right. 

Senator DURBIN [continuing]. To the FutureGen Alliance. So 

from the moment that President Bush announced this project until 

you started getting worried about its cost there was no change in 

its scope. The only difference is the estimate of what inflation will 

be. 

Secretary BODMAN. It’s not a matter of inflation, Senator. 

Senator DURBIN. Well, please explain to me. If you’re not chang- ing the scope of the project, how do you move from $1.1 billion to 

$1.8 billion? 

Secretary BODMAN. Because the cost of doing this and undertaking this project reviewed as having escalated by far more than 

5 percent a year. 

Senator DURBIN. Why? 

Secretary BODMAN. I don’t have an answer to that. 

Senator DURBIN. Well that is the critical question. Because I 

think it gets to the heart of your decision. Any time that you’ve expressed concern to me about the FutureGen project—— 

Secretary BODMAN. Right. 

Senator DURBIN. It wasn’t about whether there would be a 

NIMBY that Mattoon may someday change its mind about a coalfired plant. 

Secretary BODMAN. No. That was not the concern. 

Senator DURBIN. So there was no political sustainability question. The only questions you’ve ever raised to me relate to cost. 

Secretary BODMAN. That’s correct. 

Senator DURBIN. And if the project itself is still the project that 

President Bush announced. 

Secretary BODMAN. Yes. 

Senator DURBIN. In February 2003, the FutureGen Alliance has 

not added to the cost of that project. What the—if there’s any in-
23 

crease it’s because of your best guess and their best guess as to 

what inflation would do. 

Secretary BODMAN. That’s far more than inflation. 

Senator DURBIN. Explain to me what is the difference then? 

Secretary BODMAN. It’s one—the difference in 2 years time of going from $1.1 billion to $1.8 billion. It’s more than inflation. 

Senator DURBIN. Explain to me what was it? 

Secretary BODMAN. That’s a 50 percent increase. That’s 25 percent a year. 

Senator DURBIN. Well the question is why. Why did it increase in cost from $1.1 billion to $1.8 billion? 

Secretary BODMAN. I don’t know the answer to that. But I—— 

Senator DURBIN. Well isn’t that a question you should be able to 

answer before you pull the plug on a project after 5 years? 

Secretary BODMAN. No, I wouldn’t think so. 

Senator DURBIN. I would think it’s the first. 

Secretary BODMAN. Let me explain to you, sir. I raised the issue 

with respect to the chairman of American Electric Power. And I did 

that directly with him, personally. 

And I told him that this would not, in my judgment, if it was $1.8 billion, and I could live with a $1.3 billion. And I told him I 

would live with—try to get the $1.3 billion out of OMB that in the 

case of American Electric Power and the Alliance that I wanted 

them to share in the future on a more equitable basis of what I 

viewed a cost share ought to be. It ought to be 50–50. And I never 

got that. 

Senator DURBIN. What was the President’s original proposed cost 

share? It was 80–20. 

Secretary BODMAN. The President’s original cost share was apparently 80. I don’t know that. 

Senator DURBIN. Yes. 

Secretary BODMAN. Ok. 

Senator DURBIN. So in good faith all of these States and all of 

these companies engaged in their pursuit of this project understanding that they would be responsible for 20 percent of the cost. 

Secretary BODMAN. Senator? 

Senator DURBIN. You can not explain to me why there’s such a 

variance in the estimated cost of the project. And you certainly are 

now criticizing a percentage, 74 percent, which is lower for the Federal Government than the President originally envisioned. I can’t 

follow you. I don’t think this was—— 

Secretary BODMAN. You can’t follow it? You do follow me, sir. 

Senator DURBIN. No, I don’t. I tell you, you say this was an act 

of political courage when you can’t answer these basic questions. 

Secretary BODMAN. I do answer the basic questions, sir. 

INCREASE COST OF PROJECTS

Senator DURBIN. You have not. You have not explained to me the 

difference. 

Secretary BODMAN. There has been an escalation in the cost of 

all projects—— 

Senator DURBIN. Yes. 

Secretary BODMAN [continuing]. Throughout the world. 

Senator DURBIN. Yes. 
24 

Secretary BODMAN. Right? 

Senator DURBIN. Yes. It’s called inflation. 

Secretary BODMAN. If that’s how you want to describe inflation. 

Senator DURBIN. That’s what I’ll call it. Let’s call it inflation. 

Secretary BODMAN. You can call it inflation, but there is an increase in costing of what it costs to undertake capital projects. 

Senator DURBIN. And so it—— 

Secretary BODMAN. There is also a problem with respect to people, getting people to do the work. 

Senator DURBIN. So if we face a project. 

Secretary BODMAN. Yes. 

Senator DURBIN. That is a long term project that involves inflation in construction cost. 

Secretary BODMAN. Yes. 

Senator DURBIN. You are going to show the courage to pull the 

plug on that project? 

Secretary BODMAN. We’ll show the courage to, at a minimum, try 

to renegotiate the cost sharing in the future such that there is, 

what I consider to be a more equitable sharing of future cost. 

Senator DURBIN. Well I thank the subcommittee. You’ve given 

me more than enough time. But I would not describe it as courage 

to ignore inflation any more than it is courageous to ignore gravity. 

Secretary BODMAN. Well. 

Senator DURBIN. And in this case that project cost more because 

it’s being anticipated that it would take until 2017 until completion. And to think that the President’s original $1 billion estimate 

would not increase over that period of time is fact less. 

Secretary BODMAN. It did increase. It went to $1.8 billion. 

Senator DURBIN. It did. And any project would have. 

Secretary BODMAN. And it was probably headed to something significantly more than that. 

Senator DURBIN. And I hope—— 

Secretary BODMAN. And you want to have $3 billion shipped to 

Illinois. More power to you, Senator and get it done. 

Senator DURBIN. We were in competition with a lot of States including Texas. 

Secretary BODMAN. I understand that. And I’m all for you. I really am. But I—— 

Senator DURBIN. I’m not sure you’ve shown that, Mr. Bodman. 

Thank you. 

PROJECT MANAGEMENT

Senator DORGAN. Senator Domenici, did you have a further inquiry? 

Senator DOMENICI. I thought I had one here just a second ago, 

but it got away from me. Let me just think here a minute. I wanted 

to ask Mr. Bodman a question. 

At the point in time when you looked at the program and saw 

that the price was what everyone calls, escalating rapidly. 

Secretary BODMAN. Right. 

Senator DOMENICI. How much money did you actually have that 

you could apply to the project? And by that question, I mean, 

weren’t you and/or others going to have to get more money from 

the Government? 
25 

Secretary BODMAN. Oh, yes, sir. We think we had $160 million. 

Senator DOMENICI. And how much were you going to have to look 

for, the extra there, $500 million? 

Secretary BODMAN. Well, $1.3 billion. So it was going to go up 

by $1.1 or $1.2 billion. 

Senator DOMENICI. Alright. 

Secretary BODMAN. And it was likely to go beyond that. 

Senator DOMENICI. And was that part of your consideration? 

Secretary BODMAN. Yes, sir. 

Senator DOMENICI. That you might not get the money? 

Secretary BODMAN. Oh, absolutely. 

Senator DOMENICI. Alright. Thank you very much. Thank you, 

Mr. Chairman. 

Senator DORGAN. Mr. Secretary, before you leave, Senator Durbin asked a question, I think, that’s an important question. And 

the fact is you know and I know that under a number of administrations of both parties, big projects managed by the Department 

of Energy, have in many cases turned out to be vastly more expensive. 

Secretary BODMAN. Right. 

Senator DORGAN. And in many cases mismanaged, frankly. 

Secretary BODMAN. They have been. 

Senator DORGAN. And so we have a history here of big projects 

which come in costing much, much more than was estimated. You 

know, the question my colleague asked was a pretty reasonable 

question. And that is what’s causing this? What causes a circumstance where you go from $1.1 to $1.8 billion cost? 

And you say you don’t know. But something caused it. And it 

seems to me reasonable for us to try to figure out not even just in 

this project, but what causes these things? 

Secretary BODMAN. I will be happy to get you an answer to that. 

[The information follows:] 

PROJECT MANAGEMENT COST INCREASES

The primary reasons for the cost increases in the FutureGen project were unprecedented escalations in materials, equipment and labor since the initial DOE estimate. These escalations were significant and occurred among many construction-related activities. The estimates were confirmed by comparisons with well-respected 

industry indices. 

With respect to our other, more typical DOE capital asset line-item projects, the 

biggest reasons cited for most cost variances, as documented in the Department’s 

recently completed Root Cause Analysis report, include, but are not limited to, inadequate upfront planning and risk management, unrealistic estimates of cost and 

schedule, insufficient numbers of skilled and trained contract and project management professionals, ineffective prioritization and resource allocation, and lack of 

alignment and integration between contract and project management functions and 

organizational elements. The Department has recently completed a Corrective Action Plan to address the most significant root causes, and we will now begin implementing that plan. It must be recognized that some of these root causes will require 

additional resources and time to institutionalize the corrective actions. 

Secretary BODMAN. I can tell you that in my judgment we are 

doing a much better job than we have ever done before of managing the projects within the Department. And we have, for the 

first time in our environmental management area, which is basically all, the entire budget, all of $5.5 to $6 billion is all projects 

basically. 
26 

And we, when I arrived on the scene we didn’t even have people 

who were trained and certified as project managers managing the 

projects. We do now. And for the first time we have now had an 

outside auditor, if you will, review all these projects. 

And we are, I think, in much better shape than we have ever 

been before. And so I would comment on that. If you ask me the 

specifics of other than inflationary pressures, I think there have 

been pressures beyond what I think of as inflationary pressures 

which are 4 to 5 percent per year that have accrued in the case 

of large capital projects throughout the world. 

It’s very hard to get the people. It’s very hard to get the equipment. It’s very hard to get the materials to build the kind of structures that are needed for this project. 

NEW INITIATIVES

Senator DORGAN. Well, I don’t know what we should do about 

FutureGen. In many ways the new administration will inherit the 

bigger question, I think because I believe what we will end up 

doing is retaining the funding that’s been appropriated for 

FutureGen allowing perhaps in February of next year for a new administration to make a judgment do they continue, don’t they continue. But I come back to the—I misplaced a piece of information 

I was going to give you. 

Come back to the point of FutureGen or not, in order for us to 

work through this climate change and energy intersection that 

we’ve come to we have to use coal. In order for us to use coal we’ve 

got to understand the capability that technology will give us to continue to use coal. And the Clean Coal Power Initiative, I said to 

you, the budget and again, you can’t tell me how much you’ve 

asked for. 

But the budgets that have come to us from the President have 

under funded clean coal technology and the Clean Coal Power Initiative. So, you know, we’re far short of what had been pledged. 

And I think what you’re doing is you’re adding in the normal coal 

research we’ve done all along the way into coal technology. 

Secretary BODMAN. Right. 

Senator DORGAN. Well we would have done that anyway, Mr. 

Secretary. But these new initiatives, try to figure out how do we 

capture carbon and how do we do the other things. They’re very 

important and I’m disappointed that the administration has under 

funded them. 

Now I’m working with my colleague, Senator Domenici and others just to try to find a way to provide robust funding for that 

issue. We need on an urgent basis to do this and move forward because if we’re going to continue to use coal we have to unlock the 

mystery of how to do that by capturing carbon and sequestering 

carbon. 

Secretary BODMAN. And to do it on a retrofitted basis. 

Senator DORGAN. Well. 

Secretary BODMAN. Because that’s what CCPI is all about, I believe. 

Senator DORGAN. Well, I understand. But, I mean there’s a whole 

series of things we have to try to think through here in terms of 

how and where we commit our resources. I just showed you a 
27 

chart, 80 percent into 2030. Eighty percent of the carbons are going 

to come from existing plants. 

And how do we, you know, retrofit that. Should we continue with 

FutureGen? Should we change FutureGen to Big Bang FutureGen 

to three smaller FutureGen? 

I don’t know the answer to that, but—— 

Secretary BODMAN. This is an EIA estimate, sir? 

Senator DORGAN. Yes. 

Secretary BODMAN. EIA what they do is to take current technology. They do not anticipate any change in technology. I would 

hope that between now and 2030, in 22 more years we will have 

material changes in technology. 

Senator DOMENICI. I would hope so. 

Senator DORGAN. Well I hope that among those material changes 

in technology are the changes that we drive urgently and aggressively with the funding provided by this subcommittee. 

Secretary BODMAN. I certainly hope that as well, sir. 

Senator DORGAN. Mr. Secretary, we appreciate your being here 

today. You’ll be available I trust to receive questions in writing 

that we might wish to address. 

Secretary BODMAN. I’d be happy to do that. 

Senator DORGAN. Thank you very much for being with us today. 

Secretary BODMAN. Thank you. 

Senator DOMENICI. Thank you, Mr. Secretary. 

Senator DURBIN. Mr. Chairman? 

Senator DORGAN. Next—Yes? 

PREPARED STATEMENT

Senator DURBIN. May I ask consent that my full statement be 

part of the record? 

Senator DORGAN. Without objection. 

[The statement follows:] 

PREPARED STATEMENT OF SENATOR RICHARD J. DURBIN

INTRODUCTION—A COMMITMENT TO FUTUREGEN AT MATTOON

Thank you, Chairman Dorgan and Ranking Member Domenici, for holding this 

hearing today. 

We have a dilemma in this country. We need to secure America’s energy supply. 

And we have to slow global warming. Coal combustion with carbon capture and sequestration may be our best hope. Time is running out, though. We need to develop 

and test these technologies and bring them to commercialization, and we need to 

do it quickly. 

The FutureGen project at Mattoon is our best hope for building and operating a 

near-zero-emission, coal-fired power plant. After 5 years of progress, the Department of Energy’s attempt to scuttle this program is the wrong decision at the wrong 

time. I am determined to see the Mattoon project get back on track. The climate 

problem we are facing is too urgent to tolerate any more stalling by this administration. 

FUTUREGEN AS ORIGINALLY CONCEIVED

President Bush rolled out the FutureGen Initiative in February 2003 with great 

fanfare. The administration touted FutureGen as the centerpiece of its energy policy 

and as its response to global warming concerns. 

The Department launched the FutureGen initiative as a full-scale, integrated 

demonstration of advanced coal gasification, electricity production, and carbon capture and sequestration. 

The goal has always been to optimize the entire system to build, to quote DOE’s 

website, ‘‘a technically cutting-edge power plant that is intended to eliminate envi-
28 

1 Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, West Virginia, Wisconsin and Wyoming. 

ronmental concerns associated with coal utilization... The prototype will be the 

cleanest fossil fuel fired power plant in the world.’’ 

DOE ABANDONS MATTOON

This was the flagship project of the President’s clean coal program. It went 

through a 41⁄2 year independent, scientifically based site selection process—and the 

planners chose Mattoon, Illinois, as the best location for the FutureGen demonstration plant. 

Governors and leaders of nine States agree with that decision.1 Those nine states 

represent three-fourths of the coal mined in the United States and more than onehalf of the electricity produced from coal. 

Then in January 2008, 1 month after the site selection announcement and after 

nearly 5 years of planning, the Department of Energy decided to abandon the program. It’s a decision that seems to defy explanation. 

Let us be clear. DOE did not put an end to a project that only existed on paper. 

The group has gone into field work and site mapping. DOE wants to bring 

FutureGen to a screeching halt just as the project was about to move into threedimensional seismic testing around the Mattoon site and just as plans were being 

made for a 1 mile-deep well. 

THE EFFORTS OF ILLINOIS

Seven States with 12 sites put together proposals to host FutureGen. Those States 

and communities competed for this project in good faith, trusting the administration’s commitment to explore a promising technology to fight global warming. 

I can’t speak for the other States, but I can tell you that the people of Illinois 

put their heart and soul into bringing FutureGen home. 

The Department’s requirements were ambitious by any standard—they required 

all geographic, socioeconomic, environmental, regulatory, legal, and technical information that’s necessary for the Environmental Impact Statement be completed in 

only 12 months. 

Nine Illinois State agencies; 5 colleges and universities; 12 private companies; 2 

research institutions—all worked day and night to meet DOE’s deadlines. 

In Illinois, private groups and the State legislature worked together to come up 

with a compelling $90 million incentive package. They put together low-interest-rate 

loans, tax credits, liability protection, employee training, public improvement funding, and support for the environmental impact statement process. The Mattoon City 

Council rezoned more than 500 acres west of the city from rural-suburban to industrial use to support a FutureGen plant. 

The result: A set of documentation provided to DOE that totaled 12,300 pages, 

weighing 133 pounds. That’s a stack of paper 49 inches tall—over 4 feet. The State 

of Illinois spent almost $3 million to respond to DOE’s new program—and that does 

not count the more than $3 million raised by the State’s private partners. 

Remember, seven States put resources into the FutureGen competition. I can’t 

speak to the heft of the proposals from Texas, but I’m confident the other finalist 

worked with just as much fervor. 

And think about the people who work for Secretary Bodman. How did the decision 

to pull the plug on this project affect the program managers and specialists who 

dedicated themselves to this effort for 5 years, based on the promise of clean coal. 

Mattoon, a city of 18,000 people, is closely watching today’s hearing. This is the 

same city that Under Secretary Albright derided as ‘‘some swamp in Illinois.’’ 

Unlike DOE management, though, the people of Mattoon understand that America has a responsibility to address climate change. They understand that the 

FutureGen program is a critical next step toward large-scale carbon sequestration. 

The people of Mattoon have done the hard work of demonstrating the merits of their 

site. Their sleeves are still rolled up, waiting to begin the next phase of the project. 

DOE’S INADEQUATE EXPLANATIONS

I am looking forward to hearing Secretary Bodman’s explanation for his decision 

in January. I am aware of two rationalizations—one is program cost and the other 

is recent advances in technology. Neither justifies the Secretary’s decision. 

Time and again over the past few weeks Secretary Bodman has claimed that the 

Mattoon project costs had just grown too large. One might have thought the Sec-
29 

retary would discuss that question with Congress before making his unilateral decision. 

Instead, the Secretary has proposed to replace the integrated project in Mattoon 

with several, smaller projects that haven’t been developed. It is inconceivable that 

this approach would cost the Government less money while achieving the intended 

goals. 

Mr. Thompson will be able to address the second argument—whether coal gasification technology has made the great strides in recent years that DOE claims. It 

is my understanding that Integrated Gasification Combined Cycle technology is anything but a mature technology. It’s hard to imagine that this technology has reached 

a point that justifies such a drastic and sudden change of course. It’s been more 

than a decade since the United States has seen a commercial-scale demonstration 

of this kind of electric power generation. 

DOE AND THE UNITED STATES HAVE LOST CREDIBILITY

DOE has misled its industrial partners. The Department showed every indication 

of moving forward with the FutureGen program up until it became clear that the 

Illinois site would be chosen by the Alliance as the technically best option. This 

sorry episode has not only stained DOE’s credibility, but has also tarnished the 

credibility of the United States with our partners in China, Australia, and the UK. 

THE FUTUREGEN ALLIANCE IS AN UNPRECEDENTED INDUSTRIAL PARTNERSHIP

The FutureGen Alliance is an unprecedented partnership among coal and power 

industry leaders. Its U.S. members include American Electric Power, Consol Energy, 

E.ON U.S., Peabody Energy Corporation, Rio Tinto Energy America, and Southern 

Company, among others. International members include Anglo American, BHP Billiton, Xstrata Coal, and the China Huaneng Group. 

These leaders have come together because they are committed to contributing to 

global warming solutions. They know that clean coal technologies are not yet available and that we need to work together—Government and industry—to develop 

those technologies that can be commercially deployed. 

CLIMATE CHANGE AND THE NEED FOR COAL

We’re starting to wake up to the reality of climate change as a result of human 

activities. Global average surface temperatures are rising year after year at an everincreasing rate. It is no exaggeration to say that global climate change is the greatest threat of our time. 

Meanwhile, coal is not going away. We cannot replace one-half of our electricity 

supply with a snap of the fingers. That is why the FutureGen program, as originally 

conceived, is so important. 

FUTUREGEN AT MATTOON SHOULD PROCEED

The good news is that there is still hope to correct DOE’s ham-handed management of this program. The FutureGen project at Mattoon meets all the technical 

goals as a commercial-scale demonstration. The Mattoon FutureGen project is years 

ahead of any new program DOE could possibly put in place to demonstrate largescale carbon capture and sequestration from a coal-fired power plant. The urgency 

of the problem demands that we not abandon the progress that has been made over 

the past 41⁄2 years. 

Senator DORGAN. The next witness at today’s hearing will be 

Paul W. Thompson, the chairman of the board, FutureGen Industrial Alliance. Mr. Thompson, you may come forward and may proceed. 

Mr. Thompson, we appreciate your being with us today. Your entire statement will be made a part of the record and we would urge 

you to summarize and then we will have some questions. You may 

proceed. 

STATEMENT OF PAUL W. THOMPSON, CHAIRMAN OF THE BOARD, 

FUTUREGEN INDUSTRIAL ALLIANCE, INC. 

Mr. THOMPSON. Thank you. I need to find my glasses first, sir. 

Is that on? 

Senator DORGAN. We have some we could loan you. 
30 

Mr. THOMPSON. I have them, thank you. Thank you, Senator and 

the subcommittee. I appreciate the opportunity to be here in front 

of the subcommittee. 

As indicated I am the chairman of the board of the FutureGen 

Industrial Alliance. The Alliance is a global, non-profit consortium 

of 13 energy companies formed at the request of the U.S. Department of Energy to co-fund, design and construct the world’s first 

full-scale, near zero emission coal fueled power plant with hydrogen production and 90 percent CO2 capture and sequestration. In 

addition to my role as Alliance chairman I am senior vice president 

with E.ON U.S. Energy Services. 

And I would add in that capacity I am responsible for over 

10,000 megawatts of generation. So I’m quite familiar with much 

of what is going on in our power production industry. I would like 

to address three topics: my view on the enormous benefits of 

FutureGen at Mattoon, project costs and the Alliance view on 

DOE’s restructured approach. 

With respect to my first point, climate change is one of the most 

pressing and most challenging environmental concerns we face 

globally. The success of the policy that is ultimately adopted and 

our economic future will hinge on the availability of affordable, low 

carbon technologies. FutureGen at Mattoon offers the opportunity 

to advance many technologies faster and further than any other 

project in the world. President Bush is to be commended for originally launching it. 

FutureGen at Mattoon will meet or exceed all low emission goals 

including 90 percent CO2 capture which DOE has reported to Congress numerous times as essential to our energy future. Also, it is 

a fully integrated plant based on commercial scale component technologies. As a utility industry executive I would emphasize the importance of seeing a fully integrated plant come to fruition. 

Importantly and unlike entities that will participate in DOE’s restructured approach, the FutureGen Alliance is a non-profit enterprise. And every Alliance member has agreed to forego all rights 

to intellectual property and revenue sharing. This will enable the 

Alliance to share important findings from the project with the Nation and world which will foster rapid, widespread commercial deployment of the technology. 

FutureGen at Mattoon has demonstrated already 5 years of successes such as one, using a first of its kind citing process which can 

and should serve as a model for future commercial projects. A site 

that is ready to go has been selected on a fair, non-political and 

competitive basis. That site is Mattoon, Illinois. 

The site selection of this site relied heavily on scientific expertise 

within the DOE laboratory system and other premier scientific institutions. And it included addressing complex legal, liability, regulatory and site geology issues. It will take years for new projects 

to go through this process. 

Second, based on extraordinary work by the States of Illinois and 

Texas, the Alliance, DOE and many other institutions a nearly 

2,000 page environmental impact statement has been issued by 

DOE which concludes the Mattoon site is environmentally acceptable. 
31 

And three, a team of nearly 50 engineers and scientists have 

completed an initial conceptual design and initial cost estimate for 

the project and far along on the next phase of design and more detailed cost estimate. 

This leads me to my second topic, project cost. DOE cites an original project cost of $950 million which is in constant fiscal year 

2004 dollars. The total estimated project cost in as spent or nominal dollars through 2017 is $1.8 billion. The difference between the 

two numbers is inflation. It is not scope changes. DOE has acknowledged this on numerous occasions. 

After 3 months of review and negotiation DOE accepted these 

costs when they signed the cooperative agreement that governs the 

project. It is difficult to understand why these costs were acceptable in March 2007, but in January 2008 they formed the primary 

basis for terminating the project. Given that the Nation appears to 

be on the cusp of a massive effort to regulate CO2 emissions that 

may cost electricity consumers across the Nation hundreds of billions of dollars over the coming decades, we believe it is reasonable 

and necessary to invest this $1.8 billion on the front end to prove 

out the technology. 

Just as important as the $1.8 billion cost is what the non-profit 

Alliance has offered to do to mitigate the Government’s financial 

exposure. First we are contributing nearly $400 million of cash. 

Second, as a non-profit venture hundreds of millions of dollars of 

revenue from the electricity sales will be used to either offset 

project costs or be invested in public benefit R&D. Industry will 

never receive a single dollar of profit from this project. Third, after 

the project’s mission is fulfilled and the plant is sold, DOE will be 

repaid in part or in full for its investment. Unlike DOE Industry 

Alliance members will not receive a single dollar of repayment from 

investment nor will they receive any proprietary intellectual property benefits. 

We are very mindful of the fact that appropriated dollars are a 

limited and valuable resource. But we believe that the FutureGen 

at Mattoon project is a good investment for our Nation. And I reiterate our offer to the DOE to explore reasonable avenues to mitigate the Federal Government’s exposure. 

Moving to my third topic, DOE’s proposed restructuring. We are 

disappointed in DOE’s abrupt and unjustified change in course. 

The Department has also cited a changing marketplace as the 

basis for their decision. 

While there are numerous proposed IGCC projects as has been 

discussed here, it is widely recognized within industry, the industry 

that I participate in, that very few of these projects will come to 

fruition. In fact since the DOE signed the cooperative agreement in 

March 2007, the number of commercial IGC proposed projects have 

declined, not increased. Further, should DOE’s restructured approach move forward it has a number of business, technical and financial issues which must be addressed. 

Importantly it is under funded. An under funded approach to 

such a massively complex problem using several small projects attached to commercial ventures did not make sense for landing men 

on the moon. And it does not make sense for solving the climate 

change challenge. 
32 

In a House hearing last month DOE also acknowledged that 

their new plan will result in up to 5 years of delays. Further DOE 

testified that they may not meet the critical goals of 90 percent 

CO2 capture. This delay and reduced standards do not make sense. 

FutureGen at Mattoon is already 5 years down the path of success. 

And it would be a huge mistake to move backward on the progress 

we have already made. 

PREPARED STATEMENT

In closing as chairman of the FutureGen Alliance Board of Directors I want to convey our unwavering commitment to the continuation of FutureGen at Mattoon. We remain open and willing to 

work with the Congress and the Department of Energy to put 

FutureGen at Mattoon back on the fast track. This concludes my 

remarks. And I welcome the subcommittee’s questions. 

[The statement follows:] 

PREPARED STATEMENT OF PAUL W. THOMPSON

The FutureGen program is a global public-private partnership formed to design, 

build, and operate the world’s first near-zero emission coal-fueled power plant with 

90 percent capture and storage of carbon dioxide (CO2). It will determine the technical and economic feasibility of generating electricity from coal with near-zero 

emission technology. FutureGen has 5 years of progress behind it. More than $50 

million have been obligated to the effort with the majority spent. It is positioned 

to advance integrated gasification combined cycle (IGCC) and carbon capture and 

storage (CCS) technology faster and further than any other program in the world. 

The location of the plant will be Mattoon, Illinois. The nonprofit structure of the 

FutureGen Alliance, and involvement of 13 companies that operate on 6 continents, 

is consistent with its mission to facilitate rapid deployment of near-zero emission 

technology not only in the United States, but throughout the world. 

Climate change is one of the most pressing, and most challenging, environmental 

concerns we face, from both a domestic and international perspective. Our Government, and other governments around the world, either intend to, or are in the process of, developing policies to address the concern. Irrespective of which specific climate policy is ultimately adopted by the United States, the success of that policy 

and our economic future will hinge on the availability of affordable low-carbon technology. Nuclear, renewables, biomass, and efficiency will all be part of the low-carbon technology solution. However, coal is used to generate over 50 percent of the 

electricity in the United States, and is projected to remain the backbone of the U.S. 

electricity system for most of this century. Given that the growing economies of 

China and India will be fueled with coal plants, the availability of affordable, nearzero emission coal technology, incorporating CCS, is essential to our future energy 

security. 

The Federal Government has a pivotal role to play in fostering the development, 

demonstration, and deployment of near-zero emission coal technology. It is important that, as a Nation, we invest at the scale required to develop, prove, and deploy 

CCS technologies to the marketplace. While estimates vary, the required Federal investment is certainly in excess of $10 billion over the coming decade. This investment in our Nation’s future must be supported by the development and demonstration of near-zero emission coal technologies and CCS in a variety of applications. 

The U.S. Department of Energy (DOE) is to be commended for its vocal support 

of near-zero emission coal technology, including CCS. Its support of this technology 

was recognized in backing the FutureGen program as originally envisioned, but a 

recent proposal to restructure FutureGen fails to recognize the scale of the challenge 

that this Nation, and indeed the world, is facing. DOE’s proposal to restructure the 

FutureGen program will delay technology development and integrated demonstration of commercial scale CCS by 5 years or more. It backs away from a nonprofit 

partnership that was created, at the request of DOE, to act in the public benefit 

and broadly share its technical results throughout the world. It rebuffs the participation of international companies (and countries) that are critical to the ultimate 

deployment of clean coal technology around the world. It undermines the reliability 

of the U.S. Department of Energy—and the United States—as a dependable partner. 
33 

Therefore, regardless of what other projects or what type of restructuring DOE 

proposes, it is essential that the Department reaffirms the Unites States’ position 

as a global leader in near-zero emission coal technology and CCS development by 

maintaining its historical position that FutureGen at Mattoon is the flagship program for advancing CCS technologies. 

BENEFITS OF FUTUREGEN AT MATTOON

FutureGen, located in Mattoon, Illinois, is in the national interest and is advancing IGCC technology with CCS faster and further than any other project in the 

world. Some key features of this program include: 

—FutureGen at Mattoon Offers DOE an Opportunity to Beat its Proposed 

Timeline.—DOE’s January 15, 2008 Request for Information (RFI) suggests an 

on-line date of 2015 for projects using its restructured plan. In recent testimony 

before the House Science Committee DOE suggested 2016 or 2017. The 

FutureGen Alliance has already delivered 5 years of progress, including contract negotiations, an enthusiastic and committed local community, a site that 

is technically and legally ready to go, a design and cost estimate, a final environmental impact statement, vendor relationships, and a team of 50 engineers 

and scientists. Prior to DOE-imposed delays FutureGen at Mattoon was ontrack for a 2012 start-up. Even with these delays, no fully integrated, near-zero 

emission power plant project in the world can compete with FutureGen in terms 

of its ability to move forward with urgency on the required technology development and demonstration. 

—FutureGen at Mattoon Will Meet or Exceed all DOE Emissions and CO2 Capture 

Goals.—All emissions and CO2 capture criteria included in the 2004 FutureGen 

Report to Congress and DOE’s current Request for Information (RFI) will be 

met by FutureGen at Mattoon, including 90 percent CO2 capture. It is imperative that DOE maintain the requirement of 90 percent CO2 capture from the 

entire facility for the FutureGen program. 

—FutureGen at Mattoon is Fully Integrated and at Commercial Scale.— 

FutureGen at Mattoon incorporates a commercial-scale gasifier and commercialscale ‘‘Frame 7’’ turbine. As configured, and with the commitment to share lessons learned widely, it gives industry a chance to learn about the cost, performance, and operating strategies for an integrated system with CCS. This knowledge will be directly applicable to the marketplace. 

—FutureGen at Mattoon is a Hallmark for Public Benefit and Information Sharing.—As a nonprofit enterprise, the FutureGen Alliance will broadly share information from the project, facilitating the deployment of commercial, near-zero 

emission power plants throughout the world. It is appropriate for DOE to provide cost sharing for additional commercial CCS projects to facilitate deployment of CCS technology, but it must recognize that commercial projects, such 

as those being solicited under DOE’s restructured plan, by their very nature 

will feature protection of technological know-how and intellectual property within individual companies rather than sharing it for broad benefit. 

—FutureGen at Mattoon is a Model That Provides International Involvement at an 

Unprecedented Level, Which is Essential to the Rapid Deployment of CCS Technologies.—Thirteen companies with operations on six continents are participating as members of the Alliance. Climate technologies must be globally accepted and globally deployed, or they will not be effective. International participation has been exceptionally well-managed and has been a cornerstone of the 

information sharing in the program. No other project or program can replicate 

FutureGen at Mattoon’s level of international involvement. We need to remember that we are all striving to address ‘‘global climate change’’ not simply ‘‘U.S. 

climate change.’’ What better framework than a global public-private partnership to develop and establish the acceptable approaches to measure, monitor 

and verify that CO2 has been successfully captured and permanently stored. 

—FutureGen at Mattoon Provides a Platform for Testing Advanced Technologies, 

Which Accelerates Technology Development and Saves the Taxpayers Money.— 

A power plant constructed and operated by any for-profit entity must by its nature operate as much as possible. There is no incentive to periodically shut 

down to cooperate with the DOE and technology providers to install and test 

new technologies so as to keep improving the performance and driving down the 

costs of zero-emission technology. Maximizing revenue rather than advancing 

technology is a duty to both ratepayers and shareholders. 

Once built, and power generation, carbon capture, and sequestration operations 

are underway, FutureGen at Mattoon can serve as a test bed for advanced technologies emerging from DOE’s Fossil Energy R&D program and industry R&D ef-
34 

forts. Such testing will not interfere with the primary mission of the facility to prove 

integrated CCS technology at a 90 percent capture level and sequester a minimum 

of 1 million tons per year of CO2, and to develop and prove cost-effective approaches 

to advancing CCS technology. Absent FutureGen at Mattoon, alternative testing approaches will be far more expensive to both industry and taxpayers. Areas where 

DOE expects advancements to occur include oxygen production, gasifier improvements, gas clean-up, H2 and CO2 separation, H2 turbine advancements and fuel 

cells. By proposing to end its support of FutureGen at Mattoon, DOE will be increasing the cost and difficulty of testing the very advanced technologies that its 

program managers seek to develop and deploy. 

PROJECT COSTS AND FINANCING

In DOE’s March 2004 report to Congress, DOE estimated the project cost as $950 

million in fiscal year 2004 constant dollars. The estimated gross project cost in asspent dollars through 2017 is $1.8 billion. The difference between these figures 

($950 million and the $1.8 billion) is recent and projected inflation/escalation. There 

is no change in project scope. In preparing the $1.8 billion estimate, aggregate future inflation across the project was assumed to be 5.2 percent per year through 

2017. This is higher than general rates of inflation, but is consistent with inflation 

rates for heavy construction and the process equipment industry over the past 5 

years. These higher rates of inflation will likely be seen by all power-related 

projects, including FutureGen at Mattoon and other projects that DOE might advance. It is also important to note that this assumed rate of inflation is a long-term 

average. Finally, the $950 million is expressed in fiscal year 2004 constant dollars 

and the $1.8 billion is expressed in as-spent dollars; therefore, it is technically incorrect to characterize the cost as having doubled. This would be comparing apples and 

oranges. 

In March 2007, after reviewing the $1.8 billion project cost estimate, DOE signed 

a legally binding agreement to conduct the FutureGen project. Although the project 

cost estimate has not changed since DOE’s original signing of the agreement, in a 

January 30, 2008 letter, DOE notified the FutureGen Alliance that it wanted to terminate support for FutureGen at Mattoon, citing two concerns: 

—‘‘the Department’s serious concerns over the substantial escalation of projected 

[project] costs’’; and 

—‘‘the [FutureGen] Alliance’s insistence regarding project financing’’ (emphasis 

added). 

DOE’s letter goes on to state that the Department cannot agree to the Alliance’s 

request to ‘‘satisfy a substantial portion of its cost share commitment with borrowed 

funds using FutureGen assets as collateral’’ and concludes that ‘‘the Alliance’s desire 

to mortgage the FutureGen project would have subordinated the taxpayers’ interest 

and placed DOE—the majority owner of the project—at risk of having to surrender 

the facility to the Alliance’s outside lenders had the Alliance withdrawn from the 

project or defaulted on its debt repayment obligations.’’ The letter states that ‘‘[i]n 

short, the financing approach proposed by the Alliance not only represented a substantial departure from DOE practice concerning projects in which the Government 

bears a majority of costs, but would have significantly increased taxpayer risk as 

well.’’ 

The Alliance takes issue with both of DOE’s points: 

—Costs have not escalated since DOE’s last review of the cost estimates for the 

project, so there is no basis for DOE’s apparent surprise about the projected 

costs for the project. Also, following completion of the next design phase, all parties will have the opportunity to review refined site-specific cost estimates before proceeding with final design and construction. 

—Third-party financing for power plants is a commonly used tool to help ensure 

project success. Nearly every coal-fueled power plant project in the country, including DOE co-funded efforts, has involved financing. Further, the Alliance is 

largely providing cash to the project and the financed component is relatively 

small. 

With respect to cost escalation, the DOE letter acknowledges that the change in 

projected costs, which occurred prior to their last review, ‘‘appears to be largely attributable to market conditions.’’ As the letter appears to recognize, such costs are 

not the result of any mismanagement by the Alliance. Rather, DOE and the Alliance 

recognized up front that market conditions were an uncertainty that could affect the 

cost of the project. Article 21 of the Cooperative Agreement states that, ‘‘Given the 

nature of this first-of-a-kind Research and Development project, DOE and the Recipient recognize that many uncertainties (e.g., plant design, selection of a site, construction and operations, market conditions, the impact of DOE requirements on 
35 

any potential cost increases to subcontractors who bid the project, and the project 

schedule, CO2 storage and MMV, and market conditions for power plants and commodities) still exist in formulating a firm estimated cost.’’ In fact, large construction 

and infrastructure projects throughout the global economy are affected by these 

same market conditions. There is no reason to believe that any alternatives to 

FutureGen at Mattoon would not also be affected by these same market conditions 

and cost impacts. 

With respect to financing, it should be noted that the Alliance, as a 501(c)(3) organization, relies upon contributions from its member companies as a source of its industry cost share. The Alliance’s member companies will donate nearly $400 million 

to this DOE project, and unlike with other DOE clean coal technology projects, they 

will gain neither financial return nor intellectual property. This contribution is 

spread over approximately 8 years. However, the peak construction cost—and thus 

peak cash outflow—occurs in the middle years of the project. The Alliance proposes 

to use financing to match construction cash flow requirements with member company cash contributions, and also as a risk management tool to handle potential 

cost increases in the future, if they should occur. 

Specifically, the Alliance has proposed the following approach to DOE to achieve 

these goals and address DOE concerns, even though the Alliance does not find 

DOE’s concerns fully founded: 

—DOE will have an opportunity for partial-to-full repayment. 

—Alliance member companies have no opportunity for repayment. 

—Each Alliance member company would make a minimum dollar pledge. This 

would ensure that the companies would have ‘‘skin in the game’’ and not use 

financing to avoid meaningful industry cash contributions. 

—The Alliance would use a modest portion of the plant asset, which the Alliance 

is helping to purchase, as collateral for financing, as is done on other DOE clean 

coal projects. (Commercial projects are typically 50–80 percent financed. 

FutureGen would likely only be 10–20 percent financed). 

—The Alliance will use potential revenue from the operation of the facility as a 

pledge to the lending institution for financing, which is common commercial and 

DOE practice. 

DOE has been aware that financing would be used on the project for years, and 

did not object to such an approach when it signed the Cooperative Agreement for 

the project. The Alliance reiterated to DOE that the project would probably require 

such a financing structure in the summer of 2007, when the Alliance and DOE engaged in discussions to address new DOE concerns with the Cooperative Agreement. 

So, the apparent surprise on DOE’s part that the Alliance would seek third-party 

financing is unwarranted. 

The Alliance’s proposed financing approach, which includes borrowing funds to 

meet a portion of the Alliance’s cost-sharing commitment to the project, is fully consistent with applicable law and the existing Cooperative Agreement between the 

DOE and the FutureGen Industrial Alliance, and therefore, not, as DOE alleges, ‘‘a 

substantial departure from DOE practice.’’ 

Nothing in the law prohibits DOE award recipients with cost-sharing obligations 

from utilizing third party, non-recourse financing to facilitate fulfillment of their 

cost-share obligation. Similarly, nothing in the existing Cooperative Agreement prohibits the Alliance from utilizing such financing. Indeed, the governing regulations 

that establish rights to project property and that are specifically incorporated into 

the Cooperative Agreement (10 C.F.R. §§ 600.130–600.137), and the current Cooperative Agreement itself, both contemplate this possibility. Article 25 of the Cooperative Agreement provides that the Alliance may not ‘‘encumber the property (acquired during the project) without DOE’s prior written consent,’’ and thus contemplates that the Alliance may encumber the property with DOE approval. The 

regulations are substantively similar. Thus, rather than prohibit third party financing security interests, the governing regulations and Cooperative Agreement instead 

require that the Alliance, the recipient, obtain DOE consent to the creation of any 

financing encumbrances. 

Many DOE-supported projects rely on similar financing approaches. There is 

ample precedent where DOE has accepted projects that have proposed to finance the 

industry portion of a cost-share project by means of a project finance structure in 

which recourse, in the event of a default on a loan, is limited to the project itself 

and associated assets. Indeed, DOE’s willingness to accept such financing structures 

is embedded in the recently inaugurated loan guarantee program authorized by title 

XVII of the Energy Policy Act of 2005. Further, DOE has a pending solicitation posted on its website for the Clean Coal Power Initiative that allows financing. 

Moreover, overall, the Alliance’s proposed approach would not, as DOE asserts, 

‘‘significantly increase taxpayer risk.’’ The Alliance recognizes that its financing pro-
36 

1So long as the Alliance neither withdraws from the project nor defaults on its debt repayment obligations, DOE will not incur any additional risk or obligation as a consequence of the 

Alliance’s financing proposal. Even if the Alliance were to withdraw from the project or default 

on its debt obligations, DOE’s risk should be limited, and DOE should have the ability to prevent a situation where it would be at risk of ‘‘having to surrender the facility to the Alliance’s 

outside lenders,’’ as stated in its letter. 

posal results in some manageable risk to the Federal Government.1 However, the 

Alliance’s proposal on financing was and is only one element of a larger package 

of compromises offered to DOE in good faith in the summer of 2007 to help ensure 

that project is successfully completed and that the intended benefits of the project 

accrue to DOE and the public. On balance, we believe that the benefits of this overall package far outweigh any incremental risk to DOE associated with the package’s 

financing proposal component. 

It is important to reinforce that an existing legally binding agreement is in force 

and these discussions are an attempt by the Alliance to address DOE concerns earlier than both parties previously planned. 

It is significant to note that if DOE walks away from the project now, as it is apparently willing to do, a significant portion of DOE’s contribution to date will not 

have achieved the desired taxpayer return. DOE not only risks losing its financial 

investment, but also risks losing its investment of time, given the years already 

spent moving the project forward to this point. 

The way to ensure the highest return on the investment that the Federal Government already has made in the project is to successfully demonstrate, with international participation, an advanced power generation technology that is not being 

planned elsewhere coupled with the capture and long term storage of CO2. The Alliance and its members are in the same situation. For that reason, there is every incentive on the part of the Alliance and its members that the project succeeds. 

FutureGen at Mattoon is not an ordinary project for our country. The FutureGen 

Alliance represents a totally unique attempt by industry to aggregate financial and 

technical resources, to do so on an international basis, and to undertake a research, 

development, and demonstration project with no promised return on investment to 

its members other than addressing a global problem through a technological solution. By the Government’s own admission, the FutureGen project represents our Nation’s most significant attempt to support technology development to comprehensively address global climate change. It should be given a fair chance to succeed. 

Given that the Nation appears to be on cusp of a massive effort to regulate CO2

emissions that will cost electricity consumers across the Nation hundreds of billions 

of dollars over the coming decades, it seems reasonable to invest several billion dollars on the front-end, in this project and others, to prove out the technology. 

Just as important as the $1.8 billion cost is what the non-profit Alliance has committed to in the Cooperative Agreement to mitigate the Government’s financial exposure and additional offers the Alliance has made to DOE. Among the provisions 

in the Cooperative Agreement are: 

—Alliance agreed to provide 26 percent industry cost-share. This is up from the 

original 20 percent requested by DOE on the day the President first launched 

the initiative. 

—The Alliance and DOE agreed to negotiate an adjustable cap on the DOE contribution, where the level of the cap would be adjusted up or down based on 

inflation/escalation indices (a common practice in industry). This adjustment 

would be negotiated after the current project phase. 

—The Alliance and DOE agreed to share revenues pro-rata instead of the typical 

cooperative agreement whereby the private partner keeps all of the revenues. 

The effect of this was to have 74 percent of the estimated $300 million in revenues be allocated to reduce DOE’s cost share. 

—The Alliance and DOE agreed to share proceeds from the sale of the facility on 

a pro-rata basis instead of all being allocated to the industry partner as is typical for industry/DOE co-funded projects. This has the net effect of creating the 

potential for a material repayment of DOE’s cost share. To the best of our 

knowledge, this is unprecedented in the history of Clean Coal Technology (CCT) 

or Clean Coal Power Initiative (CCPI) projects. 

—Contributing Alliance members under the 501(c)(3) structure would not receive 

any repayment of their contributions from project revenues or a facility sale. 

Such funds must be directed back to research and development. 

At the end of the current project phase (i.e., Budget Period 1), an updated cost 

estimate will be prepared that takes into consideration site-specific design considerations and makes adjustments (up or down) for changes in marketplace escalation. 
37 

The Alliance has every motivation to control costs. The FutureGen Alliance is not 

simply a contractor billing DOE to perform a service. The Alliance is sharing in the 

costs pro-rata and is motivated to see technology developed at the lowest possible 

cost. FutureGen at Mattoon’s unique financial structure mitigates taxpayer exposure. After the project’s mission is fulfilled, if the plant is sold, DOE will be repaid 

in part or in full for its investment from sale proceeds. Industry financial contributors will never receive a single dollar of financial return. This represents an unprecedented level of commitment. Further, the Alliance members are providing their expertise in developing and managing large power plant projects with the discipline. 

The Alliance is willing to make this commitment because this investment is squarely in the interest of both the Nation and the world. 

HISTORY OF DOE INTERACTIONS

The FutureGen program was initially launched in February 2003 by President 

Bush. At this time, industry was challenged to organize a consortium of companies 

to participate in the project. A consortium was judged to be a better approach than 

DOE’s historical approach of co-funding single company projects, as there was a 

clear objective to have broad industry engagement. DOE representatives clearly conveyed that the business arrangement would be patterned after previous CCT cooperative agreements. Also, because of the project scale and the desire to make the effort 

a global one to accelerate the technology use, it was indicated that the more restrictive CCT requirements would be removed. Specifically, the DOE represented the following anticipated terms: 

—twenty percent non-Federal cost-sharing; 

—no repayment requirement from the industry partner; 

—ability to vest ownership of the plant with the industry partner; 

—traditional CCT program data protections for the industry partner; 

—potential for program income (electricity, CO2, and byproduct sales) to be shared 

among project participants proportional to their cost sharing during the 4-year 

project operating program; 

—all of the post-project revenues to the industry partner, including any proceeds 

from a sale of the facility after the project; and 

—an advance appropriation of $300 million toward the project through a programmatic transfer of funds from several cancelled CCT projects. (Typically, 

DOE appropriates all of the funds on a CCT project in advance. However, in 

FutureGen’s case, DOE determined full advanced appropriation was not possible). 

It was with this framework in mind that industry formed the Alliance, made representations to Congress and around the world, and grew its membership. Further, 

in the interest of ensuring that neither the DOE nor industry were inappropriately 

considered to be engaging in ‘‘corporate welfare,’’ the Alliance was formed as a nonprofit 501(c)(3) entity. The decision to incorporate as a 501(c)(3) entity is unprecedented for an industrial partner in a DOE clean coal project cooperative agreement, 

and has the following implications for the Alliance members and DOE: 

—unlike DOE, the industry contributors can never share in a single dollar of program income or proceeds from the plant sale if that ever occurs; 

—any program income or proceeds from the plant sale realized by the Alliance 

must be reinvested in public benefit R&D; and 

—unlike DOE, the industry contributors do not gain any stake in intellectual 

property rights. 

At the time of the project launch the DOE leadership team included: 

—Secretary Spencer Abraham, 

—Deputy Secretary Kyle McSlarrow, 

—Under Secretary Robert Card, and 

—Assistant Secretary for Fossil Energy Michael Smith. 

The public-private partnership was cemented through an initial Limited Scope Cooperative Agreement signed in 2005. This limited scope agreement supported preparation of a conceptual design report and initiation of the site selection process. 

By the time of the signing of the initial Limited Scope Cooperative Agreement, 

Secretary Abraham, Kyle McSlarrow, Robert Card, and Michael Smith had left the 

Department and were replaced by: 

—Secretary Samuel Bodman, 

—Deputy Secretary Clay Sell, 

—Under Secretary David Garman, and 

—Acting Assistant Secretary for Fossil Energy Mark Maddox. 

For the Cooperative Agreement, the National Energy Technology Laboratory 

(NETL) under the Office of Fossil Energy serves as the official contracting entity 
38 

for DOE on FutureGen. The Alliance is accountable to NETL on all technical and 

contractual issues. The official contracting officer is the individual with the authority to modify the Alliance’s work scope, adjust budgets, or make binding determinations on which activities under the Cooperative Agreement can and cannot proceed. 

The working relationship with the staff at NETL has been very positive. This included DOE management regularly being invited to Alliance board of directors 

meetings. This is also unprecedented for a DOE clean coal project. From our vantage point, it appears that DOE concerns about the project have been raised by its 

political leadership. It is also been the case that the DOE political leadership has 

often provided advice, which was valuable and consistent with contractual obligations, and has been followed. 

During the conduct of the Limited Scope Cooperative Agreement, Mark Maddox 

left the Department and was replaced by: 

—Assistant Secretary for Fossil Energy Jeffrey Jarrett. 

Following completion of the activities covered by the Limited Scope Cooperative 

Agreement, in December 2006, the Alliance submitted a conceptual design report 

and cost estimate to DOE. This material served as the basis for negotiating a $1.8 

billion Full Scope Cooperative Agreement. 

The Full Scope Cooperative Agreement acknowledged the higher project costs 

similar to those of every other major energy infrastructure project. In its original 

estimates DOE had expressed costs as constant fiscal year 2004 dollars versus outyear, as-spent dollars. Both the Alliance and members of DOE’s leadership team 

were advised of and were well aware of their increased contributions resulting from 

global escalation. The project did not change in scope from its inception. DOE 

agreed to proceed and a Full Scope Cooperative Agreement was signed in March 

2007, with a gross cost of $1.8 billion, and a net cost of $1.5 billion (the net cost 

reflects credit for electricity sales used to offset part of the gross project cost). 

The Full Scope Cooperative Agreement runs through 2017, with most of the expenditures concentrated in the next 5 years. Upon DOE’s approval of the agreement, 

Alliance members irrevocably committed $10 million to the current project phase 

and collectively budgeted nearly $390 million of private money for future project 

phases. The Alliance’s responsibilities in the first phase (termed Budget Period 1) 

of the Cooperative Agreement include selection of the final site, additional design, 

preparation of a site-specific cost estimate, and procurement of long-lead items. 

Throughout 2007, the Alliance and the four finalist sites continued to spend millions of dollars to advance the activities. The DOE continued its efforts to bring in 

government partners including China, India, Japan, South Korea and Australia. 

Project costs were a part of the negotiation with these countries. A few have already 

committed funding to the project. The Alliance hired staff, leased office space and 

retained key global contractors. 

At some point after the Full Scope Cooperative Agreement was signed in March 

2007, something in the Department had clearly changed or confusion had evidently 

developed, as Deputy Secretary Sell raised very surprising concerns about out-ofcontrol costs, scope growth, that DOE was liable for 100 percent of the cost growth, 

and that the Alliance was ‘‘mismanaging the project.’’ The Alliance did not agree 

with these observations and the Alliance promptly suggested a meeting to discuss 

the new concerns. A presentation from that meeting is included in this testimony 

as an attachment. In August 2007, DOE representatives routinely attended an Alliance Board of Directors meeting where they acknowledged to the Alliance Board 

that the cost growth was now understood to be due to market escalation, recognized 

that the project was managed by the Alliance effectively, that the Alliance has been 

responsive to the DOE, and that cost increases were not due to scope growth. 

To this day, it is unclear why after a multi-month review process and negotiation 

for the Full Scope Cooperative Agreement, concerns could have arisen within DOE 

as early as 1 month after the signing of a $1.8 billion agreement. 

It should be pointed out that both the Alliance and DOE were concerned about 

marketplace escalation. It was the Alliance’s view that the appropriate way to address the issue was to follow the plan in the Cooperative Agreement and complete 

the current project phase, which included a site-specific engineering cost estimate. 

At that time all parties could discuss how DOE’s financial exposure could be mitigated further. In the Alliance’s view it was premature to renegotiate the original 

agreement when neither party had better engineering cost information or better information about escalation than when the original negotiations and agreement occurred. 

Further, to maintain a large capital project on track, it is important to establish 

and follow a well designed plan with predefined project phases. Had DOE and the 

Alliance followed the plan as agreed to in March 2007, we would be sitting here 

today with a final site, Mattoon, a site-specific construction design, and a site-spe-
39 

cific cost estimate. There would have been sufficient time during this administration 

to adjust the Cooperative Agreement based on this new information. Instead, the 

effort is nearly stalled and valuable time is being lost. 

During the late-Spring/Summer of 2007, David Garman and Jeffrey Jarrett left 

the Department and were replaced by: 

—Under Secretary Clarence ‘‘Bud’’ Albright, and 

—Acting Assistant Secretary for Fossil Energy Thomas Shope. 

In late-September 2007, newly appointed Under Secretary Albright communicated, as general concepts, a set of Cooperative Agreement modifications. This introduced a new series of requests. Most were related to shifting more risk and cost 

from DOE to the Alliance. Early conversations were cordial and productive. From 

a business and capital project management perspective it did not make sense to the 

Alliance to modify the agreement in mid-stream without further project data such 

as site and cost estimate details; however, there was a recognition and willingness 

of the Alliance to modify the agreement at the appropriate time. Further, there was 

Alliance willingness, in principle, to accept DOE’s request that after the DOE had 

expended a mutually agreeable sum, any future cost increases above that sum 

would be shared 50/50 versus the previously agreed to 26/74. During meetings with 

DOE, the general concepts were developed in an initial term sheet of modifications 

for further discussion. 

Thomas Shope left the Department during this time period. The Assistant Secretary position remains vacant to this day. 

In mid-October 2007, a stumbling block was reached when DOE raised for the 

first time an absolute demand to limit the Alliance’s ability to use commercial financing for a portion of the project. Commercial financing is routinely used on DOE 

clean coal projects and is expressly contemplated in the applicable regulations. Financing is an important tool to manage project cash flow and manage unforeseen 

risks. Normal private sector energy projects are typically financed 50–80 percent of 

total project cost. In the case of FutureGen, a lesser amount of 10–20 percent is 

manageable. Financing had been discussed with DOE as early as 2003 and the Alliance had an obligation to provide a financing plan to DOE prior to the start of the 

next project phase. Thus, for financing to be eliminated or highly restricted by DOE 

came as another surprise. 

Still, the Alliance, based principally on a series of strong positive signals to come 

from DOE and the administration, operated under the view that the DOE concerns 

could ultimately be resolved no later than the start of the next project phase and 

that selection of a final site and preparation of a site-specific cost estimate would 

help in the resolution of those concerns. The Alliance made it very clear that its 

members would agree to contribute their pro-rata financial commitments of $400 

million in cash, subject to the availability of matching DOE cost-share. Thus, there 

should be no concern over the Alliance walking away after construction begins. 

Moreover, the Alliance would have already spent tens of millions of private sector 

money before construction so there would be the added incentive to see the project 

to completion. 

In parallel to these discussions with DOE, and DOE’s position that financing 

should be highly restricted, the following very positive events occurred over the fall 

of 2007 leading up the final site announcement: 

—Secretary of State Condoleezza Rice made positive mention of FutureGen in a 

speech before the United Nations. 

—President Bush made positive mention of FutureGen in a meeting of Major 

Economies on Energy Security and Climate Change. 

—DOE issued an approximately 2,000-page Final Environmental Impact Statement (EIS) and published a Notice of Availability in the Federal Register on November 16. The EIS described the relationship between DOE and the Alliance, 

the project costs and cost-share, and DOE’s preferred alternative to provide financial assistance to the FutureGen project. 

—DOE issued a press release indicating that completion of the EIS would enable 

a site announcement by year-end. 

—DOE was communicating to Members of Congress that a site would be chosen 

by year-end. 

—The EIS Notice in the Federal Register started an important clock on a 30-day 

‘‘wait period’’ before the end of which DOE could not issue a final Record of Decision (ROD). The Alliance and DOE had discussed, multiple times, in the preceding 6 months, that DOE would issue the ROD when the 30-day wait period 

expired (December 16, was the expiration date) and the Alliance would announce the site no later than December. DOE provided an advance copy of the 

final draft ROD for Alliance review. This interaction included a discussion that 

DOE was on-track in its preparation of the ROD so that it could be issued on 
40 

December 17, albeit an aggressive schedule. DOE staff were working hard, and 

it was an excellent team effort. 

On the basis of these positive actions by DOE and the administration, the Alliance made the final site decision the first week in December. The Alliance was obligated to make this site selection under the terms of the still active Full Scope Cooperative Agreement. Given the involvement of 13 companies, communication planners, project staff, and others, within a week approximately 50 individuals knew the 

site was Mattoon. While still confidential, the Alliance recognized the wheels were 

now in motion and the site would be known either through an organized message 

or through an unintended leak. Obviously an organized, versus unintended, release 

was the preferred approach. 

On December 10, DOE’s Deputy Assistant Secretary for Oil and Natural Gas Programs, who was also Acting Principal Deputy Assistant Secretary for Fossil Energy, 

called the Alliance CEO to indicate a letter would be coming to the Alliance. A letter 

followed, from Mr. Slutz, indicating a delay in DOE’s issuance of the ROD and indicating it was ‘‘inadvisable’’ for the Alliance to schedule an announcement of the selected site while offering no compelling reason for a delay. At that time, (with all 

due respect to Mr. Slutz and his position), the Alliance cannot recall having heard 

from him before, nor was he known to be a central player in the Department’s 

project decisionmaking process. Consequently, the Alliance weighed very strongly 

whether or not to take DOE’s advice against other compelling factors for proceeding. 

Given that the wheels on the site announcement were already in motion, the site 

decision was already made and becoming more difficult to keep confidential with so 

many individuals knowing the final site, and project delays costing as much as $10 

million per month, the Alliance felt the reasons for proceeding outweighed the reasons for delay. The Alliance had already reviewed an advance copy of the ROD, 

which reaffirmed the EIS findings and concluded all four candidate sites were acceptable. It was assumed the ROD would indeed be released on time or soon thereafter without issue, as it was effectively complete. There was also a strong feeling 

that it was inappropriate for the Alliance to string along the States of Texas and 

Illinois with another delay. The States had been spending substantial amounts of 

their sparse State resources and had originally been promised a site announcement 

in September, then October, and then November driven by slippage in the EIS release. The efforts of both States were commendable and they earned our admiration 

for always having been prompt when it came to meeting their deadlines to the Alliance. 

While DOE had suggested a possible restructuring to several of the Alliance member companies, this information was only heard by the Alliance management 

through third parties with sketchy details. Since the project’s outset, it has not been 

uncommon to hear rumors or misinformation third hand that never materialized as 

correct. No official representative of the Alliance was specifically told of the restructuring plans by DOE prior to the day of the DOE announcement. 

DOE’S PROPOSED RESTRUCTURING

As currently configured, DOE’s proposed restructuring would effectively result in 

the termination of FutureGen at Mattoon. The Alliance Board carefully evaluated 

the proposed restructuring and has concluded that neither a 13-member consortium 

nor a smaller Alliance consortium could successfully conduct FutureGen at Mattoon 

under the newly proposed model. The reasons for this are technical, financial, and 

business structure related. The Alliance also has serious concerns about the adequacy of funding under the proposed restructuring, and whether any project conducted by any party could meet the stated DOE goals in a timely manner. The Alliance view remains that it is in the national interest to complement FutureGen at 

Mattoon with additional, adequately funded projects in a variety of engineered applications and a variety of geologic formations, but that complementary projects 

must not come at the expense or delay of the number one priority, FutureGen at 

Mattoon. 

Further, DOE has cited a changing marketplace and cost-related issues as the 

basis for their decision. Cost issues have been addressed above. With respect to the 

changing marketplace, DOE argues there are now many commercially announced 

IGCC projects and carbon capture and sequestration could be incrementally added 

to them. While there are numerous proposed IGCC projects, it is widely recognized 

within industry that few of these projects will come to fruition. In fact, since DOE 

signed the Cooperative Agreement in March 2007, the number of commercial IGCC 

projects has declined not increased. Those few projects which are proceeding face 

both financial and regulatory challenges. Thus, the market is not as mature or stable as DOE has implied. 
41 

DOE cites two conventional IGCCs without CCS as being permitted. We applaud 

the leadership of Duke, AEP, and Southern Company who are farthest along in the 

development of commercial IGCC projects without capture. However, one must look 

at the actions of these companies as early market deployments that must overcome 

some substantial hurdles. In the case of Duke’s IGCC, nearly $400 million in tax 

incentives and a 18 percent rate increase were required in order for this plant to 

represent a sound commercial investment. Further, last week Duke reported the 

need for an additional $365 million from the ratepayers for its 630–MW IGCC. This 

again is for a plant without CCS. In the case of AEP’s IGCC, it has had difficulty 

gaining approval for the rate increases in both Ohio and Virginia necessary for it 

to be a sound commercial venture. Thus, one cannot conclude there is a mature, sustainable market for conventional IGCC plants without CCS. 

Adding CCS to an IGCC further complicates the siting, design, construction, and 

operation of the plant. It also complicates the business structure associated with 

building such a plant. It is a common misconception that adding CCS to a conventional IGCC is simple, particularly at high rates of CO2 capture. It is relatively 

straightforward to capture at rates of 20 percent. It becomes more costly at rates 

approaching 60 percent. As one exceeds 60 percent and approaches 90 percent capture, which is DOE’s stated goal, it becomes technologically very challenging as 

major system components must be modified or changed out completely. It also is far 

more expensive. Given these complications and the need for bold technological advances, the first such plant is best left to a public-private partnership that is not 

bound by the constraints of a normal profit-making venture. That partnership involves building FutureGen at Mattoon with 90 percent CO2 capture. 

Currently, DOE’s proposed restructuring leaves many unanswered issues that are 

of concern. Some of the specific concerns about DOE’s proposed restructuring include: —DOE’s Schedule Under the Restructuring Proposal is Unrealistic.—DOE has an 

important obligation to the taxpayer to follow comprehensive contracting processes, conduct technology reviews, and prepare an environmental impact statement on any new project. The schedule (i.e., a proposed on-line date of 2015) 

in the Request for Information (RFI) is not realistic for a project that meets 100 

percent of the stated goals. Many potential industrial partners are unfamiliar 

with DOE’s required practices, and it is important that the DOE inform them 

of a reasonable schedule so that they can properly conduct the project and deal 

with their third-party investors. Overly optimistic schedules are a disservice to 

Congress, industry, and the public. 

Based on our experience, the following would be a fast-track schedule for DOE 

to identify an alternative, fully integrated project that meets all of the existing performance goals for the FutureGen program: 

—2009∂: project selection and cooperative agreement negotiation. 

—2012: completion of preliminary design, environmental impact assessment and 

record of decision. 

—2013: completion of detailed design and procurement of major technology components. 

—2017: completion of construction. 

—2018: initial operation. 

—2022: completion of test period. 

—DOE’s Restructured Approach has Problematic Business Parameters.—DOE’s 

proposal implies that 90 percent capture simply involves the addition of new 

technology to an existing IGCC. It does not. The complex integration of CCS 

into a commercial IGCC plant will entail significant modifications to many 

other systems, including commercial systems inside the base plant. It would 

also largely require a restart of design work done to date on the base commercial plant. Thus, the Government, its procurement rules, and its oversight practices could easily extend into the commercial, for-profit power plant. Further, 

applying FutureGen funds to a project with anything appreciably less than capturing 90 percent of the total CO2 emissions from the entire plant would fall 

short of what is needed to rapidly develop near-zero emission coal plants. 

—DOE’s Restructured Approach Does Not Address the Increased Marginal Cost of 

Electricity Due to Adding CCS to a Plant.—The modified plant that DOE proposes that industry build will cost substantially more to operate than a traditional plant. DOE’s RFI is largely silent on operating costs. Adding CCS to an 

IGCC plant is expected to increase the cost of electricity by as much as 50 percent and the marginal production cost by as much as 20 percent. Because power 

plants dispatch electricity to the grid based on their marginal operating cost, 

the approach DOE proposes could result in a plant that is too expensive for industry to operate. 
42 

—DOE Appropriately Retained the 90 Percent Capture Goal in its RFI and Must 

do so in any Awarded Projects.—However, DOE has recently made public statements that this goal may be relaxed. The FutureGen program has identified 90 

percent CO2 capture as an important requirement to advance CCS technology. 

This level of CO2 capture has significant impact on the design of many critical 

components of the facility, such as the combustion turbine, gas clean-up system, 

and syngas clean-up system. It would be a serious mistake if this target level 

is relaxed. Ninety percent is a technical goal designed to ensure a sustainable 

future for coal in a carbon-constrained world. Today’s commercial projects cannot technically or economically achieve this goal and DOE’s program should 

focus on bold technological advances, not incremental change. 

—Plant Revenue Must go to the Industrial Partner.—In a commercial project, it 

is expected that all of revenue would need to go to the industry partner. For 

FutureGen at Mattoon, DOE shared in the project revenues substantially offsetting Federal investment. For projects conducted under DOE’s new approach, the 

industrial partner would insist that plant revenues go to the industrial partner 

so that the private sector participants can generate a commercial financial return. 

In its 2004 report ‘‘FutureGen Integrated Hydrogen and Electric Power Production and Carbon Sequestration Research Initiative,’’ DOE acknowledged the necessity for the type and level of risk sharing associated with FutureGen at Mattoon 

if technology is to advance at the required pace. In its report, DOE said: 

‘‘FutureGen’s integration of concepts and components is key to providing technical 

and operational viability to the generally conservative, risk-adverse coal and utility 

industries. Integration issues such as the dynamics between upstream and downstream subsystems (e.g., between interdependent subsystems such as the coal conversion and power and hydrogen production systems and carbon separation and sequestration systems) can only be addressed by a large-scale integrated facility operation. Unless the production of hydrogen and electricity from coal integrated with 

sequestrating carbon dioxide can be shown to be feasible and cost competitive, the 

coal industry will not make the investments necessary to fully realize the potential 

energy security and economic benefits of this plentiful domestic energy resource.’’ 

Technology advancements and market changes in the last 5 years have not 

changed this need for a full scale validation envisioned in DOE’s report and 

FutureGen at Mattoon. 

There is no program in the world that can move near-zero emission power and 

CCS faster or further than FutureGen at Mattoon. The FutureGen Alliance is nonprofit, includes unprecedented international involvement and information sharing, 

and has a site that is technically and legally ready to go. Alternatives will cost the 

country 5 years or more of delay, cost the taxpayers more, and/or deliver less in 

terms of results. 

As Congress and the administration debate the appropriate structure for the 

FutureGen program, the Alliance urges that all of the factors raised in this testimony be taken into account. FutureGen at Mattoon should be maintained as a global flagship program that is the Nation’s top priority for advancing near-zero emission coal technology, and complementary projects should be added to the program 

as the budget allows. 
43 
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45 
46 
47 
48 
49 
50 

Senator DORGAN. Mr. Thompson, thank you very much for your 

testimony and for being here. Let me ask you the question that 

Senator Durbin was asking the Secretary on the issue of cost. And 

the reason I ask it first is because when the Secretary called me 

and indicated that he was ‘‘pulling the plug’’ on FutureGen, the 

first point he made was the growth in cost. 

Give me your estimate of why that has happened. What has 

caused the growth in the cost of FutureGen? 

Mr. THOMPSON. What has occurred is in fact escalation of component materials, component cost, labor, so inflation of the materials 

and the activity that will go into building the plant. The constant 

dollar estimate of $950 million that scope is essentially what we 

are still looking at. So today’s estimate, really March 2007 when 

we signed that cooperative agreement, it did have in as built dollars, so the real dollars cash that would be played out over the next 

9 to 11 years that was going to be higher, $1.8 billion. And that 

difference was inflation, as discussed the 5.2 percent inflation factor is the difference. 

Senator DORGAN. Let me understand that. I didn’t quite understand the point of the March 2007 signing. At that point when an 

agreement was signed between the Alliance and the Department of 

Energy what was the cost estimate then? 

Mr. THOMPSON. It was that $1.8 billion. So all of that work had 

been established and the work with the Department of Energy. 

There was full understanding of what that cost estimate was when 

we move forward with the full agreement. 

Senator DORGAN. So you’re saying the escalation, there wasn’t an 

escalation or a change in the estimate between the time when the 

Department of Energy signed the agreement and in January/Feb-
51 

ruary timeframe when they announced they were pulling the plug 

on FutureGen. 

Mr. THOMPSON. The data points that we the Alliance, are working with what continues to be this 5.2 percent inflation. We have 

not changed our estimates. The project activity that we are under 

obligation as the Alliance to work with the Department of Energy 

on does have us working on refined estimates that may or may not 

change. It could go down. It could go up. 

Our estimation is still the same as it was in March 2007. 

Senator DORGAN. I see. You know there are some who have notwithstanding the reasons for the cancellation or the announcement 

to cancel FutureGen, there are some who have felt that the so 

called Big Bang Theory of doing one big project called FutureGen 

would have been better accomplished if you had done a number of 

smaller projects similar to what the administration had announced. 

You have indicated that first of all, it is a timing issue. I indicated 

earlier there’s an urgency here. 

But second you indicated that there is no set of smaller projects 

that will accomplish and give us the knowledge base that your 

project will. Expand on that if you will because I want to understand that. 

Mr. THOMPSON. Yes, sir. First of all, for retrofit applications 

there are a number of other technology developments that are underway which we, as the Alliance, all members of the industry 

greatly applaud. And there needs to be substantially more money 

put into that in anticipation of potential climate change legislation. 

So that work, we certainly don’t think should be stopped. It has to 

be expanded also. 

What we really look at as the Alliance, the members who are 

very keen to get the big bang, as you call it, project going is that 

it does just that. It takes all of our known technological pieces that 

science, chemistry and so on can piece together. But it has to be 

put all together into one operating plant. 

As an electricity provider I can’t store my product. I have to 

make sure that everything from the time I start putting fuel into 

the system to when I deliver electricity out, everything has to 

work. It’s integrated. 

So trying to get cost effective, long term, near zero emission 

projects together, it does take putting it all together. And that’s 

what this project does. It doesn’t supplant all of the other efforts 

that are ongoing. 

But for us to see how fast that we can get cost effective power 

using coal in this technology choice that’s out there, that’s why this 

big bang is important. All other smaller activities don’t get us to 

the moon fast enough. 

Senator DORGAN. Senator Domenici? 

Senator DOMENICI. Thank you very much. Mr. Thompson, thank 

you very much for coming today. 

Mr. THOMPSON. You’re welcome. 

Senator DOMENICI. I assume you’ve been under a lot of pressure. 

You look alright though. 

Mr. THOMPSON. Well, thank you. 

Senator DOMENICI. You must be pretty tough. Yesterday as I understand it the DOE issued a draft funding opportunity announce-
52 

ment for clean coal plants with carbon capture and storage under 

the restructured FutureGen. Will you or your members submit a 

proposal to build a plant in Mattoon under the solicitation based 

on the work that has been done at Mattoon? It seems like this 

would give you a head start over other applicants. 

Mr. THOMPSON. As the FutureGen Alliance, no we will not be 

submitting under this revised approach. The approach does require 

that there’s effectively a front end power plant that is commercially 

built that the activity would then add on to for carbon capture and 

sequestration. So this Alliance will not be focusing on building a 

commercial power plant that is a prerequisite for following 

through. Others may, but we will not be. 

Senator DOMENICI. You say others will or may? 

Mr. THOMPSON. Other companies that are in the industry certainly may want to look at that. And if they do that that is their 

choice and if it advances our understanding of technology that too 

should be applauded. But it’s a complement, not a replacement of 

what we’re trying to do. 

Senator DOMENICI. As you might know after much delay we did 

get a rather substantial allocation of loan guarantee money for 

both nuclear powerplants and coal. Coal got about $8 billion. Excuse me. Does that mean anything to you and your future? 

Mr. THOMPSON. From the standpoint of the FutureGen Alliance, 

no, we have not been focusing on that loan guarantee package as 

a part of that act in 2005. 

Senator DOMENICI. In other words it doesn’t help you, per se. 

Mr. THOMPSON. To be honest I don’t really know. So I can say 

that I’m not familiar with what we may have looked in as the Alliance, we’ve not been. I do know that we’ve not been counting on 

it as part of our process thinking forward. 

Senator DOMENICI. I had noted in my statement that it would 

seem that the Alliance was fully aware of the opposition by the Department with the site selection announcement but decided to move 

forward anyway. Is that true? 

Mr. THOMPSON. I would say actually there was a number of compelling actions taking place even with the Department of Energy 

that suggested we do move forward. Then there was a letter that 

was received by the CEO of the Alliance that suggested it was inadvisable to move forward but with no other explanation. That is 

really the only communication we’ve had with respect to not making a site announcement. 

Senator DOMENICI. Well my staff tells me that it’s our understanding that the cooperative agreement is done on a yearly basis 

to allow both sides an exit option. When DOE signed the current 

cooperative agreement in 2007 did they not inform you that they 

wanted a new funding share structure by June 15, of this year? 

Mr. THOMPSON. No, sir, they did not in March 2007. The cooperative agreement does, as you suggest, but slightly different, does 

have budget periods. And at the end of each budget period parties 

do have the opportunity to not proceed for various reasons. And we 

are coming up on the end of budget period one. 

The cooperative agreement though does have a situation in 

March 2007 in it where the parties agreed that when we were at 

the conclusion of budget period one when we now have further esti-
53 

mated, refined our estimates, that does have a phrase in there that 

allows us, says that we, the Alliance, will work with the Government to provide caps to them. But it is a generic statement saying 

we will do this at the end of budget period one. So shortly after 

the signing of the cooperative agreement that is when the Department of Energy said that they really wanted to do that at that 

point in time not at the end of budget period one. 

Senator DOMENICI. Now just in the final, make sure I’ve got it. 

The new proposal that DOE is submitting in lieu of FutureGen as 

you were a part of originally is not of interest to you or your Alliance. Is that correct? 

Mr. THOMPSON. Just to be clear, for the Alliance, the Alliance 

will not be proceeding to respond to it. When you speak as me, as 

an individual in the utility industry I do welcome all engagement 

of technology development for coal based fuel and power production. So as an individual I certainly support further efforts to look 

at technology development in this case the carbon sequestration. As 

a powerplant provider I’m eventually, certainly very interested in 

how the carbon will be stored. 

Senator DOMENICI. Thank you very much. Thank you, Mr. Chairman. 

Senator DORGAN. Senator Durbin? 

Senator DURBIN. Mr. Thompson, thank you for being here and 

for your testimony. And I struggled with Secretary Bodman’s explanation of why this was an economically unsustainable project when 

he couldn’t explain to me where the $1.8 billion came from. As I 

understand your testimony it is simply the projection of original 

cost in constant dollars over the period when this project would be 

built and operated with an inflation rate of about 5.2 percent per 

year. Is that a correct understanding? 

Mr. THOMPSON. That is a correct understanding. 

Senator DURBIN. So if he disputes the annual inflation rate. 

That’s one thing. But to ignore inflation is another thing. 

It’s like saying that I can drive to the airport from this spot anytime, any day and I know I’ll arrive there at the same time. We 

know better. If you leave during rush hour it’s going to take a lot 

longer. If you have a project that’s going to take 13 or 14 years to 

build and operate, it’s going to cost more. And that’s why I’ve 

struggled from the beginning with his explanation as to why he 

walked away from this project in the manner that he did. 

I’d like to go to the point that the chairman raised because it’s 

one that is important. And I think we need to address as to whether or not existing coal-fired plants can be retrofitted in a way to 

capture CO2 or other emissions because we’re going to face this. I 

mean in coal country we face it head on. I think about half of our 

electricity in Illinois comes from coal-fired plants, the other from 

nuclear. 

So I certainly see the merit in his suggestion of moving toward 

retrofit technologies, but as I understood FutureGen from the start 

they were looking at geologic formations where we could sequester 

CO2 safely over long periods of time. It wasn’t a matter of picking 

an existing plant and deciding whether there was a field nearby 

where we could sink CO2 safely. They were looking for one of the 

best places to experiment. 
54 

Is there a current effort underway in this country to in any way 

develop carbon sequestration on a commercial basis? 

Mr. THOMPSON. I am not aware of companies, private companies, 

trying to commercially pull together a program. So if that will come 

from the commercial sector I’m not aware of it. And so, I do believe 

that, particularly for our utility industry and it’s a large number 

in all of this equation, everything that is carbon capture and sequestration related is work that we are doing with public/private 

partnerships. 

Senator DURBIN. Unless we come up with carbon sequestration 

technology or some alternative that I can’t imagine at the moment, 

it really means that our coal resources in future years could be 

compromised in terms of their energy potential. Am I correct in 

that conclusion? 

Mr. THOMPSON. I completely agree with that. We have as was 

said earlier incredibly increasing fuel costs of oil, for example. So 

you have economic factors. You have the climate factor. 

All of these factors come together more than just that. And this 

is a situation where from an energy security point of view if we can 

solve this coal, carbon dioxide capture and sequestration issue in 

a large scale quickly, which is what FutureGen is trying to do. If 

we can solve that we’ve also solved some energy security. So economics, energy security and climate all benefit from what we’ve 

been trying to do. 

Senator DURBIN. Well I think that’s a point that really I’m glad 

is on the record because, you know, if we are dealing with the long 

term security issue in terms of energy for the United States and 

we are going to have an energy policy I think we may find that 

$1.8 billion is a modest investment for what it can bring back to 

our Nation in terms of energy security and environmental responsibility. I think those two things will work together. And I’m going 

to do my best, Mr. Thompson, to work with the Alliance. A lot of 

companies, utility, coal companies, others that are interested in 

this, I think have, in good faith have tried to move forward. 

I’m afraid as you could tell from the testimony of Secretary 

Bodman, not much is likely to happen in a positive way while this 

administration is in power. But I’m not giving up. I’m going to try 

to work with this subcommittee and my colleagues to keep the 

FutureGen Alliance concept alive. 

And I just want to close by thanking you and all the members 

of the Alliance. And I also want to thank David Workman who’s 

here, who is the public works director in Mattoon, Illinois. Thank 

you for joining us. We’re not going to quit. We’re going to keep 

working on this. Thank you very much. 

Mr. THOMPSON. Thank you, Senator. And the Alliance will continue as well. 

Senator DURBIN. Thank you, sir. 

ADDITIONAL COMMITTEE QUESTIONS

Senator DORGAN. Mr. Thompson, thank you very much for being 

with us today. And obviously this discussion and debate and all of 

the concern about the carbon capture and the technologies necessary to continue to use coal will continue for some while. Senator 

Durbin, we appreciate your joining the subcommittee today. 
55 

We would like to submit some additional questions to the witnesses for their response. 

[The following questions were not asked at the hearing, but were 

submitted to the witnesses for response subsequent to the hearing:] 

QUESTIONS SUBMITTED TO HON. SAMUEL W. BODMAN

QUESTIONS SUBMITTED BY SENATOR ROBERT C. BYRD

Question. Mr. Secretary, how do you propose to re-engage the private sector in future ventures after the administration walked out in the middle of the project with 

the FutureGen Alliance and has barely lived up to its commitments with regard to 

the Clean Coal Power Initiative? 

Answer. The FutureGen Cooperative Agreement between DOE and the Alliance 

contained clear decision points that envisioned periodic re-assessments as the 

project progressed. The Department must make sound decisions when determining 

how to invest taxpayers’ funds. The public’s interests were not best served by the 

continuation of the original FutureGen agreement with the Government shouldering 

up to 74 percent of the project cost, and with the estimated costs increasing and 

likely to go higher. Therefore, FutureGen is being restructured as a commercial 

demonstration program to better serve the interests of both the public and industry. 

The Department received responses from approximately 50 parties to the Request 

for Information (RFI) issued in January on the restructured approach, and more responses were submitted for the Draft Funding Opportunity Announcement (FOA) 

that was issued in May. The Department believes that the restructured FutureGen 

program will have ample industry support; given its orientation toward commercial 

demonstration projects and the availability of as much as $1.3 billion in possible 

cost share. Additionally, because changes to the project were made based on sound 

reasoning and good faith negotiations, the Department believes that the restructured FutureGen will have the support the program deserves. 

Regarding the Clean Coal Power Initiative, we plan to issue the solicitation for 

a third round later this year. 

Question. The Department of Energy is on record for abandoning the FutureGen 

project primarily based on escalating costs. Escalating costs are a reality for any 

major construction project. What safeguards will the administration put in place to 

ensure that any new alternative FutureGen initiatives will not endure the same 

fate? 

Answer. The primary safeguard is that the restructured FutureGen program will 

be capped at $1.3 billion for the Federal contribution focused on addressing the Carbon Capture and Storage portion of commercial plants and associated integration 

issues. Consequently, the restructured program requires a significantly greater industry cost share. The fiscal year 2009 budget proposes statutory language guarding 

against cost escalation. For example, it limits escalation of the Government cost 

share to 25 percent of the original award. Furthermore, the Funding Opportunity 

Announcement explicitly states that DOE does not plan to set-aside funds for cost 

growth. Industry will be operating the facilities for commercial power production. 

Hence, industry will have strong incentive to complete the project even if cost increases occur. 

Question. The Department of Energy also raised concerns about third-party financing of FutureGen. Is it not true that nearly every coal-fired project in the country, including DOE’s own CCPI program, involves financing? Why was the former 

FutureGen project held to a different standard? 

Answer. DOE’s financial obligations for the original FutureGen project would 

have been much higher than on any of our CCPI projects, in terms of both dollar 

value and cost share percentage. DOE’s cost-share for CCPI would be 50 percent or 

less while its share for the original FutureGen was 74 percent. If project financing 

were allowed under such a circumstance, then lenders could have taken a lien on 

the entire facility and future cash-streams, making it much more difficult for DOE 

to complete the project if the Alliance chose to terminate the agreement. This arrangement would have presented too much risk to the taxpayer. 

For restructured FutureGen where DOE will contribute only the incremental cost 

of the CCS related portion of the plant, our assumption is that commercial power 

producers investing at least 50 percent (compared to only 26 percent in the original 

FutureGen), and potentially upwards of 75 percent or more of the project cost will 

have a strong incentive to complete the project. Hence, project financing in this case 

will not expose DOE to as great a risk of project abandonment. 
56 

Question. The agency has contended that the revised FutureGen approach will 

place emphasis on gaining early commercial experience validating clean coal technologies through multiple demonstrations of Carbon Capture and Storage (CCS) 

technology in commercially operated Integrated Gasification Combined Cycle (IGCC) 

electric power plants. How realistic is it to expect that these projects will be on line 

quicker than the original FutureGen project, given that DOE will need to evaluate 

new proposals, make selections, conduct environmental reviews for new projects, 

and realize commercial operations? 

Answer. The restructured program will be premised on multiple commercial demonstration projects, rather than a single R&D plant. This strategy will produce more 

commercial plants sooner. Depending upon the number and nature of proposals received, we expect multiple projects that can enter commercial operations as soon as 

2015. 

Under the original approach, the R&D plant would have initiated R&D test operations in 2012 or 2013, and those operations would have continued for 3 years, after 

which separate commercial projects would have followed and entered commercial operations around the 2020 timeframe. 

Question. The revamped FutureGen and CCPI–3 are starting to look a lot alike. 

What are the key differences? 

Answer. The key differences are that CCPI is focused on getting new, low-cost and 

efficient carbon capture technologies that mature from the R&D sub-pilot scale to 

be tested and demonstrated in clean coal projects, while FutureGen’s primary goal 

is aimed at demonstrating at a commercial scale multiple IGCC (or other advanced 

coal) power plants with carbon capture and storage (CCS) using a variety of coals. 

Furthermore, FutureGen requires the storage of at least 1 million metric tons CO2/ 

yr in a saline reservoir, while CCPI will require a lesser amount of CO2 capture and 

allows for the beneficial reuse and/or permanent storage of the captured CO2 from 

the power plant. Both FutureGen and CCPI provide expanded demonstration experience for integrated power plants with CCS. Both programs aim to provide valuable 

commercial experience for these clean coal technologies, and FutureGen’s goal of 

capturing as much as 90 percent of CO2 along with CCPI’s demonstrations to integrate CCS with power generation are complementary and necessary activities leading to affordable near-zero emission coal plants with CCS. 

Question. I understand that the revamped FutureGen effort will not continue as 

74 percent Federal/26 percent private cost-shared demonstration projects. Please explain how the agency will determine its financial role in the revamped FutureGen 

program. 

Answer. Under the restructured FutureGen approach, the Government would contribute a portion of the incremental cost of implementing the CCS portions of the 

demonstration when compared to a state of the art facility without such technology, 

and up to 50 percent of the total allowable project costs. For example, if a project 

proposes a greenfield IGCC facility that would have a total project cost of $1 billion 

without CCS and $1.4 billion with CCS, then DOE’s maximum contribution to the 

project would be $400 million. 

Question. How much funding is expected to be available for FutureGen and for 

Round 3 of the Clean Coal Power Initiative (CCPI–3)? What are the out-year budget 

implications for FutureGen? How many projects do you anticipate funding under 

FutureGen and how many under CCPI? 

Answer. For FutureGen, we expect to have $290 million available through fiscal year 2009, plus $1.01 billion in the out-years, for a total of $1.3 billion. For CCPI 

we expect to have $224 million available for Round 3, plus significant funding over 

the next several years in order to pursue a fourth round solicitation. The number 

of projects is highly dependent upon the amount of funding available and the number and nature of the proposals received. 

Question. Will you be proposing a forth round of CCPI as originally planned, and 

when do you expect that to happen? How will out-year funding for FutureGen impact the ability to fund these important future rounds of CCPI? 

Answer. We are currently focused on Round 3 of CCPI. Out-year funding for 

FutureGen is not expected to impact the ability to fund future rounds of CCPI. 

Question. I understand that $134 million of the $173 million appropriated for the 

original FutureGen project is unobligated. Does the agency intend to submit a reprogramming request to the congressional committee of jurisdiction to make the 

$134 million available for the restructured FutureGen? 

Answer. No, at this time we do not believe that we will need to reprogram funds. 

However, we will correspond with the appropriate committees in advance of any 

award to discuss our needs for financing. As a matter of policy, the Department 

typically abides by the reprogramming guidance provided by the appropriations subcommittees each year. The general reprogramming guidance contained in the Ex-
57 

planatory Statement accompanying the Consolidated Appropriations Act, 2008 is 

that a ‘‘reprogramming includes the reallocation of funds from one activity to another within an appropriation, or any significant departure from a program, project, 

activity, or organization described in the agency’s budget justification.’’ There has 

been no change in the description of the fundamental goal of FutureGen. Both the 

Department’s fiscal year 2008 and fiscal year 2009 budget justifications describe 

FutureGen as a program that ‘‘will prove the technical feasibility and economic viability of the near-zero atmospheric emission (including carbon) coal concepts.’’ 

Question. I understand that $39 million of the $173 million appropriated for the 

original FutureGen project was obligated. What return on investment is there to 

show the taxpayer on this obligation? 

Answer. We believe the knowledge gained and lessons learned over the past 5 

years will be very helpful as we move forward with the restructured approach. The 

original approach provided a great deal of valuable information, especially in terms 

of siting processes for coal-based power plant projects equipped with carbon capture 

and storage, as well as conceptual and preliminary design parameters, equipment 

specifications, and a preliminary cost estimate. This information may also be insightful during the early stages of the restructured program, and will provide value 

in the form of analytical techniques and thought processes that were developed and 

utilized. Additionally, we have four sites that were identified in the Environmental 

Impact Statement as suitable candidate sites that could be eligible for proposed 

projects under the restructured FutureGen. Much of the environmental and siting 

information has been gathered on these sites, which will be useful in future projects. 

QUESTIONS SUBMITTED BY SENATOR WAYNE ALLARD

Question. Did the administration work with industry when making their restructuring decision to ensure that the decision was one that was workable for industry? 

Answer. On January 30, 2008, DOE issued a Request for Information (RFI) seeking industry comment on the restructured project. DOE has taken those industry 

comments under consideration and published a Draft Funding Opportunity Announcement (FOA) on May 7, 2008, in order to give industry a second opportunity 

to comment on the restructured approach before the final FutureGen FOA is released. 

Question. Mr. Secretary, will there be special consideration given to proving carbon capture and storage capabilities at high altitudes? 

Answer. All projects will be evaluated fairly on their merit and strength of proposal. If a project that proposes CCS happens to be located at high altitudes, and 

is otherwise a strong project, it will be given due consideration along with the other 

projects during the selection process. 

QUESTIONS SUBMITTED BY SENATOR RICHARD J. DURBIN

Question. President Bush announced the FutureGen Initiative in February 2003. It was called a $1 billion initiative with DOE carrying 80 percent of the cost—$800 

million. In March 2007 the Department of Energy signed a cooperative agreement 

with the FutureGen Alliance stating that DOE’s share of the project would be $1.1 

billion, approximately 40 percent more. Ten months later, in January 2008, DOE 

cancelled the project, citing increasing costs. 

If the cost estimate and terms were acceptable in March 2007, why were they suddenly unacceptable a few months later? 

Answer. The 2004 Report to Congress on FutureGen identified the following fund- ing sources: $500 million from DOE for the base plant; up to $120 million in DOE 

funding for the sequestration component, with the possibility of industry cost share 

reducing the DOE share; $250 million from the FutureGen consortium, and $80 million from international partners. The Department became concerned about cost increases in early 2007. Our concerns over future cost escalations prompted a series 

of meetings between the Department and the FutureGen Alliance in an attempt to 

resolve the cost containment issues. Through December 2007, the Department still 

hoped that a suitable arrangement with the Alliance could be achieved. Unfortunately, an agreement could not be reached, and we decided to restructure the 

FutureGen project to better build upon technological advances achieved in CCS 

technology through Federal and private R&D work, as well as changes in the marketplace including more IGCC projects proposed for construction. 

Question. How can DOE claim that its costs have doubled? 

Answer. In the Report to Congress in 2004, DOE provided a project estimate of 

$950 million in ‘‘current year dollars’’ without escalation in an attempt to identify 
58 

the scale of the project. It was not until the Alliance completed their conceptual design in 2007, that the $1.8 billion (‘‘as spent’’ dollars) estimate was finalized. Therefore, the $950 million estimate in constant year 2004 dollars is now estimated to 

be $1.8 billion in escalated ‘‘as spent’’ dollars for the same project scope. 

Question. I want to understand when DOE made the decision to pull the plug on 

FutureGen. On November 8, 2007, Acting Principal Deputy Assistant Secretary 

Slutz wrote to me, informing me that the Environmental Impact Statement would 

be issued the next day and that DOE would issue a Record of Decision after the 

public comment period. Again on November 30, you notified Congress that a Record 

of Decision would be issued and a site would be selected by the end of the year. 

Then on December 18, 2008, DOE issued a press release that the program would 

be restructured. 

DOE’s decision to restructure was made sometime between November 30 and December 18? 

Answer. DOE’s final decision to restructure the FutureGen project was made on 

January 30, 2008 after it was determined that DOE could not reach a mutually 

agreeable restructured cooperative agreement with the Alliance. 

Question. Whom specifically at the Alliance did Mr. Albright speak with? 

Answer. Under Secretary Albright spoke with representatives from member companies of the Alliance. 

Question. Did you personally ask any members of the Alliance not to make the 

site announcement? Please instruct Mr. Albright to send the subcommittee a list of 

FutureGen Alliance managers that he personally spoke with between November 30 

and December 18. His list should include a brief explanation of what was said in 

each conversation. 

Answer. On December 11, 2007, the Department advised the Alliance not to move 

forward with any site selection announcement through a letter sent by Acting Principal Deputy Assistant Secretary Jim Slutz. Under Secretary Albright spoke with 

representatives of member companies of the Alliance, asking them not to move forward with a site selection announcement in light of the nature of the negotiations 

that were taking place between the Alliance and DOE. 

Question. We have established that DOE’s restructuring decision was made sometime between November 30 and December 18. What specifically prompted you in 

this 19-day period to scuttle the program? 

Answer. DOE’s final decision to restructure the FutureGen project was made on 

January 30, 2008 after it was determined that DOE could not reach a mutually 

agreeable restructured cooperative agreement with the Alliance. 

Question. I have some questions about the new program you’ve proposed to replace FutureGen at Mattoon. DOE released a draft solicitation yesterday and announced that a final solicitation will be released in mid summer. Furthermore, DOE 

expects to select projects in December, maybe 5 months later—conveniently in time 

for a new administration to be saddled with this new program. 

From the time of the Request for Proposals, how long did it take DOE and the 

Alliance to select the Mattoon proposal? 

Answer. DOE did not select the Mattoon site proposal. The Alliance issued its Request for Siting Proposals in March 2006, and unilaterally announced its site selection (Mattoon) in December 2007. 

Question. What effort went in to preparing those proposals? 

Answer. The proposals included extensive site characterization efforts, which 

should be considered by prospective developers who are evaluating Mattoon, 

Tuscola, Jewett or Odessa for a possible site to bid on the new FutureGen solicitation when it is released. 

Question. And in the new program you expect the site characterization, system 

design, proposal writing, and proposal review process to take only 5 months? 

Answer. Yes, though a comprehensive site evaluation under NEPA will take place 

after conditional project selections are made, and will require 18 to 24 months in 

parallel with preliminary project design activities. 

Question. The intent of the proposed program is for DOE to cover the additional 

costs of a carbon capture and sequestration system tacked on to a commercial power 

plant? 

Answer. Under the restructured FutureGen approach, the Government would contribute a portion of the incremental cost of implementing the CCS portions of the 

demonstration when compared to a state of the art facility without such technology, 

and up to 50 percent of the total allowable project costs. For example, if a project 

proposes a greenfield IGCC facility that would have a total project cost of $1 billion 

without CCS and $1.4 billion with CCS, then DOE’s maximum contribution to the 

project would be $400 million. 
59 

The CCS system will reduce plant efficiency substantially. For instance, the CCS 

system will draw much electricity that would otherwise be sold on the grid. Currently, these costs are not covered in the latest draft solicitation. 

Question. The costs of less efficient electricity production will be passed on to the 

ratepayers? 

Answer. There will be costs for controlling carbon emissions, just as there have 

been costs associated with controlling other types of emissions. The determination 

of what costs will be passed on to rate payers would be made by the project owners 

and/or the regulators depending on the electricity market territory. 

QUESTIONS SUBMITTED TO PAUL W. THOMPSON

QUESTIONS SUBMITTED BY SENATOR WAYNE ALLARD

Question. What is the project doing to ensure that the results of the project are 

something that industry can pick-up and integrate into current or future facilities 

smoothly? 

Answer. Facilitating the rapid transfer of project results to a broad cross-section 

of the industrial community, with a goal of stimulating subsequent commercial 

near-zero emissions coal projects, is an important aspect of FutureGen at Mattoon. 

Further, it is our view that this transfer of the results must be continuous throughout the project. 

The first step taken by the Alliance to facilitate the sharing of results was to incorporate as a non-profit organization and welcome all coal-fueled utilities and coal 

companies to participate. This has at least two major benefits. First, the industrial 

backers of subsequent commercial projects have an open and equal opportunity to 

gain hands-on knowledge through their early participation in FutureGen at 

Mattoon. Second, the non-profit structure of the Alliance prohibits participating 

companies from gaining preferential intellectual property benefits or financial returns; thus, participants do not have the traditional for-profit motivation of keeping 

knowledge to themselves for individual corporate advantage. Instead, they benefit 

through the accelerated advancement of the technology. 

DOE’s proposed approach for restructuring FutureGen will intertwine the advancement of technology with commercial ventures. This will incentivize participants to limit information sharing in order to improve their own competitive advantage and gain a direct financial return on their investment. 

One can look to the Alliance website, www.FutureGenAlliance.org, for evidence of 

the Alliance’s early efforts to share results. During the siting process, the Alliance 

published a comprehensive set of siting criteria that were designed to help select 

a suitable power plant site that also offered safe, permanent sequestration opportunities. We believe that these criteria and the methodology can, and should, be 

adapted to the specific needs of future commercial projects in order to aid in the 

selection of high quality sites. 

As a second example, upon completion of an initial conceptual design and cost estimate, documentation of this work was publicly distributed and is also posted on 

the Alliance’s website. On typical DOE clean coal projects, and almost certainly on 

projects that are part of DOE’s proposed and restructured program, program participants will not publicly share information at this detailed level. 

As FutureGen at Mattoon moves from design to construction and operation, the 

pace of information sharing will only increase. 

Questions. As this is a ‘‘global public-private partnership’’ can one of you share 

with us some of the contributions being made by the global community? 

What is the plan for sharing the results of these demonstration projects with industries and markets outside of this country? 

Answer. There are currently 13 industrial members of the non-profit FutureGen 

Alliance, which has joined in a global public-private partnership with DOE. Approximately one-half of the participating companies are headquartered overseas. These 

overseas companies currently plan to provide approximately one-half of the approximately $400 million to FutureGen at Mattoon with no expectation of corporate financial return. Thus, funding to a DOE program is a major contribution by the global community. 

In addition, the global community is providing technological know-how through 

the industrial member companies, independent technical experts, and technology 

vendors. This is a hallmark of FutureGen at Mattoon, as the United States is benefiting from the best and brightest minds around the world in its effort to design and 

build this first-of-a-kind power plant. This is important so that we can ensure that 

the power plant is truly state-of-the-art. It is also important because sequestration 
60 

technology will only be a viable part of a comprehensive response to climate change 

if it is viewed globally as technically and socially acceptable. Involvement of the 

global community during the design process will help ensure ultimate stakeholder 

and commercial acceptance of sequestration technology. 

With respect to sharing results with the international industries and markets, 

this will take place in several ways. In all cases, export laws, other regulations, and 

the rights of participating technology vendors will be respected. Consistent with 

this, there is substantial know-how, particularly related to sequestration, operational data, procedures and experience, design approaches, and lessons-learned 

that can be shared internationally and to the benefit of the United States. Among 

other approaches, publications, participation in industrial forums, and participation 

in scientific forums will be used. Further, technology vendors participating in 

FutureGen at Mattoon will be well positioned to sell selected, U.S.-made technologies to international markets. This will improve U.S. trade and at the same 

time important progress will be made in globally deploying near-zero emissions 

technology that addresses climate change and energy security concerns. 

It is also important to note that the technologies developed as part of FutureGen 

at Mattoon will also be shared throughout the United States. As an example, the 

FutureGen at Mattoon plant is fuel flexible in terms of the coals it can gasify. So, 

while it is located in the Midwest, it will be able to gasify eastern coals and western 

coals, such as Powder River Basin coal. 

CONCLUSION OF HEARING

Senator DORGAN. This hearing is recessed. 

[Whereupon, at 11:09 a.m., Thursday, May 8, the hearing was 

concluded, and the subcommittee was recessed, to reconvene subject to the call of the Chair.] 

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