HEARING OF THE SENATE ENERGY AND NATURAL RESOURCES COMMITTEE

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SEN. BINGAMAN: All right, good morning everyone. The purpose of today's hearing is to receive testimony on the fiscal year 2011 Department of Energy budget. We want to thank Secretary Chu for testifying today on the department's 2011 budget. And I compliment him and his staff for their timely and thorough budget. That has been a tradition in the Department of Energy and very much carried forward this year.

Given our stark fiscal climate, I appreciate the president's commitment to the continued development of clean energy programs that will help the United States be competitive in the world economy. The department continues to support renewables and conservation as well as electricity delivery and transmission.
But as in past years, I'm concerned about the proposal to zero out research for oil and gas development, especially in light of the recent natural gas discoveries here in the United States.



The nuclear energy research budget is headed in the right direction by integrating it as part of a portfolio of low-carbon energy sources.

There's an increases for the Energy Information Administration that, in my view, is long overdue.


Finally, the department has taken the lead on innovative energy research and development by proposing 300 million (dollars) in funding for ARPA-E, the Advanced Research Projects Agency for Energy.

This, as well as creating centers or hubs in energy storage, energy- efficient buildings and nuclear reactor simulations, similar to the Joint Bioenergy Institute, which I visited with Secretary Chu a year or so ago.

Again, we thank you for appearing before the committee today.

And we'll have questions after your statement.

But first, let me call on Senator Murkowski.

SEN. LISA MURKOWSKI (R-AK): Thank you, Mr. Chairman.

And thank you, Secretary, for sitting before us this morning.
Appreciate your contributions.
dent's State of the Union, he remarked on energy. And my take on it was, it appeared to present a more centrist, kind of an all-of-the-above approach to the energy policy.

For example, he calls for increasing support for additional nuclear energy as well as for oil and gas production. This is certainly a welcome change, from my perspective, expanded beyond kind of the renewable-only mantra that we've been hearing from the agencies.

But with the budget request that we received on Monday, I already see a disconnect between last week's speech and some agency's budget priorities. Start first with nuclear. I'm certainly very, very pleased to see additional funding for the loan guarantee of program that Congress established in 2005, but I am frustrated that DOE has still not issued a loan guarantee for nuclear power. And I hope that we can expect that first one shortly.

Perhaps more troubling to me is the department's plan to withdraw its Yucca Mountain application from the NRC, with prejudice, within the next 30 days. This leaves us without a viable repository option at this point, and it exposes taxpayers to billions in liability for the government's breach of contract. And some agency's budget requests are also inconsistent with the desire to increase the nation's energy security through domestic oil and gas production. Not only does the budget request propose to cancel a $71 million project that would add needed capacity to the Strategic Petroleum Reserve, it contains substantial tax and fee increases for domestic oil and gas producers. These policies are clearly not designed to spur more domestic production.

The budget request also appears to pick winners and losers within the renewable industry. I was pleased personally to see the additional funding slated for geothermal activities. However, while the department calls for significant funding increases for both solar and wind activities, it cuts funding for hydropower. In fact, hydropower, which provides emissions-free, base-load power and has tremous job potential, is the only renewable resource to see a slash in funding this year.

I'm also concerned that DOE is asking for a budget increase on top of the $37 billion in additional stimulus funds that it received. As of yesterday, the DOE website showed that it has spent just $2.1 billion of those funds in the past year, just slightly more than the $1.8 billion increase that has been proposed for its baseline budget.
DOE had authority to sp a total of $63 billion last year, but did not come close to that level. And at a time of record debt and another year with a record deficit, we should ask ourselves if the department truly needs authority to sp more this year when we know that DOE is having difficulty sping the money that it already has.
And finally, on a more parochial note perhaps, I'm disappointed that the administration is not working to improve energy technology and energy efficiency efforts in cold-climate states like Alaska, particularly since last year's budget terminated funding for the Arctic Energy Office.
 know that we'll have an opportunity this morning, Mr.Chairman, to get into these issues with a little more detail.Again, I want to thank Secretary Chu for being with us.

SEN. BINGAMAN: Mr. Secretary, why don't you go ahead with your statement, and then we'll have questions.

SEC. CHU: Thank you, Chairman Bingaman, Ranking Member Murkowski and members of the committee. I'm glad to have the opportunity to discuss the president's fiscal year 2011 budget request for the Department of Energy.

President Obama has stated, "The nation that leads the world in creating new sources of clean energy will be the nation that leads the 21st century global economy." I fervently share this view. The president's FY 2011 budget request of $28.4 billion for the Department of Energy will help position the United States to be the global leader in the new energy economy.

The budget request makes much-needed investments to harness the power of American ingenuity. This request will create clean- energy jobs, expand the frontiers of science, reduce nuclear dangers and help curb the carbon pollution that threatens our planet. The president's budget request includes an investment of $2.4 billion in energy efficiency and renewable sources of energy. It also promotes innovative energy efficiency and renewable energy projects through 500 million (dollars) in credit subsidy that will support 3(billion dollars) to $5 billion in ling.

It expands the Advanced Manufacturing Tax Credit by $5 billion to help build a robust domestic manufacturing capacity for clean-energy technologies. Through this budget, we will increase research, demonstration and deployment of wind, solar and geothermal energies; make buildings and homes more efficient; develop energy- efficient vehicles; and pursue carbon capture and sequestration.

Nuclear energy must also be a part of our clean-energy mix.

Our budget request includes an additional $36 billion in loan guarantee authority for the nuclear power sector to help construct the first nuclear plants in decades, as well as 495 million (dollars) for nuclear energy research and development.

We have many technologies in hand today to begin the transition to a low-carbon economy, but we will need breakthroughs and better technologies to meet our long-term goals. The budget request invests in basic and applied research and puts us on the path to doubling funding for science, a key presidential priority.

The budget request supports the department's three new, complementary approaches to marshaling the nation's brightest minds to accelerate energy breakthroughs. The department will continue funding the three Energy Innovation Hubs introduced in FY 2010.

In addition, we are proposing a new hub to dramatically improve batteries and energy storage. The Energy Frontier Research Centers program will be expanded to capture new and emerging opportunities.
And in the FY 2011 budget request includes 300 million (dollars) for ARPA-E.

We are also requesting 55 million (dollars) to start the RE- ENERGYSE initiative to help educate the next generation of scientists and engineers. In addition to the health of our economy and our planet, the Department of Energy is focused on the safety and security of our people. Last April in Prague, President Obama outlined an ambitious aga to address the greatest threat to global security --- the danger of terrorists getting their hands on nuclear weapons or the material to build them.

The department is requesting a significant increase, more than 550 million (dollars) in new funding, for the NNSA Defense Nuclear Nonproliferation program to help meet the president's goal of securing all vulnerable nuclear materials around the world in four years.
The president has also made clear that, as long as nuclear weapons continue to exist, it is essential that we ensure the safety, security and effectiveness of our nuclear stockpile. With 7 billion (dollars) in funds we have requested, we can upgrade our infrastructure that has been allowed to decay over the past decade, support the cutting-edge work of our National Labs and recruit the skilled workforce we need.
The budget also protects public health and safety by cleaning up the environmental legacy of our nation's nuclear weapons program.
Additionally, it instructs the department to discontinue its application to the U.S. Nuclear Regulatory Commission for a license to construct a high-level waste geological repository at Yucca Mountain.

On Monday, the department filed a motion with the NRC to stay all proceedings for 30 days. During this time, we will file a formal motion to withdraw the application.
To deal with our nuclear waste management needs, the administration has brought together a range of experts to conduct a comprehensive review of the back of the fuel cycle. The blue ribbon commission announced last week, co-chaired by General Brent Scowcroft and Congressman Lee Hamilton, will provide recommations for a safe, long-term solution.

We also propose breaking down artificial stovepipes and merging the Office of Civilian Radioactive Waste Management with the Office of Nuclear Energy.
Finally, we are committed to being good stewards of the taxpayers' money. For example, we eliminated more than 2.7 billion (dollars) in tax subsidies for oil, coal and gas industries. This step is estimated to generate more than 38.8 billion (dollars) in revenue for the federal government over the next 10 years.

To further our reform aga, the budget request also includes 2 million (dollars) to establish a new management reform initiative.

This initiative will report directly to me and will receive close personal attention.

Building a clean energy future won't be easy, but it is necessary for our economy and our security. As a scientist, I am optimistic, and I believe that we can meet this challenge and lead the world in the 21st century.



President Obama and I look forward to working with this committee and this Congress to build a stronger, safer and more prosperous future. I'm pleased to answer any questions at this time.



SEN. BINGAMAN: Well, thank you for that statement. And let me start and just mention and issue that I will not ask you to respond on here, but to flag it for you, because it's one of concern.



Last year, the administration had proposed zeroing out the upgrade for the Los Alamos Neutron Science Center. And we had the head of the NNSA testifying before the Strategic Subcommittee of Armed Services this last year and the Energy and Water Appropriations Committee, to the effect that keeping that facility operational was essential to maintaining our stockpile.



So I have a concern that the proposal is continued this year to zero out that upgrade of that facility. And I will try to get with you and try to understand better the position of the department on that in the next few days, if I can.



Let me move to one do the overall issues that I think Senator Murkowski talked about, and I know is a difficult one to manage, and that is, how does the funding that was provided in the stimulus bill or the recovery bill, how does that relate to the funding levels you're now requesting in this new budget in particular areas?



One example I would ask about is this year's budget increases funding for grid energy storage research, which I think is a very good idea. Maybe you could explain to us how these funds, these new funds that are being requested, would complement or relate to the demonstrations already under way under the Recovery Act, in that area?



SEC. CHU: Yes, I'd be delighted to. Much of the Recovery Act funding on the grid and the smart grid are more towards the user side. This is the using the technology and piloting and demonstrating the technology that could be used for load leveling and things of that nature.



But as we increase our renewable energy, renewable is transient. Sometimes the wind stops blowing, the sun stops shining.



And our experience has shown that once you go over 20, 25 percent, even if you have a large-scale distribution system, you still need to integrate into that large-scale storage.



And so what we'd like to do is begin, and we've started this already in our Bonneville Power Administration and WAPA, to look at, try to develop plans to anticipate when we get to that large fraction and go beyond that, we will need to integrate storage. And that's part of why we're requesting these funds. SEN. BINGAMAN: Let me ask about this carbon capture and sequestration task force. I think President Obama announced recently when he spoke to the National Governor's Association that he would be asking the Department of Energy and EPA to develop an interagency task for on the issue of carbon capture and sequestration and how that can be brought into a reality.



Could you elaborate on the role you see the Department of Energy playing in this activity and outline what this task force would be all about?



SEC. CHU: Well, the task force, that would be co-chaired by EPA and DOE, is to try to make sure that we -- our goal is that we want to get the technology developed so that we can begin to get rid of the barriers towards beginning of reaching deployment of CCS in 10 years. That requires a lot of things. But the Department of Energy, because of our strong technological base, is going to be playing a role both in the continuation and deployment of technologies today.



We also have a very aggressive research program to see if we can begin to improve upon the things that we know today in the capture part. And we also have a very aggressive program in the storage part, that you need to demonstrate in different geological sites around the United States that the carbon can be stored safely, securely and for long periods of time.



But it shows the commitment that we believe that, given the coal resources of the United States and, quite frankly, the coal resources of the world, that this is something we have to do. It's a very important part of decreasing the carbon emissions in the world.



SEN. BINGAMAN: Senator Murkowski.



SEN. MURKOWSKI: Thank you, Mr. Chairman.



Secretary Chu, let me start with nuclear here this morning.



I understand that under the terms of the Nuclear Waste Policy Act, you are required to notify Congress of the reasons why the Yucca Mountain site is to be terminated. And the statement that is contained basically is pretty simple. It says, President Obama zeroed out Yucca funding in his budget.



I'm wondering when we might expect to get that rationale.



And hopefully it will be more instructive than just that the president has zeroed it out.



And then a follow on is, with Yucca Mountain off the table from the administration's point of view, how do you int to handle the issue of the fees that are imposed on utilities for the nuclear waste fund?



SEC. CHU: Well, first, the hole intent of the blue ribbon commission and the whole intent of our strategy coming in was that we know a lot more than we did in 1982 and subsequent years when the Nuclear Waste Act was written. So we have assembled a team of very distinguished people, you know, experts in science and technology, geology, political leaders, to look at what we know today, but also to look at what we know in the coming decades.
The NRC has stated repeatedly that dry cask storage will be safe for a half a century or more. This will give us time to look at better solutions than what was being done in Yucca Mountain.




And so the intent -- we are still planning to move forward.



We don't think the pulling of the Yucca application means that we're at a standstill regarding to moving forward, but I do believe there are better solutions. And that's the intent of the blue ribbon commission.



SEN. MURKOWSKI: How do you, though, deal with the fees that continue to be imposed?



SEC. CHU: Well, that's -- yes. So we are required to constantly review whether the fees collected are appropriate, and we will continue to do so. And so that has not really changed at all.



SEN. MURKOWSKI: Let me ask you about hydro. I mentioned this in my opening statement. You had stated this was -- earlier or later last year -- you had stated, when speaking about hydro, that the administration will be pushing hydro, because it's an -- this is your words -- an incredible opportunity, and it's actually the lowest cost clean-energy option.



I absolutely agree with you. When we look at the jobs that are associated, the National Hydropower Association figures that there's upwards of 700,000 cumulative, direct and indirect, jobs that can be created working with the potential hydropower. To me, it seems like a pretty good investment these days.



And yet, when you look at the budget, this is the one area of renewables where we're seeing cuts, a significant cut, 20 percent from what Congress approved last year.



So can you speak to the discrepancy in funding? I mentioned that solar and wind certainly seem to be the favored child. What's the situation with hydropower?



SEC. CHU: Well, actually, my feeling, hydro is no different.



I do think it is a very valuable resource, and I would be glad to work with you and talk with you about that as we formulate the budget. We continually have to make tough choices, but I do believe that hydro is an important part of the mix. And there are projects in hydro that have not been fully utilized. And this has nothing to do with large, new hydro projects, but just improving the efficiency of what we have today, plus tapping hydro storage, which was for flood control, where we can tap into that as well. Again, to me, minimal environmental impact. But I will be happy to work with you on that.



SEN. MURKOWSKI: Well, I'd like to pursue this more. I'd like to know whether or not the funds that will be made available for hydro will be divided or disbursed between, you know, the more conventional hydro projects. And then you've got the emerging technologies. We're very interested, in Alaska certainly, in looking at the potential for ocean tidal, in-river hydrokinetic. But again, these are opportunities that we would like to consider, we should pursue them.



But when you see the substantial reductions in this area, it causes us to question whether or not we've got that level of support from the administration. So I'd love to talk to you some more about it.



Thank you, Mr. Chairman.



SEN. BINGAMAN: Senator Udall.



SEN. MARK UDALL (D-CO: Thank you, Mr. Chairman.



Good morning, Secretary Chu. Let me just start by making a couple of comments and particularly focus on the budget. I know you've made some difficult choices in concert with the president.



You've balanced the needs, clean-energy technologies, which have so many important opportunities for us. I support the president's freeze on discretionary sping. And so in the , it's about setting priorities. But thank you for your hard work in that regard.



I did also want to mention that I'm pleased to see the investment in nuclear research development programs, particularly the emphasis on small modular reactors. I introduced a bill late last year. We consulted with the Department of Energy; the ranking member and the chairman graciously co-sponsored that legislation. So I look forward to moving forward in that particular area, because there's real potential with modular nuclear reactors.



Let me turn to the home front on the national renewable energy laboratory that's based in Colorado, we're very proud of that facility. I want to thank you for including the final construction funds for the energy systems integration facility. As you know, it will serve as a point of coordination and collaboration on clean- technology integration.



And everywhere I go, I hear that University of New Mexico is on the cutting edge and University of Alaska, University of North Carolina and Vermont -- every university, particularly the state systems, are excited about the potential. And that's what we want.



We want this race to the top, to borrow a phrase from the Education world. And I think that this point of attention at the renewable energy lab will serve us well.



Let me turn to the gap that you're well aware of between science and applied research. I know you've made that a focus of your efforts.



Could you update us on your efforts to assure that key labs, like NREL, are achieving that goal?



SEC. CHU: We continue -- first, the two undersecretaries relevant in this, Kristina Johnson, (the under ?) for energy, and Steve Koonin, the under for science, are working very closely together. They have a very good relationship. A lot of the issues that were traditionally stovepiped in, let's say, the applied areas, lots of discussions now with the Office of Science.



A lot of the -- also Science has, in the past, developed a very rigorous review process that's being ported over to the other areas so that we can improve the decision-making process. It's not bad, but I think there is always room for improvement. The integration of a lot of the things, for example, in the Office of Science, they could be focused on many of the research needs that will enable one to actually think of much more dramatic breakthroughs.



That is being integrated more closely with the more applied areas.



And those applied areas also include the beginning of piloting and deployment.



So this remains something that's of central concern and focus for us, because it still remains that there is very little time. If you look at what we have to do by mid century, we have to accelerate the deployment from the laboratories and universities and national labs into pilot programs and into the marketplace and being picked up by private sector.



And so there are many, many discussions, both formal and informal, after work, where, you know, I have to admit, sometimes lubricated with biofuels, where the leadership are really trying to say, okay, what can we do now because we have control of the entire value chain of this? So it's something I'd be glad to talk to you about in the details. But it's something we remain very focused on.



SEN. UDALL: Your mention of biofuels, I know that there have been concerns of various points as we've worked to encourage more biofuels that one of the problems we might have are the producers might want to drink the biofuels rather than use them in their automobiles or trucks. (Laughter.) I hear my Arkansan fri down here chuckling about that. In the remaining time, the chairman talked about storage, and we had a very important hearing late last year on potential storage, which both involves transmission and production.



You're doing some work on the modeling of the grid and to better understand how we incorporate that storage. Do you have the necessary personnel and resources to really dig deep into that opportunity?



SEC. CHU: Well, we can always use more. But certainly, for example, the administration of the (BPA ?), I had a phone conversation with him about a month ago. He's very eager to look at integrating power generation with wind. BPA, Bonneville Power Administration, is 20 percent wind and 80 percent hydro. They have good hydro storage potential. They also actually have, it turns out, to have good compressed air storage potential. And so I said, this is great, you know, you have my full backing, push on this.

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RPE is looking at storage, not at the scale of pumped hydro storage or compressed air storage, but certainly storage for large buildings and things. These would be these (liquid metal ?) batteries that we, within a few years, we'll know if this could -- the prospect of decreasing megawatt hour storage by a factor of 10, the costs of that, would have a profound impact on the reliability of our electrical systems. It could mean that you could really have, in areas like the western part of Alaska, which are off-grid, you can actually develop renewables and you have a practical source of electricity off-grid.



So it's very exciting. And it actually makes it much more feasible to use photovoltaics generating the capacity if you can have in a building that scale storage. That means you can actually put much more capacity on your rooftop.



So going forward, storage is a very important part of getting us to a low-carbon fuels.



SEN. UDALL: Thank you. I look forward to working with you, particularly in this area. Thank you.



SEN. BINGAMAN: Senator Burr.



SEN. RICHARD BURR (R-NC): Thank you, Mr. Chairman.



Mr. Secretary, welcome. Thank you for your testimony.



You said that we know more now and that there are better choices than Yucca. Now, I happen to be one that have felt that Yucca, as a plan site, we had passed way past that. But tell me exactly, what do we know now?



SEC. CHU: I'd be delighted to. Let me give you an example.



I mean, I don't want to prejudge what the blue ribbon commission is going to be doing. SEN. BURR: No, I'm trying to get you to justify for me why we need a blue ribbon panel if we know it.



SEC. CHU: Well, because I think I know something, but I'm smart enough to realize that I don't necessarily far from everything.



And to get a distinguished bunch of people together to really look over all the things that are going to be anticipated, I can't personally do that -- SEN. BURR: Now, Mr. Secretary, you and I both know that a new nuclear plant is a lot of money -- $8 billion, average. Many of the applications that are in are investor-owned utilities. They're going to do this in a combination of government-guaranteed loans and shareholder investment. Do you think we're going to maximize the build out of nuclear until we have resolved what we're going to do about nuclear waste?



SEC. CHU: No. I don't think -- look, we're going to have a solution to nuclear, the back- fuel issue. I think, scientifically, we're going to have a solution that. And I think, given that, then there's no reason to be a little bit tepid.



SEN. BURR: When? When?



SEC. CHU: Well, we have decades. As the NRC has said, there is going to be at least a half a century.



SEN. BURR: But temporary storage does not meet the requirement for shareholders to aggressively invest in the build out of nuclear generation. As long as the government loans are in place, we will probably have activity to build out. But I personally believe that that's not enough nuclear generation plants for the future. So if we build out two dozen and then we stop, where are we better off than the fact that we haven't built any for decades?



SEC. CHU: The intent of the loans and the reason the administration asked for more loan guarantee authority is to get seven to 10 nuclear power plants started. By that time, there's enough confidence in the investment community, in the utility community to let the private sector take over.



So the intent is not to stop at seven or 10. The intent is to start it and let the private sector then take it over.



SEN. BURR: But Mr. Secretary, I'd make the case to you, if the private investor community doesn't see an answer to the permanent storage, not temporary storage, of nuclear waste, they will feel they might be in some way responsible for that storage and at the whim of a future administration that decides, well, you know what, what Secretary Chu, the path he was headed on really wasn't the right one, because what we know today is, we ought to bury this in the ground.



We've got to pick a path and go for it. You know, we either know something and we should do it, or we're going to kick this can down the road, which, quite frankly, I'm getting tired of doing.



But let me just say this. You're the one that's going to have to tell ratepayers that there's not a plan for permanent storage, but they're going to be soaked by the federal government over required payment through their utility bill to fund the storage. I find that unacceptable, to be quite honest with you. They've been paying into this for years, and they got nothing. And we don't even have a plan now as to where we're going to go. We're going to set up another commission.



So I encourage you, whatever commission we set up, would you make sure that the time line for their decision is as quick as possible.



And before they start, share with them what we know now so we give them a starting point.



SEC. CHU: I would be delighted to do that and am beginning to do that.



SEN. BURR: Good.



SEC. CHU: And let me just very briefly say that the two co- chairs of this commission want to push ahead as rapidly as possible, and I share their enthusiasm.



SEN. BURR: In Washingtonspeak, that can be at a snail's pace. And I hope we won't use Washington.



Mr. Secretary, the administration proposed 7 percent budget increase. When matched with the stimulus package, the way I calculate it, that's an 80 percent increase.



Is that justifiable right now?



SEC. CHU: I believe it absolutely is justified. The administration said that -- across the board, if you take out Defense and the social programs, they were holding to a flat budget. Now, the fact that the Department of Energy has gotten an increase just reflects the priorities in nonproliferation, in national security.



There's also a -- SEN. BURR: In national security, we're decreasing the funding of the SPRO 43 percent. The SPRO is there to provide us that access to petroleum if in fact the Middle East is cut off. We're decreasing funding 43 percent. We're not increasing funding of transmission. You've talked about smart grid. But if you go to the northwest of Texas and you see a windmill firm, you see one-third of the windmills turning and two-thirds not down for maintenance, down because the transmission lines won't handle that amount of generation moving it a grid. But we haven't targeted specifically more money to get electricity from a generated point to a grid. We're focused on the grid.


I would only suggest to you that whether it's wind or whether it's solar or whether it's another renewable, if we're not going to invest in the right areas, then we're not going to be able to tap successfully what the country can do. Any comment on that?


SEC. CHU: Well, let me be very brief on the SPRO. There are projections now that the EIA is giving us is that the U.S. oil, traditional oil, going forward will remain flat. Our increase in transportation fuel will increase, but it will be taken up by biofuels.
nd so we have a statute that says, we need a reserve that allows 90 days. And we think that the current SPRO gives us that.

And so that's why we're decreasing the budget. We had an uptick in the budget to move one of the caverns -- not to repair it, but to move it, and that's an environmental issue.
ut the feeling is that the U.S. petroleum is adequately protected.
SEN. BURR: I thank you.
The Chairman has been extremely patient. I'll stay around for a second round, but I would only make this comment. I think when this decision was made, the five heads of our intelligence organizations and law enforcement didn't say to Congress that they had 100 percent confidence that there would be an attempt to attack us in the next six months. Now, I'm not sure exactly how that computes, but I would only say that it should suggest to all the members of the Senate that the world is not a safe place, the Middle East is not a stable region. And the likelihood is, there might be an interruption.
d that may or may not last more than 90 days. So I thank you.
N. BINGAMAN: Senator Sanders.
EN. BERNARD SANDERS (I-VT): Thank you, Mr. Chairman.


And Secretary Chu, thanks for being with us. And thank you for the great job that you're doing.