DOE and the private sector are involved in hundreds of cost-shared projects aimed at developing a broad spectrum of cost-effective, energy-efficiency technologies that protect the environment; support the nation’s economic competitiveness; and promote the increased use of oil, gas, coal, nuclear, and renewable energy resources. Universities and national laboratories also participate in many of these government-industry collaborations. Most of the projects that involve technology development beyond basic research are funded under cost-shared contracts, cooperative agreements, and cooperative research and development agreements (CRADAs). The offices in our review are funding more than 500 projects under contracts and cooperative agreements with industry that are expected to cost more than $15 billion by the time they are completed. DOE plans to fund about $8 billion and industry the balance. The four programs that require repayment cover about 60 projects. The other programs cover more than 450 projects. Although DOE participates with the private sector in many cost-shared technology development programs, only four require repayment of the federal investment if the technology is ultimately commercialized. The mechanisms used for repayment are similar in that they generally require a portion of royalties and fees from licensing technologies and revenues from commercial sales. Also, three programs provide for up to a 20-year repayment period and two allow flexibility on when repayment begins. A major difference in the programs is that one program provides for up to 150-percent repayment, while the other programs limit repayment to 100 percent. The Clean Coal Technology Program is a partnership between the federal government and industry for sharing the costs of commercial-scale projects that demonstrate innovative technologies for using coal in a more environmentally sound, efficient, and economical manner. DOE is investing more than $2.2 billion in this program through the year 2003. The funds have been committed under cooperative agreements to more than 40 active and completed projects that were selected in five separate rounds of nationwide competitions for project proposals conducted from 1986 to 1993. DOE funds up to 50 percent of a project’s cost, and the nonfederal participants fund the balance. Most of the projects are currently in the design, construction, or operation phases. In 1985, when the program began, DOE made a programmatic decision in consultation with industry and the Congress to require the participants in the clean coal projects to repay the federal investment in projects within 20 years after a project ends if the technology is commercialized. For projects selected in the first round of competition, repayment was to come from (1) any net revenues generated from continued project operations and (2) revenues accruing from the commercial sale, lease, manufacture, licensing, or use of the technology. During rounds two and three, DOE changed the repayment provisions to respond to the industry’s concerns and lessen the likelihood that the repayment requirements could hamper the project participants’ competitiveness. Among other things, DOE (1) excluded net operating revenues as a required source of repayment, (2) reduced the percentage of revenues from technology sales that are subject to repayment, (3) excluded foreign sales from repayment, (4) eliminated an inflation adjustment requirement, (5) allowed a grace period before repayment begins to facilitate the technology’s initial market penetration, and (6) provided for a waiver from repayment altogether if repayment would place the participants at a competitive disadvantage in the marketplace. According to DOE officials, three clean coal projects with a federal investment of about $36.2 million have progressed to the repayment phase. As of March 1996, DOE had received payments totaling about $377,000 for these projects. Under the Metals Initiative Program, DOE shares in the cost of research and development projects intended to increase the energy efficiency and enhance the competitiveness of the domestic steel, aluminum, and copper industries. The projects are carried out under cooperative agreements. Industry is required to provide at least 30 percent of the funding, and DOE provides the balance. Industry participants establish a holding company for each project for the purpose of holding patents, licensing technology, tracking technology sales and use, and collecting and distributing licensing fees and other income. Appropriations laws require repayment of the total federal investment up to one and one-half times (150 percent) from the proceeds of the commercial sale, lease, manufacture, or use of technologies developed under the program. The Metals Initiative Program is the only program that requires repayment that exceeds DOE’s investment. According to DOE, repayment applies to all sales—domestic or foreign. As of September 1995, DOE had spent or obligated about $89 million for projects under this program. Although some patent applications have been filed and some licensing agreements have been negotiated, none of the projects have begun repayment yet, according to DOE officials. In early 1991, Chrysler, Ford, and General Motors established the United States Advanced Battery Consortium to jointly sponsor research and testing to develop advanced batteries for electric vehicles. Later that year, DOE and representatives of the utility industry agreed to work together with the consortium under a cost-sharing arrangement. DOE is providing 50 percent of the funding, and the other 50 percent is being provided by the participating automobile companies, utilities, and battery developers. According to DOE, current plans call for federal contributions amounting to about $103 million for funding this research through 1996. DOE expects to approve additional funding for the continuation of the research after the consortium submits a proposal identifying its funding needs. As discussed in our August 1995 report, DOE is entitled to repayment of its financial contributions to the consortium if the advanced batteries are commercialized. Repayment is recommended in a Senate appropriations report. Under the terms of the cooperative agreement between DOE and the consortium, DOE’s investment is to be repaid based on (1) the revenue received by the consortium or its battery developers from the licensing of patents to third-party domestic or foreign battery manufacturers and (2) any payments to the consortium or its contractors upon the liquidation or winding up of its business. In addition, one of the consortium’s battery development contracts provides for repayment to DOE based on revenues from the domestic or foreign sale of batteries by the developer. The repayment period ends after DOE’s total contribution has been repaid, or 20 years, whichever occurs first. The repayment obligation can be waived, in whole or in part, if DOE determines that repayment places the consortium or its battery developers at a competitive disadvantage. Three of the eight battery development contracts provide that repayment will not begin until battery sales by the developer and/or licensee reach a specified level. The reactor program focuses on making standardized advanced light water reactors available for orders during the 1990s to help meet the projected demand for new electrical generation capacity by 2010. DOE provides up to 50 percent of the funding for projects carried out with industry, and industry provides the balance. According to DOE, in 1986 when this program was begun, repayment was not considered because the main objective was to reduce the licensing and regulatory impediments that were contributing to extensive delays in the construction and permitting of nuclear power generating facilities. The objective evolved into a certification of advanced light water reactor designs to help restore the industry’s confidence and reduce the financial risks in acquiring new nuclear plants at the appropriate time in the future. The repayment provisions covering domestic or foreign sales have been incorporated into two programs that are part of the Advanced Light Water Reactor Program. In one of these programs—the advanced reactor design certification program—the Congress provided $14 million in additional funding for a specific contract, and an appropriations report recommended that this additional federal cost should be repaid from royalties on the first commercial sale of the reactor design. DOE will require repayment of this amount. DOE subsequently agreed to provide another $11 million in additional funding and may require that this amount be repaid, as well as any additional future funding provided under this contract. DOE’s original contractual commitment of about $50 million is not subject to repayment. According to DOE officials, the Department also may provide for the recovery of any federal contributions in excess of the original $50 million commitment under another contract in the advanced reactor design certification program. The other program—the “first-of-a-kind” engineering program—involves a cooperative agreement between DOE and the Advanced Reactor Corporation. According to DOE, in the development of this program, the participating electric generating utilities made a major commitment to provide cost-share funding and overall direction and technical advice to achieve a plant design that they would be willing to acquire at some future time. Because of their direct, substantial contributions to the plant designs, the utilities require reactor vendors to pay them royalties from the sale of the plant designs or technology to other customers. Since the utilities were going to require royalty payments, DOE decided to also require royalties proportionate to its share of the project’s total costs. The cooperative agreement requires that DOE be repaid up to its total investment from the revenues received by the Advanced Reactor Corporation from the sale or use of the plant designs or technology developed under this program. The repayment period runs up to 20 years, or until the federal investment, which is expected to total $100 million, is repaid. A repayment policy provides both advantages and disadvantages. The main advantage is the recovery of the federal investment. We believe that many of the disadvantages and arguments against repayment can be mitigated by structuring a flexible policy that provides criteria and factors to consider in determining the application of repayment to individual programs or projects. In 1991, DOE considered having a Department-wide policy to recover its investment in technology development projects and even developed a draft order with criteria and guidelines for determining when repayment is appropriate. But due to substantial opposition within the Department and the departure of the Deputy Secretary who was the primary supporter of this concept, the order was never implemented.