Global emissions of greenhouse gases, such as COproduction of some crops and livestock productivity, and a decrease in the availability of fresh water in certain parts of the world. electricity, often referred to as the energy penalty or parasitic power, is required for capture and compression. Oxyfuel combustion: Oxyfuel combustion, which is in its developmental stages, is a technology that is being developed for using coal to generate electricity that could reduce CO emissions. According to DOE, oxyfuel combustion could be applied to existing pulverized coal-fired plants. Oxyfuel combustion burns coal using pure oxygen diluted with recycled CO and water vapor, with some excess oxygen, facilitating the capture of the CO is not necessary under this approach, the CO. However, depending on the level of excess oxygen and other trace components, some additional gas cleanup may be required to make the CO would be transported, likely via pipeline, to a storage site and injected at depths of over 800 meters (or about 2,600 feet) into underground geologic formations (such as depleted oil reservoirs and saline formations), thought to be conducive for isolating the CO leakage and the ownership of CO must be monitored to ensure it does not escape into the environment. On February 27, 2003, the President announced FutureGen as a cost- shared project between DOE and industry to create the world’s first coal- fired, zero emissions electricity and hydrogen production power plant. The production of hydrogen was to support the President’s Hydrogen Fuel Initiative to create a hydrogen economy for transportation. The original FutureGen plant was planned to operate at a commercial scale as a 275 megawatt IGCC facility that would capture and store at least 1 million metric tons of CO Pursuant to the agreement, the Alliance was to design, construct, and operate the FutureGen plant, and DOE was to provide project oversight, conduct the environmental analyses required by NEPA, and coordinate the participation of foreign governments. The project was to run through November 2017 and operate as the cleanest fossil fuel-fired power plant in the world. After completion of the formal project, the FutureGen plant was expected to continue operating for the typical lifespan of a power plant—usually 30 to 50 years—generating electricity and providing a platform for energy research. On January 30, 2008, DOE announced that it had decided to take the FutureGen program in a different direction. DOE stated that it would demonstrate CCS at multiple commercial-scale power plants, including retaining the integration of CCS and IGCC. DOE referred to this new approach as the restructured FutureGen program. In June 2008, in a funding announcement for the restructured program, DOE stated that it expected it would have about $290 million available through fiscal year 2009 for its share of funding for the program. (See app. II for an overview of DOE budget authority and obligations for FutureGen.) The overall goals of the original and restructured FutureGen programs are largely similar in that both programs seek to produce electricity from coal with near-zero emissions by using CCS, and to make that process economically viable for the electric power industry. However, the programs outline different approaches for achieving their goals, which could affect the commercial advancement of CCS differently in several ways. Both the original and restructured programs aim to establish the feasibility and economic viability of producing electricity from coal with near-zero emissions by employing CCS. The programs’ goals for storing CO and limiting other emissions, such as mercury and sulfur, are also similar; except that the requirement for the amount of carbon to be captured has been reduced from 90 percent in the original program to 81 percent in the restructured program (see table 1). Knowledgeable stakeholders told us that this decrease in carbon capture is of modest significance and that a goal of 81 percent is still very ambitious and costly. DOE received similar feedback in responses to its request for information from the public about its plan to restructure FutureGen. Eighteen of the 49 respondents indicated that the 90 percent goal would be too restrictive for industry participants because of the additional energy required to capture and compress CO However, the restructured program, a DOE commercial demonstration project, seeks to accelerate the commercial deployment of CCS (that is, generating and selling electricity to earn profits) by implementing CCS at one or more commercial facilities by 2015— approximately five years earlier than the original program’s commercial operations could begin. The original program, a DOE research and development project, would begin generating electricity in 2012, a few years earlier than the restructured FutureGen; but, it could not begin operating as a profit-seeking commercial facility until after the nonprofit Alliance sells it, which is currently anticipated to occur in 2020. Knowledgeable stakeholders told us that the restructured program’s time line for the commercial deployment of its project(s) might be ambitious because legal and environmental issues related to siting and permitting, in particular for CCS, could slow implementation. They also stated that the required NEPA analyses, which must be completed prior to beginning construction, could take up to 3 years. In contrast, DOE had completed its NEPA analyses for the original FutureGen. Moreover, the governments of the two states—Texas and Illinois—where the four finalist sites for the original FutureGen were located, had agreed to assume liability for the injected CO. DOE officials told us that, unlike the original program, a primary goal of the restructured FutureGen was to facilitate the siting and permitting process for CCS by implementing multiple projects in different locations. Because of the different approaches for achieving their goals, the original and restructured FutureGen programs could have different impacts on the commercial advancement of CCS (see table 2). The type of information gained from the programs may vary. First, the original program would have developed knowledge about CCS at IGCC plants, while the restructured program could allow for opportunities to learn about CCS at both IGCC and other types of coal plants. Knowledgeable stakeholders whom we contacted stated that DOE could benefit by taking advantage of the opportunity under the restructured FutureGen program to learn about CCS at multiple types of plants. They explained that opportunities to learn from multiple plant sites in different regions with various technologies would provide a wide range of knowledge about the implementation of CCS in various contexts. Similarly, 30 of 49 respondents to DOE’s request for information about the restructured program indicated that it would be beneficial if the restructured program were to include both IGCC and other types of coal plants. In addition to other organizations, such as the National Academy of Sciences, we have noted that the benefits of learning about CCS technologies are also applicable to existing pulverized coal-fired plants, since they account for an overwhelming share (about 99 percent) of the world’s coal-fired power plants. However, one of the intended benefits of the restructured program—providing opportunities to learn from multiple plants about various technologies—may not be fully realized since DOE received only a small number of applications. If an application for IGCC has not been received or is not selected, the loss of an IGCC plant with integrated CCS capability is significant because, according to the draft strategic planning document for the restructured program, demonstrating this technology is a key solution for reducing atmospheric CO emissions from coal-fired power plants. Comments submitted to DOE and knowledgeable stakeholders we interviewed indicated that the carbon capture goal for the restructured program was too restrictive for commercial facilities. One stakeholder stated that the restructured program goals might be overly optimistic about what commercial projects are willing to do. As a result of receiving only a small number of applications, the restructured program is not as likely to develop as broad a base of knowledge as it could have if more applications were received. Second, it is unclear whether the original FutureGen program or the restructured program could have advanced the broader roll out of CCS more quickly across all of industry. According to DOE documents, the restructured program is intended to begin deploying CCS at one or more commercial facilities in 2015, approximately five years earlier than the original program’s commercial operations (that is, generating and selling electricity) could begin. The original program, a DOE research and development project, would have begun generating electricity in 2012, a few years earlier than the restructured FutureGen, but it could not have begun operating as a profit-seeking commercial facility until after the nonprofit Alliance sold it, which was anticipated to occur in 2020. Moreover, unlike the restructured program, the original FutureGen would have included a wide variety of industry partners (including foreign government partners, which are absent from the restructured program). In addition, more industry partners could have joined the Alliance and its 11 members over the course of the original program. As a result of its wider participation, the original FutureGen could potentially have advanced the broader roll out of CCS across all of industry and internationally, instead of at only a few commercial facilities, more quickly than the restructured program. DOE officials told us that the original program would likely improve the global advancement of CCS more quickly than the restructured program due to its various international partnerships. They stated that DOE is developing an approach to recoup the loss of international involvement that resulted from restructuring FutureGen. Third, the restructured program will not serve as a living laboratory host facility for technologies emerging from energy research and development programs aimed at the goal of near-zero emissions and for gaining broad industry acceptance for these technologies. The original FutureGen plant was to be designed with the ability to test various technologies that are scalable to full size, such as fuel cells, advanced gasification, and membrane air separation systems. Without the opportunity to test these emerging research and development technologies, the restructured FutureGen might result in a slower advancement of CCS than the original program may have yielded. According to the cooperative agreement between DOE and the Alliance, emerging technologies, such as fuel cells, could have been tested at the original program’s living laboratory host facility. In a September 2007 presentation to DOE’s Deputy Secretary, NETL noted the impact of removing the living laboratory, saying it would “significantly delay the availability of the technology for commercial deployment” and have a “significant programmatic impact.” DOE officials told us that they have not yet determined where these technologies will be tested. DOE manages a portfolio of clean coal programs that research and develop CCS technology or demonstrate its application. Focusing on commercial coal-fired power plants, the restructured FutureGen would integrate key components of CCS, such as CO at the storage location. However, the restructured FutureGen is similar in some ways to Round III of CCPI, but CCPI’s goals are more modest than those of the restructured FutureGen and, hence, may be more achievable for industry partners. The other CCS programs include the (1) Regional Carbon Sequestration Partnerships, (2) Innovations for Existing Plants Program, (3) Advanced Turbines Program, (4) Advanced Integrated Gasification Combined Cycle Program, and (5) Round III of the Title 17 Incentives for Innovative Technologies Loan Guarantee Program (Loan Guarantee Program). Four of these five CCS programs do not integrate all key components of CCS and concentrate on developing one or two related components of CCS, such as CO storage, or CO Round III of CCPI seeks to demonstrate, at a commercial scale, advanced coal-based technologies that capture and store carbon, or put CO emissions to beneficial reuse, such as to enhance oil recovery. The proposals for Round III of CCPI were due to DOE by January 15, 2009, and DOE expects to announce its selections in July 2009. , is added to the reservoir after secondary recovery in order to increase production. The purpose of EOR is to increase oil production, primarily through an increase in temperature, pressure, or an enhancement of the oil’s ability to flow through the reservoir. may be more realistic or attainable for commercial partners, more proposals may be submitted to CCPI than the restructured FutureGen. For example, two officials from electric utility companies said that, despite the potentially greater amount of funding available through the restructured FutureGen ($1.3 billion, subject to future appropriations) than CCPI ($440 million, subject to future appropriations), their companies would apply for CCPI over the restructured program because they could meet CCPI’s goals. from coal-fired power plants, including possibly capturing 500,000 metric tons of CO storage in deep oil-, gas-, coal-, and saline-bearing formations. Phase II, the Validation Phase (2005-2009), is implementing 25 small-scale geologic storage tests. Phase III, the Deployment Phase (2008-2017), is a continuation of the Phase II small-scale tests, but at a much larger scale. other sources, such as ethanol production plants. The injection of CO capture and compression technologies to assist existing coal-fired power plants. Through this program, DOE is providing $36 million in funding for 15 projects to develop new and cost-effective CO capture: membranes, solvents, sorbents, oxyfuel combustion, and chemical looping. The Advanced Turbines Program focuses on creating the technology base for turbines that will permit the design of IGCC plants with CCS that can operate at near-zero emissions, thereby facilitating CO capture. The program aims to develop advanced gasification technologies to enable CO separation, capture, and sequestration into near-zero atmospheric emissions configurations that can, ultimately, provide electricity with less than a 10 percent increase in cost. Finally, Round III of the Title 17 Incentives for Innovative Technologies Loan Guarantee Program will provide up to $8 billion in loan guarantees for energy projects that satisfy three criteria: avoid, reduce, or sequester air pollutants or greenhouse gases; employ new or significantly improved technologies, compared with commercial technologies in service at the time the guarantee is issued; and provide a reasonable prospect of repayment. Initial applications for Round III of the program were due to DOE in December 2008. We recently reported on DOE’s progress in (1) issuing final regulations to govern this program, (2) taking actions to help ensure that the program is managed effectively and to maintain accountability, and (3) determining whether there were inherent risks due to the nature and characteristics of this program that may affect DOE’s ability to make the program pay for itself and support a broad spectrum of innovative energy technologies. Table 3 summarizes the comparison of DOE programs supporting CCS. According to our recent work and best practices, a decision to terminate or significantly restructure an ongoing program should typically be informed by timely and sufficient information on the costs, benefits, and risks of such a decision. While DOE had reason to be concerned about the escalating costs of the original FutureGen, it made its decision to cancel that program and replace it with the restructured FutureGen based, in large part, on a comparison of cost estimates that were not comparable. That is, it compared one estimate that was in current dollars with one that was in constant dollars. In restructuring FutureGen, DOE did not sufficiently analyze the costs, benefits, and risks of canceling the original FutureGen and replacing it with a significantly restructured program. A comprehensive analysis could have helped DOE determine how the costs, benefits, and risks of the restructured FutureGen compared with those of the original FutureGen. Because it did not conduct such an analysis, DOE cannot be assured that the restructured program is the best option to accelerate the widespread commercial advancement of CCS more quickly than the original program. Other options, rather than dramatically restructuring the program, were possible that could have preserved some of the benefits of the original program, including ensuring the integration of IGCC and CCS at the FutureGen facility. For example, FE identified and analyzed 13 other options for incremental, cost-saving changes to the original program, such as reducing the COvary from location to location, and technology costs and designs, such as for turbines, vary depending on the specific manufacturer and vendor. The March 2007 renewed cooperative agreement listed approximately $1.8 billion as the current estimated cost of the project. However, senior DOE officials soon began to express concerns about escalating program costs, and they directed FE officials to develop recommendations for controlling costs. In September 2007, FE officials presented several recommendations for incremental changes to control costs to the Deputy Secretary of Energy; they also noted various measures already in place for controlling costs, such as monthly progress reports and a risk management program. Importantly, none of the recommendations indicated that DOE should cancel the original program and restructure FutureGen; moreover, FE officials told us that they did not prepare any analysis or recommendations for senior DOE officials that resembled what was to become the restructured program. According to DOE, following this presentation, senior DOE officials directed FE to negotiate with the Alliance new cost sharing arrangements under the cooperative agreement, which was scheduled for continuation in June 2008. The Alliance agreed to meet to renegotiate the terms of the cooperative agreement. Over the course of several meetings, the parties discussed various funding scenarios and exchanged proposed term sheets. Subsequently, however, the Alliance and DOE did not reach agreement. In December 2007, the Alliance sent a letter to DOE stating that it preferred to proceed under the existing cooperative agreement until FutureGen’s costs and risks could be assessed with input from the preliminary design report and cost estimate that were due by June 2008. Also in December 2007, the Secretary of Energy briefed senior presidential advisers that the estimated cost of FutureGen had nearly doubled—from $950 million to $1.8 billion—and that costs were expected to continue rising. In addition, according to the briefing documents, DOE planned to end its partnership with the Alliance and was developing a new strategy for FutureGen that would cap the government’s financial exposure. The briefing documents explained that DOE’s new approach for FutureGen would fund only the CCS-related technology associated with multiple commercial IGCC plants, rather than the entire construction of a single plant with CCS. Around this time, according to DOE officials, senior DOE officials directed FE to develop the restructured FutureGen program. In response, these officials told us, many high-level offices within DOE collaborated on developing a draft strategic planning document for the restructured program. According to these officials, the draft strategic planning document that they finalized in January 2008 was the first complete document about the restructured FutureGen. On January 30, 2008, DOE publicly announced that it was restructuring FutureGen to provide a ceiling on federal contributions and that the restructured program was a more cost-effective approach. On this same day, DOE notified the Alliance that it was restructuring FutureGen and would not continue its cooperative agreement with the Alliance. DOE informed the Alliance that it was restructuring FutureGen in response to serious concerns over substantial escalation in projected costs, including what the agency concluded would be the likely continued escalation of the costs. DOE officials also stated that they disapproved of the Alliance’s decision to announce the selection of a project site before DOE issued its NEPA Record of Decision. According to DOE, prior to the site selection announcement and without knowledge of the Alliance’s choice of site, DOE had asked the Alliance not to go forward with the announcement and further advised the Alliance against making an announcement until the Record of Decision had been issued. DOE officials also said that, in their negotiations on measures that could limit DOE’s financial exposure, they lost confidence in the ability of the Alliance to fund its share of the project cost. Although comparing cost estimates can provide valuable insight about the impact of escalating costs on a project, DOE based its decision to restructure FutureGen, in large part, on a comparison of cost estimates that were not actually comparable. That is, in 2004, DOE had estimated that the cost of the original FutureGen would be $950 million in constant 2004 dollars. In contrast, the Alliance’s 2007 estimate of about $1.8 billion was in current dollars, which reflected inflation over the course of the program from 2005 through 2017. In explaining his decision to restructure FutureGen to senior presidential advisers, the Secretary of Energy indicated that the projected program costs had “nearly doubled,” from $950 million to $1.8 billion. However, comparing constant dollars, which exclude inflation, with current dollars, which reflect inflation, is misleading. Our calculations show that the Alliance’s current dollar estimate of roughly $1.8 billion is equivalent to approximately $1.3 billion in constant 2005 dollars—an increase in total program costs of about $370 million, or about 39 percent—not a near doubling of costs. In addition, the cost estimates by DOE and the Alliance were prepared early in the project and, as a result, were based on conceptual designs for FutureGen, including power plant case studies and a blanket 10 percent increase incorporated into the Alliance’s estimate to allow for the first-of- a-kind nature of some of the plant’s components and integration issues. However, neither estimate considered costs for specific types of technology or a specific location. If DOE had waited approximately 6 months for the Alliance’s technology-specific and site-specific cost estimate, due by June 2008 as part of its preliminary design report, before deciding whether to restructure the program, it would have had the benefit of more current and complete information, including the latest information on escalating costs, when making decisions about how to move forward with FutureGen. In addition, regarding FutureGen’s total cost, the March 2007 cooperative agreement stated that DOE and the Alliance recognized that many uncertainties—such as plant design, site selection, and market conditions—still existed in developing a firm cost estimate. In May 2008, the Secretary of Energy testified before Congress that FutureGen was conceived as a $950 million venture and that its estimated cost had increased to roughly $1.8 billion; however, the Secretary’s prepared statement did not indicate that the first estimate was in constant dollars, while the second was in current dollars. The Secretary also testified that DOE believed its costs would continue to escalate. We requested that DOE provide us with the analysis that supported DOE’s anticipated escalation. In October 2008, DOE officials told us that the ongoing cost escalations were unprecedented and that they had looked internally across various indexes, including the Bureau of Labor Statistics, to get a sense of prospective escalation. However, they stated that they did not have any written or comprehensive analysis. They added that they did not prepare a position paper, study, or generate any analysis examining current or future escalation for the decision to restructure FutureGen. Moreover, economic forecasting organizations, such as DOE’s Energy Information Administration, have found that significant cost escalations, such as those for building power plants over the past several years, do not typically continue in the long run. DOE did not prepare a comprehensive analysis comparing the relative costs, benefits, and risks of the original and restructured FutureGen programs before making the decision to replace the original program with the restructured FutureGen. On two different occasions, DOE officials told us that the agency did not prepare such an analysis. These officials told us that the Secretary of Energy’s May 2008 congressional testimony included the agency’s official explanation for why it decided to restructure FutureGen. In September 2008, we asked DOE to provide us with additional information, including the agency’s official position on why it decided to restructure FutureGen, all the factors upon which DOE based the decision, the extent to which the decision was based on documented supporting analysis, and a copy of any such analysis. In January 2009, after we sent a draft of this report to DOE for review and comment, DOE responded to our request for additional information, stating that the detailed analysis supporting its decision to restructure FutureGen could be found in the draft strategic planning document for the restructured program and that this document discussed the factors considered by DOE in making the decision to restructure FutureGen. However, as previously discussed in our findings, the draft strategic planning document was not completed in time to inform the decision to restructure FutureGen. In addition, we do not consider the draft strategic planning document to be comprehensive because it did not assess: 1. whether costs for the original FutureGen would escalate substantially 2. the relative costs, benefits, and risks for all of the types of plants for which the restructured FutureGen was eligible to receive proposals, such as conventional pulverized-coal and oxyfuel combustion plants, but only contemplated proposals for IGCC plants; 3. the risk that industry respondents might not propose an IGCC plant for 4. the risk that industry respondents might not propose enough viable projects for the restructured FutureGen; 5. the costs, benefits, and risks of making incremental changes to the original FutureGen alongside the relative costs, benefits, and risks of the restructured FutureGen; and 6. any potential overlap between the restructured FutureGen and other DOE programs. A comprehensive analysis could have supported DOE’s decision making in several ways. First, it could have helped DOE assess the risk that industry respondents to DOE’s request for applications under the restructured FutureGen might not propose an IGCC plant. DOE received public comments indicating that such an outcome was possible because IGCC is not yet prevalent in the industry—only two commercial IGCC plants currently operate in the United States—and other technologies may provide better opportunities to meet the restructured program’s requirements, among other reasons. Applying CCS at existing, conventional pulverized coal-fired plants is important because those plants comprise almost all operating coal-fired plants in the United States and abroad. However, according to DOE, IGCC plants integrated with CCS are important for reducing CO emissions in the future. Both DOE’s press release announcing the restructured program and the updated draft strategic planning document, dated July 1, 2008, that DOE provided Congress indicated that the restructured program would include IGCC. The funding announcement for the restructured FutureGen highlighted the important contribution that an IGCC plant integrated with CCS would make toward the nation’s energy needs, such as providing continued fuel diversity for generating electricity and mitigating dependence on more expensive and less secure sources of energy. As late as May 2008, the Secretary of Energy indicated in congressional testimony that the restructured program would likely include IGCC, stating that advances in technology and the market, in addition to regulatory uncertainty, would provide incentives for industry to begin deploying commercial-scale IGCC plants with CCS. In addition, a comprehensive analysis could have helped DOE assess the risk that industry respondents might not propose enough viable projects from which DOE could then assess and make multiple selections. Such an analysis could also have helped DOE assess whether the new cost-share arrangement would provide sufficient incentive for enough proposals to be selective. In the draft planning documents and press release announcing the restructured program, DOE stated that it restructured FutureGen, in part, because market conditions had changed in such a way that DOE could fund multiple industry projects and accomplish even more widespread commercialization of CCS and related information sharing across the industry than what would have been accomplished by the Alliance’s consortium of 11 coal producers and electric power companies. However, DOE only received a small number of applications and some proposed projects were outside the restructured FutureGen’s scope. As a result, widespread commercialization and information sharing seem less likely than under the original program. DOE also asserted that the restructured program would hasten the time frame for full-scale commercial operation of CCS. However, even if DOE accepts all applicable applications, the restructured program could implement CCS sooner than the original program at only a few commercial sites rather than, as stated before, on a more widespread and international scale. Finally, DOE also could have used a comprehensive analysis to help compare the relative costs, benefits, and risks of the restructured FutureGen with those of making incremental and other changes to the original program in order to control or offset costs. For example, prior to the decision to restructure FutureGen, FE identified and analyzed 13 options for changes to the original program, such as reducing the COrecommended or noted that DOE should be willing to consider several options with potential savings from $30 million to $55 million each. Some of these scenarios were broached during negotiations with the Alliance in the fall of 2007. According to DOE, electric power industry, academic, and other officials and experts, for the foreseeable future, coal, which is abundant and relatively inexpensive, will remain a significant fuel for the generation of electric power in the United States and the world. However, coal-fired power plants are also a significant source of CO and other emissions responsible for climate change. Hence, for at least the near-term, any government policies that seriously address climate change will need to have a goal of significantly reducing CO, and would accept technologies other than IGCC. The restructured FutureGen left open the possibility of successfully applying CCS technology to existing conventional, pulverized coal-fired power plants— an important goal in its own right, since those plants account for almost all of the coal-fired generating capacity in the United States and abroad. However, there are already existing programs to address CCS at existing plants, and the decision to remove the FutureGen program’s specific focus on cutting edge technology (IGCC) at new plants was not well explained. In at least two ways, DOE’s decision, which affected potentially up to $1.3 billion in federal funding, was not well considered. First, the decision was made on the basis of a flawed comparison of life-cycle costs for the original FutureGen, in that DOE compared an estimate of constant dollars to an estimate of inflated dollars. Second, the decision was not based on a systematic and comprehensive comparison of the costs, benefits, and risks of the original FutureGen versus the restructured FutureGen. An expanded analysis of the costs, benefits, and risks of the original FutureGen compared with a range of modifications to the program could have included incremental changes to the original FutureGen program that could have preserved some of its original goals and benefits while mitigating costs. Such an analysis might also have detailed the risk that DOE would receive only a small number of applications and that those applications might not include IGCC. The analysis could also have considered whether DOE’s $1.3 billion contribution for total program funding presents the best option for advancing the overall goals of CCS in both existing and future plants. To help ensure that important decisions about the FutureGen program reflect an adequate knowledge of the potential costs, benefits, and risks of viable options, and to promote the attainment of the goals of the program while protecting taxpayer interests, we are making the following two recommendations to the Secretary of Energy: 1. Before implementing significant changes to FutureGen or before obligating additional funds for such purposes, the Secretary of Energy should direct DOE staff to prepare a comprehensive analysis that compares the relative costs, benefits, and risks of a range of options that includes (1) the original FutureGen program, (2) incremental changes to the original program, and (3) the restructured FutureGen program. 2. In addition, the Secretary should consider the results of the comprehensive analysis and base any decisions that would alter the original FutureGen on the most advantageous mix of costs, benefits, and risks resulting from implementing a combination of the options that have been evaluated. We provided a draft of this report to the Secretary of Energy for review and comment. DOE did not comment on the recommendations and conclusions of the report; however, it provided technical and clarifying comments, most of which we have incorporated, as appropriate. For example, we revised the report to reflect DOE’s comment that it had reached its decision to restructure FutureGen, based on concerns about increasing costs associated with constructing the original FutureGen project and that it had attempted to negotiate a more favorable cost sharing agreement with the Alliance. However, DOE added that it had stopped those negotiations because it believed that the Alliance would not be able to financially partner with DOE to complete the project. We also revised the report to reflect information provided by DOE about the role of IGCC in the original and restructured FutureGen efforts, the type of knowledge likely to be disseminated by the original and restructured FutureGen efforts, and budget and appropriation data for FutureGen, beginning in fiscal year 2004. DOE’s comments are reprinted in appendix III, along with our responses. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretary of Energy, the DOE Office of the Inspector General, and interested congressional committees. This report also will be available at no charge at GAO’s Web site at http://www.gao.gov. If you or your staffs have any questions about this report, please contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for our Office of Congressional Relations and our Office of Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. We examined (1) the goals of the original and restructured FutureGen programs, (2) the similarities and differences between the restructured FutureGen and other Department of Energy (DOE) carbon capture and storage programs, and (3) the extent to which DOE used sufficient information to support its decision to restructure the FutureGen program. To examine the goals of the original and restructured FutureGen programs, including the results of the different approaches for meeting these goals, we reviewed relevant appropriations and agency documents, including budget justifications from fiscal years 2005 through 2009; the program plan for FutureGen that DOE submitted to Congress in 2004; the cooperative agreement between DOE and the FutureGen Industrial Alliance (Alliance), and its subsequent renewals; DOE’s draft strategic planning documents and funding announcement for the restructured program; and public responses to DOE’s request for information about the restructured FutureGen and its funding announcement. We also reviewed congressional testimony about FutureGen and related topics by officials from the Alliance; DOE, including the Secretary of Energy; and other knowledgeable stakeholders, such as academic and industry researchers. In addition, we met with and reviewed documents provided by officials and researchers from DOE, the Alliance, industry, nonprofit research organizations, and academia. In particular, we interviewed DOE officials from the Office of Fossil Energy’s (FE) National Energy Technology Laboratory (NETL) and Office of Clean Coal. Finally, we conducted semi- structured interviews with knowledgeable stakeholders from the electric power and coal industries, nonprofit research organizations, and academia, among others. During the interviews, we discussed the goals, approaches, and anticipated results of the original and restructured FutureGen programs. Our method for conducting these interviews, including how we selected the knowledgeable stakeholders, appears in the next paragraph. We conducted semi-structured interviews with 14 knowledgeable stakeholders from the electric power and coal industries, nonprofit research organizations, and academia, among others. We selected a nonprobability sample of stakeholders and stakeholder organizations using a “snowball sampling” technique, whereby each stakeholder we interviewed identified additional stakeholders and stakeholder organizations for us to contact. Specifically, we identified the first three stakeholders to interview from previous, related GAO work and a group of contributors toward key scientific assessments of climate change and clean coal technology. Massachusetts Institute of Technology, The Future of Coal: Options for a Carbon- Constrained World (Cambridge, MA, 2007) and IPCC, IPCC Special Report on Carbon Dioxide Capture and Storage (Montreal, Canada, Sept. 2005). Plan; the program plan for FutureGen that DOE submitted to Congress in 2004; DOE’s draft strategic planning documents and funding announcement for the restructured program; and relevant laws. We met with and discussed these programs with officials from NETL and FE’s Office of Clean Coal. We also conducted semi-structured interviews with knowledgeable stakeholders from the electric power and coal industries, nonprofit research organizations, and academia, among others. During these interviews, we discussed the relationship between the restructured FutureGen and DOE’s other CCS programs. Finally, we reviewed public responses to DOE’s request for information about the restructured FutureGen and DOE’s funding announcements for the restructured FutureGen and Round III of the Clean Coal Power Initiative. To examine the extent to which DOE used sufficient information to support its decision to restructure the FutureGen program, we reviewed documents from DOE and the Alliance, including cost estimates; the cooperative agreement and subsequent updates to it; letters, presentations, and proposals documenting the renegotiation of terms for the cooperative agreement; proposed incremental changes for controlling costs; and the draft strategic planning documents and funding announcement for the restructured program. We also reviewed congressional testimony about FutureGen and related topics by officials from the Alliance; DOE, including the Secretary of Energy; and other knowledgeable stakeholders, such as academic and industry researchers. We met with and discussed the information used to support the decision to restructure FutureGen with officials from NETL and FE’s Office of Clean Coal. In addition, we discussed and reviewed analyses of the costs for building coal-fired, electric power plants with officials and researchers from industry, academia, and government, including DOE’s Energy Information Administration. Moreover, we discussed these costs during semi-structured interviews with knowledgeable stakeholders from the electric power and coal industries, nonprofit research organizations, and academia, among others. We also reviewed public responses to DOE’s request for information about the restructured FutureGen and its funding announcement. Finally, we reviewed our recent work and guidance on best practices for cost estimation, program management, and programmatic decision making, as well as guidance from DOE and the Office of Management and Budget. We conducted this performance audit from June 2008 to February 2009, in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The following are GAO’s comments on the Department of Energy’s letter dated February 4, 2009. 1. We modified our report to address DOE’s concerns about our discussion of the 13 options for incremental changes. 2. We modified our report to add clarifying information on Round III of the Clean Coal Power Initiative. 3. We added clarifying information about the timing of the site selection announcement and the release of DOE’s NEPA Record of Decision. 4. We revised the footnote to state that, according to DOE, not less than a 50 percent nonfederal cost share will be required for all of the restructured FutureGen’s stages. 5. We have revised the report to remove the referenced discussion. 6. We made DOE’s editorial correction. 7. The report does not state or imply that the location of the site was the reason for the program’s restructuring, but rather states that DOE’s restructuring decision was based on a desire to contain costs in a time of increasing cost pressures. However, we revised the report to clarify that the Alliance announced its site selection decision before DOE’s Record of Decision was released—which has not happened, as of the date of this report. 8. DOE clarifies that under the restructured program, IGCC plants are expected to have a nominal capacity of 300 megawatts, but non-IGCC projects need only be at a scale sufficient to prove commercial viability and be designed to produce and capture 1 million tons of CO per year. We revised the report to reflect this information. 9. As suggested by DOE, we revised table 2 to reflect that the original FutureGen program focused exclusively on IGCC. 10. As indicated in our response to comment 5, we have revised the report to remove the referenced text. 11. We made appropriate revisions to the report to reflect that Round III of the Clean Coal Power Initiative focuses on carbon sequestration. 12. We revised table note “d” to table 3, to state that DOE’s cost sharing is generally capped at 80 percent. 13. We revised the report to clarify that senior DOE officials directed FE to negotiate new cost sharing arrangements under the cooperative agreement with the Alliance. 14. We revised the report to use the word “continue” in place of “renew” wherever it would more accurately reflect the various stages of the cooperative agreement. 15. Our draft report did not insinuate or state that DOE did not favor the Mattoon, Illinois, site or that DOE’s restructuring decision was based on a disapproval of the Alliance’s site selection announcement. Rather, our report states that DOE’s decision was based on a desire to limit its exposure to increased costs. However, as suggested by DOE, we clarified the report by adding that DOE had instructed the Alliance to not announce the site selection before DOE could release the Record of Decision. 16. We agree with DOE and revised the report to clarify that DOE lost confidence in the ability of the Alliance to fund its share of the project cost, rather than that DOE lost confidence in the Alliance members or their representatives. 17. We revised the report to clarify that both DOE’s press release announcing the restructured program and the updated draft strategic document, dated July 1, 2008, that DOE provided Congress indicated that the restructured program would include IGCC. 18. DOE provided information regarding the official basis for restructuring the FutureGen program and its budget authority, obligations, and expenditures that we incorporated into our report, including table 4 and its table notes. We also included in the report an additional assessment of documents, to which DOE referred as providing the basis for its decision to restructure FutureGen. 19. Regarding the tables in appendix II of the draft report, DOE provided updated FutureGen appropriations information for fiscal years 2004 and 2007 and certain calculations for the fiscal year 2006 FutureGen budget. In response, we merged tables 4 and 5 from the draft to create one table in the final report, and we adjusted the figures and calculations for the data that DOE provided. In addition to the contact named above, Ernie Hazera (Assistant Director), Nancy Crothers, Cindy Gilbert, Chad M. Gorman, Angela Miles, Karen Richey, Michael Sagalow, and Jeanette M. Soares made key contributions to this report. Harold Brumm, Jr., and Timothy Persons also made important contributions.

Summary: Coal-fired power plants generate about one-half of the nation's electricity and about one-third of its carbon dioxide (CO2) emissions, which contribute to climate change. In 2003, the Department of Energy (DOE) initiated FutureGen--a commercial-scale, coal-fired power plant to incorporate integrated gasification combined cycle (IGCC), an advanced generating technology, with carbon capture and storage (CCS). The plant was to capture and store underground about 90 percent of its CO2 emissions. DOE's cost share was 74 percent, and industry partners agreed to fund the rest. Concerned about escalating costs, DOE restructured FutureGen. GAO was asked to examine (1) the original and restructured programs' goals, (2) similarities and differences between the new FutureGen and other DOE CCS programs, and (3) if the restructuring decision was based on sufficient information. GAO reviewed best practices for making programmatic decisions, FutureGen plans and budgets, and documents on the restructuring of FutureGen. GAO contacted DOE, industry partners, and experts. The original FutureGen program and the new restructured FutureGen program attempt to use CCS at coal-fired power plants to achieve near-zero CO2 emissions and to make CCS economically viable. However, they take different approaches that could affect CCS's commercial advancement. First, the original program aimed at developing knowledge about the integration of IGCC and CCS at one plant; in contrast, the new program could provide opportunities to learn about CCS at different plants, such as conventional ones that use pulverized coal generating technology. Second, the original program was operated by a nonprofit consortium of energy companies at one plant, while the new program called for CCS projects at multiple commercial plants. The new, restructured FutureGen differs from most DOE CCS programs. The new FutureGen would develop and integrate multiple CCS components at coal-fired plants (including CO2 capture, transportation, and storage underground). Other programs concentrate on only one CCS component and/or a related component (e.g., capture or capture and compression). However, Round III of DOE's Clean Coal Power Initiative (CCPI) is a cost-shared partnership with industry that funds commercial CCS demonstrations at new and existing coal-fired plants. The new FutureGen is most like CCPI in that both fund CCS commercial demonstrations at several plants to accelerate CCS deployment and require that participants bear 50 percent of the costs, but DOE expects the new FutureGen to have more funding for commercial demonstrations than CCPI. Moreover, the new FutureGen targets a higher amount of CO2 to be captured and stored (at least 1 million metric tons of CO2 annually per plant) than CCPI (300,000 metric tons). Contrary to best practices, DOE did not base its decision to restructure FutureGen on a comprehensive analysis of factors, such as the associated costs, benefits, and risks. DOE made its decision, largely, on the conclusion that costs for the original FutureGen had doubled and would escalate substantially. However, in its decision, DOE compared two cost estimates for the original FutureGen that were not comparable because DOE's $950 million estimate was in constant 2004 dollars and the $1.8 billion estimate of DOE's industry partners was inflated through 2017. As its restructuring decision did not consider a comprehensive analysis of costs, benefits, and risks, DOE has no assurance that the restructured FutureGen is the best option to advance CCS. In contrast to the restructuring decision, DOE's Office of Fossil Energy had identified and analyzed 13 options for incremental, cost-saving changes to the original program, such as reducing the CO2 capture requirement. While the Office of Fossil Energy did not consider all of these options to be viable, it either recommended or noted several of them for consideration, with potential savings ranging from $30 million to $55 million each.