2006 Senate hearing on oil and gas, geothermal, and hydrogen fuel cells

Senate 109-503. June 27, July 11, July 17, 2006. Implementation of the provisions of the energy policy act of 2005. Enhancing oil and gas production; geothermal energy and other renewables; and hydrogen and fuel cell research and development.  U.S. Senate hearing.

Excerpts from this 221 page document follow.

KATHLEEN CLARKE, DIRECTOR, BUREAU OF LAND MANAGEMENT, DEPARTMENT OF THE INTERIOR, ACCOMPANIED BY DALE HALL, DIRECTOR, U.S. FISH AND WILDLIFE SERVICE

BLM is an agency that is really quite small, but with a huge mission. We manage over 260 million acres of Federal lands in the West, and over 700 million acres of subsurface land. And the vision that we bring to the BLM is that we should manage these lands to sustain and enhance the quality of life for Americans. And we recognize that the multiple-use mission that we have requires that we pay attention to many resource values and to all of the ways that the public relate to those lands and benefit from their uses. And clearly an important element of our mission is managing the energy resources to serve the needs of the public, particularly at this time.

BLM lands produce about 18% of the natural gas that is consumed in this Nation.

The demand for onshore oil and gas is reflected in the dramatic increase in the number of applications for permit to drill (APDs) the BLM receives from one year to the next. The number of APDs received by the BLM has increased every year since 2002, and we anticipate this trend to continue into 2007 and beyond. A recitation of the numbers illustrates this dramatic trend. The BLM received 4,585 APDs in 2002; 5,063 in 2003; 6,979 in 2004; and 8,351 in 2005. Our current projection is that we will receive over 9,300 in 2006 and over 10,500 in 2007.

MEL MARTINEZ, FLORIDA.   Because of the incredible size of reserves and the escalating price of natural gas, applications for permits to drill (APDs) have sky-rocketed from 4,585 in 2002 with projects for 10,500 APDs by 2007. This rapid increase has concerned many not just in the environmental community, but in the sportsmen groups as well. As a Senator from an environmentally sensitive state, I well understand these concerns when dealing with energy development on federal resources. Florida has very little public land left for hunters and fisherman to enjoy, which is partly a result of the staggering growth the state has experienced.

We also need to remember that our public lands are also our nation’s heritage— our inheritance, if you will. The forests, mountains, rivers, streams, the picturesque vistas and solitary wide-open spaces—as we move forward we need to remember that there is an intrinsic public value that cannot be measured only in Btu’s or kilowatts.

A Government Accounting Office (GAO) Oil and Gas Report June 2005 identified the concern that increased permitting activity by the BLM has lessened the agency’s ability to meet its environmental protection and liability responsibilities. The report indicates that field managers under pressure to complete permitting processes often shift workloads from inspection and enforcement to application processing. Examples from the report describe how the Buffalo, Wyoming and Vernal, Utah field offices, the two field offices with the largest amount of permitting activity, were only able to each meet their annual inspection goals once in the past six years. Additionally, the report highlights that the Buffalo Field Office was only able to achieve 27 percent of its required environmental inspection goals during the 2004 fiscal year. Clearly it is in the interest of the public, state agencies, the BLM and industry to ensure that the guidelines of leases and permits are being followed.

TOM REED, WYOMING FIELD ORGANIZER, TROUT UNLIMITED, ARLINGTON, VA

Our public lands sustain some of the cleanest water, healthiest habitats, and finest fishing and hunting in North America. More than 50 million Americans hunt and fish, however, too often their voices are lost in the din of controversy that has come to define public land management. A significant and growing concern among sportsmen is the impact of energy development on fish and wildlife habitat on our public lands.

Wyoming is at the forefront of these energy and public land issues and is more than carrying its weight for the energy needs of this country. Oil and gas exploration and development is taking place at an unprecedented rate. It is estimated that 25 percent of the state will be impacted by oil and gas development to help meet our nation’s demands.

More than 26 million acres of public land managed by the Bureau of Land Management (BLM) in Wyoming, New Mexico, Utah, Colorado, and Montana are open for leasing. In a year’s time, BLM approved 5,700 new drilling permits in those states—a 62% increase over the previous year. BLM has a total of nine fisheries biologists in those five states. That’s about 3 million acres of leased land per fisheries biologist. Most people agree that is an impossible responsibility to place on nine people.

At the current rate of oil and gas exploration, scientists, particularly with the Wyoming Game and Fish Department, are having a difficult time keeping up with the pace of development.

Funding for land management agencies such as the Bureau of Land Management needs to be secured specifically for scientists who deal with impacts on wildlife and fisheries. State wildlife agencies like the Wyoming Game and Fish Department also need national funding so that biologists can be hired to deal solely with oil and gas issues.

These biologists should collect data, monitor impacts and design and implement mitigation, working closely with industry and land management agencies. There is a willingness among many in the industry to move in this direction, but Congress also needs to step up with money for these agencies so that our wildlife and fisheries resources are taken care of. We believe that the scale and pace of development on oil and gas fields far outstrips the organizational capacities of both state and federal agencies responsible for managing fish and wildlife and the habitats they depend on.

To clarify how overworked and understaffed our biologists are, consider: there are only three people in the Game and Fish Department’s Cheyenne office that deal with oil and gas issues. When one realizes that just one corner of Wyoming the Powder River Basin—faces an estimated 60,000 wells, it is clear that is too much, too fast.

The Department estimates that it needs staff biologists that deal with nothing but oil and gas development to study, understand and try to mitigate impacts to crucial big game, sage grouse, sensitive species and fisheries habitats. That tally is as much as $2 million per year. Similar expenditures will be needed in other states and for federal agencies.

The purpose of this hearing is to determine the effects of the Energy Policy Act’s provisions. The fact is that after 11 months it is difficult to determine the effects on fish, wildlife, and water resources from the acceleration of development. As a lifelong hunter and angler, I can say with certainty, it isn’t looking good for game and fish. A biologist within the Wyoming Game and Fish Department told me that wildlife and fisheries are going to lose, and the best we can hope for is to minimize the loss.

Along these lines, one aspect of the Energy Policy Act that I would urge the Committee to look into is implementation of Section 1811 of the Act. That section authorized the National Academy of Sciences (NAS) to prepare a report on the impact of coalbed methane development on water. Unfortunately, because NAS is depending on funding from BLM to get this report together, and the BLM has not provided any money to them to do it, the study has not been initiated.

I mentioned earlier that there are also places where oil and gas development is inappropriate and I’d like to specifically thank our Senator Craig Thomas for his landmark stance against oil and gas drilling on our national forests. We, too, believe that our national forests should be off-limits to oil and gas drilling. These are our headwaters and our hunting grounds. They are places where Wyomingites go to recreate and relax, to spend time with family and friends. These are heirloom places that should be passed down to our children and to their children.

The Wyoming Range in the Bridger-Teton National Forest harbors some of finest mule deer, moose and elk hunting in the state. It also is home to three important subspecies of native trout: the Colorado River, Bonneville and Snake River cutthroat. People from all over the country come to this region to fish, hunt and relax. Today, we are heavily developing country east of the range for oil and gas. Places like the Pinedale Anticline and the Jonah gas field are helping to fuel this nation, but they are also places that have been historically used as winter range for our big game herds. We are very concerned about the amount of development that is taking place on these winter ranges. It is a virtual certainty that our big game resource, and as an extension, the quality of big game hunting in this region is going to decline. If we develop not only winter ranges, but migration routes and summer ranges as well, we believe it will spell the end of quality hunting in western Wyoming.

An example of why some places should be off-limits to energy development is the La Barge Creek drainage in the Wyoming Range. This stream is the site of a large restoration project being undertaken by the Wyoming Game and Fish Department to bring back a native trout, the Colorado River cutthroat. At a cost of an estimated $2 million, some 58 miles of stream are being reclaimed and revitalized for this native, pure fish that has swum these waters for thousands of years. Yet even while fisheries biologists are hard at work with the restoration process, there are daily flights of helicopters doing seismic testing in the backcountry headwaters of La Barge Creek for potential gas field development. Oil and gas development in the headwaters would mean roads and roads heavily impact fish by flushing sediment into drainages and blocking the passage of spawning fish. These two things: native pure fish swimming in clear, clean water on our national forests and industrial development cannot make for a happy marriage.

I want to share with you a few more examples from the field that help to explain why state fish and game departments, federal fish and wildlife biologists, and hunters and sportsmen across the Rocky Mountain West are so concerned about energy development.

In the past two years on the Uinta National Forest in Utah, the leasing of National Forest Lands was approved and carried out, and did not take into account the important fisheries restoration work that has occurred or the 2000 Range-wide Conservation Agreement and Strategy for Bonneville Cutthroat Trout. In at least one instance, neither the forest’s fisheries biologist nor District Ranger was aware that the resources they are charged with managing would be facing new threats and challenges resulting from leasing that occurred in the Diamond Fork, a watershed that sustains a Conservation Population of native Bonneville Cutthroat Trout and also in the Strawberry Valley, where Utah’s most popular trout fishery, Strawberry Reservoir, is located.

The Forest Service leased areas of the Wyoming Range. Many of these leases are part of watersheds that sustain core-conservation populations of Colorado River cutthroat trout, a species that is currently regarded as ‘‘sensitive’’ by both State and Federal agencies. However, the Bridger-Teton National Forest is lacking baseline data and inventory information. In addition to other concerns such as air quality, Canada Lynx habitat damage, and cumulative impacts, we don’t think it’s prudent to lease and develop areas in the absence of baseline data.

Preliminary results of an ongoing study on mule deer impacts in the Upper Green River Basin of Wyoming by Western EcoSystems Technology, Inc. (WEST), BLM, the energy industry and Wyoming Fish and Game show: —Mule deer abundance on the Mesa has declined. The Mesa’s overall mule deer population is down 46 percent since 2002. —Over-winter fawn survival rates have been slightly lower on the Mesa compared to the control region for four of the five years; —Mule deer are moving from previously ‘‘high use’’ winter habitat areas into areas that previously had been of ‘‘low use’’ suggesting that drilling and development has displaced mule deer to less suitable habitats; —Sublette County’s mule deer are among the most migratory in the West, traveling between 60 to 100 miles between summer and winter ranges. Documented migration routes, such as Trapper’s Point Bottleneck, remain important pathways between winter range in the Upper Green and summer range in the surrounding mountains.

KEN SALAZAR, COLORADO. The Energy Policy Act of 2005 contained many provisions to enhance domestic oil and gas production. I think it is necessary to recognize that, as we seek to expand our domestic energy production, land use conflicts are increasing. The search for energy is taking companies to land that is closer to, or neighboring, local communities as well as onto lands that generations of westerners have grown up fishing, hunting, and recreating on. There are also a sizable number of split-estate situations that are affecting family farms and ranches across the west. These lands are essential to our natural heritage and must be treated accordingly. I am increasingly concerned about the BLM’s rush to lease every acre of land as quickly as possible without regard to local communities. This rush is often at the expense of local communities with real, substantive concerns as to how this activity will affect their communities and the natural heritage of their area. I am further alarmed at the BLM’s willingness to brush these concerns aside and the contentious atmosphere that is being created.

In the west, we believe in multiple-use on our lands, but we realize that every use on every acre is not a sustainable approach. It seems, though, that the BLM has elevated energy exploration and development above every other use when multiple uses conflict.

There are two good examples in Colorado I would like to talk about. On Colorado’s Western Slope the City of Grand Junction and the Town of Palisade learned that mineral leases underlying their watersheds were to be leased. Both Grand Junction and Palisade protested the inclusion of these parcels in the lease sale, asking the BLM to delay their leasing so that the local communities could work with the BLM to assess the situation and to address their concerns prior to leasing. Along with Congressman John Salazar, who represents the district, I supported the local governments’ protests. The BLM went ahead anyway, ignoring the legitimate concerns of a pro-growth and pro- development community who simply needed more time to work with the agency. Also in western Colorado is the Roan Plateau. The Roan Plateau has been a contentious topic as the BLM develops the resource management plan for the area that is highly valued by local communities and sportsmen in Colorado. The final EIS is likely to contain provisions that have not been previously addressed in the process. I asked the BLM to commit to re-submit the plan for further public comment, if that proves to be the case, only to be flatly told ‘‘no’’.

As a United States Senator who is having difficulty working with the BLM is his own state, I can empathize with the local communities who feel that their concerns are being brushed aside in a mad rush to lease every acre for oil and gas exploration and development.

STATEMENT OF WESTERN COLORADO CONGRESS; WYOMING OUTDOOR COUNCIL EARTHJUSTICE; SOUTHERN UTAH WILDERNESS ALLIANCE; OIL & GAS ACCOUNT- ABILITY PROJECT; WESTERN RESOURCE ADVOCATES AMIGOS BRAVOS; SUSTAINABLE OBTAINABLE SOLUTIONS; CALIFORNIANS FOR WESTERN WILDERNESS; COLORADO ENVIRONMENTAL COALITION; POWDER RIVER BASIN RESOURCE COUNCIL; SAN JUAN CITIZENS ALLIANCE; THE WILDERNESS SOCIETY; COALITION FOR THE VALLE VIDAL; NORTHERN PLAINS RESOURCE COUNCIL; NATURAL RESOURCES DEFENSE COUNCIL; WESTERN ORGANIZATION OF RESOURCE COUNCILS

Our lives and communities continue to suffer damage from oil and gas activities. We do not oppose all exploration and drilling, but we want it to be done responsibly in the places where it is appropriate. We urge the Senate Energy and Natural Resources Committee to work with the Environmental Protection Agency (EPA), the Bureau of Land Management (BLM), as well as state and local governments, to ensure that pollution from oil and gas development is addressed and not simply ignored.

DAMAGE TO WATER QUALITY—BEST MANAGEMENT PRACTICES SHOULD BE MANDATORY Landowners and communities across the West are suffering from erosion and runoff of large amounts of sediment from oil and gas activities. Sediment increases water-treatment costs for municipalities responsible for delivering drinking water to its residents. It can cause a loss of storage in reservoirs and increase agricultural ditch maintenance. It impacts recreation. It harms fish and other aquatic life. It decreases property values. The U.S. Environmental Protection Agency has determined that ‘‘siltation is the largest cause of impaired water quality in rivers.’’ National Pollutant Discharge Elimination System—Regulations for Revision of the Water Pollution Control Program Addressing Storm Water Discharges, 64 Fed. Reg. 68722, 68724 (Dec. 8, 1999). We have enclosed additional evidence of the harm excessive erosion and sediment from energy development is causing in the West.

DAMAGE FROM TOXIC CHEMICALS—MONITORING AND DISCLOSURE IS NECESSARY We urge the Committee to press the Bureau of Land Management and Forest Service to disclose and regulate toxic chemicals used in oil and gas development. Where potentially toxic chemicals are used during oil and gas exploration and development operations, responsible agencies should monitor the levels and effects of these chemicals. The groups believe such complete disclosure and monitoring requirements are necessary for several reasons.

Toxic chemicals with known health effects are being used. Many of the products used in the exploration, drilling, and production phases of the natural gas and oil industry contain toxic chemicals with known human health effects. A recent analysis of products and ingredients used in natural gas development in western Colorado shows that oil and gas operators are using toxic chemicals throughout the development process, including during hydraulic fracturing. Of the 192 chemicals on the list, 53 percent are toxic to skin and sense organs, 48 percent cause gastrointestinal and liver damage, and 43 percent are neurotoxins. More than 26 percent of the chemicals are reproductive, kidney, or cardiovascular/blood toxicants, and 22 percent are carcinogens. 2. Toxic chemicals are being released into the environment Toxic chemical products, as well as harmful hydrocarbons produced during oil and gas production, can and do escape into the environment via a number of pathways. For example, spills release chemicals into the air through volatilization, and spills can enter the water and soil. Additionally, chemicals injected into the ground may come in contact with drinking water aquifers; chemicals may escape from recovery fluids that are stored or placed in pits or tanks on the surface; and flammable chemicals may burn, releasing a host of toxic by- products into the air.

GEOTHERMAL ENERGY AND OTHER RENEWABLES TUESDAY, JULY 11, 2006

LYNN SCARLETT, DEPUTY SECRETARY, DEPARTMENT OF THE INTERIOR

The BLM manages 354 geothermal leases, 55 of which are producing and provide geothermal energy to 35 power plants.

Since 2001, the BLM has processed more than 200 geothermal lease applications, compared to 20 lease applications received in the preceding 5 years.

The USGS is updating a nationwide geothermal resource assessment, which will include estimates of electric power production potential from identified geothermal systems.

GEOTHERMAL ENERGY

Nearly 50 percent of the nation’s geothermal energy production comes from Federal lands. There are currently 354 Federal geothermal leases, 116 on NFS lands. At the present time, there are 5 producing leases on NFS lands contributing to a 12 mega-watt power plant and a 45 mega-watt power plant. Generally, one megawatt provides enough electricity for about 1,000 homes.

SALLY COLLINS, ASSOCIATE CHIEF, FOREST SERVICE, DEPARTMENT OF AGRICULTURE

Woody biomass is woody materials removed from National Forest System, other Federal, State and private lands as a byproduct of forest management activities. Woody biomass includes tree stems, limbs, tops, needles, leaves and other woody parts. Currently most of this material is underutilized, commercial value is low, markets are small to non-existent and the infrastructure needed to process this material is insufficient or nonexistent in many parts of the country.

JIM WELLS, DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE

The Energy Policy Act of 2005 (Act) contains provisions that address challenges to developing geothermal resources, including the high risk and uncertainty of developing geothermal power plants, lack of sufficient transmission capacity, and delays in federal leasing.

This testimony summarizes the results of a recent GAO report, GAO-06-629. In this testimony, GAO describes: (1) the current extent of and potential for geothermal development, (2) challenges faced by developers of geothermal resources, (3) federal, state, and local government actions to address these challenges, and (4) how provisions of the Act are likely to affect federal geothermal royalty disbursement and collections.

WHAT GAO FOUND

Geothermal resources currently produce about 0.3 percent of our nation’s total electricity and heating needs and supply heat and hot water to about 2,300 direct-use businesses, such as heating systems, fish farms, greenhouses, food-drying plants, spas, and resorts. Recent assessments conclude that future electricity production from geothermal resources could increase by 25 to 367% by 2017. The potential for additional direct-use businesses is largely unknown because the lower temperature geothermal resources that they exploit are abundant and commercial applications are diverse.

One study identified at least 400 undeveloped wells and hot springs that have the potential for development.

The challenges to developing geothermal electricity plants include a capital- intensive and risky business environment, technological shortcomings, insufficient transmission capacity, lengthy federal review processes for approving permits and applications, and a complex federal royalty system. Direct-use businesses face numerous challenges, including challenges that are unique to their industry, remote locations, water rights issues, and high federal royalties.

Harnessing geothermal energy is not easy. Developers of geothermal energy face many challenges, including the high risk and uncertainty of developing geothermal power plants, lack of sufficient capacity to transmit electricity from these plants to consumers, inadequate technology, and delays in leasing federal lands, which supply about 50 percent of the geothermal resources used to generate electricity.

My testimony today is based on a report we recently completed entitled ‘‘Renewable Energy: Increased Geothermal Development Will Depend on Overcoming Many Challenges.’’

Future electricity generation from geothermal resources suggest that the current production of 2,500 megawatts of electricity—enough to supply 2.5 million homes—could increase to as much as 12,000 megawatts in 11 years. Although the future potential of other geothermal applications is less known, about 400 undeveloped geothermal wells and hot springs could supply heat and hot water directly to a variety of businesses and other organizations.

The developers of geothermal resources face significant financial, technical, and logistical challenges. Geothermal electric power plant developers face a capital intensive and risky business environment in which obtaining financing and securing a contract with a utility are difficult, where recouping the initial investment takes many years, and where transmission expenses could be costly due to remote locations or capacity constraints on the electric grid. These developers must also use exploration and drilling technologies that are inadequate for the unique attributes of geothermal reservoirs. Developers of electric power plants on federal lands face additional administrative and regulatory challenges and a complicated royalty payment system. Businesses and individuals trying to tap geothermal resources for direct use face unique marketing, financing, and technical challenges and, in some cases, must contend with remote locations, restrictive state water rights, and high royalties.

Meeting Energy Demand in the 21st Century: Many Challenges and Key Questions, GAO05-414T (Washington, D.C.: March 16, 2005).

BACKGROUND.   Geothermal energy is literally the heat of the earth. This heat is abnormally high where hot and molten rocks exist at shallow depths below the earth’s surface. Water, brines, and steam circulating within these hot rocks are collectively referred to as geothermal resources. Geothermal resources often rise naturally to the surface along fractures to form hot springs, geysers, and fumaroles. For centuries, people have used naturally occurring hot springs as places to bathe, swim, and relax. More recently, some individuals have constructed buildings over these springs, transforming them into elaborate spas and resorts, thereby establishing the first direct use of geothermal resources for business purposes. Businesses have also established other direct uses of geothermal resources by drilling wells into the earth to tap the hot water for heating buildings, drying food, raising fish, and growing plants. Where the earth’s temperature is not high enough to supply businesses with geothermal resources for direct use, people have made use of the ground’s heat by installing geothermal heat pumps. Geothermal heat pumps consist of a heat exchanger and a loop of pipe extending into the ground to draw on the relatively constant temperature there for heat in the winter and air conditioning in the summer.

Geothermal resources can also generate electricity, and this is their most economically valuable use today. Only the highest temperature geothermal resources, generally above 200 degrees Fahrenheit, are suitable for electricity generation.

When companies are satisfied that sufficient quantities of geothermal resources are present below the surface at a specific location, they will drill wells to bring the geothermal fluids and steam to the surface. Upon reaching the surface, steam separates from the fluids as their pressure drops, and the steam is used to spin the blades of a turbine that generates electricity. The electricity is then sold to utilities in a manner similar to sales of electricity generated by hydroelectric, coal-fired, and gas-fired power plants.

In the United States, geothermal resources are concentrated in Alaska, Hawaii, and the western half of the country, primarily on public lands managed by the Bureau of Land Management (BLM).

As of January 2006, 54 geothermal power plants were producing electricity, and companies were constructing 6 additional geothermal power plants in California, Nevada, and Idaho that collectively will produce another 390 megawatts of electricity.

Over half of the nation’s electricity generated from geothermal resources comes from geothermal resources located on federal lands in The Geysers Geothermal Field of northern California; in and near the Sierra Nevada Mountains of eastern California; near the Salton Sea in the southern California desert; in southwestern Utah; and scattered throughout Nevada.

Industry and government estimates of the potential for electricity generation from geothermal resources vary widely, due to differences in the date by which forecasters believe the electricity will be generated, the methodology used to make the forecast, assumptions about electricity prices, and the emphasis placed on different factors that can affect electricity generation. Estimates published since 1999 by the Department of Energy, the California Energy Commission, the Geothermal Energy Association, the Western Governor’s Association, and the Geo-Heat Center at the Oregon Institute of Technology indicate that the potential for electrical generation from known geothermal resources over the next 9 to 11 years is from about 3,100 to almost 12,000 megawatts.

In 2005, over 2,300 businesses and heating districts in 21 states used geothermal resources directly for heat and hot water. Nearly all of these are on private lands. About 85 percent of these users are employing geothermal resources to heat homes, businesses, and government buildings. While most users heat one or several buildings, some users have formally organized heating districts that pipe hot water from geothermal wells to a central facility that then distributes it to heat many buildings. The next most plentiful direct use application is for use by resorts and spas, accounting for over 10 percent of sites. About 244 geothermally heated resorts and spas offer relaxation and therapeutic treatments to customers in 19 states. Two percent of geothermal direct use applications consist of heated greenhouses in which flowers, bedding plants, and trees are grown. Another two percent of geothermal direct use applications are for aquaculture operations that heat water for raising aquarium fishes for pet shops; catfish, tilapia, freshwater shrimp and crayfish for human consumption; and alligators for leather products and food.

Other direct use geothermal applications include dehydrating vegetables, like onions and garlic, and melting snow on city streets and sidewalks.

Geothermal groups reported that most attempts to develop geothermal resources for electricity generation are unsuccessful, that costs to develop geothermal power plants can surpass $100 million, and that it can take 3 to 5 years for plants to first produce and sell electricity.

Although some geothermal resources are easy to find because they produce tell-tale signs such as hot springs, most resources are buried deep within the earth—at depths sometimes exceeding 10,000 feet—and finding them often requires an in-depth knowledge of the area’s geology, geophysical surveys, remote sensing techniques, and at least one test well. The risks and high initial costs associated with exploring for and developing geothermal resources limit financing. Moreover, few lenders will finance a geothermal project until a contract has been signed by a utility or energy marketer to purchase the anticipated electricity. Geothermal industry officials describe the process of securing a contract to sell electricity as complicated and costly.

In addition, lack of available transmission creates a significant impediment to developing geothermal resources for electricity production. In the West where most geothermal resources are located, many geothermal resources are far from existing transmission lines, making the construction of additional lines economically prohibitive, according to federal, state, and industry officials. Finally, inadequate technology adds to the high costs and risky nature of geothermal development. For example, geothermal resources are hot and corrosive and often located in very hard and fractured rocks that wear out and corrode drilling equipment and production casing.

Developing geothermal resources for direct use also faces a variety of business challenges, including obtaining capital, overcoming specific challenges unique to their industry, securing a competitive advantage, distant locations, and obtaining water rights. While the amount of capital to start a direct-use business that relies on geothermal resources is small compared to the amount of capital necessary to build a geothermal power plant, this capital can be substantial relative to the financial assets of the small business owner or individual, and commercial banks are often reluctant to loan them money.

Challenges that are unique to certain industries include avoiding diseases in fish farms; combating corrosive waters used in space heating; and controlling temperature, humidity, and light according to the specifications of the various plant species grown in greenhouses. Even when overcoming these unique challenges, successful operators of direct use businesses may need to secure a competitive advantage, and some developers have done so by entering specialty niches, such as selling alligator meat to restaurants and constructing an ‘‘ice museum’’ in Alaska where guests can spend the night with interior furnishings sculptured from ice.

Furthermore, developing direct uses of geothermal resources is also constrained because geothermal waters cannot be economically transported over long distances without a significant loss of heat. Even when these resources need not be moved, obtaining the necessary state water rights to geothermal resources can be problematic. In areas of high groundwater use, the western states generally regulate geothermal water according to some form of the doctrine of prior appropriations, under which specific amounts of water may have already been appropriated to prior users, and additional water may not be available.

[ My note: this is a fantastic place to stay to see the Aurora Borealis northern lights near Fairbanks, Alaska ]

BERNIE KARL, PROPRIETOR, CHENA HOT SPRINGS RESORT, FAIRBANKS, AK. My name is Bernie Karl. I am the proprietor of Chena Hot Springs outside of Fairbanks, Alaska. Chena Hot Springs will be the site of the only new geothermal power plant installation in the United States this year. It will also be the site of the lowest temperature resource (165 °F) ever used for commercial power generation in the world.

Moderate temperature geothermal resources are by far the most prevalent in the United States and around the world. Estimates indicate there are between 20,000 and 40,000 MW of geothermal electrical energy potential in the U.S. alone in the 190 to 300 degrees Fahrenheit range. In fact, you could hit those temperatures right here underneath Washington DC if a hole 20,000 feet deep 1 were drilled. Heat from the earth, whether used for power generation or heating buildings and homes is the most reliable form of renewable energy available to us. It doesn’t depend on clear skies, windy days, or rainfall, making geothermal a good base load alternative energy. While using the heat from the earth for heating and cooling is economical throughout the U.S., our best geothermal resources for power generation are in the western states.

HYDROGEN AND FUEL CELL RESEARCH AND DEVELOPMENT MONDAY, JULY 17, 2006

PETE V. DOMENICI, NEW MEXICO.  The President’s request for a hydrogen initiative was $289 million this year, and we hit that mark in the Energy and Water Appropriations Subcommittee. With this level, over a quarter of a billion dollars, we know we cannot support every possible fuel cell technology for every possible application, and we have to have priorities, and that means we get people and institutions who feel let down and who feel like they have a lot to complain about.

So, with level investment, over a quarter of a billion annually, we know we cannot support everyone, as I indicated, but we’re trying to do it in a way to give it the best chance of success. I’m hopeful that today’s witnesses are going to advise the committee on whether we are achieving the right balance among the technologies, and I know there is an ongoing argument about research on technologies that are fixed and technologies that are mobile as it applies to the particular fuel cell. We can’t resolve that. Both are needed. One could maintain that the Department of Energy’s entire Hydrogen Program is a high-risk research area.

DONALD L. PAUL, VICE PRESIDENT & CHIEF TECHNOLOGY OFFICER, CHEVRON CORPORATION, SAN RAMON, CA

As Chevron’s chief technology officer, I oversee all facets of our company’s new energy technology development and commercialization, including hydrogen generation and hydrogen infrastructure, can share our experience as well as our views regarding the critical next steps.

Oftentimes, the infrastructure part of the energy equation is ignored. Our current infrastructure took us almost a century to build. The challenge of building an entirely new one is unique, and we haven’t faced that as a Nation for some time. It’s absolutely critical that both the devices that use hydrogen as a fuel for the vehicles and the hydrogen infrastructure be developed simultaneously. This is part of the key challenge.

We believe that central vehicle fleets and transit systems are the most practical means of using hydrogen in the near future in addressing both infrastructure as well as vehicle challenges. Fleets, such as buses, use a centralized fueling point and hydrogen storage can be overcome by vehicle size.

CHALLENGES TO COMMERCIALIZATION

Production and distribution of hydrogen.  Hydrogen must be available when and where it is will be needed. Hydrogen is a fuel—not a natural resource. It must be manufactured from other sources, so how the supply system is developed is critical. The two primary sources of hydrogen are water and hydrocarbons. For the past 50 years, Chevron and the industry have been engaged in the large-scale conversion of hydrocarbons to hydrogen through refinery and gasification processes. As you may be aware, oil refineries are the largest current producers and users of hydrogen.

Additional industrial uses are for chemicals, metals, and electronics manufacturing. Approximately 9 million tons of hydrogen is produced for industrial applications in the United States (world-wide production is about 40 million tons).

The core technical and business challenge is to transform and adapt the hydrogen production and distribution

Storage of hydrogen

Storing hydrogen in the car, at the refueling station and throughout the delivery infrastructure is a significant critical path challenge. While much attention is given to storing hydrogen on board the vehicles, and rightly so, similar attention is needed in the other critical locations in the hydrogen infrastructure. In particular, cost effective dynamic storage in moderate volume is essential at the production and fueling sites. Today, all hydrogen storage is essentially in high-pressure vessels, typically at 5,000 pounds per square inch. Even at these pressures, the energy stored is far lower than with typical liquid hydrocarbon fuels.

For the evolution to light duty vehicles, most believe that cost effective solid-state storage will be required. This is an important focus area for R&D programs. The bottom line is that the development of the infrastructure for hydrogen as a fuel will require advancements across a full system including production, distribution, and storage.

In sum, to develop a commercial-scale infrastructure, the cost of using hydrogen to consumers needs to be competitive in the market with other energy fuels. Large scale deployment requires that energy suppliers be convinced that hydrogen can compete with other fuels in the market. While there is reason for encouragement in special markets, broad commercial applicability has not been demonstrated.

Dr. MCCORMICK.  Given the magnitude of the challenges that we see, both environmentally and in terms of dependence on petroleum, hybrid vehicles won’t get us there.  Secretary Garman has testified about the Department of Energy projections, and if you put those kind of efficiencies on top of what we’re seeing, in terms of growth population and things, you can’t get there from here. So, clearly, under any circumstances, it’s a stopgap. So, what we have done is really taken a portfolio approach. In the near term, it’s hybrids, it’s advanced engine technology of more conventional sorts, it’s the E85, recognizing as we look at the world and all the emerging economies, and the pressures that are going to be there, both environmentally and energy-wise, we’re going to need every amount of energy we can get, and we’ve got to use it most efficiently.

Mr. LEULIETTE. Let me echo that from our perspective as a supplier. We see the economics of hybrid and E85, et cetera, being such that they are intermediate solutions. Our biggest concern in the supplier community is that the industry, the Government, or other groups look at these, what we call, ‘‘feel-good solutions’’ as solutions, and stop the focus in the energy in the longer-term scenario.  Because if we spend a lot of money on E85 infrastructure, if we promise that hybrids will be the solution, we will all be sitting around this table 3 or 4 years from now, facing an even greater challenge, and had not spent the money properly to solve the root cause and deal with the root cause of the problem.

 

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