[Senate Hearing 112-107]
[From the U.S. Government Publishing Office]
S. Hrg. 112-107
SMALL NUCLEAR REACTORS AND
ALTERNATIVE FUELS
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HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
ON
S. 512
S. 937
S. 1067
__________
JUNE 7, 2011
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington MIKE LEE, Utah
BERNARD SANDERS, Vermont RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan DANIEL COATS, Indiana
MARK UDALL, Colorado ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota BOB CORKER, Tennessee
JOE MANCHIN, III, West Virginia
CHRISTOPHER A. COONS, Delaware
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bartis, James T., Senior Policy Researcher, RAND Corporation..... 34
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Chalk, Steven G., Deputy Assistant Secretary for Renewable
Energy, Office of Energy Efficiency and Renewable Energy,
Department of Energy........................................... 6
Colvin, Joe, President, American Nuclear Society................. 30
Kelly, John E., Deputy Assistant Secretary for Nuclear Reactor
Technologies, Office of Nuclear Energy, Department of Energy... 4
Lyman, Edwin, Senior Scientist, Global Security Program, Union of
Concerned Scientists........................................... 26
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
Siu, Brian, Policy Analyst, Natural Resources Defense Council.... 42
APPENDIXES
Appendix I
Responses to additional questions................................ 61
Appendix II
Additional material submitted for the record..................... 77
SMALL NUCLEAR REACTORS AND ALTERNATIVE FUELS
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TUESDAY, JUNE 7, 2011
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:05 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK. Why don't we get started?
The purpose of today's hearing is to get testimony on 3
bills.
S. 512, which is the Nuclear Power 2021 Act. That's a bill
that I introduced along with Senator Murkowski.
S. 1067, the Nuclear Energy Research Initiative Improvement
Act that Senator Mark Udall introduced. Senator Murkowski and I
have co-sponsored that bill.
S. 937, which is the American Alternative Fuels Act of 2011
introduced by Senator Barrasso.
Let me thank all the witnesses for testifying today. I want
to particularly mention that 2 of our witnesses are New
Mexicans.
Deputy Assistant Secretary, John Kelly, from the Department
of Energy's Office of Nuclear Energy, spent many years at
Sandia National Laboratory.
Mr. Joe Colvin, who is on our second panel, is the
President of the American Nuclear Power Society and now resides
in Santa Fe and well known here in Washington as the former
President and CEO of the Nuclear Energy Institute.
So I welcome those 2, but all witnesses today.
Small nuclear reactors, those that are less than 300
megawatts hold a promise of reducing the cost of nuclear plant
construction. Proponents claim these reactors can utilize
modular construction techniques such that plant sub assemblies
can be built and assembled onsite thus reducing the
construction costs. Large nuclear plant cost is a major issue
where 2,000 megawatt plants exceed $14 billion. In addition,
advocates believe that the small size makes it applicable to
the chemical industry for process heat thus minimizing carbon
dioxide emissions.
The 2 nuclear bills before us today establish research
programs to reduce the cost of construction using small
reactors as well as authorizing 2 cost share demonstrations to
license before the Nuclear Regulatory Commission. There are
many opinions on the merits of these reactors. We look forward
to the witnesses' comments on the legislation before us.
We'll also hear testimony on S. 937, the American
Alternative Fuels Act which Senator Barrasso, along with
Senator Murkowski, Senator Manchin and Senator Coats on the
committee, co-sponsored. This includes a number of provisions
that would seek to increase our use of transportation fuels
that do not come from petroleum. I'm glad that my colleagues
are thinking about ways that we can continue our current
trajectory of relying less on petroleum to fuel the
transportation sector. Diversifying our transportation fuels is
a clear benefit to our national and economic security.
I am, however, concerned that some of the provisions of S.
937 might have high environmental costs. So I hope we can focus
on ways to enhance national, economic and environmental
security simultaneously. Avoid polices that might sacrifice any
one kind of security in pursuit of another.
I have an additional concern that some of the provisions in
S. 937 are clearly beyond the jurisdiction of our committee.
Some of the topics covered in the bill are squarely within the
committee's expertise and jurisdiction. Others, such as long
term contracting authority for the Department of Defense and
reassessing ``best available control technology'' under the
Clean Air Act are clearly not in our jurisdiction.
It's my view that it would not be appropriate for us to
circumvent the committees that do have jurisdiction on those
issues for which those committees expertise would be valuable.
So let me stop with that and defer to Senator Murkowski for
her comments.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. Good morning.
Thank you for the hearing.
It's nice to see a packed house in the Energy Committee.
We've got a line outside. So I think that that demonstrates the
interest in nuclear and more specifically, the small modular
reactors that we're discussing today.
Let me start with small modular reactors. Clearly having
drawn great support over the past few years. This technology
has lower upfront costs, increased safety, the siting
flexibility, potential for domestic manufacture and ability to
incrementally add capacity as demand and grid capacity warrant,
all arguments for giving real consideration to small modular
reactors. I hope that they'll play a larger role in our policy
conversations as we look at the role that nuclear power can
play in meeting our energy needs and reducing our greenhouse
gas emissions.
The ongoing problems in Japan have certainly focused the
world's attention on nuclear safety issues. SMRs have some
significant benefits in this area. Because they are small
reactors with a lower power level, SMRs present less of a
potential radioactive source than conventional reactors. Small
reactors can also be designed with the entire primary coolant
system in a single integrated vessel eliminating some of the
more severe accident scenarios.
Additionally while economies of scale have continued to
make larger reactors an attractive option, not every utility or
operating site needs or even can handle 1,000 plus megawatts of
new power. The ability to incrementally ramp up the amount of
electricity generated to meet demand growth while staying
within a grid's capacity is again, another positive for SMRs.
Two of the bills we're considering today seek to further
the research and development of SMRs. I believe that they're
both good bills. I look forward to hearing our witnesses'
perspectives on each of them.
I'm also glad, Mr. Chairman, that we've got an opportunity
to consider the third bill before us today, the American
Alternative Fuels Act. I do appreciate the good work that
Senator Barrasso has put into this bill as well as his emphasis
on removing the government imposed barriers that are making it
harder to develop alternative fuels. This bill as a whole has
already drawn some bipartisan support from members of our
committee. Two provisions from within it were unanimously
accepted during a recent markup.
I'm optimistic that our committee will continue to find
common ground as we look at the remaining provisions of the
bill. Foremost among those is its repeal of section 526 of the
2007 energy bill which unnecessarily restricts the types of
alternative fuels that the Federal Government, and
particularly, our military, can pursue. Especially given the
events of the past several months while our economy is still
very, very weak, oil hovering near $100 a barrel and the
stability of a foreign energy supply threatened by
international unrest.
It's clearly appropriate to prioritize our energy security
and make greater use of our own abundant resources. A true
energy policy should include everything that America has from
biomass and natural gas to coal and unconventional oils. This
will all advance our goal of greater energy security through
reduced reliance on foreign energy.
I'm glad that we have an opportunity to discuss these
issues this morning, Mr. Chairman. I look forward to the
comments from the witnesses. Thank you.
The Chairman. Thank you very much. Let me just introduce
our first panel.
Dr. John Kelly is Deputy Assistant Secretary for Nuclear
Reactor Technologies in the Office of Nuclear Energy in the
Department of Energy.
Mr. Steven Chalk is the Deputy Assistant Secretary in the
Office of Energy Efficiency and Renewable Energy in the
Department of Energy.
So Dr. Kelly, why don't you start and then Mr. Chalk, we'll
hear from you. Then we'll have some questions.
STATEMENT OF JOHN E. KELLY, DEPUTY ASSISTANT SECRETARY FOR
NUCLEAR REACTOR TECHNOLOGIES, OFFICE OF NUCLEAR ENERGY,
DEPARTMENT OF ENERGY
Mr. Kelly. Great.
Thank you, Chairman Bingaman, Ranking Member Murkowski and
members of the committee. This is my first testimony before
Congress. It's a particular pleasure for me to be discussing
small modular reactors because these have been an area of great
interest to me for some time.
Before joining the Department I co-chaired an American
Nuclear Society Special Committee that was looking into the
generic licensing issues associated with small modular
reactors. Over the course of the last 18 months this special
committee, together with the Nuclear Energy Institute, the
Nuclear Regulatory Commission and the nuclear industry has made
great progress in forging the blueprint for the regulatory
framework for small modular reactors.
The Administration continues to view nuclear power as an
important clean energy option. Small modular reactors are a
promising and innovative technology that could give our
utilities additional clean energy options and allow nuclear to
penetrate the energy market more broadly. Secretary Chu has
written, ``If we can develop this technology in the U.S. and
build these reactors with American workers, we will have a key
competitive advantage.''
Small modular reactors are already inspiring American
innovation Have the potential to significantly enhance U.S.
competitiveness. There are several small modular reactor
vendors pursuing both light water reactor and advanced
concepts, and many utilities are interested in this technology
to replace aging fossil plants.
Earlier this year the Department released its fiscal year
2012 budget request which included an expanded small modular
reactor program that we originally proposed in FY 2011. The
request for 2012 is $29 million for R and D and $67 million for
design certification and licensing activities. The DOE request
outlines a multiyear, $452 million program that would use cost
share agreements with industry partners to complete design
certification activities for up to 2 small modular reactor
designs.
The events at Fukushima Nuclear Power Plant have led the
Nuclear Regulatory Commission to launch a 90-day review to see
what lessons could be learned from the Japanese experience and
applied to U.S. nuclear plants. I want to note that the
designers of light water, small modular reactors have already
placed great emphasis on inherent safety of these reactors.
Because of their lower power level, SMRs require less cooling
after shut down.
Most designs incorporate passive safety features that use
natural circulation to supply back up cooling in unusual
circumstances. Some concepts even use natural circulation for
normal operations requiring no pumps and providing an even more
robust safety case. Last, SMRs can be sited underground which
should improve their security profile and may enhance seismic
safety.
Turning to the 2 bills under consideration by the
Committee, the Department has a few comments.
S. 1067 gives broad authority to conduct research into
small modular reactors as well as other connected issues.
S. 512, the Nuclear Power 2021 Act would require the
Department of Energy to carry out a program to develop and
demonstrate 2 small modular reactor designs. If passed several
features would be important to consider.
The requirement that at least one of the designs be less
than 50 megawatts is too restrictive in our opinion. Simply
having an upper bound of 300 megawatt electric would be more
appropriate. Any cost share design, development and licensing
activity that uses a competitive procurement should let the
marketplace establish the appropriate design parameters.
The second point is the licensing effort should include 2
different designs to promote competition.
Finally the program should initially be focused on light
water reactor technology because of the larger experience with
design and licensing with such reactors.
That concludes my formal remarks. Thank you for the
opportunity to testify. I look forward to answering your
questions and working with the committee to achieve the
Administration goals of securing energy security while reducing
the Nation's carbon emissions. Thank you.
[The prepared statement of Mr. Kelly follows:]
Prepared Statement of John E. Kelly, Deputy Assistant Secretary for
Reactor Technologies, Office of Nuclear Energy, Department of Energy
introduction
Thank you, Chairman Bingaman, Ranking Member Murkowski, and Members
of the committee. This is my first testimony before Congress and it is
a particular pleasure to be discussing small modular reactors (SMRs)
with you, as they have been an area of great interest to me for some
time.
Before joining the Department of Energy, I co-chaired an American
Nuclear Society special committee that was developing solutions to
generic licensing issues for small modular reactors. Over the course of
the last 18 months, this special committee, together with the Nuclear
Energy Institute, the Nuclear Regulatory Commission and the nuclear
industry, has made great progress in forging the blueprint for the
regulatory framework for small modular reactors. This progress
demonstrates an increased interest in the licensing and
commercialization of SMRs.
The Administration continues to view nuclear power as an important
clean energy option. Small modular reactors, specifically reactors that
have an electrical output of less than 300 megawatts, are a promising
and innovative technology. We see these smaller reactors as giving our
utilities additional clean energy options and allowing nuclear power to
penetrate the energy market more broadly. Secretary Chu has written
that, ``if we can develop this technology in the US and build these
reactors with American workers, we will have a key competitive edge''.
SMRs are already inspiring American innovation and have the potential
to significantly enhance U.S. competiveness.
Since former Assistant Secretary Dr. Pete Miller testified to this
committee in 2009 on the two bills we are discussing today, several
developments have taken place. A little 2 over a year ago, we released
our fiscal year 2011 budget request, which proposed a small modular
reactor program with $40 million of funding. The proposal was to spend
half of that funding on R&D efforts and half to initiate a competitive
selection process to establish public-private partnerships to cost-
share design certification and licensing efforts with the selected
winners.
Earlier this year, the Department released its fiscal year 2012
budget request, which included an expanded version of the small modular
reactor program. The request for FY 2102 is $29 million for R&D and $67
million for design certification and licensing activities. The DOE
request outlines a multi-year, $452 million program that would use
cost-shared arrangements with industry partners to complete design
certification activities for up to two light water small modular
reactor designs. There are several potential SMR vendors pursuing both
LWR designs and more advanced concepts. Many utilities are interested
in this technology to replace aging fossil plants.
The events at the Fukushima nuclear power plants have led the
Nuclear Regulatory Commission to launch a 90-day review to see what
lessons can be learned from the Japanese experience and applied to U.S.
nuclear plants. I want to note that designers of light water SMRs have
already placed major emphasis on the inherent safety of these reactors.
Because of their lower power level, SMRs have a much lower level of
decay heat and therefore may require less cooling after reactor
shutdown. Several designs incorporate passive safety features that
utilize gravity-driven systems rather than engineered, pump-driven
systems to supply backup cooling in unusual circumstances. Some
concepts use natural circulation for normal operations, requiring no
primary system pumps and providing an even more robust safety case. In
addition, many SMR designs utilize integral designs for which all major
primary components are located in a single pressure vessel. That
feature results in a much lower susceptibility to certain potential
events, such as a loss of coolant accident, because there is no large
external primary piping. Lastly, most SMRs can be sited underground,
which should improve their security profile and may enhance seismic
safety.
Comments on S. 512 and S. 1067
Turning to the two bills under consideration by the committee, the
Department has a few comments.
S. 1067 gives broad authority to conduct research into small
modular reactors, as well as other connected issues.
S. 512, the Nuclear Power 2021 Act, would require the Department of
Energy to carry out a program to develop and demonstrate two small
modular reactor designs. If passed, several factors would be important
to consider:
The requirement that at least one of the designs be less
than 50 MW is too restrictive; simply having an upper bound of
approximately 300 MWe would be more appropriate. Cost-shared
design development and licensing should be based on competitive
procurements and the market place should establish the
appropriate design parameters.
The licensing effort should include two different designs.
The program should initially be focused on light water
reactor technology based on the large amount of experience--
both design and licensing--with such reactors.
Conclusion
That concludes my formal remarks. Thank you for the opportunity to
testify and I look forward to answering your questions and working with
the committee to achieve the administration's goals of energy security
and reducing the nation's carbon emissions.
The Chairman. Thank you very much.
Mr. Chalk.
STATEMENT OF STEVEN G. CHALK, DEPUTY ASSISTANT SECRETARY FOR
RENEWABLE ENERGY, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE
ENERGY, DEPARTMENT OF ENERGY
Mr. Chalk. Good morning, Chairman Bingaman, Ranking Member
Murkowski and members of the committee. Thanks for the
opportunity to appear before you today to discuss the
Department of Energy's work on alternative fuels.
The American Alternative Fuels Act of 2011, sponsored by
Senator Barrasso, is still being reviewed by the Department and
other Federal agencies including the Department of Defense and
the Environmental Protection Agency. So we do not yet have a
formal position on the bill. I will, therefore focus my
comments today on the Department of Energy's efforts to
research, develop and demonstrate the next generation of
alternative fuels and electric vehicles.
The transportation sector accounts for two-thirds of U.S.
oil consumption and represents one-third of our greenhouse gas
emissions. After housing, transportation is the second biggest
monthly expense for most American families. The President
recently outlined a portfolio of actions, which taken together
could cut U.S. oil imports by a third by 2025. These include
programs that would expand biofuels, put a million electric
vehicles on the road by 2015 and increase the fuel economy of
our cars and trucks. DOE's past, present and future investments
are critical to lowering costs for American families while
reducing our dependence on oil and enhancing our national,
economic and environmental security.
Making our cars and trucks more efficient is one of the
easiest and most direct ways to reduce our petroleum
consumption and save consumers money. We continue to work on
improving existing engine technology that will help our cars
and trucks travel farther using less energy.
Domestically produced biofuels are also a key component to
reach the President's goals. Domestic biofuels can provide a
cost effective alternative to oil imports while creating
business opportunities and jobs in the U.S., especially in
rural areas. DOE develops programs that both increase the use
of today's biomass technologies and support innovative research
next generation biomass technology.
An example of this is algae based biofuels, which are a
very promising next generation technology that DOE is pursuing.
Our current research on algae includes developing suitable
strains and cultivation parameters, harvesting and extracting
oils from algae biomass and including techno-economic analysis
of different algae processes. We're confident that continued R
and D in collaboration with relevant government stakeholders,
including academia and industry will pave the way for
significant commercial scale-up of algae-based fuels. DOE is
also making investment in next generation biofuel technologies
from a variety of other feed stocks including corn stover, wood
waste and other materials. We're exploring ways of converting
cellulose not just to ethanol, but to cost competitive, drop in
substitutes for gasoline, diesel and jet fuel.
Targeted investments under the American Recovery and
Reinvestment Act have enabled us to invest in 29 different
integrated bio-refineries to validate first of a kind
technologies at pilot, demonstration and commercial scales to
reduce risk to further investment. These projects are expected
to generate at least 170 million gallons of advanced biofuels.
Bringing more commercial bio-refineries online would help meet
our ambitious RFS goals.
The Administration also has a goal to put a million
electric vehicles on the road by 2015. Meeting this goal will
help establish the United States as a leader in clean energy
technology through capitalizing on the ingenuity of American
industry. In 2009 there were only 2, relatively small battery
factories in the U.S. Over the next few years, through the
Recovery Act investments, the U.S. will be able to produce
enough batteries and components to support 500,000 plug in and
electric vehicles per year. At the same time, DOE projects a
drop in battery costs of about 50 percent by 2013 compared to
2009.
In sum, DOE's transportation portfolio will save consumers
money, reduce our dependence on foreign oil, lower our
environmental impact and keep America on the cutting edge of
clean energy technologies enabling us to build and lead a 21st
century clean energy economy. Thank you again for your
opportunity to discuss these issues. I welcome any questions
that you may have.
[The prepared statement of Mr. Chalk follows:]
Prepared Statement of Steven G. Chalk Deputy Assistant Secretary for
Renewable Energy, Office of Energy Efficiency and Renewable Energy,
Department of Energy
Chairman Bingaman, Ranking Member Murkowski and Members of the
committee, thank you for the opportunity to discuss the Department of
Energy's (DOE's) efforts to research, develop and deploy the next
generation of alternative fuels and electric vehicles. I will also
briefly discuss some areas of S. 937, the American Alternative Fuels
Act of 2011, sponsored by Senator Barrasso. However, the Administration
is still reviewing the bill and we do not have a position on the bill
at this time.
Alternative Fuels
The transportation sector accounts for approximately two-thirds of
the United States' oil consumption and contributes to one-third of the
Nation's greenhouse gas emissions\1\. After housing, transportation is
the second biggest monthly expense for most American families\2\. As
the President said on March 30, ``In an economy that relies so heavily
on oil, rising prices at the pump affect everybody.'' Emphasizing that
``there are no quick fixes,'' the President outlined a portfolio of
actions which, taken together, could cut U.S. oil imports by a third by
2025. These include programs that would increase the fuel economy of
our cars and trucks and increase the use of nonpetroleum fuels. Both
biofuels--including algae-based fuel--and electric vehicles are
critical components of the President's strategy to lessen our
dependence on foreign oil.
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\1\ http://www1.eere.energy.gov/vehiclesandfuels/pdfs/
vehicles_fs.pdf
\2\ http://www.bls.gov/news.release/cesan.nr0.htm
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Home-grown biomass can provide a cost-effective alternative to oil
imports while creating business opportunities and jobs in the U.S.
Increased use of biofuels also contributes to national and economic
security by insulating our economy from damaging fluctuations in
international petroleum prices. And biomass use contributes to national
environmental goals, helping reduce both smog and greenhouse gas
emissions.
Within DOE, programs in the Office of Energy Efficiency and
Renewable Energy (EERE), the Office of Science, the Advanced Research
Projects Agency-Energy (ARPA-E) and the Loan Guarantee Program have all
made investments in next-generation biofuels science and technology.
DOE also works closely with the US Department of Agriculture (USDA),
the Environmental Protection Agency (EPA), the Department of Defense
(DOD), the Department of Transportation's Federal Aviation
Administration (DOT/FAA) and other Departments and agencies to
accelerate U.S. use of biomass resources.
The Nation has ambitious goals for biomass energy through the
Renewable Fuels Standards (RFS) established through the Energy
Independence and Security Act of 2007 (Pub. L. No. 110-140). The RFS
required the annual use of 9 billion gallons of biofuels in 2008 and
expands the mandate to 36 billion gallons annually in 2022 (of which no
more than 15 billion gallons can be conventional biofuels, and no less
than 21 billion must be from advanced biofuels).
The Navy has set a goal for renewable fuels to comprise 50 percent
of its transportation fuel consumption by 2020. We are working closely
with DOD to accelerate the deployment of pioneer plants that can
support this ambitious goal.
As we take steps to break down barriers to greater use of today's
biofuels, DOE is also making investments in next-generation biofuels
technologies. The American Reinvestment and Recovery Act of 2009 (the
Recovery Act) accelerated investment in innovative biorefineries,
providing funding for an additional 18 RD&D projects, in addition to
the 11 projects previously funded in 2007 and 2008. Through these
projects, DOE is helping scientists and entrepreneurs explore
technologies for converting biomass products such as algae into fuel.
To help accelerate the development of these technologies, President
Obama announced a goal of breaking ground on four commercial-scale
cellulosic or advanced biofuels plants over the next two years. To help
meet this goal, the FY 2012 budget includes funding for a reverse
auction in which cellulosic and advanced biofuels project sponsors
would compete for additional support.
With support for such plants, advanced conversion technologies
could play a significant role in a commercial biofuels market within a
few years. DOE is supporting two main pathways to convert biomass into
biofuels in a cost-effective manner: (1) thermo-chemical conversion,
based on pyrolysis or gasification, and (2) biochemical conversion
using enzymes, fermentation, and other mechanisms, including algae.
Over the longer term, research advances showing promise in the
laboratory could greatly increase the productivity and reduce the cost
of biochemical processes using engineered yeast, bacteria, and other
organisms.
ARPA-E is also undertaking a novel alternative storage approach in
its Electrofuels program. ARPA-E is seeking ways to make liquid
transportation fuels--without using petroleum or biomass--by using
novel microorganisms to harness chemical or electrical energy to
convert carbon dioxide into liquid fuels. This fuel can serve as a form
of energy storage, ready to be used in vehicles, machines, or other
pieces of equipment. The objective of this program is to develop a new
paradigm for the production of liquid fuels that could overcome the
challenges associated with current technologies.
Electric Vehicles
Few technologies hold greater promise for reducing our dependence
on oil than electric vehicles (EVs). In his 2011 State of the Union
address, the President set a goal to have the United States become the
first country with a million EVs on the road by 2015. Meeting this goal
will help the United States become a leader in the clean energy
economy, while capitalizing on the ingenuity of American industry.
Manufacturing products needed for the clean energy economy will
generate long term economic strength in the U.S., creating jobs across
the country while reducing air pollution and greenhouse gas emissions.
Department of Energy investments past, present, and future are
critical to achieving this goal. In 2009, the U.S. had only two,
relatively small, factories manufacturing advanced vehicle batteries,
and produced less than two percent of the world's hybrid vehicle
batteries.\3\ But over the next few years, thanks to investments from
the Recovery Act in battery and electric drive component manufacturing,
and electric drive demonstration and infrastructure, the U.S. will be
able to produce enough batteries and components to support 500,000
plug-in and electric vehicles per year. High volume manufacturing,
coupled with battery technology advances, design optimization, and
material cost reductions, could lead to a drop in battery costs of 50
percent by 2013 compared to 2009, which will lower the cost of electric
vehicles, making them accessible to more consumers. Further policies
and research are needed to build on the work under the Recovery Act.
That is why the Administration supports new efforts to help develop
electric vehicle manufacturing and adoption in the United States
through improved consumer incentives, investments in R&D to advance
innovative technologies, and a competitive program to encourage
communities that invest in electric vehicle infrastructure and
regulatory streamlining.
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\3\ http://www.whitehouse.gov/sites/default/files/
blueprint_secure_energy_future.pdf
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ARPA-E's Batteries for Electrical Energy Storage in Transportation
(BEEST) program seeks to develop a new generation of ultra-high energy
density, low-cost battery technologies for long electric range plug-in
hybrid vehicles and EVs. Improving the energy density of batteries will
increase the range of electric vehicles, which the Department
understands is of critical concern to consumers. If successful, new
battery technologies developed under this program will help move
electrified light-duty vehicles toward the ranges, performance,
lifetime, and cost that will help shift transportation energy sources
from oil to electricity drawn from the domestically powered U.S. grid.
ARPA-E's objective is to fund high-risk, high reward research efforts
that will promote U.S. leadership in this emerging EV battery market.
Loan and Loan Guarantee Program
The Department of Energy's loan and loan guarantee programs are
another key component to winning the clean energy future. As a
representative of the Office of Energy Efficiency and Renewable Energy,
I can only speak generally to the activities of the Loan Programs
Office, which is a separate office within DOE.
In the two years since this Administration took office, the Loan
Programs Office has helped drive significant investment in our energy
economy. Since March 2009, the Department has issued conditional
commitments for loans or loan guarantees to 29 projects, 16 of which
have reached financial close--with more to follow soon.
DOE has provided (or conditionally committed to provide) over $30
billion in financing to these 29 projects, which have total project
costs of nearly $48 billion. The projects are spread across the
country, and reflect an array of clean energy and automotive
technologies, such as wind, solar, geothermal, transmission, battery
storage, and nuclear. These projects include the world's largest wind-
farm; two of the world's largest concentrated solar power facilities;
the first nuclear power plant to begin construction in the United
States in the last three decades; and the world's first flywheel energy
storage plant.
Project sponsors estimate these 29 projects will create or save
over 61,000 jobs, including construction and operating jobs.\4\
Cumulatively, they will generate over 25 million MWh of clean energy
each year--enough to power over two million households, or nearly all
the households in Maryland.\5\ And they will avoid nearly 17 million
tons of CO2 annually--more than is produced by all of the
approximately three million registered vehicles in Oregon.\6\
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\4\ Breakdown by program is as follows (based on Sponsor
estimates): 1703: 5,210 construction, 1,340 permanent; 1705: 12,900
construction, 3,470 permanent; ATVM: 5,700 created, 33,000 saved.
\5\ Sources: EIA 2005 Residential Energy Consumption Survey, Table
US8; U.S. Census Bureau, American FactFinder, 2010.
\6\ Sources: U.S. Environmental Protection Agency, Emission Facts:
Greenhouse Gas Emissions from a Typical Passenger Vehicle; U.S.
Department of Transportation, Federal Highway Administration, Highway
Statistics 2008, Table MV-1 (December 2009).
---------------------------------------------------------------------------
Under the Section 1703 program, DOE has offered conditional
commitments for four projects so far, including one nuclear power, one
front end nuclear, and two energy efficiency projects, which amount to
just over $10.6 billion in total government supported financing,
including capitalized interest. Under 1705, DOE has issued conditional
commitments to 21 projects representing approximately just under $11.8
billion in financing, including capitalized interest. In addition, a
significant number of projects are sufficiently far along in the due
diligence process that we have issued a working draft term sheet and
are in active negotiations with the applicants. LPO estimates that
these projects, if they ultimately reach financial close, will utilize
all of our remaining credit subsidy appropriations.
To date, DOE has committed and closed five ATVM loans, totaling
over $8.3 billion, which will support advanced vehicle projects in
eight states. We anticipate making a number of significant additional
ATVM loan commitments in the coming months.
It is important to remember that the loan programs are not grant
programs; loans provided or guaranteed by the Department must be
repaid. We review projects on a competitive basis, and we do not fund
every eligible project. We ensure that the loans we support meet our
statutory requirement of having a ``reasonable prospect of repayment.''
Every project that receives financing first goes through a rigorous
financial, legal and technical review process--similar to, and in some
ways more comprehensive than, what a private sector lender would
conduct--before a single dollar of taxpayer money is put to work. This
due diligence and underwriting process takes thousands of man-hours to
complete for each transaction, particularly as the projects in
questions are large, complex, and require the coordination of multiple
parties. The Department is committed to processing transaction as
expeditiously and transparently as possible, while ensuring that
taxpayer resources are prudently deployed and properly safeguarded.
GENERAL COMMENTS ON S. 937 THE AMERICAN ALTERNATIVE FUELS ACT OF 2011
The American Alternative Fuels Act of 2011 seeks to promote and
understand the use of alternatives to conventional petroleum fuels. The
bill seeks to provide additional incentives for algae-based fuels,
examine the emissions impacts of electric vehicles, expand contract
authority for the Department of Defense to purchase alternative fuels,
and implement reforms to Department of Energy's Loan Programs. As I
mentioned previously, these provisions fall under the jurisdiction of
multiple federal agencies, including the Department of Energy,
Department of Defense, and the Environmental Protection Agency.
As the Department of Energy continues to review sections of the
legislation impacting the Department, various DOE programs are
continuing to advance the primary goal of the legislation--to reduce
our oil dependence.
For instance, DOE believes that algae based fuels may be an
attractive piece of a long term strategy for biomass production. Algal
biofuels have the potential to meet a portion of the renewable fuels
mandate. Some advantages algal biofuels may have over other biomass
feedstocks include higher per-acre oil productivity, use of non-arable
land, water input flexibility, mitigation of greenhouse gas emissions
and the production of high grade fuels and valuable coproducts.
As such, DOE is pursuing the development of algae-based biofuels
through funding from the Office of Biomass Programs. DOE continues to
support the technical development of algal fuels through focused R&D.
Through the efforts of several consortia, drawing upon private sector,
academia, and industry stakeholders, scientists and engineers are
making advances in mitigating the remaining economic and technical
barriers to achieving the full potential of algal biofuels. Currently,
research on algae includes developing suitable algal strains and
cultivation parameters, harvesting and extracting oils from algal
biomass and techno-economic analysis of different algal biofuels
processes. However, because the Renewable Fuel Standard program is
administered by the Environmental Protection Agency, DOE cannot speak
to any possible implementation challenges associated with using the
Renewable Fuel Standard to create incentives for algal biofuel
production.
Summary
The President recently set a goal of reducing petroleum imports by
one third by 2025. Together with increased fuel economy in vehicles,
acceleration of electric vehicle deployments, and expanded production
and use of biofuels this goal is well within reach. The Department of
Energy welcomes the opportunity to continue working with the committee
to advance our energy goals. I would be happy to answer any questions
the committee may have.
The Chairman. Thank you both very much.
Let me start with some questions of you, Dr. Kelly. We have
a document here in the briefing materials that I got from the
World Nuclear Association. They list what they describe as
medium and small reactors with development well advanced. They
list 16 of them around the world that they claim have
development well advanced.
What is the timing for the work that the Department of
Energy is pursuing here? I'm concerned, I guess, that we may
just be studying this issue and one of these days wake up and
find that there's a version of a modular nuclear reactor
available for sale produced in China and somewhere else that,
sort of, steals the march on any U.S. company that might be
interested in this. What is the timeframe and then where do you
see us as far as being up with these other 16 advanced
developments?
Mr. Kelly. Great. Thank you.
Over the course of the last year we've been conducting
market research into what is the viability of vendors,
utilities, of all stakeholders in this market. What we conclude
at this point is that we believe that within the decade we
could have small modular reactors of the light water version up
and operating in the U.S., designed and built by U.S.
companies. We see multiple vendors available. Utilities are
interested. So we see that as the front runner in terms of
getting the technology from design to actual production of
electricity.
Longer term we have a program, as outlined in our budget
request, to investigate advanced concepts which would have
greater benefit. We see that timeframe for deployment of those
systems out a little bit longer in time, maybe 15, 20 years.
The Chairman. But you don't believe that the development of
these modular nuclear reactors and the sub assemblies and all
of that is likely to occur more rapidly elsewhere, outside the
country?
Mr. Kelly. In my opinion, no at this point. We believe that
any design would need to go through an extensive licensing
review which would take several years. Some of these have begun
in Korea, for instance. But we're awaiting the outcome of their
work. But we intend, with the program that we propose, to begin
that effort as soon as possible.
The Chairman. Now the cost sharing that we have contemplate
in this legislation, the way I understood it, this would be a
useful thing because it would not only provide resources and
give some advantage to the 2 models that were chosen, it would
also give the Nuclear Regulatory Commission some direction as
to where they could go as far as approving licenses for modular
nuclear reactors. Is that a correct understanding or why do you
think we should include cost sharing and have the government
pay part of the cost of this thing?
Mr. Kelly. In our market survey, what industry told us is
that the regulatory risk of actually taking these new and
innovative designs through the process is something that they
thought as a significant risk. Felt it appropriate for the
government to help reduce the risk of market entry for these
new designs. At the same time they are very interested in cost
share.
So we already understand that they are investing their own
resources to further design work. So they're willing and able
to enter into a public/private partnership with no cost share
agreements.
The Chairman. OK.
Mr. Chalk, let me ask you just with regard to this S. 937.
There's a suggestion that algae based fuels should receive
triple credits under this renewable fuel standard that we
already have on the books. If that feed stock is using carbon
that has already been used in an energy production process,
that's an interesting concept.
Could you give us a sense of how likely it is that
commercial scale, algae based, biofuel facilities will be
located with power plants. I guess that would be a precondition
to this happening, right?
Mr. Chalk. Yes, sir. Algae provides a great opportunity to
use CO2 from power plants before we emit it into the
atmosphere. Basically to recycle that CO2.
Algae feeds off CO2 and sunlight, and you can
make diesel fuels from algae that are very similar to petroleum
based diesel fuel you see today. Algae requires lots of
CO2 in order to fatten up and produce these lipids
or these oils.
Location of a nearby power plant would be critical to
affordability of an algae facility. If the CO2 has
to be shipped very long distances obviously it's going to
increase the costs of these fuels. So co-location or somehow
liquefying or solidifying the CO2 would be very
important.
The Chairman. OK. My time is up.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Mr. Kelly, you mentioned the licensing issue. I think you
used the word that it would be an extensive process perhaps
taking several years. Can you just outline some of the
challenges or the hurdles that we're facing with the licensing
of these SMRs?
Mr. Kelly. If we're talking about light water technology
we, in our discussions with the Nuclear Regulatory Commission,
believe that they have a lot of knowledge already about that
technology. So that barrier is fairly low. There are some
unique features.
Senator Murkowski. So when you say that's fairly low does
that mean that we could move through the licensing process in a
relatively expedited timeframe?
Mr. Kelly. NRC has their processes, as we've discussed it
with them. So they would lay out all the sections of the design
to be evaluated. They would come up with a time table.
What I think we would achieve is high confidence in the
schedule for the licensing process because of the maturity of
the technology. That, in principle, should lead to an expedited
licensing process. So we're going in, I think, with significant
knowledge as opposed to more advanced technologies which might
have some technical uncertainties that would need additional
research to satisfy the regulator.
Senator Murkowski. But what you're saying then is that it
is only as to the light water reactors that we might anticipate
a more expedited process?
Mr. Kelly. Exactly. So we view our R and D program, the
component that we've outlined, as developing the information
that would eventually get other types of SMRs on par with light
water reactor technology. But we see that a little bit further
out in time.
Senator Murkowski. Alright. I think what we continue to
looking for is some level of certainty as to this process and
the timelines and appreciate all that goes with it. But the
hope is that there can be some element of standardization, if
you will, through the design certification.
Let me ask you, Mr. Chalk, you know, one of the big
component pieces in Senator Barrasso's bill is the repeal of
section 526 under the Energy Independence and Security Act of
2007. You omitted either in your testimony to reference that at
all. I do understand that you say that the Administration has
taken no formal position.
Can you give me a little bit more about where you guys
might be on section 526?
Mr. Chalk. Yes. I can give you some insight from the
Department of Energy. First of all, section 526 of EISA is on
the procurement and acquisition of alternative fuels, and
basically says that no Federal agency shall contract or buy an
alternative or synthetic fuel unless its greenhouse gas profile
is better than conventional fuels.
We view this as very important if we're going to address
climate change. We feel that the Federal Government needs to
take leadership on this issue, and repealing section 526 would
reverse that leadership.
In fact, a couple weeks ago, the President directed all the
Federal agencies to purchase 100 percent alternative fuel
vehicles, hybrids or EVs by 2015, and going forward to work
with private companies to upgrade their large fleets to
alternative fuels vehicles. So we feel----
Senator Murkowski. What might this mean to further energy
sources from Canada? I met with a group of Canadian producers,
no more than a couple weeks ago, and this is absolutely their
No. 1 agenda item. I think we all recognize that in certain
parts of Canada the product that we get whether it's from
Alberta or what might be coming from the Keystone pipeline.
This is pretty significant to us in terms of supply.
Mr. Chalk. Yes, I agree. When we look at the attributes we
want, in our fuel supply, one thing we want is diversification.
We don't like petroleum. We don't want to be 95 percent
dependent on one feed stock. So diversification is really
important.
The more we rely on domestic and North American fuels, the
less we have to rely on fuels from sensitive countries like
some in the Middle East. But the environmental profile of fuels
in terms of their criteria emissions, greenhouse gas, emissions
and overall sustainability criteria like water use are just as
important. A part of the attributes that we seek and we're
agnostic on feed stock or the technologies that are used, but
we want alternative fuels to meet those environmental
attributes, and lower greenhouse gases is one of the criteria
that we feel is important when we look at an alternative fuel
in terms of diversification, if it's domestically produced,
it's environmental impact and energy security.
Senator Murkowski. From what you've said I don't argue with
diversification. But I do think that we recognize that when it
comes to meeting our energy needs it is important that we focus
on North America. Canada is a good, strong neighbor. They've
been helping us out and providing us with the resource that we
desperately need. The concern that with section 526 staying in
there we severely limit our options, I believe.
Mr. Chairman, I've got other questions, but I will defer to
later.
The Chairman. Very good.
Senator Franken.
Senator Franken. Just to follow up on Senator Murkowski's
question about Canadian oil which is from the Tar Sands, has a
higher greenhouse gas and the concern that she heard from
Canadian producers regarding this bill and this exception.
Doesn't that oil just sort of become part of the entire world
oil supply? Isn't it hard to distinguish that oil?
I mean, doesn't that become sort of a mute point?
Mr. Chalk. Yes, it's a commodity, so it becomes part of the
world's supply.
But this particular law is on which alternative fuels
Federal agencies can purchase. .
Senator Franken. OK.
Do we have a commercial scale algae based fuel plant
anywhere?
Mr. Chalk. Yes and no. We have different types of algae.
Senator Franken. First yes and then no.
Mr. Chalk. We have what we call dark and light algae. The
Solazyme process is a dark process. You actually feed the algae
sugar. The algae is not really a feed stock, but it is somewhat
at a production level.
The sugar then makes the oil with the algae, and you get
the oil out of the algae. Solazyme is working with the
Department of Defense. So that process yields hundreds of
thousands of gallons per year and is somewhat commercial.
The light processes are those you typically think about,
where algae actually is a feed stock, where it's collecting the
sunlight and you're feeding it CO2 typically in a
water system. It's really aquaculture. We don't have that at
acommercial scale yet.
We have a couple companies under contract at DOE. One is
Sapphire, in New Mexico, and the other is Algenol. They're
scheduled to have pilot facilities completed next summer. So
hopefully after next summer we'll be able to assess where to go
in terms of commercial scale.
Senator Franken. We're getting like the first commercial
cellulosic in Emmetsburg, Iowa, right?
Mr. Chalk. Yes.
Senator Franken. That that would--so I have just some
concern about the algae being, you know, getting 3 times the
credit in a sense of other feed stocks.
Mr. Chalk. Yes. In the bill I don't understand the
rationale for the 3 times.
Senator Franken. Yes, I don't.
Mr. Chalk. We would say that algae is a great pathway
because it doesn't compete with cellulosic ethanol. Cellulosic
ethanol is probably, in terms of traditional algae at least 5
years ahead of traditional algae in terms of technical
maturity. We're not quite there on the light algae that's
produced from light and CO2.
Senator Franken. Can I ask you about coal to liquids
technology which would be a beneficiary to the repeal of
section 526? What are your thoughts either from a personal
standpoint or on behalf of the Administration on CTL as a
technology? Is it viable any time here soon? What are the pros
and cons of it?
Mr. Chalk. Unfortunately that's not under my purview. It's
in the Office of Fossil Energy.
Senator Franken. OK.
Mr. Chalk. So I would like to get back to you on the
record.
Senator Franken. Sure.
Mr. Chalk. On the greenhouse gas profile and so forth on
that.
[The information referred to follows:]
Coal to liquids (CTL) is a commercial process which converts coal
into liquid transportation fuels, such as diesel, gasoline, and jet
fuel. These coal-derived liquid transportation fuels are compatible
with our current petroleum-based fuel distribution infrastructure.
According to the Energy Information Administration's (EIA) Annual
energy Outlook 2011 (AEO2011) Reference case, world oil price is
projected to be just under $125/barrel by 2035 and West Texas
Intermediate (WTI) spot price as of July 14, 2011, was approximately
$95/barrel. Although studies indicate CTL using today's technologies
would be profitable at this oil price, industry is best positioned to
evaluate commercial-scale market opportunities for CTI.
Technology currently in the demonstration/deployment stage such as
carbon capture and storage (CCS) technology, if applied to the CTL
project, would reduce lifecycle emissions of the fuel to roughly
equivalent to conventional petroleum. A co-feeding coal and biomass to
liquids (CBTL) concept is another strategy to reduce greenhouse gas
(GHG) emissions that is currently being explored. Implementing CCS
technology and increasing the percentage of biomass in the feed can
reduce the life cycle GHG emissions of the fuel to below the petroleum
baseline.
Senator Franken. Dr. Kelly, how does a modular nuclear
reactor compare to like that in a submarine? A submarine is how
many megawatts, like 150 or something?
Mr. Kelly. You know, I actually don't know the design
details of the naval submarines. But they are small. I believe
on the same order of magnitude as the SMRs that we're talking
about now.
Senator Franken. OK, so these modular reactors, how do they
compare in terms of cost effectiveness per megawatt compared to
the standard, large nuclear reactors? I understand there's more
flexibility here.
Mr. Kelly. Right. So what the designers have taken on is
the question of how to reduce the initial capital costs for
these reactors by through design.
Senator Franken. Sure.
Mr. Kelly. So they've designed them smaller. At the same
time, they've paid particular attention to the safety case. So
they've made them very safe with lots of cooling, natural
processes and secure. So they've been thinking about the
underground siting. So they've tried to put together the main
attributes we're interested in: cost, safety, security,
together in the design.
But to get the competitive advantage they really are going
to have to rely on factory fabrication, mass production. So
what comes into play here then is this economy of scale verses
economy of mass production. The naval experience though, points
us in the direction that by going to factory fabrication you
can actually lower the cost as you begin to build more units.
You learn through that process how to reduce labor, how to use
more automation, etcetera.
Our initial studies and again, these are very preliminary,
indicate that the economy of mass production is very feasible
with these designs. We believe we can achieve a parity with the
large plants on a per megawatt basis.
Senator Franken. Thank you. My time is up. Thank you, Mr.
Chairman.
The Chairman. Senator Portman.
Senator Portman. Thank you, Mr. Chairman and thank you,
gentlemen, for being here this morning.
I have some follow up questions regarding the small modular
reactors. To me this is really exciting technology. It also
happens to be a place where Ohio plays a role because of our
current role in the research development and also the supply
chain should this become something that utilities take up.
I would say from what I've heard, Dr. Kelly, it is
different in kind also because with the current plants,
typically they're built onsite as compared to have been built
in a factory and then shipped to the plant in parts which is
part of your comments to scale, I guess. That you can create
efficiencies through the way in which it's produced. Is that
accurate?
Mr. Kelly. That's correct, sir. Having a controlled
environment for fabricating critical modules or subcomponents
and then doing just the final assembly at the site, we believe
will significantly reduce the construction costs. That's part
of it.
The other attribute is the quality level. That having
welding done in a controlled environment and doing the
inspections while it's being done can actually then improve the
quality of the product and eliminate the need for rework that
is sometimes found in onsite construction.
Senator Portman. Yes, almost an assembly line type example,
technique.
Mr. Kelly. Exactly.
Senator Portman. Going back to our manufacturing roots in
Ohio and elsewhere.
The second thing that I've heard is that in terms of the
cost, that by having a serial design, in other words, being
able to line up plants over time, reactors over time, utilities
would be able to offset some of the costs by having a revenue
stream including the costs of some of the loan guarantees that
are being discussed. Is that accurate?
Mr. Kelly. That's accurate, so that a revenue can be
generated while you're still building out the multi-modules and
in that type of scenario. The other attribute is that the
licensing, once you have the design certified, it lasts for a
long time. Then so as long as you're building replicas of an
initial model the licensing process is significantly
simplified.
Senator Portman. In terms of the licensing process light
water seems to be the way to go because it would be easier to
get it through the NRC. Is it the right way to go
technologically?
Mr. Kelly. I think for electricity production given what we
have today that is a true statement that it is the best way to
go. We understand the fuel and licensing the fuel are a big
part of the licensing effort. But if we think longer term we
may want these small reactors in more remote locations, have
waste management missions, long live core, export markets,
these types of things. That's where we see the R and D program
coming into play to help develop the technology to enable those
additional missions for SMRs.
Senator Portman. Let's talk about the export potential for
a second. It seems to me this is one area where the United
States is a little bit ahead of some of our competitors in
terms of the technology. I would say that in the same it's not
true since we haven't moved forward with nuclear power for such
a long period of time with regard to other aspects with our
nuclear technology.
Do you think that's accurate and do you think there's a
potential to export this technology and this expertise abroad?
Mr. Kelly. Again, this is based on information that we've
collected over the last year. But in our opinion, there have
been a number of designs that have been put forward over the
last 10 to 15 years for small modular reactors. Many of those
have not gotten traction.
But we now see, at least for these light water reactors,
significant investment by private companies in those designs.
So we believe the time is ripe to pursue forward with the
technologies.
Senator Portman. Do you see export markets?
Mr. Kelly. There are certainly significant interest
internationally. The IAEA has a committee that has polled
countries and there's significant interest. It's primarily
because the electricity demand may be smaller. Their
infrastructure for the plants may be more limited. So there may
be a much better match between the smaller output of these
plants and the indigenous infrastructure in those countries.
Senator Portman. This just seems to be a great opportunity
for us. I think there are members of this committee who are
interested in nuclear power are really interested in having
this move forward. I notice in your testimony you talked about
the $96 million in FY 2012 for the program. You also said that
there's a DOE request for a multiyear, $452 million program
that would be a cost share arrangement with private industry
partners to complete some of these design certifications and so
on.
In your opinion, Dr. Kelly, is this adequate? Is this
funding outline adequate to be able to do what you think is
necessary to have these SMR demos up and deployed and going
forward?
Mr. Kelly. We based our cost estimates on input from
industry. You know, assuming that there's a significant cost
share contribution from industry for this effort we think that
we could get through the design certification up to 2 reactors
with that funding level.
Senator Portman. What date do expect these SMRs to be
operational with that funding level?
Mr. Kelly. We're targeting operation within a decade
perhaps as early as 2018, 2019. We're looking at a 4 to 6 year
process for the design and licensing and then construction
could begin after that.
Senator Portman. My time is up. Thank you, Mr. Chairman. I
have additional questions for the record. Thank you, Dr. Kelly.
The Chairman. Thank you.
Senator Landrieu.
Senator Landrieu. Thank you and following up on Senator
Portman's line of questioning which was excellent and Dr. Kelly
thank you for being here.
The industry of course, based on the packed house today and
the line outdoors and the meetings that have been requested of
the members of this committee, seem to be extremely interested
in accelerating the timeframe of this effort. There seems to be
a tremendous amount of promise for these small nuclear
reactors. I know we've been pressing you for dates and you keep
saying some time in the next 10 years.
Can you be a little bit more specific? My second question
is, is there any barrier that exists that you can identify that
Congress could eliminate for you or is it something that you
and staff need more of or less of to accelerate this process?
Because we would like the United States to be the leader and we
see a real opportunity here.
Mr. Kelly. Right. In terms of the timeframe so at this
point we do not have any contracts with any industrial firms
because our program has not yet been initiated. So, but we have
gotten information from them in terms of what they think.
Senator Landrieu. Why hasn't the program been initiated
yet?
Mr. Kelly. It was requested in 2011 and the continuing
resolution was passed but as a new start it still needs
Congress to approve that as a new start program in FY 2011.
Senator Landrieu. So have we not approved it, Mr. Chairman?
The Chairman. So as I understand what you're saying is that
there's no money in the continuing resolution to begin the
program. Therefore you're going to have to wait until we do our
appropriation for the next fiscal year and hope that----
Mr. Kelly. No, it's been requested that this program be
allowed to be initiated this year. But it's within discussion
with all other type of new start activities.
Senator Landrieu. That's what I'm confused about. I mean, I
think we believe, at least I believe, let me just speak for
myself, that we've given you the green light. We want to
provide the money. We want you to go, green light, fast.
I just keep hearing this, sort of, well, we don't know when
we'll get to it. We've had competing. So try to be a little bit
more clear about your intentions and the Secretary's intentions
to accelerate what we think is a very promising program.
Mr. Kelly. Right. So we think the program that we've
outlined will accelerate the deployment of SMRs relative to
what industry would do on its own. So the cost share component
should be able to bring in by a couple of years what we think
industry would be able to do with private investments.
But nevertheless, going through the regulatory process
which we think is a 4 to 6 year type of effort, allows us then
to have confidence in the safety and security of these units.
At the same time gives these designs a comparative advantage
worldwide. It is recognized around the world.
Senator Landrieu. We appreciate that. I'm all for not
picking one design and moving forward. But I'm also for giving
industry some signals as to what designs could potentially be,
you know, be accelerated more quickly because it's almost like
a chicken or the egg.
I mean, there's a lot of money out there willing to be
invested in a promising technology. But for industries to be
designing 50 different types when the government may be looking
at only 1, 2 or 3, I don't know. I'm going to learn more about
the details of this.
But I understand there are 2 potentially promising maybe
even more designs. But again, it's sort of a partnership that
has to work. You're waiting for industry. They're waiting for
you. Then our taxpayers are, you know, paying more for
electricity than they need to be.
Mr. Kelly. Right.
Senator Landrieu. So I'm going to be pressing for some more
specifics on that.
Let me move to algae really quickly. I've been having some
great visits down to Louisiana. People bring this subject up to
me whether I ask for it or not which indicates to me that
there's a lot of excitement.
We've got one company, Aquatic Energy. They haven't been
able to get a grant for years from the Department. I'm not sure
why because we have a lot of water. We have a lot of sugar. We
have a lot of power plants in Louisiana.
So I'm going to be sending you all another letter about
this. But nonetheless, there are many companies that are
looking to do the research. But in Louisiana we have what all
the byproducts, or the initial products you've discussed here
at the table.
We have the power plants.
We have sugar.
We have sunlight.
We have adequate water.
From what I can understand algae doubles the cells every 12
hours. It produces approximately 6,000 gallons of oil per
hector compared to 200 gallons for soybeans, 1,000 for palm.
They sequester carbon dioxide which you've mentioned. They
don't have to compete with drinking water, the production,
because they can grow in any fresh water source including waste
water which is very interesting.
Algae is very similar to petroleum according to my
producers and pipeline folks. Because you don't have to
retrofit the equipment. It can move through the pipelines, you
know, as designed which is a significant advantage.
I'm sympathetic to the Senators. I represent a lot of corn
interest and sugar cane interest myself. But I think for the
long term future of the country to find a product like this
that doesn't compete as a food source, that can be produced
almost anywhere and have the added benefit of sequestering
carbon is something that we really should be very excited and
enthusiastic about. We are in Louisiana.
So my final question, Mr. Chalk. What do you when you look
out in 5 years, what do you see in terms of algae production
actually in the United States?
Mr. Chalk. I would say in 5 years we should be in a very
good position to be at what we would call demonstration scale.
Right now we're at pilot scale. I mentioned Algenol and
Sapphire and they are really at a pilot scale producing about a
million gallons a year. Hopefully we can scale up at least by a
factor of 10 in 5 years.
I would agree with everything you said. In addition, algae
needs nutrients which the chemical industries near Louisiana
could provide as well. We have requested $10 million in the FY
2012 budget for algae. So hopefully if that money is
appropriated there will be new opportunities for companies to
give us proposals.
Senator Landrieu. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Barrasso.
Senator Barrasso. Thank you very much, Mr. Chairman for
holding this hearing. I want to thank Senators Manchin as well
as Senators Murkowski and Coats for co-sponsoring the American
Alternative Fuels Act.
High gas prices are causing American families pain at the
pump. With gasoline at nearly $4 a gallon, American families
are spending an additional $800 this year to fill up their
tanks. The high prices are hurting families. It affects the
quality of life for families living with children and with
bills and with a mortgage.
It also threatens to undercut our economic recovery. So
this is an issue of economic security as well as national
security. That's why I introduced this bill along with our co-
sponsors.
The American Alternative Fuels Act breaks down the barriers
to alternative fuels. The bill repeals section 526 of the 2007
Energy bill which discourages development of alternative fuels
and limits access to available resources. The bill also
promotes algae based fuels by giving it credit under the
renewable fuel standard. The bill also would give the
Department of Defense authority to enter into long term
contracts for purchasing alternative fuels. This provision will
help spur the development of America's alternative fuel
capacity.
Promoting alternative fuels for the Defense Department will
safeguard the military from price spikes and make us less
dependent on foreign sources of oil. The Department of Defense
sent a letter to Congress in 2010 supporting long term
alternative fuel contracting authority. The letter says, ``The
Department of Defense agrees that alternative fuels can play a
role in ensuring our Nation's energy security.'' It says, ``We
believe long term contracting could help encourage
infrastructure investments to develop a domestic alternative
fuels market.''
This bill would provide the long term contracting authority
that I believe is needed. The American Alternative Fuels Act is
an important step to increasing alternative fuels in the
country. It will foster greater production of American fuels
and help address our reliance on foreign oil.
Mr. Chalk, I believe one of the major challenges for
alternative fuels and alternative vehicles is fuel distribution
infrastructure. Coal based fuels, I believe, don't face the
same challenges, which makes it a much more viable alternative
in the short term. Could you tell me does the Department of
Energy support the use of America's coal resources as a
transportation fuel that can help replace some of the oil
that's imported from overseas?
Mr. Chalk. Yes, as I said earlier we strongly believe
diversification is really critical here. Diversification
including through some of the feed stocks we've been talking
about world enable us to not be overly reliant on petroleum
like we are now. But we also think domestic fuels are important
to keep the money flowing in our economy and in the North
American economy as well when we look at Canada. But
environmental attributes are also very important.
When we look at the attributes of alternative fuels,
greenhouse gas intensity is an important criteria. We are
trying to go in a trend to reduce greenhouse gases. So we are
agnostic in terms of feed stock, but we should be in a downward
trajectory as far as greenhouse gas intensity compared to the
fuels we use today, specifically the benchmark conventional
fuels.
Senator Barrasso. What alternative fuel sources are really
the easiest and the least expensive to deploy widely in the
short term?
Mr. Chalk. Ethanol, as you know, is displacing about 5
percent of our petroleum today. The RFS has called for billions
of additional gallons of bio. Today around 10 or 11 billion
gallons of ethanol will be delivered and the greenhouse gas
benefit is about 20 percent.
Cellulosic ethanol is being delivered today, but in very
small quantities. As we mentioned we're hoping to scale that up
in the next 5 years providing a greenhouse gas benefit of about
60 percent. So the renewable fuel standard is our guidepost. In
the renewable fuel standard there are checks and balances with
greenhouse gases being reduced and sustainability criteria.
Senator Barrasso. Alright. You mentioned Canada. You had a
previous question from Senator Franken about Canada and what's
going on. I don't know if you saw the article in today's New
York Times*. Canada prepares plans B and C in case oil sands
pipeline hits a roadblock.
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* http://www.nytimes.com/2011/06/07/business/energy-environment/
07pipeline.html
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Mr. Chairman, I'd like to, if I could, introduce this as
part of the record.
[The information referred to follows:]
The transportation sector accounts for approximately two-thirds of
the United States' oil consumption and contributes to one-third of the
Nation's greenhouse gas (GHG) emissions. After housing, transportation
is the second biggest monthly expense for most American families.
Earlier this year, the President outlined a portfolio of actions which,
taken together, could cut U.S. oil imports by a third by 2025. These
include programs that would put one million electric vehicles on the
road by 2015; increase the fuel economy of our cars and trucks; as well
as expand the biofuels market and commercialize new biofuels
technologies, including cellulosic and other advanced biofuels.
Senator Barrasso. I just want to highlight a couple of
paragraphs from this.
``Oil producers in Canada have several alternatives for
reaching the United States market. Recent investments by
Chinese companies in the oil sands suggest that a growing
alternative market lies across the Pacific. Ronald Liepert, the
Energy Minister in Alberta said that while Canada would prefer
to sell its oil to the United States, this commodity, he said,
will go someplace.''
Do you agree with that?
Mr. Chalk. I do. As Senator Franken alluded to, this
commodity is going to enter the world market and it's going to
be sold. It's going to be mixed in with whole gasoline or
diesel pool.
Senator Barrasso. So the final paragraph says, ``In
particular China is already a major consumer of other Canadian
natural resources and a small investor in the oil sands.'' Its
Minister of Energy in Alberta quotes, ``I can predict
confidently that at some point China will take every drop of
oil Canada can produce.'' So if the United States is blocked,
it seems to me, that if we're blocked from obtaining this oil,
then it's going to go to China.
Mr. Chalk. We have a goal of reducing our oil imports by a
third by 2025, I believe. Let me check on that record.
Mr. Chalk. The critical part of this is less reliance. So
biofuels is one pathway increasing corporate average fuel
economy which we've done over the last few years. CAFE
standards are increasing from 2010 to 2016 by about 35 percent
in light duty cars and about 25 percent in light trucks.
Finally, electrification through plug in hybrid vehicles
and battery electric vehicles can also reduce our reliance on
foreign oil.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Manchin.
Senator Manchin. Thank you, Mr. Chairman. I want to thank
also Senator Barrasso and Senator Murkowski that were on this
bill. We believe very strongly in it.
West Virginians believe that basically we are too dependent
on foreign oil. It's cost us a tremendous toll as far as in our
human suffering that goes on around the world trying to secure
the energy that we need for this country. We believe that there
is a better alternative. This is why we introduced and why I'm
happy to sponsor or co-sponsor this bill. All we're saying is
we should be using everything humanly possible.
Mr. Chalk, do you believe that we can be energy independent
in the United States?
Mr. Chalk. I believe we can be self reliant. I believe that
we can----
Senator Manchin. At a competitive price, sir?
Mr. Chalk. Yes, sir.
Senator Manchin. At a competitive price?
Mr. Chalk. I believe that. For instance, if you look at our
electric vehicle program right now we have all the tools in the
tool kit. I've been at the Department of Energy for 20 years
and never in a program have we covered all the bases over basic
research, the research and development, demonstration, the
manufacturing to deployment that we have that in the electric
vehicles area.
We've also proposed a hub which gets the best scientists in
the world together for basic energy science related to energy
storage.
Senator Manchin. Do you believe that can be done without
coal?
Mr. Chalk. Pardon me?
Senator Manchin. Do you believe we can have energy
independence without coal?
Mr. Chalk. I believe we can.
Senator Manchin. How?
Mr. Chalk. We wouldn't shut it out through the
diversification----
Senator Manchin. You're 50 percent. You're 50 percent in
this Nation right now, dependent on fossil base. The rest of
the world has more demand. I can tell you in my little state
that there's more demand for the coal being exported, kept the
prices higher for with every industry of our time.
Now if the rest of the world is going to be using the coal
that we're producing in West Virginia. They want to buy up our
coal fields in West Virginia. Here we are not even using it to
our best abilities.
Why would--does that make any sense to you at all?
Mr. Chalk. We are looking at coal. We've got clean coal
programs in the Department.
Senator Manchin. Why isn't the rest of the world looking at
it that way? Why do they just need--they're taking our jobs.
They're taking our economy from us.
We're raising the price. New Jersey just lost a large
plant, 250 jobs. Twelve cents a kilowatt hour was their average
price per kilowatt hour on fuel because of all the regulations
we put on. They came down into the Pennsylvania/West Virginia
area and relocated that plant because of 6 cents.
Don't you think you're going to displace the jobs and the
markets that go with it?
Mr. Chalk. The best opportunity we have for economic growth
are these new technologies that I'm talking about,
electrification, biofuels----
Senator Manchin. Where do you think the electric is going
to come from?
Mr. Chalk. Pardon me?
Senator Manchin. Where do you think this electric is going
to come from at a competitive price?
Mr. Chalk. It will come from the same sources that we have
now. We're hoping to double renewable energy by 2035 with the
President's proposed clean energy standard.
Senator Manchin. So you're saying the Department of Defense
they've already run B-52 bombers on coal to liquids and they
were very pleased with it. But the provisions we have in the
law here don't allow us to develop it.
Mr. Chalk. It doesn't allow the Federal Government to buy
that fuel because it's going backward in terms of greenhouse
gas emissions.
Senator Manchin. It's best for them to buy foreign oil?
Mr. Chalk. Our strategies to develop biofuels and biofuels
can yield great jet fuel and great diesel fuel and we're doing
that through 2 pathways. One is cellulosic and one is through
the algae work that we talked about. Both of these pathways are
what we call drop-in fuels which are totally compatible with
today's jet engines.
Senator Manchin. I just think--do you find it appalling
that we don't have an energy policy in 2011 in the United
States of America?
Mr. Chalk. I believe we do. We have a blueprint for the
energy----
Senator Manchin. Who's this? The bureaucracy or the
lawmakers? I mean, do you find us to be an impediment to you
all moving forward with what you want to do?
Mr. Chalk. I think we have pieces of very good energy
legislation.
Senator Manchin. Don't you think we should be----
Mr. Chalk. We also have an agenda in our blueprint for how
we're going to relieve our dependence----
Senator Manchin. Don't you think the elected
representatives should be leading that and representing the
people that they do serve?
Mr. Chalk. I think that they are. Yes.
Senator Manchin. You think they are?
Mr. Chalk. I think leadership in the Senate Energy and
Natural Resources Committee has been great over the last few
years.
Senator Manchin. Do you support the repealing of section
526?
Mr. Chalk. As I said, we don't have a formal position. It
does not allow the Federal Government to contract or buy fuel
that emits more greenhouse gases than conventional
technologies. So----
Senator Manchin. You're talking about oil base.
Mr. Chalk. So that's the first trend that we want. We want
to address climate change. We want to reduce greenhouse gases.
Senator Manchin. We want jobs. We want an economy. We want
to be able to compete. We don't want wars around the world. We
don't want to continue to be relying on foreign oil.
Don't you think that plays a part also?
Mr. Chalk. I think that all of these goals are mutual. I
think we can get reduced greenhouse gases along with new jobs.
Senator Manchin. Is China worried about reducing greenhouse
gases? Is India worried about reduced greenhouse gases? Is
Indonesia?
Mr. Chalk. China is going to be formidable and they are
already very formidable competitor in all of these areas I'm
talking about: electric vehicles, solar technology, wind
technology.
Senator Manchin. One final question, sir.
Mr. Chalk. They see that as economic growth.
Senator Manchin. Do you believe that we should be
developing these new technologies overseas verses developing
here in the United States?
Mr. Chalk. We want to develop them here in the United
States.
Senator Manchin. Thank you.
The Chairman. I thank you all.
Senator Murkowski, do you have additional questions?
Senator Murkowski. I recognize we have a second panel, Mr.
Chairman. So I don't want to take too much more time. But I
certainly appreciate what my colleague, Senator Manchin, has
been drilling at and what Senator Barrasso said.
You know, as we talk about our dependence on foreign
sources of oil I think we have to recognize that some of our
dependency is making us more vulnerable as a Nation than
others. I appreciate Senator Franken's question and your
response about oil being a global commodity. We all understand
that.
But I certainly am not losing sleep thinking that we are
gaining a substantial source of our oil revenue from our
neighbors in Canada. I do lose a lot of sleep over the reliance
that we have on Middle Eastern sources of oil and how we
reconcile that. But I think that the position that you have
just stated here, Mr. Chalk, on behalf of the Administration
allows for a vulnerability. It enhances our insecurity. I don't
think that's the direction that we should go in.
Yes, we need to be working to reduce our emissions. But as
Senator Manchin has said, there are technologies that we can be
advancing in this country that allow us to use our most
affordable resource. Let's use it smartly. Let's use the
technologies to have the jobs, to have the energy and to reduce
our reliance.
Mr. Kelly, I wanted to ask you one very quick question. I
had asked you about some of the hurdles with the SMRs. A
question came up about the control rooms that would be required
for the reactors.
In existing reactors there's one control room for each
reactor. But in a small modular reactor set up would you still
require one control room for each reactor or would there be one
control room for the entire plant? Have we worked that through
yet?
Mr. Kelly. That particular question is still being worked
by the Nuclear Regulatory Commission. They are studying that.
They're pointing toward the need to collect data on how human
and machines work together in order to quantify how many
operators, how many shift supervisors, etcetera.
We----
Senator Murkowski. Is that information coming as quickly as
you would like?
Mr. Kelly. I believe so. It's certainly going to be in time
for the design activity that we're talking about. They have a
very public process. They have the issues. They will publish
their findings and then seek public comment.
At this point it seems to be heading in a direction that's
favorable.
Senator Murkowski. OK.
Thank you, Mr. Chairman.
The Chairman. Do others have additional questions or can we
go to the second panel?
Thank you both very much for your testimony. We appreciate
it. We will move now to the second panel.
Dr. Edwin Lyman, who is the Senior Scientist with the
Global Security Program at the Union of Concerned Scientists.
Mr. Joe Colvin, who is the President of the American
Nuclear Society.
Dr. James T. Bartis, who is Senior Policy Researcher with
RAND Corporation.
Mr. Brian Siu, who is Policy Analyst with the Natural
Resources Defense Council.
We thank all of you for being here. We'll have the same
ground rules for you as we do with all witnesses. That is we
will include your entire statement in the record as if read. We
would appreciate it if you would each take about 5 minutes and
give us the main points that you think we need to understand
from your testimony.
Dr. Lyman, why don't you begin, please?
STATEMENT OF EDWIN LYMAN, SENIOR SCIENTIST, GLOBAL SECURITY
PROGRAM, UNION OF CONCERNED SCIENTISTS
Mr. Lyman. Good morning. On behalf of the Union of
Concerned Scientists, I would like to thank Chairman Bingaman,
Ranking Member Murkowski and the other members of the committee
for the opportunity to provide our views on the--some of the
important legislation that's being considered today.
The Union of Concerned Scientists is neither pro nor
antinuclear power. But we have served as a nuclear safety and
security watchdog for over 40 years. UCS is also deeply
concerned about global climate change. We have never ruled out
an expansion of nuclear power as an option to help reduce
greenhouse gas emissions provided that it is affordable
relative to other low carbon options and that it meets very
high standards of safety and security.
However, the Fukushima Daiichi crisis has revealed
significant vulnerabilities in nuclear safety around the world.
If we want to reduce the risk of another Fukushima in the
future, new nuclear plants will have to be substantially safer
than the current generation. To this end we appreciate the
initiative of Members of Congress who seek to bolster the
development of innovative nuclear technologies through
legislation such as S. 512. But to help ensure the Energy
Department will spend taxpayer money only on technologies that
will actually increase nuclear safety in the end, we believe
that S. 512 should provide more stringent and specific safety
criteria than it currently does.
In our view small modular reactors may pose some benefits
but they're likely to be modest at best. But on the other hand
unless they're carefully designed, licensed, deployed and
inspected, small modular reactors could actually pose greater
safety, security and proliferation risks than large reactors.
This has to be avoided.
Small modular reactors start out with a very big cost
disadvantage because of the economies of scale. By standard
formula the overnight capital cost per kilowatt of a 125
megawatt reactor would be nearly two and a half times greater
than that of a 1,250 megawatt unit for all other factors being
equal. Now advocates of small reactors argue there are a whole
host of other factors that could help reduce those costs. But
one estimate I'm aware of in a 2007 paper by Westinghouse
actually found when they quantified these factors they could
not overcome the big burden or the big cost disadvantage from
economies of scale. At best you might achieve parity with large
reactors per kilowatt which is what Dr. Kelly said in the first
panel.
Given there is no apparent capital cost advantage for SMRs
the advocates of SMRs have been pushing to reduce the operating
maintenance costs. Dr. Kelly testified or told the Nuclear
Regulatory Commission in March that the Nuclear Regulatory
Commission's framework, regulatory framework for small modular
reactors will be a very large determinant into the economic
feasibility of these plants. As a result the industry has been
pressing the NRC to reduce regulatory requirements based on the
idea that small modular reactors will be inherently safer than
large reactors.
Now even a 50 megawatt reactor will still contain an
enormous quantity of fission products. There has to be
significant protection against accidents or sabotage. So
cutting regulatory requirements is not really the thing to do
especially in light of the Fukushima accident.
What we found from Fukushima is that we need significant
margins of safety to protect against extreme events. We believe
the NRC should be increasing nuclear safety requirements across
the board today rather than considering reducing them for SMRs.
Because even if an SMR has inherent safety advantages you don't
want to erode those advantages by reducing the safety margins
and you may end up with something which is no safer than what
we have today.
Consider the reduction of emergency planning zones which
some have advocated. We've seen in Fukushima that significant
radioactive contamination has occurred well beyond the ten mile
zone which is the current regulatory standard in the United
States for emergency planning. In fact the levels would trigger
resettlement if they occurred here in the United States. So I
don't think we should be talking about reducing emergency
planning zones today for any type of reactor.
Also we've seen how the impact of multiple reactors at one
site can greatly complicate dealing with crises as we've seen
in Fukushima. You have to consider the interactions between the
reactors. For small modular reactors we might have up to 12
modules at a site. You have to have additional safeguards to
ensure that you can deal with multiple events and you do not
want to do things like reduce the number of qualified operators
that can deal with a significant confusing crisis like we saw
at Fukushima.
We've also seen that multiple safety systems disabled a
reactor can lead to a rapid degradation of the core and
meltdown. Sabotage can actually simulate that and even cause a
faster meltdown than we saw in Fukushima. So you do not want to
actually reduce security requirements which is another aspect
which has been considered.
So we believe that the legislation should really encourage
the Department of Energy to pursue designs that only have
greatly increased safety and security standards relative to
current reactors. Should also not accelerate or put undue
pressure on the Nuclear Regulatory Commission to accelerate
licensing of novel designs because you're going to pay in the
end later if you take short cuts now.
I will stop my remarks. Be happy to take your questions.
Thank you.
[The prepared statement of Mr. Lyman follows:]
Prepared Statement of Edwin Lyman, Senior Scientist, Global Security
Program, Union of Concerned Scientists
Good morning. On behalf of the Union of Concerned Scientists, I
would like to thank Chairman Bingaman, Ranking Member Murkowski, and
the other distinguished members of the committee on Energy and Natural
Resources for the opportunity to provide our views on S. 512, the
Nuclear Power 2021 Act, and S. 1067, the Nuclear Energy Research
Initiative Improvement Act of 2011.
The Union of Concerned Scientists is neither pro nor anti-nuclear
power, but has served as a nuclear power safety and security watchdog
for over 40 years. UCS is also deeply concerned about global climate
change and has not ruled out an expansion of nuclear power as an option
to help reduce greenhouse gas emissions-provided that it is affordable
relative to other low-carbon options and that it meets very high
standards of safety and security. However, the Fukushima Daiichi crisis
has revealed significant vulnerabilities in nuclear safety. If we want
to reduce the risk of another Fukushima in the future, new nuclear
plants will have to be substantially safer than the current generation.
To this end, we appreciate the initiative of members of Congress who
seek to bolster the development of innovative nuclear technologies
through legislation such as S. 512. But to help ensure that the Energy
Department will spend taxpayer money only on technologies that will
actually increase nuclear safety, we believe that S. 512 should provide
more stringent and specific safety criteria than it currently does.
S. 512 supports the development and licensing of two small modular
reactor (SMR) designs, which are defined by the bill to be less than
300 electric megawatts. In our view, any advantages that SMRs may offer
over larger reactors would be modest at best. On the other hand, unless
they are carefully designed, licensed, deployed and inspected, SMRs
could pose greater safety, security and proliferation risks than large
reactors.
Because nuclear reactor costs follow the principle of economies of
scale, smaller reactors will begin with a large economic disadvantage.
For example, a standard formula indicates that the overnight capital
cost per kilowatt of a 125 megawatt reactor would be roughly 2.5 times
greater than that of a 1250 megawatt unit, all other factors being
equal. Advocates argue that SMRs offer advantages that can offset this
economic penalty, such as a better match of supply and demand, reduced
up-front financing costs, reduced construction times, and an
accelerated benefit from learning from the construction of multiple
units. However, a 2007 paper by Westinghouse scientists and their
collaborators that quantified the cost savings associated with some of
these factors did not find that they could overcome the size penalty:
the paper found that at best, the capital cost of four 335 megawatt
reactors was slightly greater than that of one 1340 megawatt
reactor.\1\
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\1\ M.D. Carelli et al., ``Economic Comparison of Different Size
Nuclear Reactors,'' 2007 LAS/ANS Symposium, Cancun, Mexico, 1-5 July
2007. Available at http://www.las-ans.org.br/Papers%202007/pdfs/
Paper062.pdf
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Given that there is no apparent capital cost benefit for SMRs, it
is not surprising that the SMR industry is seeking to reduce operating
and maintenance (O&M) costs by pressuring the Nuclear Regulatory
Commission to weaken certain regulatory requirements for SMRs. Deputy
Assistant Energy Secretary John Kelly told the Nuclear Regulatory
Commission in March that the NRC's regulatory requirements for SMRs
will ``directly influence the operating cost, which will be a large
determinant into the economic feasibility of these plants.''
For example, the industry argues that regulatory requirements for
SMRs in areas such as emergency planning, control room staffing and
security staffing can be weakened because SMRs contain smaller
quantities of radioactive substances than large reactors and therefore
pose lower risks to the public. The NRC is currently considering the
technical merits of these arguments. But even a single 50-megawatt SMR
will contain an enormous quantity of radioactive fission products and
could pose a severe public health threat if the core is damaged by an
accident or sabotage.
Moreover, small reactors will not necessarily be safer than large
reactors on a per-megawatt basis. Simply put, the risk to the public
posed by one 1200-megawatt reactor will be comparable to that posed by
six 200-megawatt reactors (assuming that all units are independent),
unless the likelihood of a serious accident is significantly lower for
each small reactor. But such an outcome will not be assured under the
current regulatory regime. The Nuclear Regulatory Commission has a
long-standing policy that new nuclear reactors, large or small, are not
required to be safer than operating reactors. One consequence of this
policy is that new reactor designs that have inherent safety features
not present in current reactors may not actually end up being safer in
the final analysis if designers compensate by narrowing safety margins
in other areas, such as by reducing containment strength or the
diversity and redundancy of safety systems. Any safety advantages will
be eroded further if the NRC allows SMR owners to reduce emergency
planning zones and the numbers of operators and security officers per
reactor.
One of the early lessons from Fukushima is that prevention of
serious nuclear accidents requires significant margins of safety to
protect against extreme events. After Fukushima the NRC should be
strengthening nuclear safety requirements across the board, rather than
weakening them for SMRs. Consider the following examples:
Emergency planning zones around U.S. nuclear plants extend
to a radius of ten miles. Yet significant radiological
contamination from the Fukushima accident has been detected
well beyond a distance of ten miles from the plant. In fact,
radiation levels high enough to trigger resettlement if they
occurred in the United States have been detected over 30 miles
away from the Fukushima site. The discussion we should be
having today is whether current emergency planning zones need
to be increased, not whether we can shrink them for SMRs.
As we have seen in Fukushima, nuclear plants with multiple
reactors that experience severe conditions present extreme
challenges. At Fukushima, the need to manage multiple
simultaneous crises resulted in what sometimes appeared to be a
game of ``whack-a-mole'' as the plant operator was forced to
shift limited resources from one unit to another as new
problems cropped up. These considerations make multiple-reactor
sites less attractive from a safety perspective. Yet many plans
entail multiple SMRs at one site-in some proposals, up to
twelve SMRs would be co-located. The need to maintain adequate
physical separation between individual SMRs and sufficient
equipment and resources to ensure all the reactors could be
safely shutdown and managed in an emergency would likely drive
up costs.
Fukushima also demonstrated how rapidly a nuclear reactor
accident can progress to a core meltdown if multiple safety
systems are disabled. A well-planned and executed 6 terrorist
attack could cause damage comparable to or worse than the
earthquake and tsunami that initiated the Fukushima crisis,
potentially in even less time. And although Osama bin Laden is
gone, the terrorist threat to domestic infrastructure may
actually increase over time as al Qaeda seeks to retaliate.
This is the wrong time to consider reducing security
requirements for nuclear power plants, regardless of their
size.
UCS is also concerned that reducing safety and security
requirements for SMRs could facilitate their sale to utilities or other
entities in the United States and abroad that do not have prior
experience with nuclear power. Some SMR vendors argue that their
technology is well-suited for deployment to remote areas, military
bases, and countries in the developing world that have relatively low
electric demand and no nuclear experience or emergency planning
infrastructure. In the United States, for example, a rural electric
cooperative might be interested in replacing an old coal-fired plant
with a small nuclear plant. As another example, high-temperature gas-
cooled SMR vendors are marketing reactors to the chemical industry
worldwide for the production of process heat. However, SMRs deployed in
this manner would raise additional safety, security and proliferation
concerns compared to their deployment by experienced nuclear utilities.
The distributed deployment of small reactors would put great
strains on licensing and inspection resources. Nuclear reactors are
qualitatively different from other types of generating facilities, not
least because they require a much more intensive safety and security
inspection regime. Similarly, deployment of individual small reactors
at widely distributed and remote sites around the world would strain
the resources of the International Atomic Energy Agency (IAEA) and its
ability to adequately safeguard reactors to guard against
proliferation, since IAEA inspectors would need to visit many more
locations per installed megawatt around the world. Maintaining robust
oversight over vast networks of SMRs around the world would be
difficult, if even feasible.
UCS does not support the deployment of SMRs to any entity that does
not have a demonstrated or plausible capability to manage and operate
nuclear facilities safely. UCS believes that the United States needs to
carefully control the deployment of SMRs, especially those that it
supports through proposed cost-sharing programs.
How can legislation address these problems? S. 512 has a provision
that requires DOE to take into account ``the efficiency, cost, safety
and proliferation resistance of competing reactor designs.'' We would
suggest that even more stringent factors be applied. Congress should
direct DOE to consider only designs that have the potential to provide
significantly greater levels of safety and security than currently
operating reactors (and hence exceed NRC requirements). As a corollary,
Congress should prohibit DOE from selecting designs with a business
case that depends on a weakening of NRC safety and security regulations
or marketing reactors to countries with inadequate safety rules.
S. 512 requires DOE to establish a program to develop designs for
two SMRs and then to obtain design certifications from the NRC by
January 1, 2018 and combined operating licenses by January 1, 2021. We
are concerned about the establishment of statutory requirements of
dates certain for the completion of licensing actions on these new
reactor designs. This requirement could put undue political pressure on
the NRC to accelerate its reviews of these novel technologies (if, for
instance, DOE blames the NRC for schedule delays), and potentially
force it to cut short its examination of complex technical issues. It
would be counterproductive to undermine the thoroughness of the review
of new reactor designs, because it would be much more costly to fix
problems discovered after construction has already begun. Therefore, we
respectfully suggest that while the bill could instead impose a
deadline on DOE to submit its licensing applications to the NRC, it
should not impose a deadline on the final approval of those
applications, but rather let the NRC reviews proceed at a pace
determined by the technical complexity of the reviews.
We would also like to comment on S. 1067, which requires the
Secretary of Energy to conduct a research program to ``lower the cost
of nuclear reactor systems.'' We suggest that the bill direct the
Secretary to ``conduct research to lower the cost of nuclear reactor
systems while increasing their levels of safety and security.'' After
all, one can always reduce costs by cutting corners: the real research
challenge is how to reduce cost without compromising safety. Given that
the Fukushima accident review may well indicate the need for
additional-and potentially costly-safety requirements for both
operating and new reactors, there is an acute need for research on how
to enhance safety as cost-effectively as possible.
Thank you for your attention.
The Chairman. Thank you very much.
Mr. Colvin, go right ahead.
STATEMENT OF JOE COLVIN, PRESIDENT, AMERICAN NUCLEAR SOCIETY
Mr. Colvin. Good morning. Thank you, Mr. Chairman and
Ranking Member Murkowski and members of the committee.
As indicated I am here as my capacity as President of the
American Nuclear Society or ANS. ANS represents the more than
11,000 men and women of the American nuclear community
including utilities, national laboratories, government, State
agencies, industrial vendors, suppliers, universities and the
whole area of medicine. Our members have been involved with
small reactors for almost the entire 55 year history of their
organization including the Experimental Breeder Reactor, EBR-1,
the first reactor to produce electricity in the U.S. in 1951
and with the 10 megawatt USS Nautilus reactor, the original SMR
which paved the way for the nuclear navy and today's commercial
water cooled reactor fleet.
The ANS and its membership believe that the development of
new generation of SMRs has the potential to make a significant
contribution to our long term energy, economic and national
security. They offer a unique flexibility. Has been discussed
earlier by Dr. Kelly, they can produce large quantities of
fresh water through desalination, can be used to produce
hydrogen and biofuels, deployed in remote areas to produce
energy for towns and military installations, heat for mining
operations and unconventional oil recovery. SMRs could also be
an attractive alternative for smaller U.S. utilities,
especially in the Midwest, who seek to replace old coal fired
generating stations because of environmental considerations.
Today's SMR designs also employ the latest generation suite
of safety features. Obviously we're all saddened by the events
at Fukushima, the earthquake and tsunami, and the impact on the
Japanese population as well as the world as a result of
Fukushima Daiichi nuclear power plant events. In the wake of
those events we must reiterate our commitment to maintaining
the highest levels of safety.
Frankly, in my view the best way to improve long term
nuclear safety is to hasten deployment of a new generation of
reactors that have advanced safety systems. New SMR designs
employ features such as underground containment structures that
can be filled with water to provide indefinite decay heat
removal without external power or diesel generators, ``Integral
designs'' that place steam generators and pressurizers within
the reactor pressure vessel thereby eliminating the threat of
primary coolant loop ruptures and extensive use of natural
phenomena such as convection and conduction in place of pumps,
valves and pipes.
There's also a national security aspect to the development
of U.S. SMR technology that must be considered. Beyond the
United States, over 60 countries have expressed interest in new
nuclear power plants. Some of those countries already have
nuclear power plants, others are developing Nations who do not
have the electrical grid that can support a 1,000 megawatt
nuclear plant.
While U.S. nuclear technology is still considered to be the
gold standard in safety and reliability, the nuclear supply
market has been increasingly international in the last 30
years. If the U.S. is unwilling or unable to develop exportable
SMR technology there are several other Nations who are prepared
to meet the growing demand. I believe it's clearly preferable
to have the active U.S. engagement in global nuclear
marketplace rather than seeding that territory to non U.S.
suppliers that may always not share our approach to our safety
and non-proliferation.
ANS fully supports the legislation. Although we're a
501(c)(3) organization so normally that's not--we do not
normally support legislation as a process. But I can
confidently say that S. 512 represents a strong foundational
effort to augment the Federal Government's role in U.S. SMR
development.
The 2 bills including S. 512 and S. 1067 would give DOE the
additional tools to address the technical aspects of nuclear
energy which have the greatest impact on installed costs. The 2
bills focus on advanced light water SMR technology which I
think clearly is the next target for commercialization. I urge
the committee and the Administration to keep the pedal down on
Gen Four reactor technology. Both high temperature gas and
liquid metal cool fast reactor systems offer true game changing
potential to address long term carbon emissions and to turn
nuclear waste into a clean energy fuel.
In closing I would like to offer the following
observations.
It's critically important that the U.S. transition to a
stable, long term energy policy emphasizes reliability,
affordability, predictability in pricing, diversity of supply
and well paying, domestic, job growth. Under any conceivable
scenario nuclear energy will be an indispensible component of
our nuclear energy future. SMR technology will likely play an
increasing important role.
Thank you for the opportunity to be with you today. Thank
you.
[The prepared statement of Mr. Colvin follows:]
Prepared Statement of Joe Colvin, President, American Nuclear Society
Thank you, Chairman Bingaman and members of the committee for the
opportunity to testify before the committee today. I am here in my
capacity as President of the American Nuclear Society (ANS), the
premier U.S. professional society dedicated to promoting the beneficial
uses of nuclear science and technology. The ANS has roughly 11,000
national members and another 10,000 plus members of 51 local sections
spread across 38 states. We also have 38 student sections at major U.S.
universities and 11 international sections in other countries. Our
members span the nuclear enterprise, including: utilities, national
laboratories, government and state agencies, industrial vendors and
suppliers, universities, and medicine.
ANS members have been involved with small reactors for almost the
entire 55 year history of the organization, including the Experimental
Breeder Reactor (EBR-1), the first reactor to produce electricity in
1951, and the 10 MW USS Nautilus reactor--the original SMR--which paved
the way for the nuclear navy and today's commercial water cooled
reactor fleet.
More recently, through its Special Committee on SMR Generic
Licensing Issues, ANS has worked with experts in the U.S. nuclear
industry, universities, national laboratories, and government agencies
to identify key regulatory impediments in the areas of licensing, risk
informed regulation, physical security, staffing requirements, which
could hinder timely deployment of a new generation of SMRs, and offered
consensus solutions to address them.
My testimony today will focus on 3 main points:
1. SMRs have great potential to contribute to U.S. energy,
economic and national security.
2. S. 512, the Nuclear Power 2021 Act is an important step
toward the near-term deployment of U.S. SMR technology.
3. There are other SMR related technical and regulatory
challenges that need to be addressed by the federal government.
1. The Potential of Small Modular Reactors
The ANS and its membership believe that the development of a new
generation of small modular reactors has the potential to make a
significant contribution to our long-term energy, economic, and
national security. SMRs offer several unique advantages over their
larger brethren.
First, they provide great operational flexibility. SMRs can be
deployed in arid regions to produce large quantities of fresh water
through desalination. They can be used as a heat source for industrial
processes, including hydrogen production, fertilizers, production of
synthetic fuels and biofuels. They can be deployed in remote areas to
produce energy for towns and military installations as well as heat for
mining operations and unconventional oil recovery. SMRs could be an
attractive alternative for smaller U.S utilities, especially in the
Midwest, who seek to replace their old, coal-fired generating stations
because of environmental considerations. These facilities would already
have the necessary water, rail and transmission facilities and the
necessary infrastructure, thereby simplifying the installation process.
Second, new SMR designs employ the latest generation suite of
safety features. Obviously we are all saddened by the Japanese
earthquake and tsunami and its impact on the Fukushima Daiichi nuclear
power plant. In the wake of these events, we must reiterate our
commitment to maintaining the highest levels of safety.
Frankly, in my view, the best way to improve long-term nuclear
safety is to hasten deployment of a new generation of reactors that
have advanced safety systems. New SMR designs employ features such as
underground containment structures that can be filled with water to
provide indefinite decay heat removal without external power or diesel
generators; ``integral'' designs'' that place steam generators and
pressurizers within the reactor pressure vessel, thereby eliminating
the threat of primary coolant loop ruptures; and extensive use of
natural phenomena such as convection and conduction in place of pumps,
valves and pipes.
Third, there is a national security aspect to the development of
U.S. SMR technology that must be considered. Beyond the U.S., over 60
countries have expressed interest in developing new nuclear energy
generation capacity. While some of these countries already have
existing nuclear plants, others would be new entrants, many of whom are
from the developing world which do not have electrical grids that can
absorb a 1 GW nuclear plant in their current configuration.
While U.S. nuclear technology is still considered to be the gold
standard in safety and reliability throughout the world, the nuclear
supply infrastructure has become thoroughly internationalized in the
last three decades. If the U.S. is unable or unwilling to develop SMR
technology which can be exported internationally as well as used
domestically, there are several nations who are prepared to meet the
growing global demand. I believe it is clearly preferable to have
active U.S. involvement in the global nuclear marketplace, rather than
ceding the territory to non-US suppliers that may not always share our
approach toward safety and nonproliferation.
2. S. 512 the Nuclear Power 2021 Act
As a 501(c)(3) not-for-profit organization, the American Nuclear
Society does not normally endorse congressional legislation. However, I
can say confidently that S. 512, The Nuclear Power 2021 Act, represents
a strong foundational effort to augment the federal government's role
in U.S. SMR development. It would provide the US Department of Energy
(DOE) with the authority to enter into public-private partnerships to
develop and license small modular reactors. We believe this would
significantly accelerate U.S. SMR reactor development in a manner that
furthers U.S. environmental, foreign-policy, and economic objectives.
This legislation builds on the proven success of the Nuclear Power 2010
(NP 2010) program, which expedited the design and licensing activities
of the Westinghouse AP 1000 and GEH ESBWR reactors, enabled the
submission of over 15 combine construction permit and operating license
(COL) applications for NRC review, while attracting billions in private
investment in creating tens of thousands of jobs.
3. Other challenges to SMR development/deployment
ANS encourages Congress to consider other aspects of SMR
development. These include accelerating the development of SMR-related
codes and standards; updates to U.S. laws and regulations that would
facilitate accelerated maturation and transfer of SMR-relevant
technology from the national laboratories to U.S. industry and
regulators; streamlining export control laws to minimize the incentives
to ``off-shore'' SMR component manufacturing; and integration of
university-based U.S. nuclear science and engineering education
programs with SMR development efforts to ensure we have technically
skilled workforce to design, deploy, and operate these reactors in the
future. Furthermore, I strongly encourage the U.S. Nuclear Regulatory
Commission (NRC) to move forward with alacrity in addressing the
outstanding generic licensing and regulatory issues, including
instrumentation and control, required staffing levels, unique design
features, enabling construction activities during operations, and
security requirements.
In closing, I would like to offer the following observation: it is
critically important that the U.S. transition to a stable long-term
energy policy emphasizes reliability, affordability, predictability-in-
pricing, diversity of supply and well-paying domestic job growth. Under
any conceivable scenario, nuclear energy will be an indispensable
component of our energy future, and SMR technology will likely play an
increasingly important role.
The Chairman. Thank you for that testimony.
Dr. Bartis, go right ahead.
STATEMENT OF JAMES T. BARTIS, SENIOR POLICY RESEARCHER, RAND
CORPORATION
Mr. Bartis. Mr. Chairman and distinguished members, thank
you for inviting me to testify on S. 937, the American
Alternative Fuels Act of 2011. My remarks today are based on
RAND studies that cover a spectrum of alternative fuels
including oil shale, coal to live liquids, oil sands and
biofuels. As is RAND's policy my testimony neither endorses nor
opposes specific legislation.
An important finding from this body of research centers on
the vastness of the resource base for alternative fuels in the
United States. The largest deposits of oil shale in the world
are located in Western Colorado and Eastern Utah. The potential
yield is about triple the oil reserves of Saudi Arabia.
Our coal resource base is also the world's largest
dedicating only 15 percent of recoverable coal reserves to coal
to liquid production would yield roughly 100 billion barrels of
liquid transportation fuels, enough to sustain 3 million
barrels per day for more than 90 years.
Our biomass resource is also appreciable offering to yield
over 2 million barrels per day of liquid fuels. Over the longer
term, as we have heard earlier today, advanced research in
photosynthetic approaches for alternative fuels production
offers the prospect of even greater levels of sustainable
production.
Our research at RAND also examined the benefits that a
commercial alternative fuels industry would yield to our
Nation's economic well being and national security. In
particular a national energy policy directed at:
One, promoting increased energy efficiency.
Two, the development of a commercial, alternative fuels
industry would weaken the ability of the OPEC cartel to raise
world oil prices by limiting production.
This benefit alone is substantial. Every $10 increase in
the price of crude oil costs the average American household
over $550 per year. That's because they use more than just
gasoline.
Another important benefit of some alternative fuels is the
reduction in life cycle, greenhouse gas emissions as compared
to their petroleum counterparts. Alternative fuels have offered
significant reductions include some, but not all, renewable
fuels and some, but not all, fuels manufactured from a blend of
coal and biomass.
Presently the legislation governing the energy policies of
the United States strongly promotes the production of
alternative fuels that can be derived from renewable resources.
These policies have successfully promoted the extensive use of
corn derived ethanol in gasoline powered vehicles. This has
yielded energy security benefits but economic and environmental
impacts have been mixed.
Moving beyond food derived fuel will be difficult.
Production of cellulosic biofuels is well below the target set
by Congress. Our examination of near term renewable oils such
as seed oils and waste oils and fats indicates that the
national production potential is extremely limited.
Meanwhile U.S. Federal energy policies give very little
support to any alternative fuel produced from coal or for that
matter, any other fossil energy source. In doing so, we forgo
the opportunity to develop a domestic industry that has the
potential of producing millions of barrels per day of
alternative fuels that can reduce dependence on imported oil
while not increasing greenhouse gas emissions. Moreover over
the long term liquid fuels derived from the combination of coal
and biomass could provide a new market for coal that could
counter the adverse local and regionally economic impacts of
reduced demand for coal in power generation due to potential
future measures to reduce greenhouse gas emissions.
Our analysis indicates that there are serious
misperceptions regarding the use of coal as opposed to biomass
for alternative fuels production. Coal facilities do have
higher capital costs, but their through put is also higher. Our
research also shows that alternative fuels derived from coal or
a mixture of coal and biomass have production costs that are
generally more favorable when compared to those of fuels
produced from most biomass resources.
While there is no doubt that additional coal mining raises
safety, health and environmental issues, inappropriate
production of biomass could also lead to serious, adverse
environmental impacts including loss of biodiversity, diversion
of water resources and water pollution. With regard to worker
health and safety, agriculture ranks among the most hazardous
industries. For these reasons we suggest that when framing new
energy legislation Congress refrain from establishing resource
specific goals and instead focus on desired outcomes such as
conventional petroleum, displaced and life cycle greenhouse gas
emissions. More to the point, I would suggest consideration of
revising the renewable fuels standards so that they become
``the clean and secure fuels standards.''
With regard to the provisions contained in S. 937, my
written testimony addresses sec. 3 and sec. 5-7. My overall
assessment of these sections is that enactment of any or all
will not appreciably influence future alternative fuels
production in the United States. To do so requires legislation
that is a bit more comprehensive and that focuses on goals, as
I mentioned, including environmental goals and establishes
broad based mechanisms that are free of technology, resource,
regional or sector bias.
This concludes my remarks. Thank you.
[The prepared statement of Mr. Bartis follows:]
Prepared Statement of James T. Bartis\1\ The RAND Corporation
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\1\ The opinions and conclusions expressed in this testimony are
the author's alone and should not be interpreted as representing those
of RAND or any of the sponsors of its research. This product is part of
the RAND Corporation testimony series. RAND testimonies record
testimony presented by RAND associates to federal, state, or local
legislative committees; government-appointed commissions and panels;
and private review and oversight bodies. The RAND Corporation is a
nonprofit research organization providing objective analysis and
effective solutions that address the challenges facing the public and
private sectors around the world. RAND's publications do not
necessarily reflect the opinions of its research clients and sponsors.
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testimony on s. 937 the american alternative fuels act of 2011\2\
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\2\ This testimony is available for free download at http://
www.rand.org/pubs/testimonies/CT364/.
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Chairman and distinguished Members: Thank you for inviting me to
testify on S. 937, the American Alternative Fuels Act of 2011. I am a
Senior Policy Researcher at the RAND Corporation with over 30 years of
experience in analyzing and assessing energy technology and policy
issues. At RAND, I have been actively involved in research directed at
understanding the costs and benefits associated with the use of
domestically abundant resources, such as coal, oil shale and biomass,
to lessen our nation's dependence on imported petroleum. The findings
that I will discuss today are drawn from studies sponsored and funded
by the National Energy Technology Laboratory (NETL) of the U.S.
Department of Energy, the United States Air Force, the Federal Aviation
Administration, the National Commission on Energy Policy, the U.S.
Chamber of Commerce, and the Defense Logistics Agency.
Today, I will discuss the strategic importance of alternative fuels
and our assessment of the most promising candidates for near-term
production. I will also specifically address sections 3 and 5 through 7
of S. 937. These are the sections of the proposed legislation where I
hope to provide useful insights to the committee based on our recent
research on alternative fuels and energy security.
The Importance and Value of Alternative Fuels
The United States' consumption of liquid fuels is about 19 million
barrels per day (bpd). Meeting this demand requires importing about 10
million bpd of petroleum, mostly in the form of crude oil. In a world
that consumes about 85 million bpd of petroleum products, the United
States holds first place in total consumption and in the magnitude of
its imports.
Currently the average price of crude oil imports is over $105 per
barrel. At these prices, oil imports will cost U.S. oil consumers
nearly $400 billion per year. Considering both direct and indirect
expenditures for energy, each $10 per barrel increase in the price of
world oil costs the average U.S. household over $550 per year.
The national security consequences of the dependence of the United
States, and its allies and trading partners, on imported oil are well-
documented.\3\ All oil consumers are vulnerable to increased prices for
oil when oil exporters are able to reduce supplies on the world oil
market. Most serious would be the economic impact of a large and
extended disruption in global oil supplies as a result of conflict or
natural disaster. There is also the problem of wealth transfers to the
governing regimes of some oil exporting nations, such as Libya,
Venezuela and Iran, that pursue policies that run counter to the
national security interests of the United States and its allies. When
oil prices are high, these nations have more funds to invest in
purchasing armaments and building their own industrial bases for
manufacturing munitions. High oil prices also provide more funds that
may eventually find their way to large terrorist organizations such as
Hamas and Hizballah.
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\3\ Imported Oil and U.S. National Security, Crane et al., Santa
Monica, Calif.: RAND Corporation, MG-838-USCC, 2009.
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Alternative fuels are already being produced in many countries.
Examples include corn-derived ethanol in the United States and sugar-
derived ethanol in Brazil, synthetic crude from oil sands in Canada,
coal-to-liquids production in South Africa, natural gas-to-liquids
production in Qatar and Malaysia, and small amounts of biodiesel
production in the United States and Europe. Expanding alternative fuels
production beyond these initial efforts would offer economic and
national security benefits to the United States. Because it provides a
substitute for products refined from crude oil, increased production of
alternative fuels will reduce demand for crude oil, resulting in lower
world oil prices to the direct benefit of all oil consumers. Lower
world oil prices and greater supply diversity also mitigate the adverse
national security impacts of imported oil.
About 45 percent of the operating refinery capacity of the United
States is located in the hurricane-prone states of Texas, Louisiana,
and Mississippi. Because alternative fuels production would likely
occur in diverse locations throughout the United States, a domestic
alternative fuels industry would improve the resiliency of the
petroleum supply chain, especially against natural disasters.
Increasing the geographical diversity of fuels production implies that
a smaller fraction of supplies would be affected by any natural
disaster. As such, we anticipate less economic disruption as the
remaining supplies are allocated to users.
For certain alternative fuels, another important benefit could be a
reduction in lifecycle greenhouse gas emissions, as compared to their
counterparts produced from conventional petroleum. Alternative fuels
that offer significant reductions include some, but not all, types of
renewable fuels and fuels manufactured from a blend of coal and
biomass.
But if alternative fuels are to achieve these economic, security,
and environmental benefits, combined global and domestic production of
alternative fuels must be an appreciable fraction of global and
domestic demand for liquid fuels. Specifically, the need is for an
alternative fuel portfolio that can competitively produce millions of
barrels per day in the United States. Alternative fuel advocates often
use gallons per year when describing production potential. For
perspective, one million barrels per day is 15.3 billion gallons per
year.
An important finding from our research in alternative fuels is that
the United States has resources that could be used to produce
alternative fuels at a rate of millions of barrels per day. The largest
deposits of oil shale resources in the world are located primarily in
western Colorado and eastern Utah. The potential yield is about triple
the oil reserves of Saudi Arabia. Our coal resource base is also the
world's largest. Dedicating only 15 percent of recoverable coal
reserves to coal-to-liquid production would yield roughly 100 billion
barrels of liquid transportation fuels, enough to sustain production of
three million barrels per day for more than 90 years. Our biomass
resource base is also appreciable, offering to yield over two million
barrels per day of liquid fuels. And over the longer term, advanced
research in photosynthetic approaches for alternative fuels production
offers the prospect of even greater levels of sustainable production.
Presently, mining in the United States produces about 1.1 billion
tons of coal per year. Nearly all of this production is directed at the
generation of electric power. Coal's future in power generation will
depend on whether the United States adopts measures to control
greenhouse gas emissions. If such measures are implemented, it is very
likely that the level of coal mining will decrease, with potential
adverse economic impacts in traditional coal mining areas. Using coal
to make liquid fuels, especially when combined with biomass so that
greenhouse gas emissions are favorable, provides not only the economic
and national security benefits associated with reducing dependence on
imported oil, but also a new market for coal that could counter the
adverse local and regional economic impacts of reduced demand for coal
in power generation.
Assessment of Alternative Fuels
The Duncan Hunter National Defense Authorization Act for Fiscal
Year 2009 contained a provision calling for the Secretary of Defense to
select a federally funded research and development center (FFRDC) to
conduct a study of the use of alternative fuels in military vehicles
and aircraft. Responding to Congress, the Department of Defense asked
the RAND National Defense Research Institute, an FFRDC, to conduct an
examination of alternative fuels for military applications. Our report
on this study was published and delivered to the Secretary of Defense
and Congress in January 2011.\4\ As part of that study, RAND
researchers examined the opportunities to produce alternative fuels in
a way that reduces lifecycle greenhouse gas emissions relative to
emissions from the production and use of the petroleum products that
they would replace.
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\4\ Alternative Fuels for Military Applications, Bartis and Van
Bibber, Santa Monica, Calif.: RAND Corporation, MG969-OSD, 2011.
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Because this Congressionally-mandated study was directed at
military applications, we focused our attention on alternative fuels
that could substitute for jet fuel, diesel fuel, and marine distillate
fuel, since these are the major liquid fuels consumed by military
aircraft, ships, ground vehicles, and associated combat support
systems. These fuels are often referred to as distillate fuels to
distinguish them from the more volatile and more easily ignited
gasoline used in spark-ignition automobiles.
As a group, distillate fuels account for over 95 percent of
military fuel purchases, which are currently averaging about 340,000
barrels per day. Distillate fuels are also important in the civilian
sector, fueling the trucking industry and commercial aviation and
serving as an important home heating fuel in some parts of the United
States. Current consumption of distillate fuels in the United States is
about 5 million bpd. For comparison, recent gasoline demand is running
at slightly below 9 million bpd.
While the emphasis of our assessment of alternative fuels was on
military applications, our results also apply to alternative fuels that
could displace petroleum-derived distillate fuels that are used in
civilian application. Note, however, that as part of this
Congressionally-mandated study, we did not examine options for
producing alternative fuels that can substitute for gasoline, such as
alcohol fuels. For safety and operational reasons, these more volatile
fuels are not appropriate for military applications. Since RAND has not
conducted an in-depth examination of alcohol fuels, my remarks today
will not cover this family of fuels.
Also included here is a brief statement regarding the oil shale
resources located in the Green River Formation of Colorado, Utah, and
Wyoming. Here our findings derive from the RAND 2005 examination of oil
shale and our continuing monitoring of progress in this area.\5\
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\5\ Oil Shale Development in the United States: Prospects and
Policy Issues, Bartis et al., Santa Monica, Calif.: RAND Corporation,
MG 414-NETL, 2005.
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Fischer-Tropsch fuels are the most promising near-term options for
producing middle distillate fuels cleanly and affordably.--The Fischer-
Tropsch (FT) method was invented in Germany in the 1920s. It can
produce alternative liquid fuels that can substitute for petroleum
derived civilian and military fuels, including civilian and military
jet fuels, marine fuels, and automotive diesel fuel, and home heating
oil. Generally, gasoline is produced as a co-product in FT facilities,
and one commercially proven variant can be configured to produce only
gasoline. The method accepts a variety of feedstocks. For example, a
commercial facility operating in South Africa uses coal, one operating
in Qatar uses natural gas, and forest product firms in the United
States are examining the viability of small facilities that would use
biomass. Blends of up to 50 percent FT-derived jet fuel and petroleum-
derived jet fuel have been certified for use in commercial aircraft.
Ongoing work by the services strongly suggests that appropriately
formulated FT fuel blends can be safely used in tactical military
systems as well.
Both coal and biomass are abundant in the United States. Together,
they are sufficient to support a multimillion-barrel-per-day
alternative fuel industry based on FT fuels. But if FT fuel production
is to occur without compromising future national goals to control
greenhouse gas emissions, the following must hold:
For biomass-derived FT fuels, the biomass feedstock must be
produced in a sustainable manner; specifically, its production
should not be based on practices that lead to sizable emissions
due to direct or indirect changes in land use. If this is
achieved, lifecycle greenhouse gas emissions can be near zero.
For coal-derived FT fuels, carbon dioxide emissions at the
FT fuel production facility must be captured and sequestered.
If this is achieved, lifecycle emissions can be in line with
those of petroleum-derived fuels.
For FT fuels derived from a mixture of coal and biomass,
carbon dioxide capture and sequestration must be implemented.
The biomass must also be produced in a sustainable manner. If
this is achieved, lifecycle emissions can be less than half
those of petroleumderived fuels. For example, a feedstock
consisting of a 60/40 coal/biomass blend (by energy) should
yield alternative fuels with lifecycle greenhouse gas emissions
that are close to zero.
The preceding approaches can result in FT fuels with lifecycle
greenhouse gas emissions that are less than or equal to those of their
petroleum-derived counterparts and thereby fuels that are eligible for
government purchase per the provisions of section 526 of the Energy
Independence and Security Act of 2007.
Considering economics, technical readiness, greenhouse gas
emissions, and general environmental concerns, FT fuels derived from a
mixture of coal and biomass represent the most promising approach to
producing amounts of alternative fuels that can meet military, as well
as appreciable levels of civilian, needs by 2030. But whether this
technology will reach its potential depends crucially on gaining early
production experience-including production with carbon capture and
sequestration-in the United States. To our knowledge, no agency of the
U.S. government has announced plans to promote early commercial use of
FT fuels derived from a mixture of coal and biomass.
It is highly uncertain whether appreciable amounts of hydrotreated
renewable oils can be affordably and cleanly produced within the United
States or abroad.--Hydrotreated renewable oils are produced by
processing animal fats or vegetable oils (from seed-bearing plants such
as soybeans, jatropha, or camelina) with hydrogen. Various types of
algae have high oil content and are another possible source of oil for
hydrotreatment. Fifty-fifty blends of hydrotreated oils have already
been successfully demonstrated in flight tests sponsored by the
commercial aviation industry. Laboratory analyses and testing strongly
suggest that hydrotreated renewable oils can also be formulated for use
in the Department of Defense's tactical weapon systems. Technical
viability is not an issue.
The problem lies in uncertainties regarding production potential
and commercial viability, especially affordability and lifecycle
greenhouse gas emissions. Animal fats and other waste oils may offer an
affordable low-greenhouse-gas route to hydrotreated renewable oils. But
these fats and waste oils are also traditionally used in other nonfuel
applications, including animal feed additives and the manufacture of
soaps, household cleaners, resins, and plastics. Because the supply of
these feedstocks is limited, substitutes would need to be found for use
in these other applications. These substitutes may cause additional
greenhouse gas emissions. Production potential is also a significant
issue with animal fats and waste oils: The available supply of these
feedstocks will likely limit production to no more than 30,000 barrels
per day.
With regard to feedstock vegetable oils, to keep lifecycle
greenhouse gas emissions at levels lower than those of petroleum-
derived fuels, these oils must be derived from crops that do not
compete with food production and that minimize nonbeneficial direct and
indirect changes in land use. Jatropha and camelina are often mentioned
as ideal plants to meet these requirements, but there exists little
evidence to back these claims. Even if low-greenhouse-gas approaches
can be established and verified, total fuel production is likely to be
limited. Producing just 200,000 barrels per day (about 1 percent of
daily U.S. petroleum consumption) would require an area equal to about
10 percent of the croplands currently under cultivation in the United
States.
Advanced approaches, such as photosynthetic approaches using algae
or other microbes as a feedstock, may yield renewable oils without the
limitations and adverse land-use changes associated with seed oils. But
all of these advanced approaches are in the early stages of the
research and development (R&D) cycle. Large investments in R&D will be
required before confident estimates can be made regarding production
costs and environmental impacts. Considering (1) the very limited
production potential for fuels derived from animal fats and waste oils,
(2) the highly uncertain prospects for affordable, low greenhouse-gas
fuels derived from seed crops, and (3) the early development status of
algae/microbe-based concepts, renewable oils do not constitute a
credible, climate-friendly option for meeting an appreciable fraction
of civilian or military fuel needs over the next decade. Because of
limited production potential, fuels derived from animal fats, waste
oils, and seed oils will never have a significant role in the larger
domestic commercial marketplace. Algae/microbe-derived fuels might, but
technology development challenges suggest that algae/microbe-derived
fuels will not constitute an important fraction of the commercial fuel
market until well beyond the next decade. This assessment holds for
algae-derived fuels based on photosynthetic energy conversion or based
on the conversion of cellulosic biomass. Algae-derived fuels based on
the conversion of sugars compete with food production and are not a
sustainable source of liquid fuels.
The prospects for oil shale development in the United States remain
uncertain.--With regard to oil shale, most of the high-grade shale is
on federal lands. Six years ago, when we published our examination of
oil shale, we concluded that the prospects for development were
uncertain. They remain so today. The Bureau of Land Management has made
available small amounts of acreage so that private firms can perform
research and development and demonstrate technology performance before
committing to the construction of full-scale commercial plants. It is
our understanding that privately-funded research activities are ongoing
but that no private firm is prepared to commit to commercial
production. Meanwhile, the Department of the Interior has announced a
review of the commercial rules for the development of oil shale
resources on public lands. In part, this review will examine approaches
for assuring a fair return for providing access to oil shale lands.
This part of the review is consistent with recommendations provided by
RAND to the Congress in 2007.\6\ The key to progress lies in
formulating a land access and incentive policy that rewards those
private firms willing to take on the substantial risks associated with
investing in pioneer production facilities. It would not be advisable
to develop detailed regulations that would pertain to full-blown
commercial development until more information is available on process
performance and impacts.
---------------------------------------------------------------------------
\6\ ``Policy Issues for Oil shale Development,'' Testimony by James
T. Bartis presented before the House Natural Resources Committee,
Subcommittee on Energy and Mineral Resources, April 17, 2007. Available
for download at http://www.rand.org/pubs/testimonies/CT279.
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Comments on S. 937
The remainder of my testimony is focused on specific sections of S.
937.
Section 3. Repeal of Unnecessary Barriers to Domestic Fuel Production
Section 3 would repeal section 526 of the Energy Independence and
Security Act of 2007 as well as section 1112 of the National
Aeronautics and Space Administration Authorization Act of 2008.
Section 526 prohibits federal agencies from entering into a
contract for procurement of an alternative fuel or a fuel from an
unconventional petroleum source unless the contract specifies that the
lifecycle greenhouse gas emissions of that fuel are less than the
equivalent product produced from conventional petroleum. The only
exception would be for alternative fuels purchased for the purposes of
research and fuel testing.
As enacted, section 526 places severe restraints on the
government's ability to purchase fuels. It would prohibit the
government from purchasing any mobility fuel that might be derived in
part or whole from coal, oil shale, oil sands, or biofuels without a
certification from the fuel supplier regarding lifecycle greenhouse gas
emissions. To my knowledge, section 526 has not been applied to
biofuels, even though biofuels can have lifecycle greenhouse gas
emissions that are higher than the equivalent product produced from
conventional petroleum.
Since passage of section 526, the main concern has been whether the
law prohibits government purchases of fuels that might be derived in
part from Canadian oil sands. If this were the case, the government
would be unable to purchase fuels from a growing number of commercial
fuel vendors. With less competition, it is reasonable to expect that
the government would incur increased costs. Additionally, the Defense
Department may find it difficult or very costly to purchase aviation
fuel in South Africa or Qatar, where alternative fuels from coal and
natural gas are likely to be blended with conventional fuels.
To remedy this problem, Congress in 2010 passed legislation (Public
Law 111-314, Sec 30210) that provides an exception to the fuel purchase
prohibitions of section 526. That exemption apparently allows
government purchases of commercially available fuels that might in part
be derived from alternative fuels so long as three conditions hold. The
language of section 30210 is unclear, so my interpretation of Public
Law 111-314 as providing a remedy to the more onerous provisions of
section 526 may be incorrect.
Repeal of section 526 would remove any confusion regarding the
exemptions to constraints on government purchases of mobility fuels. It
would also allow agencies to continue their current practice of
purchasing biofuels, such as corn-derived alcohol fuels and biodiesel,
without regard to lifecycle greenhouse gas emissions. Finally, it would
allow federal procurement of alternative fuels such as coal-derived
liquids, natural gas-derived liquids, and fuels produced from oil shale
without regard to lifecycle greenhouse gas emissions.
The primary policy issue raised by repeal of section 526 is whether
it is in the national interest to allow government agencies to promote
the production of alternative fuels that have lifecycle greenhouse gas
emissions that are significantly higher than their petroleum
counterparts. For example, repeal of section 526 would open the door to
a government procurement of coalderived liquids produced without
managing greenhouse gas emissions.
If Congress is concerned with the limitations and continued
uncertainties associated with the implementation of section 526, I
suggest consideration of legislation that would clarify the meaning of
Section 30210 of Public Law 111-314 so that the government is not
prohibited from purchasing commercial fuels derived in part from
alternative fuels or oil sands. Congress should also clarify whether
section 526 prohibitions apply to biofuels.
If the intent of Congress is to promote the early production of
alternative fuels with greenhouse gas emissions that are comparable or
better than those of their petroleum counterparts, I suggest
consideration of an amendment to section 526 that would allow the
government to target purchases of alternative fuels derived from fossil
fuel resources (such as coal, natural gas, or oil shale) if 90 percent
of greenhouse gases produced during the alternative fuel production
process are captured and sequestered or if lifecycle greenhouse gas
emissions are no more than five percent above the lifecycle greenhouse
gas emissions of their petroleum counterparts. This suggested amendment
would still require management of greenhouse gas emissions, but it
would significantly reduce the costs of building and operating pioneer
alternative fuels facilities that are based on coal, stranded natural
gas resources in Alaska, and possibly oil shale.
Section 5. Algae-Based Fuel Incentives
Section 5 would modify a portion of the Clean Air Act that governs
the implementation of the Renewable Fuel Standard program managed by
the Environmental Protection Agency (EPA). This program forces the use
of government-selected fuels in the transportation sector. It provides
unknown, but potentially very high, levels of subsidies to certain
renewable fuel producers, but works in a way that the total costs borne
by the public are hidden. These hidden costs include not only increased
prices at the pump but also at the supermarket. Finally, this program
puts government in the position of picking technology winners
irrespective of whether these technologies offer environmental or
energy security benefits.
Under section 5, each gallon of algae-based fuel would basically
receive a triple subsidy if it were produced using carbon dioxide from
an energy production process that would otherwise release that carbon
dioxide into the atmosphere. section 5 does not define an ``energy
production process.'' Possible candidates include electric generating
plants that use fossil or biofuels, oil refineries, alternative fuel
production facilities, and natural gas processing plants.
Section 5 applies to algae that use sunlight to convert carbon
dioxide to oils that are similar to vegetable oils. These oils can be
converted to a biodiesel or can be treated with hydrogen so that they
are interchangeable with conventional diesel or jet fuel. The technical
viability of producing useful fuels from algae has been established for
some time. The big unknown is whether these fuels can be produced at
costs that are competitive, or even in the ballpark, with conventional
fuels. Over the past two years, we have closely examined this issue.
Our finding is that photosynthetic approaches to algae appear very
promising, but that at this time algae-derived fuel is a research
topic, not an emerging fuel option.
EPA has published its renewable fuel standards for 2011. From their
Notice of Final Rulemaking, it is clear that the rule requires the use
of fuels from small experimental facilities. This could lead to fuel
refiners and importers paying very high premiums i.e., over $10 per
gallon for certain renewable fuels. These additional costs will likely
be passed to consumers. If EPA continues to apply this logic, any small
pilot or demonstration plant built for the purpose of understanding
scale-up and operational issues would be transformed into a commercial
production facility. The same would apply to pre-commercial algae-
derived fuel production facilities, including those being built with
federal funds.
If this were a direct government expenditure, many would doubt that
subsidies in the range of $10 to $30 per gallon are appropriate.
Considering that commercially viable photosynthetic algae production is
many years in the future, a more productive approach in accelerating
this technology is direct investment in research and development.
Overall, the net effect of section 5 will be a transfer of wealth
from fuel consumers to firms trying to develop algae-derived fuel. It
is difficult to see how these subsidies and this approach will have any
impact over the next decade on the rate of development of a
commercially viable industry.
Section 6. Loan Guarantees
This section would amend the Energy Policy Act of 2005 so that
eligibility for DOE loan guarantees would include facilities that
produce a fuel that can substitute for natural gas using a solid
feedstock, provided that at least 90 percent of the carbon produced
through the gasification process is captured. Since any renewable
energy projects already qualify for loan guarantees, the net effect of
this amendment would be to extend the coverage of the loan guarantee
program to projects that use coal, or possibly oil shale, to make a
substitute natural gas.
Considering the resource estimates and recovery costs for shale
gas, it is highly unlikely that any firm will consider using any solid,
non-renewable feedstock to produce natural gas as a primary product.
Oil shale production facilities might produce natural gas as a by-
product, although it is not clear whether such production would cause
them to qualify for a loan guarantee. Overall, it is highly unlikely
that enactment of this section will have any impact, positive or
negative, on energy production in the United States.
Section 7. Multi-year Contract Authority for Department of Defense For
Procurement of Alternative Fuels.
The main benefit would be to allow the use of the purchasing power
of the Defense Department for the promotion of early commercial
experience in the production of alternative fuels. The ``Required
Provisions'' within section 7 make it fully consistent with the
findings of our research on alternative fuels for military
applications. Specifically, our analysis suggests that a cost-effective
approach, considering both government and industry perspectives, would
be one in which:
the Defense Department would commit to purchase alternative
fuels that meet military specifications at a specified floor
price;
the alternative fuels producer would commit to sell
alternative fuels that meet military specifications to the
Department according to a specified formula that would
basically set a ceiling price; and
the Department's purchase price would be set using a market-
based formula when prices for the corresponding petroleum-
derived fuels are between the floor and the ceiling.
This arrangement places a collar on the prices of some fraction of
the fuels that would be produced by an alternative fuels production
facility. In return for guaranteeing a minimum sale price to the
benefit of the producer in the event that world oil prices are low, the
Department would be guaranteed a maximum purchase price that would be
lower than world oil prices in the event that world oil prices pass a
specified threshold. Such arrangements appear to be allowed and meet
the provisions of section 7 that call for ``pricing mechanisms to
minimize risk to the Federal Government from significant changes in
market prices for energy.''
This arrangement would have the added benefit of promoting the use
of coal-derived liquids in applications where they have the greatest
value. In particular, most military applications involve the use of
high sulfur jet fuel in turbine engines. These applications place no
value on the high cetane number and near-zero sulfur levels of
hydrotreated renewable fuels and Fischer-Tropsch fuels.
In closing, I thank the committee for inviting me to testify. I
hope the foregoing analysis of policy issues is useful to your
deliberations.
The Chairman. Thank you very much.
Mr. Siu, go right ahead.
STATEMENT OF BRIAN SIU, POLICY ANALYST, NATURAL RESOURCES
DEFENSE COUNCIL
Mr. Siu. Chairman Bingaman, Ranking Member Murkowski and
members of the committee, thank you very much for today's
opportunity to testify on the subject of S. 937. My name is
Brian Siu and I'm a policy analyst for the Natural Resources
Defense Council. NRDC is a national, non-profit organization
dedicated to the protection of public health and the
environment.
There is no doubt that our sources of conventional liquid
fuel have become increasingly problematic. We are reminded of
this every time events beyond our control drive price
volatility. Thus it is with good reason that the Nation is in
search of energy efficiency in alternative fuels. It is vitally
important not to let the urgency that we all feel distorts
sound, long term judgment driving investments that are
ultimately more harmful than the ones we have today.
Today I'll focus my comments on 3 provisions of the
American Alternative Fuels Act that increase the likelihood of
such mistakes.
The first of these provisions would repeal section 526 of
the Energy Independence and Security Act of 2007. NRDC strongly
opposes efforts to repeal this reasonable protection that
ensures that the Department of Defense and other Federal
agencies do not exacerbate climate change by buying fuels with
higher greenhouse gas emissions than conventional fuels. It is
noteworthy that section 526 does not categorically prohibit any
fuel source nor does it require emissions to even decline, it
simply ensures that the Federal Government does not
commercialize environmentally flawed technologies that make no
effort to reign in their carbon pollution to at least parity
with conventional petroleum. Such restrictions are necessary
given scientific concern that rising temperatures will induce
higher sea levels, migration of invasive species, disease
factors and severe weather incidents.
The link between climate change and national security is
another strong reason to preserve section 526. I do not profess
to be a military expert, but take them at their word when they
cite the climate change's numerous liabilities. Highly
credentialed organizations such as the National Intelligence
Council, the Center for Naval Analysis and the Pentagon have
all noted that climate change can act as an accelerant of
instability drive humanitarian crises, tax military resources
and less readiness and threaten coastal installations.
Placed in this context section 526 is largely about
accountability. Removing it would allow fuel producers to
access public funds without making any effort to mitigate these
well acknowledged, public concerns. By contrast, preserving
section 526 sends a signal that new fuel technologies must
balance energy, environment and climate security.
Next Section 7 of 937 empowers DOD to enter 20 year
contracts for alternative fuels. For emerging fuel technologies
long term contracts are viewed as a way to mitigate risk by
establishing a known and stable revenue stream. NRDC agrees
that some form of genuinely low carbon fuel is desirable for
environment and supply. However this provision does not
encourage such fuels and would have the opposite effect.
First, it acts in conjunction with repealing section 526 to
wipe long term financial support for fuels that are vastly more
destructive than today's.
Second, the language fails to ensure that potentially
beneficial fuels do not also accrue unacceptably high
ecological costs.
While emerging biofuels may provide sustainable options for
aviation and ground transport careless development can also
lead to a range of consequences such as water quality
deterioration, greenhouse gas emissions and habitat loss. Given
that possibility, eligibility guidelines must help minimize
unintended consequences. Unfortunately no such guidelines are
set here.
Finally, section 8 of 937 would amend the determination of
best available control technology or BACT, under the Clean Air
Act by allowing emissions reductions from electric vehicles to
be taken into account. The BACT requirement is designed to
ensure that newer, modified major facilities minimize their
emissions of regulated air pollutants like sulfur dioxide,
particulates, oxides of nitrogen and mercury as well as carbon
pollution.
NRDC has serious concerns with introducing offsets into the
BACT determination process since it would allow power plants to
forgo available technology to control emissions that are
dangerous to human health. In doing so, it risks failing to
protect those whose health would be adversely affected by
increasing power plant emissions since there's really no
guarantee that offsite emission reductions would geographically
match increased power plant pollution. In those cases air
quality from some local businesses and residents would be
allowed to deteriorate simply because it improved elsewhere.
In conclusion fuel policy must include protections to hedge
against significant environmental harms. Unfortunately no such
protections appear in S. 937. Once again, NRDC thanks you for
the opportunity to present its views. I'm happy to answer
questions. Thank you.
[The prepared statement of Mr. Siu follows:]
Prepared Statement of Brian Siu, Policy Analyst, Natural Resources
Defense Council
Chairman Bingaman, Ranking Member Murkowski and members of the
committee, thank you for today's opportunity to testify on the subject
of Senate bill 937. My name is Brian Siu. I am a policy analyst for of
the Natural Resources Defense Council (NRDC). NRDC is a national,
nonprofit organization of scientists, lawyers and environmental
specialists dedicated to protecting public health and the environment.
Founded in 1970, NRDC has more than 1.2 million members and online
activists nationwide, served from offices in New York, Chicago,
Washington, Los Angeles and San Francisco.
S. 937 would amend several existing laws in an effort to promote
alternative transportation fuels. While the bill may be well
intentioned, NRDC maintains that many of its provisions will have
unintended consequences that outweigh any expected benefits. Today, I
will focus my comments on three key provisions. The first of these
provisions is the proposed repeal of section 526 of the Energy
Independence and Security Act of 2007 (EISA). The second allows the
Defense Department (DoD) to enter 20 year procurement contracts for
alternative fuels. Finally, the third provision requires state and
federal agencies that issue construction permits for major new or
modified power plants under the Clean Air Act to consider on-road
pollution reductions due to electric vehicle deployment when
determining best available control technology.
Section 526 of the Energy Independence and Security Act of 2007 Should
Remain in Place
There is no doubt that our sources of conventional liquid fuel have
become increasingly problematic. We are reminded of this every time
geopolitical unrest, natural events or developments beyond our control
drive price volatility. Thus, it is with good reason that the nation is
in search of energy efficiency and alternative fuels. But it is vitally
important not to let urgency distort sound long term judgment, leading
to investments that cause more harm than good. Section 3 of the
American Alternative Fuels Act increases the likelihood of such
mistakes by repealing section 526 of EISA. NRDC strongly opposes
efforts to weaken or remove this reasonable, common sense protection.
Put simply, section 526 disallows federal agencies from procuring
alternative fuels that have higher lifecycle greenhouse gas emissions
than conventional petroleum products. It is noteworthy that section 526
does not categorically prohibit any type of fuel nor does it require
emissions to actually decline. It simply ensures that federal
government does not exacerbate climate change by expanding or
commercializing high carbon technologies before measures are taken to
capture and dispose the carbon pollution. While section 526 applies to
all federal agencies, the Department of Defense is the largest federal
purchaser of fuel. In the past, the United States Air Force was eager
to develop liquid coal fuels. section 526 prevented DoD from leveraging
its significant procurement power to commercialize those fuels unless
the emissions were managed responsibly.
There are strong environmental reasons to avoid expanding or
commercializing high carbon fuels. The increased carbon loadings
associated with these fuels would accelerate global warming and its
catastrophic consequences. There is broad scientific concern that
rising temperatures will induce higher sea levels, shifting disease
vectors, migration of invasive species, and severe weather incidents.
To help avoid these consequences, the United States and other
nations will need to deploy energy resources that release lower amounts
of carbon pollution than today's use of oil and gas. To keep global
temperatures increases from causing widespread environmental and
economic harm, we need to get on a pathway now to allow us to cut
global warming emissions significantly from today's levels over the
decades ahead. The technologies we choose to meet our energy needs in
the transportation sector and in other areas must have the potential to
perform at greatly improved emission levels. Unfortunately, high carbon
fuels such as liquid coal, tar sands, and oil shale do not have a role
in that scenario. Liquid coal without carbon capture and storage, for
instance, produces approximately double the carbon pollution as
conventional petroleum fuel over the full product lifecycle.
The good news is that others in the transportation sector plan to
reduce their emissions of greenhouse gases. Pursuant to the
Administration's vehicle efficiency and carbon pollution standards, for
instance, auto companies will achieve an equivalent of 35.5 miles per
gallon by 2016. According to the Environmental Protection Agency, the
2012-2016 standards will avoid 960 million metric tons of greenhouse
gas emissions that would have otherwise been emitted into the
atmosphere.\1\ As the auto and other economic sectors endeavor to
reduce carbon emissions, unchecked high carbon fuel facilities could
offset their achievements. In the interests of consistency and
fairness, federal government should not assist these fuels to mass
market, especially when no measures are taken to bring emissions into
alignment with even conventional fuels.
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\1\ Environmental Protection Agency, ``EPA and NHTSA Finalize
Historic National Program to Reduce Greenhouse Gases and Improve Fuel
Economy for Cars and Trucks'', April 2010.
---------------------------------------------------------------------------
There are other substantial environmental reasons to avoid these
technologies. Fuels such as liquid coal and tar sands tend to impose
significant upstream impacts as a result of feedstock extraction. These
are difficult to avoid, especially as the industry scales up. For
instance, it requires nearly half a ton of coal to produce one barrel
of liquid coal. Thus, establishing a mature liquid coal industry,
perhaps at 3 million barrels per day, would greatly increase coal
mining. Meeting those levels would require roughly 550 million
additional tons of annual coal production.\2\ By comparison, the Energy
Information Administration estimates that the United States mined just
over one billion tons of coal in 2009.\3\ Thus, a significant liquid
coal industry might increase mining activity by roughly 50% over
today's levels.
---------------------------------------------------------------------------
\2\ James Bartis et al, Producing Liquid Fuels from Coal, RAND
Corporation, 2008.
\3\ Energy Information Administration, Annual Energy Review 2009,
August 2010.
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The environmental consequences would be tremendous. Today, coal
mining is already responsible for a range of environmental harms
including biodiversity loss, mountaintop removal, groundwater
contamination and loss of natural heritage. To be certain, coal plays a
major role in America's power production and will for some time. But
few believe this energy source is benign. As we evaluate our liquid
fuel options, we must remember that the decisions we make today will
have growing implications for decades to come. We must therefore
prioritize resources that achieve balance between energy supply and
environmental sustainability while avoiding fundamentally flawed
technologies that are not already in use today.
The recognized link between climate change and national security is
yet another reason to preserve section 526. In recent years, many
military and security experts have noted that increased temperatures,
droughts, and extreme weather events could exacerbate political tension
and resource competition in some of the world's volatile regions.
Moreover, military experts have expressed concern that elevated seal
levels threaten coastal installations as well as the supporting
industries. Here are direct quotations from national security voices
with impeccable credentials:
In 2008, the National Intelligence Council noted that ``As
climate changes spur more humanitarian emergencies, the
international community's capacity to respond will be
increasingly strained. The United States, in particular will be
called upon to respond. The demands of these potential
humanitarian responses may significantly tax US military
transportation and support force structures, resulting in a
strained readiness posture and decreased strategic depth for
combat operations.''\4\
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\4\ June 25, 2008: House Permanent Select Committee on Intelligence
& House Select Committee on Energy Independence and Global Warming:
Statement for the Record by Dr. Thomas Fingar, Deputy Director of
National Intelligence for Analysis--National Intelligence Assessment on
the National Security Implications of Global Climate Change to 2030
---------------------------------------------------------------------------
In 2008, the National Intelligence Council also found that
``A number of active coastal military installations in the
continental United States are at a significant and increasing
risk of damage, as a function of flooding from worsened storm
surges in the near-term. In addition, two dozen nuclear
facilities and numerous refineries along US coastlines are at
risk and may be severely impacted by storms.''\5\
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\5\ ibid.
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In 2009, the Center on Naval Analysis found that
``Destabilization driven by ongoing climate change has the
potential to add significantly to the mission burden of the
U.S. military in fragile regions of the world'' and that ``the
U.S. should not pursue energy options inconsistent with the
national response to climate change.''\6\
---------------------------------------------------------------------------
\6\ Center for Naval Analysis, Powering America's Defense: Energy
and the Risks to National Security, May 2009.
---------------------------------------------------------------------------
In 2010, the Pentagon Quadrennial Defense Review stated that
although ``climate change alone does not cause conflict, it may
act as an accelerant of instability or conflict, placing a
burden to respond on civilian institutions and militaries
around the world. In addition, extreme weather events may lead
to increased demands for defense support to civil authorities
for humanitarian assistance or disaster response both within
the United States and overseas.''\7\
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\7\ U.S. Department of Defense, Quadrennial Defense Review,
February, 2010.
Placed in this context, section 526 is largely about
accountability. It simply ensures that alternative fuel providers do
not benefit from federal procurement initiatives if their products make
addressing these risks even more difficult than they already are.
Stated another way, removing section 526 would allow fuel producers to
access public coffers without at least making efforts to mitigate these
well acknowledged national concerns.
Finally, repealing section 526 sends the wrong signal to the
broader economy. Even if the DoD chooses not to pursue high carbon
fuels due to previously noted concerns, repealing the provision would
increase tolerance for these types of fuels. A signal that increasingly
harmful fuels are now endorsed by the federal government could help
encourage investments that are wholly incompatible with the need to
reduce carbon pollution and harmful extractive practices while
drastically reducing opportunities in cleaner, sustainable fuels that
that provide a wider array of benefits.
Long Term Contracting Provisions must Include Environmental Protections
Section 7 of the American Alternative Fuels Act empowers the
Department of Defense to enter 20-year contracts for alternative fuels.
As written, NRDC opposes this provision since it fosters alternative
fuels without the necessary safeguards to avoid unacceptable
environmental costs.
Current regulations limit the Department of Defense from entering
into fuel procurement contracts that exceed a five year period. But
there has been growing interest in extending the contracting window.
This is because many emerging technologies pose high risk due to
initial technology costs and lack of commercial experience. In the
past, long term fixed price contracts have been viewed as a way to
mitigate those risks by establishing a known and stable revenue stream.
It is believed that this certainty will help attract private capital
for the project.
NRDC agrees that some form of genuinely low carbon alternative fuel
is desirable for both environmental and energy security reasons.
However, this provision falls short of encouraging such fuels and could
easily function to the opposite effect. First, the provision acts in
conjunction with repealing section 526 to provide long term financial
support for fuels that are more destructive than today's. Secondly, the
language fails to set any environmental parameters that ensure
alternative fuels do not create unacceptably high ecological costs.
NRDC does not categorically oppose these forms of support, so long as
the resulting fuels are consistent with public health, climate science
and environmental protection. But the long term contracting provision
in this bill appears to create a pathway for unchecked high carbon,
high impact fuels.
As an example, I will once again use liquid coal to describe the
risk. Liquid coal facilities are large, centralized and capital
intensive. By some estimates, the investment costs might approach
$125,000 per barrel of daily production capacity.\8\ Indeed, recent
cost estimates for proposed commercial scale projects exceed billions
of dollars per facility. Given these costs, a long term contract, or
even the possibility of such an arrangement could go a long way towards
assuring investors that the project can generate profitable returns
over a significant portion of the operating life.
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\8\ James Bartis et al, Producing Liquid Fuels from Coal, RAND
Corporation, 2008.
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Yet for reasons we have already discussed, federal agencies should
not help deploy technologies that undermine climate and environmental
priorities. Instead, these types of supports should be reserved for
fuels that strike balance between security, environmental and climate
concerns. These parameters will foster new fuel technologies that
respond to, rather than ignore the growing impacts of increased fuel
demand.
Even for advanced biofuels, the proposed language is
environmentally insufficient. NRDC believes that emerging forms of drop
in biofuel can provide sustainable options for aviation and ground
transport if caution is observed throughout the chain of production.
But vegetative feedstocks are intertwined with land and water health.
Thus, careless development can lead to a range of consequences such as
water quality deterioration, soil impaction, habitat loss and
greenhouse gas emissions. As a nascent advanced biofuels fuels industry
scales up, it is critically important to observe these risks so that
the supporting resources can sustain the industry.
Unfortunately, S. 937 is silent on these critical issues. To manage
these concerns, NRDC recommends an approach taken by Senator Murray,
Senator Cantwell and Representative Inslee. Their proposal, the
Domestic Fuel for Enhancing National Security Act (D-FENS), would
provide 15-year contracting authority for DoD but limit eligibility to
``advanced biofuel'' as defined under section 211(o) of the Clean Air
Act. That definition includes critical land and wildlife protections as
well as greenhouse gas targets. To that extent, the D-FENS Act
addresses separate but linked challenges. Rather than favoring
mountaintop removal and global warming, it helps diversify fuel supply
with sustainable alternatives to oil. At the same time, it helps
identify environmentally realistic pathways amid public concern over
unintended environmental consequences of careless fuel development. And
by encouraging genuinely low carbon fuel, it helps manage the
recognized national security threats of global warming. This approach
demonstrates how a core emphasis on performance can address multiple
but linked challenges.
In sum, NRDC does not support the long term contracting provisions
in American Alternative Fuels Act. While we believe that there may be
some role for these instruments, the potential effects of significant
alternative fuel production require careful attention to environmental
protection and public health. At this time, parameters to encourage
that balance have not been included.
The Clean Air Act's ``Best Available Control Technology''
Requirements Should Not Be Changed in an Alternative Fuels Bill
Section 8 of the bill would amend the determination of best
available control technology (BACT) under the Clean Air Act. The
requirement for major new and modified sources to meet emission
limitations reflecting BACT was originally adopted as part of the 1977
Clean Air Act amendments. The Act requires a preconstruction review and
the issuance of a permit for the construction of any new or modified
``major emitting facility''.\9\ The BACT requirement is designed to
require new or modified major facilities to minimize their emissions of
any regulated air pollutant, including greenhouse gas emissions.
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\9\ See 42 U.S.C. Sec. Sec. 7475, 7501-7503.
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The American Alternative Fuels Act introduces, for the first time,
an off-site consideration in determining BACT. It is not at all clear
how off-site emission reductions would be incorporated into a
determination of BACT. Perhaps most importantly, there is significant
risk that this provision would fail to protect those whose health will
be adversely affected by increased emissions of power plant pollutants
that are directly dangerous to human health such as sulfur dioxide,
particulates, oxides of nitrogen, and mercury, as well as carbon
pollution that contributes to risks of death, illness, and injury
through climate change impacts. There is no guarantee that off-site
emission reductions will affect the same locations that are affected by
unmitigated power plant pollution. There is certainly no guarantee that
electric vehicles will be deployed in the immediate vicinity of large
power plants where some pollutant concentrations are highest. In those
cases, it would be highly inequitable to allow air quality for some
local businesses and residents to deteriorate simply because it
improved elsewhere.
Moreover, it would base the long term BACT determination upon
factors that are hard to discern and may fluctuate over time. While a
plant must undergo a BACT determination only before major construction,
the vehicle mix and vehicle usage patterns may shift on an ongoing
basis, rendering the original determination inaccurate. For instance,
the determination would not respond to subsequent vehicle retirements,
migrations or other shifts to the fleet mix. It is also unclear what
the assumed pollutant reductions would be in reference to as an
increasing number of clean and efficient vehicle choices enter the
market. While generating emissions can be predicted with relative
accuracy, it will be hard to determine what the vehicle purchaser would
have chosen if not an electric vehicle. Comparison to an average
vehicle, a cleaner vehicle or something less efficient will yield
different pollution reductions that could applied in the BACT
determination.
Finally, introducing offsets into the BACT determination
essentially allows power plants to forego available technology that
could improve health and save lives. The determination process includes
an analysis on technical and economic feasibility, ensuring that the
environmental measures are achievable. Indeed, it is worth noting that
vehicle electrification is a key opportunity for power producers to
enter the lucrative transportation fuel market. As more electric and
plug-in electric vehicles hit the road, power producers will meet the
new electricity demand and therefore capture new revenue. NRDC believes
that allowing them to minimize their responsibility over emissions that
are a direct result of significant new business opportunities provides
a windfall at the expense of those who may be affected by air quality
impacts.
Conclusions
NRDC appreciates and shares the desire to identify alternative fuel
sources. The nation's dependence on petroleum is a known economic and
national security burden. However, we also maintain that each
alternative fuel pathway provides unique tradeoffs, some greater than
others. These effects are destined to grow as fuels achieve self
sufficiency and expand in scale. Policymakers must be highly cognizant
of the potential impacts in order to avoid the significant unintended
consequences that wide scale fuel production can create. The best way
to manage these risks is to establish parameters that guide investment
decisions. With regards to S.937 those should be:
Avoid actions that move us backward on climate change. Given
the national security, environmental and economic implications,
it is best to forego commercializing high carbon, high risk
technology. To that extent, section 526 must remain in place
because it sends the right signal to private markets and
government alike.
Only extend long term financial support to technologies with
demonstrable environmental benefits. Federal procurement awards
represent an exciting opportunity to develop fuels with
climate, supply, and environmental advantages. Capturing these
benefits once again requires embedding the right parameters to
optimize results.
Maintain strong protections for public health and air
quality. While vehicle electrification may reduce pollution in
some regions, these reductions may not geographically match
where pollution from the power facility would increase. It is
inequitable to relax pollution controls in these regions simply
because pollution has declined elsewhere.
Once again, NRDC thanks you for the opportunity to present its
views. As the nation continues to strive towards alternatives to
petroleum, we look forward to working with the committee to develop
policies that foster a balanced and sustainable outcome.
The Chairman. Thank you all very much for your testimony.
Let me start with a few questions.
Mr. Colvin, I think it was Senator Franken who raised the
question of how the small nuclear reactor models that are now
coming forward are--how they relate to the naval reactors that
you referred to in your testimony. Could you just give us a
general perspective on that? Is there a close connection or is
it very different?
Mr. Colvin. Thank you, Mr. Chairman.
You know, the question that we talked about in SMRs from
the reality was that the U.S. light water reactor program
really developed from the Navy program in concert with the
government programs. I operated SMRs on 6 different nuclear
submarines for nearly 20 years. There are some very good
similarities and some differences.
The biggest issue has to do with the power density, the
fact that the submarine has to operate in an environment with
rapidly changing power level requirements for propulsion
mainly. So that's probably the largest difference. The basic
philosophy and the basic design of these plants is the same.
The second nuclear submarine built was actually the USS
Seawolf which was a liquid cool fast reactor that operated for
a number of years before it was converted to light water. So
back in--this was in 1975 through 1978. So we have a tremendous
history of development of these technologies that we can bring
to bear on these new designs.
It is being brought to bear on these new designs. So there
are very, very good similarities, but at the same time, we're
looking at the advanced technologies, advanced design
characteristics and ways to improve the safety and reliability
of these plants in much different ways than we looked at back
in the early 1950s.
The Chairman. Alright. Let me switch and talk about this
section 526.
Mr. Siu and Dr. Bartis, either one or both of you might
comment on how you see, section 526 affecting the Department of
Defense's ability to contract for coal to liquid fuel if
greenhouse gas emissions were sequestered or otherwise reduced?
Dr. Bartis, why don't you go ahead first and then Mr. Siu,
if you have a comment.
Mr. Bartis. With extensive capture of greenhouse gas
emissions we think current technology abounds. Coal to liquid
plants would put out emissions, life cycle emissions, that are
comparable to those from conventional petroleum products. In
some cases it is going to be very technology specific. We don't
have that much experience here in the United States.
In some cases they may be slightly over. When I say
slightly, we're talking about a few percent. Or they could be
slightly under. As you all are aware, you know, the greenhouse
gas problem we have it's not about a couple of percent.
So given the--one of the things that we suggested for your
consideration was would be to allow coal to liquid plants that
do capture, say 90 percent of their greenhouse gas emissions
and sequester them, to allow them to be included within the DOD
purchasing. But----
The Chairman. Do you----
Mr. Bartis. It's at the margin. It's just at the margin.
That's the problem. It's right at the edge.
The Chairman. If the coal to liquids plant was producing or
was capturing 90 percent it would be eligible to enter into or
to be selling to the Department of Defense.
Mr. Bartis. Not under--not necessarily under current law.
It may miss the mark by a couple of percent points, by a very
small amount.
The Chairman. I see. OK.
Mr. Bartis. That's why when we suggested that there could
be a slight modification to the act that would allow coal to
liquid plants with sequestration to conform, to be allowed to
be purchased.
The Chairman. OK.
Mr. Siu, did you have a point of view on this?
Mr. Siu. Yes, I do. In terms of the impacts on section 526
I agree with Jim to a large extent. If you sequestered enough
carbon dioxide at the CTL plant you could achieve emissions on
parity with conventional petroleum.
There is a degree of error in there, a couple percent
above, a couple percent below. But assuming that you achieve
parity with conventional petroleum there is no legal
contradiction with section 526. I think that it's a
misperception that section 526 is a technological ban. It's a
performance standard.
The Chairman. You're both recommending that we try to
legislate performance standards rather than technology specific
provisions. That's my understanding. Is that right?
Mr. Bartis. I mean I don't want to get--there's a much
broader way to approach this. But within the current context it
would try, you know--to me the most important goal is to get
some early production experience here in the United States on
coal to liquids production. Because then we'll see how this
technology performs and we'll start learning.
This slight modification, to me, a very slight modification
that does not compromise on the major goal of section 526 will
go a long way in opening that door up. But there are other--
there's a bigger problem with section 526 which I mentioned in
my written testimony. That's this issue of incidental blending
of, I'll say, oil sands or if we want to buy fuel from Cutter,
we're going to find gas derived alternative fuels that have
excessive greenhouse gas emissions compared to section 526,
blended in it's going to preclude us from buying those fuels.
Now there appears to be some legislation that have
corrected that problem. I've read it. I don't understand it
fully. So we suggest in our remarks that we might want to
clarify that.
Mr. Siu. May I respond to that?
The Chairman. Sure.
Mr. Siu. Just to depart from what Mr. Bartis is saying a
little bit. NRDC supports section 526 in its current form. In
terms of buying jet fuel and other DOD fuel from South Africa,
Cutter, if you look at the DLA, then DESC 2009, section 526
implementation plan, they cut themselves out an exception to
buying overseas where readiness might be a problem there.
NRDC does not take an issue with this position.
The Chairman. Alright.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman. Gentlemen,
appreciate your testimony.
Mr. Siu, you mentioned that within NRDC you can look at the
picture. You've got energy. You've got the intersect with
environment and you've got climate security. I would suggest
that we also need to be looking at economic security.
What that means to this Nation in terms of our jobs, in
terms of the strength of our economy, in terms of how we,
again, move away from this vulnerability that we have. There's
vulnerability on oil and other sources of energy, most
certainly. But clearly there is economic vulnerability that
comes to us when we basically say well, ok, China can have
everything that they're going to produce out of Alberta.
Mr. Bartis, you mention the economic benefits of coal to
liquids. Cite a whole series of statistics, which I think are
helpful to us. You mention as we're talking about Department of
Defense, long term contracting and the ability really to help
advance in perhaps a more robust manner the development of some
of these alternative fuels, technologies, if in fact, DOD has
that long term contracting authority to go forward.
But it's not just the benefits to our military I would
suggest. Would you not also agree that we could then see those
benefits translate to commercial aviation, to the Maritime
industry in terms of how they power the vessels? I mean, what
are we talking about specifically, if you were able to get this
long term contracting within DOD?
Mr. Bartis. In fact we just completed a congressionally
mandated study at RAND where we looked at the military benefits
and the civilian benefits of alternative fuels. Because
alternative fuels are no worse and they're no better than
regular fuels for the military. So there's limited military
benefits, if any, to these fuels.
So our view is that if the military is going to be involved
in alternative fuels the reason they should be involved is as
an agent of the broader government to encourage early
production. We don't see a tactical military benefit with these
fuels.
Senator Murkowski. Let me ask you, Mr. Colvin, about the
SMR bills. If we could get things moving forward, as I think,
you and I would agree is a good thing for this country and our
energy policy, if you had a small nuclear reactor design of
about 300 megawatts that's licensed by the NRC, how long would
the build out of something like this take?
How long to construct? How long to bring a reactor online?
Then how would that compare, for instance, with a smaller SMR
in say the 50 megawatt range?
Mr. Colvin. I think the biggest challenge we have moving
forward is the design certification, licensing process that we
have to face going forward by the Nuclear Regulatory
Commission. I think there's a perception as illustration by Dr.
Lyman's comments that the industry and the designers are trying
to cut regulatory requirements. But the reality is, I think, we
need to look at the regulatory requirements going forward that
are necessary to provide the adequate levels of protection of
the public health and safety.
They may not be the same as we're operating today because
the technology is different. It's a different design or a
different criteria. I think that's going to be the biggest
transition.
So if you look at the timeframe right now, as Dr. Kelly
talked about, we're looking out at about between 4 and 6 years
to achieve the design certification. That's fairly similar to
the timeframe for the large advanced reactors that we're
seeing. So right now, that process hasn't changed.
I think what we were trying to encourage is between the
Department of Energy and the Nuclear Regulatory Commission. To
lay out the plan to in fact accelerate the licensing activities
as well as the research and development activities for the SMR
technology to be able to move forward and make that transition.
Once we get to the design certification phase with the first of
a kind engineering nearly completed for that design, then we
get the construction build out process for the SMRs will be
considerably shortened from the light water reactor technology
we have today. I mean----
Senator Murkowski. That's not saying much. Because we know
how long it takes.
Mr. Colvin. Today you're seeing U.S. reactor technology,
advanced reactor technology, that will be built and into
operation in less than 4 years for a 1,100 plus megawatt plant.
We haven't done that in the United States yet. We have 2
utilities that are in the process of building and looking for
the license, combined operating license for 2 AP1000 reactors,
both at southern companies, Vogtle plant near Augusta, Georgia
and then South Carolina Electric and Gas summer plant up on the
South Carolina coast.
Those plants are going to gain a tremendous amount of
experience from the construction and build out that's being
conducted in China by the U.S. companies, by Westinghouse and
Shell Engineering. So I think we're going to see the economy of
scale and the experience feedback that's going to give us an
accelerated timeframe. I think we'll see the same thing in the
SMR technology moving forward.
Senator Murkowski. Thank you. Thank you, Mr. Chairman.
The Chairman. Senator Manchin.
Senator Manchin. Dr. Bartis, is there--do you know of any
commercial coal to liquid plants in the United States and has
any been permitted recently?
Mr. Bartis. Quite a few have been announced. There's--I
think the one that's farthest along is in Wyoming. It's a plant
that would produce gasoline using the process developed by
Exxon Mobil and commercially proven on natural gas in New
Zealand. Now that plant has started, I believe, some site
preparation work. But that's the only plant that's moved
forward that far, so far.
Senator Manchin. What country is developing more in CTL
than most or what's the most developing Nation that you know
of?
Mr. Bartis. China was. China had a very aggressive program
but they've run into problems with their coal supply. So I
think they've pulled back a lot of builds because of that.
Senator Manchin. Because of the stock feed.
Mr. Bartis. Yes, they're having problems delivering coal
to----
Senator Manchin. South Africa. How's their CTL program?
Mr. Bartis. South Africa's CTL plant is moving along. Most
interestingly, of course, is that, you know, the big technical
advances have taken place with natural gas to liquids. It's the
same technology. Quite frankly, I thought it would never apply
to the United States except now that we have stranded gas in
Alaska this may be a technology that's applicable there.
We've had great progress in Cutter. They will be producing,
this year, about 170,000 barrels per day. That's not gallons
per year. That's a huge amount of fuel.
So the technology is really up to date.
Senator Manchin. You believe that basically we, as a
country, could be energy independent if we use the resources we
have available?
Mr. Bartis. We have so much oil shale, coal and biomass
that together it is easy to see that we could be using, well,
making well over 5 to 6 million barrels a day from these
resources alone. Combine that with efficiency measures and I
think we could easily make that. But we have to have--we have
to unleash these other fuels.
Senator Manchin. Not the course we're on now.
Mr. Bartis. The situation we have now it's not going to get
us there.
Senator Manchin. Mr. Siu, do you believe that we're too
dependent on foreign oil?
Mr. Siu. Yes. That's NRDC's position. But we also believe
that there are other tradeoffs that we have to consider when
planning out our energy technologies.
Senator Manchin. Do you look at the economy at all when
you're stating your policies or taking you all's position? Do
you look at the economy, I mean, the American economy, if you
will, the jobs that go with it, the balance between environment
and the economy?
Mr. Siu. Yes, we, of course, consider the economy. We
believe energy efficiency provides benefits to consumers. We
believe that reducing the oil imports provides economic
benefits to the United States. So yes, we are in agreement
there.
However, I think where we depart is where we also believe
that we should put emphasis on avoiding unintended consequences
when we deploy some of these fuels to, you know, broad scale.
Senator Manchin. Do you believe any of that can be done
without the use of fossil but we have gas and coal and the
abundance of resources we have in this Nation?
Mr. Siu. To argue the other side of that I think that if we
deploy coal technologies that we're not already using here in a
very irresponsible way, I think it completely destroys our
chances of achieving these other important public priorities.
Senator Manchin. Mr. Colvin, as far as on the nuclear. What
is our reliance on nuclear power in America? Is it 19? I heard
19, 20 percent?
Mr. Colvin. We generate about 20 percent of our
electricity, about 1 out of 5 households is served by nuclear
generated electricity in the United States currently, Senator.
Senator Manchin. Coal is how much, Mr. Bartis?
Oh, I'm sorry, Mr. Colvin. That would be OK if you have the
answers, sir, go ahead. Go ahead.
Mr. Colvin. Coal generates, we generate about 50 percent of
our electricity from coal in the U.S.
Senator Manchin. So 70 percent between nuclear and coal
right now. The 30 percent, is a derivative of so many other
different things, correct?
Mr. Colvin. Correct.
Senator Manchin. There's nothing in sight that's going to
take that, in any short period of time, take up that amount of
dependency that we have?
Mr. Colvin. No, not that we see, Senator. I think one of
the things that I might just mention, you know, the big
question that faces a lot of the utilities is what's the best,
long term source of electricity going forward when you take in
all the parameters. The biggest risk that's seen by most of the
utilities is the volatility of natural gas.
Senator Manchin. Do you see the citizens of this country
paying a much higher price because of our indecision in not
having an energy policy?
Mr. Colvin. Yes, absolutely, Senator.
Senator Manchin. What has that increased? I mean, I know I
see my mother's bill and some different of our bills coming
across what they were before, a year or 2 or 5 years ago.
Mr. Colvin. You know, it really depends on the area of the
country. I think in parts of the country we have very low and
economical electricity prices given where we are today. But in
some parts of the country, especially the Northeast we see
very, very high electricity prices. Those are typically caused
by the difference in generation sources that we apply to the
electricity sector.
Senator Manchin. Thank you.
The Chairman. Senator Barrasso.
Senator Barrasso. Thank you very much, Mr. Chairman.
Mr. Bartis, I enjoyed your presentation. I had an
opportunity to read everything you've submitted. I admire the
work that you've been doing because I believe that coal is
America's most affordable, available, reliable and secure
source of energy and using America's coal resources as a
transportation fuel will decrease our dependence on foreign
sources of oil and really strengthen our national security.
Getting to section 526 of the 2007 energy bill, that places
restrictions, as we know, in the Federal Government's ability
to purchase alternative fuels. In your testimony you
highlighted potential problems for the Defense Department
purchasing fuels in areas. I think you said, in South Africa as
well as in Qater.
Would repealing section 526 decrease the Department of
Defense fuel costs in the long term? What's your assessment of
that?
Mr. Bartis. To the extent that if section 526 prohibits the
incidental inclusion of alternative fuels then there's going to
be fewer vendors that are willing to sell to our Defense
Department. So that's going to make costs go up. As I mentioned
so repeal, outright repeal, would certainly eliminate that
problem.
I've also suggested that the bill could be amended slightly
and take care of that problem.
Senator Barrasso. From a practical perspective does section
526 in its current form discourage investment in coal to
liquids, even including coal to liquids with a major carbon
capture potential?
Mr. Bartis. I think it gives the investment community a
signal and that the government is opposed to--doesn't favor
coal to liquids. But it's a signal. It's hard for me to
quantify that.
Senator Barrasso. Thank you.
Mr. Siu, following up on the section 526 discussion with
the previous panel I want to ask you a question related to
Canadian oil verses Middle Eastern oil. The Administration
said, as I heard it, it said that it doesn't believe that
buying Canadian oil is better than buying oil from the Middle
East. That so if Canada can provide oil from oil sands that's
say, higher in greenhouse gas emissions and Saudi Arabia can
provide oil that's lower in greenhouse gas emissions.
Does your organization believe that oil from Saudi Arabia
is better for the United States to purchase?
Mr. Siu. I think what the Administration might have been
referring to is the effect on the world oil market and how the
world oil market affects us. As far as I know last--
economically speaking in last year's, this year's price run ups
the Canadians weren't cutting us any good neighbor to the south
deals.
Senator Barrasso. Let me ask about the position of your
organization, the position of your organization for imports. Is
a greenhouse gas potential impact the greater issue?
Mr. Siu. I think the greenhouse--I think they're both
important issues. I think given the national security
liabilities of climate change, I think we seriously need to
consider that as well when turning to more and more greenhouse
gas intensive forms of fuel.
Senator Barrasso. So I'll get back to the question. Yes or
no? If Canada can provide oil from oil sands that's higher in
greenhouse gas emissions, Saudi Arabia can provide oil that's
lower in greenhouse gas emissions. Does your organization, the
NRDC, believe that oil from Saudi Arabia is then better for the
United States than oil from Canada?
Mr. Siu. NRDC hasn't had that internal discussion yet and
put a formal opinion out on that. I will give you my personal
opinion on it, is I don't think that there this a benefit to
buying from Canada as opposed to Saudi Arabia if we're talking
about how much money each of these countries is deriving from
the world oil market.
Senator Barrasso. Mr. Bartis, do you want to comment?
Mr. Bartis. If we impose a barrier to a logistically
preferred purchase then we're going to--there's going to be a
premium attached to that. The net greenhouse gas effect will be
zero because that Canadian tar sands is just going to go
somewhere else and we're just playing with the logistics of the
oil, the international world oil market.
Senator Barrasso. Thank you.
Thank you, Mr. Chairman.
The Chairman. Senator Shaheen has not yet asked any
questions so maybe we should give her a chance to ask questions
first and then Senator Franken.
Senator Shaheen. Mr. Chairman, Senator Franken, can go
ahead.
The Chairman. Alright.
Senator Franken.
Senator Franken. OK, if you want to be that way.
[Laughter.]
Senator Franken. Mr. Bartis, last week in your testimony in
the House you said that, ``Without management of greenhouse gas
emissions liquid fuels produced from coal will have life cycle
greenhouse gas emissions that are about twice that of their
conventional petroleum counterparts.'' Even if you had carbon
capture and storage--that's the end of your quote. OK. Even if
you had carbon capture and storage for these liquid coal
production facilities the greenhouse gas emissions would be
higher than conventional petroleum based fuels depending, I
guess, on how much carbon you could sequester.
Now the National Academies of Science warned just last
month that, ``The risk of dangerous climate change impacts is
growing with every ton of greenhouse gas is emitted into the
atmosphere.'' Given this warning from America's scientists does
it make sense to use Federal dollars to produce fuels that have
greater greenhouse gas emissions than the ones that are
employed today? Shouldn't we instead be focused on technologies
like advanced biofuels which don't have--which have a lower
carbon footprint and which are renewable and have--and are
being brought to commercial scale, have already been brought to
commercial scale. Now cellulosic is being brought to commercial
scale.
Mr. Bartis. It is true that without any management of
greenhouse gas emissions coal to liquids is a technology with
double the life cycle emissions of conventional petroleum.
That's why we at RAND and others, for example, those at the
National Academy, one of the study committees, Princeton
University and others have examined another alternative, have
examined the alternative sequestration. With carbon
sequestration we believe they're basically even, a couple
percent either way, with conventional petroleum.
It depends on what fuel you're talking about. There is a
way that oil is a lot dirtier than the average oil in terms of
greenhouse gases, for example.
Senator Franken. OK.
Mr. Bartis. But----
Senator Franken. Like cellulosic ethanol.
Mr. Bartis. Cellulosic ethanol isn't here today, right?
Senator Franken. It's being, actually, it is--there is a
commercial scale plant being built in Emmetsburg.
Mr. Bartis. It's a first of a kind demonstration plant.
It's----
Senator Franken. It's a commercial plant. There have been
demonstrations.
Mr. Bartis. But if you look at the production. I don't know
if it's 100 barrels a day or 200 barrels a day because it's a
small facility. What I was trying to say in my written
testimony is, is that there are ways to make coal a very clean
fuel by combining coal with biomass and including
sequestration.
When you do that we can get greenhouse gas emissions that
are very favorable. We can significantly lower the cost of some
of these processes that just depend on biomass. Many of the
cellulosic processes on biomass begin with gasification.
Senator Franken. OK. Let me ask you this.
Mr. Bartis. Right. OK. I'm sorry.
Senator Franken. Is there commercial scale sequestration?
Mr. Bartis. Yes. It's done commonly in the United States.
We use about 40----
Senator Franken. Where?
Mr. Bartis [continuing]. Million tons of CO2 are
taken out of the ground and put into oil fields in the United
States. It's common. It's been done. It was discussed by the
IPCC. It's in Colorado and the regional oil fields.
Senator Franken. OK. Let me put it this way.
Mr. Bartis. It stays in the ground.
Senator Franken. I understand that. Has there been
sequestration in a way--I'll ask Mr. Siu. Has there been
commercial sequestration in a way that has made coal, clean
coal?
Mr. Siu. Not to my knowledge outside of enhanced oil
recovery.
Senator Franken. In a commercial, you know, scale?
Mr. Siu. Not to my knowledge, no.
Senator Franken. Mr. Bartis.
Mr. Bartis. We have a coal to liquid--a coal to natural gas
plant in North Dakota that sends its product to an oil field in
Canada. It sends its CO2.
Senator Franken. Is that plant now----
Mr. Bartis. It's a commercial plant. It was built----
Senator Franken. All right. I mean, where is the plant? Is
it carbon neutral?
Mr. Bartis. I don't know if it's carbon neutral.
Senator Franken. You don't know. So you have no answer to
my question in this sense.
Mr. Bartis. I don't know whether it's carbon or not. I can
find out.
Senator Franken. OK. Because when you burn biomass it's
carbon neutral, right? I mean----
Mr. Bartis. Biomass it is, no, it is not carbon neutral
when you use biomass. Not at all. There is significant issues
with regard to the life cycle greenhouse gas emissions when
using certain forms of biomass.
Senator Franken. OK.
Mr. Bartis. When you start using food there's a major
problem.
Senator Franken. OK. OK. I guess my time is up then go to
Senator Shaheen. Unless you don't want to ask any?
[Laughter.]
Senator Franken. Oh, wait. It's actually I go to the
chairman. The chairman is the Chairman.
The Chairman. Let me call on Senator Shaheen for her
questions and then we'll have an opportunity for you to
continue with more questions, Senator Franken.
Senator Shaheen. Thank you, Mr. Chairman.
I apologize for having missed the testimony, but I would
actually like to go back and address some of the nuclear issues
in the other 2 pieces of legislation that are pending before
the committee this morning. I find it very interesting that
there is technology that could develop smaller, more cost
effective nuclear plants. I'm interested in how the current
regulations around nuclear plants would affect those potential
nuclear reactor designs.
So are there requirements in the legislation or should
there be requirements in the legislation that address safety
concerns with these nuclear designs that might be different
than current nuclear plants. I don't know, Dr. Lyman or Mr.
Colvin, if either of you would like to address that.
Mr. Lyman. Thank you for your question. As I said in my
testimony, on paper certain designs have features that look
like they might present safety advantages. But unless--those
safety advantages could be lost if there's an erosion of the
safety standards that govern their licensing.
So we believe that--the Nuclear Regulatory Commission has a
policy that new nuclear reactors don't have to be any safer
than existing reactors. We think that's a bad policy because
we're missing an opportunity. I mean if we build reactors that
may be around for 60, 80 years why not use the best available
technology. Make sure they're safer than what they have today.
We feel that the consequence of that policy is that the
designs and the licensing aren't as good as they should be. So
we think, you know, Congress has the opportunity and Department
of Energy is already interested in financing of these cost
sharing programs but what the value added of this legislation
could be to lock in additional safety and security levels that
even the Nuclear Regulatory Commission doesn't require because
of their own bureaucratic issues.
Senator Shaheen. Could you talk about what some of those
safety and security requirements ought to be?
Mr. Lyman. Yes. I mean, for example, as I said in my
testimony, the emergency planning zones around U.S. nuclear
reactors are only required to be 10 miles. Yet we've seen after
Fukushima that there are significant contamination that goes
much further.
So we've always thought that 10 miles is not adequate to
address all the populations that may be at risk. So we'd like
to make sure that if we site new nuclear reactors in the future
we make sure that there's emergency planning, very rigorous
emergency planning in place to make sure that potassium iodide,
for example, will be able to get to the children who might need
it. That people will be evacuated out of zones where they might
receive high radiation exposure.
Now the small modular reactor community has been arguing
that because these reactors are smaller they'll have less
radioactivity we can shrink these zones even to the boundary of
the plant so that the people living right outside the gate may
not even have to receive any special instructions. We think
that that is shortsighted, especially in what we've seen in
Fukushima.
Senator Shaheen. Do we know, and maybe Mr. Colvin you could
also address this. Do we know if the technology for these
modular reactors is more advanced and what that would mean in
terms of any emissions?
Mr. Colvin. I think that the real point in this and I made
the comment earlier, Senator, was that we really need to have
the NRC set the safety standards for the reactors in a way to
protect the public health and safety. That's been the NRC's
mandate from day one. On the industry side I reckon, an
experience we've had in the advanced light water reactor
program.
The industry has actually set a standard for itself to
design all the new advanced reactors to a level at least 10
times safer. Problematically and deterministically then we did
with the earlier light water reactors. In fact, the advanced
reactors that we're building, planning to build in Georgia,
South Carolina, that are being built in China, meet that
criteria.
We think there's a lot of that same logic and philosophy in
practice that would go into the advanced--to the SMR design.
We're asking the Electric Power Research Institute is
undertaking a project to develop what we call a utility
requirements document which was the basis for the design of
those plants that would lead you to those levels of safety and
ultimately be decided by NRC.
If you really look at S. 512, what S. 512 is trying to do,
in my view, is to in fact launch those discussions between DOE,
NRC and the industry and to help define those criteria. We need
to move that discussion forward because there may be safety
criteria that are different than the criteria we use today that
could lead us even to higher levels of safety even though we
don't follow the procedures we've used in the past. I think
that's the real benefit of moving forward in this public/
private partnership working with the government and with the
Nuclear Regulatory Commission to define that.
Senator Shaheen. Thank you. My time is actually expired.
But one issue that we saw in Japan was that the reactor design
was not--didn't consider the worst case scenario which was not
just the earthquake but the tsunami. I think, as you point out,
if we're going to be looking at a new design we should make
sure that they address the worst case scenario.
Coming from a state where we licensed the last nuclear
power plant in the country I think we do need to re-evaluate
the ten mile emergency zone around nuclear plants.
Thank you, Mr. Chairman.
The Chairman. Thank you. Let me just see if Senator
Murkowski had any additional questions. Alright.
Senator Franken.
Senator Franken. I just want to say one thing and then ask
a question. I would love to see carbon sequestration in coal
fired utility plants work magnificently. I mean, that would
be--solve a lot of problems.
If we could find all the places to sequester it whether it
be the bottom of the ocean, whatever it is, if it works, that
would be--I think we'd all agree, everyone would be just
jumping for joy because then we'd have a use for all this coal
in a clean way. So that's my one--I want to say that. But I
wonder about making liquid fuel out of coal before we establish
that we can actually do that.
Dr. Lyman, you mentioned the need for safety in the siting
and operation of modular reactors. Are there any issues that
you think we should worry about regarding the design of modular
reactors?
Mr. Lyman. Yes. For one example, Fukushima has also shown
that a defective containment design can lead to unacceptable
radiological consequences and a large radiological release. Now
many of the modular reactor designs depend on having
containment buildings that are smaller, that have less
capacity, to withstand something like a hydrogen explosion.
In some cases it would be hard to see how you can design a
small modular reactor economically without shrinking the
containment like that. But you have to examine the consequences
of whether those containment buildings are really going to be
robust enough to protect the public and beyond design based
accident.
Senator Franken. Thank you. As far as the worst case
scenario, in Minnesota, in Monticello we have the exact as--
plant as Fukushima and although Minnesota the chances of
having--Senator Shaheen was talking about worst case scenario,
the chances of an earthquake of that level in Minnesota are
very low. But if we had a tsunami in Minnesota we'd have bigger
problems that even the reactors.
[Laughter.]
The Chairman. You're opposed to tsunamis, is that the----
[Laughter.]
Senator Franken. No, I'm just saying that if there was a
tsunami in Minnesota we'd be----
The Chairman. Really in trouble.
Senator Shaheen. So the Great Lakes are not a potential.
Senator Franken. Actually I don't know maybe the Great
Lakes. I don't know.
[Laughter.]
The Chairman. Thank you all very much. We've learned a
great deal. We appreciate your hard work and testimony.
That will conclude our hearing.
[Whereupon, at 12:03 p.m. the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Responses of James T. Bartis\1\ to Questions From Senator Murkowski,
on S. 937\2\
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\1\ The opinions and conclusions expressed in this testimony are
the author's alone and should not be interpreted as representing those
of RAND or any of the sponsors of its research. This product is part of
the RAND Corporation testimony series. RAND testimonies record
testimony presented by RAND associates to federal, state, or local
legislative committees; government-appointed commissions and panels;
and private review and oversight bodies. The RAND Corporation is a
nonprofit research organization providing objective analysis and
effective solutions that address the challenges facing the public and
private sectors around the world. RAND's publications do not
necessarily reflect the opinions of its research clients and sponsors.
\2\ This testimony is available for free download at http://
www.rand.org/pubs/testimonies/CT364z1.html.
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Question 1. Coal-to-liquid (CTL) Fuel in Alaska (S. 937)--The
military bases in my home state of Alaska have shown significant
interest in CTL fuels over the years. When you look at Alaska's
resource base and geographic location, what do you think the most
viable alternative fuels are, both now and over the near term?
Answer. My RAND colleagues and I have not conducted research on the
prospects of producing alternative fuels in Alaska; however, I can make
a few general comments. Alaska has three resources that potentially can
be used to produce alternative liquid fuels: natural gas, coal, and
biomass. Abundant natural gas resources are located in the Alaska North
Slope. Because of projected production of shale gas in the lower-forty
eight, it is possible that North Slope gas will not be marketable. This
stranded North Slope gas could serve as the feedstock for a gas-
toliquids (GTL) production facility. The technology for such a plant is
fully commercial, as shown by the recent construction of two modern GTL
plants in Qatar. The liquid products of the facility could be
transported using the Trans-Alaska Pipeline System. With stranded
natural gas, a large GTL plant might be an economically viable project.
However, we have not examined the extra costs or environmental damage
that would be incurred in constructing and operating a plant in the
harsh environment of the North Slope. An alternative is to transport
North Slope gas to a location on the Gulf of Alaska, from whence it
could be brought to market as LNG or converted to an alternative liquid
fuel.
In the absence of a Trans-Alaska Gas Pipeline, a potentially
attractive location for alternative fuels production is the Cook Inlet
area. A few small (e.g., 5,000 barrels per day) production facilities
using a combination of biomass and natural gas (BGTL) could yield
favorable greenhouse gas emissions without the need to capture and
sequester greenhouse gas emissions. Such a facility could possibly
qualify for federal loan guarantees. Further analysis would be required
to determine whether, and under what conditions, the fuel produced from
such a facility would qualify under the renewable fuel standard
provisions of the Clean Air Act.
Another option for Alaska would be to construct an alternative
fuels plant that would use a combination of coal and natural gas to
produce liquid fuels (CGTL). This feed combination has process
advantages that could reduce overall production costs, but whether this
combination makes economic sense depends on the delivered costs of coal
and natural gas. A moderate size facility (e.g., 20,000 barrels per
day) would require a major increase in Alaskan coal production and may
require the development of new natural gas production in the Cook Inlet
area. Lifecycle greenhouse gas emissions associated with the production
of fuels from a CGTL plant are likely to be much lower than a coal-only
alternative fuels plant, but still higher than those from the
corresponding petroleum fuels. To reach parity with conventional
petroleum would require capturing and sequestering greenhouse gases
that would otherwise be emitted at the production facility. Oil
producers in the Cook Inlet basin might be interested in purchasing
captured carbon dioxide for use in enhanced oil recovery.
In the preceding, I have emphasized alternative fuel concepts that
involve natural gas, since such concepts might give Alaska a
competitive advantage as compared to other U.S. locations. Other
concepts such as using coal, biomass, or a combination of both as a
feedstock are possible. Whether Alaska affords a competitive locale for
such production facilities depends on local construction costs and the
costs of delivering suitable feedstocks to the facility.
Transport of finished fuels, such as diesel, jet, and home heating
oil, to Alaskan ports represents a small fraction of the total costs of
delivering fuel to these ports. Consequently, local demand in Alaska,
whether civilian or military, is not a significant factor in
determining whether Alaska is a favorable location, as opposed to other
U.S. locations, for alternative fuel production facilities.
Question 2. Economic Benefits of Coal-to-liquid and Coal/Biomass-
to-liquid Fuels (S. 937): You've researched the economic benefits of
coal-to-liquid and coal/biomass-to-liquid fuels. In one scenario, you
project that the United States could develop an industry capable of
producing 3 million barrels a day by 2030. Can you describe the
economic value of that production to the United States, especially in
terms of how much less we would spend to acquire foreign oil, the
government revenues that would be generated, and any potential impact
on global oil prices?
Answer. In our 2008 report on liquid fuels from coal, we examined
the economic benefits of domestic production of alternative fuels. The
most substantive benefits are those associated with the economic
profits of domestic production and reductions in the world oil price.
Three million barrels per day of alternative fuels production would
reduce imports of petroleum by about $120 billion dollars per year.
This estimate is based on a world oil price of $100 per barrel. If
production costs, including a reasonable rate of return on capital
investments, are below the prevailing market price for oil, a domestic
alternative fuels industry would generate economic profits. For
example, once an alternative fuel technology, such as CBTL becomes
mature, we expect that production costs could be much lower than those
of first-of-a-kind facilities. In 2011 dollars, $75 per barrel might be
possible. At world oil prices of $100 per barrel, this production cost
would yield an economic profit of $25 per barrel, or equivalently, $27
billion per year if annual production is 3 million barrels per day.
Through income taxes, about a third of these economic profits would go
to the federal government, and thereby broadly benefit the public.
Smaller amounts would go to state and local governments.
Fundamental economic considerations indicate that lower world oil
prices will result from any increase in liquid-fuel production anywhere
in the world, whether it be conventional petroleum extraction or from
unconventional resources such as tar sands or from alternative fuels
from coal, biomass or natural gas. Our research indicates that an
alternative fuel production level of 3 million barrels per day could
cause world oil prices to drop by between 2 and 5 percent, as compared
to what they would otherwise be. Assuming that a 3 million barrel per
day industry is operating in 2030 and that the world oil price is $100
per barrel at that time, the analysis that we published in 2008
indicated that the value of the world oil price reduction to the U.S.
economy is a savings of between $10 and $25 billion per year. These
benefits are in addition to the economic profits discussed above.
Since publication of our 2008 report on coal-derived liquids, very
little progress has been made toward obtaining early production
experience. For that reason, a very aggressive national program in coal
and coal/biomass fuel production would be required to achieve a
production level of 3 million barrels per year by 2030.
Question 3. CTL Abroad (S. 937)--We often hear about the
investments that other countries, particularly China, are making in
alternative and renewable technologies. Can you discuss any investments
that China--and perhaps India and other nations--are making into CTL
fuels?
Answer. Our main source of global CTL fuel developments is the
National Energy Technology Laboratory. We have also discussed CTL
development with senior Chinese government officials. Within China, two
CTL plants are operational. One is a small facility 2,500 barrels per
day) that produces gasoline using the ExxonMobil coal-to-methanol-to-
gasoline process. The other is a facility designed to produce 24,000
barrels per day of fuels using a method generally referred to as direct
liquefaction of coal. This facility is the first direct liquefaction
facility built at a significant scale since the end of the Second World
War. We do not know whether it will be able to reach and sustain
operations at or near its design capacity.
A number of additional CTL plants in China had been announced, but
all of these appear to have been placed on hold. In addition to CTL
plants, China also has about 35 facilities that gasify coal to produce
various chemicals. As such, these plants provide China with extensive
experience in technology that is directly applicable to alternative
fuels production.
Press reports indicate that two large CTL plants have been approved
by the Indian government. Within India, the major investors are
reported to be Tata Steel and Jindal Steel and Power, Ltd. We do not
have information regarding the level of design work that has been
completed on either of these two projects.
Question 4. Oil Shale (S. 937)--Your organization has estimated
that the U.S. has about 800 billion barrels of technically recoverable
oil shale. Can you provide the committee with an assessment of the
federal government's current approach to oil shale? Do you believe
federal policies are helping, hindering, or hurting efforts to
commercialize this resource?
Answer. I have examined the commercial leasing rules published in
2008 and find them to be seriously deficient. Basically the oil shale
leasing rules were modeled on existing rules for coal and oil leasing.
The rules do not take into account the geographic concentration of the
oil shale resource base, the fundamental uncertainties regarding the
economic, environmental, and technical performance of oil shale
production technologies, and the national energy security benefits of
being able to produce eventually a few million barrels per day of fuel
(gasoline, diesel, and jet) derived from oil shale. My June 3, 2011
testimony before the Energy and Power Subcommittee of the House Energy
and Commerce Committee further amplifies on this matter and suggests
areas where Congress might offer direction.
It is my understanding that the Department of the Interior is
conducting a review of the commercial leasing rules for oil shale. At
this time RAND does not have sufficient information to make an informed
assessment of the impact of current or prospective federal policies on
the commercialization of oil shale.
Question 5. Energy Security as a Priority--One of the greatest
benefits of coal-derived fuels is their ability to provide our military
with a more stable, domestic source of the energy. section 526 of the
2007 energy bill effectively sets us on a course to rely even more upon
the unstable regions where many of our military men and women are now
deployed. Which do you believe is the greater national security
imperative: the potential to source military fuel from domestic
resources, or the ability to reduce greenhouse gas emissions by
maintaining the status quo established by section 526?
Answer. RAND research on alternative fuels shows that viable
approaches to produce alternative fuels are available that would allow
coal and other fossil fuel resources to be used to produce alternative
fuels without increasing greenhouse gas emissions. Specifically,
research by RAND and others shows that using a combination of fossil
fuel resources and biomass can result in lifecycle greenhouse gas
emissions that are significantly lower than those associated with
conventional petroleum products or with certain biofuels that receive
favorable treatment under Renewable Fuels Standard provisions of the
Clean Air Act.
Full repeal of section 526 is unlikely to have a significant impact
on the development of a domestic alternative fuels industry. First,
government purchases account for less than 2 percent of national fuel
consumption. Second, potential investors in alternative fuel production
projects will likely remain wary of the possibility of future
legislation that will place a cost on emitting greenhouse gases.
Considering the growing evidence of the deleterious impacts of
increasing atmospheric concentrations of greenhouse gases, such
legislation is likely over the financial lifetime of an alternative
fuel facility. Consequently, alternative fuel production projects that
are based on fossil energy resources are likely to include management
of greenhouse gas emissions so that net emissions are in line with
those of conventional petroleum products.
In my written testimony submitted to the committee on June 27,
2011, I provided options for minor revisions to section 526 that would
serve to reduce fuel procurement costs, and reduce barriers to the
procurement of fossil-derived alternative fuels that can be produced
with greenhouse gas emissions that are comparable to those of
conventional petroleum-based fuels.
Question 6. Long-term Contracting Authority: What role do you
believe long-term contracting authority for the Department of Defense
could play in the development of a robust alternative fuels industry?
Do you believe that the military's efforts to bring alternatives into
the marketplace would have any positive effects for other industries,
including the commercial aviation and maritime industries?
Answer. Long-term contracting authority will not have any
appreciable role unless it is coupled with other measures that would
provide incentives for investments in alternative fuel projects.
Otherwise, the military will be purchasing at competitive prices, and
therefore offering no incentive beyond the civilian marketplace.
Measures to provide incentives for investment include investment
subsidies (such as direct grants and tax credits), loan guarantees,
production subsidies, and price floors. The cost effectiveness and
risks of these various measures differ considerably. By examining
incentives from the perspective of the federal government as well as
private investors, our analysis revealed that a balanced and cost-
effective approach would include a price floor on purchases of fuel
from pioneer production facilities, an investment incentive (such as an
investment tax credit, a loan guarantee, or both), and an income
sharing agreement, in the event that world market oil prices
significantly increase during the term of the incentive agreement.
While properly prepared alternative fuels are no less able than
conventional fuels for meeting the needs of the Defense Department,
they offer no particular tactical or operational benefit. Therefore,
the only significant benefit of Defense Department purchases would be
to promote early production of fuels that have application in the
broader civilian market. This raises the issue of whether incentives
for early production should be placed within the Defense budget, as
opposed to within the budget of the Department of Energy.
Responses of James T. Bartis to Questions From Senator Udall
Question 7. Your report Alternative Fuels for Military Applications
recommends that ``Fischer-Tropsch fuels are the most promising near-
term options for meeting the Department of Defense's needs cleanly and
affordably.'' (p. xi)
Your report did not evaluate the amount of water required to
produce this level of alternative fuels, or the amount of wastewater
that would be created. It did not assess the discharge of this
contaminated water, or protection of surface or ground waters. Your
report did not compare the impact on water use of F-T coal to liquid
fuels compared to advanced biofuels. Given that your report did not
assess the impact on water quantity or quality of producing military
fuels, how can you credibly claim that using this process can meet the
Department of Defense's fuel needs both ``cleanly and affordably''?
BACKGROUND
In the 1990s, Bechtel performed a series of studies for DOE in
which they evaluated a variety of coal liquefaction schemes for
indirect liquefaction (Bechtel 1998) and determined the following water
needs:
``For eastern coal 7.3 gal of water/gal F-T liquid
``For western coal 5.0 gal of water/gal F-T liquid''
Emerging Issues for Fossil Energy and Water, NETL, June 2006
``Before coal liquefaction can make a significant contribution to
meeting the demand for liquid fuels, it will be necessary to ensure
that sufficient water resources are available at proposed plant
sites.''--ibid
Answer. The report on Alternative Fuels for Military Applications
drew on our 2008 report: Producing Liquid Fuels from Coal: Prospects
and Policy Issues. That report did examine water requirements to
produce liquid fuels from coal as well as other environmental issues,
including greenhouse gas emissions, air quality, land use, ecological
impacts, and water quality. With regard to water consumption, our
analysis suggests that the practical lower limit is about 1.5 gallons
of water per gallon of F-T liquid. The amount of water that will be
consumed in a CTL plant will depend on the availability of suitable
water supplies, including groundwater. Where water supplies are
abundant and inexpensive, as they are in certain locations in the
central and eastern United States, CTL plant designs may involve
consumption of over 10 gallons of water per gal of F-T liquid. These
estimates do not include water used during coal mining or during the
production of biomass.
In contrast, plants built in arid regions will likely employ
methods to minimize the consumption of water. How much will depend on
cost-benefit and regulatory analyses that will be done as part of the
front-end engineering design of such facilities. It is possible that
water consumption may be a limiting factor in locating CTL plants in
arid areas. At present, this remains an unresolved issue. If and when
industrial interest in CTL development grows to the point at which
several large plants are planned in arid regions, local, state, tribal
and federal governments should assess how longterm water supplies and
projected demand will be affected. Otherwise, heavy water usage in
early CTL plants will compete with other priority uses and possibly
foreclose further CTL development.
We did not do a comparative analysis of water requirements for
various alternative fuel production concepts. Available information
suggests that water requirements for F-T fuels are comparable or lower
than other near-term biofuel production concepts for middle distillate
fuels, including hydrotreated renewable oils and algae-derived fuels.
Consistent with current regulations and modern engineering
practices, Fischer-Tropsch facilities will be built with zero discharge
of water. With regard to both coal-derived fuels and biofuels, the
primary water quality concerns are associated with feedstock
production. In the case of coal mining, these issues include mine
drainage, hydrological impacts, and the management of coalslurry
impoundments. For biofuels, the water quality issues depend very much
on how the feedstock is produced, including whether irrigation is used
for feedstock production.
Question 8. In your testimony (page 3) you state that, ``advanced
research in photosynthetic approaches for alternative fuels production
offers the prospect of even greater levels of sustainable production.''
In this case, how do you define, ``sustainable production''? And would
you consider liquid fuel production from coal to be sustainable on the
same timescales as that of these photosynthetic approaches?
Answer. In my testimony, ``sustainable'' implies production that
can be carried out over an extended timeframe with acceptable
environmental impacts. For coal, our analysis show a sustainable
timeframe could be on the order of 100 years. If and when industry
interest indicates that large-scale development of a coal-derived
alternative fuel industry is likely, a review of the legislation and
regulations governing mine safety, environmental protection, and
reclamation may be appropriate to assure that production will be
sustainable.
Advanced photosynthetic approaches, such as algae and certain
biochemical approaches for liquid and gaseous fuels production, are at
the research stage. If and when they will be commercially viable
approaches for alternative fuel production remains highly uncertain.
Whether these approaches will offer sustainable production of millions
of barrels per day is also highly uncertain, depending on process
details, such as water requirements, that are not well understood at
the present state of knowledge. If development efforts are successful,
these photosynthetic approaches offer sustainable production over a
multi-century timeframe, and possibly with environmental impacts that
are more favorable than those associated with coal/biomass approaches.
The prospect of successfully achieving a sustainable, environmentally
superior process for alternative fuels development warrants federal
investment in long-term research and development directed at
photosynthetic approaches.
Question 9. The February 2010 Quadrennial Defense Review notes that
climate change will play a significant role in the future security
environment for the United States. Additionally, in the
Congressionally-mandated report by the National Research Council,
National Security Implications of Climate Change for U.S. Naval Force,
the authors list a number of adverse impacts that climate change will
have on U.S. Naval operations, and U.S. national security, in general.
For example:
climate change can act as an accelerant of instability or
conflict'' (page 20)
and,
Viewed from a national security standpoint, these [climate-
induced] changes would likely amplify stresses on weaker
nations and generate geopolitical instability in already
vulnerable regions.'' (page 21)
And a number of reports, including the recent America's Climate
Choices suite of reports from the National Research Council,
affirmatively attribute climate change to increasing levels of
greenhouse gases in the atmosphere.
In your testimony you state (page 9) that Congress ought to
consider an amendment to section 526 of the Energy Independence and
Security Act of 2007:
suggest consideration of an amendment to section 526 that
would allow the government to target purchases of alternative
fuels derived from fossil fuel resources (such as coal, natural
gas, or oil shale) if . . . lifecycle greenhouse gas emissions
are no more than five percent above the lifecycle greenhouse
gas emissions of their petroleum counterparts.''
Given this context, isn't such a proposal in direct conflict with
the aforementioned national security interests of the United States
since greenhouse gas emissions would increase under your proposal?
Answer. My testimony does not recommend or advocate specific
legislation. As an energy policy researcher working at the RAND
Corporation, my testimony is provided for the purpose of informing the
committee and its staff of alternative options. For that reason, the
quotation from the testimony regarding consideration of an amendment to
section 526 was preceded by the phrase: ``If the intent of Congress is
to promote the early production of alternative fuels with greenhouse
gas emissions that are comparable or better than those of their
petroleum counterparts, . . . ''
Information on the adverse impacts of increasing atmospheric
concentrations of greenhouse gases suggest that national security
consequences represent but a single dimension of a growing global
environmental problem. If Congress is interested in reducing U.S.
greenhouse gas emissions, I strongly suggest consideration of broad-
based approaches, such as placing a fee on carbon dioxide emissions.
Liquid fuel use by the U.S. military generates less than 1 percent of
national greenhouse gas emissions. Targeting military fuel consumption,
which is basically the impact of section 526, while ignoring the much
larger civilian sources of greenhouse gas 10 emissions is not an
effective approach to addressing the national security or other adverse
impacts of rising atmospheric greenhouse gas concentrations.
With regard to the suggestion of ``no more than five percent,'' a
number of ``conventional'' petroleum products that government is
allowed to purchase are characterized by lifecycle greenhouse gas
emissions that are above 5 percent of the U.S. average. For example,
fuels produced from heavy oils produced in California or imported from
Venezuela exceed the 5 percent threshold.
Question 10. With respect to your testimony on section 7 of S.937
(Multi-year contract authority for DOD procurement of alternative
fuels), do you have any comments on the manner in which the
Congressional Budget Office currently scores such long-term contracting
authority? Do you feel their accounting methodology is a true and
accurate representation of the actual cost to the federal government?
Does it account for the cost savings accrued over the lifetime of the
contract or for the fact that the federal government would be
purchasing some form of fuel, electricity, etc. anyways?
Answer. These specific questions deal with issues that we have not
examined and, therefore, respectfully defer comment.
Question 11. In 2007 you testified in front of Congress that the
BLM should ``rescind the requirement to prepare a programmatic EIS for
a commercial leasing program [for oil shale],'' and instead you
recommended that the federal government phase in a process based upon
research results. Last month, you testified in front of the House
Energy and Commerce committee that ``It would not be advisable to
develop detailed regulations . . . until more information is available
on process performance and impacts.'' Just last week, in front of the
same committee you stated in written testimony that the 2008 commercial
leasing regulations are ``seriously deficient.'' Can you say more? Does
the rush to lease jeopardize the development of oil shale?
Answer. The research that we conducted on oil shale in 2004 and
2005 indicated that not enough information was available to assess the
environmental impacts of large scale oil shale development. Major
information shortfalls included:
1) Options for mitigating damage to plants and wildlife;
2) Reducing uncertainties associated with ecological
restoration after oil shale production activities;
3) Understanding the subsurface environment, including
hydrological, geochemical, and geophysical phenomena that could
result from oil shale development; and
4) The air and water emissions associated with advanced
processes for oil shale development.
It was and continues to be our judgment that these information
shortfalls preclude moving forward with a programmatic EIS for a full-
scale commercial leasing program.
The written testimony provided to the Energy and Power Subcommittee
of the House Energy and Commerce Committee on May 5 and June 3 and to
the Senate Energy and Natural Resources Committee on June 7 represents
our current perspective on the challenges of moving forward with oil
shale development. The emphasis should be on obtaining information from
a limited number of pioneer facilities. The leasing program should be
designed to motivate investment in such pioneer plants. A rush to a
commercial leasing program could seriously jeopardize the development
of oil shale and could result in adverse socioeconomic and
environmental impacts that could have a profound effect on northwestern
Colorado and northeastern Utah.
Question 12. Last month you testified in front of a house committee
that in regard to oil shale development, ``It would not be advisable''
to proceed with ``full-blown commercial development'' until we know
more. How much do we know about the research that is going on, whether
it will bring us to a point where we can even contemplate commercial
development of America's oil shale resources? In the past, you've also
raised concerns about water quantity and quality. Has research
addressed these concerns?
Answer. Formal research by RAND on oil shale terminated with
publication of our 2005 report. Since then, I and other staff have
tried to maintain an awareness of what progress is occurring. With
regard to the four information shortfalls discussed in the answer to
Question 11, we are not aware of significant progress, although certain
firms interested in oil shale development may have information that is
not publicly available. Government support of research that would
address these information shortfalls is very small.
Question 13. What can you tell us about other attempts to develop
oil shale around the world; Estonia being the nation that is mentioned
the most often? What can you tell us about these other experiences with
oil shale? What have been the results? Is it the case that Estonian is
struggling to manage the tremendous volumes of toxic waste from their
years of oil shale development?
Answer. In Estonia, oil shale is primarily used as a solid fuel for
the generation of electric power. A small amount is converted to a
liquid fuel, all of which is used in power generation or 12
cogeneration plants. To our knowledge, oil shale in Estonia is not used
to produce transportation fuels. A recent environmental assessment of
oil shale produced and consumed in Estonia indicates severe impacts
have occurred. These include subsidence over underground mining areas,
overexploitation of underground waters, pollution of surface and
underground waters, and the emission of hazardous air pollutants
(Gavrilovaa, Olga, et al, ``A life cycle environmental impact
assessment of oil shale produced and consumed in Estonia,'' Resources,
Conservation and Recycling, Volume 55, Issue 2, December 2010, Pages
232-245).
China also produces a small amount of liquid fuels from oil shale.
We have not been able to locate information on the environmental
impacts of oil shale production in China.
Responses of James T. Bartis to Questions From Senator Portman
Question 14. Would you see it as a positive step for development of
domestic energy resources if government agencies--the Department of
Defense specifically--were given authority to enter into long term
purchasing agreements for alternative fuels?
Answer. This question is similar to Question 6 posed by Senator
Murkowski. Please see Answer 6.
Question 15. Would those long term purchasing agreements assist
alternative fuels developers in obtaining the private financing they
need to move forward with projects?
Answer. They could if such purchasing agreements protected
investors against the risk that world oil prices might drop for an
extended period during the financial lifetime (about 20 years after
operations commence) of an alternative fuel project. In particular, if
DoD were given authority to grant long-term contracts, it could offer
price floors to investors to protect them against low world oil prices.
To balance this benefit to investors, DoD could require price discounts
during periods of high oil prices. To be more cost-effective, however,
fuel contracts designed to promote early commercial production should
be part of a broader package of incentives, such as investment tax
credits, accelerated depreciation, and loan guarantees. The RAND
analysis also argues against long-term contracts that establish a
guaranteed or fixed price without recourse to adjusting prices. Such
agreements are rarely observed in contracts between private parties and
are far less likely to serve the federal government's interests. More
of this is discussed in Camm, Bartis, and Bushman, Federal Financial
Incentives to Induce Early Experience Producing Unconventional Liquid
Fuels, Rand Corporation, TR-586-AF/NETL, 2008.
Question 16. How effective would you say the Department of Energy
has been in utilizing its Loan Guarantee Program?
Answer. Loan guarantees can strongly encourage private investment.
However, they encourage investors to pursue early alternative fuels
production experience only by shifting real default risk from private
lenders to the government. By their very nature, the more powerful
their effect on private participation, the higher the expected cost of
these loan guarantees to the government. In addition, loan guarantees
encourage private investors to seek higher debt shares that increase
the risk of default and thus increase the government's expected cost
for providing the guarantee. Consequently, it is appropriate that the
government should take great care in employing loan guarantees to
promote early experience in producing alternative fuels.
RAND has not conducted an analysis of the effectiveness of the
Department of Energy in utilizing its Loan Guarantee Program, and
therefore the preceding observations should not be interpreted as
justifying the pace or portfolio of the Department of Energy's loan
guarantee program. It is my understanding that the Department of Energy
has not yet made a commitment, either conditional or final, to provide
a loan guarantee to any project that would produce an alternative
liquid fuel.
Question 17. Are you familiar with section 526 of the 2007 Energy
bill and the restrictions it places on the federal government's ability
to purchase alternative fuels? Does that policy make any sense in a
world where energy prices are spinning out of control and we are
increasingly dependent on foreign energy sources?
Answer. I am familiar with section 526 and the restrictions it
places on the federal government. Please see my responses to Question 5
from Senator Murkowski and Question 9 from Senator Udall.
______
Responses of Joe Colvin to Questions From Senator Bingaman
Question 1. Your testimony mentions other countries pursing small
modular reactors, can you describe these efforts?
Answer. There is significant international interest in the field of
small modular reactors (SMR) given the potential benefits and uses of
this technology for mankind. The major countries pursuing SMRs, in
addition to the US, are Russia, China, Argentina, South Africa and
Japan. There are currently 16 specific SMR designs from these countries
that are well-advanced and that are believed to be at the forefront of
the initial designs being pursued.
Question 2. What do you think will be the hardest element to
licensing small modular reactors?
Answer. From the licensing perspective, the hardest element will
likely be the safety criteria and design requirements set by the
Nuclear Regulatory Commission (NRC) from two important perspectives:
I. First, the NRC needs to determine the necessary safety
case for SMRs from a thorough evaluation of the steps necessary
to protect the public health and safety. This must recognize
the unique design considerations of the technologies, rather
than just to apply the regulatory requirements currently used
for larger reactor technologies. The unique designs of SMRs
will result in safer plants, rely on natural phenomena such as
natural circulation, not on power-driven pumps, likely be
located below ground, rely on inherently safe considerations
that do not require the typical containment structures, etc.
Applying the current regulatory requirements, as is, will
likely lead to SMRs not being viewed as viable by customers in
the future.
II. Second, many of the new technologies are in areas outside
the typical light-water reactor technology currently licensed
in the US. The NRC does not currently have the expertise
necessary to evaluate the designs, safety cases and technology
of the advanced SMRs, such as high-temperature gas reactors and
fast reactor technology. It's important that the NRC, working
with the DOE and industry, develop this expertise to allow
efficient and effective licensing of these advanced concepts.
Question 3. Given your experience with the nuclear industry and
their utilities trending over the last 40 years towards large 1000 MW
reactors with economies of scale, do you think small modular reactors
will be adopted by this same market?
Answer. Clearly the economies of scale and the economics of the SMR
technology will determine if SMRs are adopted by utilities in the US
and around the world. Many of the US companies interested in building
new reactors are interested in larger reactors in the range of 1000MWe
to 1500MWe; however, there are many other smaller utilities in the US
that would likely be interested if the SMR technology is proven--
utilities whose systems could not support the addition of a large
reactor or those utilities that desire to shut down older coal-based
units and replace them with non-emitting generation sources. Outside
the US, there will be many applications for SMR technologies, once
proven, since most of the developing world could take full advantage of
the smaller capacity of SMRs and then add additional plants as needed.
Question 4. Your testimony mentions the early relationship of these
reactors with Navy prototypes, my understanding is Naval power reactors
are substantially different in design and operation than small modular
reactors--is that true?
Answer. The US Naval Submarine reactor programs were clearly the
first SMRs and were the foundation of many of the technologies that are
being used and/or developed today. For example, the 10MW light-water
reactor for the first nuclear submarine, USS Nautilus (SSN-571) formed
the basis for the initial commercial designs. The second submarine
reactor on the USS Sea Wolf (SSN-575) was a liquid metal sodium-cooled
intermediate reactor using thorium fuel. A number of the currently
proposed SMRs intend to use liquid metal cooling with a fast reactor
fuel, including thorium-based technologies.
At the same time, submarine reactors have many differences in the
designs due to their intended purpose. For example, the majority of the
reactor output of a submarine reactor is used for propulsion and the
reactor needs to be able to change power very rapidly to meet tactical
conditions. Additionally, reactor design criteria such as power
density, length of time between refueling, etc. result in design
considerations different than for SMRs used in power generation, steam
production or desalinization applications.
Responses of Joe Colvin to Questions From Senator Murkowski
Question 1. (S. 512 and S. 1067)--What is the biggest hurdle that
needs to be overcome for all components of a small modular reactor to
be manufactured in the United States?
Answer. The loss of US manufacturing capability for large reactor
components and equipment is a serious concern. The current global
marketplace for nuclear components and equipment is likely to continue
until there are sufficient markets to warrant the investment in new
plants and equipment in the US. There has been some recent investment
in new facilities in the US for reactor construction in Virginia and in
Louisiana; however, these facilities will provide only part of the
equipment and components for new reactors. New facilities will be built
when the growth in new reactor construction in the US expands
significantly.
Question 2. (S. 512 and S. 1067): In order for any SMR to move
forward, there must be interest from a user. What are you hearing from
utilities about their interest in SMRs?
Answer. There is significant interest and support from US utilities
in new SMR technology. For example, the Tennessee Valley Authority
recently announced a partnership with B&W for the m-reactor project and
desires to pursue the development of a prototype to prove the
technology for future applications and sales. In the end, the utilities
are interested in keeping all their options open for SMR technology.
Once SMRs are proven to be safe, licensable and competitive, there will
be increasing interest and use of this promising technology.
______
Responses of Edwin Lyman to Questions From Senator Bingaman
Question 1. Fukushima Daiichi involved an accident with several
reactors all adjacent to each to other, do you see a similar safety
concern with multiple small modular reactors sited adjacent to each
other as proposed by many vendors?
Answer. In light of the Fukushima Daiichi accident, I do see a
safety concern with co-located multiple small modular reactors (SMRs)
in close proximity that should be addressed by the Nuclear Regulatory
Commission (NRC) in SMR licensing. In its June 2011 report to the
International Atomic Energy Agency, the Nuclear and Industrial Safety
Agency of Japan (NISA) stated that
The accident occurred at more than one reactor at the same
time, and the resources needed for accident response had to be
dispersed. Moreover, as two reactors shared the facilities, the
physical distance between the reactors was small and so on. The
development of an accident occurring at one reactor affected
the emergency responses at nearby reactors.
Reflecting on the above issues, Japan will take measures to
ensure that emergency operations at a reactor where an accident
occurs can be conducted independently from operation at other
reactors if one power station has more than one reactor. Also,
Japan will assure the engineering independence of each reactor
to prevent an accident at one reactor from affecting nearby
reactors. In addition, Japan will promote the development of a
structure that enables each unit to carry out accident
responses independently, by choosing a responsible person for
ensuring the nuclear safety of each unit.''
These lessons need to be studied by the NRC, which has acknowledged
that some of its current regulations and procedures do not account for
events affecting multiple units on a site. For instance, according to
the NRC, emergency planning regulations focus on single-unit events
with regard to requirements for emergency operations staffing,
facilities and dose projection capability. Also, the NRC's guidance for
probabilistic risk assessment, an analysis tool which is used in many
regulatory applications, does not require the consideration of
multiple-unit events.
It is also clear that NRC will need to consider these issues in
developing its licensing approach for small modular reactor sites,
which may host two to four times the number of units present at the
largest U.S. nuclear plant site today. As I pointed out in testimony,
prior to Fukushima SMR vendors called for relaxing NRC staffing
requirements for multiple modules, which would tend to decrease, rather
than increase, the independence of modules at a site. In the aftermath
of Fukushima, such requests need to receive very careful scrutiny.
Question 2. What concerns you, technically, in the licensing
process at the NRC for these small reactors?
Answer. At present the NRC has almost no regulations specific to
small modular power reactors. Small reactor vendors are lobbying the
NRC to weaken certain requirements for small reactors based on a
perception that they will be safer. My chief concern is that there is
inadequate justification at this point for licensing small reactors to
a lesser standard than large reactors. The Fukushima disaster has shown
that nuclear safety standards need to be raised for all plants. To the
extent that small reactors have inherent safety features relative to
large reactors, they can be part of this solution, but not if standards
for small reactors are weakened.
One aspect of NRC's licensing approach for small modular reactors
that I find particularly troublesome is a recent proposal to ``risk-
inform'' the reviews of small modular reactor applications.\1\ This
proposal would use probabilistic risk assessment (PRA) information to
assess which systems, structures and components (SSCs) of small modular
reactors are the most important with regard to severe accident risk,
and would downgrade the review of SSCs that are determined not to be
``risk-significant.'' But the Fukushima accident has called into
question the nuclear community's understanding of risk for reactor
types that have been operating around the world for decades. In
particular, equipment that could have mitigated the outcome of the
Fukushima accident was not available for use because it was not
sufficiently well-protected. Similar equipment at U.S. plants is not
considered ``risk-significant'' and therefore is not required to have
high reliability or survivability. This misperception of risk is likely
to be even greater for new plant designs, since their PRAs are only
paper studies that have not been validated with plant operating data. I
am concerned that the NRC's proposal would put too much weight on these
theoretical studies in small modular reactor licensing reviews and as a
result could fail to thoroughly evaluate important contributors to
plant risk in the real world.
---------------------------------------------------------------------------
\1\ R.W. Borchardt, ``Use of Risk Insights to Enhance the Safety
Focus of Small Modular Reactor Reviews,'' SECY-11-0024, U.S. Nuclear
Regulatory Commission, February 18, 2011.
---------------------------------------------------------------------------
Question 3. Do you believe some of these reactors as proposed are
truly passive in their safety features, that is they can shut down and
cool themselves without intervention?
Answer. I am not aware of any credible reactor design that is truly
passive and can shut itself down and cool itself in every circumstance
without any potential need for intervention. Some reactor designs,
large or small, have certain passive safety features that allow the
reactor to depend less on operator action for a limited period of time
following designbasis accidents. Small reactors may have an advantage
here because the lower the power of a reactor, the easier it is to cool
through passive means such as natural convection cooling. But generally
all passively safe reactors require some features, such as valves, that
are designed to operate automatically but are not one hundred percent
reliable. And operators will always be needed to monitor systems to
ensure they are functioning as designed, and to intervene if they fail
to do so. Both passive systems and operator actions would require
functioning instrumentation and control systems, which have been shown
to be unreliable during severe accidents both at Three Mile Island and
Fukushima. It is unrealistic to expect any reactor design to be
completely passive in every contingency, and as result passive designs
should also be equipped with highly reliable active backup systems and
associated instrumentation and control systems.
Question 4. Many people believe that small modular reactors can be
used in geographically remote locations or with smaller utilities than
would be for large reactors--this seems simplistic to me--can you
comment on this?
Answer. In my view, small modular reactors are not suitable for
deployment in remote locations unless there is an established
infrastructure to cope with emergencies, and if sufficient numbers of
trained operator and security staff can be provided. In light of the
answer to the previous question, it is unrealistic to assume the
availability of small reactors that are so safe they can be shipped
around the world without the need to ensure the highest levels of
competence and integrity of local regulatory authorities, plant
operators, emergency planning organizations and security forces.
Fukushima has demonstrated the importance of timely off-site response
in the event of a severe accident, so the accessibility of reactors in
remote locations also must be a prime consideration. Even within the
U.S., small utilities with little or no experience in operating nuclear
plants need to fully appreciate the unique challenges and
responsibilities associated with nuclear power and should not expect
that small modular reactors will provide any relief in this regard.
Response of Edwin Lyman to Question From Senator Murkowski
Question 1. (S. 512 and S. 1067)--Could you describe how a light-
water small modular reactor (SMR) would have fared if faced with
similar conditions at the Fukushima Daiichi power plant? (S. 512 and S.
1067)--Much of your testimony is directed at the concern that the
Nuclear Regulatory Commission will weaken regulatory requirements for
SMRs. In your view, do all of the requirements need to be the same for
small and larger reactors? Capital costs aside, if a site is only being
used for a 300 megawatt reactor--to replace an existing coal power
plant--or a single 50 megawatt reactor for off-grid applications,
should the emergency planning zone requirements be the same as a 1200
megawatt reactor?
Answer. It is difficult to say in general how any light-water small
modular reactor would have fared under the conditions experienced at
Fukushima Daiichi. That would depend on many factors, including the
plant design basis, siting characteristics, the size, number and
separation of modules on site, the level of operator staffing, and the
adequacy of the emergency procedures. While heat removal requirements
would be less challenging for a single small reactor than a single
large one, on a per-megawatt basis (that is, if one 1250 MW plant is
replaced with ten 125 MW modules, for example) the difficulty of coping
with multi-unit accidents could well outweigh this advantage. And for
any plant, large or small, the key factor is the most severe event that
the plant is designed to withstand. No reactor, large or small, can be
expected to survive an event significantly beyond its design basis, and
that is why post-Fukushima nuclear safety standards for new reactors
need to be strengthened across the board. If the NRC weakens standards
for SMRs based on an erroneous perception of their safety relative to
large reactors, SMRs may well end up less able to cope with a severe
event.
______
Responses of Brian Siu to Questions From Senator Bingaman
Question 1. I do not understand how increased demand for
electricity to power electric cars is relevant to EPA's assessment of
``best available control technology.'' Could you explain how these are
related to each other, and what policy change might result from tying
the two together, as they are in Sec. 8 of S. 937?
Answer. NRDC finds the implementation pathway for section 8 of S.
937 to be unclear. The provision appears to allow on-road emissions
reductions due to electric vehicle deployment to be taken into account
when determining best available control technology for power plant
pollution. Yet the bill's language is extremely vague, lacking rules or
parameters to guide how these offsets would be determined, measured,
monitored or otherwise applied. For instance, it does not explain which
pollutants could be considered or how they would be measured. Nor does
it explain how baseline emissions would be evaluated. In order to
determine an offset for BACT, one must know what the consumer would
have bought if an electric vehicle were not chosen. Without that
information, it would be impossible to determine the pollution
reduction that actually took place. Yet, no such guidance is provided
under section 8 of the bill. For these reasons it is difficult to
predict if and how this provisions could be implemented.
Assuming that section 8 could be implemented, the provision poses
serious risks to public health and welfare. As mentioned, it appears to
use on-road pollution reductions from electric vehicle deployment to
justify laxer pollution controls for power plants. For instance, if
electric vehicles were able to reduce on-road NOx emissions, those
reductions could apparently be taken into account when determining BACT
for the generating source. This poses serious risks to local air
quality and public health because increased power plant pollution might
not geographically match on-road emissions reductions. Thus, the
provision would allow air quality in some regions to deteriorate based
on improvements elsewhere. This would be extremely unfair to local
businesses and residents who would ultimately suffer the health
impacts.
Moreover, on-road emissions reductions could conceivably be applied
to carbon dioxide and other greenhouse gases since BACT determinations
now include global warming pollution. If so, section 8 is once again at
fundamental odds with sound public policy. Allowing power plants to
increase their carbon pollution would significantly undermine efforts
to lower transportation sector emissions. Automakers will achieve the
Administration's vehicle efficiency and tailpipe standards through
range of clean technologies, including vehicle electrification. Section
8 introduces an element of emissions leakage that allows power plants
to directly negate those automaker achievements. To that extent, it
would provide a windfall to the power sector at the expense of auto
manufacturers that are working to provide a cleaner vehicle fleet. NRDC
maintains that this is inequitable and short sighted policy that will
make necessary transportation emissions reductions much more difficult.
Question 2. What would be the likely outcome if algae-based fuels
that were co-located with power plants were given triple RFE credits?
Would suggest favoring some algae technologies and pathways over
others?
Answer. It is difficult to predict whether a credit multiplier
would effectively promote algal fuels. If successful, however, it could
come at the expense of other emerging biofuels since the signal could
potentially divert investment from other nascent fuel technologies.
This view is not intended to show disapproval or opposition to
sustainably grown algal fuels in general. It simply speculates on one
possible outcome of S. 937s proposal.
Environmentally, it is important to note that there is no carbon
benefit to co-locating algal fuel production near power plants or other
large industrial sources of carbon dioxide. Algae requires the same
volume of carbon dioxide to grow irrespective of location. From a
carbon accounting standpoint, it is irrelevant whether the algae takes
carbon directly from the atmosphere or from a carbon dioxide stream
that is imminently headed to the atmosphere. Thus, the proposal applies
a triple credit multiplier where there are no significant carbon
benefits relative to algae grown elsewhere.
______
Responses of John E. Kelly to Questions From Senator Bingaman
Question 1. S. 512, the Nuclear Power 2021 Act requires cooperative
agreements with cost-sharing. Can you comment on the non-federal cost
sharing outlined in this bill?
Answer. Under the provisions of S.512, industry would be required
to support design certification activities at a 50% cost-share level
and construction and operating license activities at a 75% cost-share
level. i
In balancing, the acceleration of work and the offset in risk
afforded by the Government cost-share. DOE determined that at least 50%
cost-share From industry for both the design certification and
licensing activities was a starting point. The Department believes that
a higher cost share from industry be incentivized and will include
greater than 50% industry contribution as a priority rating criterion
for selection.
Question 2. S. 1067, the Nuclear Energy Research Initiative
Improvement Act authorizes $50 million per year for 5 years--is this
adequate?
Answer. The S. 1067 Bill authorizes $50 million a year for the
research element of the Small Modular Reactor (SMR) program. The
Department's budget request for FY 2012 outlined a $452M, five-year
program to help accelerate the commercialization of light water reactor
based SMRs through a cost-shared public-private commercial application
project. In addition, a research component ($28.7 million in FY 2012)
was proposed to accelerate the development of more advanced SM R
concepts. The Department believes that this level of funding is
appropriate.
Question 3. S. 512, authorizes the selection under merit review of
two candidate small reactors to begin a demonstration program lor
licensing. Are these the appropriate reactor sizes to consider for
licensing?
Answer. A wide range of design parameters and power levels have
emerged during the recent surge in the domestic SMR market. These
designs have largely been driven by what the vendors perceive to be
their customers needs and requirements, including cost, incremental
load growth, and aging fossil plant replacement. As such, the
Department does not see the need for this bill to dictate reactor size
constraints to the industry. The Department has defined the upper limit
on the SMR power output as 300 MWe, and will only be considering those
designs that meet this criterion in our solicitation. Beyond this
constraint, we should be soliciting and selecting, projects based on
the value they can provide in improving the U.S. environment, economy,
and energy security and let market forces determine the precise size
range.
Question 4. S. 1067, the Nuclear Energy Research Initiative
Improvement Act authorizes research and development, should it also
include demonstrations as well?
Answer. The Department does not plan to support demonstrations of
either the near-term light water-based or advanced SMR designs.
Question 5. S. 1067 requires cost sharing--is that appropriate?
Answer. Yes. The Department expects that any RD&D activity that
supports the development of technologies will be cost-shared. Any RD&D
activity that supports specific designs will be appropriately cost-
shared by the industry partners that receive direct benefit from that
activity.
Response of John E. Kelly to Question From Senator Murkowski
Question 1. Given your background with DOE and the American Nuclear
Society, and your interaction with Nuclear Energy Institute and the
Nuclear Regulator Commission, could you discuss some of the lessons
learned from implementing the Nuclear Power 2010 program in terms of
industry participation, cost sharing, and design certification that
would be applicable to the Nuclear Power 2021 Act?
Answer. Nuclear Power 2010 (NP 2010) was a government-industry, 50-
50 cost-shared initiative with two main goals: demonstrating the then
newly revised. Nuclear Regulatory Commission's design-centered
licensing approach and providing industry with information needed to
make decisions to construct and operate those plants. The program
concluded at the end of FY 2010.
A NP2010 lessons learned report is under development and will
ultimately be available on the DOE Office of Nuclear Energy website.
Key lessons learned from the NP2010 program that should be applied to
SMR activities supported under the Nuclear Power 2021 Act include:
Developing the business case and, most importantly, a
Roadmap in the early phases of the program
Encouraging the formation of utility-led industry consortia
based on a specific reactor technology
Including appropriate industry cost share (50-50 minimum)
Including utility members of consortia in a leadership role,
especially with respect to reactor technology selection
Including utility participation in reactor design
development
Avoiding and/or tightly controlling `in-kind' contributions
on industry cost-share
Phasing project activities and including appropriate project
decision points (off-ramps) and oversight
NE is incorporating these lessons into the SMR program methodology
at each stage of the program.
Responses of John E. Kelly to Questions From Senator Portman
Question 1. In your opinion, with the funding outline suggested by
DOE ($452 million), what is the earliest that you think the first SMR
demo could be deployed and operational?
Answer. The Department believes industry is planning deployment
decisions in a timerrame that could result in the first SMR plants
being operational in the 2020 timeframe.
Question 2. The Administration requested $67 million for design,
certification and licensing. In which of those three areas will the
majority of the funding, be spent?
Answer. In FY 2012, the vast majority of the $67 million request
would be for engineering work-to support design related activities.
Total expenditures for Nuclear Regulatory Commission design
certification and licensing are modest by comparison. Perhaps two-
thirds to three-quarters of the cost will be associated with design
activities, recouizing that there arc some grey areas or overlaps
between these activities and that there would be some discretion on how
costs are allocated between the activities.
Question 3. Small Modular Reactors have received increased
attention since the disaster in Japan. SMR designs are considered
``highly passive,'' meaning if there is a situation where the reactor
is disconnected from the grid, the safety functions of the unit can
still engage and ensure that the reactor is shut down without an
external incident. Dr. Pete Lyons, Assistant Secretary of the Office of
Nuclear Energy at the Department of Energy, highlighted this fact in
March at the Senate Energy of Natural Resource Committee's briefing on
Japan. Can you speak in more detail about these particular safety
functions?
Answer. All of the currently proposed light water-based SMR
technologies have been designed to provide long-term cooling via
natural circulation after accidents that may result in a loss of
powered systems. This means that the circulation of-water over the fuel
is driven by thermal gradients and gravity, so there is no need for
powered pumps. This passive cooling capability does not require
emergency generators or additional operator actions to continue cooling
a reactor core. Some designs utilize natural circulation cooling for
normal operation as well. Most of these designs also integrate the
primary system components within the reactor pressure vessels, which
could significantly reduce the possibility for large-break loss-of-
coolant accidents. SMRs also employ smaller cores requiring less water
to cool.
Question 4. The economics of natural gas have changed significantly
in the past couple of years. Prices have dropped significantly since
2008 and many are saying that prices will remain low and stable for the
significant future. In your opinion, at what price level must natural
gas be for S'AVIRs to be competitive?
Answer. At the current market price for natural gas, existing
options for electricity generation are not competitive based solely on
a cost per kilowatt basis. however, significant long-term investments
in electrical generation capacity must consider more than current fuel
prices. Utilities adding future capacity will consider price
volatility, diversity of supply, the amount of capital cost and
financing, project risks, and policy considerations. For example,
natural gas price volatility over time and policies to curb greenhouse
gases could affect electricity' generation choices.
While it is premature to provide a specific price range for SMRs to
compete favorably with natural gas at present, the Department thinks
that tinder certain circumstances, future (nth of a kind) SMRs can be
competitive with both large baseload nuclear plants and the historical
mean price for natural gas. In addition. SMRs offer potential buyers a
lower (or incremental) capital investment. lower interest costs and a
shorter construction schedule than the large nuclear plants.
Responses of Steven G. Chalk to Questions From Senator Bingaman
Question 1. Could you please explain to us what changes in
Administration policy would result from the repeal of Sec. 526 of the
Energy Independence and Security Act of 2007, as called for in S.937?
Is it likely that government purchasing decisions would be altered in
any way?
Answer. The Department has not analyzed what changes in
Administration policy would result from the repeal of Sec. 526 of the
Energy Independence and Security Act of 2007, as called for in S. 937.
Sec. 526 of EISA 2007 is consistent with the goals contained in
Executive Order 13514 and is an effective provision in helping meet the
Administration's greenhouse gas reduction goals.
Question 2. Could you explain to us how the changes to the DOE loan
guarantee program proposed by S. 937 would affect DOE's decisions about
what projects are awarded loan guarantees?
Answer. The Administration is still reviewing S. 937 which proposes
an expansion of section 1703 eligible projects to include substitute
natural gas production facilities. DOE is concerned that the reporting
requirement proposed in S. 937 could have detrimental effects on the
Department's ability to review loan guarantees effectively.
Responses of Steven G. Chalk to Questions From Senator Murkowski
Loan Guarantees for Fossil Projects (S. 937)
Question 1. The 2005 Energy Bill names ``coal gasification'' as
eligible for support under the loan guarantee program that the law
created. As you are aware, coal is abundant in the United States and a
very affordable option for consumers. Not only does gasification make
coal use cleaner, but it can also diversify the products we make with
it, including electricity, fuels, plastics, fertilizer, and other
commodities.
Please describe the level of interest the coal sector has shown in
the loan guarantee program, and the status of the Department's support
for coal-utilizirw, projects that have sought guarantees. How does that
compare to guarantees considered in other sectors?
Answer. The Loan Guarantee Program has received several fossil
applications in the section 1703 program.
Oil Shale (S. 937)
Question 2. DOE has estimated that our technically recoverable oil
shale resource base is potentially greater than one trillion barrels.
Please describe what DOE is doin4 to help commercialize this
potentially massive resource. Is your Department coordinating its
efforts with the Department of Interior?
Answer. DOE worked closely with the Department of the Interior and
other representatives of the Unconventional Fuels Task Force
(established under subsection 369(h) of the Energy Policy Act of 2005)
in developinv, the Task Force's initial report and program plan to
expedite commercialization of unconventional fuels, including oil
shale. The initial report and the program plan are available on the
Task Force's website at www. unconventionalluels.org.
Responses of Steven G. Chalk to Questions From Senator Manchin
Question 1. During my tenure as Governor of West Virginia, I
chaired the Southern States Energy Board for one year we released a
study, the American Energy Security Study, which evaluated
opportunities to use coal and biomass as transportation fuel
feedstocks. Are there legislative actions we could take to enhance the
American Alternative Fuels Act of 2011 to provide more market
opportunities for coal-derived fuels?
Answer. Conversion of.coal to transportation fuels is a mature
technology. The Energy Information Administration's (ER) Annual Energy
Outlook 2011 projects that world oil prices will he just under $125/
barrel in 2035 (2008 $/barrel). Given ETA's long-term projection and
current world oil prices, which are near $100/barrel as of June 13,
2011, industry is best positioned to evaluate market opportunities to
proceed with commercial production of transportation fuels derived from
coal.
Question 2. Over the past several years, RAND has studied various
mechanisms to stimulate the creation of a broader alternative fuels
industry in the United State using domestic resources. Are you in a
position to identify the mechanisms that would be most effective in
encouraging the necessary investment in projects to produce alternative
fuels from domestic energy resources?
Answer. DOE is familiar with RAND's work on this issue, and
representatives from DOE's Biomass Program have met with an author of
RAND's recent study, ``Alternative Fuels for Military Applications.''
Alternative fuels are a critical component of DOE's strategy to lessen
our dependence on oil while creating business opportunities and jobs in
the United States. Biofuels derived from domestic biomass can
potentially provide a cost-effective alternative to oil and, depending
on the choice of feedstock, can contribute to national environmental
goals, by helping reduce greenhouse gas emissions.
Private sector investment is necessary for creating meaningful
growth in the U.S. alternative fuels industry, and DOE and other
agencies can play an effective role in stimulating this investment
through a variety of mechanisms. In our discussions with investors and
prospective binfuel producers, we have identified four main sources of
risk that discourage private investment: (I) feedstock supply risk; (2)
fuel-production technology risk; (3) product offtake risk; and (4)
regulatory stability risk.
For (1) and (2), both USDA and DOE have been supporting projects
ranging from R&D to small-scale trials and up to ``pioneer'' commercial
scale plants in order to improve and demonstrate the necessary
technologies at scale. Continuing these research, development, and
demonstration efforts for emerging, new crops and conversion
technologies should encourage private investors in these areas.
For (3), there are two factors. First, long-term fuel-purchase
contracts are virtually unknown in private industry, and limited by law
to 5 years for Department of Defense purchases. Second, crude oil
prices (and therefore fuel prices) are exceedingly volatile. Even
though the long-term trend of increasing oil prices justifies
investment in alternative fuels, the volatility of crude oil prices can
deter investors clue to the significant downside risk when crude oil
prices are low.
For (4), the issue is that advanced biofuels will entail huge
investments both for farmers (new, perennial crops and the equipment to
plant and harvest them) and fuel producers (costly new biorefineries).
Appendix II
Additional Material Submitted for the Record
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NuScale Power,
Portland, OR, June 7, 2011.
Hon. Jeff Bingaman,
Chair, Committee on Energy and Natural Resources U.S. Senate,
Washington, DC.
RE: S. 215, a bill to promote small, modular scalable nuclear power
reactors, public witness testimony for the record.
Dear Mr. Chairman and Ranking Member,
On behalf of NuScale Power, Inc. of Corvallis, Oregon we are
writing in support of your efforts to enact S.215, as currently drafted
and introduced in the Senate and which was passed in identical form by
your committee last session. We believe that the creation of a U.S.
based, nuclear manufacturing industry will significantly contribute to
our nation's long-term economic goals and help the U.S. sustain and
grow the existing 20 percent contribution to our electricity needs from
clean, non-emitting nuclear power.
There is a great deal of urgency in these efforts as the U.S.
already faces stiff competition from overseas vendors. With quick and
proper action, I believe we can preserve much of the U.S. market share
and compete successfully in overseas markets because of our superior
design features and the commitment to safety in the U.S. that is
unsurpassed around the world.
Small, modular reactor technologies build on a rich history of
American innovation and world class nuclear design, manufacturing and
operations. The President has recognized the need for nuclear power as
part of a comprehensive energy, environment and employment strategy for
this country, including new financial incentives. NuScale is ready to
deliver:
NuScale Power owns and operates a one-third scale test
facility on the campus of Oregon State University. It is in use
to document critical tests required to comply with NRC design
certification and licensing. The next phases of regulatory
approval are costly in the U.S. and require federal support.
Since last year, NuScale Power has conducted extensive
discussions with various government operations centers managed
by both DOE and DOD. We are in the process of scoping both
research and deployment opportunities that have the potential
to benefit the federal government directly by lowering the
facilities' long term costs and reducing their greenhouse gas
impacts as an electric power consumer.
NuScale Power has committed to construct a full-scale
control room simulator to specifically address digital
instrumentation, control and human factors analysis that will
be integrated in all of the next generation nuclear plants,
regardless of size. NRC staff has visited Corvallis to review
these plans and provide their input.
As confirmed by a panel of independent experts whose work
was presented to the NRC in September 2009, NuScale Power has
achieved safety margins that are 10 times safer than the
previous generation of nuclear plants. This translates into
improved public safety and better financial risk management.
NuScale Power's inherently safe technology has received
considerable attention since the natural disaster and ensuing
nuclear accident in Japan. We have developed a nine-page safety
illustration that can be viewed on our website,
www.nuscalepower.com. It shows how our reactor and spent fuel
pool might have responded to similar events. From what we know
now, the results are very positive.
Finally, in addition to the President's leadership in
requesting funding for research, development and demonstration
of small, modular reactors, the Nuclear Regulatory Commission
and its staff have also continued to provide on-going licensing
support efforts in their own separate budget request. In a
Commission briefing held in March 2011, NRC staff outlined for
the Commission the planned approach to licensing SMRs. Staff
concluded by saying, in essence, ``It's not a matter of whether
we can license these plants but how we best proceed.'' This was
encouraging to us, and is a positive sign that Congress can
move forward with taxpayer dollars to support the licensing
efforts.
Our company experienced a temporary financial setback earlier this
year but we are receiving considerable interest in new funding from
investors that include American manufacturers, fabricators, suppliers,
constructors and investment firms. We have advised DOE that we expect
to be in a position to compete for Federal cost-sharing dollars as
early as FY2011 if the program is approved by Congress.
NuScale Power wants to thank you, the other cosponsors of this
legislation and other members of the committee for the support you are
providing to SMRs. We look forward to continued work with you and your
staff.
Sincerely,
Paul G. Lorenzini,
Chief Executive Officer.
______
Statement of Steven Sterin, President, Advanced Fuel Technologies,
Celanese Corporation, on S. 937
Mr. Chairman and members of the committee--On behalf of Celanese
Corporation (Celanese), I am pleased to offer the following statement
to be entered into the hearing record.
Mr. Chairman, we believe that our federal fuels policy should be
feedstock and technology neutral, should promote domestic fuel sources
and should be subsidy free.
Celanese Corporation will deliver a fuel that adheres to each of
these concepts, provided federal regulations do not discriminate
against our process for producing ethanol from basic hydrocarbons such
as natural gas and coal.
Celanese is a leading global technology and specialty materials
company that makes a broad range of products essential to everyday
living. Headquartered in Dallas, Texas, Celanese employs approximately
7,250 people worldwide, including 2,350 in the U.S. Our products,
manufactured in the Americas, Europe and Asia, are found in many
consumer and industrial applications and deliver value to customers
around the globe with innovative solutions using best-in-class
production technologies. It is from this expertise that I derive my
comments for today's hearing.
Celanese commends the Senate Energy & Natural Resources Committee
for considering S. 937, the American Alternative Fuels Act of 2011.
This legislation would expand the opportunities for domestic fuel
production using traditional hydrocarbon feedstocks. Celanese believes
that new, ground-breaking technologies within the energy and fuels
industries can help alleviate the high cost of gasoline consumers are
facing at the pump, be part of a solution to broader energy security
concerns about our dependence on foreign petroleum and minimize some of
the unintended consequences of the current federal policy on
transportation fuels.
Celanese has developed and is in the process of commercializing a
game-changing process to produce ethanol from basic hydrocarbons, and
we can do so in a much more water-and energy-efficient manner than the
traditional fermentation process. In addition, under today's market
conditions, we will be able to produce ethanol for approximately $1.50
per gallon--a fraction of the current per gallon cost of corn-based
ethanol or gasoline. Because of this, Celanese could compete with
traditional ethanol even without a subsidy from the federal government.
Celanese is concurrently intends to commercialize its technology
both domestically at our Clear Lake, Texas facility and at our wholly
owned operation in Nanjing, China. In China, the growing demand for
additives that promote cleaner burning gasoline faces concerns about
the diversion of food sources such as corn to produce fuel. This
country faces a similar dilemma. Public policy in the United States,
however, would preclude our product from competing in the current fuel
ethanol marketplace.
Current transportation fuels policy is dictated largely by the
Renewable Fuels Standard (RFS), which was established by the Energy
Policy Act of 2005 and amended by the Energy Independence and Security
Act of 2007. The RFS created a federally mandated marketplace designed
to promote the development of domestic renewable fuel technology and
production capacity. This new capacity would replace the use of
traditional fuels based on petroleum, much of which is imported from
foreign countries. The RFS establishes specific feedstock and fuel
definitions that create fuel categories, which are then required to be
produced and used at volumes prescribed on an annual basis. While well-
intentioned, the structure of the RFS is overly rigid and does not lend
itself to ongoing advances in technology and processes that can fall
outside the original definitions outlined in statute, even those that
may address the underlying purposes of the RFS.
Celanese's groundbreaking technology is a perfect example of these
limitations. Our technology is not only capable of producing ethanol at
a fraction of the cost of traditional fermentation, but it also can
more quickly ramp up production of advanced biomass-based fuels. Under
the current RFS regime, however, we could not sell our fuel into the
mandated U.S. marketplace, forcing the company to look to other markets
around the world to deploy this technology.
In addition to the statutory prohibition, the RFS creates an over-
reliance on the agricultural community to grow the feedstocks necessary
to produce the bulk of the 36 billion gallons of fuel required by 2022.
This over-reliance has resulted in a number of unintended consequences.
For instance, the RFS's diversion of traditional food and animal feed
crops to the fuel sector has negatively impacted a number of industries
that depend on these products. Corn prices today are near historic
highs, leaving little margin should natural disasters or other events
disrupt the normal growing season. Celanese believes diversifying the
use of feedstocks to produce renewable and alternative fuels would
greatly enhance our overall ability to meet the growing energy and fuel
demands facing the nation and mitigates these unintended consequences.
Celanese commends the committee's consideration of S. 937 because
our company believes that public policy surrounding transportation
fuels should be technology and feedstock neutral. Such neutrality would
unlock the full potential of American ingenuity and make better use of
our abundant natural resources. We encourage the committee to continue
exploring the potential of all new and emerging technologies. Celanese
stands ready to add its expertise to this issue and would be pleased to
provide additional information to the committee, its Members and staff.
Thank you for this opportunity to offer our thoughts on the
committee's important work.
______
Statement of Marvin S. Fertel, President and Chief Executive Officer,
Nuclear Energy Institute
The Nuclear Energy Institute\1\ (NEI) appreciates the committee's
continuing recognition of nuclear energy's essential role in achieving
three strategic U.S. goals: energy security, environmental protection
and economic development. Your vision and leadership will help America
achieve the clean energy future we want while creating the high quality
jobs we need.
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\1\ The Nuclear Energy Institute is the industry's policy
organization, whose broad mission is to foster the beneficial uses of
nuclear technology in its many commercial forms. Its membership, more
than 350 corporate members in 17 countries, includes every U.S. utility
that operates a nuclear power plant as well as international utilities,
plant designers, architect and engineering firms, uranium mining and
milling companies, nuclear service providers, universities,
manufacturers of radiopharmaceuticals, universities, labor unions and
law firms.
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Specific to today's hearing, NEI's comments are focused on S. 512,
the Nuclear Power 2021 Act, and S. 1067, the Nuclear Energy Research
Initiative Improvement Act of 2011, which we broadly support. The
Nuclear Power 2021 Act will help accelerate the development and
deployment of small modular reactors (SMRs) in much the same way that
the highly successful Nuclear Power 2010 program helped to
commercialize the large, advanced nuclear plants now being built in the
United States and overseas, including those expected to be licensed in
the United States later this year. The Nuclear Energy Research
Initiative Improvement Act of 2011 will direct research to drive down
the cost of manufacturing and constructing nuclear power systems,
including small reactors.
Small Reactor Development Advances Energy, Environmental Benefits in
New Markets
Small-scale reactors can complement large nuclear plant projects by
expanding potential markets in the United States and abroad for carbon-
free energy production. Smaller reactors provide energy companies and
other users with additional options to achieve energy and environmental
objectives.
Their small size-less than 300 megawatts-and innovative features
like dry cooling expand the range of sites suitable for deployment to
include remote and arid regions. These and other attributes make them
well-suited to repower some of the 50,000 MW of older coal plant
retirements predicted in a December 2010 study by the Brattle Group\2\,
helping us achieve our clean energy goals.
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\2\ Potential Coal Plant Retirements Under Emerging Environmental
Regulations, The Brattle Group, December 8, 2010.
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Modular construction will allow these new small reactors to be
built in a controlled factory setting, transported to the site by rail,
truck or barge, and installed module by module, improving manufacturing
efficiency and cost while reducing construction time and financing
costs. Because they can be manufactured in North America to meet
growing domestic and export demand, their deployment will create high-
tech U.S. jobs and improve our global competitiveness.
Public/Private Partnerships are Essential to Achieve Small Reactor
Deployment
The economic, energy security and environmental benefits of small
reactor technologies make a strong case for accelerated market
development. Work remains to design, develop and license small reactor
designs. A variety of factors must be addressed to achieve this
outcome. The cost and time required to design, develop, and license a
small reactor is not necessarily reduced linearly with size. In
addition, it takes time and resources for the Nuclear Regulatory
Commission (NRC) to develop the institutional capacity to license new
reactor designs.
All of these issues increase the risk and uncertainty for vendors
facing expensive design and licensing challenges. Traditional
partnerships among technology vendors, component manufacturers and end
users are necessary but insufficient in themselves. Absent additional
business risk mitigation through government incentives, the potential
benefits of these small, modular reactor concepts may go unrealized, or
may be realized later than desirable.
Leveraging these private sector resources through public
partnerships with the Department of Energy and other government
entities will accelerate these new reactor technologies to market,
achieving their many benefits while helping regain U.S. nuclear
leadership.
Legislation Before this Committee Contains Practical, Proven Provisions
The industry supports the intent of both S. 512, the Nuclear Power
2021 Act, and S. 1067, the Nuclear Energy Research Initiative
Improvement Act of 2011. Together they can accelerate the deployment
and improve the competitiveness of U.S.-developed small modular
reactors.
S. 1067 authorizes the Secretary of Energy to carry out research,
development and demonstration programs to reduce manufacturing and
construction costs relating to nuclear reactors, including small-scale,
modular designs. By focusing federal research support on programs to
reduce the cost of licensing, construction and the manufacturing plant
components, S. 1067 can accelerate the construction of small modular
reactors.
Chairman Bingaman's Nuclear Power 2021 Act directs the Secretary of
Energy to carry out programs to develop and demonstrate two small,
modular reactor designs. It would seek to secure design certifications
and combined licenses for the two designs by 2021. Proposals for this
initiative will be made on the basis of scientific and technical merit,
using competitive procedures, and taking into account efficiency, cost,
safety, and proliferation resistance.
Since the Nuclear Power 2021 Act was first introduced in 2009, both
the industry and the NRC have explored the option of using 10 CFR Part
50 to license the ``first mover'' plants of a specific small reactor
design. Subsequent designs would be licensed under 10 CFR Part 52 using
a combined operating license.
The Administration's FY 2012 budget request for a cost-shared
program to develop and demonstrate two small modular reactor designs
provides the flexibility to use 10 CFR Part 50 to license the lead
plants of a specific small reactor design. The cost-shared provision of
this proposed DOE program requires a minimum of 50 percent industry
funding for both design certification and licensing support. This also
differs from S. 512, which requires that not less than 75 percent of
the funding for licensing demonstration come from non-federal sources.
Conclusions and Recommendations
NEI appreciates the committee's ongoing, comprehensive support of
public-private partnerships to share the costs and risks associated
with developing and licensing small modular reactors. S. 512
demonstrates the committee's vision and leadership role in deploying
small reactors within the next 10 years.
Beyond legislation the committee is considering now, the industry
recognizes that the committee's support has also extended to the
Department of Energy's FY 2012 budget request for the LWR SMR Licensing
Technical Support Program, and SMR Research and Development. NEI thanks
the committee for its bipartisan support of this funding, which is
critical to help ensure our industry can meet the deployment timelines
laid out in S. 512.
The intent and vision of The Nuclear Power 2021 Act and the
Department of Energy's SMR activities are united, and together promise
to create the partnerships that will reestablish our nation's
leadership in advanced nuclear energy innovation.
NEI nonetheless encourages the committee to consider two minor
modifications to S. 512 that would ensure its implementation is aligned
with DOE's FY 2012 SMR cost-share program. These recommendations are:
1. Provide the Department of Energy, Nuclear Regulatory
Commission, eligible vendors and utilities the flexibility to
use either the 10 CFR Part 52 or 10 CFR Part 50 licensing
framework, as appropriate; and
2. Apply a consistent, minimum 50 percent industry
contribution to all activities included in the program.
Current regulations allow the use of either 10 CFR Part 52 or 10
CFR Part 50 for the deployment of first-of-a-kind nuclear power plants.
``First mover'' utilities may choose to use the 10 CFR Part 50
framework to provide necessary flexibility in the deployment of the
first SMRs.
NEI believes that the use of this framework, where appropriate,
would be advantageous to the committee's goal to achieve near-term
deployment of small reactors. Therefore, S. 512 should be modified
slightly to align with current regulatory options. In addition, the
Department of Energy's Fiscal Year 2012 budget request for the SMR
program includes financial cost-share assistance with a minimum of 50
percent industry contribution to support both design and licensing of
selected reactor systems. NEI believes this cost-share arrangement is
appropriate to the risks of both vendors and utilities, and therefore
recommends that S. 512 be modified to align with the Department's
request.
We urge the sponsors to combine the small reactor provisions into a
single bill, and adopt the two changes recommended above.
The potential benefits of small, modular, nuclear energy plants are
substantial and the technologies should be pursued and supported. These
designs expand the strategic role of nuclear energy in meeting national
environmental, energy security and economic development goals.
______
National Rural Electric Cooperative Association,
Arlington, VA, June 9, 2011.
Hon. Jeff Bingaman,
Chairman, Senate Energy Committee, U.S. Senate, Washington, DC.
Hon. Lisa Murkowski,
Ranking Member, Senate Energy Committee, U.S. Senate, Washington, DC.
Dear Senators: On behalf of over 900 not-for-profit electric
cooperatives serving consumers in 47 states, I am writing to respond to
a false and, frankly, demeaning statement made by the Union of
Concerned Scientists (UCS) at your June 7, 2011 hearing regarding S.
512, the Nuclear Power Act of 2012. The UCS, without any foundation or
apparently any facts in hand, asserted that electric cooperatives would
be inexperienced or unsafe operators of Small Modular Reactors (SMRs).
In fact, cooperatives successfully and solely operated two of the first
small reactor demonstrations in the nation--the Elk River reactor in
Elk River, Minnesota, and the Lacrosse Boiling Water Reactor in Genoa,
Wisconsin. Moreover, electric cooperatives own shares of nine nuclear
plants in eight states, totaling 2,710 MW of generation. In many cases,
cooperatives have experienced staff on site at those plants and are
members of the management teams that operate the facilities.
In Edwin Lyman's testimony on behalf of the UCS, he states:
UCS is also concerned that reducing safety and security
requirements for SMRs could facilitate their sale to utilities
or other entities in the United States and abroad that do not
have prior experience with nuclear power. Some SMR vendors
argue that their technology is well-suited for deployment to
remote areas, military bases, and countries in the developing
world that have relatively low electric demand and no nuclear
experience or emergency planning infrastructure. In the United
States, for example, a rural electric cooperative might be
interested in replacing an old coal-fired plant with a small
nuclear plant. As another example, high-temperature gas-cooled
SMR vendors are marketing reactors to the chemical industry
worldwide for the production of process heat. However, SMRs <<
File: GE letter re coops and smrs.docx >> deployed in this
manner would raise additional safety, security and
proliferation concerns compared to their deployment by
experienced nuclear utilities. (emphasis added) 4301 Wilson
Blvd.
Mr. Lyman has no grounds to imply that electric cooperative
deployment of SMRs raises safety, security or proliferation concerns
beyond those raised by deployment by investor-owned utilities with whom
electric cooperatives frequently partner. The regulations, safety and
licensing requirements set forth by the Nuclear Regulatory Commission
(NRC) apply equally to all nuclear operators. And, electric
cooperatives have experience operating nuclear generation
successfully--as well as natural gas, coal, hydropower, wind, solar,
and biomass generation. I can only speculate, therefore, that the UCS
does not believe that people in ``rural'' areas are as effective in
engineering and business as people in urban areas, or that they do not
believe that not-for-profit, consumer-owned businesses are legitimate.
I am disappointed that the UCS used their invitation to your hearing on
this important topic to distort the committee's understanding of
electric cooperatives.
To update you on current activities among electric cooperatives--
Oglethorpe Power Corporation has 30% ownership of the Vogtle 3 and 4
reactors in Georgia. They are the first new nuclear plants that will be
built in the nation in several decades, with help from a loan guarantee
from the Department of Energy. And, thirteen generating and
transmitting cooperatives from across the country are members of the
Babcock and Wilcox mPower consortium that is seeking to deploy its
first SMR by 2020. Cooperatives will continue to seek safe, affordable
and reliable generation options for their consumers. As such, electric
cooperatives support your efforts through S. 512, the Nuclear Power
Act, to make licenses for SMRs a reality.
Thank you for your consideration of these facts and do not hesitate
to call on me or my staff with any questions or concerns.
Sincerely,
Glenn English.
______
Nuscale Power,
Portland, OR, June 29, 2011.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources U.S. Senate,
Washington, DC.
Hon. Lisa Murkowski,
Ranking Member, Committee on Energy and Natural Resources, U.S. Senate,
Washington, DC.
RE: Union of Concerned Scientists Testimony on Small Modular Reactors
(SMR's)
Dear Chairman Bingaman and Ranking Member of the Committee,
On June 7, a representative of the Union of Concerned Scientists
(UCS) testified before your committee regarding S. 512 and S. 1067, and
the safety of small, modular reactors. As the President and Chief
Executive Officer of NuScale Power, Inc., a company that is developing
a 45MWe light water Small Modular Reactor (SMR), I am writing to
challenge claims in this testimony regarding both the safety and
economics of SMRs.
Enhanced Safety--A number of the new SMR designs offer an approach
to commercial nuclear power that greatly enhances safety. Since I am
most familiar with the NuScale design, let me speak to some of these
unique features. NuScale's SMR design includes:
An innovative approach that places each small reactor in its
own steel containment vessel then submerges both in a pool of
water below ground. The pool of water is so large it can absorb
all the heat from every reactor module for more than 30 days
until it is safely cooled after shutdown.
A containment vessel that can withhold ten times the
pressure of a conventional containment building. Because it is
entirely submerged in a large pool of water, the containment
vessel is highly effective at transferring heat from the
nuclear fuel, if needed.
A plant that does not require any back-up emergency
electrical generators to operate the systems that remove the
decay heat produced after shutdown. Instead, water continues to
cool the fuel using natural circulation.
A simple design that eliminates almost all of the pumps,
pipes and valves required in a large nuclear power plant, and
thus numerous traditional failure modes--no pumps to fail, no
pipes to break. For these and other reasons, an independent
analysis of the NuScale design estimated that it was safer by
at least a factor of 10 and as much as a factor of 100 when
compared to current nuclear power plants.
Because the nuclear reactor and its containment are
submerged in a pool of water inside a building designed to
withstand large earthquakes, tornadoes and aircraft impact,
there are added barriers between the nuclear reactor and the
external environment, greatly minimizing the potential for an
environmental release in the event a severe accident should
ever occur.
Because the plant and the pool of water are below ground, it
is seismically more resilient and can withstand larger seismic
forces.
It is clear from its testimony that the UCS had no knowledge of, or
appreciation for, any of these features. The testimony rests on the
dubious significance of the observation that many units may be located
at a single site. While a single NuScale installation may indeed house
up to 12 individual units, each would have its own individual
containment, and all would be submerged in a large pool of water with a
sufficient capacity to remove all the decay heat from all the units
inside the facility. In the event of a situation like Fukushima, the
operators can put the plant into safe long-term shutdown simply by
opening valves that allow water to circulate and continue to cool the
fuel. The simplicity and lack of complexity associated with the design
do not compromise safety; quite the contrary, they collectively reduce
risks and improve safety.
Improved Economics--For decades, the economics of nuclear power
have been informed by what insiders refer to as the ``economies of
scale.'' If a plant of a particular design can be increased in size,
typically the per unit costs go down. With no more thought or insight
than this, UCS confidently asserts that SMRs will be uneconomic because
they are small. A closer look says otherwise.
NuScale challenged this historic notion by asking a different
question. If one starts with a clean sheet of paper, are there
economies that are unique to a smaller plant that can be captured to
improve economic performance? We discovered there are and have tried to
capture that idea in what we refer to as the ``Economies of Small.''
Those economies come first from the simplicity that allows major
systems to be eliminated, and second, from the efficiencies that can be
captured by moving from the construction yard to a factory floor. The
experience of manufacturers in the nuclear navy bears this out. They
even have a well established ``rule of thumb'' gained from their real
world experience with submarines and aircraft carriers. According to
that principle, as manufacturing moves to the factory floor,
productivity improves by as much as a factor of eight. This combination
of simplicity and manufacturing efficiency have allowed NuScale to
produce a plant design that fully captures the advantage of reduced
capital costs and thus reduced financial risk while at the same time
maintaining competitive unit costs. This has been confirmed both by
comprehensive engineering design and estimating efforts, and the
independent reviews of industry experts.
Taken together, the prospect of an approach to nuclear power that
increases safety and strengthens economics explains why SMRs have
attracted the attention they have over the past three years. When one
adds to this the opportunity to strengthen the domestic manufacturing
base and create new export markets, one can see why S. 512 and S. 1067
serve the national interest.
There were other contentions in the UCS testimony, most of which
rely on the presumption that existing regulations and regulatory
agencies will somehow choose to ignore their rules for SMRs. The notion
that untrained operators will be running nuclear plants is but one
example. On its face, these are claims without merit.
The many professionals at NuScale Power and at our strategic
partners across the U.S. appreciate the support proposed in S. 512 and
S. 1067. We are committed to delivering a clean, inherently safe and
economic technology that can make a profound difference in efforts to
address climate change and improve the quality of life around the
world. Interestingly, and contrary to the innuendo in the testimony of
the UCS, NuScale is relying on the international strength of U.S
regulatory oversight to build its global markets. U.S. regulatory
approval has become the ``gold standard'' throughout the world. That is
why we have chosen to gain regulatory approval in the U.S. first and
use it as a platform to reach out to global markets. In short, we
believe the cost-shared licensing process envisioned by this
legislation assures that the U.S. regulatory oversight process will
apply these high standards to the evolution of new SMR designs as they
mature into the marketplace. It is a process we embrace and one which
is assured by this legislation.
Sincerely,
Paul G. Lorenzini,
President and Chief Executive Officer.
______
World Nuclear Association
Report: http://www.world-nuclear.org/info/inf33.html