Hearings and Business Meetings

2211 King Boulevard, Casper, Wyoming Wyoming Oil and Gas Conservation Commission Building 01:30 PM

Mr. Thomas Shope

Chief of Staff, Office of Fossil Energy, Department of Energy

Statement of Thomas D. Shope Chief of Staff
Office of Fossil Energy
U.S. Department of Energy to the
Wyoming Field Hearing
Energy and Natural Resources Committee
U.S. Senate
April 12, 2006
Mr. Chairman, members of the Committee, it is a pleasure to join you here in Wyoming today to discuss the promise of technology to allow coal to remain the bedrock of the American and the world power generation industry. The Department appreciates the support of the Chairman and the Members of the Committee over the past years and we look forward to working with you as we move forward with Fossil Energy’s research and development programs.
It is a fact that coal is our most abundant domestic energy resource – we have a 250-year domestic supply at current consumption rates, and the entire world has a nearly 200-year supply. Coal is a critically important contributor to both America’s and the world’s energy security: a potentially clean, affordable and key source of energy for the indefinite future.
I’d like to begin by laying out a few facts about fossil fuels and energy in general.
The first fact I want to highlight is that fossil fuels – coal, oil and natural gas – today supply about 85 percent of the total energy consumed in the United States. Oil accounts for 40 percent of that total – most of it for transportation fuels – while coal and natural gas account for about 23 percent each. Nuclear energy,
large hydroelectric facilities and other renewable energy account for the remaining 14 percent. Coal accounts for well over half of our total electricity generation.
Interestingly, roughly the same numbers apply for total world energy consumption.
If we do not change the way we produce and consume energy, the U.S. will remain reliant on imported sources of oil. Current forecasts suggest that in 20 years the U.S. and the rest of the world would need even more energy than we now consume to serve more people in improved economic circumstances. Total U.S. energy consumption is forecast to increase by about 27 percent and world consumption by 64 percent. The use of our domestic resources, especially coal, will continue to be important in meeting our energy needs and ensuring our energy security.
Consumption of oil in the U.S. is projected to increase by 25 percent; of natural gas by 21 percent and of coal by 37 percent. Wyoming and neighboring states will play a critical role in satisfying that demand growth. Consumption of nuclear, and renewable energy is also projected to increase.
We will need energy from every available source and, for that reason, we cannot be for one source of energy and against another. We need them all and we must be for them all.
How are we going to meet this growing demand for energy? The answer, as it always has been, is through human ingenuity -- advances in technology.

Intelligence and imagination have allowed us to tap oil and natural gas resources deeper in the ground, deeper underwater and in more inhospitable places than ever before.
That will continue as new technologies allow us to develop oil and gas resources in parts of the Rocky Mountain region, on the Outer Continental Shelf, and in Alaska.
Enhanced oil recovery technology using carbon dioxide injection could significantly increase our domestic recoverable oil reserves by allowing more oil to be recovered from mature oil fields.
At the same time, technology is allowing us to take greater advantage of “unconventional” domestic resources. Perhaps the most prominent example is coal-bed methane, which now accounts for nine percent of all gas produced in the U.S. Our coal-bed methane resources are centered in Wyoming, Colorado and New Mexico.
Other unconventional resources, while not yet proven to be economic, hold significant potential for the future if certain technological hurdles can be overcome. As you know, our oil shale resource is concentrated in Wyoming, Colorado and Utah. In addition, an estimated 200,000 trillion cubic feet of gas resource exist in methane hydrate formations in the U.S. Worldwide, methane hydrates are estimated to contain 400 million trillion cubic feet of gas.
Technology has made solar and wind power sensible technology choices in certain circumstances today, and further R&D breakthroughs will continue to

drive down costs and encourage more widespread applications of these technologies.
Technology has made nuclear power plants safer, more secure and more efficient. It has transformed the transportation sector, providing far cleaner fuels and, increasingly, more efficient vehicles. And it has made industry and society overall much more energy efficient, producing more goods and services while using less energy and emitting less pollution for an ever-expanding economy. Our economy grew by over 125 percent from 1972 to 2000, yet energy use increased by only 30 percent. The EIA projects a further 32 percent improvement in energy intensity – energy consumption per dollar of Gross Domestic Product – by 2025.
Technology has made coal and other fuels far cleaner today than they were a generation ago. While our economy and population have been growing, pollution has been declining. Electricity generated from coal has risen 177 percent since 1970, yet emissions of small particulate matter have decreased by 87 percent, along with a 38 percent decrease in SO2 emissions and a 24 percent reduction in nitrogen oxide emissions,
Our ultimate goal is energy security, which can be defined concisely as reliable, affordable, and environmentally sound energy for the future. That goal can be reached with the help of scientists and engineers working to research and develop new, cost-effective technologies that take us beyond current performance.

Based on what we have accomplished to date, anyone with knowledge of the energy and environmental field should be an optimist about our future prospects.
President Bush is an optimist, and his energy plan has from day one been founded on technology. The President’s new Advanced Energy Initiative which he unveiled in his State of the Union Address is founded on accelerating research in technologies that hold great promise. As the President has said, we are on the verge of spectacular technological advances that will redraw the energy and environmental landscape beginning in our lifetimes.
We can and will provide the energy we need and we need to have short, medium and long term approaches to this challenge. We must also continue to make incremental but impressive gains in environmental performance. There is no one immediate solution to our energy challenge. We must face this challenge with a long term view to change fundamentally the way we produce and consume energy. There are things we can accomplish in the short term that change the way we power our homes and businesses and vehicles. Energy efficiency measures will play an important role. But many of the big changes are still some way off. It will be perhaps 10 to 20 years before we see the transformational technologies we are researching and developing today begin to have real-world, beneficial effects on our lives.
The wait will be worth it. The benefits will be enormous, changing our lives and addressing the energy and environmental concerns that preoccupy us today.

There are great things coming in the energy and environmental world and many of them have to do with clean coal’s promise and the role we envision for it in helping to meet our overall energy challenge. The Office of Fossil Energy has taken and is taking a lead role, in partnership with industry, university researchers, state governments, independent energy organizations, foreign governments and others in researching and developing technological advances that are making coal a cleaner, more efficient source of energy every day. Our clean coal programs are driven by: President Bush’s energy policy goal of energy security; by the Clear Skies Initiative to reduce polluting emissions to the air by 70 percent by 2018, and recent complementary Environmental Protection Agency regulations; by the climate change goal to reduce the greenhouse gas intensity of the economy by 18 percent by 2012; and by the President’s 10-year, $2 billion Coal Research Initiative to develop near-zero atmospheric emissions, coal-based power generation and hydrogen production.
Perhaps the best way to survey the goals and activities of the coal and power generation sector is to take a brief tour of the Department of Energy’s clean coal program. If a technology is important, we’re working on it, often leading cooperative international R&D efforts. And in all cases we are partnering with industry and scientific and technology leaders.
The various R&D projects currently underway are mutually supportive; while each project and program is aimed at a specific technological goal with a specific energy/environmental benefit to be met according to a specific timetable, all the projects are designed to contribute in one way or another to our ultimate

vision: a completely clean – that is, emissions free – coal-based plant that maintains coal’s favorable cost advantage over competing fuels.
Coal plants have a useful life of at least 40 years, which means that there are coal plants currently operating that were built as far back as the 1960s, just about the time we as a nation began to take the phenomenon of pollution emissions seriously. The federal government and state governments have passed pollution control legislation and the coal power industry has met the challenge by retrofitting technological improvements to older plants and incorporating new technology in each new plant as it was built, with impressive results, as mentioned earlier.
That’s good, but in order for coal to continue to account for more than half of America’s electricity supply, and nearly a quarter of our – and the world’s -- total energy output, the coal research program is proceeding along three interwoven, complementary tracks: a Clean Coal Power Initiative for the commercial demonstration of new technology; design, construction and operation of the coal-based power plant of the future called FutureGen, a 275-Megawatt, fully integrated, near-zero emissions, coal-fired power plant and research facility that will produce both electricity and hydrogen while sequestering carbon emissions; and a coal research effort that is concentrated on clean coal’s key technology needs.
Our coal research extends from innovations for existing plants to needed technologies of the future in the areas of gasification, turbines, carbon

sequestration, hydrogen from coal, fuel cells, and associated advanced technologies.
In about six years, we expect our work to result in an up-and-running FutureGen plant: a working, large-scale power plant and hydrogen production facility that emits almost no polluting or greenhouse gases to the atmosphere. Think about: virtually no nitrogen oxides, no sulfur dioxides, no mercury, no particulate matter, no carbon dioxide. Nothing but energy.
The goal is for FutureGen to prove out the new technologies we’re working on today and serve as a model for the coal-based power plants of the future. FutureGen holds the potential to not only assure coal’s future as the dominant source of electric power, but to also be an important early source of the hydrogen that will fuel a hydrogen-based economy of the future.
That is transformational technology – and it’s within our reach.
Clean coal is set to continue its enormous contribution to America’s energy security and as you will see, to world energy security.
While FutureGen is our promise for the future, let me turn to some of the more immediate advances being brought about by the Clean Coal Power Initiative, or CCPI.
CCPI has progressed steadily since it was initiated by the President in 2002, providing Government co-financing with utility partners for new coal technologies that can help utilities meet the President's Clear Skies Initiative and other energy goals. Some of the early projects are also showing ways to reduce

greenhouse gases from coal plants by boosting coal combustion and power plant efficiency.
To take one example from the 10 CCPI projects that have been selected after two rounds of competitive solicitations, the “Mustang” project in New Mexico will demonstrate a multi-pollutant control process that can remove virtually all sulfur dioxide and nitrogen oxide emissions and 90 percent of mercury emissions.
While CCPI demonstrates existing new technology, our core coal research program is developing the technologies of the future that will eventually be essential components of FutureGen.
We can break the program elements down in general terms, beginning with our Innovations for Existing Plants program, which is aimed at short- and medium-term goals.
We aim by next year to develop cost-effective technologies ready for commercial demonstration that reduce mercury emissions by 50 to 70 percent, and eliminate microscopic particle emissions.
By 2010, we plan to test technologies for cutting mercury emissions by an average of 70 percent.
For the long-term, our coal research goals are ambitious but achievable.
We are far along in research, development and demonstration of advanced Integrated Gasification Combined Cycle, or IGCC, technology. IGCC, in essence, converts coal to its constituent gases and then burns the gas. The IGCC process is inherently clean, highly efficient and versatile. It is potentially

capable of generating electricity, steam, and a broad range of chemicals including synthetic natural gas, and virtually eliminating atmospheric emissions of nitrogen oxides, sulfur dioxides, mercury and other pollutants.
With IGCC, carbon dioxide emissions may eventually be reduced by half compared to conventional coal technology, with the majority of the remaining carbon dioxide emissions ready for capture and permanent underground storage.
As we move along our R&D path for coal gasification, we have specific technological hurdles to leap. We have to improve new gasifier and turbine performance and reliability while steadily bringing down costs. We will have to develop new gas-related technologies and integrate them with fuel cells and fuel cell/turbine hybrids.
Fuel cells are usually thought of as a feature of automotive vehicles of the future. Often overlooked is their potential to be a very important part of our power generation future, both as an integral part of future power plants and as a “distributed generation” supplement to the electricity grid -- a local power source for commercial and public buildings, hospitals and residences, for energy-intensive telecommunications facilities, and other uses.
Because fuel cells rely on electrochemical reactions rather than combustion, they are inherently efficient, quiet, and virtually pollution-free.
Combined with the kind of IGCC system described earlier, fuel cells will make possible near-zero emissions, coal-based power with nearly double the efficiency of today’s coal-fired plants. Fuel cells are a key option for the FutureGen concept.

Our Solid State Energy Conversion Alliance program, known as SECA, is working today to develop fuel cell modules that can operate at one-tenth the capital cost of today’s systems, and hybrid fuel cell-turbine systems that operate at up to 60% efficiency on coal. Compare that to the average 33 percent efficiency rate at today’s coal power plants.
Another of our research projects is aimed at a new and potentially transformational market, given the right price environment, for hydrogen derived from coal. Transition to hydrogen from coal as a transportation fuel could help reduce our dependence on imported oil.
Finally, our carbon sequestration program has immense potential for reducing greenhouse gas intensity.
Carbon sequestration is the capture and permanent storage of carbon dioxide. Our ability to eliminate CO2 emissions from coal-based power plants by permanently capturing and storing them underground will have a significant, beneficial effect on greenhouse gas intensity. That’s why carbon capture and storage, as well as measurement, monitoring and verification are at the heart of our efforts to meet the goals President Bush set out in his Global Climate Change Initiative.
We plan to demonstrate a portfolio of safe, cost-effective greenhouse gas capture, storage and mitigation technologies at the commercial scale by 2012, with the potential for substantial deployment and market penetration beyond 2012.

By 2018 we should have developed commercial systems for the direct capture and sequestration of greenhouse gases and pollutant emissions that results in near-zero emissions with less than 10% increase in the cost of produced energy.
To accomplish this ambitious program, we have formed seven Regional Carbon Sequestration Partnerships in the United States and Canada. Wyoming, it should be noted, is an active participant in two of the regional partnerships: Big Sky, led by Montana State University, and the Southwest Partnership led by the University of New Mexico. We have also formed the international Carbon Sequestration Leadership Forum (CSLF) to share scientific and technological information and participate in joint projects. The CSLF has drawn the enthusiastic attention of many of the world’s largest coal consumers and now comprises 21 member nations and the European Commission.
Just last week we conducted a meeting of the CSLF in New Delhi, at which we reached another, closely related milestone in international energy/environmental cooperation when India become the first country to join the government steering committee for FutureGen. As a partner, the Indian government will contribute $10 million to the FutureGen Initiative and Indian companies will be invited to participate in the private sector segment. India is the first of what we hope will be many international government partners to join with us in the FutureGen project.
I don’t need to point out that Carbon Sequestration technology is integral to the design and operation of FutureGen.

But I do want to emphasize a couple of additional potential benefits of carbon capture. First, carbon dioxide derived from power plants will be increasingly in demand as a commercial product for injection into mature oil fields, adding to our domestic oil reserves and production and providing revenue to power generators. And second, research projects currently underway are testing the strong possibility that CO2 injected into active oil fields can be sequestered there, providing a very attractive energy and environmental double benefit: reduced greenhouse gas emissions and increased oil production.
The successful development and deployment of clean coal technology will undoubtedly be important to America’s energy future. It will also be important to Wyoming. Here are a few numbers to illustrate just how important:
• Substantial new coal fired power plants are being prospected nearly every week. More than 140 new coal-fired power plants have been proposed representing 85 GW of electricity, over $119 billion investment, and enough power to electrify over 85 million homes. At least 6 new coal fired plants have been proposed for Wyoming.
• Market shares for western coals continue to rise, with production growing at about 20 million tons per year. More eastern power plants are expected to use western coals, with western coal supply to eastern power plants expected to increase by more than 50 percent through 2030.
• Wyoming continues to lead the Nation in coal production. Your mines account for more than one-third of the approximately one billion tons of

domestic coal produced each year, and nearly 70 percent of western coal production.
• Wyoming coal production is increasing, thanks in large part to your world class coal seams and desirable low sulfur composition.
• The Powder River Basin is a tremendous coal producing region with over 65 trains filled with coal leaving the basin each day destined for various end uses throughout the country.
• The coal industry continues to be an important source of employment for Wyoming.
• Coal industry jobs here are among the highest paying, with the Department of Commerce reporting Wyoming’s labor earnings from coal mining at more than $300 million. That breaks down to wages of more than $64,000 per year (excluding benefits), more than twice the state average.
• Each coal mining job supports an estimated three related jobs, leading to a total payroll effect of more than $600 million to the state of Wyoming.
Coal is at the heart and soul of Wyoming, both now and for the foreseeable future.
I will conclude by emphasizing how deeply committed we are to the research underway today.
The President’s energy policy, his new Advanced Energy Initiative, his goals for climate change, his Coal Research Initiative and the other activities I

outlined propose nothing less than to rewrite the future of the energy and environmental challenges that preoccupy our country and the world today.
We must invest today to reach the day when combined energy from all sources will be reliable and affordable; when energy-related emissions from stationary sources will be minor to non-existent; when a large segment of the transportation sector will be converted to fuel-cell vehicles running on hydrogen; when our efforts to control emissions and increase efficiency will be complemented by less-developed, faster-growing countries with far larger populations having the benefit of the technologies we have taken the lead in developing.
Imagine, for example, the beneficial effect on global emissions and energy resource consumption if China, which is building new coal-based power plants at the rate of one a week, were to adopt some of these new power generation and energy efficiency technologies and processes. We’re working with them on it.
The combination of sensible energy policy, scientific and engineering ingenuity, the genius of American business and the rich energy resources of Wyoming and other states will allow us to continue to grow our economy and enjoy our way of life for centuries to come.
Mr. Chairman, that concludes my testimony. I will be happy to answer any questions the Committee may have.
END