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21-447 PS 2005

H.R. 1071, TO DIRECT THE SECRETARY OF ENERGY TO MAKE

INCENTIVE PAYMENTS TO THE

OWNERS OR OPERATORS OF

QUALIFIED DESALINATION FACILITIES; AND OVERSIGHT ON ‘‘REDUCING POWER AND OTHER COSTS OF

THE DESALINATION PROCESS.’’

LEGISLATIVE AND

OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON WATER AND POWER

OF THE

COMMITTEE ON RESOURCES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

Tuesday, May 24, 2005

Serial No. 109-14

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://resourcescommittee.house.gov

(II)

COMMITTEE ON RESOURCES

RICHARD W. POMBO, California, Chairman

NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska

Jim Saxton, New Jersey

Elton Gallegly, California

John J. Duncan, Jr., Tennessee

Wayne T. Gilchrest, Maryland

Ken Calvert, California

Barbara Cubin, Wyoming

Vice Chair

George P. Radanovich, California

Walter B. Jones, Jr., North Carolina

Chris Cannon, Utah

John E. Peterson, Pennsylvania

Jim Gibbons, Nevada

Greg Walden, Oregon

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

Jeff Flake, Arizona

Rick Renzi, Arizona

Stevan Pearce, New Mexico

Henry Brown, Jr., South Carolina

Thelma Drake, Virginia

Luis G. Fortun ̃ o, Puerto Rico

Cathy McMorris, Washington

Bobby Jindal, Louisiana

Louie Gohmert, Texas

Marilyn N. Musgrave, Colorado

Vacancy

Dale E. Kildee, Michigan

Eni F.H. Faleomavaega, American Samoa

Neil Abercrombie, Hawaii

Solomon P. Ortiz, Texas

Frank Pallone, Jr., New Jersey

Donna M. Christensen, Virgin Islands

Ron Kind, Wisconsin

Grace F. Napolitano, California

Tom Udall, New Mexico

Rau ́l M. Grijalva, Arizona

Madeleine Z. Bordallo, Guam

Jim Costa, California

Charlie Melancon, Louisiana

Dan Boren, Oklahoma

George Miller, California

Edward J. Markey, Massachusetts

Peter A. DeFazio, Oregon

Jay Inslee, Washington

Mark Udall, Colorado

Dennis Cardoza, California

Stephanie Herseth, South Dakota

Steven J. Ding, Chief of Staff

Lisa Pittman, Chief Counsel

James H. Zoia, Democrat Staff Director

Jeffrey P. Petrich, Democrat Chief Counsel

SUBCOMMITTEE ON WATER AND POWER

GEORGE P. RADANOVICH, California, Chairman

GRACE F. NAPOLITANO, California, Ranking Democrat Member

Ken Calvert, California

Barbara Cubin, Wyoming

Greg Walden, Oregon

Thomas G. Tancredo, Colorado

J.D. Hayworth, Arizona

Stevan Pearce, New Mexico

Cathy McMorris, Washington

Louie Gohmert, Texas

Vacancy

Richard W. Pombo, California, ex officio

Rau ́l M. Grijalva, Arizona

Jim Costa, California

George Miller, California

Mark Udall, Colorado

Dennis A. Cardoza, California

Vacancy

Vacancy

Nick J. Rahall II, West Virginia, ex officio

(III)

CONTENTS

Page

Hearing held on Tuesday, May 24, 2005 ............................................................... 1

Statement of Members:

Davis, Hon. Jim, a Representative in Congress from the State of Florida .. 26

Prepared statement of ............................................................................... 28

Radanovich, Hon. George P., a Representative in Congress from the State

of California ................................................................................................... 1

Prepared statement of ............................................................................... 2

Statement of Witnesses:

Bach, Maryanne, Director, Research and Development, Bureau of

Reclamation, U.S. Department of the Interior ........................................... 9

Prepared statement of ............................................................................... 10

Garman, David, Assistant Secretary for Energy Efficiency and Renewable

Energy, U.S. Department of Energy ........................................................... 5

Prepared statement of ............................................................................... 6

Holtz-Eakin, Dr. Douglas, Director, Congressional Budget Office ............... 14

Prepared statement of ............................................................................... 15

Max, Dr. Michael D., Chief Executive Officer, Marine Desalination

Systems, L.L.C., St. Petersburg, Florida .................................................... 58

Prepared statement of ............................................................................... 60

McCourt, Pat, City Manager, City of Alamogordo, New Mexico .................. 54

Prepared statement of ............................................................................... 55

Rhinerson, Bernie, Board Member, San Diego County Water Authority,

on behalf of the U.S. Desalination Coalition, San Diego, California ........ 36

Prepared statement of ............................................................................... 37

Sabol, Colin R., Chief Marketing Officer, GE Infrastructure, Trevose,

Pennsylvania ................................................................................................. 47

Prepared statement of ............................................................................... 49

Wattier, Kevin L., General Manager, Long Beach Water, Long Beach,

California ....................................................................................................... 39

Prepared statement of ............................................................................... 41

(1)

LEGISLATIVE HEARING ON H.R. 1071, A BILL

TO DIRECT THE SECRETARY OF ENERGY

TO MAKE INCENTIVE PAYMENTS TO THE

OWNERS OR OPERATORS OF QUALIFIED

DESALINATION FACILITIES TO PARTIALLY

OFFSET THE COST OF ELECTRICAL

ENERGY REQUIRED TO OPERATE SUCH

FACILITIES, AND FOR OTHER PURPOSES;

AND AN OVERSIGHT HEARING ON ‘‘REDUCING POWER AND OTHER COSTS OF THE

DESALINATION PROCESS.’’

Tuesday, May 24, 2005

U.S. House of Representatives

Subcommittee on Water and Power

Committee on Resources

Washington, D.C.

The Subcommittee met, pursuant to call, at 10:05 a.m., in Room

1334, Longworth House Office Building, Hon. George Radanovich

[Chairman of the Subcommittee] presiding.

Present: Representatives Radanovich, Walden, Tancredo,

Hayworth, Pearce and Napolitano.

Also Present: Representatives Gibbons and Davis.

STATEMENT OF THE HON. GEORGE P. RADANOVICH, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF

CALIFORNIA

Mr. RADANOVICH. Good morning. Welcome to the Subcommittee

on Water and Power, Committee on Resources hearing on

H.R. 1071, a bill to direct the Secretary of Energy to make incentive payments to the owners or operators of qualified desalination

facilities to partially offset the cost of electrical energy required to

operate such facilities, and for other purposes; and a hearing on

‘‘Reducing Power and Other Costs of the Desalination Process.’’ The

hearing by the Subcommittee is now in order.

Today, we will examine ways to create new water through the

promise of desalting. This growing alternative water supply should

be a major piece of our water toolbox.

2

So far this Congress, we have looked at ways to improve our

water supplies, to increase water storage, water recycling, and

other mechanisms. We still need all these tools to meet growing

population environmental demands, and we will continue to pursue

them.

For years, desalting water has been a major focus in the Middle

East, where cheap oil subsidizes the high power cost. The U.S.

Navy extensively uses this process for its water needs. Just recently, however, desalting is now being considered on a large scale

in our coastal and inland communities. Our Nation has come a long

way in reducing desalting costs, but when the water is still two or

three times more expensive than traditional sources, we can do

better.

The purpose of today’s hearing is to figure out the appropriate

Federal role of this arena of ‘‘water world.’’ H.R. 1071, authored by

our distinguished colleagues, Jim Davis and Jim Gibbons, is one

proposed way to reduce power costs. This bill is well-intentioned

and has merit, but we should also look at what role the Federal

agencies can play in limited research and development as well.

We should do something about permitting requirements, too.

When almost a third of the construction costs of a proposed southern California desalting facility are related to Federal and State

permits, it begs the question of the need to reduce this part of the

cost equation. We ought to think about a one-stop-shop permitting

provision—like Nancy Pelosi envisioned for Hetch Hetchy—to

reduce these costs.

I welcome my colleagues and today’s witnesses for their dedication in desalting and reducing costs, and I look forward to working

with everybody on this important topic.

[The prepared statement of Mr. Radanovich follows:]

Statement of The Honorable George Radanovich, Chairman,

Subcommittee on Water and Power

Today, we will examine ways to create new water through the promise of

desalting. This growing, alternative water supply should be a major piece of our

water toolbox.

So far this Congress, we have looked at ways to improve our water supplies

through increased water storage, water recycling and other mechanisms. We still

need all of these tools to meet growing population and environmental demands and

we will continue to pursue them.

For years, desalting water has been a major focus in the Middle East, where

cheap oil can subsidize the high costs of this process. The U.S. Navy extensively

uses this process for its water needs. Just recently, however, desalting is now being

considered on large scale in our coastal and inland communities. Our Nation has

come a long way in reducing desalting costs, but when the water is still two or three

times more expensive than traditional sources, we can do better.

The purpose of today’s hearing is to figure out the appropriate federal role in this

arena of ‘‘water world.’’ H.R. 1071, authored by our distinguished colleagues, Jim

Davis and Jim Gibbons, is one proposed way to directly reduce power costs. This

bill is well-intentioned and has merit, but we should also look at what the role the

federal agencies can play in limited research and development as well.

We should do something about permitting requirements too. When almost of third

of the construction costs of a proposed southern California desalting facility are related to federal and state permits, it begs the question of the need to reduce this

part of the cost equation. We ought to think about a one-stop-shop permitting provision—like Nancy Pelosi envisioned for Hetch Hetchy—to reduce these costs.

I welcome my colleagues and today’s witnesses for their dedication to promoting

desalting and reducing its costs. I look forward to working with everyone on this

important topic.

3

Mr. RADANOVICH. I now recognize Mrs. Napolitano, as the Ranking Democrat, for any statement she may have.

Mrs. NAPOLITANO. Thank you, Mr. Chair. It is a pleasure to be

here this morning to look at what role desalination plays and to

hear from the witnesses, the experts on the various aspects of desalination.

You are very well aware that I strongly support and advocate the

use of technologies to solve some of our water problems. As we are

all well aware, putting technology to work on the water shortages

can be expensive, but it can also provide new and less expensive

ways as they fine-tune some of these technologies.

Some of the communities will find it impossible to build desalination plants or water recycling projects because they lack either the

tax base or the seed money to construct and carry through some

of their plans, or because the revenues from water sales are not

enough to cover all those costs. Can or should we, Federal Government, step in to help committees and communities finance or operate desalination plants?

A strong case for the Federal assistance can be made in many

cases, but we first must carefully consider exactly what the Federal

role should be. We need to find out what the communities need,

where they need it, how they need it, have a more clearly defined

role in the Federal Government as a partner in these communities

who wish to build these facilities, and is it in the areas of greater

need where they are facing drought, continuing drought conditions

that affect their economy and their ability to have growth potential.

I want to thank my Chair, a good friend, Mr. Radanovich for

scheduling the hearing, and I look forward to Congressman Jim

Davis’ desalination bill explanation, H.R. 1071, and for working

with us to line up the two excellent panels of witnesses of whom

I have a ton of questions. Thank you, Mr. Chairman.

Mr. RADANOVICH. Thank you, Grace.

I now recognize the gentleman from Nevada, the co-sponsor, coauthor of the bill, Jim Gibbons.

Mr. GIBBONS. Thank you, Mr. Chairman; and thank you for giving me an opportunity to testify here today and to discuss

H.R. 1071, the Desalination Drought Protection Act of 2005.

I want to also welcome all our witnesses here today. I look forward to your testimony. I think it is going to be very insightful in

helping us make a better informed decision.

I am actually a lead sponsor and quite proud to be a lead sponsor

of this important bill; and, Mr. Chairman, while I do not serve on

this Subcommittee as a member, our Nation’s water supply is an

issue of great interest to me and my constituents, especially in Nevada. I am pleased to be here today to discuss this bill which would

give great hope for those of us out West where water is short. Mark

Twain, a one-time Nevada silver prospector, once observed: Whiskey is for drinking, water is for fighting over. And that holds true

today.

Seven States currently are competing for their share of the

Colorado River. With potentially fierce battles over the distribution

of the Colorado River looming, Nevada and the entire West must

consider alternative sources of water to continue our growth and

prosperity.

4

The West, home to the fastest-growing communities in the Nation, continues to face a prolonged drought. Now entering our sixth

consecutive year of drought, Nevada must look for other sources of

water. Desalination, the process through which seawater and

brackish groundwater are converted into pure drinking water, is

one such source. Desalination plants produce dependable supplies

of fresh water at increasingly lower cost every year.

Given further advances in technology, desalination holds the

promise of becoming a key component of a long-term solution to

America’s water shortage crisis. The development of a robust desalination industry in California, the largest user of the Colorado

River water, could result in a more efficient allocation of that river

water for Nevada and its neighbors.

It is my hope that through the passage of this legislation the

Federal Government can help propel an industry that can become

a vital part of our Nation’s long-term solution to water shortage.

With that, Mr. Chairman, I thank you for the opportunity to be

present here today and yield back the balance of my time.

Mr. RADANOVICH. Thank you, Mr. Gibbons.

Mr. Pearce.

Mr. PEARCE. Thank you, Mr. Chairman. I would also like to say

thanks for having this hearing.

New Mexico just struggles continuously for water resources.

Many parts of the State typically only get nine inches per year and

in the last 3 and 4 years only two inches per year. So we are facing

a water shortage that is unprecedented.

On the second panel, I would like to introduce a person from my

district. I will be in and out of this Committee hearing, going to

another one, but I would like to introduce Mr. Pat McCourt, who

is the City Manager from the City of Alamogordo. The City of

Alamogordo has estimates of about a billion acre feet underneath

it, but it is pretty salty water. So in that area we have plenty of

water, just not plenty of cheap water, and this bill should help us

move a long way to beginning to have the alternative sources of

water available where we do have the actual water there. So we

are appreciative of his work and his testimony here today, and we

look forward to the discussion on what we can do on this

Committee to ensure the communities have the resource available

that creates all life.

Thank you again, Mr. Chairman, for this hearing.

Mr. RADANOVICH. Thank you, Mr. Pearce.

Now if there is nobody else having an opening statement, we will

introduce our first panel.

We have two panels here today. The first is Mr. David Garman,

who is the Assistant Secretary For Energy Efficiency and Renewable Energy in the Department of Energy; Ms. Maryanne Bach,

who is the Director of Research and Development at the Bureau of

Reclamation; and Dr. Douglas Holtz-Eakin, Director of the Congressional Budget Office.

Ladies and gentlemen, welcome to the Subcommittee. What we

will do in the course of the hearing is allow each one to testify for

about 5 minutes. The clocks will guide you. If you keep in mind

that your written testimony is included in the public record—and

feel free to be extemporaneous in your remarks, if you would like.

5

We will go down for comments from each of the three panelists and

then open it up for questions from the dais here.

Mr. RADANOVICH. Mr. Garman, welcome. You may begin.

STATEMENT OF DAVID GARMAN, ASSISTANT SECRETARY FOR

ENERGY EFFICIENCY AND RENEWABLE ENERGY, U.S.

DEPARTMENT OF ENERGY

Mr. GARMAN. Thank you, Mr. Chairman. We appreciate this opportunity to testify on the bill H.R. 1071, legislation directing the

Department of Energy to help offset the cost of electrical energy required to operate desalination facilities.

To the narrow question as to whether or not the Department of

Energy should directly subsidize electricity cost at desal facilities,

we believe the answer is no, and therefore regrettably cannot support this legislation. It is our view that incentive payments are not

the best means to remove the energy cost barriers to desalination.

Instead, we feel that continued Federal support for desalination research and development as well as our ongoing efforts to reduce energy demand and increase supply through the adoption of comprehensive energy legislation will have a large impact in the long

run on reducing desalination costs, perhaps a bigger impact than

making incentive payments in the short run to owners and operators of individual facilities.

But, having said that, let me express the view that we share this

view that members of this Subcommittee have that we have to develop innovative new approaches to dealing with the regional,

national, and global challenges related to water availability and

quality. This is an issue that is commanding significant attention

at the highest levels of the Administration. The White House Office

of Science and Technology Policy and the Office of Management

and Budget have identified water as a top Administration research

and development priority and called upon the National Science and

Technology Council to develop a coordinated, multi-year plan to improve research and to understand the processes that control water

availability and quality and to collect and make available the data

needed to ensure an adequate water supply for the Nation’s future.

Of course, the Water Desalinization Act of 1996 gave lead responsibility to the Department of the Interior to conduct, encourage, and assist in the financing of research to develop cost-effective

and efficient means for converting saline water into potable water

suitable for beneficial uses. We are looking at ways to better coordinate our efforts with those of the Department of the Interior and

other agencies through the process under way in the STSC Subcommittee on Water Availability and Quality.

At the Department of Energy, we have also been engaging our

national labs in serious discussions on what we call the ‘‘waterenergy nexus.’’ the relationship between energy and water is not

well understood by the public. It is surprising to many, for instance, that the amount of fresh water withdrawn nationally for

electricity production is more than twice the amount of water used

for residential, commercial, and industrial purposes and is comparable to the amount used for agricultural irrigation. Meanwhile,

pumping, storing, and treating water also consumes huge amounts

6

of electricity. An estimated 7 percent of California’s electricity consumption is used just to pump water.

So we understand that both our energy and our water supplies

are interconnected, and my written statement goes into much

greater detail into the work we have under way at the national

labs and universities and in conjunction with the private sector.

So allow me to conclude my testimony by saying that, while we

might oppose this specific legislation, the Department of Energy

supports the overarching goal to make desalinated water more affordable for communities that need it. We will continue to work in

support of the Department of the Interior and other Federal agencies in relevant research toward those ends, and we will look forward to working with this Committee and other committees of the

Congress in that effort.

So that completes my prepared statements, and I am happy to

answer any questions the Subcommittee might have either today or

in the future.

Mr. RADANOVICH. Thank you, Mr. Garman.

[The prepared statement of Mr. Garman follows:]

Statement of The Honorable David Garman, Assistant Secretary for Energy

Efficiency and Renewable Energy, U.S. Department of Energy

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity

to testify today on H.R. 1071, the Desalination Drought Protection Act of 2005. This

legislation would direct the Secretary of Energy to make payments to partially offset

the cost of electrical energy required to operate desalination facilities, presumably

in an effort to alleviate water supply issues now and in the future.

We share the view that we must develop innovative new approaches to dealing

with the regional, national, and global challenges related to water availability and

quality, and this is an issue that is commanding significant attention at the highest

levels of the Administration.

For example, in August 2004 the White House Office of Science and Technology

Policy (OSTP) and Office of Management and Budget (OMB) identified water as a

top Administration research and development priority and called upon the National

Science and Technology Council (NSTC) to ‘‘develop a coordinated, multi-year plan

to improve research to understand the processes that control water availability and

quality, and to collect and make available the data needed to ensure an adequate

water supply for the Nation’s future.’’ The NSTC Committee on Environment and

Natural Resources has formed a Subcommittee on Water Availability and Quality

(SWAQ) comprised of 15 Federal Departments and Agencies who are now in the

process of developing a comprehensive research plan. Their first report, ‘‘Science and

Technology to Support Fresh Water Availability in the United States,’’ was released

in November, 2004. Among the points highlighted by this report are the following:

• We do not have an adequate understanding of water availability at national, regional, or local levels.

• Water, once considered a ubiquitous resource, is now scarce in some parts of

the country—and not just in the West as one might assume.

• The amounts of water needed to maintain our natural environmental resources

are not well known.

• We need to evaluate alternatives to use water more efficiently, including technologies for conservation and supply enhancement such as water reuse and recycling as a way to make more water available.

• We need improved tools to predict the future of our water resources to enable

us to better plan for the more efficient operation of our water infrastructure.

The Water Desalination Act of 1996 (Public Law 104-298) gave lead responsibility

to the Department of Interior to conduct, encourage, and assist in the financing of

research to develop cost-effective and efficient means for converting saline water

into potable water suitable for beneficial uses. We are looking at ways to better coordinate our efforts with those of the Department of the Interior and other agencies

through the process underway in the NTSC’s Subcommittee on Water Availability

and Quality.

7

At the Department of Energy, we have been in serious discussions with some of our labs on what we call the ‘‘energy-water nexus.’’ The relationship between energy

and water is not well understood by the public, and it is surprising to many, for

instance, that the amount of fresh water withdrawn nationally for electricity production is more than twice as much as the water used for residential, commercial, and

industrial purposes, and is comparable to the amount of water used for agricultural

irrigation. Meanwhile, pumping, storing, and treating water consumes huge

amounts of electricity—an estimated 7 percent of California’s electricity consumption is used just to pump water. We understand that our energy and water supplies are interconnected. In fact, as much energy is used for water and wastewater purposes as for other major industrial sectors of the U.S. economy such as paper and pulp and petroleum refining. Although supplying and distributing water is largely a local responsibility, we be- lieve there is a Federal role in providing appropriate scientific and technological

support for these efforts. The legislation before the subcommittee this morning, however, poses a narrower question: Should the Department of Energy subsidize electricity costs at desalination facilities? We believe the answer is no. While well intended, H.R. 1071 is not a comprehensive approach to the challenge we face. It would subsidize a narrow group of electricity users engaged in water desalination efforts, and could divert limited Federal funding from efforts to engage

in a more comprehensive approach.

It is our view that incentive payments are not the best means to remove the en- ergy cost barriers to desalinating water. Instead, we feel continued targeted Federal

support for desalination research and development consistent with the Administration’s Research and Development Investment Criteria, as well as our ongoing efforts

to reduce energy demand and increase supply through the adoption of comprehensive energy legislation, will have a larger impact in the long-run on reducing desalination costs than will making incentive payments to the owners or operators of individual facilities.

Although the hearing today focuses on producing drinkable water through a tech- nological process, the equally important aspect of the larger issue is finding ways

to reduce water consumption and remove some of the demand pressure from regional water supplies. A prime place to start is the water intensive process of thermoelectric generation from fossil fuels such as coal, oil, and natural gas. For these

systems, an average of 25 gallons of water is withdrawn to produce a kilowatt hour

(kWh) of electricity of which nearly one-half gallon is consumed by evaporation.

Overall, fossil-fuel-fired power plants require withdrawals of more than 97 billion

gallons of fresh water each day, of which 2-3% is lost to evaporation. The Department’s Office of Fossil Energy is supporting numerous research projects aimed at reducing the amount of fresh water needed by power plants and

to minimize potential impacts of plant operations on water quality. One project at

West Virginia University is assessing the feasibility of using underground coal mine

water as a source of cooling water for power plants. A North Dakota project is attempting to reduce the water consumption of power plants by recovering a large

fraction of the water present in the plant flue gas. A project in New Mexico is exploring whether produced waters, the by-product of natural gas and oil extraction

which often present a disposal issue, can be used to meet up to 25 percent of the

cooling water needed at the San Juan Generating Station, as well as investigating

an advanced wet-dry hybrid cooling system. In addition, the Department currently

has a competitive solicitation on the street seeking additional innovative technologies and concepts for reducing the amount of fresh water needed to operate fossil-based thermoelectric power stations, including advanced cooling and water recovery technologies. The Department is also investigating whether a suite of specially

selected, salt-tolerant agricultural crops or other plants can be used to remove sodium and other salts from coalbed methane produced water so that it can be safely

discharged or used in agriculture.

One promising new approach to electricity generation, Integrated Gasification

Combined Cycle (IGCC) technology that converts coal and other hydrocarbons into

synthetic gas, offers significant environmental and water benefits compared to traditional pulverized coal power plants. Because the steam cycle of IGCC plants typically produces less than 50 percent of the power output, IGCC plants require 30 to

60 percent less water than conventional coal-fired power plants. The Department is

supporting research, development, and demonstration on a number of advancements

that will significantly drive down the costs of IGCC plants.

The Fossil Energy office is also supporting work at the University of Florida investigating an innovative diffusion-driven desalination process that would allow a

power plant that uses saline water for cooling to become a net producer of fresh

water. Hot water from the condenser provides the thermal energy to drive the

8

desalination process. Using a diffusion tower, saline water cools and condenses the

low pressure steam and fresh water is then stripped from the humidified air exiting

the tower. This process is more advantageous than conventional desalination technology in that it may be driven by waste heat with very low thermodynamic availability. In addition, cool air, a by-product of this process, can be used to cool nearby

buildings.

The Department’s Office of Energy Efficiency and Renewable Energy (EERE) is

supporting R&D for innovative wind and solar electricity supply technologies that

have attributes that may prove to be very beneficial to the desalination industry.

For example, wind power is now becoming a competitive, clean, bulk electric

power supply option in many areas of the Nation, and places no further demand

on water supplies for its operation. In addition, excellent offshore wind resources are

available near many coastal areas facing water supply challenges. The role that

wind could play in powering desalination could take a range of forms, from stand

alone systems exclusively powered by wind, to desalination plants that receive the

majority of their energy requirements from wind power delivered via electricity grid

systems. In either case, the relative ease and low cost of storing desalinated water,

in comparison with storing electricity, will allow operating flexibilities that will facilitate using inherently variable wind power as a primary energy source for desalination.

We are currently funding a concept design study which will set up engineering

and economic models to examine viability of wind-powered reverse osmosis systems,

looking at applications for coastal seawater, inland brackish water, and water produced during oil or gas recovery. A second project will model solar and wind resources for a desalination unit to determine the effects of variable loads on desalination, and perform pilot-scale testing to determine how renewable energy could reduce desalination costs.

We are also undertaking a mapping project to overlay data such as fresh and

brackish water resources, wind resources, water consumption, estimated growth,

and electricity supply. Two maps will be developed, one of the United States, and

one for the four-state region of Colorado, Utah, Arizona, and New Mexico, identifying locations that have the best economic and technical potential for using wind

to power desalination

Even as we proceed with these activities, we are mindful that the energy intensive technique of reverse osmosis we use for desalination today may not be the

membrane technology of tomorrow. But whether that breakthrough comes from a

lab working specifically on desalination, or through an area of broader scientific research remains to be seen. The Department’s Office of Science, for example, is

studying microbes and smart membranes that may ultimately have relevance to desalination in the future.

Having said that, it seems certain that desalination will play an important role

in maintaining and expanding our Nation’s, and indeed the world’s, water supply.

Where fresh water aquifers are under pressure in many regions, over-drafted and

subject to salt-water intrusion, brackish aquifers can be found throughout the country and the world, a ready source of new water. More than 120 countries are now

using desalination technologies to provide potable water, most commonly in the Persian Gulf where energy costs are low. The desalination plants of the future must

come in a range of sizes so that they can be installed where demand exists—smaller

footprint facilities which can make use of smaller deposits of impaired water, at a

price the community can afford. For American companies, the growing need for desalination will open new global markets.

While we oppose this specific legislation, the Department of Energy supports the

overarching goal to make desalinated water more affordable for communities that

need it. We will continue to work in support of the Department of the Interior and

other Federal agencies in relevant research toward those ends.

This completes my prepared statement, and I am happy to answer any questions

the Subcommittee may have.

Mr. RADANOVICH. Next is Ms. Maryanne Bach, the Director of

Research, R&D, at the Bureau. Welcome, Maryanne. You may

begin your testimony.

9

STATEMENT OF MARYANNE BACH, DIRECTOR OF RESEARCH

AND DEVELOPMENT, BUREAU OF RECLAMATION, U.S.

DEPARTMENT OF THE INTERIOR

Ms. BACH. Thank you, Mr. Chairman. I am Maryanne Bach. I am the Reclamations Director of Research and Development. Given

that the testimony is submitted for the record, I will just highlight

a few points.

You are familiar with the Bureau’s mission. I would say, in order to manage, develop, and protect waters in a way that make them

economically and environmentally available for use, our tools are

storage, transfer, conservation, and technology. Those are the

means by which western water is managed. We have spent nearly a half a century advancing desal tech- nology. That began in the Department of the Interior back in 1952.

The Office of Saline Water was created. It came from the Saline

Water Conversion Act. Until about 1982, the Department was

spending on the order of $30 million a year in research. This was

concurrent with the timeframe in which Reclamation was constructing storage facilities across the West. So the Department was

focusing on desal technology; the Bureau was completing construction of many authorized projects. The Office of Saline Water morphed into an office called the Office of Water Research and Technology, and it was about in 1982

that determination was made that the research facilities, the research institutes that were part of the Water Research and Technology Office would be then managed by USGS, and the desalinization research activity would be transferred to the Bureau of Reclamation.

There are some 1,200 Federal documents, sponsored documents,

that were created, much of which has formed the basis for the technology that has been applied worldwide. I have noted in my testimony that there is an extensive set of CDs that relate to all of that

technical work, plus the additional publications. I have one example, and I would be happy to submit the full set for the record. But

they are known worldwide, and they are used extensively throughout the world as reference documents.

In the late 1970s and early 1980s, Reclamation developed the

Yuma Desalting Plant. The Committee is familiar with the background on Yuma. With a 73 million gallon per day capacity of

desalted water, the Yuma Desalting Plant was larger than the

overseas desal plants then running.

What did the Yuma Desalting Plant have that those plants did

not? It is an exhibit of the evolution of technology. It had large reverse osmosis elements, practical energy recovery and other technology applications that are still being in use today.

In 1992, the agency moved into an area of improved reliability

and cutting costs for the water treatment technology research program and in certain cases or opportunities to test that internal on

reclamation projects.

In 1996, Congress passed the Desal Act authorizing the agency

to have a renewed effort at cutting desal costs through cooperative

R&D, and the written testimony expands on that. Through that

1996 reauthorization, the desal and water purification research and

development program is the line item in our budget that

10

Reclamation has used to fund desal. We have developed membrane

bioreactors and other important advanced technologies. DWPR has

widespread support outside of government, and I would note that

that authority for that particular piece of legislation does expire at

the end of 2005.

Technology transfer is another extremely important component of the desal work Reclamation does. We lead a Federal consortium

and a task force with professional research organizations. Working

with the American Waterworks Association, we have gathered

desal literature that ties together a wealth of desal information. Another product of our tech transfer effort is the desal roadmap.

That was produced in partnership with—assisted with the national

lab from Department of Energy of Sandia National Lab. We are

now in our second edition of the desal roadmapping. We have convened an even larger set of interested parties and additional

national lab perspectives. It is also worth noting that the desal

roadmap was critiqued by the National Academy of Sciences, and

their recommendations are also being considered. The importance of the desal roadmap is that it is broad based.

It is not specific about what research should be conducted in the

Federal Government. It is much more comprehensive than that. It

speaks to the full array of opportunities for research and how to

make use of perspectives from State and local government, from industry and from the Federal Government. I would want to also note that Congress has authorized the con- struction of the Tularosa Basin National Desal Research Facility.

In fact, this is one of two research facilities that the Bureau of Reclamation has available to it to focus on desal activities. For

Tularosa, its particular emphasis is on brackish water. It is going

to be completed in construction in 2006. However, the first demonstration project is under way. In closing, I would just like to say that our aim in water tech- nology research is to accelerate new technologies, to reduce costs,

and implement solutions to meet water supply challenges. This

takes communication and coordination of existing efforts, pushing

technology development and transfer, recognizing research gaps

and pursuing those, and assessing new technologies. We do this

through laboratory scale, through pilot and demonstration on a

competitive process.

I am happy to answer any questions that you might have. Thank

you.

Mr. RADANOVICH. Thank you, Ms. Bach, for your testimony. [The prepared statement of Ms. Bach follows:]

Statement of Maryanne Bach, Director, Research and Development, Bureau of Reclamation, U.S. Department of the Interior

Mr. Chairman, my name is Maryanne Bach, Director of Research and Develop- ment (R&D) for the Bureau of Reclamation. I am pleased to provide information regarding the Department of the Interior and the Bureau of Reclamation’s past and

present involvement in activities related to desalination research and development

that may be of use to the Committee in its consideration of H.R. 1071.

Introduction

The Bureau of Reclamation’s mission is to manage, develop, and protect water

and related resources in an environmentally and economically sound manner in the

interest of the American public. Historically, this has been accomplished in four

major ways: 1) storing water for use in times of greater need; 2) transferring water

11

to places of greater need; 3) conserving water to reduce demand; and 4) applying

technology to increase useable water supplies. In this latter area, over the course

of half a century the Department of the Interior, and now the Bureau of Reclamation in particular, has developed a great deal of research data and technical expertise with regard to water desalination.

Implementation of the 1996 Desalination Act as amended

Desalination research by the Department of the Interior and Reclamation began in 1952 as a result of the Saline Water Conversion Act (P.L. 82-448). From that

time until 1982, Department of the Interior funding for desalination research averaged approximately $30 million per year. Interior’s Office of Saline Water (later, the

Office of Water Research and Technology) subsequently coordinated much of this research and development. Some 1,200 federal government desalination reports were

written during this time period, and are believed by many experts worldwide to

have formed the basis of today’s technologies. Membrane advances made by this program were responsible for some of the most significant reductions in the cost of desalination.

During the late 1970s and early 1980s, emphasis on research shifted to applica- tion with the design and construction of the Yuma Desalting Plant, as directed in

the Colorado River Basin Salinity Control Act of 1974 (P.L. 93-320). This plant,

with a design capacity of 73 million gallons per day of desalted water, was larger

than the overseas demonstration-type plants that had been built previously. Technological advancements achieved during the construction of the Yuma plant included

development of large reverse osmosis elements, electro dialysis stacks, a practical

demonstration of energy recovery, and a number of other technology applications

still being used today. The unit costs of desalination, however, remained high relative to other water supply alternatives. In 1992, recognizing the need for more reliable and less costly technology for treating impaired waters, particularly in the West, the Bureau of Reclamation

began a water treatment technology research program, supported by internal research funds. This research included both contracted work as well as research and

development by staff at Reclamation’s Technical Services Center in Denver,

Colorado. The Reclamation-wide program has been focusing on water supply and

quality issues in the 17 western states served by Reclamation. Research projects are

mission oriented and related to Reclamation’s project needs, such as membrane

process development, chemical treatment processes, and other innovative treatment

concepts. Through these research studies, pilot projects and other efforts, a number

of localized, site-specific problems and needs in the areas of Native American and

rural water supply have been addressed.

Current Reclamation Desalination Efforts

The Desalination Act

Public Law 104-298, the Water Desalination Act of 1996 (Desalination Act), authorized Reclamation to begin a renewed effort from 1997-2002, to lower desalination costs through cooperative research and development. The objective has been to

determine and develop technologically efficient and cost-effective means by which

useable water can be produced from saline or otherwise impaired or contaminated

water sources. The program has developed advanced technologies to treat previously

unusable sources of water, e.g. brackish groundwater, coastal waters, irrigation

drainage, municipal wastewater, and other impaired waters, in order to increase usable water supplies. The program has focused on two primary efforts. The first has

been to support cooperative research on desalination technologies and related issues

to push the state-of-the-art forward. The second has been to conduct development

and demonstration activities to field-test technological advancements, confirm economic feasibility, and gain public acceptance. Authority for these activities has been

renewed through Fiscal Year 2005, and the program is funded in the FY 2005 Omnibus Bill.

Under the authority of the Desalination Act, Reclamation has been conducting the

Desalination and Water Purification Research and Development Program (DWPR).

It has produced important technical results, such as, membrane bioreactors, and has

widespread support outside the Government.

Recent DWPR Program activities/accomplishments include: 1) demonstration of

the effectiveness of membrane bioreactors in treatment of secondary sewage, 2) various advancements in membrane materials and technology, 3) new methods of membrane element cleaning, 4) improved means of energy recovery, 5) use of beach wells

or river banks to pre-treat water prior to reverse osmosis desalination, 6) demonstration of the relative benefits of membrane filtration as a pre-treatment method,

7) selection of a standard diameter element size for use in large capacity reverse

12

osmosis and nano-filtration facilities, 8) an innovative, low-cost evaporation system,

and 9) demonstrated application of the natural freeze-thaw process, which has considerable promise for industrial applications. On August 14, 2001, consistent with

the Water Desalination Act of 1996, the Commissioner of Reclamation forwarded a

report to Congress on the implementation of the Act.

Technology Transfer

Technology transfer has been an important part of the DWPR program as well.

Reclamation currently leads a federal consortium and a task force with professional

research organizations. In coordination with the American Water Works Association,

Reclamation produced a collection of desalination literature that ties together the

wealth of desalination and advanced water treatment technology developed since

1952. This collection, called Desalted, is a series of searchable CD ROMs containing

full text reports of the Interior and Reclamation’s desalination studies and projects

and various desalination conference proceedings. I am submitting a copy of this collection to the Committee for the record.

Another result of Reclamation’s technology transfer efforts is the Desalination and

Water Purification Technology Roadmap, developed from funding provided in the FY

2004 Energy and Water Development Appropriations Bill. The Roadmap was produced through Reclamation’s partnership with Sandia National Laboratories and an

executive committee composed of multidisciplinary experts from across the country.

Subsequent to its publication, Reclamation requested a National Academy of Science

(NAS) review of the document. The intent of the Roadmap was to establish longterm goals for research and development in desalination and water purification to

meet the nation’s needs, research that could be undertaken by state, private, nongovernmental, or federal entities; it is not a prospectus for federal desalination research. Other technology transfer efforts include a computerized desalination cost

model, the Desalination Handbook for Planners, a manual on concentrate disposal,

and over 100 final reports from the DWPR.

Tularosa Research Facility

Authorized initially in the Fiscal Year 2002 Energy and Water Development Appropriations Act, the Tularosa Basin National Desalination Research Facility is

under construction and scheduled for completion in 2006. This facility has been designed to conduct research and development relating to: the desalination of brackish

groundwater; the problems of concentrate treatment and disposal; renewable energy/desalination hybrids; and small desalination systems for rural and Native

American applications. Development of the facility is the product of a partnership

between Reclamation and an Executive Committee comprised of multidisciplinary

experts from across the country. The facility is located on a 40-acre site in

Alamogordo, New Mexico. The facility plan consists of a 16,000-square-foot research

building, three external large pilot plant pads, evaporation ponds, an agricultural

research area, a renewable energy applications research area, and a future expansion area.

Yuma Water Quality Improvement Center (WQIC)

The WQIC is a desalination R&D laboratory facility located on the site of the

Yuma Desalting Plant (YDP). The WQIC implements the authority provided under

Public Law 96-336 for the Colorado River Basin Salinity Control Project (Title I).

Public Law 96-336, Sec 108 states: ‘‘In order to provide for the utilization of significant improvements in desalinization technologies which may have been developed

since the Bureau’s evaluation, the Secretary is directed to evaluate such cost effective improvements and implement such improved designs into the plant operations

when the evaluation indicates that cost savings will result.’’ The desalination research pursued at the WQIC is focused on technologies that can be applied to the

YDP to improve and lower the cost of long term operations and maintenance of the

plant. The WQIC uses a competitive, merit reviewed process to ensure that quality,

performance, and relevance are integrated into the research investment decisions.

The WQIC also effectively implements Federal Technology Transfer Legislation in

two important ways. First, the Technology Transfer Act of 1986 requires federal

agencies to make their R&D facilities and expertise available to the private sector

through Cooperative Research and Development Agreements (CRADAs). The WQIC

is well utilized by municipalities and the private sector, through cost reimbursable

CRADAs, for the conduct of desalination R&D. Second, the technology advancements achieved at the WQIC are made available and transferred to the industry for

commercialization and applications by others.

13

Water 2025

In 2004, Secretary Norton announced the Water 2025 Initiative. In some areas

of the West existing water supplies are, or will be, inadequate to meet the demands

for water for people, cities, farms and the environment, even under normal water

supply conditions. Water 2025 sets forth a framework to focus on meeting water

supply challenges in the future, which includes six principles, five realities and four

key tools (www.doi.gov/water2025/Water2025-Exec.htm)

One principle is to improve water treatment technology, such as desalination, to

help increase water supply. The four key tools are: conservation, efficiency and markets; collaboration; improved technology; and removal of institutional barriers and

increased interagency cooperation.

Desalination Funding

To date, Congress has appropriated $4.2 million under Water 2025 for focus on

desalination research. Beginning in FY 2004, the Administration has redirected its

efforts under Title XVI (P.L.102-575), the Reclamation Wastewater and Groundwater Study and Facilities Act, to complement the DWPR authority and Water

2025.

Under Title XVI of PL 102-575, Congress has authorized (PL 104-266) and appropriated funds for the Las Vegas Area Shallow Aquifer Desalination Research and

Development Project and the Long Beach Desalination Research and Development

Project. Total funding to date is $3.9 million.

Since passage of the original 1996 Desalination Act, $28.025 million has been appropriated to the Reclamation’s Desalination and Water Purification program. Total

appropriations to date for the Water Quality Improvement Center in Yuma for research and development is approximately $4.7 million.

In FY 2005, $12.6 million was appropriated for Reclamation desalination research

and development, including $3.5 million to continue construction of the Tularosa

Desalination R&D Facility. The FY 2006 budget proposes $4.85 million for desalination R&D.

Reclamation’s Future Role in Desalination and Appropriate Federal

Involvement

The Administration is currently evaluating federal research and development efforts in desalination, to clearly establish long-term goals and ensure that our efforts

are carried out in accordance with the Administration’s Research and Development

Investment Criteria, and that these efforts represent the best investment of federal

resources.

There are three broad standards against which R&D investment decisions are

judged: 1) Relevance—Programs must be able to articulate why they are important,

relevant, and appropriate for Federal investment. Research and Development efforts

should focus on activities that enable high pay-activities that require a federal presence, support technological innovation to enhance economic competitiveness and

new job growth. The Department’s efforts in desalination, as with other Federal research, must have complete plans with clear goals and priorities, relevance to the

needs of the nation, clearly articulated public benefits, and periodic prospective and

retrospective reviews of relevance to program ‘‘customers’’. The program must also

meet specific standards of, 2) Quality—Programs must justify how funds will be allocated to ensure quality; and 3) Performance—Programs must be able to monitor

and document how well the investments are performing.

Reclamation’s future role in water technology research may include activities that

accelerate the development of new technologies to reduce costs and speed the implementation of solutions in order to meet the water supply challenges of the future,

consistent with the broader Research and Development Investment Criteria framework. It may also include improving communication within the desalination research community, and coordination of research activities.

Mr. Chairman, this concludes my remarks, and I would be pleased to answer any

questions at this time.

Mr. RADANOVICH. Next is Mr. Douglas Holtz-Eakin, who is the

Director of the Congressional Budget Office.

Dr. Holtz-Eakin, welcome to the Subcommittee.

14

STATEMENT OF DOUGLAS HOLTZ-EAKIN,

CONGRESSIONAL BUDGET OFFICE

Dr. HOLTZ-EAKIN. Mr. Chairman, members of the Committee,

thank you for the chance for the CBO to be here today to talk

about H.R. 1071.

Our written testimony falls into two broad areas. The first is a look at the bill itself in which $200 million are authorized over the

window to provide incentive payments at a rate of 62 cents per

thousand gallons of water produced, and the key features of this

that we highlight in our testimony are the structure of this in

terms of targeting. In contrast to a tradition of targeting subsidies

on capital costs, this is an operating subsidy. That is a difference

that is more in form than substance because it is targeted at new

plants and, in the end, subsidizes all entrants in that form. However, the overall subsidy, which comes to a rate of about 30 percent

for desalination plant, $200 per acre foot, is not targeted on energy

despite the stated intent of the bill. It is tied only to the output

of the water itself.

The second piece of the bill is an authorization of $10 million for

R&D, and that leads directly to the broader part of our written testimony, which is to look at opportunities for improvements in the

efficiency of water markets more generally. There is a natural role

for the Federal Government in supporting research and development in those circumstances where the shared knowledge of R&D

may not provide adequate incentives for the market to produce sufficient R&D, and the bill is consistent with that role by authorizing

the R&D money. More generally, water markets are characterized by the fact that users typically do not pay the full cost of the delivery and production of the water, and instead cost recovery gets shifted in large

part to taxpayers to make up that difference. They are also characterized by the fact that water users pay quite disparate prices for

the same water, and those prices may not be reflective of the underlying economic value of water in different uses.

Improving the efficiency of water markets and acknowledging at

the outset that efficiency isn’t the only criteria in public policy but

improving the efficiency in water markets really has three prongs

to the approach. The first would be to improve the legal infrastructure that characterizes water rights and water trades in the United

States so as to produce improved pricing. This is a very difficult

task in part because so much of the law that governs this is at the

State level and not directly controlled by the Federal Government.

The second would be to reduce Federal subsidies both in the capital and operating costs areas, because these subsidies distort

choices in the construction area, distort tradeoffs in types of technologies and preventive maintenance versus initial construction

and in operating costs do not reflect the full cost of delivering

water to the public.

Then the third piece would be to support R&D in a sufficient

fashion that new technologies would be brought on line and supported by the market incentives, so a more efficient water, where

users were charged more closely to the cost of the water that they

consume and suppliers were able to recover costs more closely by

using market incentives alone.

15

We are pleased to have a chance to talk both about the water

market more generally and the bill in particular and look forward

to your questions.

Mr. RADANOVICH. Thank you very much for your testimony.

[The prepared statement of Dr. Holtz-Eakin follows:]

Statement of Douglas Holtz-Eakin, Director,

Congressional Budget Office

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity

to be here today to discuss H.R. 1071. H.R. 1071 directs the Secretary of Energy

to make payments to the public or private owners or operators of new desalination

facilities providing municipal water service to domestic customers. Those payments,

for which $200 million is authorized for appropriation from Fiscal Year 2006 to

Fiscal Year 2016, are intended to partially offset the energy costs of facility operations. The bill specifies that no more than 60 percent of the funds can be disbursed

to facilities that obtain source water from the sea; the remainder must go to those

using brackish groundwater or surface water. H.R. 1071 also authorizes for appropriation $10 million over the 10-year period to support research and development

of novel technologies for desalination.

Specific Effect of H.R. 1071

As it is currently written, H.R. 1071 serves to subsidize facility operating costs

in general, rather than energy costs specifically. Under the bill, eligible facilities

would receive a payment of $0.62 (adjusted for inflation) for every 1,000 gallons of

water produced and sold, regardless of the energy costs associated with their operations. Generally speaking, energy costs for desalination—which rise in conjunction

with the salinity of feedwater—can account for more than one-third of operating

costs, but the ratio is not fixed among facilities.

The proposed subsidy amounts to approximately $200 per acre-foot of water produced, which corresponds to about 30 percent of a new desalination facility’s total

costs of production. In 2002, new desalination plants were reportedly producing

freshwater at a cost of about $655 per acre-foot. By comparison, in 2002, the average price for irrigation water from California’s Central Valley Project was $17.14

per acre-foot, while Los Angeles residents paid $925 per acre-foot.

In the absence of federal support, the demand for water has already led to the

establishment of new desalination facilities, including sites in Tampa, Florida, and

Brownsville, Texas (drawing brackish groundwater from the Gulf Coast aquifer). In

Texas alone, there are more than 100 desalination units using either brackish surface water or groundwater as their source. Municipal facilities account for roughly

60 percent of the state’s desalination production, and the remainder is produced by

industrial facilities. At the end of the 1990s, nearly 800 desalination plants in 46

states (many of which were inland and for industrial use) were in operation and provided desalinated water amounting to about 1.4 percent of domestic and industrial

water consumption.

Traditionally, federal subsidies for water supply have primarily been designed to

address capital costs—for example, federally financed Western water supply projects

initiated by the Reclamation Act of 1902, financial assistance for construction of

water reclamation and reuse facilities under title XVI of the Reclamation Projects

Authorization and Adjustment Act of 1992, and the Drinking Water State Revolving

Fund that finances infrastructure improvements. H.R. 1071 adopts the less-common

approach of subsidizing operating costs. From an economic-efficiency perspective,

however, the distinction between a capital- or operating-cost subsidy makes little

difference in this case, because the only facilities eligible for the subsidy are those

that begin operations during the 10-year period following the bill’s enactment. Either approach reduces the overall costs of building and operating a new facility and

improves the relative attractiveness of the subsidized-water-supply option compared

with others.

Subsidizing Desalination: Implications for Economic Efficiency

In the area of desalination, past federal support has primarily been directed toward research and development. That funding began with the Saline Water Act of

1952; by 1982, when most federal funding for desalination research and development was discontinued, the United States had spent cumulatively more than

$1 billion (in today’s dollars). Under the Water Resources Research Act of 1984, desalination research was conducted by the U.S. Geological Survey as part of general

research, rather than as a separate program. In 1996, the Congress passed the

16

Water Desalination Act, renewing support for research and development with the

aim of determining the most technologically efficient and cost-effective means of purifying saline water. The Act created the Bureau of Reclamation’s Desalination and

Water Purification Research and Development Program, authorizing $5 million annually from Fiscal Year 1997 through Fiscal Year 2002 for research and

$25 million per year for desalination demonstration and development projects. The

Congress appropriated $28.1 million under that (extended) authority from 1998

through 2005 (see Table 1).

In addition to those instances of support, the 2004 Energy and Water Development Appropriations bill contained $3 million for desalination research at the

Sandia National Laboratory in New Mexico and authorized the design, construction,

testing, and operation of the $5 million Tularosa Basin National Desalination Research Facility in Almogorda, New Mexico. That facility, which is currently under

construction, will focus on inland brackish groundwater from sources that have

widely varying degrees of salinity.

An economic-efficiency argument can be made for federal investment in research

and development, because when multiple states and private-sector entities face a

similar problem, each balances the potential cost of research against only its own

expected benefits, rather than the benefits that could accrue to all parties. Federal

support counteracts the resulting tendency for nonfederal entities to invest too little

in research and development.

H.R. 1071’s proposal to subsidize new facilities that provide local water supplies

would be similarly appropriate from an economic-efficiency perspective if it targeted

a market failure. The underlying market issue connected with desalination technologies, however, is that in many U.S. water markets in general, the prices

charged do not reflect the full cost of providing water. Allowing the prices charged

and received to more fully reflect the cost of supply is an alternative approach to

enhancing the viability of desalination.

Because water users tend not to pay prices that reflect the full cost of provision,

their demand is higher—in some cases, much higher—than it would be otherwise.

Water supply problems in the United States are typically driven by high demand

associated with underpricing rather than by physical shortages. In agriculture, for

example, Bureau of Reclamation facilities provide about 32 percent of surface water

withdrawals used for irrigation, but the water supply charges recover for the government only a fraction of the cost of providing the water. Since the beginning of

the reclamation program in 1902, irrigators’ interest-free payments—due over a 40-

or 50-year horizon—have been based only on recovering the associated nominal costs

for capital and operations and maintenance, neglecting the opportunity costs of federal expenditures. At a federal borrowing cost of 4 percent annually, over a 40-year

repayment period, the government recovers only 49 percent of its total cost. The

problem is not unique to agriculture: municipal and industrial users served by public water systems (those that furnish water to at least 25 people or have a minimum

17

1 Congressional Budget Office, Future Investment in Drinking Water and Wastewater Infrastructure (November 2002).

of 15 connections) are responsible for about 13 percent of freshwater withdrawals

from surface and groundwater sources, and they also generally obtain water at lessthan-full-cost prices. Over time, providers have failed to take in revenues adequate

for procuring and treating supplies as well as for operating, maintaining, and replacing their water infrastructure. 1

On the demand side of the market, consumers respond to the incentives they face.

The lower the marginal price (the price for the next unit of water consumed) that

water users face, the weaker their incentive for efficient water use. Rate structures

with fixed charges for an initial volume and higher charges for use above that volume can provide for basic water use while encouraging efficient water-use choices.

Such structures are rare among Bureau of Reclamation-supplied irrigation districts. In a 1986 survey of 196 of those districts, which account for more than 70

percent of total irrigated acreage in Bureau-supplied districts, 48 percent of the districts assessed their members a fixed charge per acre that was independent of the

amount of water delivered. Fourteen percent of the districts used a purely quantitybased rate structure, and almost all (96 percent) had a constant per-unit price. Thirty-eight percent coupled a fixed charge for an initial volume with a quantity-based

rate for water use in excess of the initial volume that was typically not triggered

in normal years (and for 86 percent of those districts, the quantity-based rate was

constant or decreasing). When the districts were revisited in 1997, the situation was

largely the same.

Most municipal water rate structures are made up of a service charge—a fixed

fee per billing period—and a unit consumption charge for set quantities of water (or

‘‘blocks’’). Under decreasing block rates, the per-unit charge for water declines as the

consumption volume increases. Under a uniform structure, the unit rate for water

is constant, or flat, regardless of the amount of water consumed. Under increasing

block rates, the unit rate for water rises as the consumption volume increases. Although the proportion may be somewhat higher now, only about 20 percent of the

systems surveyed a decade ago were using increasing block-rate structures.

Conclusion

Appropriate pricing would reflect the marginal cost of water supply, maximizing

economic efficiency in allocating water among competing uses by ensuring that the

marginal value per unit of water was equal for all uses. Encouraging the efficient

production and use of freshwater would imply a greater reliance on its marginal

value than is currently seen in the United States. Subsidies for new desalination

facilities would most likely not improve the overall economic efficiency of water supply and use because such subsidies would compound the distortion of price signals.

An alternative means of improving the viability of desalination would be to allow

prices charged to water users and received by water producers in general to more

fully reflect the cost of supply.

One could argue that the pace of the evolution of water treatment technologies,

and thus their suitability for more widespread use, has probably been impeded by

the historically low price of water in the United States. Nevertheless, the need for

such technologies has already attracted private as well as federal interest, and the

level of interest seems to be growing. At the end of the 1990s, industry was adding

an estimated $5 million to $10 million annually to the federally supported research

and development efforts for water purification technologies. Recently, global demand

for freshwater has prompted increased interest in research and development of more

efficient means of desalination by companies such as General Electric, ITT Industries, Siemens, and Tyco International. Sandia National Laboratory’s Desalination

and Water Purification Technology Roadmap, issued in January 2003, asserts that

exploration of alternative technologies will yield the greatest advances in desalination.

With that combined support for research and development of new, more energyefficient desalination technologies as well as efforts to improve price signals in

water markets so that users face charges that more accurately reflect the marginal

costs of water supply, desalination may become an important source of freshwater

in some markets.

Mr. RADANOVICH. I will start off in questioning, just by a general

question for all three witnesses regarding the one-stop-shop permitting. It kind of pauses me or concerns me that one-third of the cost

18

of some of these desal projects are through the permitting. Would

anybody care to enlighten me about what type of—how is it the

Federal Government might be getting in the way of streamlining

this process? What kind of restrictions are these? Are these ESA

requirements? Are they just general paperwork requirements of filing? You know, where is it? Where is the source of the delay? Or

is it local and State that are generally the ones that are getting in

the way or assuming such a large part of establishment costs for

these desal facilities?

If anybody would be interested in commenting.

Mr. GARMAN. I would be hesitant to offer a blanket comment, not

being an expert myself on permitting. It is certainly—you know, to

the extent that there is a major Federal role, that would trigger

some NEPA requirements that might not necessarily be triggered

if it was solely a local community affair. But I cannot offer the

Committee much input on that and would be happy to comment for

the record, if that is appropriate.

Mr. RADANOVICH. You would be happy to comment for the

record?

Mr. GARMAN. Yes, sir.

Mr. RADANOVICH. Please do so, if you would like.

Mr. RADANOVICH. Maryanne?

Ms. BACH. Yes. Mr. Chairman, our experiment, to the extent that

it is of value to the community we—when we were building

Tularosa, we did have to go through a State permitting process.

But being that mostly our involvement is in the R&D area, we

have less experience in terms of the intricacies of the permitting

process.

Mr. RADANOVICH. Generally, these are State projects, desal

projects, or are they local water agency projects? I can’t imagine

them being Federal projects.

Ms. BACH. In the case of if something is a pilot or demonstration

project, that is frequently federally sponsored, and the funds are

matched, that is, to test to be sure that the technology has efficacy,

that it has a high potential. When plants are actually constructed,

that is of a different nature when that goes into operations. That

is generally operated under a State permitting processes.

Mr. RADANOVICH. Very good. Thank you.

Dr. Holtz-Eakin?

Dr. HOLTZ-EAKIN. We would also prefer to get back to you on the

record with better details. I mean, this is the intersection of State

and local permitting and often environmental considerations, and

I am not sure a single answer is appropriate but would be happy

to work with you on that.

Mr. RADANOVICH. But I suspect if there is Federal funding involved, too, that that is the hook that brings in the Federal Government on some of this stuff, I gather. Thank you.

Mr. RADANOVICH. Mrs. Napolitano.

Mrs. NAPOLITANO. Thank you, Mr. Chairman.

First of all, Mr. Chairman, may I request that we remind and

impress upon the panelists the need to have those reports to us 48

hours as requested by the Committee? I got one of my reports this

morning. I have not read it, so I cannot ask intelligent or semi-intelligent questions to follow up on what the testimony is given. So

19

I would really appreciate if you would follow that procedure,

please.

Mr. Garman, the reports that are going to be generated by the

White House Office of Science and Technology Policy with the 15

agencies that are forming the Committee on Environmental and

Natural Resources, the Subcommittee on Water Availability and

Quantity, where are those reports going to go? Are they going to

go to the Energy Department or are they going to come here also

for us to review?

Mr. GARMAN. These will be public reports. They have generated

one report thus far in November, which I will be happy to—we will

be happy to share with the Committee and make sure the

Committee has a copy. It acknowledges I think the problem and

the challenge that we face. Please understand that we differ from

the proponents of this bill not in the goal but in the method of getting to that goal.

Mrs. NAPOLITANO. Understood. But I don’t know if this

Committee has seen that report or if we have any idea what it contains as relates to the job that we are doing on specifically desalination and recycling water and those areas. I certainly would like

to have the Committee have a copy of that report, Mr. Chairman.

Mr. RADANOVICH. Without objection.

Mrs. NAPOLITANO. The second one is, in your testimony you are

referring to: The Department is also investigating whether a suite

of specially selected, salt-tolerant ag—that is in your page 3. How

will that affect aquifers? In other words, do salt-tolerant ag crops

or other plants used to remove sodium and other salts from the

coalbed methane-produced water, how will that affect the aquifers

of the nearby residents or the rivers or whatever is available in

those areas? I have a concern in how that might ecologically affect

other areas.

Mr. GARMAN. Correct. The development of coalbed methane is a

concern to many communities because, in addition to the methane

produced, water is also produced with the methane, co-produced. So

as you are pulling the methane out of the coal seams, you are also

pulling out water; and sometimes the water is of very poor quality.

So the challenge is, what do you do with that water that you have

co-produced with the methane? You need the methane for energy,

but what do you do with the water?

The opportunities include putting the water back in the ground

where it came from, or trying to clean it up and put it to a beneficial use. So we are looking at a variety of methods of using that

co-produced water to see how it might be cleaned up and put into

beneficial use.

One of the ideas that we have been thinking about is using wind

power. Wind has some real advantages and some disadvantages.

One of the disadvantages is you can’t necessarily predict when the

wind is going to blow and thus produce dispatchable power. But,

on the other hand, if the purpose is to generate electricity that you

are going to use on an intermittent basis to clean up water, you

really don’t mind. So wind can—there may be a terrific opportunity

to employ wind technology to clean up water that takes care of or

allows you to sidestep one of the disadvantages of wind-generated

electricity.

20

Mrs. NAPOLITANO. But that would only be used in limited areas

where you have the ability to have wind.

Mr. GARMAN. Correct. You have to have a situation where you

have a good wind resource close to the point of cleanup to help the

economics work.

Let me also say that one of the primary R&D activities of the Department of Energy is, of course, to lower the cost of some of these

alternative methods of generating electricity so that you can make

projects such as this more affordable and financeable.

Mrs. NAPOLITANO. Well, the other question I have is your mapping project. You limited it to an overall United States map and

then one covering the regions of Colorado, Utah, Arizona and New

Mexico. Would you explain why it is limited to those?

Mr. GARMAN. It is partially as a method of putting the resources

where we think the greatest need is. However, we are happy to

take comments from the public and the Subcommittee. If there is

an activity that we are not mapping that you believe we should be

mapping, we will be happy to take that back and consider getting

that in the queue.

Mrs. NAPOLITANO. I would certainly like that advantage.

Thank you very much, Mr. Chairman. I would like to have a second round when we are done.

Mr. RADANOVICH. Not a problem.

I ask unanimous consent that our colleague from Florida, Mr.

Davis, be allowed to sit on the dais today and participate in today’s

hearing.

Hearing no objection, I welcome the gentleman from Florida; and

we will be with you on questions in just a minute.

Welcome, Jim. Mr. Gibbons.

Mr. GIBBONS. Thank you very much, Mr. Chairman; and again,

to our witnesses, thank you for your testimony.

In Nevada, of course, listening to my colleagues talk about water

rainfall in New Mexico, we have an average of about six inches a

year, and when it is in a drought stage it is down to two. So we

do have similar problems in Nevada.

There are limitations on what we in Nevada get from the

Colorado River for our highest-growth area in Nevada, which is Las

Vegas, the fastest-growing city, I believe, in the United States. Our

limitation, of course, is an original decree of the amount of water

we get out of the Colorado River. There are some restrictions within the law of the river—of the law of the Colorado River which prohibit wheeling, which is the transfer of water rights from an upState user to a lower State user.

My question is, do you feel—and maybe I should just leave this

as an open question. Do you feel that a proposal to acquire water

rights of downstream users by the creation of desalination is an affordable alternative for the acquisition of their water rights before

they have to be wheeled downstream?

In other words, California. If Las Vegas, Nevada, decided to assist Los Angeles or some southern California community with the

desalination plant in exchange for a water right off the Colorado

River, do you feel that that is a reasonable alternative to other

means of acquiring water that are in even more short supply and

going against the legal status?

21

Ms. BACH. Mr. Gibbons, I will be happy to answer that question

from the Bureau of Reclamation.

The heightened interest in desal in California and also from inland States that are associated and receive their supply from the

Colorado River has certainly grown, and the interest in technology

and technology breakthroughs is to get desal into a more affordable

range. So that, in fact, does become another tool to be used in

water supplies.

Mr. GIBBONS. May I ask what your assessment is on the cost of

per acre foot of water from a desalination plant today?

Ms. BACH. The discussion of today’s cost is between $600 and

$650 per acre foot. If desal can be brought down to the $400 to

$450 ranges, that is considered to be more of a competitive tool,

more of an opportunity and an option to be put into the portfolio

of water managers in the West.

Mr. GIBBONS. Mr. Chairman, I don’t want to take up much more

of your time. I would like to submit written questions for this panel

to be answered and submitted back to us. And I appreciate the

time. I have another obligation.

Mr. RADANOVICH. Very good. Thank you, Mr. Gibbons.

Mr. RADANOVICH. Mr. Davis, any questions?

Mr. DAVIS. Mr. Chairman, again, I really appreciate your hospitality to be here as part of the bill that Congressman Gibbons and

I were doing.

I just wanted to comment, and perhaps there may be a comment

from the panel, that something was brought up just before I got

here. I remember you start on time, Mr. Chairman. We don’t do

that over in the Energy and Commerce Committee.

The question was raised whether there were problems with the

permitting process; and I just wanted to say that, as far as the

desal facility is concerned in the Tampa area, there was not a problem with permitting; it was mostly State permitting. I am not

aware there are representatives here today from that entity, but I

think they would be happy to answer any further questions that

members of the Committee might have about whether there is

some lessons learned about the Florida permitting process. Maybe

the Florida permitting process could offer some good examples

other States could be following as well.

Mr. RADANOVICH. Thank you, sir.

Mr. Walden.

Mr. WALDEN. Mr. Chairman, I really don’t have any questions at

this point.

Mr. RADANOVICH. Mr. Tancredo?

Mr. TANCREDO. Mr. Chairman, I have a question, although I

apologize for not having been here earlier and perhaps much of this

has already been determined. But I just wonder if you could help

me understand, what are those new—or what are the ideas that

are being bandied about so that we may look forward to some time

in the near future when desalination becomes economically viable

in terms of the technologies? What are we thinking about? What

is happening in that area that we can be excited about?

Ms. BACH. Mr. Tancredo, I will address some of those. The disposal cost is one that needs addressing.

22

There are different—first of all, let me distinguish there are different issues if you are dealing with seawater and if you are dealing with brackish water. When it comes to brackish, the disposal

issue is a significant one and how perhaps to address reuse of that

material.

The reason why the Department of Energy and, in fact, our

Tularosa facility in New Mexico will be able to bring people onsite,

the reason why people are looking at whether plants can uptake

salt or brine matter or whether that byproduct is capable of being

used in construction or what have you is associated with the cost

of disposal.

There is continued effort in membrane technology and testing

going on in terms of both cleaning of membrane and the use of

membrane and the types of membrane and the efficiency of membrane. A membrane that is merely to remove salt is different than

a membrane that is dealing with water that has been once used in

a community and now is looking to be reused.

So those are just some examples, and we can certainly submit

others for the record.

Mr. TANCREDO. And what are the implications for returning it,

the salt, to the ocean?

Ms. BACH. In fact, that is one approach presently used with some

of the smaller plants that exist. How that is released is being explored, because there is nuances and some sensitivities environmentally about how it is released in terms of also ensuring that the

material breaks up.

Hopefully, that answers your question.

Mr. TANCREDO. Anybody else want to?

Mr. GARMAN. I would just add that—because you answered specifically in the short term, and the Department of Energy does not

have a great deal to offer in the short term. In the longer term,

we are working on some very basic technologies, for instance, in

the area of biological membranes, as one example of something

that might produce a breakthrough technology for the more distant

future, particularly as this problem becomes more pronounced and

aware.

Our national labs tend to be involved in more basic fundamental

science of a kind where we don’t often understand—it is serendipitous at times. We may be working on one problem and simultaneously solve another. And I think that is the importance. That

speaks to the importance of interagency cooperation and coordination in these areas, so that the Department of the Interior, which

has the lead responsibility for this activity, is aware and knowledgeable of some of the things we have under way at the national

labs, at the Department of Energy; and that is what we hope to

build upon and improve as we go ahead.

Mr. TANCREDO. Is it the case that there really is little progress

being made anywhere else in the world simply because where desalination is an ongoing project it is usually in an area where there

is a plentiful supply of oil and therefore the costs are offset? It is

cheap enough to do it, I suppose is what I am trying to say, to use

the oil to create the energy to desalinate?

Mr. GARMAN. Clearly, that is where—my understanding—large

desalination efforts, folks find it affordable or possible to do it

23

because of energy subsidies. But let me say that there has been reverse osmosis membrane technology and other technologies that

have come perhaps in pursuit of other markets. I mean, even very

small-scale markets such as so-called water makers aboard sailboats and some of these technologies where small-scale water,

these kinds of prices are very affordable for smaller scale applications. There are some things that we are learning in the smaller

scale applications that may have utility in larger scale, newer

plants, but I would defer to the Department of the Interior.

Ms. BACH. Congressman, the U.S. would be seen internationally

as having led the way on a number of technologies that really resulted in construction overseas; and the reason why construction

occurred overseas is because, in fact, there were limited alternatives available. So, for seawater communities in the Middle East,

for instance, there were not the kind of alternatives as the United

States had.

Where we do presently have more to demonstrate to help overseas with is in brackish, which—inland water. The technology that

we have gone on to develop inland is not as readily advanced overseas, and so that is a further opportunity for the United States.

Mr. TANCREDO. Thank you, Mr. Chairman.

Mr. RADANOVICH. Mr. Pearce.

Mr. PEARCE. Thank you, Mr. Chairman.

Ms. Bach, how many people do you have working in your research department, and what is the budget annually?

Ms. BACH. The water treatment and engineering research group

is our focus on desal.

Mr. PEARCE. How many people do you have working in the research? You are the head of the research.

Ms. BACH. I am the head of research, and I just immediately

have five people working for me. But I use the technical service

center, which is approximately 600 individuals.

Mr. PEARCE. And your budget?

Ms. BACH. They are not appropriated. They have, I believe, a

$3 million operating budget. But that is paid-off budget, not

through appropriations.

Mr. PEARCE. So 600 people that are available cost $3 million?

How many—in other words——

Ms. BACH. If I could verify that for the record, sir. But what occurs is those research engineers—they are scientists and engineers.

Mr. PEARCE. So you have 600 available?

Ms. BACH. Yes.

Mr. PEARCE. And how much do they cost? Just more or less.

What kind of budget figure are we looking at? I just want to know

how much we are spending per year in the Bureau of Reclamation

to research water issues.

Ms. BACH. I am sorry. Off the top of my head, I can’t pull the

number. But I will be happy to provide it for you.

Mr. PEARCE. OK. You mentioned in your testimony that you have

been working for a half century to understand desalination or the

expertise that would be required to treat water. Now you are saying currently the costs are about $650 per acre foot. What does that

amount to per gallon of water? Most of us don’t consume acre feet,

we consume gallons. So what is $650 per acre foot?

24

Ms. BACH. It is about $2 per thousand gallons.

Mr. PEARCE. OK. And at what point does water get economic?

Ms. BACH. If you can bring it closer to a dollar.

Mr. PEARCE. A dollar?

Ms. BACH. Break that in half.

Mr. PEARCE. So when you all started your research, how much

was the—if we were to equate it to current costs, how much was

the cost of water when we first started our research and how much

have we lowered that cost?

Ms. BACH. In the 1950s, that would have been about $16.

Mr. PEARCE. The equivalent of today’s $16?

Ms. BACH. That is correct.

Mr. PEARCE. In today’s dollars. And so what has been the great

reduction from $16 to $2?

Ms. BACH. Much of that has been in membrane technology,

breakthrough in membrane technology.

Mr. PEARCE. The membrane technology is probably going to—is

that going to—if we are considering brackish water from zero parts

per million and the Tularosa basin is about 1,700 parts per

million——

Ms. BACH. That is about right.

Mr. PEARCE.—something in that range. We will put it wherever

we want to put it, but then seawater is at 25,000 parts per million.

Are membranes effective at 25,000 parts per million?

Ms. BACH. To some extent, and——

Mr. PEARCE. We can take 25,000 parts per million down to about

what level?

Ms. BACH. I think maybe to 100 parts——

Mr. PEARCE. About 200 parts per million.

Ms. BACH. About 100.

Mr. PEARCE. And at that level are those membranes effective or

do they have to be discarded so often that the process bogs down?

Ms. BACH. Well, there are certainly important costs associated

with membranes and their longevity as well as the type of water

you are passing through, if you just take seawater that is several

miles out versus if you were closer inland where you may have it

mixed with other pollutants.

Mr. PEARCE. Dr. Eakin, on page 3, you talk about the water market and you point out that agriculture users don’t really repay the

costs of providing water to them. Is your recommendation that—is

it your observation that all Federal projects have an opportunity

cost replacement, and that water is—to irrigators somehow deficient, that it is handled differently than other programs? So the

near estimation—when you give us this evaluation on page 3, is it

your estimation that water to irrigators is somehow unusual?

Dr. HOLTZ-EAKIN. The observation is simply that the cost is subsidized to irrigators, and that——

Mr. PEARCE. And your findings then would be that we should

be—that we should correct that? I think you mentioned then that

opportunities cost should be recovered by the user.

Mr. HOLTZ-EAKIN. For water markets to operate more efficiently,

you would want a price closer to those full costs.

25

Mr. PEARCE. And is the same calculation used for highways? Do

we have some way to recapture the cost of highways, for instance?

In other words, is there a public good?

Dr. HOLTZ-EAKIN. In highways, there are also many potential

improvements in efficiency which would come from better pricing

congestion, for example, and where the roads——

Mr. PEARCE. So there are Federal functions that go beyond the

recapture of the dollars that are used?

Dr. HOLTZ-EAKIN. There are functions which go beyond pure

market efficiency, certainly; and the testimony is targeted on efficiency. There are often other objections for public policy, which are

to promote a particular activity for either fairness or other——

Mr. PEARCE. When you analyzed the use of water, did you calculate the potential security risk for the Nation of giving up our agriculture base and also then the cost of—the increasing cost to the

consumer in higher food costs? In other words, there is a national

public benefit to lower food prices. Were those calculations added

into your equations?

Dr. HOLTZ-EAKIN. We don’t have a specific calculation. The cost

will be borne one way or the other whether they come in the form

of higher food prices or whether they come in the form of a subsidy

via the Tax Code or whether they are costs to be borne by the Nation of a whole. The question is whether—what is the most efficient

way to allocate those costs and to minimize them where possible.

That is the focus of the testimony.

Mr. PEARCE. Thank you, Mr. Chairman.

Mr. RADANOVICH. Thank you, Mr. Pearce.

As you know, we have one vote—I think a vote on the previous

question now. I would like to go to Ranking Member Napolitano

and then to Mr. Hayworth for questions. So perhaps, if that is

agreeable——

Mrs. NAPOLITANO. Do you want to defer? You can go vote and

come back. Because I am going to take some time.

Mr. RADANOVICH. Well, we can keep this hearing going.

Mr. HAYWORTH. Well, Mr. Chairman, I thank you, and I thank

the Ranking Member, and I will make this very quick. It is a very

specific area of concern that I have.

Welcome to all our witnesses.

Specifically, Ms. Bach, what is the status of the Bureau of Reclamation report on operating the Yuma Desalting Plant?

Ms. BACH. The status is that it is anticipated that the report will

be delivered to Congress next month.

Mr. HAYWORTH. We are happy to hear that news, Ms. Bach. That

report was due last summer, and we are getting it a year late. That

is your government in action. What is the status on starting the

Yuma Desalting Plant?

Ms. BACH. There are no immediate plans for starting the

desalting plant. What I envision you will see, Congressman, is that

with the Sid Wilson report that was recently available, it does offer

a number of options for consideration and that those options are

being taken into account in the report that the Department is completing. So at this point there are no immediate plans for starting

up the Yuma Desalting Plant.

26

Mr. HAYWORTH. Could a revamped Yuma desalter help provide

a solution to the challenges internationally confronting water problems between the United States and Mexico?

Ms. BACH. The Yuma Desalting Plant has, in fact, been maintained in City/State status so that there is an opportunity to exercise it under the right circumstances if it is appropriate under certain policy considerations.

Mr. HAYWORTH. Ms. Bach, you mentioned the Sid Wilson

report——

Ms. BACH. Yes.

Mr. HAYWORTH.—and I am not sure it is the same report as the

Yuma Desalting Plant work group released last month.

Ms. BACH. Yes, it is.

Mr. HAYWORTH. OK, good. Well, I understand it describes options

for utilizing the Yuma Desalting Plant and meeting water delivery

obligations to Mexico while helping to preserve wetlands in that

nation. Among the recommended options, I think it is important to

voice and to make part of the record, included using Yuma area

groundwater for Mexican deliveries, using the desalting plant to

treat Yuma area groundwater for municipal and industrial water

uses, and developing a voluntary forbearance program. Will Reclamation use the work group’s recommendations in their final decision? And, as you mentioned it I think in the affirmative in your

previous answer, will you undertake a public process in doing so?

Ms. BACH. In fact, the Commissioner did respond to a letter from

Senator Kyl just last month, and we can provide that for the

record, in which the Commissioner did commit to a public process

for an opportunity for public comment on the report that the Bureau will be sending up next month.

Mr. HAYWORTH. Well, Ms. Bach, that is very encouraging news.

We look forward to the public process. We look forward to that report and reviewing what those perhaps closest to the situation

have evaluated. I thank you for your answers.

Again, my thanks to the other panelists; and, Mr. Chairman, I

yield back the balance of my time.

Mr. PEARCE. [presiding.] Thank you, Mr. Hayworth.

Mr. Davis.

Mr. DAVIS. I would like to ask unanimous consent to submit my

statement for the record, if I could, in support of the bill Congressman Gibbons and I have introduced which is the subject of the

hearing.

Mr. PEARCE. Without objection, it would be submitted.

STATEMENT OF THE HON. JIM DAVIS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF FLORIDA

Mr. DAVIS. Mr. Chairman, I would like to take a minute or two

just to put the bill in context. It is not in the form of questions to

the witnesses, but I just want to start by saying, first of all, in the

next panel Dr. Michael Max from St. Petersburg, who is one of my

constituents, will be here, who is probably one of the more knowledgeable people in the room, if not the country, on the whole desalination technology.

I wanted to say that one of the reasons I introduced this bill with

Congressman Gibbons is based on the experience and lessons that

27

my community has had. The State of Florida, like many States that

we represent, is experiencing explosive growth, about 900 residents

per day. No matter how much it rains in Florida, and it rains a

lot in the summertime, our water level is about the same or has

slightly decreased over the last 10 to 15 years. In Florida, as in

many States in the West coast and increasingly in between, we are

looking at ways through conservation, recycling, reclamation and

reuse to deal on the front end as opposed to the back end with this

problem, and potentially a crisis at some point, in terms of the

availability of potable and nonpotable water. Just in Florida alone

we estimate over the next 20 years potentially $500 billion to a

trillion dollars in expense to keep up with our shortage of water.

Mr. DAVIS. H.R. 1071, which is the subject of this hearing, which

I have introduced with Congressman Gibbons and others, is an attempt to stimulate further development as well as research for environmentally sound and economically feasible desalination prosecution throughout the country by subsidizing—which has been

discussed, and I think very prudently analyzed by many of the witnesses today—the operating cost of desal facilities that have proven

on a performance basis to achieve the desired result.

There is also an appropriation of $10 million for research and

development. The ultimate goal behind the legislation is to stimulate the market to move more quickly than it might otherwise

move to make this technology more available and encourage inventors like Dr. Max to work more closely with the private sector to

explore various forms of technology.

I want to point out that the facility in Tampa that is currently

operating has had some problems. They are still working through

those problems. Even when the problems are resolved, the estimates right now still call for producing water at a level that will

not exceed what was originally expected, which was $2.50 to $3 per

1,000 gallons.

So even with the glitches that have occurred in one of these earlier facilities, which is bound to occur, the ultimate result is still

expected to be a very positive one for my area. I also want to point

out that in Florida, as in many States, we are very environmentally conscious, and there are a lot of legitimate concerns

raised about the impact of disposal in terms of the salinity content

of Tampa Bay, which is an estuary and a very fragile ecosystem.

I am pleased to report, with respect to this particular facility, we

have had success. There have been some questions, and there have

been some adjustments made along the way. But at the end of the

day, the salinity levels have been acceptable to the vast majority

of stakeholders who have been concerned about the environmental

impact.

So I think, on balance, the experience in Tampa has been a positive one. There are some lessons to be learned for Florida and other

States. I certainly commend you, Mr. Chairman, and the witnesses

and the staff to help us identify what we can be doing on more of

a short-term basis to encourage more effective and rapid development of desalination facilities and further research and development.

Again, I would like to submit a more detailed statement for the

record and appreciate your consent to that, Mr. Chairman.

28

[The prepared statement of Mr. Davis follows:]

Statement of The Honorable Jim Davis, a Representative in Congress from the State of Florida

Mr. Chairman and Members of the Subcommittee,

Thank you for holding this hearing on H.R. 1071, the Desalination Drought Pro- tection Act of 2005. Although I am not a member of this Committee, I appreciate

the opportunity to participate and join you at the dais. I am very pleased to welcome

Dr. Michael Max, from St Petersburg, Florida, which I have the pleasure of representing. Dr. Max is here today to share with us his recent advances in the area

of desalination through the use of hydrates—a cutting edge technology that I will

let him explain at the appropriate time.

As all of you are aware, communities all over the country are struggling to meet the demands of exploding populations. My home state of Florida greets 900 new

residents per day. We are witnessing the continuing trend of population growth despite the fact that water supplies have remained at the same level or even decreased over the last ten to fifteen years. Water conservation and the emergence of water recycling as a tool for meeting non-potable demands have stretched available supplies farther and farther. The

South West Florida Water Management District (Swiftmud) has already laid more

than 900 miles of pipelines for delivery of reclaimed and reusable water. Estimates

for meeting our municipal water and wastewater needs over the next 20 years range

anywhere from $500 billion to $1 trillion. Investments in water and wastewater

systems pay substantial dividends to public health, the environment, and the economy. Citizens in the Tampa Bay area have been leaders in finding comprehensive solu- tions to the problems facing our state’s water supply issues. Tampa Bay Water is

a regional agency responsible for supplying the needs of a population of approximately 1.8 million. With the demand on the area’s aquifers steadily increasing,

Tampa Bay Water decided to investigate alternative water sources, including desalination.

Because of my work with constituents like Tampa Bay Water, I have begun to

look for opportunities to share the successes found in some of our solutions with

other communities around the country and have introduced H.R. 1071. The Desalination Drought Protection Act of 2005 will encourage the development of environmentally sound and economically feasible desalination projects by providing energy

assistance grants to qualified entities, such as local water agencies and public utilities, in the amount of 62 cents per thousand gallons for the initial ten years of a

projects operation. This bill encourages innovation and does not favor any particular

technology to be used for desalination—basing incentives on performance. By focusing on how much water is produced rather than providing incentives for the construction of these new facilities, we have created a competitive system of incentives.

Recognizing the vast importance of developing new technologies and lowering the

cost for future endeavors in desalination, a new section was added to H.R. 1071.

This provision authorizes $10 million over the same period for the Secretary of Energy to support research and development of novel technology approaches for costeffective desalination.

Tampa Bay’s Big Bend desalination plant was designed to produce an initial 25

million U.S. gallons of water per day into the water system, with planned expansion

that will add capacity, enabling the plant to reach 34 million gallons a day as needs

continue to grow. Located adjacent to Tampa Electric’s Big Bend 2,000MW Power

Station, it is currently the largest of its kind in the United States. Construction

began in August 2001 and the first water was produced in March 2003. The Tampa

Bay Seawater Desalination plant will provide the Tampa Bay region with 10 percent of its drinking water.

Tampa Bay has faced unique obstacles—it’s tough to be first, and because of the

high salinity and unusual water temperatures in the Golf of Mexico they had to

make some design adaptations that later led to other learning curves. Knowing

what we know today, our community would have still built the facility that we see

today. When planning the cost allocations in 1996, expected water costs were estimated to be between $3.50 and $4.50 per 1,000 gallons of water ‘‘with all of the design alterations water coming out of the Big Bend facility will not exceed $2.50 to

$3.00 per 1,000 gallons of water produced, still lower in cost than the original expectations.

Organizations and citizens concerned with protecting Tampa Bay, including the

Agency on Bay Management, the Hillsborough County Water Team, the Audubon

Society, the Tampa Baywatch and Tampa Estuary Program, also reviewed and

29

commented on submitted materials throughout the permitting and planning process.

None of the groups is opposed to the Big Bend seawater desalination facility. Although the plant’s discharge is roughly twice as salty as Tampa Bay, it does not increase the bay’s salinity because it is diluted in the cooling water from Tampa

Electric’s Big Bend Power Station before being discharged back into the bay. Salinity in the plant’s discharge is, on average, only 1.0 to 1.5 percent higher than

Tampa Bay’s. This slight increase in salinity falls well within the natural, yearly

salinity fluctuations of Tampa Bay, which vary from 16 to 32 parts per thousand,

or by up to 100 percent, depending on the weather and the season. I urge the Subcommittee to complete consideration of this bill and proceed with a mark-up of the Drought Protection Act of 2005. This grant system and the Research and Development section will add another tool for states and local governments to use for providing affordable and drinkable water to their communities. Mr

Chairman, again, I thank you and the Members of this Subcommittee for the opportunity to address you today and look forward to working with you on this and many

other issues in the future.

Mr. PEARCE. [presiding.] Thank you, Mr. Davis.

The Chair would recognize himself to ask a couple more questions.

Mr. Garman, we pursued the same line of questions that we did

with Ms. Bach, how many people do you estimate in DOE are

working on water cleanup?

Mr. GARMAN. Exclusively very few. Our budget, as allocated toward water, will vary greatly. I believe the GAO report did an

analysis looking back at expenditures of the Federal Government.

Mr. PEARCE. If you gave me an estimate, how much would that

be?

Mr. GARMAN. It would vary from $300,000 to $7.7 million a year,

depending on the work——

Mr. PEARCE. That is all the facilities nationwide, $7.7 million

total.

Mr. GARMAN. That is correct, sir.

Mr. PEARCE. Ms. Bach, if I took your figure of 600 people, would

a scientist working on researching be making $100,000, more or

less, $50,000, $60-something? If we took $100,000, it would be

about $60 million annually. If we took $50,000, we could just go

to $30 million annually.

So, then, Dr. Holtz-Eakin, we come back at some point to your

analysis of what things are being paid for and not being paid for—

if you were to look at the $30 million a year and the decrease from

$15 to around $2 per gallon. If we had $30 million that, since the

1950s, I think Ms. Bach said, is that the sort of return on capital

that you all would consider is sufficient? Or is that something that

would concern you that we are spending upwards of $30 million a

year from just one agency, and maybe there are more agencies?

Would you like to comment on that?

Dr. HOLTZ-EAKIN. I don’t have a comment on the particular number, which we would be happy to analyze and get back to you on

the rates of return. But I think you are on the mark in trying to

identify whether there are social rates of return which merit R&D

investment. That is exactly the right way to do——

Mr. PEARCE. If you would scoot closer to the mike, please.

Dr. HOLTZ-EAKIN. I don’t know specifically on numbers whether

that particular rate of return is satisfactory or not, although we

would be happy to work with you on that. I think that your question is right on the mark, which is, this a rate of return which

30

broadly accrues to the Nation as a whole, which is satisfactory for

the kinds of investments we are making. These are the broad R&D

investments that are the appropriate role for the government. We

would be happy to work with you on the number itself.

Mr. PEARCE. Ms. Bach, if we were to pursue that line of questioning then with you, if you were to estimate the total operating

cost—now we are not talking about research, we are going to estimate that at about $30 million or maybe a little bit more. But if

you are looking at that time total operating cost of all of your different research facilities, what would those costs per year—and,

again, the end result of what I am trying to get at is the actual

benefit that we are getting from your research?

Ms. BACH. The operating budgets for the two research facilities

that we presently have, I would estimate that to be about

$3 million a year, for the two facilities. We estimate Tularosa will

be an O&M budget of about $2 million. And the facility at Yuma,

the research facility there, is under $1 million.

Mr. PEARCE. Do you have any estimate? You were saying that

you think the cost of $1 is when you get to be economic. So do you

have any estimates of when you are requesting that your research

staff—do you have goals set out there when you would like that

cost estimate of $1 to be reached?

Ms. BACH. Well, in fact, the research agenda is even more comprehensive than the Reclamation or even the Federal Government.

There is a consensus amongst those in the research community

that is what the roadmap is about, is how to tackle the—where the

costs are, so the research opportunities are and then to distinguish

what industry should do versus what the Federal Government

should do.

Mr. PEARCE. So we are spending $30 million a year to find out

where the costs are and not to find out how to solve the costs. I

mean, at some point—I will just tell you, when I look closely at the

operating structure, particularly the facility in Tularosa, I get concerned that it is nondirectional and that I really—I don’t see where

the real intent is to get the cost down to where it is economic, that

instead we are more concerned with the research.

Even in DOE, I read in your report, Mr. Garman, it just doesn’t

feel like we are really aggressively attacking the cost structure of

water with an outcome that we can be proud of at the end of the

day.

Ms. BACH. Mr. Chairman, if I may just comment. I certainly

didn’t want to leave the Committee with a misunderstanding. The

600 scientists and engineers that Reclamation have, I think you realize that those are on a whole variety of water issues, not just on

desal.

Mr. PEARCE. I understand that, but the whole purpose of water

research should be how to keep it cleaner and how to use it and

have it available when it is not available.

Ms. BACH. Absolutely.

Mr. PEARCE. Having said that, we are being passed a memo that

there is just 3 minutes to vote, and I am still the only one here.

We can either—OK. They say that I probably should go on to recess and go cast my vote on the Floor. So with everyone’s consensus, we will stand in recess till the Chairman comes back.

31

[Recess.]

Mr. RADANOVICH [presiding]. The Subcommittee is back in order,

and I recognize Grace Napolitano for some further questioning of

the first panel.

Mrs. NAPOLITANO. Thank you, Mr. Chairman.

Starting off with Ms. Bach, Bureau of Reclamation. You state, in

2004, Bureau of Reclamation redirected efforts under Title XVI, the

Reclamation Wastewater and Groundwater study, et cetera, et

cetera, to complement the DWPR 40 Water 2025 number 1, what

does it mean under what direction—what Congressional authority

was this, does a redirection of the efforts of Title XVI occur? Was

Congress notified?

Finally, I understand that the eligibility on the Floor today will

zero out 2025 water funding. So would you please answer those.

Ms. BACH. Yes, Congresswoman, a couple of questions that you

had with respect to Title XVI, the authority to invest in desal activities is included in Title XVI. In fact, Title XVI is quite broad

in what it considers to be impaired waters. In fact, essentially, if

the water cannot be used for consumptive uses, then under Title

XVI, it would be considered impaired.

With respect to the redirection of Title XVI activities toward

desal, that would have been described to Congress in the justification of the budget.

And then your third question is, yes, with respect to the markup

from the House Appropriations Committee, it is my understanding—I have reviewed the bill that is going to the Floor, and

that, in fact, does zero out the Water 2025 funding. That is correct.

So for desal activities, that is a reduction that would be a cut of

$1.8, almost $2 million from their request.

Mrs. NAPOLITANO. As you probably have heard in the past, I

have been very vocally opposed to the Bureau of Reclamation reducing the funding to recycle water, because it has helped California, specifically, and other States, from what I am learning to

be able to deal with the issues of whether it is drought or contaminated water or water that they can recycle.

Yet we continue to forge forward and based on the fact that it

is part of the original Act. There was a demonstration project, I

was told by Commissioner Keys, a while back.

I just do not understand why there is such a reluctance to include recycling along with desal and other objectives, because this

is what has helped California. In answer, I believe, to Mr. Gibbons

is that California has now met the 2016 objective of reducing the

Colorado River take, which means then that they are already going

to have that additional water coming from the Colorado River,

because California has managed, through recycling water projects

and other programs, been able to cut their take. So I am very concerned about the continued effort to cut the recycling funding.

The other question that I have for you, and it was partly addressed, oh, Mr. Gibbons answered the question about the cost of

the acre-foot of water. If you could bring it down to the range of

400 to 500, the research, what about recycling. What is the cost of

recycling versus the desal?

32

Ms. BACH. You know, I am sorry, I apologize for not having that

information readily available. But I think what you are asking me

is, what is the distinction between the reuse process and desal?

Mrs. NAPOLITANO. The cost of the reuse process and the desal

process.

Ms. BACH. If you might allow me to submit that for the record.

Let me verify that, because I don’t have it available to me.

Mrs. NAPOLITANO. Can your staff probably give you a ballpark

figure?

Ms. BACH. Well, let me—I don’t know that this is going to be a

complete answer, but the technology—technologies that are available for desal and technologies that are available for reuse sometimes can, in fact, be similar to it, is the ability to have one technology breakthrough with two different applications.

Mrs. NAPOLITANO. That still doesn’t answer my question.

Ms. BACH. I will get to your question. I believe it can be demonstrated that the reuse costs would be less than the desal. But I

will be happy to get more information.

Mrs. NAPOLITANO. Would you explain that in writing, please?

Ms. BACH. Yes.

Mrs. NAPOLITANO. Also, the fact that there needs to be an infrastructure for the recycled water that may have more extended use

to communities that actually can cut down the use of pure water.

That is my point.

Ms. BACH. Yes, I am aware that there is a difference of philosophy within the Administration and the views that you have

pressed about what role Reclamation should be playing with respect to——

Mrs. NAPOLITANO. You might add to that report, if you will,

whether or not communities have voiced their concern about their

ability to obtain assistance in expansion of the recycled water

projects to use for economic reasons, whether it is for commercial—

actually, industrial use, as well as agricultural use.

Ms. BACH. I can expand upon that. I can also indicate that the

type of proposals that we are seeing coming in for competitive

funding in the research arena would include those that are looking

for industrial applications.

Mrs. NAPOLITANO. Great.

Ms. BACH. I will expand.

Mrs. NAPOLITANO. You have already answered the questions why

the Administration favors. But I would certainly want to make

clear that the Title XVI has been very favorably received by communities throughout the United States, has helped immeasurably

in some areas. And why the continued reluctance to include or

work with this Committee on continuing to see how that can continue to help bring potable water to the communities or increase

the water by utilization of recycled water?

Ms. BACH. Well, again, I understand that it comes down to a distinction of maybe a difference of philosophy in that the Administration recognizes that there are broad authorities in Title XVI, and

as I pointed out, in fact, does allow for us to conduct research, including desal, because of that broad understanding of how it defines impaired water. But when it comes to the actual funding of

33

the construction of the facilities, that is where you see a differentiation in policy.

Mrs. NAPOLITANO. OK. Well, I visited the sanitation district

where millions of gallon per minute are dumped into the ocean.

And that is a concern if it can be recycled and put back into good

use whether it is for ag or industrial uses, and that is why I am

pursuing that, one of the reasons.

Dr. Holtz-Eakin, I have a question in regard to your report on

page 1 where you are referring to the third paragraph on the California Central Valley Project, being $70.14 per acre-foot versus LA

residents, $925. Where did you obtain the $925 figure? How did

that come about? Is it current figure?

Dr. HOLTZ-EAKIN. It is a 1992 figure, ma’am.

Mrs. NAPOLITANO. 1992. Do we have any better update than

that?

Dr. HOLTZ-EAKIN. We will certainly work on getting one for you.

Mrs. NAPOLITANO. Would you submit that to this Committee?

Dr. HOLTZ-EAKIN. Happily.

Mrs. NAPOLITANO. For the record, please. Then I can look at page

2 of your report, paragraph one. In discussing the H.R. 1071,

adopting a less commonsense approach of subsidizing operating

costs, and you go into the facilities eligible for subsidy. Are those

to begin operation, during, now? I would like to get this clear. Is

it newly built operations?

Dr. HOLTZ-EAKIN. Yes, ma’am.

Mrs. NAPOLITANO. Not existing desalination operations that you

are hoping to help with this bill.

Dr. HOLTZ-EAKIN. The bill is targeting new facilities being built.

Mrs. NAPOLITANO. Isn’t that discriminating against those that

are already in operation and have been doing work?

Dr. HOLTZ-EAKIN. It is a targeted subsidy on new facilities and,

by definition, discriminates against those who don’t qualify.

Mrs. NAPOLITANO. So it is just for new. Does that take into consideration the amount of time that those facilities would have to

be up and running, operating?

Dr. HOLTZ-EAKIN. It takes about three years to construct one, if

that is your question. But the funding is not conditional upon a period operation.

Mrs. NAPOLITANO. Is it during the 10-year period following the

bill’s enactment, the subsidy? They are eligible only during that 10-

year period, so you lost three years, for instance, if it took three

years to build.

Dr. HOLTZ-EAKIN. The authorization is for a 10-year window and

not beyond that, but that is true.

Mrs. NAPOLITANO. But the enactment of this bill——

Dr. HOLTZ-EAKIN. The authorization is for a 10-year period and

then expires at the end of that. That is the nature of the bill, not

the nature of the operation of the plant. Not that a plant is by definition only going to get 10 years of funding and lose 3 during the

startup. It is simply the bill itself only has that period, and that

is the nature of the budgeting process.

Mrs. NAPOLITANO. So that would affect the ability of plants to be

able to have an extended period time of return?

34

Dr. HOLTZ-EAKIN. It certainly would affect the calculations that

go into thinking about startup construction and the planning process involved in a facility, yes.

Mrs. NAPOLITANO. So, in essence, it probably would affect their

cost?

Dr. HOLTZ-EAKIN. Most certainly.

Mrs. NAPOLITANO. OK. Then, I think you did answer the one referring to Sandia National Lab in New Mexico in the third paragraph of the same page. The one under construction—I believe

somebody had a question on that. I didn’t quite get the answer

because I was walking out. When will it be finished and what technology does it use?

Ms. BACH. I think this is about Tularosa with respect to New

Mexico.

Mrs. NAPOLITANO. Tularosa, yes.

Ms. BACH. Right. The facility will be finished in 2006, and it will

focus on brackish, brackish inland.

Mrs. NAPOLITANO. What new technology? Is this the membrane?

Ms. BACH. It is actually a research facility set up to test technologies of all kinds, not just water but also energy.

Mrs. NAPOLITANO. OK. Going back to the statement about R&D

dollars appropriated from 1998 to 2005, a 7-year span, there have

been $28.1 million for R&D. Is that small, large?

Ms. BACH. That is specific just to one authority. That is for the

DWPR program, and then there would have been another

$5 million under Title XVI for the two demonstration projects that

Congress authorized, one in Las Vegas and one Long Beach, which

you will be hearing on the next panel.

Mrs. NAPOLITANO. I still want to bring up the fact that agricultural water is subsidized for municipal water, and the assistance

water is not—yes, all you want is true.

OK. I think—I have a couple of questions, but I will defer and

come back and rethink what I have.

Thank you, Mr. Chair.

Mr. RADANOVICH. Mr. Davis.

Mr. DAVIS. Thank you, Mr. Chairman. I think you have raised

a legitimate point about the quality incentive. It could be, in fact,

7 years, and I think it is a legitimate point for discussion, whether

it is sufficient incentive for someone to factor into the subsidy the

operating costs as opposed to the feasibility of the entire project.

So I am sure that is something we can discuss. Thank you for raising the point.

Mrs. NAPOLITANO. Yes, Dr. Holtz-Eakin, the Chair has been kind

enough to allow me to continue because he has more questions.

How would the private sector react if we reallocated more money

for private research and development? And would private industry

be encouraged or discouraged from doing research with their own

money? Any one of you.

Dr. HOLTZ-EAKIN. The broad lesson of history, not just in water

but elsewhere, is, to the extent that the Federal Government devotes funds to R&D, it does reduce the incentives for both the private sector and for both State and local governments to do the

same activity. And there is, on net, some crowding out of the total

funding.

35

Mr. GARMAN. As a general proposition, we at the Department of

Energy like to engage in public/private partnerships where we require cost share from our private partners, or nonFederal partners,

I should say. That cost share depends on the nature of the research. If it is of a very fundamental nature, we require smaller

cost share. If it is demonstrating technology, closer to commercialization, we would require a larger cost share. That approach is

codified in the Energy Policy Act of 1992.

Ms. BACH. Along similar lines, what I would say as a general

philosophy is that high-risk, long-term basic research has been long

recognized as being an important function of the Federal Government. That which is more applied is generally subjected to a cost

share. And in fact, Reclamation, similar to the Department of Energy, we have a 50/50 cost share, and we generally see that cost

share increasing on outside partners as we go from pilot to demonstration.

Mrs. NAPOLITANO. Thank you for those answers.

Dr. Holtz-Eakin, your testimony emphasizes the importance of

pricing and the effects of how water is used. What do we know

about the use of water in response to changes in pricing?

Dr. HOLTZ-EAKIN. From the limited research evidence that we

have, it is evident that residential users will respond to higher

prices with more judicious use of water. A 10 percent price increase

could decrease their consumption by 2 to 4 percent. Commercial

and industrial users are a bit more responsive. The same kind of

price increase might move their consumption down from 5 to 8 percent.

That builds off a survey that really operates on a limited range

of prices. We don’t know how much people respond to a greater

range of price variation.

Mrs. NAPOLITANO. Thank you. I was interested in your statement

or your testimony about, there is a disincentive for people to save

water, conserve water, because of the pricing structure?

Dr. HOLTZ-EAKIN. It is certainly the case that the pricing structure affects all aspects of water use. The price sensitivity is about

choices in using water. The price has the same incentives on

sources of water. Whether it would be recycled, whether it would

be desalination, whether it would be some other source, those

prices that provide incentives for new technologies, those which are

deemed to be meeting the market test, depend ultimately on the

prices that are in place. So things which are not meeting the market test now might very well meet a private market test if prices

were closer to the full cost of production.

Mrs. NAPOLITANO. Thank you.

Mr. Chair, I probably have a ton of others. I would like to have

the ability to submit them to the panel for answers to this

Committee.

Mr. RADANOVICH. Absolutely. We will be making that statement

at the close of the hearing.

I want to thank the members of the panel for being here. You

provide valuable information to the Committee, and we do appreciate it.

With that, I will call up the next panel, which is Mr. Bernie

Rhinerson of the San Diego Water Authority on behalf of the U.S.

36

Desalination Coalition; Mr. Kevin Wattier, who is the General

Manager of the Long Beach Water Department; Mr. Colin Sabol,

Chief Marketing Officer at General Electric Infrastructure; Mr. Pat

McCourt, City Manager for Alamogordo, New Mexico; Dr. Michael

Max, Marine Desalination Systems, L.L.C.

Mr. RADANOVICH. Ladies and gentlemen, welcome to the Subcommittee. As in the last panel, we will allow each member to

speak. Please keep in mind that your written testimony is included

in the full record. Feel free to be extemporaneous in your comments. We will start with each and then open up to the dais for

questions.

Mr. Rhinerson, welcome to the Subcommittee, you may begin.

STATEMENT OF BERNIE RHINERSON, BOARD MEMBER, SAN

DIEGO COUNTY WATER AUTHORITY, ON BEHALF OF THE U.S.

DESALINATION COALITION, SAN DIEGO, CALIFORNIA

Mr. RHINERSON. Thank you, Chairman Radanovich and members

of the Subcommittee. My name is Bernie Rhinerson, I am here this

morning representing the United States Desalination Coalition

where I serve as a member of The Board of Directors and as the

past chairman of that organization. I am also immediate past

chairman of the San Diego Water Authority, and I serve as a member of the Board representing the City of San Diego on that agency.

I very much appreciate the opportunity this morning to be here

to testify in support of H.R. 1071, the Desalination Drought Prevention Act of 2005.

A few comments about my agency and some clarifications about

previous testimony. Our agency provides wholesale water service to

3 million people in San Diego County. The authority’s charge is to

deliver a safe and reliable water supply to businesses and residents

that we serve providing water that fuels a $1.6 billion economy.

We are planning a desalination plant in Carlsbad that will

produce 50 million gallons a day which represents about 5 percent

of San Diego County’s water supply. We are currently doing an

EIR. We are hope to have that plant in operation in 2008 and 2009

expandable up to 100 million gallons a day.

To correct a comment made in earlier testimony, we anticipate

that the cost of water from that facility will be in the $800 to $900

range, based on a power cost of about $0.06 per kilowatt. The $600

range mentioned earlier is a cost that we wish we could achieve,

but we are more in the $800 range.

My agency, like water agencies throughout the country, is continually struggling to identify long-term water supplies because of

drought, increasing population, competing demands from business

and agriculture. So it is these challenges that brought us here

today and led us to lead the U.S. Desalination Coalition which

brought together agencies and utilities in Florida, Texas, California, New Mexico and Hawaii, all agencies that are struggling

with the same problem, finding long-term water supplies. So we

are very encouraged to be here to hopefully have the Federal

Government create a program that can help us with financial

assistance to bring these desalination plants into reality.

37

I want to thank the sponsors of the bill, Congressman Gibbons,

Congressman Davis, for their support and leadership, and you, Mr.

Chairman, for having this hearing.

Mr. RHINERSON. H.R. 1071 is a bill that is a little bit different

in that it provides energy assistance grants based on performance,

and that is a very important difference by design.

In our opinion, we cannot afford to continue to wait for more research. We need to get these plants on line and built and producing

water. It takes a long time to plan them, get through the environmental permit process, as you have talked about earlier, and to get

these plants built. So the approach in H.R. 1071 is, rather than

providing construction grant funds, it is to focus on plants that are

built by local agencies that are the best plants that are actually

producing water.

I would like to encourage the Committee to consider a couple of

changes that have been mentioned before to this bill. One is the

one-stop-shopping environmental permitting process that is similar

to what is used in highway construction. That would help us with

the major challenge that we face. It is the cost of permitting and

the delays and the processing that we have, and a one-stop-shop

process could help speed up the approval process and therefore

save money on building these plants.

Second, we would like to ask that you consider adding language

to the bill where the Secretary of Energy would evaluate applications that are based on the best available technology. Those are the

plants that have designed into them energy-efficiency units and

things that are as advanced as possible. With those two changes,

we are very much in support of this bill.

Once again, I want to reiterate that we very much appreciate the

Federal Government’s support for research from Reclamation and

the Department of Energy. But we need to think beyond research

and actually building plants that will produce water for the people

of my region and in other areas of the country where water supply

is something that we have to start working on now, because it

takes a long time to build these plants.

I would be happy to answer any questions during your questionand-answer period, and I appreciate your support for this bill.

Mr. RADANOVICH. Thank you, Mr. Rhinerson.

[The prepared statement of Mr. Rhinerson follows:]

Statement of Bernie Rhinerson, Member of the Board of Directors, San

Diego County Water Authority on behalf of the U.S. Desalination Coalition

Chairman Radanovich and Members of the Subcommittee, my name is Bernie

Rhinerson. I am before the Committee this morning representing the U.S. Desalination Coalition, where I serve as a member of the Board of Directors and am the immediate past Chairman. I also serve as a member of the Board of Directors of the

San Diego County Water Authority as a representative of the City of San Diego. I

very much appreciate having the opportunity to testify today in support of

H.R. 1071, the Desalination Drought Prevention Act of 2005.

The San Diego County Water Authority serves as the wholesale water supplier

to more than 2.95 million people and 23 member agencies in San Diego County. The

Authority’s charge is to provide a safe and adequate supply of high quality water

to the communities, businesses, and residents that we serve.

Like water resource managers throughout the United States, we are struggling

to address the long-term challenges posed by drought, increasing population, and

competing demands from business, agriculture, and the environment. These challenges led us to join together with water agencies and utilities from other States

38

including Florida, Texas, Hawaii, and New Mexico to form the U.S. Desalination Coalition, a group dedicated to advocating an increased Federal role in advancing desalination, both seawater and brackish groundwater, as a viable long term tool for

meeting our Nation’s water supply needs.

The goal of the U.S. Desalination Coalition is to encourage the Federal government to create a new program to provide financial assistance to water agencies and

utilities that successfully develop desalination projects that treat both seawater and

brackish water for municipal and industrial use. The Desalination Drought Prevention Act of 2005, introduced by Representative Jim Davis and Representative Jim

Gibbons, will achieve this goal in a fiscally responsible way. Similar legislation has

been introduced in the United States Senate by Senator Mel Martinez of Florida.

I am delighted to be here today in support of this legislation and tell you how it

will positively affect the San Diego County Water Authority.

Despite the tremendous advances in desalination technology that have reduced

the costs of desalinating water, energy costs remain quite high and are responsible

for more than 30% of the overall cost of desalinated water. H.R. 1071 directs the

Secretary of Energy to provide incentive payments to water agencies or utilities that

successfully develop desalination projects. This would be a competitive, performance-based program that will help to offset the costs of treating seawater and brackish water. Under the proposed program, qualified desalination facilities would be eligible to receive payments of $0.62 for every thousand gallons of fresh water produced for the initial ten years of a project’s operation. The legislation would also

insure that there is a balance in the amount of money going to seawater and brackish water projects in any one year.

The rationale for this approach is that while the cost of desalinating water has

dropped dramatically over the last decade, the energy costs associated with desalination are still quite high. Most experts believe that these costs will continue to

come down over time and that desalination will eventually be widespread. But waiting for this to occur is a luxury that, in my opinion, we cannot afford. A modest

investment to jump-start the development of these projects today is the smart thing

to do.

It is true that the approach suggested in H.R. 1071 to encourage the development

of seawater and brackish groundwater desalination projects is different from the

traditional approach of providing construction grant funds. That difference is by design. First, while the availability of energy assistance grants will encourage the development of desalination projects, these grants will be performance based. In other

words, the Federal government will not be betting ‘‘on the come’’ that these projects

will be technically and economically sound and will actually get built. Only the very

best projects will get built by local sponsors and only those will receive financial

support.

San Diego County is literally at the end of the pipeline. In order to ensure water

supply reliability for our region, we have instituted a multi-faceted water supply diversification strategy that includes imported water, increased conservation, water

recycling, agriculture to urban water transfers and the development of a new,

drought-proof, local water supply—the Pacific Ocean. Toward that goal, the Water

Authority has instituted one of the most ambitious seawater desalination programs

in the country. Our water supply diversification plan calls for the development of

up to 125 million gallons per day of seawater desalination capacity over the next

20 years. We expect that by 2020, six to fifteen percent of our water supply will

come from the ocean. Environmental review is expected to be completed this year

for a 50 million gallon per day seawater desalination plant in Carlsbad, California.

Development of this high quality reliable water supply will address two vital federal interests; it will ensure that the economic health of a $142 Billion a year economy is maintained, and it will offset the need to provide water to a growing population by seeking additional imported supplies from environmentally sensitive

sources in Northern California such as the San Francisco- San Joaquin Bay Delta.

Mr. Chairman, as you and the Subcommittee consider this legislation, I would respectfully suggest two modifications to improve the legislation.

First, we would encourage the Committee to consider establishing a ‘‘one stop

shop’’ to coordinate the environmental review process required for these projects

similar to the process used in highway construction and embodied in statute at 23

U.S.C. 109. This would help public water agencies address one of the biggest problems we face in developing desalination facilities, navigating through an overly complex, time consuming and expensive permitting process involving numerous Federal

and State agencies.

Second, we would encourage the Subcommittee to include language that would require the Secretary of Energy in the evaluation of applications for assistance under

39

the Act to give priority to projects that utilize the best available technologies to conserve energy or utilize renewable energy in the desalination process.

In conclusion, thank you again for holding this hearing on this important legislation. We very much appreciate your leadership on this important issue.

Mr. RADANOVICH. Mr. Wattier.

STATEMENT OF KEVIN WATTIER, GENERAL MANAGER, LONG

BEACH WATER DEPARTMENT, LONG BEACH, CALIFORNIA

Mr. WATTIER. Good morning, Mr. Chairman, members of the

Committee. Thank you for the opportunity to speak before this distinguished Subcommittee today.

My name is Kevin Wattier. I am the General Manager of the

Long Beach, California, Water Department. My verbal testimony

today will summarize the development and current status of the

Long Beach Seawater Desalination Project, currently the largest

federally authorized project of its kind in the United States.

The Long Beach Desalination Project represents the Federal

Government’s current investment in seawater desalination research and development. In full partnership with the U.S. Bureau

of Reclamation, through work at a 300,000 gallon-per-day prototype

desalination facility, we are attempting to optimize a unique and

extremely innovative membrane technology, which was developed

by engineers at our agency, that has indicated several advantages

over traditional reverse osmosis methods on a small scale.

Development of this research facility is also being made possible

by the generous assistance from the Los Angeles Department of

Water and Power.

Additionally, together with the United States Bureau of Reclamation, we will construct an Under Ocean Floor Intake and Discharge Demonstration System, a project we believe is among the

first of its kind in the world, that will effectively demonstrate an

alternative to traditional ocean intake and discharge practices.

The two parts of this large research and development program

are aimed at fulfilling the intent of the U.S. Congress put forth by

this Committee in its 1996 funding authorization for the Long

Beach Desalination Project, which is to drive down the cost of seawater desalination through advancements in technology.

The work being done in Long Beach is consistent with the recommendations on pursuing seawater desalination contained in the

Department of Interior’s recent publication entitled, Water 2025:

Preventing Crisis and Conflict in the West.

In Long Beach, the reliability of our future water supply rests on

four pillars of critical investment: conservation, reclamation, conjunctive use and seawater desalination. Increased implementation

of aggressive conservation programs, expansion of our recycled

water distribution system, innovative and increased utilization of

our groundwater basin and seawater desalination, as a package, for

the foreseeable future, will mitigate variable constraints on imported and groundwater supplies, significantly restrengthen our

water supply reliability, and keep water rates low.

Seawater desalination has indeed emerged as one of several alternatives for stronger water supply reliability. In fact, we believe

that early in the next decade seawater desalination could help

40

meet 10 percent of our customers’ annual water demands. However, we believe significant opportunities to further reduce the operating costs of seawater desalination exists, making it an even

more affordable option for water reliability. Long Beach has chosen

to pursue these opportunities prior to moving forward on construction of a full-scale production facility.

Using a small 9,000 gallon-per-day pilot scale desalter since

2001, Long Beach water has significantly reduced the overall energy requirement of seawater desalination using a relatively lowpressure, two-pass nanofiltration process, which has come to be

known as the Long Beach method. Testing at this scale has estimated this new technology to be 20 to 30 percent more energy efficient than traditional reverse osmosis.

This technology, among other critical processes, will now be tested on a larger scale. A Federal funding agreement with the U.S.

Bureau of Reclamation was signed in September of 2002 to design

and construct a 300,000 gallon-per-day prototype seawater desalination research and development facility. This funding agreement

provides for 50 percent, or up to $20 million, of the total cost of the

Long Beach project. Total cost of design, construction and operations for this 300,000 gallon-per-day prototype facility is $8 million. To date, approximately $4 million have been appropriated by

the Federal Government starting in 2002.

The Long Beach prototype seawater desalination facility will be

operational in August of this year. Once operational, Long Beach

Water and Bureau of Reclamation officials will conduct 18 months

of research. The research conducted at this facility will be among

the most advanced seawater desalination research being undertaken anywhere at this time. With the data we gather, we will

verify energy savings of the two-pass nanofiltration method and optimize the process so that it can be easily duplicated.

Among the research being conducted in Long Beach will be a

full-scale, side-by-side comparison of the two-pass nanofiltration

and single-pass reverse osmosis methods, the only full-size energy

use comparison of these two processes being conducted at this time.

The Long Beach project will also test many of the newest energy

recovery devices being made available on the market.

We will extend our efforts beyond optimization of the two-pass

nanofiltration process and seek out other innovative and affordable

ways to develop other components of a full-scale desalination facility, while looking ahead at some of the common operational challenges faced by other desalination facilities around the world.

Issues such as seawater intake, pretreatment and brine disposal affect both the two-pass nanofiltration and the reverse osmosis processes.

In partnership with the Bureau of Reclamation, we are currently

planning the design, construction and subsequent research activity

of an Under Ocean Floor Intake and Demonstration System, among

the first of its kind in the world. We believe this research will demonstrate an alternative and an environmentally responsive method

of seawater intake and brine discharge using slow sand filtration

and that existing beach sand under the ocean floor can be a viable

pretreatment method for seawater desalination.

41

Mr. Chairman, I would like to thank this Committee, the Congress and the Bureau of Reclamation for your continued support

and confidence in the partnership between the Federal Government

and the City of Long Beach. We continue to strive to provide you

with a tangible return on your investment in seawater desalination

research and development. We look forward to sharing our research

with this Committee and other stakeholders in the months ahead.

Along with my written testimony, I have submitted recent photo- graphs of the Long Beach prototype desal facility and graphic

renderings of the Under Ocean Intake Project. I would be happy to answer any questions you might have.

Thank you, Mr. Chairman.

Mr. RADANOVICH. Thank you, Mr. Wattier. [The prepared statement of Mr. Wattier follows:]

Statement of Kevin Wattier, General Manager, Long Beach Water, Long Beach, California

Mr. Chairman, thank you for the invitation to speak before this distinguished Subcommittee today. My name is Kevin Wattier and I am General Manager of Long Beach Water, an urban municipal water supply agency located in Long Beach, California. I am a licensed Professional Engineer and Grade 5 Water Treatment Operator. My verbal testimony today will summarize the development and current status of the Long Beach Seawater Desalination Project; currently the largest Federally

authorized project of its kind in the United States. The Long Beach Desalination Project represents the Federal government’s current investment in seawater desalination research and development. In full partnership

with the United States Bureau of Reclamation, through work at a 300,000 gallonper-day prototype desalination facility, we are attempting to optimize a unique and

extremely innovative membrane technology, which was developed by engineers at

our agency, that has indicated several advantages over traditional reverse osmosis

methods when tested on a small scale.

Development of this research facility is also being made possible by generous as- sistance from the Los Angeles Department of Water & Power. Additionally, together with the Bureau of Reclamation, we will construct an Under Ocean Floor Intake and Discharge Demonstration System, a project we believe is among the first of its kind in the world, that will effectively demonstrate

an alternative to traditional open ocean intake and discharge practices. The two parts of this large research and development project are aimed at ful- filling the Intent of The Congress, put forth by this Committee in its 1996 funding

authorization for the Long Beach Desalination Project, which is to drive the cost of

seawater desalination down through advancements in technology. The work being done in Long Beach is consistent with the recommendations on pursuing seawater desalination contained in the Department of Interior’s recent

publication entitled, ‘‘Water 2025: Preventing Crises and Conflict in the West.’’ Today, I will give you a progress report on this project, in which you all are a

partner.

By way of background, Long Beach Water currently meets the annual water de- mand for the 500,000 people living in and around the City of Long Beach through

a broad resource portfolio, 42 percent of which is water imported into Southern California by the Metropolitan Water District via the State Water Project and the

Colorado River Aqueduct; 38 percent is groundwater which is pumped and treated

locally; and the final 20 percent of demand is met through conservation and use of

recycled water.

Long Beach believes implementation and management of a diverse water supply

portfolio is the most effective way to mitigate variable constraints inherent with imported and groundwater supplies.

By the beginning of the next decade, Long Beach Water’s supply portfolio will resemble that of an experienced and successful investor’s: smart, balanced and most

importantly productive, while maximizing flexibility.

In Long Beach, the reliability of our future water supply rests on four pillars of

critical investment: Conservation, Reclamation, Conjunctive Use and Seawater Desalination. Increased implementation of aggressive conservation programs, expansion of recycled water distribution systems, innovative and increased utilization of

42

our groundwater basin and seawater desalination, as a package, for the foreseeable

future, will mitigate variable constraints on imported and groundwater supplies,

significantly strengthen water supply reliability and keep water rates low.

We recognize conservation as a top priority in our water resource management

strategy. As a City, we are using the same amount of water that we did in 1987,

even though our population has increased by over 100,000 people.

Major components of Long Beach’s water conservation program include: aggressive system maintenance; participation in the Metropolitan Water District’s Regional Conservation Credits Programs; implementation of Conservation Best Management Practices; use of economic and financial incentives to encourage efficient

water use; implementation of water use regulations through local ordinances; and

extensive public relations and community education programs to teach and encourage the community how to use water wisely.

Long Beach is aggressively expanding its reclaimed water system with the construction of 84,000 feet of new reclaimed water pipeline, new pump stations, and

the conversion of two existing water reservoirs into reclaimed water storage. The

expanded reclaimed water system will provide 4,000 to 9,000 acre-feet a year of reclaimed water to the populations living in and around the City of Long Beach.

In addition, Long Beach Water has partnered with the Water Replenishment District of Southern California in constructing a water treatment facility capable of producing 3,000 acre-feet per year of treated reclaimed water. This water replaces potable water that is currently being injected into the existing Alamitos Seawater Intrusion Barrier to prevent seawater from contaminating the groundwater supply.

Again, through rigorous conservation and water reclamation, Long Beach Water has

been able to reduce approximately 20 percent of its total water demand from ground

and imported water sources.

Long Beach Water has a conjunctive use program in place for drought years. The

Long Beach conjunctive use program allows us to capture excess water during wet

years and store up to 13,000 acre-feet or 4.2 billion gallons in the Central Groundwater Basin for use during dry years.

Seawater desalination has indeed emerged as one of several alternatives for

stronger water supply reliability. In fact, we believe that early in the next decade,

seawater desalination could help meet 10 percent of our customer’s annual water

demand. However, we believe significant opportunities to further reduce the operating costs of seawater desalination exist, making it an even more affordable option

for water reliability. Long Beach has chosen to pursue these opportunities prior to

moving forward on construction of a full-scale production facility.

Using a small 9,000 gallon-per-day pilot scale desalter since 2001, Long Beach

Water has significantly reduced the overall energy requirement of seawater desalination using a relatively low-pressure, two-pass nanofiltration process, which has

come to be known as the Long Beach Method. Testing at this scale has estimated

this new technology to be 20 to 30 percent more energy efficient than reverse osmosis.

This technology, among other critical processes, will now be tested on a larger

scale. A Federal funding agreement with the U.S. Bureau of Reclamation was

signed in September of 2002, to design and construct a 300,000 gallon-per-day prototype seawater desalination research and development facility. This funding agreement provides 50 percent, or up to $20 million, of the total cost of the Long Beach

Seawater Desalination Project. Total cost of design, construction and operations for

this 300,000 gallon-per-day prototype facility is $8 million. To date, total Federal appropriations of $4 million have been received since FY’02.

The Long Beach Prototype Seawater Desalination Facility will be operational in

August of this year. Once operational, Long Beach Water and Bureau of Reclamation officials will conduct 18-months of research. The research conducted at this facility will be among the most advanced seawater desalination research being undertaken anywhere at this time. With the data we gather, we will verify energy savings

of the two-pass nanofiltration method, and optimize the process so that it can be

easily duplicated.

Among the research being conducted in Long Beach will be a full-scale, side-byside comparison of the two-pass nanofiltration and single-pass reverse osmosis

methods of desalination, the only full-size, energy-use comparison of these two processes being conducted at this time. The Long Beach project will also test many of

the newest Energy Recovery Devices being made available.

We will extend our efforts beyond optimization of the two-pass nanofiltration process and seek out innovative and affordable ways to develop other components of a

full-scale desalination facility, while looking ahead at some of the common operational challenges faced by other desalination facilities around the world. Issues

43

such as seawater intake, pre-treatment, and brine disposal affect both the two-pass

nanofiltration and reverse osmosis processes.

In partnership with the Bureau of Reclamation, we are currently planning the design, construction and subsequent research activity of an Under Ocean Floor Intake

and Discharge Demonstration System, among the first of its kind in the world. We

believe this research will demonstrate an alternative and environmentally responsive method of seawater intake and brine discharge using slow sand filtration, and

that existing beach sand under the ocean floor can be a viable pre-treatment method

for seawater desalination.

Mr. Chairman, I would like to thank this Committee, The Congress and the Bureau of Reclamation for your continued confidence in the partnership that the Federal government has with Long Beach. We continue to strive to provide you with

a tangible return on your investment in seawater desalination research and development. We look forward to sharing our research with this Committee and other

stakeholders in the months ahead.

I will be happy to answer any questions you might have.

Thank you.

44

45

46

47

Mr. RADANOVICH. Mr. Sabol, welcome to the Subcommittee. You

may begin.

STATEMENT OF COLIN R. SABOL, CHIEF MARKETING

OFFICER, GE INFRASTRUCTURE, TREVOSE, PENNSYLVANIA

Mr. SABOL. Thank you, Mr. Chairman and members of the

Committee, for allowing me to appear before you today.

GE invests $3 billion in research and development annually, and

our Water and Process Technologies business is a leading global

supplier of water treatment systems and services.

Water is the lifeblood of industry, and our products and services

conserve billions of water gallons per year for our industrial customers. Our water scarcity solutions create safe, affordable water

for millions of people living in water-scarce regions throughout the

world.

A picture is worth a thousand words, and I have a few slides on

the easel over here that will help. They are also part of my written

statement.

48

Global water stress is spreading throughout the world——

Mr. RADANOVICH. If I can interrupt you—we won’t hold you on

the time—but if you could bring those slides a little closer that

would be helpful for us. Is there more than one slide, or is that it,

sir?

Mr. SABOL. There are several. They are in the written testimony,

if you happen to have it in front of you. If not, we will bring them

forward.

Mr. RADANOVICH. It is in our testimony. Maybe during the questioning we can go through the slides.

Mr. SABOL. Great.

Global water stress is spreading throughout the world. Today,

there are about 4 billion people in the world that are living in a

water stress area. That number is going to increase to 6 billion people by 2025. These water scarcity issues are also occurring here in

the United States on the west coast, on the east coast, as well as

here in Washington, D.C. Where we have lead in the drinking

water.

Many regions in high-stress situations have abundant water supplies nearby, but they are not in a usable form. Water in the form

of seawater, brackish water, and wastewater can be sources of new

water to relieve water scarcity. There is a slide that is in your written testimony that also shows the various sources of new water.

These various sources include seawater desalination, but they also

include brackish water desalination and the recovery of wastewater

for reuse in industrial and agricultural purposes.

It is important to note that desalination of seawater is much

more expensive than it is to reuse water from wastewater sources

or from brackish water sources, on the order of magnitude of two

times more expensive to desalinate seawater.

The technologies that are developed to desalinate seawater are

translatable into brackish water desalination and into reuse, so it

is important to invest in technology, but I hope this Committee focuses not just on seawater desalination but also creating new

sources of water from reuse and brackish water.

Desalination costs are driven by a couple of things: one, the lifetime of plants, the capital costs of these plants, contributes greatly

to the overall cost of running a plant; and, second, energy, as we

have talked about today.

This chart depicts—the two bars on the left are thermal desalination, the technology of choice in the Middle East. The chart on

the bar on the right is reverse osmosis, or membrane-based, desalination. You can see reverse osmosis or membrane-based desalination is the least expensive alternative for desalinating seawater

and brackish water today.

Technology advances have driven the cost of desalinating seawater down dramatically over the past couple of decades. Our figures show that the cost of desalinating seawater back in 1980 was

as high as $20 per 1,000 gallons. The industry is manufacturing

seawater desalination at a cost of $3 to $4 per 1,000 gallons reliably today. We think this number can be driven even lower.

The technologies that we are focused on at GE in driving this

cost even further down are as follows: number one, high-rejection

energy efficient membranes; number two, chlorine-resistant, longVerDate 11-MAY-2000 11:13 Aug 30, 2005 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6602 J:\DOCS\21447.TXT HRESOUR1 PsN: HRESOUR1
49

life membranes; number three, energy recovery devices; number

four, the combination of energy and water systems and designing

them in a way such that the total system is optimized; and highefficiency pretreatment systems to enable longer life of plants.

In conclusion, subsidies can create a means to encourage investment in desalination technologies. They can help build and install

a base today. So, for that purpose, they can be very valuable. We

can learn from that installed base.

But we believe that long-term solutions lie in advanced technologies that create economical water scarcity solutions. A broad

research and development program that is focused on membrane

advancements and improved energy efficiency could lead to a 30

percent reduction in operating cost and a 25 percent reduction in

capital cost, encouraging industry and potable water providers to

reduce their reliance on surface water.

As a leader in the industry, GE looks forward to working with

policymakers, users, and the technical community to continue to

improve technologies that address water scarcity solutions.

I thank you for the time, and I look forward to answering your

questions.

Mr. RADANOVICH. Thank you, Mr. Sabol.

[The prepared statement of Mr. Sabol follows:]

Statement of Colin Sabol, Chief Marketing Officer,

GE Infrastructure

Introduction

Chairman Radanovich, respected members of the Committee, thank you for inviting me to appear before you today. It is my honor to address the topic of clean water

scarcity and to share our views on how advanced technologies can reduce the cost

of providing clean water and increase long-term water availability in an economically sustainable way.

Background

GE is a global leader in diverse technologies and one of the world’s most recognized brands. We invest over $3 billion on R&D annually and provide our customers

with advanced technologies that reduce emissions, increase energy efficiency, enhance safety and security, and improve health care. GE Water & Process Technologies is a leading global provider of water treatment systems and services. Water

is the lifeblood of industry, and our products and services conserve billions of gallons

of water annually for our industrial customers. Our treatment systems also create

safe, affordable water for millions of people living in water-scarce regions of the

world from many sources, including brackish water, sea water and recovered water.

GE does this using multiple technologies, including reverse osmosis, electrodialysis,

and treatment systems that remove impurities and improve water quality.

Water Scarcity is Spreading

As population increases and industrial development expands, the stress on water

resources will continue to increase. According to the World Meteorological Organization, the number of people living in regions defined as ‘‘stressed’’: and ‘‘high stress’’

will increase from 4 billion in 1995 to nearly 6 billion in 2025 B an increase of 50%

in 30 years. (Figure 1).

50

This is a global trend that can also be felt in the U.S. due to shifts in population

and impairment of existing water resources. For example:

• Increasing populations and high demand are depleting freshwater aquifers in

the southwest US;

• Groundwater contamination is a growing problem in New England;

• Competition for water access in the Colorado river basin have created far-reaching economic and political tensions in that region;

• Lead and bacteria contamination have affected drinking water supplies in

areas, including here in Washington DC.

Paradoxically, many regions of high stress have abundant water supplies nearby.

The problem is one of access to clean, usable water. There are technology solutions

to this problem. GE and other companies are able to provide technologies to convert

seawater, brackish water and recovered water into useful water supplies. As demand increases, it will become increasingly important to reduce the cost of water

by reducing capital cost, energy cost, and operating maintenance cost.

Economics of Water Treatment and Desalination

Water treatment costs vary by the amount of salt removal, type of technology, cost

of energy, and size of plant. As shown in Figure 2, different water resources require

different treatment technologies, and higher salinities have higher costs.

Desalination costs are dominated by capital investment, energy and maintenance

costs. (Figure 3) Reverse osmosis systems, which utilize membrane technology for

water treatment, have the lowest cost of operations, especially in areas with high

power cost.

51

52

Technology Advances Have Reduced Cost of Clean Water

GE and others have made great strides in reducing the cost of desalinating seawater using membranes, from over $20/K-gal in 1980 to under $4/K-gal today (Figure 4).

While membrane technology advances have resulted in significant cost reductions,

energy still accounts for up to 60% of the operating cost (Figure 5). Further improvements in energy efficiency will deliver sustainable reductions in operating cost.

Along with improvements in energy efficiency, improvements in membrane performance and membrane life through integrated treatment systems can reduce capital

cost and life cycle cost.

53

Roadmap for Sustainable Reduction in Clean Water Costs

Membrane-based treatment solutions are essential to creating new water sources

such as brackish water aquifers, seawater, and even wastewater. Membrane based

desalination is a proven solution, but a broader application of these technologies to

create meaningful new water sources requires investment to further reduce the energy consumption associated with the operation of membrane systems.

Significant improvements in clean water cost can be achieved by investing in the

development of:

• New membrane systems with improved energy efficiency;

• Higher flux membranes with increased capacity and lower capital costs;

• Higher efficiency of energy recovery systems to reduce energy costs;

• Integrated treatment systems and longer life membranes with higher resistance

to chlorine that increase efficiency and reduce maintenance costs.

In addition, innovative financing models and tax incentives can reduce first cost

and help accelerate the deployment of these new technologies.

GE is already investing in research to develop membranes that have lower energy

consumption, improved life, and innovative integrated treatment systems. Furthermore, through government support, GE is looking at new systems such as the integration of membrane-based desalination and energy generated from wind turbines.

We are committed to continuing our efforts in these areas, but government support

will facilitate and accelerate these developments.

Recommendations

We recognize the value of subsidies as effective means to encourage early adoption

and deployment of solutions. Technologies exist today that are effective at removing

salts and contaminants from water. Short-term assistance with energy cost will help

communities in need put solutions in place faster.

However, we think that the long-term solution lies in advanced technologies that

make clean water economical and sustainable. A broad research and development

program focused on membrane advancements and improved energy efficiency could

lead to a 30% reduction in operating costs, and a 25% reduction of capital costs. Additional efforts to develop integrated treatment programs and innovative financing

can further reduce the cost of clean water. This would encourage industry and potaVerDate 11-MAY-2000 11:13 Aug 30, 2005 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 J:\DOCS\21447.TXT HRESOUR1 PsN: HRESOUR1
54

ble water providers to reduce their reliance on surface water sources by fulfilling

their demand with new water sources.

As a leader in the industry, GE looks forward to working with policymakers,

users, and the technical community to continue to improve desalination technologies

and increase the availability of clean water. Thank you Mr. Chairman and members

of this Committee for your time.

Mr. RADANOVICH. Mr. McCourt, welcome to the Subcommittee;

and you may begin your testimony.

STATEMENT OF PAT McCOURT, CITY MANAGER,

ALAMOGORDO, NEW MEXICO

Mr. MCCOURT. Mr. Chairman, members of the Committee, thank

you for this opportunity to appear before you today.

I am City Manager for the City of Alamogordo, New Mexico.

Mr. RADANOVICH. Mr. McCourt, would you mind pulling your

microphone a little bit closer there? Make sure it is on. That is better.

Mrs. NAPOLITANO. Would you repeat that statement?

Mr. MCCOURT. It is not empirical, we didn’t do a scientific study,

but what we have found out was that people use a certain amount

of water for their basic needs; therefore, pricing did not have a

large effect on the lower quantities. As we moved into larger users

of water, we found it to be very sensitive with consumers, and so

that worked out. We do have a tiered system, as I mentioned in

my written testimony. It has significant impact on water conservation.

We have done quite a bit of research. We have been working on

developing a new water source approximately 10 years in our

55

Tularosa basin area. The potable water is essentially used up. We

are now looking at nonpotable water. That water will require some

type of treatment. Unlike seawater, ours is a variable quality. It

goes all the way from about 2,000 parts to, as you heard mentioned

by Representative Pearce, about 17,000 parts per million. So our

goal is to tap into the best of the bad water at this particular point

in time to supply our needs.

The energy cost is a significant factor in any type of desalination

project that you do. It has risen very rapidly in recent years. Our

initial incremental costs over our other water was at 65 cents per

thousand. It has now jumped to 90 cents per 1,000 in the last couple years. So we feel that that is a very important area.

This really sticks in my throat, but I have to say that I don’t support the subsidy for operating cost. We think a long-range energy

policy which would stabilize energy prices would be more beneficial. Now, having said that, I want you to know if you do choose

to pass this bill we will be happy to get in line to help you demonstrate its usefulness.

We do try to keep our costs of operation down as much as possible. We, again, use conservation, as has been mentioned, a very

important part. We see desalination not only for our own community but throughout the United States and the world. Inland desalination we see is an extreme area, an area of very large growth

coming up in recent years. We face some somewhat unique problems in that. In the brine disposal in the coastal cities, they tend

to have an easier concern with that. In the inland cities, we find

that to be a much more difficult environmental concern to address.

We—in the case of the major metropolitan areas in Phoenix, they

would literally be generating tons of waste products, solid waste

product, from desalination projects. We are a little smaller than

them, so we don’t generate quite that much. But we still do it, generate it.

The Tularosa desalination facility we would strongly encourage.

One of the prime functions of that is to look for ways to use the

waste product from desalination in an economical manner and,

therefore, reduce the overall cost of disposal and protect the environment.

We strongly support the continued funding for research activities.

I will be happy to answer any additional questions you may

have. Thank you for this opportunity.

Mr. RADANOVICH. Thank you very much, Mr. McCourt.

[The prepared statement of Mr. McCourt follows:]

Statement of Pat McCourt, City Manager, City of Alamogordo

Honorable Members of Congress, I appreciate the opportunity to address the Subcommittee on Water and Power regarding this important issue of desalination research and water resource management. As you know, this topic is highly relevant

in the southwest. I am Pat McCourt, City Manager in Alamogordo, New Mexico, a

city of approximately 37,000 citizens. Cultivating reliable and long-term water availability has been one of my most important and challenging tasks since I arrived in

Alamogordo.

In the late 1990s, The City of Alamogordo recognized the need for a new longterm, reliable, and cost efficient water source for current and future residents. Our

region has a dwindling supply of readily-potable water for a growing population.

This problem is exacerbated by a severe, prolonged drought. We have sought many

56

avenues to protect our most elusive resource. We have taken two approaches for addressing the challenge of providing an adequate water supply. The first step has

been to conserve our existing supply, and the second step was to seek a new longterm and dependable water source.

To conserve water, the City of Alamogordo has undertaken proactive, innovative, costly, and some difficult techniques. We have covered and lined all of our potable

water reservoirs and treated waste-water reservoirs to prevent leakage and evaporation. To our knowledge, we are the only community in New Mexico and one of

very few nationally to have completed such a task. The cost to our City was almost

$2,000,000. The combined effect of this program has been a loss prevention of up

to 1.44 million gallons a day during the summer months, and up to 600 acre-feet

per year. The City has instituted an ongoing repair and replacement program that

is designed to keep the delivery system in a good state of repair. This is essential

to minimizing unnecessary losses from the system and to assuring that the maximum amount of water is delivered to the users. The City has adopted a very extensive reclaimed water program to reuse available water and maintain a quality of

life in the community beyond bare subsistence. The City has routed reclaimed water

to all major city green space, the high school athletic fields, one junior high athletic

field, city ball fields, two cemeteries, the landscaping on city buildings, and the zoo.

Additionally, the City requires the construction industry to use reclaimed water for

construction purposes (dust control and settlement). Reclaimed water is sold to contractors. They must sign up for a meter with the Utility Billing Department. The

City uses reclaimed water in the Public Works yard for cleaning of equipment and

for any City repair work on streets. The net result has been to shift from potable

water to reclaimed water—approximately 499 million gallons of reclaimed water

were used in 2004. Recent updates to the reclaimed water system include the addition of a one million gallon storage tank. This will increase our storage capacities

to 2.5 million gallons. This extensive reclaimed system has been highlighted in a

water conservation documentary regarding the drought situation in New Mexico.

The City has spent over $4 million constructing 16.2 miles of pipeline, two booster

stations, and storage for this reclaimed system. In 2004, the Department of Public Safety/ Fire Services implemented innovative methods to conduct required equipment testing. They built a pump test facility and

installed an in-ground tank to re-circulate fire truck testing water. A modified surplus tanker is used for hydrant flushing. Water is captured by the tanker, released

into the sewer system, and used in our reclaimed water program. The Department

contracted a consultant to conduct a computer analysis of hydrant flow capabilities

throughout the City, which provided an accurate gallons-per-minute measurement

of each hydrant’s capacity. These testing methods save tens of thousands of gallons

per year. The City Commission has adopted a Water Conservation and Rationing Ordinance, which has been updated several times, to establish community values for appropriate uses of water and to allocate the available resources when they are in

short supply. The City uses a tier rate structure, reviewed yearly, to encourage the

prudent use of water by each customer. Our average daily use has declined steadily,

and reached a low measure of 4.82 million gallons per day (MGD) in 2003. This

amount is down from as much as 7.73 MGD in 1992. The City has provided education and incentives to assist citizens in reducing usage of water while maintaining

a reasonable lifestyle. We use a broad-based program that incorporates the customer’s freedom of choice, economics, and good stewardship of the water resource

to provide a high quality water delivery system in Alamogordo. Our water conservation success has gained Alamogordo national attention from entities such as the

National Municipal League and the Ash Institute for Democratic Governance and

Innovation.

Unfortunately, water conservation alone is not enough to ensure a future supply

for even our current residents, or to provide the water necessary for the continued

growth of our community. During periods of low storage, we have had to enact

emergency stages of rationing. In our approach towards securing a new, long-term,

reliable potable water source, several options were researched in great detail. Consulting engineers looked at current and future feasible sources for the City. Current

water sources include Bonito Lake, canyon flows, and well fields. In March 2003,

at the time of the development of the 40-Year Water Plan, our water rights totaled

to a consistent, firm supply of 4,500 acre-feet/ year, but we were using over 6,000

acre-feet/ year. Research, and the resulting 40-Year Water Plan, provided suggestions for making the current supply last as long as possible. These suggestions were

agreed to and accomplished; such as expansion of the reclaimed water system and

restoring two dilapidated wells in a well field southwest of the community. The

following alternatives for a future supply were investigated and considered not

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feasible: a Sacramento River pipeline, flood control recharge, fresh ground water

south of Alamogordo, Salt Basin water pipeline, Three Rivers water pipeline, and

agricultural water conversion. After considering all available alternatives, the study concluded that desalination of brackish water was the most feasible way to produce a quality and quantity of

‘‘wet’’ water to cover future demands. The Tularosa Basin sits atop a vast aquifer

of brackish water. The City is also involved in an associated national desalination

project. The Tularosa Basin Desalination Research Facility is a joint project managed by the U.S. Bureau of Reclamation. A Naval Research Unit is currently conducting the research at the facility. The City of Alamogordo has provided the land

for the facility. This is a research facility designed to look at the growing shortage

of potable water at inland sites. Desalination research which has been conducted in

the past has focused on the techniques needed to operate desalination facilities on

ocean front areas. Inland sites face unique problems in operation that are not faced

by ocean-site facilities. These problems include how to dispose of the brine waste

product in an environmentally acceptable manner. Ideally, solutions will be developed to use the brine waste product in not only an environmentally acceptable manner but also in an economically advantageous manner. The City of Alamogordo will

integrate the results of this facility’s studies into our desalination project. The City of Alamogordo’s plan is to utilize desalination to provide potable water to residents in Alamogordo and the surrounding area. This method will allow other

potential users, such as Holloman Air Force Base, the Villages of Tularosa and possibly La Luz, to utilize the expanded water supply. Alamogordo is currently in a

legal process to obtain water rights necessary for the project at the most appropriate

location, north of Tularosa. Alamogordo is also undergoing a NEPA study to determine if there will be any significant impact to the environment and if so, how to

best avoid potential impacts. Mineral by-product disposal management is just one

of the issues that this in-depth environmental study is considering. Research has brought down the cost of desalination by providing standardized equipment. There are several methods of desalination, all of which were considered

during our feasibility phase. Two such methods are ion exchange and reverse osmosis membrane filtering. The City of Alamogordo has chosen to use a membrane to

treat brackish water because it is the most cost effective for our use, as we are utilizing gravity pressure to save on electricity costs. In 2001, during our water plan

development and the desalination feasibility study, it was estimated that the costs

associated with the desalination method would be approximately $34 million to construct the plant and delivery system, and $0.65 per 1000 gallons in operating and

maintenance costs. The May 2005 estimate is $0.90 per 1000 gallons. This increase

is due mainly to power and chemical costs, which have risen since the 2001 estimate. Our production, or operating and maintenance expenses, will also vary depending upon the method chosen for disposal of concentrate. These figures will be

above and beyond our current system’s delivery costs. Currently, the cost to deliver

water to a residential customer averages about $2.93 per 1000 gallons.

Alamogordo submits our rates to the State of New Mexico every year by survey

for a community comparison. The State compares communities by looking at a consumption rate of 6,000 gallons per month. We are right in the middle of the State’s

average range, which for 2003 was between $17 and $20 billed for 6,000 gallons consumed. Our current water rates for 6,000 gallons run $18.05. Desalination will raise

customer rates, and the capital costs for completing the project are still being acquired as each phase is initiated. However, research and a careful review of our

available resources makes us confident in the decision that desalination is the only

method which can provide the quality and quantity of water that Alamogordo will

need in the very near future.

The permitting process in New Mexico is a lengthy and sometimes difficult process. The State of New Mexico along with 18 other western states have water laws

based upon the doctrine of ‘‘prior appropriation’’ with beneficial use being the basis,

the measure, and the limit of the right to use water. The water in New Mexico does

not belong to the surface owners, but to the people of the State of New Mexico. To

appropriate these waters, an application must be filed that states the intended

points of diversion, place, and purpose of use. This application must be advertised,

per statute, and is subject to protest. If no protests are filed the application is reviewed by the New Mexico State Engineer’s Office Water Rights Division to assure

that there is water available for appropriation that the appropriation will not impair

existing rights, and that granting of the application will not be contrary to conservation or public welfare in the State. If the application is protested, as was the case

for the City of Alamogordo, the application goes to an administrative hearing process where the Protestants are provided an opportunity to present evidence that the

application should be denied based upon the aforementioned criteria. The Water

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Rights Division is also a party and presents their evidence. The applicant is faced

with the burden of proof and presents its case in favor of the application. This process involves hydrologic analysis, engineering assumptions, supply and demand analysis, and the legal presentation of those tasks and results. All evidence is presented

to a hearing officer representing the State Engineer. After weighing the evidence,

a determination on the application is made. Based upon the outcome of the hearing

process, the State Engineer either approves the application to appropriate water

and issues permits to drill at pre-described locations and depths, or he denies the

application. Alamogordo’s application was approved at less than the amount requested, and this allocation has been appealed to the judicial system. We are still

in a legal battle to be able to utilize the rights approved by the Office of the State

Engineer in 2004. What Congress can do to further bolster our efforts is to recognize the urgent need for alternative, non-traditional water supplies, to continue funding support through

sources such as the Environmental Protection Agency, the Corps of Engineers, and

the Department of Interior—Bureau of Reclamation, and to assist entities with identification of potential sources by supporting research and development. Alamogordo

truly appreciates the funding and technical assistance we have received on this

project. We have utilized Federal, State, and local dollars to come this far. We have

completed a pilot project, a feasibility study, infrastructure improvements, planning

stages, and are in the middle of our NEPA study and water rights allocation process. I look forward to the opportunity of updating you with the good news that we

have begun construction within the next two years. Thank you again distinguished

Members of Congress for your interest in this important issue of affordable, clean

water, and for the opportunity to share my community’s story with you.

Mr. RADANOVICH. Mr. Max, welcome to the Subcommittee; and

you may begin, as well.

STATEMENT OF MICHAEL D. MAX, CEO, MARINE

DESALINATION SYSTEMS, L.L.C., ST. PETERSBURG, FLORIDA

Mr. MAX. Thank you, Mr. Chairman. Thank you for this oppor- tunity to testify. I request that my written statement be included in the record.

In your letter of invitation to me to present testimony on the issue of desalination, you noted that ensuring a continual supply

of affordable, clean water is vital, and the process of desalination

is one direction policymakers can pursue. I strongly agree with the

identification of clean water supply as a national issue and with

desalination as being a principal solution to the emerging problem. There is a national as well as an international shortage of water

now, and the problem is getting worse daily. The problem is

national because States share water resources. In fact, the water

problem is international because we share water with our continental neighbors.

The combination of increasing demands and degrading natural

fresh water supplies is moving us toward the tipping point where,

without new sources of clean, fresh water, severe water restrictions

and steeply elevating water costs will become inevitable.

New fresh water sources are required. More efficient water distribution of the national water might be done by building a

national water grid but at a huge expense; and, even then, the natural water supplies would not be sufficient, even with conservation.

The only long-term solution to new water sources is large-scale desalination of seawater.

Provision of water from the sea makes sense, because over 70

percent of our population lives within 100 miles of the sea. The

fresh water produced from the sea could be delivered at relatively

low transport costs. This would reduce the demand on water

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resources further inland, which now have to share water with the

thirsty and more heavily populated coastal areas.

I talk about seawater desalination from the viewpoint of a scientist who felt that the impending worldwide water crisis was important enough to try to make a difference by developing a promising new technology. I left my post at the Naval Research Laboratory and established a small company. My intention is to try and

perfect a chemical engineering method of seawater desalination

that will be large-scale, inexpensive, and more environmentally

friendly than any other technology.

I have over 250 scientific publications. My company, Marine Desalination Systems, has initiated and carried out sustained research and development of industrial crystallization in the field of

chemical engineering, and we presently have over 12 patents. We

have identified two different approaches and are pushing toward

development of practical industrial processes. We have designed,

fabricated and carried out experiments in unique apparatus; and

we believe that we are in the last stages of perfecting a new desalination technology.

The water crisis in the United States presents us with two distinct problems: first, desalination needs to be encouraged to meet

existing and immediately looming water shortfalls; and, second, research needs to be carried out that has the possibility of dramatically lowering the cost of seawater desalination.

The United States needs to initiate a two-pronged attack on the

problem of water shortage. Immediately, it is necessary to encourage existing desalination production. This can be achieved by providing incentive payments to producers of any desalination technology that would have the effect of reducing the cost of energy

consumed for desalination. Incentivization of the cost of energy

should be regarded as a temporary measure, required only to

bridge the transition to more efficient desalination. In other words,

the incentivization should be fixed on the energy component of desalination and not on the cost of desalinated water as a whole.

The overall aim, however, should be to develop new desalination

technologies that will achieve sufficient improvement in energy cost

of desalination so that the energy incentive payments no longer become necessary and in as short a time as possible.

Investing in research will broaden the technological base in a

way that mitigating current production costs cannot. The promotion of innovative research into new and more efficient technologies should be embedded in the bill.

Innovative research is required, rather than incremental improvements to existing technology that only constitutes improvement of mature technologies. That, I am afraid, constitutes the majority of present desalination funding. Only increased-risk research

and development can produce the great result of a downward stepfunction in the energy cost of desalination and to a new fresh water

provision paradigm for all of us.

Currently, seawater desalination is targeted at what I would call

make-up water. That is, desalinated water now bridges the gap between the amount of water that can be produced between existing

fresh water sources and actual demand. Our intention should be to

carry out seawater desalination at costs that make the new

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methods of seawater desalination the new major supply of fresh

water. We need rivers from the sea.

In closing, I would like to add that government sponsorship of

new desalination technologies and combinations of new and conventional technologies is the one critical factor that may result in the

establishment of a new seawater desalination paradigm that has

the potential to radically alter the present situation of an intensifying shortage of water situation.

I look forward to answering questions.

Mr. RADANOVICH. Thank you very much, Mr. Max.

[The prepared statement of Mr. Max follows:]

Statement of Michael D. Max, Chief Executive Officer,

Marine Desalination Systems, L.L.C.

Mr. Chairman, in your letter of invitation to me to present testimony on desalination, you noted that, ‘‘Ensuring a continual supply of affordable clean water is vital,

and the process of desalination is one direction policy makers can pursue’’. I agree

strongly with the identification of clean water supply as a national issue and with

desalination as being a principal solution to the emerging problem. The situation

in the United States is a reflection of an impending world water crisis, as the combination of increasing demands and degrading natural fresh water supplies move us

toward the tipping point where without new sources of fresh water, severe water

restrictions and steeply elevating water costs will become inevitable. The impending

water crisis is a national issue now because States share water resources. When

large scale desalination becomes a reality, more than one state is likely to use the

water produced by any coastal state. This sharing of resources will continue to be

important as some current net water importing states may assume the role of water

exporters. Thus, water supply is and will continue to be a national issue.

My background is extensive in a number of areas of scientific investigation and

in the development and execution of basic and applied research. I talk about desalination not from the viewpoint of an established technology or company but from the

viewpoint of a scientist who felt that the impending worldwide water crisis was important enough to try to make a difference by developing a promising new desalination technology. So, I left my post at the Naval Research Laboratory in 1999 and

established a small research and development company with the help of a small

group of visionary investors. My intention was to try and develop a chemical engineering method using industrial crystallization practices that would result in a new

method for the large scale, inexpensive, more environmentally friendly, desalination

of seawater. In this effort, I have become acquainted with the broad range of desalination and water treatment issues, with researchers improving existing technologies

and with the development of new technologies.

I have over 250 scientific publications, with many in the field of gas hydrate,

which is the industrial mineral we have identified to be used in the chemical engineering/industrial crystallization process that we believe has an excellent chance to

become a new method for large scale, inexpensive seawater desalination. I am involved in the field of gas hydrate in a number of areas including the recovery of

natural gas from oceanic and permafrost hydrate, industrial applications of gas hydrates including two technologies for desalination, and the planetary science aspects

of gas hydrate. My edited introductory book on gas hydrate is being used as a course

textbook by universities not just in the United States but also across the world. An

industry-standard book on the exploration and extraction aspects of hydrate natural

gas is currently about to go into press for publication in the autumn. My company

holds over 10 patents in the field of chemical engineering for desalination and has

more applications under examination and in preparation to make applications.

The one thing that is no longer a matter of debate is that a national shortage

of fresh water exists in the United States. To some extent, the problem is parallel

to any couple, which has not saved or invested enough to allow them leisure in their

retirement. Their problem is not understanding how to manage their money better,

for no matter how they manage it, there will not be enough to confer what they

want. Their problem is that they do not have enough money. Similarly, the world’s

water problem can be mitigated somewhat by conservation and better water use but

the widespread impending water shortage can only be fully resolved by finding new

and inherently artificial sources of fresh water. The only available source of large

quantities of fresh water potentially lies in the world’s oceans. But this fresh water

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must be removed from the seawater by a process called desalination. We must find

both better and new ways to produce new fresh water. Currently, desalination is targeted, mainly because of its high cost, at what could be called, ‘‘make-up water’’. That is, desalinated water is now intended to bridge the

gap between the amount of water that can be produced from existing natural fresh

water sources and the actual demand. Our intention should be to be able to carry

out seawater desalination at costs that make it competitive with natural fresh water

sources. When this can be achieved, some, if not most of the water that is currently

being extracted from natural sources, can be allowed to remain in the natural cycle.

Our aim should be not only to produce adequate volumes of fresh water from seawater, but also to restore the environment as a natural outcome of achieving the

technology required for this new paradigm. There is a national shortage of water now and the problem is intensifying. In ad- dition, where there is overuse of natural water sources this leads to environmental

damage. It is therefore prudent to initiate a two-pronged attack on the problem of

water shortage through desalination. Immediately, it is necessary to encourage existing desalination production. This can be achieved by providing incentive payments to producers (of any desalination technology) that would have the effect of

reducing the cost of energy consumed for desalination. The aim should be, however,

that new technology developments should achieve sufficient improvement in energy

cost of desalination so that the new or sufficiently improved technology can be implemented without the energy incentive payments required for the existing technology. In other words, the incentivization should be fixed on the energy component

of desalination and not on the cost of the desalinated water as a whole.

incentivization of the energy cost should be regarded as a temporary measure required only to bridge the transition to more efficient desalination. While making incentive payments to lower the energy costs of conventional desalination, it is mandatory to also support research that would lead to enabling new technologies. Investing in research will broaden the technological base in a way that mitigating current production costs cannot. The promotion of innovation and research into new

and more efficient technologies should be embedded into the Bill. In order to make real progress on developing new and more efficient desalination technologies, research and development into new desalination technologies should be

undertaken as a matter of urgency. Very little innovative research in new technologies is presently being funded. Commercial companies are making insufficient

investment to move any new technologies. American industry has enough other

issues that developing enabling new technologies is low on their priority list. Increasing research funding for breakthrough and new technologies has the potential

to accelerate a solution. Unfortunately, much of the research and development is

being spent on ‘‘safe’’ development, which involves incremental improvements to existing technology, which is actually process optimization, not research. This is happening because of the natural, but unintended operation of research funding where

only projects that achieve well-designated goals are regarded as fully successful.

Funders have become very conservative because the achievement of the goals identified in proposals and statements of work are the basis of ‘‘grading’’ of the program

managers, even though the actual achievements may be very limited and the improvement small. Innovative research, where the fully identified solution is inherently unknown and where the actual framing of the research path itself depends

on results produced during the course of the research, is almost unknown today.

Therefore, where research is supported as the second prong of the attack on this

water problem, it must be vectored toward speculative research and development or

it will simply be consumed while producing no great result. Only increased-risk research and development can produce the great result of a downward step-function

in the energy cost of desalination and the new fresh water provision paradigm.

Each technology for desalination has its own particular inherent costs and benefits, inhibiting factors and opportunities. Because of this, the different technologies

are usually compared through their cost structure. Of these, energy is the primary

cost element, although construction costs can vary considerably for different technologies. Desalination technologies fall into two different categories; conventional

and unconventional. Conventional technologies for seawater desalination today consist of thermal and membrane processes. These technologies are termed ‘‘conventional’’ because they are regarded as working, industrially practiced technologies

that have low risk. With respect to the difficulties commonly encountered in some

of these conventional technology desalination installations, for instance the Tampa

reverse osmosis facility, substantial risk factors remain even in what is considered

conventional technology by industrial proponents. It must be pointed out that sequentially newer conventional technologies only become recognized as conventional

after they are implemented in a number of commercial installations. The only way

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for a potential new desalination technology to emerge is for adequate research to

be undertaken. There is no methodology for evaluating the likelihood of success of

potential desalination technologies other than doing enough applied research and

development to establish operating parameters and cost factors. Of the conventional desalination techniques, thermal processes or distillation, for

instance, is characteristically the most energy expensive because of the energy cost

of boiling water. Modern multi-stage, multi-flash distillation technology is much

more efficient than simple boiling, but it still is generally the most expensive method. Thermal methods are the oldest of the desalination technologies and their development has been carried the farthest. There is less potential for development in this

technology than any other. Membrane filtration desalination methods, principally

reverse osmosis, has its main energy requirement in pumping the source water to

high pressures necessary to force it through the membrane filters. Improvements in

membranes and membrane technology, and in energy recovery techniques, have

vastly improved performance over the last ten or 15 years, but it is still relatively

energy expensive. Unless there is some breakthrough in membrane technology that

will vastly reduce the energy cost, there is again potentially very little gain to be

expected, no matter how much R&D funding is applied. Development of conventional desalination technologies concerns the incremental improvement of existing

technologies. As a technology matures, increasingly large investment in product improvement tends to increase performance in only smaller and smaller increments.

Both of these conventional methods extract all or most of the water and produce

considerable volumes of environmentally potentially harmful brine that has to be

safely collected, transported and disposed of in an environmentally acceptable manner. This produced brine must be mixed with seawater.

Because of the limited scope for reaching the new desalination paradigm with fur- ther development of existing technology, focused research is required on new methods that have potential for seawater desalination. These methods are mainly in the

fields of electrical and chemical engineering applications. A common attribute of

electrical methods is that while they may work efficiently with brackish water, the

currently practiced methods do not work efficiently with full-salinity seawater. Current developments in capacitive deionization, however, show promise for being able

to desalinate seawater. Desalination through chemical engineering, where the formation of a crystalline substance incorporating water and rejecting salt from the

crystallized material, is an attractive option. Principal among the chemical engineering methods for seawater desalination is the use of gas hydrate in an industrial crystallization process. Gas hydrate is a solid

crystalline material formed from a cage of water molecules hosting hydrate forming

gas molecules within voids in the cages; the entire structure being stabilized by

weak electrical bonding forces. It is a special type of clathrate, or inclusion compound. Common hydrate forming gases on Earth are the hydrocarbon gases (methane, ethane, propane, and butane), carbon dioxide, sulfur di- and trioxide, amongst

others. At higher pressures and/or colder temperatures, virtually all gases will form

hydrates. Although gas hydrate has often been regarded as a type of freeze desalination because of the apparent similarity of gas hydrate to water-ice, the differences

between them are far more important. Water-ice (freeze desalination, which has limited scope for seawater desalination as part of an industrial process) is essentially

isobaric and the control of temperature alone is available for freezing and melting

the water. In contrast, the stability of gas hydrate can be controlled by varying both

temperature and pressure. When gas hydrate forms, it is known for strongly rejecting dissolved solids (salts). Gas hydrate occurs commonly in nature, although not

at pressure-temperature conditions where it can be easily observed. Natural gas hydrate, which is only now being recognized as potentially one of the major energy

reserves of the planet, occurs in both oceanic marine sediments along continental

margins and in permafrost regions. Understanding how natural gas hydrate forms

has led to research to use gas hydrate as an industrial crystallization product for

large scale, inexpensive desalination.

My company, MDS has initiated and carried out sustained research and development of gas hydrate industrial crystallization. MDS is now recognized as one of the

leading gas hydrate research laboratories in the world, and the only one regularly

growing large volumes of gas hydrate in short periods of time. We have designed,

engineered, and fabricated unique experimental apparatus and are currently in

what we believe are the last stages of perfecting the hydrate desalination method

as an industrial technology. We have identified two different sub-technologies for

hydrate formation that each have particular attributes for controlled hydrate formation and are pushing toward development of practical industrial processes. The

main one of these is intended to produce very large volumes of fresh water very

inexpensively, with very low energy costs.

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The water matrix or buoyant hydrate separation process is intended to operate

in the sea or in shafts nearby the sea using cold, relatively pure deep seawater. In

this process, the hydrate is formed at depth where pressure is provided by the

weight of water using natural gas that forms positively buoyant hydrate. No water

is pumped to pressure and the cost for injecting the hydrate forming material can

be very low where certain common supply conditions can be utilized. Once the hydrate is formed, under counter-flow conditions that hold the crystallizing hydrate in

the deep hydrate formation region for a desired period of time, the hydrate is allowed to float upward under its own buoyancy. As it rises in the column or shaft,

it passes with insignificant mixing from a region of seawater in the lower part of

the shaft to a region of fresh water in the upper part of the shaft. Within this fresh

water region, it naturally is subject to decreasing pressure as it rises and becomes

unstable at a certain pressure and begins to dissociate. Dissociation is a process

similar to melting where the structure at the margin of solid hydrate breaks down

and releases the constituent gas and water. The gas and water naturally separate.

The gas is drawn off for reuse or use elsewhere, such as in the generation of power,

and the fresh water is available to be drawn off. Once the startup period for an apparatus is complete, the amount of water drawn off is directly related to the formation of hydrate. It is intended that very large volumes of hydrate be crystallized and

that very large production of water take place. Because no artificial pressurization

of water or thermal energy costs of the water are required, it is possible to economically remove only a small portion of fresh water from the whole of the seawater,

which results in an environmentally friendly residual cooling water (the process of

hydrate formation is exothermic and the water is naturally heated) that will require

no mixing with seawater to make it tolerable for marine organisms.

In the course of the MDS research, considerable spin-off technology has emerged

in the field of being able to carry out desalination using negatively buoyant gas hydrate and where the source water is too warm for hydrate to form spontaneously

as it will in the colder water but whose bulk does not have to be refrigerated, in

artificially pressurized apparatus, dewatering industrial process water effluent, such

as the settling ponds of phosphate fertilizer factories, removing water from complex

fluids such as water and ethylene glycol mixes, separating different gases, such as

SOx from exhaust or natural gas, food processing, and the removal of water vapor

from gas.

I regard it as likely that in the new desalination paradigm, different technologies

can complement rather than replace existing technologies. This is known as a treatment train, the aim of which is to improve overall efficiency and performance. One

of the main negative features of new technology development is that existing technology adherents inherently regard the development of new technologies as a threat

their desalination technology. It is more likely, however, that bringing hydrate industrial crystallization to the desalination marketplace will actually stimulate the

greater use of existing desalination technology, principally membranes or some

other desalination methods suitable for brackish water. Future large scale, inexpensive desalination may involve the use of more than one technology, each removing

salt within the operating conditions in which each offers best performance. For instance, thermodynamic and process modeling of a chemical engineering process for

industrial crystallization using gas hydrate indicates that the process is most efficient at rendering salt from raw seawater of almost any oceanic salinity down to

the level of lightly brackish water. Operated less efficiently (with respect to rate of

water removal as a function of product salinity), the method may be capable of producing water of potable dissolved solids standards. Even at this level, however, the

product water almost certainly will need polishing. When a conventional desalination technology such as reverse osmosis can operate within its most efficient energy/

cost region to both polish and produce final product water as part of a multi-system

approach, this should remove the need for incentive payments for energy.

MDS has identified Southern California as the first place that we would like to

establish a major desalination facility. The deep, cold water necessary for the water

matrix hydrate process to operate efficiently is available immediately off the narrow

continental shelves of California, particularly southern California. There is no doubt

that a market for competitively priced, new sources of fresh water exists. We are

presently carrying out a site survey for an artificial island on the Coronado Bank

off San Diego, which imports over 95% of its fresh water. And there is no doubt that

if our production targets can be achieved that substantial reduction in water extraction for southern California may be achieved, with a consequent beneficial effect for

the environment and for the water availability situation in the upstream basin of

the Colorado River. Our intention is to develop a desalination installation based on

our new technology that will not only provide for all the potable water for San Diego

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but to also allow San Diego to export desalinated water inland. Other sites for this

MDS technology are also possible to the north along the coast.

In closing, I would like to add that government sponsorship of new desalination

technologies and combinations of new or new and conventional technologies, is the

one critical factor that may result in the establishment of a seawater desalination

paradigm that has the potential to radically alter the present situation of an existing, and intensifying shortage of fresh water.

Mr. RADANOVICH. I have a question for probably both Mr. Sabol

and Mr. Wattier. Both of you are doing the research on bringing

down the costs and efficient production of water from desalination.

One of you is a public agency, the other is private business, and

we are talking about a bill that is talking about public financing

of this type of technology. I am assuming, Mr. Wattier, that Long

Beach would be the beneficiary of something like a subsidy where

perhaps GE would not be. Is that the case?

Mr. SABOL. Well, I think, in some ways, GE and other companies

that manufacture equipment and provide services into this market

could be a short-term beneficiary of a energy subsidy as proposed

in the bill. The method of GE’s benefit would be that it would spur

the market to buy more systems. We would, therefore, sell more

equipment into the marketplace.

Mr. RADANOVICH. But as far as doing the research, you would not

be applying for a grant to continue the research, would you?

Mr. SABOL. GE invests its own money in research. We oftentimes

partner with the government. Several of the previous panel members have worked with GE in the past.

We are working currently on a desalination solution that combines wind power with membrane technology to provide alternative

energy sources of desalinating water. So we do frequently use government funding and combine it with our own funding to accelerate

the pace of development.

Mr. RADANOVICH. Is there a difference between the type of research you would do, Mr. Sabol, as opposed to what kind you would

do, Mr. Wattier? Does public financing have a more appropriate

role in one place or the other, or do you just view it as research

is good, no matter what.

Mr. WATTIER. I would agree with your latter statement, that research is good. And certainly the private sector can move the technology a long ways forward. Certainly the connection with wind energy and membranes is a very interesting one that Mr. Sabol has

mentioned. I think that is a very interesting area of opportunity.

Mr. RADANOVICH. Can you, either one of you, or anybody else

want to tell me about the future efficiencies that are going to be

gained by further research? Is it just by perfecting the membrane?

You know, just more work on the membrane? Or is it in new types

of technology, that they are still kind of in its infancy?

Mr. WATTIER. I think they are both. What we have developed in

Long Beach is a process application. We have not developed any

new membranes. We are using existing off-the-shelf membranes

from several manufacturers and using them in a different method.

So we haven’t developed any new membranes.

But the cost of membranes continues to come down. You may

have been aware that the Chinese recently started manufacturing

membranes. So there will be Chinese membranes on the market.

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There are Korean membranes on the market, which we have tested, which work very well. So the private sector, both in the U.S.

And worldwide, is continually improving the efficiency of the membranes and the cost of the membranes.

So there are really two things going on. The private sector is

really spurring the development of more efficient, cost-effective

membranes; and then what we are doing in Long Beach is using

them in a different method.

Mr. RADANOVICH. And economics is bringing the price down.

Mr. WATTIER. Yes.

Mr. SABOL. At GE, we are working on a variety of technologies.

I mentioned some in my earlier statement. It is focused primarily

around membrane technology developments, allowing more salt removal with less energy. There is a lot of advancement that can be

made there through materials changes and the fabrication techniques around membranes. We are also looking at making much

larger membranes, much larger systems that enable more efficiency.

We are also focused very heavily, because of GE’s interest in the

energy markets as well, on the combination of energy and water.

The optimization of that system provides a lot of benefit as well.

So that is another area of focus for us.

Mr. MCCORT. Mr. Chairman, relative to research, I think membrane technology is the area that there has been the major increases in cost reduction in recent years, and I think that is going

to continue. That is an incremental step, and we will continue to

work on research in that area. It is not the type of research that

my unit of government would perform. We would look for that to

occur either in the private sector or be funded at the Federal level.

I think we also have to recognize that the research needs to

occur in breakthrough technology. Unfortunately, these are the

areas with the highest failure rate, new innovative ideas, and the—

but they have the highest potential, also, to cause us to leap forward in technology.

I think there are two different types of research that goes on.

Mr. RADANOVICH. Very good. Thank you.

Mr. McCourt, you had mentioned studying an environmentally

acceptable manner to dispose of brine waste. Can you give me an

idea of what those possible economic solutions might be?

Mr. MCCOURT. Mr. Chairman, the normal methods for inland

brine disposal at this time involve two basic methods. One is to do

deep well injection. That would be where you actually drilled deep

wells and injected the now concentrated brine water into a layer

that is even more concentrated, because it is so far down into the

ground, hopefully improve it. The theory being that at some future

date when we now tap into that, technology will have advanced

and we will recover that water and reuse it again.

Mr. RADANOVICH. Be able to use it?

Mr. MCCOURT. Yes. The second method involves basically an

evaporation-type method, where the waste product is put in large

evaporative lined ponds. The water then evaporates off. The waste

product is then captured, and there is methods used to—well, we

are looking for methods to try and see how we can use that waste

product in an economically feasible way.

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Some of the research going on now, though, is to take that very

brine water and see if there aren’t other agricultural crops that can

be grown with the brine water, for example, and use it economically in that manner.

Mr. RADANOVICH. Thank you very much.

Mr. McCourt, you mentioned about the cost of energy and how

it relates to the affordability of this desalinized water. Is there a

threshold that you would go through to the point where, if energy

costs increased so much, that desalination costs go up too high to

be reasonable?

Mr. MCCOURT. Mr. Chairman, I am sure there is. The effect that

would have where we live—we live in the desert. We don’t have

any alternate sources. So what will happen is, as the cost of water,

in this case, desalination water that we are going to use to augment our other supply sources, continues to increase, it will just

basically squash any economic growth that may be able to occur in

our community.

Mr. RADANOVICH. Thank you. Thank you, gentlemen.

Grace.

Mrs. NAPOLITANO. Thank you, Mr. Chairman.

Mr. Max, I was very interested in listening to your testimony in

regard to the different types of technology that you have evolved

with or have been working with. Does the desal process that you

are applying use membranes?

Mr. MAX. No, except in that we use them to infuse a gas into the

seawater that we need for the process to work. But that is not the

same. And those membranes are not—it is gas moving through

membranes into the water, so there is no——

Mrs. NAPOLITANO. Since you advocate this increased risk research, you make a distinction between research and process optimization. The desal research is not doing innovative speculating, so

you want more innovative. How can we better direct desal research

toward that, and does your proposal also include addressing contaminated and brackish water or just desal?

Mr. MAX. We are primarily focused on desalination, but we also

are looking at water treatment in general. But, as Mr. McCourt

said, the greater the risk, the greater the reward. This is something where, you know, if you want to play very safe you have no

chance of making a breakthrough, even in membrane research. You

know, in order to get new membranes, you have to try and do new

things; and it is not always possible to predict exactly what the

outcome of your investment is. Sometimes it is going to work;

sometimes it is not going to work. It is a matter of risk taking.

But we are in a very—what I would regard as a very desperate

situation, and a little bit of extra risk for a relatively small amount

of money is pretty good.

$3 billion a year on research has brought us one percentage improvement in the price of water just from one company. $3 billion,

that is a lot of money. I don’t think there has been that much improvement in the last year for the $3 billion, because it is focused

on conventional technology.

Mrs. NAPOLITANO. That then brings another question to my

mind, is that we have found sources of water, but they are not—

we are not able to use them. In other words, we have contaminated

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water aquifers; we have brackish water in others. The cost of water

has, at least when I was serving on sanitation, gone from 200 an

acre foot now to I am hearing 600 and 800 in San Diego being proposed. Where do you see this ending? Considering what we are

looking at now in new technology, do you think the water cost per

acre foot will be lower, or are we looking at an escalation because

of the cost? Because—because—because——

Mr. MAX. It is a complicated thing. For instance, the cost of

membranes is going to go up because they are made out of petroleum and gas; and as that cost goes up, the cost of those materials

go up. And I think that it is not just—energy hits everything. It

hits transport, it hits the cost of materials, and it hits the actual

cost of process.

On the cost of process, I think that with reverse osmosis, at the

moment, it is basically the best way we can think of energy cost

for any process, is in kilowatt hours rather than dollars. Because

dollars can be an Enron accounting process sometimes, although I

don’t expect anybody here does that.

But if you go in kilowatts, at the moment, the reverse osmosis

has an energy cost of about 16 kilowatt hours a thousand gallons.

That is going to drop with energy recovery down to around 12, I

think. Some people say they can get it down to 10. Then, at that

point, you are into the second law of thermodynamics, and there

is just not more you can do. That is why you need to go to a different technology.

One of the reasons why reverse osmosis is being thought of as

brackish groundwater is that when you have the lower dissolved—

volume of dissolved solids in the water, it is a much more efficient—a much more energy efficient process. Work on brackish

water reversed osmosis is really not very expensive at all. When

you get into full seawater, then it can become very, very expensive

for a whole lot of different reasons. But our focus in our chemical

engineering process is for full salinity seawater.

Mrs. NAPOLITANO. Thank you, sir.

Mr. McCourt, how can we decide how much Federal support is

appropriate for research and how much funding should go to direct

support of projects?

Mr. MCCOURT. Mr. Chairman, madam, I am glad I don’t have to

make that decision; and I am glad you are up there to do that.

From where I sit, the more the better.

Mrs. NAPOLITANO. Thank you, sir.

Mr. Wattier, how will brine disposal be handled in your desal

plant, and if you would explain what ocean floor plan is.

Mr. WATTIER. Let me clarify. What we are building now in Long

Beach is a large research facility. And a lot of people get confused.

It is not for potable consumption. It is research.

So what we are essentially doing is taking water out of an existing channel, taking it apart, measuring it and putting it back together and putting it where it came from. So there is no brine discharge issue with regard to the 300,000 gallon-per-day project that

is currently under construction.

The project that we have proposed to move forward on next, the

Under Ocean Intake and Brine Discharge Project, which would be

a $5 million research project jointly with the Federal Bureau of

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Reclamation, would be testing two things. It would be testing an

under ocean intake, where you would have a series of perforated

pipes under the ocean floor which would allow the water to percolate down through the sand and then provide some pretreatment

for your membranes. Pretreatment of the membranes as they found

out in Tampa, is a very, very important process. And so that is

how—what we would be testing over the next couple of years.

In addition, we would be testing, running that system backwards, putting the brine out underneath the ocean floor and percolating it up through the ocean floor to eliminate any concerns of

the brine discharge.

Mrs. NAPOLITANO. There is a contaminated area in the Long

Beach area. I think it is Palos Verdes Point. The DDT contamination that EPA has been watching with the sanitation district,

would that have any effect on your project?

Mr. WATTIER. No, I don’t believe so. That is further west, and I

don’t think there is any impact of that on our quality in Long

Beach.

Mrs. NAPOLITANO. But water migrates. You have storms. You

have the ability for some of that to spread.

Mr. WATTIER. Well, obviously, those are things we will be testing

fully during this multi-year research effort. But, again, I don’t expect that to be a problem because of the way the oceans currents

run in southern California.

Mrs. NAPOLITANO. But that is a concern for the whole area.

Mr. WATTIER. Sure. Anybody that needs to fully analyze. And we

have done some of this with our other partners in southern California, the quality of the ocean water, analyzed for all the constituents, including things like DDT.

Mrs. NAPOLITANO. Thank you, sir.

Mr. Rhinerson, in the San Diego desal plant, what is the total

project capital cost and how would it be financed?

Mr. RHINERSON. The 50 MGD plant that we are planning, off the

top of my head, I think is in—around the 200, $250 million range.

It would be financed by the water authority with revenue bonds

and, hopefully, receive some financial support from the Metropolitan Water District that has talked about support and, hopefully,

through H.R. 1071 that is before you today.

As I said, the cost of the water that we are projecting there is

about $800 at the fence. That is before we transport it into our distribution system. We are today paying about $450 an acre foot for

water for Metropolitan. So you can see the cost differential of

desalinated water is almost twice—you know, it is up there.

So in order to stimulate the market for building desalinated

water plants that will actually produce water—and this plant is

projected to produce about 5 percent of San Diego County’s needs.

We can do that because we will then blend that water with the

other less expensive water that we are buying from Metropolitan.

Our water transfer and those things and the overall cost is then

disbursed over the 2,000,000 people customer base that we have.

So, in general, that is the capital cost and the pricing structure

that we envision.

Mrs. NAPOLITANO. Well, there is another question that I would

have, because San Diego gets most of its water from the Met. Was

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the San Diego agreement to receive water transferred from farms

in Imperial Valley seen as somewhat of a threat by MWD? And,

along that, are your plans for the new project a further threat to

the finances of the Met, because it will reduce the water sales to

San Diego?

Mr. RHINERSON. At this point, I find Metropolitan to be very supportive of desalination. They are a member of the U.S. Desalination

Coalition. I think the view of all of us in southern California is

looking at a diversified water portfolio and identifying new supplies

that we will have in the future. Because the Colorado River is a

limited resource, and we know we are in the sixth year of a

drought. Lake Mead is at 50 percent, Lake Powell is way down,

and certainly the State water project is a limited resource.

We in southern California need to identify new water supplies as

we look out 20, 30 years and beyond; and desalination plays an important part of that picture. I think that our relationship with Metropolitan is very positive and we are on the same page in that regard.

In San Diego, our long-range facilities master plan looked at

changing San Diego’s portfolio from about 80 to 90 percent of our

water from Metropolitan and the Colorado River and the State

water project to a more diversified portfolio where seawater desalination by the year 2030 can deliver about 15 percent of San Diego’s

water needs. The ag-to-urban water transfer is another slice of that

pie. That delivers about 20 to 30 percent.

Water conservation is extremely important, and we are very aggressive about that. Water reclamation is very important, and then

certainly the continued supplies from Metropolitan. With that

strategy of identifying new water from desal and diversifying our

water portfolio, we believe that San Diego can have a safe and reliable water future. But desal is very critical, and this bill is very

important to help stimulate the market and encourage agencies

like mine to go forward with actually building a plant that will

produce water on a large scale for our urban population.

Mrs. NAPOLITANO. Thank you, sir.

Last question and I will quit.

Mr. Sabol, your statement mentions possible tax incentives for

the desalination industry. Can you explain how this would work?

Mr. SABOL. There is a variety of potential options. The point of

including it in my written testimony is to say that it is another

form of incentive that could be provided to manufacturers of equipment or builders of desalination facilities to enable them to get

over the hurdle of the incremental cost.

I think it is important to recognize that we don’t have an unlimited supply of water at a dollar a thousand gallons. That is the

issue we are facing. That is why we are all here. We need to bring

to bear conservation strategies, investment technology, tax incentives potentially, subsidies, other things to make a new industry

come to life to provide relief to that strain that we have on our dollar a thousand gallon water supply. So tax incentives could be one

way to do that.

Mrs. NAPOLITANO. Thank you.

And the last statement, Mr. Chair, is that, hopefully not only will

the different industries and the different organizations that are

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interested in providing new technology and working with us, that

they and the Federal agencies that are involved sit at the table and

talk to each other. Many times, we do not. The right hand doesn’t

know what the left hand is doing. Unfortunately, that effects how

we are able to deal with some of the issues that come up before

this Committee; and I have very grave concerns about how we may

be spending money where we shouldn’t be and not spending it

where we should.

With that, thank you, Mr. Chair. Thank you very much.

Mr. RADANOVICH. Thank you, Mrs. Napolitano; and I want to

thank the panel for being here and the valuable information that

you provided on this issue. Thank you very much.

This does conclude our hearing today. The meeting is adjourned.

Thank you.

[Whereupon, at 12:30 p.m., the Subcommittee was adjourned.]

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