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[Senate Hearing 110-1200]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 110-1200

 
                         CLEAN COAL TECHNOLOGY

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, 
                             AND INNOVATION

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 26, 2007

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey      JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas                 JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
   Christine D. Kurth, Republican Staff Director and General Counsel
Kenneth R. Nahigian, Republican Deputy Staff Director and Chief Counsel
                                 ------                                

          SUBCOMMITTEE ON SCIENCE, TECHNOLOGY, AND INNOVATION

JOHN F. KERRY, Massachusetts,        JOHN ENSIGN, Nevada Ranking
    Chairman                         JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         KAY BAILEY HUTCHISON, Texas
    Virginia                         GORDON H. SMITH, Oregon
BYRON L. DORGAN, North Dakota        JOHN E. SUNUNU, New Hampshire
BARBARA BOXER, California            JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri
AMY KLOBUCHAR, Minnesota

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 26, 2007...................................     1
Statement of Senator Boxer.......................................     5
Statement of Senator Dorgan......................................    46
Statement of Senator Kerry.......................................     1
Statement of Senator Stevens.....................................     3
    Prepared statement...........................................     4
Statement of Senator Thune.......................................    50

                               Witnesses

Chaisson, Joseph M., Technical and Research Director, Clean Air 
  Task Force.....................................................     6
    Prepared statement...........................................     8
Denis, Roberto R., Senior Vice President, Sierra Pacific 
  Resources......................................................    13
    Prepared statement...........................................    15
McRae, Gregory J., Hoyt C. Hottel Professor of Chemical 
  Engineering, Department of Chemical Engineering, Massachusetts 
  Institute of Technology........................................    19
    Prepared statement...........................................    20
Rencheck, Michael W., Senior Vice President--Engineering, 
  Projects, and Field Services, American Electric Power..........    24
    Prepared statement...........................................    26
Wilson, John M., Chief Operating Officer, Siemens Environmental 
  Systems and Services...........................................    35
    Prepared statement...........................................    37

                         CLEAN COAL TECHNOLOGY

                              ----------                              

                        THURSDAY, APRIL 26, 2007

                               U.S. Senate,
          Subcommittee on Science, Technology, and 
                                        Innovation,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m. in 
room SR-253, Russell Senate Office Building. Hon. John F. 
Kerry, Chairman of the Subcommittee, presiding.

           OPENING STATEMENT OF HON. JOHN F. KERRY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Kerry. The hearing will come to order. Thank you 
all very much, welcome to our witnesses, thank you, folks, for 
taking time to come in today.
    I know that we have some other colleagues coming, but I 
also have a conflict. The Finance Committee is meeting now, and 
a number of members are caught up between them. We're going to 
just proceed ahead and we'll see who's here.
    Obviously, the subject of climate change and emissions is 
increasing in its importance to the country and to the world as 
the evidence mounts regarding the impact of greenhouse gas 
emissions.
    This is a subject that I've followed in this Committee 
since 1987, or slightly before, when Al Gore and I held the 
first hearings on global climate change. Subsequently we wound 
up going down to Rio for the Earth Summit where the voluntary 
Framework was entered into in 1992.
    So, it's been a journey of 20 years or more, with a lot of 
evidence mounting and a lot of knowledge gained in the interim.
    The science is pretty clear now, when you sit down with 
some of our top scientists from Jim Hansen to Ed Miles or John 
Holdren at Harvard or a bunch of folks. The feedback that we're 
getting from the climate, from Earth itself, is indicating a 
much more rapid, and much more consequential rate of change 
than had been predicted. The predictions are coming true, but 
in greater degree, and greater intensity.
    Senator Stevens, welcome.
    So the question we face is of how to deal with this? The 
scientists are telling us we have a 10-year window within which 
to try to get it right, and that 10-year window has now 
narrowed in the sense that the consensus of those scientists 
was 2 years ago. Two years ago the consensus was that we could 
afford a three-degree centigrade increase in the Earth's 
temperature, before you get to the catastrophic tipping point, 
as they judge it, and that was deemed to be about 550 parts per 
million of greenhouse gases in the atmosphere.
    They have now revised that, based on the rapidity and size 
of the feedback that they're getting. They now deem it to be a 
two-degree centigrade increase that we can tolerate, and a 450 
parts per million level of greenhouse gases in the atmosphere.
    So, we face an enormous challenge, and the question that we 
are all grappling with is how to do this responsibly, minimize 
economic dislocation, maximize economic output, growth, 
productivity, and lead the world, hopefully, in the creation of 
technologies that we can sell to India, to China, less 
developed countries, and others.
    Obviously there's a lot of money that's already beginning 
to chase these technologies. Venture capital is moving in 
significant amounts into green technologies. But, at the same 
time leading industrialists, leading corporate chieftains, are 
telling us that they want the Government to create a certainty 
about the direction we're going, and not to have a patchwork 
of, California doing this, and New England Regional Compact 
doing that, and different states maneuvering. They believe that 
it's important to have a standard, and we need to wrestle with 
that.
    I happen to believe that's true, I just came back from the 
Milken Conference out on the West Coast where this was one of 
the top topics of conversation with a lot of Wall Street folks 
and a lot of business people, all of whom believe that we 
probably need to move in that direction of having a cap and 
trade, some structure, with perhaps auctions, and create value 
and move in that direction.
    The big question within that framework is, what's going to 
be the new mosaic of American energy sources? And to the 
greatest degree, most of us would like to let the marketplace 
decide that. I don't think the Government ought to pick the 
winner or loser in that effort, but I think we should create 
some strong incentives for people to move in certain 
directions.
    Obviously, coal is a big deal to all of us. We have a lot 
of it, it's abundant, it's cheap, we know how to get it, and 
there's every indicator that it's going to be a significant 
part of the mix. But, to meet the challenge, we're going to 
have to find a way to burn it clean. Half of our electricity is 
currently generated from coal. That coal currently produces 
approximately 1.5 billion tons of carbon dioxide annually.
    According to the National Energy Technology Laboratory at 
DOE, those numbers are going to get bigger, and get bigger 
fast.
    Over 150 new coal-fired power plants are proposed for 
construction in our country alone. And China, we are told, is 
going to build one to two per week. Over their lifetime, those 
plants, the new plants that come online, are going to spew an 
additional 30 billion tons of carbon dioxide into the air.
    We have witnesses today who will share with us their 
expertise and their views about what the prospects are as we go 
forward. In response to this challenge, today I am introducing 
the Clean Coal Act of 2007 which will seek to make certain that 
whatever plants we're going to build are going to be built with 
the new state-of-the-art technology that we're going to hear 
about today from our witnesses.
    Recently, one of the world's top climate scientists, Jim 
Hansen, called for an end to building new coal-fired powered 
plants that use pulverized coal, without the new technologies, 
because of what they do with respect to global warming. Jim 
Hansen said, ``Coal is the big amount. Until we have that clean 
coal power plant, we should not be building them, it is as 
clear as a bell.''
    The threat of those challenges, I've talked about a little 
bit, and I don't want to go on about it. Let me just say that 
we look forward to hearing from our 5 witnesses today, Joseph 
Chaisson, the Director of Research and Technology for the Clean 
Air Task Force, based in Boston; Roberto Denis, the Senior Vice 
President for Sierra Pacific Resources, a utility in the 
Pacific Northwest; Dr. Gregory McRae, the Bayer Professor of 
Chemical Engineering at MIT, and one of the authors of the 
recent MIT Coal Study; Michael Rencheck, the Senior Vice 
President for Engineering, Projects, and Field Services at 
American Electric Power; Mr. John Wilson, Chief Operating 
Officer for the Environmental Systems and Services Group at 
Siemens Corporation.
    Before I introduce Senator Stevens and Senator Boxer, let 
me say that I have had a number of conversations in the recent 
weeks with Lou Hay at Florida Power and Light, and with AEP's 
CEO, and AEP is, as we will hear today, building two new plants 
with IGCC technology, in West Virginia and Ohio, and FPL is a 
powerful advocate for the notion that we need this cap, as are 
other major CEOs from the USCAP effort. They are growing in 
number in terms of the companies they represent in the country. 
So, there's a movement in this direction, but obviously time is 
of the essence, and we need to grab this baton and run with it.
    Senator Stevens?

                STATEMENT OF HON. TED STEVENS, 
                    U.S. SENATOR FROM ALASKA

    Senator Stevens. Well, thank you very much, Mr. Chairman. I 
have a conflict and will have to leave soon. I did want to hear 
the witnesses if we could, but I ask that my statement appear 
in the record, if you will.
    And, I want to add to it that most people don't realize 
that half of the coal in the United States is in Alaska. Access 
to it is denied because of a provision that was placed in 
Federal law back in the days when the projection was that we 
were entering into a new Ice Age, and the decision was made to 
prohibit the production of coal in Alaska unless the original 
contour of the land was restored. But, if you take out the 
coal, you have to melt the ice, and if you melt the ice, it 
would be hard to replace the act of God and freeze it back so 
that you had the same elevation and the same contour, so we 
haven't had a new coal operation in Alaska for a long time.
    We are, now, proceeding with the coal gasification plant at 
Nikiski in the Kenai peninsula, that will allow the company 
known as Agrium to produce fertilizer and ammonia, and also 
clean diesel fuel. It is something that, as a project, we're 
all looking forward to see if it will work, it is one of the 
alternative energy technologies currently being partially 
financed by the Federal Government, and I really support that 
activity.
    I do have some serious questions, however, about the role 
of carbon and CO2 in the air, and I hope that one of 
these days we'll listen to the scientists from International 
Arctic Research Institute who have studied this, this process 
of change, now, for 20 years, and they do disagree with the 
current concepts that are being pursued by--in this Nation, and 
to a certain extent, in Britain, and I think it's time we took 
stock of looking at the accuracy of some of the comments that 
have been made in the past concerning the impact of global 
warming on our economy and its cause.
    But, I do ask that my statement be put in the record, 
completely. Thank you.
    Senator Kerry. Without objection, it will be put in the 
record.
    [The prepared statement of Senator Stevens follows:]

    Prepared Statement of Hon. Ted Stevens, U.S. Senator from Alaska

    Mr. Chairman, thank you for holding this hearing today on clean 
coal technologies.
    In the United States alone, coal-fired power plants satisfy more 
than half of the Nation's energy needs and this percentage is likely to 
increase in the future. Coal is both abundant, inexpensive, and 
represents one of our most important natural resources.
    It is a stable commodity and a key component in satisfying the 
United States' growing energy demands. Coal production is an important 
element to our national security. Without it, we would be increasingly 
reliant on unstable or unfriendly nations for our energy needs.
    Most people don't realize that half the coal in the U.S. is located 
in Alaska. Access to it is denied because of a provision that was 
placed in Federal law back in the days when the projection was that we 
were entering into a new ice age. The decision was made to prohibit the 
extraction of coal in Alaska unless the original contour of the land 
was restored. But if you take out the coal you have to melt the ice, 
and if you melt the ice it is hard to replace the act of God and freeze 
it back so you have the same elevation and the same contours. We 
haven't had a new coal operation in Alaska for a long time.
    Continued reliance on imported energy from volatile regions of the 
world is not a solution. We must increase our domestic production in 
order to remain globally competitive and we must do so in an 
environmentally responsible manner. New technologies to make this 
possible are on the horizon. Carbon capture and sequestration is just 
one of many processes already in development. Ground breaking research 
is being conducted to develop new ways to burn coal in order to 
maximize energy yield and employ cleaner and more efficient processes.
    One of these processes, which we will hear about today, is called 
Integrated Gasification Combined Cycle or IGCC. The IGCC process is a 
promising new technology which has the potential to increase efficiency 
by 40 percent. However, this process is not conducive to all regions 
because of its limitations on the type of coal which can be used. 
Solutions must be found that will accommodate these differences and we 
must continue to research and develop other methods.
    In my state, Agrium Incorporated is developing coal gasification at 
its Nikiski fertilizer plant. This process would allow the plant to 
switch from natural gas to coal as a chemical feedstock. This coal 
gasification project will allow Agrium to not only produce the 
fertilizer and ammonia currently in production but also clean diesel 
fuel. In addition, the excess energy produced by this project, 
estimated at 75 megawatts, could be injected into the existing power 
grid of the surrounding community. Agrium is also evaluating carbon 
sequestration, which can be utilized in existing oil and gas fields to 
yield additional energy supplies.
    Like many of the alternative energy technologies currently in 
development, no one single solution will solve the problem of meeting 
energy needs in a responsible manner. However, we should continue to 
explore the benefits clean coal can continue to offer our economy. I 
look forward to hearing our witnesses' testimony and their response and 
their insight into how we can achieve this goal.
    I do have some serious questions about the role of carbon and 
CO2 in the air and I hope that one of these days we will 
listen to the scientists from the International Arctic Research 
Institute who have studied this process of change for twenty years. 
They do disagree with the current concepts that are being pursued in 
this Nation and to a certain extent in Britain. I think it is time we 
took stock of looking at the accuracy of some of the comments that have 
been made in the past concerning the impact of global warming on our 
economy and its cause. Thank you.

    Senator Kerry. And, Senator, I would be delighted, I think 
there's nothing more important than to get at the science, so 
I'd be happy to have those folks come in here, have a good 
dialogue here with them and with some others that have a 
different point of view, because I think we obviously need to 
proceed forward intelligently, and whatever theories are out 
there, we are all smart enough here to pick our way through 
them. So, I'd be delighted to have those scientists come in 
here, and we'll try to set that up as soon as we can.
    Senator Boxer?

               STATEMENT OF HON. BARBARA BOXER, 
                  U.S. SENATOR FROM CALIFORNIA

    Senator Boxer. Mr. Chairman, thank you so very much for 
your leadership, not only in this particular hearing this 
morning, but thank you for your leadership in general on global 
warming. We need that leadership from many people in the Senate 
and the House and the Administration, because as we know, we 
face a threat here that's pretty grave.
    I'm going to speak, probably as long as Senator Stevens 
spoke, no longer than that.
    We know that advanced cleaner coal can help us solve one of 
the--this, this great threat that is facing us. And, you know, 
we've had seven hearings in the Environment Committee, Senator 
Kerry, you've been part of a couple of those. The most 
disturbing thing, of course, is what could happen if we don't 
respond to this, and I won't go through it--it's in my 
statement--but what was stunning in new news, was that a 
scientist testified that 40 percent of the species on the 
planet could be at risk, if the worst predictions come true. We 
just can't abide by that.
    Global warming puts the web of life that we take for 
granted in jeopardy. At current utilization rates we have more 
than 250 years worth of coal in the ground right here in the 
United States, we are the Saudi Arabia of coal. If we could 
figure this out, how to do this in a clean way, we'll be way on 
our way to energy independence in a very, I think, responsible 
way that will lead the way for the world.
    Right now, 40 percent of our greenhouse gas emissions come 
from electricity generation. More than half of that comes from 
coal-fired power plants. Plans are on the books to build 
hundreds of new coal-fired power plants. That's why I think 
your legislation, we're analyzing it now, is a very important 
contribution to this, because if we don't deal with this we're 
going to keep going backward. We can't afford to go backward on 
global warming.
    So, we have a big challenge, but I think it's doable. Some 
of the technologies are commercially available, some are in 
operation at pilot projects, others remain in early research. 
Some work on all kinds of coal, others do best with only one 
kind of coal, so this isn't a kind of a one-size-fits-all 
operation.
    But, we need additional research. I've been one to say, we 
need a Manhattan Project on clean coal. We need to get very 
strongly behind that effort, because all the countries in the 
world, I think, are looking to us. The Administration keeps 
saying, ``We're not going to get anywhere unless China and 
India get involved,'' we can't wait. We never wait for other 
countries when it comes to the health and safety of our people, 
our planet, or our economy.
    So, we need to move forward. If we do solve this problem, 
it will be exported across the world, we will create jobs, and 
our grandchildren will be able to have a similar experience 
living on this planet, as we have had.
    So, thank you, again, Mr. Chairman for your leadership, I 
look forward to working with you continually as we solve this 
problem.
    Senator Kerry. Thank you, Senator. I reciprocate--you've 
been terrific over in the Environment Committee and you're 
moving ahead and we're enjoying working together on this and we 
look forward to continuing to cooperate.
    Folks, thank you, again, for taking time to be here, this 
is a very important topic, there's a lot of discussion here, as 
you know, about how to do this, so we anxiously look forward to 
your testimony.
    Mr. Chaisson?

    STATEMENT OF JOSEPH M. CHAISSON, TECHNICAL AND RESEARCH 
                 DIRECTOR, CLEAN AIR TASK FORCE

    Mr. Chaisson. Mr. Chairman and Members of the Subcommittee, 
my name is Joseph Chaisson, I'm the Technical and Research 
Director of the Clean Air Task Force, or CATF. Thank you for 
the opportunity to testify this morning about advanced coal 
technology and the environment.
    Founded in 1996, CATF is the only national environmental 
advocacy organization with an exclusive focus on protecting the 
Earth's atmosphere and human health from air pollution and 
climate change.
    A major CATF focus is working with state and regional 
environmental groups, state governments and private sector 
project developers to facilitate early domestic deployment of 
advanced coal gasification technology, including carbon capture 
and geologic storage, where feasible, today.
    We're also exploring how to remove barriers to promising 
advanced coal technologies that have not yet entered the 
market.
    Today, I will address why we need to deploy radically 
cleaner coal technology, highlight several recent advanced coal 
market developments, list key challenges to deploying cleaner 
coal technologies, and outline what I think the Federal 
Government could do to address these challenges.
    Conventional coal combustion technology is responsible for 
some of the most important environmental problems on Earth, 
including air pollution that damages human health and 
ecosystems, land disruption, depletion of water resources, 
toxic solid waste production, and global warming.
    Despite these problems, coal will continue to be widely 
used throughout the world for many decades, at least. 
Therefore, we must act to develop and commercially deploy much 
cleaner coal-using technologies, as soon as possible.
    The good news is that much commercial activity, typically 
too recent to be reflected in available studies, is already 
underway in both coal gasification power production, or IGCC, 
and in carbon capture and geologic storage.
    Some key highlights include, first, the emergence of 
Siemens and Mitsubishi as full-systems IGCC vendors, offering 
coal gasifiers as well as combustion and steam turbines in an 
integrated package, with both of these gasifiers being well-
suited to using low-rank sub-bituminous and lignite coals.
    Second, we have several next-generation commercial IGCC 
plants under development, and these plants are driving 
important engineering design work, including serious 
exploration of options for adding carbon capture to these 
plants in the future.
    Third, we see innovative hybrid coal gasification projects 
moving forward by independent power project developers that 
combine electricity and substitute natural gas production. 
These are very interesting projects.
    We also see several promising advanced gas-fired 
technologies, moving into the process demonstration stage, it 
could be commercially available within the next 2 or 3 years.
    And finally, projects using coal gasification, a new 
technology with significant implications, including the 
potential to avoid most adverse environmental impacts 
associated with coal mining, transportation and solid waste 
disposal, to significantly lower coal gasification project 
costs, and potentially to triple our economic coal reserves.
    The first domestic underground coal gasification project is 
being developed in Wyoming by the Gas Tech Company.
    However, several serious challenges exist to deploying 
these very clean coal technologies. First, proposed IGCC 
projects face the very significant global run-up in large 
energy project construction costs that is impacting and slowing 
down most proposed coal plants today.
    Second, and very importantly, in the absence of a stringent 
cap on carbon dioxide emissions, there is no economic incentive 
today to incorporate carbon capture and geologic storage into 
most IGCC projects.
    Third, Federal advanced coal research, development, and 
demonstration programs lack sufficient scope to help promptly 
develop and deploy the technologies we need.
    And, fourth, and this is actually quite important, we do 
not yet have a low-cost practical technology for capturing 
carbon dioxide from conventional coal-plant combustion flue 
gas, which will be essential to substantially reducing 
CO2 emissions from the existing global coal-powered 
plant fleet.
    Several Federal policies could help overcome these 
challenges. First, a production tax credit, or some other form 
of equivalent financial incentives for new coal power plants 
that include full carbon capture and geologic storage.
    Second, a carbon emissions performance standard for new 
fossil power plants that would require significant carbon 
capture and sequestration for all new coal-powered plants.
    Third, an effective carbon emissions cap and trade system; 
and fourth, to expand and broaden DOE's advanced coal research, 
development and demonstration programs.
    In summary, I believe the technology we need to transition 
coal to much more environmentally sustainable systems could be 
either deployed or developed promptly, if effective Federal 
advanced coal technology policies were implemented.
    Thank you for this opportunity to testify, and I look 
forward to your questions.
    [The prepared statement of Mr. Chaisson follows:]

   Prepared Statement of Joseph M. Chaisson, Technical and Research 
                     Director, Clean Air Task Force

Introduction
    Mr. Chairman and Members of the Subcommittee,
    My name is Joseph Chaisson. I am Technical and Research Director of 
the Clean Air Task Force (CATF). Thank you for the opportunity to 
testify today on advanced coal technology and the environment.
    Founded in 1996, CATF is the only major national environmental 
advocacy organization with an exclusive focus on protecting the Earth's 
atmosphere and human health from air pollution and climate change. This 
singular focus enables CATF to field deep analytic and strategic 
resources equal to the significant and complicated atmospheric 
challenges we face over the next fifty years.
    Over the past several years, one of CATF's major activities has 
been to work with state and regional environmental groups, state 
governments and private project developers in several parts of the 
country to facilitate early domestic deployment of coal gasification 
technology--with carbon capture and geologic sequestration (storage) 
where currently feasible. We have briefed numerous Congressional 
offices--accompanied by state environmental partners--about the promise 
of coal gasification technology. Another related CATF focus has been 
exploring how to remove barriers to promising advanced coal 
gasification and carbon capture technologies that have not yet entered 
the market. This ``hands on'' project facilitation and market entry 
work provides us with a useful perspective on what is happening on the 
ground in today's marketplace.
    In this testimony, I will briefly restate the importance of moving 
forward radically cleaner coal technology than is deployed today; 
highlight current market developments on the ground which the 
Subcommittee may not be aware of; and, finally, discuss key challenges 
to radically cleaner technology, and what the Federal Government might 
do to help tackle those challenges.

I. The Current and Projected Environmental ``Footprint'' of Coal
    Coal-fired power generation is today one of the planet's most 
environmentally destructive activities. It is responsible for most of 
the Nation's sulfur dioxide emissions that, even after recent 
regulatory reductions, will still take 15,000 lives prematurely in the 
U.S. each year by EPA's own estimate. It contributes substantially to 
nitrogen oxides, which add to smog, haze, and crop and ecological 
damage. It emits most of the Nation's manmade mercury air pollution. 
Current coal mining practices have scarred land and threatened water 
and habitat. Coal power generation consumes and discharges enormous 
quantities of water, while generating nearly 100 million tons of toxic 
wastes each year, the disposal of which is not regulated by the Federal 
Government. Finally, coal power generation is responsible for nearly 40 
percent of the planet's man-made emissions of carbon dioxide that 
contribute to global warming.
    Despite these problems, coal-fired power generation is likely to be 
relied on for decades to come and is projected to expand dramatically. 
World electric demand is expected to triple by 2050, coming largely 
from developing countries like China and India. Most analyses agree 
that this underlying demand growth will substantially outpace even the 
most aggressive energy efficiency policies. Renewable energy, while it 
should and will be widely deployed, faces significant physical, 
environmental and economic challenges that will practically limit its 
share of total electrical supply for several decades. Natural gas is 
relatively expensive and its reserves are far more limited than coal. 
Finally, nuclear power faces considerable hurdles of scale, economics 
and environmental opposition. For these reasons among others, China is 
building as much new coal capacity each year as the entire U.K. power 
grid, and coal power generation in India is projected to grow rapidly--
matching current U.S. coal consumption by 2020 and China's current coal 
consumption by about 2030. The United States faces both growing demand 
for electricity and an aging power plant fleet; coal will remain 
economically attractive to meet some portion of electricity demand 
growth and to replace some existing power plants.
    Turning to climate, numerous analyses performed or commissioned by 
such bodies as the Intergovernmental Panel on Climate Change, the 
European Union, the National Commission on Energy Policy, academic 
institutions such as Harvard, MIT, and Princeton University as well as 
environmental organizations such as Friends of the Earth-U.K. have 
concluded that, even with aggressive energy efficiency, renewable 
energy development and in some cases nuclear expansion, coal-fired 
power generation is likely to remain a significant part of any 2030-
2050 global power supply. Accordingly, each of these studies has 
identified the critical importance of transitioning coal use to 
technologies that minimize health-related air emissions and allow for 
the removal and storage of carbon dioxide, and to begin to demonstrate 
and scale up those technologies on a commercial basis as soon as 
possible.
    In short, the planet is unlikely to be able to live without coal 
for some time to come. But, at the same time, the planet, from an 
environmental standpoint, can't stand to live with coal as it is 
currently used to produce electricity. This leaves only one path 
forward: we need to change how we use it--and we need to do so as 
quickly as possible.

II. What Is to Be Done?
    An environmentally responsible coal policy would do the following:

   Ban the construction of new coal combustion plants due to 
        their inherently unacceptable air, water, solid waste and 
        climate impacts.

   Rapidly commercialize the use of integrated coal 
        gasification combined cycle (IGCC) for electric power 
        generation, because it has a much smaller environmental 
        footprint for air emissions and waste than does coal 
        combustion.

   Rapidly demonstrate the feasibility of large-scale geologic 
        storage of carbon dioxide and then require all new coal power 
        plants to capture and sequester at least 90 percent of their 
        coal carbon content.

   Demonstrate and deploy advancements such as underground coal 
        gasification, that could further shrink IGCC's environmental 
        footprint by substantially minimizing mining impacts and waste 
        management.

   Reform coal mining practices worldwide, impose effective 
        Federal regulation of coal plant solid waste disposal and 
        reduce coal generation water use and associated impacts to the 
        minimum practical levels.

   Increase the energy efficiency of IGCC power generation to 
        the maximum practical levels over time.

   Establish effective carbon dioxide emissions controls.

    Commercializing IGCC is of special importance. Because it is an 
inherently cleaner process--the gas it produces from coal must be free 
of most contaminants to power a gas turbine--IGCC reduces deadly sulfur 
and nitrogen oxide emissions to very low levels--approaching those 
achievable by natural gas combined cycle power plants. Gasification is 
the only coal power generation technology that can virtually eliminate 
mercury air emissions and capture most of the coal mercury content in a 
concentrated form that can potentially be sequestered from 
environmental release; IGCC is the only way we can continue to use coal 
to produce power without adding significantly to the global mercury 
burden. Total solid waste from gasification is typically half the 
volume generated by conventional coal plants, and gasification water 
use is substantially lower as well.
    Underground coal gasification (UCG), a promising further 
advancement in IGCC would gasify the coal directly within the deep, 
unmineable coal seams. This process can potentially eliminate the 
environmental impacts of current coal mining and transportation 
practices, as well as significantly reduce the challenges of coal waste 
management.
    Finally, IGCC is the key enabling technology for capture and 
storage of carbon dioxide from coal power generation and will be 
essential to meeting any reasonable climate stabilization target. While 
it is possible to retrofit a coal combustion plant with carbon capture 
technology, it is expensive and inefficient to do so today, costing 
twice as much for plants using bituminous coal as capturing carbon from 
an IGCC plant and reducing plant efficiency by as much as 40 percent. 
While development of more cost-effective coal-combustion carbon capture 
alternatives is important, current efforts are very early in the 
technology development stage, and it is unclear whether and when cost-
effectiveness will be fully demonstrated for this technology. If we are 
to turn the world coal tide to a near-zero carbon footprint in the next 
20 years, IGCC power generation is likely to be the most availing path 
forward based on current information.

III. Recent Market Developments
    The good news about cleaner coal power and carbon capture is the 
many recent coal gasification market developments, nearly all of which 
are too new to be reflected in academic studies and many of which are 
being conducted by companies not well represented by Washington trade 
groups or research organizations. When we ``look out the window'' at 
these market developments, we see a substantially different situation 
than is typically presented in available studies or by traditional 
institutions.
    Key highlights include the areas listed below. It should be noted 
that the coal gasification market developments described below do not 
reflect a complete survey of recent developments, but rather are 
intended to illustrate the contrast between the relatively static and 
out-of-date study characterizations of coal gasification technology 
with today's rapid pace of market development.

Emergence of New ``Full System'' IGCC Vendors
    Prior to last summer, GE was the sole ``full systems'' IGCC vendor 
capable of offering all major IGCC components (that is, gasifier, 
combustion turbines and steam turbines) in a single package. Since that 
time, Siemens and Mitsubishi have developed full system commercial IGGC 
offerings, significantly expanding vendor choice for potential IGCC 
project developers. Siemens emerged as a full systems vendor last 
summer when the company acquired the Future Energy gasifier. NRG's 
recent selection of Mitsubishi as the technology supplier for their 
proposed domestic IGCC plants introduced the entry of Mitsubishi as a 
full systems vendor.

Emergence of New Coal Gasifiers
    Up until last summer, there were only three serious commercial coal 
gasifier offerings: the GE (Texaco technology), ConocoPhillips (E-Gas 
technology) and Shell gasifiers. These gasifiers have different 
characteristics that affect their suitability for various coal types, 
with Shell appearing most suited to low-rank coals (sub-bituminous and 
lignite). These gasifiers are also estimated to vary significantly in 
cost. Nearly all IGCC studies and academic literature have been 
restricted to analysis of these gasifiers.
    Several additional coal gasifiers have moved into the marketplace 
over the past year:

   The Future Energy gasifier, developed in the former East 
        Germany and recently acquired by Siemens, should be well suited 
        to low rank coals and shows promise of being quite economically 
        competitive.

   The British Gas Lurgi (BGL) gasifier is an evolution of the 
        Lurgi gasifiers used extensively in South Africa and at the 
        Dakota Gasification plant in the U.S. This gasifier should also 
        be well suited to low-rank coals.

   The Mitsubishi gasifier is partially oxygen blown, should 
        also be well suited to low-rank coals and shows promise of 
        being quite economically competitive.

    As all three of these gasifiers are well suited to low-rank coals, 
they provide a much more competitive set of market offerings for 
projects using these coals and should reduce pre-inflation low-rank 
coal IGCC project costs. This point is particularly important as some 
critics have suggested that some conventional gasifiers are not well-
suited to low rank coals, and that there may not be an economic path 
for low-rank coal use.

``Next Generation'' IGCC Plant Development
    At least four ``next-generation'' IGCC projects are moving forward 
in the U.S., in addition to the ``hybrid'' coal gasification plants 
described below. These projects are AEP's Meigs plant in Ohio and 
Mountaineer plant in West Virginia, Duke Energy's Edwardsport plant in 
Indiana and BP's Carson Refinery Hydrogen project in California.
    These projects all use the most advanced available combustion 
turbine (for example, GE's 7FB) and are a major ``scale-up'' from the 
several IGCC plants built at refineries in Europe about 5 years ago. 
They are also much larger than the two early demonstration plants built 
in the U.S. (Wabash Station in Indiana and Polk Station in Florida) 
about a decade ago. These projects will typically have about 600 MW of 
generating capacity. The BP Carson project will use petroleum coke (a 
coal-like refinery waste product) and will include 90 percent carbon 
capture, which reduces plant output to about 500 MW. The BP Carson 
project will be the first commercial project in the U.S. to include and 
demonstrate ``full'' carbon capture.
    Several additional ``next-generation'' plants may also be moving 
forward, but at a slower pace, including additional AEP-proposed plants 
in Kentucky and NRG's proposed Huntley plant in New York State.
    These ``next generation'' plants are important for several reasons, 
including lower inflation adjusted costs and higher operating 
efficiencies. They also are driving significant detailed engineering 
design work, including in the case of Duke and AEP, serious engineering 
analysis of options for adding carbon capture to these plants at some 
future time, and provisions that can economically be built into the 
initial plant to facilitate carbon capture retrofit. The good news is 
that this very significant amount of engineering work will provide much 
more detail than is currently available on next generation costs, 
performance and carbon capture retrofit feasibility. The bad news is 
that this information remains proprietary and is not yet available in 
open literature.

``Hybrid'' Projects
    Some independent IGCC project developers like the ERORA Group and 
Summit Power are developing coal gasification projects that produce 
both electric power and substitute natural gas, typically allocating 
about 50 percent of the project coal syngas to each of these products. 
The ERORA group is developing projects in Illinois (Taylorville) and 
Kentucky (Cash Creek) and Summit Power is developing projects in Oregon 
and Texas.
    These developers are pursing ``hybrid'' projects because they have 
economic advantages over next-generation ``power only'' IGCC plants, 
including reduced overall project cost, high availability--particularly 
in projects using several of the new Siemens gasifiers--and attractive 
overall project economics for power generating companies that have 
existing natural gas power plants by allowing them to have coal-based 
fuel pricing for both their new coal generation and some portion of 
their existing natural gas generation.
    Some of these projects are close to final permitting and full 
financing. Several projects plan to include some carbon capture and 
will initially use the captured carbon for enhanced oil recovery (EOR). 
At least one project is exploring full carbon capture and 
sequestration. In many respects these projects reflect efforts by 
project developers to overcome current economic barriers to stand-alone 
IGCC plants.

Advanced Coal Gasifiers
    Several innovative coal gasification technologies are conducting 
process demonstrations and could be commercially available within the 
next 2 years. Two examples among several such systems being developed 
include Great Point Energy's catalytic coal gasifier (a technology 
originally explored in the 1970s) and Texas Syngas' molten metal bath 
gasifier. Both technologies can potentially be produced modularly in a 
factory and both appear to have potential to reduce gasification costs 
compared with traditional gasifier designs.

Underground Coal Gasification
    Underground coal gasification (``UCG'') is just beginning to be 
recognized as a potential option for utilizing coal. UCG is a 
gasification process conducted in deep coal seams. Injection and 
production wells are drilled into the coal seam and are then linked 
together. Once linked, air and/or oxygen is injected and the coal is 
ignited in a controlled manner to produce hot, combustible coal syngas 
that is captured by the production wells, brought to the surface and 
cleaned for power generation and/or production of liquid hydrocarbon 
fuels or substitute natural gas. This technology has been used at a 
minor level since the early 2000s and DOE conducted many pilot UCG 
projects in the 1970s.
    A successful modern pilot project was conducted about 6 years ago 
in Chinchilla, Australia by the Ergo Exergy Technologies, Inc. and the 
first modern commercial UCG electric power production project started 
up this January in Mpumalanga, South Africa. I understand that two 
commercial UCG projects producing hydrogen for chemical plants have 
been developed in China. The GasTech Company is developing the first 
North American pilot UCG project in Wyoming. The initial GasTech 
project will be conducted in the Powder River basin and will use a coal 
seam 950 feet deep. Current estimates are that the pre-clean-up syngas 
will be produced for about $1.90/mmbtu (as compared with current U.S. 
gas forward prices of about $8.00/mmbtu for the next several years).
    UCG technology is potentially quite significant for several 
reasons:

        1. It can avoid most of the adverse environmental impacts 
        associated with coal mining and transportation;

        2. It leaves coal residuals (ash and some other constituents) 
        underground;

        3. It can potentially reduce coal gasification costs--perhaps 
        significantly; and

        4. It can open up large amounts of deep coal reserves that are 
        currently not economic to mine. Lawrence Livermore National 
        Laboratory (LLNL) estimates that UCG could potentially triple 
        domestic economic coal reserves.

        5. Carbon capture costs may be somewhat lower than with above-
        ground gasification and a significant fraction of captured 
        carbon can potentially be stored in the underground 
        gasification cavities created by a UCG project.

    Once this technology emerges from the pilot/demonstration stage, 
which will be necessary to clarify technology costs, it may be deployed 
rapidly if it proves to be more economic than conventional pulverized 
coal plants or advanced above-ground gasification system IGCC's. LLNL 
has recently produced a summary of current UCG knowledge that is 
available at https://eed.llnl.gov/co2/11.php.

IV. A Key Technology Gap
    Developing a practical and very-low cost method of capturing carbon 
dioxide from existing power plant flue gases would be an enormous boost 
to global efforts to reduce carbon dioxide emissions and may be the 
only practical opportunity to significantly reduce future carbon 
dioxide emissions from the rapidly developing coal power plant 
``fleet'' in China and India. Current technologies that can accomplish 
this task are too expensive and consume far too much energy to be 
practical to apply broadly throughout the world. While current research 
in this area is focused primarily on what are essentially incremental 
improvements in existing technology systems, a ``break through'' 
technology is needed. Potential ``high-risk/high-reward'' breakthrough 
technologies, like structured fluids, have been identified (in this 
case by MIT researchers) but there appear to be no relevant sources of 
Federal support for such research.

V. Challenges to Advanced Technology Deployment
    Several problems are constraining rapid deployment of advanced coal 
gasification technologies and associated carbon capture, including the 
recent substantial increase in large energy project costs; the lack of 
an economic incentive to build IGCC projects with full carbon capture 
today; and Federal advanced coal research, development and deployment 
programs that are not adequately funded or sufficiently broad.

Recent Large Energy-Project Cost Inflation
    For several reasons, including massive infrastructure development 
in China and very large investments in Persian Gulf oil and gas 
projects, the construction cost of large energy projects has 
significantly increased over the past two to three years. In some 
cases, this cost inflation may have doubled project costs--including 
some domestic proposed coal plants. While it is not clear how long 
costs will continue to rise or for how long they will remain inflated, 
it does not appear that this cost-inflation period will be short.
    The current cost-inflation environment will also affect the 
economics of carbon capture and sequestration for new coal projects, 
raising the estimated costs from roughly 1.5 cents/kwh to about 2.5 
cents/kWh. This suggests that if this cost environment prevails, carbon 
capture will begin to be economic at a carbon emissions price of about 
$40 per ton of CO2, at least initially.

No Economic Incentive To Build New Coal Plants With Full Carbon Capture 
        Today
    While the technology exists to develop new coal IGCC plants with 
full carbon capture and sequestration today, as is being demonstrated 
by BP's Carson project, there is no economic basis to do so except 
possibly in the very few cases (like BP's Carson project) where all 
captured carbon can be used for enhanced oil recovery. This 
disincentive to adding CCS to new coal plants will continue until 
captured and sequestered carbon is worth roughly $40/ton of carbon 
dioxide.

Limitations of Federal Advanced Coal Research, Development and 
        Demonstration Programs
    We have not conducted a serious review of the relevant Federal 
``clean coal'' research, development and demonstration programs, but we 
have observed several ``disconnects'' between such programs and both 
promising market activity and needed ``breakthrough'' technology. We 
note that all EPAct financial support for new IGCC projects has been 
awarded to next-generation commercial IGCC projects, which in nearly 
all cases are being proposed by large investor-owned utilities. In 
contrast, no innovative ``hybrid'' IGCC/SNG projects being developed by 
independent project development companies were awarded financial 
support. We also note that none of the promising advanced coal 
gasifiers being developed that we are aware of are receiving 
significant DOE support nor are these advanced gasifier concepts listed 
in the various technology evolution ``road maps'' developed by DOE and 
others. And as we noted above, no Federal programs exist today that 
would provide financial support for new IGCC project developers seeking 
to include full carbon capture and sequestration in their projects.
    MIT's Future of Coal Study reviewed current DOE clean coal 
research, development and demonstration programs and outlines one 
approach to expanding and better targeting these programs. We see MIT's 
proposals as a good starting point for discussion, but believe they 
would not be sufficient to address all research, development and 
demonstration gaps or ``disconnects'' we have observed.

VI. What Can the Federal Government Do to Accelerate Deployment of 
        Needed Technology?
     Several Federal actions could accelerate development and 
deployment of the advanced coal technology needed to address climate 
change and dramatically reduce coal's environmental impacts:

        1. Establish a production tax credit or some other form of 
        equivalent financial incentives for new coal power plants with 
        full carbon capture and sequestration. These incentives would 
        be in effect until a national carbon emissions reduction 
        program has been established that creates a carbon emissions 
        allowance price sufficient to offset carbon capture and 
        sequestration costs. At current energy project prices, such a 
        production tax credit would likely need to be at least 2.5 
        cents per kWh.

        2. Establish a carbon emissions performance standard at some 
        future date for new fossil power plants that would require 
        significant carbon capture and sequestration for new coal power 
        plants.

        3. Establish effective carbon emissions controls.

        4. Significantly expand and broaden DOE's advanced coal 
        research development and demonstration programs.

    The recent MIT Future of Coal Study outlines one approach for 
expanding DOE's advanced coal programs and suggests that such programs 
need to be funded at levels as high as $800-$900 million per year. 
Beyond MIT's recommendations, it would be useful to review current 
research and market activity in this field to identify promising 
technologies that are slipping through the cracks in current DOE 
programs to help develop more effective programs. It is also critically 
important that appropriate support be established for developing 
``breakthrough'' technology in critical areas like practical, low cost 
carbon capture at existing power plants.
    In summary, I believe that the technology we need to transition 
coal use to much more environmentally sustainable systems could be 
either deployed or developed promptly if effective Federal advanced 
coal technology policies were implemented.

    Senator Kerry. Thank you, sir, we look forward to it.
    Mr. Denis?

 STATEMENT OF ROBERTO R. DENIS, SENIOR VICE PRESIDENT, SIERRA 
                       PACIFIC RESOURCES

    Mr. Denis. Thank you very much, Chairman Kerry, Members of 
the Committee. I'm Roberto Denis, I'm Senior Vice President of 
Sierra Pacific Resources, a holding company that serves the 
electrical needs of 1.2 million customers throughout most of 
Nevada.
    Our company has been taking significant steps to lessen our 
carbon footprint, while at the same time, investing in new 
technologies to meet our ever-increasing demand for energy.
    Nevada is a high-growth state. We have been adding about 
55,000 new customers per year, at an annual growth of 5 
percent, an envy in the industry.
    Over the next several years, we intend to invest more than 
$1 billion annually to add new generating capacity, and 
transmission infrastructure.
    In 1997, Nevada enacted one of the Nation's first renewable 
portfolio standard laws. As a state and as a company, we are 
committed to renewable energy. As evidence of this commitment, 
by year-end, Sierra Pacific Resources will lead the Nation in 
generation of solar and geothermal energy in relation to the 
total electric energy sold to consumers, even exceeding 
California.
    However, Sierra Pacific Resources cannot meet our future 
energy demands solely from renewable projects. We are building 
over 2,800 megawatts of new, efficient natural gas generation. 
This will cause our company to become about 75 percent 
dependent on natural gas for the electricity that we deliver.
    Last year, we announced that we were pursuing the 
development of the Ely Energy Center, a four-unit coal-powered 
complex totaling 2,500 megawatts. The first two units will 
utilize the newest, commercially available, supercritical 
generation, highly efficient and emissions controls technology. 
These two units will be followed by two more Integrated 
Gasification Combined Cycle, or IGCC units, once those units 
become commercially viable.
    Ely will also be the catalyst for the development of wind-
to-energy in the mountains of eastern Nevada. Ely will make a 
$600 million, 250-mile transmission line economically possible, 
providing the means for wind energy to reach consumers.
    It is also important to point out, as new generation is 
developed, Sierra Pacific Resources is decommissioning older, 
less efficient coal and natural gas units, a move that 
mitigates our CO2 emissions. These combined actions 
will ensure that even when the first two coal units of the Ely 
Energy Center are completed, our company's carbon footprint 
will mirror that of a utility that burns 100 percent natural 
gas.
    We particularly urge Congress to be mindful that the most 
knowledgeable source of our collective ability to capture and 
store CO2, the Electric Power Research Institute, 
estimates that even with the most aggressive technology 
development actions that can be realistically contemplated, we 
will not have the ability to capture and sequester carbon on a 
commercial scale until 2020. Thus, a policy--any policy choices 
should recognize that our economically viable generation 
strategies must include clean supercritical coal generation, 
and when viable, IGCC.
    As recognized in the recent MIT study, instead of excluding 
the most viable domestic energy source, we must focus on 
seeking technological solutions to mitigate the adverse effect 
of the current and future use of coal. In such regards, we're 
working with EPRI and 25 other utilities to fund a pilot-scale 
demonstration project in Wisconsin of a promising new 
CO2 capture technology for pulverized coal. While 
integrated gasification combined cycle technology offers 
promise in the near-term, it has been shown to be more economic 
using eastern bituminous coals.
    The use of IGCC with eestern sub-bituminous coals, which 
have different characteristics and contain higher moisture, has 
not yet been proven commercially viable, particularly at the 
higher altitude sites available in our State.
    I would like to quote Dr. Bryan Hannegan's recent testimony 
before the Senate Energy and Natural Resources Committee. 
``EPRI stresses that no single advanced coal generating 
technology . . . has clear-cut economic advantages across the 
range of U.S. applications. The best strategy for meeting 
future electricity needs while addressing climate change 
concerns and economic impacts lies in developing multiple 
technologies from which power producers--and their regulators--
can choose the best, when suited, to local conditions and 
preferences.''
    In conclusion, innovative technological advances must be 
supported and encouraged to the maximum extent feasible. But, 
in the meantime, we should not curtail the construction of new 
generation needed to serve our customers. Walking away from 
coal-powered generation altogether would mean higher prices for 
consumers, and even a greater national reliance on energy 
imports.
    We must be careful to avoid arbitrary efforts to pre-ordain 
winners in the race to develop new generation technologies. Our 
industry is large, and geographically diverse, and winners must 
be market-driven if we are to serve our customers well.
    Thank you.
    [The prepared statement of Mr. Denis follows:]

    Prepared Statement of Roberto R. Denis, Senior Vice President, 
                        Sierra Pacific Resources

Introduction
    Chairman Kerry, Senator Ensign, Members of the Committee, thank you 
very much for the opportunity to be with you today. My name is Roberto 
Denis and I'm Senior Vice President of Energy Supply for Sierra Pacific 
Resources, a holding company that serves most of the electrical energy 
needs of Nevada. Our company has been taking significant steps to 
lessen our carbon footprint while at the same time meeting the ever 
increasing demand for energy in one of fastest growing regions of the 
country. There are many factors that make this an especially difficult 
task. These involve managing the tradeoffs between renewable energy and 
fossil fuel plants, different fuel types, self generation versus market 
purchases, the commercial application of current and emerging 
technologies and of course, the cost of energy to our customers.

Company Profile
    Sierra Pacific Resources is the holding company for two utility 
subsidiaries, Nevada Power Company and Sierra Pacific Power Company 
that provide electricity to 1.2 million electricity customers in Nevada 
and around the Lake Tahoe area of California. We are interconnected to 
the western transmission grid and are significant participants in the 
western power markets since we currently purchase about half the energy 
we deliver. It is noteworthy that Nevada was a major victim of the 
meltdown in the western markets several years ago when Enron and others 
were found to be illegally manipulating the power purchase market in 
California.
    Our state's high growth rate is also a very important 
consideration. We have been adding about 55,000 new customers per year, 
an annual growth rate of 5 percent, which is much higher than the 
electric industry as a whole. Investing to meet this growth is a 
constant challenge. Our company owns nine power plants with a diverse 
mix of fuels including coal and natural gas. For 10 years, Nevada has 
had a renewable portfolio standard in place and we have been 
contracting for geothermal, wind and solar energy and expect to be 
making direct investments in renewable energy projects as well for 
years to come. Because of our state's rapid economic growth plus the 
hard lessons learned from being over reliant on the power purchase 
markets during the Enron years, Sierra Pacific Resources is committed 
to delivering a diverse power portfolio that protects against the 
volatility of fluctuating fuel costs and swings in the purchased power 
markets. Over the next several years we intend to invest more than $1 
billion annually to add to our generating capacity and build the 
infrastructure necessary to support the strong growth.

Renewable Energy: An Important Source of Power
    Our utility in northern Nevada, Sierra Pacific Power Company leads 
the Nation in use of renewable energy as a percentage of total energy 
consumed. In 1997, Nevada enacted one of the Nation's first Renewable 
Portfolio Standard (RPS) laws. It required all electric providers in 
the state to acquire renewable electric generation or purchase 
renewable energy credits so that 1 percent of the energy consumption of 
each utility was produced from renewable sources.
    In 2001, the state amended the RPS law to become the country's most 
aggressive renewable portfolio standard. The law then required that 15 
percent of all electricity consumed in Nevada be derived from new 
renewables by the year 2013, with 5 percent of that amount coming from 
solar energy. In June 2005, the Nevada legislature extended the 
deadlines and raised the requirements of the RPS to 20 percent of sales 
by 2015. The bill also allows utilities to receive credits toward 
meeting the state's RPS by investing in certain energy efficiency 
measures capped at one-quarter of the total standard in any particular 
year. The law phases in the renewable energy commitment over time as 
follows: 9 percent by 2007, increasing to 12 percent by 2009, 15 
percent by 2011, 18 percent by 2013 and 20 percent by 2015.
    We are committed to renewable energy and believe that such 
investment needs to be stimulated; in that regard, we call upon 
Congress to extend the Investment Tax Credit (ITC) and the Production 
Tax Credit (PTC) for all types of renewable energy for at least 8 years 
and to remove the outdated provision which excludes utilities from 
participating in the ITC for renewables. This nation needs the 
financial strength of the Nation's utility industry if we are to 
substantially attract the investment of large sums of capital to 
renewable energy.
    This year, state regulators approved three new geothermal contracts 
that will bring an additional 73 megawatts of renewable energy to our 
customers. Two major Nevada solar projects, including the largest solar 
thermal plant built anywhere in the past 15 years, will this year begin 
delivering a total of 74 megawatts of power. Just this past Monday, I 
attended an event at Nellis Air Force Base in Las Vegas celebrating the 
beginning of construction for the largest solar photovoltaic system 
ever to be built in North America. I can assure that our company, in 
cooperation with our state leaders, is doing everything possible to be 
at the forefront of renewables development. By year end, Sierra Pacific 
Resources will lead the Nation in the generation of solar and 
geothermal energy in relation to total electric energy consumed.

Energy Conservation Programs
    Sierra Pacific Resources places a high priority on helping our 
customers conserve energy. It is our goal to achieve 50 percent of our 
energy savings from our residential customers. Our demand side 
management (DSM) program will result in the installation of 2 million 
compact fluorescent light bulbs each year. This is accomplished through 
a buy down subsidy we provide local retailers who sell these energy 
saving light bulbs. We perform energy efficiency audits for our 
customers and help almost 23,000 per year to improve the efficiency of 
residential AC units. We continue to work with the gaming properties to 
convert the bright lights along the famous Las Vegas strip to efficient 
lighting. We have a program to improve energy efficiency of swimming 
pools and outdoor water features. One-quarter of the RPS goal of 20 
percent by 2015 may come from DSM programs. Below is a projection of 
our DSM goals by company.

   Includes Both Sierra Pacific Power Company and Nevada Power Company
------------------------------------------------------------------------
                               2007            2008            2009
------------------------------------------------------------------------
Budget                        36,553,000      45,265,000      44,886,000
MWh Saved                        205,220         242,417         233,750
Sales MWh                     28,771,765      29,639,965      30,756,233
Customers                      1,127,132       1,160,946       1,195,774
$/Customer                        $32.43          $38.99          $37.53
kWh Save as % of Sales             0.71%           0.82%           0.76%
------------------------------------------------------------------------

Fossil Fueled Generation
    Despite years of experience coupled with one of the most aggressive 
renewable energy programs in the nation, it must be noted that Sierra 
Pacific Resources cannot meet our future energy demands solely from new 
wind, solar or geothermal. By 2008, we expect to be about 75 percent 
reliant on natural gas as the source of fuel for the power we sell. 
This dependence is due to the addition of more than 2,800 megawatts of 
new, efficient combined cycle natural gas generation. We are concerned 
however about the price stability of natural gas which was the fuel 
choice for the majority of new power plant additions during the past 
decade.

Ely Energy Center
    Last year we announced that we were pursuing the development of the 
Ely Energy Center, a four unit coal power complex totaling 2,500 
megawatt in eastern Nevada. This facility will utilize the newest high 
efficiency, supercritical boilers, water saving dry cooling and the 
latest emission-control technologies. The first two, 750-megawatt units 
located near Ely, Nevada will not be completed until 2011 and 2013, 
respectively. The project is an important part of our company's ongoing 
strategy to maintain a balanced energy portfolio that is in the best 
interests of the state. Ely will also be the catalyst for the 
development of more renewable energy resources (particularly wind 
energy in the mountains of eastern Nevada) by providing transmission 
access to northern and southern Nevada via a proposed 250-mile 
transmission line between our two companies. This transmission line 
that would not be economically justifiable to serve a stand alone 
renewable energy project. Therefore, this project and its associated 
transmission should provide the opportunity to develop additional 
renewable projects that would not otherwise be developed in Nevada.
    It also is important to point out that, as new generation is 
developed, Sierra Pacific Resources is decommissioning older, less-
efficient coal and natural gas plants, a move that conserves the use of 
natural resources and mitigates our CO2 emissions. After the 
Ely facility is built, we are planning to retire three aging coal units 
at the Reid Gardner Station in southern Nevada. And, with the 
anticipation of Ely, Nevada Power will not participate in efforts to 
restart the coal-fired Mohave power plant that was shuttered in 2006. 
These actions combined with the aggressive development of renewables 
will insure that even when the first two units of the Ely Energy Center 
are completed, our company's carbon footprint will mirror that of a 
utility that burns 100 percent natural gas.

Climate Change Legislation
    As you can tell, we at Sierra Pacific Resources have not been 
waiting for Congress to impose carbon controls before we developed our 
own carbon mitigation and reduction program. In addition to striving to 
meet a 20 percent RPS goal and replacing our older natural gas units 
with highly efficient combined cycle plants and building new state-of-
the-art supercritical coal units, we have also implemented aggressive 
energy conservation programs. All of these measures will be needed if 
we are to face the challenge. Like Sierra Pacific Resources, many other 
utilities in the Nation are also moving to implement carbon reduction 
strategies.
    Should Congress eventually conclude however that these voluntary 
efforts are not sufficient; we would favor Federal legislation which 
imposes an economy-wide approach to carbon control with trading 
mechanisms for allowance distribution. Should Congress impose a cap and 
trade regime as is reflected in most of the legislation that has been 
introduced, we believe that caps must be applied with great care to 
avoid inequitable distribution of carbon allowances.
    As the fastest growing state for nineteen of the past twenty years 
and with expected high growth anticipated far into the future, a simple 
cap would, relative to other states, severely and unfairly disadvantage 
Nevada's economy. Additionally, Nevada has for many years imported a 
large proportion of its electricity. After the serious market disaster 
created by the California energy crisis and with all western states 
growing far faster than the electric supply can accommodate, it is 
clear that consideration must be given in any capping mechanism to both 
the historic use of carbon by a utility (really by a group of 
customers) (whether self generated or not) and the growth of the 
state's economy. If Congress adopts a cap and trade system, it must 
allocate carbon emission allowances for growth states (as was done for 
SO2 allowances in the 1990 Clean Air Act Amendments) and for 
power purchased and not just self generated. CO2 emission 
allowances must be distributed taking into account both historic and 
projected use of carbon.

CO2 Capture and Sequestration and IGCC Technologies
    We particularly urge the Congress to be mindful that the most 
knowledgeable source about our collective ability to capture and store 
CO2, the Electric Power Research Institute (EPRI), estimates 
that even with the most aggressive technology development actions that 
can be realistically contemplated, there will be no ability to 
effectively capture and sequester carbon until at least 2020.
    Thus, any policy choices that may be made by the Congress should 
recognize that every economically viable set of generation strategies 
to serve the electric needs of the U.S. economy until then must include 
coal, clean supercritical coal or when viable, IGCC. As recognized in 
the recent MIT study, instead of excluding the most viable domestic 
energy source, we must focus on seeking technological solutions to 
mitigate any adverse effect of the current and future use of coal.
    Much has been said of the recent MIT study on the future of 
generation in a carbon constrained world. It is important to remember 
that the MIT study did not recommend that the United States should stop 
building coal-fired generation. Its conclusion, with which we agree, 
was that new coal units must utilize the best commercially available 
technologies and must be built to accommodate retrofits when new large 
scale carbon capture and sequestration (CCS) technologies are 
demonstrated feasible. Our new Ely coal complex will do just that. The 
first two units are being designed so that when CCS is available we 
will have a physical facility that can be retrofitted to enable us to 
capture the CO2 and identified the land for a CO2 
storage site. Additionally, we are working with the Electric Power 
Research Institute (EPRI) and 25 other utilities to fund a pilot-scale 
demonstration project in Wisconsin of a promising new CO2 
capture technology for pulverized coal units. American Electric Power 
has already announced plans for scale-up of this technology at two of 
its coal-fired plants in West Virginia and Oklahoma. We hope we will be 
able to deploy these emerging technologies by the time the final two 
units of our Ely complex are scheduled to be constructed.
    While integrated gasification combined cycle (IGCC) offers promise 
in the near term, it has been shown to be more economic using eastern 
bituminous coals. The use of IGCC with western subbituminous coals 
which have different characteristics and contain higher moisture has 
not yet been proven commercially viable. Quoting from recent testimony 
given by EPRI's Mr. Stuart Dalton:

        ``The COE cost premiums . . . vary in real-world applications, 
        depending on available coals and their physical-chemical 
        properties, desired plant size, the CO2 capture 
        process and its degree of integration with other plant 
        processes, plant elevation, the value of plant co-products, and 
        other factors. Nonetheless, IGCC with CO2 capture 
        generally shows an economic advantage in studies based on low-
        moisture bituminous coals. For coals with high moisture and low 
        heating value, such as subbituminous and lignite coals, a 
        recent EPRI study shows PC with CO2 capture being 
        competitive with or having an advantage over IGCC.'' \1\
---------------------------------------------------------------------------
    \1\ EPRI House Testimony Carbon Capture and Sequestration, March 6, 
2007 (Subcommittee on Energy and Air Quality).
---------------------------------------------------------------------------
The Pinon Pine Clean Coal Technology Project
    Indeed, Sierra Pacific has a history with gasification of coal. In 
1992, near Reno, we partnered with U.S. Department of Energy in one of 
the few western Clean Coal Technology Projects. The Pinon Pine Project 
attempted to extract synthetic gas from coal under pressure and burn 
the synthetic gas stream in gas fired turbines. Because of significant 
challenges, the Pinon Pine Project was not completed until late 2001 
and at a cost of $335 million. It was never able to operate 
commercially because of problems we encountered with the first-of-a-
kind technologies used in the plant. Ultimately, the plant was 
abandoned and converted to a pure natural gas facility. Our company 
ventured and lost millions of dollars on this experiment.
    I would like to quote from Dr. Bryan Hannegan's recent restimony 
before the Senate Energy and Natural Resources Committee given on March 
22, 2007. In expressing EPRI's view on the MIT report he said:

        ``EPRI stresses that no single advanced coal generating 
        technology (or any generating technology) has clear-cut 
        economic advantages across the range of U.S. applications. The 
        best strategy for meeting future electricity needs while 
        addressing climate change concerns and economic impact lies in 
        developing multiple technologies from which power producers 
        (and their regulators) can choose the one best suited to local 
        conditions and preferences.''

    I would also like to submit with my testimony a copy of the EPRI 
report entitled ``Technologies for a Carbon Constrained World'' that 
was first released to the public in February 2007.
    [This information is being retained in Committee files.]

Conclusion
    Clearly, innovative technological advances must be supported and 
encouraged and successful outcomes must be embraced, but in the 
meantime we should not stop the development of new generation needed to 
serve customers today and in the immediate future. Walking away from 
coal-powered generation altogether would mean higher prices for 
consumers and an even greater national reliance on energy imports. Our 
nation's energy independence must include the use of coal, our most 
plentiful energy resource, in the production of new, environmentally 
responsible electric generation. We must be careful to avoid arbitrary 
efforts to pre-ordain winners in the race to develop new generation 
technologies. Ours is a large and geographically diverse industry and 
winners must be market driven if we are to best serve our customers. We 
believe this is an appropriate and responsible approach to addressing 
environmental concerns while keeping our commitment to deliver reliable 
power to our customers. Thank you.

    Senator Kerry. Thank you very much, Mr. Denis.
    Dr. McRae?

         STATEMENT OF GREGORY J. McRAE, HOYT C. HOTTEL 
   PROFESSOR OF CHEMICAL ENGINEERING, DEPARTMENT OF CHEMICAL 
       ENGINEERING MASSACHUSETTS INSTITUTE OF TECHNOLOGY

    Dr. McRae. Senator Kerry and members of the Committee, 
thank you very much for this opportunity to address you on this 
important topic.
    My name is Greg McRae, I am a Professor of Chemical 
Engineering at MIT, and I'm one of the co-authors of the recent 
MIT report on the future of coal, where we set out to address 
what are the issues about how we might burn this fuel in an 
environmentally responsible way.
    Our study involved many colleagues from across MIT, as well 
as advisory groups from outside of MIT, in fact, our first 
panelist Joe Chaisson was, in fact, a member of one of our 
advisory committees.
    The key premise that drove our report was, in fact, the 
need to think about global climate, and warming, and the need 
to think about--by mid-century--that we're going to have to 
sequester several gigatons of carbon, or carbon dioxide. The 
size of the problem is enormous, and one of the things that we 
were interested in is how do we actually go about developing a 
strategy for coping with these problems.
    A key conclusion, and you touched on it in your 
introduction, is that coal is an important part of this 
problem. And while we fully support and are actively involved 
in a lot of developments associated with solar and wind and 
biomass conversion, the key issue is that in order to meet our 
energy demands today, in fact, there are very few other fuel 
sources that we can supply at scale, other than coal. And so 
the key question is, how do we use this important fuel in an 
environmentally friendly way?
    And so, we believe that there are two crucial issues that 
need to be addressed in order to use coal as a fuel in the 
future. The first is the issue of sequestration. Our belief is 
that there's a critical need for demonstration projects at 
scale to show that you can safety store and capture 
CO2 in a way that imposes no risk to the community. 
We believe that most of the technology that's available to do 
this exists already, what's missing is the opportunity to do it 
at scale.
    And just to give you a sense of the size of the problem, a 
typical 500 megawatt coal-fired power plant will produce about 
ten to twelve thousand tons a day of carbon dioxide, that's 
roughly 4 million tons a year. There are about, roughly, 500 
power plants of this size in the United States. The biggest 
sequestration experiment that's going on right now is less than 
1 million tons a year. And so, in order to be able to develop 
the regulatory framework, the monitoring framework, and to 
build public confidence that you can safely mitigate and store 
carbon, we believe that it's crucial that we immediately start 
to look at three or four demonstration projects at scale, in 
the order of a million tons per year.
    We view this as an important investment--almost as an 
insurance policy--because this provides us with the information 
and data that we will need to build these systems at scale over 
the longer time period.
    The second part associated with sequestration is the issue 
of capture of CO2 in the first place. And again, 
while we believe that many of the existing technology exists to 
be able to do that, and there are exciting developments taking 
place on a daily basis, again, we believe that these should be 
done at scale. We do not believe that focusing on IGCC per se 
is the right way to go.
    We, in fact, think that we need to look at a spectrum of 
technologies from pressurized oxified combustion processes, 
chemical looping combustion systems--there are many, many other 
technologies that are potentially out there that could 
significantly lower the cost of CO2 capture, but the 
issue is how to do it at scale. And, we believe that, again, 
that you need demonstration projects to show that you can, in 
fact, capture CO2 at that scale.
    The third point is that we basically need to put the two 
pieces of the problem together--how do you actually capture 
CO2 at scale, and how do you sequester it at scale? 
And, again, our belief is that the demonstration project should 
be supported with adequate monitoring, so that the data that's 
going to be available to help, builds public confidence that 
this is a viable option for mitigating carbon in the future.
    We believe that there are many opportunities for the United 
States to become leaders in the supply of this important 
technology to the rest of the world. These, and many other, 
topics are discussed in our report, and I thank you very much 
for the opportunity to discuss these this morning. Thank you.
    [The prepared statement of Dr. McRae follows:]

  Prepared Statement of Gregory J. McRae, Hoyt C. Hottel Professor of 
       Chemical Engineering, Department of Chemical Engineering, 
                 Massachusetts Institute of Technology

    Senator Kerry and Members of the Committee, good morning and thank 
you for the opportunity to address you on this important topic. My name 
is Gregory McRae and I am a professor of chemical engineering at the 
Massachusetts Institute of Technology. In addition to my research and 
teaching on energy and environmental issues I am also one of the co-
authors of the recent MIT Report called the Future of Coal--Options for 
a Carbon Constrained World.\1\ This study involved eleven colleagues 
from various disciplines at MIT as well as an external advisory group 
that represented diverse perspectives on the problem. This morning I 
would like to draw your attention to a few of the key recommendations 
from the report related to clean coal technology.
    Four key premises drove our study:

        1. There is a pressing need to address the global warming 
        problem. The risks are real and the United States and other 
        governments should take action to restrict the emissions of 
        carbon dioxide (CO2) and other greenhouse gases 
        (GHG).1,2

        2. Our second and equally important premise is that coal will 
        continue to play a large and indispensable role in a greenhouse 
        gas constrained world because it is cheap, abundant, and in the 
        short term one of the fuel sources that can meet, at scale, the 
        growing demands for electricity.

        3. We believe that CO2 capture and sequestration 
        (CCS) are the critical enabling technologies that would 
        significantly reduce CO2 emissions associated with 
        coal combustion. Much of the needed technology exists 
        (CO2 capture, transport and storage) but there is a 
        critical need for several large scale demonstration projects to 
        give policymakers and the public confidence that a practical 
        carbon mitigation control option exits.

        4. A key conclusion based on experience in other RD&D programs 
        is that the government should not pick a ``technology winner'' 
        per se, but rather create an environment that will enable the 
        development of a diverse range of cost effective options to 
        reduce green house gas emissions.

    These and other issues are discussed in much more detail in.\1\ In 
this morning's testimony I will focus on two key technical 
recommendations related to the future use of coal.

The Driving Force for Change
    The risk of adverse climate change from global warming is serious 
forced in part by growing greenhouse gas emissions. While projections 
vary, there is now wide acceptance among the scientific community that 
global warming is occurring, that the human contribution is important, 
and that the effects may impose significant costs on the world economy. 
As a result, governments are likely to adopt carbon mitigation policies 
that will restrict CO2 emissions; many developed countries 
have taken the first steps in this direction. For such carbon control 
policies to work efficiently, national economies will need to have many 
options available for reducing greenhouse gas emissions. The Future of 
Coal \1\ addresses one option, the continuing use of coal with reduced 
CO2 emissions.
    Coal is an especially crucial fuel in this uncertain world of 
future constraint on CO2 emissions. Because coal is abundant 
and relatively cheap ($1-$2 per million Btu, compared to $6-$12 per 
million Btu for natural gas and oil)--it is often the fuel of choice 
for electricity generation, and perhaps for extensive synthetic liquids 
production in the future in many parts of the world. Its low cost and 
wide availability make it especially attractive in major developing 
economies for meeting their pressing energy needs. On the other hand, 
coal faces significant environmental challenges in mining, air 
pollution (including both criteria pollutants and mercury) and 
importantly, emissions of carbon dioxide (CO2). Indeed coal 
is the largest contributor to global CO2 emissions from 
energy use (41 percent), and its share is projected to increase.
    The U.S. has 27 percent of the total global recoverable coal 
reserves, enough for about 250 years at current consumption. Over 50 
percent of U.S. electricity was generated from coal last year. It is 
important to understand the magnitude of CO2 emissions 
associated with power generation. A single 1,000 MWe coal-
based power plant emits between 5 and 8 million tonnes of 
CO2 per year. A few statistics give a sense of the enormity 
of the challenge.\4\

   There are the equivalent of more than five hundred 500 
        megawatt, coal-fired power plants in the United States with an 
        average age of 35 years.

   China is currently constructing the equivalent of two 500 
        megawatt, coal-fired power plants per week, a capacity 
        comparable to the entire U.K. power grid each year.

   At present the largest sequestration project is injecting 
        one million tons/year of carbon dioxide (CO2) from 
        the Sleipner gas field into a saline aquifer under the North 
        Sea.

    By mid-century, given the expectation that coal use will grow 
substantially, the annual sequestration of several gigatonnes of carbon 
dioxide is the scale needed for a major impact on climate change 
mitigation,. This translates into sequestration of the CO2 
emissions from many hundreds of utility scale plants worldwide. Each 
plant will need to capture millions of metric tonnes of CO2 
each year. Over a fifty-year lifetime, one such plant would inject 
about a billion barrels of compressed CO2 for sequestration 
5,6

Recommendation 1--Large Scale Demonstration of Carbon Dioxide Capture 
        and Storage (CCS)
    Carbon dioxide capture and sequestration (CCS) is the critical 
enabling technology that would reduce CO2 emissions 
significantly, while also allowing coal to meet the world's pressing 
energy needs. What is needed is a successful large-scale demonstration 
of the technical, economic, and environmental performance of the 
technologies that make up all of the major components of a large-scale 
integrated CCS system--capture, transportation, and storage.
    We have confidence that megatonne scale injection at multiple well-
characterized sites can start safely now, but an extensive program is 
needed to establish public confidence in the practical operation of 
large scale sequestration facilities over extended periods, and to 
demonstrate the technical and economic characteristics of the 
sequestration activity.1,6
    An important additional objective of the demonstration program is 
to create an explicit and rigorous regulatory process that gives the 
public and political leaders confidence in effective implementation of 
very large scale sequestration. A regulatory framework needs to be 
defined for sequestration projects, including site selection, injection 
operation, and eventual transfer of custody to public authorities after 
a period of successful operation.
    Present government and private sector sequestration projects are 
inadequate to demonstrate the practical implementation of large scale 
sequestration on a timely basis.
    Thus, we believe that the highest priority should be given to a 
program that for demonstrating CO2 sequestration at 
megatonne scale in several geologies, following ``bottom-up'' site 
characterization. For the United States, this means about three 
megatonne/year projects with appropriate modeling, monitoring and 
verification (MMV), focusing on deep saline aquifers. Each 
demonstration project should last about eight to 10 years. We estimate 
the cost for the total program to be about $500M over a decade, not 
including the cost of CO2 acquisition. The CO2 
costs are likely to be considerable and highly variable depending on 
the acquisition strategy (natural reservoirs, capture from existing 
plants, supply from large scale demonstrations of new coal combustion 
and conversion plants).1,6
    We estimate that for new plant construction, a CO2 
emission price of approximately $30/tonne (about $110/tonne C) would 
make CCS cost competitive with coal combustion and conversion systems 
without CCS. This would be sufficient to off set the cost of 
CO2 capture and pressurization (about $25/tonne) and 
CO2 transportation and storage (about $5/tonne). This 
estimate of CCS cost is uncertain; it might be larger and with new 
technology, perhaps smaller.
    The pace of deployment of coal-fired power plants with CCS depends 
both on the timing and level of CO2 emission prices and on 
the technical readiness and successful commercial demonstration of CCS 
technologies. The timing and the level of CO2 emission 
prices is uncertain. However, there should be no delay in undertaking a 
program that would establish the option to utilize CCS at large scale 
in response to a carbon emission control policy that would make CCS 
technology economic. Sequestration rates of one to two gigatonnes of 
carbon (nearly four to eight gigatonnes of CO2) per year by 
mid-century will enable appreciably enhanced coal use and significantly 
reduced CO2 emissions.
    In addition to the value of the scientific and engineering data 
that will emerge from this sequestration demonstration program, we 
should not underestimate the value of demonstrating the ability to 
successfully manage the program over an extended time. Such practical 
implementation experience will be important for public confidence in 
committing to very large sequestration over many decades.
    Our highest priority recommendation is that as soon as possible the 
Congress, the Department of Energy, and other private and public sector 
entities work to launch a sequestration demonstration program with the 
characteristics identified above, including those associated with 
development of the regulatory system. A sense of urgency has been 
absent and this needs to change.

Recommendation 2--Avoid Picking ``Technology Winners''
    Our second recommendation is for the U.S. Government to provide 
incentives to several alternative coal combustion and conversion 
technologies that employ CCS. At present, integrated gasification 
combined cycle (IGCC) is the leading candidate for electricity 
production with CO2 capture because it is estimated to have 
lower cost than pulverized coal with capture. For lower rank coals this 
choice may not be so clear, particularly as the traditional 
CO2 capture technology continues to improve.
    Thus, it is too early to declare IGCC the winner for all situations 
at this time.1,5 History teaches us that one single 
technology is almost never the winner in every situation. However, 
neither IGCC nor other coal technologies have been demonstrated with 
CCS at large scale. CO2 capture will add significantly to 
the Cost of Electricity (COE), independent of which approach is taken.
    It is critical that the government RD&D program not pick a 
technology ``winner'' especially at a time when there is great coal 
combustion and conversion development activity underway in the private 
sector in both the United States and abroad. Approaches with capture 
other than IGCC could prove as attractive with further technology 
development for example, oxygen-fired pulverized coal combustion, 
especially with lower quality coals. Of course, there will be 
improvements in IGCC as well. R&D is needed on sub-systems, for example 
on improved CO2 separation techniques for both oxygen and 
air driven power systems and for oxygen separation from air. The 
technology program would benefit from an extensive modeling and 
simulation effort in order to compare alternative technologies and 
integrated systems as well as to guide development. Novel separation 
schemes such as chemical looping should continue to be pursued at the 
process development unit (PDU) scale. The reality is that the diversity 
of coal type, e.g., heat, sulfur, water, and ash content, imply 
different operating conditions for any application and multiple 
technologies will likely be deployed.
    The U.S. Department of Energy (DOE) program needs considerable 
strengthening and diversification in looking at a range of basic 
enabling technologies that can have major impact in the years ahead, 
particularly in lowering the cost of coal use in a carbon-constrained 
world. This work needs to be done at laboratory or process development 
unit scale, not as part of large integrated system demonstrations. A 
significant increase in the DOE coal RD&D program is called for, as 
well as some restructuring.
    Government assistance is needed for a portfolio of coal combustion 
and conversion demonstration projects with CO2 capture--
IGCC, oxyfuel retrofits, new combustion technologies, coal to synthetic 
natural gas, chemicals and fuels are examples. Given the technical 
uncertainty and the current absence of a carbon dioxide emissions 
charge, there is no economic incentive for private firms to undertake 
such projects at any appreciable scale. The DOE coal program is not on 
a path to address our priority recommendations namely--enabling 
technology, sequestration demonstrations, coal combustion and 
conversion demonstrations with capture. The level of funding falls far 
short of what is required and perhaps as a result the program is 
imbalanced.
    The flagship project FutureGen is consistent with our priority 
recommendation to initiate integrated demonstration projects at scale. 
However, we are concerned that the project needs more clarity in its 
objectives. Specifically, a project of this scale and complex system 
integration should be viewed as a demonstration of commercial viability 
at a future time when a meaningful carbon policy is in place. Its 
principal call on taxpayer dollars is to provide information on such 
commercial viability to multiple constituencies, including the 
investment community. To provide high fidelity information, it needs to 
have freedom to operate in a commercial environment.
    We believe that the Congress should work with the Administration to 
clarify that the project objectives are commercial demonstration, not 
research, and reach an understanding on cost-sharing that is grounded 
in project realities and not in arbitrary historical formulas. In 
thinking about a broader set of coal technology demonstrations, 
including the acquisition of the CO2 needed for the 
sequestration demonstration projects, we suggest that a new quasi-
government corporation should be considered.
    The 2005 Energy Policy Act contains provisions that authorize 
Federal Government assistance for coal plants containing advanced 
technology projects with or without CCS. We believe this assistance 
should be directed only to plants with CCS, both new plants and 
retrofit applications on existing plants.

Recommendation 3--Regulatory Action
    Success at capping CO2 emissions ultimately depends upon 
adherence to CO2 mitigation policies by large developed and 
developing economies. We see little progress to moving toward the 
necessary international arrangements. Although the European Union has 
implemented a cap-and-trade program covering approximately half of its 
CO2 emissions, the United States has not yet adopted 
mandatory policies at the Federal level. U.S. leadership in emissions 
reduction is a likely prerequisite to substantial action by emerging 
economies. Recent developments in the American business sector and in 
Congress are encouraging.
    A more aggressive U.S. policy appears in line with developing 
public attitudes. Our study has polled the American public, following a 
similar poll conducted for the earlier MIT study on nuclear power. 
Americans now rank global warming as the number one environmental 
problem facing the country, and seventy percent of the American public 
think that the U.S. Government needs to do more to reduce greenhouse 
gas emissions. Willingness to pay to solve this problem has grown 50 
percent over the past 3 years.

Conclusion
    In conclusion the central message of the MIT study on the Future of 
Coal is that demonstration of technical, economic, and institutional 
features of carbon capture and sequestration at commercial scale coal 
combustion and conversion plants, will (1) give policymakers and the 
public confidence that a practical carbon mitigation control option 
exists, (2) shorten the deployment time and reduce the cost for carbon 
capture and sequestration should a carbon emission control policy be 
adopted, and (3) maintain opportunities for the lowest cost and most 
widely available energy form to be used to meet the world's pressing 
energy needs in an environmentally acceptable manner.
    Mr. Chairman, thank you again for inviting my testimony on this 
important topic.

References
    1. The Future of Coal--Options for a Carbon Constrained World, 
Massachusetts Institute of technology, 2007. (See the website http://
web.mit.edu/coal for the report and the executive summary).
    2. Ernest J. Moniz and John M. Deutch, Hearing on the MIT 
Interdisciplinary Study: The Future of Coal, Options for a Carbon-
Constrained World, Comments made to the Senate Committee on Energy and 
Natural Resources, 22 March 2007, Washington, D.C.
    3. Intergovernmental Panel on Climate Change, Climate Change 2007: 
The physical science basis, Summary for Policy makers, http://
www.ipcc.ch/.
    4. A few statistics from \1\ that illustrate the scale of the 
problem.

   50 percent of the electricity generated in the U.S. is from 
        coal.

   Today fossil sources account for 80 percent of energy 
        demand: Coal (25 percent), natural gas (21 percent), petroleum 
        (34 percent), nuclear (6.5 percent), hydro (2.2 percent), and 
        biomass and waste (11 percent). Only 0.4 percent of global 
        energy demand is met by geothermal, solar and wind.

   There are the equivalent of more than five hundred, 500 
        megawatt, coal-fired power plants in the United States with an 
        average age of 35 years.

   China is currently constructing the equivalent of two, 500 
        megawatt, coal-fired power plants per week and a capacity 
        comparable to the entire U.K. power grid each year.

   One 500 megawatt coal-fired power plant produces 
        approximately 3 million tons/year of carbon dioxide 
        (CO2).

   The United States produces about 1.5 billion tons per year 
        of CO2 from coal-burning power plants.

   At present the largest sequestration project is injecting 
        one million tons/year of carbon dioxide (CO2) from 
        the Sleipner gas field into a saline aquifer under the North 
        Sea.

    5. James R. Katzer, Coal-Based Power Generation with CO2 
Capture and Sequestration, Comments made to the Senate Committee, on 
Commerce, Science, and Transportation, Science, Energy, and Innovation 
Subcommittee, March 20, 2007, Washington, D.C.
    6. Julio Friedmann, Technical Feasibility of Rapid Deployment of 
Geological Carbon Sequestration, Comments made to the House Energy and 
Commerce Committee, Energy and Air Quality Subcommittee. 2007: 
Washington, D.C.

    Senator Kerry. Well, we welcome it. Thank you very much.
    Mr. Rencheck?

         STATEMENT OF MICHAEL W. RENCHECK, SENIOR VICE

          PRESIDENT--ENGINEERING, PROJECTS, AND FIELD

               SERVICES, AMERICAN ELECTRIC POWER

    Mr. Rencheck. Good morning, Mr. Chairman and Members of the 
Committee. Thank you for inviting me to participate in this 
hearing.
    I am Mike Rencheck, Senior Vice President of Engineering, 
Projects, and Field Services for American Electric Power.
    American Electric Power is one of our nation's largest 
utilities with more than 5 million customers in 11 states. We 
are also one of the Nation's largest power generators, with 
more than 38,000 megawatts of generating capacity from a 
diverse fleet.
    But of particular note for today, AEP is one of the largest 
coal-fired generators in the U.S., and we have implemented a 
portfolio of voluntary actions to reduce and avoid and offset 
greenhouse gases during the past decade.
    Coal generates over 50 percent of the electricity used in 
the U.S., and is extensively used worldwide. As the demand for 
electricity increases significantly, coal use will increase as 
well. In the future, coal-fired electric generation must be 
zero emission, or near-zero emission. This will be achieved 
through new technologies that are being developed today, and 
are not yet commercially proven, or commercially available. 
Like most companies in our sector, AEP needs new generation. We 
are investing in a new clean coal technology that will enable 
AEP, and our industry, to meet the challenge of reducing 
greenhouse gases in the near-term, and for the long-term. This 
includes plans to build new, integrated gasification combined 
cycle plants, IGCC plants, and two state-of-the-art, ultra 
supercritical coal units. These will be the first of the new 
generation of ultra supercritical plants in the U.S.
    AEP is also taking the lead in commercializing carbon 
capture technology for use on new generation, and more 
importantly, for retrofitting the existing generation fleet.
    We signed a Memorandum of Understanding with Alstom for 
post-carbon capture combustion technology, using Alstom's 
chilled ammonia system. Starting with a commercial performance 
verification project in mid- to late-2008 in West Virginia--a 
project that will also include storage and capture of carbon 
dioxide in a saline aquifer, we will move then--after that's 
completed--to the first commercial-size project at one of our 
450-megawatt coal plants, our Northeastern plant, in Oklahoma, 
in 2011.
    This would capture about 1.5 million metric tons of 
CO2 a year, which will be used for enhanced oil 
recovery. We are also working with Babcock & Wilcox to take its 
oxy-coal combustion technology from the drawing board, to a 
commercial-scale application in the next decade.
    AEP is very comfortable leading the way on technology. We 
have had a long and impressive list of technological firsts 
during our first 100 years, being in existence. But, we have 
identified one very important caveat during our century of 
technological achievement, and engineering excellence--
providing a technology to be commercially viable, and having 
that technology ready for widespread commercial use, are two 
very different things. It takes time to develop off-the-shelf 
commercial offerings for technology to be widely deployed.
    AEP is not calling for an indefinite delay in the enactment 
of mandatory climate change legislation until advanced 
technology, such as carbon capture and storage is developed, 
however, as the requirements become more stringent during the 
next 10 to 20 years, and we move beyond the ability of current 
technology to deliver those reductions, it is essential that 
requirements for deeper reductions allow sufficient time for 
the demonstration and commercialization of technologies.
    How can you help? It is also important to establish 
specific public funding, as well as incentives for private 
funding, for the development of commercially viable technology 
solutions, as well as providing the legal and regulatory 
structures to facilitate development.
    AEP believes that IGCC and carbon capture technology need 
to be advanced, but the building of IGCC and the timely 
development of commercially viable carbon capture technologies 
will require additional public funding.
    AEP and others in our sector have already invested heavily 
in the research and early development of the technologies that 
may eventually be commercially viable solutions to address 
greenhouse gases. For this reason, separate investment tax 
credits are needed to facilitate both construction of IGCC 
plants now, and the development of carbon capture technologies 
for future use.
    Of significance here, the final decider on the type of 
power generation that can be built in many states is the public 
utility commission of that state. That commission determines 
how, or if, a utility can recover the cost of new generation, 
or retrofits of existing generation.
    How do you reconcile a Federal mandate for expensive 
greenhouse gas mitigation with states that desire to cap energy 
costs? The utilities and their shareholders remain caught in 
the middle, and need your help to research, develop, and build 
this type of generation.
    American industry has long been staffed by excellent 
problem solvers, I am confident that we will be able to develop 
technologies to efficiently address emissions of greenhouse 
gases, in an increasingly cost-effective manner. We have the 
brain power, we need time, funding assistance, and legal and 
regulatory support.
    Thank you very much.
    [The prepared statement of Mr. Rencheck follows:]

   Prepared Statement of Michael W. Rencheck, Senior Vice President--
   Engineering, Projects, and Field Services, American Electric Power

    Good morning, Mr. Chairman and distinguished Members of the Senate 
Subcommittee on Science, Technology, and Innovation.
    Thank you for inviting me here today. Thank you for this 
opportunity to offer the views of American Electric Power (AEP) and for 
soliciting the views of our industry and others on climate change 
technologies.
    My name is Mike Rencheck, Senior Vice President--Engineering, 
Projects and Field Services of American Electric Power (AEP). 
Headquartered in Columbus, Ohio, we are one of the Nation's largest 
electricity generators--with over 36,000 megawatts of generating 
capacity--and serve more than five million retail consumers in 11 
states in the Midwest and south central regions of our Nation. AEP's 
generating fleet employs diverse sources of fuel--including coal, 
nuclear, hydroelectric, natural gas, and oil and wind power. But of 
particular importance for the Committee members here today, AEP uses 
more coal than any other electricity generator in the Western 
hemisphere.

AEP's Technology Development
    Over the last 100 years, AEP has been an industry leader in 
developing and deploying new technologies beginning with the first high 
voltage transmission lines at 345 kilovolt (kV) and 765 kV to new and 
more efficient coal power plants starting with the large central 
station power plant progressing to supercritical and ultrasupercritical 
powers plants. We are continuing that today. We implemented over 11 
selective catalytic reactors (SCRs), 9 Flue Gas Desulphurization units 
with others currently under construction, and we are a leader in 
developing and deploying mercury capture and monitoring technology. In 
addition, we continue to invest in new clean coal technology plants and 
R&D that will enable AEP and our industry to meet the challenge of 
significantly reducing GHG emissions in future years. For example, AEP 
is working to build two new generating plants using integrated 
gasification combined cycle (IGCC) technology in Ohio and West 
Virginia, as well as two highly efficient new generating plants using 
the most advanced (e.g., ultrasupercritical) pulverized coal combustion 
technology in Arkansas and Oklahoma. We are also supporting a leading 
role in the FutureGen project, which once completed, will be the 
world's first near-zero CO2 emitting commercial scale coal-
fueled power plant. We are also working to progress specific carbon 
capture and storage technology.

AEP's Major New Initiative to Reduce GHG Emissions
    Just this past month, AEP announced several major new initiatives 
to reduce AEP's GHG emissions and to advance the commercial application 
of carbon capture and storage technology and oxy-coal combustion. Our 
company has been advancing technology for the electric utility industry 
for more than 100 years. AEP's recent announcement continues to build 
upon this heritage. Technology development needs are often cited as an 
excuse for inaction. We see these needs as opportunities for action.
    AEP has signed a memorandum of understanding (MOU) with Alstom, a 
worldwide leader in equipment and services for power generation, for 
post-combustion carbon capture technology using Alstom's chilled 
ammonia system. It will be installed at our 1,300-megawatt Mountaineer 
Plant in New Haven, W.Va. as a ``30-megawatt (thermal) commercial 
performance verification'' project in mid to late 2008 and it will 
capture up to 100,000 metric tons of carbon dioxide (CO2) 
per year. Once the CO2 is captured we will store it. The 
Mountaineer site has an existing deep saline aquifer injection well 
previously developed in conjunction with DOE and Battelle. Working with 
Battelle and with continued DOE support, we will use this well (and 
develop others) to store and further study CO2 injection 
into deep geological formations.
    Following the completion of commercial verification at Mountaineer, 
AEP plans to install Alstom's system on one of the 450-megawatt coal-
fired units at its Northeastern Plant in Oologah, Oklahoma, as a first-
of-a-kind commercial demonstration. The system is expected to be 
operational at Northeastern Plant in late 2011, capturing about 1.5 
million metric tons of CO2 a year. The CO2 
captured at Northeastern Plant will also be used for enhanced oil 
recovery.
    AEP has also signed an MOU with Babcock and Wilcox to pursue the 
development of oxy-coal combustion that uses oxygen in lieu of air for 
combustion, which forms a concentrated CO2 post combustion 
gas that can be stored without additional post combustion capture 
processes. AEP will work with B&W on a ``30-megawatt (thermal) pilot 
project in mid-2007 then use the results to study the feasibility of a 
scale 100-200 Mw demonstration.'' The CO2 from the 
demonstration project would be captured and stored in a deep saline or 
enhanced oil recovery application.
    Just last month, AEP voluntarily committed to achieve an additional 
five million tons of GHG reductions annually beginning in 2011. We will 
accomplish these reductions through a new AEP initiative that will add 
another 1,000 Mw of purchased wind power into our system, substantially 
increase our forestry investments (in addition to the 62 million trees 
we have planted to date), as well as invest in domestic offsets, such 
as methane capture from agriculture, mines and landfills.

AEP Perspectives on a Federal GHG Reduction Program
    While AEP has done much, and will do much more, to mitigate GHG 
emissions from its existing sources, we also support the adoption of an 
economy-wide cap-and-trade type GHG reduction program that is well 
thought-out, achievable, and reasonable. Although today I intend to 
focus on the need for the development and deployment of commercially 
viable technologies to address climate change and not on the specific 
policies issues that must be addressed, AEP believes that legislation 
can be crafted that does not impede AEP's ability to provide reliable, 
reasonably priced electricity to support the economic well-being of our 
customers, and includes mechanisms that foster international 
participation and avoid creating inequities and competitive issues that 
would harm the U.S. economy. AEP supports reasonable legislation, and 
is not calling for an indefinite delay until advanced technology such 
as carbon capture and storage (CCS) is developed. However, as the 
requirements become more stringent during the next ten to twenty years, 
and we move beyond the ability of current technology to deliver those 
reductions, it is essential that requirements for deeper reductions 
coincide with the commercialization of advanced technologies.

Phased-in Timing and Gradually Increasing Level of Reductions 
        Consistent with Technology Development that is facilitated by 
        Public Funding
    As a practical matter, implementing climate legislation is a 
complex undertaking that will require procedures for measuring, 
verifying, and accounting for GHG emissions, as well as for designing 
efficient administration and enforcement procedures applicable to all 
sectors of our economy. Only a pragmatic approach with achievable 
targets, supported by commercial technology, and reasonable 
timetables--that does not require too many reductions within too short 
a time period--will succeed. Past experience with the Clean Air Act 
Amendments of 1990 (which involved a vastly simpler SO2 
allowance trading system for just the electric power sector), strongly 
suggests that a minimum of 5 years will be necessary to have the 
administrative mechanisms in place for full implementation of the 
initial GHG emission targets.
    AEP also believes that the level of emissions reductions and timing 
of those reductions under a Federal mandate must keep pace with 
developing technologies for reducing GHG emissions from new and 
existing sources. The technologies for effective carbon capture and 
storage from coal-fired facilities are developing, but are not 
commercially engineered to meet production needs, and cannot be 
artificially accelerated through unrealistic reduction mandates.
    While AEP and other companies have successfully lowered their 
average emissions and emission rates during this decade, further 
substantial reductions will require the wide-scale commercial 
availability of new clean coal technologies. AEP believes that the 
electric power industry can potentially manage much of the expected 
economic (and CO2 emissions) growth over the course of the 
next decade (2010-2020) through aggressively deploying renewable 
energy, further gains in supply and demand-side energy efficiency, and 
new emission offset projects. As stated above, AEP supports reasonable 
legislation, and is not calling for an indefinite delay of GHG 
reduction obligations until advanced clean coal technology is 
developed. However, as the reduction requirements become more 
stringent, and move beyond the ability of current technologies to 
deliver those reductions, it is important that those stringent 
requirements coincide with the commercialization of advanced 
technology. This includes the next generation of low- and zero-emitting 
technologies. In the case of coal, this means demonstration and full-
scale deployment of new IGCC units with carbon capture, new 
ultrasupercritical or oxy-coal plants with carbon capture and storage, 
as well as broad deployment of retrofit technologies for carbon capture 
and storage at existing coal plants. The next generation of nuclear 
technology will also play an important role in meeting significant 
reduction targets.
    However, today's costs of new clean coal technologies with carbon 
capture and storage are much more expensive than current coal-fired 
technologies. For example, carbon capture and storage using current 
inhibited monoethanolamine (MEA) technology is expected to increase the 
cost of electricity from a new coal-fired power plant by about 60-70 
percent and even the newer chilled ammonia carbon capture technology we 
plan to deploy on a commercial sized scale by 2012 at one of our 
existing coal-fired units will result in significantly higher costs. It 
is only through the steady and judicious advancement of these 
applications during the course of the next decade that we can start to 
bring these costs down, in order to avoid substantial electricity rate 
shocks and undue harm to the U.S. economy.
    Simply put, our Nation cannot wait a decade or longer to begin the 
development and commercialization of IGCC and carbon capture and 
sequestration technologies. The need for new electric generating 
capacity is upon us now. The need is real and it is pressing. 
Unfortunately, the deployment of advanced coal electric generation 
technology, such as IGCC, is expensive now and will only become more so 
if development is postponed.
    AEP believes that IGCC is the best commercially-ready technology 
for the future inclusion of CCS but that the timely development of 
commercially viable CCS technologies will require additional public 
funding. Our IGCC plants will incorporate the space and layout for the 
addition of components to capture CO2 for sequestration, but 
AEP does not plan to incorporate CCS equipment until after the plants 
are operating and the technology is demonstrated and proven.
    Our IGCC plants will be among the earliest, if not the first, 
deployments of large-scale IGCC technology. The cost of constructing 
these plants will be high, resulting in a cost of generated electricity 
that would be at least twenty percent greater than that from 
conventional pulverized coal (PC) combustion technology. As more plants 
are built, the costs of construction are expected to come into line 
with the cost of PC plants.
    To help bridge the cost gap and move IGCC technology down the cost 
curve, there is a need for continuation and expansion of the advanced 
coal project tax credits that were introduced by the Energy Policy Act 
of 2005. All of the available tax credits for IGCC projects using 
bituminous coal were allocated to only two projects during the initial 
allocation round in 2006. More IGCC plants are needed to facilitate 
this technology. AEP believes an additional one billion dollars of 
section 48A (of the Internal Revenue Code) tax credits are needed, with 
the bulk of that dedicated to IGCC projects without regard to coal 
type.
    Along with an increase in the amount of the credits, changes are 
needed in the manner in which the credits are allocated. Advanced coal 
project credits should be allocated based on net generating capacity 
and not based upon the estimated gross nameplate generating capacity of 
projects. Allocation based upon gross, rather than net, generating 
capacity potentially rewards less efficient projects, which is 
antithetical to the purpose of advanced coal project tax incentives. 
AEP also believes that the Secretary of Energy should be delegated a 
significant role in the selection of IGCC projects that will receive 
tax credits.
    On a critical note, the inclusion of carbon capture and 
sequestration equipment must not be a prerequisite for the allocation 
of these additional tax credits due to the urgent need for new electric 
generating capacity in the U.S. AEP also believes that this requirement 
is premature and self-defeating, since the technology to capture and 
sequester a significant portion of an IGCC project's CO2 
does not currently exist. The addition of yet-to-be-developed carbon 
capture and sequestration technology to an IGCC project would cause the 
projected cost of a project to increase significantly, making it that 
much more difficult for a public utility commission to approve.
    AEP also believes that additional tax incentives are needed to spur 
the development and deployment of greenhouse gas capture and 
sequestration equipment for all types of coal-fired generation. We 
suggest that additional tax credits be established to offset a 
significant portion of the incremental cost of capturing and 
sequestering CO2. These incentives could be structured 
partly as an investment tax credit, similar to that in section 48A (of 
the Internal Revenue Code), to cover the upfront capital cost, and 
partly as a production tax credit to cover the associated operating 
costs.
    In summary, AEP recommends a pragmatic approach for phasing in GHG 
reductions through a cap-and-trade program coincident with developing 
technologies to support these reductions. The emissions cap should be 
reasonable and achievable. In the early years of the program, the cap 
should be set at levels that slow the increase in GHG emissions. 
Allowing for moderate emissions increases over the first decade is 
critical due to limitations on currently available GHG control options 
and technologies. The stringency of the cap would increase over time--
first stabilizing emissions and then requiring a gradual, long-term 
decline in emissions levels. The cap levels should be set to reflect 
projected advances in new carbon-saving technologies, which advances 
AEP believes can be facilitated by Federal incentives. In the case of 
the electric power sector, additional time is necessary to allow for 
the deployment of new nuclear plants as well as the demonstration and 
deployment of commercial-scale gasification and advanced combustion 
facilities fully integrated with technologies for CO2 
capture and storage. Substantial GHG reductions should not be required 
until after the 2020 time-frame.
    Requiring much deeper reductions sooner would very likely harm the 
U.S. economy. For AEP and the electric sector, the only currently 
available strategy to achieve substantial absolute CO2 
reductions prior to 2020 without the full-scale deployment of new 
technologies will inevitably require much greater use of natural gas, 
in lieu of coal-fueled electricity, with the undesirable effects of 
higher natural gas prices and even tighter supplies.

Technology is the Answer to Climate Change
    The primary human-induced cause of global warming is the emission 
of CO2 arising from the burning of fossil fuels. Put simply, 
our primary contribution to climate change is also what drives the 
global economic engine.
    Changing consumer behavior by buying efficient appliances and cars, 
by driving less, and by similar steps, is helping to reduce the growth 
of GHG emissions. However, these steps will never be nearly enough to 
significantly reduce CO2 emissions from the burning of coal, 
oil and natural gas. Such incremental steps, while important, will 
never be sufficient to stabilize greenhouse gases concentrations in the 
atmosphere at a level that is believed to be capable of preventing 
dangerous human-induced interference with the climate system, as called 
for in the U.S.-approved U.N. Framework Convention on Climate Change 
(Rio agreement).
    For that, we need major technological advances to effectively 
capture and store CO2. The Congress and indeed all Americans 
must come to recognize the gigantic undertaking and significant 
sacrifices that this enterprise is likely to require. It is unrealistic 
to assume, and wrong to argue, that the market will magically respond 
simply by the imposition of severe caps on CO2 emissions. 
The result will not be a positive response by the market, but rather a 
severe impact on the economy. Not when what we are talking about, on a 
large scale, is the capture and geologic storage of billions and 
billions of tons of CO2 with technologies that have not yet 
been proven anywhere in the world.
    CCS should not be mandated until and unless it has been 
demonstrated to be effective and the costs have significantly dropped 
so that it becomes commercially engineered and available on a 
widespread basis. Until that threshold is met, it would be 
technologically unrealistic and economically unacceptable to require 
the widespread installation of carbon capture equipment. The use of 
deep saline geologic formations as the primary long-term geologic 
formations for CO2 storage has not yet been sufficiently 
demonstrated. There are no national standards for permitting such 
storage reservoirs; there are no widely accepted monitoring protocols; 
and the standards for liability are unknown (and whether Federal or 
state laws would apply), as well as who owns the rights to these deep 
geologic reservoirs remains a question. Underscoring these realities, 
industrial insurance companies point to a lack of scientific data on 
CO2 storage as one reason they are disinclined to insure 
early projects. In a nutshell, the institutional infrastructure to 
support CO2 storage does not yet exist and will require 
years to develop. In addition, application of today's CO2 
capture technology would significantly increase the cost of an IGCC or 
a new efficient pulverized coal plant, calling into serious question 
regulatory approval for the costs of such a plant by state regulators. 
Further, recent studies sponsored by the Electric Power Research 
Institute (EPRI) suggest that application of today's CO2 
capture technology would increase the cost of electricity from an IGCC 
plant by up to 50 percent, and boost the cost of electricity from a 
conventional pulverized coal plant by up to 60-70 percent, which would 
again jeopardize state regulatory approval for the costs of such 
plants.
    Despite these uncertainties, I believe that we must aggressively 
explore the viability of this technology in several first-of-a-kind 
commercial projects. AEP is committed to help lead the way, and to show 
how this can be done. For example, as described earlier in this 
testimony, AEP will install carbon capture controls on two existing 
coal-fired power plants, the first commercial use of this technology, 
as part of our comprehensive strategy to reduce, avoid or offset GHG 
emissions.
    AEP is also building two state-of-the-art advanced 
ultrasupercritical power plants in Oklahoma and Arkansas. These will be 
the first of the new generation of ultrasupercritical plants in the 
U.S.
    AEP is also advancing the development of IGCC technology. IGCC 
represents a major breakthrough in our work to improve the 
environmental performance of coal-based electric power generation. AEP 
is in the process of permitting and designing two of the earliest 
commercial scale IGCC plants in the Nation. Construction of the IGCC 
plants will start once traditional rate recovery is approved.
    IGCC technology integrates two proven processes--coal gasification 
and combined cycle power generation--to convert coal into electricity 
more efficiently and cleanly than any existing uncontrolled power 
plants can. Not only is it cleaner and more efficient than today's 
installed power plants, but IGCC has the potential to be retrofitted in 
the future for carbon capture at a lower capital cost and with less of 
an energy penalty than traditional power plant technologies, but only 
after the technology has been developed and proven.
    AEP is also a founding member of FutureGen, a groundbreaking 
public-private collaboration that aims squarely at making near-zero-
emissions coal-based energy a reality. FutureGen is a $1.5 billion, 10-
year research and demonstration project. It is on track to create the 
world's first coal-fueled, near-zero emission electricity and hydrogen 
plant with the capability to capture and sequester at least 90 percent 
of its carbon dioxide emissions.
    As an R&D plant, FutureGen will stretch--and indeed create--the 
technology envelope. Within the context of our fight to combat global 
climate change, FutureGen has a truly profound mission--to validate the 
cost and performance baselines of a fully integrated, near zero-
emission coal-fueled power plant.
    The design of the FutureGen plant is already underway, and we are 
making great progress. The plant will be on-line early in the next 
decade. By the latter part of that decade, following on the 
advancements demonstrated by AEP, FutureGen and other projects, CCS 
technology should become a commercial reality.
    It is when these technologies are commercially demonstrated, and 
only then, that commercial orders will be placed on a widespread basis 
to implement CCS at coal-fueled power plants. That is, roughly around 
2020. Widespread deployment assumes that a host of other important 
issues have been resolved, and there is governmental and public 
acceptance of CCS as the proven and safe technology that we now believe 
it to be. AEP supports rapid action on climate change including the 
enactment of well thought-out and achievable legislation so that our 
Nation can get started on dealing with climate change. However, the 
complete transformation of the U.S. electricity system will take time, 
and we can't put policy ahead of the availability of cost-effective 
technology. The development of technology must coincide with any 
increase in the stringency of the program.
    What will happen if the Congress does the opposite, and mandates 
deep reductions in the absence of a proven, viable technology? It is 
the proverbial road of good intentions, and only dangerous consequences 
can follow. The most immediate would be a dramatic--and very likely 
costly--increase in the use and price of natural gas by the utility 
sector, since there would be no other identifiable alternative. This 
would have significant adverse impacts on consumers and workers by 
driving up the cost of gas for home heating and cooking, and would 
further increase costs to any industry dependent upon natural gas as a 
feedstock, such as chemicals and agriculture with a further exporting 
of jobs overseas.
    A huge challenge that our society faces over the remainder of this 
century is how we will reduce the release of GHG emissions from fossil 
fuels. This will require nothing less than the complete reengineering 
of the entire global energy system over the next century. The magnitude 
of this task is comparable to the industrial revolution, but for this 
revolution to be successful, it must stimulate new technologies and new 
behaviors in all major sectors of the economy. The benefits of projects 
like FutureGen and the ones AEP is pursuing will apply to all countries 
blessed with an abundance of coal, not only the United States, but also 
nations like China and India.
    In the end, the only sure path to stabilizing GHG concentrations 
over the long term is through the development and utilization of 
advanced technologies. And we must do more than simply call for it. Our 
nation must prepare, inspire, guide, and support our citizens and the 
very best and the brightest of our engineers and scientists; private 
industry must step up and start to construct the first commercial 
plants; and our country must devote adequate financial and 
technological resources to this enormous challenge. AEP is committed to 
being a part of this important process, and to helping you achieve the 
best outcome at the most reasonable cost and timelines possible. Thank 
you again for this opportunity to share these views with you.
                                 ______
                                 
                                              NEWS from AEP
Media Contact:
Pat D. Hemlepp
Director, Corporate Media Relations
Analysts Contact:
Julie Sloat
Vice President, Investor Relations
For Immediate Release
AEP to Install Carbon Capture on Two Existing Power Plants; Company 
        Will Be First to Move Technology to Commercial Scale
    As climate policy advances, ``it's time to advance technology for 
commercial use,'' CEO says Columbus, Ohio, March 15, 2007--American 
Electric Power (NYSE:AEP) will install carbon capture on two coal-fired 
power plants, the first commercial use of technologies to significantly 
reduce carbon dioxide emissions from existing plants.
    The first project is expected to complete its product validation 
phase in 2008 and begin commercial operation in 2011.
    ``AEP has been the company advancing technology for the electric 
utility industry for more than 100 years,'' said Michael G. Morris, AEP 
chairman, president and chief executive officer. ``This long heritage, 
the backbone of our company's success, makes us very comfortable taking 
action on carbon emissions and accelerating advancement of the 
technology. Technology development needs are often cited as an excuse 
for inaction. We see these needs as an opportunity for action.''
    ``With Congress expected to take action on greenhouse gas issues in 
climate legislation, it's time to advance this technology for 
commercial use,'' Morris said. ``And we will continue working with 
Congress as it crafts climate policy. It is important that the U.S. 
climate policy be well thought out, establish reasonable targets and 
timetables, and include mechanisms to prevent trade imbalances that 
would damage the U.S. economy.''
    Morris will discuss AEP's plans for carbon capture during a 
presentation today at the Morgan Stanley Global Electricity & Energy 
Conference in New York. A live webcast of the presentation to an 
audience of investors will begin at 12:10 p.m. EDT and can be accessed 
through the Internet at http://www.aep.com/go/webcast. The webcast will 
also be available after the event. Visuals used in the presentation 
will be available at http://ww.aep.com/investors/present.
    AEP has signed a memorandum of understanding (MOU) with Alstom, a 
worldwide leader in equipment and services for power generation and 
clean coal, for post-combustion carbon capture technology using 
Alstom's Chilled Ammonia Process. This technology, which is being 
piloted this summer by Alstom on a 5-megawatt (thermal) slipstream from 
a plant in Wisconsin, will first be installed on AEP's 1,300-megawatt 
Mountaineer Plant in New Haven, W.Va., as a 30-megawatt (thermal) 
product validation in mid-2008 where up to 100,000 metric tons of 
carbon dioxide (CO2) will be captured per year. The captured 
CO2 will be designated for geological storage in deep saline 
aquifers at the site. Battelle Memorial Institute will serve as 
consultants for AEP on geological storage.
    Following the completion of product validation at Mountaineer, AEP 
will install Alstom's system on one of the 450-megawatt (electric) 
coal-fired units at its Northeastern Station in Oologah, Okla. Plans 
are for the commercial-scale system to be operational at Northeastern 
Station in late 2011. It is expected to capture about 1.5 million 
metric tons of CO2 a year. The CO2 captured at 
Northeastern Station will be used for enhanced oil recovery.
    Alstom's system captures CO2 by isolating the gas from 
the power plant's other flue gases and can significantly increase the 
efficiency of the CO2 capture process. The system chills the 
flue gas, recovering large quantities of water for recycle, and then 
utilizes a CO2 absorber in a similar way to absorbers used 
in systems that reduce sulfur dioxide emissions. The remaining low 
concentration of ammonia in the clean flue gas is captured by cold-
water wash and returned to the absorber. The CO2 is 
compressed to be sent to enhanced oil recovery or storage.
    In laboratory testing sponsored by Alstom, EPRI and others, the 
process has demonstrated the potential to capture more than 90 percent 
of CO2 at a cost that is far less expensive than other 
carbon capture technologies. It is applicable for use on new power 
plants as well as for the retrofit of existing coal-fired power plants.
    AEP has signed an MOU with The Babcock & Wilcox Company (B&W), a 
world leader in steam generation and pollution control equipment 
design, supply and service since 1867, for a feasibility study of oxy-
coal combustion technology. B&W, a subsidiary of McDermott 
International, Inc. (NYSE:MDR), will complete a pilot demonstration of 
the technology this summer at its 30-megawatt (thermal) Clean 
Environment Development Facility in Alliance, Ohio.
    Following this demonstration, AEP and B&W will conduct a retrofit 
feasibility study that will include selection of an existing AEP plant 
site for commercial-scale installation of the technology and cost 
estimates to complete that work. Once the retrofit feasibility study is 
completed, detailed design engineering and construction estimates to 
retrofit an existing AEP plant for commercial-scale CO2 
capture will begin. At the commercial scale, the captured 
CO2 will likely be stored in deep geologic formations. The 
plant, with oxy-coal combustion technology, is expected to be in 
service in the 2012-2015 time-frame.
    B&W, in collaboration with American Air Liquide Inc., has been 
developing oxy-coal combustion, a technology that utilizes pure oxygen 
for the combustion of coal. Current generation technologies use air, 
which contains nitrogen that is not utilized in the combustion process 
and is emitted with the flue gas. By using pure oxygen, oxy-coal 
combustion excludes nitrogen and leaves a flue gas that is a relatively 
pure stream of carbon dioxide that is ready for capture and storage. 
B&W's and Air Liquide's collaborative work on oxy-coal combustion began 
in the late 1990s and included pilot-scale development at B&W's 
facilities with encouraging results, burning both bituminous and sub-
bituminous coals.
    The oxy-coal combustion process, as envisioned, uses a standard, 
cryogenic air separation unit to provide relatively pure oxygen to the 
combustion process. This oxygen is mixed with recycled flue gas in a 
proprietary mixing device to replicate air, which may then be used to 
operate a boiler designed for regular air firing. The exhaust gas, 
consisting primarily of carbon dioxide, is first cleaned of traditional 
pollutants, then compressed and purified before storage. B&W, working 
with Air Liquide, can supply the equipment, technology and control 
systems to construct this new value chain, either as a new application 
or as a retrofit to an existing unit.
    The Alstom technology provides a post-combustion carbon capture 
system that is suitable for use in new plants as well as for 
retrofitting to existing plants. It requires significantly less energy 
to capture CO2 than other technologies currently being 
tested.
    The B&W technology provides a pre-combustion boiler conversion 
option for existing plants that promotes the creation of a pure 
CO2 stream in the flue gas.
    Both pre- and post-combustion technologies will be important for 
companies facing decisions on carbon reduction from the wide variety of 
coal-fired boiler designs currently in use.
    AEP anticipates seeking funding from the U.S. Department of Energy 
to help offset some of the costs of advancing these technologies for 
commercial use. The company will also work with utility commissions, 
environmental regulators and other key constituencies in states that 
have jurisdiction over the plants selected for retrofit to determine 
appropriate cost recovery and the impact on customers.
    ``We recognize that these projects represent a significant 
commitment of resources for AEP, but they are projects that will pay 
important dividends in the future for our customers and shareholders,'' 
Morris said. ``Coal is the fuel used to generate half of the Nation's 
electricity; it fuels about 75 percent of AEP's generating fleet. By 
advancing carbon capture technologies into commercial use, we are 
taking an important step to ensure the continued and long-term 
viability of our existing generation, just as we did when we were the 
first to begin a comprehensive, system-wide retrofit program for sulfur 
dioxide and nitrogen oxide emissions controls. We have completed the 
sulfur dioxide and nitrogen oxide retrofits on more than two-thirds of 
the capacity included in the program and we are on schedule to complete 
all retrofits by shortly after the end of the decade.''
    ``By being the first to advance carbon capture technology, we will 
be well-positioned to quickly and efficiently retrofit additional 
plants in our fleet with carbon capture systems while avoiding a 
potentially significant learning curve.''
    AEP has led the U.S. electric utility industry in taking action to 
reduce its greenhouse gas emissions. AEP was the first and largest U.S. 
utility to join the Chicago Climate Exchange (CCX), the world's first 
and North America's only voluntary, legally binding greenhouse gas 
emissions reduction and trading program. As a member of CCX, AEP 
committed to gradually reduce, avoid or offset its greenhouse gas 
emissions to 6 percent below the average of its 1998 to 2001 emission 
levels by 2010. Through this commitment, AEP will reduce or offset 
approximately 46 million metric tons of greenhouse gas emissions by the 
end of the decade.
    AEP is achieving its greenhouse gas reductions through a broad 
portfolio of actions, including power plant efficiency improvements, 
renewable generation such as wind and biomass co-firing, off-system 
greenhouse gas reduction projects, reforestation projects and the 
potential purchase of emission credits through CCX.
    American Electric Power is one of the largest electric utilities in 
the United States, delivering electricity to more than 5 million 
customers in 11 states. AEP ranks among the Nation's largest generators 
of electricity, owning nearly 36,000 megawatts of generating capacity 
in the U.S. AEP also owns the Nation's largest electricity transmission 
system, a nearly 39,000-mile network that includes more 765 kilovolt 
extra-high voltage transmission lines than all other U.S. transmission 
systems combined. AEP's utility units operate as AEP Ohio, AEP Texas, 
Appalachian Power (in Virginia and West Virginia), AEP Appalachian 
Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public 
Service Company of Oklahoma, and Southwestern Electric Power Company 
(in Arkansas, Louisiana and east Texas). AEP's headquarters are in 
Columbus, Ohio.
          * * * * * * *
    This report made by AEP and its Registrant Subsidiaries contains 
forward-Looking statements within the meaning of Section 21E of the 
Securities Exchange Act of 1934. Although AEP and each of its 
Registrant Subsidiaries believe that their expectations are based on 
reasonable assumptions, any such statements may be influenced by 
factors that could cause actual outcomes and results to be materially 
different from those projected. Among the factors that could cause 
actual results to differ materially from those in the forward-looking 
statements are: electric load and customer growth; weather conditions, 
including storms; available sources and costs of, and transportation 
for, fuels and the creditworthiness of fuel suppliers and transporters; 
availability of generating capacity and the performance of AEP's 
generating plants; AEP's ability to recover regulatory assets and 
stranded costs in connection with deregulation; AEP's ability to 
recover increases in fuel and other energy costs through regulated or 
competitive electric rates; AEP's ability to build or acquire 
generating capacity when needed at acceptable prices and terms and to 
recover those costs through applicable rate cases or competitive rates; 
new legislation, litigation and government regulation including 
requirements for reduced emissions of sulfur, nitrogen, mercury, 
carbon, soot or particulate matter and other substances; timing and 
resolution of pending and future rate cases, negotiations and other 
regulatory decisions (including rate or other recovery for new 
investments, transmission service and environmental compliance); 
resolution of litigation (including pending Clean Air Act enforcement 
actions and disputes arising from the bankruptcy of Enron Corp. and 
related matters); AEP's ability to constrain operation and maintenance 
costs; the economic climate and growth in AEP's service territory and 
changes in market demand and demographic patterns; inflationary and 
interest rate trends; AEP's ability to develop and execute a strategy 
based on a view regarding prices of electricity, natural gas and other 
energy-related commodities; changes in the creditworthiness of the 
counterparties with whom AEP has contractual arrangements, including 
participants in the energy trading market; actions of rating agencies, 
including changes in the ratings of debt; volatility and changes in 
markets for electricity, natural gas and other energy-related 
commodities; changes in utility regulation, including the potential for 
new legislation or regulation in Ohio and/or Virginia and membership in 
and integration into regional transmission organizations; accounting 
pronouncements periodically issued by accounting standard-setting 
bodies; the performance of AEP's pension and other post-retirement 
benefit plans; prices for power that AEP generates and sell at 
wholesale; changes in technology, particularly with respect to new, 
developing or alternative sources of generation; other risks and 
unforeseen events, including wars, the effects of terrorism (including 
increased security costs), embargoes and other catastrophic events.
                                 ______
                                 
Background: American Electric Power's Actions to Address Climate
Change GHG Reduction Commitment
    American Electric Power (AEP) was the first and largest U.S. 
utility to join the Chicago Climate Exchange (CCX) and make a legally 
binding commitment to gradually reduce or offset its greenhouse gas 
emissions to 6 percent below the average of 1998-2001 emission levels 
by 2010.
    As a founding member of CCX, AEP committed in 2003 to reduce or 
offset its emissions gradually to 4 percent below the average of 1998-
2001 emission levels by 2006 (1 percent reduction in 2003, 2 percent in 
2004, 3 percent in 2005 and 4 percent in 2006). In August 2005, AEP 
expanded and extended its commitment to a 6 percent reduction below the 
same baseline by 2010 (4.25 percent in 2007, 4.5 percent in 2008, 5 
percent in 2009 and 6 percent in 2010). Through this commitment, AEP 
expects to reduce or offset approximately 46 million metric tons of 
greenhouse gas emissions.

Operational Improvements
    AEP has been able to reduce its carbon dioxide (CO2) 
emissions by improving plant efficiency for its fossil-fueled plants 
through routine maintenance and investments like turbine blade 
enhancements (installing new turbine blades) and steam path 
replacements that improve the overall heat rate of a plant and, in 
turn, reduce CO2 emissions. A one-percent improvement in 
AEP's overall fleet efficiency can reduce the company's greenhouse gas 
emissions by 2 million metric tons per year.
    AEP has also reduced its CO2 emissions by improving the 
performance and availability of its nuclear generation. AEP's D.C. Cook 
Nuclear Plant in Michigan set plant records for generation and capacity 
factor in 2005. The plant had a capacity factor (energy generated as 
compared to the maximum possible) of 96.8 percent in 2005 and generated 
17,471 gigawatt-hours (GWH) of electricity. Additionally, AEP will 
invest $45 million to replace turbine motors in one unit at D.C. Cook 
in 2006, which will increase that unit's output by 41 megawatts.
    As a member of the U.S. EPA's Sulfur Hexafluoride (SF6) Emissions 
Reduction Partnership for Electric Power Systems, AEP has significantly 
reduced emissions of SF6, an extremely potent greenhouse gas, from 1999 
levels of 19,778 pounds (a leakage rate of 10 percent) to 2004 
emissions of 1,962 pounds (a leakage rate of 0.5 percent).

Managing Forests and Agricultural Lands for Carbon Sequestration
    To reduce carbon dioxide (CO2) concentrations in the 
global atmosphere, AEP has invested more than $27 million in 
terrestrial sequestration projects designed to conserve and reforest 
sensitive areas and offset more than 20 million metric tons of 
CO2 over the next 40 years. These projects include 
protecting nearly 4 million acres of threatened rainforest in Bolivia, 
restoring and protecting 20,000 acres of degraded or deforested 
tropical Atlantic rainforest in Brazil, reforesting nearly 10,000 acres 
of the Mississippi River Valley in Louisiana with bottomland hardwoods, 
restoring and protecting forest areas in the Sierra Madres of 
Guatemala, and planting trees on 23,000 acres of company-owned land.

Deploying Technology for Clean Coal Generation
    AEP is focused on developing and deploying new technology that will 
reduce the emissions, including greenhouse gas emissions, of future 
coal-based power generation. AEP announced in August 2004 its plans to 
build commercial-scale integrated gasification combined cycle (IGCC) 
plants to demonstrate the viability of this technology for future use 
of coal in generating electricity. AEP has filed for regulatory 
approval in Ohio and West Virginia to build a 629-megawatt IGCC plant 
in each of these states. The plants are scheduled to be operational in 
the 2010 to 2011 timeframe and will be designed to accommodate retrofit 
of technology to capture and sequester CO2 emissions.

Developing Technology for CO2 Capture and Storage
    AEP's Mountaineer Plant in New Haven, W.Va., is the site of a $4.2 
million carbon sequestration research project funded by the U.S. 
Department of Energy, the Ohio Coal Development Office, and a 
consortium of public and private sector participants. Scientists from 
Battelle Memorial Institute lead this climate change mitigation 
research project, which is designed to obtain data required to better 
understand and test the capability of deep saline aquifers for storage 
of carbon dioxide emissions from power plants.
    AEP is a member of the FutureGen Alliance, who, along with the 
Department of Energy, will build ``FutureGen,'' a $1 billion, near-zero 
emission plant to produce electricity and hydrogen from coal while 
capturing and disposing of carbon dioxide in geologic formations.
    Additionally, AEP funds research coordinated by the Massachusetts 
Institute of Technology Energy Laboratory and the Electric Power 
Research Institute that is evaluating the environmental impacts, 
technological approaches, and economic issues associated with carbon 
sequestration. The MIT research specifically focuses on efforts to 
better understand and reduce the cost of carbon separation and 
sequestration.

Renewable Energy and Clean Power
    AEP strongly supports increased renewable energy sources to help 
meet our Nation's energy needs. AEP is one of the larger generators and 
distributors of wind energy in the United States, operating 311 
megawatts (MW) of wind generation in Texas. The company also purchases 
and distributes an additional 373.5 megawatts of wind generation from 
wind facilities in Oklahoma and Texas. Additionally, AEP operates 2,285 
megawatts of nuclear generation and 884 megawatts of hydro and pumped 
storage generation.
    More than 125 schools participate in AEP's ``Learning From Light'' 
and ``Watts on Schools'' programs. Through these programs, AEP partners 
with learning institutions to install 1 kW solar photovoltaic systems, 
and uses these systems to track energy use and demonstrate how solar 
energy is a part of the total energy mix. Similarly, AEP's ``Learning 
From Wind'' program installs small-scale wind turbines to provide wind 
power education and renewable energy research at educational 
institutions.

Biomass Energy
    Until the company sold the plants in 2004, AEP co-fired biomass in 
4,000 MW of coal-based power generation in the United Kingdom 
(Fiddler's Ferry and Ferry Bridge). AEP has been evaluating and testing 
biomass co-firing for its smaller coal-fired power plants in the United 
States to evaluate potential reductions in CO2 emission 
levels.

Energy Conservation and Energy Efficiency
    AEP is implementing ``Energy Efficiency Plans'' to offset 10 
percent of the annual energy demand growth in its Texas service 
territory. In 2003 alone, AEP invested more than $8 million to achieve 
over 47 million kilowatt-hours (kWh) of reductions from installation of 
energy efficiency measures in customers' homes and businesses. Total 
investments for the four-year program will exceed $43 million, 
achieving more than 247 million kWh of energy efficiency gains.

2005 EPA Climate Protection Award
    In May 2005, the EPA selected AEP to receive a 2005 Climate 
Protection Award for demonstrating ingenuity, leadership and public 
purpose in its efforts to reduce greenhouse gases. EPA began the 
Climate Protection Awards program in 1998 to recognize outstanding 
efforts to protect the Earth's climate.

    Senator Kerry. Thank you very much, Mr. Rencheck, we 
appreciate that.
    Mr. Wilson?

                  STATEMENT OF JOHN M. WILSON,

                    CHIEF OPERATING OFFICER,

           SIEMENS ENVIRONMENTAL SYSTEMS AND SERVICES

    Mr. Wilson. Thank you very much. Greetings, Chairman Kerry, 
and the Committee.
    My name is John Wilson, I am the Chief Operating Officer 
for Siemens Environmental Systems and Services. It's a company 
created out of a 90-year-old air pollution control business.
    I'm really pleased to be able to give the overall 
presentation from the practical side for air pollution control 
here for clean coal.
    Today I'm speaking on behalf of Siemens power generation, 
it's a $10 billion organization, part of the $100 billion 
global infrastructure supplier. And, what I'd like to do, is 
really like to let you know about Siemens Power Generation 
first.
    We've basically grown by consolidating many of the well-
known companies out in the industry--Westinghouse, 
Wheelabrator, Bonus Energy, as well as the industrial turbine 
business of Alstom. And what we invest right now, every year, 
is about $600 million a year in R&D in the energy sector, so 
we're fully vested in this energy sector.
    Siemens recognizes that clean coal doesn't have to be an 
oxymoron, either, because that's our business. We basically 
focus on the safe environmental use of coal today, and in the 
future.
    So, what we've done, is we basically participate with DOE 
and bring our expertise to funding on clean coal technology 
programs like the hydrogen fuel gas turbine, like 
CO2 separation technologies, membrane technologies, 
oxy-fuel combustion, and ultra supercritical steam turbines. So 
we participate in that, all of these efforts because we believe 
that coal is going to be a part of our global future. As you 
mentioned, it's 50 percent today, in terms of electricity 
generation, growing to 60 percent by 2030, according to the 
Energy Administration.
    So, that's 325,000 megawatts, essentially, of installed 
base out there that's already operating--it's not going to go 
away--that's basically going to be there in providing our 
needs. It take decades, essentially for these plants to 
amortize their value, and my business is actually focused on 
cleaning up the emissions at these plants.
    We fundamentally are now in a boom, where we have State 
regulatory commissions, with consent decrees that are forcing 
higher levels of emissions controls on the existing plants. And 
so, what we see today, is that with the appropriate engineering 
design, we're able to design emissions control systems that 
basically are on par with the proposed IGCC plants that are out 
there today.
    There's a real potential for improvement, essentially, out 
there today in the existing fleet, because we see the 
opportunity and capability to retrofit these plants with 
additional controls that aren't deployed today. If you want to 
permit a new plant today, you have to have a full suite of 
environmental controls for a new source review, but 
fundamentally, the existing plants that are out there are not 
necessarily all compliant with that, and they're just now being 
upgraded.
    So, with the fact that there's a lot of technology out 
there, we also focus--as we've said--across the whole 
technology spectrum--gasification and gas-turbine technology 
for IGCC, emissions control, and ultra supercritical combustion 
based technologies. So, we provide essentially whatever the 
market asks for in terms of technology.
    But clearly efficiency, or CO2 avoidance, is 
superior to CO2 capture--either post-combustion or 
pre-combustion. So, we see the efficiency improvements in the 
existing fleet as one of the areas that we could look at. 
Because, clearly, with the average fleet efficiency of 33 
percent--and now plant technologies that are in excess of 40 
percent efficient--there's a great deal of improvement 
potential for the existing fleet, both in emissions and also in 
efficiency.
    Gasification is a real option, too. Basically, Siemens has 
over 320,000 hours of operation on gasification (or integrated 
gasification combined cycle) plants around the world. We've 
also recently acquired one of the leading gasification 
technologies. This technology is very favorable and works very 
well on Western coals, higher moisture coals and lower-quality 
coals. So, we're also part of the overall gasification 
technology business.
    But clearly the CO2 policy issue not only 
involves important advanced technology questions but also the 
ultimate cost to the consumer and the economy. For example, 
current estimates suggest that CO2 capture and 
storage will add several cents a kilowatt to existing utility 
bills.
    So, fundamentally, Siemens believes that the long-term 
storage of carbon, is one of the critical areas--that we have 
to focus on in the regulatory environment.
    So, in closing, I want to make it clear that there are 
existing technologies out there today to make the coal, much 
cleaner coal and that we are providers of most of these 
technologies. In addition, we'd like to see further R&D 
development across the suite of technologies because there is 
no clear ``winner'' technology today. We need investment and 
demonstration programs in all of these technologies because it 
takes years to prove out the right technology and the right 
application. We also support the development of industry-wide 
performance-based/efficiency-based standards as well as a 
reevaluation of the new source rules. These changes would 
facilitate the deployment of newer, more advanced coal-based 
technologies which would result in improved environmental 
performance, including CO2.
    Thank you very much.
    [The prepared statement of Mr. Wilson follows:]

Prepared Statement of John M. Wilson, Chief Operating Officer, Siemens 
                   Environmental Systems and Services

    Greetings, Chairman Kerry and Ranking Member Ensign and 
Subcommittee members. My name is John Wilson; I am the Chief Operating 
Officer of Siemens' Environmental Systems and Services business unit 
which was created out of a company with over 90 years of experience in 
air pollution control technology. I am honored to be here today to 
discuss the current state of clean coal technology from an 
infrastructure suppliers' perspective.
    Today I am speaking primarily on behalf of the power generation 
business at Siemens. For the last several years, I was the vice 
president of strategy for the Power Generation Group, headquartered in 
Orlando, Florida, and Erlangen Germany, which is a 10 billion dollar 
segment of Siemens 100 billion dollar global infrastructure business.
    Before I speak specifically to clean coal issues, I'd like to 
direct the Subcommittee's attention to a unique global project and 
recently published report entitled ``Megacity Challenges'' that is 
based upon research conducted by two independent organizations with the 
support of Siemens. The goal of the project was to carry out research 
at the megacity level to gather data as well as perspectives from 
mayors, city administrators and other experts on infrastructure 
challenges, like energy supply and delivery systems, in which this 
Subcommittee takes great interest. Over 500 public and private sector 
experts from 25 cities were interviewed. The results were fascinating, 
including the projection that by 2030 over 60 percent of the world's 
population will live in cities. The key megatrends identified in this 
report that are guiding Siemens' priorities are: healthcare challenges, 
urbanization and associated mobility challenges, scarcity of clean and 
reliable natural resources such as clean air and water, and reliable 
energy supplies. Siemens has been investing in the technologies that 
address these massive shifts that are driving the current and future 
needs of society. In addition to the energy infrastructure technologies 
that I will focus upon today, other examples of our forward-looking 
technologies include efficient lighting, automation and controls, 
intelligent traffic controls, water purification and efficient 
technologies for buildings and rapid transit.
    Siemens' power generation business has grown to its current size by 
consolidating some of the best known names in the power generation 
industry, such as Westinghouse, KWU, Parsons, Wheelabrator, Bonus 
Energy, and the Alstom industrial turbine business. Our technology 
portfolio in this business sector is comprehensive, and we will invest 
over $600 million in research and development in the next fiscal year 
in technology enhancements that will improve both efficiency and 
overall performance.
    Siemens recognizes that clean coal does not have to be an oxymoron, 
because there are many technologies that can facilitate the safe 
environmental use of coal, both today, and into the future, as an 
integral part of a balanced energy supply portfolio. As part of our 
strategy, we have been working jointly with the Department of Energy on 
several key efficiency and CO2 capture technologies which 
will play a role in the continued use of coal. Areas of cooperative 
research include:

   Development of hydrogen fueled gas turbines for gasification 
        plants, possibly one approach for reducing the carbon footprint 
        of power generation (FutureGen Alliance);

   Ion Transport Membrane (ITM) for improved efficiency in gas 
        separation.\1\ Efficient, low cost gas separation is a key 
        enabling technology as part of a CO2 mitigation 
        strategy;
---------------------------------------------------------------------------
    \1\ A cooperative venture with Air Products, Inc.

   Oxy-Fuel Turbine: This is a new turbine design that 
        capitalizes on advances in gas separation and hydrogen turbine 
        design, providing a unique pathway for CO2 
---------------------------------------------------------------------------
        separation, and ultimately, CO2 sequestration;

   USC (ultra supercritical) steam turbine materials--
        developing better materials for more efficient, higher 
        temperature and pressure steam turbines.

    The continued usage of coal will be an integral part of any 
solution in power generation in our lifetimes, because coal currently 
provides 50 percent of the United States' generation needs. According 
to the Energy Information Agency, this usage will grow to almost 60 
percent by 2030. Compare this demand trend to that for renewable 
energy, which, excluding hydropower, makes up a little more than 2 
percent of capacity in the United States. For some of the world's 
largest economies, coal represents the dominant domestic energy 
resource. Today, Siemens' generating equipment provides over 25 percent 
of electricity worldwide, and we also provide services to our customers 
to maintain and upgrade their equipment.
    The United States' fleet of 325,000 megawatts of coal-fired 
generating capacity was built over generations, and cannot be replaced 
quickly. Unlike commodities or consumer goods, power plants are massive 
in scale, take years to build, and require decades to recover their 
costs. Economics and regulatory requirements demand that we efficiently 
extract the most energy from this installed base. Currently, in the 
United States, the average age of a coal-fired power plant exceeds 40 
years (and is increasing).

SOX, Mercury, NOX and Particulate Matter
    Today with appropriate engineering design, we can routinely reduce 
criteria pollutants from these existing power plants by 90 percent 
compared to an uncontrolled power plant; for some pollutants 99 percent 
reduction is the norm. Modern air pollution control technologies that 
are readily available today, with no substantial investment in research 
and development, can reduce emissions of criteria pollutants from any 
coal-fired plant to levels that are projected to be achieved by 
integrated gasification combined cycle (IGCC) plants. The attached 
table in Appendix One compares the performance of retrofit air 
pollution controls to IGCC performance. Even though the performance is 
basically the same at this point, Siemens recognizes the need to invest 
in multiple technological pathways, and so Siemens not only provides 
the technology for the world's highest efficiency supercritical steam 
power plants, along with total emissions controls, it also has gas 
turbines and gasification technology for IGCC plants (to be discussed 
later herein).
    Although substantial fossil fuel plant upgrades are available, in 
fact very little of the fleet has the emissions control that would be 
required for a new power plant. For example, while most units have 
particulate controls, about one-third of capacity has SO2 
scrubbers, most have low-NOX burners, and only one-third of 
the capacity in the Eastern United States has advanced NOX 
controls.\2\ Our business in retrofitting SO2 air pollution 
controls to existing plants has recently boomed in the U.S., with many 
states regulating existing units under consent decrees.
---------------------------------------------------------------------------
    \2\ Recent communication with U.S. EPA
---------------------------------------------------------------------------
    Today, all new plants will include either wet or dry flue gas 
desulphurization as required by the Clean Air Act Amendments. Trading 
in SO2 credits is an incentive for the implementation of 
new, high efficiency flue gas desulphurization (FGD) systems. FGD 
systems also efficiently recycle the sulfates extracted from the 
process streams. Over 90 percent of the sulfates extracted from FGDs 
are recycled for use as wallboard in the construction industry. The 
largest single-stage FGD system in the United States utilizes Siemens 
technology, and was installed at the Big Bend Plant near Tampa, 
Florida.
    In addition to sulfur, burning coal can generate a great deal of 
particulate matter, or dust. The technology of capturing dust has been 
available for decades as electrostatic precipitators--or bag houses--
that have been widely applied in the power generation sector. According 
to the American Coal Ash Association, nearly 71 million tons of fly ash 
is collected today, with over 40 percent of this is recycled for uses 
in concrete products, cement, and agriculture.
    More recently, small particulate matter and aerosols less than 2.5 
microns in size have been identified as serious health hazards, and 
therefore, to meet even tighter ambient air quality standards, there 
has been a renewed interest in improving the performance of these 
emission control devices. Siemens emissions control technology products 
include wet electrostatic precipitator (WESP) designs that can meet the 
most stringent requirements. WESPs and bag house filtration systems can 
yield greater than 99 percent particulate capture and achieve 
compliance with the most stringent air quality requirements.
    Mercury is a unique chemical element exhibiting no health benefits 
at any concentration (lead is another); mercury can damage the central 
nervous system, endocrine system, kidneys, and other organs. In the 
United States, mercury has been identified as a hazardous air pollutant 
to be regulated. Today, coal plants in the United States emit between 
30 and 50 tons of mercury per year. Siemens provides technology to 
capture mercury, incorporating some of the same design features for 
particulate capture.
    NOX, which contributes to visible smog and is a 
respiratory health concern, is also emitted from automobiles and is one 
of the more challenging pollutants to control because it is formed from 
the nitrogen and oxygen in the atmosphere at high heat. Several 
technologies are now available for NOX control, including 
third- and fourth-generation low NOX burners that minimize 
the creation of NOX, and selective catalytic reduction 
technologies, or multi-pollutant technologies, that convert 
NOX back to stable nitrogen and water vapor. Siemens offers 
new, advanced burner designs to reach 75 percent NOX 
reduction compared to uncontrolled emissions, and can provide advanced 
catalysts, or multi-pollutant technology, to reduce NOX by 
over 95 percent.

Carbon Dioxide and Other Greenhouse Gases
    Any fossil fuel used in any application will have CO2 
emissions associated with the process. Because of CO2's 
potential role in global warming, reducing or mitigating emissions is a 
central strategy for Siemens. Siemens offer the tools to manage all the 
emissions from power plants. And while emissions of CO2 are 
linked to climate change, other emissions including methane and 
particulates are also factors of concern for climate change. The 
technology to address emissions of criteria pollutants that impact 
climate change (NOX, CH4, particulates) are 
available as described above.
    Carbon dioxide, however, is radically different. None of the 
current capture technologies that are used for the priority pollutants 
can be directly applied to CO2 capture. The best way today 
to address the reduction of CO2 in the power generation 
fleet is the same as for automobiles, by essentially increasing the 
output of the fleet without increasing the fuel used. The current 
United States fossil fleet operates at approximately 33 percent 
efficiency (with the remainder of that energy lost as heat to the 
environment). If we could improve that fleet efficiency by even just 1 
percentage point, we could reduce CO2 emissions by 50 
million tons per year, with no loss in net generation. The most 
efficient coal plants today can reach well over 40 percent efficiency, 
and if the entire United States fleet were operating at that 
efficiency, nearly one-quarter of the CO2 emissions from 
power generation would be eliminated.\3\ Siemens offers advanced 
technology to improve the efficiency of any power plant, thus 
indirectly reducing the CO2 generated for each unit of 
electricity produced.
---------------------------------------------------------------------------
    \3\ Approximately 500 million tons of CO2 reduction if 
the fossil fleet were to operate at 42.5 percent efficiency.
---------------------------------------------------------------------------
Integrated Gasification Combined Cycle (IGCC)
    As an alternative to the discussed technologies to capture 
emissions post-combustion, some of the next generation of clean coal 
power plants are proposing pre-combustion coal gasification to capture 
these same pollutants during the fuel processing steps. The most 
desirable part of the fuel is the energy content in the form of CO and 
hydrogen, which is extracted in gasification, leaving behind most of 
the pollutants. Siemens offers gasification for applications such as 
power generation (IGCC) as well as for production of synthetic fuels.
    Siemens has demonstrated 320,000 hours of gas turbine operation 
with gasification processes at scales ranging from 8 MW to over 300 MW. 
Our current product strategy is to provide a 630 MW IGCC plant here in 
the United States. To broaden its portfolio in this sector, Siemens 
recently acquired one of the longest demonstrated and commercially 
offered technologies for gasification for the production of 
petrochemical liquids or for conversion to synthetic natural gas, and 
for power generation applications.
    The DOE clean coal initiative has focused on pre-combustion capture 
of emissions, along with CO2 capture. The debate on pre-
combustion versus post-combustion capture has now fully developed, with 
the industry planning demonstration projects for both technologies 
underway. One feature of gasification is that carbon can be effectively 
extracted from the concentrated high pressure gas stream leaving the 
gasifier, resulting in reduced energy losses and less adverse impact on 
the cost of electricity. Post-combustion capture operates similarly 
using solvents, like an amine, or ammonia, to capture the 
CO2 from the exhaust gases at much lower pressures, after 
they have had all the other pollutants removed. Neither of these 
processes has been commercially demonstrated on a full-scale power 
generation facility, however we are working to demonstrate this 
application on existing power plants.
    Nearly every scenario we have explored reveals that all 
CO2 recovery comes at a cost of energy, sometimes 
substantial amounts of energy. Increased research, along with 
demonstration projects are needed to find ways to reduce the energy 
intensity of CO2 capture and removal for both pre-combustion 
and post-combustion capture. Equally important, we must also resolve 
the issue of carbon storage, because if there is no long-term storage 
for the carbon, then CO2 capture and recovery is moot. We 
agree with the MIT study, The Future of Coal, that CO2 
Capture and Storage (CCS) is ``the critical enabling technology that 
would reduce CO2 emissions significantly while also allowing 
coal to meet the world's pressing energy needs''.
    As an Original Equipment Manufacturer (OEM), we are also aware that 
our customers and end-users are sometimes reluctant to upgrade or 
repair facilities to improve plant efficiency which may trigger new 
reviews. Output-based efficiency standards could be used as a tool to 
encourage upgrades and to improve environmental and output performance. 
Such an approach has been used for gas turbine emission regulations in 
the recent New Source Performance Standards updated in February 2005.
    To close, Siemens believes that there are currently many 
technologies to provide the Nation with cleaner coal power generation, 
and that what is needed is a meaningful commitment from the Government 
to encourage greater efficiencies. We urge increased support for 
research, development and deployment of more efficient end-use 
technologies, low or zero-emitting technologies, and cost effective 
carbon capture and storage technologies. We also urge support for 
incentives to encourage private sector risk taking for the development 
and deployment of these technologies.

                              Appendix One

                Comparison of Retrofit Projects and IGCC
------------------------------------------------------------------------
          Parameter               Units        Recent AQCS        IGCC
------------------------------------------------------------------------
SO2                              % Removal              95-99         99
SO2                               Lb/MMBtu          0.03-0.18       0.03
PM                                Lb/MMBtu        0.010-0.015      0.011
PM10                              Lb/MMBtu         0.015-0.03      0.011
HCL                               Lb/MMBtu      0.00001-0.003     0.0006
HCL                              % Removal              97-98         95
HF                                Lb/MMBtu    0.00001-0.00026        N/A
Mercury                            Lb/TBTu           0.28-2.2  0.56-0.74
Lead                               Lb/TBTu           0.9-16.2       10.2
------------------------------------------------------------------------

    Senator Kerry. Thank you, Mr. Wilson, very, very much. I 
appreciate that. I want to follow up with you on some of the 
tech notions that you just put forward.
    But, before I do, let me try to get the big picture here a 
little bit if we can. I thought one of the most important 
points put forward, you've all talked about the technology 
that's out there, we've got technology, but the big question 
is, how to sequester? Big question--how to capture carbon? And 
what we can do to do that rapidly.
    The date, 2020, rang a bell. This is an issue where you 
kind of can't be half-pregnant. If you believe the scientists, 
I assume you all accept, you're all accepting the science, or 
are you simply doing this because you see it coming? Let me 
just establish that as a front line. Do you accept the science 
on global climate change, Mr. Chaisson?
    Mr. Chaisson. Yes.
    Senator Kerry. Mr. Denis?
    Mr. Denis. Yes.
    Senator Kerry. Dr. McRae?
    Dr. McRae. Yes.
    Senator Kerry. Mr. Rencheck?
    Mr. Rencheck. Yes.
    Mr. Wilson. Yes.
    Senator Kerry. OK. So, if you accept the science, and you 
have 2,000-plus scientists from around the globe, including 
some of, what we consider to be our smart folks, from Jim 
Hansen and John Holdren, Ed Miles, Bob Correll, others, all 
coming together, and if those scientists are telling us, with 
alarm, that the indicators that they see are moving more 
rapidly, and with greater impact, species movement already 
showing up, millions of acres of forest with bug infestation 
that didn't used to exist because they'd die, because of the 
cold, now they don't. No ducks for hunting in South Carolina or 
Arkansas, because migratory patterns have changed--I mean, you 
run the list. All of the feedback is coming back faster, ice 
melting, et cetera, et cetera, et cetera. Question marks about 
oceans currents' impact on climate, all of these things.
    So, here you are, you've got the science, and those same 
scientists are telling us, ``You've got a 10-year window,'' to 
get on the track where you're able to get the 3.2 reduction you 
need going out to 2050, or if you don't get 3.2 percent, you're 
going to have to get a much higher percentage faster in out-
years.
    To know whether or not we can capture or have capture 
online by 2020 or sometime seems unacceptable when measured 
against the 10-year window. Can you speak to that? Let me throw 
one other ingredient out there. Back when we negotiated the 
Clean Air Act in 1990, I was part of those negotiations and we 
were working to put the SO2, acid rain provisions 
in. The industry came in, and everybody said, ``Oh, we can't do 
this, it's going to take us 10 years, it's going to cost eight 
billion bucks, don't make us do it, you'll kill the industry.'' 
The environmental community said, ``No, no, no, it's not going 
to take 8 years, it's going to take 4 years, it'll cost about 
$4 billion, and we must do it, we can afford it.''
    To the credit of George Herbert Walker Bush, Bill Reilly, 
and John Sununu, we did it. They bought the science, they said, 
``We have to do it.'' Guess what? It took half the time that 
the environmental community thought it would, and half the 
money. Why? Because nobody was capable of predicting what 
happens once you make the Federal commitment, once you create 
the standard, once you have moved all of these industries 
toward a now-existing marketplace. And nobody is able to 
predict the rapidity with which the technology then takes over 
and provides you with something.
    Aren't we in that kind of situation here, folks? Where 
we've got to put up whatever we think it takes for those 
demonstration projects, for the tax credit, for the science, 
and guarantee we're setting a goal, and we've got to get this 
done within 10 years. I'd like everybody to comment.
    Mr. Chaisson. Certainly. I mean, I think that from our 
perspective, the issue here is, how do you transition from 
where we are today, to where you need to be in 2020? And I 
guess, our view would be that you need a suite of policies, no 
one policy will do it.
    On a national scale, requiring that all new coal plants 
have carbon capture and sequestration wherever they might be 
located, and having the knowledge to do nationwide geologic 
sequestration is probably something that's going to take 10 
years--perhaps 2018.
    There has been a lot of expert testimony presented in the 
Energy Committee or whatever, about the geologic demonstration 
projects. In the short-term, you have a lot of companies like 
BP and others, I'm sure several of the folks pursuing IGCC 
projects today would be perfectly happy to do carbon capture 
early, in carefully selected situations, with financial 
incentives to, to support the cost of doing that. Given the 
recent run-up in energy project costs, we're going to need to 
see CO2 allowance prices somewhere in the $40 a ton 
range to actually offset the cost of adding carbon capture and 
storage, so the third piece we need is an effective carbon cap 
and trade system, but it's going to take awhile for that to 
ramp up to $40.
    So, from our view, the complementary policies would be, 
first of all, financial incentives for the companies willing to 
move right now--and I think we'd find that many would be 
willing to move right now--that would cover the cost of carbon 
capture and storage between their plants starting up, and us 
eventually getting to, say, $40 a ton of CO2 with a 
cap and trade system.
    A second piece would be something along the lines of your 
proposed legislation, Senator Kerry--an absolute date by which 
all new coal plants will simply have to have carbon capture and 
storage--that puts people on notice today, their behavior will 
change based on that, and that will be a date certain, rather 
than a questionable date as to when, when we might reach $40 a 
ton. But behind all that, I think the foundation is, an 
effective carbon cap and trade system, which will eventually 
drive prices sufficient to offset any need for financial 
support.
    Senator Kerry. Anybody else?
    Mr. Denis. Certainly, Senator.
    Certainly, like yourself, I wish we could have this 
tomorrow, and not 10 years from now. But, I believe that we do 
have to be realistic in the timeframe that it takes to 
develop--not only the technology, but to be able to establish 
the framework under which we can store the carbon that is going 
to be sequestered.
    I have to observe that, really, the focus really should be 
on the development of technology--whether it's 1 year, 2 years, 
10 years or twelve years. You know, yesterday, the DOE even 
said it was 2045, which I believe it's a date that's 
unacceptable to everybody. Nevertheless, the development of 
technology really needs to move forward. And the reason I say--
--
    Senator Kerry. What if we can't capture it? What if we 
can't store it? What if you can't find a sufficient storage 
capacity, it leaks, or it's just too costly or geologically 
problematic?
    Mr. Denis. That is problematical, and that is a quandary 
that we have. However, I do believe that current research has 
it that there can be found some geological structures where the 
carbon, the CO2 can be stored.
    It is not in all parts of the country. There are some parts 
of the country that are unsuitable for this, so we need to talk 
about infrastructure that may be needed to transport such 
CO2 to those areas that are geologically safe.
    Senator Kerry. Obviously we can't store it in some places, 
because we're using it now to push fuel. We actually tap into 
naturally produced CO2 in order to improve our 
capture of oil out of old wells and things, so I assume, I 
don't know what the amount is, but I know there's a sufficient 
capacity.
    Mr. Denis. And we have to deal with the liability loss 
associated with such capture, and Congress needs to address 
that, also.
    But, one of the reasons I say we really need to address the 
technology is, because the focus, and our discussion centers 
around coal. But we really can't overlook the fact that a 
modern gas plant produces 50 percent of the carbon dioxide that 
a coal plant does. So, the problem is wider than just coal, the 
problem is carbon dioxide. So, the technology that gets 
developed for coal, hopefully is some technology that's also 
applicable to some of the gas generation that exists, because 
even if we replace all the coal units with, or do away with 
coal units, and have just gas units, we will still have half of 
the problem, and that half of the problem is still a large 
problem.
    Senator Kerry. Senator Boxer's asked for some time, and I 
have no problem with that, I can come back.
    Senator Boxer. I don't have to leave until eleven.
    Senator Kerry. No, that's OK, I'll let you do it now, and 
I'll come back afterwards and follow up, make sure we do.
    So, Senator Boxer?
    Senator Boxer. Mr. Chairman, thank you so much, I wish I 
could stay all morning, but I have another Committee I need to 
go to.
    Again, Senator Kerry, thank you for doing this.
    I don't know if you share my view, but Mr. Denis, you said 
that you don't believe we'll have the ability to capture and 
sequester carbon till at least 2020, that was your initial----
    Mr. Denis. That, we will have the viable commercial means 
to do so in a large scale.
    Senator Boxer. OK, but you said at least 2020.
    Mr. Denis. Yes, ma'am.
    Senator Boxer. Now, I just have to say to my Chairman, 
that's 3 years after scientists tell us we've reached a tipping 
point. So, just speaking for myself, I can't speak for anybody 
else, we need a better attitude about this. It's just not 
realistic. I mean, really.
    And I don't, in any way want to minimize what we're facing. 
We've done a lot in this country when we've put our mind to it. 
I want to see what it is you think we can do as policymakers to 
help.
    And, I guess I'll ask Mr. Wilson, since he's out there now, 
already, putting out some technologies that are helpful. Do you 
think we need a Manhattan-like Project? To do more model 
projects, to help us find the way here? Because I don't see how 
we wait until at least--at least--2020.
    Mr. Wilson. Clearly, a more intensive effort would be 
highly valuable in terms of demonstrating these technologies at 
the commercial scale.
    Here is the challenge we face. All of these plants, are 
basically massive in scale; they take years to build and years 
to prove out their operational efficiency and their 
performance. At the same time, these facilities must 
demonstrate economic viability within the regulatory climates, 
(i.e., a guaranteed rate of return), along with all of the 
other elements associated with business investments. Without 
significant Federal guarantees, in many cases, these projects 
will not move ahead. If you're talking about a Manhattan-type 
Project, then we have to have a Manhattan-type Project, not a 
business as usual scenario which is how most of these plants 
have to operate today.
    Senator Boxer. Would you support a Manhattan-like Project 
in this area?
    Mr. Wilson. Of course, we would support--I mean, we're a 
technology provider, and we will provide to any, any need that 
was identified in terms of what our customers want.
    Senator Boxer. Mr. Rencheck, you were a bit more optimistic 
than Mr. Denis, I think, trying to find some out here, because 
in your statement you said, ``Over the last 100 years, AEP has 
been an industry leader in developing and deploying new 
projects.'' You said that you have a Memorandum of 
Understanding for post-carbon capture using Alstom's chilled 
ammonia system, it will be installed at your 1,300 megawatt 
plant in New Haven, West Virginia as a ``commercial performance 
verification project in mid- to late-2008, it will capture up 
to 100,000 metric tons of carbon dioxide.'' Once the 
CO2 is captured, you'll store it. So, you hope to do 
that by 2008.
    Mr. Rencheck. Yes, ma'am.
    Senator Boxer. So, are you a little bit more optimistic 
than is Mr. Denis on future of the sequestration issue?
    Mr. Rencheck. We believe technology is the answer, and AEP 
is pushing technology on several fronts, we talk about an IGCC 
plant being constructed, new, more efficient coal plants, being 
the ultra supercritical coal plant, the oxy-coal plant for 
combustion, and we also are looking at back-end retrofit 
technologies, like carbon capture and sequestration using the 
chilled ammonia process.
    Senator Boxer. So, are you more optimistic than is Mr. 
Denis, that we could solve this before 2020? He said at least, 
at the earliest 2020.
    Mr. Rencheck. We are working to solve it very quickly.
    Senator Boxer. Good, good.
    Mr. Rencheck. Technology will evolve, and in R&D efforts, 
sometimes you take a few steps forward, and it stalls, and you 
have to take a few steps back. So, we are working to make that 
reality at AEP----
    Senator Boxer. Could you use more incentives?
    Mr. Rencheck. We definitely need incentives from the 
Government. We could use additional investments up to $1 
billion a year in the R&D program for DOE. We could use 
investments in areas for understanding geological 
sequestration.
    At our Mountaineer Facility, for example, in 2004, we have 
drilled a well, a 9,200-foot well, where we have studied the 
geological structure underneath the plant, looking for saline 
aquifers that could store carbon. We've done that with the DOE 
and Battelle, and we believe we've identified porosity of the 
geological structure that would enable carbon capture to take 
place there. We want to test that out with these projects. 
We're going to need help, we're going to need additional 
funding to study that.
    Senator Boxer. Well, I appreciate your work, your attitude, 
it's very helpful. I have one last question if I might?
    Senator Kerry. Yes, absolutely.
    Senator Boxer. And then I'll leave.
    Mr. Wilson, you say that you are working every day, your 
company is, to get cleaner coal going, and you have success. 
I'm trying to understand where we are right now, with the 
technologies you're using. So, you say you have cleaner coal, 
does this mean, you're not only dealing with carbon, but 
NOX, SOX and mercury, as well?
    Mr. Wilson. We're dealing predominantly with 
NOX, SOX and mercury, because we--all of 
the technologies we have, basically, are capture technologies, 
filtration technologies, which are able to clean all of the 
pollutants out of the exhaust stream to where you'd have--you 
basically have no, negligible pollutants left.
    Senator Boxer. OK.
    Mr. Wilson. With respect to CO2, the only real 
option available is to improve the overall efficiency of the 
plant so that it uses less fuel, therefore produces less 
kilowatts per unit output. The capture and sequestration 
objective is clearly the issue that the whole panel was talking 
about----
    Senator Boxer. OK.
    Mr. Wilson.--which does need additional work, and a lot of 
additional work, to get----
    Senator Boxer. So, you're not doing any of the work of 
carbon capture?
    Mr. Wilson. Not predominantly, not yet.
    Senator Boxer. So, you're doing cleanup of NOX, 
SOX and mercury, and not to minimize that, that's 
absolutely crucial under the Clean Air Act, and it's important 
to our families, but----
    Mr. Chairman, I think what you've identified today is 
really critical, here. And I think this panel is so 
interesting, because you really do have, I believe, different 
attitudes on how we can move forward.
    I hope we can get bipartisan support to really move forward 
on this. Because, without solving this problem, it's going to 
create obstacles for us. I've learned a lot, and I thank you so 
much for your leadership, and I'm sure we will be doing more of 
this together. Thank you.
    Senator Kerry. We will, indeed, thank you very, very much.
    I'll let the others ask some questions, and then I'll come 
back afterwards. Who was next? I think, yes, Senator Dorgan?

              STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. Mr. Chairman, thank you very much.
    We have, in my State, lignite coal, something around 800 
years worth of lignite coal reserves, and my guess is that we 
are going to continue to use coal--the question isn't whether, 
I mean, I don't think we have much choice--but the question is 
how do we use it, and do we use it in a way--especially 
combined with new technology, to make it much, much less 
difficult for our environment.
    In, I would say to the Chairman, we have--I believe--the 
only coal gasification plant in the country, in North Dakota, 
it produces synthetic natural gas from lignite coal. And the 
production of synthetic natural gas from lignite coal is a--
it's using old technology, the plant was built about 25 years 
ago, but it's an unbelievable plant, very productive, and we 
take CO2 from that plant, put it in a pipe in the 
world's--I believe--the world's largest application of 
CO2 sequestration. We put it in a pipe, and move it 
to the oil fields of Alberta, Canada, invest it in the ground, 
to make more productive marginal oil wells in Canada. So, you 
have beneficial use of CO2, even as you sequester.
    Now, that obviously is not a solution for all of that which 
we have to deal with, but it's a demonstration that there are 
some things you can do that make some sense.
    I'd just like to ask a couple of questions, because I--I 
think we're going to use coal. The question is, can we--in a 
robust way--invest in technology to get to the point where we 
have zero emissions coal-fired electric generating plants? Do 
we do it by capturing and storing CO2? Or do we do 
it by, hopefully, with some technology that is an avoidance 
technology, with the production of CO2? I don't know 
what the technology will give us.
    But, here's the situation, what I want to ask you about. 
The President and the Administration says, ``Let's go with 
FutureGen,'' big old project, really a big project. In fact, in 
Fiscal Year 2008, the Fossil Energy and Coal Request is $426 
million, by the President, that's a $1 million increased over 
the previous year. So, essentially, flat funding for fossil 
energy and coal--which is mostly research. And flat funding for 
that at a time--it seems to me--when we ought to be saying, 
``Wait a second, we can't hardly run fast enough to catch up to 
this, we need to be really aggressive.'' Flat funding for that, 
and then we have $108 million for FutureGen, which is 20--fully 
25 percent of that which we're going to put into fossil energy 
and coal research.
    So, tell me your thoughts on that, is that what we ought to 
be doing? Or, is that kind of a slow motion approach to finding 
our top speed, using technology to address these questions?
    Yes, sir?
    Mr. Chaisson. Senator, a couple of responses. First all, on 
the DOE program funding, I think the MIT report does a pretty 
good job of reviewing that, and I think--for all practical 
purposes--they're talking about something like $1 billion a 
year being, sort of minimum. And I think both Professors 
Deutsch and Moniz testified, or have stated that, when they 
both have been at DOE, running those programs, you know, many 
years ago, at least Professor Deutsch, in those-year dollars, 
the program was actually larger than that. So, it's just sort 
of getting it back to what it used to be.
    I think, in addition, as far as near-term carbon capture, 
whether it be in North Dakota, or Indiana, we're going to--it 
costs two and a half cents a kilowatt hour to add carbon 
capture to a plant today. And, as I said, you're going to have 
to get to $40 a ton of CO2 before you offset that. I 
think there are a lot of companies--not every company--but 
there are many companies that would do this today, if there was 
some way to bridge that financial gap between having to add two 
and a half cents cost today with no ability to offset those 
costs, and some future point in time where that would be 
offset, because of the CO2 benefits.
    Senator Dorgan. But, the implication of your answer is that 
the technology is there, it's just a matter of cost. I don't 
think that's the case. I mean, it's true, we can capture in 
certain areas, but capture and storage--it seems to me--
requires much, much, much more technology. And, the pursuit of 
that technology is going to require substantially new 
investment. And, it looks to me like the President's budget is, 
perhaps, less than half of what is necessary, with no increase 
from the previous year, which suggests that this is not a 
priority. I think it's a huge priority.
    Others? Yes, sir, Mr. Rencheck?
    Mr. Rencheck. We need additional support in funding, I 
recommend approximately a billion dollar a year, consistent 
with the MIT folks. And, we also support FutureGen, and we 
think it's important for the further development of the IGCC 
technology. We are working now, off of a platform technology to 
go commercial that was developed in the early eighties, to mid-
nineties, we'll take that to a commercial scale with today's 
present technology and prove it in operation, but then 
FutureGen takes it to the next step, where it will, truly, 
involve the invention of new technology, such as a hydrogen 
combustion turbine that will truly enable them to generate 
electricity, separate out CO2, and capture.
    We also need monies to study the geologies. As you know, 
different areas of the country have different formations, and 
at times, the formations aren't consistent within a region. So, 
we have to drill more holes, understand more about the geology, 
and start injection projects in those areas, so we can 
understand how CO2 will behave in those rock 
formations.
    Senator Dorgan. Are any of you bullish on where we're 
headed here? Are you bullish on technology?
    Mr. Wilson. Yes.
    Senator Dorgan. OK.
    Mr. Wilson. Yes, I'm bullish on technology and I----
    Senator Dorgan. Give me some encouragement, would you, Mr. 
Wilson?
    Mr. Wilson. Yes, the point I just wanted to make is we've 
always been an advocate of higher funding, essentially, on the 
development programs, we're a participant in virtually every 
DOE program that comes out. And we provide our expertise, 
essentially, into these programs. And we are very bullish that, 
if we want to accomplish a greater goal, we certainly think we 
can.
    It's the political will that has to be behind it in order 
for funding, and also for the demonstration project that my 
compatriots all talk about. Is that their significant projects 
have to be demonstrated, in order for them to be commercially 
viable, and adopted wholesale.
    So that, we believe, yes, indeed, I'm bullish, that the 
technology is there. The question is, it has to be brought to 
the scale that utility plants operate at.
    Senator Dorgan. And I'm not suggesting, by the way--just to 
finish this thought--I'm not suggesting that the demonstration 
through FutureGen of IGCC is irrelevant, it is not. I'm not 
suggesting it's not valuable, it is. What I am saying is that, 
even as we do this, and claim a significantly larger part of 
our budget, and our appropriations for FutureGen, we're not 
seeing the ramp up of a country that says there's an urgent 
need to deal with coal research, and the research on carbon 
capture, so that we open up and unlock the opportunities to be 
able to continue to use our coal. That's my, that's my problem 
with this.
    And so I, let me thank Senator Kerry, for leadership in 
this area. I think all of us--Senator Thune, myself, and 
others--all of us have to figure out that this is urgent. I 
mean, this isn't something, this isn't like every other 
problem.
    If we're going to be able to continue to use these 
resources in the future, given the intersection we've now come 
to with respect to energy and climate change, if we're going to 
continue to use these resources, we had better figure out that 
these minds of ours--the fertile minds of, that exist here in 
this country that have unlocked a lot of mysteries through 
scientific inquiry and research, we can do the same with 
technology in coal development.
    But it requires significant investment. And it is not 
coming in this budget. So, we have to be attentive--that's why 
I think this hearing is very important.
    I appreciate--I interrupted you, Mr. Chaisson, I'm sorry 
for interrupting you----
    Mr. Chaisson. That's fine.
    Senator Dorgan.--but let me thank the Chairman for the 
time, and I thank all of the witnesses for your presentations. 
I was chairing another hearing so I, but I had read your 
presentations, and I appreciate your contributions.
    Senator Kerry. Senator Dorgan, thank you very much. 
Couldn't, couldn't agree with you more. Part of the purpose of 
this hearing and the others we're holding is to raise the level 
of urgency about this.
    And, as I said, you can't be half-pregnant on this thing. 
Either you accept the science, and then you've got to, if 
you're accepting the science for valid reasons, to act on it. 
And, we're not. So, we have a huge challenge.
    Let me establish something quickly before I turn to Senator 
Thune.
    Senator Dorgan spoke about the capture of CO2 
that's taking place now, and the piping that takes on, and I 
had mentioned earlier, we're able to pipe CO2 
naturally out of the Earth, and we're using it also for 
enhanced oil recovery, I guess it's called.
    What's the restraint here, on the capture? You keep saying, 
``Well, we're going to have to develop the ability to be able 
to capture out of the IGCC,'' can you share with us, what do we 
get out of IGCC, what's left to get, and why can't we get that 
other piece yet?
    Mr. Rencheck, go ahead.
    Mr. Rencheck. Yes, on an IGCC plant, the fundamentals of 
the way it works with the flue gas stream, when you shift the 
gas reaction into hydrogen and CO2, you now have to 
combust the hydrogen. That CO2 adds mass flow into 
the gas turbine, so it's like adding horsepower into a car 
engine--when you remove that, you generate much less 
electricity, and then you have to supply energy for the 
compression, to either put it into a pipeline, or to sequester.
    We need to evolve that integration and those systems, so 
that the electricity amount produced is contained and 
maintained, and not degraded.
    Senator Kerry. But that's the challenge, but not the actual 
capture of the carbon itself?
    Mr. Rencheck. On IGCC, it is ahead of pulverized coal units 
in that area. If you looked at the two technologies, PC 
combustion is further advanced than IGCC, there's a lot to 
learn. In the capture piece, I would put IGCC ahead than 
pulverized coal, but the technology race is on for the two to 
see which one will ultimately be the winner. And, we believe 
that both, both have a place, and both have a role.
    Senator Kerry. But the key is not to degrade the power that 
you get out of it in the process?
    Mr. Rencheck. That's correct.
    Senator Kerry. OK.
    Mr. Rencheck. You can see power prices as an example, using 
today's state-of-the-art technology----
    Senator Kerry. Because if you degrade it, then you've got 
to replace it. And then the question is cost for what you're 
providing.
    Mr. Rencheck. Fifty dollars a megawatt would go to $113 a 
megawatt, is an example on a pulverized coal unit----
    Senator Kerry. I understand.
    Mr. Rencheck.--in that range.
    Senator Kerry. What about on the sequestration, if you 
could all, somebody else raised their hand, but you wanted to 
add something?
    Dr. McRae. Just on the issue of technology, just to follow 
up on the comments that were made by Senator Dorgan--coming 
from MIT, I'm clearly very bullish on technology.
    One of the key themes in the MIT Coal Study is a sense of 
urgency, to really move very, very quickly. And, I think our 
time scales are somewhat shorter, to get the information that 
you need to solve this problem.
    I think that the discussion about capture, sequestration 
illustrates how people have thought about it in the past. We 
have to think about it as a system--all the way from the 
beginning of mining the coal, all the way through to the 
sequestration.
    If you think about how we've dealt with conventional 
pollutants, like sulfur oxides, and nitrogen oxides, we took, 
basically, conventional combustion processes, and then added to 
them control technologies to remove those pollutants. If you, 
sort of, think about the CO2 capture problem in a 
slightly different way, there are some very, very interesting 
technologies coming along that could potentially cut the cost 
of both the capture--but without compromising the thermal 
efficiency of the plant.
    For example, if you burnt the coal at pressure, with 
oxygen, you--it's much easier to take the carbon dioxide out of 
the gas stream, and you've already got a compressed gas stream 
which is partially ready for injection into the reservoir. And 
so our view is that, while FutureGen is focused on IGCC, it 
should not be to the exclusion of very different ways of 
thinking about the problem.
    I mean, I'm very optimistic about the opportunities--you 
know, a lot of the technologies that we've been talking about 
are 50 years old. There's not a lot of investment that has been 
built into how to capture CO2 out of a gas stream. I 
mean, we're still using technology that's 50 years old. The 
problem is to turn it around--what molecule should you have to 
design to take the CO2 out of the gas stream? You 
know, pose it that way.
    So, our view is that if you step back a little bit from the 
problem, think of it as a systems perspective, it opens up a 
whole bunch of different ways of thinking about the problem.
    So, I think--two points. One, is that I think we have 
technology to deal with the problem today, at cost. I think 
there are lots of opportunities for dramatically lowering those 
costs, costs over time.
    The other issue is the issue of scale. In the United 
States, there's very little activity that addresses this 
problem at scale. To be able to monitor it, to make sure that 
it actually stays in the ground----
    Senator Kerry. That's the 10 demo projects, so to speak, 
that we----
    Dr. McRae. Most of the interesting work that's going on is 
out of--outside of the United States. All of the big 
sequestration experiments are being done in Algeria, they're 
being done in the North Sea, they're being done in Canada, and 
I just had a workshop over the last couple of days at MIT, 
where we brought together all of the people that are doing the 
sequestration experiments from around the world, and one of the 
key themes that kept coming up over, and over, and over again, 
was the need to do these at scale, and the need to develop a 
monitoring program so that you could assure the public that the 
stuff is going to stay in the ground, where you put it.
    Senator Kerry. Great.
    Dr. McRae. And our view is that you can do that in less 
than 10 years.
    Senator Kerry. Well, I'm going to come back to this, 
because I want to pursue it, I just don't want to cut in on 
Senator Thune, so let me go to Senator Thune, and then we'll 
come back.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman. I want to express 
my appreciation for you holding this hearing on what is a very 
important topic, clean coal technologies, and the important 
role that coal can play in securing our energy independence. 
And, as I know everybody on this Committee is probably aware, 
that we have an abundant supply of coal, in fact, coal-fired 
plants supply 22 percent of our U.S. energy demand, and over 50 
percent of the energy used by the electric power sector. And, 
it is projected the U.S. has a 250-year domestic supply of 
coal.
    As the witnesses have testified, I think we are on the 
horizon of an exciting new generation of coal power, IGCC, and 
other advanced clean coal technologies are very much in their 
infancy stages, but considering the potential for carbon 
capture and sequestration, coal could provide a clean and 
reliable source of energy for generations to come.
    So, I too, appreciate the testimony that we've heard this 
morning, and your thoughts about where this is headed, and I am 
interested in knowing, as well, what we can do to facilitate 
the things that will get us to where we need to be, sooner 
rather than later.
    And I think the next step is to continue investing in these 
technologies, so that IGCC can be implemented on a wide-scale, 
and that's going to require significant investment, research 
and development. So, we welcome your input and suggestions 
about how to do that and what we ought to be doing here to 
support the efforts that are underway.
    Let me, if I could, pose a couple of quick questions.
    Mr. Denis, in your testimony, you state that Sierra 
Pacific's Ely Energy Center, which is a four-unit coal-powered 
complex, totaling 2,500 megawatts in eastern Nevada, will pave 
the way for additional renewable energy sources in eastern 
Nevada. I'd be interested to know what is the relationship 
between coal facilities and future development of renewable 
energy projects, such as wind power? And how much of the new 
transmission capacity could be available for other types of 
energy, and energy generation, such as wind?
    Mr. Denis. Certainly. Certainly, Senator.
    The relationship between the Ely Energy Center and the 
additional development of renewables is, the Center is being 
built in a very sparsely populated portion of our State. 
Essentially, there are no transmission facilities, there are no 
wires, but yet, there's a lot of wind. So, you can put up all 
the windmills you want, but there's nowhere for the electricity 
to go.
    This $600 million transmission line is just economically 
unfeasible to build just for several hundred megawatts of wind 
and resources that exist in the area. We've identified up to 
about 500 megawatts of proposals from wind farms that are in 
the area that could develop, and could use this transmission 
line, then, to get the power to the market, primarily to the 
Las Vegas region. This is 250 miles north of Las Vegas, is 
where this plant is.
    So, without the ability of the Ely Energy Center being 
there, and economically justifying the construction of this 
facility, we basically have some locked-in geotherm--wind 
resources.
    In addition, the northern part of the state of Nevada, as 
it's closer to California, is really blessed with geothermal 
resources. We're the leaders in geothermal production. Yet, 
there's going to be more geothermal energy than there are 
people to consume the electricity. We need to get that 
electricity to the South, where the big load centers are.
    So, we have now, a combination where we have a marriage 
where this coal unit is a catalyst to provide for additional, 
and fostering additional development of renewable energy. So, 
that's the nexus that exists between the two.
    Senator Thune. Well, we've got the same problem in South 
Dakota, a lot of wide-open space, a lot of wind--in fact, I saw 
a study the other day that South Dakota could provide 52 
percent of the entire electrical demand in this country, just 
from the wind we generate in our State alone. But, we have the 
same problem--we're not close to population centers, and 
transmission is prohibitively expensive.
    And, so, I was interested in what you're doing there, in 
leveraging with an investment in another facility, but being 
able to use that capacity for renewables. We also have a lot of 
wide-open space, and, wind turbines. Things that in some parts 
of the country, people don't want to have in their back yard, 
are things that my state would welcome.
    South Dakota, obviously, is close to Western sub-bituminous 
coal from Wyoming and Montana--you mentioned how it's more 
economical to use Eastern bituminous coal--do you know of any 
research that's taking place in either the public or private 
sector, working to make Western sub-bituminous coal more 
economical for IGCC? And in your view, would such research 
warrant a Federal investment?
    Mr. Denis. Well the--the issue of sub-bituminous coal, the 
studies that have been performed, particularly by Electric 
Power Research Institute is that when you add the carbon--the 
estimated costs of the carbon capture systems, and you're 
talking about IGCC with Western Powder River Basin coal, sub-
bituminous coal, that the economics are that it is less costly 
to add the carbon capture to a supercritical coal unit.
    The answer here, I think, the takeaway from that--in other 
words, IGCC is more costly with Western coals, with carbon 
capture than it is on Eastern bituminous coal without--with 
carbon capture, relative to a supercritical coal.
    I think the takeaway from this is that there is no silver 
bullet with regards to what is the answer to the 
CO2. We really must be investing in multiple 
initiatives--not just in FutureGen, and not just in the 
experiment that we are conducting with EPRI at Wisconsin 
Energy, WE Energies, or the answer that AEP has for their Ohio 
plant--we really must be looking, rather than placing the bet 
on just a single technology, we must be looking across a series 
of technologies at present, so that we're not disappointed in 
the future that we picked the wrong technology going forward.
    Senator Thune. Well----
    Mr. Denis. I'm not sure if I answered your question, but--
--
    Senator Thune. I think you did, I was just, specifically 
homing in on Eastern sub-bituminous, versus Western.
    Mr. Chaisson?
    Mr. Chaisson. Senator Thune, I guess I'd like to sort of 
add a slightly different perspective. The EPRI work has been 
based solely on the Shell gasifier, which is the sort of, best 
gasifier for low-ranked coals, of sort of the traditional 
gasifiers.
    There are two new gasifiers that are probably going to be 
excellent for low-ranked coals, the new Siemens gasifier, and 
Mitsubishi's gasifier, which simply are too new to have been 
incorporated in these studies. And, I know NRG--a large 
independent power developer that's very active in Texas--is 
been very bullish on using the Mitsubishi gasifier on Texas 
lignite coals.
    So, I think the availability of gasification for low-ranked 
coals is probably a more complicated picture than has been 
presented by some of these earlier studies.
    Senator Thune. OK.
    Mr. Rencheck. I would concur. The issue with the Western 
coal being less efficient is with the moisture in the coal. In 
the gasifier, you're required to dry the coal before you can 
partially combust it within the gasifier. That drying takes 
energy, which makes it less efficient than a pulverized coal 
plant.
    Those processes, for example, we've signed a Memorandum of 
Cooperation with Siemens to help develop that technology, but 
those processes need funding for development, and with the 
proper funding, would advance over time.
    Senator Thune. I, yes, Mr. Denis?
    Mr. Denis. Just to add to my prior statement that there's 
no silver bullet, and we really must look at a menu of 
technologies to prove out which one works best--in the sense 
that there's no one-size-fits-all, there should not be a one-
size-fits-all attitude.
    Also, the--in my opening statements, one of the issues that 
we have in the West is also the altitude. Our Ely site is at 
6,200 feet of altitude, and yet, there is to be proven whether 
some of the technologies, in particular, IGCC, how they perform 
at those higher levels where the air is less dense.
    That's not to say it's not a good technology, in fact our 
company was one of the few companies that participated in the 
DOE Clean Coal Program of the 1990s, we built an IGCC. It never 
worked. It sits idle, and it was abandoned, ultimately.
    Senator Kerry. Who built it?
    Mr. Denis. It was a combination, I believe, it was a Kellog 
gasifier----
    Senator Kerry. When was it built?
    Mr. Denis. I'm sorry?
    Senator Kerry. When was it built?
    Mr. Denis. It was built, it was started in--the 
negotiations with DOE started in 1991, it started construction 
in 1995, was completed in 2001.
    Senator Kerry. And why did it not work?
    Mr. Denis. It was first of a kind technology. We were 
experimenting--this was when DOE and their Clean Coal Program 
of the 1990s was experimenting with different IGCCs to 
determine which technologies worked. We eventually abandoned 
the facility, it sits outside of Reno, idle. The consumers of 
the State and the Federal taxpayers lost $335 million on that.
    But, it taught us some important lessons in the need to 
move forward----
    Senator Kerry. Is it not retrofit? Is it not retrofittable 
to the technology that General Electric or Siemens, or others 
have developed?
    Mr. Denis. No, it's not. It'd be more--it'd be less costly 
to, probably, start from scratch than to try and modify what is 
there.
    Senator Thune. Well, I thank you--those aren't exactly the 
answers I wanted to hear, Mr. Chairman, but I appreciate them, 
nonetheless. So, thank you for your input.
    Senator Kerry. Well, don't go away for a minute, because I 
want to explore something that may be of interest to you.
    The difficulty that Senator Thune mentioned with respect to 
the wind power that could be produced is the transmission. And, 
I know that, there's an issue always about the length, the 
distance from the wind turbine to the grid, but I assume 
transformers can have a profound impact on that, correct? If 
you can come into--sorry, go ahead, Mr. Rencheck?
    Mr. Rencheck. It's, it really is the voltage level of the 
transmission lines. AEP is proposing across our system, and in 
other places, to construct a 765 kV line, 765 kilovolt that 
would be able to transport power more efficiently.
    Part of the discussion around CO2 is also the 
efficiency of energy transmission. Those high-voltage lines are 
very difficult to get permitted, as we all know. In West 
Virginia, we permitted an extension that took us upwards of 
what, 12 years?
    Mr. Kavanagh. Sixteen.
    Mr. Rencheck. Sixteen years to get permitted. So, that can 
have a very, very large effect on being able to move power 
across the Country.
    Senator Kerry. We obviously don't have 16 years to fool 
around with, here. But, that's why I think we ought to consider 
thinking out of the box a little bit, and thinking, as you've 
said, sort of systemically, and differently.
    But, with respect to that, you know, the 1930s, when 
electricity first came around, Roosevelt decided that it was 
important to get this out to the whole Country. And so, the 
Government invested in making certain that within a certain 
period of time, every home was going to be wired. Now, I don't 
think this is unlike that.
    If South Dakota has the ability to be able to provide 52 
percent of the electricity, and we're looking at this emissions 
challenge we have over these next years, what is the value of 
our investing in that line, and providing an ability for them 
to do it, and you joint venture this with the urgency that we 
have to provide that.
    Mr. Denis. Ultimately, it boils down to the cost of 
electricity. If you look at the cost of that investment, plus 
the cost of the electricity produced by the wind----
    Senator Kerry. But, I'm not talking about this being 
private sector-driven, I'm talking about the Federal Government 
investing as we did in the TVA, and otherwise, in order to 
provide the connection, and help make this happen at a cost 
that then doesn't kill the consumer, and makes a return on 
investment viable. Until you get going, until you get up and 
running and you've pushed these other technologies. Is that 
viable?
    Mr. Wilson. Siemens provides transmission and distribution 
products and services; essentially, this is one of our major 
businesses, both in the U.S. and globally. And, your point is 
well-taken; the U.S. is not a highly well-interconnected system 
compared to Europe or other highly interconnected systems.
    There's a great deal of value that could be gained by 
increasing the transmission and distribution capacities of the 
U.S., to basically balance the loads. This would enable us to 
make use of the best most efficient plants and decrease the 
emissions. It also would provide improved access for and wider 
distribution of, of our renewable sources. This is another of 
the key challenges that we're going to face.
    Senator Kerry. Mr. Rencheck?
    Mr. Rencheck. Yes, the 765 kV line is just that--it will 
open up a highway for electric transmission. And you will find 
private industry willing to invest in that, as well, with 
Government funding, it could be expanded. The point will be in 
the permitting process. If we wanted to expand those lines, we 
couldn't wait 16 years to address that.
    Senator Kerry. I agree. We have to have an expedited 
process, we've got to put on in place. We've got to behave like 
this is urgent. It is urgent, so we've got to behave that way. 
And I think we've got to take a look at these kinds of options.
    I'd be happy to work with you, Senator Thune, to see if 
there's some way to go at that.
    Dr. McRae. Senator?
    Senator Kerry. Yes.
    Dr. McRae. The issue about the infrastructure, which is, 
you're touching on with power lines, is very, very important, 
it's an often critically missing part of the debate. I mean, 
we're dealing with, not just with transmission lines, for 
moving electricity, we're also beginning to be looking at----
    Senator Kerry. We're going to have to move carbon dioxide.
    Dr. McRae.--carbon dioxide, and getting the regulatory 
structures in place----
    Senator Kerry. Right.
    Dr. McRae.--to be able to do that, I think, is very 
crucial.
    Senator Kerry. I completely agree with you, I understand 
that.
    If that's the avenue we go down. Now, you know, if we push 
the R&D, in 2004, I talked about putting $2 billion up front on 
the table immediately for clean coal technology R&D. Because, I 
think the minute you start to push this, who knows whether you 
guys are going to come up with some other technology, or 
someone at MIT, or Cal Tech, or Carnegie Mellon or somewhere, 
is going to sit there and say, ``Hey, there may be a better way 
to do this.'' Once the marketplace is beckoning, I'll bet you 
there are 10 new Googles out there, waiting to be created----
    Yes, go ahead.
    Dr. McRae. Perhaps a small anecdote might illustrate this 
point. I teach the Senior Design Course in Chemical Engineering 
at MIT, and this semester we had 72 students who were 
interested in how to burn coal in a clean way. We broke the 
class up into 18 teams of four students, and each team was 
assigned a different piece of the problem. And this is the 
first time in my whole academic career, that after the class 
finished, teams of students have come back to me and said, ``We 
want to continue to working on this project, because we've got 
this neat new idea for how to capture CO2,'' or a 
neat new idea to think about how to build a fertilizer market.
    I think--two things here. One is, that there's a group of 
very talented young people who want to work on this problem, 
but more importantly, by thinking out of the box, they can come 
up with many different ideas about how to tackle the problem.
    I mean, just one example, just following up on your 
discussion about Wyoming, if you think about it as a systems 
problem, you can--in addition to taking CO2 and 
putting it in the ground, you can also use it as a basis for a 
C1 chemical industry. And, if you have electricity, but you 
can't move it, you can make hydrogen, if you had the 
CO2, then you can make methanol, you've got a 
transportation fuel. That's--you'd have to work through this in 
a lot more detail.
    But the idea here is that we need, in my view, to start to 
think about this problem much more broadly than just pure 
generation of power, because I think that opens up a very 
different way of thinking about the technology. And it's what I 
see when I look at all of these technologies, is a crucial 
thing about beginning to think about them in a life cycle 
sense.
    You hear a lot about, for example, solid photovoltaic cells 
as clean power sources. But what's often missing is the debate 
that you probably have to run them for at least 3 years before 
you get more power out than was used to actually produce it in 
the first place, and there are all kinds of other environmental 
impacts associated with the production of silicone.
    So, I think, in addition to sort of thinking about 
infrastructure issues, I think we need to couple that with sort 
of a life cycle view of what these technologies might be, 
because, on the surface, some of them look very good. But, when 
you look at the co-effects of them, you often get a very 
different picture.
    Senator Kerry. Yes, Mr. Denis?
    Mr. Denis. Mr. Chairman, I think you've touched on 
something that is very important, and this is that the--if we, 
as we agree in the science, there has to be a comprehensive 
solution, the solution is not only the carbon capture and 
sequestration. We really must focus on the development of 
renewables, we must focus on the conservation of energy. I know 
you have a proposal in a bill to make the Capitol carbon-
neutral, I observe that we don't have compact fluorescent 
lights in this room. Things that we could be doing to reduce 
our energy use in this Country, that really have the effect of 
reducing the carbon dioxide.
    So, it's not a simple answer, it--I think it's a portfolio 
of initiatives that we need--really need to pursue to solve 
this quandary, this problem that we have in front of us.
    Senator Kerry. Oh, I couldn't agree more. That's why I 
introduced the bill. We can't talk about this with legitimacy, 
if we don't take steps here in the Capitol and elsewhere to 
become carbon neutral and energy efficient.
    The book that my wife and I have just written has a chapter 
about energy efficiency and the three biggies, clean coal being 
one of them.
    I mean, there are only three ways we're going to grab this 
thing fast enough. And one is clean coal technology, two is 
alternative and renewables, and three is energy efficiency. You 
can do your other things at the margins, but those are the big 
three. And the energy efficiency piece happens to be the 
cheapest, fastest, most efficient and effective way of grabbing 
it fast. And a lot of companies have understood that.
    You know Texas Instruments built a new plant down in Texas 
that saved 88,000 jobs. It's going to provide $14 billion to 
the economy over its lifetime, and they're burning 25 percent 
more effective on their energy use, 35 percent less water, I 
mean, these are the things we can do all over the country, 
we've got to, and there's a lot of money to be made, 
incidentally, in the companies that wind up doing these things, 
it'll be more effective.
    Let me come back, if I can, for the clean coal piece of 
this for a second, I just want to make sure my own 
understanding, as well as the record, is complete on it.
    The IGCC, Integrated Gasification Combined Cycle, in 
layman's terms, can you just tell people what that does, how it 
does it?
    Mr. Rencheck?
    Mr. Rencheck. It partially combusts coal to produce a 
syngas, synthetic gas, and that synthetic gas has sulfur, 
methane in it. You clean out the sulfur, and what you 
essentially do, then, is combust the gas, it's a clean gas at 
that point.
    Senator Kerry. And it requires no flue component at that 
point?
    Mr. Rencheck. You get an exhaust emission out of the HRSG 
of basically the combined cycle plant, the heat regenerative, 
heat exchanger. You get the combustion flue from the gas 
turbines.
    Senator Kerry. And how complicated is it to attach the 
carbon capture to that?
    Mr. Rencheck. It would require, basically, a new type of 
combustion turbine that would burn hydrogen. And that is one of 
the emphases of FutureGen to develop. The DOE is also working 
on that, both with Siemens and General Electric, but you would, 
essentially, at that point, move the gas stream from a methane-
based type gas stream to a higher, if not purer, hydrogen-based 
gas stream. And its combustion profiles are a lot different 
than with the syngas. And, to understand that, and be able to 
get the delivered horsepower from that engine so that you could 
maintain electrical output is what the quest is all about.
    Senator Kerry. But, prototype-wise, the basics work, the 
key now is to take it to scale.
    Mr. Rencheck. For the conventional combined cycle, that's 
correct. For the hydrogen turbine--it's still in the 
laboratory.
    Senator Kerry. What--sorry.
    Mr. Wilson. Siemens is actually heavily involved, in the 
DOE programs for development of hydrogen fuel combustion. And 
your point is well-taken in terms of, it's a different 
combustion phenomena, it's a much hotter flame, and thus a, 
higher performance standard is required of the gas turbine. So, 
we're working in order to make the turbine parts more robust, 
to be able to maintain the turbine and maintain the cooling 
technology, so they don't degrade quickly.
    So, the hydrogen turbine, the next step in advancement, in 
terms of gas turbine technologies. Gas turbines originally 
operated very very inefficiently and at very low temperature. 
They're now very efficient, very high temperature with methane-
type gasses. The next step in turbine technology is the 
hydrogen capable gas turbine and Siemens is heavily involved in 
the development of this technology.
    Senator Kerry. And, is that the key to the carbon capture 
itself?
    Mr. Wilson. Yes.
    Senator Kerry. Now, what kind of a threat is thermal solar? 
Solar thermal?
    Mr. Wilson. Threat, it's actually a very promising 
technology.
    Senator Kerry. But if you can do solar thermal, and drive a 
steam turbine as a consequence of that and produce electricity, 
what does that say to the coal industry in the long-term?
    Mr. Wilson. Well,--we actually are suppliers of steam 
turbines for virtually almost all of the solar-thermal plants 
in the world. Siemens has a steam turbine that actually is 
well-suited for solar industry application.
    The challenge is, it's a fraction of a percent of the 
contribution of thermal electricity to the overall electrical 
demand. The scale of these projects is relatively small. These 
are all multi-megawatt plants, compared to the utility-scale 
project, which is 500, 1,000, 2,500 megawatts.
    Senator Kerry. Yes, but isn't that, because they're new and 
they are sort of coming online, can't they be taken to scale?
    Mr. Denis. Mr. Chairman, if I may----
    Senator Kerry. Yes.
    Mr. Denis.--next month, we will put in El Dorado Valley, 
just south of Las Vegas, into service, the largest solar 
thermal facility built in the United States in the last 15 
years. It's a 64 megawatt facility, using the sun, the strong 
sun that we have in southern Nevada, to generate the 64 
megawatts of electricity. The--as you come into Las Vegas, if 
you land, you will look to one side----
    Senator Kerry. Well, you hope you land.
    Mr. Denis.--you will see half a square mile covered with 
mirrors.
    Senator Kerry. Yes, I've seen that.
    Mr. Denis. That will generate the 64 megawatts. We're very 
excited about this. There are similar facilities that exist in 
California that were built in the 1980s, late 1980s, but this 
one is the first one built in the last 15 years. And we're very 
excited about that, and it will provide----
    Senator Kerry. Who built it?
    Mr. Denis. The company that started--it has changed hands 
several times, it was initially Duke Solar, then they sold it 
to a company called Solargenics, which is now the majority of, 
the Solargenics is owned by a Spanish company called Axiona.
    Senator Kerry. Very interesting.
    Mr. Denis. But it is a promising technology for the deserts 
of the Southwest.
    Senator Kerry. What other, besides the IGCC and this 
current concept, the hydrogen separation, are there other 
possibilities for clean coal?
    Mr. Wilson. Clearly, there are.
    Dr. McRae. There's actually quite a broad spectrum of 
possibilities. One, for example, is to--instead of using air, 
you use oxygen to burn the fuel, and if you use oxygen to burn 
the fuel, then the primary combustion products are just water 
and CO2, and that separation problem is much, much 
easier than it is with the conventional technologies. The 
downside is, that you actually then have to supply the oxygen.
    But, what's interesting is that there has been a very slow 
and measurable downward trend in the price of oxygen. So, oxy-
firing is a system that I think is a very interesting 
alternative to IGCC. It also is an interesting possibility for 
retrofitting. So, that's one technology.
    Senator Kerry. How many viable, how many different 
technologies, are being seriously explored at this point?
    Dr. McRae. In our Coal Study we did an initial sieving, and 
we had about, I think 10 or 20 of them, and then we brought 
them down to four, which are the ones----
    Senator Kerry. Right.
    Dr. McRae.--which we think could be brought to bear very, 
very quickly.
    Senator Kerry. We're going to be doing an incentive bill, 
in the Finance Committee, sometime in June. As we think about 
those incentives, should we be narrowing it down to the four? 
Or should we frame it in a way that allows people to make their 
own choice within the 20, let's say, or more.
    Dr. McRae. My sense is that you need to engage the 
community with lots of different ideas about how to deal with 
this problem. I think the history of sort of mandating 
technology has not been very good. If you open it up to the 
marketplace and provide the appropriate incentives to deliver, 
then I think, in fact, you'll get very different and very 
innovative ways of dealing with the technology. And there's 
enough out there to suggest to me that there are real 
possibilities, and real alternatives to IGCC.
    We can use IGCC now, there are some problems with the 
hydrogen turbines, and there are also some capture issues, but 
I think they're relatively small time-scale problems to solve, 
compared to bringing some of these other technologies. But they 
are there.
    And I think just to build on a point that Mr. Denis made is 
that, what we need is a portfolio of approaches, so that we're 
bringing on technologies that are evolving over time. And, more 
importantly, that we put in place mechanisms to learn from 
these technologies.
    One of the, the big problems that we had in carrying out 
the Coal Study, is that it's very difficult to extract the 
lessons learned from some of these demonstration projects. And, 
one of the things that I would argue, that if we do open this 
process up, that, in fact, we pay attention to how we can more 
efficiently learn about these technologies.
    Mr. Chaisson mentioned about some of these gasifiers--it's 
very difficult to get your hands on what the chemistry that is 
going on inside those, what really is new and different. And my 
sense is that this, this kind of information----
    Senator Kerry. Why is it so difficult to get your hands 
on--?
    Dr. McRae. I think, in part, because it's, the way it's 
viewed commercially, you know, they view it as a----
    Senator Kerry. You mean, because it's proprietary.
    Dr. McRae.--proprietary, yes.
    Senator Kerry. So, people hold it close to the vest.
    Dr. McRae. But, I think there are things after the 
technologies being tried, if you're going to provide large 
amounts of government support to invest in these technologies, 
that you should, in fact, have the ability to----
    Senator Kerry. Guarantee that there is some sort of review 
capacity for methodology and so forth?
    Mr. Denis. Mr. Chairman, I----
    Senator Kerry. Well, that makes sense, yes, Mr. Rencheck? 
I'm sorry, who--?
    Mr. Denis. Mr. Chairman, I hope that in that June package 
of incentives that you were talking about crafting, that you 
don't forget the incentives for renewables. We believe that the 
investment tax credit and the production tax credit, the 
extension of those for at least 8 years is important to make 
sure that we have continuity in the program.
    Senator Kerry. Those will be, absolutely.
    Mr. Denis. Also the, there's a disallowance, utilities 
cannot avail themselves of those investment tax credits 
presently, and the electric utility industry can be a key 
catalyst in making sure that we bring this country, and that 
we, in fact, bring a lot more renewables, which may do away 
with a lot of coal plants, may do away with a lot of gas 
plants.
    Senator Kerry. Good advice.
    Mr. Denis. Thank you.
    Senator Kerry. And we will do that.
    Mr. Rencheck, then Mr. Chaisson.
    Mr. Rencheck. We are working with Babcock & Wilcox to pilot 
an oxy-coal plant in Barberton, Ohio. It will be a 10 megawatt 
electric demonstration plant, or scale plant, and from that, 
we'll use that to study and learn, so that we can scale it up 
to a commercial-size plant.
    As we talk about funding, it is, it was imperative that we 
were able to fund demonstration plants. It takes a lot to get 
it from the drawing board to a commercial scale that we're 
talking about that can be economically applied to the grid, and 
hold down electric rates.
    Senator Kerry. Understood, absolutely. I can see that.
    Mr. Chaisson?
    Mr. Chaisson. Just two points, Senator. One is, we would 
certainly support having a very broad approach to incentives, 
so that any potentially viable technology gets a shot at the 
incentive funding. But, I would point out that our 
organization's perspective is much broader than CO2, 
and while we agree that there are a lot of promising options 
for, for capturing CO2 from coal to electricity, the 
processes, the other environmental aspects of those processes 
may vary significantly.
    And, at the moment, one reason why we are primarily only 
supportive of coal gasification, is because of all of the other 
environmental aspects. I think our view is that, in the long 
run, for coal to be sustainable, it must deal with 
CO2, but it ultimately has to deal with all of the 
other environmental aspects. And those should not be forgotten.
    Senator Kerry. I couldn't agree more. Obviously, as we go 
down the road here, the marketplace is going to decide some of 
this, but probably some public policy needs to look at, the 
downstream water use, land use, and overall cost impacts. 
Because, if you look at liquefied coal, for instance, I don't 
know if anybody here is advocating it but, there's more and 
more evidence that that is just a huge mistake. I know there's 
some momentum here, by some, to sort of move in that direction, 
but it's more energy exploitative in the end, more costly, and 
threatens an even greater degree of CO2.
    I think we have to think in the, again, the larger piece 
here, of the consequences.
    Is there anything with respect to the clean coal piece that 
we should know, that you haven't had a chance to share with us 
as we think about this? Yes.
    Mr. Chaisson. I'd just make one final comment. I think we 
see underground coal gasification as an extremely promising 
technology, Lawrence Livermore lab is doing a lot of work in 
that area, it's really not on the radar, except, perhaps the 
Governor of Wyoming, who you might want to have come in and 
talk about that--but that technology, if it proves out anything 
like its promise appears, it may be a very cost-effective way 
to use coal, with full capture of carbon, and at the same time, 
to really minimize most of the adverse impacts of using coal. 
And it's, it's just not in the studies, it's not kind of, on 
the radar, but there's actually a surprising amount of 
commercial activity moving forward in North America.
    Senator Kerry. Well, that's terrific, thank you for calling 
that to our attention, and we will dig into it, get a handle on 
it, take a look at it, and understand it better.
    Yes, Mr. Wilson?
    Mr. Wilson. I just wanted to make one last point in terms 
of, we're looking at a lot of promising technologies for the 
next generation. We want to make sure that we address the fact 
that we have a very large fleet out there now. Whatever options 
you put in place need to also address the existing fleet, and 
essentially incentivize industry to address that existing fleet 
at the same time you invest in new projects. You've got to 
level the playing field, and not necessarily grandfather 
everything out there.
    Senator Kerry. I couldn't agree more. I'm very opposed, 
personally, to a lot of grandfathering, which is why I got 
involved in TXU, and I think we have a serious issue there, and 
obviously we've got a fight here on the new source performance 
standards issued over the last few years which I think was just 
a terrible mistake, and will be one of those big contributions 
to the problem we have.
    Yes, Dr. McRae?
    Dr. McRae. Just one comment I would make, this morning was 
spoken mostly about what's going on in the United States, but 
we shouldn't lose sight of the fact that there's an enormous 
amount of activity going on in Europe, and in China and I think 
there's a crucial need to figure out how to----
    Senator Kerry. Are we sharing any of that?
    Mr. Wilson. I work in a global organization, and everything 
we do is basically on a global basis.
    Dr. McRae. But, my general sense is, that there is sharing, 
individually, amongst companies, but there is an opportunity to 
learn a lot from some of the technology demonstrations that 
other--that are being done in other parts of the world. This 
meeting that we had on Monday about sequestration, I think, 
just getting all of these countries together to talk about how 
to do it----
    Senator Kerry. Who brought them together?
    Dr. McRae. This was MIT and Chamboucher, excuse me.
    Senator Kerry. That's a very good thought. We need to think 
about how to augment the global effort. Previously, if I may 
say, when Senator Worth was serving as the Policy Director at 
the State Department, that position was essentially created to 
empower us to be engaged in these kind of talks. Obviously, for 
the last few years, given the Administration's attitude about 
Kyoto, there has been zero exchange in that regard. I think 
there's a very, you know, there's a huge pent-up demand for us 
to get involved in that kind of a dialogue, and I think we 
will, very shortly. Yes?
    Mr. Rencheck. We sponsored an Asian-Pacific partnership 
meeting, where we had members from India and China attend in 
very large numbers. It went over quite well, in discussions of 
energy efficiency, and also new generations of combustion and 
IGCC plants. So that, that sharing of technology is starting to 
occur.
    There was recently a sponsored meeting in Japan that also 
went along those lines.
    Senator Kerry. I can't thank you enough. I think it's been 
a very helpful, very interesting exchange, and we're all 
learning up here, trying to get up to speed.
    I don't think there's any disagreement about the urgency, 
and it's interesting to hear you all accept that, readily 
accept the challenge, and understand that if you had greater 
resources, you believe you could move this thing an awful lot 
faster. I have complete confidence in that, incidentally.
    Again, referencing back to the Clean Air Act experience, 
and the Clean Water Act experience of the 1970s, there is no 
doubt in my mind that once we get a standard in place, create a 
market, get this moving, American ingenuity--global ingenuity--
but American ingenuity will contribute significantly, and we 
can get this done. But, we've got to treat it as the emergency 
and urgent effort that it is.
    Thank you for contributing to that dialogue and we will 
certainly follow up with you.
    I'm going to leave the record open for 2 weeks in the event 
that any colleagues want to submit any questions in writing, 
and the full text of all of your testimonies will be placed in 
the record.
    Thank you very much, we stand adjourned.
    [Whereupon, at 11:54 a.m., the hearing was adjourned.]

                                  
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