The Committee recommends an appropriation of $100,000,000 in fiscal year 1986 for the Clean Coal Technology Program as well as advance appropriations of $175,000,000, $300,000,000, and $175,000,000 for fiscal year 1987, fiscal year 1988, and fiscal year 1989 respectively. This program was established by Public Law 98-473 "for the purpose of conducting cost-shared clean coal technology projects for the construction and operation of facilities to demonstrate the feasibility for future commercial operation." Pursuant to section 321 of that act, the Department solicited statements of interest in clean coal projects and received 175 responses.

The Committee has not agreed to the transfer of funds from moneys available to the Synthetic Fuels Corporation to the Department of Energy to initiate the Clean Coal Technology Program as proposed by the House, but has instead recommended the multiyear appropriations of new budget authority now. This approach is intended to ensure industry of a firm Federal commitment to a $750,000,000 program. Removing the uncertainty of future funding will reduce apparent risk to the private sector and should help the Government negotiate more favorable cost-sharing arrangements. Clear Federal commitment will stimulate greater competition and likely produce better projects. Also, the provision of multiyear funding is intended to be a strong congressional signal that the Department of Energy is expected to enter into multiyear contracts with project sponsors.

In addition to making advance appropriations, as noted previously, the Committee has recommended bill language requiring the Secretary to issue a general solicitation for clean coal projects within 30 calendar days after enactment of this legislation, to close this solicitation within 60 days, and to select projects for awards 90 days thereafter. Language proposed by the House relating to levels and forms of cost sharing have been retained in the bill. Earlier project selection criteria which were contained in Senate Report 99-82 on the fiscal year 1985 supplemental appropriations bill and which were modified in the statement of the managers, House Report 99-236, continue in force.

DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATION BILL, 1986

The clean coal technology reserve was established by Public Law 98-473, the Act making continuing appropriations for fiscal year 1985. At the same time, the law required the Department of Energy to solicit "statements of interest in, and proposals for projects employing emerging clean coal technologies". The response to the Department's solicitation was impressive, with over 170 responses received even though respondents were aware that no funding was available.

There appears to be a consensus building that some government impetus is necessary to assist in the development of technologies beyond the scale of the ongoing research and development programs in the Department of Energy. At the same time, it is apparent that very large scale facilities of the type originally envisioned to be sponsored by the Synthetic Fuels Corporation (SFC) will require too large a subsidy to attract either government or industry

interest. This is evidenced by the SFC's stated intent to reduce the scale and adjust the support of candidate projects before the Corporation.

The foregoing situation, combined with the need to develop technologies that will use coal cleanly, either for power generation or to fuel other equipment or vehicles, leads the Committee to recommend the transfer of $750,000,000 from the funds available to the Synthetic Fuels Corporation to the Department of Energy for clean coal technology. The funds are to be derived from the $5.7 billion currently available for projects for which Letters of Intent were authorized on or before June 1, 1984.

Air pollution, particularly acid rain, is a problem of growing concern in the Nation. In addition, significant new generating capacity will be required by utilities in the 1990's. In view of the collapse of the nuclear construction industry, the only viable alternative appears to be coal-fired plants. Therefore, it becomes imperative to demonstrate technologies that use coal cleanly and efficiently, so that needed generating capacity will be available on time, and with minimal environmental impact. Technologies that can be retrofitted to existing applications of coal will also provide pollution relief. Clean uses of coal in other applications will also reduce dependence on foreign oil as well as increase coal markets.

In order to show the long-term commitment of the Congress to this program, appropriations are recommended for three years; $100,000,000 for fiscal year 1986, $300,000,000 to become available in fiscal year 1987, and $350,000,000 to become available in fiscal year 1988. The Committee believes such an action is necessary in order to assure serious industry proposals with concomitant commitments, including cost-sharing. Staging the availability also allows for orderly review of the program.

The Committee believes that projects in this program should be industry projects assisted by the government, and not government directed demonstrations. To emphasize this view the Committee has included a requirement that government funding not exceed 50% of project cost. The Committee also has included provisions related to cost-sharing to provide that:

(1) Project sponsors must cost-share in each phase of the project. (2) If the government participates in sharing costs above the original estimate, it may not be in a greater proportion than was shared originally and then only up to 25% of the original amount of assistance.

(3) Future considerations such as royalties and revenue sharing from other plants or operations are not considered cost-sharing. The Department is, however, encouraged to negotiate such considerations if possible.

(4) Other appropriated Federal funds are not considered costsharing.

(5) In-kind contributions, such as supplies, equipment, facilities, and previously expended research and development funds will only be considered cost-sharing to the extent that they would be expensed, amortized, or depreciated in normal business practice. Thus, for example, fully depreciated or amortized investments would not be considered cost-sharing, nor would supplies previously expensed against income rather than placed in inventory.

The Committee believes that the above cost-sharing provisions will lead to carefully considered proposals from industry because industry will be required to provide significant funds of its own from the beginning of the project. This was a failing of the original Department demonstration program and many of its large scale pilot facilities.

Finally, the Committee has included a requirement for the Department to issue a general request for proposals within 90 days of enactment of the Act, and then move promptly into the contract process. As a result of the informational proposals received pursuant to the continuing resolution in fiscal year 1985, sufficient prior work has been done so that the process can proceed expeditiously. The Committee expects a full and open competition and has not favored any technology or project.

Many sources in Congress and elsewhere have been suggesting technical or procedural criteria for the selection of projects, and in general, the criteria suggested appear reasonable. The Committee observes that the criteria tend to concentrate on utility applications, and believes that although these are very important, other applications such as industrial, including steel and iron ore processing, and transportation uses are also of interest. The preparation of clean coal fuels is also important in itself.

The Committee believes that this program can be a significant step in reducing the environmental effects of coal burning, in increasing power generation options, in introducing new coal burning equipment, and in increasing markets for coal and coal-derived products, which will offset oil imports in the future.

CONFERENCE REPORT ON PUB. L. NO. 99-88,

MAKING SUPPLEMENTAL APPROPRIATIONS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1985, AND FOR OTHER PURPOSES

DEPARTMENT OF ENERGY

CLEAN COAL TECHNOLOGY

The managers agree with the clean coal technology project guidelines contained in Senate Report 99-82 with the following modifications:

I. GENERAL PROJECT GUIDELINES:

2. The project should utilize or expand the utility of technologies, techniques or processes which do not duplicate a commercial scale demonstration currently being conducted in the United States.

3. The clean coal technology, alone or in conjunction with other technologies, must result in emission levels that comply with or exceed Clean Air Act requirements, in a cost-effective

manner.

and,

IV. ENVIRONMENTAL BENEFITS:

1. The commercial application of the clean coal technology for retrofit applications on fossil fuel-fired plants is likely to result in a reduction of emissions from the use of coal at a cost which is competitive with the cost of achieving comparable emission reductions by current technology.

The managers agree that the clean coal technology project criteria contained in the Senate report provide useful guidance for the development of a competitive solicitation for cost-shared clean coal technology projects, and that the Department of Energy should immediately begin preparing such a solicitation document so that it can be issued as soon as possible after the beginning of fiscal year 1986, if funds are provided. To the extent that technologies traditionally supported by the Environmental Protection Agency (EPA) are part of the solicitation or responses to it, as well as on environmental regulatory considerations, the Department should consult with EPA.