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the Relative Costs, Benefits, and Risks of a Range of Options for 
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Before the Subcommittee on Energy and Environment, Committee on Science 
and Technology, House of Representatives: 

United States Government Accountability Office: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Wednesday, March 11, 2009: 

Clean Coal: 

DOE Should Prepare a Comprehensive Analysis of the Relative Costs, 
Benefits, and Risks of a Range of Options for FutureGen: 

Statement of Mark Gaffigan, Director:
Natural Resources and Environment: 


Mr. Chairman and Members of the Subcommittee: 

Thank you for the opportunity to discuss our recent report on the 
Department of Energy's (DOE) decision to restructure the FutureGen 
program.[Footnote 1] As requested, my remarks will focus on that 
report, which examined (1) the goals of the original and restructured 
FutureGen programs, (2) the similarities and differences between the 
restructured FutureGen program and other DOE carbon capture and storage 
programs, and (3) the extent to which DOE used sufficient information 
to support its decision to restructure the FutureGen program. 

As you know, Mr. Chairman, coal is currently the world's leading source 
of electricity. Coal-fired power plants generate about one-half of the 
electricity used in the United States, as well as about one-third of 
the nation's carbon dioxide (CO2) emissions, which contribute to 
climate change. In 2003, DOE initiated FutureGen--a program to design, 
build, and operate a commercial-scale, coal-fired power plant that 
incorporated carbon capture and storage (CCS) with integrated 
gasification combined cycle (IGCC), an advanced technology for 
generating electricity that has been deployed on a commercial scale at 
only two coal-fired power plants in the United States.[Footnote 2] In 
IGCC power plants, coal is gasified to produce a synthesis gas, 
consisting primarily of hydrogen, carbon monoxide, and CO2. Then, in a 
process called precombustion CCS, the CO2 is removed and separated from 
the synthesis gas before the synthesis gas is burned in a combustion 
turbine to generate electricity. Through IGCC, electricity is generated 
more efficiently than through conventional pulverized coal-fired 
technology, the process most widely in use, because IGCC uses less coal 
to generate the same amount of electricity. 

The original FutureGen plant was to capture and store underground about 
90 percent of its CO2 emissions. DOE's cost share was to be 74 percent, 
and industry partners agreed to fund the rest. Concerned about 
escalating costs, DOE announced in January 2008 that it had decided to 
restructure FutureGen. In October 2008, DOE received a small number of 
applications for the restructured FutureGen; however, some of these 
applications were for proposals outside the restructured FutureGen's 
scope. As we reported, DOE is currently assessing proposals received 
and stated it expected to announce a selection of projects by December 
2008; however, as of the beginning of March 2009, it had made no 
decision. DOE requested supplemental information from restructured 
FutureGen applicants, which will be reviewed before any selection 
decision.[Footnote 3] As you know, the recently enacted American 
Recovery and Reinvestment Act of 2009, known as the stimulus law, 
provides DOE an additional $3.4 billion for "Fossil Energy Research and 
Development."[Footnote 4] Such a substantial amount of funding could 
significantly impact DOE's decisions about how to move forward with 
programs such as FutureGen. 

Our report provides detailed information about our findings. In 
summary, we found the following: 

* The overall goals of the original and restructured FutureGen programs 
are largely similar in that both programs seek to produce electricity 
from coal with near-zero emissions by using CCS, and to make that 
process economically viable for the electric power industry. However, 
the programs have different approaches for achieving their goals, which 
could have different impacts on the commercial advancement of CCS and, 
therefore, result in two largely distinct programs. First, the original 
program focused on researching and developing the integration of IGCC 
and CCS at a new, commercial-scale, coal-fired power plant, while the 
restructured FutureGen aims at demonstrating the use of CCS technology 
at one or more new or existing commercial coal-fired power plants. As a 
result, the restructured program could provide opportunities to learn 
about CCS at different plants, including those that use IGCC and 
conventional ones that use pulverized coal generating technology. 
However, under the restructured program, learning about the integration 
of IGCC and CCS would be possible only if DOE received applications 
proposing IGCC and selected one for funding. Second, it is unclear 
which of the two programs would advance the broader roll out of CCS 
across industry more quickly. In particular, the original program was 
to be operated by a nonprofit consortium of some of the largest coal 
producers and electric power companies in the world at one plant, while 
the restructured program called for CCS projects at multiple commercial 
plants. DOE officials told us that the original program would likely 
have improved the global advancement of CCS more quickly than the 
restructured program because of its various international partnerships 
and that DOE is developing an approach to recoup the loss of 
international involvement that resulted from restructuring FutureGen. 
Finally, the original FutureGen would have served as an operating 
laboratory host facility for (1) emerging technologies aimed at the 
goal of near-zero emissions (such as hydrogen fuel cells and advanced 
gasification) and (2) gaining broad industry acceptance for these 
technologies. In contrast, the restructured FutureGen would not include 
a facility for testing these technologies, and its ability to advance 
them would, therefore, be limited. 

* DOE manages a portfolio of clean coal programs that research and 
develop CCS technology or demonstrate its application. The restructured 
FutureGen differs in important ways from most of DOE's other CCS 
programs, with the exception of one program--Round III of the Clean 
Coal Power Initiative (CCPI). Both the restructured FutureGen and CCPI 
(1) fund the commercial demonstration of CCS at new or existing coal- 
fired power plants and (2) require industry participants to bear at 
least 50 percent of costs. We reported that the restructured FutureGen 
targets a higher amount of CO2 to be captured and stored (at least 1 
million metric tons stored annually, per plant) than CCPI does (300,000 
metric tons of CO2 stored or put to use annually, such as to enhance 
oil recovery, per plant). However, CCPI's goals may be more achievable 
for industry partners than those of the restructured FutureGen and, 
therefore, lead to more industry participation. Regarding the 
restructured program's differences from most of the other CCS programs, 
the restructured FutureGen would integrate key components of CCS at 
commercial coal-fired power plants, such as CO2 capture, compression, 
transport, storage, and monitoring of stored CO2. In contrast, most of 
DOE's other CCS programs concentrate on developing individual 
components of CCS, such as CO2 storage, and/or an individual component 
and a related one, such as capture and compression. 

* Contrary to best practices, DOE did not base its decision to 
restructure FutureGen on a comprehensive analysis of factors such as 
the associated costs, benefits, and risks. DOE based its decision 
largely on its conclusion that costs for the original FutureGen had 
doubled and would escalate substantially. However, this conclusion was 
problematic because it was derived from a comparison of two cost 
estimates for the original FutureGen that were not comparable; DOE's 
$950 million estimate was in constant 2004 dollars, while the $1.8 
billion estimate of DOE's industry partners was inflated through 2017. 
As a result, DOE has no assurance that the restructured FutureGen is 
the best option to advance CCS. In contrast, DOE's Office of Fossil 
Energy had identified and analyzed 13 other options for incremental, 
cost-saving changes to the original program, such as reducing the CO2 
capture requirement. While the Office of Fossil Energy did not consider 
all of these options to be viable, it either recommended or noted 
several of them for consideration, with potential savings ranging from 
$30 million to $55 million each. 


According to various energy experts, for the foreseeable future, 
because coal is abundant and relatively inexpensive, it will remain a 
significant fuel for the generation of electric power in the United 
States and the world. However, coal-fired power plants are a 
significant source of CO2 and other emissions responsible for climate 
change. Hence, for at least the near-term, any government policies that 
address climate change will need to have a goal of significantly 
reducing CO2 and other emissions from coal-fired power plants. While 
CCS is still in its infancy, it may be a promising technology to 
achieve these purposes. By integrating IGCC and CCS technology at an 
operating laboratory host facility, DOE's original FutureGen program 
was intended to address significant technological, cost, and regulatory 
issues associated with the implementation of CCS at a new plant. 
Alternatively, the restructured FutureGen left open the possibility of 
successfully applying CCS technology to existing conventional, 
pulverized coal-fired power plants--an important goal in its own right, 
since those plants account for almost all of the coal-fired generating 
capacity in the United States and abroad. However, DOE's decision to 
restructure FutureGen and remove the program's emphasis on integrating 
IGCC and CCS technology was not well documented or explained, in light 
of the fact that DOE already had existing programs to address CCS at 
existing coal-fired power plants. 

Given the magnitude of the current fiscal and economic challenges 
facing our nation, along with the urgent need to secure an adequate and 
sustainable energy supply that does not contribute to climate change, 
much rides on the success of clean coal programs, such as FutureGen. To 
ensure the best uses of billions of federal dollars, informed and 
thoughtful approaches should be taken when making decisions about these 
programs, including the restructuring of FutureGen. Such informed 
decision making has become even more critical with the important 
opportunity that over $3 billion in additional funding for fossil 
energy research and development in the recently enacted stimulus law 
provides DOE for promoting cleaner forms of power generation. 

Along these lines, to help DOE make more fully informed decisions on 
how best to move forward with FutureGen, our February 2009 report 
recommended that DOE conduct a comprehensive analysis of different 
options. Specifically, to help ensure the widespread commercial 
advancement of CCS while protecting taxpayer interests, we recommended 
that, before implementing significant changes to FutureGen or 
obligating additional funds for such purposes, the Secretary of Energy 
direct DOE staff to prepare a comprehensive analysis comparing the 
relative costs, benefits, and risks of a range of options, including 
the original and restructured FutureGen programs and incremental 
options for modifying the original program. We also recommended that 
the Secretary consider the results of the comprehensive analysis and 
base any decisions that would alter the original FutureGen on the most 
advantageous mix of costs, benefits, and risks resulting from the 
options evaluated. In reviewing a draft of our report, DOE did not 
comment on the report's recommendations. 

In performing our work, we reviewed best practices for making 
programmatic decisions, FutureGen plans and budgets, and documents on 
the restructuring of FutureGen. We also contacted DOE, industry 
partners, and experts. We conducted this performance audit from June 
2008 to February 2009, in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Mr. Chairman, this completes my prepared statement. I would be happy to 
respond to any questions you or other Members of the Subcommittee may 
have at this time. 

Contacts and Acknowledgments: 

For further information about this testimony, please contact me at 
(202) 512-3841 or by e-mail at Ernie Hazera 
(Assistant Director), Nancy Crothers, and Chad M. Gorman made key 
contributions to this testimony. Harold Brumm, Jr., Cindy Gilbert, 
Angela Miles, Timothy Persons, Karen Richey, Michael Sagalow, and 
Jeanette M. Soares also made important contributions. 

[End of section] 


[1] GAO, Clean Coal: DOE's Decision to Restructure FutureGen Should Be 
Based on a Comprehensive Analysis of Costs, Benefits, and Risks, 
[hyperlink,] (Washington, D.C.: 
Feb. 13, 2009). 

[2] Currently, only two IGCC plants operate at commercial scale in the 
United States. In service since 1997, the Polk Station, near Mulberry, 
Florida, can provide 250 megawatts to the electric grid. The Wabash 
River Coal Gasification Repowering Project is the first full-size 
commercial gasification-combined cycle plant built in the United 
States, having begun operations in November 1995. The plant, located 
outside West Terre Haute, Indiana, can provide 262 megawatts to the 
electric grid. 

[3] DOE has identified certain details regarding the negotiations for 
both the original and the restructured FutureGen as sensitive or 
proprietary information. Due to the ongoing nature of these 
negotiations for the restructured FutureGen and the fact that 
disclosure of sensitive/proprietary information could adversely affect 
negotiations of these projects and related future projects, our 
discussion of some aspects of these negotiations is necessarily 

[4] Pub. L. No. 111-5, tit. IV, 123 Stat. 115, 139 (2009). 

[End of section] 

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