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36–921 PDF 2007

CLIMATE CHANGE: PERSPECTIVES

OF UTILITY CEOS

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 20, 2007

Serial No. 110–22

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov
COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

BUD ALBRIGHT, Minority Staff Director

(II)
(III)

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

RICK BOUCHER, Virginia, Chairman

G.K. BUTTERFIELD, North Carolina

Vice Chairman

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

ALBERT R. WYNN, Maryland

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

JOHN D. DINGELL, Michigan (ex officio)

J. DENNIS HASTERT, Illinois,

Ranking Member

RALPH M. HALL, Texas

FRED UPTON, Michigan

ED WHITFIELD, Kentucky

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

STEVE BUYER, Indiana

MARY BONO, California

GREG WALDEN, Oregon

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

MICHAEL C. BURGESS, Texas

JOE BARTON, Texas (ex officio)

PROFESSIONAL STAFF

SUE D. SHERIDAN, Chief Counsel

JOHN W. JIMISON, Counsel

DAVID J. MCCARTHY, Minority Counsel

CHRISTOPHER A. TREANOR, Legislative Clerk

(V)

C O N T E N T S

Page

Hon. Rick Boucher, a Representative in Congress from the Commonwealth

of Virginia, opening statement ............................................................................ 1

Hon. J. Dennis Hastert, a Representative in Congress from the State of

Illinois, opening statement .................................................................................. 2

Hon. Mike Doyle, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 4

Hon. Joe Barton, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 5

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

Hon. Charles A. Gonzalez, a Representative in Congress from the State

of Texas, opening statement ................................................................................ 7

Hon. Ralph M. Hall, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 8

Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ................................................................................... 8

Hon. John Shimkus, a Representative in Congress from the State of Illinois,

opening statement ................................................................................................ 9

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 10

Hon. Michael C. Burgess, a Representative in Congress from the State of

Texas, opening statement .................................................................................... 11

Hon. Jane Harman, a Representative in Congress from the State of California, opening statement ........................................................................................ 12

Hon. John B. Shadegg, a Representative in Congress from the State of Arizona, opening statement ...................................................................................... 13

WITNESSES

Jeffry E. Sterba, chairman, president, and chief executive officer, PNM Resources, Incorporated, Albuquerque, NM ........................................................... 14

Prepared statement .......................................................................................... 153

James E. Rogers, president, and chief executive officer, Duke Energy Corporation, Charlotte, NC ............................................................................................... 16

Prepared statement .......................................................................................... 113

David Sokol, president, and chief executive officer, MidAmerican Corporation,

Omaha, ND ........................................................................................................... 18

Prepared statement .......................................................................................... 131

Michael G. Morris, chairman, president, and chief executive officer, American

Electric Power, Columbus, OH ............................................................................ 20

Prepared statement .......................................................................................... 76

Jackson E. Reasor, president, and chief executive officer, Old Dominion Cooperative, Glen Allen, VA ........................................................................................ 22

Prepared statement .......................................................................................... 95

Milton B. Lee, general manager, and chief executive officer, CPS Energy,

San Antonio, TX ................................................................................................... 24

Prepared statement .......................................................................................... 66
(1)

CLIMATE CHANGE: PERSPECTIVES OF

UTILITY CEOs

TUESDAY, MARCH 20, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ENERGY AND AIR QUALITY,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 10:08 a.m., in room

2123 of the Rayburn House Office Building, Hon. Rick Boucher,

chairman, presiding.

Members present: Representatives Barrow, Waxman, Markey,

Doyle, Harman, Gonzalez, Inslee, Baldwin, Matheson, Dingell,

Hastert, Hall, Upton, Shimkus, Shadegg, Buyer, Walden, Myrick,

Sullivan, Burgess, and Barton.

Also present: Representative Hill.

Staff present: Sue Sheridan, Bruce Harris, John Jimison, Lorie

Schmidt, Laura Vaught, Chris Treanor, Margaret Horn, C.H. Bud

Albright, David McCarthy, Tom Hassenboehler, and Matthew

Johnson.

OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF VIRGINIA

Mr. BOUCHER. The subcommittee will come to order. This morning, our climate change hearing focuses on the Nation’s electric

utility industry, as we welcome to the subcommittee the chief executive officers of some leading coal-fired electricity generators. As

we draft a greenhouse gas control measure, it is essential that we

preserve the ability of electric utilities to utilize coal, our Nation’s

most affordable and abundant energy resource with a 250-year reserve.

If that ability is not adequately preserved, and in lieu of coal,

utilities rely to a greater extent on natural gas, the resulting increases in natural gas prices would substantially harm the entire

American economy. We are already losing tens of thousands of

manufacturing jobs, notably in the chemical industry, but in other

industries as well, to countries that have lower and more stable

natural gas prices. Significant gas price increases would only worsen that job flight from the United States to other lands.

One-half of all homes in the United States are heated with natural gas, and the elevated prices that have occurred, largely because

so many gas-fired electricity generators are now in use, has placed

severe stress on the family budgets for tens of millions of Ameri-
2

cans. For the sake of those who heat with natural gas, we also

must avoid placing greater stress on natural gas prices.

Much of American industry, from agriculture to the smelting of

aluminum, is natural gas dependent and would suffer adversity if

prices escalate. The key to avoiding those consequences is to draft

our greenhouse gas control measure, so as to ensure that utilities

that desire to do so may continue to use coal, to do so in the volumes in which they’re using it today, and to preserve the opportunity for market for coal as a component of the overall fuel mix

for electricity generation.

I look forward to the advice of today’s witnesses about how the

legislation should be structured in order to achieve those ends. I

would also note that, with the leadership of today’s witnesses, the

trade association representing investor-owned utilities has announced the industry’s intention to work with the subcommittee in

drafting a control program of economy-wide application that does

not dislocate any economic sector. I want to thank our witnesses

for their role in developing that industry position, and I will look

forward to working with each of you in order to achieve the result

that is embodied within that position.

We are particularly interested this morning in the views of our

witnesses regarding the potential for carbon capture and storage

technologies to enable electric utilities to continue to rely on coal

as the predominant fuel for electricity generation.

Several questions will be prominent in our discussion today.

What do we need to do to provide, by way of Federal resources, sufficient funds to enable early deployment of affordable and reliable

technologies? How much additional money for grants, for loan guarantees, for direct expenditures on research, development, and demonstration of these technologies will be required and over what

time period?

Should we draft the schedule for the implementation of carbon

controls to coincide with the arrival of reliable and affordable control technology? What do we need to do about the liability with respect to CO2 that is injected into permanent storage in the event

that it migrates beyond where it is supposed to be or escapes again

into the atmosphere, or if other problems that might result in legal

liability are encountered associated with that injection and storage?

What other core concerns should we be aware of as we begin the

exercise to draft this legislation during the latter part of the spring

of this year?

I want to thank our witnesses for joining us this morning, and

I look forward to their answers to these and other questions that

will be propounded to them.

I am now pleased to recognize the ranking Republican member

of the Energy and Air Quality Subcommittee, the gentleman from

Illinois, Mr. Hastert, for an opening statement of 5 minutes.

OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. HASTERT. I thank the chairman, and Mr. Boucher, I also

thank you for your leadership in this area. You called this meeting

this morning to learn. It is crucial that we get the perspectives of
3

industry that will be most affected by any climate change legislation. Last week, we heard from the automakers.

This week, electric utilities, and over the course of these hearings, I hope we hear from other industries as well: the cement industry, the fertilizer industry, oil and gas, and other industries

that will likely be affected by any action that we take here. Their

perspectives are critical if we are to understand the consequences

of legislation of any type that aims to reduce greenhouse gas emissions.

Electricity generation in this country is largely about coal. Nationally, 50 percent of our electricity comes from coal. In the Midwest and some other regions of the country, this percentage is

much higher. But when we look at some where it is lower, we see

the east coast where it depends on fuel oil coming from abroad or

liquid natural gas from abroad where some country or some despot

could turn the handle and cut that supply completely off.

Though we talk about energy independence, I believe it is important for us to remember that the United States is currently energy

independent in one sector: the generation of electricity. Our abundant coal resources make this possible. Any plan that seeks to control CO2 emissions must account for this reality. Failure to do so

would make the U.S. dependent upon foreign sources of energy,

namely LNG for getting electric power done.

This committee has heard testimony about the coal combustion

and carbon capture and sequestration technologies that would be

employed to reduce CO2 emissions. And what did we learn? That

carbon capture and sequestration technology probably wouldn’t be

widely commercially available or deployed for at least 30 years.

Of course, the technologies come with a price tag that is as yet

unknown since no one is actually using them on a coal-fired power

plant today. It is therefore important to get an assessment from

the utility industry about their views on how they plan to meet future generation needs, the importance of maintaining a robust fuel

mix, and the economic feasibility of deployment of carbon capture

and sequestration technologies. We need to hear from them when

they plan to deploy such technologies and how much this is going

to cost the consumers.

Some of the witnesses before us today support cap-and-trade legislation. Of course, the prerequisite for such a plan to work is that

we are able to cap. Now, I am personally convinced that I think

the testimony presented to this committee bears this out, that we

will develop over the next 20 years the technologies and capacities

to economically capture and sequester CO2 on a large enough scale

to make a difference. In order to legislate rationally, we need to

recognize the critical fact that this and related technologies will

take time to develop and mature.

If we do not, cap-and-trade becomes cap-and-pray. I might say

that ‘‘pray’’ might be spelled p-r-e-y. A plan whereby we cap carbon

before it is technologically feasible to do so and pray it doesn’t cost

the consumers or the economy too much. A cap-and-trade scheme

put in place before we had the technology capacity to control CO2

emissions is simply a tax on the generation of electricity and will

do nothing to reduce the Earth’s average temperature.
4

Finally, I am interested in our witnesses’ view on the necessity

for the participation of developing countries, like China and India,

in any global emissions reduction plan. China, for example, is

building the equivalent of a 500-megawatt coal-fired plant every

week. China very soon will become the world’s largest emitter of

greenhouse gas emissions. I personally do not see how a cap that

doesn’t include these countries will do much to limit world trade,

greenhouse gas emissions, or lower the Earth’s average temperature.

There are many things we can do that would help. We can push

development of carbon control technologies. We can advance the

use of biofuels. We can develop clean coal and coal-to-liquids technology, and we can ensure that these technologies are made available to the developing world. We cannot, however, wave a magic

wand and make these technologies appear overnight. I think the

bottom line is we want to make this country and this world a better and healthier place to live.

We also need to keep jobs and production and manufacturing in

this Nation. If we push out the ability to manufacture, to create

jobs, for our people and send them to China or India where they

continue to build dirty plants, then we have no jobs and a worse

ecology in this world to deal with.

Mr. Chairman, I thank you for the time, and I thank you for

holding this hearing today.

Mr. BOUCHER. Well, Mr. Hastert, thank you very much for a

truly thoughtful statement.

The gentleman from Georgia, Mr. Barrow, is recognized for 3

minutes.

The gentleman from Georgia waives.

I would note that pursuant to the rules of the committee, any

member who waives the time allotted for an opening statement will

have those minutes added to the time for questioning witnesses.

The gentleman from California, Mr. Waxman.

Mr. WAXMAN. Mr. Chairman, I welcome our witnesses today, and

I also waive my opening statement.

Mr. BOUCHER. Gentleman waives his opening statement. The

gentleman from Pennsylvania, Mr. Doyle.

OPENING STATEMENT OF HON. MIKE DOYLE A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

Mr. DOYLE. Thank you, Mr. Chairman. I would like to welcome

each of you to the committee, as we all look forward to hearing

your testimony regarding what your companies can do to join us in

the fight against global warming.

As I have stated at previous hearings, we are long past the point

of dueling scientists where, for every expert who testifies that global warming is real and manmade, another one is brought out to say

the studies are inconclusive. We are at a point where we know

what the problem is. We know what causes it, and we are beginning to discuss solutions that we can craft to correct.

A discussion of that solution has brought each of here to this

committee. Each of you find yourself in a unique position when

compared to other aspects of our American economy. On the one
5

hand, your companies contribute to global warming. On the other

hand, your companies provide the energy backbone that allows our

entire economy to prosper.

As a result, the question before us today is not if you are going

to reduce your carbon dioxide emissions but how you are going to

achieve this goal. In addition to your testimony about carbon sequestration and other pollution controls, I am particularly interested in your thoughts about a renewed national policy that would

encourage the building of next generation nuclear capacity. Seems

to me that because this is a discussion about emissions and the effect of greenhouse gases into our atmosphere, we must also have

a frank discussion regarding the benefits of nuclear energy, an energy source that does not release greenhouse gases.

While nuclear energy does pose some other significant environmental questions, the fact that global warming is caused by gases

being trapped in our atmosphere makes it relevant to this discussion. Simply stated, if the release of these gases is a cause, then

a form of energy that does not release them is certainly a part of

the solution. I look forward to hearing each of your testimonies.

I hope that we will hear some concrete, real-world suggestions as

to how we can work together to reduce the impact of global warming. Two things are certain. Congress will act, and your industries

will be among the industries most affected. I sincerely hope that

we can work together to achieve the right mix of reductions, incentive, and innovation to achieve our common goal. I thank you, Mr.

Chairman, and I yield back.

Mr. BOUCHER. Thank you very much, Mr. Doyle. The gentleman

from Texas, the ranking member on the full Energy and Commerce

Committee, Mr. Barton, is recognized for 5 minutes.

OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BARTON. Thank you, Mr. Chairman. I went upstairs. I

thought this hearing was upstairs, so I have got my exercise for the

day. I have a prepared statement, but I want to at least show, or

maybe state, for the record my last two power bills. This one is

from TXU Energy down in Texas. And down here at the bottom in

tiny, tiny, tiny, tiny print, in fact you have to have a magnifying

glass to read, it says ‘‘The average price you paid for electric service this month was 16.56 cents per kilowatt hour.’’ 16.56.

I just got this. I opened my mailbox in Arlington, Virginia. I have

a little condo. This in my Dominion Power bill, and in print that

is a lot bigger for some reason, it says ‘‘The price to compare 5.96

cents.’’ OK, now, Texas 16.56, Virginia 5.96. Which of these would

you rather pay? Obviously the 5.96.

Now, the difference between those is that Texas has built almost

every new power plant it has built in the last 20 years uses natural

gas. Natural gas prices got up to about $14, 1,000 cubic feet last

year. Now, they have come back down to about $8. TXU has yet

to see fit to lower its price, but that is a whole other story.

But Texas became too dependent on natural gas and consumers’

pain. Dominion, probably thanks to the good work of Chairman

Boucher, who is now the chairman of this subcommittee, has got
6

a diversified power mix. But they produce over, I think, about 60

to 70 percent of their power from coal.

Right now, the differential between coal and natural gas is about

4 to 1. Natural gas is about four times expensive as coal. What relevance does that have to this hearing? We are in a frenzy to put

a carbon tax on or regulate CO2 or come up with some mandatory

cap-and-trade system for carbon dioxide. And unless our future

project works, which we won’t know for another 8 or 9 years, if you

burn coal, you are going to create CO2.

If you tax CO2, if you regulate CO2, if you put a cap on it, it is

going to be a lot more expensive. Now, in the European Union in

Germany, their utility prices at wholesale went up 30 to 40 percent

when the Europeans adopted their carbon cap-and-trade system, 30

to 40 percent. In our technology hearing last week, when we had

all of the folks come in to talk about the new technology for using

coal, the average price increase for the carbon sequestration and

capture methods, the minimum was 25 percent. The average was

over 50, and one was 100 percent.

Ladies and gentleman, unless everyone wants to pay 16.5 cents

or 20 or 25 cents like they are paying in Hawaii and San Francisco,

we need to tread very lightly on these mandatory systems for carbon capture and various other of these mandatory systems.

So I have a prepared statement, Mr. Chairman, that I will put

in the record. Suffice it to say I am very pleased to have this panel.

I honestly can say I know most of these gentlemen on a first-name

basis. They are all fine Americans, patriots, and they have differences of opinion. And we are going to hear that, but that is what

democracy is all about.

But I think it is a very important hearing today. The people that

would have to implement some of these systems, to hear what they

say about them. With that, Mr. Chairman, I yield back.

[The prepared testimony of Mr. Barton follows:]

PREPARED STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS

Thank you, Chairman Boucher, for holding this hearing today on utility perspectives on global warming. This is an important hearing because any global warming

legislation that proposes to cut CO2 levels will do it on the backs of the utility industry and its ratepayers. Particularly vulnerable will be the homeowners whose

electricity comes from coal, even the ones who get power produced by the latest

clean-coal technology.

We have a responsibility to the people who work for a living and pay their electric

bills. Part of our responsibility is to guard against laws that would make electricity

so expensive that cooking and heating become a luxury. And when our colleagues

propose legislation that will produce no discernable environmental benefit, but will

surely cost working people their jobs, it’s our job to say no.

Today we have more representatives of the USCAP group. We heard from three

members of this group at our first hearing several weeks ago. At that hearing, the

Pew Center seemed to be the stand-in for the electric utility industry. I’m glad we

will hear from the industry directly today.

I also want to welcome CPS Energy from San Antonio. CPS Energy is a municipal

utility that makes no profit and is directly accountable to its ratepayers, rather than

its shareholders. It relies heavily on coal to generate its electricity. That perspective

is important for us to hear.

This committee is embarked on a fact-based exploration of global warming issues.

Much of the call today for global warming legislation includes a mandatory cap

on CO2 emissions and a complex trading scheme for CO2 emissions allowances. Allegedly, this will make compliance somehow cheaper. So far, we have not heard any
7

hard facts to support this claim. Proponents have given us hypotheticals with no

hard numbers. They did agree that it would not be free.

The only hard numbers based on real-world experience that we have heard was

the German experience with the European Emissions Trading Scheme. There,

wholesale electric rates went up by 40 percent after the trading scheme was implemented. I’m not sure that there will be any environmental benefit from the European system because most European nations are going to exceed their CO2 caps,

and China, India and other non-OECD nations will exceed Europe. The evidence so

far is not promising that a cap-and-trade scheme is worthwhile. Perhaps that is one

reason that Speaker Pelosi has acknowledged that we won’t we doing a cap-andtrade by the 4th of July, after all.

I see a lot of industries now lining up behind a cap-and-trade system, despite the

evidence from the European experience. I think they believe there is money to be

made in CO2 trading. In fact, I’ve heard that argument in this room.

Here’s some other news that shows what the future in America might be like

under a cap-and-trade system. After requiring companies to cap-and-trade, the governments of Sweden and Finland are both dabbling with windfall profits taxes on

companies that did what they were told, but just a little too well. I guess no good

deed goes unpunished. You can bet that if U.S. companies start to make profits on

CO2 trading, the same Members of this Congress who called for windfall profits

taxes on oil company profits will call for new taxes on CO2 trading. They raised

taxes and fees on domestic oil production already, so the pattern is clear.

I hope today’s witnesses will be able to tell us what they think a cap-and-trade

system will mean for their ratepayers and shareholders. Who gets the benefits? Is

the technology for CO2 reduction available? When and at what cost? What are the

environmental benefits, particularly if China and India are not participants in any

international cap-and-trade system? These are the hard facts and numbers we need

before we legislate on any global warming legislation. I hope we get some answers

today.

Thank you, Mr. Chairman.

Mr. BOUCHER. Thank you very much, Mr. Barton. The gentleman

from Texas, Mr. Gonzalez, is recognized for 3 minutes.

OPENING STATEMENT OF HON. CHARLES A. GONZALEZ, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. GONZALEZ. Thank you very much, Mr. Chairman. First of all,

as we attempt to craft some sort of legislation, and we don’t know

to what degree or extent we are going to have something ready in

the next few months, my concern, of course, is that we do it with

the reality that faces us.

And what is that backdrop when it comes to coal-fired plants?

The reality is, of course, we have got one that is coming online as

we speak, and I was reading an article the other day. And it represented that you will have 40 new coal-fired plants within 5 years

and 150 new coal-fired plants by 2030. That is the reality. That is

the backdrop, and whatever we do, how is that going to impact the

construction of these particular coal-fired plants and their ability

to provide energy to, obviously, our constituents.

We have had many different witnesses as we have this accelerated, expedited schedule that represent different stakeholders. We

don’t really hear from the consumer. They are not organized. They

don’t really have advocacy groups and so on, but that is truly our

job up here as representatives of our individual districts.

Keeping that in mind, what I wanted also, with the indulgence

of the chair and of course using up my own time, I wanted to welcome one of our witnesses, which obviously is someone locally from

San Antonio and the general manager and CEO of City Public

Service Energy, Milton Lee. I wanted to welcome him this morning.

I appreciate the fact that he made himself available to testify,
8

which is a brave thing to do, Milton, when you think in terms of

the questions that you are going to be fielding.

Hopefully, he will lend some real insight as to the San Antonio

experience, and, of course, the plans to build the new coal-fired

plant, but also the expertise that you have brought in the past 6

years. You were at Austin Energy previous to your service in San

Antonio, and that expertise is reflected by a very efficiently-run,

publicly-owned municipal utility and the diversification, as far as

sources of energy, which I hope that you will touch on in your testimony. Welcome, and with that, I yield back.

Mr. BOUCHER. Thank you, Mr. Gonzalez. The gentleman from

Texas, Mr. Hall, is recognized for 3 minutes.

OPENING STATEMENT OF HON. RALPH M. HALL, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. HALL. Mr. Chairman, I will just be very brief. I think I am

not telling this fine array of members of Energy Committee that

today we are observing a major attack on energy, period. And to

me, other than the word prayer, the word energy is probably the

most important word in the dictionary for our children and our

grandchildren, who we’ll send overseas to take some energy away

from people, when if we could just use energy we have right here

at home, could prevent a war for them.

And that is what it is all about, and I remember in boxing, you

have always heard boxing managers and promoters say kill the

stomach, and the head will die. Well, all of these punches are stomach punches, and they are trying to kill the stomach now. And the

head is global warming, and for the global warming to work, a lot

of people’s brain has to die because nobody is talking about anything that has to do with what it costs and what it will take and

how we will send jobs to the worst polluter in the world, who is

going to pay absolutely nothing.

Mr. Vice President, what about China? What about Russia?

What about Mexico? What about India? Who is going to pay for

this mass array of funds for something that we don’t know if going

to happen? We are not positive it is going to happen. Major people

who are much more intelligent than I am and made 20 grade

points in college have an idea about it, and not a small minority

of them have different ideas.

Thank you for giving us your side of it. I am anxious to hear it,

and I yield back my time. But remember there is a major assault

in this country by people who want a plaque on the wall. No, they

are not going to get a bill against energy. I yield back.

Mr. BOUCHER. Thank you very much, Mr. Hall. The gentleman

from Washington State, Mr. Inslee, is recognized for 3 minutes.

Mr. INSLEE. I will waive, Mr. Chairman.

Mr. BOUCHER. Gentleman from Washington waives. The gentle

lady from Wisconsin, Ms. Baldwin, is recognized for 3 minutes.

OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Ms. BALDWIN. Thank you, Mr. Chairman. Today’s hearing focuses on one of the main components of our debate on climate
9

change, the electricity sector. As has been echoed numerous times,

our Nation’s electric utilities release a large portion of the total carbon dioxide emissions released in the atmosphere, with coal representing the largest single source of carbon dioxide emissions.

As Americans, we are dependent on the electricity our Nation’s

utilities provide. We are accustomed to expect reliable, affordable

service on demand. As such, it is clear that the companies represented before us today play an important role in our everyday

lives, but the question remains: What role will you play in our future for generations to come?

Scientists have told us loudly and clearly that the Earth is

warming at an unprecedented rate and that human activities are

largely the cause. The scientists have sounded the alarm that we

must act now to slow, stop, and reverse the growth of greenhouse

gas emissions. And the electricity industry will have to be a large

part of our response.

Now, I agree that we must reconcile the demand for affordable

and reliable service with the goal of reducing greenhouse gas emissions from electricity generation. And I believe it is possible for us

to take such action without worry that the lights will turn out but

only if we commit to smart, aggressive initiatives that protect our

constituents, our Nation, and our planet from the harmful effects

of global climate change.

In my home State of Wisconsin, we face real challenges when it

comes to addressing our power supply. We are increasingly dependent on coal, and as a result, emit greenhouse gases at a rate that

is about one-third higher than the national average. The people of

Wisconsin understand the consequences of that dependence, and as

a result, they are willing to meet the challenges of reducing our impact on the world.

For instance, Wisconsinites supported our State’s renewable portfolio standard that requires our utilities to use renewable energy

to meet part of its electricity demand. And as a result of this action, by 2015, Wisconsin will avoid emitting about 5.5 million tons

of greenhouse gas pollution.

On a national level, we have a very difficult task ahead of enacting meaningful legislation that will push the envelope in terms of

creating efficient, effective, and environmentally-friendly climate

change programs. But it can be done, and with your cooperation,

your ingenuity, and willingness to take bold action, we can bring

about change.

Thank you, Mr. Chairman. I yield back the balance of my time.

Mr. BOUCHER. Thank you very much, Ms. Baldwin. The gentleman from Michigan, Mr. Upton, is recognized for 3 minutes.

Mr. UPTON. I am going to defer, Mr. Chairman.

Mr. BOUCHER. Gentleman from Michigan waives his opening

statement. The gentleman from Illinois, Mr. Shimkus, is recognized

for 3 minutes.

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. SHIMKUS. Thank you, Mr. Chairman. I will try to be brief

also. Last night, I had a tele-townhall meeting where we try to contact over thousands of my constituents. We actually ended up over
10

500 folks on the line, and I took questions for about an hour. Not

one question on global warming or climate change.

However, Chairman Barton and Mr. Gonzalez, I did get numerous questions about electricity prices and energy bills, especially

from Illinois, where we have moved to ‘‘a competitive market’’ and

we have seen anywhere from 50 to 100 percent to 300 percent increase in energy costs.

I will submit to you that once consumers start receiving the bill,

consumers will talk to us. And whether it is any venue, it will not

be a pleasant conversation because it will be lost jobs. It will be

higher prices. It will be slow economic growth, and it will be devastation for this country.

Make no mistake. We are talking about major costs being passed

on, either through a tax increase, which the UK just did, and that

is not good enough. Or it is going to be increased costs of the price

of doing business. You can’t cap this depiction on how much we

rely on coal to meet our energy demands because our energy demands are not going down. They are going up. So the laws of supply and demand would say that we are in deep trouble on this capand-trade.

The more I attend these hearings, the more I understand, and

I am very quizzical that we human beings think we can affect

world climate. If you are an evolutionist, the world has swung

through climate changes 33 different times in the evolution of this

planet. Thousands and thousands of those years, man was not here

and had no effect, either a glacier age or a warming. Some would

argue this planet is carbon-starved if you really go to the science.

Now, if that is the premise, if you really talk about the evolution—I’m a creationist. So I believe God is in control. I don’t care

what we do, but if you are in the evolutionary scientific model, the

planet balances itself out. Man cannot balance this. We are not

going to have the impact on this effort, and the issue will be at

what cost. And I think the cost will be devastating.

Thank you, Mr. Chairman. I yield back.

Mr. BOUCHER. Thank you very much, Mr. Shimkus. The gentleman from Massachusetts, Mr. Markey. Mr. Markey waives his

opening statement.

The gentleman from Michigan, the chairman of the full committee, Mr. Dingell, is now recognized for 5 minutes.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. DINGELL. Mr. Chairman, I thank you. I also commend you

for the vigor and diligence with which you are addressing the problem that is before the committee. To our witnesses, thank you for

being here. I hope you feel welcome, and I would observe that each

of your companies has a significant stake in the business of producing and providing to its customer electricity produced from our

country’s most abundant generation source: coal.

As we have learned in the subcommittee’s hearing today, coal accounts for nearly 50 percent of the Nation’s electricity mix and is

thus, critical to our energy security and independence. The U.S.
11

has heavily relied on coal, and no one seriously argues that we will

not continue to need this fuel source to meet our future needs.

Yet it is equally clear that coal faces challenges as the U.S.

searches for ways to reduce carbon emissions. The subcommittee’s

March 6, 2007, hearing examines some of the difficulties and the

opportunities for using coal more cleanly, and nearly every week,

a new study on the topic comes forth.

The subcommittee is fortunate to have among today’s witnesses

a number of companies that rely on coal and are seeking answers

to the same questions that we seek, and that is how to maintain

and improve the service to customers while at the same time, being

good stewards of the environment.

The witnesses today include chairmen of companies that have

called for legislation to limit carbon emissions, a goal that you, Mr.

Chairman, and I are working towards. Others are still formulating

their positions, and we will be indeed welcoming their testimony as

to the questions they confront and how they plan to limit the production of greenhouse gases.

I note that yesterday was the date on which you, Mr. Chairman,

and I requested responses to a letter we sent last month asking

questions about greenhouse gas legislation. The responses, I note,

are now coming in, and I want to thank our witnesses and the organizations to which they belong for the hard work which they put

into these submissions. I am sure that the information will be very

helpful to the committee in its future deliberations.

With that, Mr. Chairman, I thank you for your recognition. I welcome our witnesses, and I look forward to their testimony. Thank

you, gentleman. I yield back the balance of my time.

Mr. BOUCHER. Thank you very much, Chairman Dingell. The

gentleman from Oregon, Mr. Walden, is recognized for 3 minutes.

Mr. WALDEN. Mr. Chairman, I intend to waive and take my time

in the questions.

Mr. BOUCHER. The gentleman from Oregon waives his opening

statement. The gentleman from Texas, Mr. Burgess, is recognized

for 3 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BURGESS. Thank you, Mr. Chairman. I, too, want to thank

you for holding this hearing today, and Mr. Lee from San Antonio,

you are not my part of the State, but any part of Texas is good to

see on this panel. You know the challenge we have ahead of us as

so many Yankees move to our State, and we have got to keep them

cool in the summertime. So what you guys do is critically important.

Well, 2 weeks ago, this subcommittee held a hearing on carbon

capture and sequestration. We heard from a variety of witnesses

regarding the status of the technology and what steps must be

taken for full-scale deployment. And we also heard about the potential costs. Last week, the Massachusetts Institute of Technology released a report entitled ‘‘The Future of Coal’’ which examined the

role of coal in a carbon-constrained world. Much of the report focused on the technological, regulatory, and infrastructure chal-
12

lenges that stand in the way of commercial deployment of carbon

capture and sequestration.

I had hoped that our subcommittee would hold the carbon sequestration hearing after the report had been released so that we

might have had the benefit of their expertise during the hearing.

But nevertheless, and never constrained as before, I am pleased to

have the CEOs of many of our country’s leading electricity companies before us here today to share their perspective.

One question that I would like to hear answered by our group

in front of us is what would happen if carbon dioxide emissions

were capped and affordable carbon capture and sequestration technology was not available. In their written statements, most of our

witnesses emphasized the importance of having carbon capture and

sequestration technology commercially available in order for a capand-trade policy to work.

As we have already learned, we are not at that point right now.

Carbon capture and sequestration technology won’t be widely available for another 40 years. That is a long time to trade credits before there is a technological alternative to credits. Since most of our

witnesses today expressed support for mandatory cap-and-trade

system, I look forward to hearing how they reconcile their support

with the current state of our technology.

And, Mr. Chairman, I am going to yield back a full minute.

Mr. BOUCHER. Thank you very much, Mr. Burgess. The chair

greatly appreciates that gesture. And now recognizes the gentle

lady from California, Ms. Harman, for 3 minutes.

OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. HARMAN. Thank you, Mr. Chairman, and welcome to our witnesses. I want to also join the chorus about coal. It is a form of energy we need in our future, but obviously we need to drive technology so that we can find the way to produce truly clean coal.

The utility companies represented here today are caught in a

catch–22 it seems to me. On one hand, power production is responsible for the lion’s share of our Nation’s greenhouse gas emissions,

approximately 40 percent. On the other hand, your businesses sell

power, and the more you sell, that is at least using the most current technology, the more carbon you emit, the more money you

make.

The solution is not to tell you how much money you can or cannot make. The solution is to create adequate incentives for your

companies to invest in energy efficiency and to produce efficient

and clean energy for our Nation’s needs. In California, we have

been doing this for decades with a short, ill-fated experiment in deregulation. And that is because power companies’ profits in my

home State are not tied to how much energy Californians use. As

a result of this decoupling, energy producers investments in efficiency pay dividends. And this investment is far cheaper than planning and building new power plants.

Now, I am not suggesting that decoupling is a magic answer, but

it does work in California, and the results are telling. The average

American uses 12,000 kilowatts of energy per year, but the average

Californian uses 7,000. This latter figure has held constant over 30
13

years, while energy usage among average Americans has increased

by 50 percent. Best of all, we Californians emit 30 percent less carbon dioxide, per capita, than we did back then. Efficiency is paramount.

I recently introduced a bill to drive technology in producing efficient light bulbs. Clearly that is a smaller topic, and the light bulb

producers are all welcoming this kind of push. So our goal here,

Mr. Chairman, I think is to figure out how we can reach a common

cause in driving your efficiency, push you to cleaner and cleaner

energy production, and find a solution not just for America but for

this huge problem that the world faces.

Thank you, and I yield back.

Mr. BOUCHER. Thank you very much, Ms. Harman. The gentleman from Indiana, Mr. Buyer, is recognized for 3 minutes.

Mr. BUYER. I will waive.

Mr. BOUCHER. Gentleman waives his opening statement. The

gentleman from Arizona, Mr. Shadegg, is recognized for 3 minutes.

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA

Mr. SHADEGG. Thank you, Mr. Chairman, and thank you for

holding this important hearing. I look forward to the testimony of

our witnesses. I am extremely pleased to see David Sokol and to

have mentioned in his prepared remarks the theme I think we

need to hit upon, which is nuclear energy. I recently note that Senator McCain of my State says he doesn’t like following the French

in many things, but he thinks with regard to energy production,

perhaps they have it right.

As we look at the challenges of climate change and of the emissions of greenhouse gases, I believe nuclear has to be a part of the

equation, and I think it is important that we get started with that

effort as quickly as possible.

I also agree with you, however, Mr. Chairman, and with the previous speaker that coal remains an important part of our overall

future. And I am very anxious to hear what the executives who are

with us today propose to do with regard to continuing our reliance

on coal and our use of coal but doing it in the clean and appropriate manner that the previous speaker just mentioned.

I believe that too many people are discussing the notion of capand-trade as the only viable solution of trying to limit greenhouse

emissions. I do not believe that it holds that potential. I think the

experience in Europe has demonstrated that cap-and-trade may, in

fact, not work at all and that creating such a market may be more

challenging and may in fact appear to solve the problem without

really doing so. I believe that this is a very important challenge for

us as a Nation. I look forward to hearing the testimony of our witnesses and hope they will bring us encouraging news on what they

hope to do. But I would reemphasize that I believe nuclear has to

be part of the solution

With that, Mr. Chairman, I yield back.

Mr. BOUCHER. Thank you very much, Mr. Shadegg. The gentleman from Utah, Mr. Matheson, is recognized for 3 minutes. And

the gentleman waives his opening statement.
14

I believe all members have now been recognized for opening

statements except for the gentleman from Oklahoma, Mr. Sullivan,

who just arrived. The gentleman is recognized.

Mr. SULLIVAN. I’ll waive.

Mr. BOUCHER. The gentleman waives his opening statement. The

gentleman from Indiana, Mr. Hill, who is a member of the full committee but not a member of the subcommittee has joined us for the

hearing. And we would be happy to entertain an opening statement

from you, Mr. Hill.

Mr. HILL. Well, I don’t have an opening statement so I won’t take

much of your time other than to acknowledge Jim Rogers who is

here with Duke Energy. He and I had a very good discussion about

this very important issue that you are addressing here this morning. I am glad to welcome Mr. Rogers here to this hearing.

Mr. BOUCHER. Thank you very much, Mr. Hill, and we are

pleased to have you participate in our hearing this morning. We

have a very distinguished panel of witnesses who will inform the

subcommittee this morning about their views, and I want to welcome each of them to the subcommittee and let you know how

much we are looking forward to your testimony. I will introduce

briefly each witness, and we will then proceed, beginning with Mr.

Sterba, to receive testimony. Mr. Jeffry Sterba, is the chairman,

president, and chief executive officer of PNM Resources in New

Mexico. James Rogers is the president and chief executive officer

of Duke Energy Company. Mr. David Sokol is chairman and chief

executive officer of the MidAmerican Corporation. Michael Morris

is chairman, president, and chief executive officer of American

Electric Power. Jack Reasor, who I am pleased to note is a former

constituent of mine and a former member of the Virginia State

Senate, is the president and chief executive officer of Old Dominion

Electric Cooperative, a major electric utility generator of electricity

in Glen Allen, Virginia. And Mr. Milton Lee is the general manager

and chief executive officer of CPS Energy Company in San Antonio,

Texas.

I want to say a welcome to each of our witnesses and note in this

introduction that each is a major user of coal and a principle coalfired electric utility. Many of our witnesses also took a leadership

role in developing the position of the Edison Electric Institute, the

trade association for investor-owned utilities in support of working

with this subcommittee as we seek to structure an American response to the challenge of climate change. We appreciate that position. We appreciate your being here with us this morning.

Without objection, your prepared statement will be made a part

of the record, and we would welcome your oral summary of approximately 5 minutes. Mr. Sterba, we will be pleased to begin

with you.

STATEMENT OF JEFFRY E. STERBA, CHAIRMAN, PRESIDENT,

AND CHIEF EXECUTIVE OFFICER, PNM RESOURCES, INCORPORATED, ALBUQUERQUE, NM

Mr. STERBA. Good morning, Chairman Boucher, Congressman

Hastert, and members of the subcommittee. Based on your leadership, I almost wanted to say I waive, but I won’t do that.
15

In 2004, the electric power sector reported 282 million metric

tons of CO2 equivalent emission reductions. This represented over

63 percent of all reported voluntary reductions in that year. While

our industry’s voluntary programs have achieved meaningful reductions, I believe it is time to do more to address climate change,

at least as an insurance policy for the future.

We need Federal legislation that is environmentally effective,

economically sustainable, and fair. And we cannot make significant

long-term reductions without seriously addressing the need to fund

and advance technology that can provide a robust and diverse portfolio of carbon-friendly alternatives. This needs to include energy

efficiency, advanced coal, renewables, nuclear, carbon capture and

storage, and plug-in hybrids. The removal of any one of these options impacts our ability to be serious about the challenge.

Federal legislation should engage all sectors of the economy and

provide leadership globally. The current path, which seems to be

one of State action, is unsatisfactory because it will create a patchwork quilt of inconsistent and conflicting elements.

We need to aggressively fund research, development, demonstration, and deployment so that we can bring carbon capture and sequestration technologies online as soon as possible. It is not just

technology availability, but the necessary policy facilitation. This

includes addressing licensing, citing, and reliability issues.

And not just the storage facilities themselves, but also the transportation infrastructure to get the material from where the generation is located to where it must be placed underground. And if

mandatory emission reduction targets and timelines are not in sync

with the commercial timeline and construction and permitting of

these technologies, we risk massive switching to natural gas and

associated increase in gas prices that greater demand will create.

I am not saying that we need to wait to begin reducing our carbon footprint until these technologies are fully deployed. There are

a number of things, what you would call low-hanging fruit, that

can be done now. Energy efficiency measures are at the top of this

list and can achieve significant reductions immediately and cost-effectively. And they can also save Americans money.

For example, if every American home replaced just one light bulb

with a compact fluorescent, we would save enough energy to light

more than two and a half million homes for a year and prevent

greenhouses gases equivalent to the emissions of nearly 800,000 vehicles.

We can also modify existing plants to be more efficient and increase their capacity with virtually no additional fuel input, effectively creating very low emission generation. But certain environmental regulations, the new source review for example, may need

to be modified to enable these improvements.

I would ask this subcommittee to consider an overall architecture

for a comprehensive climate change bill, which, one, accounts for

the global dimension of climate change through U.S. participation

in negotiations for a post–2012 international framework. Two, provides for policy initiatives that will fundamentally change the way

we produce and use energy. This will require us to establish a national technology roadmap that includes an aggressive research development, demonstration, and deployment program targeting a
16

full suite of carbon-friendly breakthrough technologies and longterm stable funding that is not subject to the vagaries of annual

appropriations. Three, to be cost-effective and allow for economic

growth while achieving meaningful emissions reductions. Both objectives can be achieved through an economy-wide Federal cap-andtrade program that sets mandatory emissions reduction targets but

must allow a slow, stop, and reduce strategy over the next 50 to

100 years. I believe it also must include cost control mechanisms

that do not undermine ultimate environmental goals but prevent

adverse economic impact during the initial transition and enable a

long-term price signal for major capital projects, such as a safety

valve. When I am making a technology decision about a new resource, I don’t care what the carbon price is today. What matters

is what is it 10 years from now, 15 years from now, on the basis

of the technology that I will be installing. And so if we have an unconstrained carbon price in the near term, when we don’t have this

technology, the only thing that will happen is I and my customers

will pay more and probably make the wrong decisions for the long

term.

Further, legislation should not create winners and losers among

generation resources, particularly with respect to existing resources, but rather promote all types of fuel sources and recognize

the disproportionate impact mandatory reductions will have on certain regions and existing resources.

Ultimately, the goal should be to create an economically sustainable and environmentally appropriate addressing of the climate

change issues. With that, Mr. Chairman, I end my comments.

[The prepared statement of Mr. Sterba appears at the conclusion

of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Sterba. Mr. Rogers, we

will be pleased to hear from you.

STATEMENT OF JAMES E. ROGERS, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, DUKE ENERGY COMPANY, CHARLOTTE, NC

Mr. ROGERS. Chairman Boucher, Congressman Hastert, and

members of the committee, I would like to thank you all for inviting us here today to share our thoughts on how to design a fair effective greenhouse gas bill that puts us on a path of decarbonizing

of our economy without causing economic dislocation, particularly

in the regions so dependent on coal.

My name is Jim Rogers. I am CEO of Duke Energy, Charlotte,

North Carolina. We are the third largest investor-owned utility in

the United States. We serve nearly 4 million customers in five

States: Indiana, North Carolina, South Carolina, Ohio, and Kentucky. And almost 98 percent of our electricity comes from coal and

nuclear plants. We are the third largest consumer of coal, so I

speak as a representative of a company with much at stake in this

debate.

I am struck today by the common threads that run through the

testimony you have seen and heard from the power industry. We

are engaged and ready to work with you. We want the same things

you want. Like you, we are concerned about what kind of planet

we are leaving for our children and for our grandchildren. And like
17

you, we seek a policy that inspires innovation and efficiency but

does not place too heavy a burden on our customers and our economy. All of us agree on an economy-wide approach.

I know this sentiment is shared by every economist I have seen

who has commented on this issue. And importantly, just last week,

the auto industry, which represents a third of our Nation’s emissions said the same thing. All of us favor a system that uses market-based principles that establish a moderate price signal.

As we look back to 1990 and the history since then, no one can

deny the success of a cap-and-trade system in reducing sulfur dioxide and nitrogen oxides economically and fairly. In my judgment,

an economy-wide cap-and-trade system would establish a single

price signal for carbon, providing the framework for economic compliance decisions and driving the development of new technologies.

We all have emphasized the need for our industry to employ the

full range of options available to reduce our carbon footprint. They

include renewables, nuclear, energy efficiency, and clean coal. We

must work together to remove the regulatory roadblocks that have

impeded the full potential of these technologies, especially with respect to energy efficiency.

Finally, there is a sense of urgency at this table focused on the

need for a real, sustained commitment to developing and deploying

new clean coal technologies. We look to Congress to accelerate the

research and development of low to zero-emission technologies and

to partner with the private sector in addressing risks as we move

to deploy.

Everyone here agrees it is critical to our Nation’s long-term energy security goals to keep coal in the Nation’s generation mix for

decades to come.

As this map shows, wide regions of the country, including much

of the manufacturing belt of the Midwest, the fast growing Southeast and Southwest, and the farm belt depend on coal for their

electricity needs. Customers in all these States will bear the deepest and most costly reductions, a disproportionate burden that Congress can address as it did with SO2 and The Clean Air Act amendments of 1990.

And the politics of this issue is really embedded in that map. If

you look at the States who are dependent on coal and those that

are not, that gives you, in my judgment, an insight into this issue

as it unfolds. We have urged you to remember climate change is

a long-term challenge and that the emissions reduction path you

propose should be based on a slow, stop, reverse strategy that

saves the deepest reductions for later. Let me underscore this—

saves the deepest reductions for later when technology is available.

This is not a retreat from our commitment. It is a reflection of

our view that we ought to do what is possible now and not set goals

that feel good, but are unachievable. We need to set goals that are

achievable.

You all have a big job ahead of you. There is no environmental

question more important than climate change, and no answer more

complicated. While we all hope you find consensus in this Congress, we understand your decision will have a great bearing on the

economy, and you need to be sure.
18

I would urge you however to do something. If a cap-and-trade is

not right today, seek consensus on some first steps. Consider a carbon registry. Provide for credits for early action. Find ways to

speed up development in new clean coal technology, especially carbon capture and storage. We need clarity as to rules and regulation

for the storage of CO2. It could take a long time to develop the

legal obligations and liabilities associated with the transportation

and storage of CO2. Encourage the States to move on regulatory reforms to spur energy efficiency and the adoption of renewable portfolio standards,

and the States are well on the way with 22 States having adopted

renewable portfolio standards. Look carefully at some of the specific policy tools and measures in Jeff Sterba’s testimony and David

Sokol’s testimony. They really kind of focus on things we can do up

front.

Lastly and in conclusion, I would say our climate challenge is

heightened by the fact that as we look out, we are projecting a 40

percent increase in the demand for electricity in the U.S. by 2030.

We must meet this challenge with available, affordable, reliable,

and a clean supply of electricity. This is job one for me as CEO of

Duke, and it is job one for our industry.

I look forward to your questions today, and I look forward to

working with each of you all in the months ahead. Thank you all

very much.

[The prepared statement of Mr. Rogers appears at the conclusion

of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Rogers. Mr. Sokol, we

will be pleased to hear from you.

STATEMENT OF DAVID SOKOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MIDAMERICAN CORPORATION, OMAHA, ND

Mr. SOKOL. Thank you, Mr. Chairman. I am Dave Sokol, chairman and CEO of MidAmerican Energy Holdings Company which

has energy assets in 20 U.S. States and around the world serving

7 million end-use customers. Our highly diverse generating mix includes one of the largest renewable energy portfolios in the country, as well as coal, hydro, nuclear, and natural gas-fired assets.

Additionally, we have already reduced our carbon intensity by 9

percent since 2000.

I commend you for the series of vigorous hearings that you have

scheduled. No one should underestimate the challenge of developing a strategy for effectively decarbonizing an economy that has relied on carbon-based fuels to drive more than two centuries of economic growth. Let us not kid ourselves. It is going to cost a great

deal to move to a low-carbon world, and those costs will fall squarely on utility customers from family on fixed income, to small business and industrial customers.

And it is essential to understand that the devil is clearly in the

details. If you adopt a plan that fails to take technology development into account, but instead imposes arbitrary timelines with

unknown economic impacts, you will place upon every American

the largest unfounded mandate in U.S. history.

Well, how then can we move forward? We believe that a phasedin technology and policy-driven approach provides the tools nec-
19

essary to successfully reduce long-term global greenhouse gases

while minimizing the cost and the risks to our country.

Transitioning to a low-carbon economy cannot take place overnight,

but there are measures we can undertake now that will place us

on the right path.

In the first phase, we suggest technology development and market transformation activities. Specifically in the electricity sector,

we propose the following: adoptions of a flexible, renewable and

clean technology portfolio standard, more stringent energy efficiency mandates, policies to encourage efficiency improvements at

existing facilities, a 10-year multibillion dollar public/private research and development program for emissions reduction, removal

of the legal and regulatory barriers to the deployment of new technology, such as carbon sequestration and new nuclear development,

and lastly, tax policies to support these programs, such as the longterm extension of renewable tax credits.

In the second phase, as technologies become widely available, we

suggest a hybrid system of phased-in emissions reductions based on

carbon intensity targets, together with trading and safety valve

pricing mechanisms. With this design, we will begin to gain certainty around the emissions reductions available, while the safety

valve will provide the necessary certainty regarding cost.

Any allowance allocation scheme must be based on historical

emissions. Providing allowances to non-emitters based on the socalled output-based methodology will simply create large and distorted wealth transfers unrelated to the overall goal of emissions

reduction. By using this transitional glide path, the U.S. should be

poised for dramatic reductions in the third phase beginning around

2030. A mandatory domestic program must also include flexibility

measures allowing future congresses and presidents to adjust requirements based on periodic reviews of climate science, technology

development, economic impacts, and international cooperation.

If I may, let me leave you with five clear messages. First, don’t

pick winners and losers. Our country’s fuel mix today is based on

decades of economically rational decisions approved by State public

utility commissions and municipal utility boards. No one should be

penalized for past actions that were deemed both lawful and prudent at the time.

Second, funding technology research and development is absolutely essential. President John F. Kennedy told a joint session of

Congress in May of 1961 that America should commit itself to the

goal, before that decade was out, of landing a man on the moon.

Does this analogy apply to our global climate change challenge?

Well, in 1961, President Kennedy had a space program, rockets,

and a Congress committed to fund necessary technology. Today, we

have neither. Federal spending on energy R&D has decreased 85

percent since the 1980s.

Third, failing to take technology development timelines into account could result in enormous unintended consequence such as

fuel shifting from coal to natural gas, which already faces tight

supply/demand imbalance and deliverability constraints. And further would promote emission shifting through industry relocation

to countries without carbon controls.
20

Fourth, the end consumer, our customer, your voter, must be

thoughtfully protected in this debate because it is they who will

pay the price of such legislation through their heating and electric

bills at the gas station and through virtually every expenditure

they make.

Lastly, I would like to raise a cautionary note about the cap-andtrade concept. It is a regulatory mechanism that mandates reductions, and it says essentially let the market figure it out. Cap-andtrade can be a useful tool, but it is not a panacea. It does not supply emissions-free power. It does not develop nor bring new technologies online. It does not reduce prices for renewable energy resources. It merely raises the price for carbon-based emissions.

The SO2 trading system created by the 1990 Clean Air Act

amendments is rightly viewed as a success. But reducing carbon dioxide emissions, as I explained in my written testimony, is far

more complex. A detailed legislative outline of our proposals included in our written testimony, which I hope will prove useful to

the committee. And we would be pleased to answer any questions

at the end of the comments.

[The prepared statement of Mr. Sokol appears at the conclusion

of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Sokol. Mr. Morris, we

will be happy to hear from you.

STATEMENT OF MICHAEL G. MORRIS, CHAIRMAN, PRESIDENT

AND CHIEF EXECUTIVE OFFICER, AMERICAN ELECTRIC

POWER, COLUMBUS, OH

Mr. MORRIS. Thank you, Mr. Chairman and Mr. Hastert and

other distinguished members of the subcommittee, particularly my

good friend Joe Barton from the great State of Texas, Fred Upton

from the great State of Michigan, and others who I have known

well, including you, Mr. Chairman. Thanks for the opportunity to

be here with you.

Since we are all talking a bit about who we are, I might share

with the panelists who aren’t familiar with American Electric

Power that we are, in fact, the largest burner of coal in the western

hemisphere. We serve customers in the north from Michigan, to the

south in Texas, in the east of Virginia, and the west to Oklahoma.

There are 5.1 million customers in that 11-State footprint.

Seventy percent of our 38,000 plus megawatts of generation capacity are fired by coal. We think it is essential that we have the

opportunity to share with you some of the challenges that we see

and some of the processes that we believe can be implemented to

address the very important challenge that you all spoke to in your

introductory remarks.

Let me make three particular points. First, the dual nature of

the global warming challenge. Second, the true technology challenges are in front of all of us as an industry and as a country. And

lastly, the ultimate implementation process and the significance

that it has on many of us who struggle with this challenge as we

go forward.

By the dual nature of global warming, I mean to speak first to

the environmental issue. It is global warming. It is not American

Electric Power warming. It is not U.S. warming. It is clearly global
21

warming, and to the comments that many of you made in your own

opening statements, we need to see to it that other nations join us

in this endeavor if we hope to be successful. Clearly, if the developing countries of China, India, Brazil, and others do not join in this

endeavor, we will have had no impact on the environmental aspects

of global warming.

Let me move now for just a moment then to the economic impact.

When we think of this issue, we are looking here at a trade issue.

We are looking at a jobs issue. What I hope this committee doesn’t

do, with the help of many of us who are trying to be helpful, is to

create the jobs elimination bill of 2007–08. We simply can’t visit

that upon ourselves.

We believe there are two unique ways to approach that issue. As

some of you may have seen, Ed Hill, who is the president of the

International Brotherhood of Electrical Workers, thousands of bluecollar jobs, relatively high-paying, joined me in an op-ed not long

ago on the issue of the potential to implement a tariff on countries

who bring products into our Nation in a competitive sense without

any environmental costs because they have chosen not to do anything about the issue in their homeland. We think that this is one

way that we might be able to do that.

Another is to learn from our friends in the European Union who

most recently spoke to the issue of setting a target with a timeline

and a commitment, which would be reduced and the target line extended if other nations didn’t join the European Union in that endeavor. We think that both of those are meritorious steps to take

when you consider the economic side of the issue of global warming.

Second, the technological challenges that are in front of us are

real. Those technological challenges have been addressed by panels

prior to us, and I am one to take a bit of a contest with the notion

that we can’t get the carbon capture and storage in a 40-year

timeline. I believe that is quite an extended timeline. We hope that

we don’t get there.

Our company has joined in the belief that Chairman Boucher

mentioned 2 weeks ago, and I hate to reflect back on a Budweiser

commercial, but you said it all. If, in fact, this technology and the

timelines that you set for us don’t join together, then we will accomplish very little short of a nice, political sound bite.

The facts remain that we have to address this issue both in a

pre-combustion and a post-combustion undertaking. At American

Electric Power where we have led the industry in technological

breakthroughs for over 100 years, we have announced two pre-combustion technologies. One, integrated gas combined cycle, which we

would hope to build either in Ohio, West Virginia, or maybe Kentucky.

Second, ultra-super-critical coal technologies which we hope to

deploy in Arkansas and Oklahoma. One of the other things that we

are working on in a pre-combustion sense is an oxy-fueled undertaking with the Babcock and Wilcox Company, which we hope to

put in place at our northeastern plant in Oologah, Oklahoma on a

450-megawatt sized facility for the ultimate taking of that resource

for enhanced oil recovery opportunities. We believe that is very important.
22

On a post-combustion activity, we have every intent to go forward with our partner Olstrum by putting a demonstration and

verification project at our mountaineer station in West Virginia at

the 30-megawatt level and then ultimately moving that up to the

450-megawatt level to capture and utilize gas for underground storage in the West Virginia environment and, as I said, enhanced oil

recovery out west.

We believe that these things can be done. Those are really not

research but in fact are demonstration verification deployment

technologies. The sooner we get about that business, the quicker

we will have some answers to this challenge. On the research side

for CO2, we really should, as a country, embrace the notion of researching some multiple and beneficial use of CO2 once it has been

captured rather than simply storing. Our friends in Japan today

have a heat pump that utilizes CO2 as its fuel source.

Some years ago when we implemented the post-combustion technologies for SOx and NOx control, we had a byproduct that we

used to put to landfills. Today I am proud to tell you that this industry, our company, and many of my colleagues, now provide that

byproduct to the wallboard industry to make what we call in the

Midwest drywall, which some of us call in the rest of the country

wallboard. I believe that there is where we should put our research

efforts rather than continuing to say that capture and storage is a

science project. It doesn’t need to be. Both pre- and post-combustion

can be handled.

Last, let me mention a moment about the implementation. Both

my colleagues Jim Rogers and David Sokol raised this issue for

you, but as you go forward with a cap-and-trade program if, in fact,

that is the way that we go, the allocation of the credits is substantially important to all of us who will be involved with the real challenge to get this work done. We would be strong proponents for

taking the road map that you have used once before where 95 percent of the credits that were created by the enabling legislation

were, in fact, allocated to those of us who were going to face the

technological and financial challenge to get it done.

I firmly believe that if we go to a massive auction undertaking,

it is simply a matter of economics for those who would buy the

credits because they wouldn’t buy them unless they intended to sell

them at a profit. An allocation to non-emitting sources is exactly

the same thing: a chance for profit taking rather than giving those

credits to us who are trying to make a difference.

I thank you for your time, your attention. I look forward to your

questions and answers.

[The prepared statement of Mr. Morris appears at the conclusion

of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Morris.

Mr. MORRIS. You’re welcome.

Mr. BOUCHER. Mr. Reasor, we will be happy to hear from you.

STATEMENT OF JACKSON E. REASOR, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, OLD DOMINION ELECTRIC COOPERATIVE, GLEN ALLEN, VA

Mr. REASOR. Good morning, Mr. Chairman and members of the

subcommittee. My name is Jack Reasor, and as president and CEO
23

of Old Dominion Electric Cooperative, ODEC, headquartered just

outside Richmond, Virginia, it is a pleasure to be here today and

to share our views of this important topic of global climate change.

After listening to Mr. Morris, I must confess to you that the footprint of ODEC is rather small, but I can assure you that the

500,000-plus consumers that own us and depend upon us for their

power supply are vitally interested in this question as well. ODEC

has tried over the years to provide a diverse generation source for

our members. We depend primarily on coal, but also have a small

ownership interest in a nuclear plant, and we have also built gas

and oil peaking units as well. And we find this mix very, very important for us.

We have also worked toward finding some renewables, and that

has been very difficult for us. The availability of renewables in our

area is very limited, but we have begun to work in this area. And

we do generate or purchase from some renewable sources a small

amount of energy today.

But we have also worked with our members over the past years.

We have 12 distribution electric cooperatives throughout Virginia,

Maryland, and Delaware that depend upon us for their power supply. In working with them through demand-side management programs, we have been able to reduce about 10 percent of our peak

load through that opportunity.

But today we face a challenge because of the fact that our members are growing at a very rapid rate, not only population wise, but

in their use of electricity. And we are in a position that we are already behind the curve in providing new and additional generation.

We are required to purchase more and more of our energy needs

on the open market. Majority of that through the PJM system is

also coal generated as well, but we need to have more control over

our own assets and over the assets of the generation that we provide our members.

ODEC is also part of a larger organization, the electric cooperatives all across the country. Electric cooperatives serve about 75

percent of the landmass of this country, and we serve about 12 percent of the consumers in the United States. But when you look at

who we serve and where we are located, we are usually in very

low-density areas of the country.

As an example, generally the typical electric cooperative in the

United States has 7 customers per mile, 7. That compares to the

investor-owned utilities at about 35 customers per mile, and municipal systems at about 47 customers per mile. We also find that on

average our member consumers are at a lower income level. As a

matter of fact, the average utility electric cooperative consumer’s

income is about 16 percent below the national income average.

And when you look at the electric cooperatives and the G&Ts,

such as ODEC, who provide the power to these rural areas and to

these consumer owners, you will find a couple of factors about us

that are very important in this process.

One, because of the fact that we are consumer-owned and we return any excess funds back to the consumer, we have very low equity ratios. Second, due to the fact that we are consumer-owned,

we do not have stockholders. Therefore we basically are always
24

debt financing. With low equity ratios, always debt financing, it

puts us in a very difficult position.

And as I move to my first point, Mr. Chairman, and that is that

technology is very important. I will not repeat a great deal of what

has been said by my colleagues because I endorse what they are

saying as well, that it is very important that the technology be developed to address the issues that we face today. I would caution

you please do not let the legislation get ahead of the technology.

But as electric cooperatives, we find it very difficult for us to be

the first to try new technologies. We want to support all the technologies that are available and that can be developed, and we are

confident the answers will be found in that new technology. But

electric cooperatives are not in a position to be on the frontline of

developing those new technologies.

Second, as you move down this road of requirements and moving

all of us toward a cleaner environment, which we want to be a part

of as well, we would ask that as you provide certain incentives, and

you will be required to provide those incentives, that you would

also be sure that those incentives will also work for not-for-profit

electric cooperatives as well. If you will do that, I can assure you

that we will take advantage of those opportunities and also work

toward the development of these new technologies.

And, Mr. Chairman, my final point would be if this committee

moves in the direction of a cap-and-trade program, we would like

to have the opportunity to work with the subcommittee in developing that program. And I would ask two particular points be considered in that process. One, we think under a cap-and-trade program

that the allowances should be allocated and not auctioned. We

think that is very important.

Second, we also feel that these allocations should be based on

fuel input. It is very important that they go toward the source of

where they are needed, and that generally will be fossil fuels. And

I say that as president of a company who also has a small ownership interest in a nuclear facility, but I would ask that you would

consider these proposals and think about them as you move toward

this process.

Mr. Chairman, I appreciate the opportunity to be here, and we

look forward to answering questions and also working with the

subcommittee as you make your decisions.

[The prepared statement of Mr. Reasor appears at the conclusion

of the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Reasor. We are delighted to have you here this morning. Mr. Lee, we will be happy

to hear from you.

STATEMENT OF MILTON B. LEE, GENERAL MANAGER AND

CHIEF EXECUTIVE OFFICER, CPS ENERGY COMPANY, SAN

ANTONIO, TX

Mr. LEE. Thank you, Mr. Chairman. Good morning and to the

distinguished members of the subcommittee also. My name is Milton Lee, and I am general manager and CEO of CPS Energy in San

Antonio, Texas. I appreciate the opportunity to address you today,

and I hope my remarks will assist you in your deliberations.
25

CPS Energy is the Nation’s largest municipally-owned energy

company providing both natural gas and electric service. And as a

municipal utility, CPS Energy belongs to a class of utilities termed

public power utilities. Our owners are the citizens of our communities, and they expect their public power utilities to provide reliable, affordable power in an environmentally sensitive manner.

Public power utilities are governed either by elected public officials, such as city councils or by boards or appointed or elected officials. It is truly local governed, subject to open meetings and open

records requirements that assures local issues are adequately addressed.

Public power makes no profit. Our prices are set not at what the

market will bear but at the level sufficient to cover our costs and

sustain a reasonable reserve for repairs and replacement of our

capital equipment. CPS Energy recently began construction of a

new coal-fired power plant near San Antonio, a plant that was subject to the most rigorous public involvement process ever. Many of

the issues now being dealt with this committee were at issue during our public involvement process of our coal-fired power plant.

As a result, our engineers and consultants have given careful

thought to these matters, and they have relied upon the most current information available in forming their opinions. The research

conducted by CPS Energy over the past several years gives us an

opportunity to express a few opinions regarding the current discussions of a greenhouse gas policy and how it relates to the utility

sector.

Please permit me to summarize those opinions and recommendations now. First, given the extreme complexity and seriousness of

the issues at hand, the committee should undertake its deliberations with all due consideration and without regard to artificially

imposed or impractical deadlines or timelines. Improperly done,

this legislation could adversely impact the economic health of the

United States and yet have no positive impact on climate change.

Proceed, but proceed with caution.

Global climate change policy and regulations should include all

greenhouse gases. Greenhouse climate change should include all

members of the global community also, and they should be expected to commit to a program of greenhouse gas emissions reductions. In the event other significant emitters fail to meet goals and

objectives, legislation should provide a safety valve to protect

against economic harm.

Any legislation must be applicable to all sectors of the economy,

not just the electric utility industry itself. Current technology for

carbon capture and sequestration for fossil fuel generation does not

adequately support the effective implementation of a cap-and-trade

program for CO2 at this present time. Legislation should not limit

our flexibility to rely on the most abundant domestic fuel source,

coal.

Legislation should be based upon a phased approach to solving

this problem. Congress should develop a reasonable timeline for

these phases based upon the objectives of preserving economic

growth, developing the technologies needed to accomplish these

goals, and allowing time to deploy these technologies.
26

Public power and private utilities have different government

structures that have lead to the discrepancies in the availability of

certain Federal incentives. Whatever Federal incentives are utilized to promote private investment, all sectors should share in

equal access.

Mr. Chairman, this concludes my prepared remarks. Thank you

again for the opportunity to address this committee.

[The prepared statement of Mr. Lee appears at the conclusion of

the hearing.]

Mr. BOUCHER. Thank you very much, Mr. Lee. And thanks to

each of our witnesses for your very thoughtful testimony here this

morning. I am going to recognize myself for a 5-minute round of

questions, and I will begin by propounding to each of you the same

question that we propounded to the chief executive officers of the

automobile manufacturers when they were before the subcommittee last week. I would note that each of them answered this question in the affirmative. I will just note that, and we will look forward to your answers as well.

We are in the process of considering legislation that would be

mandatory in nature, that would fashion a United States response

to the challenge of climate change. It would have economy-wide application. It would not be something that controls only the electric

utility sector but would apply to the entire economy. Our goal

would be to prevent any sector of the economy from being dislocated and to prevent any disproportionate burden from falling on

any sector of the economy as compared to the balance of the economy.

We would certainly preserve your ability to continue to use coal,

and I have duly noted that comment in virtually all of your statements. It also would be a measure that would assure in some fashion that we have international participation from the developing

world as we go forward with the mandatory program for the United

States.

I should say that while we certainly are considering cap-andtrade as one approach to achieving this result, we have not made

policy decisions about what mode we would have for establishing

a mandatory program in this country. And so this question is not

specific to cap-and-trade; although, that certainly is one major candidate for our consideration.

If we fashion legislation that has these components and these

characteristics, will each of you work with the subcommittee in

drafting the bill, in making sure that these goals are met, and in

helping to fashion a United States response for the challenge that

we are confronting? Mr. Sterba, let me begin with you.

Mr. STERBA. I will be brief. Yes. And we look forward to the opportunity.

Mr. BOUCHER. Thank you, Mr. Sterba. Mr. Rogers?

Mr. ROGERS. Jeff set a good example. My answer would be yes,

and we look forward to the opportunity to work with you to make

it happen.

Mr. BOUCHER. Thank you, Mr. Rogers. Mr. Sokol?

Mr. SOKOL. Yes, Mr. Chairman, we would be pleased to.

Mr. BOUCHER. Thank you, Mr. Sokol. Mr. Morris?

Mr. MORRIS. Yes, sir.
27

Mr. BOUCHER. Thank you, Mr. Morris. Mr. Reasor?

Mr. REASOR. Yes, sir, we look forward to it.

Mr. BOUCHER. Thank you, Mr. Reasor. Mr. Lee?

Mr. LEE. Yes, sir.

Mr. BOUCHER. That was just a great set of answers. I want to

thank you for those responses.

One of the objectives that we have, as I think you have indicated

in your statements and we have indicated here in ours is not in

any way to disable the ability of coal-fired utilities to continue to

use coal, to do so at current volumes and preserve the opportunity

for coal’s share of the electricity generation market to grow. I think

it is noteworthy that EEI has suggested that under current trends,

by the year 2030, coal’s share of the market would grow from 51

percent today to 57 or 58 percent, and we would want to preserve

that opportunity for coal to occupy that greater market share if it

is your desire for that to happen. For that to happen, we will have

to have technology available that in a carbon-constrained environment enables carbon capture and permanent storage. And so my

question to you is what is the appropriate government role at this

point to accelerate the availability of that technology? Should we

provide financial incentives to electric utilities? Should we be providing research and development funding? I should say research,

development, and demonstration funding in order to accelerate the

arrival of that technology. And assuming that the answer to that

question is yes, and more dollars are going to be required, can you

give us a sense of the scope of what those expenditures should be,

and is there a schedule that you have in mind for the expenditure

of those funds? Mr. Sterba, would you like to comment?

Mr. STERBA. Yes, sir. There are a number of things that need to

be done, and they are not all just associated with funding. Let me

touch on those first, and then I will touch briefly on funding. One

of the biggest challenges that we have is the era of uncertainty. We

don’t have certainty over what the licensing, siting, or liability requirements may be, particularly licensing and siting. Those still

have to be defined, and it is very difficult to go forward on a commercial basis until they are.

And it is not just with respect to the storage facilities themselves. It is all of the pipeline and other infrastructure that will be

necessary to move the material from where it is going to be coming

from out of a coal-fired plant to where it is going to be located.

That has got to be job one, and the difficulty is that frankly could

be fraught with litigation and opposition, and so I would urge that

that get moved on very quickly.

Relative to the RDDD, and it really is, as you rightfully pointed

out, it is more on the DDD, development and deployment and demonstration than it is on the pure research side. Yes, there is additional funding that is necessary. I believe in the revised budget,

there is $100 million being put forward in this proposed budget

from the administration. That is probably off by a factor of five to

six times in terms of what is necessary on both the capture and

storage end of the game. And that is probably an average over the

next 10 years. We cannot afford to be in a position that we can’t

by 2020, 2025, be able to implement capture and storage. But to

do that, we have got to accelerate the pace of the demonstration
28

and development a number of large-scale projects, a million or

more tons each, in different geologies across the country.

Mr. BOUCHER. Thank you, Mr. Sterba, for that very thorough answer. Would other witnesses care to comment on that question?

Mr. Sokol.

Mr. SOKOL. Mr. Chairman, I think the other piece of this—and

Jeff hit on a very important piece, but that is just the regulatory

side needs to be emphasized. The MIT study that was referenced

earlier in this discussion points out that if we are just to capture

and store 60 percent of existing coal-fired CO2 generation, we have

to replicate one-third of the pipeline capacity of the existing natural gas system in America, just to move it. That has to be sited,

the siting of transmission lines today for electricity are well known

to all of you is the difficulty of doing that. Natural gas is a separate

commodity than CO2. Those types of issues have to be focused upon

in these timelines for not only research, but also the development.

And second, if we are sincere about moving to a carbon severely

constrained environment, we have got to spend more money on the

nuclear side of this equation as well because coal has to play a

major role. Nuclear will have to play a major role as well.

Mr. BOUCHER. Thank you very much, Mr. Sokol. Would anyone

else care to comment? Mr. Lee.

Mr. LEE. Yes, Mr. Chairman, one other consideration could be

that a user fee could be supplementing any Federal incentives that

would come forward and which all coal users could participate in

that process with the restriction though that that funding would be

placed for a little ‘‘r’’ and big ‘‘D’’ for technology to move forward.

And the latest that we have seen via EPRI, the Electrical Power

Research Institute, is that they think technology could be available

as soon as 2020 if appropriate funding was provided at this current

time.

Mr. BOUCHER. I think the pace of the deployment really will depend on the pace of the funding between now and the time it is

ready. Well, thank you very much. I appreciate those answers, and

my time is expired. The gentleman from Illinois, Mr. Hastert, is

recognized for 5 minutes.

Mr. HASTERT. Thank you, gentlemen. It’s interesting if you will

look on that map that was put up on the board. My State of Illinois

only has about 45, 48 percent coal utility. I had the dubious honor

of chairing a select committee to rewrite the Public Utility Act in

1983 and 1984. After Three Mile Island, we had 14 nuclear plants

coming online at that time, and nuclear was supposed to be too

cheap to meter. A $400 million nuclear plant ended up costing $5

billion. Of course, that was passed onto the ratepayers, as Mr. Barton noted, that those increasing costs do. So I made a rash prediction back then that probably we wouldn’t cite another nuclear

plant in this Nation for 20 years. Well, it has been 20 years, and

it is time to review this and look at it. I think nuclear has to develop. We have to find the best and safest ways to develop nuclear.

In my district that has a huge nuclear use, there are 40 coal

trains, 130 cars a piece, that move through my district every day

to fire up and light up the greater metropolitan area of Chicago.

I have to explain: 20 going and 20 leaving. But they are there. And
29

how do we make sure then that that coal utility can keep operating, can stay efficient and bring a fair cost to the consumer?

At the same time, we see, when I was here in 1992, and we

looked to see how do we need to develop energy. And we decided

that natural gas, there was such an abundance of natural gas in

this country that it was an unlimited commodity. So every power

plant that we build basically since 1992 has been a gas-fired or

gas-peak plant. Well, we find out that all of a sudden, there is an

end to natural gas and there is a cost to natural gas. And that too

then has become suspect.

Here are the alternatives. You say you are going to sequester

and cap. That is one technology. That is one idea. If we are going

to gasify coal or liquidize coal, there is more energy under the city

of Gillette, Wyoming than there is of all Saudi Arabia if it was

used in an effective manner. How do you determine or how should

we determine what are the best ways? Let us not just go down one

road. Let us look at all the alternatives. Mr. Sterba, what is the

best way in your opinion, just quickly?

Mr. STERBA. It is to use all of those sources. We cannot make the

assumption that there is a single answer. It has got to be the entire portfolio, and every time we eliminate one for political or other

reasons, our ability to accomplish the objective is impacted.

Mr. HASTERT. Mr. Rogers.

Mr. ROGERS. The portfolio approach to creating a generation fleet

is really critical. In the period you talked about in the 1990s, there

has been no time in our history of our country have we been so dependent on one fuel, where 90 percent of the generation was gasfired. And that is the new generation.

That is really the answer. We need coal. From an energy security

standpoint, we need to find a way to use it. We need nuclear, and

we shouldn’t be addressing this issue of climate without addressing

in a straightforward way the nuclear issues. Today, 24 reactors are

being built around the world, and not a single one is built in the

United States today.

Mr. HASTERT. Mr. Sokol?

Mr. SOKOL. Yes, Congressman, I think you are hitting on a point

that is very important, and that is that we need all of the above.

This subcommittee and the Congress needs to deal with this issue,

even the magnitude of the issue, in a holistic way. We have got to

blend energy policy, environmental policy, and economic policy because in the past what we have done is focused on natural gas or

nuclear in energy policy or coal. We then dealt with pieces of environmental policy, and we largely ignored the economic effects. This

is a wholesale change. If global climate change is to be addressed

in the way it is being discussed, a wholesale change in how we utilize and develop energy in this country, and that can’t be done with

any single technology. It has to be a holistic approach.

Mr. HASTERT. Mr. Morris.

Mr. MORRIS. One of the things that we can lose sight of, Mr.

Hastert, is that all of these decisions are really State decisions. I

think Tip O’Neill said it best. All utility rates are local. The fact

remains that if I want to build an integrated gas plant in Ohio,

which I do because I think that technology is important for precombustion capture and storage of carbon and global warming
30

gases, that is up to the public utility commission of Ohio, not to the

Congress of the United States. And we all have to face that issue,

so going to the portfolio, allowing those who want to build new nuclear are going forward, allowing those who want to build clean

coal, either pre- or post-combustion go forward. But it is always a

State’s issue at the rate regulator in the States where we are still

regulated, which still is the dominant regulatory process here in

the country. So my colleagues are right. The portfolio is important,

but this is a State’s issue as to how we decide what plant will be

built and how the costs incurred in building that plant are doled

out to our customers in the charges that we have.

Mr. HASTERT. Well, sometimes I think maybe this committee

may want to usurp or some committees may want to usurp State

regulation. I don’t have time to ask the rest of the gentlemen. I

would really like to hear your comments later. Mr. Chairman,

thank you for your indulgence.

Mr. BOUCHER. Thank you very much, Mr. Hastert. The gentleman from Michigan, Mr. Dingell, chairman of the full committee,

is recognized for 5 minutes.

Mr. DINGELL. As chairman, you are most courteous. Thank you.

Gentlemen, thank you for being at the committee today. It is a

pleasure to see many old friends down there again, and I want you

to know that I appreciate your testimony. You have given us some

very good testimony. You have told us what you think should be

done, but you have not told us who should be the one to do it. Mr.

Rogers, what kind of regulatory agency or to whom should these

matters be suggested?

Mr. ROGERS. Well I think first and foremost is I look back to the

success that we have had with cap-and-trade and SO2 that really

grew out of 1990 Clean Air Act amendments. As I look forward,

that kind of regulatory regime makes sense because it is both a

push and pull to get it right in terms of the market price with respect to technologies as well——

Mr. DINGELL. But to whom do we assign this? This is going to

be a fine mess. Who is going to be the lucky guy that gets it?

Mr. ROGERS. Well, I think at the end of the day, in terms of setting it, it is really with respect to the—I would say the EPA would

be the one in terms of having the jurisdiction over this long term.

Mr. DINGELL. Gentlemen, I would appreciate it if each of you

would submit for the record to whom you think this responsibility

should be allocated for administration. Sir?

Mr. MORRIS. Chairman Dingell, if I might add a comment to Mr.

Rogers’ answer, I think it is important when we look back at the

implementation of new source review and the on-again-off-again,

never ending debate over what those words mean, I would hope

that this committee, in its drafting of this legislation, would be

somewhat prescriptive so that we don’t leave a great deal open to

debate. As I learned at the Detroit College of Law some years ago,

words are extremely important, and they have very deep and broad

meaning. So the more clarity that your committee can put into legislation, whichever form it takes, will help all of us in the end trying to accomplish these goals, which we all jointly believe in and

clearly do support.
31

Mr. DINGELL. Now, I have heard the suggestion that we should

have essentially a two-phase program. One is we should have an

allocations allowance system for a certain period of time which

should be phased out gradually in favor of an auction system. And,

Mr. Rogers, I am going to stick you with this question again. How

long should the allocation phase last, and who would make a decision as to when and how this system would be phased out in favor

of the auction system?

Mr. ROGERS. Chairman Dingell, my judgment would be is that it

would be three phases actually. I think there ought to be a 5-year

waiting period, as we had with the Clean Air Act amendments of

1990 first. Second, we then go into the phase where we do the allocation of allowances, and allow that to be for a period that is—and

this is an important point. It needs to be timed with the availability of the technology that actually allows us to remove the carbon.

And that is an important part. Whether it is 10 years, 15 years,

20 years, to me, it needs to be tied to the availability of technology.

That has to be the determining point. And then the auction period

comes in after that period.

Mr. DINGELL. All right, now, Mr. Sterba, you urge that the U.S.

account for the global dimension of climate change, and you suggest our leadership is essential and that the United States should

not condition its own policies on equal actions by developing nations. How should the U.S. coordinate its domestic climate change

actions with the participation in international negotiations? Each

of these tasks is very difficult, and doing the two of them together

will require enormous skill and care. How are we going to address

that, and how will we do it?

Mr. STERBA. Mr. Dingell, my suggestion would be that the U.S.

should formulate its policy and what it believes makes sense but

in the context of the global environment, and that it should not just

be a policy of we won’t do it until you do it. But I very much endorse the proposal that has been put forward by Mr. Morris and

by our friends at IBEW that says if you don’t do it, there is a cost

to the goods that are imported into our country because you have

not taken on that responsibility as our country has. So I believe

that our continued engagement needs to be relative to the engagement of the rest of the countries, particularly those developing

countries. But I don’t think we can say we won’t do it until you do

it.

Mr. DINGELL. You are saying we should have an enforcement

mechanism?

Mr. STERBA. Absolutely.

Mr. DINGELL. Gentlemen, I look, and my time has expired. Mr.

Chairman, I thank you for your courtesy. I would ask this, Mr.

Chairman. I will have some questions that I would like to submit

to the panel for the purposes of the record, and I would ask your

courtesy in keeping the record open so that could be done. And,

gentlemen, I would hope that when we send you a nice little letter

that you would respond to us because we have some questions

frankly on which we desperately need your assistance and advice.

Thank you.

Mr. STERBA. Thank you for the opportunity.
32

Mr. BOUCHER. Thank you very much, Mr. Dingell. And without

objection, the record of this hearing will remain open for the submission of questions by the members of the subcommittees to our

witnesses. And we would ask for your expeditious response when

they are received. The gentleman from Texas, Mr. Barton, the

ranking member of the full committee, is recognized for 5 minutes.

Mr. BARTON. Thank you, Mr. Chairman. And before I ask my

questions, I think we should take time out to congratulate this

panel and the industry that they represent. We have the most efficient, cleanest—with the exception of the French who are almost

all nuclear-power generation and transmission system in the world.

And it is in large measure thanks to the fact that we have allowed

the decision making, as has been pointed out, to be done by the private sector in conjunction with our public utility commissions

around the country. So I want to congratulate this group for making it possible to have the kind of economy and the industrial

strength that we have in our Nation. I am sincere about that.

My first question is I assume everybody on the panel thinks we

should continue to use coal and even use more of it. Everybody that

thinks coal should be a part of our future energy mix, please raise

your hand.

All right, I also, with the exception of maybe our public utility

down from San Antonio, would assume that you all are all committed to trying to increase the use of nuclear power. If you do that,

raise your hand.

I see even our San Antonio gentleman, OK.

Mr. SHIMKUS. Mr. Barton, would you make sure just for the

record you will note that they all raised their hands?

Mr. BARTON. They have all so far.

Mr. SHIMKUS. I mean I see it, but for the record.

Mr. BARTON. I am learning from Mr. Boucher. I am trying to

come up with questions that they all agree to. Now, it gets a little

bit tougher. Mr. Lee, you announced that your utility, which is a

municipal utility, has just begun construction or got approval to

begin construction of a new coal-fired power plant. Is that correct?

Mr. LEE. That’s correct. We got that permit from the Texas Commission of Environmental Quality about a year ago, and the unit

has been under construction for about a year.

Mr. BARTON. OK, when it is in operation, can you tell us what

the cost per kilowatt hour of its output is expected to be?

Mr. LEE. Approximately 5 to 6 cents a kilowatt hour.

Mr. BARTON. Five to 6 cents, OK. Now, Mr. Rogers, you are the

new president of EEI, and you just announced to this group the

support for some sort of a cap-and-trade system. But if I heard you

correctly, you don’t want that to be implemented for about 20

years. Is that right?

Mr. ROGERS. No, I didn’t say it that way. First of all, Mr. Barton,

Tom Kuhn is president. I am just chairman of the board.

Mr. BARTON. Just chairman of the board. I apologize.

Mr. ROGERS. For a short period.

Mr. BARTON. Yes, I have a feeling he does what you and the

board tell him to do, but I may be wrong. But no, I know Tom well,

and he is——

Mr. ROGERS. We do a good job of listening to Tom.
33

Mr. BARTON. Right.

Mr. ROGERS. I think the way we look at it is that to implement

cap-and-trade, which is not the position of EEI, but which is our

company’s position, and to do that appropriately, based on past

precedent, you need a 5-year waiting period. And then you need a

period where cap-and-trade goes into place because you start to

work to get the most cost-effective offsets. But during that period

you have allocations which are really critical to making the transition.

Mr. BARTON. But when in your scenario do you expect there to

really be a cost that has to be incurred by the ratepayer or the

stockholder or the taxpayer for this system? What is your first year

that there is a real cost that kicks in?

Mr. ROGERS. It is 5 years after enactment, which is the waiting

period.

Mr. BARTON. OK. Well, here is my problem. When I hear Mr.

Boucher ask these questions and he gets everybody to say yes, the

only thing that you are not agreeing to is a chicken in every pot

and a mule in every barn. I mean he phrases it so everybody says

yes, but we really don’t talk about when it is going to happen and

what is it going to cost when it does happen.

My understanding is that our economy is growing each year, and

a demand for electricity is somewhere in increase between 2 and

3 percent a year. That is about one 500-megawatt power plant

every week. Every week. What are we going to do next year? Are

we going to build these new coal plants? And if you are going to

build a coal plant, what kind of a technology are you going to use

next year?

I am fine for some system 50 years from now, but I am not fine

with a system that kicks in next year if it means that everybody

in America is going to pay 16.5 to 20 cents a kilowatt hour like I

am paying down in Texas right now. That is my problem. What do

we do next year and next year and next year while we are getting

to this nirvana of zero cost carbon capture and sequestration while

our economy is still growing 2 to 3 percent a year? What do you

do next year?

Mr. ROGERS. Mr. Barton, the reason for the waiting period, in my

judgment, is to get prepared and start to, during that period, get

credit for early action so you start to bank credits. You start to

take action. You start to look for offsets. You start to plan for future generation. You look at replacing old coal plants with new coal

plants that are more efficient. You take at least 10 years to build

nuclear. You look at that. You look at renewables or investment in

renewables. You look at energy efficiency because all of a sudden

once you start to price carbon, you begin to get a clear picture of

what the value of energy efficiency initiatives would be. So I think

you do all these things going forward.

Mr. BARTON. Well, my time has expired, but I think we kind of

got the nub of the problem. There is nothing we can do next year

to build these new generation plants that is cost-free. That is the

issue that at some point in time we have got to address in a serious

way if we don’t want to wreck our economy. With that, Mr. Chairman, I yield back.
34

Mr. BOUCHER. Thank you very much, Mr. Barton. The gentleman

from Pennsylvania, Mr. Doyle, is recognized for 5 minutes.

Mr. DOYLE. Thank you, Mr. Chairman. I want to thank the panelists for your very thoughtful testimony, and if we are going to get

this done, we do have to work together. And, Mr. Barton, I think

we all recognize this isn’t something that is going to happen next

year, and it isn’t going to be without cost.

I had a guy come in my office about 10 years ago, and he said

to me Mike, remember two things. He says coal can never be clean,

and nuclear can never be safe. There are probably still a lot of people that believe that today. I am certainly not one of them. I think

that we understand that if we are going to address our energy

needs of the future, one of the things we can’t do is put all our eggs

in one basket. When we put all our eggs in a natural gas basket

and those prices went up, we all saw the ramifications of that.

We have invested hundreds of millions of dollars in developing

these next-generation nuclear power plants. The AP1000, Westinghouse, General Electric. We sell it everywhere but our own country.

Everywhere but our own country. We fight every year on the House

floor with Members of Congress who want to cut the R&D funding

for clean coal technology programs.

I noted in Mr. Sokol’s testimony that the Federal budget for research and development has decreased 85 percent since 1980. We

are not putting our money where our mouth is either. If these are

national priorities, if this is important for the future—if this is like

when President Kennedy said let us put a man on the moon when

nobody knew how to do that, but he doubled the NASA budget for

the next 2, 3, 4 years until it got done, I think it is going to take

the same kind of commitment on behalf of Congress to not just say

this is a problem and not just say this is a challenge for the country, but to start to invest in the research and development and to

provide the incentives in partnership with the private sector so

that we can start moving down this path.

Mr. Morris, I read your editorial with Mr. Hill. I think it is right

on the money. We cannot consider climate change debate without

considering our trade policy too. If this is just going to be about

emission migration to countries that aren’t participating, we are

going to de-industrialize our country. And coming from western

Pennsylvania, from Pittsburgh, I am not going to be party to that

either.

Mr. MORRIS. With no environmental benefit whatsoever worldwide.

Mr. DOYLE. Exactly. We are just shifting the emissions. We are

not eliminating them.

Mr. MORRIS. Absolutely.

Mr. DOYLE. So that has to be part of the debate too. But one

thing is for certain. If the United States doesn’t start doing something, nobody else is going to do anything either. So not doing anything isn’t an option either. We have to start to take steps to address this problem. But then we have to make sure that others are

taking steps to work with us because if they are not willing to do

this—and that is where I think this situation comes in with the

trade or with some sort of a safety valve, if you want to call it that,

with any type of mandatory program that we put on our industries
35

here in the United States that we will take some steps in that direction too. But if the world doesn’t follow, then there is going to

have to be some leveling of the playing field for those countries

who don’t participate in the form of disincentivizing technologies

and companies to simply shift their resources over to these countries that don’t participate.

I just want to ask all of you in the minute and a half that I have

left what you think we can be doing? Because this is going to be

a partnership. We have done darn little, in my opinion, in terms

of the investment we have made to this. What can we do? What

current programs we are doing now or what new programs or what

regulation-wise can we be doing to give you guys the biggest bang

for your buck to address some of the concerns that Mr. Barton has?

How do we start to bring some of these technologies, some of these

strategies to deployment sooner rather than later? What can we do

to help you do that? And just go right down from the beginning.

Mr. STERBA. Let me start with three, Mr. Doyle. Number 1, appropriately and adequately fund the research, development, and

demonstration endeavors that need to be undertaken at the Federal level. Number 2, resolve the nuclear spent fuel issue so that

we can make nuclear a viable component in the future. And No. 3,

ensure that the administration either has legislation or has the

ability to develop the necessary siting and licensing and liability

aspects from an administrative perspective associated with carbon

storage.

Mr. DOYLE. Thank you.

Mr. ROGERS. My comment would be that everybody likes to talk

about the devil being in the detail. I think God is in the details,

and this committee needs to embrace the details. And the details

are the funding, as Jeff talked about, RDDD. It is solving the nuclear spent fuel issue. It is encouraging States to really step up on

energy efficiency and renewables, and it is also really about, during

this waiting period, getting credit for early action. The most important point I can leave with you is if this problem is as it has been

defined, and I believe it is, we need to go to work now. And waiting

5 years, 10 years, 15 years, 20 years is not a good answer because

the lowest cost solution for our customers and for our country will

be action now, not delay.

Mr. SOKOL. Merge the Department of Environmental Protection

into the Department of Energy and require them to deal with these

issues on a combined basis.

Mr. MORRIS. Interesting. To your comment earlier on, coal can be

clean and nuclear can, in fact, be safe, but it will not be cheaper.

And we can’t continue to believe that that is part of the answer because it just isn’t. We do need 24/7 base load power plants. We do

not need any more peaking coal or peaking gas. An 18, 19 trillion

foot supply, 22 trillion foot demand just gets worse if we head in

that direction, so we need to do those things.

What our company intends to do in 2008, we will have a 30-

megawatt capture and storage project on our mountaineer station

in New Haven, West Virginia. By 2011, we will have a 450-megawatt capture enhanced oil recovery project at our northeastern station in Oklahoma. It is time to quit talking, and it is time to begin

acting. And American Electric Power intends to do that.
36

To the extent that DOE will help fund that, that is important to

my customers because ultimately, as I said to Mr. Hastert, the public utility commission in the State of Oklahoma will tell PSO what

they can and cannot do. And the public utility commission in the

State of West Virginia and Virginia will tell Appalachian Power

what they can and cannot do in a financial sense.

So again all of the things that we are talking about today are

going to end up with an incredible timeline if the States aren’t

equally encouraged to follow through and allow us to put that capital to work to demonstrate that this does work.

We keep talking about coal 50 percent of the capacity growing to

58 or 59 percent. That is capacity. That is not actual gigawatt

hours production. It is much, much higher on gigawatt hours production because when you look at the overall capacity, renewables

and other things fall in there. When you look at the actual

gigawatt hours of produced energy for the economies of this country, there is a huge difference there. So this is a very important

point. We cannot leave coal off of the agenda. We cannot leave our

existing nuclear feet and the new potential nuclear plants not to

come into play.

Mr. REASOR. Mr. Doyle, three things quickly. One, the diversity

of the types of fuels that are involved, and we do need all of those.

And that is what the other gentlemen have said, and I agree with

that absolutely.

Second, the Department of Energy has had some excellent programs over the years in clean coal technology. That is not the only

program, but the funding for those types of programs must be increased. And the private sector is prepared to step up and put

money into those programs as well, but they need to be funded in

a greater level from the Federal perspective. And then last, is to

provide incentives. The electric cooperatives, while we might be

small, if you take all of the electric cooperative generation across

the country, that is 43,000 megawatts. That is a lot of generation.

It would make us one of the large utilities in the country. We are

prepared to do our part in helping new development, but we do

need incentives, and we do need programs that will apply to notfor-profit cooperatives.

Mr. DOYLE. Mr. Lee.

Mr. LEE. And I will just finish by saying municipals are very

similar to what Mr. Reasor just said on the cooperative side. We

are not big into R&D, but we certainly are willing to work with you

and this committee to move forward to do it. And I am certainly

willing to give Jack a rate of return on his investment for the kind

of investment that he is talking about doing in R&D.

Mr. DOYLE. Excellent. Mr. Chairman, thank you so much.

Mr. BOUCHER. Thank you very much, Mr. Doyle. The gentleman

from Michigan, Mr. Upton, is recognized for 8 minutes.

Mr. UPTON. Thank you, Mr. Chairman, and I certainly appreciate

the testimony of all of you, and to follow Mr. Barton, Mr. Boucher,

maybe just a quick show of hands, are all of you in support of more

nuclear power? That is very good. I am not going to yield back. I

am sorry, Mr. Shimkus. I think in the response to Mr. Hastert, one

of you indicated that we have got 24 new nuclear plants on the

books to be built around the world, and not one of them—not one—
37

is in the United States. And Mr. Doyle made the very good point

that Westinghouse and others, GE, have been very involved in new

technology to make these even more efficient. Obviously continue

the safety record that we have. But in that response to Mr.

Hastert, Mr. Morris made the point that perhaps we need to look

at overriding State regulatory bodies to try and get these in place

in more States. And I would like you to expand on that and get

comments from the other members of the panel as well.

Mr. MORRIS. Mr. Hastert took that to overriding the State authority, Congressman Upton. I would not make such a suggestion

because I am still regulated in all 11 jurisdictions by those State

public utility committees for public service.

Mr. UPTON. But if we did it, you wouldn’t be opposed to that?

Mr. MORRIS. No, sir, if, in fact, we were able to shorten that

timeline in the process. If you look at the certificate of operation

and licensing, or COL, now at the NRC, it is a very, very productive, much more time respectful, and still very much a public endeavor as it goes forward.

Mr. UPTON. And we did that in the 2005 Act as I recall.

Mr. MORRIS. We did do that in the 2005 Act. To Mr. Rogers’

point, however, though I am not sure we will see a new nuclear

station, a shovel in the ground, until 2018 or 2019 here because

clearly the first COL that is actually issued and the first utility

that clearly intends to go forward will have to have in-State financial regulatory approval to do that. If I wanted to expand the DC

Cook Plant in Michigan, I would have to petition the Michigan

Public Service Commission for the authority to do that before I put

my capital to work.

I don’t suggest that Congress ought to overrule that or override

that. Maybe enabling legislation that encourages a timeline shortening so we can do that. But all of that will also be challenged legally, and so we have to be realistic about what is in front of us.

One of the critical things that we need to do in this process is

something that the chair has said over, and that is to make certain

the existing nuclear fleet doesn’t get impacted. The existing coal

fleet has a fighting chance to continue to participate in the generation of gigawatt hours, which are significant on a national basis.

Mr. UPTON. Other members wish to comment?

Mr. SOKOL. I would just make the comment that one of the single

biggest issues with nuclear is the deposition of the final product,

if you will, the spent fuel. United States Government took money

from our customers and committed over 20 years ago to resolve

that issue. Today it is still not resolved. I would ask you, would you

allow us to get away with that? To take money for something and

then not do it? And second, until we resolve it, you are not going

to see new nuclear because the financial risk that every State regulatory body looks at is what is going to happen there. And with the

unknown—and that is just part of this bigger issue. I have got environmental groups opposing hydroelectric facilities that are operating today, opposing renewable resources when they are in their

backyard, against new nuclear, and absolutely dead set against

coal.

Mr. UPTON. And even wind. In the case of Massachusetts, even

wind.
38

Mr. SOKOL. If it is in your backyard. And we are one of the largest renewable companies in the country, and the reality is we solve

this long-term pending problem called global climate change by

working together in a portfolio fashion that has to include each of

these technologies.

Mr. MORRIS. There is one more issue that we might want to

think about when we talk about renewables, Congressman Upton,

and I think that David just really brought it to light. We too are

very large players in the renewable industry, particularly in the

western Texas environment where wind blows 24/7. Unfortunately,

no one lives in western Texas, so there is about a billion dollar

transmission network that needs to be built to bring that wind

from its point of origin to the actual load pocket where it might be

used in central or eastern Texas.

We still have a huge disjoint at the Federal State level on the

permitting, the regulatory approval, and the cost recovery of the

transmission build out. And I know in the 2005 Act, we addressed

the issue of backup Federal eminent domain authority, and we may

need to cede the FERC with more authority to see to it that legislation allows for the transmission to be built. It will, at the end of

the day, be both an environmental bill and an economic bill. So it

falls right into the work that this subcommittee is taking on.

Mr. UPTON. Mr. Morris, you talked a little bit about a couple of

different technological breakthroughs that you are embarking on. I

notice Michigan wasn’t among the States. Illinois was not among

the States either, and I know for Michigan, jobs is a very big issue.

In fact, we have the highest unemployment rate in the Nation, and

we are above the national average in terms of the coal share of

total generation based on this chart at 58 percent, the national average being 50 or 51. What were the costs to AEP for these new

facilities that you are building?

Mr. MORRIS. It looks as though the 30-megawatt endeavor at the

mountaineer station will be something between $50 and $100 million. And again that is a 30-megawatt demonstration verification of

the Olstrum chilled ammonia technology as being a viable technology to capture carbon. We are blessed at that station that we

have an underground storage complex that is more than capable of

handling the carbon storage.

Mr. UPTON. How deep does it go?

Mr. MORRIS. I am sorry. That is beyond my pay rate. I don’t exactly know what the depth of it is, but we have done all of the geologic testing of that formation to feel comfortable about that.

Mr. UPTON. And what is the reduction in CO2?

Mr. MORRIS. Well, you will be capturing in excess of 90 percent

of the CO2 out of the flue gas stream because that is really a postcombustion technology that we intend to use. In Oklahoma, our intent, at a 450-megawatt station, which is going to be considerably

more expensive, is to capture the carbon there and put it into productive use in enhanced oil recovery. In some of the well played out

fields in Oklahoma, we think that is the real plus for the energy

process in the country, as well as for our customers in the State

of Oklahoma. That might absorb a great deal of the cost of the actual carbon technology capture, but at our Northeastern section, we

still need to, because of the implementation of the care rules, we
39

will now need to invest in the FGDs and the SERS for SOx, NOx

in mercury, which we intend to do.

Mr. UPTON. Mr. Rogers, in your combined role at EEI, do you all

support the safety valve, make sure that other countries have to

play as well?

Mr. ROGERS. I think the safety valve is really critical in two

ways. One is it guarantees that we don’t have an adverse impact

on our economy, but also really allows us to get as much carbon

reduction as we can at that price. So I think the safety valve is important. I also think a broader sort of provision with respect to

reset is important. It could be tied to other developing countries

stepping into the program. It could also be tied to the prospect of

what if technology, for instance carbon capture and storage, doesn’t

evolve as we plan the timeline on the cap. I think it is very important to sync up, match up the reduction and our perception of when

the technology will be available to allow us to actually remove carbon from our plants.

Mr. UPTON. And as my time expires, I just want to comment on

Mr. Sterba’s comment on more energy efficient light bulbs. It has

been something that I have been looking at for a while now. I am

looking forward to working with the chairman, Mr. Hastert, Mrs.

Harman, on developing legislation so we can really make some advances forward. And I look forward to seeing that accomplishment

this year. Thank you.

Mr. BOUCHER. Thank you very much, Mr. Upton. The gentleman

from Texas, Mr. Gonzalez, is recognized for 5 minutes.

Mr. GONZALEZ. Thank you very much, Mr. Chairman. One thing

these hearings have been able to establish, and it should have been

the obvious, is that we have coal. We are going to continue to depend on coal, and for anyone to go away from these hearings with

some sort of an illusion that we are going to replace coal in the

near future is just plain wrong.

So the question then goes to how do we make it cleaner and

such, and still expand on the other sources, such as nuclear, which

we have problems there too with disposing of the waste and so on,

the licensing. The information that is provided us here today is

that U.S. power generation by energy source, coal nearly 50 percent United States. And I don’t know how that compares in previous years if we fast-forward.

I also cited from a ‘‘Post’’ article that in the next 5 years we are

probably going to have 40 more coal-fired plants in the making, established, completed, and by 2030, 150. Mr. Sokol, I think you have

your plant coming on, and, Mr. Lee, you all have made a determination that you are going with coal. The question then comes to

why did you not utilize the latest technology in the way of what,

I guess, is referred to as gasification, Mr. Sokol?

Mr. SOKOL. That is a great question, Congressman. One brief

moment just to remind everyone what it is we do because all of us

here are essentially co-ops. There are regulated, profitable co-ops,

and there are municipal and rural electric co-ops. We present to

the regulator the options of fulfilling the State and Federal mandates that we have, which is to provide energy at the lowest cost

available to the cooperative members, our customers.
40

We are not a free market. Our customers don’t get to buy a different SUV or a hybrid automobile. They buy power from us if they

live in our region. And the State regulatory bodies direct us as to

how we make decisions on the next round of technology. In our

case, in 2000, we sat down with the Democratic governor of Iowa,

the Republican and Democratic leaders of the House and the Senate, the consumer advocate groups, the major consumers, environmental groups, as well as the regulatory body, and said Iowa needs

to make some decisions for the long haul.

Over a 6-month period, a decision was made to increase renewables to about 12 percent of the overall portfolio, which we have

now already done, add a new natural gas-fired facility of the modern technology, which was 550 megawatts, which is already added.

And thirdly, add for our system’s benefit, 500 megawatts of supercritical coal which is this plant just online today, operating at

super-critical technology, just came online beginning in January. It

is an 800-megwatt plant of which we own 500 megawatts, and we

have allowed the rural electric co-ops and municipal agencies in

our State to buy the other 300 megawatts and own that of that facility.

That decision was made by our State regulatory body along with

us and along with all those municipal agencies on the basis that

IGCC technology with sequestration is not a proven technology, nor

one that the economics can be reasonably estimated at this time.

We have gone out for bids of the major suppliers. We have not been

able to get a fixed price bid from any of the major suppliers of

IGCC technology, nor any meaningful guarantees as to their performance. It is a technology in development, and based on that, the

regulatory bodies wouldn’t allow us to go forward. But they did go

forward with the energy efficiency, renewables, gas, and coal decision.

Mr. GONZALEZ. Mr. Lee?

Mr. LEE. Let me follow up on that, Congressman. What we did

is we made a thorough review of all the various technologies, and

just like been mentioned before, we didn’t see that the IGCC technology was ready for prime time. So what we decided to do was say

until it is ready for prime time, and Mr. Morris already stated that

they will be looking at a demonstration project of 30 megawatts, we

decided to go with proven technology.

But the difference for what we did was to ensure that the emissions systems on our publicized coal plant would be some of the

lowest emission levels in the country. So if you take SOx, NOx,

particular, and mercury and put them together and take a look at

the emissions level, if this plant really doesn’t meet the limits that

we have in our permit, the systems or subsystems for those emission levels, we basically would have to shut down the plant.

So there is little to no flexibility in the emission levels, and from

studies that we have done in looking at IGCC, we believe that the

emissions level today on this plant when it comes online in 2010

will either meet or beat those that are being proposed by IGCC.

Mr. GONZALEZ. Thank you very much. I yield back.

Mr. MORRIS. If I could just take 1 minute to make sure the

record reflects accurately, my good friend, Mr. Lee, made a mistake. On our 30-megawatt facility is a post-combustion capture
41

demonstration. Now, an integrated gas combined cycle plans are

for plants that will be 630 megawatts, which is considerably different.

Mr. LEE. My correction. Thank you, Mr. Morris.

Mr. MORRIS. You’re welcome, Milton.

Mr. GONZALEZ. Thank you.

Mr. BOUCHER. Thank you, Mr. Gonzalez. The gentleman from Illinois, Mr. Shimkus, is recognized for 5 minutes.

Mr. SHIMKUS. Thank you, Mr. Chairman. I think this has been

a great hearing, and I appreciate the comments. I had one of your

colleagues, to be nameless, said we are in discussions because we

would rather be shot in the arm than shot in the head. And I know

some of you folks are here at the table out of that concern. So I

am the skeptic at the table, and I think you need skeptics to continue to raise these issues so that this can be fully debated. Be

careful of what, in your negotiations, the Federal Government

promises you that it will do.

Yucca Mountain is a perfect example of our inability to deliver.

So as we negotiate, and the chairman of this committee knows that

I have great respect for him, and I think he is an honest and fair

broker. But I can’t say that for how we deliver. Here in Washington, we continue to overpromise and underdeliver across the board.

I don’t know one example—maybe the landing on the moon, but

there is a difference in this debate. Landing on the moon was Government funds, Government science. It wasn’t private capital. Unless we want to take over the electricity generation business as a

Federal responsibility, then correlating this to NASA and the

moonwalk is, I think, a worthless exercise because you have to

raise capital. You have to assume risks. I think that is what we

just talked about with the research plant in why are you deploying

what you are deploying? Here is my skepticism. Tell me how—and

we fought this battle in this committee and this Congress now for

years. How would alleviating the problems of new source review

help in this debate? And you can be brief. It is a pretty simple

question. Mr. Sterba?

Mr. STERBA. It is the uncertainty of the language of NSR that

creates interpretation capabilities about what may be imposed if

you take certain actions. Specifically, there are many coal plants

that exist in the United States today that could be upgraded

through what is called a dense pack process. It is basically a

reblading of the turbine with using new materials and new fitting

such that you would be able to get more megawatts out of the same

amount of energy that you put in.

Mr. SHIMKUS. Thanks. Let me stop there for a second because I

know my friend from Washington State is here, and he always

talks about this company with new compression technology, and

that would help us in this whole debate. Now, if this new compression technology was available to assist in power and electricity generation plants, could you deploy it without extremely additional

cost?

Mr. STERBA. We could deploy it without significant additional

cost, but we may be faced with the risk of much higher costs, depending on the interpretation of NSR. If it triggers an NSR then
42

I may be exposing my customers to a set of costs that are way beyond what I can justify.

Mr. SHIMKUS. So if I could summarize. If we tried to bring some

certainty to the new source review process, which would allow you

to get more efficiencies, higher electricity generation, having the

same emission ratio as you do now, that would be a positive public

policy change in this debate. And you, Mr. Sterba, and I will do the

same thing. Would that be a positive approach to trying to address

some of these concerns?

Mr. STERBA. Yes.

Mr. SHIMKUS. For the record, I will note that every panelist

raised their hands saying that if we successfully address new

source review. And, Mr. Chairman, I am a skeptic, but I would submit that if you would have that as part of your legislative package,

you might be able to start convincing me to be less of a skeptic as

we move forward because the problem is those of us who have

worked on new source review for years, it gets blocked every year

by the environmental community in this town when it has all benefits, zero disadvantages to this whole debate. Not just on carbon,

but NOx, SOx, particular matter, and mercury. So I would ask you

to join me in that cause. Mr. Chairman, I will end and yield back.

Mr. BOUCHER. Thank you very much, Mr. Shimkus. The chair

appreciates that line of questioning. I am pleased now to recognize

the gentleman from Washington State, Mr. Inslee, for 8 minutes.

Mr. INSLEE. Thank you. How many of you believe it is appropriate for the United States to adopt some cap-and-trade system for

CO2? Great. It is a start.

Mr. SHIMKUS. For the record, only two raised their hands, Mr.

Inslee.

Mr. INSLEE. Time will tell. That will change, Mr. Shimkus. Bear

with me.

Mr. MORRIS. Only because it had no definition other than a capand-trade program, which is clearly unvotable.

Mr. INSLEE. How many agree with Mr. Sterba’s testimony that,

just as the space race spawned today’s information technology age,

the clean energy race has the potential to launch the U.S. as a

world leader and exporter of carbon-free technology? Raise your

hand if you agree with that. OK, we have five. We have unanimity

in that, Mr. Shimkus. We had a start. I think that is one of the

most important things I have heard today, and the reason is that

I believe that our response to this challenge is the greatest economic opportunity the United States has had to expand our economy since the invention of the Internet for sure.

I was having breakfast with a longshoreman this morning talking about the fact that the ships come in from China low in the

water, and when they go back, they are empty, and they are high

in the water. We need to start putting our technology on the ships

back to China, and what I want to see is this Congress to develop

a policy so that we give an incentive to American economy to develop the technologies to sell to China to clean coal technology they

are going to have to have. And they know they are going to have

to have it because you can’t see the flag of China in Tiananmen

Square because it is too foggy right now. And I believe it is our destiny to sell that technology to them.
43

Now, Mr. Shimkus made reference to this one compression technology. I hope you get to know the Ramgen Company. It is a little

company in Tacoma, Washington that has developed a compression

technology using sonic wave technology that can reduce the cost of

compressing CO2 30 to 40 percent and generating heat that you

can use in the gasification process at less cost. And that is the kind

of thing that I hope to incentivize.

And I want to tell you I have seen a great epiphany here today

in one thing. There is a lot of good reasons to have this hearing,

but one of them is a great epiphany by my friends on the Republican side of the aisle because for years we tried to ask them to

help us deal with spiraling energy costs when Enron was running

rampant charging 1,000 percent increases in the West. Turned out

the stoplights in California. We couldn’t get them to raise a finger

to help us. Now, I hope they will help us to develop a meaningful

cap-and-trade system.

I want to ask you gentlemen about the relationship between your

use of coal and the potential coal-to-liquids fuel issue. Some advocate the United States should adopt a policy that will vastly expand a coal-to-liquids technology to use liquid fuel in our gas tanks.

Now, I am concerned about that because my understanding of that

technology is that it does not reduce CO2 emissions in the lifecycle

of the technology. You might save some CO2 in the processing, but

when you burn the liquid, you end up putting just almost as much,

probably 94 percent, at least as much CO2 in the air as you do a

gallon of gasoline.

So I want to ask you this. If we have two alternatives. If we have

$100 for R&D for coal, and scenario A is to take that $100 and put

it into clean coal technology to find out how to sequester CO2 in

your industry in the production of electricity. Or we have scenario

B where we only have $50 available for you, and we take $50 and

we give it to the coal-to-liquification R&D, which one of those scenarios should the country adopt? Whoever wants to go first.

Mr. SOKOL. Congressman, if you have $100, I would keep it.

Mr. INSLEE. Right.

Mr. SOKOL. But let me try to put it—I am not an expert in the

liquid side of it. That is not our field. I am familiar with gasification-to-liquids because it is often raised when we look at a gasifier for coal to make electricity. But our sector, it is estimated—and

I think these numbers are not aggressive. They are actually probably understated. We need $5 billion of our DDD dollars federally

to actually make a meaningful impact in the technology development that we need as an energy sector, and that is for electricitytype involvement, whether it is the removal of CO2 out of gas

streams, whether it is sequestration, or whether it is new technologies, nuclear and others. So $5 billion a year for 10 years to

kind of get the level of technology capability that we could then export into China, et cetera.

The important thing to recognize there is we don’t develop technology. No one here sitting on this panel develops technology. We

utilize it. What Mr. Morris is doing at AEP is terrific, and we are

actually friends with them on a number of different undertakings.

But they are using Olstrum technology. We are using other peoples’

technology. Those folks can only develop it if there is a market for
44

it and if there is cooperation with Government on some of these

changes.

And that is a really critical element is we are not a free market

enterprise, as I said before. We are a cooperative, and so I think

that is just an important piece.

Mr. INSLEE. Mr. Morris.

Mr. MORRIS. I will try to comment on that issue that you raised,

Congressman. I think when you talk to coal-to-liquids, you are

talking about an energy independence issue, not necessarily an environmental plus issue. And Governor Manchin and Governor

Strickland in the State of West Virginia and Ohio and our company

are beginning to look at that much more aggressively in West Virginia. But that is really an energy independence as to a transportation fuel. That does have potential. There is no question about

that, and we should continue to look at that. When you are talking

about coal to gas to electricity, you are talking about an environmental benefit of the concept of capturing all of the gases, whether

they are pollutants in a traditional sense or this global warming

gases in a non-traditional sense. And I can support that we understand those two differences. As to your first point——

Mr. INSLEE. I want to make sure I let Mr. Rogers—could I get

to Mr. Rogers’ point just for a minute? Thank you.

Mr. MORRIS. Sure.

Mr. INSLEE. Thank you.

Mr. ROGERS. Congressman, I would make the observation I

would put all my money into the electricity side of this for a real

clear reason. You have to have a vision in terms of where we are

going. Today, 50 percent of our electricity comes from coal, and we

are going to build additional plants in the future.

The second point is if you want to have energy security and a

vision, the right vision for the auto industry is really the idea of

plug-in hybrids, and we see that on the horizon as the answer. So

if I was picking between coal-to-liquids and plug-in hybrids, I

would pick plug-in hybrids because I think it is near term and

more likely. And it allows us at the same time to really put the

money where it really needs to be with respect to the backbone of

our economy, and that is our electric grid.

Mr. STERBA. Mr. Inslee, I would make one other caveat to that,

and that is that the most important piece is on the storage side.

Because whether we use it out of the carbon that is coming from

coal-fired gas generation or the liquifaction for the use of fuels, in

both instances, you have got the storage question. And then I

would second what Mr. Rogers said about plug-in hybrids.

Mr. INSLEE. Mr. Sterba, one of the questions my friends on the

other side asked is what do we possibly do right now while we are

waiting for this technology to develop, and I was impressed in your

testimony about your evaluation of the New Mexico efficiency market where, I guess, you said that you could meet 40 percent of your

new system growth at half the cost of conventional generation. Is

that accurate, and how do you do that?

Mr. STERBA. Yes, and there are a number of different elements

to that program, but what we have to do in order to effect is we

have got to change the business model so that energy efficiency is,

in fact, a business so we are incented to do as much energy effi-
45

ciency as we would be for building new power plants. But it is

lighting. It is HVAC. It is all of the fundamental aspects that go

into how customers use energy, and you can’t do it by just changing

your behavior. You have to do it by leveraging technology.

Mr. INSLEE. And that is decoupling?

Mr. STERBA. Decoupling is certainly one of the tools. It is not the

only one, but it is one of the tools.

Mr. INSLEE. Thank you, gentlemen.

Mr. BOUCHER. Thank you very much, Mr. Inslee. The gentleman

from Oregon, Mr. Walden, is recognized for 8 minutes.

Mr. WALDEN. Thank you, Mr. Chairman. I want to thank our

panelists who are here today. We have appreciated hearing your

thoughts on this issue that is so important in America and I think

across the globe today. I would ask a general question. The former

chairman asked about how many new power plants are going to

have to be built to keep up with demand, and I wonder if you each

could tell me, from your perspective, how many new plants at what

megawatt output do you anticipate need to be built in the United

States from whatever generating source to keep pace with demand,

Mr. Sterba?

Mr. STERBA. Well, yes, sir, it represents about a 40 percent increase, and if my memory serves me, there is about 300,000,

320,000 megawatts within the United States today. So we are talking about somewhere around 150,000. The part that probably bothers me a little bit is something that I am not sure we have adequately taken into account. There is an estimate by CERA, Cambridge Energy Research, that says that there is another 150,000

megawatts of generation that will be required if, in fact, we have

a 11⁄2 to 2 degree increase in temperature by 2050.

Mr. WALDEN. All right.

Mr. STERBA. So that is another piece that frankly we have not

taken into account in a lot of our planning.

Mr. WALDEN. All right, anybody else want to comment or add to

that? Then I guess the next question I would ask is what is the

cost to consumers for some sort of CO2 capping and trading system? Can any of you identify for me today what your estimates

would be? Mr. Sokol?

Mr. SOKOL. Congressman, let me try to estimate it because it depends on what it is you do. One of the reasons we are not in favor

of a cap-and-trade system anywhere in the near future is merely

because it will effectively merely in the electric sector be a tax on

our consumers. Because since we don’t have the alternatives available to us then whatever you charge us will get passed through to

our customers. The SO2 system worked well once we had the technologies available so that an economic decision could be made that

this is what it cost to do that. We spent over $1 billion in our company on SO2 NOx and mercury removal just in the last 10 years

because those price signals were clear and the technology existed.

If I am charged $30 a ton which translates basically through to

a doubling of generation costs for coal-fired generation, the customer is going to pay that because we don’t——

Mr. WALDEN. But can anybody quantify what you think that will

be? Mr. Morris, you talked about——
46

Mr. SOKOL. But our system would be doubling of their

generational electric rates.

Mr. WALDEN. Doubling of their rates in the Pacific—well, my

part of the world the Pacific course system. Mr. Morris, you indicated this would be a job loss bill of some sort in your comments.

Can you comment on this aspect of it?

Mr. MORRIS. What I suggest was if we go about this in a wrongheaded fashion without making certain that the rest of the world

joined us in one way, shape, or form, we could end up seeing a

huge export of industrial manufacturing jobs. Our company serving

the middle part of the country still has a tremendous manufacturing base in our customer account.

To your question of the cost, it is unknown but not unknowable.

And that is why we are trying to get some projects up and running,

a, to verify that the technology works, b, to have a real understanding of the impact of those technologies.

One of the biggest challenges with the greenhouse gas capture is

the amount of parasitic impact it has on the megawatt hours available from a power plant. The chilled ammonia approach appears to

be in the 10 or 12 plus percent range, which is to say if you had

a 1,000-megawatt plant today, you’ll have an 880-megawatt plant.

That is a negative impact that we need to work on, but until we

get those projects up and running, we won’t know the answers to

those questions.

To David’s point, there is no question it will be more expensive.

No question it will be more expensive.

Mr. WALDEN. Do you think it will double the rates?

Mr. MORRIS. I don’t know if it is that high because I just don’t

know what that will cost. I know this: that just like MidAmerican,

we have spent over $4 billion on SOx, NOx, and mercury control.

And because we have been able to change our fuel mix, higher sulfur coals, our overall cost production has actually stayed very level.

I don’t know if that will be the case with more carbon capture.

Mr. ROGERS. Congressman, may I make an observation?

Mr. WALDEN. Yes, sure, quick.

Mr. ROGERS. We need to be careful here not to over or underestimate the impact of the future, and let me tell you why because it

goes back to the God is in the details point.

Mr. WALDEN. Right.

Mr. ROGERS. And that is if we do the cap right, if we phase it

in consistent with the technology that we project to be available,

if we really invest in energy efficiency—and we have had chronic

underinvestment in energy efficiency in this country—if we invest

in renewables, there is a series of things that we can do over a period of time that will allow us to do this without having adverse

impact on our economy.

Mr. WALDEN. I hope you are right, and I get that. And I realize

that the devil is in the details. What I am trying to figure out is

ratepayers in my region, what it will cost them if it isn’t done correctly. And I will tell you, as much as I am a skier. I love snow

in the mountains. I don’t want the globe to adversely warm if we

can prevent that if that is a good thing. But I have real trouble in

going down this path when I know that India and China are going

to put 450 coal burning plants online over the next few years. We
47

already get their pollution in the Northwest. Whether there is a

dust storm in the Gobi Desert to the noxious emissions out of their

various industrial plants blow right over the Pacific and pollute our

atmosphere. And I don’t see why we ought to upend our economy

if we don’t have some sort of worldwide agreement on this because

China and India will put more carbon into the atmosphere than the

Kyoto Accords were designed to remove in the first place. Do any

of you disagree with that?

Mr. MORRIS. No, sir.

Mr. WALDEN. Raise your hands if you disagree. Thank you. For

the record, nobody raised their hand. Well, you don’t. Well, then let

me take it the other way. Do you think we ought to have a capand-trade system, the United States, on anything related to carbon

that doesn’t include other countries around the world? Should we

go it alone?

Mr. MORRIS. We should not. We can start it alone, but it has to

have either one of two safety valves that I spoke to in my comment,

either a tariff aspect on those products that would be imported

without control in the home country, or as the European Union did,

set a standard, have a timeline. If no one joins us, lower the standard, extend the timeline, have less of an impact on the economy,

one of those two options.

Mr. WALDEN. Let me ask a different question, and that is about

renewable portfolio standards. Do all of you agree that energy producing sources that don’t add to SOx, NOx, or CO2 in a measurable

degree should be included in any renewable portfolio standard, either mandatory or voluntary? Should an energy source that doesn’t

produce that be included and counted. We are doing the raise the

hand thing, I guess, today. Now, I come from the Northwest. It is

no secret to you all we are predominantly hydro, and yet in most

renewable energy portfolio standards hydro is dismissed as if it

doesn’t exist as a renewable energy source.

Mr. STERBA. Well, I think what we have seen, and of course, I

come from New Mexico, and the one thing we would like is your

water because we don’t have any. But I think in most of the renewable portfolio standards, we see new hydro being included, just not

existing hydro.

Mr. WALDEN. Well, yes, but I guess the point and a concern I

have with cap-and-trade is those of us who are fortunate enough

to live where we do that have power in our regions that don’t

produce noxious gases or CO2, I don’t want us to get penalized for

being good players when these systems are set up. I don’t think

that is right or fair. So with that, my time is expired. Thank you,

Mr. Chairman. I thank the panelists.

Mr. BOUCHER. Thank you very much, Mr. Walden. The gentleman from Massachusetts, Mr. Markey, is recognized for 8 minutes.

Mr. MARKEY. Thank you, Mr. Chairman. Mr. Morris, in your testimony, you argue for having the Federal Government allocate

greenhouse gas emission allowances to your company and other

owners of coal plants based on historic emissions allowing ‘‘only a

small number of the allowances, less than 5 percent to be auctioned

or set aside for public benefit purposes.’’ Now, according to the National Commission on Energy Policy, this is what they say. Because
48

they do not bear the cost, allocating most allowances for free to energy producers creates the potential for large windfall profits. Why

should utilities receive what amounts to a huge Government grant

that can be worth many, many times the cost of compliance?

Mr. MORRIS. Because they will actually incur the cost to implement the technology that would allow us to capture and store the

carbon. Those who would advocate for allowance to them who incur

no cost simply are in it for the money. We are in it to make a difference, Congressman.

Mr. MARKEY. Well, as you know, many have criticized the European Union for allocating too many pollution credits to industry

during the period between 2005 and 2007. A recent study on how

the German government allocated credits reports that German utilities were set to make windfall profits of between 31 and 64 billion

Euros until the end of 2012. If we follow your formula and allocate

95 percent of the credits to your company and other utility and

non-utility generators of carbon and other emissions, I think we are

just going to be handing over a similar windfall.

Mr. MORRIS. Well, I would think that the mistakes that were

made by the Germans in the European Union don’t need to be repeated by us. We should learn by others’ mistakes, not repeat

them. The fact of the matter is that we allocated in the SOx and

NOx and mercury process, those credits went to the very people

who invested hundreds of millions. In our company, $5 billion in

the last 3 years on SOx, NOx, and mercury control. Those are real

costs that were incurred. The credits go to the benefit of our customers while we are implementing those undertakings. There is no

windfall profit in the regulated utility model. In the 11 States we

serve, we are rate regulated in all but the State of Texas, except

for our energy delivery piece.

Mr. MARKEY. Well, let me turn to Mr. Rogers. Let me ask you

a question, Mr. Rogers, and it is in the same subject area. In your

testimony, I see that you seem to disagree somewhat with Mr.

Morris’s call for 95 percent of allowances to be allocated to utility

and other generators for free, instead calling for allocations during

a transition period, and then gradually phasing them out in favor

of a full auction. What percentage, Mr. Rogers, of these allowances

would you want to initially have allocated for free? What percentage would you have auctioned off? And how quickly would you

phase out the free allocations and move to a full auction system?

Mr. ROGERS. Now, you are putting me in the position to be king

of the world, and I love that. If I was king of the world, I would

start out with 100 percent allocated to those who are going to incur

a disproportionate burden of this, and it is primarily consumers

who rely primarily on coal. And that is why we presented the map

to show the 25 States where more than 50 percent of electricity

comes from coal. And then I would phase it out over time, and I

would look to what we did with SO2.

Mr. MARKEY. What period of time would you suggest?

Mr. ROGERS. I would tie it to when we see technologies coming

online to allow us to capture carbon and store carbon or remove

carbon from the stream. It is critical that we get the reduction.
49

Mr. MARKEY. Who would select that? Should we select a timeframe, or would you allow it to the industry to select the timeframe?

Mr. ROGERS. I think that you all should be prescriptive with this,

but leave a provision that says if the technologies are not online

as expected, we take a look at what the cap should be and how the

allocations are done. I think it is critical that we keep in mind this

idea of reset because there is a lot of things that we don’t know

today but we may know better later.

Mr. MARKEY. But you would move to a full auction eventually?

Mr. ROGERS. Eventually. Yes, sir.

Mr. MARKEY. OK.

Mr. ROGERS. OK, may I make one point just quickly?

Mr. MARKEY. Yes please.

Mr. ROGERS. There is a fundamental difference about what happened in Europe and what would happen in the United States. In

Europe, they allocated the allowances to companies who did not reduce their rates. They actually charged them for the CO2 and

didn’t give the benefit to the customers. In the U.S. in every regulated jurisdiction, and certainly in all of ours, you would pass those

zero allowances through to the customers, and the customers would

get the benefit, not the companies or the investors in the company.

Mr. MARKEY. OK. Now, how about if there is an unregulated

area? Would we mandate that there be a pass through?

Mr. ROGERS. In the unregulated areas, it is primarily left to the

market.

Mr. MARKEY. No, should we mandate it in other words. You are

saying that the regulated automatically pass on. Should we mandate a national mandate on the unregulated?

Mr. ROGERS. I think it is difficult to do that in a competitive

market. Is it possible? Yes.

Mr. MARKEY. So now we have your loophole, OK, so that is the

problem. It would be an unregulated market. So if you can’t force

that it be passed on, then it is just a windfall profit.

Mr. STERBA. Mr. Markey, I would encourage that you do that.

Mr. MARKEY. OK, thank you. I appreciate that, sir. I appreciate

it. Thank you. Mr. Morris, why shouldn’t we allocate all of these

greenhouse credits to auction them off, and use the resulting revenues for public benefit, such as accelerated R&D on new technologies, energy efficiency, or even reducing taxes for business or

individual consumers that might be faced with higher energy

prices? Why not use market mechanisms like an auction to efficiently price these credits rather than have politicians allocate

most of the credits?

Mr. MORRIS. Well, again, I think that because we have tried the

allocation system and it works so well in SOx, NOx, and mercury,

we should simply repeat that success and not try to do something

that may or may not be beneficial. At the end of the day, if you

do auction, I would argue that is exactly where the money should

go. But, as our Congressman from Illinois said, money into the

Federal coffers never seems to come back, and that is a very real

world that we all live in. If you have an auction, the person who

buys at auction is going to sell at a profit creating your very wind-
50

fall profits that you spoke to. And they are not going to spend the

money to make a difference, and that is what this is about.

Mr. MARKEY. All right, Mr. Sokol, on page two of your testimony,

you asked us the subcommittee ‘‘to impose this new system in a

way that does not proportionately burden any sector of the economy or consumers in any region of the country and one is that we

should not try to pick winners and losers.’’ If we are going to be

allocating to the utility industry a potentially huge windfall profit

in the form of free allowances, why doesn’t that result in picking

winners and losers? Why shouldn’t we use market mechanisms,

auctions, to the maximum extent possible to efficiently price these

allowances?

Mr. SOKOL. Thank you, Congressman. I don’t think you should

allocate a windfall to the utility industry. We don’t want it. We

would specifically oppose it because in the methodology you are

talking about, that is the reason we are opposed to cap-and-trade

at this point. The market can’t deal with this issue because the

technology to solve the problem isn’t there.

Congressman Shimkus made the point that President Kennedy

and the analogy to the space program isn’t direct. It is direct.

President Kennedy was honest with the American people in that he

said, I am going to take your tax dollars, and through NASA, we

are going to put a man on the moon, and we are going to bring him

back safely. And there will be benefits from that. Be as honest with

the American people. Tax the American people to remove CO2 from

our atmosphere, and tax the American people. And then you use

those dollars to create the technologies to do it. That is all we are

asking. We are not opposed to solving this problem. We have to

have the technologies available to us to do it. Cap-and-trade doesn’t

bring them to us. It makes, perhaps, financiers wealthy, it may

make marketers wealthy, but it will not solve the problem of reducing CO2 technology well, and so that is where the dollars need to

be applied. We don’t want them as windfall. We would reject them.

Mr. MARKEY. I look forward to the day where Congressman

Shimkus sounds like President Kennedy and says I want to tax the

American people. I look forward to that day, and it is a day in the

future that will probably be as likely to arrive as——

Mr. BOUCHER. Thank you, Mr. Markey.

Mr. MARKEY. Thank you.

Mr. BOUCHER. The gentleman from Texas, Mr. Burgess, is recognized for 5 minutes.

Mr. BURGESS. Thank you, Mr. Chairman. Mr. Lee, back home in

Texas, of course, San Antonio, you represent a municipal power

company. In Denton, Texas, we similarly have a municipal power

company that serves the citizens there, primarily natural gas derived and a lignite coal plant from which they derive their power.

And as a consequence, when the natural gas prices went high, as

you pointed out, you service a good number of citizens who are low

income. The city of Denton has a good number of low-income citizens, and they were really hit hard with that. As someone pointed

out, I heard from a lot of them. They were concerned about their

bills. So with that in mind and the CO2 cap-and-trade system that

we have already heard about will raise prices by, I think the tech-
51

nical assessment was a lot. Well, what do you think that we are

going to do about this?

Mr. LEE. I think it is a whole bunch. What we have done in San

Antonio is roughly 20 percent of our population is at or below the

poverty level, and if you assume poverty on an annual basis, for a

family of four, is around $22,000 a year, you can see it doesn’t go

very far. What we have been able to do is to offer low-income consumers in our area some options to be able to help and assist them

in paying their bills on the gas side and on the electric side both.

In other words, we are actually contributing to funds within San

Antonio, added revenues from CPS Energy that we get the city of

San Antonio to administer for us. And we have made a commitment to them saying that that would continue to be available to

them along with a lot of other Federal programs also.

Mr. BURGESS. So if there is a cap-and-trade system enacted,

there will have to be some mechanism to protect the lower-income

ratepayer as part of that?

Mr. LEE. Yes, sir. And we would still make a proposal to continue to assist them with the current processes we have in San Antonio.

Mr. BURGESS. Very good. Mr. Sokol, in light of your statement

and your testimony that every dollar spent on reducing greenhouse

gas emissions and avoiding potential impact of future climate

change is one less dollar that can be invested in education or disease eradication or even other environmental programs that directly protect human health, we must weigh the risk and benefits

carefully and spend our resources prudently. So with that in mind,

how do you feel that Congress should focus on the issue of climate

change and obviously, to some degree, the exclusion of other activities.

Mr. SOKOL. Thank you, Congressman. We agree with the comments that have been made by various people of a slow, stop, and

reduce process. We are not, by any means, opposed or wanting to

stick our head in the sand about is this an issue for the world to

deal with. But we do have to make these tradeoffs. People have to

pay real dollars for these decisions. As we have said, we have reduced our carbon intensity since 2000, 9 percent fleetwide. And we

are a relatively large company, not as big as some here. And those

are from voluntary decisions that we have made since we have obviously recognized that the world cares about this issue. And it is

important. This is an important distinction. Nobody at this table

built power plants 20 years ago to try to avoid a CO2 issue. We

didn’t know it was an issue. We all breathe it, exhale it. We didn’t

know it was an issue. So we think we need a three-phased approach, spend time to reduce where we can, get to a point, we

think, by 2030 perhaps to get back to where we were in 1990 levels

and stop the growth, and then have the technology available to us

through that process to start making serious reductions in the future. That type of glide slope, our estimation is, is affordable. It is

going to cost money. It is not free. We think that glide slope costs

about a 50 percent increase in electricity cost in this country above

the CPI. That is a significant price to pay, but one we can probably

afford. If we try to shorten those timeframes without available
52

technology, it can be multiples of that—and that is really our concern—are we then putting dollars to the best use.

Mr. BURGESS. And thank you for that very thoughtful answer.

Mr. Rogers, in the limited time I have left, you provided us with

a very colorful map, and you referenced the fact that politics might

be involved in this process. I just wondered had you done a calculation of the electoral votes of the red and blue States versus the

green States? Just wondering.

Mr. ROGERS. That is actually a great question because I really

do believe the politics of this issue is driven not so much whether

you are a Republican or a Democrat. They are really driven by

what part of the country you are from and what resource you rely

on. What that map does is illustrate that 25 States have more than

50 percent of their electricity from coal, and it is critical to their

standard of living and their economy. And so as we make these decisions, I want to make sure everybody in those States understands

the implications of this on their States because it is pretty easy for

people to say it will have a minimal impact across the country. But

the reality is it is going to have a dramatic impact on some regions

much more than others.

Mr. BURGESS. Thank you, Mr. Chairman. I will yield back.

Mr. MATHESON [presiding]. Well, thank you. And now the Chair

will recognize himself for 8 minutes. First of all, I want to thank

the panel. You are up almost 3 hours now being here, and I think

this has been one of the more substantive discussions we have had

of the different climate change hearings for this subcommittee. And

I think that your written testimony provides a lot of detailed suggestions and ideas, and I just want to compliment all of you because I think it is what this committee wants.

I want to make two quick comments, then ask some questions.

First of all, Mr. Morris, you mentioned in response to a discussion

with Mr. Upton the need for additional clarification beyond the

2005 Energy Act in siting of high-voltage transmission lines. And

I encourage you to continue to advocate for that, and I think the

subcommittee needs to take a look at that issue because I do think

that there is still a level of uncertainty in the marketplace that creates a disincentive to invest in that infrastructure. And I think

that is another energy issue this country needs to address.

Mr. MORRIS. It truly is, and it is an environmental issue as well.

Mr. MATHESON. Absolutely, so I appreciate that. Second, I want

to thank Mr. Shimkus for his discussion on the new source review

issue and the panelists’ discussion on that. I do think that is something that would be helpful for us to be talking about more and trying to make some incremental progress. I fear sometimes in pursuit

of the perfect, we are not willing to take some incremental steps

that make a lot more sense. And we ought to be doing that, and

I look forward to working with you on that as well.

Mr. Sokol, in your testimony, you mentioned the Epree study

that had just come out recently, and you mentioned that you felt

that it had some good recommendations in terms of how to move

forward. You also included a draft outline of legislation with your

testimony. The Epree study just came out recently, so is your draft

outline pretty consistent with the Epree study? Do you want to
53

take a look back at revising that with the Epree material having

come out, or do you feel that is pretty consistent with that?

Mr. SOKOL. I think it is pretty consistent. There are some details,

both from the Epree study and frankly the recent MIT study that

we think might bring some additional thought to a couple segments. But I think on balance, it is pretty consistent with both.

Mr. MATHESON. And you mentioned a target amount for R&D of around $5 billion annually. Do you have a suggestion of how that

ought to be deployed? Are there certain technologies we ought to

be looking at? Or do you have guidance for the committee on how

you would suggest that be spent?

Mr. SOKOL. Well, yes, in the sense that it should be—I am talking about only of generation of electricity.

Mr. MATHESON. Understood.

Mr. SOKOL. It needs to be across a number of fronts. Frankly,

transmission being one. Coal gasification, the storage and transportation of sequestered CO2, nuclear, and frankly renewables in various categories, and the key element, I think, is in addition to the

level of funding, and much of it would follow the Epree model that

they have laid out. We think they have done an excellent job of

identifying the areas, but also timeliness, put performance-based

R&D dollars out there for industry to respond to rather than it getting gummed up in frankly Government bureaucracy. If we really

want to move with due haste, we have got to have these technologies.

Mr. MATHESON. That may be something that would be helpful to

have additional input from the panelists is that I think everybody

up here at one level likes the notion of investment in basic research

and development. It often becomes a dollar discussion, but there is

a process discussion that ought to be had as well about how we go

about implementing that. So I appreciate that.

Mr. Rogers, you mentioned that it would be helpful if we could

remove some regulatory roadblocks, and you mentioned especially

for energy efficiency. Can you talk about what some of those roadblocks might be?

Mr. ROGERS. Sure. It is very important that on the State level

there is almost a renaissance of rethinking. What used to be called

demand-side management really focused on energy efficiency, and

the important point here is that today, at the State level, in virtually almost all States, we are not compensated in the same way

to produce a save-a-watt or we reduce energy compared to a megawatt. And I think it is going to be critical that we are allowed to

invest and create save-a-watts and earn off that at the State level,

have the same incentives to do it as we have incentives today to

meet the new demand with megawatts. And getting that right on

the State level is going to lead to significant more investment in

energy efficiency and fill the gap of chronic underinvestment that

we have seen in this country over the last 20 to 30 years.

Mr. MATHESON. Do you think Congress has a role in making that

happen?

Mr. ROGERS. I think Congress can encourage it. I think it still

has to be done at the State level, but I think there is a series of

things in terms of tax policy and other things that can be done to

encourage that to happen. Another important aspect of this is I
54

know we consider renewable portfolio standards. In the 22 States

who have adopted them, three of the States actually count the creation of save-a-watts or energy efficiency as part of their goal on

renewables. That concept is a very important concept to move forward because not all parts of our country have the ability to invest

in renewables like wind. We certainly can in South Carolina and

North Carolina like you could if you were in the upper Midwest or

in west Texas. But being able to focus on energy efficiency is really

critical.

Mr. MATHESON. That just triggered one other question I did want

to ask. We haven’t had a lot of discussion today about thoughts on

setting mandates for renewable energy portfolios. There is a need

for flexibility in my mind because different States and different

geographical areas have different opportunities. If that issue is

going to be addressed in Federal legislation, how could we incorporate that flexibility into the mix?

Mr. ROGERS. I think one approach would simply be to recognize

that a lot of progress has been made. Twenty-two States have

passed it. Nine are considering it. We really need to kind of get to

the goal line where every State has a renewable portfolio standard,

and I think it is not unreasonable for Congress to contemplate setting a timeline for States to adopt, but leave it to the States to

adopt what makes the most sense in that State.

Mr. MATHESON. All right.

Mr. SOKOL. Congressman, and two comments there. One would

be also allowing States that maybe don’t access to renewable energy as plentifully as others to, if you will, buy down their requirement by energy efficiency or even new nuclear. And you raise a

very important point that I would strongly urge is as you formulate

legislation, the National Association of Regulatory Utility Commissioners needs to be an important player in your thoughts because

what you legislate, they have to implement. And I think while you

shouldn’t necessarily, in all cases, direct them, their input as to

how some of these things are done so that they can, in fact, implement policy that works, I think can be enormously helpful.

Mr. MATHESON. I think that is a good suggestion.

Mr. STERBA. Mr. Chairman, if I could.

Mr. MATHESON. Sure.

Mr. STERBA. One other quick thing that is, I think, very essential

is we have to think about renewables as a market, and the worst

thing that happens is when we have States that say well, it is only

renewable if it is located in my State because we disadvantage the

most economic resources as opposed to helping ensure that they

can move on the basis of where the lowest costs are.

Mr. MATHESON. That is helpful. Mr. Sterba, in your comments,

you mentioned that in the short term, we ought to go after some

of the low-hanging fruit as you described with efficiency being one

of the obvious ones that is in front of us. What is the Federal role

for trying to help pursue that? Do you have suggestions on what

we ought to be doing from the Federal perspective to help make

that happen?

Mr. STERBA. I think there is a couple of things, Mr. Chairman.

The first is we had the conversation about new source review.

Mr. MATHESON. Right.
55

Mr. STERBA. And there are things that can be done to improve

the efficiency of existing facilities that need to be facilitated. So

that is one. The second one is on the end-use energy efficiency, one

is we need to really take a hard look and see if we can reinvigorate

the standards setting process for efficiency standards for appliances. We have just gone through it with transformers, and I think

the industry stood up tall and said we want to drive efficiency in

transformers to their highest levels. And then the third one is the

encouragement of States to change the regulatory business model

such that utilities who are looked at as the energy experts can be

effective in helping move energy efficiency into the home and into

the business.

Mr. MATHESON. OK, thanks. I have used up all of my time. I

would like to recognize Mr. Buyer for 8 minutes.

Mr. BUYER. I will switch with Mr. Shadegg if that is OK with

the Chair.

Mr. MATHESON. The Chair will recognize Mr. Shadegg for 5 minutes.

Mr. SHADEGG. I am going to begin by yielding to Mr. Shimkus.

Mr. SHIMKUS. Thank you. Just for clarification, there was a debate on coal-to-liquid technologies and plug-in hybrid. Coal-to-liquid is only a technology—you guys are in the electricity generation—for diesel fuel and aviation fuel. So it really has no bearing

on gasoline. So that the debate about plug-ins for the vehicles is

not—that is why DOD is very excited about this application. I

know my chairman would agree with that.

Mr. SHADEGG. Thank you very much, Mr. Chairman, for yielding.

I want to compliment this panel. I think it has been a superb

panel. There is obviously an immense amount of thought that has

been given to this topic. I would also like to thank Mr. Buyer for

yielding.

I want to urge the panel, in addition to complementing them, to

think through thoughtfully the major thrust of Mr. Shimkus’s

points, that is that this town overpromises and underdelivers, his

discussion of the problems with Yucca. And I am going to illustrate

some of those other problems that also the comments of the ranking member of the full committee, Mr. Barton, in terms of how difficult this is.

It is easy to talk about solutions and create the impression that

we are going to fix this thing very quickly, but there are no answers that fit for tomorrow. New source review, I appreciate the

comments of Mr. Shimkus on new source review. I want to crystallize this. I would like each of you to raise your hand if you agree

that the current new source review law is keeping the industry

from achieving efficiencies which would, in fact, reduce greenhouse

gases. Is that correct? Everybody agrees with that.

Second, in both the 2003 bill and the 2005 bill, I inserted language which would have expedited the process for transmission

siting. Everybody viewed that as evil. It didn’t pass at all in the

2003 bill. It was softened dramatically in the 2005 bill. By softened, I meant actually toughened. We made the regulatory process

worse rather than easier as I had tried in the 2005 bill. Let me ask

the same question. Does everybody in this panel agree that if we
56

could expedite transmission siting, we would enhance our ability to

use alternative fuels? Yes, everybody agrees with that.

Because Mr. Markey’s questions go to a point I want to make.

I take it everybody on this panel believes that the reason to allocate any credits, if we go to cap-and-trade—and I will tell you I

have grave reservations about cap-and-trade. The reason to allocate

them to current producers is because they are the ones having the

burden, and because the goal isn’t to create some third market out

here that people can profiteer off of. The goal is to put the money

into cleaning up the industry and reducing emissions. Does everybody agree with that?

Mr. MORRIS. Yes, in order to make a difference, not to make a

profit.

Mr. SHADEGG. And everybody raised their hand. Everybody

agreed. I want to make a point about renewable fuels. I believe 5

years ago and maybe longer than that, 8 years ago, in this committee, I brought in the hydrologic chart. I brought it in from, I think,

a third or a fourth-grade text to show the committee that in point

of face, the first renewable is hydro. And it showed water

evaporating out of the ocean into the clouds, coming over the land

mass, falling on the ground, and then going downhill. I did that because we were debating a bill, which had encouraging renewables

in it and hydrology or hydrological power was not present at all.

Do any of you know—and it seems to me it is the ultimate, certainly was the original, renewable.

There was some testimony here earlier that new hydro is in some

of the States’ renewable portfolios. Nobody here claims that it is in

all of the States’ renewables, do they? Let me ask how many of

your companies are doing research on enhanced efficiency for hydrologic? That is it is my understanding that with today’s technology, you can, instead of building a dam and putting a turbine

on it, which creates a lake and causes all kinds of environmental

problems, you can actually put a turbine in an in-stream flow. And

that is have it produce electricity just by the movement of the

water downhill without disturbing the environment by creating a

dam. Are any of you looking into some of that technology? Mr.

Sokol, you are? Could you explain briefly?

Mr. SOKOL. Well, we have actually built one just as you said, and

we have a number of low-head hydros that could possibly be replaced with a similar type of technology. It works in some scenarios

well. It is basically a run of the river structure so it can work in

some areas well. It is not applicable for others.

Mr. SHADEGG. Right, I would encourage you all to take a look at

that. We talked a little bit about nuclear, and in the time left, I

want to talk about that. Do each of you believe—and if you do,

please raise your hand—that any plan to control carbon dioxide or

to control greenhouse gases must include legislation that removes

the current regulatory obstacles for nuclear power? Does everybody

agree with that? Will you help push for that? The chairman of the

committee asked if you would help push for legislation. Will you

help push for that as well?

Mr. SOKOL. Yes, sir.

Mr. SHADEGG. Let me ask you just to then each of you answer

this question as my final question. Do you believe the administra-
57

tion’s current Yucca Mountain legislative proposal goes far enough

to remove those obstacles against new nuclear, or do you believe

Congress needs to go beyond what is in the administration’s proposal? Mr. Sterba?

Mr. STERBA. I don’t believe it goes far enough. I think we need

to both recognize the interim situation that we have got where we

will not be able to get Yucca Mountain up, and we need to resolve

the long term. So we have got to do both.

Mr. SHADEGG. To the extent that it goes beyond that, will you

submit information to my office suggesting what else needs to be

done?

Mr. STERBA. To the best extent of our ability, yes.

Mr. SHADEGG. Thanks.

Mr. BOUCHER [presiding]. Thank you, Mr. Shadegg.

Mr. SHADEGG. I think I asked each of them quickly.

Mr. BOUCHER. Very quickly.

Mr. ROGERS. I agree with Jeff, and I will submit the information

to you.

Mr. SHADEGG. Thank you.

Mr. SOKOL. I think it needs to go further.

Mr. MORRIS. Same.

Mr. REASOR. Same here.

Mr. LEE. Same here, and we will submit some comments.

Mr. SHADEGG. Thank you all very much, and thank you, Mr.

Chairman.

Mr. BOUCHER. Thank you very much, Mr. Shadegg. The gentleman from Indiana, Mr. Buyer, is recognized for 8 minutes.

Mr. BUYER. Thank you. Earlier there was a comment, and I

think it came from one of the members of the subcommittee that

utilities or companies are responsible for 40 percent of the greenhouse gases, and that number is bantering about. So I just want

to hear from all of you whether or not——

Mr. MORRIS. Thirty-two.

Mr. BUYER. Thank you. And where do you get your number?

Mr. MORRIS. From the generation statistics that are kept by the

Federal Government.

Mr. STERBA. And the number I have seen is 37, and I don’t know

if it is different years of measure or what.

Mr. BUYER. OK, Mr. Rogers.

Mr. ROGERS. Sir, I don’t see it as——

Mr. BUYER. You have a number too?

Mr. ROGERS. One-third, 33.

Mr. SOKOL. I think the bulk of the numbers, if you plot them,

run around 32 to 33 percent.

Mr. BUYER. OK, that is interesting. I am glad we clarified that.

Mr. MORRIS. We clarified that 40 isn’t right.

Mr. STERBA. Which year do you want?

Mr. BUYER. Well, you know what? Eight percent is a big number

though when you think about that. I think there is a reality that

is in front of us, and that is a desire to rebalance our portfolio with

regard to our sources of energy. And I think that is given. That is

on the table.

I also recognize that what happens here in Washington has a tremendous impact upon the marketplace because how it reacts to
58

whatever policies we put in place coupled with the State regulatory

regimes. So, Mr. Rogers, you had put up this map of the United

States earlier, and as I looked at it, I mean I looked at that saying

well, it tells a lot of history. That’s the way I look at this map, Mr.

Rogers, and say this is a country that got away from nuclear power

and didn’t use natural gas and build the infrastructure perhaps

like it should have.

But at the same time, we had regulatory policies, that doesn’t

permit access to that natural gas. So you can’t drill off the West,

can’t drill off the East, you can’t drill here, you can’t drill on BLM

land. But I tell you what. We will go ahead and we will drill an

Alaskan pipeline and bring it down. So here in Washington in the

environmental policies, we end up here in this town making this

a mess. And you are then trying to provide power to a country.

Now, all of a sudden, these same individuals, OK, who sort of let

that go in place—the reason I say those same individuals, I came

here in 1992 in the minority. Then when I came to the majority,

those same forces here in this town that are an extreme environmental policy still prevented a Republican controlled Congress to

even make changes in the rebalancing of our portfolio.

Those forces are alive, well, and excited. So excited, we get to listen to an Academy award winner tomorrow, Al Gore. I just can’t

wait to hear from his sound public policies. So what we have now

to do is we are going to rebalance it, what, by using a regulatory

regime? I don’t know. I am frightened. I just want you to know I

am a little frightened for you. Mr. Rogers?

Mr. ROGERS. I go back to what job one is for us. Our job is to

keep the lights on. Our job is, when you throw the switch, electricity is there. That is what our mission is. Now, the problem in

the past is we sometimes have gotten confused because we made

environmental policy, not recognizing the impact on the energy policy and vice versa.

It is very important that when we make policy in the energy area

or the environmental area we know of how those work together.

And I think that is really critical to what you all are doing now

with these hearings is seeing the interplay between energy policy

and environmental policy.

My other point about that map is that map is not only about history in terms of how we got here. But also it is a little bit about

the future because if you look at those States and who has relied

on coal, it is going to be the same States that are going to build

the coal plants for the future because that is where the coal is.

That is where it is abundant and available and easy to get to your

plants. Like Indiana. I mean of all the States on there, Indiana has

got the greatest dependency. Only two other States have a greater

dependency on coal.

So I think it is very important we get this right. We get the capand-trade right. We understand the interplay between energy and

environmental policy, and the most important point, Congressman,

I would leave with you is that we in this country, given the growth

and demand for electricity at 40 percent by 2030, we cannot afford

to take anything out of the equation. We cannot take nuclear out.

We can’t take gas out, renewables or energy efficiency. We need

them all, and we need a lot of all of them in order to do this.
59

Mr. BUYER. Yes, but, Mr. Rogers, we can’t say well, we want this

fuel switching to occur. At the same time, we are not going to permit drilling.

Mr. ROGERS. I totally agree with that. In the 1990s, we had a

policy in this country to build gas, and it was built in our environmental laws. It was built in a lot of different ways, and it was incentive to build gas. At the same time, we weren’t allowing for the

exploration in drilling to have the supply of gas. And that is why

today we are sitting here saying how many LNG terminals can we

build to meet the demand, and the fastest growing demand for gas

is in power generation.

And unless we come up with a way to incent the building of coal

plants and nuclear plants, we will build more gas, and we will find

that our grid is dependent on foreign sources, not local sources.

And that raises an energy security question that is pretty dramatic

for this country in light of our dependence on oil and where that

is taking us today.

Mr. MORRIS. I would argue we don’t necessarily need to have incentives to build new coal plants. We just to have the opportunity

to build them with regulation and legislation that provides for trying to make certain they are done in the cleanest potential way

that we can. If we have accomplished anything today, we have

heard many compliments from you all to us. I would like to compliment you back because what I believe my colleagues have been

able to help establish is this is a very true technological challenge

that has an acceptable timeline on it if we all begin to work on it.

Mr. ROGERS. More importantly, these are goals that we all support. There isn’t a person on this side of the table who doesn’t support a cleaner environment and better utilization of coal, and I am

certain of that not only at this table but my colleagues in the industry, whether we are municipals, co-ops, or investor-owned utilities.

But it is going to cost more, and we touched on that issue. Congressman Burgess from Texas brought that up. It is very important

we understand that. We are all willing to take those steps.

Mr. BUYER. All right, I have a limited amount of time. Who at

the table, whether you can discuss right now or please let me

know, are preparing to bring online or have in the plans increasing

your nuclear capability?

Mr. ROGERS. We are.

Mr. BUYER. We will go right down the line.

Mr. STERBA. Longer-term plans, yes.

Mr. BUYER. Define longer term.

Mr. STERBA. Probably in the 18- to 20-year window.

Mr. BUYER. OK.

Mr. ROGERS. In Cherokee County, South Carolina, we are planning to build a nuclear plant to bring online in 2017, 2018.

Mr. SOKOL. We would like to. We don’t know how to today.

Mr. MORRIS. No plans to build new nuclear at this time.

Mr. REASOR. We are working with a current owner of a nuclear

facility, which we are part owner, to increase and add another unit

to that facility, hopefully to come online by 2014 or 2015.

Mr. LEE. We own existing generation, including nuclear on the

Gulf Coast, and we are evaluating and assessing it today to add to
60

it approximately 2,500 megawatts if it makes sense to do so by

2020.

Mr. BUYER. Keeping in the spirit of Chairman Boucher’s opening

statements, if you have recommendations to us on how to better

incentivize the rebalancing of our portfolio resources and to assist

you on the nuclear question, let us know please.

Mr. ROGERS. Congressman, can I qualify—I mean Mike picked

up on it, but I think it might have missed the point. When I think

of incentives for coal, I don’t think of building a coal plant today,

unless I am thinking about carbon capture and storage, given the

future that I see in front of us. So when I talk about incentives,

it is about carbon capture and storage. And it is not only incentives

to get it done, but it is investment to allow for more research and

development.

Mr. BUYER. Thank you, Mr. Boucher.

Mr. BOUCHER. Thank you very much, Mr. Buyer. The gentleman

from Oklahoma, Mr. Sullivan, is recognized for 8 minutes.

Mr. SULLIVAN. Thank you, Mr. Chairman, and I appreciate all of

you being here today. One good thing about this job is that we get

to have people like you come in front of us, and it is like the best

university in the world to be at, and I appreciate you being here.

This is a very exciting time for you to be in this business, isn’t

it?

Mr. MORRIS. It truly is.

Mr. SULLIVAN. Very complex issues out there, and that is why I

was glad this—I guess recently Nancy Pelosi wanted to have a bill

to address all these issues by June, and I thought that was pretty

ambitious. And I think she has backed off of that a little bit, thank

goodness, because I think it is going to require a lot more time and

investigation and research to look at all the portfolio of all these

different energy needs as we go forward.

Mr. Morris, your company supplies power to the majority of my

district.

Mr. MORRIS. Yes, sir.

Mr. SULLIVAN. And I am from Tulsa, Oklahoma and northeastern

Oklahoma, and I think it is really neat what you are doing.

Mr. MORRIS. Thank you.

Mr. SULLIVAN. You have got a great sequestration program going

on or just starting down in Nelagony, and I just wanted to ask a

few questions about that like how are you going to get that into

the old oil wells that have been played out, the enhanced oil recovery? Is it going to be piped in there? Did you have to build one,

or are you using existing pipeline?

Mr. MORRIS. The process, as you well know, in that part of the

State, tremendous amount of existing underground pipeline network. We will simply build the pipe that is needed to come from

the capture equipment to the pipeline grid. So it really is a costeffective place. Now, remember northeastern Oklahoma, that area

is blessed with an existing facility, and we think that we will come

with a very important partner inside the State of Oklahoma who

already has the wells, already has the need, and surely has the intent to join us in that undertaking. We think that is a very important point. To the points made by my colleagues, however, if you

are distant, that is an added cost to the whole notion of using CO2
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for an EOR process. But it is well-proven technology that it is a

great EOR agent.

Mr. SULLIVAN. And let us say an old well that has been played

out, is there some type of percentage of the oil that can be recovered in those enhanced oil recoveries with CO2 because of the

makeup of the molecular structure of it or——

Mr. MORRIS. It would be better to ask a petroleum engineer rather than a biologist lawyer that, but fields that have been played out

to the 60 percent range, now they think they can play them out to

the 80 percent range. If you look at Chevron’s statistics on the Bakersfield in California, which has been producing since the 1940s,

I think the numbers are they went from 6,500 barrels a day to over

80,000 barrels a day with enhanced oil recovery technology so——

Mr. SULLIVAN. Even after it has been water flooded?

Mr. MORRIS. After it has been there forever.

I am not exactly sure what they do, and those statistics are

available to you.

Mr. SULLIVAN. And is the reason you are doing this in Oklahoma

is because of our pipeline infrastructure that we have in the State?

Mr. MORRIS. Exactly.

Mr. SULLIVAN. And because of the old wells that are abundant

in Oklahoma?

Mr. MORRIS. Exactly, as well as what we think is a very important asset to public service of Oklahoma and Oklahomans in general, and that is our northeastern station, which is going to be a

large-scale application of capture and EOR technology use. Very

important for not only our company, but I would say for everybody

at this side of the table.

Mr. SULLIVAN. And has your company looked at other ways to—

you mentioned earlier, someone did on the panel, about getting the

CO2, and I believe it might be you, Mr. Sterba. That you said that

when you get this CO2, there needs to be a lot more research and

development on it, and you said—I believe it was you—several million metric tons of it need to be stored in different formations

around the country for a period of time to see, I guess, which ones

will hold it the best? I heard that saline is pretty good, but others,

there is a potential of migration of the CO2. Could you explain

that?

Mr. STERBA. Well, a single 500-megawatt unit will generate

about a little over 4 million tons of CO2 per year. So that is the

magnitude that you are talking about with a single unit. And because geology is different in different parts of the country, we need

to have a couple, three, four, five minimum experiments with large

scale, at least a million tons or more per year, of injection to make

sure that we understand that what the geologists say is going to

happen is actually going to happen.

And I also agree with Mr. Morris’s comment earlier, but we also

have to look for, and this is where real research can come into play,

how can we effectively utilize CO2? Is there a use for this material?

I mean I come from a State, New Mexico, where we pump CO2 out

of the ground and send it down to the Permian Basin for enhanced

oil recovery. Seems to me there are other things that we can since

we are already pulling it out of the ground today.

Mr. MORRIS. Probably be cheaper than a pipeline from Alaska.
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Mr. SULLIVAN. Well, and also it was mentioned that if we captured 60 percent of the CO2, we would have to—I guess someone

said that we need about the equivalent of what is used for natural

gas pipelines in this country. And I guess CO2, just like any other

kind of gas or jet fuel or oil, crude oil, can use the same pipeline

infrastructure, couldn’t they? We wouldn’t really have to build out

too much.

Mr. STERBA. Well, that is true except that the natural gas pipeline system is pretty well stressed today.

Mr. SULLIVAN. OK.

Mr. STERBA. In many instances, there might be some opportunity.

Mr. SULLIVAN. So what you are saying is that would have to be

duplicated to actually do this on a widespread basis?

Mr. SOKOL. But make sure, Congressman, that you can’t commingle CO2 and natural gas in the pipeline grid and then put it

into your home, my home, or anyone else’s. You would have to have

the technology of batching a pipeline, which is more common on the

liquid side where you might have pentane going down the pipe, and

behind that, you might have a kerosene going down the pipe. There

are batching technologies that are there, but not commingling of

the gases.

Mr. SULLIVAN. OK. Well, thank you very much. I yield back. Go

ahead, sir.

Mr. SOKOL. Just one thing, Congressman, if I could. You talked

about that this is going to take time.

Mr. SULLIVAN. Yes.

Mr. SOKOL. And there is no question it is, though if there one

thing I could urge the committee though is don’t take time on the

funding side. The slower we are to really put the funding behind

technology development for R&D, the farther off the solutions are.

So that is one that shouldn’t wait.

Mr. SULLIVAN. And I think someone else had an intriguing idea

of merging EPA and DOE? Who said that?

Mr. SOKOL. Yes, I am definitely in favor of that. At least they

have to look at these problems together instead of them constantly

being dealt with as though we live on a different planet.

Mr. SULLIVAN. That is interesting. I like that. Yes, sir.

Mr. REASOR. Congressman, one of our electric cooperatives base,

an electric cooperative in North Dakota has put in one of these

pipelines and is actually transporting the CO2. It was about a 200-

mile long pipeline. It cost over $250 million to put that in place.

So it isn’t an inexpensive part of the process.

Mr. MORRIS. But that project—I happened to do the environmental work on that one. American Natural Resources built that

plant. We thought it was great. We were churning lignite coal into

natural gas, and it worked perfectly in an engineering gas. It made

$8 into a $2 market. That became a bit troubling, but now that

pipe actually paid for itself because the enhanced oil recovery the

Canadians get out of that in their tar sands application has made

that a cost break-even undertaking. But it was expensive.

Mr. SULLIVAN. Also, Mr. Morris, I’d love to come out and see that

when you——
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Mr. MORRIS. We would love to have you come out there, and I

hope you know, as everyone else knows, that that is the great home

of Will Rogers one of the great Oklahomans.

Mr. SULLIVAN. That is good. Thank you very much. I appreciate

it.

Mr. BOUCHER. Thank you very much, Mr. Sullivan. I actually

have just one basic question. It has two parts, and it is for the purpose of clarifying some answers that were previously provided by

witnesses, not for the purpose of opening any new subject matter.

And in view of the fact that our witnesses have been here now for

more than 3 hours and have very patiently answered questions

from across the committee, Mr. Barton and I have agreed that I

will propound questions for 2 minutes, and then he will have an

opportunity to propound questions for 2 minutes.

And I would like to ask unanimous consent that we proceed in

that order.

Mr. BARTON. I thought it was 20 minutes for me and 2 minutes

for you. I will go 2 and 2.

Mr. BOUCHER. So without objection, we will proceed in that fashion, and I will recognize myself for 2 minutes. We have not, as I

indicated previously, made any decisions about the mode that we

would use for establishing a mandatory program. We have decided

to draft a mandatory program and process that through the Congress, but we are leaving to a later date decisions about exactly

what the contents of that mandatory program would be. Obviously

cap-and-trade is one of the candidates that we are considering.

We want to keep all of our options open, and it was my general

understanding that this was also the approach taken by EEI at the

time that EEI passed its resolution. And so, Mr. Rogers, my first

question is to you just for clarification purposes. When Mr. Barton

asked you about your preference for an approach, I think you indicated that cap-and-trade was in fact Duke Energy’s preference for

an approach.

Mr. ROGERS. Yes, sir.

Mr. BOUCHER. But you then said that is not EEI’s position, and

I wanted to clarify that what you really meant by that is that EEI

has not endorsed cap-and-trade at this point but also has not announced opposition to that, has not taken that option off the table.

Is that correct?

Mr. ROGERS. That is correct. Yes, sir.

Mr. BOUCHER. Thank you very much. Then Mr. Inslee propounded the question about who on the panel favors cap-and-trade,

and at that point, Mr. Sterba raised his hand, and Mr. Rogers

raised his hand, and no one else raised their hands. Mr. Morris

said that the reason he had not raised his was because there was

no specificity with regard to the details that would surround the

cap-and-trade program. So my question to the panel is this. Can we

assume, for purposes of our record today, that while Mr. Rogers

and Mr. Sterba have endorsed cap-and-trade as the preferred approach, the other witnesses are not taking a position at the present

time and simply waiting to see what the details are, but would consider cap-and-trade in the event that the details are appropriate.

Would that be a fair way to characterize what the other witnesses’

position is, or would you care to make some other statement?
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Mr. REASOR. Mr. Chairman, I would just say that I think your

analysis is fairly correct. We are not necessarily supporting capand-trade. We are not necessarily opposed to it.

Mr. BOUCHER. Thank you Mr. Reasor. That was a perfect statement.

Mr. REASOR. We see that as one part of the entire package. So

you would have to see what the entire package encompassed before

you made a decision on any one part.

Mr. BOUCHER. That’s right. Mr. Sokol.

Mr. SOKOL. I can’t eliminate nor include something that the details make all the difference, and so we would view it as an option

out there if the details made sense in a broader package.

Mr. BOUCHER. Thank you. Mr. Morris?

Mr. MORRIS. Our position has been relatively clear, that that approach is acceptable to us so long as it is a reasoned and well

thought through undertaking in that regard. And I don’t think we

have to wait until we get to a point where technology has proven

to a certainly that we can take those steps. There are many things

that we can do along the way, but like my colleague David Sokol,

without the details around the process, it would be very hard for

us to vote for it. And I am sure you wouldn’t take anything out of

this committee like that.

Mr. BOUCHER. Thank you, Mr. Morris. That defines my view as

well. Mr. Lee.

Mr. LEE. The only other caveat I would say, Mr. Chairman, is

that we have said we didn’t think cap-and-trade was appropriate,

but if this committee in its infinite wisdom decides to say that it

is, we certainly want to be a part of that process to evaluate that

with you and work with you to determine what it is.

Mr. BOUCHER. Thank you very much, Mr. Lee. Thank you gentleman. Well, I have consumed 31⁄2 minutes, and so Mr. Barton is

recognized for 31⁄2 minutes.

Mr. BARTON. Well, I will try to give you some time back. You

didn’t ask my opinion of cap-and-trade, Mr. Chairman, but put me

down as opposed to mandatory cap-and-trade. And I actually have

a vote on the committee, so that might be worth knowing.

To try to show some positivism, are all the members of this panel

supportive of the FutureGen project to find a way to develop the

technology for mandatory carbon capture, sequestration or CO2?

Are you all supportive of that?

Mr. MORRIS. Well, not all of us are members of that. We might

be supporting. Some of us are financial——

Mr. BARTON. How many are putting your money where your

mouth is and have actually signed up in the FutureGen Alliance?

We will let the record show that Mr. Morris. The rest are not, but

you are supportive of the project?

Mr. SOKOL. Yes, Mike has put his money where several of our

mouths are.

Mr. LEE. And we also support the project coming to Texas.

Mr. SOKOL. We are putting money into something that can be

brought online sooner, and that is IGCC in Edwardsport, Indiana.

Mr. BARTON. OK, I want to also put on the record that we have

in current law in the Energy Policy Act a program that authorizes,

I believe, $3 billion where the industry goes out in conjunction with
65

the Department of Energy to retrofit existing coal-fired power

plants with the newest available technology. And that has been authorized by the Act. It hasn’t been funded by the Bush administration, but that would be another avenue that is currently in law

that can help in this area.

Mr. SOKOL. And we have every intention to take advantage of

that opportunity with the projects that I announced earlier, Congressman.

Mr. BARTON. OK, and I want to clarify an answer that Mr. Sokol

gave while I was out of the room, but I was watching on my television set in my office. I believe that you told one of the other members of the committee that if we went to a mandatory cap-andtrade system for carbon immediately, it would double the retail

price of electricity. Did I hear you correctly?

Mr. SOKOL. Not exactly. If $30 per ton was set as the cost of CO2

emissions, it would double the cost of generation in our——

Mr. BARTON. Double the cost of generation?

Mr. SOKOL. Right, which would—we are about 50 percent generation, 50 percent transmission/distribution is a rough breakdown of

our cost. So it would have that 50 percent increase then in the delivered cost of electricity.

Mr. BARTON. OK. But there is not anybody on the panel that disputes that if we went to something fairly quickly with existing

technology, the rates, the retail rate to the average consumer

would go up considerably. Is that a fair statement?

Mr. SOKOL. Yes, sir.

Mr. BARTON. Everybody agrees with that? Well, I thank you, Mr.

Chairman. I just have a question for Mr. Lee. Are the lights going

to be on in the Alamodome, heated or cooled as the case may be,

when the Fighting Texas Aggies beat the fool out of the Memphis

whatever they are this Thursday down in the Alamodome?

Mr. LEE. The answer is yes, Congressman.

Mr. BARTON. We will worry about the Buckeyes if we can get

past Memphis.

Mr. LEE. But the lights will be on, and the Alamodome will be

very cool.

Mr. BARTON. Thank you, and I yield back, Mr. Chairman. Thank

you.

Mr. BOUCHER. Thank you very much, Mr. Barton, and let me say

thank you once again to these witnesses. Your testimony today has

been really excellent. We have heard comments from the members

of this committee on both sides about how much they appreciate

this hearing and appreciate what you have done to enlighten us regarding the views of the electric utility industry. And we look forward to working closely with you as we take further steps in this

process. This hearing is adjourned.

[Whereupon, at 1:35 p.m., the subcommittee was adjourned.]

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