Hearing of the Energy and Water Development Subcommittee of the Senate Appropriations Committee - Funding and Oversight of the Department of Energy

Statement

Chaired By: Senator Byron Dorgan (D-ND)

Witness: Secretary of Energy Steven Chu

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SEN. DORGAN: (Sounds gavel.) Going to call the hearing to order. This is a hearing of the Energy and Water Subcommittee of the Appropriations Committee. Dr. Chu, we welcome you to the committee this morning. I'm sorry for the inconvenience. We're starting a few minutes late.

I think probably all three of us were on the floor of the Senate waiting for a 10:00 o'clock or 10:15 vote to occur, and we were just informed it won't occur now but will occur sometime in the future, either in the short term or the longer term -- (laughter) -- in a moment or perhaps sometime today. So that -- that's the reason I was a bit delayed. We have asked Secretary Chu from the Department of Energy to come and present and discuss the 2010 budget.

My expectation is that we will be truncated a bit and probably interrupted with a short recess for a cloture -- cloture vote. I want to note that we will have Administrator D'Agostino before the subcommittee on June 2nd to discuss National Nuclear Security Administration's -- the National Nuclear Security Administration's budget request. We're free to discuss any of that today as well but I simply want to remind members that there'll be further opportunity to discuss that in two weeks' time.

This year's budget of $27.1 billion for the department is basically flat compared to 2009 appropriation numbers. A substantial sum of money -- a great deal of money was provided, $38.7 billion, as a part of the American Recovery and Reinvestment Act. Those numbers, of course, were not intended to be a substitute for the regular budget. They were intended for the purpose of moving money around the country, getting people to work, getting contractors working and building projects and doing things that are substantial value and creating assets for the future.

So having said that, I was a bit surprised when I received the president's budget because I felt that with the economic recovery funds -- very substantial amounts of money, 38.7 billion (dollars) to the department -- that we might see a very different approach in trying to deal with the priorities in the department, and I'm going to talk to you today about some of the strengths that I see in the budget request and some of the concerns that I have.

There are some, I think, good (stories ?) in the funding increase proposals. Renewable energy -- I think we have to maximize the capability of renewable energy in our country. In order to do that, we not only have to be determined to say, here's where the country is headed and -- and plot a map to get there but we have to create the capability to have an interstate transmission capability that connects all of America, and that's not easy. That's very difficult to do. And the science budget is robust. There's also a proposal for eight new energy innovation hubs, which I view as a means of helping the Department of Energy address what normally people call the valley of death -- the dilemma of getting technology transferred from basic science to applied research and then out into the marketplace so that it accomplishes what we intend to accomplish in the field of energy for our country's future.

I'm -- I'm going to just truncate my statement. I will, during the questioning, have an opportunity to go through a wide range of subjects with you, Secretary Chu. I think what I -- what I'd like to do with the permission of our colleagues is call on Senator Bennett for a brief opening statement, call on the secretary to make a presentation. Perhaps about that time we'll have to go over for the cloture vote and then come back and have a substantial opportunity this morning to ask questions of the secretary. If that is all right with my colleagues let me call on the ranking member, Senator Bennett.

SEN. ROBERT BENNETT (R-UT): Thank you very much, Mr. Chairman, and I -- I will abbreviate my opening statement. Mr. Secretary, welcome to the subcommittee. We're glad to have you here in your first experience in defending your budget, and having served in the executive branch myself I know that this isn't entirely your budget -- that the OMB has -- had a few suggestions, shall we say. And you may or may not be pleased with those but I won't call on you to defend or -- or comment on those. Just a few -- a few highlights -- you apply additional resources to programs that appear to already enjoy some surpluses but fail to address chronic pension shortfalls that have been created by the poor market performance.

And I understand that these could not be foreseen but I don't think it's acceptable to ignore the estimated 500 (million dollars) to $600 million shortfall spread across the department and the impact that that will have in undercutting scientific and clean-up missions. I continue my interest in NNSA and the labs, and would be interested in talking to you about that and some of the cuts and comments that you've made there.

The Office of Science and Renewable Energy has received nearly 50 percent of the stimulus funding and it seems unlikely that this will be spent before the 2010 deadline. So we could talk about how that could be shifted. It's not a matter of I don't favor this kind of thing but you can only shovel so much money out the door and -- in certain circumstances and that's one thing that -- that I would look at.

Funding for environmental clean-up is down 161 million (dollars). There are two other factors that significantly increase the deficit of this program. It fully fails to -- it fails to fully fund the pension shortfalls. It will reduce environmental clean-up by an estimated 400 million (dollars) in fiscal '10, and I've included an amendment to the budget resolution to mitigate the impacts on this -- the budgets will have on the clean-up and I'm grateful, Mr. Chairman, for your support in that effort. And the budget includes a 200 million (dollars) tax on uranium fuel to be played -- paid by utilities, offsetting -- (inaudible) -- our overall budget authority.

If we don't do this -- and it's, frankly, a little bit of a budget gimmick -- it creates a $200 million shortfall in our bill, and this revenue isn't as -- isn't necessary as there's 4.5 (billion dollars) in existing balances. Those kind of details we would -- we would talk through. So with that, Mr. Chairman, I will -- I will leave it there and do the best we can to move the hearing forward.

SEN. DORGAN: Senator Bennett, thank you very much. Mr. Secretary, I know that you personally worked hard on the budget that was presented to us but you did so with very limited time and also with very limited staff. I regret that a good number of your nominations are now being held up. I have spoken to the senator that has the hold. It's a hold that's very Byzantine as far as I'm concerned because that senator has been promised a hearing date, which is what he wanted.

So I hope that -- that you get those nominations through so that you can have a full complement of staff. But having done what you have done you will now tell us the justification for the administration's budget proposals for the Department of Energy. Mr. Secretary, thank you for being here.

SEC. CHU: Thank you, Chairman Dorgan, Ranking Member Bennett, members of the committee. I'm pleased to be before you today to present the -- present (a modest ?) fiscal year 2010 budget request for the Department of Energy. The president's 2010 budget seeks to usher in a new era of responsibility, an era in which we invest to create new jobs and lift our economy out of recession while laying a new foundation for long-term growth and prosperity. President Obama's 2010 budget invests in clean renewable sources of energy so that we can reduce our dependence on oil, address the threat of a changing climate, and become the world leader (a ?) new clean energy economy.

The 2010 budget request for the Department of Energy is 26.4 billion (dollars), essentially flat compared to FY 2009, and it complements the significant energy investments in the American Recovery and Reinvestment Act. This budget request emphasizes science, discovery, and innovation to support the key missions of the department. My written testimony includes an extensive breakdown of this budget and I'd like to use this time briefly to highlight a few -- (inaudible) -- numbers in areas of particular importance.

To promote nuclear security and the president's ambitious nonproliferation goals, the budget requests 9.9 billion (dollars) for the National Nuclear Security Administration. To continue to accelerate legacy clean-up of our nation's nuclear weapons production, the budget requests 5.8 billion (dollars) for the Office of Environmental Management. To bolster the department's commitment to scientific discovery, the budget requests 4.9 billion (dollars) for the Office of Science, and to foster a revolution in energy supply and demand while positioning the United States to lead on global climate change policy, the budget includes requests for a range of energy investments including 882 million (dollars) for the Office of Fossil Energy, 845 million (dollars) for the Office of Nuclear Energy, and 2.3 billion (dollars) for the Office of Energy Efficiency and Renewable Energy.

That clean energy funding includes several notable strategic investments even as this budget holds the line on spending overall. Solar power will receive 320 million (dollars), an increase of 82 percent. Wind energy is funded at 75 million (dollars), an increase of 36 percent. Funding for clean vehicle programs is up 22 percent to 333 million (dollars), and funding for building technologies is increased by 69 percent to 238 million (dollars).

Another significant increase is in the Office of Electricity Delivery and Energy Reliability, which received 208 million (dollars), 52 percent more than in FY 2009, as it works to develop a new smart electric grid. The request also includes funding to implement the loan guarantee program and Advanced Technology Vehicle (sic) Manufacturing Loan Program. With that brief overview, I want to turn to one of my top priorities in the budget and as secretary -- amplifying the Office of Science's fundamental research with innovative approaches to solving the nation's energy problems.

Specifically, this budget request includes three initiatives designed to cover a spectrum of basic to applied science to maximize our chances of energy breakthroughs. The fiscal 2010 budget will launch eight energy innovation hubs while the Energy Research Frontier (sic) Centers and the RBE (ph) were launched last month.

Let me explain -- briefly explain the differences among these initiatives and why I believe launching these hubs is so important. The EFRCs are small-scale collaborations, predominantly at universities, that focus on overcoming (no ?) hurdles in basic science that block energy breakthroughs, not on developing energy technologies themselves. ARPA-E is a highly-entrepreneurial funding model that explores potentially revolutionary technologies that are too risky for industry to fund. The proposed energy innovation hubs will take a very different approach. They will be multidisciplinary, highly- collaborative teams ideally working under one roof to solve priority technology challenges such as artificial photosynthesis or creating fuels from sunlight.

A few years ago, I changed the course of my scientific work to focus on solving our energy and climate challenges because of the urgency of this issue and because I remain optimistic that science can offer better solutions than we can imagine today. But those solutions will only come if we harness the creativity and ingenuity and intellectual horsepower of our best scientists in the right way.

I'm convinced that launching energy innovation hubs is a critical next step in this effort. Bringing together the best scientists from different disciplines in a collaborative effort is our best hope of achieving priority goals such as making solar energy costs competitive with fossil fuels or developing new building designs that use dramatically less energy, or developing an economical battery that will take your car 300 miles without recharging.

These are the breakthroughs we need, and the energy innovation hubs will help us achieve them. I saw -- I saw the power of truly collaborative science like this firsthand during my time at Bell Laboratories. I believe that to solve the energy problem the Department of Energy must strive to be the modern version of Bell Laboratories in energy research, and this is what these hubs will do. They will essentially be little Bell lablets. These investments will pay for themselves many times over and enhance America's competitiveness on the green energy jobs of tomorrow.

A final initiative in the FY 2010 budget is a comprehensive K through 20-plus science and engineering effort call Reenergize -- (inaudible) -- for regaining our energy, science, and independence -- engineering edge, funded at 115 million (dollars). Through Reenergize, the department will partner with the National Science Foundation to educate thousands of students at all levels in the fields that contribute to our fundamental understanding of energy, science, and engineering systems.

It is my firm belief that the short-term impact of the recovery act combined with the long-term vision in (the ?) President Obama's FY 2010 budget will lay the necessary groundwork for a clean economy. Both President Obama and I look forward to working with the 111th Congress to make this vision a reality. I appreciate this opportunity to be -- appear before you and I'm happy to take questions at this time.

SEN. DORGAN: Mr. Secretary, thank you very much for your testimony. I have a good many questions so I will begin with the first few questions and then my colleagues will ask questions and I will be able to stay and ask the remaining questions. Let me ask you about coal.

You know, I ask -- during I believe it was your confirmation hearing your statement, "Coal is my worst nightmare" that you had made and you -- you described the context of that statement which is -- I understand it. But this budget essentially flat-funds coal research and development, and the fact is coal is our most abundant resource by far -- not even close. And if it's our most abundant resource and -- and I believe and many believe and I would hope you believe that we can continue to use coal because we can use science, research, and technology to decarbonize coal, then how do we get there if we flat- fund research and development with respect to coal?

So can you give me a little bit of the philosophy that led to a flat-funding for that (account ?). I would have expected -- given what the president said about the substantial front-end investments for these kinds of things I would have expected a very substantial recommended increase in order that we might be able to use coal in our future because it's our most abundant resource.

SEC. CHU: Well, Senator -- Chairman, I -- I agree with you and I have to say that this budget reflects that because it has folded in the fact that we have received $3.4 billion -- substantial funds in the economic recovery and reinvestment act. Many of the pilot programs for that money -- the $3.4 billion -- that might have been funded in this section are now -- have gone over to that. So -- so in a certain sense, that incredibly large amount of funding for these pilot programs and the investigations (are then say ?) well, we will continue this current budget. Certainly, if it were not for the recovery act funds we would -- you would have seen a different budget. So even though I know the philosophy of the recovery act was -- was to be seen as strictly as supplemental, in the context of that addition I think it's reasonable.

SEN. DORGAN: Well, that -- that was the philosophy actually but I think most of the stimulus funding is considered to be demonstration projects rather than R and D and, you know, in -- in the area of solar, which I support, and some other areas. Even though there was substantial money in the stimulus there was also substantial money in R and D but coal is there flat-funded and I -- quickly, do you -- you believe that we will have to continue to use coal in our future and need to find ways to decarbonize coal?

SEC. CHU: Yes.

SEN. DORGAN: Okay. Well, we'll talk more about that. Let me ask you about hydrogen. You have essentially zeroed out the hydrogen program. You moved a portion of it in a -- into a different direction. But there are about 190 ongoing hydrogen projects that are unfunded.

We've -- we've got, you know, about 500 jobs -- 140 at universities, 150 at national laboratories, 235 in industry -- that have been working on hydrogen, and I agree that hydrogen is not near- term but I also agree if -- if someone is going to look at things that are not near term but are essential in the longer term who but the Department of Energy should do that?

I'm -- I'm stunned that the budget essentially just moves away from hydrogen fuel cell research and stops projects in the middle of these projects. I -- you know, I -- I don't understand just deciding to take projects that are half completed and say, you know what -- we've decided that we're not going to do those projects anymore. I'm a big fan of hydrogen in fuel cells and I believe that they are going to be part of our future. I agree it's not near term but I agree also that the Energy Department has a significant role in continuing this research. Your response?

SEC. CHU: Well, I -- this was a tough call. I think there was -- there were a lot of -- you know, centered mostly on saying that hydrogen for vehicles is -- is not near term and that we wanted to prioritize to get more -- to be investing more into things like advanced batteries, something that -- that I could see in the next 10, 15 years could actually be adopted on a significant mass deployment scale.

Hydrogen stationary fuel cells, I think, is -- we will continue funding. The -- there are real issues that I have with -- with transportation vehicles. The most problematic, in my opinion, is we still have not figured out how to store hydrogen in a compact form, and that -- so while we can be funding more basic research in looking for ways to do that that is something of real significance.

The other is the infrastructure. We would have to create a totally new infrastructure in order to have the hydrogen vehicles be fueled. Not insignificant is the fact that the hydrogen, if we were to deploy this within the next 10 years, would come out of reforming natural gas and it's -- it's a questionable call as to whether we want to be using the reforming of natural gas.

And so there are many issues (and ?) a more basic research level. I think there have been advances in fuel cells and we want to push on more radical approaches to these things. But I think stationary hydrogen is going to be, in my opinion, the first application.

SEN. DORGAN: Well, in North Dakota we're actually using wind power to produce hydrogen from water -- separating hydrogen from -- well, at any rate.

I mean, my point is that I think the Department's made a significant mistake here, and I for one am not interested in shutting down these research projects. And we're going to do everything we can to continue them.

If we're only looking at near-term, the next five to 15 years, that's -- you know, when you come around talking about cap-and-trade and climate change you're going to talk about 2040 and 2060, 2070. So I really think this is an important area of research that President Bush, Senator Domenici, myself, so many others have been very involved in this. And to see these contracts shut down in the middle of the contract on very important research, I think is not a smart thing to do. So we'll have more to discuss about that.

Quickly, what is the status of the development of the Nuclear Waste Blue Ribbon Commission? You recommended shutting down Yucca Mountain as a storage site. So the question is what's the development of the commission, the status, what's your evaluation of what the Energy Committee is doing? In the Energy Authorizing Committee we have -- prefer something of that sort. Are you considering recycling spent nuclear fuel to reduce the volume? So give us your thoughts about what is behind shutting down Yucca Mountain.

SEC. CHU: There is a first draft of names that are beginning to be circulated among the White House personnel people. We will be circulating it among Congress also for comment. The authorization, which means Chairman Bingaman's committee, is -- I think we're essentially in sync in terms of trying to develop a very measured, intelligent, deep group of people that can actually step back and say that there are options available to us today and looking down at our crystal ball and tea leaves 50 years from now -- 20, 50 years from now, we can see other options. So now is a good opportunity to say -- to charge the committee.

There are options. I personally feel that if we do it right we can develop ways of processing nuclear fuel to recover much more of the inherent energy value of that stuff -- (inaudible) -- runs through recycling, but we need to develop processes that are economically viable and proliferation resistant.

So if that's true, and I think there's a reasonably good chance we can do this in the coming decades, then we would want to have two different types of storage, an interim type of storage where you can then get back the access to reprocess the fuel. We also want to be investing in types of reactors that can help burn down this fuel and especially the loan guarantees so that we can greatly reduce the waste.

Now having -- after you've done all of than, then there comes a point where you say you might not want to have access after you've burned down a considerable amount of the energy value. And so then a permanent disposition might be called for. But these are things that the Blue Ribbon Panel should be discussing. And it's the hope that with their advice to both the administration and the Congress we can formulate a path forward that I think could be much better than the one we're currently on.

SEN. DORGAN: I'm going to reserve the remainder of my questions until the end.

Senator Bennett.

SEN. ROBERT BENNETT (R-UT): Thank you, Mr. Chairman. Let's -- Mr. Secretary, let's continue this conversation about nuclear power. You've testified several times and again today in your support of nuclear power, and I'm delighted with that because I'm a strong proponent myself. The budget fails to demonstrate any urgency, in my view, particularly deploying state-of-the-art reactor technology. And the rest of the world is investing in new reactors. Russia, France, India -- all beginning to line up countries to sell their reactor technologies.

Now, the United States is clearly the leader in terms of safety. There has never been a life lost; there's never been a problem with the American reactors. So that raises the question of why we are not the export leader in this business but these other countries are.

So would you be willing to support additional funding for the NP 2010 Program if it improved U.S. export competitiveness and accelerated the deployment of new reactors domestically? Now that would, I believe, create thousands of new jobs in the United States. Is that something that you could be supportive of if this committee moves in that direction?

SEC. CHU: Well, in terms of NP 2010, there are two reactors that we initially were supporting, the AP 1000, a Westinghouse reactor, and the GE reactor. It is my understanding that the orders for the GE reactor have shifted and it's not clear. And so while that reactor is still going forward in a much, much more different -- much different pace. And so a decision was made until we get strong signs from General Electric that they were going to go ahead and push this, because of the recession, because of the shifting of borders, for example, from the GE reactor to the Westinghouse reactor, the support of the licensing of that reactor didn't seem to be as high a priority.

So I do want very much to start -- restart the nuclear industry. We're in the final review of a number of proposals for the loan guarantees, and so that's something that's -- that has a very high priority with me. The specific reactor, the GE reactor and the extension of 2010 will really depend in large part on what General Electric, how aggressively they want to move forward on it as well.

SEN. BENNETT: I see. Let's talk about the loan guarantees for a minute. In the bill that left the Senate there was a very hefty increase in loan guarantees. It did not survive with the conversations in the Congress, in the conference. And those are the -- well, I won't say those are -- I was subjected to some fairly heavy criticism on the part of people who said, well, the loan guarantees should not include nuclear. The loan guarantees should be entirely for wind and solar and that sort of thing, and you shouldn't be -- shouldn't include nuclear in there.

The Department's issued five solicitations under the Loan Guarantee Program, and in four of the five, demand vastly exceeded the available supply. Now would you be open to having the Congress change the law so that you could shift from one pattern to the other, if there's one that's undersubscribed and have -- make that money available to others? And do you still support the idea that under the loan guarantees nuclear has to be included as renewable in the sense that we are defining as renewable something that is not emitting carbon?

SEC. CHU: I absolutely support the idea that within the loan guarantees restarting nuclear industry should be supported. Right now, the $18.5 billion can probably start, help start three. There are four applications; we're looking as to whether there can be some cost sharing with non-federal loan guarantees from abroad in order to fund four. I think that's a start. I personally would like to see a bigger start.

SEN. BENNETT: Well, the request for 93 billion (dollars) for the 18.5, so there's obviously a great deal of interest in it, and my concern is that if you have other areas under loan guarantees where there requests are below the amount available, that you be given the authority to shift money from that and make it available to nuclear. Is that something you would be --

SEC. CHU: Yeah.

SEN. BENNETT: -- supportive of?

SEC. CHU: I think in general, philosophically, absolutely yes, but I think to balance that there is a fear that because the nuclear -- because the costs of nuclear plants are so high -- that there is a fear that that could, if you were allowed to shift the money that it could easily gobble up a lot of the things of the lower-cost, renewable energy projects. And so there should be a balance there, but having the flexibility to make those decisions, I would welcome.

SEN. BENNETT: Okay. One last question. We've talked about the stimulus package and the amount of money that's available. Can you give us a path as to how quickly some of this money can be moved out? It has not moved as rapidly as many people thought that it should. And are those people just -- their expectations are too high and you're moving the best you can? Or have you run into problems, or is there a holdup where we can be helpful? Can you give us a time that -- just give us an overall view of what's happening with all of the money that got appropriated to --

SEC. CHU: I think the progress in the loan guarantees has been actually very good. Since -- when the new administration took over -- when I took over initially I was told that the first loan, which was authorized by the --

SEN. BENNETT: Not just loan guarantees, but generally. The president -- you have 38.7 billion (dollars) appropriated and you've spent 1 percent of that.

SEC. CHU: Okay. So -- that's right. So in many of the programs we're doing we're on target. We have a schedule that we want to have allocated, 70 percent of that Recovery Act money by Labor Day. There is an issue here because in many of the things that we do we request for proposals; we have to review the proposals. And then we have to make decisions. So in order to do this there's going to be a massive review this summer of many of those programs.

So we've got clearance from what would be apportionment of many of these things, and so the allocations, we hope a lot of them can be made by this Labor Day. So so far there's been $4 billion obligated to date, about 10 percent.

SEN. BENNETT: About 10 percent, okay. So Labor Day is an updated timeline when you will have, what, 70 percent of it spent?

SEC. CHU: Well, by spent what we're saying -- (laughs.)

SEN. BENNETT: Or obligated.

SEC. CHU: Yes, we're trying to get to that obligation period by that time, that's right.

SEN. BENNETT: By Labor Day. And are there any accounts that you see that might, in fact, lower the amount you'll have to spend in fiscal 2010 as a result of the normal appropriations?

SEC. CHU: Sorry, I didn't quite get --

SEN. BENNETT: If you have a backup of stimulus funds that you've been unable to spend and then those get spent during fiscal 2010, does that mean there are any fiscal 2010 money that can, in fact, be delayed until fiscal 2011 because you simply can't physically spend it?

SEC. CHU: Right. Well, we're going -- we're trying to do our best to satisfy the statutes of that economic recovery which is really to have it essentially obligated -- 100 percent of it obligated by 2010 and a large fraction of it spent. But as you know -- and some of these things that we're doing in order to lay the foundation for a new energy economy, it's not as though it's money instantly into supplemental --

SEN. BENNETT: No, I understand that, but you understand the angst that is out there among our constituents about the amount of money in total the federal government is spending and the concern that it may not be spent wisely. And if, as you move forward and your pattern is, say, okay, this is the proper timetable and the proper method of spending stimulus funds, and you discover that in doing that it means that you do not need as much of the 2010 in terms of -- speaking in business terms now -- actual cash flow. I'm not talking about changing your plans or changing your research programs or your targets you're selling, but it becomes a physical question of pushing the money out the door.

SEC. CHU: Right.

SEN. BENNETT: And in terms of actual cash flow in 2010, you can't prudently do it --

SEC. CHU: Right.

SEN. BENNETT: -- would you share with the committee those funds that might be pushed on to 2011.

SEC. CHU: Yes, I could share those concerns, but we are looking at novel ways of addressing this. It is a -- you're quite right to say that this is a Herculean task. It more than effectively doubles our budget and so for example, I have sent a letter out to all the presidents of the major research universities, development deans, the presidents and the executive chairs of all development professional societies to say that we're going to have essentially have a review fest over a period of one week in Washington, asking them to nominate for this summer their best people to help us review these proposals. We cannot do this alone with our current staff and so we're looking at things like that in order to get this moving.

SEN. BENNETT: Okay, thank you very much.

SEN. DORGAN: Senator Bennett, thank you very much. I have just been called by Senator Reid, the Majority Leader, to go to the floor to negotiate an amendment that they're trying to clear before they do final on this -- the bill that's now pending.

So I've asked Senator Murray to chair while I'm gone, and I'll call on Senator Alexander. We're recognizing senators in order of appearance at the hearing.

SEN. LAMAR ALEXANDER (R-TN): Thank you very much, Mr. Chairman.

Mr. Secretary, welcome.

On May 9th of 2008, I made an address at Oak Ridge Laboratory about a new Manhattan Project for clean energy independence, seven grand challenges for the next five years: Plug-in cars and trucks, carbon capture, solar power, nuclear waste, advanced biofuels, green buildings and fusion.

So I like your hubs. (Laughs.) I think that's exactly how to go about these grand challenges.

I have a question about a relatively small item. In the America Competes Act, which you had a role in developing the recommendations for, there is a provision for distinguished scientists who would have one foot at a university and one foot at a national laboratory. It's worked well at Oak Ridge, for example, with the University of Tennessee over the last 20 years.

There's authorization for up to 100 was the idea, to be phased in over a period of time. And there's the authorization for $30 million in spending, none of which is funded yet in this budget.

I just want to call that to your attention in case it does get funded, to suggest that moving ahead with those at the rate of four or five a year might be one way to advance these hubs as you're looking to attract very talented people to focus their attention on those.

Have you noticed this?

SEC. CHU: Actually, first let me just say I support the idea. I think having intimate collaborations with universities and national labs is something I'm very supportive of. I would be encouraging -- although one doesn't see it specifically in a line item of the budget, one is beginning to see this in the national labs. And I would be encouraging the national labs to grow much stronger relationships with surrounding universities. It serves both the university and the national labs very well. It brings in a lot of young (blood ?). It creates a (churn ?) and an intellectual excitement.

So while it doesn't have to necessarily show up in a line item, I would be encouraging all the national labs to do just that within their programs.

SEN. ALEXANDER: And this authority isn't earmarked to a particular university. It's for the secretary to compete in doing whatever way is (right ?).

I would like to explore the questions that Senator Dorgan and Senator Bennett raised about nuclear power. The president, in his inaugural address, talked about power from the earth, the wind and the sun, and that's captured the imagination of a lot of people. But it's less than one-half percent of our electricity today. And if we double it or triple it, we still don't have much. And even if we reach the 15 or 20 percent that some people think we might of renewable power, that's probably it, and that still leaves a need for 80 or 85 percent base-load power.

I thought that the president's (rumored ?) proposal today of capping greenhouse gases from tailpipes by a low-carbon fuel standard was a good idea. I think that it makes sense, because that will encourage switching to an existing technology such as electric cars. We have enough -- we could plug in, Brookings says, half our cars and trucks without building one new power plant if we do it at night; we have so much unused capacity.

And if we look back at the beginning of the cap-and-trade program in 1990-91, we had an existing technology then for dealing with the acid rain. We had scrubbers that would take care of that.

Where I'm going is, as we move along in the greenhouse gas discussion, we probably get next to coal plants, which are 40 percent of the carbon. And we don't have an existing technology to deal with that except nuclear power and a limited amount of experience with burying carbon underground.

So why wouldn't we be as aggressive about expanding nuclear power and doubling or tripling research and then have a Manhattan Project to find a way to get rid of the carbon in existing coal plants, as we are with wind and solar and other so-called renewable powers? They're not base-load powers. And isn't it true we have to have some new source of clean base-load power? Why not just put a plan in to build 100 new nuclear power plants in the next 20 years as a start toward that and double or triple research to take carbon from existing coal plants?

SEC. CHU: The -- (inaudible) -- on nuclear power, that number 100 would be a lot. It would be a huge challenge to our nuclear industry. I think I've repeatedly gone on record as saying, as you well know, that this administration, this department, the soon-to-be, hopefully soon-to-be confirmed members of my team are all enthusiastic about it. They say it is a necessary part of our base-load power.

I agree with you, if you're going to about 15, 20, 25 percent renewables, there are real issues having to do with the transmission distribution system, having to do with surge. So we are going to be looking at ways of -- the storage problem is especially an unsolved problem, but there are options, and so we'll be looking at, for example, pumped hydro where it's appropriate in certain regions.

But I reiterate the fact that coal is -- we're blessed with a lot of coal, and although we do not have today the technologies that would make capture and sequestration of coal economically competitive, I think there's a good chance that we can get there. And so I'd prefer to take a different stand and say let's push all these things as hard as we can.

The nuclear industry simply, if you look at the capacity of their ability to build reactors, it's not there today. And so while we want to move aggressively ahead on that, I think we still have to try to move as aggressively as we can on developing the technologies for capturing sequestration.

SEN. MURRAY: Thank you, Senator Alexander.

SEN. ALEXANDER: Thank you, Madame Chairman.

SEN. MURRAY: We'll go to Senator Tester.

SEN. JON TESTER (D-MT): Thank you, Madame Chair.

Thank you for being here, Secretary Chu.

A couple of things, going back to some previous questions. I certainly appreciate the situation you're in and that there is a sizable sum of money available to you to send out. But I also appreciate the fact that you're taking the time to make sure we get the results from this. It's just not money spent for the sake of spending money. And I think there's a real urgency in generation and transmission in this country, as the questions before me have pointed out.

I want to go back a little bit to the loan guarantee program. You talked about a massive review; I don't know if it was on that program or not. But just can you tell me where we are as far as the decision-making process of that loan guarantee program? And what is the time frame for getting some of the loan guarantees out the door?

SEC. CHU: Okay, so we've made a provisional grant to one company. That means that they have to find funding for -- (inaudible) -- 20 percent, I think. This is middle May. I think, by the end of this month, we'll be announcing a number of others. We're looking hard at -- we've greatly accelerated all of the review processes and how we do it. And we're doing many things in parallel now, something that the department has not (been used to ?).

And so the loan guarantees essentially are being accelerated by about a factor of five, maybe closer to 10. So it's a very significant focus on making sure that these things are viewed, reviewed adequately, but very quickly.

SEN. TESTER: Okay. So you're anticipating some announcements, because we are in the middle of May --

SEC. CHU: Right.

SEN. TESTER: -- any way.

SEC. CHU: Certainly within the next couple of weeks or month, yes.

SEN. TESTER: Okay. All right. Do you -- we have great wind resources, particularly in the eastern part of Montana. And what has traditionally happened over the last four or five years is they've built a lot of towers in a fairly small area for purposes of maintenance and construction, cranes, all that stuff.

It looks to me like the best benefit you can get out of wind is if you decentralize it, if you move it around for intermittency purposes. The wind is blowing somewhere in eastern Montana every day, all the time; and the issue of the grid.

Do you ever put forth policies or put forth direction to electrical generation companies to encourage them? Or is there anything we can do to encourage that, or is that even a good idea? I'm talking about decentralization of wind to reduce intermittency and reduce the need for -- go ahead.

SEC. CHU: That is a very good idea. In fact, a number of Cabinet-level people have been meeting on an every-other-week basis, the principals. And much of our meetings -- this is Interior, Ag, Energy, CEQ, a number of stakeholders -- to try to develop a coherent plan. Where are the energy resources, both solar and wind?

SEN. TESTER: Yes.

SEC. CHU: Where are the places where it would not be -- we have to be very sensitive to environmental concern and danger species, things like that. And trying to now develop this -- FERC is also, of course, part of this. And we're trying to then develop this and start to work with the private sector.

SEN. TESTER: So you have the ability to give some direction? Or do we need to do it at this level?

SEC. CHU: Well, we are trying to develop some plan that gets buy-in from the private sector.

SEN. TESTER: Okay. That's (the best ?).

SEC. CHU: These meetings have been going on for several months.

SEN. TESTER: A few weeks ago, this subcommittee had a hearing on beneficial use of CO2. We heard some pretty encouraging things from algae. One that was particularly encouraging to me was making cement, not having to separate the (flue grass ?). And it sounded to me like it was (checked ?) out and ready to go.

Two questions. Number one, is that kind of special use of CO2 something that you see as, number one, viable and something that can happen? And then the follow-up question is, is the beneficial re-use of CO2, is it being limited by our study of carbon sequestration and storage?

SEC. CHU: We're generally looking into those things, both algae -- the algae-converted CO2 into lipids that can be used for transportation fuel and cement. The verdict is not in whether these processes could go to a scale necessary to be significant, and so we're looking very hard into this.

I do know other countries also are looking into it. For example, I just had a discussion with some representatives of China. They're keen on seeing whether this can actually work. But again, we're in the process of trying to study whether it can really go to scale or whether it will be small, more boutique type of thing.

Cement especially is something that goes in several stages. There are various grades of cement. And long before you can actually get into structural cement, there are many issues having to do with structural integrity. The economic viability is something -- these are fairly new ideas, and so we are very interested in looking and seeing if they can really work.

SEN. TESTER: Do you think the budget is adequate enough to deal with the carbon -- the CO2 issue, generally speaking, both as a beneficial use and as storage? Is this an adequate budget to deal with that?

SEC. CHU: I believe it is. I think we're -- (inaudible) -- the funding (analogy ?), and cement -- there are a couple of companies looking at this in terms of -- (inaudible) -- loan guarantees.

SEN. MURRAY: Thank you, Senator Tester.

Senator Feinstein.

SEN. DIANNE FEINSTEIN (D-CA): Thank you very much, Madame Chairman.

Good morning, Secretary. It's good to see you here.

I've tried to obtain an appointment with you; so far I have not been able. So I'm going to take this opportunity to express a concern publicly that I would have expressed privately, had I had the opportunity.

You may not know this, but I authored the Desert Protection Act in southern California. We created two new national parks, Joshua Tree and Death Valley, and the Mojave Preserve.

Since that time, for about the past seven years, we've been trying to buy railroad in-holdings to put them into conservation, and have, in fact, bought about 700,000 acres in a very unique public- private partnership. The private sector has contributed $30 (million) -- excuse me -- $40 million, and we about $17 million, to be able to do that.

So it was much to my consternation that I was suddenly told that a lot of large solar facilities were going on the land that we had just purchased with a lot of private money to conserve. So I went down to the desert and brought the companies involved and took a look. And here's what I found, that -- I saw seven projects. They totaled nearly 60 square miles -- 60 square miles.

One was 9.3 square miles. One was 7.03 square miles, one 15 miles square -- that's Bright Source; Iberdrola, 3.09; the second Iberdrola, another 3.09; PG&E, 6.56; and SOLAL6.25. And many of them in this land that was due for conservation and that had been purchased for the purpose of conservation.

Then I began to look and I talked to Southern California Edison what's your largest solar project, 50 megawatts. And I see here we've got 914, 815 megawatts, 500, 500, 500, 800, 600. Huge projects. And I asked how is this done? Well the natural topography of the land is leveled out, the sand -- and is removed, gravel surface is put in, the soil troughs are centered, you need a large steam plant, and you need very large transmission lines.

The question comes for me having tried very hard over 16 years to protect this area of the desert now to see it all in the main going for a huge number. Now I'm only talking about seven out of 65 projects for the area. Those were the only ones I saw, but the ones I saw were 60 square miles worth of solar troughs, huge steam plants, fences that will go around it, right in the middle of a desert where the desert tortoise has some habitat, where there are other problems, big horn sheep, Indian petrogras (ph) and so on and we've been able to clean up this desert all the time.

The question I have is should we not cap the size of these things? The largest that I know of is in Kramer Junction) two projects, one 160 megawatts and one 150, each one is about two square miles. Those are the largest I know of anywhere in the United States. And now we're talking about one of 15 square miles. Should we not cap the size of these?

SEC. CHU: Well I certainly would be willing to say that first I'm a little bit surprised if you asked to see me and my staff said no.

SEN. FEINSTEIN: Well, we just haven't gotten a response, that's sort of the way it's done. You just --

SEN. CHU: Oh.

SEN. FEINSTEIN: -- come here. (Laughter.) But anyway.

SEC. CHU: I'm still surprised. You actually have my private number.

SEN. FEINSTEIN: Well I should call you at home then. (Laughter.)

SEC. CHU: But I'd certainly be willing to talk to you about this. This -- this -- these are sensitive issues and we have to think hard about them. I don't know -- I was actually just informed only a few days ago about this concern and I'd certainly be willing to look into it. I think this is one of those very delicate issues -- you know, as I was saying to Senator Tester -- as we are developing a plan moving forward in conjunction with the other secretaries, one of the issues is the sensitivity to habitants of those endangered species that we're looking at. And we're trying to make sure that we fold all those concerns into where there would be good sites for solar and wind.

SEN. FEINSTEIN: My time is up. Let me say one more thing. In my state, I have 47,000 abandoned mines. People came in, they mined, they took the stuff they wanted, they walked away from the mines. Solar technology is going to change.

In Daggett, I've looked at some photovoltaics and solar troughs, they walked away from them. They left the steam engine there, steam plant there, this has to be considered as well. You know everything right now is how you can do it the cheapest possible way you can, huge is better. But I've got to tell you I'm going to fight for this land to be protected. And, you know, I think that size is a factor and you just can't come in and build 15 mile square facilities with huge steam plants. We're willing to do our share. I am. I understand the desert is a good place for it. But the sky's not the limit Mr. Secretary, and that's what I want to say.

SEC. CHU: Mm-hmm.

SEN. FEINSTEIN: Thank you Madame Chairman.

SEN. MURRAY: Thank you Senator Feinstein.

Mr. Secretary, thank you. You and I have spoken on several occasions about the legal and moral obligation for the federal government to clean up the waste that was left behind from World War II and the Cold War. We talked about it prior to your confirmation, at the Budget Committee hearing, and again after the release of the 2010 budget proposal.

My position is really clear and the administration is going to have to except it to remain consistent because that's what I want for these budgets. I want budgets that clearly meet the obligations we have to the nation and the states and the communities that are home to those clean up sites. And I want budgets that consistently make progress towards the goal of cleaning up that waste.

The funding highs and lows that we see just don't get us there and unfortunately that's what I see in the EM budget that we've been presented with. Let me talk about the highs. In the Office of River Protection, it's good to see an increase for the work at the tank farm. We have seen years and years of pushing off those infrastructure needs and there's a lot of work that needs to be done there. And you're putting your focus back on that work and I do appreciate that and I expect that we can remain consistent and we'll look forward to that as the new base level of funding for those tanks. That's really important.

However, the same effort isn't evident with Richland Operations where there's a reduction in funding below the FY '09 and FY '08 appropriated amounts. That reduction does not represent a consistent effort for stable and compliant budgets. And we all have to remember here that the economic recovery funds were not meant to make up for -- were meant to make up for lost time and to create good paying jobs, not to make amends for this year.

The River Closure Project is up, however the Central Plateau is down, and reducing that active footprint at the site is a really large task that requires consistent budgets from us at this end. So I encourage you to keep that in mind when you're planning for next year's budget so we don't get ourselves back into this position again. You know, Hanford is not going to be cleaned up in five or 10 years, it's a large project massive in size and we need to manage it thoughtfully and consistently with that long term mission in mind. And that's why I am always saying stable and consistent budgets. So we can get the job done safely number one and successfully.

I also wanted to just quickly mention to you the Hammer Facility that it is onsite at Hanford. That Hammer Facility offers incredibly wonderful training for people who take on that very, very dangerous work of clean up. And I'm hopeful that when you do come out to visit the Hanford site that you'll get the opportunity to stop by and see Hammer, see what they're doing to help promote a safe working environment at a very, very challenging place. So I'm so looking forward to your visit at some point in the near future where you can see progress on the site, but also some of the worker safety training going on at Hammer and at PN&L and how that all works together towards clean up.

I do have a number of detailed questions for you and I don't have time but I hope you can answer them on support for Hammer and the B reactor, but I do -- and I'll submit those for the record. But I do have a question for you while you're here Mr. Secretary. I do want to say that I'm pleased at the overall increase for energy efficiency and renewable energy. We've got to move forward on a clean energy economy and I think that does help us keep on the path.

Now that you have spent some time at the Department I'm looking forward to having an update on the water power program. As you know, that program got $40 million in '09 and the president is now requesting a 25 percent reduction, which I am very concerned about. I think we have to have a very strong continued investment in existing hydro facilities that will allow us to use those to supplement the more unpredictable sources like water or wind or solar, and I think we have to increase our work to develop new marine and hydrokinetic technologies as well that you and I have talked about before.

So with my last minute left, if you could talk to me a little bit about your vision for the water power program.

SEC. CHU: I think first very briefly I share your -- as you know, I am very committed to continuing the clean up and -- (inaudible) -- and looking for better ways of doing that. It's not the only money but it's also the way it's invested and funded, and so a lot of times now being spent in reviewing how we deal with the contractors, making sure they do the job in a timely manner.

In terms of the water projects, it's too late to start this in 2010 but in the 2011 budget I'm a big advocate for looking at ways of being -- let me just say friendly to the fish that allow us to continue hydropower but also to look at the possibility of actually having some pumped hydro, small amounts of sources so that we can actually couple the renewable energy better. And so we're going to be looking very hard at that.

SEN. MURRAY: Okay. I look forward to working with you on that. I think it's extremely important and I appreciate your response.

Senator Cochran.

SEN. THAD COCHRAN (R-MS): Mr. Secretary, welcome to the committee, we thank you for your cooperation and your service as secretary, very important position.

When the budget request for the strategic petroleum reserve roughly $50 million is included and proposed for the purchase of a new cavern to replace an existing storage cavern that was said to pose an extreme environmental risk. And this is for storage of the strategic petroleum reserve.

There are salt domes in my state of Mississippi which some think are ideal sites for the storage of the petroleum reserve; your assistant secretary recently testified about legislation to increase storage capacity, specifically for the strategic petroleum reserve. I'm curious to know what your thoughts are about choosing caverns that some say are not environmentally appropriate for storage rather than looking into the possibility of salt domes that are coincidentally located in southern Mississippi. I was just curious to know if this has reached your level for attention and consideration.

SEC. CHU: Well my understanding is that one cavern which I believe is a salt cavern was -- it wasn't understood that the thickness of the salt was in one section of it thin enough that it could open up the possibility of a breech and can actually -- the petroleum could leak into the environment. And so that was discovered in my understanding the last year, year-and-a-half. And so once it was discovered, it was decided that that posed an environmental risk and we should go out and purchase some property to put it in a place where the envelope if you will would be less likely to be breeched. And so that's what we're in the process of doing. But, you know, salt caverns are actually used for that as you well know.

SEN. COCHRAN: Right. Well I was just curious to know whether that had reached your level for your personal attention. I don't have any fixed views about which caverns are the best or not the best, but we certainly want to be sure that they are safe in terms of environmental consequences and certainly in respect to possible damage to people who live in the area.

Funding incidentally for the strategic petroleum reserve included $35 million for a site in Richton, Mississippi contingent on a report issued by the Department within 45 days. My staff has contacted the Department about the report, and we were just curious to know what is the status of that report, if you know.

SEC. CHU: I don't know. I could get back to you on that and give you the details.

SEN. COCHRAN: We would appreciate that and we would like to be kept in the loop as long as you're considering and have active consideration of Mississippi sites or I know in Louisiana they have some salt caverns there as well. But it's of importance. We want to be a positive contributor to the solving of our energy problems and we think that there are some caverns that possibly could be suitable. And we'd like to know -- there was a report I think contemplated at one time to describe and define this so the general public would have some better ideas of what's going on, rumors get started, and I would like to know what the facts are so I can pass that on to my constituents. If you could look into that, I would appreciate it very much.

SEC. CHU: Sure, I'd be delighted to.

SEN. COCHRAN: Thank you. Thank you, Madame Chairman -- sorry, Mr. Chairman.

SEN. DORGAN: No, that's entirely all right. I'll ask a few questions here waiting for Senator Reed to go here.

Real quick, do you think that there's any future as far as geothermal goes, in relation to base-load power? Or is it economically not going to happen?

SEC. CHU: I think there is real potential, especially enhanced geothermal like we're looking -- geothermal right now is only .3 percent of our electricity generation capacity in the United States.

SEN. DORGAN: But we have incredible resource.

SEC. CHU: We have incredible resource. It's mostly -- my understanding, it's mostly in the ability to do enhanced geothermal, meaning that you pump in water or carbon dioxide is used as the heat transfer fluid. We know how to fracture rock much better than we did before. And so this is -- this is a possibility.

We will -- we are going to be investing in research to see whether enhanced geothermal can actually be viable. If it is viable, there is a very large resource.

SEN. DORGAN: How many years out do you think it is before its viability?

SEC. CHU: I'm trying to think of the briefing, but I -- these things are issues where you're going to -- it's -- again, there's -- it takes time to drill; it takes time to test it. You know, 10 years -- I don't know.

SEN. DORGAN: Okay.

Senator Reed?

SEN. JACK REED (D-RI): Thank you very much.

Mr. Secretary, thank you for joining us today.

I know you are aware that my state of Rhode Island is aggressively trying to deploy wind-powered facilities off its coast, state waters near Block Island and in federal waters further out. This is not only going to provide us with, we hope, renewable energy resources but also provide a stimulus to our manufacturing sector, producing the blades, the turbines and other equipment.

One of the concerns we have is that the investments that you are leading in terms of the grid might focus attention away from these projects along the East Coast and more towards the center of the country. And I would just ask you to ask us how these grid improvements can help and not hinder the development of these wind power -- (inaudible). It's not just Rhode Island; it's Delaware; it's all up and down the Virginia -- all up and down the coast, this sector.

SEC. CHU: Well, this is -- you're raising a very important point. The Atlantic Coast has the water-wind resources very close to population centers. And we are -- certainly, this is part of (this ?) as we get our feet wet, so to speak, in finding out how to develop the wind resources.

I think it's important to actually develop them in both places. The more diverse the set of wind resources -- not only in Montana, but all over the United States -- the better we have of actually becoming more base-load. And so to have wind resources all through the shallow Atlantic Coast and have it in the northern Midwest are very important.

So there -- you know, in talking to power distribution companies, utility companies, it's not clear to them what's the best economic investment either. And so we're really trying to work through this. They're -- the issue with offshore is that it is about -- for shallow offshore it's about a factor of two more expensive in initial investment, even more so -- perhaps a factor of three or more -- in the maintenance. And so far, the maintenance is higher than expected in the European experience. And so we are trying to work through all these things. Hopefully within several years, we can -- we can get the wind turbines so that the gear boxes, the blades are much more robust. But -- so these are all issues. Going offshore actually complicates that.

SEN. REED: Yes, indeed. I think, though, that -- and I don't want to suggest a response, but it seems that there should be a very explicit recognition of this -- these offshore efforts and a coordination as you invest in the grid -- (inaudible) -- inadvertently or directly see huge investments which make it even more difficult to bring this power in.

SEC. CHU: No, I agree with you. I think it should be a balanced view and how to develop the renewable resources at large in the United States in the most balanced way. And so this -- you know, in our little group of secretaries and other administrators, this is very much on the table, the balance between Atlantic offshore and Midwest for --

SEN. REED: And principally FERC and the Department of Interior will be -- have the principal role in the siting, et cetera, but I presume the Department of Energy will be an active participant --

SEC. CHU: Yes.

SEN. REED: -- from your comments.

SEC. CHU: Yes, but -- you said it correctly. FERC and Interior will have the major roles in deciding.

SEN. REED: Let me, if I have another -- one final topic, and that is thanks to the efforts of Chairman Dorgan, particularly, there's been an unprecedented investment in weatherization in the Recovery Act. And then the 2009 appropriations bill has $450 million to complement the roughly $5 billion in the Recovery Act. But the 2010 budget has only 220 million (dollars) for weatherization. Now, I understand some of that is because of a big spike up and you're coming down. But there is a concern that we're ramping up this capacity of weatherization; we're getting people out there -- particularly in the context of recovery. Those are good jobs. And then we're going to see the funding streams, you know, diminish rapidly, leaving us with capacity and people, but -- and still with demand.

So I wonder if you could just give us a notion of what's your long-term strategy of weatherization, Dr. Chu.

SEC. CHU: Yeah, Senator, you're actually raising a very good point, because in the weatherization it's roughly $10 billion in the Recovery Act, a fair amount in several agencies. Part of that is actually building a workforce that can weatherize. And, you know, after two years or two and half years, what do you do with this workforce?

SEN. REED: Right.

SEC. CHU: So I think what we are very concerned about is trying to design self-sustaining programs beyond that. Let me give you one example. Secretary Donovan and I are looking for ways in which, when properties change hands -- when you buy a home -- that you can have financing -- additional financing -- say an extra 10,000 (dollars), $15,000 that's part of your mortgage that, if done right, that financing could actually decrease the cost of running your house, because the money you save in lower utility bills will be more than compensating for the additional little bit of mortgage. Now, when you sell your property, it's okay, the investments are there. And so that helps overcome the initial hurdle of capital. That is very important. This weatherization could cost 10(,000 dollars), $15,000 for middle- class homes. It also gets the middle class into this.

We're also looking at programs where banks could be encouraged to -- again, for the affordability of the house -- ask that, in addition to a termite inspection, they ask for the utility bills, some -- you know, the gas and heat. And in that section of the country, this is the spread of utility bills per square foot or for average house. So just like a refrigerator label, this is the spread. The home you're thinking of buying is here or here. This does, at first -- no taxpayer money, very little transaction costs, but it motivates several things. You get a more informed consumer. You actually give incentive to the current homeowner to weatherize, to increase the resale value of the home. And you actually -- then there's an incentive. It also helps the new-home builders who are reluctant to put in energy efficiency -- one can predict the energy efficiency of those new homes, and they look much better. And so you stimulate in many ways just by the simple transaction that seems to me logical in the sense that what the bank really cares about is the affordability of the home. It includes the taxes; it includes the mortgage rates; it includes the utility bills.

So there are things like that we're cooking up to -- and revolving funds, yet another one, so that we actually get this -- the million or 2 million homes is just the beginning. We need to get this self-sustaining in a very deep way. And so these are some of the programs we're thinking piloting and testing.

SEN. REED: Thanks very much, Mr. Secretary.

Thank you, Mr. Chairman. Thank you.

SEN. DORGAN: Senator Reed, thank you very much.

Mr. Secretary, again, I regret that I was called over to the Capitol, but appreciate your answering the questions of my colleagues. Let me go back to the issue of hydrogen. I want to ask a number of questions. Then we will let you be on your way.

The hydrogen fuel cell issue has been a part of the Department of Energy's portfolio for well over a decade, now. In 2006, the Department of Energy developed and released the Hydrogen Posture Plan, 2006. It laid out a 15-year strategy for hydrogen and fuel-cell research, development, demonstration and deployment. Since about 2001, $1-1/2 billion, roughly, has been invested by the federal government in hydrogen and fuel cells. And industry and the states are estimated to have spent somewhere in excess of $4 billion. My understanding is that -- from experts who know -- that these programs have met their cost and their technical goals, that the research has kept pace with key milestones as established in the Hydrogen Posture Plan.

So, again, I don't understand -- let me be more specific, I guess -- do you -- do you come to us saying you want to shut down these research projects in the middle of the research? Is that -- is that what the budget is asking us to do?

SEC. CHU: Well, it is shifting our priorities. I would be very happy to talk to you about this and discuss this. But certainly it was more the intent of the -- the concern of the 2010 budget was focused more on the transportation sector and whether hydrogen cars could become a reality in, let's say, 20 years and whether -- or do we see it further out -- and whether we should be investing these resources in, for example, much more efficient internal combustion engines, especially, from my point of view, diesel, since the new advances in diesels allow diesels to now meet California EPA standards. They're very clean diesels. And so -- and also the plug- in vehicles.

And so in terms of offsetting our imports of foreign oils, getting some more oil independence, really getting these things into the marketplace, I see those as more likely solutions in the next 20 to 30 years.

SEN. DORGAN: I don't disagree with that at all. But do you think 50 years from now that your hope is more efficient internal combustion engines, more diesel engines on the road? Or is it your hope perhaps we do things that are transformative, for example, continuing to work on hydrogen fuel cells that are longer term? And if not the Department of Energy to work on this, who? And then finally, you didn't quite answer the question. Do you really want us to shut down about I think 190 projects that are -- research projects that are in the middle of the project and we just say, "You know what? That was yesterday's money, yesterday's secretary, yesterday's idea. Shut them all down." -- do you really want us to do that?

SEC. CHU: I'd be happy to work with you and look at the details of actually which -- where the programs are and things of that nature, but -- and we can work out --

SEN. DORGAN: I'm hoping to help you with the funding for these projects, by the way -- (laughter) -- because I think, well, we may not be around in the long term. I mean, Galbraith said in the long term, we're all dead. But the fact is the near term is not the only thing that's important to us. If we're going to be transformative, I think you look out beyond five, 10 and 20 years.

Let me ask you, Mr. Secretary, about an issue -- a wind dynamometer -- a dynamometer that is at NREL -- my understanding is that we've spent a lot of money to test commercial wind turbines at NREL. I've been there. I've seen this big investment in hardware. And I'm told that DOE is now pursuing competitive solicitation in the private sector for a dynamometer rather than capitalizing on the investment made at -- made it NREL. Are we moving to -- moving away from NREL as a center of expertise in this area? And if so, why?

SEC. CHU: Well, actually, I would contest -- I don't know that part of it. I did know that we had this wind-test facility at NREL and there's a dynamometer. Getting the private sector involved is something I think the Department of Energy is very interested in. So I don't know the exact details of that.

SEN. DORGAN: Would you look at that? And my understanding is there's some -- there's some interest in the Department of Energy to duplicate that investment in the private sector up in the Northeast. And I'd be very concerned about that. I mean, I would hope that we would continue having NREL as the center of that research.

SEC. CHU: Oh, well, there's something else -- maybe it's the -- we are making investments in Boston for -- but that's a wind test blade facility. That other --

SEN. DORGAN: That's not what I'm thinking of, no.

And also the -- I'm going to say really nice things about you in a moment, but I want to -- I do want to ask some questions. (Laughter.) It appears to me there's about a half a million dollars to a billion dollar shortfall on the pension side.

SEC. CHU: Yes.

SEN. DORGAN: And I think my colleague from Utah mentioned that. And I didn't hear, but maybe you've answered it since I --

SEC. CHU: No, I didn't -- actually, I didn't get to that. This is of great concern to us. We did -- we did scrounge around for a lot of the money. This is a serious concern. We have a lot of employees and former employees and we have an obligation to them. And so there was some last-minute scrambling to find some emergency funds. It's not completely covered yet.

In the long term, this is an -- this is an obligation the Department of Energy has in the sense that we have a liability. I don't think any other agency has this liability. We have to figure out a way -- for example, if having our contractors move towards defined contributions rather than defined benefits -- of course, we -- (inaudible) -- all the people that we have the obligation to, but -- we're not talking about that -- but this overhanging liability is something serious. And because of the stock market decrease then -- and because of the new act that says it has to be 80 percent funded, we all of sudden got these shortfalls.

And we're aware of the problem. The long-term fix will probably have to be something like evolving towards -- as we get in new contracts -- towards defined contributions.

SEN. DORGAN: Right. So we might have some unfinished business on the budget side. I mean, I -- it appears to us it's a half a billion to a billion dollars that's the shortfall. We'll have to continue to work with you on that.

Let me ask if you could just describe again so I can understand it in shorthand, what -- under what conditions would you consider recycling of spent fuel -- spent nuclear fuel?

SEC. CHU: If we could develop proliferation resistance, something that would be unlikely that terrorists, if they got hold of this material, could actually work with it, as an example, that has some self-protection so it doesn't create a stream of separated plutonium, or something that's easily shielded. There's also the economic viability of the processes in general. We want to see industry saying, you know, there's a path forward; saying we can really invest in these recycling plants. And finally, we need to develop generation-four reactors -- high-energy neutron spectrum reactors that can burn down this waste.

I think actually all these things are solvable. It could take decades, but I'm certainly interested in looking at it, looking toward -- there is -- if we extract a lot of the worth of the nuclear fuel, this is a clean source of energy, base-load energy --

SEN. DORGAN: That's right.

SEC. CHU: -- and I think the waste problem is solvable, and I think there's a likelihood if we do it right, get a bunch of very smart people on it, that we can develop these recycling methods.

SEN. DORGAN: And I would say, as you look out there decades out on the horizon exist not just this issue but hydrogen as well in the longer term.

Let me ask you for a moment about the -- what -- you come from a science laboratory, Nobel Prize winner, very distinguished person who -- I feel very strongly that the administration has solicited the service of someone who's extraordinary. So I'm very pleased you're there.

But I also know where you are. You're in the Department of Energy. And that's a great place. You've got some great people there. But it's also an area with -- it's -- in some areas, it's filled with super glue. You know, you just slow everything down and get it all stopped.

On the issue of loan guarantees and the things that you've come to this agency -- an agency that in some areas just is almost impossible to move, you know, a glacier, as -- you can observe more movement in a glacier than in the Department of Energy on some issues -- so tell me about what you have discovered and what your experience is with respect to getting some of these loan guarantee programs moving that were just dead stopped?

SEC. CHU: Well, I -- we discovered that -- first, that they could be increased by a factor of five, maybe even 10. The only way we discovered this is actually -- for example, we hired Matt Rogers, an outstanding person from McKinsey, and by literally first looking at other agencies in the government, seeing how they do their loan programs and then looking at how we do it, but then looking step by step at everything and how you actually go about the business, in terms of little horror stories here and there. They said that the amount of paper required was such that they were concerned if any loans below several hundred million dollars -- they couldn't know how people could afford to do this because the paper cost, the amount of paperwork -- 500 to 1,000 pages. We're working very hard to reduce that. The target is 50 pages. If you can't get your idea out in 50 pages, there's something wrong with it.

In terms of vetting, many of the times when you have a dual vetting process, it's -- there's a substantial financial investment in a bank or (some other things ?). We can then cooperate and do that. The idea that in helping the customers, the potential customers, there was a strong sense that you couldn't help any particular customer because it would be unfair. It was giving a particular advantage to that particular applicant. And so we're turning that around and saying there's another way to be fair, help everyone. It's a novel thought, but we're moving ahead on that.

And so what it really took, after the first couple weeks, is to say, okay, you know, look, the people there need a little help in seeing that you can actually move considerably faster. The idea that you -- that you go in serial and then you go and get to the next point and you go again; it's a long relay race. Every time you pass the baton, the baton's dropped. In actual fact, in -- (inaudible) -- project management, in good project management in the federal government, that's not done that way. You can start many things nearly in parallel.

So we essentially are looking at every nook and cranny and finding that we can actually increase this considerably. And so, again, we went from getting the first loan out in a year and a half to getting the first loan out in 58 days from the time I took office. And so we are very anxious to see this continue.

You made a reference to the fact that it is -- the friction in Department of Energy is conserved well. It's Archimedes more than Newton was right: A body set in motion tends to stop the next day -- (laughs) -- unless there's continual pressure.

But I think the good news is as we work through this and actually give people the tools and the ideas on how to do this, there's now beginning to be genuine excitement in the career people.

SEN. DORGAN: Senator Tester, do you have a question?

SEN. JON TESTER (D-MT): Yeah. I just -- I just have one.

SEN. DORGAN: Let me just -- if you might, let me finish on my one question, and I'll recognize you for whatever you wish.

People are coming to my office with really interesting ideas. Had a person in some while ago who has a couple hundred scientists working on developing synthetic microbes to chew the coal -- that's a scientific term, "chew the coal," I guess. Actually, the synthetic microbes would consume the coal, and through the consumption of coal by these microbes, you would produce methane and probably even be able to do that in situ, underground. I have no idea whether that's just harebrained or unbelievably interesting in the next five years, 25 or 50 years.

Someone comes to me with a patent that says "I have the silver bullet with respect to de-carbonizing coal," and we -- in fact, we had a hearing on it. And the guy that comes to the hearing is the recognized expert in the country from Stanford on cement and concrete. And he takes all of the flue gas from a coal plant and through mineralization, I guess, or whatever, produces a product that is, he says, harder than concrete and more valuable and contains all of the CO2. A company comes to me and says we have a process by which we separate CO2 at the flue gas and we get nitrogen, hydrogen and baking soda, and baking soda contains all the CO2.

Those are just three, but there are lots of them, lots of people out there doing interesting things. Give me your assessment -- and the reason I'm asking this is because I believe, again, we're going to continue to use coal in the future. The question is, how effectively and at what cost do we de-carbonize coal? Give me your assessment of those kinds of things and ideas. And are you running into them? And do you believe they represent great promise for the future?

SEC. CHU: I'm running into them. I think many of them are very interesting and we are looking at them very hard. I think one of the things that you're seeing and one of -- and the things I'm also seeing is there's an unleashing of incredible ingenuity and imagination.

Not all these things will work. Most of them will probably not work. But yet out of that, I think there is -- there's a great possibility that there will be some really very good ideas.

I'm a big fan of, at least in these early stages where it costs very little to explore these ideas, to explore as many of them as possible. This is, actually, one of the joys of being in the job I have. We can look at these wonderful new ideas and see is there going to be merit in this five, 10, even 15 years out, of all those things -- the concrete, the conversion of coal so most of the pollutants and the really bad stuff is just left deep underground, and you just sift out the natural gas. These are potentially very good ideas.

What's especially nice about some of these ideas -- especially the one on the bio part -- is that's occurring in an area where the science is advancing very rapidly. And so the chance of a dramatic breakthrough, because we now know how to reprogram these microbes in completely new ways, offer real hope. Whenever you see the science advancing most rapidly, there's more likelihood of getting really big breakthroughs.

SEN. DORGAN: Senator Tester.

SEN. TESTER: Thank you, Mr. Chairman.

I just -- there's two policies that we're wrestling with right now. One of them is putting a value on carbon. And the other one is a renewable portfolio standard. Assuming we put a value on carbon, is there really a need for a renewable portfolio standard?

SEC. CHU: I think there is. Because of the way you are going to be capping and bringing down the cap in a gradual way, that it -- and the path of registration is being discussed -- actually has to allow the United States to make this transition over a period of time. I mean, that's realistic. We just have to do that.

And what a renewable portfolio standard does is it gives you a guaranteed market. And so it can tell investors you -- we need to get to, let's say, 15 (percent) or 20 percent. The price signal, if you will, from the cap and trade and the decrease in the carbon emissions is one way, but that has to be, by its very nature, in order for the country to make a transition, a slow, gradual process. And a renewable electricity or renewable clean energy standard, you say, now has created a market. And so it's a draw, so that the investment community can say, yes, I can put in my wind turbines or my photovoltaics. So they actually complement each other.

SEN. TESTER: Okay. Thank you very much.

SEN. DORGAN: Well, Mr. Secretary, I'm -- you are the first Cabinet secretary to use the term "joy" in describing your work in all the years I've served in the -- but I expect that joy reflects your background as someone who ran a science lab and having access to all of the interesting things that are going on in these laboratories.

Thank you for being with us this morning. Our subcommittee will want to work closely with you and with your staff in the Department of Energy as we work through the mark-up of an appropriations bill going forward in the coming fiscal year.

This hearing's adjourned. (Sounds gavel.)

SEC. CHU: Thank you.

END.

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