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					                                                            Govern m ent R elat i ons                     tel   1.202.785.3756

                                                            1828 L St reet NW, Suit e 906                 fax   1.202.429.9417

                                                            Wa sh in gt on, DC                            www.asme.org

                                                            20036 -5104          U. S. A.


To:                 ASME Energy Committee (EnComm)
From:               Robert Rains, Sr. Government Relations Representative
Subject:            Energy Public Policy Report
Date:               November 1, 2011

The Deficit Panel Deadline looms as does the Federal Budget

The fifth public session of the Joint Committee on Deficit Reduction will take place this week. The Panel
will receive testimony from former-Sen. Alan Simpson (R-Wyo.) and former White House Chief of Staff
Erskine Bowles, as well as former-Federal Reserve Vice Chairman Alice Rivlin, and former Senate Budget
Chairman Pete Domenici (R-NM).

The Congressional Deficit Panel has a hard deadline of November 23, the week of Thanksgiving, to report
its recommendations to Congress with at least $1.2 trillion in savings.1 Some interest groups, including the
U.S. Chamber of Commerce are demanding steeper cuts. Recently, it was revealed that the Democratic
side proposed a $3 trillion budget cut over the next decade which would seek to balance spending cuts with
revenue raisers (tax increases), but would leave Medicare and Social Security alone. According to news
reports, this was not acceptable to House Speaker John Boehner, leaving the Committee at a slight
impasse for the time being.

Meanwhile, the federal government continues to operate on a Continuing Resolution (CR) until November
18; the week before Thanksgiving that likely portends another short-term CR giving lawmakers a buffer in
which to further negotiate regarding the budget.

The Democratic plan included nearly $1.3 trillion in new revenues, while the Republican plan recommended
less than $800 billion. Both proposals were panned by their opponents almost immediately.2

Energy and Water Appropriations Bill

Budget negotiations for the fiscal year 2012 (FY12) are still at a slight impasse; leading to Senate Majority
Leader Harry Reid (D-NV) to release plans for a second “minibus” budget bill. Senate Appropriations
Energy and Water Subcommittee Chair Dianne Feinstein (D-CA) was unconvinced at a hearing in early
September that funding for small modular reactors (SMRs) should be included as part of this fiscal year.
Ranking Member Lamar Alexander (R-TN) continues to support the inclusion of this technology as part of
the current fiscal year budget. The House Energy and Water Appropriations bill included almost $100
million to support SMRs.



1   Leaders Focus on Finding Broad Deal http://www.cq.com/doc/news-3971770

2Deficit Panel Still Has Long Way to Go http://www.rollcall.com/issues/57_50/deficit_committee_still_has_long_way_to_go-
209879-1.html?pos=hln
The Senate Appropriations Committee approved an Energy-Water bill in September with $31.6 billion in
discretionary spending for the Department of Energy, the Army Corps of Engineers and water programs at
the Interior Department.3 If Energy and Water, a traditionally uncontroversial spending measure, is passed
then conferees will be named and lawmakers will begin negotiating a final version of the bill.

Interior Shakeup for OSM and BLM

Interior Secretary Ken Salazar announced recently his plans to consolidate the Office of Surface Mining
(OSM) into the Bureau of Land Management (BLM). In a speech to Interior Department workers last week,
Salazar said the mining regulator would remain an "independent entity" with a Senate-confirmed leader.
The merger, he said, would comply with the 1977 Surface Mining Control and Reclamation Act.4

The two agencies have separate mandates and serve regionally diverse constituencies. BLM is in charge
of managing some 250 million acres of mostly Western lands, while OSM is a strictly regulatory agency that
oversees coal mining, mostly through state programs.

The realignment will focus on integrating four key areas shared between the two offices:

            Administrative support functions. This includes human resources management, budget and
            communications, among others.
            Restoration of abandoned mine lands.
            Fee Collections. Integrating OSM's coal fee collection under the umbrella of a special office for
            natural resources revenue, which already handles BLM's fee collection.
            Mining regulation, inspection and enforcement.5

Some activist groups consider the timing to be suspicious, given the Super Committee’s looming deadline
for fiscal recommendations of November 23, and some are even arguing that the decision is not within the
law.6 The realignment is supposed to take effect December 1.

Another DOE Loan Guarantee goes belly up

Massachusetts-based Beacon Power Corp. filed for Chapter 11 protection in federal bankruptcy court
recently, just 14 months after receiving a $43 million loan guarantee from DOE to help produce technology
that prevents energy grid power surges. Beacon previously filed for a $23 million grant for DOE.7 Beacon

32. APPROPRIATIONS:
Senate to take up energy-water spending bill http://www.eenews.net/eenewspm/2011/10/31/2
46. COAL:
Watchdogs suspicious of planned merger of mining agency, BLM http://www.eenews.net/Greenwire/2011/10/31/6
5   Interior plans merge for mine regulations office http://www.federalnewsradio.com/?nid=486&sid=2609223
6   Id.
71. RENEWABLE ENERGY:
New bankruptcy filing by DOE loan recipient adds fuel to GOP's ire http://www.eenews.net/Greenwire/2011/10/31/1
was also lauded by the Obama Administration, specifically Energy Secretary Steven Chu, for their work in
developing fly-wheel energy storage concept.

The flywheel energy storage system worked by accelerating a rotor, or flywheel, to a very high speed and
then maintaining the energy within the system. The energy was then converted back by slowing the rotor
when the energy was needed. Although the business model in its current form failed, the technology still
draws high praise from not just the Department of Energy (DOE) but also from the Federal Energy
Regulatory Commission (FERC) and may reemerge within another company at the completion of the
bankruptcy.8 The New York-based plant will continue to operate throughout the bankruptcy and likely be
sold to help satisfy Beacon’s debts.9

The Solyndra woes continue after numerous hearings have already been held, the House Energy and
Commerce Committee has announced fresh plans to subpoena more documents from the Obama
Administration regarding the $535 million in loan guarantees extended to the now-defunct solar company.
Solyndra at one point was given permission to shuffle around $75 million, partially from its loan guarantee,
in an effort to drum up additional capital to pay back private investors ahead of the government. 10

The Energy and Commerce Investigations Subcommittee, led by Rep. Cliff Stearns (R-FL) is seeking to
prove that politics played a role in the securing of the loans for Solyndra. The investigation has not
identified such a connection yet, however, it has still been a black eye for the Administration, as well as
somewhat of a referendum on the efficacy of the “American Recovery and Reinvestment Act.” In fact,
many of the internal emails already received by the Energy and Commerce Committee paint that there was
much discussion, and disagreement, about extending a second loan to Solyndra.11 The Administration is
eager to get their side of the story out; and Secretary Chu has agreed to testify before the Energy and
Commerce Committee on November 17 about the LGP, and the circumstances surrounding the Solyndra
loans.12

The Administration will also likely continue to identify the differences between the Beacon loan and the
Solyndra loans, for better or worse. This past week, Obama Administration Chief of Staff William Daley
announced that the government's entire energy loan portfolio will be reviewed by Herbert Allison, who
previously oversaw the Troubled Asset Relief Program in the Treasury Department, the Associated Press
reports. Allison was directed to report back to the Administration with recommendations in 60 days. 13



8   Id.
9   Second green flop stokes controversy http://thehill.com/blogs/e2-wire/e2-wire/190915-second-green-flop-stokes-controversy

10 Second Clean-Energy Company Failure Fuels Criticism of Loan Program
http://www.cq.com/alertmatch/144474306
11
     Id.

12   Chu to testify before House panel on Nov. 17 http://www.eenews.net/EEDaily/2011/10/28/2
13 Obama's energy loan review may rope in electric-car makers
http://content.usatoday.com/communities/driveon/post/2011/10/obamas-energy-loan-review-may-rope-in-electric-car-makers/1
Allison will review all three Energy Department loan guarantee programs, totaling about $36 billion. The
program that supported Solyndra no longer makes new guarantees because funding for it expired Sept. 30.
The department said it would work with Allison and heed his findings.14

Loan guarantees have always been a controversial measure.

Approved as part of the Energy Policy Act (EPAct) (P.L. 109-58), the loan guarantee program (LGP) was
not funded until the “American Recovery and Reinvestment Act” (P.L. 111-5) at $6 billion. Officially, the
program is authorized under Title XVII of the 2005 energy law. It set asides loan thresholds of $18.5 billion
for renewables, known as 1705, and nuclear or fossil projects, known as 1703. There is also a separate
pot of money for clean-car projects.15

DOE's 1705 program, which ceased issuing new loan guarantees at the end of the previous fiscal year,
currently has a portfolio of 28 projects worth $16 billion. Under 1703, DOE has approved four conditional
loans worth $10.6 billion.16

Since then, the LGP has come under fire by lawmakers who oppose the program’s philosophy, watchdog
groups who have criticized how the program functions, and even targeted for rescission by lawmakers
seeking to inject funds into other priorities.

Loan guarantees, particularly for emerging economic areas like energy, are far from certain, and, according
to critics, the government simply should not be in this business. While programs such as the Defense
Advanced Research Projects Agency (DARPA), or the newer Advanced Research Projects Agency-Energy
(ARPA-E) have been upfront about the high risk of failure associated with their programs; the LGP was sold
from the beginning as something that would only cost money if the company that received the loan went
through bankruptcy.

Now that has happened twice, and because of the size of the loans, the scrutiny is greater. There are other
programs within the federal government, many in fact, that extend varying types of grants, or loans, to
businesses with promising, albeit risky concepts. Indeed, the notion of public-private partnerships
continues to be a popular model for lawmakers to create within as they seek to identify ways to forestall
another recession. Earmarks are also another historical source of direct funding for companies, which until
recently, were championed by lawmakers as valuable work on behalf of their districts.

Sen. Hatch faces scrutiny over Raser Technologies

Sen. Orrin Hatch (R-UT), who is facing a potentially-difficult reelection in his state next year, has recently
come under fire for his unabashed support for a company located in Utah, Raser Technologies, which
recently filed for bankruptcy protection. Sen. Hatch has been particularly tough on the Administration since
the Solyndra bankruptcy was announced, and has not shied away from suggesting that politics may have

14White House to scrutinize Energy Department loan guarantees http://www.latimes.com/business/la-fi-white-house-solyndra-
20111029,0,6267461.story
151. DOE:
Shutting down loan guarantee programs easier said than done http://www.eenews.net/EEDaily/2011/10/28/1

16
     Id.
played a role in Solyndra securing their loan from the LGP. USA Today also reported that Sen. Hatch
fought for Raser to receive a $20 million loan guarantee.17 Raser applied for a loan with the LGP but was
apparently rejected. Instead, Raser Technologies was awarded a $33 million Treasury Department grant in
2010 for construction of a geothermal plant located in Utah, in part, from the support by Sen. Hatch.18 The
Treasury Department grant was then used to pay some of the company's debts, according to a Raser filing
with the SEC.19

With the economy still in a weakened position, and a looming trade war with the Chinese over energy
technologies, a difficult environment greets many energy entrepreneurs and companies seeking to secure
their financial footing. If anything, this story underscores the bipartisan belief among many representatives
and senators to aid new businesses, and industries in districts and states across the country from their
privileged positions.

Biofuels and CAFE standards discussion heats up in Congress

This week the House Science, Space, and Technology (SS&T) Committee will hold a hearing looking at
fuel standards.20 Energy and Environment Subcommittee Chairman Andy Harris (R-Md.) has been critical
of the administration's efforts to increase the ethanol blend in gasoline, part of the national renewable fuel
standards (RFS), saying the proposed E15 standard could be harmful to consumers.

Passed by Congress in 2005 and amended in 2007, the RFS requires that 36 billion gallons of fuel come
from alternative sources: 16 billion from cellulosic biofuels, 15 billion from conventional or corn-grain
ethanol, 4 billion from advanced renewable biofuels and 1 billion from biomass-based diesel.21 Cellulosic
ethanol has not successfully been scaled up from the laboratory level to commercial use; forcing the
Environmental Protection Agency (EPA) to continually pare back the fuel’s national requirements. A recent
report issued by the National Research Council states that cellulosic production is at 6.6 million gallons per
year this year, far below the RFS target of 250 million gallons for 2011.22

Turning to fuel efficiency, House Government Reform Committee Chair Darrell Issa (R-CA) also recently
held a hearing in order to examine the Administration’s plan to raise fuel economy standards to 54.5 miles-
per-gallon by 2020. A few weeks ago a hearing was held where the Committee accepted testimony from



17GOP's Hatch urged $20M in earmarks for bankrupt clean energy firm http://www.usatoday.com/news/washington/story/2011-10-28/hatch-solyndra-cyrq-
energy/50985576/1

18  Failed energy projects cross U.S. party lines http://www.usatoday.com/money/industries/energy/story/2011-10-13/failed-energy-projects-cross-party-
lines/50760182/1

19   Id.
20   Science panel to consider consequences of federal standards http://www.eenews.net/EEDaily/2011/10/31/11
213. BIOFUELS:
Study raises questions about RFS impacts, goals http://www.eenews.net/Greenwire/2011/10/04/archive/3

22Cellulosic Ethanol Production Far Behind Renewable Fuel Standard http://www.ens-newswire.com/ens/oct2011/2011-10-11-
093.html
National Highway and Transit Safety Administration (NHTSA) administrator David Strickland, who defended
the policy.23

The hearing will focus on the "conflicts and unintended consequences of motor fuel standards." On hand
will be several officials from the gas industry, including the American Petroleum Institute and the National
Petrochemical and Refiners Association, to discuss the impact of fuel standards.

Today, ethanol is the most commonly produced biofuel in the United States. In 2010, the nation produced
13.2 billion gallons of ethanol, the vast majority of which came from corn.24 Cellulosic ethanol has not
moved beyond the laboratory stage to overtake corn-based ethanol in scale and production. Currently, the
U.S. consumes almost 19 million barrels of oil per day.

In July, the Administration announced plans to raise corporate average fuel economy standards (CAFE) to
54.5 miles-per-gallon (MPG) by 2020.25 A final proposal on the so-called CAFE standards was due in late
September, but officials delayed the unveiling in an attempt to address expected consumer and industry
concerns.26

Concerns regarding cost and safety have also recently been raised. In a letter to President Obama in July,
before the negotiations concluded, Michigan lawmakers cited estimates by the Center for Automotive
Research that “overly stringent standards would cost approximately 260,000 jobs and add $10,000 to the
cost of a new vehicle.” 27




23   Head of Transportation Safety Board Defends Planned Fuel Efficiency Rules http://www.cq.com/doc/news-3960942
24   GAO: Challenges to the Transportation, Sale, and Use of Intermediate Ethanol Blends http://www.cq.com/pdf/govdoc-3903683
25 President Obama Announces New Fuel Economy Standards
http://www.whitehouse.gov/blog/2011/07/29/president-obama-announces-new-fuel-economy-standards

26   Auto Dealers Still Trying to Alter Process for New Fuel Economy Standards http://www.cq.com/doc/news-3971614

27 Head of Transportation Safety Board Defends Planned Fuel Efficiency Rules
http://www.cq.com/doc/news-3960942

				
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