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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

February 2009: 

Clean Coal: 

DOE's Decision to Restructure FutureGen Should Be Based on a 
Comprehensive Analysis of Costs, Benefits, and Risks: 

GAO-09-248: 

GAO Highlights: 

Highlights of GAO-09-248, a report to congressional requesters. 

Why GAO Did This Study: 

Coal-fired power plants generate about one-half of the nation’s 
electricity and about one-third of its carbon dioxide (CO2) emissions, 
which contribute to climate change. In 2003, the Department of Energy 
(DOE) initiated FutureGen—a commercial-scale, coal-fired power plant to 
incorporate integrated gasification combined cycle (IGCC), an advanced 
generating technology, with carbon capture and storage (CCS). The plant 
was to capture and store underground about 90 percent of its CO2 
emissions. DOE’s cost share was 74 percent, and industry partners 
agreed to fund the rest. Concerned about escalating costs, DOE 
restructured FutureGen. GAO was asked to examine (1) the original and 
restructured programs’ goals, (2) similarities and differences between 
the new FutureGen and other DOE CCS programs, and (3) if the 
restructuring decision was based on sufficient information. GAO 
reviewed best practices for making programmatic decisions, FutureGen 
plans and budgets, and documents on the restructuring of FutureGen. GAO 
contacted DOE, industry partners, and experts. 

What GAO Found: 

The original FutureGen program and the new restructured FutureGen 
program attempt to use CCS at coal-fired power plants to achieve near-
zero CO2 emissions and to make CCS economically viable. However, they 
take different approaches that could affect CCS’s commercial 
advancement. First, the original program aimed at developing knowledge 
about the integration of IGCC and CCS at one plant; in contrast, the 
new program could provide opportunities to learn about CCS at different 
plants, such as conventional ones that use pulverized coal generating 
technology. Second, the original program was operated by a nonprofit 
consortium of energy companies at one plant, while the new program 
called for CCS projects at multiple commercial plants. 

The new, restructured FutureGen differs from most DOE CCS programs. The 
new FutureGen would develop and integrate multiple CCS components at 
coal-fired plants (including CO2 capture, transportation, and storage 
underground). Other programs concentrate on only one CCS component 
and/or a related component (e.g., capture or capture and compression). 
However, Round III of DOE’s Clean Coal Power Initiative (CCPI) is a 
cost-shared partnership with industry that funds commercial CCS 
demonstrations at new and existing coal-fired plants. The new FutureGen 
is most like CCPI in that both fund CCS commercial demonstrations at 
several plants to accelerate CCS deployment and require that 
participants bear 50 percent of the costs, but DOE expects the new 
FutureGen to have more funding for commercial demonstrations than CCPI. 
Moreover, the new FutureGen targets a higher amount of CO2 to be 
captured and stored (at least 1 million metric tons of CO2 annually per 
plant) than CCPI (300,000 metric tons). 

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 made its decision, 
largely, on the conclusion that costs for the original FutureGen had 
doubled and would escalate substantially. However, in its decision, DOE 
compared two cost estimates for the original FutureGen that were not 
comparable because DOE’s $950 million estimate was in constant 2004 
dollars and the $1.8 billion estimate of DOE’s industry partners was 
inflated through 2017. As its restructuring decision did not consider a 
comprehensive analysis of costs, benefits, and risks, DOE has no 
assurance that the restructured FutureGen is the best option to advance 
CCS. In contrast to the restructuring decision, DOE’s Office of Fossil 
Energy had identified and analyzed 13 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. 

What GAO Recommends: 

GAO recommends that DOE re-examine its restructuring decision, based on 
the comparative costs, benefits, and risks of the original and 
restructured programs, as well as other incremental options for 
modifying the original program. DOE provided technical comments but did 
not comment on the report’s recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-248]. For more 
information, contact Mark E. Gaffigan at (202) 512-3841 or 
gaffiganm@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

The Goals of the Original and Restructured FutureGen Programs Are 
Largely Similar, but the Programs' Different Approaches May Lead to 
Different Results: 

The Restructured FutureGen Differs from Most of the Other DOE Carbon 
Capture and Storage Programs, but It Is Similar to CCPI in Several 
Ways: 

DOE Did Not Support Its Decision to Restructure FutureGen with 
Sufficient Information on Costs, Benefits, or Risks: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Budget Authority and Obligations for FutureGen: 

Appendix III: Comments from the Department of Energy: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Storage and Emissions Goals for the Original and Restructured 
FutureGen Programs: 

Table 2: Key Differences in the Approaches of the Original and 
Restructured FutureGen Programs: 

Table 3: DOE Programs Supporting Carbon Capture and Storage: 

Table 4: DOE Budget Authority and Obligations for FutureGen, Fiscal 
Years 2004 through 2008: 

Abbreviations: 

Alliance: FutureGen Industrial Alliance: 

Btu: British Thermal Units: 

CCPI: Clean Coal Power Initiative: 

CCS: carbon capture and storage: 

CO2: carbon dioxide: 

DOE: Department of Energy: 

EOR: enhanced oil recovery: 

FE: Office of Fossil Energy: 

IGCC: Integrated Gasification Combined Cycle: 

IPCC: Intergovernmental Panel on Climate Change: 

NEPA: National Environmental Policy Act of 1969: 

NETL: National Energy Technology Laboratory: 

syngas: synthesis gas: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 13, 2009: 

The Honorable Bart Gordon: 
Chairman: 
Committee on Science and Technology: 
House of Representatives: 

The Honorable Brian Baird: 
Chairman: 
Subcommittee on Energy and Environment: 
Committee on Science and Technology: 
House of Representatives: 

The Honorable Daniel Lipinski: 
House of Representatives: 

The Honorable Jerry Costello: 
House of Representatives: 

Key scientific assessments have underscored the urgency of reducing 
carbon dioxide (CO2) emissions to help mitigate climate change. Given 
the United States' heavy reliance on coal-fired power plants, which 
emit significant quantities of CO2, many of these scientific 
assessments have cited carbon capture and storage (CCS), a developing 
technology, as a crucial component of any strategy for addressing 
climate change. CCS involves separating CO2 from other gases emitted in 
power plants; capturing the CO2; compressing it into a liquid form; 
transporting it (for example, by pipeline) to suitable locations; 
injecting it into deep underground geologic formations, such as 
depleted oil reservoirs and saline formations, for long-term storage; 
and finally, monitoring the presence of the CO2 at the storage site for 
a long period of time. Developing CCS is particularly important since 
total world CO2 emissions are expected to increase significantly in the 
near future as the United States continues to use its large coal 
reserves and as rapidly developing countries, such as China and India, 
increasingly rely on coal to generate electricity. To date, however, 
CCS has not been demonstrated on a commercial scale at a power plant, 
although key stakeholders, such as the International Energy Agency, an 
organization that advises 28 member countries on energy policy, have 
noted the importance of commercial-scale demonstration projects for 
advancing the technology's widespread commercialization. 

In 2003, the Department of Energy (DOE) announced its FutureGen program 
as a $1 billion venture, partnering with the electric power industry to 
design, build, and operate the world's first coal-fired, zero-emissions 
power plant. In 2005, the FutureGen Industrial Alliance (Alliance), a 
nonprofit consortium of some of the largest coal producers and electric 
power companies in the world, formed to join DOE in this effort. The 
Alliance agreed to fund 26 percent of the program, and DOE agreed to 
fund the remaining 74 percent--of which DOE anticipated receiving 
funding contributions for about 8 percent of the program's total cost 
from foreign government partners. The agreement was subject to 
renegotiation and renewal or continuation by both DOE and the Alliance 
at various stages. In addition to FutureGen, DOE has other clean coal 
programs with CCS components. For example, Round III of the Clean Coal 
Power Initiative (CCPI) seeks cost-shared partnerships with industry to 
fund commercial CCS demonstration at coal-fired power plants. 

FutureGen was originally conceived as a research and development 
project to integrate CCS with another developing technology--integrated 
gasification combined cycle (IGCC)--in a single power plant at 
commercial scale.[Footnote 1] In IGCC power plants, coal is gasified to 
produce a synthesis gas (syngas), consisting primarily of hydrogen, 
carbon monoxide, and CO2. In a process called precombustion CCS, the 
CO2 is removed and separated from the syngas before the 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. 
In addition, oxygen-fired IGCC plants produce CO2 as a concentrated gas 
stream at high pressure that may be captured and stored more easily and 
cheaply than CO2 from a typical pulverized coal-fired power plant, 
which emits CO2 that must be separated from other gases before storing. 
Construction on FutureGen was scheduled to begin in 2009, and 
operations were to begin in 2012. In that year, FutureGen was to begin 
capturing, storing, and monitoring the stored CO2 for 3 to 5 years, and 
then continue monitoring the stored CO2 for 2 more years. In addition, 
the FutureGen plant was being designed to serve as a living laboratory 
host facility for emerging clean coal research programs, including 
DOE's ongoing coal research program, to help develop advanced 
technologies that could (1) improve CCS and IGCC, and (2) advance 
research in other areas, such as hydrogen fuel cells. 

By mid-2007, partly because of cost escalations for building power 
plants around the world, DOE had become increasingly concerned about 
potential escalating costs for FutureGen. For example, the price of 
cement, large quantities of which are required for building power 
plants, had increased by about 30 percent from 2004 to 2006, and 
certain labor costs for building power plants had increased by over 25 
percent, or almost twice the rate of general inflation, from 2001 to 
2007. In October 2007, to address these concerns, DOE began 
renegotiating its share of program costs with the Alliance. In December 
2007, after DOE finished conducting the extensive environmental 
analyses required by the National Environmental Policy Act of 1969 
(NEPA)[Footnote 2] of four potential sites that took over a year, the 
Alliance announced that it had selected Mattoon, Illinois, for the 
location of FutureGen. However, DOE had not yet issued its NEPA Record 
of Decision.[Footnote 3] Further, DOE had advised the Alliance not to 
announce a site selection until the Record of Decision had been issued, 
as contemplated by the cooperative agreement. Subsequently, in January 
2008, DOE announced that it would not continue its cooperative 
agreement with the Alliance and that it was going to take a different 
approach to FutureGen. DOE stated that this decision was based on 
concerns over potential cost escalations and the need to more quickly 
advance commercial technology. 

DOE's new approach--the restructured FutureGen--focuses on 
demonstrating CCS at multiple new or existing commercial coal-fired 
power plants that may use IGCC or other types of coal plants, such as 
existing pulverized coal-fired power plants, which comprise 99 percent 
of all existing coal-fired power plants in the United States. Under the 
restructured FutureGen, DOE would fund several projects proposed by 
industry, including entities such as electric power companies, to add 
CCS to commercial power plants. The plants would begin using CCS by the 
end of 2015; and, as planned under the original FutureGen, they would 
be required to capture, store, and monitor the stored CO2 for 3 to 5 
years, and to continue monitoring the stored CO2 for an additional 2 
years. In June 2008, DOE announced that it anticipated providing up to 
$1.3 billion for the entire restructured FutureGen program, with 
certain caps in funding for each individual project. The original 
FutureGen was a DOE research and development project, but the 
restructured FutureGen is a DOE commercial demonstration project. Under 
the Energy Policy Act of 2005, a nonfederal source must generally fund 
not less than 20 percent of a DOE research and development project and 
not less than 50 percent of a DOE demonstration and commercial 
application project--that is, industry partners share more of the costs 
of demonstration projects.[Footnote 4] However, with both the original 
and restructured FutureGen, a nonfederal source must pay at least 50 
percent of any demonstration component's cost.[Footnote 5] In October 
2008, DOE received a small number of applications for the restructured 
FutureGen; however, some of these applications are for proposals 
outside of the restructured FutureGen's scope. DOE is currently 
assessing proposals received and had stated it expected to announce a 
selection of projects by December 2008; however, as of the beginning of 
February 2009, it had made no decision. DOE requested supplemental 
information from restructured FutureGen applicants which will be 
reviewed prior to any selection decision.[Footnote 6] 

While IGCC is a promising technology for generating electricity from 
coal, currently, coal-fired electricity is almost exclusively generated 
in existing pulverized coal-fired power plants. In these plants, 
pulverized coal is combusted in air to boil water, which raises steam 
that, in turn, is routed to turbines to generate electricity. The CO2 
that results from burning coal is exhausted in the flue gas at 
atmospheric pressure. 

In addition to generating electricity in pulverized coal-fired plants 
or utilizing IGCC technology, oxyfuel combustion is another 
developmental technology not yet deployed at a commercial scale that 
could burn pulverized coal to generate electricity. In oxyfuel 
combustion plants, coal would be burned in pure oxygen diluted with 
recycled CO2 or water. Oxyfuel combustion technology could also be one 
of the technologies considered by DOE in its CCS research efforts, 
including the restructured FutureGen. 

You asked us to examine (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. 

In conducting our work, we reviewed FutureGen appropriations, cost 
estimates, budget justifications, and other DOE documents, including 
the cooperative agreement and proposed terms for renegotiating the 
agreement between DOE and the Alliance. We also met with officials from 
DOE's Office of Fossil Energy (FE), including the National Energy 
Technology Laboratory (NETL) and the Office of Clean Coal, in addition 
to officials from the Alliance. We conducted semi-structured interviews 
with 14 knowledgeable stakeholders from the electric power and coal 
industries, nonprofit research organizations, academia, and others to 
determine, among other things, the potential benefits of and key 
differences between the original and restructured FutureGen programs. 
We also reviewed public responses to DOE's request for information 
about the restructured FutureGen and its funding announcement. Finally, 
we reviewed our recent work and guidance on best practices for cost 
estimation, program management, and programmatic decision making. A 
more detailed description of our scope and methodology is presented in 
appendix I. 

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. 

Results in Brief: 

The overall goals of the original and restructured FutureGen programs 
are similar in that both programs aim 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 two 
programs would take different approaches to achieving their goals 
resulting in, according to knowledgeable stakeholders, two largely 
distinct programs that could affect aspects of the commercial 
advancement of CCS differently in the following ways: 

* Type of information gained. The original FutureGen aimed at 
developing knowledge about the integration of IGCC and CCS at one power 
plant. In contrast, the restructured FutureGen could provide 
opportunities to learn about CCS at different types of coal-fired power 
plants because the program would be open to coal-fired plants utilizing 
technologies other than IGCC, such as conventional pulverized coal and 
oxyfuel combustion. However, under the restructured program, learning 
about the integration of IGCC and CCS is only possible if DOE receives 
applications proposing IGCC and selects one for funding. 

* Speed of widespread commercialization of CCS. It is unclear whether 
the original FutureGen program or the restructured program would 
advance the broader roll out of CCS across all of industry more 
quickly. According to DOE documents, the restructured program is to 
begin deploying CCS at one or more commercial facilities that generate 
power for sale in 2015, approximately 5 years earlier than the original 
program's commercial operations could begin. However, the original 
program would have begun generating, if not marketing, electricity in 
2012. Also, unlike the restructured program, the original program 
through the Alliance would have included a wide variety of industry and 
international partnerships, thereby fostering widespread 
commercialization of CCS technology and the use of that technology. 

* Testing advanced technology. The original FutureGen would have served 
as a living laboratory host facility for emerging technologies, aimed 
at the goal of near-zero emissions (such as hydrogen fuel cells), and 
for 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. 

The restructured FutureGen differs in important ways from most of DOE's 
other CCS programs, with the exception of one program--Round III of 
CCPI. Both the restructured FutureGen and CCPI (1) fund the commercial 
demonstration of CCS at coal-fired power plants, and (2) require 
industry participants to bear at least 50 percent of costs. The 
restructured FutureGen would potentially have more available funding 
for commercial demonstrations than CCPI, and the restructured FutureGen 
targets a higher amount of CO2 to be stored (at least 1 million metric 
tons of CO2 stored annually, per plant) than CCPI (300,000 metric tons 
of CO2 stored or put to use annually, per plant). However, because 
CCPI's goals may be more realistic or attainable for commercial 
partners than those of the restructured FutureGen, CCPI may receive 
more proposals and, hence, 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. 

DOE did not use sufficient information to support its decision to 
restructure FutureGen. According to our recent work and best practices, 
a decision to terminate or significantly restructure an ongoing program 
should be informed by timely and sufficient information on the costs, 
benefits, and risks of such a decision.[Footnote 7] DOE did not prepare 
a comprehensive analysis of the costs, benefits, and risks of its 
decision to replace the original FutureGen with the restructured 
program. DOE made its decision based, in large part, on its conclusion 
that construction and material costs for the original program would 
continue escalating substantially in the indefinite future and that 
life-cycle costs were likely to double. However, according to economic 
forecasting organizations, such as DOE's Energy Information 
Administration, significant cost escalations for building power plants, 
in general, do not typically continue in the long run. Also, DOE 
reached this conclusion by comparing its cost estimate for the original 
FutureGen ($950 million in constant 2004 dollars) with the Alliance's 
2006 estimated life-cycle costs for the program through 2017 (about 
$1.8 billion, considering inflation). In explaining his decision to 
restructure FutureGen, the Secretary of Energy noted that the projected 
program cost had "nearly doubled," from $950 million to $1.8 billion. 
However, that assertion did not take into account a major difference 
between the two estimates: one was based on constant dollars and the 
other on inflated dollars. Our analysis indicates that the Alliance's 
estimate in constant 2005 dollars would be approximately $1.3 billion-
-an increase of about $370 million, or about 39 percent, over DOE's 
estimate, not a near doubling of costs. As DOE's restructuring decision 
was not based on a comprehensive analysis of the associated costs, 
benefits, and risks, DOE has no assurance that the restructured program 
is the best option to accomplish the goal of promoting the accelerated 
and widespread commercial advancement of CCS. In contrast to the 
restructuring decision, FE identified and analyzed 13 other options for 
incremental, cost-saving changes to the original program, such as 
reducing the CO2 capture requirement. While FE did not consider all of 
these options to be viable, it either recommended or noted several of 
them for consideration, each with potential savings from $30 million to 
$55 million. 

To help ensure the widespread commercial advancement of CCS while 
protecting taxpayer interests, we are recommending that, before 
implementing significant changes to FutureGen or before obligating 
additional funds for such purposes, the Secretary of Energy should 
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. 

In commenting on a draft of this report, DOE thanked us for the 
opportunity to review the draft. In its response, DOE did not provide 
comments on the report's conclusions or recommendations. However, DOE 
provided us with technical comments, which we have incorporated into 
the report, as appropriate. See appendix III for DOE's comments and our 
response to these comments. 

Background: 

Global emissions of greenhouse gases, such as CO2, from human 
activities have grown markedly since preindustrial times--since about 
the year 1750--with an increase of 70 percent from 1970 to 2004. Most 
scientists agree that increased greenhouse gases in the atmosphere are 
the primary cause of the rise in global temperatures in recent decades. 
The Intergovernmental Panel on Climate Change (IPCC) expects greenhouse 
gas emissions to continue to increase over the next few decades, 
resulting in a continued rise in global temperatures and related 
harmful impacts, including the flooding of large populated coastal 
areas, a reduction in the production of some crops and livestock 
productivity, and a decrease in the availability of fresh water in 
certain parts of the world. 

According to the National Academy of Sciences, CO2 levels in the 
atmosphere are currently at their highest in at least 650,000 years and 
are continuing to rise. Global increases in concentrations of CO2 in 
the atmosphere are due primarily to the burning of fossil fuels--such 
as petroleum and coal--for energy, industrial processes, and 
transportation. Coal is currently the world's leading source of 
electricity, and the use of coal to generate electricity around the 
world is projected to double by 2030. Coal-fired power plants provide 
about one-half of the supply of electricity used in the United States, 
and DOE's Energy Information Administration estimates that coal 
accounts for approximately one-third of the total CO2 emissions in the 
United States. In addition, the International Energy Agency anticipates 
that the two largest developing countries--China and India--will drive 
increased demand for coal to meet their growing electricity needs. 
According to the International Energy Agency, these countries' heavy 
reliance on coal has already contributed significantly to recent 
increases in global CO2 emissions. 

To prevent the anticipated increase in coal-fired electricity 
generation from emitting significant amounts of CO2 into the 
atmosphere, many are suggesting CCS as a tool that allows for continued 
coal use, while mitigating its effect on the climate.[Footnote 8] CCS 
comprises several components: separating CO2 from other gases emitted 
by the plant; capturing emitted CO2; compressing the CO2 into a fluid 
state to facilitate its transportation; transporting it to a storage 
location; injecting the CO2 into geologic formations, such as depleted 
oil and gas reservoirs and saline formations, for storage; and 
monitoring the storage site to verify that the CO2 remains in place. A 
successful CCS system must integrate all of these components. 

Currently, three major approaches have been identified for capturing 
CO2 at coal-fired power plants: (1) generating electricity using 
pulverized coal as a fuel in conventional power plants with 
postcombustion capture of CO2, (2) generating electricity using IGCC 
technology with precombustion capture of CO2, and (3) using pulverized 
coal as a fuel in power plants that utilize oxyfuel combustion 
technology to generate power and capture CO2. 

* Postcombustion capture and pulverized coal-fired power plants: 
Pulverized coal-fired power plants, which comprise 99 percent of all 
existing coal-fired power plants in the United States, burn pulverized 
coal to boil water, which raises steam that, in turn, is routed to 
turbines to generate electricity. The CO2 that results from burning 
coal is exhausted in the flue gas at atmospheric pressure and a 
concentration of 10 to 15 volume percent. Postcombustion capture of CO2 
occurs after the coal is burned. The technology for capturing the CO2 
could be retrofitted onto existing power plants. However, according to 
DOE, the postcombustion capture of CO2 is a challenging approach 
because (1) the low pressure and dilute concentration dictate a high 
actual volume of gas to be treated; (2) trace impurities in the flue 
gas tend to reduce the effectiveness of the CO2 adsorbing processes; 
and (3) compressing captured CO2 from atmospheric pressure to pipeline 
pressure (about 1,200 to 2,000 pounds per square inch) requires a large 
amount (an estimated 20 to 40 percent) of the electric power generated 
by the power plant.[Footnote 9] 

* Precombustion capture and IGCC power plants: This approach would be 
used at coal plants that use IGCC, a technology for generating 
electricity that has been deployed on a commercial scale at only two 
coal-fired power plants in the United States. In an IGCC plant, coal is 
gasified through a thermochemical process to break it down into its 
chemical constituents and produce a synthesis gas (syngas) which 
consists mostly of hydrogen, carbon monoxide, and CO2.[Footnote 10] The 
syngas is then treated to remove contaminants, such as ammonia and 
mercury, and burned in a combustion turbine to generate electricity. 
Precombustion capture in IGCC plants can occur because the CO2 in the 
syngas is at a very high pressure, which allows it to be captured 
before the combustion of the syngas. 

* Oxyfuel combustion: Oxyfuel combustion, which is in its developmental 
stages, is a technology that is being developed for using coal to 
generate electricity that could reduce CO2 emissions. According to DOE, 
oxyfuel combustion could be applied to existing pulverized coal-fired 
plants. Oxyfuel combustion burns coal using pure oxygen diluted with 
recycled CO2 or water. As a result, oxyfuel combustion emits primarily 
CO2 and water vapor, with some excess oxygen, facilitating the capture 
of the CO2 by condensing the water in the exhaust stream. Because 
separating out the CO2 is not necessary under this approach, the CO2 
capture consists essentially of drying and compressing the CO2. 
However, depending on the level of excess oxygen and other trace 
components, some additional gas cleanup may be required to make the CO2 
suitable for transportation. 

After being captured, the CO2 would be transported, likely via 
pipeline, to a storage site and injected at depths of over 800 meters 
(or about 2,600 feet) into underground geologic formations (such as 
depleted oil reservoirs and saline formations), thought to be conducive 
for isolating the CO2 for hundreds to thousands of years. We reported 
in 2008 that among the barriers to CCS deployment are regulatory and 
legal uncertainties regarding the liability for CO2 leakage and the 
ownership of CO2, once injected. Once injected, the CO2 must be 
monitored to ensure it does not escape into the environment.[Footnote 
11] 

On February 27, 2003, the President announced FutureGen as a cost- 
shared project between DOE and industry to create the world's first 
coal-fired, zero emissions electricity and hydrogen production power 
plant. The production of hydrogen was to support the President's 
Hydrogen Fuel Initiative to create a hydrogen economy for 
transportation. The original FutureGen plant was planned to operate at 
a commercial scale as a 275 megawatt IGCC facility that would capture 
and store at least 1 million metric tons of CO2 per year. In December 
2005, DOE signed a cooperative agreement with the nonprofit Alliance. 
[Footnote 12] Pursuant to the agreement, the Alliance was to design, 
construct, and operate the FutureGen plant, and DOE was to provide 
project oversight, conduct the environmental analyses required by NEPA, 
and coordinate the participation of foreign governments.[Footnote 13] 
The project was to run through November 2017 and operate as the 
cleanest fossil fuel-fired power plant in the world. After completion 
of the formal project, the FutureGen plant was expected to continue 
operating for the typical lifespan of a power plant--usually 30 to 50 
years--generating electricity and providing a platform for energy 
research. On January 30, 2008, DOE announced that it had decided to 
take the FutureGen program in a different direction. DOE stated that it 
would demonstrate CCS at multiple commercial-scale power plants, 
including retaining the integration of CCS and IGCC. DOE referred to 
this new approach as the restructured FutureGen program. In June 2008, 
in a funding announcement for the restructured program, DOE stated that 
it expected it would have about $290 million available through fiscal 
year 2009 for its share of funding for the program. (See app. II for an 
overview of DOE budget authority and obligations for FutureGen.) 

The Goals of the Original and Restructured FutureGen Programs Are 
Largely Similar, but the Programs' Different Approaches May Lead to 
Different Results: 

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 outline different approaches for achieving their goals, 
which could affect the commercial advancement of CCS differently in 
several ways. 

With a Few Key Exceptions, the Goals of the Original and Restructured 
Programs Are Largely Similar: 

Both the original and restructured programs aim to establish the 
feasibility and economic viability of producing electricity from coal 
with near-zero emissions by employing CCS. The programs' goals for 
storing CO2 and limiting other emissions, such as mercury and sulfur, 
are also similar; except that the requirement for the amount of carbon 
to be captured has been reduced from 90 percent in the original program 
to 81 percent in the restructured program (see table 1). 

Table 1: Storage and Emissions Goals for the Original and Restructured 
FutureGen Programs: 

Storage and emissions goals: Carbon; 
Original FutureGen: Capture at least 90%[A]; 
Restructured FutureGen: Capture at least 81%[A]. 

Storage and emissions goals: CO2; 
Original FutureGen: Store at least 1 MMT/year[B]; 
Restructured FutureGen: Store at least 1 MMT/year[B]. 

Storage and emissions goals: Sulfur; 
Original FutureGen: Remove at least 99%; 
Restructured FutureGen: Remove at least 99%[C]. 

Storage and emissions goals: Mercury; 
Original FutureGen: Remove at least 90%; 
Restructured FutureGen: Remove at least 90%[D]. 

Storage and emissions goals: Btu NOx; 
Original FutureGen: Reduce to less than .05 lb/million; 
Restructured FutureGen: Reduce to less than .05 lb/million. 

Storage and emissions goals: Btu particulate matter; 
Original FutureGen: Reduce to less than .005 lb/million; 
Restructured FutureGen: Reduce to less than .005 lb/million. 

Source: GAO analysis of DOE program documents. 

[A] The original FutureGen program's goal is to capture 90 percent of 
the CO2 in the total plant gas stream, while the restructured FutureGen 
program requires capture of 81 percent of the carbon in the total plant 
gas stream. According to DOE officials, the carbon capture goal of the 
restructured program includes the capture of CO2, as well as other 
carbon-based gases--such as methane (CH4), another greenhouse gas. DOE 
officials explained that they changed the measure from CO2 to carbon 
for clarification purposes and because the restructured FutureGen was 
designed to accommodate a range of gasification and combustion 
technology configurations. Also, while the goal for the restructured 
FutureGen states 90 percent carbon capture, the minimal performance 
requirement is 81 percent of carbon. 

[B] Per demonstration unit or plant. 

[C] Based on the sulfur content of the coal, or less than 0.04 
lbs/million Btu if there is low sulfur concentration in the coal. 

[D] Based on the mercury content of the coal. 

[End of table] 

Knowledgeable stakeholders told us that this decrease in carbon capture 
is of modest significance and that a goal of 81 percent is still very 
ambitious and costly. DOE received similar feedback in responses to its 
request for information from the public about its plan to restructure 
FutureGen. Eighteen of the 49 respondents indicated that the 90 percent 
goal would be too restrictive for industry participants because of the 
additional energy required to capture and compress CO2, often referred 
to as the energy penalty, and the fact that no power plant to date has 
been designed to operate with the conditions necessary to achieve a 90 
percent capture. Some respondents suggested setting a lower capture 
goal, such as 65 percent, and adopting an incremental approach over 
time to reach 90 percent that would eventually allow industry to obtain 
baseline data and demonstrate reliability and widespread confidence in 
CCS. One respondent wrote that the "90% capture level was appropriate 
for a 'living laboratory' like the originally proposed FutureGen 
project but a 30% level is most suitable for a commercial IGCC 
facility." 

Both the original and restructured programs would operate plants at a 
commercial size.[Footnote 14] However, the restructured program, a DOE 
commercial demonstration project, seeks to accelerate the commercial 
deployment of CCS (that is, generating and selling electricity to earn 
profits) by implementing CCS at one or more commercial facilities by 
2015--approximately five years earlier than the original program's 
commercial operations could begin. The original program, a DOE research 
and development project, would begin generating electricity in 2012, a 
few years earlier than the restructured FutureGen; but, it could not 
begin operating as a profit-seeking commercial facility until after the 
nonprofit Alliance sells it, which is currently anticipated to occur in 
2020. Knowledgeable stakeholders told us that the restructured 
program's time line for the commercial deployment of its project(s) 
might be ambitious because legal and environmental issues related to 
siting and permitting, in particular for CCS, could slow 
implementation. They also stated that the required NEPA analyses, which 
must be completed prior to beginning construction, could take up to 3 
years. In contrast, DOE had completed its NEPA analyses for the 
original FutureGen. Moreover, the governments of the two states--Texas 
and Illinois--where the four finalist sites for the original FutureGen 
were located, had agreed to assume liability for the injected CO2. DOE 
officials told us that, unlike the original program, a primary goal of 
the restructured FutureGen was to facilitate the siting and permitting 
process for CCS by implementing multiple projects in different 
locations. 

The Different Approaches for Achieving Goals Could Have Different 
Impacts on the Commercial Advancement of CCS: 

Because of the different approaches for achieving their goals, the 
original and restructured FutureGen programs could have different 
impacts on the commercial advancement of CCS (see table 2). 

Table 2: Key Differences in the Approaches of the Original and 
Restructured FutureGen Programs: 

Original FutureGen: Only includes IGCC; 
Restructured FutureGen as currently designed: May or may not include 
IGCC; IGCC was identified as a goal, but its inclusion in the program 
depends on the applications received and selected. 

Original FutureGen: Accelerated deployment of CCS at commercial 
facilities is not a goal; 
Restructured FutureGen as currently designed: Accelerated deployment of 
CCS at commercial facilities is a goal. 

Original FutureGen: Includes a living laboratory host facility for 
advanced technologies, such as fuel cells; 
Restructured FutureGen as currently designed: Does not include a living 
laboratory host facility for advanced technologies. 

Original FutureGen: Project would be operated by a nonprofit consortium 
of 11 industry partners (FutureGen Industrial Alliance); 
Restructured FutureGen as currently designed: Each project could be 
operated by a nonprofit or for-profit entity. 

Original FutureGen: Research and development project (DOE cost share 
capped at 74%); 
Restructured FutureGen as currently designed: Demonstration project 
(DOE cost share capped at 50%). 

Original FutureGen: Consists of one plant; 
Restructured FutureGen as currently designed: Potential for multiple 
sites, depending on the applications received and selected. 

Original FutureGen: Includes international involvement; 
Restructured FutureGen as currently designed: No international 
involvement. 

Source: GAO analysis of DOE program documents. 

[End of table] 

The type of information gained from the programs may vary. First, the 
original program would have developed knowledge about CCS at IGCC 
plants, while the restructured program could allow for opportunities to 
learn about CCS at both IGCC and other types of coal plants. 
Knowledgeable stakeholders whom we contacted stated that DOE could 
benefit by taking advantage of the opportunity under the restructured 
FutureGen program to learn about CCS at multiple types of plants. They 
explained that opportunities to learn from multiple plant sites in 
different regions with various technologies would provide a wide range 
of knowledge about the implementation of CCS in various contexts. 
Similarly, 30 of 49 respondents to DOE's request for information about 
the restructured program indicated that it would be beneficial if the 
restructured program were to include both IGCC and other types of coal 
plants. In addition to other organizations, such as the National 
Academy of Sciences, we have noted that the benefits of learning about 
CCS technologies are also applicable to existing pulverized coal-fired 
plants, since they account for an overwhelming share (about 99 percent) 
of the world's coal-fired power plants.[Footnote 15] However, one of 
the intended benefits of the restructured program--providing 
opportunities to learn from multiple plants about various technologies-
-may not be fully realized since DOE received only a small number of 
applications. If an application for IGCC has not been received or is 
not selected, the loss of an IGCC plant with integrated CCS capability 
is significant because, according to the draft strategic planning 
document for the restructured program, demonstrating this technology is 
a key solution for reducing atmospheric CO2 emissions from coal-fired 
power plants. Comments submitted to DOE and knowledgeable stakeholders 
we interviewed indicated that the carbon capture goal for the 
restructured program was too restrictive for commercial facilities. One 
stakeholder stated that the restructured program goals might be overly 
optimistic about what commercial projects are willing to do. As a 
result of receiving only a small number of applications, the 
restructured program is not as likely to develop as broad a base of 
knowledge as it could have if more applications were received. 

Second, it is unclear whether the original FutureGen program or the 
restructured program could have advanced the broader roll out of CCS 
more quickly across all of industry. According to DOE documents, the 
restructured program is intended to begin deploying CCS at one or more 
commercial facilities in 2015, approximately five years earlier than 
the original program's commercial operations (that is, generating and 
selling electricity) could begin. The original program, a DOE research 
and development project, would have begun generating electricity in 
2012, a few years earlier than the restructured FutureGen, but it could 
not have begun operating as a profit-seeking commercial facility until 
after the nonprofit Alliance sold it, which was anticipated to occur in 
2020. Moreover, unlike the restructured program, the original FutureGen 
would have included a wide variety of industry partners (including 
foreign government partners, which are absent from the restructured 
program). In addition, more industry partners could have joined the 
Alliance and its 11 members over the course of the original program. As 
a result of its wider participation, the original FutureGen could 
potentially have advanced the broader roll out of CCS across all of 
industry and internationally, instead of at only a few commercial 
facilities, more quickly than the restructured program. DOE officials 
told us that the original program would likely improve the global 
advancement of CCS more quickly than the restructured program due to 
its various international partnerships. They stated that DOE is 
developing an approach to recoup the loss of international involvement 
that resulted from restructuring FutureGen. 

Third, the restructured program will not serve as a living laboratory 
host facility for technologies emerging from energy research and 
development programs aimed at the goal of near-zero emissions and for 
gaining broad industry acceptance for these technologies. The original 
FutureGen plant was to be designed with the ability to test various 
technologies that are scalable to full size, such as fuel cells, 
advanced gasification, and membrane air separation systems. Without the 
opportunity to test these emerging research and development 
technologies, the restructured FutureGen might result in a slower 
advancement of CCS than the original program may have yielded. 
According to the cooperative agreement between DOE and the Alliance, 
emerging technologies, such as fuel cells, could have been tested at 
the original program's living laboratory host facility. In a September 
2007 presentation to DOE's Deputy Secretary, NETL noted the impact of 
removing the living laboratory, saying it would "significantly delay 
the availability of the technology for commercial deployment" and have 
a "significant programmatic impact." DOE officials told us that they 
have not yet determined where these technologies will be tested. 

The Restructured FutureGen Differs from Most of the Other DOE Carbon 
Capture and Storage Programs, but It Is Similar to CCPI in Several 
Ways: 

DOE manages a portfolio of clean coal programs that research and 
develop CCS technology or demonstrate its application. Focusing on 
commercial coal-fired power plants, the restructured FutureGen would 
integrate key components of CCS, such as CO2 capture, compression, 
transport, storage, and monitoring of CO2 at the storage location. 
However, the restructured FutureGen is similar in some ways to Round 
III of CCPI, but CCPI's goals are more modest than those of the 
restructured FutureGen and, hence, may be more achievable for industry 
partners. The other CCS programs include the (1) Regional Carbon 
Sequestration Partnerships, (2) Innovations for Existing Plants 
Program, (3) Advanced Turbines Program, (4) Advanced Integrated 
Gasification Combined Cycle Program, and (5) Round III of the Title 17 
Incentives for Innovative Technologies Loan Guarantee Program (Loan 
Guarantee Program). Four of these five CCS programs do not integrate 
all key components of CCS and concentrate on developing one or two 
related components of CCS, such as CO2 separation, CO2 storage, or CO2 
capture with related compression. 

The Restructured FutureGen Program Is Similar to Round III of CCPI in 
Several Ways, but CCPI's Goals May be More Achievable for Industry 
Partners: 

Both the restructured FutureGen and CCPI are cost-shared partnerships 
with industry, in which DOE funds no more than 50 percent of the costs. 
Like the restructured FutureGen, Round III of the CCPI program funds 
the commercial demonstration of CCS at coal-fired power plants. 
[Footnote 16] Round III of CCPI seeks to demonstrate, at a commercial 
scale, advanced coal-based technologies that capture and store carbon, 
or put CO2 emissions to beneficial reuse, such as to enhance oil 
recovery.[Footnote 17] The proposals for Round III of CCPI were due to 
DOE by January 15, 2009, and DOE expects to announce its selections in 
July 2009. 

In public comments on DOE's request for information and the draft 
funding announcement for the restructured FutureGen, two respondents 
noted the similarity between the restructured FutureGen and CCPI. They 
suggested that DOE explain the linkages and possibly combine the 
programs. However, important differences exist in the two programs' 
goals. First, while both programs have annual requirements for the 
capture of CO2 emissions, the restructured FutureGen requires 1 million 
metric tons of CO2 per plant, while CCPI requires 300,000 metric tons 
of CO2 per plant. Knowledgeable stakeholders told us that CCPI's goal 
of capturing 300,000 metric tons of CO2 is more realistic and 
attainable by commercial facilities than the restructured FutureGen's 
goal of 1 million metric tons. Another noteworthy distinction is that 
the restructured FutureGen requires the 1 million metric tons of CO2 
emissions to be stored in saline formations, whereas the 300,000 metric 
tons of CO2 emissions that CCPI requires to be captured can either be 
stored or be put to beneficial reuse, such as to enhance oil recovery. 
The latter opens up more options for industry partners and can serve as 
an attractive opportunity for increasing revenue in the project by 
selling the CO2. Finally, because CCPI's goals may be more realistic or 
attainable for commercial partners, more proposals may be submitted to 
CCPI than the restructured FutureGen. For example, two officials from 
electric utility companies said that, despite the potentially greater 
amount of funding available through the restructured FutureGen ($1.3 
billion, subject to future appropriations) than CCPI ($440 million, 
subject to future appropriations), their companies would apply for CCPI 
over the restructured program because they could meet CCPI's goals. 

The Restructured FutureGen Differs from Most Other DOE CCS Programs: 

The restructured FutureGen and other DOE CCS programs strive to reduce 
CO2 emissions by advancing CCS. However, while most of these programs 
do not integrate all key components of CCS, the restructured FutureGen 
integrates all key components of CCS. The other CCS programs include 
the (1) Regional Carbon Sequestration Partnerships, (2) Innovations for 
Existing Plants Program, (3) Advanced Turbines Program, (4) Advanced 
Integrated Gasification Combined Cycle Program, and (5) Round III of 
the Title 17 Incentives for Innovative Technologies Loan Guarantee 
Program. 

The Regional Carbon Sequestration Partnerships seek to develop the 
technology, infrastructure, and regulations necessary to implement CO2 
storage.[Footnote 18] The 7 regional partnerships are composed of over 
350 organizations, 42 states, 4 Canadian provinces, and 3 Native 
American tribes. Now entering Phase III,[Footnote 19] the regional 
partnerships are working to implement 7 large-scale projects that will 
demonstrate the long-term, effective, and safe storage of CO2 in the 
major underground geologic formations throughout the United States and 
portions of Canada. The CO2 stored through the projects can come from 
coal-fired power plants or other sources, such as ethanol production 
plants. The injection of CO2 into geologic formations will continue 
over several years, and the monitoring will continue through 2017. 

The Innovations for Existing Plants Program focuses on developing CO2 
capture and compression technologies to assist existing coal-fired 
power plants.[Footnote 20] Through this program, DOE is providing $36 
million in funding for 15 projects to develop new and cost-effective 
CO2 capture technologies for existing power plants. According to DOE, 
all 15 projects selected have received funding. The projects will be 
implemented across 11 states and will last for 2 to 3 years. Projects 
will focus on five areas of interest for CO2 capture: membranes, 
solvents, sorbents, oxyfuel combustion, and chemical looping. 

The Advanced Turbines Program focuses on creating the technology base 
for turbines that will permit the design of IGCC plants with CCS that 
can operate at near-zero emissions, thereby facilitating CO2 capture. 
According to DOE, the development of new turbines technology could 
improve applications of IGCC by reducing the costs of producing 
electricity from coal. 

Similarly, the Advanced Integrated Gasification Combined Cycle Program 
also focuses on one aspect of CCS--developing gasification technology 
to enable CO2 capture. The program aims to develop advanced 
gasification technologies to enable CO2 capture with minimal impact on 
the cost of electricity. DOE reports that by 2012, gasification 
technology will be integrated at pilot scale with CO2 separation, 
capture, and sequestration into near-zero atmospheric emissions 
configurations that can, ultimately, provide electricity with less than 
a 10 percent increase in cost. 

Finally, Round III of the Title 17 Incentives for Innovative 
Technologies Loan Guarantee Program will provide up to $8 billion in 
loan guarantees for energy projects that satisfy three criteria: avoid, 
reduce, or sequester air pollutants or greenhouse gases; employ new or 
significantly improved technologies, compared with commercial 
technologies in service at the time the guarantee is issued; and 
provide a reasonable prospect of repayment.[Footnote 21] Initial 
applications for Round III of the program were due to DOE in December 
2008. We recently reported on DOE's progress in (1) issuing final 
regulations to govern this program, (2) taking actions to help ensure 
that the program is managed effectively and to maintain accountability, 
and (3) determining whether there were inherent risks due to the nature 
and characteristics of this program that may affect DOE's ability to 
make the program pay for itself and support a broad spectrum of 
innovative energy technologies.[Footnote 22] Table 3 summarizes the 
comparison of DOE programs supporting CCS. 

Table 3: DOE Programs Supporting Carbon Capture and Storage: 

Description: 
Restructured FutureGen: Demonstration of capture and storage of CO2; 
Clean Coal Power Initiative (Round III): Demonstration of capture and 
storage, or beneficial reuse, of CO2; 
Regional Carbon Sequestration Partnerships: Demonstration of CO2 
storage in geologic formations; 
Innovations for Existing Plants Program: Develops CO2 capture and 
compression technologies for pulverized coal power plants, which 
represent the majority of existing coal plants; 
Advanced Turbines Program: Creation of new turbines for IGCC plants 
that will include CCS and facilitate near-zero atmospheric emissions; 
Advanced Integrated Gasification Combined Cycle Program: Supports the 
development of advanced gasification technologies to enable CO2 capture 
with minimal impact on the cost of electricity; 
Loan Guarantees (Round III): Loan guarantees for activities at 
retrofitted and new facilities that incorporate carbon capture and 
sequestration, other beneficial uses of carbon, or advanced coal 
gasification. 

Integrates all key CCS components[A]: 
Restructured FutureGen: Yes; 
Clean Coal Power Initiative (Round III): Yes; 
Regional Carbon Sequestration Partnerships: No[B]; 
Innovations for Existing Plants Program: No; 
Advanced Turbines Program: No; 
Advanced Integrated Gasification Combined Cycle Program: No; 
Loan Guarantees (Round III): Possible. 

Commercial site: 
Restructured FutureGen: Yes; 
Clean Coal Power Initiative (Round III): Yes; 
Regional Carbon Sequestration Partnerships: No; 
Innovations for Existing Plants Program: No; 
Advanced Turbines Program: No; 
Advanced Integrated Gasification Combined Cycle Program: No; 
Loan Guarantees (Round III): Yes. 

Demonstration or R&D: 
Restructured FutureGen: Demonstration; 
Clean Coal Power Initiative (Round III): Demonstration; 
Regional Carbon Sequestration Partnerships: R&D; 
Innovations for Existing Plants Program: R&D; 
Advanced Turbines Program: R&D; 
Advanced Integrated Gasification Combined Cycle Program: R&D; 
Loan Guarantees (Round III): N/A. 

DOE cost share: 
Restructured FutureGen: 50%[C]; 
Clean Coal Power Initiative (Round III): 50%[C]; 
Regional Carbon Sequestration Partnerships: 80%[D]; 
Innovations for Existing Plants Program: 80%; 
Advanced Turbines Program: 80%; 
Advanced Integrated Gasification Combined Cycle Program: 80%; 
Loan Guarantees (Round III): N/A. 

Carbon storage required (amount and location): 
Restructured FutureGen: Yes, storage required; At least 1 million 
metric tons/year of CO2 must be stored in a saline formation and any 
excess of 1 million metric tons/year can be put to beneficial reuse, 
such as for enhanced oil recovery; 
Clean Coal Power Initiative (Round III): No, storage not required; 
300,000 metric tons/year can either be stored or put to beneficial 
reuse, such as for enhanced oil recovery; 
Regional Carbon Sequestration Partnerships: Yes, storage required; Some 
will store up to 1 million metric tons/year in geologic formations; 
Innovations for Existing Plants Program: N/A; 
Advanced Turbines Program: N/A; 
Advanced Integrated Gasification Combined Cycle Program: N/A; 
Loan Guarantees (Round III): N/A. 

Source: GAO analysis of DOE program documents. 

[A] Key components include capture, compression, transport, storage and 
measurement, monitoring and verification. 

[B] The Regional Partnerships will conduct large-scale geological 
sequestration testing that will require the participants to secure 
sufficient quantities of CO2 needed to demonstrate CO2 storage, 
monitoring, and verification. However, while DOE will cost share in the 
acquisition of CO2, it will not fund the development and/or testing of 
CO2 capture technologies under the Regional Partnership program. 

[C] DOE cost sharing is generally capped at 50 percent. According to 
DOE officials, it is quite common under DOE's commercial demonstration 
programs for the Government cost share to be well below 50 percent of 
the total project cost. 

[D] DOE cost sharing is generally capped at 80 percent. Private sector 
cost sharing under the seven Regional Partnerships averages 34 percent. 

[End of table] 

DOE Did Not Support Its Decision to Restructure FutureGen with 
Sufficient Information on Costs, Benefits, or Risks: 

According to our recent work and best practices, a decision to 
terminate or significantly restructure an ongoing program should 
typically be informed by timely and sufficient information on the 
costs, benefits, and risks of such a decision. While DOE had reason to 
be concerned about the escalating costs of the original FutureGen, it 
made its decision to cancel that program and replace it with the 
restructured FutureGen based, in large part, on a comparison of cost 
estimates that were not comparable. That is, it compared one estimate 
that was in current dollars with one that was in constant dollars. In 
restructuring FutureGen, DOE did not sufficiently analyze the costs, 
benefits, and risks of canceling the original FutureGen and replacing 
it with a significantly restructured program. A comprehensive analysis 
could have helped DOE determine how the costs, benefits, and risks of 
the restructured FutureGen compared with those of the original 
FutureGen. Because it did not conduct such an analysis, DOE cannot be 
assured that the restructured program is the best option to accelerate 
the widespread commercial advancement of CCS more quickly than the 
original program. Other options, rather than dramatically restructuring 
the program, were possible that could have preserved some of the 
benefits of the original program, including ensuring the integration of 
IGCC and CCS at the FutureGen facility. For example, FE identified and 
analyzed 13 other options for incremental, cost-saving changes to the 
original program, such as reducing the CO2 capture requirement. While 
FE did not consider all of these options to be viable, it recommended 
or noted several of them for consideration with potential savings from 
$30 million to $55 million each. 

DOE Decided to Restructure FutureGen Based, in Large Part, on a 
Comparison of Cost Estimates that Were Not Comparable: 

In January 2007, as part of its initial conceptual design report for 
the original FutureGen, the Alliance estimated the cost of the original 
program at about $1.8 billion. The Alliance's report explained that 
this estimate included inflation through 2017--the last year of the 
anticipated life of the program--and was the equivalent of almost $1.4 
billion in constant 2006 dollars. This report also stated that, after 
subtracting anticipated revenue from program activities, such as the 
sale of electricity, the estimate was similar to DOE's 2004 estimate of 
$950 million. However, DOE officials told us that DOE's estimate did 
not subtract anticipated revenue. In March 2007, after approving the 
Alliance's cost estimate, DOE renewed the cooperative agreement with 
the Alliance to proceed with developing a preliminary design for 
FutureGen by June 2008, including a revised cost estimate and a risk 
analysis. The preliminary design was to be based on a specific site and 
technology for the program--information that has an important impact on 
the program's overall cost because labor expenses vary from location to 
location, and technology costs and designs, such as for turbines, vary 
depending on the specific manufacturer and vendor. 

The March 2007 renewed cooperative agreement listed approximately $1.8 
billion as the current estimated cost of the project. However, senior 
DOE officials soon began to express concerns about escalating program 
costs, and they directed FE officials to develop recommendations for 
controlling costs. In September 2007, FE officials presented several 
recommendations for incremental changes to control costs to the Deputy 
Secretary of Energy; they also noted various measures already in place 
for controlling costs, such as monthly progress reports and a risk 
management program. Importantly, none of the recommendations indicated 
that DOE should cancel the original program and restructure FutureGen; 
moreover, FE officials told us that they did not prepare any analysis 
or recommendations for senior DOE officials that resembled what was to 
become the restructured program. 

According to DOE, following this presentation, senior DOE officials 
directed FE to negotiate with the Alliance new cost sharing 
arrangements under the cooperative agreement, which was scheduled for 
continuation in June 2008. The Alliance agreed to meet to renegotiate 
the terms of the cooperative agreement. Over the course of several 
meetings, the parties discussed various funding scenarios and exchanged 
proposed term sheets. Subsequently, however, the Alliance and DOE did 
not reach agreement. In December 2007, the Alliance sent a letter to 
DOE stating that it preferred to proceed under the existing cooperative 
agreement until FutureGen's costs and risks could be assessed with 
input from the preliminary design report and cost estimate that were 
due by June 2008. 

Also in December 2007, the Secretary of Energy briefed senior 
presidential advisers that the estimated cost of FutureGen had nearly 
doubled--from $950 million to $1.8 billion--and that costs were 
expected to continue rising. In addition, according to the briefing 
documents, DOE planned to end its partnership with the Alliance and was 
developing a new strategy for FutureGen that would cap the government's 
financial exposure. The briefing documents explained that DOE's new 
approach for FutureGen would fund only the CCS-related technology 
associated with multiple commercial IGCC plants, rather than the entire 
construction of a single plant with CCS. Around this time, according to 
DOE officials, senior DOE officials directed FE to develop the 
restructured FutureGen program. In response, these officials told us, 
many high-level offices within DOE collaborated on developing a draft 
strategic planning document for the restructured program. According to 
these officials, the draft strategic planning document that they 
finalized in January 2008 was the first complete document about the 
restructured FutureGen. On January 30, 2008, DOE publicly announced 
that it was restructuring FutureGen to provide a ceiling on federal 
contributions and that the restructured program was a more cost- 
effective approach. On this same day, DOE notified the Alliance that it 
was restructuring FutureGen and would not continue its cooperative 
agreement with the Alliance. DOE informed the Alliance that it was 
restructuring FutureGen in response to serious concerns over 
substantial escalation in projected costs, including what the agency 
concluded would be the likely continued escalation of the costs. DOE 
officials also stated that they disapproved of the Alliance's decision 
to announce the selection of a project site before DOE issued its NEPA 
Record of Decision. According to DOE, prior to the site selection 
announcement and without knowledge of the Alliance's choice of site, 
DOE had asked the Alliance not to go forward with the announcement and 
further advised the Alliance against making an announcement until the 
Record of Decision had been issued. DOE officials also said that, in 
their negotiations on measures that could limit DOE's financial 
exposure, they lost confidence in the ability of the Alliance to fund 
its share of the project cost. 

Although comparing cost estimates can provide valuable insight about 
the impact of escalating costs on a project, DOE based its decision to 
restructure FutureGen, in large part, on a comparison of cost estimates 
that were not actually comparable. That is, in 2004, DOE had estimated 
that the cost of the original FutureGen would be $950 million in 
constant 2004 dollars. In contrast, the Alliance's 2007 estimate of 
about $1.8 billion was in current dollars, which reflected inflation 
over the course of the program from 2005 through 2017.[Footnote 23] In 
explaining his decision to restructure FutureGen to senior presidential 
advisers, the Secretary of Energy indicated that the projected program 
costs had "nearly doubled," from $950 million to $1.8 billion. However, 
comparing constant dollars, which exclude inflation, with current 
dollars, which reflect inflation, is misleading. Our calculations show 
that the Alliance's current dollar estimate of roughly $1.8 billion is 
equivalent to approximately $1.3 billion in constant 2005 dollars--an 
increase in total program costs of about $370 million, or about 39 
percent--not a near doubling of costs.[Footnote 24] 

In addition, the cost estimates by DOE and the Alliance were prepared 
early in the project and, as a result, were based on conceptual designs 
for FutureGen, including power plant case studies and a blanket 10 
percent increase incorporated into the Alliance's estimate to allow for 
the first-of-a-kind nature of some of the plant's components and 
integration issues. However, neither estimate considered costs for 
specific types of technology or a specific location. If DOE had waited 
approximately 6 months for the Alliance's technology-specific and site- 
specific cost estimate, due by June 2008 as part of its preliminary 
design report, before deciding whether to restructure the program, it 
would have had the benefit of more current and complete information, 
including the latest information on escalating costs, when making 
decisions about how to move forward with FutureGen.[Footnote 25] In 
addition, regarding FutureGen's total cost, the March 2007 cooperative 
agreement stated that DOE and the Alliance recognized that many 
uncertainties--such as plant design, site selection, and market 
conditions--still existed in developing a firm cost estimate.[Footnote 
26] 

In May 2008, the Secretary of Energy testified before Congress that 
FutureGen was conceived as a $950 million venture and that its 
estimated cost had increased to roughly $1.8 billion; however, the 
Secretary's prepared statement did not indicate that the first estimate 
was in constant dollars, while the second was in current dollars. 
[Footnote 27] The Secretary also testified that DOE believed its costs 
would continue to escalate. We requested that DOE provide us with the 
analysis that supported DOE's anticipated escalation. In October 2008, 
DOE officials told us that the ongoing cost escalations were 
unprecedented and that they had looked internally across various 
indexes, including the Bureau of Labor Statistics, to get a sense of 
prospective escalation. However, they stated that they did not have any 
written or comprehensive analysis. They added that they did not prepare 
a position paper, study, or generate any analysis examining current or 
future escalation for the decision to restructure FutureGen. Moreover, 
economic forecasting organizations, such as DOE's Energy Information 
Administration, have found that significant cost escalations, such as 
those for building power plants over the past several years, do not 
typically continue in the long run.[Footnote 28] 

A Comprehensive Analysis Could Have Helped DOE Determine How the Costs, 
Benefits, and Risks of the Restructured FutureGen Compared with Those 
of Other Options: 

DOE did not prepare a comprehensive analysis comparing the relative 
costs, benefits, and risks of the original and restructured FutureGen 
programs before making the decision to replace the original program 
with the restructured FutureGen. On two different occasions, DOE 
officials told us that the agency did not prepare such an analysis. 
These officials told us that the Secretary of Energy's May 2008 
congressional testimony included the agency's official explanation for 
why it decided to restructure FutureGen. In September 2008, we asked 
DOE to provide us with additional information, including the agency's 
official position on why it decided to restructure FutureGen, all the 
factors upon which DOE based the decision, the extent to which the 
decision was based on documented supporting analysis, and a copy of any 
such analysis. In January 2009, after we sent a draft of this report to 
DOE for review and comment, DOE responded to our request for additional 
information, stating that the detailed analysis supporting its decision 
to restructure FutureGen could be found in the draft strategic planning 
document for the restructured program and that this document discussed 
the factors considered by DOE in making the decision to restructure 
FutureGen. However, as previously discussed in our findings, the draft 
strategic planning document was not completed in time to inform the 
decision to restructure FutureGen. In addition, we do not consider the 
draft strategic planning document to be comprehensive because it did 
not assess: 

1. whether costs for the original FutureGen would escalate 
substantially in the future; 

2. the relative costs, benefits, and risks for all of the types of 
plants for which the restructured FutureGen was eligible to receive 
proposals, such as conventional pulverized-coal and oxyfuel combustion 
plants, but only contemplated proposals for IGCC plants; 

3. the risk that industry respondents might not propose an IGCC plant 
for the restructured FutureGen; 

4. the risk that industry respondents might not propose enough viable 
projects for the restructured FutureGen; 

5. the costs, benefits, and risks of making incremental changes to the 
original FutureGen alongside the relative costs, benefits, and risks of 
the restructured FutureGen; and: 

6. any potential overlap between the restructured FutureGen and other 
DOE programs. 

A comprehensive analysis could have supported DOE's decision making in 
several ways. First, it could have helped DOE assess the risk that 
industry respondents to DOE's request for applications under the 
restructured FutureGen might not propose an IGCC plant. DOE received 
public comments indicating that such an outcome was possible because 
IGCC is not yet prevalent in the industry--only two commercial IGCC 
plants currently operate in the United States--and other technologies 
may provide better opportunities to meet the restructured program's 
requirements, among other reasons. Applying CCS at existing, 
conventional pulverized coal-fired plants is important because those 
plants comprise almost all operating coal-fired plants in the United 
States and abroad. However, according to DOE, IGCC plants integrated 
with CCS are important for reducing CO2 emissions in the future. Both 
DOE's press release announcing the restructured program and the updated 
draft strategic planning document, dated July 1, 2008, that DOE 
provided Congress indicated that the restructured program would include 
IGCC. The funding announcement for the restructured FutureGen 
highlighted the important contribution that an IGCC plant integrated 
with CCS would make toward the nation's energy needs, such as providing 
continued fuel diversity for generating electricity and mitigating 
dependence on more expensive and less secure sources of energy. As late 
as May 2008, the Secretary of Energy indicated in congressional 
testimony that the restructured program would likely include IGCC, 
stating that advances in technology and the market, in addition to 
regulatory uncertainty, would provide incentives for industry to begin 
deploying commercial-scale IGCC plants with CCS. 

In addition, a comprehensive analysis could have helped DOE assess the 
risk that industry respondents might not propose enough viable projects 
from which DOE could then assess and make multiple selections. Such an 
analysis could also have helped DOE assess whether the new cost-share 
arrangement would provide sufficient incentive for enough proposals to 
be selective. In the draft planning documents and press release 
announcing the restructured program, DOE stated that it restructured 
FutureGen, in part, because market conditions had changed in such a way 
that DOE could fund multiple industry projects and accomplish even more 
widespread commercialization of CCS and related information sharing 
across the industry than what would have been accomplished by the 
Alliance's consortium of 11 coal producers and electric power 
companies. However, DOE only received a small number of applications 
and some proposed projects were outside the restructured FutureGen's 
scope. As a result, widespread commercialization and information 
sharing seem less likely than under the original program. DOE also 
asserted that the restructured program would hasten the time frame for 
full-scale commercial operation of CCS. However, even if DOE accepts 
all applicable applications, the restructured program could implement 
CCS sooner than the original program at only a few commercial sites 
rather than, as stated before, on a more widespread and international 
scale. 

Finally, DOE also could have used a comprehensive analysis to help 
compare the relative costs, benefits, and risks of the restructured 
FutureGen with those of making incremental and other changes to the 
original program in order to control or offset costs. For example, 
prior to the decision to restructure FutureGen, FE identified and 
analyzed 13 options for changes to the original program, such as 
reducing the CO2 capture requirement, which aimed at reducing costs 
while continuing to retain some of the original program's key benefits. 
DOE noted that some of the potential changes would have a detrimental 
impact on the original program's objectives, while other potential 
changes would not significantly impact project objectives. Of these 
changes, FE either recommended or noted that DOE should be willing to 
consider several options with potential savings from $30 million to $55 
million each. Some of these scenarios were broached during negotiations 
with the Alliance in the fall of 2007. 

Conclusions: 

According to DOE, electric power industry, academic, and other 
officials and experts, for the foreseeable future, coal, which is 
abundant and relatively inexpensive, will remain a significant fuel for 
the generation of electric power in the United States and the world. 
However, coal-fired power plants are also a significant source of CO2 
and other emissions responsible for climate change. Hence, for at least 
the near-term, any government policies that seriously address climate 
change will need to have a goal of significantly reducing CO2 and other 
emissions from coal-fired power plants. CCS, while still in its 
infancy, can be a promising technology to achieve these purposes. By 
integrating IGCC and CCS technology at a living laboratory host 
facility, DOE's FutureGen program was intended to address significant 
technological, cost, and regulatory issues associated with the 
implementation of CCS at a new plant. However, in early 2008, citing 
concerns about a "doubling of costs," DOE abruptly canceled the 
original FutureGen program and announced a dramatic restructuring. The 
restructuring cast aside the initial concept and substituted a request 
for multiple projects to be proposed by industry that would retain the 
goal of capturing and sequestering 1 million metric tons of CO2, and 
would accept technologies other than IGCC. 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, there are already existing programs to address CCS at existing 
plants, and the decision to remove the FutureGen program's specific 
focus on cutting edge technology (IGCC) at new plants was not well 
explained. 

In at least two ways, DOE's decision, which affected potentially up to 
$1.3 billion in federal funding, was not well considered. First, the 
decision was made on the basis of a flawed comparison of life-cycle 
costs for the original FutureGen, in that DOE compared an estimate of 
constant dollars to an estimate of inflated dollars. Second, the 
decision was not based on a systematic and comprehensive comparison of 
the costs, benefits, and risks of the original FutureGen versus the 
restructured FutureGen. An expanded analysis of the costs, benefits, 
and risks of the original FutureGen compared with a range of 
modifications to the program could have included incremental changes to 
the original FutureGen program that could have preserved some of its 
original goals and benefits while mitigating costs. Such an analysis 
might also have detailed the risk that DOE would receive only a small 
number of applications and that those applications might not include 
IGCC. The analysis could also have considered whether DOE's $1.3 
billion contribution for total program funding presents the best option 
for advancing the overall goals of CCS in both existing and future 
plants. 

Recommendations for Executive Action: 

To help ensure that important decisions about the FutureGen program 
reflect an adequate knowledge of the potential costs, benefits, and 
risks of viable options, and to promote the attainment of the goals of 
the program while protecting taxpayer interests, we are making the 
following two recommendations to the Secretary of Energy: 

1. Before implementing significant changes to FutureGen or before 
obligating additional funds for such purposes, the Secretary of Energy 
should direct DOE staff to prepare a comprehensive analysis that 
compares the relative costs, benefits, and risks of a range of options 
that includes (1) the original FutureGen program, (2) incremental 
changes to the original program, and (3) the restructured FutureGen 
program. 

2. In addition, the Secretary should 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 implementing a combination of the options that 
have been evaluated. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of Energy for 
review and comment. DOE did not comment on the recommendations and 
conclusions of the report; however, it provided technical and 
clarifying comments, most of which we have incorporated, as 
appropriate. For example, we revised the report to reflect DOE's 
comment that it had reached its decision to restructure FutureGen, 
based on concerns about increasing costs associated with constructing 
the original FutureGen project and that it had attempted to negotiate a 
more favorable cost sharing agreement with the Alliance. However, DOE 
added that it had stopped those negotiations because it believed that 
the Alliance would not be able to financially partner with DOE to 
complete the project. We also revised the report to reflect information 
provided by DOE about the role of IGCC in the original and restructured 
FutureGen efforts, the type of knowledge likely to be disseminated by 
the original and restructured FutureGen efforts, and budget and 
appropriation data for FutureGen, beginning in fiscal year 2004. DOE's 
comments are reprinted in appendix III, along with our responses. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the Secretary of Energy, the DOE Office of the Inspector General, 
and interested congressional committees. This report also will be 
available at no charge at GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at (202) 512-3841 or gaffiganm@gao.gov. Contact points for 
our Office of Congressional Relations and our Office of Public Affairs 
may be found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix IV. 

Signed by: 

Mark Gaffigan: 
Director, Natural Resources and Environment: 

[End of section] 

Appendix I: Scope and Methodology: 

We examined (1) the goals of the original and restructured FutureGen 
programs, (2) the similarities and differences between the restructured 
FutureGen and other Department of Energy (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. 

To examine the goals of the original and restructured FutureGen 
programs, including the results of the different approaches for meeting 
these goals, we reviewed relevant appropriations and agency documents, 
including budget justifications from fiscal years 2005 through 2009; 
the program plan for FutureGen that DOE submitted to Congress in 2004; 
the cooperative agreement between DOE and the FutureGen Industrial 
Alliance (Alliance), and its subsequent renewals; DOE's draft strategic 
planning documents and funding announcement for the restructured 
program; and public responses to DOE's request for information about 
the restructured FutureGen and its funding announcement. We also 
reviewed congressional testimony about FutureGen and related topics by 
officials from the Alliance; DOE, including the Secretary of Energy; 
and other knowledgeable stakeholders, such as academic and industry 
researchers. In addition, we met with and reviewed documents provided 
by officials and researchers from DOE, the Alliance, industry, 
nonprofit research organizations, and academia. In particular, we 
interviewed DOE officials from the Office of Fossil Energy's (FE) 
National Energy Technology Laboratory (NETL) and Office of Clean Coal. 
Finally, we conducted semi-structured interviews with knowledgeable 
stakeholders from the electric power and coal industries, nonprofit 
research organizations, and academia, among others. During the 
interviews, we discussed the goals, approaches, and anticipated results 
of the original and restructured FutureGen programs. Our method for 
conducting these interviews, including how we selected the 
knowledgeable stakeholders, appears in the next paragraph. 

We conducted semi-structured interviews with 14 knowledgeable 
stakeholders from the electric power and coal industries, nonprofit 
research organizations, and academia, among others. We selected a 
nonprobability sample of stakeholders and stakeholder organizations 
using a "snowball sampling" technique, whereby each stakeholder we 
interviewed identified additional stakeholders and stakeholder 
organizations for us to contact.[Footnote 29] Specifically, we 
identified the first three stakeholders to interview from previous, 
related GAO work and a group of contributors toward key scientific 
assessments of climate change and clean coal technology.[Footnote 30] 
We then used feedback from these interviews to identify additional 
stakeholders to interview, and so on, being certain to interview every 
stakeholder or a knowledgeable official from every stakeholder 
organization identified by at least two other stakeholders. We also 
ensured that we selected stakeholders from electric power companies 
both within and outside the Alliance to obtain a range of industry 
perspectives. Over the course of our work, we conducted semi-structured 
interviews with knowledgeable stakeholders from the following 
organizations: American Electric Power, Carnegie Mellon University, the 
Coal Utilization Research Council, Duke Energy, Duke University, the 
Electric Power Research Institute, the Massachusetts Institute of 
Technology, the National Association of Regulatory Utility 
Commissioners, the National Mining Association, Resources for the 
Future, and Southern Company. We used a semi-structured interview guide 
to interview these stakeholders and facilitate analysis of what they 
identified as the key similarities, benefits, and differences between 
the original and restructured FutureGen programs, in addition to DOE's 
other carbon capture and storage (CCS) programs. These semi-structured 
interviews allowed us to obtain information addressing all three of our 
objectives. 

To examine the similarities and differences between the restructured 
FutureGen and other DOE CCS programs, we reviewed agency documents, 
including budget justifications from fiscal years 2005 through 2009; 
DOE's Carbon Sequestration Technology Roadmap and Program Plan; the 
program plan for FutureGen that DOE submitted to Congress in 2004; 
DOE's draft strategic planning documents and funding announcement for 
the restructured program; and relevant laws. We met with and discussed 
these programs with officials from NETL and FE's Office of Clean Coal. 
We also conducted semi-structured interviews with knowledgeable 
stakeholders from the electric power and coal industries, nonprofit 
research organizations, and academia, among others. During these 
interviews, we discussed the relationship between the restructured 
FutureGen and DOE's other CCS programs. Finally, we reviewed public 
responses to DOE's request for information about the restructured 
FutureGen and DOE's funding announcements for the restructured 
FutureGen and Round III of the Clean Coal Power Initiative. 

To examine the extent to which DOE used sufficient information to 
support its decision to restructure the FutureGen program, we reviewed 
documents from DOE and the Alliance, including cost estimates; the 
cooperative agreement and subsequent updates to it; letters, 
presentations, and proposals documenting the renegotiation of terms for 
the cooperative agreement; proposed incremental changes for controlling 
costs; and the draft strategic planning documents and funding 
announcement for the restructured program. We also reviewed 
congressional testimony about FutureGen and related topics by officials 
from the Alliance; DOE, including the Secretary of Energy; and other 
knowledgeable stakeholders, such as academic and industry researchers. 
We met with and discussed the information used to support the decision 
to restructure FutureGen with officials from NETL and FE's Office of 
Clean Coal. In addition, we discussed and reviewed analyses of the 
costs for building coal-fired, electric power plants with officials and 
researchers from industry, academia, and government, including DOE's 
Energy Information Administration. Moreover, we discussed these costs 
during semi-structured interviews with knowledgeable stakeholders from 
the electric power and coal industries, nonprofit research 
organizations, and academia, among others. We also reviewed public 
responses to DOE's request for information about the restructured 
FutureGen and its funding announcement. Finally, we reviewed our recent 
work and guidance on best practices for cost estimation, program 
management, and programmatic decision making, as well as guidance from 
DOE and the Office of Management and Budget. 

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. 

[End of section] 

Appendix II: Budget Authority and Obligations for FutureGen: 

Table 4: DOE Budget Authority and Obligations for FutureGen, Fiscal 
Years 2004 through 2008: 

Fiscal year: 2004; 
DOE budget authority for FutureGen: $9 million; 
Adjusted: DOE budgetary: resources: $8.64 million; 
DOE obligations for its cooperative agreement with the FutureGen 
Industrial Alliance: [Empty]; 
Remaining budgetary resources: [Empty]. 

Fiscal year: 2005; 
DOE budget authority for FutureGen: $18 million; 
Adjusted: DOE budgetary: resources: $17.26 million; 
DOE obligations for its cooperative agreement with the FutureGen 
Industrial Alliance: [Empty]; 
Remaining budgetary resources: [Empty]. 

Fiscal year: 2006; 
DOE budget authority for FutureGen: $18 million; 
Adjusted: DOE budgetary: resources: $17.33 million; 
DOE obligations for its cooperative agreement with the FutureGen 
Industrial Alliance: [Empty]; 
Remaining budgetary resources: [Empty]. 

Fiscal year: 2007; 
DOE budget authority for FutureGen: $54 million; 
Adjusted: DOE budgetary: resources: $52.50 million; 
DOE obligations for its cooperative agreement with the FutureGen 
Industrial Alliance: [Empty]; 
Remaining budgetary resources: [Empty]. 

Fiscal year: 2008; 
DOE budget authority for FutureGen: $75 million; 
Adjusted: DOE budgetary: resources: $74.32 million; 
DOE obligations for its cooperative agreement with the FutureGen 
Industrial Alliance: [Empty]; 
Remaining budgetary resources: [Empty]. 

Total: 
DOE budget authority for FutureGen: $174 million[A]; 
Adjusted: DOE budgetary: resources: $170.05 million[B]; 
DOE obligations for its cooperative agreement with the FutureGen 
Industrial Alliance: $39.11 million[C]; 
Remaining budgetary resources: $130.94 million[D,E]. 

Source: DOE. 

[A] All FutureGen budget authority was no-year authority, which means 
the authority is available for obligation for an indefinite time 
period. DOE has requested $156 million for FutureGen in its budget 
justification for fiscal year 2009. 

[B] According to DOE, the department adjusted its program budget for 
several factors. In fiscal years 2004 through 2008, the program's 
budget authority was adjusted for the Small Business Innovation 
Research program and/or the Small Business Technology Transfer program. 
Moreover, the FutureGen budget for fiscal years 2004 and 2005 also 
included the Interior and Omnibus reduction, and in fiscal years 2004 
and 2006, FutureGen's budget authority included a general rescission. 

[C] According to DOE, the agency has spent over $22 million on 
obligations for the original FutureGen, via its cooperative agreement 
with the FutureGen Industrial Alliance. In addition, DOE anticipates 
reserving an additional $2.5 million for final close-out costs related 
to these obligations pending invoicing from the Alliance. Depending on 
the actual amount of these final close-out costs, DOE estimates that it 
could deobligate approximately $14.5 million of its obligations for the 
original FutureGen, after which time these funds would be available for 
the restructured FutureGen. 

[D] According to DOE, the agency has additional obligations and 
expenditures for support contracts related to FutureGen that fall 
outside the scope of its cooperative agreement with the Alliance. The 
expenditures and remaining obligations for these contracts total 
approximately $7.8 million. 

[E] DOE officials told us that, after accounting for all anticipated 
expenditures on the original FutureGen, they expect the agency to have 
approximately $293 million available for the restructured FutureGen in 
unobligated balances of unexpired budget authority, brought forward 
from prior years (i.e., carryover), including the $156 million budget 
request for fiscal year 2009. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Energy: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

Department of Energy: 
Washington, DC 20585: 

February 4, 2009: 

Mr. Mark E. Gaffigan: 
Director: 
Natural Resources and Environment Team: 
U.S. Government Accountability Office: 
441 G Street, NW, Mail 2T23A: 
Washington, DC 20548: 

Dear Mr. Gaffigan: 

Thank you for the opportunity to review the Government Accountability 
Office (GAO) draft report entitled, "DOE's Decision to Restructure 
FutureGen Should Be Based on a Comprehensive Analysis of Costs, 
Benefits, and Risks" (GAO-09-248). Enclosed please find the U.S. 
Department of Energy's comments on the draft report. 

If you have any questions or comments please contact Mr. Jarad Daniels 
of my staff at (202) 485-7355. 

Sincerely, 

Signed by: 

Victor K. Der: 
Acting Assistant Secretary: 
Office of Fossil Energy: 

Enclosure: DOE Comments on Draft GAO Report: 

[End of letter] 

Department of Enemy Comments on GAO "DOE's Decision to Restructure 
FutureGen Should be Based on a Comprehensive Analysis of Costs, 
Benefits and Risks" (GAO-09-248) (GAO Draft Report): 

This responds to your request for comments by the Department of Energy 
on the above-referenced GAO Draft Report. 

1. The draft report uses inconsistent terminology to characterize the 
13 options for incremental changes developed by the Office of Fossil 
Energy. The summary page, page 9, and the discussion on page 27 make it 
appear that all 13 options were viable without jeopardizing the project 
objective. In reality, some of the 13 options were not considered 
viable or recommended by Fossil Energy and were rejected by the 
Department as a whole. [See comment 1. Now on pp.8 and 24.] 

At each of these locations (the summary page, last sentence of the 
third paragraph; page 9, the first full sentence; and page 27 second to 
last sentence of the first paragraph), DOE recommends GAO delete the 
number "13." Not all of the 13 options would have preserved the 
original project objectives nor were all recommended. Additionally on 
page 27, the last sentence of the first paragraph is incorrect and 
should either be deleted or the sentence should start with "Some of 
these options." 

The discussion on page 33 is more accurate in that it states that DOE 
considered some of the potential changes within the list of I3 to have 
a detrimental impact on the original project objectives and pursued the 
remaining changes during negotiations with the Alliance. To the extent 
GAO believes discussion of the FE options is appropriate, DOE 
recommends that the report consistently present the options as they are 
characterized on page 33. 

2. On page two, suggest that the last sentence of the carryover 
paragraph be changed to reflect that only Round III of the CCPI focused 
on carbon capture and sequestration and that selections have not yet 
been made. Suggested revision would read: 

For example, DOE's Clean Coal Power Initiative (CCPI) Round III Funding 
Opportunity Announcement will result in cost-shared partnerships with 
industry for projects that demonstrate carbon capture from coal-fired 
plants with sequestration or beneficial reuse. [See comment 2. Now on 
pp. 2, 17, and 18.] 

3. On page 3, in the first full paragraph, the draft report states: 

In December 2007, after DOE finished conducting the extensive 
environmental analyses required by the National Environmental Policy 
Act of 1969... of four potential sites that took over a year, the 
Alliance announced that it had selected Mattoon, Illinois, for the 
location of FutureGen. [See comment 3. Now on pp. 3 and 26] 

In order to accurately depict the context of activities at the time, 
the report text should be revised. The above-quoted sentence implies 
that DOE completed its NEPA responsibilities prior to the Alliance 
announcement of the Mattoon site, and that is not the case. For 
projects requiring an environmental impact statement, an agency's NEPA 
review culminates with a Record of Decision. DOE had not issued a 
Record of Decision at the time the Alliance, over the Department's 
objection, chose to announce its site selection. The chronology of 
activities set out in the Cooperative Agreement clearly provided for 
the issuance of a Record of Decision first. This context should be 
provided for in the text of the GAO report. 

4. On page 4, DOE recommends changing footnote 4 to read: 

In addition, for original FutureGen, costs for the initial planning and 
research stages were subject to a 20 percent nonfederal cost-share. 
[See comment 4. Now footnote 5.] 

As drafted by GAO, the footnote sentence applies to both the original 
and restructured approaches, but should only apply to the original 
FutureGen. For Restructured FutureGen, DOE mandated not less than 50 
percent private sector cost-share for all stages. 

Since Fiscal Year 2005, the requirements for cost sharing of the 
original FutureGen has been set out in statute: 

Provided further, That the initial planning and research stages of the 
FutureGen project shall include a matching requirement from non- 
Federal sources of at least 20 percent of the costs: Provided further, 
That any demonstration component of such project shall require a 
matching requirement from non-Federal sources of at least 50 percent of 
the costs of the component.... 

See, e.g., Pub. L. No. I08-447. 

5. On pages 6 and 18, the draft report suggests that the technology 
transfer potential was greater under the original FutureGen because the 
non-profit Alliance would own new inventions and was willing to share 
its knowledge industry-wide. GAO contrasts the original FutureGen with 
the Restructured program where GAO believes for-profit recipients would 
be more reluctant to disseminate information. In fact, the intellectual 
property policies and provisions for each effort are essentially the 
same. For both the original and Restructured program, most new 
inventions would likely be generated by for-profit subcontractor/ 
vendors supplying technology to the project. Ownership of these 
inventions would be granted to the subcontractors/vendors either by law 
for small businesses or nonprofits, or through a DOE patent waiver for 
large businesses. Inventions by the Alliance were far less likely since 
they were to have subcontracted for most technology development 
efforts. Furthermore, as with original FutureGen, DOE will require 
Restructured FutureGen recipients to disseminate the results of the 
project. Accordingly, the underlying assumptions for GAO's conclusions 
and comparisons about technology transfer potential are in part faulty. 
Please see DOE's comments on GAO's draft statement of facts. [See 
comment 5] 

In the same section on page 6, and in the first line on page 19, the 
draft reports states that the Alliance was comprised of utilities, 
mining companies, and "others. " To the best of DOE's knowledge, the 
Alliance was comprised only of utilities and mining companies both 
domestic and foreign. 

6. In the first line on page 8, CO2 should have a subscript rather than 
a superscript. [See comment 6] 

7. On page 13 in the first paragraph, the draft report states: 

On January 30, 2008, about a month after the Alliance announced that it 
had selected Mattoon, Illinois, for the site of the FutureGen plant, 
DOE announced that it had decided to take the FutureGen program in a 
different direction. [See comment 7. Now on pp. 3 and 26] 

We believe the statement set out above needs to be put in context. 
Prior to the announcement and without knowledge of the Alliance's 
choice of site, DOE asked the Alliance not to go forward with an 
announcement and further advised the Alliance that an announcement at 
that time was inadvisable in light of the ongoing DOE-Alliance 
discussions. 

By mid-2007, in part because of an overall climate of cost escalations 
for building power plants around the world, DOE managers had become 
increasingly concerned about actual and potential escalating costs for 
FutureGen, and DOE had signaled to the FutureGen Alliance that DOE had 
serious concerns about the sustainability of the project. During 
September 2007, DOE began negotiating with the Alliance to develop a 
mutually acceptable cost-sharing formula to deal with the prospect of 
further cost-growth. 

In December 2007, after analyzing four potential sites for the original 
FutureGen, the FutureGen Alliance announced that it had selected 
Mattoon, Illinois, for the location of the original FutureGen. The 
Alliance announced the site in advance to DOE's issuance of a record of 
decision (ROD) to complete DOE's review under the National 
Environmental Policy Act (NEPA) and contrary to DOE's advice. 
Announcement of the Alliance's selection of a site prior to the ROD was 
inconsistent with the schedule set out in the Cooperative Agreement. 

Only after months of unsuccessful negotiations with the FutureGen 
Alliance regarding cost sharing for cost growth did DOE announce, on 
January 30, 2008, that it would not proceed beyond the then current 
budget period with the FutureGen Alliance, and that it planned to take 
a different approach to FutureGen. DOE's rationale for this decision 
was based on DOE's interest in maximizing the role of private sector 
innovation, providing a ceiling on federal contributions, and 
accelerating and increasing the use of clean energy technologies to 
help meet the growing demand for energy while also mitigating 
greenhouse gas emissions. The selected location of the site had no 
bearing on DOE's determination. 

8. On page 16, the first sentence of the first full paragraph states: 

Both the original and restructured programs would operate plants at 
commercial size (about 300 megawatts). [See comment 8. Now on p. 14.] 

Under the restructured program, IGCC plants were expected to have a 
nominal capacity of 300 megawatts, but, as set out in the Funding 
Opportunity Announcement, non-IGCC projects needed only to be at a 
scale sufficient to prove commercial viability and be designed to 
produce and capture I million tons of C02 per year. 

9. On page 17, in Table 2, under original FutureGen, the word 
"includes" should be deleted in the first row since the original 
program was exclusively focused on IGCC. [See comment 9. Now on p. 15.] 

10. On page I9, DOE recommends GAO strike the words "in new inventions 
it would likely own" from the last sentence of the first paragraph. 
Inclusion of this phrase would actually limit the scope which can also 
more broadly include non-patentable technical data. [See comment 10] 

11. On page 21, the words "Round III" should be added after "Clean Coal 
Power Initiative" in the underlined heading since only the third round 
of CCPI has focused on carbon sequestration. [See comment 11. See 
comment 2. Now on pp. 2, 17, and 18] 

12. On page 25, change footnote "d" to read "DOE cost sharing is 
generally capped at 80 percent." Alternately, delete the first sentence 
of the footnote. [See comment 12. Now on p. 23.] 

13. On page 28, DOE recommends that GAO revise the first sentence of 
the last paragraph to read: 

Following this presentation, senior DOE officials directed FE to 
negotiate with the Alliance new cost sharing arrangements under the 
cooperative agreement, which was subject to a continuation decision in 
June 2008. [See comment 13. Now on p. 25.] 

14. On page 29, in the fourth to last sentence of the first full 
paragraph, DOE recommends that GAO replace the word "renewing" with 
"continuing" for technical accuracy. [See comment 14] 

15. On page 29, the second to last sentence of the first full 
paragraph, as currently drafted, erroneously suggests that DOE 
officials disapproved of the selection of Mattoon for the project site. 
The sentence implies that DOE's determination was influenced by the 
Alliance's selection of the Mattoon site, and that is not the case. 
Prior to the announcement and without knowledge of the Alliance's 
choice of site, DOE asked the Alliance not to go forward with an 
announcement and further advised the Alliance that an announcement was 
inadvisable. The selected location of the site had no bearing on DOE's 
determination to restructure the program. [See comment 15. Now on p. 
26.] 

DOE recommends that the second to last sentence of the first full 
paragraph be revised into two sentences as follows: 

DOE officials also stated that they disapproved of the Alliance's 
decision to announce the selection of a project site. Prior to the 
announcement and without knowledge of the Alliance's choice of site, 
DOE asked the Alliance not to go forward with an announcement and 
further advised the Alliance that an announcement was inadvisable. DOE 
had not issued its NEPA Record of Decision and was continuing its 
attempts to negotiate with the Alliance. 

16. On page 29, the sentence at the end of the first paragraph should 
be modified to make it clear that DOE lost confidence in the ability of 
the Alliance to fund its share of the project cost, rather than 
confidence in the Alliance member companies or their representatives. 
[See comment 16. Now on p. 26.] 

17. On page 32, the third to last sentence of the first paragraph 
suggests that the draft strategic planning document was developed in 
July 2008, and that is not correct. The document was transmitted to 
Congress in response to a document request in July of 2008. In 
addition, we would also like to clarify a point regarding DOE's 
position on the role of CCS, including IGCC with CCS, in reducing CO2 
in the future. Therefore the sentence should be changed to read as 
follows: 

However, according to DOE, plants with CCS, including those with IGCC 
integrated with CCS, are important options for reducing C02 emissions 
in the future, and DOE's press release announcing the restructured 
program and the draft strategic planning document that DOE provided to 
Congress in July 2008 indicated that the restructured program would 
include IGCC. [See comment 17. Now on p. 29.] 

18. On page 32, footnote 30 and on page 40, table II.2 footnotes b and 
c, the draft report states: "DOE had not yet provided" the information 
or response that GAO had requested. As of the date of these comments, 
DOE understands that it has either already provided the relevant 
documentation, and has referred GAO back to those documents, or has 
since provided the documentation. DOE understands that all information 
has been provided. [See comment 18. Now on pp. 28, 29, and 38.] 

19. On page 40, we noticed several errors in the Tables contained in 
Appendix II. Table II.1. [See comment 19. Now on p. 38.] 

The correct FutureGen appropriations for Fiscal Year 2004 through 2008 
are as follows: 

2004: $9,000,000: 
2005: $18,000,000: 
2006: $18,000,000: 
2007: $54,000,000: 
Total: $174,000,000: 

These above-stated amounts are not yet adjusted for rescissions or the 
SBIR/STTR offset. Hence, the actual amount available to DOE for 
FutureGen, as depicted in Table II.2, is less than $174,000,000. Under 
the "Appropriated" column in Table II.1, the Fiscal Year 2007 amount 
should be changed from $18,000,000 to $54,000,000. The total should be 
changed accordingly. Under the heading "Directed" in Table II.1, the 
Fiscal Year 2007 amount of $257,000,000 should be deleted as this was 
deferred budget authority under the Clean Coal Technology Program that 
was not made available to the Department for FutureGen. The last column 
should be updated to reflect the changes in the first two columns. 

Table II.2: 

The calculations for the Fiscal Year 2006 Budget are as follows: 

Appropriation Act: $18,000,000: 
General Rescission 1%: (180,000): 
SBIR Assessment: (441,000): 
STTR Assessment: (53,000): 
FY-2006 Available: $17,326,000. 

The Fiscal Year 2006 amount in Table II.2 should be changed from 
$17,820,000 to $I7,326,000 and the Total changed to $170,045,000. 

The following are GAO's comments on the Department of Energy's letter 
dated February 4, 2009. 

GAO's Comments: 

1. We modified our report to address DOE's concerns about our 
discussion of the 13 options for incremental changes. 

2. We modified our report to add clarifying information on Round III of 
the Clean Coal Power Initiative. 

3. We added clarifying information about the timing of the site 
selection announcement and the release of DOE's NEPA Record of 
Decision. 

4. We revised the footnote to state that, according to DOE, not less 
than a 50 percent nonfederal cost share will be required for all of the 
restructured FutureGen's stages. 

5. We have revised the report to remove the referenced discussion. 

6. We made DOE's editorial correction. 

7. The report does not state or imply that the location of the site was 
the reason for the program's restructuring, but rather states that 
DOE's restructuring decision was based on a desire to contain costs in 
a time of increasing cost pressures. However, we revised the report to 
clarify that the Alliance announced its site selection decision before 
DOE's Record of Decision was released--which has not happened, as of 
the date of this report. 

8. DOE clarifies that under the restructured program, IGCC plants are 
expected to have a nominal capacity of 300 megawatts, but non-IGCC 
projects need only be at a scale sufficient to prove commercial 
viability and be designed to produce and capture 1 million tons of CO2 
per year. We revised the report to reflect this information. 

9. As suggested by DOE, we revised table 2 to reflect that the original 
FutureGen program focused exclusively on IGCC. 

10. As indicated in our response to comment 5, we have revised the 
report to remove the referenced text. 

11. We made appropriate revisions to the report to reflect that Round 
III of the Clean Coal Power Initiative focuses on carbon sequestration. 

12. We revised table note "d" to table 3, to state that DOE's cost 
sharing is generally capped at 80 percent. 

13. We revised the report to clarify that senior DOE officials directed 
FE to negotiate new cost sharing arrangements under the cooperative 
agreement with the Alliance. 

14. We revised the report to use the word "continue" in place of 
"renew" wherever it would more accurately reflect the various stages of 
the cooperative agreement. 

15. Our draft report did not insinuate or state that DOE did not favor 
the Mattoon, Illinois, site or that DOE's restructuring decision was 
based on a disapproval of the Alliance's site selection announcement. 
Rather, our report states that DOE's decision was based on a desire to 
limit its exposure to increased costs. However, as suggested by DOE, we 
clarified the report by adding that DOE had instructed the Alliance to 
not announce the site selection before DOE could release the Record of 
Decision. 

16. We agree with DOE and revised the report to clarify that DOE lost 
confidence in the ability of the Alliance to fund its share of the 
project cost, rather than that DOE lost confidence in the Alliance 
members or their representatives. 

17. We revised the report to clarify that both DOE's press release 
announcing the restructured program and the updated draft strategic 
document, dated July 1, 2008, that DOE provided Congress indicated that 
the restructured program would include IGCC. 

18. DOE provided information regarding the official basis for 
restructuring the FutureGen program and its budget authority, 
obligations, and expenditures that we incorporated into our report, 
including table 4 and its table notes. We also included in the report 
an additional assessment of documents, to which DOE referred as 
providing the basis for its decision to restructure FutureGen. 

19. Regarding the tables in appendix II of the draft report, DOE 
provided updated FutureGen appropriations information for fiscal years 
2004 and 2007 and certain calculations for the fiscal year 2006 
FutureGen budget. In response, we merged tables 4 and 5 from the draft 
to create one table in the final report, and we adjusted the figures 
and calculations for the data that DOE provided. 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Mark Gaffigan, (202) 512-3841 or gaffiganm@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Ernie Hazera (Assistant 
Director), Nancy Crothers, Cindy Gilbert, Chad M. Gorman, Angela Miles, 
Karen Richey, Michael Sagalow, and Jeanette M. Soares made key 
contributions to this report. Harold Brumm, Jr., and Timothy Persons 
also made important contributions. 

[End of section] 

Footnotes: 

[1] 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. 

[2] Pub. L. No. 91-190 (1970). Under the act, federal agencies must 
evaluate the likely environmental effects of their activities using an 
environmental assessment or, if the activity likely would significantly 
affect the environment, a more detailed environmental impact statement. 

[3] The cooperative agreement originally scheduled the final site 
announcement to take place on September 4, 2007, contingent upon DOE's 
August 1, 2007, publication of the Record of Decision. On November 9, 
2007, DOE issued a press release announcing the completion of its final 
environmental impact statement for FutureGen and that DOE anticipated 
site selection would be made later that year. 

[4] Pub. L. No. 109-58 (2005), codified at 42 U.S.C. § 16352. 

[5] In addition, beginning in fiscal year 2005, costs for the initial 
planning and research stages were subject to a 20 percent nonfederal 
cost share. According to DOE, for the restructured FutureGen, not less 
than a 50 percent nonfederal cost-share for all stages will be 
required. 

[6] 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 
general. 

[7] GAO, Defense Acquisition: Termination Costs Are Generally Not a 
Compelling Reason to Continue Programs or Contracts That Otherwise 
Warrant Ending, [hyperlink, http://www.gao.gov/products/GAO-08-379] 
(Washington, D.C.: Mar. 14, 2008); Cost Assessment Guide: Best 
Practices for Estimating and Managing Program Costs--Exposure Draft, 
[hyperlink, http://www.gao.gov/products/GAO-07-1134SP] (Washington, 
D.C.: July 2, 2007); Standards for Internal Control in the Federal 
Government, [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: Nov. 1, 1999); and Executive Guide: Leading 
Practices in Capital Decision-Making, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-99-32] (Washington, D.C.: Dec. 1, 
1998). 

[8] The International Energy Agency identifies CCS and other clean coal 
technologies as one of the most promising routes for mitigating 
emissions and notes that, "CCS could reconcile continued coal burning 
with the need to cut emissions in the longer term." Similarly, the IPCC 
notes that CCS would help preserve existing energy infrastructure, 
thereby restraining the cost of emissions reductions. 

[9] Regardless of the approach used to generate electricity and capture 
CO2, additional electricity, often referred to as the energy penalty or 
parasitic power, is required for capture and compression. 

[10] ICGG plants can be either air-blown or oxygen-blown, referring to 
the way in which oxygen is introduced into the gasifier. The syngas 
produced in an air-blown gasifier consists primarily of inert nitrogen, 
along with hydrogen, carbon monoxide, low levels of CO2, and water 
vapor. In oxygen-blown gasification, the syngas is comprised of the 
same primary components, but has very little nitrogen and is, 
therefore, more concentrated in respect to the other components. 

[11] GAO, Climate Change: Federal Actions Will Greatly Affect the 
Viability of Carbon Capture and Storage As a Key Mitigation Option, 
[hyperlink, http://www.gao.gov/products/GAO-08-1080] (Washington, D.C.: 
Sept. 30, 2008). 

[12] The Alliance is currently comprised of the following 11 companies 
that produce coal or generate coal-fueled power on six continents: 
American Electric Power, Anglo American LLC, BHP Billiton, China 
Huaneng Group, CONSOL Energy Inc., E.ON U.S., Foundation Coal 
Corporation, Peabody Energy, Rio Tinto Energy America, Southern 
Company, and Xstrata Coal Pty Limited. The Alliance membership 
continues to be open to U.S. and international companies that produce 
coal or electricity from coal as a significant business activity. 

[13] In 2006 and 2007, DOE received funding contributions for FutureGen 
from the governments of India and South Korea. 

[14] According to DOE, if a non-IGCC plant is selected under the 
restructured FutureGen, it is only required to be at a scale sufficient 
to prove commercial viability and be designed to produce and capture 1 
million tons of CO2 per year. IGCC plants would be required to produce 
at least 300 megawatts of gross electricity output. 

[15] [hyperlink, http://www.gao.gov/products/GAO-08-1080]. 

[16] While the first two rounds of CCPI did not focus on CCS, Round III 
does so through projects that capture and store CO2 or put CO2 to 
beneficial reuse. Round I was broadly focused on advancing technologies 
in coal-fired power generation that would result in efficiency, as well 
as environmental and economic improvements. Round II was focused on 
gasification technology and mercury control. 

[17] According to DOE, most oil is produced in three distinct phases: 
primary, secondary, and tertiary, or enhanced oil recovery (EOR). The 
definition of tertiary or EOR is that a substance, such as CO2, is 
added to the reservoir after secondary recovery in order to increase 
production. The purpose of EOR is to increase oil production, primarily 
through an increase in temperature, pressure, or an enhancement of the 
oil's ability to flow through the reservoir. 

[18] We reported in [hyperlink, 
http://www.gao.gov/products/GAO-08-1080] that the regional partnerships 
program appears to be placing more emphasis on demonstrations of CO2 
capture at coal-fired power plants. Specifically, a DOE official 
identified three projects being planned to capture CO2 from coal-fired 
power plants, including possibly capturing 500,000 metric tons of CO2 
from a coal- fired power plant in North Dakota. Program shifts were 
also evident in the Innovations for Existing Plants and CCPI programs. 
We recommended that DOE continue its recent budgetary practice of 
helping to ensure that greater emphasis is placed on supporting 
technologies that can reduce greenhouse gas emissions at existing coal-
fired power plants. 

[19] Phase I of the regional partnerships, the Characterization Phase 
(2003-2005), focused on describing the potential for CO2 storage in 
deep oil-, gas-, coal-, and saline-bearing formations. Phase II, the 
Validation Phase (2005-2009), is implementing 25 small-scale geologic 
storage tests. Phase III, the Deployment Phase (2008-2017), is a 
continuation of the Phase II small-scale tests, but at a much larger 
scale. 

[20] In response to language in the Explanatory Statement accompanying 
its fiscal year 2008 appropriation, DOE has shifted the focus of the 
Innovations for Existing Plants program to research and development on 
CO2 capture technologies that can be retrofitted to existing pulverized 
coal-fired power plants. 

[21] Federal loan guarantee programs help borrowers obtain access to 
credit with more favorable terms than they may otherwise obtain in 
private lending markets because the federal government guarantees to 
pay lenders if the borrowers default, which makes extending credit more 
attractive to lenders. 

[22] GAO, Department of Energy: New Loan Guarantee Program Should 
Complete Activities Necessary for Effective and Accountable Program 
Management, [hyperlink, http://www.gao.gov/products/GAO-08-750] 
(Washington, D.C.: July 7, 2008). 

[23] The Alliance estimate was $1.785 billion, in current dollars, from 
2005 through 2017. 

[24] We selected constant fiscal year 2005 dollars for illustrative 
purposes. However, our review of DOE's documentation pertaining to its 
$950 million cost estimate for the original FutureGen shows that DOE 
considered base year constant dollars for the estimate from several 
years, ranging from late quarter 2003 dollars, to fiscal year 2004 
dollars, and fiscal year 2005 dollars. We asked DOE to confirm the base 
year for its cost estimate, and department officials responded that 
several versions of the estimate had been prepared using fiscal year 
2003 and fiscal year 2004 dollars. When we pointed out the existence of 
an additional estimate in fiscal year 2005 dollars, DOE officials 
informed us that they would clarify which constant year dollars DOE had 
used. However, as of January, 2009, DOE had not yet fully clarified 
this information for us. 

[25] The Alliance has decided to continue preparing the preliminary 
cost estimate, and it anticipates completing and releasing the estimate 
by early 2009. 

[26] The cooperative agreement also stated that DOE and the Alliance 
agreed in principle to, ultimately, cap DOE's share of costs at $700 
million in constant 2004 dollars--approximately 74 percent of DOE's 
cost estimate--and it required the Alliance to develop, by June 2008, a 
proposal for the terms of such a cap. The cap was to be adjusted for 
unanticipated cost escalation upon each scheduled renewal or 
continuation of the cooperative agreement, based on a suitable index of 
actual costs negotiated by DOE and the Alliance. 

[27] U.S. Senate. Committee on Appropriations, Testimony of Samuel W. 
Bodman, Secretary of Energy, U.S. Department of Energy, before the 
Subcommittee on Energy and Water Development, May 8, 2008. 

[28] These findings are for building power plants, in general, and do 
not specifically address FutureGen. 

[29] The information gathered from these semi-structured interviews 
cannot be used to generalize findings to, or make inferences about, the 
entire population of knowledgeable stakeholders on FutureGen and clean 
coal technology. Although the sample provides some variety, it is 
unlikely to capture the full variability of knowledgeable stakeholders 
and it cannot provide comprehensive insight into the views of any one 
group of knowledgeable stakeholders. This is because, in a 
nonprobability sample, some elements of the population being 
interviewed have no chance, or an unknown chance, of being selected as 
part of the sample. However, the information gathered during these semi-
structured interviews allows us to discuss various stakeholder views on 
FutureGen and clean coal technology, and it provides important context 
overall. It also helps us interpret the documentation and testimonial 
evidence we have collected. 

[30] Massachusetts Institute of Technology, The Future of Coal: Options 
for a Carbon-Constrained World (Cambridge, MA, 2007) and IPCC, IPCC 
Special Report on Carbon Dioxide Capture and Storage (Montreal, Canada, 
Sept. 2005). 

[End of section] 

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