[Senate Hearing 111-478]
[From the U.S. Government Publishing Office]
S. Hrg. 111-478
AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
TO
EXAMINE THE DEPARTMENT OF ENERGY'S IMPLEMENTATION OF PROGRAMS
AUTHORIZED AND FUNDED UNDER THE AMERICAN RECOVERY AND REINVESTMENT ACT
OF 2009
__________
MARCH 4, 2010
Printed for the use of the
Committee on Energy and Natural Resources
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Washington, DC 20402-0001
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Dalton, Patricia, Managing Director, Natural Resources and
Environment, Government Accountability Office.................. 11
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
Nellenbach, Michele, Director, Natural Resources Committee,
National Governors Association................................. 20
Rogers, Matthew, Senior Advisor to the Secretary for Recovery Act
Implementation, Department of Energy........................... 4
Woolf, Malcolm, Director, Maryland Energy Administration, and
Vice Chair, National Association of State Energy Officials,
Annapolis, MD.................................................. 26
APPENDIX
Responses to additional questions................................ 55
AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
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THURSDAY, MARCH 4, 2010
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK, why don't we get started. Thank you all
for being here.
The purpose of this hearing is to focus on the progress
that the Department of Energy has made in implementing the
Recovery Act in the year that has elapsed since it was passed.
This is an important effort, both to create high quality jobs
in the near term and also to begin to reverse the course that
we've been on of under investing in our country's
competitiveness in clean energy technology.
While we all feel the urgency to get these programs moving
and to generate jobs, I'm glad to see that there's been some
real progress in recent months on that front. It's also
important that we be sure these investments are the right
investments. So, I look forward to hearing the testimony today
on both of those issues.
The scale of the investment that the Department has been
asked to manage is very substantial. In many cases, programs
were either never funded before or were funded at a level that
is a fraction of what was provided in the Recovery Act. This
was a particular challenge for State and local officials who
faced constrained local budgets even as they tried to scale up
their management of new Federal funds, and the reporting and
accountability requirements that went with those new Federal
funds.
I believe the care that the Department and its partners in
the States have exercised in setting up these programs will pay
great dividends over the long term. The energy infrastructure
needs of the country are so substantial that I think we can
only regard these investments as a downpayment. If we can get
the market incentives as they should be and provide some of the
initial support that's needed, I believe there are substantial
private-sector funds ready to be invested in these areas.
We've heard testimony before here in the committee that the
scale of potential for investments in the energy sector dwarfs
previous investments that were made in the information sector
or in biotechnology. Those are 2 areas where the United States
has led the world. So, if we're to similarly lead in clean
energy and reap the associated benefits in economic and energy
security, it will take a sustained commitment and a urgency of
purpose to do that. I think the Recovery Act has had that as
one of its purposes, and we're anxious to hear how that's
coming and what to expect in the future.
So, let me defer to Senator Murkowski for her comments, and
then I'll introduce our witnesses.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman.
Welcome, to all of our witnesses this morning. I appreciate
you being here and your expertise in this area.
As many of you know, I did not support the American
Recovery and Reinvestment Act last year. During the debate on
it I detailed some of the concerns that I had at that time,
including those that are related to the energy sector, that it
was not timely, targeted, and temporary, as we had hoped, that
green jobs, that shovel-ready projects would not materialize as
promised, and that unprecedented Federal spending was not the
only way to overcome our economic challenges. I had some
criticism.
That criticism remains, as recently as just 2 weeks ago,
when we came to that first anniversary marker. I think it's
fair to say that there's still some pretty wide division over
whether the bill is intending what we had hoped it would
accomplish.
But, we're not here to debate that. That's a good thing.
We're here to review just one part of it, and that is a focus
on the Department of Energy.
The DOE received nearly $37 billion. I think this hearing
gives us an opportunity to determine whether those funds are
being disbursed in a timely and in an effective manner.
I will have say though, that I have been disappointed, with
the Department's record, as we understand that DOE has just
spent out just over 7 percent of its funding in the past year.
The Web page ProPublica developed this information. You have to
look all the way down to the bottom of the page to get to the
DOE, because it's in next-to-last place amongst the Federal
agencies.
Now, I'm sure we'll hear this morning that it's
bureaucratic delays that have hampered spending. To no one's
surprise, it appears that much of that delay can be pointed
back to those of us here and the decisions made in Congress.
The joke that, ``Congress does cut the red tape, but it cuts it
sideways.''
With regard to weatherization, we had a tried-and-true
program that already exists within DOE. We haven't seen the
splash that we anticipated. Some areas where spending is
occurring, of course, have come under fire. There's an article,
in this morning's Post, where several of my Democratic
colleagues have sided specifically to these wind energy
projects and the funds going overseas or to foreign countries.
Researchers have found that 80 percent of the renewable
energy grants have been awarded to foreign companies, including
nearly 200 million awarded to a bankrupt Australian company
that built a Texas wind farm using turbines made by a Japanese
company. It's things like this, of course, that get people
agitated, excited, and clearly very emotional about it.
The CBO's estimated spend-out rates, which projected a very
low spend-out last year, increases to just 22 percent this
fiscal year. I'm also very mindful that the stimulus
effectiveness depends not only how much money is spent, but
when it's spent. Some of our Nation's best economists have told
us, over and over and over, that time is of the essence.
They're right. We've seen the cost of last year's stimulus
balloon by 75 billion, and I believe that is at least partially
because of the slow pace of the expenditures that we see, and
maybe more particularly in agencies like DOE.
As we move forward with jobs, agenda packages here in the
Congress, unemployment right near 10 percent, we're seeing new
legislation that attempts to further create jobs. Here in this
committee, this is going to be an interesting debate. We're
more than a year into a program that was pitched as capable of
getting the economy back on track, but only 7 percent of the
timely, targeted, temporary funding given to the Department of
Energy has actually been spent.
So, Mr. Chairman, I really appreciate the hearing this
morning. I think it comes at a very critical juncture in our
discussions. I really do hope that we will hear some good news
from folks today, because, before Congress commits to new
spending, even greater deficits, we need to make sure that
we've learned from our recent experiences in order to make the
best possible decisions for our country and for our
constituents.
With that, again I thank the witnesses, and I look forward
to the opportunity for questions.
The Chairman. Thank you very much.
Let me just introduce our witnesses briefly.
Matthew Rogers is the senior advisor to the Secretary of
Energy for Recovery Act Implementation. We very much welcome
Matt here. He's been a witness several times before our
committee in the past, and we welcome him back.
Patricia Dalton is the managing director of the Natural
Resources and Environment section at the Government
Accountability Office.
Thank you for being here.
Michele Nellenbach is director of the Natural Resources
Committee with the National Governors Association.
Thank you for being here.
Malcolm Woolf is the director of the Maryland Energy
Administration. Also, he is vice chair of the National
Association of State Energy Officials, in Annapolis. His
location is in Annapolis.
All right. So, why don't we start, and just go across the
table there. If each of you could take 5 or 6 minutes and tell
us the main points you think we need to understand, that would
be most helpful. Then we will, of course, put your entire
statements in the record.
Matt, please go right ahead.
STATEMENT OF MATT ROGERS, SENIOR ADVISOR TO THE SECRETARY,
DEPARTMENT OF ENERGY
Mr. Rogers. Thank you very much. Chairman Bingaman, Ranking
Member Murkowski, members of the committee, thank you for the
opportunity to appear before you today to report on the
progress of the American Recovery and Reinvestment Act within
the Department of Energy. I'll make my opening remarks brief. I
have submitted a more detailed statement for the record.
As this committee knows, the Department of Energy's
recovery program focuses both on creating high quality jobs
quickly and accelerating the pace of innovation to lay the
foundation for long-term economic growth and prosperity. To
support this work, Congress entrusted the Department with $36.7
billion in appropriations. The Recovery Act also directed DOE
to work with Treasury to underwrite more than $5 billion in
clean energy tax credits and grants. These funds, combined with
cost share and leverage, will support more than $100 billion in
projects.
During the last full recipient reporting period, the
October through December 2009 period, DOE Recovery Act programs
directly created or saved 16,300 jobs. Beyond those jobs
reported in FederalReporting.gov, subcontractors generated more
than 4,000 additional jobs and grant recipients reported an
additional 12,000 jobs. As spending accelerates this year, we
expect that tens of thousands of additional jobs will be
created or saved under DOE Recovery Act programs.
DOE has been focused on moving the money out the door
quickly to create jobs and spur economic recovery. We have used
competitive processes to select exceptional projects. We have
increased transparency. We are building a culture of
accountability within DOE, based on the mantra,
``Accountability Every Day.''
DOE's $36.7 billion in appropriations came in 4 different
categories, each with a different time horizon and a different
contracting vehicle. DOE received $7.5 billion in contracts,
largely for the Office of Science and the Office of
Environmental Management, to accelerate a set of projects, many
of which were already underway. Today, we've obligated $6.8
billion of these funds and outlaid $1.6 billion.
We also received $11.2 billion in formula grants for
States, counties, cities, and tribes through the Recovery Act.
We've obligated $10.6 billion of these funds, and we are now
supporting our partners as they spend these funds through local
contracting processes. The State weatherization programs have
contracted more than half of their funds and have outlaid more
than $590 million as of this morning.
The more project-based State Energy programs have
contracted more the $770 million of their funds, and we have
reimbursed $64 million for completed projects under the State
Energy programs.
The third block of funds includes $14 billion in
competitive grants. Congress asked us to compete these funds to
find the very best projects in the country. This required us to
work through the funding opportunity, to application review, to
merit selection process. These were very highly competitive
processes, where we were heavily oversubscribed--5 to 1, on
average. So, we were only able to select the best 20 percent of
the projects who applied. We've made over 90 percent of the
selections under the competitive grant areas, and we've
obligated $8 billion of these funds to date.
The loan and borrowing authority take the longest to move,
because in those contexts we have to underwrite the full value
of the project, not just the credit subsidy that shows up in
the appropriations. In our loan programs, we've issues more
than $2 billion in conditional loan commitments to renewables,
out of more than $18 billion in total loans that the Department
has made in the last year.
In addition, we supported Treasury in selecting 183
projects in 43 States to receive $2.3 billion in renewable
energy manufacturing tax credits, a really important program to
build clean-energy, high-technology manufacturing in the United
States. We've also evaluated over $2.6 billion in grants in
lieu of tax credits for 393 renewable generation projects that
have been finished thus far.
We are ahead of where we expected to be on selections, on
obligations, and on job creation. We are on track with where we
expected to be in contracting. We are slightly behind where we
planned to be on an outlays basis, based on the master plan
that we developed at the beginning of this program.
Over the next 6 months, we expect to see an accelerating
rate of job creation, contracting, and reimbursements. We are
working with more than 5,000 individual recipients now to
ensure that each delivers on their commitments to create jobs
and meet their project milestones on time and on budget.
As we put people back to work, DOE's Recovery Act programs
are making our homes and buildings more energy efficient. We're
expanding U.S. high technology, clean-energy manufacturing and
generation. We're modernizing our electric grid. We're
transforming the transportation sector. We're accelerating the
cleanup of legacy cold-war nuclear sites. We're laying the
foundation for the United States to take a leadership role in a
global clean energy economy.
I thank you for the opportunity to testify today, and I
look forward to answering your questions.
[The prepared statement of Mr. Rogers follows:]
Prepared Statement of Matt Rogers, Senior Advisor to the Secretary
Department of Energy
Chairman Bingaman, Ranking Member Murkowski, and Members of the
Committee, thank you for the opportunity to appear before you today to
report on the progress of ``The American Recovery and Reinvestment
Act'' (Recovery Act).
recovery act impact
One year after the passage of the Recovery Act, approximately 2
million jobs have been created or saved thanks to the Act's impact on
hiring in the private sector, by local and state governments and by
non-profits. The Recovery Act's $787 billion came in three pieces:
roughly a third in tax cuts directly to the American people, another
third in emergency relief for hard-hit families, businesses, and state
governments, and a third in investments in the infrastructure and
technology, creating platforms for economic growth.
The Department of Energy's Recovery program focuses on the third
leg, accelerating innovation to lay the foundation for long term
economic growth. To support this work, Congress entrusted the
Department of Energy with $36.7 billion in appropriations and $6.5
billion in power marketing administration borrowing authority. The
Recovery Act also directed DOE to work with Treasury to provide more
than $5 billion in clean energy manufacturing tax credits and
generation tax grants. These funds combined with private cost share and
leverage will support more than $100 billion in projects.
The Recovery Act investments in energy are putting Americans to
work, helping to build a clean energy economy, accelerating energy
innovation, and reducing our dependence on oil. During the last full
recipient reporting period (Oct-Dec 2009), DOE Recovery Act programs
directly created or saved over 16,300 full-time equivalents (FTEs) as
reported by recipients. Contractors have reported another 4,000 FTEs
have been created or saved at the subcontractor level (not required to
report to FederalReporting.Gov) and more still down the supply chain.
Meanwhile, Section 1603 programs which provide grants in lieu of tax
credits for renewable energy projects are creating a self-reported
12,633 jobs. As spending accelerates this year, we expect that tens of
thousands of additional jobs will be created or saved under DOE
Recovery Act programs.
As we put people back to work, DOE's Recovery Act is making our
homes and buildings more energy efficient, expanding US high technology
clean energy manufacturing and generation, modernizing our power
infrastructure, transforming the transportation sector, accelerating
the clean-up of legacy cold war nuclear sites, and laying the
foundation for the next generation of technological and scientific
innovation.
Our programs are providing benefits across sectors and across the
country. DOE's formula grant selections include over 2,300 state and
local governments in all fifty states and territories to receive nearly
$11 billion of Recovery Act funds. Native American tribes in over 575
towns have been selected for nearly $55 million in energy efficiency
conservation block grants and an additional $27.5 million for a
combination of Smart Grid, Weatherization and renewable energy
projects. 200 small businesses have received nearly $1 billion in
grants and $2 billion in loans. Educational institutions in 43 states
have been selected for over $600 million to support 200 projects
focused on innovation.
doe implementation status
From the first day after the Recovery Act was signed into law, DOE
has been focused on moving the money out the door quickly to create
jobs and spur economic recovery. We have used competitive processes to
select exceptional projects. We have streamlined DOE operating
processes across the board. We are providing unprecedented transparency
and insist on clear accountability every day. We are partnering with
the private sector to make a meaningful down-payment on the nation's
clean energy future.
DOE's $36.7 billion in appropriations came in four different
categories each with a different time horizon. DOE received $7.5
billion in the form of contracts for the expansion and acceleration of
Office of Science and the Office of Environmental Management projects.
To date, $6.8 billion of contract funds have been obligated. Through
the Recovery Act, we also received $11.2 billion in formula grants for
states, counties, cities, territories, and tribes through the Recovery
Act. We have obligated $10.6 billion of the $11.2 billion and have
accelerated full obligation of these formula awards, using an
unprecedented SWAT team process, to enable the recipients to work
through their local competitive selection processes quickly. The third
block of funds includes $14 billion in competitive grants. We have
obligated $8 billion of these funds to date. These highly competitive
processes were over-subscribed with strong projects, 5:1 on average,
presenting us with the challenge and the opportunity to select the best
20%, using over 4,500 reviewers. Finally, the loans and borrowing
authority take the longest to move as we finance a large portion of the
value of the project in the loan guarantee program and the power
marketing administration borrowing programs.
In addition, we are providing support to the Treasury in allocating
$2.3 billion in renewable energy manufacturing tax credits. We have
also been continuously reviewing renewable energy generation grant in-
lieu of tax credit applications for Treasury, recommending over $2.5
billion in grants for finished projects thus far.
Working across these funding categories we have made substantial
progress over the last year. We are working with more than 3,500
recipients who have been selected to receive over $31.4 billion in DOE-
funded contract and grant funds. We have obligated $25.7 billion of the
$31.4 billion in funds awarded, and supported Treasury in awarding $4.9
billion in tax credits and payments in lieu of tax credits. In our loan
program, we have issued more than $2.1 billion in conditional loan
commitments. We have paid out $2.5 billion to recipients of DOE's
appropriated ARRA funds, while Treasury has provided recipients an
additional $2.6B in the form of Section 1603 payments in-lieu of tax
credits. These funds are being matched with nearly $25 billion in
private capital. We are ahead of where we expected to be on selections,
obligations, and job creation. We are slightly behind where we expected
to be on payments based on our plans from last spring.
We plan to announce the remaining contract and grant selections
before the end of June. We are now working actively with our more than
3,500 recipients to accelerate costing and ensure each delivers on
project goals and commitments, on time and on budget. We are confident
that the next six months will be the period of most rapid job creation
for Department of Energy Recovery Act programs.
The remainder of this statement provides detail on each energy
Recovery Act investment area in turn.
saving consumers money and improving the environment through energy
efficiency
Under the Recovery Act, we are making the largest single investment
in home energy efficiency in U.S history. For low-income families that
are hit hardest by high utility bills, the Recovery Act provides $5
billion for the Weatherization Assistance Program, which funds local
agencies to perform home energy audits and weatherization services. We
are working closely with our partners to deliver this vital program.
Each state has made clear performance commitments and we have worked
directly with the Governor's office in every state towards a shared
plan to reach these performance targets. We have taken steps to address
barriers that we have identified, as well as issues raised by GAO and
the DOE Inspector General. During January, states significantly
increased their spending and the number of homes weatherized under the
Recovery Act, moving monthly output to a preliminary estimate of 17,000
units and we are working with the community action agencies towards
meeting their full run rate commitments by the end of March. The
Department undertook a broad-based restructuring program to address the
initial challenges in program implementation. As a result of these
efforts, states reported that they weatherized more than 125,000 homes
in 2009, including over 25,000 with Recovery Act funds and based on
this reporting are on pace to deliver at least 250,000 homes with
Recovery Act funds this year. In fact, since September 2009, we have
tripled the pace of Recovery Act-funded home weatherization. Still, our
goal is to improve further, reaching run rate performance goals by the
end of March 2010 and we are moving forward with additional new
measures that should increase our pace of weatherization. The
Department will remain focused on providing each of the states and
local agencies with the resources they need to quickly and effectively
implement this program. We expect to weatherize nearly 600,000 homes
with Recovery Act funds by March of 2012.
The Recovery Act also includes $3.1 billion for DOE's State Energy
Program and $300 million to states for energy efficient appliance
rebates, showcasing cooperation between federal and state governments.
The state energy programs are sponsoring very innovative projects. Ohio
is using some of their state energy grant money to increase industrial
energy efficiency, helping companies reduce cost and become more
competitive in the market. Idaho is improving energy efficiency in 210
K-12 schools across the state, putting money back into school budgets.
The state energy programs appear to be ahead of their plan to ensure
more than $1 billion of their $3.2 billion is contracted by the end of
March. All of the states already have their appliance rebate funds and
most have completed their program offerings, helping consumers improve
appliance efficiency significantly.
The Recovery Act provided $3.2 billion to fund the Energy
Efficiency and Conservation Block Grant program for the first time,
which this committe was instrumental in creating. This program will
help over 2,300 cities, counties, states, territories and Indian tribes
to develop their own efficiency programs, including: building code
development, energy audits and retrofits, efficient public lighting and
landfill gas capture. Standing up a new program always takes a little
more effort-it took a dedicated 125 person SWAT team in the basement of
DOE to process all the new EECBG applications, working with recipients
directly on the phone to ensure each application met the statutory
requirements and to minimize bureaucratic back and forth. This hard
work will pay dividends in the coming months, as states and communities
bring innovative projects on line. We are particularly excited about
the competitive portion of the energy conservation block grant program,
known as Retrofit Ramp up. The leading projects under this program will
define new approaches to make energy efficiency services available to
all Americans at significantly lower cost.
These formula grant programs have created opportunities for
innovation in how the Department of Energy works. Our expanded call
center has handled almost 10,000 calls from formula grant recipients,
guiding people through the process. We now have dedicated account
representatives for each state, providing service continuity. We
collaborate with the national weatherization and state energy
organizations weekly, building a shared view on performance. Each
innovation not only moves this program faster every day, but better
positions DOE for long-term base performance as well.
developing the strongest renewable energy industry in the world
Recovery Act investments and incentives totaling $23 billion
combined with more than $40B in private capital are putting us on track
to meeting our goal of doubling both renewable electricity generating
capacity (excluding conventional hydropower) and advanced energy
manufacturing by 2012. Recovery Act programs are also quickly expanding
high technology, clean energy manufacturing in the U.S.
We are funding a range of renewable energy generation technologies,
including wind, solar, and geothermal. DOE has supported Treasury in
implementing the 1603 program, which has provided $2.6 billion in 1603
payments to 392 renewable energy generation projects across the
country. By partnering with private industry, Treasury and DOE have
already funded enough new renewable energy projects through these
payments to power over one million homes, enough clean energy to power
the homes of everyone living in Boston, Seattle, Atlanta, Kansas City,
and Cincinnati combined. These projects have already been completed.
DOE has also supported Treasury in awarding $2.3 billion in tax
credits for 183 clean energy manufacturing projects in 43 states under
the 48C program. The manufacturing capacity supported by these grants
will produce solar panels, wind turbines, geothermal equipment, nuclear
plant components, and energy efficient building products, putting the
US on track to double our capacity to manufacture these high
technology, clean energy components by 2012. These facilities represent
some of the premier companies in renewable manufacturing. These
projects will generate more than 17,000 jobs. This investment will be
matched by as much as $5.4 billion in private sector funding likely
supporting up to 41,000 additional jobs.The interest was extraordinary
and the program was oversubscribed by a ratio of more than 3 to 1. The
Administration has called on Congress to provide an additional $5
billion to expand the program. Because there is already a deep pipeline
of projects, these funds could be deployed quickly to create jobs and
support economic activity.
We have announced more than $2 billion in conditional commitments
to build renewable energy and grid electrification projects in the US
under the Recovery Act including Solyndra (CA), Nordic (ID), and Beacon
(NY), and Brightsource (CA). These conditional commitments have proven
very effective in bringing private capital off the sidelines and into
the market at scale. Solyndra, Nordic, and Beacon are all in
construction.
We're also investing over $600 million in grants in the research,
development and deployment of renewable energy. For example, $24
million in Recovery Act funding has gone to three universities (in IL,
ME, and SC) around the country to improve wind turbine performance and
reliability. The Solar Incubator is providing $10 million in Recovery
Act funds to help 4 companies in North Carolina and California lower
the cost and improve performance of promising PV technologies. We are
awarding up to $81 million to 45 geothermal projects in 20 states
developing innovative approaches to enhanced geothermal systems,
potentially unlocking vast amounts of baseload power.
transforming the transportation sector
The Recovery Act provided $3.4 billion to help develop the next
generation of vehicles and the fueling infrastructure to support these
innovative new technologies. This is in addition to $8.4 billion so far
from our Advanced Technology Vehicle Manufacturing loan program outside
the Recovery Act. These projects aim to transform the transportation
sector by creating competition among electrification, natural gas
vehicles, advanced biofuels, hydrogen and improvements in internal
combustion engine efficiency.
Over the next six years, we expect to make three new electric
vehicle plants--the first ever in the United States--and 30 new battery
and other electric-vehicle component manufacturing plants fully
operational. We've made investments in battery and component suppliers
like A123, Enerdel and Cellgard, as well as manufacturers\1\ like
Nissan, Tesla, Fisker and Ford to make advanced vehicles in the United
States. By 2015, these plants will be expected to have capacity to
produce 250,000 electric-drive cars and batteries to power 500,000
plug-in hybrid electric vehicles. We are also building the
infrastructure to support these vehicles, including more than 10,000
charging locations in a dozen cities.
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\1\ Manufacturers Ford, Nissan, Tesla and Fisker are funded by the
Advanced Technology Vehicle Manufacturing Program, which is not part of
the Recovery Act.
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We've selected $300 million in Recovery Act grants to 25 Clean City
coalitions of public and private fleets, of which $260 million has been
obligated to date. These grants significantly expand city-and county-
led efforts to reduce petroleum consumption and deploy high-efficiency
cars, trucks and buses that run on alternative fuels. The 25 projects
support over 9,000 alternative-fuel vehicles, 70 percent of which will
run on natural gas, mainly for heavy-duty trucks.
At the same time, Recovery Act investments will support the
development and deployment of the next generation of biofuels. Over
$600 million in Recovery Act grants will support 19 pilot,
demonstration, and commercial-scale bio-refineries. These facilities
will convert biomass into fuels and chemicals that otherwise would be
produced from oil, while creating jobs and raising farm incomes in
rural communities across the country. Before these investments, the
development of an advanced biofuels industry was at a virtual
standstill as numerous facilities at the pilot stage had faltered
during the economic downturn.
More than $100 million from the Recovery Act, plus an additional
$87 million in base budget funding, will go to improving the efficiency
of heavy-duty trucks and passenger vehicles. With private sector cost-
sharing, this will support nearly $375 million in total investment,
positioning the US as a leader in heavy duty fuel efficiency and
reducing transportation costs across the country.
investing in a 21st-century grid infrastructure
Our electrical grid is a critical piece of infrastructure, but
today it uses century-old technology. It wastes too much energy, it
costs us too much money, and it's too susceptible to outages and
blackouts. Just as President Eisenhower's investment in an interstate
highway system revolutionzed the way Americans travel, our Recovery Act
investments in the smart grid and new transmission lines is
revolutionizing how we produce, transport and use energy.
The more than $4 billion in Recovery Act smart grid investments are
being matched by more than $5.5 billion in private sector funding,
supporting 132 projects that will reduce electricity costs, increase
reliability, and give consumers more choice and control over their
energy use. By 2015, we expect a combination of public and private
investment to lead to the deployment of 18 million smart meters
nationally (more than double the number currently in service). The
Recovery Act is also funding the installation of nearly 1,000 sensors
on the electric transmission system to improve reliability and
security, for the first time providing visibility and control across
the entire U.S. transmission system. 200,000 smart transformers and
nearly 700 automated substations will allow power companies to replace
units before they fail, and respond more effectively to restore service
when bad weather knocks down power lines. These are important first
steps toward the modernization of our power infrastructure.
supporting the goal that carbon capture and sequestration (ccs) can be
economical in 8-10 years
With $3.4 billion from the Recovery Act ,we are making
unprecedented investments in carbon capture and sequestration
technologies, attracting approximately $7 billion in private capital.
Projects we are supporting are projected to capture more than 10
million tons of CO2 annually by 2015 and put us on a path to
demonstrating that carbon capture and sequestration can be economical
by 2020. Realizing the promise of low-carbon electricity from coal
requires an economical solution to capturing CO2. The
leading processes today are amine and ammonia-based processes that cost
$60 per ton and have a very significant energy penalty, which has
prevented them from reaching widespread commercial implementation. New
CO2 capture technologies, using different solvents,
adsorbents and absorbents, hold the promise to significantly reduce the
energy penalty, cut capital costs and reduce the cost per ton by more
than half. Our innovative grants are funding entirely new approaches
such as synthetic enzymes or conversion of CO2 into valuable
fuels or chemicals, that could reduce the cost even more.
cleaning up the legacy cold war nuclear sites
DOE also has the important role of cleaning up sites across the
country associated with the legacy of our nation's nuclear weapons
program. DOE's Office of Environmental Management has allocated $6
billion in Recovery Act funding to ongoing cleanup work at 17 sites.
The stimulus funding is being used to accelerate cleanup work to reduce
the lifecycle cost of EM's cleanup effort. These projects have
permanently disposed of over 1,300 cubic meters of transuranic waste
and nearly 11,000 cubic meters of low-level waste, and over 400,000
square feet of contaminated facility demolition. The EM program's
Recovery Act goal is to help reduce the footprint of land and
structures requiring cleanup by 40 percent by 2011.
EM and site prime contractors have obligated approximately $700M in
Recovery Act Small Business contracts. In fiscal ear 2009 EM Prime
Small Business contractors were awarded about $396 million which
exceeded EM's goal of 4.8 percent ($288M) of EM Recovery Act funds by
achieving 136 percent of the goal. In fiscal year 2010, EM anticipates
additional Small Business contracts to both prime contractors and
subcontractors.
These projects have already created nearly 8,000 direct jobs as of
December 31, 2009 at the prime and sub-contractor level, in communities
like Hanford Washington, Savannah River South Carolina and Oak Ridge
Tennessee. The Environmental Management projects were among the first
to start and more than 90% of the funds have been obligated and almost
25% has been spent.
maintaining u.s. leadership in science and technology
The Recovery Act is accelerating the pace of scientific and
technological innovation in the energy sector, laying the foundation
for sustained future economic growth. There is widespread agreement in
the economic community that innovation is a primary driver of long-term
economic growth and prosperity. Historically, however, energy has been
one of the slowest sectors to innovate, taking decades to change.
Nevertheless, when it occurs, the economic impact from energy
innovation has been significant. Energy innovation in production and in
end-use technologies has been a key ingredient in US economic growth
for the last century. Energy innovation is essential to address global
energy security and climate change concerns on time and on budget.
Innovation also drives job creation. Long term, high quality jobs stay
in industries where there is a high degree of innovative content.
For instance, the Recovery Act included $400 million for the
Advanced Research Projects Agency--Energy (ARPA-E), modeled after the
Defense Department's famed DARPA. DARPA is widely credited for
inventing, among other things, the Internet. ARPA-E will fund high-
risk, high-reward energy technology research. Not every project will
succeed, but those that do have the potential to radically transform
our energy system.
Potentially game-changing research funded through ARPA-E so far
includes: Grid-scale liquid metal batteries that could cut battery
costs by 90% while doubling energy density; Direct solar fuels--
photosynthetic organisms that produce hydrocarbons instead of
carbohydrates, combining CO2, sun and water to produce
ultra-clean gasoline; and Super-high-efficiency small wind turbines,
leveraging advanced aerospace designs and materials to reduce the cost,
improve the reliability and expand the range of wind energy. The
projects we have funded under the Recovery Act--and the many great
projects we have not been able to fund--highlight the opportunity for
the United States to accelerate clean energy innovation and take a
global leadership position in clean energy industries globally.
The Office of Science has invested $1.6 billion to advance basic
research (e.g. 17 new energy frontier research centers, the world's
fastest super computer at Oak Ridge), to expansion science
infrastructure (e.g. national synchrotron light source at Brookhaven, a
new Continuous Beam facility at TJ lab, new battery user facilities at
Argonne) and to increase funding for promising early career scientists.
Science is almost 90% obligated and is expected to disburse over 20% of
their funds when the next set of data is reported.
The next six months will expect to see an accelerating rate of job
creation, contracting, and reimbursements. We are working with more
than 5,000 recipients to deliver on their commitments to job creation
and meet their agreed project milestones, on time and on budget. Our
task remains to knock down barriers to ensure each recipient can
perform and to hold our funding partners accountable to deliver on
their commitments. We have great projects at every level that are
contributing to job creation and economic growth now and laying the
foundation for long-term US leadership in these industries.
The Chairman. Thank you very much.
Ms. Dalton, go right ahead.
STATEMENT OF PATRICIA A. DALTON, MANAGING DIRECTOR, NATURAL
RESOURCES AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Dalton. Thank you, Mr. Chairman, Ranking Member
Murkowski, members of the committee.
I'm pleased to be here today to discuss the status of DOE's
implementation of programs under the Recovery Act. My statement
today is based on 2 recent GAO reports, and will focus on the
extent to which DOE has obligated and spent Recovery Act funds
and the factors that have affected its ability to select and
start Recovery Act projects.
The Recovery Act provided DOE more than $43 billion,
including 6.5 billion in borrowing authority. As of February
28, DOE reported it had obligated $25.7 billion, or 70 percent
of its spending authority; and had reported expenditures of
$2.5 billion, 7 percent of its expenditure authority.
The percentage of Recovery Act funds obligated varied
widely across DOE offices. Several program offices had
obligated more than 85 percent of the Recovery Act funds, as of
February 28, while other program offices had obligated less
than a third of their funds. It should be noted that, in some
of these cases, awards and obligations were not expected until
at least 2010. The percentage of Recovery Act funds spent also
varied across DOE offices, but to a lesser extent than the
funds obligated. None of the offices reported expenditures of
more than a third of their Recovery Act funds, and some
reported zero.
The Federal requirements and other factors affected the
timing of project selection and starts. In particular, DOE
reported that the Davis-Bacon and environmental requirements
slowed some project selection and starts, while State officials
also reported to us that the National Historic Preservation Act
had an impact.
DOE's Weatherization Assistance Program became subject to
Davis-Bacon requirements for the first time under the Recovery
Act. In general, the States we reviewed used only small
percentage of their available Recovery Act funds in 2009.
Davis-Bacon requirements contributed to this low spend rate.
Many States chose to use funds from their annual appropriation,
which were not subject to Davis-Bacon, before beginning using
their Recovery Act funds. The Department of Labor issued its
wage determinations for residential weatherization workers in
early September. Many States also waited for these
determinations before beginning to use Recovery Act funds.
DOE officials told us that the timing of certain projects
may also be slowed by environmental requirements. DOE has taken
steps to mitigate potential delays; nevertheless, they told us
that several offices, including the Loan Guarantee and Fossil
Energy Offices, will likely have projects that have a
significant environmental impact, and therefore will require
environmental assessments or impact statements.
Several State officials told us that historic preservation
requirements also affect Recovery Act project selection and
starts. For example, in Michigan, officials estimated that 90
percent of the home units scheduled to be weatherized were
going to need an historic review. In November, they did sign an
agreement with the State Historic Preservation Office that is
designed to expedite the review process.
Officials also told us that factors other than Federal
requirements have affected the timing of project selection and
starts, including the newness of programs, staff capacity, and
State and local issues. Because some Recovery Act programs were
newly created, in some cases officials needed to establish
procedures and provide guidance before implementing projects.
Officials from DOE stated that they needed to hire an
additional 550 people both permanent and temporary--to carry
out Recovery Act project work. Some State officials told us
that they experienced heavy workloads as a result of the
Recovery Act, which impaired their ability to implement
programs. Smaller localities, which are often rural, told us
that they faced challenges because of the lack of staff to
understand, apply for, and comply with the Recovery Act
requirements. Officials from the National Association of
Counties have told us that some localities turned down Recovery
Act funds to avoid the administrative burdens associated with
the Act's reporting requirements. The effects of the economic
recession on States' budgets, also had an effect, in that, for
example, State hiring freezes and furloughs their ability to
implement new programs.
GAO is continuing to review energy programs, including the
reporting systems. With respect to recipient reporting, DOE has
established a data quality assurance plan to assist in
identifying reporting errors, and we are reviewing that system.
In addition, we have several ongoing engagements that are
looking at other Energy Department programs, including the Loan
Guarantee Program, and environmental management for nuclear
waste cleanup.
Mr. Chairman, that concludes my statement. I'd be happy to
take any questions.
[The prepared statement of Ms. Dalton follows:]
Prepared Statement of Patricia A. Dalton, Managing Director, Natural
Resources and Environment, Government Accountability Office
why gao did this study
The American Recovery and Reinvestment Act of 2009 (Recovery Act)-
initially estimated to cost $787 billion in spending and tax
provisions-aims to promote economic recovery, make investments, and
minimize or avoid reductions in state and local government services.
The Recovery Act provided the Department of Energy (DOE) more than
$43.2 billion, including $36.7 billion for projects and activities and
$6.5 billion in borrowing authority, in areas such as energy efficiency
and renewable energy, nuclear waste clean-up, and electric grid
modernization.
This testimony discusses (1) the extent to which DOE has obligated
and spent its Recovery Act funds, and (2) the factors that have
affected DOE's ability to select and start Recovery Act projects. In
addition, GAO includes information on ongoing work related to DOE
Recovery Act programs. This testimony is based on prior work and
updated with data from DOE.
recovery act
Factors Affecting the Department of Energy's Program Implementation
What GAO Found
As of February 28, 2010, DOE reported it had obligated $25.7
billion (70 percent) and reported expenditures of $2.5 billion (7
percent) of the $36.7 billion it received under the Recovery Act for
projects and activities. For context, as of December 31, 2009, DOE
reported that it had obligated $23.2 billion (54 percent) and reported
expenditures of $1.8 billion (4 percent). The percentage of Recovery
Act funds obligated varied widely across DOE program offices and ranged
from a high of 98 percent in the Energy Information Administration to a
low of 1 percent for the Loan Guarantee Program Office. None of DOE's
program offices reported expenditures of more than a third of their
Recovery Act funds as of February 28, 2010.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Officials from DOE and states that received Recovery Act funding
from DOE cited certain federal requirements that had affected their
ability to implement some Recovery Act projects. For example:
Davis Bacon Requirements.--Officials reported that Davis-
Bacon requirements had affected the start of projects in the
Weatherization Assistance Program because the program had
previously been exempt from these requirements.
National Environmental Policy Act (NEPA)--. DOE officials
told us that NEPA may affect certain projects that are likely
to significantly impact the environment, thereby requiring
environmental assessments or environmental impact statements.
National Historic Preservation Act (NHPA).-- Officials from
the Michigan Department of Human Services told us that about 90
percent of the homes scheduled to be weatherized under the
Weatherization Assistance Program would need a historic review.
Additionally, DOE and state officials told us that other factors
also affected their ability to quickly select or start projects. For
example:
Newness of programs.--In some cases, because some Recovery
Act programs were newly created, officials needed time to
establish procedures and provide guidance before implementing
projects.
Staff capacity.--DOE officials also told us that they
experienced challenges in hiring new staff to carry out
Recovery Act work. Also, District of Columbia officials told us
they needed to hire 6 new staff members to oversee and manage
the weatherization program.
State, local, or tribal issues.--The economic recession
affected some states' budgets, which also affected states'
ability to use some Recovery Act funds, such as difficulty
providing matching funds. The American Recovery and
Reinvestment Act of 2009 (Recovery Act)-initially estimated to
cost $787 billion in spending and tax provisions-aims to
promote economic recovery, make investments, and minimize or
avoid reductions in state and local government services. The
Recovery Act provided the Department of Energy (DOE) more than
$43.2 billion, including $36.7 billion for projects and
activities and $6.5 billion in borrowing authority, in areas
such as energy efficiency and renewable energy, nuclear waste
clean-up, and electric grid modernization.
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the status of the
Department of Energy's (DOE) implementation of programs funded under
the American Recovery and Reinvestment Act of 2009 (Recovery Act).
Congress and the administration have fashioned a significant response
to what is generally considered to be the nation's most serious
economic crisis since the Great Depression. The Recovery Act is
intended to promote economic recovery, make investments, and minimize
or avoid reductions in state and local government services. Enacted on
February 17, 2009, the act was a response to the economic recession at
a time when the jobless rate was approaching 8 percent. In early 2009,
the Congressional Budget Office estimated that the Recovery Act's
combined spending and tax provisions would cost approximately $787
billion. On January 26, 2010, CBO updated its estimate of the cost of
the Recovery Act. It now estimates that the Recovery Act will cost $75
billion more than originally estimated-or a total of $862 billion from
2009 through 2019. That amount includes more than $43.2 billion for DOE
efforts in areas such as energy efficiency and renewable energy,
nuclear waste cleanup, and electric grid modernization.
The Recovery Act specifies several roles for GAO, including
conducting ongoing reviews of selected states' and localities' use of
funds made available under the act. We recently completed our fifth
review, issued yesterday, which examined a core group of 16 states, the
District of Columbia, and selected localities.\1\ We also recently
completed a review on the impact of certain federal requirements and
other factors on Recovery Act project selection and starts.\2\
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\1\ GAO, Recovery Act: One Year Later, States' and Localities' Uses
of Funds and Opportunities to Strengthen Accountability, GAO-10-437
(Washington, D.C.: Mar. 3, 2010).
\2\ GAO, Recovery Act: Project Selection and Starts Are Influenced
by Certain Federal Requirements and Other Factors, GAO-10-383
(Washington, D.C.: Feb. 10, 2010).
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My statement today is based largely on these two prior reviews and
updated with data from DOE and focuses on (1) the extent to which DOE
has obligated and spent its Recovery Act funds, and (2) the factors
that have affected DOE's ability to select and start Recovery Act
projects. In addition, we include information on ongoing GAO work on
DOE Recovery Act programs. We obtained financial data from DOE on its
obligations and expenditures for Recovery Act projects and also asked
DOE-and 26 other federal agencies-which federal requirements, if any,
affected the timing of project selection and start dates, as well as
whether any requirements at the state and local levels, or any other
factors, affected project selection and start dates. To supplement the
federal agencies' responses, we spoke with officials in 16 states and
the District of Columbia who are responsible for implementing Recovery
Act projects. We are reviewing these 16 states and the District of
Columbia for our bi-monthly reviews on Recovery Act implementation. The
states selected contain about 65 percent of the U.S. population and are
estimated to receive collectively about two-thirds of the
intergovernmental federal assistance funds available through the
Recovery Act. We selected these states and the District of Columbia on
the basis of federal outlay projections; percentage of the U.S.
population represented; unemployment rates and changes; and a mix of
states' poverty levels, geographic coverage, and representation of both
urban and rural areas. We also spoke with representatives from the
National Governors Association; the National Association of State
Auditors, Comptrollers, and Treasurers; and the National Association of
Counties.
Our prior work was conducted 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.
Background
The Recovery Act provided DOE more than $43.2 billion, including
$36.7 billion for projects and activities and $6.5 billion in borrowing
authority.\3\ Of the $36.7 billion for projects and activities, almost
half-$16.8 billion-was provided to the Office of Energy Efficiency and
Renewable Energy for projects intended to improve energy efficiency,
build the domestic renewable energy industry, and restructure the
transportation industry to increase global competitiveness. The
Recovery Act also provided $6 billion to the Office of Environmental
Management for nuclear waste cleanup projects, $4.5 billion to the
Office of Electricity Delivery and Energy Reliability for electric grid
modernization, $4 billion to the Loan Guarantee Program Office to
support loan guarantees for renewable energy and electric power
transmission projects, $3.4 billion to the Office of Fossil Energy for
carbon capture and sequestration efforts, and $2 billion to the Office
of Science and the Advanced Research Projects Agency-Energy for
advanced energy technology research.
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\3\ DOE was initially appropriated $45.2 billion in the Recovery
Act; however, $2 billion for the Loan Guarantee Program was transferred
from DOE's Recovery Act appropriation. As a result, DOE's
appropriations under the Recovery Act now total $43.2 billion.
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DOE Obligated 70 Percent and Reported Expenditures of 7 Percent of its
Recovery Act Funds as of February 28, 2010
As of February 28, 2010, DOE reported that it had obligated $25.7
billion (70 percent) and reported expenditures of $2.5 billion (7
percent) of the $36.7 billion it received under the Recovery Act for
projects and activities (see table 1). By comparison, as of December
31, 2009, the department reported it had obligated $23.2 billion (54
percent) and reported expenditures of $1.8 billion (4 percent).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The percentage of Recovery Act funds obligated varied widely across
DOE program offices. Several program offices-Energy Efficiency and
Renewable Energy, the Energy Information Administration, Environmental
Management, and Science-had obligated more than 85 percent of their
Recovery Act funds by February 28, 2010, while other program offices-
Fossil Energy, the Loan Guarantee Program, and the Western Area Power
Administration-had obligated less than a third of their Recovery Act
funds by that time.
The percentage of Recovery Act funds spent also varied across DOE
program offices, though to a lesser degree than the percentage
obligated. None of the program offices reported expenditures of more
than a third of their Recovery Act funds as of February 28, 2010. The
percentage of funds spent ranged from a high of 31 percent for
Departmental Administration to a low of zero percent for the
Electricity Delivery and Energy Reliability, Energy Information
Administration, and Fossil Energy offices.
Federal Requirements and Other Factors Affected the Timing of Project
Selection and Starts
Officials from DOE and states that received Recovery Act funding
from DOE cited certain federal requirements and other factors that had
affected their ability to implement some Recovery Act projects. In
particular, DOE officials reported that Davis-Bacon requirements and
the National Environmental Policy Act affected the timing of some
project selection and starts, while state officials reported that the
National Historic Preservation Act affected their ability to select and
start Recovery Act projects. Other factors unrelated to federal
requirements-including the newness of programs, staff capacity, and
state and local issues-also affected the timing of some projects,
according to federal and state officials.
DOE and State Officials Reported that Certain Federal
Requirements Affected Project Selection and Starts
Officials from DOE and states that received DOE funding cited
certain federal requirements that had affected their ability to select
or start some Recovery Act projects. For example:
Davis-Bacon requirements.\4\ DOE's Weatherization Assistance
Program became subject to the Davis-Bacon requirements for the
first time under the Recovery Act after having been previously
exempt from those requirements.\5\ Thus, the Department of
Labor (Labor) had to determine the prevailing wage rates for
weatherization workers in each county in the United States. In
July 2009, DOE and Labor issued a joint memorandum to
Weatherization Assistance Program grantees authorizing them to
begin weatherizing homes using Recovery Act funds, provided
they paid construction workers at least Labor's wage rates for
residential construction, or an appropriate alternative
category, and compensated workers for any differences if Labor
established a higher local prevailing wage rate for
weatherization activities. On September 3, 2009, Labor
completed its determinations; later that month, we reported
that Davis-Bacon requirements were a reason why some states had
not started weatherizing homes.\6\ Specifically, we reported
that 7 out of 16 states and the District of Columbia decided to
wait to begin weatherizing homes until Labor had determined
county-by-county prevailing wage rates for their state.
Officials in these states explained that they wanted to avoid
having to pay back wages to weatherization workers who started
working before the prevailing wage rates were known. In
general, the states we reviewed used only a small percentage of
their available funds in 2009, mostly because state and local
agencies needed time to develop the infrastructures required
for managing the significant increase in weatherization funding
and for ensuring compliance with Recovery Act requirements,
including Davis-Bacon requirements. According to available DOE
data, as of December 31, 2009, 30,252 homes had been
weatherized with Recovery Act funds, or about 5 percent of the
approximately 593,000 total homes that DOE originally planned
to weatherize using Recovery Act funds.\7\
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\4\ The Davis-Bacon Act requires that contractors and
subcontractors pay workers the locally prevailing wages on most
federally funded construction projects, and it imposes several
administrative requirements relating to the payment of workers on
qualifying projects. The Recovery Act generally applies Davis-Bacon
requirements to all Recovery Act-funded projects, requiring contractors
and subcontractors to pay all laborers and mechanics at least the
prevailing wage rates in the local area where they are employed, as
determined by the Secretary of Labor. In addition, contractors are
required to pay these workers weekly and submit weekly certified
payroll records, generally to the contracting federal agency.
\5\ The Recovery Act appropriated $5 billion for the Weatherization
Assistance Program, which DOE is distributing to each of the states,
the District of Columbia, and seven territories and Indian tribes. The
program seeks to assist low-income families by making such long-term
energy efficiency improvements to their homes as installing insulation;
sealing leaks; and modernizing heating equipment, air circulation fans,
and air conditioning equipment.
\6\ GAO, Recovery Act: Funds Continue to Provide Fiscal Relief to
States and Localities, While Accountability and Reporting Challenges
Need to Be Fully Addressed, GAO-09-1016 (Washington, D.C., Sept. 23,
2009).
\7\ DOE collects data reported by states and territories on the
number of homes weatherized and on state and territory expenditures of
funds on a quarterly basis. The data reported by states as of a certain
date (such as for the quarter ending December 31, 2009) can change as
states finalize figures for homes weatherized and funds spent. DOE
originally planned to weatherize 593,000 homes with Recovery Act
funding by March 31, 2012. A DOE report issued on February 24, 2010,
indicated that 30,252 homes had been weatherized nationwide as of
December 31, 2009, though numbers are not yet finalized.
National Environmental Policy Act (NEPA).\8\ DOE officials
told us that while NEPA is unlikely to impose a greater burden
on Recovery Act projects than on similar projects receiving
federal funds, the timing of certain projects may be slowed by
these requirements. However, DOE officials reported that the
agency had taken steps to expedite the NEPA review process and
said that the agency's funding opportunity announcements
specified that projects must be sufficiently developed to meet
the Recovery Act's timetable for commitment of funds.
Nevertheless, DOE officials also told us that several program
offices-including Loan Guarantee, Fossil Energy, Electricity
Delivery and Energy Reliability, and the Power Marketing
Administrations-will likely have projects that significantly
impact the environment and will therefore require environmental
assessments or environmental impact statements. DOE officials
told us that they plan to concurrently complete NEPA reviews
with other aspects of the project selection and start process.
State officials in California and Mississippi also told us that
NEPA had caused delays in DOE Recovery Act projects. For
example, California officials said that the State Energy
Commission must submit some of its Recovery Act projects to DOE
for NEPA review because they are not covered by DOE's existing
categorical exclusions.\9\ State officials said that such
reviews can take up to 6 or more weeks. Both California and
Mississippi officials told us that activities that are
categorically excluded under NEPA (e.g., road repaving or
energyefficient upgrades to existing buildings) still require
clearance before the state can award funds. Staff must spend
time filling out forms and supplying information to DOE on
projects that may qualify for a categorical exclusion.
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\8\ NEPA established national environmental policies and goals to
ensure that federal agencies properly consider environmental factors
before deciding on a project. Under NEPA, federal agencies evaluate the
potential environmental effects of projects they are proposing using an
environmental assessment or, if projects may significantly affect the
environment, a more detailed environmental impact statement.
\9\ If an agency determines that activities of a proposed project
fall within a category of activities the agency has already determined
has no significant environmental impact-called a categorical exclusion-
then the agency generally does not need to prepare an environmental
assessment or environmental impact statement.
National Historic Preservation Act (NHPA).\10\ State
officials told us that NHPA had also affected DOE Recovery Act
project selection and starts.\11\ Mississippi officials, in
particular, cited NHPA's clearance requirements as one of the
biggest potential delays to project selection in energy
programs. Many of the city-and county-owned facilities that
could benefit from the Energy Efficiency and Conservation Block
Grant program could be subject to historic preservation
requirements, which mandate that projects must be identified
within 180 days of award.\12\ In part because of this
requirement, the state had to adjust program plans and limit
the scope of eligible recipients and projects to avoid historic
preservation issues. Likewise, officials from the Michigan
Department of Human Services told us that NHPA requires that
weatherization projects receiving federal funds undergo a state
historic preservation review. According to Michigan officials,
this requirement means that the State Historic Preservation
Office may review every home over 50 years of age if any work
is to be conducted, regardless of whether the home is in a
historic district or on a national registry. These officials
estimated that 90 percent of the homes scheduled to be
weatherized would need a historic review. These reviews are a
departure from Michigan's previous experience; the State
Historic Preservation Office had never considered
weatherization work to trigger a review. Furthermore, Michigan
officials told us that their State Historic Preservation
Office's policy is to review weatherization applications for
these homes within 30 days after receiving the application and
advise the Michigan Department of Human Services on whether the
work can proceed. However, as of October 29, 2009, the State
Historic Preservation Office had only two employees, so state
officials were concerned that this process could cause a
significant delay. To avoid further delays, Michigan officials
told us that in November 2009, they signed an agreement with
the State Historic Preservation Office that is designed to
expedite the review process. They also told us that with the
agreement in place, they expect to meet their weatherization
goals.
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\10\ NHPA declares that the federal government has a responsibility
to expand and accelerate historic preservation programs and activities
in order to preserve the nation's historical and cultural foundations.
The act requires that for all projects receiving federal funding or a
federal permit, federal agencies must take into account the project's
effect on any historic site, building, structure, or other object that
is or can be listed on the National Historic Register. Under the act
and its implementing regulations, the agency must consult with relevant
federal, state, and tribal officials with regard to such a project.
\11\ DOE officials told us in January 2010 that they were in the
process of developing an agreement with the Advisory Council on
Historic Preservation and the National Conference of State Historic
Preservation Officers to create a manageable framework for streamlining
DOE's compliance with NHPA requirements.
\12\ The Energy Efficiency and Conservation Block Grants program,
administered by DOE, provides funds through competitive and formula
grants to units of local and state government and Indian tribes to
develop and implement projects to improve energy efficiency and reduce
energy use and fossil fuel emissions in their communities. The Recovery
Act includes $3.2 billion for the program.
Buy American provisions.\13\ DOE officials told us that Buy
American provisions could cause delays in implementing Recovery
Act projects. Officials from other federal agencies said those
provisions have affected or may affect their ability to select
or start some Recovery Act projects. In some cases, those
agencies had to develop guidance for compliance with Buy
American provisions, including guidance on issuing waivers to
recipients that were unable to comply. For example, according
to Environmental Protection Agency officials, developing Buy
American guidance was particularly challenging because of the
need to establish a waiver process for Recovery Act projects.
At the local level, officials from the Chicago Housing
Authority (CHA) reported that the only security cameras that
are compatible with the existing CHA system and City of Chicago
police systems are not made in the United States. CHA worked
with the Department of Housing and Urban Development to
determine how to seek a waiver for this particular project.
Moreover, an industry representative told us that the Buy
American provisions could interrupt contractors' supply chains,
requiring them to find alternate suppliers and sometimes change
the design of their projects, which could delay project starts.
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\13\ The Buy American Act generally requires that raw materials and
manufactured goods acquired for public use be made or produced in the
United States, subject to limited exceptions. Federal agencies may
issue waivers for certain projects under specified conditions, for
example, if using American-made goods is inconsistent with the public
interest or the cost of those goods is unreasonable. Agencies also need
not use American-made goods if they are not sufficiently available or
of satisfactory quality. The Recovery Act has similar provisions,
including one limiting the ``unreasonable cost'' exception to those
instances when inclusion of American-made iron, steel, or other
manufactured goods would increase the overall project cost by more than
25 percent.
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DOE and State Officials Reported that Other Factors Have
Also Affected the Timing of Project Selection and
Starts
Officials from DOE and states also told us that factors other than
federal requirements have affected the timing of project selection or
starts. For example:
Newness of programs.--Because some Recovery Act programs
were newly created, in some cases, officials needed time to
establish procedures and provide guidance before implementing
projects. In particular, the DOE Inspector General noted that
the awards process for the Energy Efficiency and Conservation
Block Grant program, newly funded under the Recovery Act, was
challenging to implement because there was no existing
infrastructure. Hence, Recovery Act funds were not awarded and
distributed to recipients in a timely manner.
Staff capacity.--Officials from DOE stated that they would
need to hire a total of 550 staff-both permanent and temporary-
to carry out Recovery Act-related work. However, several issues
affected DOE's ability to staff these federal positions,
including the temporary nature and funding of the Recovery Act
and limited resources for financial management and oversight.
To address those issues, DOE was granted a special direct hire
authority as part of the Recovery Act for certain areas and
program offices. The authority allowed DOE to expedite the
hiring process for various energy efficiency, renewable energy,
electricity delivery, and energy reliability programs and
helped DOE fill longer term temporary (more than 1 year, but
not more than 4 years) and permanent positions. However,
according to DOE officials, government-wide temporary
appointment authority does not qualify an employee for health
benefits, and thus few candidates have been attracted to these
temporary positions. According to DOE officials, the Office of
Management and Budget recently approved direct-hire authority
for DOE, which officials believe will alleviate issues related
to health care benefits.
Some officials told us that they experienced heavy workloads as a
result of the Recovery Act, which impaired their ability to
implement programs. As we reported in December 2009, smaller
localities, which are often rural, told us that they faced
challenges because of a lack of staff to understand, apply for,
and comply with requirements for federal Recovery Act
grants.\14\ For example, some local government officials
reported that they did not employ a staff person to handle
grants and therefore did not have the capacity to understand
which grants they were eligible for and how to apply for them.
In the District of Columbia, Department of the Environment
officials explained that weatherization funds had not been
spent as quickly as anticipated because officials needed to
develop the infrastructure to administer the program. For
example, the department needed to hire 6 new staff members to
oversee and manage the program. Officials reported that, as of
late January 2010, the department had still not hired any of
the six new staff required. Officials from the National
Association of Counties said that some localities had turned
down Recovery Act funding to avoid the administrative burdens
associated with the act's numerous reporting requirements.
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\14\ GAO, Recovery Act: Status of States' and Localities' Use of
Funds and Efforts to Ensure Accountability, GAO-10-231 (Washington,
D.C.: Dec. 10, 2009).
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State, Local, or Tribal Issues.--In our recently issued
report on factors affecting the implementation of Recovery Act
projects, we noted that the economic recession affected some
states' budgets, which, in turn, affected states' ability to
use some Recovery Act funds.\15\ For example, according to a
recent report by DOE's Office of Inspector General,
implementation of the Weatherization Assistance Program's
Recovery Act efforts was delayed in part by state hiring
freezes, problems resolving local budget shortfalls, and state-
wide furloughs.\16\ State-level budget challenges have affected
the implementation of Recovery Act projects. For example,
officials from the Department of Defense told us that because
states were experiencing difficulties in passing their current-
year budgets, some were unable to provide matching funds for
certain Army National Guard programs. As a result, the
Department of Defense had to revise its Recovery Act project
plan to cancel or reduce the number of Army National Guard
projects with state matchingfunds and replace them with other
projects that did not require matching funds. Officials from
the Department of Housing and Urban Development also told us
that project starts in some instances were affected by the need
for state and local governments to furlough employees as a
result of the economic downturn.
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\15\ GAO-10-383.
\16\ DOE Office of Inspector General, OAS-RA-10-04, Special Report:
Progress in Implementing the Department of Energy's Weatherization
Assistance Program Under the American Recovery and Reinvestment Act
(February 19, 2010).
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GAO Has Ongoing Work on DOE Recovery Act Programs
In a report issued yesterday, we discussed recipient reporting in
DOE's Weatherization Assistance Program.\17\ Specifically, we noted
that reporting about impacts to energy savings and jobs created and
retained at both the state and local agency level is still somewhat
limited. Although many local officials that we interviewed for that
review have collected data about new hires, none could provide us with
data on energy savings. Some states told us they plan to use
performance measures developed by DOE, while others have developed
their own measures. For example, Florida officials told us they plan to
measure energy savings by tracking kilowatts used before and after
weatherization, primarily with information from utility companies. In
addition, local agencies in some states either collect or plan to
collect information about other aspects of program operations. For
example, local agencies in both California and Michigan collect data
about customer satisfaction. In addition, a local agency in California
plans to report about obstacles, while an agency in New York will track
and report the number of units on the waiting list.
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\17\ GAO-10-437.
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As we reported, DOE made several outreach efforts to their program
recipients to ensure timely reporting. These efforts included e-mail
reminders for registration and Webinars that provided guidance on
reporting requirements. For the first round of reporting, DOE developed
a quality assurance plan to ensure all prime recipients filed quarterly
reports, while assisting in identifying errors in reports. The
methodology for the quality assurance review included several phases
and provided details on the role and responsibilities for DOE
officials. According to DOE officials, the data quality assurance plan
was also designed to emphasize the avoidance of material omissions and
significant reporting errors.
In addition to our reviews of states' and localities' use of
Recovery Act funds, GAO is also conducting ongoing work on several DOE
efforts that received Recovery Act funding, including the Loan
Guarantee Program and the Office of Environmental Management's
activities.
As I noted earlier, Congress made nearly $4 billion in Recovery Act
funding available to DOE to support what the agency has estimated will
be about $32 billion in new loan guarantees under its innovative
technology loan guarantee program. However, we reported in July 2008
that DOE was not well positioned to manage the loan guarantee program
effectively and maintain accountability because it had not completed a
number of key management and internal control activities.\18\ To
improve the implementation of the loan guarantee program and to help
mitigate risk to the federal government and American taxpayers, we
recommended that, among other things, DOE complete internal loan
selection policies and procedures that lay out roles and
responsibilities and criteria and requirements for conducting and
documenting analyses and decision making, and develop and define
performance measures and metrics to monitor and evaluate program
efficiency, effectiveness, and outcomes. We are currently engaged in
ongoing work to determine the current state of the Loan Guarantee
Program and what progress DOE has made since our last report, and we
expect to report on that work this summer.
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\18\ GAO, Department of Energy: New Loan Guarantee Program Should
Complete Activities Necessary for Effective and Accountable Program
Management, GAO-08-750 (Washington, D.C., July 7, 2008).
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Ongoing work also focuses on DOE's Office of Environmental
Management, which also received Recovery Act funding. The Office of
Environmental Management oversees cleanup efforts related to decades of
nuclear weapons production.\19\ The Recovery Act provided DOE with $6
billion-in addition to annual appropriations of $6 billion-for cleanup
activities including packaging and disposing of wastes, decontaminating
and decommissioning facilities, and removing contamination from soil.
DOE has begun work on the majority of its more than 85 Recovery Act
projects at 17 sites in 12 states and has spent nearly $1.4 billion
(about 23 percent of its total Recovery Act funding) on these projects.
We are currently conducting work to evaluate the implementation of
these projects, including the number of jobs that have been created and
retained, performance metrics being used to measure progress, DOE's
oversight of the work, and any challenges that DOE may be facing. We
expect to report on that work this summer.
---------------------------------------------------------------------------
\19\ DOE estimates that the total cost to complete this work will
come to about $300 billion and that it will take several more decades.
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Mr. Chairman, this completes my prepared statement. We will
continue to monitor DOE's use of Recovery Act funds and implementation
of programs. I would be happy to respond to any questions you or other
Members of the Committee may have at this time.
The Chairman. Thank you very much.
Ms. Nellenbach, go right ahead.
STATEMENT OF MICHELE NELLENBACH, DIRECTOR, NATURAL RESOURCES
COMMITTEE, NATIONAL GOVERNORS ASSOCIATION
Ms. Nellenbach. Thank you Chairman, Ranking Member
Murkowski.
My name is Michele Nellenbach. I'm the director of the
Natural Resources Committee for the National Governors
Association. On behalf of the Governors, thank you for this
opportunity to talk with you about what they've experienced,
over the last year, implementing DOE's ARRA-related programs.
In October 2008, the Governor sent a letter to the Hill and
also met with then Governor--then President-elect Obama to talk
about stimulus funding and what they would like to see in a
bill. They had identified 4 items. One was FMAP; the second was
infrastructure funding; the third was accountability
provisions--the Governors wanted the tough questions about how
they're going to spend this money, they wanted the use-it-or-
lose-it provisions, they asked for those things in the bill;
and finally, they asked for no new red tape. They got 3 of the
4. As you just heard from GAO, I think the fourth is the reason
we're here today, is because of some of the obstacles
encountered dealing with that red tape.
Now, the Governors do believe most of that is behind us
now. So, I'd like to focus, sort of, on what we see as the path
forward. There are a few issues that are still out there that
we need to address.
DOE is working tirelessly to do NEPA reviews, but they are
still taking a--they're still taking some time. We had one
State that had its EECBG grant approved in September 2009. They
are still waiting for that NEPA determination, and they cannot
spend that money until they have it. So, that's still an issue.
Again, DOE has got SWAT teams on it now, and they're working
tirelessly to get those reviews done. They've established a
pretty aggressive agenda for when they want to do that, but it
is a concern, moving forward.
One issue that hasn't been talked very much about, and is a
very big issue for the Governors, is reporting requirements.
The Governors don't just oversee the Energy Program, they--we
have--$240 billion worth of the Recovery Act money is going
through the States or to the States. That's a lot of money to
manage. While we're happy--they're happy to do it, and
committed to meeting the goals of the Recovery Act, there is
some concern that some recent actions by the Department, if
others pile on, it's really going to overwhelm the programs
with administrative requirements.
The DOE finalized, this week, a requirement that we--that
the States report monthly on the State energy program and the
weatherization program. We expect, very soon, to get
notification that the same monthly requirements will kick in
for EECBG.
So, putting this in the context of State budgets, as you
all know, talking to your States, they are not hiring; they are
laying off workers; they're furloughing workers; programs that
previously were untouchable, like K-12 education, unfortunately
are very much touchable now.
So, we need--they need every possible man-hour committed to
approving applications and getting that money out the door so
that we can be weatherizing homes and doing energy audits and
getting people back to work. That's what the Governors want to
be doing. Instead, they're going to have to devote more man-
hours to sending reports to Washington that are not going to
affect the year-long delay we've encountered, they're not going
to increase the number of homes we weatherize just because
we're reporting more often. So, that's a very big concern for
the Governors.
A recent development from last week: As you all know, with
each Weatherization Program in a State, there's an approved
weatherization plan that indicates the exact number of homes
that State believes it has the money and the time and the staff
to weatherize. Last week, the Department sent out letters to
all the energy officials in the country--in each State, giving
them a new target for homes to be weatherized that is above and
beyond what is in those plans. Now, I understand from the--Mr.
Rogers' written statement that they're still committed to the
600,000 home weatherized goal, which we're really happy to hear
about, because that's the goal that we can meet, based on the
numbers in those plans. So, we're just concerned about what the
expectations are, moving forward, and want to work with the
agency to clarify exactly what number the States are supposed
to be striving for.
So, those are just a few of the issues that are moving
forward. Again, the major issues, the big problems, we think
are largely behind us, and States are having a great deal of
success. What it's important to remember is that ARRA gave the
States until September 10, 2010, to obligate the money. The
Governors will meet that number. Then we have until March 2012
to spend the money. So, for all 3 of these programs--EECBG,
Weatherization, and SEP--they have plans in place to spend that
money over the course of the next 2 years.
We're already seeing a lot of successes. For instance, in
the State of Kansas, they have a--they've trained 45 new energy
auditors. That's up 15 from a year ago. Most of those auditors
have gone out and started their own new businesses. So, that's
job growth, right there in Kansas, and its promoting the green
energy economy through energy audits.
In New York State, they're on their third request for
proposals for $74 million of its State energy program. They're
going to fund energy conservation projects, energy efficiency,
and renewable energy programs. We've heard from State after
State that they're oversubscribed for a lot of these programs,
there's a huge demand for them.
Puerto Rico estimates that 15--5,500 families will benefit
from their weatherization program. They have set up a hotline,
of sorts--a call center; and in the first month of the call
center they set up, 11,000 appointments were scheduled.
So, there are some great things happening in the States.
Again, I just would like to close with stating that the
Governors are committed to meeting the goals that Congress laid
out for them. They have 2 years to do that. They have through
March 2012. So, I think you'll see a significant ramp up, and
particularly in weatherization, in the coming weeks and months,
now that the Davis-Bacon issue has been resolved on that
program.
With that, I'll close and would be happy to take any
questions.
[The prepared statement of Ms. Nellenbach follows:]
Prepared Statement of Michele Nellenbach, Director, Natural Resources
Committee, National Governors Association
Chairman Bingaman, Senator Murkowski and Committee Members, on
behalf of the National Governors Association, thank you for the
opportunity to testify on implementation of the American Recovery and
Reinvestment Act's (ARRA) energy-related provisions.
As you know, ARRA outlined three basic goals: spend the money
quickly, create jobs, and maintain full transparency and accountability
in spending taxpayer dollars. Governors have worked diligently since
passage of the Act on February 17, 2009 to efficiently and
transparently manage and spend over $240 billion in ARRA funds flowing
to or through states. While there have been delays at the federal and
state levels in fully implementing some of ARRA's energy-related
programs, those delays are mostly behind us and states are focused on
meeting the Act's September 30, 2010 deadline to obligate and expend
all funds by the Department of Energy's (DOE) deadline of spring 2012.
Background
On October 27, 2008, the National Governors Association (NGA)
joined with five other associations that represent state and local
elected officials to urge congressional leaders to provide
countercyclical assistance to state and local governments to help
offset declining tax revenues and growing safety net expenditures. NGA
asked that Congress provide a two-year increase in the Federal Medical
Assistance Percentages, a Medicaid component that would provide
immediate fiscal relief to states. NGA also asked that the stimulus
package include funding for infrastructure, including funds for
airports, highways, transit, clean water, drinking water and schools.
While NGA did not take a position on the inclusion of state energy and
weatherization programs in the stimulus bill, governors are committed
to efficiently using these funds to create jobs, reduce energy costs
including for low-income citizens and small businesses and promote
renewable energy.
State Energy Program; Weatherization Assistance Program; Energy
Efficiency and Conservation Block Grant
ARRA provided significant increases for three energy programs
administered by state and local governments: the State Energy Program
(SEP) received $3.1 billion; the Weatherization Assistance Program
(WAP) received $5 billion and the newly-created Energy Efficiency and
Conservation Block Grant (EECBG) received $3.2 billion. In the cases of
SEP and WAP, these amounts represented significant increases above the
programs' annual appropriations of $50 million in fiscal year 2009 and
$200 million respectively. EECBG, as a new program, had never received
an appropriation nor had any existing infrastructure or regulations to
guide its implementation.
ARRA also continued several existing program requirements and
imposed new restrictions on the programs. For example, ARRA continued
requirements that the programs comply with the National Environmental
Policy Act (NEPA) and the National Historic Preservation Acts (NHPA);
laws requiring sometimes lengthy processes to ensure the projects have
a minimal environmental impact and protect historic buildings. In
addition, although SEP and WAP had always been exempt from Davis Bacon
prevailing wage requirements and Buy American procurement provisions,
ARRA required recipients of SEP, WAP and EECBG funds to comply with
both provisions. These new and existing requirements, especially when
combined with unprecedented levels of funding and ARRA's objectives of
accountability and transparency, required the Department of Energy
(DOE) to establish new programguidelines before states could fully
implement the programs.
Federal Delays
In December 2009, NGA sent Secretary Chu a letter along with its
colleagues in the other ``Big 7'' associations (the National Conference
of State Legislatures, the National League of Cities, the U.S.
Conference of Mayors, the National Association of Counties, the Council
of State Government and the International City Managers Association)
articulating frustration with the slowness in which federal guidance
was issued. This frustration was subsequently underscored by both the
Government Accountability Office and DOE's own Inspector General (OIG)
in reports detailing some of the obstacles the Department encountered
in 2009. The OIG summed up the situation by stating `` . . . as
straight forward as [the Weatherization Assistance Program] may have
seemed and despite the best efforts of the Department, any program with
so many moving parts was extraordinarily difficult to synchronize.''
The following paragraphs outline federal obstacles identified by
states and articulated by GAO and OIG as having slowed spending for the
SEP, WAP and EECBG programs.
NEPA/Historic Preservation: Despite having experience with NEPA and
the NHPA, ARRA's significant increase in funding for SEP and WAP
generated significantly more projects subject to NEPA and NHPA review.
In hindsight, increasing the capacity of the NEPA and historic
preservation processes would have helped avoid delays caused by the
sheer volume of projects subject to review. We very much appreciate
that DOE has developed a model programmatic agreement for states to use
that will speed historic preservation reviews, but note that the model
was just released in February of this year. In contrast, NEPA reviews
continue to be a problem. For instance, DOE is still conducting its
NEPA review for one state's EECBG plan that was approved in September
2009. Until the NEPA review is completed, the state cannot use its
EECBG funds.
Davis Bacon--While the Secretaries of Energy and Labor issued a
joint memorandum in July 2009 encouraging recipients to spend the money
while the Department of Labor conducted the wage survey necessary to
determine the prevailing wage for weatherization projects, many states
did not proceed with awarding grants out of fear of future liability.
States were concerned they would have to later divert funds from one
project to retroactively pay workers on another project that were
unintentionally paid less than the prevailing wage or would have to
take money away from workers who were paid more than the contractually-
mandated prevailing wage.
While the new wage determination is now in place for the WAP, DOE
just received final word from the Department of Labor stating that this
same wage rate cannot be used for residential projects funded through
EECBG and SEP. This delay, through no fault of DOE, tied up millions of
dollars from these programs.
Inconsistent messages: DOE encouraged states to establish loan loss
reserves, a credit enhancement mechanism through SEP and EECBG.
However, it has recently come to light that such credit enhancements
may be disallowed under an OMB circular. Several states are holding
funding until this issue is resolved.
Reporting
Since December, communication between DOE, NGA and the other Big 7
organizations has improved. Representatives of the seven associations
now have weekly calls with the department to review issues and receive
updates. However, there is one remaining issue over which the Governors
are at odds with the department: DOE's new monthly reporting
requirements.
While states share the DOE's interest in tracking spending and job
creation, the additional reporting sought by the department will do
nothing to speed the expenditure of funds or hasten the creation of
jobs through these programs. States have made it clear that from a
capacity standpoint, their personnel are already fully dedicated to
implementing ARRA programs and meeting quarterly reporting
requirements. Any additional requirements or responsibilities will
diminish the amount of time state officials can spend implementing the
programs and meeting existing requirements.
States were particularly dismayed that OMB gave DOE emergency
information collection authority for the SEP and WAP programs and
required that DOE seek public comment only on how to implement the
reporting authority and whether to proceed with monthly reporting for
the EECBG program. I have attached the comments submitted by the NGA,
the Council of State Governments and the National Conference of State
Legislators expressing our concerns with the monthly reporting
requirements, and ask that the letter be included in the hearing
record.
NGA maintains that the quarterly reports DOE already receives and
the OMB jobs reporting guidance issued on December 18, 2009 are
sufficient to meet federal data collection needs, and that DOE's
additional job counting requirements are inconsistent with existing job
calculations. While OMB requires all recipients report on full time
equivalent (FTE) jobs created by ARRA funding, DOE will also now
require the collection of non-federally funded FTEs. NGA believes this
invites criticism that recipients are using subjective calculations to
`inflate the numbers' to make ARRA look better. One of OMB's goals with
its new guidance was to move away from subjective criteria to improve
the job calculation. As noted by OMB in its guidance, ``Previous
guidance required recipients to make a subjective judgment on whether a
given job would have existed were it not for the Recovery Act. The
updated guidance eliminates this subjective assessment and defines jobs
created or retained as those funded in the quarter by the Recovery
Act.''
Further, DOE has added to its requirement that states report
quarterly on more than 100 SEP metrics, a requirement that states
report monthly on over 40 metrics. States are awaiting a final
determination as to whether similar reporting requirements will be
placed on EECBG.
Even if there is some value in having the information the
Department is seeking on a monthly basis, NGA disagrees that the value
of that information exceeds the level of burden it places on state and
local recipients. States have designed new computer programs and
systems to automate the unprecedented reporting requirements of ARRA.
If DOE proceeds with its proposals for new data points on a monthly
timeframe, state systems will have to be reprogrammed or changed
increasing the initial burden of the requirements beyond what DOE has
projected.
More importantly, DOE's proposed requirements must be viewed as
part of the comprehensive reporting process required by ARRA. Over half
of the states are central reporting states for Section 1512 reporting
purposes, meaning that reports flow through a central system with its
own level of verification and validation. Adding reporting requirements
on recipients therefore translates into additional hours at each level
of government responsible for collecting information. These additional
reporting requirements were not included in the states' original
estimates of personnel costs which will now have to be recalculated
potentially affecting overall grant amounts.
Governors are very concerned that other departments will follow
DOE's lead and institute their own monthly reporting requirements. For
states charged with administering more than $240 billion worth of
recovery funding on thousands of projects, any further reporting
requirements threaten to quickly overwhelm recipients and slow
implementation.
Fiscal Condition of the States
A final critical factor in the expediency with which funds are
being spent is capacity and the financial crisis affecting nearly all
state and local governments. According to a fiscal survey conducted by
NGA with the National Association of State Budget Officers in February,
states experienced historic drops in revenues in fiscal years 2009 and
2010, which resulted in a 3.4 percent decline in general fund spending
for fiscal 2009 and a 5.4 percent decline in fiscal 2010. Moreover,
between now and the end of fiscal 1012, state balanced budget
requirements will force states to close budget gaps in excess of $136
billion. These gaps translate into spending cuts, hiring freezes and
furloughs that hinder the ability of states to implement new programs
or administer the explosive growth in programs like SEP and WAP. As the
OIG noted:
Ironically, given the anticipated stimulus effect of the
program, economic problems in many states adversely impacted
their ability to ensure that weatherization activities were
performed. State hiring freezes, problems with resolving
significant local budget shortfalls, and state-wide planned
furloughs delayed various aspects of the program and
contributed to problems with meeting spending and home
weatherization targets.
While the OIG was speaking of the WAP program, its comments could
just as easily be applied to the SEP and to a lesser extent, the EECBG,
which had to be created from the ground-up. ARRA itself did not provide
administrative funding for the states. The Weatherization program does
authorize states to use 5% for administrative expenses and EECBG and
SEP authorize the use of 10%, but most state hiring-freezes apply
across the board, making it extremely difficult for states and local
governments to rapidly increase capacity to the level proportionate
with the amount of funding provided.
State Implementation
Despite federal delays and state and local fiscal constraints,
states are focused on using ARRA money to create jobs and promote
energy conservation. Governors believe that most of the obstacles to
implementation are now behind us and are confident states can fully and
efficiently spend SEP, WAP and EECBG funds. Here are just a few
examples of the successes Governors are having throughout the country
with their energy programs:
1. The State of Minnesota typically provides about 4,000
Minnesota households per year with weatherization services, but
with ARRA the state expects to weatherize 17,000 homes by March
2012. Minnesota estimates that the enhanced weatherization
program has created over 340 new jobs through December 31,
2009.
2. OH was one of the few states that proceeded with
weatherization projects without having the final wage
determination from DOL and as a result, has weatherized 7,289
homes and created job activity equivalent to 2,485 FTE jobs.
DOE estimates that for every $1 invested in OH's weatherization
program returns $2.73 to the household and society. Further,
since January 2009, OH has trained over 350 weatherization
workers, 100 inspectors, 130 existing heating contractors and
completed 40 inspector and 10 heat tech re-certifications.
3. California has obligated $195.4 million of its $226
million SEP grant, including $25 million for a low interest
loan program that is currently oversubscribed and $20 million
for green jobs workforce training through the state. The state
expects to begin in April or May of this year a clean energy
business loan program that would use up the remainder of its
grant.
4. Pennsylvania also saw the infusion of ARRA money as a
prime opportunity to update and reform its program establishing
new standards and monitoring requirements for weatherization
work. The state also hired eight new program monitors to ensure
the quality of weatherization activities. While much of the
work in Pennsylvania was delayed by protracted budget
negotiations, weatherization efforts took off in November and
December. The state has already met its goal of weatherizing
1,500 homes per month.
5. Michigan's State Energy Program's funding opportunities
are oversubscribed by a range from 2:1 to 10:1. Among the
projects Michigan has funded is $15.5 million in grants to
support Clean Energy Advanced Manufacturing of renewable energy
systems and components in Michigan and the installation of
anemometers to assist in the collection of data to support wind
development in the state. Michigan plans to use $10 million for
its revolving loan program but is awaiting final DOE
determination regarding the loan loss reserve issue.
6. Michigan expects to have 100% of its EECBG funds under
contract by March 2012. Projects funded through EECBG will
include a mobile recycle center program and tire and electronic
recycling collections in Montcalm County; conducting building
audits and retrofits and developing energy conservation
strategies for several towns.
7. North Carolina used some of its ARRA SEP money to provide
technical assistance to applicants prior to the issuance of its
EECBG RFP. The Energy Office provided nearly 300 local
governments and education units with strategic energy plans.
The state will soon issue an RFP for the SEP program, following
on one already done for the EECBG program, providing funds to
its Main Street Programs which fund preliminary and detailed
energy surveys of private businesses. Grants are provided on a
dollar-for-dollar match.
8. North Carolina, like several other states, also saw the
infusion of ARRA money as an opportunity to update its
weatherization program to ensure timely and efficient
expenditure of federal funds. In particular, NC, through its
community colleges, redesigned its training programs for both
local nonprofits and vendors.
9. The State of Kentucky has established the Green Bank of
Kentucky Revolving Loan Program to promote energy efficiency in
state buildings with its first loan going to the Kentucky
Department of Education (KDE). KDE will use the loan to make
improvements and implement Energy Conservation Measures (ECM)
for a total savings of $2.15 million over the life of the
project.
10. Beginning in June, Kentucky will begin its Kentucky Home
Performance program leveraging ARRA funds at a 3:1 ratio with
private capital to make loans for home energy retrofits. The
state hopes to make available $20 million in loans.
11. The State of Mississippi has weatherized over 1,500 homes
using ARRA funding and anticipates weatherizing 5,468 homes by
March 2012.
12. The State of Nevada will use $7.9 million of its SEP
grant for energy efficiency and renewable energy projects in
state buildings and $10 million of its grant to provide energy
efficient lighting in each of Nevada's 17 school districts.
13. In Oklahoma, the Governor has committed $11million from
the state's SEP funding for compressed natural gas vehicle and
infrastructure development.
14. Pennsylvania has allocated $10 million from its SEP grant
for the deployment of innovative alternative and renewable
energy generation, efficiency and demand side reduction
projects. Another $12 million of its SEP grant will fund a
competitive grant program for combine heat and power projects.
Conclusion
Thank you again for the opportunity to talk with the Committee
regarding state implementation of DOE's ARRA-funded energy programs.
Governors are committed to the successful implementation of these
programs over the next two years and are optimistic about their
potential to create jobs and energy savings.
The Chairman. Thank you very much for your testimony.
Mr. Woolf, go right ahead.
STATEMENT OF MALCOLM WOOLF, DIRECTOR, MARYLAND ENERGY
ADMINISTRATION, AND VICE CHAIR, NATIONAL ASSOCIATION OF STATE
ENERGY OFFICIALS, ANNAPOLIS, MD
Mr. Woolf. Thank you, Mr. Chairman.
My name is Malcolm Woolf. I am appearing today on behalf of
the National Association of State Energy Officials. I'm vice
chair of NASEO, as well as serving as--on behalf of Governor
O'Malley as director of the Maryland Energy Administration.
From NASEO's perspective, the energy portion of the
stimulus funds has been a success. Clean energy investments are
being made, in every State, that address the Nation's short-
term needs to boost job creation with our long-term needs to
reduce household bills, promote energy independence, and
preserve our environment.
I have 3 messages that I'd like to share with the committee
today:
First, over half of the State Energy program funds have
already been committed--over $1.8 billion--which enables the
companies to hire workers, purchase new products, even though
that money has not yet been spent, by the way that the Federal
Government and DOE tracks it. So, real jobs are being created
today, even if it's not showing up in GAO's numbers yet.
Second, the initial delays have been largely overcome.
Third, the ARRA energy investments are beginning to pay
significant dividends.
Let me briefly elaborate on each of these issues:
First, a survey of NASEO members last week indicated that
well over one-half, 1.8 billion, of the SEP funds are actually
committed and approximately $777 million is actually under
contract. This is critically important because, unlike other
programs, States generally pay for energy retrofits or
renewable installations only after the work has been
satisfactorily performed. However, businesses hire new workers
and purchase extra supplies many months earlier, when the
contracts are awarded. In other words, to evaluate how well
stimulus is doing in creating new jobs, it's more important to
look at the pipeline of projects and the work that's actually
committed than it is to look at the money actually being spent,
because the money isn't spent until all the work has been
completed.
Moreover, States are leveraging the Federal funds to
attract significant additional resources toward projects, a
fact that's ignored under Federal guidelines for calculating
job creation. In addition to the SEP program, States have made
considerable progress in implementing the other ARRA programs.
Spending under the EECBG program, which--over 2,000 grant
recipients--is accelerating in accordance with the statutorily
required local government plans. The ENERGY STAR Appliance
Rebate Program has been very popular with consumers and
retailers alike; in many States, it's oversubscribed. Spending
should generally be completed by the first half of 2010. In
addition, spending for weatherization funds has accelerated
significantly in recent years--in recent months--excuse me--
despite the initial delays caused by Davis-Bacon. We're
confident that the national target of 600,000 weatherized homes
by March 2012 will be achieved.
Progress under ARRA has certainly been slower than anyone
would've hoped. Much of the initial delays were caused by the
need of DOE and the States to ramp up and to comply with a host
of newly applicable requirements. For example, the NEPA statute
for States to look for shovel-ready projects that literally
didn't involve shovels because physical construction would take
too long and trigger the lengthy NEPA review. A year later, DOE
has now issued over 5,000 NEPA determinations, which equates to
$1.8 billion of spending.
ARRA has also applied Davis-Bacon to the State
weatherization activities for the first time. We had to wait
for the establishment of wage-class rates from the Department
of Labor, which didn't occur until September 2009. Contracts
were issued immediately thereafter, and the work has ramped up
dramatically as a result. We're still waiting for wage
determinations in 5 States. In addition, we understand that the
Department of Labor recently declined to allow the wage rates
for residential energy efficiency retrofits under the
Weatherization Program to be applied to the exact same
activities under the EECBG or SEP programs. With approximately
$800 million in residential energy efficiency retrofits planned
in the EECBG and SEP programs, we need a rapid resolution to
that problem. There's no reason why a contractor doing energy
retrofits in a low-income home on Monday doesn't get paid the
same wage rate if they're doing it in a private home on
Wednesday.
I've heard it said that ``statistics lie, but stories tell
the truth.'' I've included, in my written testimony, stories
from the States represented on the committee showing how the
clean energy investments are paying dividends in your State. In
Maryland, I could share stories about the over 1300 low-income
residents who are having their apartments retrofitted to reduce
their bills or the roughly 1,000 homeowners who are trying to
take control of their own energy future by installing solar,
geothermal, or even backyard wind systems in their homes.
But, the one story that I'd like to highlight today is our
innovative effort to tackle one of the fundamental barriers
preventing further investment in clean energy by homeowners,
and that's the upfront cost. We--the emPOWER Financing
Initiative in Maryland seeks to leverage the public money from
stimulus with private capitol to provide homeowners low-cost
loans voluntarily secured through their property. Both
Annapolis and Montgomery County have enacted local enabling
jurisdiction, and we should be issuing loans shortly.
In sum, the ARRA clean energy investments are working to
promote--are working to create jobs and reduce household bills
in the short run, as well promote American energy independence,
economic competitiveness, and the environment in the long run.
I thank you for the opportunity to share our experiences. I
look forward to your questions.
[The prepared statement of Mr. Woolf follows:]
Prepared Statement of Malcolm Woolf, Director, Maryland Energy
Administration and Vice-Chair, National Association of State Energy
Officials, Annapolis, MD
Mr. Chairman, my name is Malcolm Woolf and I am appearing today on
behalf of the National Association of State Energy Officials (NASEO). I
am Vice-Chair of NASEO and the Director of the Maryland Energy
Administration. I am also pleased to be here today alongside the
National Governors Association, where I previously served as the Staff
Director of the Natural Resources Committee. I also previously worked
as a staff counsel for the Senate Environment and Public Works
Committee.
NASEO represents the energy offices in the states, territories and
the District of Columbia. We are focused on a balanced national energy
policy. At the present time, the Association is focused on working with
the states in ensuring that the energy portion of the stimulus funds
directed to state activities is effectively distributed.
The short answer is that the energy portion of the stimulus funds
operated by the state governments has been a success. Clean energy
investments are being made in every state that are creating jobs,
reducing household bills and promoting renewable power sources to
accelerate our energy independence. We are seeing a significant ramp-up
in spending across the United States and we are certainly observing a
flood of innovative activities by state and local governments.
During NASEO's recent winter meeting here in Washington, D.C., I
discussed with my colleagues a wide variety of creative solutions being
implemented by my fellow energy directors. The dynamism and progress
was palpable. In my own state of Maryland, we have instituted energy
programs in all sectors of the economy that are retaining and producing
jobs.
Today, I will focus on describing our activities under the State
Energy Program (SEP) and the Energy Efficiency and Conservation Block
Grant (EECBG). I will also discuss the Weatherization Assistance
Program (WAP) and the Energy Star Appliance Rebate Program. SEP
received $3.1 billion under ARRA, EECBG received $3.2 billion under
ARRA, WAP received $5 billion under ARRA and the Appliance Rebate
Program received $300 million under ARRA.
SEP and WAP have been funded since the 1970s and have a strong
track record of success. ARRA funds were added to base funding with an
existing infrastructure. Congress was wise to build on existing
programs and existing authorizations. EECBG was authorized in the
Energy Independence and Security Act of 2007 (EISA) and the Appliance
Program was authorized in the Energy Policy Act of 2005 (EPACT 2005).
Neither of these programs received funding until ARRA was passed.
There is no doubt that the ramp-up of existing programs and the
implementation of new programs has been a challenge, both at the
federal and state levels. The federal government has been adding and
training new employees . The state governments are suffering through
the worst cutbacks since the Great Depression, which has led to
difficulties, but we are adding energy jobs and persevering to
effectively invest the federal funds.
over half of sep funds are already committed, which enables companies
to hire employees and begin work long before funds are formally
``spent''
In the case of SEP and EECBG, the present reporting mechanisms
under ARRA do not reflect the whole picture. With respect to SEP, our
recent survey from last week indicates that well over one-half ($1.8b.
+) of the SEP funds are committed (grantees selected and awards made)
and approximately $777 million is actually under contract. This is very
important, because the actual rate of ``costing'' or federal spending
does not accurately reflect the jobs created or the impact on the
economy. I should also note that DOE NEPA reviews have been completed
for $1.86 billion in projects.
For illustrative purposes, the vast majority of the states utilize
private sector companies to conduct the energy efficiency activities.
In the case of an energy service company (ESCO) that has received a
contract to undertake energy efficiency upgrades in a school building,
the contract generally provides that payments are not made until the
work is actually completed or milestones under the contract are
satisfied. In general, the ESCO begins hiring upon contract execution
and conducts the work. The economy is directly and indirectly impacted.
However, the spending or ``costing'' (in federal parlance) does not
occur until the work is completed, the state is satisfied that the work
is done properly and then the payment is made. Payments are not
generally made up-front in order to protect the public against waste,
fraud and abuse. Our ability to enforce the terms of these agreements
are greatly enhanced if the state is holding the money, not the
contractor. So, while the ``costing'' figure is low, the work conducted
and jobs created is accelerating. We will not waste federal or state
dollars by changing these contract terms. However, businesses can add
employees and receive financing once the binding contracts are
executed, with appropriate performance guarantees.
The state energy director in Arizona recently reflected on this
example, when he described being in his office one day in January when
two contractors appeared looking at lighting and examining the facility
in great detail--they were hired by the state's contractor--and they
were doing a technical energy audit as the precursor to implementing
the energy efficiency measures. The state had not yet paid them, thus
the federal money was not yet ``costed'' but the work was surely being
done and these individuals were surely being paid.
Moreover, the federal tally of jobs created does not reflect the
substantial leverage states are achieving with excellent program
design. In the case of state and local government building retrofits,
states typically obtain 4-to-1 private capital leverage for projects.
The federal guidelines for jobs created does not allow for the counting
of any of the jobs directly created by this leverage. Given states' use
of at least one third of SEP funding for these types of retrofits the
jobs count provided by DOE is far lower than reality.
Spending of WAP funds has accelerated this quarter, despite the
delays caused by Davis-Bacon compliance. The National Association of
State Community Service Programs (NASCSP) and the National Community
Action Foundation (NCAF) have been working closely with DOE to
accelerate program delivery. We are confident that the target of
600,000 weatherized homes by March of 2012 will be achieved.
For example, in New York the WAP program will dramatically exceed
its goal by weatherizing 15,000 low-income houses and apartments in
2010, with an ultimate goal of 45,000 units by March of 2012. 550
housing units have now been completed and more than 17,400 units are in
process. As of December 31, 2009, 226 jobs were directly created with
many more subcontractor jobs and more than 720 people have been
trained. In New York, $60 million from ARRA has been targeted for
multi-family dwellings.
In Arizona, 110 homes received weatherization services in September
and October 2009 with ARRA funds and an additional 369 houses were
weatherized with regular appropriated dollars (an increase of 50% above
normal rates).
EECBG funds have been provided to well over 2000 cities, towns and
tribes, many of which have not operated energy programs previously. In
addition, the authorizing legislation also requires the development of
an energy strategy. We have been impressed with the types of projects
that are being implemented. The states are also tasked to work with the
smaller communities directly. This has led to more coordinated energy
programs and the use of ``best practices.'' We are also working closely
with the U.S. Conference of Mayors, National League of Cities and the
National Association of Counties to share information and assist the
local and state governments.
The State Energy Efficient Appliance Rebate Program (SEEARP),
totaling $300 million, is being rolled out across the country,
generally in the first two quarters of 2010. The states are working
with retailers to identify target time frames for program initiation,
e.g., President's Day sales or Earth Day. The program is over-
subscribed and has had an immediate impact. The DOE Energy Savers web
site has updated information (www.energysavers.gov/rebates).
We are also trying to use these funds to transform energy markets
and produce long-term, sustainable jobs. Thus, it is critical to plan
our programs so that projects are conducted over time rather than over
1-3 months. This will help more effectively train workers, allow the
demand to increase and allow a ``green'' workforce to develop. SEP ARRA
funds are leveraging almost an additional $5 billion in investments,
beyond the ARRA dollars.
initial delays are now largely overcome
The most significant problems in ramping-up these programs have
simply been in the processing of the paperwork and the need for
federal, state and local employees to gear-up. This was an enormous
job. SEP went from $50 million to $3.1 billion (though state-
administered funding was in the hundreds of millions). WAP went from a
DOE funding level of $450 million (though much more when considering
other sources of funds) to $5 billion. EECBG went from $0 to $3.2
billion, with over 2,300 direct grantees. The Appliance Rebates went
from $0 to $300 million.
With that said, the work completed thus far has been extraordinary.
While there are, and there will be, examples of problems that are
slowing us down, the results have been very positive. While there have
been frustrations, the federal, state and local governments are working
together--we are sharing successful approaches and looking at ways to
streamline the systems.
To step up to the challenge, NASEO hired on a part-time basis (with
DOE support), 7 former state energy officials to help coordinate on a
regional basis to ensure that every time a problem was solved we would
not have to solve that exact problem again. DOE has also assembled a
remarkable team. Matt Rogers has been extremely helpful in moving the
ball forward. Cathy Zoi, as the Assistant Secretary for Energy
Efficiency and Renewable Energy, has been tremendously accessible and
moved quickly to find creative solutions. Gil Sperling first and now
Claire Johnson, as the heads of the Office of Weatherization and
Intergovernmental Programs (managing SEP, WAP and EECBG), and their
staff, have been critical in addressing problems. Scott Blake Harris,
the DOE General Counsel, recommended holding monthly calls with the
state energy officials and the appropriate legal officials in the
states to address problems. These calls have produced positive results.
General Counsel Harris has also imposed a 48-hour rule--he attempts to
solve problems in 48 hours. They have also set up a hotline
([email protected]) to respond to state and local legal problems.
Sky Gallegos, the Principal Deputy Assistant Secretary for
Congressional and Intergovernmental Affairs, has also been a key
problem-solver for the Department. The National Energy Technology
Laboratory (NETL) and the Golden Field Office (GO) are the key
procurement arms for the Energy Efficiency and Renewable Energy
Division (EERE) and they have been staffing up and improving their
response times. Have there been issues--absolutely. Do we wish that
problems were solved earlier--absolutely. However, we all recognize
that the personnel are trying hard to get the job done and are more
rapidly processing the paperwork.
The greatest burdens have been in five areas: 1) general ramp-up
issues; 2) the National Environmental Policy Act (NEPA); 3) Davis-
Bacon; 4) Buy-American; and 5) Historic Preservation. In each case,
spending has been delayed but the laws are being complied with and the
programs are being implemented. DOE's efforts to address these issues
resulted in the issuance of multiple guidance documents by the
Department in November and December 2009. With this guidance in hand,
states were then able to rapidly move funds to grantees. This process
is accelerating.
Ramp-up issues:--DOE has been faced with quickly building the
capacity to manage massive new responsibilities. In addition to huge
paperwork increases, DOE also needed to hire and train new personnel.
The rapid expansion at DOE has led to some inconsistent decisions where
one DOE program manager approves a state program while the identical
program is rejected by another DOE official.
To minimize the risk of waste, fraud or abuse, states also have
detailed procurement processes that hindered rapid ramp-up. In
Maryland, for example, any contract over $200,000 goes before a three
member Public Works Commission, consisting of the Governor, Comptroller
and Treasurer. While such procurement procedures take time, they help
ensure that taxpayers receive the maximum value for their dollar.
NEPA--NEPA posed a variety of challenges. First was simple
logistics--there were simply not enough trained DOE personnel to
evaluate these projects and programs. DOE has acted on over 5,000 NEPA
actions, though there are thousands more.
Second, NEPA forced states to look for ``shovel-ready'' projects
that didn't involve shovels, since physical construction would likely
trigger a lengthy NEPA review process. Maryland, for example, submitted
its SEP application in June 2009 with programs designed to qualify for
so-called ``Categorical Exclusions'' under NEPA. In early November
2009, DOE created ``templates'' for SEP and EECBG to make it easier for
state and local governments to get ``Categorical Exclusions.'' Once we
revised our application to fit the new DOE templates, DOE finally
approved Maryland's categorical exclusions in January 2010. For
example, NEPA reviews for solar activities in Tennessee has slowed
spending in that state. Nationwide, NEPA determinations have been
completed on over $1.8 billion of SEP projects.
Davis-Bacon--ARRA applied the Davis-Bacon statute to state energy
activities for the very first time, creating a series of issues. In the
WAP program we had to wait for the establishment of the wage rate for
WAP workers by the Department of Labor before issuing contracts for WAP
work. This wage rate was not established until September 2009, after
the survey was completed in late August. Contracts were issued within a
couple of months and work has ramped-up.
In the recent IG report (OAS-RA-10-04) regarding the WAP program,
the IG suggests that the states could have initiated these programs
without knowing the wage rates. Unfortunately, the DOE IG simply has a
lack of knowledge about these programs. If the preliminary wage rate
was too high, does the IG suggest that we should get the money back
from the employees? In the case of Ohio, where they did move more
aggressively, the Department of Labor essentially reprimanded the state
for moving too quickly. Wage determinations are still required for 5
states. In addition, we are still awaiting a determination by the
Department of Labor that the WAP wage rates for residential energy
efficiency programs can be utilized for the approximately $800 million
in residential energy efficiency programs planned under SEP and EECBG.
This determination will be critical and needs to happen quickly.
Twenty-five percent unemployment in the construction trades and a 38%
drop in reseidential construction jobs since the recession started,
could be partially alleviated by permitting these projects to go
forward.
Another provision of Davis-Bacon requires that employees be paid
weekly. In Maryland, and I believe elsewhere, many potential recipients
of federal stimulus funds have declined awards upon learning of the
need to reprogram their entire payroll system. It simply costs too much
to accept the federal grant.
Buy-American--For Buy-American requirements, three product waivers
have been issued since the start of 2010 for LED street lighting, CFLs
and certain types of electronic ballasts. These products are simply not
made here. Without more guidance in the Davis-Bacon and Buy-American
areas, the state and local governments are simply requiring that fund
recipients ensure that the laws are complied with. We recognize the
importance of these legal requirements; we are simply stating that it
has caused delay.
Historic Preservation--ARRA has created an avalanche of new work
for state historic preservation agencies. Maryland, for example, will
issue over a thousand ARRA grants and each one will need to be reviewed
by our state historic preservation office. We have worked
collaboratively to establish a screening process whereby grants at
newly constructed buildings are approved quickly, whereas work
performed at older buildings receive heightened scrutiny. Despite this
workable arrangement, it sometimes causes frustrating delays. DOE, the
National Conference of State Historic Preservation Officers and the
Advisory Council on Historic Preservation recently concluded a model
agreement that will hopefully speed program implementation.
arra's energy investments are beginning to pay significant dividends
It is sometimes said that ``Statistics lie, but stories tell the
truth.'' Let me briefly highlight four examples of early successes that
Governor O'Malley and the Maryland Energy Administration have achieved
thus far. I believe these stories show that ARRA's clean energy
investments are beginning to show significant returns.
First, we announced last week the ``Greens at Liberty Road''
project, which involves the construction of 105 affordable rental
housing units for the elderly in northwest Baltimore County. The
typical resident will enjoy energy savings of approximately 20%. The
savings are particularly significant because low income families pay a
disproportionate share of their income on energy.
Thus far, over 1,300 apartments occupied by low income Marylanders
have been retrofitted to date with ARRA funds. The Maryland Energy
Efficiency Housing Affordability program provides grants for energy
audits and the purchase and installation of equipment and materials for
energy efficiency and renewable energy measures in affordable multi-
family rental housing. The program is an ongoing partnership between
the Maryland Department of Housing and Community Development and the
Maryland Energy Administration and is part of Governor Martin
O'Malley's EmPOWER Maryland initiative, which aims to reduce the
state's peak demand and overall energy consumption by 15 percent by
2015.
Governor Martin O'Malley also announced last week a ``Clean Energy
Economic Development Initiative'' grant to TDI, a Bethesda based
company that manufacturers components of energy efficient lighting.
With this funding, TDI will be able to transform their production from
`batch' to `continuous' and they anticipate hiring new employees. TDI
was one of four companies receiving the first round of performance-
based awards to businesses that will spur clean energy production and
create jobs in Maryland. Other winners include SWEBO, a Swedish-based
biomass company that recently opened its U.S. headquarters in Bowie,
Maryland, Competitive Power Ventures, which is proposing to build a
10MW solar installation in Charles County, and Maryland Environmental
Services, which is developing a poultry litter-based biomass facility
at the Maryland Eastern Correctional Installation.
To bring the benefits of clean energy within reach of Main Street
Maryland, Governor O'Malley has also invested $4 million of SEP funds
into the development of an innovative, property-assessed clean energy
(PACE) loan program. The EmPOWER Financing initiative seeks to leverage
public funds with private capital to offer local governments a
voluntary, clean energy loan program for their citizens. Maryland
families and small businesses will benefit from the opportunity to
obtain loans, which will be assessed on their property, to lower
upfront costs for energy efficiency improvements and renewable energy
installations. In close partnership with the Maryland Clean Energy
Center, both the City of Annapolis and Montgomery County have enacted
implementing local ordinances and several other localities are actively
following suit. We hope to issue the first 50 loans over the next
quarter.
My final story involves our residential solar grant program. With
hundreds of Marylanders on our wait-list, the Maryland Energy
Administration exhausted its annual budget early in the fiscal year.
Using ARRA funds, MEA was able to keep this program running. In just
the last few months, over 100 homeowners have installed systems on
their homes. An additional 185 homeowners have been approved for
grants, while over 400 individuals are on a wait-list. The wait-list
ensures a steady flow of work and avoids the boom and bust cycle, so
solar installers can hire new crews with the confidence that the funds
will continue through April 2012, the end of ARRA.
Qualified Energy Conservation Bonds--Last week, when the Senate
passed the first Jobs Bill, it approved a provision to allow Qualified
Energy Conservation Bonds (QECBs), which are currently structured as
tax-credit bonds, to be issued as direct-subsidy bonds, which have been
far more successful. This is an important change for a valuable yet
difficult-to-issue Stimulus bond program. I thank the Committee for
your leadership on this issue and encourage you to work with the House
to not only keep the Senate language in the final bill but also raise
the subsidy level.
Maryland's QECB allocation is a little more than $58 million, split
among 12 local governments and the state. Maryland's eligible local
governments are very interested in issuing QECBs to help finance viable
energy projects that will save energy and create jobs. Until the change
to direct-subsidy bonds and a higher subsidy level are enacted, QECBs
will continue to be tantalizingly out of reach.''
Smart Grid--We are also concerned about the apparent impasse
between the IRS and DOE on the taxability of ``Smart Grid'' grants.
These grants should not be subject to federal taxation. This is slowing
these projects and will reduce their reach and effectiveness.
programs in other states
More complete updates are attached to this testimony.*
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* Updates have been retained in committee files.
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Alabama--This state has focused on a revolving loan program ($25
million), funding for energy efficient school retrofits ($5 million)
and $20 million for state building energy efficiency retrofits
including performance contracting.
Alaska--The state is working to establish a bond program that would
utilize $18 million in ARRA funds to match $250 million in bonds for
revolving loans for state and municipal building retrofits. Their
appliance rebate program is targeted to begin on March 16, and will
work with Alaskans with disabilities.
Arizona--$19 million is being dedicated to school energy efficiency
programs, with additional innovative activities in the agricultural
sector and for non-profits.
Arkansas--This state has also established a revolving loan fund for
K-12 schools, job training at technical and community colleges and
industrial and agricultural energy efficiency programs. Arkansas has
also established a $12 million revolving fund for sustainable building
design.
Colorado--$19 million of Colorado's funds went to revolving loan
funds, New Energy Economy Development Grants, renewable energy finance
and a cooperative activity on technology commercialization with NREL.
Residential energy efficiency programs received almost $6 million and a
variety of renewable energy activities received almost $10 million.
Kansas--Over $34 million in ARRA funds have been committed to
revolving loans for residences and small businesses. The state is
providing a $250 rebate to local banks to defray the costs for
financing energy efficiency improvements.
Kentucky--Almost $10 million is allocated for energy efficiency
programs in schools. They have also allocated funds for agricultural
energy programs and a Home Performance with Energy Star program.
Louisiana--Almost $26 million was allocated to energy efficiency in
state university buildings. They have also expanded their home energy
efficiency rebate (HERO) program. They have also developed a commercial
buildings energy efficiency program.
Michigan--They allocated $24 million for energy efficiency in small
industrial operations and supplier expansion activities for wind,
solar, geothermal and biomass.
New Hampshire--This state has 16 separate SEP programs, including
their revolving loan fund and a first-time homebuyer's energy
efficiency program.
New Jersey--$7 million has been allocated to fund solar
installations on multi-family buildings for income-qualified
recipients. Residential energy efficiency activities also received $8
million (including single and multi-family residences).
New Mexico--$24 million under SEP was awarded to schools, colleges,
tribes and other agencies to improve energy efficiency. Transportation
programs and community-based district heating and cooling also received
funds.
North Carolina--Over $11 million was allocated to small businesses
and industry for energy savings and renewable energy activities. $18
million was used to create an energy investment revolving loan fund for
businesses, schools and other agencies.
North Dakota--This state is working with the utilities providing
consumer rebates for installation of energy efficiency and renewable
energy equipment. Their wide variety of projects include extensive work
with the agricultural and industrial sector and a high efficiency
furnace rebate program.
Pennsylvania--$82 million in SEP ARRA funds have been awarded, with
most of the contracts executed for wind, biogas, combined heat and
power and solar projects. Like many states, Pennsylvania has allocated
funds for revolving loan programs ($12 million for the Green Energy
Revolving Loan Fund).
South Dakota--They committed $20 million for a revolving loan for
state institutions. They are also targeting on-site generation
activities, ground source heat pumps and HVAC improvements.
Tennessee--$24 million has been committed to the Tennessee Solar
Institute, and additional funds for comprehensive solar programs
throughout the state.
Utah--$3 million has been dedicated to a whole home retrofit
initiative with an additional $3 million for builder rebates for high
performance homes. Public schools also received funding directly and
through a revolving loan.
Vermont--In this state they are expanding grants and loans for
renewable energy through the Clean Energy Development Fund.
Washington--They established an energy efficiency and renewable
energy loan and grant program. They also dedicated $14 million for
community-wide urban residential and a commercial energy efficiency
pilot program. An additional $5 million was provided as a credit
enhancement to support $50 million in project expenditures.
Wisconsin--This states' Energy Independent Communities Program has
been on excellent example of state-local cooperation. This is
complementing efforts under EECBG and SEP. Wisconsin has utilized ARRA
funds to focus on manufacturing retooling and expanding new energy
efficiency and renewable energy efforts.
Wyoming--$19 million was provided for energy efficiency upgrades
for public buildings, tribal entities and non-profit organizations.
$3.5 million was contributed to weatherize homes for individuals above
the WAP level, up to 250% of poverty.
The Chairman. Thank you very much. Thank you all for your
testimony.
Let me start with a few questions. Matt, let me ask you, on
this issue that Ms. Nellenbach raised about monthly reporting.
I've heard this same concern raised in my home State, where the
same folks working in State government to get these funds
distributed and allocated and all are the ones who are being
asked to do these reports. They've been doing quarterly
reports, as I understand it, and now they've been told they
need to do monthly reports. I heard the same concern that I
think Ms. Nellenbach talked about is--if this is the Department
of Energy's requirement, then are we going to see this all
across the Federal Government, that we've got to do monthly
reports for all ARRA spending, going forward? It seems like a
very major recordkeeping burden. I don't know if there's any
justification that you folks have settled on, that you think
causes you to require it.
Mr. Rogers. So, in terms of the managerial reporting
requirements, if you think about the quarterly reporting, that
is about public accountability, making sure that, every
quarter, we talk about how many jobs are created and how much
money has been spent.
Monthly reporting is what I would refer to as ``managerial
oversight.'' We're targeting managerial oversight reporting
requirements on 12 specific projects that, up front, were
identified as potentially high risk areas, weatherization being
one of them, because what it allows us to do within the
Department is to focus resources on helping those States and
localities that are struggling the most.
So, if we take weatherization--it's actually a very simple
reporting requirement. We want units weatherized and funds
spent every month. By getting units weatherized and funds spent
every month, what it allows us to do, then, is to identify
those States and localities that are having the hardest time
actually getting the units done against the targets that they
have set for themselves working together with DOE. What that
then allows us to do is to focus our training, oversight, and
technical support resources on those communities that need them
the most.
The challenge is, without that data, we end up having to
search around and find the areas that are in most need. The
paradox is that sometimes the communities in most need, because
they are under water, don't even know what to ask for. What
this does is, it gives us the kind of managerial data that,
frankly, any business has. How much data do we need to have?
Just in those programs where there is a great risk that we may
not be achieving the numbers that we expect.
The Chairman. All right. I think, we'll just have to sort
of feel our way along and see if the requirement is one that
can be accommodated by the States and still get all the rest of
what they need to do done.
Let me ask--I think, also, you talked, Matt, about the
various programs that have been oversubscribed, and the number
of folks who've come forward with good applications that you
haven't been able to fund. Are there some particular areas that
you folks have made funds available in that you think
additional funds ought to be made available in by the Congress
in future budgets, for example, because of the quality and
quantity of applications that you've received?
Mr. Rogers. One of the real privileges of this role is to
look at the pipeline of new innovation going on in the United
States right now. It is a rich and deep pipeline of very high
quality projects.
The area that I was most excited about, and most
disappointed in our inability to fund fully, were the 48C
manufacturing tax credits. We were oversubscribed in that
program, by 3 to 1, with really terrific projects. We were able
to fund 183 projects, 43 States, for $2.3 billion, but we could
have easily done double that with projects that, as we went
through this competitive merit review process, were above the
line, really good projects that we would have been excited to
fund.
What we're trying to do under that program is rebuild U.S.
leadership in high technology, clean energy manufacturing. It's
in wind, it's in solar, it's in nuclear, it's in geothermal,
it's in energy efficiency, it's in the automotive sector, where
U.S. manufacturers have the potential to produce the most
competitive products in the world, but need the capital and
need the kind of tax breaks to be able to make upgrades to
their manufacturing facilities. So, that was the one that we
were most excited about the project pipeline, and most
disappointed with the quality of the projects that we were not
able to fund.
The Chairman. Let me just ask--this runs over my time, but
I'd like to ask one followup on that. We're likely to be
debating, on the Senate floor, one or more amendments related
to foreign-produced wind turbines, particularly wind turbines
produced in China, and whether or not it's appropriate for us
to limit the use of Recovery Act funds to--and tax benefits--to
projects that produce--or that involve the use of wind turbines
manufactured here in this country.
I don't know if you've had a chance to look at these
amendments, or if you have any thoughts about the issue; if you
do, I'd be interested in hearing.
Mr. Rogers. We share a common goal, which is creating jobs
for American workers. That's clearly the focus of the Recovery
Act, it's the focus of every dollar that we spend within the
Department of Energy. With respect to the 1603 program, in
particular, 100 percent of those funds go to U.S. projects. So,
the reporting has been more than a little misleading in this
area.
Vestas is a foreign company that has invested in the United
States, in Colorado, to build a facility. Those are the kind of
jobs that we actually want. We've seen, as a result of 1603 and
48C, $10 billion of foreign investment in the United States in
the last year. When Nissan builds an auto factory in Smyrna,
Tennessee, we are really excited about that, because that's
jobs for American workers. Frankly, whereever the headquarters
are, what we want are the jobs here.
The other issue which is important in this discussion is,
today about 63 percent of the value-added of a wind turbine, as
a simple example, is made in the United States; the rest is
imported. The biggest problem we have is not enough
manufacturing capacity in the United States. So, things like
the 48C program, where we're trying to expand the manufacturing
capacity, are essential. The most important thing we could do
to fix the--make sure we get more jobs in America is to expand
the manufacturing capacity here in the United States.
What we've done with the 1603 program--this is a program
that is really working. We were going to see about a 50-percent
drop in employment in the wind sector last year if we hadn't
done that. So, these were jobs that were saved. Instead, we saw
a 3-percent increase in wind energy capacity in the United
States, and an increase--we've more than doubled the American
content of wind turbines in the last 5 years. This is a program
that's working. What we need to do is build more manufacturing.
So, we are very excited about working with Congress to
develop programs that make sure more and more of that is U.S.
content. That, we can work with Congress and, I think,
develop--while I have not seen the current language. I think
the challenge is--what we don't want to do is stop a program
that's really, really working well and putting Americans to
work today.
The Chairman. Thank you.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Mr. Rogers, would like to follow up. I absolutely agree
with you that we need to be looking to the number of jobs that
are created here. Oftentimes you look at the name of the
corporation and where it's based, and you say, ``Ah, there's
the issue'' It oftentimes turns out to be a red herring. I
would like your comments on this American University report,
because in that report they indicate that almost 80 percent of
the money has gone to foreign manufacturers of wind turbines.
It may be that it's explained, as you have said, that they were
foreign-based. But, they go further to state that, ``The
stimulus bill created approximately 6,000 jobs overseas and
maybe a couple hundred in the United States.'' I am not sure if
this was necessarily part of the American University report,
but there are some press accounts that there is a Chinese
company called A-Power, which is helping to build a wind farm
in Texas. They expect to receive 450 million in stimulus.
dollars. The American partner on that project, which allows the
American base, estimates that it could create about 300
temporary construction jobs in this country, but it's creating
2,000 manufacturing jobs in China.
I agree with you, we have to do more to build our
manufacturing base here. But, can you comment on, first, the
American University report. How do we balance this out to
ensure that we really get the bulk of the jobs here in this
country, and not 6,000 overseas and a couple hundred here, and
then we then claim that this is a jobs-producing bill for us? I
would also like you, in this vein, to comment on the request
from our colleagues Senators Schumer, Casey, Brown, and Tester,
on their call for an immediate suspension of the Wind Energy
Grant Program, until we can sort all this out. If you can
address that, I would appreciate it.
Mr. Rogers. Over the last decade, one of the challenges
that the United States faced is that we did not have a set of
incentives, either for clean energy development or for clean
energy manufacturing, that were competitive on a global basis.
So, some of the most successful companies in the world decided
to startup elsewhere; they started in Spain, they started in
Denmark, they started in Germany. One of the things that we are
trying to do is to change that landscape.
So when we now have created a set of incentives, both on
the manufacturing side and on the development side, that are
attractive, these companies, the best companies in the world in
clean energy, are investing in the United States, because the
United States has actually created the most attractive market
for investment and job creation in the world. That's actually
what we want to be doing.
The 1603 program is doing that, and bringing those jobs
here. So, when the American University says that--I forget the
number--80 percent, 79 percent of the companies were
headquartered abroad, that's probably a true statement. The
fact that those jobs are here in the United States is somehow
missed in the report.
What we're seeing is investment in manufacturing. Gamesa is
a Spanish company. They took a U.S. steel facility and turned
it into a wind facility in Pennsylvania. They are now bringing
people back to work. Over the last month, they actually just
brought back 2 full shifts of operation because of the demand
that they saw under the 1603 program.
If we lead to an immediate cessation, the problem is that
what Gamesa will have to do is lay those folks off, because all
of the sudden the project can't continue going forward, because
the project somehow doesn't meet a requirement or because we
create such regulatory uncertainty that people say, ``You know,
I really don't want to move ahead.''
The last piece is with respect to the Texas project. There
is no project. We have no application. They haven't broken
ground on anything. One of the challenges that we face in clean
energy development--I'm sure you see this all time--is, lots of
people announce projects on paper, because they really, really
would like to attract investors, and they'd like to position
themselves well for other things. Until we have a project, we
have nothing that we can actually evaluate. If we have a
project, what we see is, in the vast majority of projects in
the United States, the vast majority of the content is
domestically based. So, we can only evaluate what we actually
have. There is no Texas wind project, other than on a press
release. So, until we see that application, it's really hard to
evaluate it.
Senator Murkowski. Would you dispute, the American
University report, when it says that some 6,000 jobs have been
created overseas and maybe a couple hundred is what----
Mr. Rogers. I would----
Senator Murkowski [continuing]. The terminology----
Mr. Rogers [continuing]. I would say that----
Senator Murkowski [continuing]. That they used.
Mr. Rogers [continuing]. That was factually false.
Senator Murkowski. Factually false. I will have to check
back on this, because we've looked at the situation with the
Spanish firm Iberdrola, and the manufacturer Gamesa. It was my
understanding within the Pennsylvania facilities, that they had
to lay off about 100 workers, and I'm understanding it's
temporary but, based on what's going on within the market, they
had to lay off their workers as well.
Mr. Rogers. With respect----
Senator Murkowski. So----
Mr. Rogers [continuing]. Specifically, to the Gamesa
facility, they called them back, about 3 weeks ago, to full
strength--again, based on the demand that they were seeing in
the marketplace. So, again, this is--these are the things that
we find very reassuring and very confidence- building. One of
the things that we don't--one of the challenges that we've
faced in--particularly in clean energy regulation, is we've
been inconsistent with what we were doing, and so, people
freeze and then, you know, don't invest the capital. We're
actually seeing the capital investing, we're seeing rapid
growth in the market, we're seeing people called back to work.
So, what we don't want to do is disrupt that. At the same time,
I do think we need to work to make sure that we're maximizing
the jobs here in the United States.
Senator Murkowski. I understand, based on what you said,
you would disagree with our democratic colleagues, with their
request to halt the funding to the wind grant programs.
Mr. Rogers. We are looking forward to working with Congress
to make sure that we have appropriate provisions. Halting a
program at this point would not be helpful for jobs.
Senator Murkowski. Thank you, Mr. Chairman.
The Chairman. Senator Stabenow.
Senator Stabenow. Thank you very much, Mr. Chairman.
Welcome, to each of you. I would just like to follow along
this discussion, which I think is so very important.
First, coming from Michigan, I can say that the Recovery
Act has absolutely created jobs. We have been extremely pleased
to work with the administration on the advance battery
manufacturing dollars, which are opening plants and putting
people back to work, as well as the 48C, the advance
manufacturing credit, which I was pleased to partner with
Senator Bingaman in championing in the Recovery Act, as well.
Retooling loans are bringing back, literally, cars that were
made in Mexico to being made in the United States, because
we're helping retool plants for smaller energy-efficient
electric vehicle and so on. So, I appreciate that.
I guess, to add my voice to this, though, we, in my
judgment, need to have an advanced manufacturing strategy in
this country. We have bits--we have bits and pieces of it that
we've put into the Recovery Act. But, we are in this dilemma,
in my judgment, of creating new industry when we don't yet have
full capacity.
I think of the Advanced Battery Initiatives. We have
companies--our auto companies partnering with Korean companies,
who make the battery cell, because they can do the battery
pack, and assemble it, but they don't yet have the technology
for the cell. On the other hand, I guess what I would challenge
us, is we do have a company--A123 Batteries--in this country,
that is doing all of it. So, how do we prioritize, when we do
have companies that are beginning to focus on, you know,
bringing that technology--and they actually came back from
Asia. They were in Asia, and came back. It's a wonderful story;
an American company producing in Asia came back to the United
States.
So, one of my questions relates to, How do we make sure we
are giving priority to those that are developing here, the
complete package here in the United States? I would suggest
that, while I share the concerns of colleaguea that--in terms
of, ``How do we make sure these jobs are all happening here?''
it is not just section 1603 that's the problem; it's the fact--
if it's a--if it's by itself, that's the problem. So, expanding
in--and we are, you know, working together to--and support the
President in his call for additional moneys for the
manufacturing tax credit in 48C, and the retooling programs,
and so on. Because, I think we have to have a strategy that, in
my judgment, also includes things like trade; opening up
markets, as the President has called for; trade enforcement,
when they steal our patents overseas. I mean, we need a whole
strategy.
Right now, on wind turbines, there are 8,000 parts in a big
wind turbine. Mr. Chairman, we could make every one of those in
Michigan, if given the opportunity. But, we know right now
that--I think we have one American company that makes gear
boxes, and, you know, the first supplier of generators just
came online last year.
So, I would just ask you to--as we look at all these
programs that we're putting together, what is DOE doing to take
into account the fact that we have to create the capacity--and
I know that--I know you've spoken to that, but it seems to me,
we have to be laser focused on how we create that capacity
here. We need to do our part, as well, to make sure that we are
not in a situation that we have been in with other industries,
where--never forget the President going to England and--Great
Britain--presenting to the Queen a great American ingenuity,
the iPod, developed in America, made in China. So, we don't
want that to happen with clean energy, there is absolutely no
reason for that to happen on clean energy.
So, I guess I would just ask you to--your thinking, more
broadly, on what we ought to doing, what DOE's doing to, as
quickly as possible, fill in these gaps.
Mr. Rogers. I think it's exactly the right question. This
is something that is deeply important to the Secretary. If you
take the specific examples of the battery grants, where
companies like A123, which started as a small-business
innovative research program under DOE, with $100,000, and now
is the largest recipient under the battery program, was going
to build their plants in China, now A123 is going to build them
here in the United States.
I think we draw 2 pieces. First, under the selection
criteria you had to have a domestic demand source to go with
the domestic manufacturing, in order to actually move up the
chain in the reviews. So, one of the things that we clearly
recognize is the need to manage a supply and demand together.
Because if we do one without the other, all of a sudden we
could end up with factories that are empty, or we end up
importing, because we're buying really high quality stuff, but
we don't have the manufacturing capacity. So, we have to think
about supply and demand together.
The other thing that I think the A123 story illustrates is
the need to link R&D and manufacturing. One of the things that
the Secretary is doing is having a national conversation about
the notion of accelerating innovation. How do we accelerate
innovation in this country? One of the clear messages back is
that, when I do R&D, I actually want my factory next-door,
because that's where the innovation actually takes place.
Because I can take the R&D and I can turn it into money in the
factory by innovating the way that I'm actually producing the
product. If I don't have the manufacturing here, all of the
sudden it's harder actually to keep the R&D here. Right?
So, we have to think about supply and manufacturing and R&D
together to make that work. This is an enormously important
theme for the Secretary. He's working a lot of time, on a
national basis, really trying to understand, ``How do we
articulate this in a comprehensive way?'' Because if we're
going to be successful competing on a global basis, we've got
to think about that whole value chain together.
Senator Stabenow. Thank you, Mr. Chairman.
The Chairman. Senator Wyden.
Senator Wyden. Thank you, Mr. Chairman.
Thank you all for your service.
Mr. Rogers, I want to ask you about the Energy Efficiency
Block Grants. I will tell you, the process, obviously, has been
long and drawn out. But, I am just baffled about how the
Department is going about making some of its decisions in this
area. I want to walk you through an example that has been very
frustrating to my constituents.
I was recently having a townhall meeting in Condon. It's
Condon, Oregon, population 600. The city received a grant of
$244,000 to make repairs and upgrade its water system and save
thousands of kilowatt hours of electricity that are now used to
pump water through an out-of-date, leaky water system. The
project that they proposed clearly would save energy, it would
save money, and it would save water.
Your Department told them that their project was
ineligible. So, I have written to the Secretary about this. We
haven't yet gotten an answer. The committee has worked hard to
figure out how they can save energy, make their own
contribution to creating some jobs and advancing our national
energy goals. We are just baffled as to why the Department
doesn't think they should get the grant. I think there's also
some indications that, initially, they thought they were going
to get the grant. So, anything you can do to shed some light on
this, this morning, and give us your thought?
Mr. Rogers. The overarching observation I'd make is, one of
the exciting parts about the Energy Efficiency Conservation
Block Grant Program is the innovation that is going on at the
local level and giving the localities the ability to prioritize
projects, because they know, actually, where the best place is
to spend the money locally. So, that's why we're quite excited
about that program.
With respect to the city of Condon issue, this is an issue
where--my understanding, at least, is that, in the initial
application, the energy savings were unclear. One of the clear
mandates that we have is to make sure that the energy savings
are there.
We've gone back--Secretary's gone back, and I've gone
back--to investigate that we will, in fact, re-review that
application and make sure that--if the energy benefits are
there, we will make sure that that grant can actually move
forward.
I think this is one of those challenges, as both--one of
the things that we did under the Conservation Block Grant
Program is, we asked a whole set--2350 new recipients to
develop energy efficiency plans at the local level, if they
hadn't done before. As they developed those plans, we and the
communities actually had to learn how to talk to each other
about what energy savings looked like, how to measure that. I
think we're getting much more articulate in that conversation
now. We'll be more than happy to take a look at that one and
get back to you promptly.
Senator Wyden. Would you? Because it--again, I think--we're
pleased to hear that it's going to be reviewed, but the State
did the original evaluation for it. Apparently, they scored 4
out of 5 in all of the relevant criteria--being shovel-ready,
ability to implement the project, the benefits to the
community.
I'll just tell you, this, to me, is the real world. I mean,
these are tiny communities. I have open meetings every county,
every year. I'm concerned that they walk away and think that
the Federal Government is going to have policies that turn them
into a sacrifice zone that basically say, ``What goes on in a
community, like Condon, really isn't all that important.''
I've seen the pictures they show, with respect to the
problems they have in these pipes. They're just big old
enormous holes. I mean, this is not rocket-science stuff, and I
just hope that we can get, to the good people of Condon, some
positive news here, because, on every count, the evidence,
whether it's assembled by the State--or the pictures that they
walked me, you know, through--it seems to me this should have
been resolved a long time ago.
When can you get back to me with respect to the timetable
for re-reviewing and when a decision's going to get made?
Mr. Rogers. We can get back to you in the next couple weeks
on that topic. This is not that complicated.
[The information referred to follows:]
Department of Energy
Washington, DC, March 9, 2010.
Hon. Ron Wyden,
U.S. Senate, Washington, DC.
Dear Senator Wyden: Thank you for your February 19, 2010, letter to
Secretary Chu regarding the Energy Efficiency and Conservation Block
Grant (EECBG) funding for the City of Condon, Oregon.
The EECBG project submitted by the City of Condon called for the
replacement of 2,000 feet of aged water pipeline and the installation
of new water meters. The Department of Energy's (DOE) review suggested
that the project would have limited energy savings over its lifetime
and as a result, the project would require a long payback period. Thus,
we initially did not approve the project.
On March 5, 2010, we discussed the merits of the City of Condon's
project with the Oregon State Energy Office. The State of Oregon
conducted a comprehensive merit-based review of the application. Within
that review, the State considered not only the energy saved, but the
project's ``shovel-readiness'' and its ability togenerate jobs. In
addition, the State considered the demographic diversity of each
project, its contribution to conserving water, and the synergies
between projects. Based on this, and other new information, the DOE
approves the City of Condon's pipeline project.
Thank you for bringing this matter to my attention and for your
commitment to energy efficiency and renewable energy. If you need
additional information, please contact me or Mr. Jonathan Levy, Office
of Congressional and Intergovernmental Affairs, at (202) 586-5450.
Sincerely,
Cathy Zoi,
Assistant Secretary.
Mr. Rogers. One of the things we discovered in this process
was, when we got in the initial applications from so many
communities--right? This is part of the learning process--we
ended up putting about 100 people down in the basement of the
Department of Energy to call people. Because one of the things
we found was, the traditional bureaucratic processes, where we
go and toss things back and forth over the transom, those don't
work. Right? The key thing is to actually pick up the phone,
call the city, really understand what they're trying to do, and
make sure that we can do the translation function into the
necessary forms to make that work. So, we'll get to the get to
the bottom of that. I'll be happy, personally, to get back to
you----
Senator Wyden. Thank----
Mr. Rogers [continuing]. On that.
Senator Wyden. Thank you. There's no question that you and
the folks at your Department are well intentioned. I am
absolutely convinced there is nobody at the Department of
Energy who got up that morning and said, ``I want to spend my
day being rotten to the people of Condon, Oregon.'' That is not
at issue. Your folks are well intentioned, trying to do the
right thing. But, these places are falling between the cracks,
Mr. Rogers. We can't have that. I'm going to just assume we're
going to get this resolved within the next 2 weeks.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Burr.
Senator Burr. Thank you, Mr. Chairman.
Mr. Rogers, in a report to Secretary Chu the inspector
general, Gregory Friedman, said that, as of February 16th, only
$368 million, or 8 percent, of the $4.73 billion targeted for
weatherization programs had been tapped by State and local
governments. Now, that computes to only 30,297 homes, when the
target was 586,000. In North Carolina, if I break that down,
it's 197 homes, with a target of 22,000.
Now, on the surface, it seems to me that we rushed to put
together a spending program, to put together items that we
thought were attractive, that would generate economic activity,
and that we gave very little thought to the challenges of how
quickly you could stand these programs up.
My question's really to the entire panel. How can you
effectively and efficiently put this money to work?
Mr. Rogers. Maybe I'll start, and others have good views on
this program, as well.
So, that what--the data that you cited from Greg Friedman
was actually end-of-the-year data, that we'd done 30,000 homes
with Recovery Act funds by the end of the year. Actually, the
Weatherization Program, overall, did 125,000 homes last year,
which was a 70-percent increase on the year prior. So, big step
up in the program, good execution on that. We slowed up, for a
variety of Davis- Bacon related reasons, in terms of spending
Recovery Act funds, but they actually got a lot of homes
weatherized.
We're on pace to do 250,000 homes this year. In the month
of January, we were operating at about a 17,000-homes-a-month
rate. We believe we were up on that in February. We're
targeting a 30,000-homes-a-month rate by the end of March. This
is about making sure that each of the recipients understands
what their targets are and understands that we can help if
they're behind with training and technical assistance to make
sure that they're successful.
As of this morning, we've actually outlaid $590 million of
the Weatherization Program, so almost double the number that we
were at--just at the end of December. So, we're making good
progress, and accelerating progress, under this program.
Senator Burr. Let me sort of expand the scope, and I'll let
everybody comment on it. During a DOE budget hearing, February
4, Secretary Chu suggested that the delay in stimulus
expenditures was at the State and local levels. But, both the
inspector general's report and the GAO report suggests it's the
Federal requirements that have hindered the expenditure of
funds.
Now, you're telling me there's nothing that's been
hindered, based upon your comments, that you're right on
schedule, you're doing exactly--and, I would love to know,
especially from the Governors Association, Is that accurate?
GAO suggested that it was the Federal Government, and not the
State or local governments. I think maybe we need to sort
through this and find out what's the right thing.
Ms. Nellenbach. Thank you for the opportunity, Senator. We
don't--we would generally agree with the GAO's findings that it
was the Federal requirements and the unfamiliarity of some of
agencies that were now supposed to implement Davis-Bacon, who
had not had to do so before. So, unfortunately, it took until
July for the Department of Energy to ask Department of Labor to
help with the wage determination. To the Department of Labor's
credit, it took them 3 months, which I guess is very, very
quick for this type of work. But, they, within 3 months, had a
wage determination.
So, really no weatherization money, or very limited numbers
of weatherization money, could go out the door until September
2009. So, at that point, then, States really got into doing
some training and getting workers in place. So, I think you're
going to see a ramp up of spending over the next couple months
on weatherization, but there was definitely a delay at the
Federal level that hindered State ability to spend those funds.
I think an important benefit--well, an important side story
to this is, you know, weatherization preceded ARRA by 30 years.
A lot of States, and North Carolina included, took the infusion
of the ARRA money as an opportunity to make sure that problem
can live another 30 years. So, they reformed their programs.
North Carolina worked with its community colleges to update its
training programs. So, it's--a lot of things were done so that,
when the ARRA money runs out, you have more sustainable
programs over the long run. But, certainly a lot of that was
delayed because of delays at the Federal level.
Senator Burr. OK.
Ms. Dalton.
Mr. Woolf. If I could respond----
Senator Burr. Sure.
Mr. Woolf [continuing]. To that, as well. Sorry. On behalf
of the NASEO, the State energy officials, progress certainly
has been slower than anyone would hope. But, I think some of
the data that is being cast about paints an incomplete picture.
You don't pay for the work that's been done until it's been
satisfactorily completed. So, it's always a lagging indicator.
The work is being done now, businesses are hiring workers,
buying more insulation, making purchases, and that's not
showing up in GAO's data of money spent, because we don't pay
those workers until the job's actually been completed. To
prevent waste, fraud, and abuse, we're doing a huge amount of
quality control before we're paying them, as well. So, a lot of
work has been done, both on weatherization as well as the rest
of the programs, that we're not seeing in the Federal costing
numbers, but it--are real jobs being created. There's success
stories in every State to back that up.
Senator Burr. Ms. Dalton.
Ms. Dalton. I would actually agree with all of my
colleagues, but try to put a picture on what was happening.
There was an awful lot of effort that was put in, last year, in
building the infrastructure of this program. I grew by
twentyfold from the original program. But, there certainly were
things, like the Davis-Bacon requirements, that did cause some
delays, and I think they still are causing some concerns at the
State level.
The Davis-Bacon, wage determination came out in September.
The government really didn't start action on it until June. It
was something that probably could have been foreseen a little
bit earlier and moved along faster. States rightly, I think,
decided to wait until that final wage determination came out
before they started actually implementing the Recovery Act.
In the meantime, as was pointed out by the Department of
Energy, they did start weatherization activities using their
base program that comes through their annual appropriation, and
about 100,000 homes were weatherized through that program.
But, as problems come up, it's important to quickly react
to them. As I said, on Davis-Bacon, we probably could have
reacted a little bit sooner. There are continuing concerns with
it. For example, the wage determination that came out in
September applies to residential housing units. There's
continuing concerns on larger housing units, those that are 5
floors or higher, and what wage rates should be applied there.
It's difficult for the contractors that are actually doing the
weatherizing to figure out, ``Well, which wage rate should I be
using here?'' and paying, potentially, the same workers
different rates because of what work they're doing.
These are things I think we need to be proactive about and
try to get resolution so that the States aren't--and the local
governments--aren't having to deal with this issue.
The Chairman. Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Mr. Rogers, I was proud to support the President in the
passage of the Recovery Act. When he signed it, he declared
that the plan would, quote, ``be implemented with an
unprecedented level of transparency and accountability.''
However, my staff has made several inquiries to your offices to
find out how many New Jersey companies applied for the Advanced
Energy Manufacturing Tax Credit, 48C. They were told that this
information could not be shared. We didn't ask for names of any
applicants, we asked for how many companies applied.
Now, as we look to extend this program, information like
this is critically important. So, is it truly information that
is so secret that I can't know how many people from my State
applied for this program?
Mr. Rogers. One of the things we've tried to do under this
program is to create a high degree of transparency. You go to
our Web site, you can see every recipient of our funds. You
go--you see our financials every day. So, we are trying to make
sure we drive more transparency.
On this--on the particular issue of the tax credit program,
the 48C program, the challenge we have there is, we're working
on behalf of the Department of Treasury and the IRS. We're
act--and we--under those conditions, we actually have to
operate under IRS rules, not under DOE regulations. IRS rules
specifically prohibit the sharing of that data. We've actually
gone--
Senator Menendez. Sharing of----
Mr. Rogers. Our general----
Senator Menendez [continuing]. Data to know how many
entities applied. Not who they are----
Mr. Rogers. Correct.
Senator Menendez [continuing]. But how many entities
applied. You're telling me the--if I get the IRS, that's what
they're going to tell me?
Mr. Rogers. That--we went back to--our general counsel went
to the IRS general counsel to ask that question, and that was
the answer that came back, was that we were legally prohibited
from sharing that information. I'm not an expert, by any means,
in IRS rules. So----
Senator Menendez. All right.
Mr. Rogers [continuing]. I take the----
Senator Menendez. So, we will----
Mr. Rogers [continuing]. IRS----
Senator Menendez [continuing]. We will get the IRS and get
to the bottom of it, because I don't know how Congress is
supposed to determine whether there is a sufficient demand for
a program in order to make a determination whether it is worthy
of extension and producing the results. It's--I mean, somewhat
asinine, at the end of the day, that--I'm not looking for who
they are, I'm simply looking to know the quantity of demands on
something. It's pretty incredible.
Let me ask you something else. We asked how many New Jersey
communities have applied for the competitive portion of the
Energy Efficiency Block Grant Program, which I authored, and we
were stonewalled again. Are these national secrets, as well?
Mr. Rogers. So, the Energy Efficiency Conservation Block
Grant Program, the competitive portion, is a--a very exciting
program. So, we applaud your authoring of that--of the--over
all the EECBG. The competitive portion, I think, is going to be
a very exciting piece to roll out.
One of the things that we've had to be careful with,
throughout this process, is on the people that we have turned
down for applications. This is broad-based. So, we've--we're
oversubscribed, 5 to 1, on average, for all of the competitive
activities that we've had underway. We've run through very
competitive peer-review processes, with an emphasis on making
very high quality decisions as we work through there.
What we worry about is that we've had to turn down some
great companies, we've had to turn down some great projects.
Senator Menendez. Let me----
Mr. Rogers. What we----
Senator Menendez. Let me----
Mr. Rogers [continuing]. Don't want to do--no----
Senator Menendez. Let----
Mr. Rogers [continuing]. What we----
Senator Menendez [continuing]. Let me----
Mr. Rogers [continuing]. Don't want to do----
Senator Menendez [continuing]. Interrupt you, because
that's not my question.
Mr. Rogers. I'm sorry.
Senator Menendez. That's not my question. Let's listen to
my question. I asked a simple question. How many New--I didn't
ask even who they were--how many New Jersey communities applied
for the Energy Efficiency Block Grant? What is the State
secret, that I can't get that number?
Mr. Rogers. So, what we don't want to do is make--is
diminish the value of any company that is not awarded funds,
even though they're a great project. That--that's the principle
that we're operating with. So, there are a whole set of
procurement rules that say we cannot disclose things about
applicants who are not awarded. That limits our ability----
Senator Menendez. I won't know----
Mr. Rogers [continuing]. To have conversations--
Senator Menendez [continuing]. Who the applicant wasn't
awarded. I'll just know that 100 entities--New Jersey
communities--I'm not even talking about companies--100 New
Jersey communities applied, and we got 20 of 100. I mean, I--
what is--what is wrong with getting this--this is transparency?
That I can't know the macro number of communities that--public
entities that applied? How can you sit there and tell me that?
It's ridiculous. Ridiculous.
Let me ask you one last question. You know, we--I have
worked with the U.S. Conference of Mayors, which was one of the
instigators of the Energy Efficiency Block Grants, and--as we
devised it--and, you know, based on the testimony today, it
seems that States have managed to clear away many of the
roadblocks hampering the program. Based on my conversations
that my staff has had, with the Conference of Mayors and with
mayors in my home State, it seems that working through these
issues on the local level has been less successful.
What's DOE doing to get Block Grants actually spent--not
committed--on the local level? How are we breaking through? It
seems I've done fairly well with the States. Why can we not do
this with municipalities?
Mr. Rogers. The level of innovation going on at the local
level is absolutely terrific. One of the things that we're
trying to do is to do is to expedite that. One of the things
that we found was, with 2350 new recipients of DOE funds, that
some traditional processes didn't work. So, what we did was, we
made a set of changes. What we're effectively doing now is
working this on a SWAT team basis. We've got a group of folks
who are designed to knock down each of the barriers in the way.
One of the key challenges right now is making sure that
each of the communities has described what it is that they're
going to spend the money on, and that we can categorically
clear that through things like NEPA reviews. What we've created
are a whole set of very streamlined 1-page things, that
basically you can check off and say, you know, ``Therefore,
we--therefore, we're ready to move forward.'' So, we've created
a whole new set of ways to get this done. Basically what we're
doing is calling communities one by one to make sure that that
happens, with a group of about 80 folks in our offices, because
what we've discovered is, again, it doesn't work very well with
mail coming in, or even emails; it works really well when we
can get on the phone with people and actually work through it,
and just clear them. Because what we're trying to do with each
of those--the mantra that we've put in place there is, ``Move a
set of communities across the line, get them spending every
day.''
Senator Menendez. I look forward to following up with you.
You know, as one Senator who has been supportive, you're not
going to get my support if I can't simply get information. I
can't make decisions that are intelligent, I can't act as a
fiduciary for the 9 million New Jersians I represent here, I
can't make intelligent budget decisions on your requests, if I
can't get information. So, either we're going to change the
paradigm on how we get information, or you're going to lose one
Senator's vote here, at the end of the day.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Mr. Woolf, let me ask you--you and Ms. Dalton have both
made reference to this problem with the wage rates, saying that
the wage rates were decided, as I understand it, and
established by the Department of Labor in September for
residential construction, but they have not yet been fully
established, I guess, with regard to other types of
construction. Could you elaborate on what that problem is and
what is needed to get that problem fixed?
Mr. Woolf. I think we were talking about 2 different
aspects of the same type of problem. What the Department of
Labor has done, in a very expedited manner, is create, for the
first time, a wage classification for weatherization retrofits.
It's never been subject to that, to Davis-Bacon, before. Now,
that we know that a wage rate for a contractor who's
retrofitting a low-income home, we want to apply that same wage
rate for the same contractor who's doing the non-low-income
home outside of the Weatherization Program.
So, if you're doing--if your community, using EECBG funds,
are retrofitting buildings, it's the same work, it's often
simply the same--literally, the same contractor. The Department
of Labor has not allowed that wage classification to be
extended beyond weatherization to other categories; so
communities have to guess; contractors who are applying have to
guess what wage classification to use; one contractor may make
one assumption another may make another; gives them a
competitive advantage, because of the uncertainty. It is
impacting how quickly jobs are getting done.
The Chairman. So, you're suggesting that Department of
Labor needs to clarify that the wage rates they've established
for this weatherization activity should be applicable for any
weatherization activity, whether it's federally subsidized or
not?
Mr. Woolf. Regardless of which Federal program it's----
The Chairman. Regardless of which----
Mr. Woolf [continuing]. Coming from.
The Chairman [continuing]. Which program is subsidizing it.
Is that your understanding of the problem, as well, Ms. Dalton,
or not?
Ms. Dalton. I think there's just one other aspect of the
problem, and that was what I was referring to, where the
Department of Labor has said that a different class of worker
and wage rate should be applied to, as I said, buildings that
are more than 4 floors high. What they haven't looked at is
what, exactly, is the work that's going to be done, and setting
a wage rate for that.
So, what they've said is that, for those larger buildings,
you should be applying a wage rate that's for a different class
of construction work--for plumbers or electricians, as opposed
to weatherization workers. What they really need to look at is
weatherization workers, and what types of work are going to be
done, and what the wage rate should be for them, so that there
is a determination that people can go to, to say, ``All right,
this is the class of worker; this is what we're doing,'' and
not bringing in electricians and plumbers and all of these
other types of activities.
I think--some of this has been just because, as there's a
better understanding of the Weatherization Program, there's
clear understanding of the types of work, but I think the
Department of Energy and the Department of Labor really need to
talk to each other and reach, as I said, some consistent
guidance and determinations that State, local governments, and
contractors can use. It's really unclear. We keep running
across different problems----
The Chairman. Mr. Rogers, do you know of anything going on
that will clarify this, or is this something that we should
contact the Department of Labor about? What's your thinking?
Mr. Rogers. So, this is a topic that we talk to the
Department of Labor about just about every day. This is
something where--I would note the collaboration with our
partners at NASEO and other--and with some of the other
national agencies have been very, very helpful. because what it
allows us to do is identify the confusion on the front line,
and then see if we can solve it at the top level, here.
So, we've been working with Labor on this issue. I think
there are 2 different pieces:
In terms of the commercial wage rates, I think that's
simply a question of guidance, making sure that, for large
buildings, there's clear guidance on which categories you use.
The wage rates are clearly established; it's just making sure
people are consistent in doing that. That's something that we
can do reasonably directly.
In terms of the application of weatherization rates, it's a
Department of Labor decision as to what happens there. We've
made our views on that known to Labor, and we expect to have
that resolved relatively promptly.
The Chairman. OK. Mr. Woolf, did you want to add anything?
Mr. Woolf. I did. I know that there are proposals floating
on Capitol Hill for further efforts to accelerate clean energy
innovation. I would encourage Congress to think about our
experiences with Davis-Bacon before they apply that requirement
to new programs, because it has been an impediment to getting
dollars spent quickly.
The Chairman. OK.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
You know, I am still as fuzzy on this as before the line of
questioning started. The comment was made, I don't remember who
made it, but, weatherization programs have been going on in the
States for decades now. If we have a State weatherization
program in Alaska, and we've been working with our auditors and
moving the State level, and then we now have stimulus funds
that come in to supplement what we're doing, is the State
weatherization program somehow or other snarled up in the wage
resolution issues that we have been discussing? It causes me to
wonder whether our good intentions, in advancing these stimulus
funds, has actually even slowed some of our efforts with our
own State weatherization programs.
Mr. Woolf, you look like you're going----
Mr. Woolf. Yes.
Senator Murkowski [continuing]. To jump in.
Mr. Woolf. I think what the Davis-Bacon--the application of
Davis-Bacon to State weatherization programs has delayed the
ability to use the stimulus funds. So, what Maryland and, I
think, other States have done is use their other State money,
and they've exhausted that money first----
Senator Murkowski. Right.
Mr. Woolf [continuing]. While the Federal Government has
worked out Davis-Bacon. The success story here is that the
States, working with the Department of Energy and the
Department of Labor, now do have a wage classification for most
weatherization activities. That was made in September. It's now
kicked up--in Maryland, at least. We've been able to ramp up
our production, so we are now about on track to do as many
homes as we hoped to, to reach our ultimate goal. What I'm
asking for is that be extended----
Senator Murkowski. Sure.
Mr. Woolf [continuing]. Beyond weatherization, to the other
areas.
Senator Murkowski. Let me ask you a question, Mr. Rogers,
about Smart Grid. We haven't had a lot of discussion about
this. But, you know, that was a big chunk of change, $4 billion
in Smart Grid grants authorized under the stimulus last year.
Now there's this issue about whether or not they're subject to
Federal taxation. It's my understanding that, while DOE has
awarded these Smart Grid grants, the Department hasn't
completed the terms and conditions, and so, we haven't seen any
funds actually go out and then be distributed to the grant
recipients.
There is great expectation as to what we could see from
this program, but we haven't had the immediate impact. Given
where we are right now, and the fact that we've had this delay
on funding distribution, this open question as to whether or
not these funds are going to be subject to tax, do you
anticipate that we're going to see any of the recipients
declining the awards and backing off? Are we seeing any
layoffs, for instance, at the smart metering companies, because
the work has stopped with the distribution of these Federal
funds? What's our status there?
Mr. Rogers. So, the status--we're making good progress on
that front. We worked very closely with our colleagues at the
IRS to get a determination under section 118A. The IRS has
actually completed their analysis and will be publishing
guidance here shortly that will actually provide clarity on
that question.
Senator Murkowski. Do we know what ``shortly'' is?
``Shortly,'' in my mind, is different than the IRS's mind.
Mr. Rogers. Yes. I--I'm--that is--that's a fair
observation. So, we--our expectation is, it will be in the next
2 weeks, that they will have formal guidance issued on that. We
do not anticipate anyone turning back the--turning back the
funds, and we've been very pleased with the collaboration with
the IRS on this topic.
Senator Murkowski. You don't think we're going to see any
retraction on----
Mr. Rogers. We--I do not expect that.
Senator Murkowski. OK. Then my final question. This is
actually directed to you, Mr. Woolf. I appreciated the
summaries that you attached for the committee that shows the
amount of funding that's been obligated or awarded to selected
States. I noticed that you have everybody on the committee,
except Alaska. Is there a reason that we don't have Alaska of
course, we're very special, but I'm wondering if there was any
reason, or if perhaps you could supply that to me.
Mr. Woolf. We would be happy to supply that.
Senator Murkowski. OK. So, there really wasn't a reason.
Mr. Woolf. Didn't get it to us in time for the hearing.
We'll get it to you as soon as we get it.
Senator Murkowski. OK. I appreciate that. Your organization
does keep track of the actual expenditures, in each of these
States.
Mr. Woolf. We do. As States are our members, and we report
so that we can keep track of what's happening nationally.
Senator Murkowski. I'm assuming Alaska's a member.
Mr. Woolf. Absolutely.
Senator Murkowski. OK. Thank you.
Thank you, Mr. Chairman.
The Chairman. Let me just ask one additional question. I
think you referred to this, Matt, in your testimony. One of our
big challenges, going forward, is this--this Recovery Act money
is such a big infusion of resources into a lot of programs that
had no resources before, and into activities that had no
funding before. You were saying that one of the keys to really
transforming our economy to a clean energy economy is
predictability, and where we're headed in the future for--so
that folks will know when to--whether they can build their
factory here, or do whatever.
It's going to be difficult, I think, to be sure that we
properly transition from this high level of funding that we
currently have through the Recovery Act to a more normalized
budget situation. I guess I'm just anxious that--any insights
that you can give us, not necessarily today, but as we go
forward, as to how we ensure the predictability of these
funding levels as best we can, at whatever level they're going
to be. I mean, obviously we can't maintain the high funding
level once the Recovery Act funds go away, but we can certainly
try to be sure that the tax provisions that are helpful are
still in place, that the funding programs that are helpful are
still in place; that the Weatherization Program not go back to
being a sort of a neglected stepchild as it perhaps was prior
to this Recovery Act infusion of funds. Any thoughts you've
got, I'd be anxious to hear.
Mr. Rogers. I'd make 2 simple observations. One is that
we're asking companies to make long-lived asset decisions. So,
we actually have to have a clear set of incentives over the
long term. If I'm going to make a 30-year asset investment, I
actually have to have a reasonable confidence about what the
rules of the road are over an extended period of time.
One of the things that we've tried to do under the Recovery
Act is to use this as an opportunity to demonstrate to the
private sector that these are some very high-return
investments. Senator Murkowski was asking about the Smart Grid
program. One of the things that we're encouraged by is seeing
this play out in so many different States, and seeing the rate
of return that each of those States is going to see on those
kind of investments. All of the sudden then, the private sector
can take on a set of these funding levels if we have the tax
provisions clear and if we have the long-term pricing
provisions in the market clear. I think those are the
opportunities for this committee over the next year. You are at
the center of defining what the playing field looks like for
investments in clean energy for the long term.
Mr. Woolf. If I could jump in on that.
The Chairman. Yes. Go ahead.
Mr. Woolf. Sure. The question of, ``How do we keep the
success from stimulus going after stimulus?'' is something that
States have given a lot of thought to. I think we've--certainly
the level of activity from stimulus has been a huge boost, and
we want to keep that going. Most States have invested at least
a portion of the stimulus funds in revolving loan programs so
that after--even after stimulus when those loans are repaid,
it'll keep providing dividends on clean energy.
We are very excited about our Property-Assessed Clean
Energy Program, where we're going to use the Federal money to
kind of leverage private capital into a revolving loan program
to keep that going. Even in a standard program like our
Renewable Energy Grant Program, we're intentionally giving out
a certain number of grants, each and every month, so that solar
companies know they can hire new crews to do the work, and
there will be stimulus money available for the next month and
the month after that. Keeps the--gets their crews trained;
reduces their costs, so that, post-stimulus, the jobs will
still be there. So, every State is thinking about, ``How do we
keep this going after stimulus?'' We've got some great
successes.
Ms. Nellenbach. Yes, and, Chairman Bingaman, I would also--
echo what Malcolm said, but also, as I had mentioned to Senator
Burr, a lot of the States looked at this as an opportunity to
really fix some problems with some of their programs.
Pennsylvania, for instance, redid its computer system that
connects all the community action programs that do
weatherization so that when the ARRA money does run out, they
have a new more efficient system in place.
In terms of the funding window, again, we've been given
through March 2012, from the Department of Energy, to spend all
the money in those 3 programs. So, most States have in place a
plan to gradually spend it over time, so that hopefully that,
when March 2012 comes, there's more of a network in place,
there's people in place, that it's not a sudden drop off. So,
they are looking at the long-term future of those programs.
The Chairman. Very good.
Did you have a comment, Ms. Dalton.
Ms. Dalton. I would just add one thing looking at the
Recovery Act money knowing where we've had some successes and
where, maybe, we want to do additional investments post-
Recovery Act, and being sure that we've got a plan, moving
forward, of, ``Do we want to keep the funding at a certain
level? Do we want to ramp down and not have any kind of cliff
effect?''
The Chairman. Very good.
Senator Murkowski, did you have additional questions?
Senator Murkowski. Yes. I don't have anymore questions,
just a comment at this point.
I really appreciate the last few minutes that we've had,
here, because I think there have been some positive comments
coming from the State, from the Governors, and that's important
to hear. Your final comment, Ms. Dalton, is exceptionally
important, because right now there's a lot of pressure on us:
create jobs; make things happen now, spend money to make
something happen. My fear is that so much of it will be
continued--I'll use the phrase, ``a knee-jerk response''--we
have to do something now. I think we do need to take some
lessons learned from what we're seeing, last year and now, as
we are into the more full-on implementation. I appreciate the
process and the difficulty of moving things through, but you
hate to be sitting back and saying, ``Well, I told you so. I
knew we couldn't get it out the door that fast, and that we
were going to see this.''
I am hopeful that there is more of a vision plan. How do we
continue the good things that came from this, rather than, as
we work to put together yet another jobs bill, well let's put
in another energy piece that maybe DOE is not ready to, or not
the best suited to, be advancing. I think we need to be working
in a far more coordinated manner. I think we recognize that,
when we're talking about our taxpayer dollars going out to
create jobs, that not all jobs are created equal. I don't think
most of my constituents in Alaska think that creating jobs in
China is going to be the best thing for them.
We want to make sure that, as we talk about how we create
the jobs, that we're not making our country less competitive by
helping to build out the infrastructures and all that is
happening overseas. There has to be a very solid piece of this
where we're doing exactly what Senator Stabenow has talked
about, and what you mentioned, Matt. We have to build that
manufacturing base here, but, I think, in an effort to
jumpstart some things. We're seeing the criticisms coming out
of some of these reports, and we're living with them.
I appreciate the discussion here this morning and, Mr.
Chairman, your great willingness to put this on the agenda.
The Chairman. Thank you all very much. This has been very
useful testimony.
[Whereupon, at 11:35 a.m., the hearing was adjourned.]
APPENDIX
Responses to Additional Questions
----------
Responses of Patricia A. Dalton to Questions From Senator Bingaman
Question 1. In your testimony you cite the National Historic
Preservation Act as one area that states have reported as a problem. I
understand that in some states the local historic preservation laws
themselves present issues for weatherization or new clean energy
installations. Were you able to separate out issues created by the need
to comply with the federal mandate from issues that likely would have
already been present under local law?
Answer. No, we did not separate out these issues; we focused only
on federal requirements. Federal and state officials told us that the
National Historic Preservation Act affected the selection and start of
Recovery Act projects, but they did not discuss local laws or
requirements nor did we specifically ask about local laws and
requirements.
Question 2. In your bi-monthly audits of Recovery Act spending, do
you have sufficient data so we can see acceleration of spending, and
thus tell if problems have been addressed?
Answer. GAO's bimonthly audits discuss changes in Recovery Act
spending and the progress being made in addressing implementation
issues for selected programs, including the Department of Energy's
Weatherization Assistance Program, though our tracking of Recovery Act
spending does not make a causal link between an increased rate of
spending and the resolution of problems related to federal
requirements. We selected programs for review based primarily on
whether they have begun disbursing funds to states or have known or
potential risks, such as an existing program receiving significant
amounts of Recovery Act funds or new programs. In the case of the
Weatherization Assistance Program, GAO's bimonthly audits have tracked
the program's obligation and spending status and have discussed the
reasons for the program's slow spending rate and the steps being taken
to address those issues. Specifically, we reported that states used
only a small percentage of their available funds in 2009 primarily
because state and local agencies needed time to develop the
infrastructures required for managing the significant increase in
weatherization funding and for ensuring compliance with Recovery Act
requirements. For further information, see our latest bimonthly audit
issued on March 3, 2010 (Recovery Act: One Year Later, States' and
Localities' Uses of Funds and Opportunities to Strengthen
Accountability, GAO-10-437).
Responses of Patricia A. Dalton to Questions From Senator Murkowski
Question 1. NHPA--You state in your testimony that the Michigan
Department of Human Services told you that 90 percent of the homes
scheduled to be weatherized under the Weatherization Assistance Program
would need a historic review under the National Historic Preservation
Act. Do you have similar statistics for any other states?
Answer. Other states did not provide estimates for the percentage
of homes that would require historic reviews, and we did not
specifically ask for this data. Michigan made particular mention of the
percentage of homes affected because the requirements of the act
affected such a large number of homes there.
Question 2. Status of Funds--According to your testimony, DOE has
obligated approximately 70 percent of its funds, while expenditures
amount to about 7 percent. How do those figures compare to the
obligation and spendout rates at other federal agencies that GAO is
tracking?
Answer. As of December 31, 2009, DOE's obligation rate for Recovery
Act funds was in the bottom third of 27 federal agencies GAO is
tracking, while its spending rate was next to last among those same
agencies. However, the 54 percent of its funds that DOE had obligated
at that time was just below the overall obligation rate of 63 percent
for all 27 federal agencies. In contrast, DOE had only spent 4 percent
of its Recovery Act funds at that time compared to an overall Recovery
Act spending rate of 20 percent. The table below shows the percentage
of Recovery Act appropriations obligated and spent by federal agencies
as of December 31, 2009.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Question 3. Weatherization--In your written testimony, you noted
that GAO is currently working on a report that will detail
weatherization-related jobs and energy savings. When will that report
be released? Can you share anything about what you've found so far, and
some of the difficulties that are apparently manifesting with regard to
measuring energy savings?
Answer. The report-titled Recovery Act: One Year Later, States' and
Localities' Uses of Funds and Opportunities to Strengthen
Accountability (GAO-10-437)-was issued on March 3, 2010. It is the
fifth in a series of reports by GAO on the use of and accountability
for Recovery Act funds in selected states and localities; the next
report in that series will be issued in May 2010.
As part of the March report, we examined recipient reporting
associated with the Weatherization Assistance Program. We found that
state reporting about impacts, especially energy savings, was still
somewhat limited for the program's Recovery Act efforts. Available data
showed that about 8,500 jobs had been created through the use of
Recovery Act weatherization funds. However, while many local officials
had collected data about new hires, none could provide us with data on
energy savings.
Contributing to the lack of information about impacts is that most
state and local agencies either were just beginning to use Recovery Act
funds to weatherize homes or had not yet begun to do so. Some states
told us they planned to use performance measures developed by DOE,
while others had developed their own measures. For example, Florida
officials told us they planned to measure energy savings by tracking
kilowatts used before and after weatherization, primarily with
information from utility companies.
Question 4. Wind Energy Grants--Just this week, four Democratic
Senators sent a letter to the Obama Administration asking it to suspend
the Treasury/Energy wind energy grant program until it can be amended.
Has GAO looked at, or do you plan to look at, what's happening with
this program and where its funds are going?
Answer. GAO has not previously and is not currently conducting work
in this area.
______
Responses of Malcolm Woolf to Questions From Senator Bingaman
Question 1. You indicate you believe the problems that have led to
delays have been largely overcome. Do you have an estimate of when you
believe the current funding can be spent out?
Answer. We believe that the funding under the State Energy Program
(SEP) and the other major grant programs impacting the states and local
governments should be spent within the statutory deadlines created in
the ARRA statute and the implementing rules from the Department of
Energy.
Question 2. Now that capacity is built up and the state and federal
levels, what are you seeing with regard to demand? Are there programs
that you see as being particularly oversubscribed?
Answer. In general, the states have utilized a bidding process to
determine what projects to fund within allowable categories. In the
vast majority of cases all these categories have been over-subscribed.
According to the survey prepared by the National Association of State
Energy Officials (NASEO) in December 2009, some examples of this level
of over-subscription are striking: a) AZ--104 school retrofit project
applications totaling $87 million were submitted, with funding for only
one-half that amount; b) GA--$226 million in requests were received for
state facility retrofits, with only $63 million in available funds and
under SEP they received competitive proposals of $122 million with only
$14.5 million available; c) IL--526 applications totaling $525 million
were received for only $100 million in available funds (total project
value was $3.2 billion); d) MD--in my own state, the Clean Energy
Economic Development Initiative received $36.5 million in applications
for only $7 million in funding; e) MI--for projects in energy
efficiency, wind, solar and local government energy efficiency, the
state had $39 million available and received applications totaling $219
million; and f) WI--$53 million in projects have been funded from
approximately $100 million in proposals. These activities include, but
are not limited to, building retrofit projects in all sectors,
industrial energy efficiency projects, renewable energy projects, local
government energy projects, etc.
Responses of Malcolm Woolf to Questions From Senator Murkowski
Question 1. State Energy Programs--I appreciate the attachment you
included with your testimony, which shows the amount of funding
obligated or awarded to selected states. You testified that NASEO also
keeps track of the actual expenditures in each state. Would you please
provide those figures to the Committee?
Answer. State Energy Programs--We have generally tracked the funds
committed by the states and the funds contracted by the states. We
believe that DOE is tracking the actual expenditures by state. At this
point, over $1.1 billion is actually under contract and over $2 billion
is committed (i.e., obligated for specific projects and programs) by
the states under the State Energy Program. As I explained in my
testimony, the key statistics under SEP are not the federal ``costing''
numbers but the commitments and contracted numbers. This is important
because when states commit and contract to implement projects with the
private sector, the private sector hires the employees and conducts the
work. States pay only when the project is completed (``accepted'') and
shown to be implemented correctly, and when milestones are achieved.
Neither the states nor the federal government generally pay for
projects in advance of work being satisfactorily completed, for obvious
reasons. As I stated in my testimony, the federal ``costing'' number is
a lagging indicator and not reflective of the economic benefit of these
projects. Further, if the ``costing'' number had escalated well in
advance of projects being completed, this would be a sign that prudent
procurement procedures are not being followed.
Question 2. Federal Guidance--Mr. Woolf, you stated in your written
testimony that you were waiting on a determination by the Department of
Labor on whether the wage rates for the Weatherization Assistance
Program can be utilized for the residential efficiency programs planned
under the State Energy Program and the Energy Efficiency Conservation
Block Grants. Ms. Nellenbach stated that DOE has just received final
word from the Department of Labor that this same rate wage in fact can
NOT be used for EECBG and SEP. How much longer do you expect these wage
rate determinations to take?
Answer. Federal Guidance--We hope that the guidance from the
Department of Labor will be forthcoming as soon as possible. We believe
that the Weatherization wage rate should be applied to residential
energy efficiency retrofit projects under SEP and the Energy Efficiency
and Conservation Block Grant (EECBG). Designated residential energy
efficiency retrofit projects under SEP and EECBG total over $800
million. We understand that DOE has been working with DOL to resolve
this critical issue.
Question 3. State Energy Office: Part of the reason that it has
taken so long to spend the money is that state energy offices have had
to ``ramp up''--find office space, get new operations going, and of
course, hire new staff. What will happen to these jobs when the
Recovery Act expires in March 2012, or when the money runs out?
Answer. State Energy Office: Energy offices and states have
utilized a variety of mechanisms to respond to the flow of new and
expanded responsibilities under ARRA. New hires in many states have
been on a contract or term basis, so that if the work is no longer
there, the jobs will be eliminated. In light of state budget crises
across the country, states have been reluctant to hire new people on a
permanent basis. States are working very closely with the private
sector to ensure that as the economy grows a trained energy work force
is in place to respond. In addition, many states are utilizing
revolving loan funds to ensure that the ARRA funds will be stretched to
help more people and to help people over an extended period of time.
Many of the proposals being considered by Congress in a possible Jobs
Bill (Home Star, Building Star, Manufactured Housing, industrial energy
efficiency, etc.) and other provisions included in S. 1462 (Bingaman-
Murkowski energy bill, approved by the Energy and Natural Resources
Committee in June 2009) as well as other comparable legislation, if
funded, would provide resources to continue important work started
utilizing ARRA funds.
Question 4. Maryland Weatherization--In Maryland, only 4 percent of
homes selected for improvement have been finished. What is the outlook
for spending the rest of this money? When do you expect all of
Maryland's Weatherization funds will be spent?
Answer. Maryland Weatherization--As of the end of March, Maryland
has completed 10.5% of its 3-year ARRA weatherization production goal.
Maryland has been building its capacity to do weatherization and has
therefore been accelerating its pace of work and its spending of
weatherization funds. Maryland expects to fully utilize the funding and
anticipates completing production with this funding at the end of the
grant period in March 2012.
Question 5. Weatherization--Has it been problematic that stimulus
funds for Weatherization projects are not disbursed up front, but
instead reimbursed after 45 days? Have there been problems obtaining
credit to start any of these projects?
Answer. Weatherization--We are unaware of any widespread problems
associated with the delay in reimbursements or the lack of available
credit. The Low-Income Weatherization Assistance Program has
historically operated on a reimbursement basis. The local community
action agencies (CAAs) or other providers generally perform the work
directly or contract out the work. Once the work is completed then the
reimbursement from the state is requested. Obviously, there has been a
significant ramp-up of funding under ARRA and some CAAs or other local
providers might have had difficulty providing up-front funding. States
have the authority under the program to provide cash advances to the
CAAs and the other local providers.
______
Responses of Michele Nellenbach to Questions From Senator Bingaman
Question 1. Despite the initial setbacks, it seems from your
testimony that states see great potential for job creation this year.
Many programs seem to be oversubscribed already. Do you have any sense
of how the overall demand at the state level compares with amounts
available?
Answer. The National Association of State Energy Officials
conducted a brief survey in December 2009 and found that of the states
that responded, all are oversubscribed. For instance, AZ received 104
applications worth $87 million for school energy efficiency retrofits
but can only fund half of the projects. Georgia received $226 million
worth of requests for just $63 million in state facility retrofit
funds. Further, Georgia has available $13.3 million in EECBG funds but
received applications totaling $24 million. Illinois had only $100
million to cover 526 SEP applications totaling over $525 million.
Finally, Wisconsin reports that it has over $100 million worth of
applications but can fund only $53 million.
Question 2. Is your concern about reporting requirements more about
the possibility that other agencies will require more or inconsistent
reporting, or are the current requirements overly burdensome? Would a
standardized reporting system across agencies solve the problem?
Answer. The NGA is concerned about both burden of the current
requirements and the threat of future requirements. The current 1512
reporting requirements have proven quite difficult to implement. While
1512 reporting is becoming less onerous as states become accustomed to
it that will quickly change if every federal agency requires granular
detail on each program. Specifically, such a development would further
stress limited state resources and call into question whether the value
of any additional information justifies the burdens placed on states.
NGA has advocated for universal reporting criteria along the lines
of those contained in OMB's jobs guidance. If other federal agencies
follow DOE's lead, NGA would support shared definitions and metrics.
However, NGA is uncertain that such a commonality can be achieved. For
instance, DOE's required metrics include square footage of buildings
with new wind energy and the kilowatt hours saved in a home
weatherization project. It seems unlikely that other Agencies will find
value in such metrics. If common metrics were defined, NGA would
recommend that any requirements for individual agency metrics not
included in these common definitions be eliminated.
Responses of Michele Nellenbach to Questions From Senator Murkowski
Question 1. State Energy Offices: Part of the reason that it has
taken so long to spend the money is that state energy offices have had
to ``ramp up''--find office space, get new operations going, and of
course, hire new staff. What will happen to these jobs when the
Recovery Act expires in March 2012, or when the money runs out?
Answer. If funding levels return to their historical appropriations
levels, as expected, then there will be a significant drop-off of
services, and employment opportunities, by March 2012. This drop-off
was documented by the Congressional Budget Office in a presentation to
the Lieutenant Governors Association during which the CBO estimated
that job growth will peak towards the middle of 2010 followed by a
significant jobs drop-off in 2011 and subsequent years. (http://
www.cbo.gov/ftpdocs/113xx/doc11353/3-17-10-NLGA.pdf)
Question 2. Weatherization--Has it been problematic that stimulus
funds for Weatherization projects are not disbursed up front, but
instead reimbursed after 45 days? Have there been problems obtaining
credit to start any of these projects?
Answer. While the Ranking Member may be aware of anecdotal
instances, NGA is unaware of either the wait for reimbursement or a
lack of available credit as having created any widespread problems with
the expenditure of ARRA Weatherization funds. As you know, the
weatherization program has historically functioned on a reimbursement
basis such that the local community action agency (LCAA) either
performs the weatherization work itself or contracts for the work. Once
the work is completed, the LCAA seeks reimbursement from the state for
its expenditures. The only reason this system may be of concern under
ARRA is because of the significant ramp-up in funding. Some community
action agencies have not been able to front the costs without
reimbursement. However in these instances, most states have used their
authority under the weatherization program to provide cash advances to
the LCAAs. Typically, the LCAAs are not using credit on the open market
to fund their work and therefore, the tightness in the credit market
has not been a factor in weatherization financing.
Question 3. Wage Rates--You stated that DOE has just received final
word from the Department of Labor that this same rate wage in fact can
NOT be used for EECBG and SEP. Have you received any indication of when
states will receive guidance for those programs?
Answer. As of April 7, 2010, the DOE is continuing to negotiate
with the DOL on allowing the wage rate for WAP to be used for
residential projects funded through EECBG and SEP. I have been told an
official announcement is imminent.
______
Responses of Matt Rogers to Questions From Senator Bingaman
Question 1. Your testimony indicates a fairly dramatic acceleration
in obligations and spending in recent months. Are you on target to have
the Recovery Act funds obligated by the end of this fiscal year? Are
there any specific programs where you have seen demand from quality
applicants beyond the funds available, such that you could reasonably
expect to spend additional funds well?
Answer. By the end of September, the Department of Energy plans to
have obligated 100 percent of its $32.7 billion in appropriated
Recovery Act contract and grant authority. We are currently on track to
hit this target. The Fossil Energy Programs will be the last to meet
their target. DOE officials are working closely with these applicants
to review all technical, financial and management plans and to take
action early if intervention is needed. A decision will likely be made
in May if funds should be re-allocated to other projects. DOE
anticipates that the remaining loan credit subsidy funding will be
obligated as loans close before September 30th, 2011, when the ARRA
budget authority expires.
The selection process for DOE Recovery Act funds was highly
competitive. High demand from quality applicants in some programs
allowed us to select consistently strong projects, ensuring the
American public receives solid returns on the investment of hard earned
taxpayer funds. We saw especially high demand from quality applicants
in the following programs: ARPA-e, Small Business Innovation Research,
Smart Grid, and Industrial Energy Efficiency.
We have the greatest opportunity to use further funds in the 48c
manufacturing tax credits program, and the FY2011 Budget includes a
request for an additional $5 billion for this program. Recovery Act
manufacturing tax credits were awarded to 183 projects in 43 states,
(though numbers are being revised based on the March 15 IRS contracting
deadline). Facilities must manufacture: equipment or components
designed for use in projects that produce energy from the sun, wind,
geothermal deposits or other renewable resources; nuclear power; fuel
cells, microturbines, energy storage systems for EVs or HEVs; electric
grids, grid storage; property designed to capture and sequester carbon
dioxide; property designed to refine or blend renewable fuels; property
designed to produce energy conservation technologies; plug-in electric
drive motor vehicles or components or; other property designed to
reduce greenhouse gas emissions as may be determined by Treasury. The
48C tax credits do not apply to production of electricity or fuel.
Despite a narrow time frame to apply for the program, the 48c
program saw many high quality applicants, indicating the importance and
relevance of such a tax credit. The additional $5 billion requested in
the Budget will provide the opportunity to fund those quality projects
that were not selected in the initial $2.3 billion, as well as reaching
out to new applicants with a broader technology representation.
The higher than expected response of applications indicates that
the stimulus has provided confidence for American manufacturers to plan
capital expenditures in FY10 and to anticipate a tax liability.
Question 2. I understand the Southern Company has returned nearly
$300 million in committed funds for CCS. Do you have a process in place
or a schedule for awarding those funds to a new applicant?
Answer. Yes, on March 9th, Secretary Chu announced that a project
with NRG Energy has been selected to receive up to $154 million,
including funding from the American Recovery and Reinvestment Act.
Located in Thompsons, TX, the post-combustion capture and sequestration
project will demonstrate advanced technology to reduce emissions of the
greenhouse gas carbon dioxide. It will also assist with enhanced oil
recovery efforts from a nearby oil field.
The NRG Energy project was selected under the third round of the
Clean Coal Power Initiative (CCPI), a cost-shared collaboration between
the federal government and private industry to demonstrate low-emission
carbon capture and storage technologies in advanced coal-based, power
generation. The goal of CCPI is to accelerate the readiness of advanced
coal technologies for commercial deployment, ensuring that the United
States has clean, reliable, and affordable electricity and power.
NRG will construct a 60 megawatt carbon capture demonstration
facility at the company's W.A. Parish Unit 7 in Thompsons, Texas. The
6-year project will demonstrate an innovative integration of several
important advances in carbon capture and sequestration technologies,
including-
Fluor's advanced Econamine FG PlusSM carbon capture process,
using several different novel amine solvents.
Ramgen's advanced carbon dioxide compression system.
The integration of highly efficient co-generation to provide
the necessary steam and electricity.
Enhanced oil recovery sequestration in one of the Texas Gulf
Coast oilfields near the Parish plant.
The project will demonstrate post-combustion carbon capture
technology applied to an existing plant that could significantly reduce
the cost of mitigating greenhouse gas emissions.
Responses of Matt Rogers to Questions From Senator Murkowski
Question 1. Cash-for-Appliances.--Why has the appliance rebate
program been delayed for so long? The President is advocating a new
rebate program called Home Star with a similar objective--to encourage
people to upgrade the efficiency in their homes and receive rebates. If
it took a year for the appliance rebate program to get up and running,
why should we think it would be any different for Home Star, which is
arguably a more complicated program?
Answer. The State Energy Efficiency Appliance Rebate Program
provides funds to states and territories who then design, and
administer their own state rebate programs. This leads to different
state programs offering appliance rebates at different times in the
year. April is the peak month for appliance rebates so we should see
costing soon. HOMESTAR would provide rebates directly to consumers at
the point of sale through a federally administered program.
The State Energy Efficiency Appliance Rebate Program provided
nearly $300 million in funding from the American Recovery and
Reinvestment Act for state-run rebate programs for consumer purchases
of new ENERGY STAR qualified home appliances. Congress specified that
the funding was to be awarded to states and territories, through their
energy offices, using a formula set forth in the Energy Policy Act of
2005. Each state or territory was required to submit a plan that
specifies which ENERGY STAR appliance categories will be included in
their rebate program, the rebate level for each product type, how the
rebates will be processed, and their plan for recycling old appliances.
Many states had no experience launching an appliance rebate program. It
took time for the states to design and develop individual plans and
start the programs within their states.
In contrast, consumers would be eligible for direct HOMESTAR
rebates at the point of sale for a variety of energy-saving investments
in their homes, like the Cash for Clunkers program. A broad array of
vendors, from small independent building material dealers, large
national home improvement chains, energy efficiency installation
professionals and utility energy efficiency programs (including rural
utilities) would market the rebates, provide them directly to consumers
and, then the vendors would be reimbursed by the federal government.
Unlike the State Energy Efficiency Appliance Rebate Program, the broad
array of vendors would be able to offer these point-of-sale rebates 30-
days after the legislation is passed.
Question 2. Spend-Out: DOE has spent just over seven percent of its
stimulus funding in the past twelve and a half months, and in your
testimony, you note that spending will accelerate this year.
a. What do you expect the spend out rate will be six months from
now?
Answer. DOE has selected recipients for $32 billion of is $32.7
billion in grant and contract authority and we have obligated $26.5
billion to our recipients. At the DOE level the money has been spent
through the obligation process allowing hiring to begin and projects to
start. We will reimburse recipients as they spend out the money. We
have now outlaid almost $4 billion. By the end of this fiscal year, DOE
currently expects to reach an average spend rate of $800-900 million
per month. This spring, Program Offices developed updated payment plans
based on recipient, and project level spend projections to improve our
accuracy on spend rate projections. Based on this updated information
we should be at a total of $8 billion in payments by the end of this
fiscal year.
Question 2b. How about the end of calendar year 2010?
Answer. By the end of this calendar year, DOE expects to be
incurring outlays an average of $1 billion a month. Based on revised
spend plans we should be at over $11 billion in payments by the end of
the calendar year.
Question 2c. How long do you think it will take for 100 percent of
DOE's ARRA funds to be spent?
Answer. DOE Recovery Act appropriations are funding 144 projects in
10 different program offices (e.g., Energy Efficiency, Fossil Energy,
Science, etc.). Each of these projects has a unique structure and time
horizon for the deployment of these funds (i.e., R&D vs. infrastructure
investment). For example, DOE's Office of Environmental Management has
allocated nearly $6 billion in Recovery Act funding to 17 sites with a
goal to complete their work by the end of FY11. Large scale, heavy
infrastructure projects in the Fossil Energy program require extensive
design and construction stages that will take their Recovery Act
spending out until FY14. As an agency, DOE expects to spend 70 percent
of its ARRA funds by the end of CY2011, nearly 90 percent by CY2012,
and 100 percent by CY2015.
Question 3. PACE.--You state that you are ``ahead of where we
expected to be on selection, obligations, and job creation.'' Can you
tell us where you expected to be, or what benchmarks the Department had
set for itself, that you based that statement on?
Answer. By December 31, 2009, we had selected projects to receive
$31 billion of DOE's $32.7 billion in ARRA contract and grant authority
and obligated $23.3 billion. This surpassed our CY 2009 targets of $30
billion in selections and $22.8 billion in obligations. As of the end
of the calendar year, our recipients had outlaid nearly $1.8 billion in
ARRA funds (falling short of our target of $3 billion). Based on
recipient reporting, DOE funded over 20,000 jobs\1\ between October-
December 2009. This is ahead of pace based on the Council of Economic
Advisers' estimate that $92,136 in spending creates one job-year as
$1.8 billion dollars outlaid would result in 19,500 jobs created or
saved.
---------------------------------------------------------------------------
\1\ Over 16,300 full-time equivalents (FTEs) were reported to
Federalreporting.gov by recipient. Contractors reported another 4,000
FTEs at the subcontractor level (not required to report to
FederalReporting.gov).
---------------------------------------------------------------------------
Question 4. Alaska Spending.--According to the data on DOE's
website, which is dated November 20, 2009, a total of $93 million had
been announced for my home state of Alaska, but just $50,000 had
actually been spent. Over the course of the first nine months of the
stimulus, that amounts to less than $200 per day.
a. Can you provide any updated figures for DOE's spendout in
Alaska?
Answer.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Question 4b. Can you explain why it is taking so long for funds
announced for, and awarded to, communities in Alaska to be spent?
Answer. The following will address spending for individual projects
in Alaska:
State Energy Program (SEP).--The State of Alaska submitted a SEP
plan under the previous gubernatorial leadership in May 2009. After a
change in gubernatorial leadership and a re-commitment to Recovery Act
programs, Alaska modified and resubmitted their SEP plan in October
2009. Over the next 2 months DOE worked very closely with Alaska to
develop a plan that could expeditiously navigate the DOE procurement
process. Alaska's plan was approved and they were awarded the SEP grant
on January 12, 2010. The state used a DOE-created NEPA template in
designing their programs which allowed DOE to also categorically
exclude all project activites from further NEPA review in early January
2010, clearing a major hurdle that could have potentially slowed
spending.
The majority of project activities that Alaska is pursuing with SEP
Recovery Act funds are an expansion of existing programs and/or
programs that will be receiving significantly more state funds should
Alaska Senate Bill 220 (Omnibus Energy Bill) be passed in the state
legislature. It is our understanding that over the past couple months
Alaska has been in the process of negotiating memorandums of
understanding with other agencies. However, it is our understanding
that much of the SEP funded programs are awaiting passage of SB 220 to
become operational and formalized. SB 220 was recently referred out of
the state Energy committee to the Finance committee, but will continue
to cause a delay for some of the SEP funded programs (approx. $19.1mm
or 68% of SEP funds are tied to SB 220).
DOE is holding weekly calls between state energy offices and DOE
project officers. In addition, DOE Assistant Secretary Zoi, Mike Nizich
(AK Chief of Staff) and Susan Bell (Special Assistant to the Governor)
spoke on January 19th to discuss measures for increasing Alaska's
spending of SEP funds.
Energy Efficient Conservation Block Grants (EECBG).--With over
2,300 recipients, no two grantees have had the exact same issues to
resolve with the EECBG process. The entire program was set up this year
and most grantees had not worked with DOE before and many had never
developed comprehensive energy efficiency plans in the past. There have
been several common issues which have led to delays in processing EECBG
funds including NEPA reviews, Davis-Bacon, Historic Preservation, and
Buy American.
Alaska has presented a unique challenge for the processing of EECBG
grant funds. Of the 255 grant recipients, 10 are cities and towns, 9
are counties and 236 are tribal grantees. The two largest recipients
were the State Energy Office which received $9 million in order to
provide grants and the City of Anchorage which received $2.6 million.
Many of the tribes have opted to pool their resources in order to
provide wider-ranging benefits since many of the grants are in the
$50,000.00 range. DOE has committed resources to work directly with the
Tribal Community to address these needs.
Weatherization Assistance Program (WAP).--Alaska usually plans work
a year ahead. Due to the extreme climate, most production takes place
during the short summer season. Home assessments are done in the summer
so that materials can be ordered over the winter months. Materials need
to be barged or flown to rural villages after the spring thaw, and work
is completed during the following summer. State has been training local
public housing authority staff over the past several months to perform
weatherization services. State and local agencies already staffed up in
2008-2009 utilizing the influx of State funds for Weatherization. In
November, Alaska trained 40 staff to be EPA Certified Renovators (a new
program requirement), and two agencies are in the process of being
designated as EPA training entities. Alaska network already has the
capacity to complete 1,700 homes per year. This was accomplished in the
2008-2009 program year combining State, DOE, and HHS funds. Alaska
plans to exceed that number in the current year and next year, but is
waiting for the summer to being work.
Appliance Rebate Program.--AK's State Energy Efficient Appliance
Rebate Program (SEEARP) went live on March 15th. Of the 56 SEEARP
programs, it was the 17th to launch. Alaska's program is unique in that
it targets disabled residents while providing higher rebates to such
residents in rural areas. This program targets the funds at a small
percentage of the population to lower the price-premium on efficient
appliances that otherwise may be too expensive for them but will
provide them ongoing savings on their energy bills. As of March 31St,
86 vouchers have been requested but no vouchers have been redeemed as
residents have 120 days to make their purchase and submit the paperwork
after having received a voucher. Now that the program has begun in
earnest we expect outlays to ramp up over the course of the spring and
summer.
Grid Formula Grants.--The State of Alaska has received two formula
grants under the Recovery Act program managed by the Office of
Electricity Reliability and Energy Assurance. Under both grants the
State of Alaska is responsible for the expenditure of the funds
consistent with the programs objectives. No grant funds have been spent
by the State as of this date.
On December 7, 2009, the Alaska Department of Commerce, Community &
Economic Develoment, received $767,493 in discretionary grant funding
under the State Assistance on Electricity Policy program.
On August 14, 2009 the Alaska Housing and Finance Corporation
received $262,969 in discretionary grant funding under the Enhancing
State and Local Governments Energy Assurance program.
Competitive Grants.--Nearly $19.5 million was awarded through a
competitive selection process that took place in late Fall/early Winter
2009. Alaska received four competitive Recovery Act grants for
geothermal and fossil energy projects. These projects have faced a
series of reviews before reaching full award, ranging from NEPA
determination to property right negotiations.
Question 5. Smart Grid.--Recently, DOE reversed its position on the
applicability of Buy American requirements for smart meters, and now
have ruled that smart meters are not ``Manufactured Products''--meaning
Buy American provisions don't apply. At the same time, EPA has ruled
that water meters are ``Manufactured Products'' so Buy American does
apply. Why is the Administration treating these products
inconsistently? What happened to promoting the manufacturing of smart
meters in the U.S.?
Answer. After an extensive legal analysis taking into account the
specific facts presented by DOE's Office of Electricity Delivery and
Reliability, DOE's Office of the General Counsel concluded in early
February 2010 that smart meters were not subject to the Buy American
requirements of the Recovery Act. This was the only determination by
the Department regarding the applicability of Buy American to smart
meters and did not reverse a previous finding.
The Department's analysis considered the context of an upgrade of a
mechanical electricity meter with a smart meter by a utility on a pre-
existing privately-owned property, and determined neither the
``manufactured good'' nor the ``construction, alteration, maintenance
or repair'' prongs of the three-part test under Section 1605 of the
Recovery Act were met. Even though all three prongs must be met for
applicability of the Buy American requirements, DOE lawyers also
considered the third prong, ``public building or public work,'' and
determined it too would not be implicated unless the installation was
performed on government-owned ``public buildings'' or possibly on
buildings/structures that, although privately owned, had a governmental
use or significant governmental involvement. Consequently, without any
additional governmental ties to a particular building/structure, DOE
determined that the ``Buy American'' statutory requirements were not
generally applicable to public utilities when installing smart meters
on privately-owned buildings.
Three weeks after DOE reached its legal conclusion, EPA published
notice that it had issued a waiver of the Buy American requirements of
the Recovery Act for certain water meters to be purchased by a
governmental entity for installation in heated spaces, on the grounds
that American meters were unavailable for this specific purpose. The
consequence of this waiver is that the Buy American requirements of the
Recovery Act do not apply so both DOE and EPA actions have the same
result. We are not aware of EPA's internal analysis of this question or
of the specific facts underlying its decision, and thus are not in a
position to compare the two actions.
Question 6. Smart Grid--How is the Energy Department coordinating
with its contracting offices on smart grid monies? We've heard
complaints that the different contract offices lack consistent policies
making it difficult for industry to understand the rules.
Answer. The two largest programs associated with smart grid are the
Investment Grant ($3.4B) and Demonstration Grant ($620M) programs. As
the program office responsible for both programs, the Office of
Electricity's oversight has ensured consistent application of policies
while respecting the difference between the programs.
Each program has unique requirements which were set out in the
Funding Opportunity Announcements. In addition the timing of the two
programs has been different. The Investment Grant selections were
announced on October 27, 2009, and the Demonstration Grant selections
were announced on November 24, 2009, which has resulted in schedule
differences which may account for perceived inconsistencies. Also the
investment grants are focused on technology deployment while the
demonstrations are focused on a technical demonstration.
Question 7. Loan Guarantees--According to DOE's website, you've so
far closed one loan under the temporary loan guarantee program, and
made a few small conditional commitments. More than $32 billion in
additional authority for renewable energy projects remains under that
program. DOE has also requested credit subsidy for an additional $3-5
billion in loan guarantees in this year's budget request.
a. Can you shed any light on how you expect loan guarantees to be
distributed over the next year?
Answer. Since issuing its first conditional commitment in March
2009 to an innovative photovoltaic manufacturing company, the Loan
Guarantee Program has closed that loan guarantee and issued conditional
commitments for seven additional projects, four of which are eligible
to receive appropriated credit subsidy under the Recovery Act. The Loan
Guarantee Program has offered commitments to a diverse portfolio of
alternative energy projects including wind turbine manufacturing, solar
generation and manufacturing, electricity storage, nuclear power, and
energy efficiency. In the next year, new conditional commitments and
closings will continue to reflect this diversity of projects. The
Department's 2011 budget request for $500 million in appropriated
credit subsidy is important to the program's ability to support
innovative energy efficiency and renewable energy projects.
b. How long do you think it will take DOE to exhaust its current
authority for the 1705 program?
Answer. The Loan Guarantee Program has a robust pipeline of
projects eligible for both appropriated credit subsidy under the
Recovery Act and able to meet the Recovery Act requirement to begin
construction by September 30, 2011. In addition, the Loan Guarantee
Program has two open solicitations and continues to receive
applications from eligible projects. These solicitations will remain
open to new applications until August 24, 2010, and January 6, 2011,
respectively. These efforts, in addition to potential future
solicitations, are aimed at exhausting the current authority by
September 30, 2011.
Question 8. Weatherization--According to a memo released last month
by DOE's Inspector General, ``it appears likely that pressure will
increase to accelerate the weatherization of residences in the
compressed statutory timeframe available under the Recovery Act. In a
situation like this, our concern is that the understandable desire to
spend the Weatherization funds on a catch-up basis may lead to an
environment conducive to wasteful, inefficient, and, perhaps even
abusive practices.''
a. Do you agree with the IG's assessment?
Answer. We are working with each community to reach a target run
rate to ensure each can deliver on their full authority with consistent
quality. Good operations tend to perform consistently in a target
performance band--not too hot and not too cold. We are watching closely
to make sure that each recipient remains within appropriate target
performance band. Quality control has always been a strong component of
the Weatherization Assistance Program; measured against the level of
funding and number of homes being weatherized, the proportion of
problems found on an annual basis has always been insignificant. DOE
expects this record of compliance and achievement to continue under the
Recovery Act.
b. What steps is DOE taking to ensure this does not come to pass?
Answer. Increased monitoring, quality assurance, and desk
monitoring have been and continue to be implemented by DOE. Several
staff persons have been added and the engagement of additional
contractors to conduct oversight activities is being, considered.
Furthermore, beginning in April for the month of March we will move
from quarterly to monthly reporting for this program. This will greatly
support our efforts to ensure that these funds are both spent quickly
and wisely as will be ability to provide states that are struggling to
meet their goals with training and technical assistance.
Question 9. Weatherization--The Weatherization program has
indicated that there are over 38 million households whose income levels
make them eligible for Weatherization services, The Department
estimates that approximately 15 million homes are good candidates for
cost-effective Weatherization. How many of these 15 million homes have
been weatherized? What is the process to determine how to address the
remaining eligible homes?
Answer. More than 6.3 million homes have been weatherized since the
program's inception. The process to determine how to address the
remaining eligible homes allows for grantees and local agencies to
target their services to maximize program effectiveness. In
prioritizing weatherization assistance grantees are to include
consideration of ``high residential energy users'' and ``households
with a high energy burden.'' However, the weatherization of such units
is not mandatory. Consideration of such units may be used in lieu of,
or in any combination with, the other priority categories of elderly,
persons with disabilities, or families with children. By considering
``high residential energy users'' and ``households with a high energy
burden,'' grantees and local agencies should be better able to partner
with utilities and other programs to leverage additional resources into
their programs.
Question 10. Weatherization--I've seen several different numbers,
so I'll ask you to state for the record: how many homes were
retrofitted during the first year of the stimulus, and what was the
average federal cost to weatherize each of those homes? How do you
determine what type of retrofit is needed with each home?
Answer. Weatherization Assistance Program grantees weatherized
30,252 homes with Recovery Act funds through December 31st, 2009.
Information about weatherization production in the first quarter of
2010 is still forthcoming as the reporting deadline for performance
figures in the first quarter is not until April 30th. DOE projects,
when reported, weatherization performance in the first quarter of 2010
will represent a significant increase in production rate. While some
reports are still being verified, recipient data shows that 13,053
units were completed in January, 18,234 units were completed in
February, and 22,311 units were completed in March.
In 2009, states weatherized more than 125,000 homes in total
(including both recovery and non-recovery work). As states ramped up
and prepared to spend Recovery Act funding--by hiring and training
workers, purchasing equipment, and putting in place strong
accountability and transparency measures--they accelerated the number
of homes weatherized with Fiscal Year 2009 funding; making the combined
total the best indicator of progress in the program. Nevertheless, the
pace of Recovery Act funded weatherization tripled in the last three
months of the year.
The average estimated federal cost to weatherize a home during the
Recovery Act, as estimated by grantees, is $5600. The average actual
federal cost to date is artificially inflated as most grantees have
made large upfront outlays on equipment that will be used over the next
few several years.
To determine the most cost-effective measures appropriate for each
home, weatherization crews use computerized energy audits and
diagnostic equipment, such as a blower door, manometer, or infrared
camera. Typical measures include installing insulation in walls,
floors, and attics; reducing air infiltration and pressure imbalances;
sealing and repairing ducts; and, tuning and repairing heating and
cooling units.
Crews use DOE funds to install only those energy-efficiency
measures that meet a savings-to-investment ratio of 1:1 and above. DOE
funds can be used to address energy-related health and safety problems,
or to perform incidental repairs. This approach ensures the program's
cost effectiveness.
Weatherization crews also perform health and safety tests that may
include: testing heating units and appliances for combustion safety,
carbon monoxide, and gas leaks; assessing moisture damage; checking
electrical system safety; replacing unsafe heating and cooling systems;
and installing smoke and carbon monoxide detectors.
Question 11. Staff Capacity--Will you provide the Committee with
the number of new employees that DOE has hired in order to administer
ARRA funds? Can you comment on what will happen to those individuals'
jobs after the stimulus' obligation deadline passes?
Answer. According to the Office of Human Capital Management, DOE
currently has 354 employees who have been hired to focus specifically
on implementing the Recovery Act, with many more existing staff working
hard to implement Recovery Act funding alongside their standard duties.
Many of these employees are working in one of DOE's many field offices
including states such as OH, PA, CO, TN, and WA, with over 150 at NETL
and Golden. Some of these employees are on term appointments set to
expire by September 30th, 2012, at the very latest. Others were hired
to permanent positions whose employment will be terminated by September
30th, 2012, at the very latest if their positions are funded by the
Recovery Act. Depending on the program in which they work, we expect
many Recovery Act dedicated employees to begin to leave the federal
workforce in the fall of 2010 continuing through September 30th, 2012.
Question 12. Solar Energy--According to a recent news report, the
solar industry is worried that its ``large-scale projects will miss a
2010 construction deadline to receive cash grants'' available under the
stimulus.
a. Are any of these projects being held up due to requirements
imposed through the stimulus bill?
Answer. The 1603 program does not impose NEPA or Buy America
requirements. However, all need to meet state permitting and zoning
requirements and many need Bureau of Land Management permits. The
volume of permit request is straining state resources. We do not
believe there is anything in the program that is delaying or holding up
projects. The program is funding grant requests within the 60-day
window from receiving a completed application as mandated by the
statute.
b. Given that this funding was intended as stimulus spending, is it
still the Department's position that the 2010 deadline should remain in
place, instead of being extended to a later date?
Answer. The Department is aware of interest in extending the
deadline for commencing construction (by the end of 2010) and is
considering the pros and cons of an extension. It is certainly possible
that, due to factors outside the ambit of the 1603 program and the
Recovery Act, large-scale solar projects may not be able to commence
construction by the end of this year, but given the stimulative focus
this deadline can press the projects to get the shovels in the ground.
Question 13. Solar Energy: Exactly how much federal funding has the
solar industry received from the stimulus? How many domestic jobs has
that created? Are those jobs manufacturing jobs or temporary
construction work? How many overseas jobs did solar funding from the
stimulus bill create?
Answer. More than $1.5 billion in Recovery Act funding has been
provided to support solar energy, along with over $1.9 billion in
closed loan guarantees and conditional commitments for loan guarantees.
That includes:
48C manufacturing tax credits: Solar was by far the largest
category of applications received for the Section 48C advanced energy
manufacturing tax credits and was the largest category of awards
announced, followed by wind, Out of the 183 projects receiving $2.3
billion of tax credits, 62 solar projects were selected to receive
nearly $1.2 billion of tax credits, meaning solar received one-third of
the awards for more than half the total dollar amount of tax credits.
The high level of solar applications is one leading indicator that U.S.
solar manufacturing is poised to grow dramatically in the coming years.
1603 renewables grants: To date, this program has funded over $140
million to more than 350 rooftop solar PV and solar thermal
installations. That is more than three-quarters of the projects
receiving funding under the 1603 program, although because they are
small projects it amounts to only 5% of the $2.75 billion funded
overall under the 1603 program.
Loan guarantees: $535M loan guarantee for Solyndra's CIGS thin-film
manufacturing facility in Freemont, CA, now under construction.
Solyndra estimates the new plant is creating 3,000 U.S. construction
and supply chain jobs, and may lead to as many as 1,000 U.S. jobs once
the facility opens. Solyndra also estimates that more jobs will be
created installing Solyndra's solar modules on rooftops around the
country. In addition, DOE has approved a $1.37B conditional loan
guarantee to BrightSource Energy to build a 392 MW solar thermal power
plant in Ivanpah, California. BrightSource estimates that this project
will create 1,000 construction jobs and 86 ongoing operating and
maintenance jobs.
R&D grants: DOE is providing $168 million of ARRA funds for basic
R&D funding for solar and $74 million for advanced R&D or pilot funding
for solar.
Question 14. Buy American--GAO's recent reports indicate that DOE
believes the ``Buy American'' requirements of the stimulus could hamper
the agency's efforts to spend their ARRA funds.
a. Which programs would these requirements affect?
Answer. The Buy American requirements of the Recovery Act affect
all DOE Recovery Act-funded programs. However, to date, the Office of
Energy Efficiency & Renewable Energy (EERE) programs have generated the
majority of issues and questions concerning compliance with the Buy
American requirements. In particular, Energy Efficiency and
Conservation Block Grants (EECBG) and the State Energy Program (SEP)
have been the source of many inquiries.
b. Has DOE issued guidance for the ``Buy American'' requirements so
far?
Answer. Yes. DOE has issued agency-wide guidance for the Recovery
Act, including the Buy American requirements, in its ``Department of
Energy Acquisition and Financial Assistance Guide for the American
Recovery and Reinvestment Act of 2009,'' http://management.energy.gov/
policyguidance/1672.htm. Section 3.9 (p. 3-7) explains the Recovery Act
Buy American requirements in general. Additional, specific information
is provided in two attachments to that guidance document, Attachment
10--``Buy American Issues in the Recovery Act for Financial Assistance
Agreements,'' and Attachment 13--''.ecovery Act Buy American Act
Requirements for Information Needed From Financial Assistance
Applicants/Recipients for Waiver Requests Based on Unreasonable Cost or
Non-Availability.'' These are detailed explanations of what the Buy
American requirements mean, how they apply, and how to request waivers
of the Buy American requirements based on unreasonable cost or non-
availability.
EERE also has created a web page entitled, ``Buy American
Guidance,'' http://wwwl:eere.energ.gov/recovery/buy_american
provision.html. This web page explains the Buy American requirements,
contains the waivers EERE has issued to date (Nationwide Limited Public
Interest Waiver for LED Lighting and HVAC Units; and Nationwide
Categorical Waivers for Electronic Ballasts, LED Traffic Lights, and
Compact Fluorescent Lights) as well as additional information including
``Guidance on the Buy American Provisions as Applied to EERE Projects
funded by ARRA,'' ``Instructions for Waiver Requests,'' and
``Frequently Asked Questions about the Buy American Provision.''
Also on the EERE ``Buy American Guidance'' web page is EERE's
Request for Information (RFI) on questions pertaining to the Buy
American Provisions of the Recovery Act that was published in the
Federal Register. 75 Fed. Reg. 5783, 5784 (Feb. 4, 2010). The RFI
requests two categories of information from stakeholders. Part 1
requests technical information from stakeholders seeking to ascertain
the availability of manufactured goods produced in the United States
that are needed to carry out projects funded by EERE. Part 2 requests
information on questions pertaining to the application and
implementation (programmatic questions) of the Buy American provisions
in Recovery Act projects funded by EERE. The products and technical
specifications submitted in response to Part 1 will be catalogued and
disseminated to the domestic manufacturing community in order to
ascertain the domestic manufacturing capacity for these products before
EERE considers issuing any waivers based on non-availability.
Submissions in response to Part 2 (programmatic questions) are
addressed by designated program staff.
c. What is your agency doing to make sure those delays are
minimized?
Answer. EERE has designated a Buy American Coordinator whose
responsibilities are to disseminate information to stakeholders, obtain
feedback, and work with various program and staff and support offices
within DOE to resolve issues. EERE also has established an e-mail box,
[email protected], to receive inquiries and issue responses.
The DOE General Counsel's office operates an email hotline for
legal questions related to the Recovery Act, including the State Energy
Program, (SEP), Energy Efficiency Conservation Block Grant (EECBG) and
Weatherization Assistance Program (WAP), GCHotline FAQ Answers to Legal
Questions Related to the Recovery Act, http://wvvw.gc.energy.gov/
GCHotlineFAQ. Typically, Recipients who submit questions to the
GCHotline are given individual responses tailored to their factual
descriptions. Responses that are of general interest are posted as
FAQs. The FAQ section includes a ``Buy American'' category. In
addition, the Office of General Counsel holds a monthly call with state
energy offices to answer questions concerning the EECBG, SEP, and WAP
programs; some of the questions raised initially concerned Buy
American. In the two most recent monthly calls, no questions concerning
Buy America have been raised.
DOE's Recovery Act website, http://www.eergy,gov/recovery/
index.htm, has a link to the Buy American Guidance on the EERE web
page. It also features the DOE Recovery Act Clearinghouse, with a toll
free number that operates Monday through Friday, 9 am. to 7 p.m. EDT,
which provides information on popular topics, including the Buy
American requirements, and a link to the web address that accepts email
inquiries.
Question 15. Job Creation--You state that 2 million jobs have been
created or saved thanks to ARRA' s impact on hiring in the private
sector, by local and state governments and by non-profits. How many
jobs has the stimulus created in the private sector, as compared to
within government?
Answer. On April 14, 2010, the Council of Economic Advisers
estimated that by the end of the fourth quarter 2009 ARRA had raised
employment by 1Y2--2 million jobs relative to what it otherwise would
have been. This figure was based on a macroeconomic model and a
statistical model computed by the CEA. Specific data on the number of
jobs created by the stimulus in the private vs. public sector would be
available through CEA. These approaches do not allow a detailed
breakdown by industry. Source: http://www.whitehouse.gov/sites/default/
files/microsites/CEA-3rd-arra-report.pdf
Response of Matt Rogers to Questions From Senator Shaheen
We're very proud of the investments made in clean energy under the
ARRA bill. These funds are helping to make efficiency improvements and
deploy clean energy technologies across the country, including New
Hampshire. I believe the ARRA bill was an important down payment in
helping to get our country running on clean energy.
As you may know, NH's electric cooperative, like many of our
country's electric cooperatives, was awarded two smart grid grants by
DOE. I had the opportunity to visit the NH electric co-op last month
and learn first-hand about their efforts to modernize their electricity
system. The DOE smart grid grants are a critical part of that larger
effort.
However, concerns have been raised by New Hampshire's Electric
Cooperative and other electric cooperatives through the National Rural
Electric Cooperative Association (NRECA) regarding possible tax issues
surrounding the acceptance of DOE smart grid grants under ARRA.
It's my understanding that the Treasury Department may view these
grants as taxable income; which, if accepted, could affect the tax
status of many of the country's rural electric status, including the
New Hampshire electric cooperative. This is having a chilling effect on
many of the clean energy projects our countries electric co-operatives
are working on. It could result in our co-ops having to turn down the
ARRA grants.
This was clearly not the intent of Congress, in my view, to prevent
our electric cooperatives from participating in these important DOE
programs funded through ARRA.
Question 1. I am told that progress is being made between DOE and
Treasury to address this issue. Can you provide me with an update on
that status of DOE and Treasury to address this issue?
Question 2. Do you believe that you will be able to address this
issue in a timely manner in order to address the concerns that the
electric co-ops have raised?
Question 3. When do you think a resolution to this issue will be
made?
Question 4. What would happen to the DOE Smart Grid program should
these grants become taxable?
Question 5. Is there anything Congress needs to do to address this
issue, or do you think Treasury and DOE can work it out?
Answer. On March 10th, The Department of Treasury and the
Department of Energy announced new guidance on the tax treatment for
grantees receiving Recovery Act funding under the $3.4 billion Smart
Grid Investment Grant program. Under the guidance released, the
Internal Revenue Service is providing a safe harbor under section
118(a) of the Internal Revenue Code for corporations receiving funding
under the program.
With the determination that Smart Grid Investment Grants to
corporations are nontaxable, corporate utilities will be able to launch
their investments with a clear indication of the tax status for their
projects. This decision has allowed the Department of Energy to move
forward quickly to finalize many grant agreements in the past several
weeks. We continue to work with Treasury to evaluate the Smart Grid
Demonstration Program grants.
Responses of Matt Rogers to Questions From Senator Wyden
Question 1. Wave Energy--Europe has spent upwards of $100 million
developing a wave energy research facility in Scotland, while the U.S.
Government has committed just a few million dollars to developing a
similar capacity at two Marine Energy Centers in Hawaii and Oregon. The
U.S. is literally being left high and dry in developing this
technology. The President's FY2010 budget stated that FY2010 funding
for the Water Power Program ``complement funds provided by the Recovery
Act.'' Despite the commitment in the President's budget and requests
from both the House and the Senate, the Department hasn't provided any
funds for these technologies under the Recovery Act. To add insult to
injury, the FY2011 budget would cut funding in the marine-hydrokinetic
research program from the amount that Congress gave you to spend in FY
2010 to less than $20 million dollars a year. What is the justification
for ignoring the President's FY2010 budget and refusing to provide ARRA
funding for this research area, especially in light of the significant
sums being devoted to these technologies by other countries?
Answer. Based on Marine Hydrokinetic (MHK) technology development
levels and the amounts of open water testing and demonstration that
have taken place thus far, it was determined that no devices were
immediately suitable for commercial-scale deployment, and could best
meet the Recovery Act's goals of increased energy generation and rapid
economic stimulus. The FY 2011 request is $40 million, a $10 million
(19 percent) decrease from FY 2010 enacted levels. This amount will be
sufficient to continue and build upon activities started in FY 2010, as
well as to begin to support the development of cost-effective
incremental hydropower opportunities identified in 2010. FY 2011 is a
critical year for the Water Power program to test marine and
hydrokinetic devices and conduct feasibility studies at hydroelectric
facilities and dams not currently producing electricity. The program
plans to invest $10 million in public-private partnerships for the
development and testing of innovative device designs to support
establishing baseline costs of energy and performance for different
marine and hydrokinetic technologies. Of the $19.5 million for
conventional hydropower, the program's main investment in FY 2011 will
be $10.4 million in feasibility studies to identify opportunities for
increased incremental power generation utilizing efficiency
improvements, capacity upgrades, and powering existing non-powered
dams.
Question 2. Alternative Transportation Funding--I support the
programs that you have put in place such as the SuperTruck grants to
improve the energy efficiency of vehicles, but there are other
transportation technologies that can save energy also. There are
companies in Oregon that are developing state-of-the-art plug-in
motorcycles and streetcars, that not only can reduce our dependence on
imported oil here at home, they can help us preserve American jobs here
at home and create products that could be exported around the world--a
goal the President just highlighted in his State of the Union Message.
The motorcycle company would like to export their products to China as
well as market them here at home. The street car company--United
Streetcar--is the only U.S. manufacturer left. And they have to import
key components like traction motors which they would rather build here
in the U.S. Unfortunately, there is no U.S. Government support for
these technologies. During Under Secretary Kristina Johnson's testimony
before the Committee last December, she indicated that the Department
would not be opposed to expanding the Department's advanced vehicle
program to include a broader range of technologies such as the plug-in
motorcycle. As I told Under Secretary Johnson, not being opposed is not
the same as being supportive. Why isn't the Department supporting a
broader range of vehicle technologies? Why can't DOE use Recovery Act
funding to develop these energy saving products here in the U.S.?
Answer. The Department supports a wide range of advanced
transportation technologies: electric-drive, advanced combustion,
advanced biofuels, natural gas, and fuel cells. The plug-in motorcycles
described above benefit from the DOE's investments in electrification.
In electrification--the Department is addressing several of the largest
barriers to deploying plug-in vehicles: the high cost of batteries, the
need for charging infrastructure, and the need to build consumer
confidence by supporting the largest electric car demonstrations in the
world. Success in these areas will also help to ensure that electric
motorcycles are more affordable, easier to charge, and--as a result--
more likely to be embraced by the public.
The Advanced Technology Vehicle Manufacturer (ATVM) Loan Program is
not part of the Recovery Act. It has, however, announced four
conditional commitments for loans supporting advanced technology
vehicle manufacturing facilities in the United States since issuing the
program's Interim Final Rule in November 2008. The ATVM loan program
was recently expanded to include a broader range of vehicles that
qualify. The original authorizing legislation limited the program to
light duty vehicles that meet emission standards and achieve an
improvement of 125% of base year combined fuel economy for similar
vehicles.\1\ Due to the statutes reliance on corporate average fuel
economy (CAFE) metrics, DOE's implementing regulations restricted the
program to those vehicles subject to the CAFE standards. Motorcycles
are not subject to CAFE standards.
---------------------------------------------------------------------------
\1\ This was established by Section 136 of the Energy Independence
and Security Act of 2007.
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The amended authorizing legislation includes ``ultra efficient
vehicles'' in addition to ATVs.\2\ Ultra-efficient vehicles achieve 75
miles per gallon-equivalent, in gasoline or electric mode. Vehicles
must have closed compartments and be designed for at least 2-
passengers.
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\2\ Amended in the Energy and Water Development and Related
Agencies Appropriations Act of 2010.