S. HRG.

109692

U.S./INDIA ENERGY COOPERATION

HEARING
BEFORE THE

COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
TO

EXAMINE UNITED STATES AND INDIA ENERGY COOPERATION IN THE

CONTEXT OF GLOBAL ENERGY DEMAND, THE EMERGING ENERGY
NEEDS OF INDIA, AND THE ROLE NUCLEAR POWER CAN PLAY IN
MEETING THOSE NEEDS

JULY 18, 2006

(
Printed for the use of the
Committee on Energy and Natural Resources

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON

31088 PDF

2006

For sale by the Superintendent of Documents, U.S. Government Printing Office

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COMMITTEE ON ENERGY AND NATURAL RESOURCES

PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho
JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming
DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee
BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska
RON WYDEN, Oregon
RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida
MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri
DIANNE FEINSTEIN, California
CONRAD BURNS, Montana
MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia
KEN SALAZAR, Colorado
GORDON SMITH, Oregon
ROBERT MENENDEZ, New Jersey
JIM BUNNING, Kentucky
BRUCE M. EVANS, Staff Director
JUDITH K. PENSABENE, Chief Counsel
ROBERT M. SIMON, Democratic Staff Director
SAM E. FOWLER, Democratic Chief Counsel
HENRY ABEYTA, Fellow
JONATHAN EPSTEIN, Legislative Fellow

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CONTENTS
STATEMENTS
Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico ..........................................

Bunning, Hon. Jim, U.S. Senator from Kentucky .................................................
Domenici, Hon. Pete V., U.S. Senator from New Mexico .....................................
Gadbaw, R. Michael, Vice President and Senior Counsel, General Electric
Company ...............................................................................................................
Poneman, Daniel B., Principal, The Scowcroft Group ..........................................
Pumphrey, David, Deputy Assistant Secretary for International Energy Cooperation, Department of Energy .......................................................................
Simons, Paul, Deputy Assistant Secretary for Economic and Business Affairs,
Department of State ............................................................................................
Thomas, Hon. Craig, U.S. Senator from Wyoming ...............................................
Victor, Dr. David G., Director, Program of Energy and Sustainable Development, Stanford University ...................................................................................

2
3
1
38
34
3
11
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27

APPENDIX
Responses to additional questions ..........................................................................

49

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U.S./INDIA ENERGY COOPERATION

TUESDAY, JUNE 18, 2006

U.S. SENATE,
NATURAL RESOURCES,
Washington, DC.
The committee met, pursuant to notice, at 10:10 a.m., in room
SD366, Dirksen Senate Office Building, Hon. Pete V. Domenici,
chairman, presiding.
COMMITTEE

ON

ENERGY

AND

OPENING STATEMENT OF HON. PETE V. DOMENICI, U.S.

SENATOR FROM NEW MEXICO

The CHAIRMAN. Hello, everybody. The purpose of todays hearing

is to examine recent developments in U.S./India Energy Cooperation. After committing to a framework exactly one year ago, President Bush and Indias Prime Minister announced an agreement in
March this year on civil nuclear cooperation between our countries.
This is an historical agreement that I believe will lead to a strategic relationship between our great democracies. Im pleased with
the recent action taken by my good friend, Senator Lugar, of the
Foreign Relations Committee to pass the U.S./India Civil Nuclear
Agreement, withstanding bipartisan, strong bipartisan support. I
encourage the Senate and Senator Frist to bring this measure to
the Senate floor prior to departure of the August recess.
In hearings that led up to the approval of the Foreign Relations
Committee nonproliferation issues, issues related to sharing nuclear technology played a promising role. A related measure focused on U.S./India energy security. Cooperation did not receive
the same level of media attention but it raises a very serious issue
that we all became keenly aware of after the hurricanes hit our
gulf coast last year and that is that human and economic toll that
can result from a tight, inter-dependent world energy market reliant on energy sources that are subject to disruption. Energy security is not only a concern for the United States but for the developing countries like India, that has a population to surpass China
in the next 50 years, an economy rapidly expanding with a growth
rate of over 7 percent in 2005, resulting in increased energy consumption which is expected to double in the next 25 years. Our
witnesses today will speak to the role of technological cooperation
and industry partnerships to aid in developing options to meet future global energy demands while assuring diversified, proliferation-resistant energy sources.
My good friend Senator Bingaman and I have engaged in serious
discussions on another topic of global importance, that is of climate
change and I have said that I do not know where we will end up
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2
but I do believe that a large number of our citizens are concerned
about climate change. I think that Congress needs to explore ways
to reduce our contribution to those gases. Our cooperation with
India also encourages the development and the developing world to
do their part by adopting sustainable energy sources that reduce
greenhouse gases and their emissions. It is no secret to anyone in
Washington that I am a serious proponent of expanding nuclear
power generation along with many members of the Senate who sit
here today. The global community is rapidly examining nuclear
power as a means of providing sustainable energy. India has announced plans to significantly expand its civil nuclear program
with nine reactors currently under construction. I am hopeful that
cooperation with India will lead to significant opportunities for U.S.
industry in nuclear powers resurgence as India and other countries
develop plans for expanded nuclear power in the next decade. I
strongly support an evolving strategic U.S. relationship with India.
India is home to one billion people, the largest democracy and a
worthy partner that we can work with in our pursuit of global security. I look forward to the testimony today and hope that the
Senators who are here are also looking forward to what we are
going to hear today.
We are going to have two panels testifying before us. On one
panel we have Mr. David Pumphrey, Deputy Assistant Secretary
for International Energy Cooperation at the Department of Energy
and Mr. Paul Simmons, Deputy Assistant Secretary for Economic
and Business Affairs at the Department of State. I will stop with
that and ask if Senator Bingaman will have any comments and
then either of you two Senators. Thank you for coming today. It is
a very interesting panel.
STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR
FROM NEW MEXICO

Senator BINGAMAN. Thank you very much, Mr. Chairman, for

having the hearing. It is an extremely important hearing and set
of issues. Im interested in hearing from the witnesses, of course,
about the energy cooperation aspects of this but also about the implications of what is proposed for our nonproliferation efforts in the
world. I hope to have some questions when we get to that part of
the hearing. Thank you.
The CHAIRMAN. Thank you.
Senator Thomas.
STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR
FROM WYOMING

Senator THOMAS. Thank you, Mr. Chairman. I think it is an interesting issue as well. Nuclear power has great promise, of course,
and I think we are looking at the growth and change in the world,
change in the economies, India being one of those that is going to
make a change in the world and so this is an opportunity. I think
we need to work with them to talk about it in terms of air quality
and the environment. However, that responsibility with nuclear
power doesnt end just with the environment. We have to be concerned about nuclear proliferation and so on. So I think it is important we work in this area and help to develop the economy, our re-

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3
lationships as well as the safety, over time. So thank you. I look
forward to your comments.
STATEMENT OF HON. JIM BUNNING, U.S. SENATOR
FROM KENTUCKY

Senator BUNNING. Thank you, Mr. Chairman. This hearing represents an important step in recognizing that energy prices are
governed by a global marketplace. The price my constituents pay
for gasoline at the pump in Kentucky and the price Americans pay
for natural gas to heat their home is directly related to energy demands in countries like India. The growing demand for energy in
India will stretch limited international resources and push energy
prices even higher. To meet worldwide energy challenges, it is important that America and India cooperate.
America is the worldwide leader in mining, processing, burning
and gasifying coal. It is the most abundant domestic energy resource that we have. Similarly, India relies on coal to fuel more
than half of its energy needs. With its electricity growth forecast
to increase by 8-10 percent annually, India has the potential to be
an important new marketplace for our America coal and electricity
companies. In partnership with India, we can apply the newest
clean coal technologies and mining techniques. India will benefit
from our experiences and American companies will take advantage
of a new market. Cooperation is not only about helping India or developing a new market for American goods, it is a way for us to
take control of our own energy prices. Every time an American
company shares a new technique or asset or a new project, we can
increase the efficiency of Indias energy production and usage.
Added efficiencies will curb demand and decrease pressures on
international energy prices. As we help India develop a vibrant, efficient and environmentally friendly energy marketplace, we must
ensure that American companies who share their technologies are
protected. They need a level playing field with Indias companies
in terms of regulations, market participation and intellectual property rights. The partnership of America and India is an opportunity
for both nations to realize significant benefits. Thank you, Mr.
Chairman.
The CHAIRMAN. Thank you, Senator. I note the arrival of Senator
Craig. We were just finishing a few observations by each Senator
before we proceeded. Do you have any?
Senator CRAIG. No, Mr. Chairman.
The CHAIRMAN. Very good. All right. Witnesses, let us proceed.
Mr. Pumphrey, if you would start.
STATEMENT OF DAVID PUMPHREY, DEPUTY ASSISTANT SECRETARY FOR INTERNATIONAL ENERGY COOPERATION, OFFICE OF POLICY AND INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY

Mr. PUMPHREY. Thank you, Mr. Chairman, members of the Committee. I am pleased to appear before you this morning to discuss
Indias expanding role in global energy markets and the important
energy cooperation taking place between our two countries. India
has been mentioned already, a Nation of over a billion people with
an economy growing at nearly 8 percent per year has a large and

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4
rapidly increasing appetite for energy. Providing clean, reliable and
affordable energy to sustain this high level of economic growth is
a critical challenge for the Indian government. Between 1980 and
2004, energy demand increased by over 270 percent and based on
our latest EIA assessments, we expect demand to double again by
the year 2030. Concerns about assuring adequate energy supplies
prompted President Bush and Prime Minister Singh to focus on energy security cooperation as a key aspect of a transformed IndoU.S. strategic relationship. This focus on energy security was reflected in the launch of the new U.S./India energy dialogue on May
31 of last year, chaired by Secretary Bodman and Deputy Chairman of Indias Planning Commission, Dr. Montek Singh Ahluwalia.
The goal of the dialogue is to identify concrete actions the two
countries can take to help India address its energy challenge
through increased trade and investment and cleaner domestic energy production, energy efficiency, clean energy technologies and
diversified imports of energy.
This dialogue has established five Working Groups, each cochaired by the Department of Energy and an appropriate government of India counterpart and we also have a number of other U.S.
Government agencies involved in the activities. So I will briefly
highlight some of the key activities and accomplishments so far
and of course, there is more detail in the formal testimony.
Coal, as was mentioned, currently provides about half of Indias
energy and is expected to remain the dominant fuel in the future.
The dialogue is focused on a number of activities to improve the
mining, transport and utilization of coal. Perhaps the most significant development has been Indias decision to become a partner in
the Government Steering Committee of the FutureGen alliance.
India is contributing $10 million to this demonstration powerplant,
which will capture and sequester carbon dioxide.
India has recently discovered significant reserves, new reserves
of natural gas but lacks an adequate infrastructure to move this
gas to major national markets. In addition, India has a large potential for coal-bed methane. We have brought together the private
sector and government officials to review the potential for natural
gas development and to assist the government of India in shaping
the regulatory environment necessary to attract the investment in
these natural gas resources.
Looking towards the longer term, we are also working with India
on the first efforts to drill for gas hydrates offshore. We hope this
research will accelerate efforts and develop this resource of considerable untapped potential. Energy efficiency and renewable energy
resources, we believe, will also make an important contribution in
shaping future demand for energy in India. We have undertaken
a number of activities to support energy efficiency practices and
stimulate investment in renewable energy. This work builds on significant programs undertaken by the U.S. Agency for International
Development. Clearly, nuclear energy will be an important part of
Indias energy future as well. While we have had only limited exchanges under the dialogue, meaningful collaboration in this area
will be contingent on the modification of our own legal framework.
In looking longer term again, at our urging, the ITER partners
have invited India to participate as a full member in this project

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to advance fusion energy research. Private sector investment in all
parts of the energy supply chain is critical to achieving any of Indias energy goals. We and the government of India have made it
a priority to include the participation of U.S. and Indian business
community in aspects of all of the Working Groups. We have
launched several events designed to bring U.S. industry in contact
with Indian counterparts, including a CEO Roundtable in Houston
put together by the U.S./India Business Council with the Minister
of Petroleum and Gas to discuss investment in Indias oil and gas
sector. Finally, we have also been working with India to help develop its emergency response capability and its own strategic stockpiles. Over the past few years, we have hosted study tours to visit
the U.S. SPR sites, invited Indian officials to international conferences in the United States and invited Indian representatives to
visit with the International Energy Agency to better understand
how the IEA members plan for and respond to severe supply disruptions.
Mr. Chairman and members of the committee, let me conclude
by emphasizing that the economic growth that India is experiencing today will lift many people out of poverty. It is in our mutual interest to help India meet its energy needs and become a
more efficient user of energy in order to sustain this growth. We
are convinced that bilateral, multi-lateral energy cooperation maximizes everyones energy security. Thank you again, Mr. Chairman,
for the opportunity to address the committee and Ill be happy to
take any questions that you or the members have.
[The prepared statement of Mr. Pumphrey follows:]
PREPARED STATEMENT OF DAVID PUMPHREY, DEPUTY ASSISTANT SECRETARY FOR
INTERNATIONAL ENERGY COOPERATION, OFFICE OF POLICY AND INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY
Mr. Chairman and Members of the Committee, I am pleased to appear before you
this morningthe one-year anniversary of the Joint Statement concluded by President Bush and Prime Minister Singhto discuss Indias expanding role in the global energy market and the important energy cooperation taking place between the
U.S. and India.
President Bush placed energy security high on his agenda from the beginning of
his first term and that commitment has only increased. The Presidents policy recognizes the global nature of the energy markets, and that a nations energy security
does not end at its national boundaries. Our overarching energy security objective
is to promote adequate and reliable supplies of affordable energy, as well as the
clean and efficient use of energy resources. As the worlds largest producer and consumer of energy resources, the U.S. must play a leading role in addressing the
worlds energy challenges and ensuring a secure energy future. The worlds demand
for energy is growing rapidly and the demand growth will be increasingly concentrated in the developing world.
We are working internationally to create expanded energy partnerships with
major consuming and producing countries. These partnerships are designed to improve energy security globally through domestic energy resource development, increasing the use of clean fuels, improved legal and regulatory regimes, increasing
private investment, diversifying resources to include alternative and renewable energy sources, and helping the developing countries and growing economies to be
more efficient producers and consumers of energy.
INDIAS ENERGY OUTLOOK

Indiaa nation of over a billion people with an economy growing at approximately 8 percent per yearhas a massive and rapidly growing appetite for energy.
Rapid population growth, expanding industrial production, economic development,
urbanization, and increased motor vehicle ownership are all driving this energy demand. Between 1980 and 2004, energy demand increased by over 270 percent. In

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1980, total primary energy demand was only 4.16 quadrillion BTUs but by 2004 demand had risen to over 15 quadrillion BTUs of commercial energy, thus making it
the fifth largest consumer of energy in the world behind only the United States,
China, Russia, and Japan. This growth will continue at a rapid pace with total energy demand projected to be 25.7 quadrillion BTUs by 2020 and 32.5 quadrillion
BTUs by 2030.
India is the worlds third largest coal producer behind China and the U.S. Coal
consumption was 478 million short tons (mst) in 2004, growing to 775 million mst
by 2020. Indias coal has twice the ash content of U.S. coal, resulting in serious environmental and health consequences for its population. Currently, about 53 percent
of Indias total energy (and 70 percent of Indias electric power generation) is derived from coal.
Of the remaining sources:
nearly 33 percent is derived from oil;
8 percent from natural gas;
5 percent from hydro-electric power;
less than one percent from renewable (solar and wind) sources; and,
the remaining 1 percent comes from nuclear energy.
Indias current civilian nuclear program has an installed capacity of 3,850
megawatts electric (MWe), but, according to the Government of India, it is expected
to reach 20,000 MWe by 2020.
Indias demand for oil and natural gas is substantial, and will only increase as
its economy grows and industrializes. Indian consumption of natural gas has risen
faster than any other fossil fuel in recent years, from 63 trillion cubic feet per year
(Tcf) in 1995 to 1.09 Tcf in 2004. Its use is projected to reach 1.5 Tcf by 2010 and
2.2 Tcf by 2020. Oil accounts for 33 percent of Indias total energy consumption. Indias average oil production level was 828,000 barrels per day in 2005. Future oil
consumption is expected to grow from 2.6 million barrels per day (mmbd) in 2005
to 3.7 mmbd in 2020 and 4.5 mmbd in 2030. In 2005, India imported (net) approximately 1.7 mmbd of oil. Based on conservative estimates, these imports will continue to grow as consumption needs will rapidly outpace growth in production capacity. Looking ahead, in 2020 Indias production capacity will be 1.4 mmbd, leaving
an estimated import demand of 2.3 mmbd. Likewise, by 2030 import demand will
continue grow to 2.9 mmbd as production will only increase slightly between 2020
and 2030 (1.4 to 1.6 mmbd.)
U.S. POLICY RESPONSES

The U.S. began engaging India on energy more than a decade ago. We realized
the enormous growth potential in its economy and recognized the implications for
our energy security and for the global environment. My colleague from the Department of State can elaborate on the Civil Nuclear Cooperation Initiative; I would like
to discuss more fully the broad range of energy-related activities we have undertaken with India. Today, the Department of Energy leads a wide variety of joint activities with India designed to increase its energy security while building a lasting
partnership and friendship between our two nations. These partnerships include
participation from several agencies, the Department of State, the Department of
Commerce, the Agency for International Development, the Trade and Development
Agency, and the Environmental Protection Agency.
Our efforts in 1994 focused on improving the efficiency of Indias coal-fired power
plants, promoting the use of clean fuels such as natural gas, wind and solar energy,
helping establish public-private partnerships in industrial energy efficiency, and improving the investment climate for U.S. energy firms.
President Bush and Prime Minister Vajpayee bolstered our energy cooperation in
November 2001, issuing a Joint Statement establishing energy as one of five pillars
of the Indo-U.S. Economic Dialogue, with the other pillars being trade, investment,
commerce and the environment. This enabled the implementation of the Presidents
National Energy Policy Plans recommendation that the Department of Energy work
with Indias Ministry of Petroleum and Natural Gas to enhance domestic oil and gas
supply.
U.S.-INDIA ENERGY COOPERATION

Growing concerns about energy security prompted the U.S. and India to launch
a new energy dialogue in 2005 that reflects the transformed strategic relationship
between the worlds two largest democracies. The United States and India recognize
their mutual interests are best served by working together in a collaborative fashion
to ensure stability in global energy markets. Adequate and reliable supplies of clean

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energy at reasonable cost are essential to fuel Indias rapidly growing economy. Both
the U.S. and India are increasingly reliant upon global oil and natural gas markets
to satisfy their energy needs. Both nations depend heavily upon domestic supplies
of coal for electric power generation and seek to increase their utilization of natural
gas, renewable energy and nuclear power, as well as pursue energy efficient practices to ensure a balanced and sustainable energy economy that helps preserve a
clean environment.
In addition to our bilateral work, the United States and India joined with Australia, China, Japan, and South Korea to launch the Asia-Pacific Partnership on
Clean Development and Climate in January. This results-oriented, pro-growth initiative will help Partner countries to focus on steps that will create new investment
opportunities, build local capacity, and remove barriers to the introduction of clean,
more efficient technologies. This partnership, pursued in close collaboration with the
private sector, will help each member meet the challenges of improving energy security, reducing pollution, and addressing the long-term challenge of climate change.
We look forward to Indias active participation in this critical initiative.
U.S.-INDIA ENERGY DIALOGUE

President Bush has called for a transformed Indo-U.S. relationship premised upon
a new strategic partnership under which energy security and energy cooperation are
key factors. This relationship was reflected in the launch of the new U.S.-India Energy Dialogue on May 31, 2005 chaired by Secretary Bodman and Deputy Chairman
of Indias Planning Commission Montek Singh Ahluwalia. It established five Working Groups along with a Steering Committee to provide oversight and direction. The
goal of the Dialogue is to identify concrete actions that the two countries can take
to help India address its energy challenges. The underlying strategy is to address
these challenges through increased trade and investment in cleaner domestic energy
production, energy efficiency and diversified imports of energy. Building upon the
broad range of existing cooperation, this effort will help mobilize secure, clean, reliable, and affordable sources of energy.
The five Working Groups are: Oil and Gas, Coal, Power and Energy Efficiency,
New Technologies and Renewable Energy, and Civil Nuclear. These Working
Groups have launched activities designed to increase the development of domestic
resources, promote the deployment of clean energy technologies and fuels, support
reforms in the power sector, enhance Indias awareness of steps it needs to take to
attract foreign investment in the energy sector, and bolster Indias energy security.
The Department of Energy co-chairs each of these Working Groups with the appropriate Government of India counterparts and we convene experts from a variety of
U.S. Government agencies to participate in the projects.
DEVELOPING INDIAS DOMESTIC ENERGY RESOURCES

The Department of Energy, in partnership with several other U.S. Government

agencies, has been working with the Government of India on several projects that
will increase the use of Indias domestic resources.
More Efficient Utilization of Coal Resources
The Department of Energy is undertaking a number of steps to support the most
efficient development of coal resources. In April 2006, India became a partner in the
FutureGen international partnership which will work to create a zero-emissions
coal-fired power plant that will produce hydrogen and sequester carbon dioxide underground, enabling greater use of coal in an environmentally sustainable way. Successfully demonstrating and adopting this technology will allow India to reduce the
intensity of future greenhouse gas emissions from the burning of their abundant
coal resources. India became the first country to join the United States on the
FutureGen Government Steering Committee and plans to participate in the
FutureGen Industry Alliance. The Government of India will contribute a total of $10
million to the project to join the government steering committee, $2.2 million of
which has already been contributed.
The Coal Working Group has recently identified several high priority projects that
will be pursued by our two countries over the next 2 years, including pursuing investment opportunities and information exchanges in the areas of coal mining and
processing, coal mine safety, coal mine methane, and in situ coal gasification. The
U.S. Trade and Development Agency has provided a $360,000 for a feasibility study
grant for the Neyveli coal mine expansion project. Technical exchanges and visits
are underway between the U.S. and India to examine the potential for pilot projects
in India in the areas of underground coal gasification and coal beneficiation/coal
washeries.

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Finally, a Memorandum of Understanding, or MOU, between the U.S. Minerals
Management Service and Indias Oil Industry Safety Directorate is expected to be
signed in July 2006 in Washington, D.C. The MOU will deal primarily with operational safety, inspection issues and accident investigations of offshore oil and gas
operations related to both drilling and production.
In the area of coal-based power generation, a proposed strategic partnership has
been established between Indias National Thermal Power Corporation and the U.S.
Department of Energys National Energy Technology Laboratory to collaborate on
advanced research and development of clean and efficient power generation. A workshop is planned in India for September 2006 to discuss the results of a study on
the feasibility of Integrated Gas Combined Cycle power plants in India.
Promoting Natural Gas Development
The promotion and development of clean coal technologies and carbon sequestration efforts associated with power generation remain a focus of current U.S. initiatives with India.
The Department of Energy has been working with India to help them develop
their domestic natural gas resources that can offer near-term alternatives. India has
discovered a significant reserve of natural gas off its east coast but lacks an adequate infrastructure to move this gas to major national markets. We recently held
a joint conference on natural gas that included representatives from government
and the private sector to review the potential for natural gas development and to
assist the Government of India in shaping the regulatory environment necessary to
attract the investment needed to move this gas to market.
Another important area for future domestic natural gas production is from coal
bed methane (CBM). India is believed to have significant resources of CBM that
could make important contributions to meeting future energy needs. This is an opportunity for the U.S. private sector, which has extensive experience in the area of
CBM development, to engage in this key energy source. The Ministry of Coal and
Ministry of Petroleum and Natural Gas with the U.S. Trade and Development Agency (USTDA) and the U.S. Environmental Protection Agency are working together to
establish a CBM Clearinghouse Information Center, an initiative under the Methane to Markets Partnership. This Center would promote the development of CBM
projects and CBM resources by collecting data, conducting training, facilitating technology transfer, and providing consulting services. USTDA plans to support a kickoff event such as a workshop or conference showcasing U.S. technologies, and the
Environmental Protection Agency plans to provide financial assistance, technical
training, and other support to the organization. In addition USTDA is providing a
$506,000 grant to Reliance Industries Limited to partially fund the cost of technical
assistance to develop CBM resources at Reliances Sohagpur field.
The U.S. Department of Energy is also working with India on ongoing research
and development of the first hydrate drilling offshore India; this research is expected to accelerate efforts to develop methane production from hydrates in both
countries, potentially providing a significant increase in the quantity of domestic
natural gas available to the Indian market. The ocean research ship Joides Resolution is currently drilling and coring hydrate-bearing sediments offshore India. DOE
has provided specialized equipment and research scientists to detect and evaluate
gas hydrates in cores. DOE and the Directorate General for Hydrocarbons are in
discussions to develop an MOU to exchange information and analyses, conduct joint
studies and projects, and exchange scientific and technical personnel in order to increase understanding of the geologic occurrence and the potential for methane production from natural gas hydrates in both India and the United States.
ACCELERATING ENERGY SECTOR REGULATORY REFORM

In order to meet Indias growing demand for energy, significant new investment
is needed and the necessary legal and regulatory framework must be in place to attract the needed capital. Recently, the two governments conducted a workshop on
natural gas regulation held at the Ministry of Petroleum and Natural Gas. India
has recently enacted a Petroleum and Natural Gas Regulatory Board Act which
seeks to promote competition, open access and greater transparency in gas pipeline
transportation. The meeting addressed a number of regulatory issues and processes
that India will have to address to develop a regulatory scheme that will be attractive to potential investors. The meeting was attended by various U.S. Government
officials (from the U.S. Department of Energy, U.S. Department of Commerce, U.S.
Trade and Development Agency, and U.S. Embassy in India); and a senior official
of New York States regulatory body for natural gas who is an expert on both U.S.
federal and state regulation. The Indian representatives at this meeting included
the Ministry of Petroleum and Natural Gas, and its Petroleum Planning Analysis

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Cell, as well as the Gas Authority of India (GAIL). The effort to establish an appropriate regulatory regime is also being supported by a USTDA grant to the Government of India for a limited feasibility study of a national pipeline grid and to explore
the possibility of providing further technical assistance in the area of gas sector regulation.
DATA COLLECTION AND INFORMATION EXCHANGE

A key element of a fully functioning energy market is the availability of timely

and accurate information. To help support Indias efforts to develop much better
data and information, the U.S. Energy Information Administration and Indias Ministry of Petroleum and Natural Gas have initiated activities to help develop Indian
data systems. The initial work has focused on techniques for collecting hydrocarbon
data in India and the United States and methods to improve data collection in
India.
IMPROVING ENERGY EFFICIENCY

One of the most important areas of cooperation between the U.S. Government and
the Government of India is improving energy efficiency. Energy efficiency investments could make a major contribution to shaping the future demand for energy in
India. Much of the recent cooperation between DOE and India has focused on facilitating the development and deployment of energy efficient technologies and practices, including those directed at the industrial, residential, and transportation sector. Building on much of the work of the U.S. Agency for International Development
mission in India, the Power and Energy Efficiency working group has engaged in
several projects designed to decrease energy demand and improve power generation
infrastructure in India.
A U.S.-India Energy Efficiency Technology Cooperation Conference, jointly organized by DOE and Indias Ministry of Power, was held on May 2nd and 3rd, 2006
in New Delhi with technical support from USAID and sponsorship by several Indian
and U.S. industry groups. The focus of the conference was on industrial and building energy efficiency. Among the key recommendations that came from the event
was the establishment of five regional centers of excellence in energy efficiency in
India as well as a collaborative program of assistance in developing macro-economic
energy efficiency indicators. Following the conference, USAID in technical partnership with the State Government of Karnataka and the Ministry of Power, announced the establishment of a center of excellence for efficient lighting technologies
and products, to be called the Lights Museum and Energy Centre in Bangalore.
Cooperation is also continuing on energy efficient buildings and on the development
of building codes, and a U.S. team conducted training in India in May 2006.
Major strides have been made towards rural electrification as well. USAID recently launched a public-private partnership with the General Electric Company to
increase access to clean and affordable energy services in rural communities in
India. The partnership will span a two-year period and provide up to four communities in India with access to clean energy. The Distribution Reform Upgrades and
Management program under USAID has also completed detailed project reports on
four model projects on efficient power distribution in the states of Karnataka,
Maharashtra, Gujarat and Delhi.
INCREASE USE OF ALTERNATIVE AND RENEWABLE ENERGY RESOURCES

U.S.-India energy cooperation has also focused on the fostering of reliable sources
of fuels, including development, deployment, and commercialization of technologies
for sustainable, renewable fuels. This work includes creating public-private sector
partnerships, as well as the promotion of investment, trade, and technology cooperation in the development of renewable resources such as solar, wind, hydro, and biomass. The Minister of Non-Conventional Energy Sources recently met with experts
at DOEs National Renewable Energy Lab to discuss potential areas of collaboration
in hydrogen and biofuels research.
CIVIL NUCLEAR ENERGY COOPERATION

Nuclear energy will also be an important part of Indias energy future. To that
end, the Department of Energy held a joint technical workshop earlier this year in
Mumbai to advance dialogue and cooperation on technical issues associated with civilian nuclear energy use. Initial preparations are underway for a second workshop
to take place this fall in the United States. However, any meaningful collaboration
in this area is contingent on modification of our legal framework as proposed under
the U.S.-India Civil Nuclear Cooperation Initiative.

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Looking longer term, the U.S. and its ITER partners, the European Union, Russia, Japan, Republic of Korea and China, have invited India to participate as a full
partner in the international research project which aims to demonstrate the feasibility of fusion power. U.S. support was instrumental in ensuring this final agreement. The partnership represents the first tangible and concrete step towards greater cooperation between the U.S. and India in the area of civil nuclear energy.
IMPROVED BUSINESS CLIMATE AND MOBILIZE PRIVATE INVESTMENT

Private sector investment in all parts of the energy supply chain is critical to fostering energy security. We have made it a priority to include the participation of
U.S. business in aspects of all of the working groups under the U.S.-India Energy
Dialogue, which we have encouraged on the Indian side as well, and we have consistently made an effort to encourage the Government of India to take the necessary
steps to improve the investment climate and attract U.S. companies.
This past March, the Department of Energy, with the Department of Commerce
and USTDA, organized a CEO-roundtable event for the Ministry of Petroleum and
Natural Gas in Houston. This event was held in conjunction with the roadshow for
the sixth round of New Exploration Licensing Program and third Coal Bed Methane
bid round. The meeting was designed to be a forum for U.S. companies to discuss
their potential investment and voice any concerns they may have about the oil and
gas sector in India.
In addition, the Department of Energy and the U.S.-India Business Council jointly
organized a meeting in January of this year with the purpose of soliciting industry
views on key commercial issues and building private sector participation in the Energy Dialogue and to promote increased U.S. trade and investment in Indias energy
sector.
The Coal Working group is also establishing a Coal Business Council consisting
of representatives from business, industry, academia and other non-governmental
organizations to serve as a resource to the Working Group.
DEVELOPING CRISIS RESPONSE MECHANISMS

The Department of Energy has been working closely with India for some time to
help develop its emergency response capability and its strategic stocks. India is developing a 5 million ton (approximately 36.5 million barrels) strategic crude oil reserve, with several locations near Mangalore on the east coast being considered. The
Department of Energy has hosted study tours for Indian officials to visit U.S. Strategic Petroleum Reserve sites and speak with U.S. experts in these areas. Indian
officials have also participated in international oil stockpile conferences we have
held in the U.S. We have also invited Indian representatives to visit with the International Energy Agency (IEA) to better understand how the IEA members plan for
and respond to a severe supply disruption.
As such, the Department of Energy has been actively improving relations with
senior Indian officials in energy policy-making. In order to ensure a coordinated response in an emergency or crisis situation, we must continue to develop close relations at the highest levels of government. In recent months we have had several
high level meetings and exchanges between senior Department of Energy and Indian government officials.
CONCLUSION

Mr. Chairman and members of the Committee let me conclude by emphasizing

that the economic growth that India is experiencing today will lift many people out
of poverty and it is in our mutual interest to see that growth continue. Therefore,
it is in our mutual interest to help India meet its energy needs and become a more
efficient user of energy, both that which is available domestically and that which
it imports.
The U.S. is leading by example and making needed investments in technologies
that will fundamentally transform how we produce and consume energy in the future. We have embarked on an ambitious agenda through the Presidents Advanced
Energy Initiative. We can share these bold ideas and our experiences with India.
We are convinced that bilateral and multilateral energy cooperation maximizes everyones energy security. Thank you, Mr. Chairman, for the opportunity to address
the Committee on this important subject and I am happy to take any questions you
or the Members may have.

The CHAIRMAN. Thank you very much. We will have some questions.

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Mr. Simons.
STATEMENT OF PAUL SIMONS, DEPUTY ASSISTANT SECRETARY FOR ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE

Mr. SIMONS. Thank you, Mr. Chairman. From the perspective of

the State Department, we very much appreciate the interest of this
committee in the U.S./India energy relationship. Let me ask that
my full statement be entered for the record and Id just like to
focus on three brief points in my opening statement.
The CHAIRMAN. It will be made a part of the record and we
thank you for doing that. Please proceed.
Mr. SIMONS. Thank you. Let me focus on three very brief points
this morning in my opening statement. First, Mr. Chairman, as
you pointed out, we have an evolving strategic relationship with
India and as the Secretary stated in her speech on July 10, 2006,
we do consider strengthening and expanding and deepening this
U.S./India relationship to be one of the Presidents signature foreign policy achievements. India is the worlds largest democracy. It
is a natural partner for the United States. Its society is open and
free and transparent and stable and multi-ethnic and multi-religious. Indias democracy is characterized by individual freedom by
Rule of Law and by civilian control of the military, all aspects that
we very much support and want to reinforce. India will soon become the worlds most populous Nation as well as one of the five
largest economies of the world and of course, as a rising global
power, India can be a pillar of stability in a rapidly changing Asia
and a strategic partner for the United States as we meet many of
the broad challenges of the 21st century. We have invested the necessary capital to build a global partnership with India. This partnership is founded on strategic success and strategic interests, common democratic ideals and this partnership will advance the cause
of peace and freedom and the opportunity in the new century. So
we definitely agree, Mr. Chairman, with your support for this
evolving strategic partnership with India.
The second point is that from our perspective and again, as Secretary Rice noted last week, a key to unlocking the full promise of
this partnership is the very Civil Nuclear Cooperation Initiative
that President Bush and Prime Minister Singh put forth last July.
By addressing Indias unique situation creatively and responsibly,
we believe that our civil and nuclear initiative will elevate our
partnership to this new strategic position that we all seek. The Secretary noted that this is the first benefit of the Civil Nuclear
Agreement. She also noted four other improvements.
First, the initiative, as several of the Senators have pointed out,
will enhance energy security. Second, it will benefit the environment. Third, it will create opportunities for American jobs and finally, it will add to stability and security of the world and in fact,
be a net gain for the cause of nonproliferation worldwide.
The third point Id like to stress is the role of nuclear energy in
acting as a critical element in building a portfolio of technologies
that will bring the world onto a more sustainable energy path. This
concept of a portfolio of technologies was laid out in a recent report
issued by the IEA, the International Energy Agency. For the first

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time, they conducted a survey out to the year 2050, to try to take
a look at what a sustainable, global energy future would look like.
And their conclusions are very similar to the conclusions that have
been arrived at by the Bush administration and which basically
frame our overall approach to global energy security, which is that
we need work simultaneously in a number of key areas, technologyrelated areas, to assure this sustainable future and nuclear energy
is clearly one of those. It is an important component. Other areas
are clean coal, including the incorporation of carbon capture and
stewards technology. A third area is increased use of biofuels for
road transport and a fourth area is a strong focus on energy efficiency. I point this out because, as Mr. Pumphrey pointed out, we
have an energy partnership now with India and I think it is important to note that we are focusing on all four of these areas in our
energy partnership and they are very much consistent with the
analysis of the IEA and the administrations analysis, in terms of
what is necessary to lead towards a sustainable energy future.
Thank you, Mr. Chairman and I look forward to your questions.
[The prepared statement of Mr. Simons follows:]
PREPARED STATEMENT OF PAUL SIMONS, DEPUTY ASSISTANT SECRETARY
ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE

FOR

Mr. Chairman, distinguished Committee members, I am pleased to be here today,

with Department of Energy Deputy Assistant Secretary David Pumphrey to discuss
Indian energy issues. As the worlds largest democracy and an important emerging
energy consumer, India surely warrants the extra attention.
U.S.-INDIA PARTNERSHIP

During the visit of President Bush to New Delhi last March, he proclaimed that
India in the 21st century is a natural partner of the United States. It is this natural partnership that has led to our ongoing U.S. India Economic dialogue since
2000 and led to the launching of the U.S.-India Energy dialogue prior to the Prime
Ministers visit in July 2005.
The U.S.-India economic relationship has become stronger. We are working with
India on a full agenda of economic issues through our Embassy in New Delhi, the
many cabinet-level visits to the sub-continent, and the four policy forums of the Economic Dialoguethe Trade Policy Forum, the Financial and Economic Forum, the
Environment Dialogue, and the Commercial Dialogueas well as two cross-cutting
forums focused on biotechnology and information technology. We also established a
CEO Forum last year composed of 10 chief executives from each country. Their
input will help the United States and India make progress on key issues that will
enhance economic growth and job creation and promote bilateral trade and investment by harnessing the energy and expertise of private sector leaders.
India is increasingly becoming a major U.S. trading partner. From just $16 billion
in two-way trade in 1998, U.S.-India trade has grown to $26 billion in 2005. U.S.
exports (of goods), now at approximately $8 billion, grew almost 30 percent last year
and we expect continued strong growth. In the past year, we have taken steps that
are opening many new opportunities for both India and the U.S. We negotiated a
comprehensive open skies agreement that has brought momentum to the aviation
sector. Since then Boeing has sold almost $15 billion in new aircraft to India and
two U.S. airlines have opened non-stop routes to India. Airport privatization is underway and the air transport market has grown by close to 40 percent in the past
year.
ECONOMIC CHALLENGES

There are a number of mutually beneficial strategic reforms that could contribute
significantly to Indias progress and encourage American business to invest in Indias future. Private enterprise and free markets are key to long-term progress. Effective public-private cooperation will address economic growth and development
challenges far more effectively than micro-management by governments. Business
activity and people-to-people engagement will be critical to the transformation of
U.S.-India relations. Nevertheless, governments play an important role in setting

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the ground rules for much business activity. Prime Minister Singh has put economic
reform at the top of Indias agenda. We recognize that these reforms must be politically viable to survive. There are a number of mutually beneficial strategic reforms
that could contribute significantly to Indias progress and encourage American business to invest in Indias future.
The most prominent challenge is world-class infrastructure, which India must provide as a platform for higher sustained growth to enable India to achieve its vision
of becoming a world power. Infrastructure is now a national priority, but bringing
together federal/state authorities and public/private players is just beginning, and
remains a tall order. Infrastructure challenges are complicated by the fact that Indias federal/state fiscal deficits severely restrict necessary finances for development.
India must invigorate private sources to finance long-term project development. This
means that the regulatory environment and attitudes towards private investment
in infrastructure at the federal and state level must change. Opening up sectors of
the economy where private investment is now restricted, such as retailing, real estate, food processing, small-scale industry, and telecommunications will improve
rural connectivity and help generate the growth and revenue streams necessary to
provide positive returns to infrastructure investment.
Investors need greater confidence to undertake infrastructure investments, especially in the power sector, where our U.S.-India Energy Dialogue promotes increased
trade and investment, including in civilian nuclear power. Transparent market
structures and commercial practices help to open markets. They enable foreign investors to better understand and negotiate on a level playing field. These are essential for realizing the energy security objectives of India as well as other countries
in the South Asian region. Market structures will be critical for nations as they seek
to increase access to global energy markets and strive to meet the needs of their
growing economies.
U.S.-INDIA CIVIL NUCLEAR COOPERATION INITIATIVE

One of the most important aspects of our strategic partnership with India is, of
course, the U.S.-India Civil Nuclear Cooperation Initiative. As Secretary Rice said
during her Senate hearing, this initiative is an historic strategic achievement that
will advance energy security, further environmental protection, foster economic and
technological development in both of our countries, bolster international security,
and strengthen the global nonproliferation regime.
The significance of this initiative should not be underestimated. India has
pledged, for the first time, to submit its entire civil nuclear program to international
inspection and to take on significant new nonproliferation commitments in exchange
for full civil nuclear cooperation with the international community. With this initiative, the world expects India to be a full partner in nonproliferation, and India expects the world to help it meet its growing energy needs. We will continue to work
with India on a range of nonproliferation issues as it implements its Joint Statement commitments and our strategic partnership further unfolds.
Implementing this Initiative is a top priority for both the United States and India.
We continue to engage our Indian counterparts on a daily basis as we both move
forward. In doing so, we look to Congress as a full partner in this endeavor. We
are thankful for the support of the Senate Foreign Relations Committee and the
House International Relations Committee in favorably reporting legislation on this
initiative by overwhelming bipartisan margins. Your support for this is crucial and
we look forward to continuing to work closely with you to ensure that we grasp this
important opportunity by passing the enabling legislation by the full bodies of both
houses.
ENERGY CHALLENGES

Another top priority for India is found in ensuring energy security to maintain
its strong economic growth. Indias growing appetite for energy has been fueled by
urbanization, economic development, population growth, expanding industrial production, and increased motor vehicle ownership. Between 1980 and 2001, demand
increased by 208 percent. By contrast, China, often thought of as the next big energy consumer, saw a 130 percent increase over the same period according to the
U.S. EIA (Energy Information Administration). India ranked fifth in the world in
total energy consumption in 2004, only behind the United States, China, Russia,
and Japan. Indias energy needs are expected to double by 2025.
India has experienced very strong growth in energy demand, growth that threatens to outstrip supply and lead to energy shortages around the country. This is a
serious challenge for the country, but we need to keep in mind that this is the result
of strong economic growth, which is good news. We should also understand that

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India is not the only country facing this challenge. For oil importing countries, the
rise in the cost of oil and refined products has added to trade deficits and in some
cases, created balance of payments problems. Many developing countries, whether
in Asia, Africa or Latin America, are also facing challenges meeting growing electricity demands, resulting in brownouts and blackouts.
ENERGY OPTIONS AVAILABLE

While these are enormous challenges, I believe that India has more options than
many other countries in meeting them. In order to meet these challenges, it needs
to pursue a policy of energy security through diversification of supply and resources.
India relies on the following principal sources of energy:
Coal is the dominant energy source in India. Currently, over 50 percent of Indias
total energy, and 70 percent of Indias electric power generation, is derived from
coal. India is the worlds third largest coal producer (after China and the United
States), so domestic supplies satisfy most of the countrys coal demand. One major
drawback is that Indian coal is extremely energy inefficient. It produces about twice
as much ash and particulate matter as American coal. Coal consumption is projected
in the International Energy Outlook 2005 to increase to 544 million short tons
(Mmst) in 2010, up from 431 million short tons (Mmst) in 2003.
Oil demand in India grew by over 6% annually during the past decade, more than
three times the world average, while at the same time oil production rose barely
at all. This has led to a widening of the demand-supply gap and in an increased
dependency on imports. The EIA says that future oil consumption in India is expected to grow rapidly from 2.2 million barrels per day in 2003 to 2.8 million barrels
per day in 2010. At current rates of economic growth this figure is likely to rise to
over 5 million barrels per day by the year 2030 according to the IEA (International
Energy Agency). Unless India obtains or develops alternative sources of energy, in
15 years it will have to import close to 90 percent of its petroleum needs. India is
trying to limit its dependence on oil imports by expanding domestic oil exploration
and production and by diversifying to other energy sources where possible. Much
will depend on Indias ability to locate and use existing domestic oil reserves.
Natural gas is an increasingly important fuel as India strives to meet growing energy needs by diversifying its fuel supply, with the recent focus on development of
gas-fired electric power plants in coastal areas. Indias domestic natural gas is unlikely to keep up with demand, and the country will have to import much of its natural gas, either via pipeline or as liquefied natural gas (LNG). Potential for gas use
in Indias growing economy is large and has so far mainly been constrained by insufficient supplies. India became a gas importer in February 2004 with the arrival of
the first LNG tanker at the Dahej terminal. India needs to almost triple its existing
pipeline capacity over the next five years to accommodate LNG imports and growing
domestic consumption. Construction of a National Gas Grid is one of the major
national priorities and plans for the construction of over 7,000 km of pipelines for
a cost of about $4.5 billion by 2008 have been announced. India also currently lacks
a coherent natural gas policy and regulatory framework. The price of natural gas
also remains regulated, reducing incentives for energy companies in the Indian market.
Electricity: Indias installed power generating capacity on 31 January 2005 was
115,545 MW reflecting a 44 percent increase in capacity in the decade between 1993
and 2002. India currently relies on coal for nearly 70% of its electricity generation
and forecasts indicate that coal will remain the backbone of the countrys power sector for many decades. To meet its mounting power demands, the Indian government
plans to double its capacity to produce electricity within the next eight years. The
government of India has set an ambitious target of adding 100,000 MW of new capacity by 2012.
Nuclear energy currently only comprises approximately two percent of Indias
total power generation. In comparison, the United States, receives over 20 percent
of its power from nuclear energy, Japan derives 30 percent, and France roughly 78
percent. Indias operating civil nuclear power plants currently have approximately
3,310 megawatts of installed capacity. If given the opportunity under the U.S.-India
civilian nuclear initiative, India plans to invest quickly in additional civil nuclear
reactors so that, by 2030, its capacity to produce electricity from clean nuclear technology would reach 40,000 megawattsa twelve-fold increase, according to Indias
Atomic Energy Commission. Under this plan and further long-term objectives, the
Indian government has indicated that approximately 20 percent of Indias total
power production would eventually be met by nuclear technology, thus significantly
decreasing the growth in its reliance on fossil fuels.

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Indias power generation resources are unevenly distributed and far away from
major load centers. Two-thirds of Indias population lacks access to electricity, and
those who are connected to the power grid have to live with frequent power disruptions. State Electricity Boards (SEBs) are responsible for the production and distribution of electricity in all but 3 of Indias 28 states. Old equipment, subsidized
electricity rates, and bloated payrolls mean that reform of the Indian power sector
is necessary to maximize economic growth.
Renewable Energy: India has a modest renewable-energy program, and the plans
for its expansion are ambitious. According to the governments Policy Statement on
Renewable Energy, India hopes to obtain as much as 10 percent of its new power
capacity from renewable sourceswind, biomass, hydroelectric, and solarby 2012.
If the country even hopes to approximate this goal, however, it will require both external funding and technological expertise. US companies, which have considerable
expertise in the development of alternative and renewable energy sources, could
play a vital role in energizing the Indian market.
EXTERNAL ENERGY POLICY

India has increased its energy diplomacy with states in the South Asia region as
well as states in Central Asia, Russia, the Middle East, Latin America and Africa.
The Indian state-owned Oil and Natural Gas Company (ONGC) has invested $3.5
billion in overseas exploration since 2000. It has invested in gas fields in Vietnam,
as well as energy projects in Algeria, Kazakhstan, Indonesia, Venezuela, Libya and
Syria. Indian private sector firms have pursued projects in the Middle East and in
Africa.
Gas Pipelines involving Iran, Turkmenistan, Burma and Bangladesh have also
been considered in recent years. Each of these proposals has serious geopolitical
problems and the outlook for pipeline supplies will depend on resolving key regional
geopolitical rivalries and constraints. The Iran-Pakistan-India pipeline has been in
discussion since the early 1990s. A meeting earlier this year reached no consensus
on gas price and project framework. The U.S. government continues to make clear
our concerns about the pipeline, based on long-standing U.S. policy and law. We encourage India to look to non-Iranian sources for their gas supplies. The proposed
Burma-Bangladesh-India has also seen little progress due to opposition in Bangladesh. Instead, a longer and more costly route directly from Burma through Indias northeast is being considered. In 2006, India agreed to join the TurkmenistanAfghanistan-Pakistan (TAP) pipeline project.
U.S.-INDIA ENERGY COOPERATION ON INDIAN ENERGY CHALLENGES

Diversifying Indias energy sector will help to alleviate the competition among
India, the United States, and other rapidly expanding economies for scarce carbonbased energy resources, thereby lessening pressure on global energy prices. At the
same time, increased energy efficiency can have significant environmental gains. An
India that can meet its energy needs efficiently and rationally ultimately strengthens global and U.S. energy security.
Our cooperation with India in its energy sector goes back to the 1960s through
a variety of initiatives. More recently, we have continued this cooperation through
the U.S.-India Energy Dialogue. The U.S. and India are cooperating on energy initiatives through five working groups: The Civil Nuclear Working Group, the Coal
Working Group, the Power and Energy Efficiency Working Group, the Oil and Gas
Working Group, and the New Technology and Renewable Energy Working Group.
These DOE-led groups have been actively meeting since the formation of the U.S.India Energy Dialogue in May 2005, and plan a full range of activities in the near
term.
National Gas Grid: These groups are allowing us to work with India on key areas
of concern in the energy sector. A key example is our support of a national gas grid.
Through the support of the USTDA (U.S. Trade and Development Agency), the Indian Ministry of Petroleum and Natural Gas, is exploring the feasibility of a national gas grid for reaching all major energy consuming areas in India. Expanded
access to, and utilization of, natural gas is expected to facilitate economic growth
and maintain sufficient energy supplies to avoid potential shortages as Indias energy demand grows. This represents an example of the U.S.-Indian private and public sector cooperative efforts underway as a part of the U.S.-India Energy Dialogue.
Power Sector: There are many other challenges that both our countries face in the
energy sector. As the IEA noted in a report several years ago, reform of Indias electricity supply sector is important in order to maintain its level of economic growth.
The demand-supply gap will grow unless more market mechanisms are introduced
while taking into account goals of electricity access, environmental protection and

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economic growth. State Electricity Boards are heavily dependent on government
subsidies, which have reached the point where their impact on state and national
fiscal operations could threaten Indias overarching development objectives. Power
utilities lose almost $7 billion per year, and this figure is growing at 15 to 20 percent each year.
The U.S. government has worked closely with the Indian government to promote
best practices in the power sector, expand electrification to rural areas, and to enhance billing and tariff collection systems through USAIDs new Distribution Reform, Upgrades, and Management (or DRUM) activity. In April of this year,
USAID launched a public private partnership with General Electric Company in association with Winrock International India to bring energy to rural areas in India
that currently lack access to electricity by establishing several pilot projects. Such
partnerships with the private sector help to introduce new technologies and management expertise and provide access to financing.
Electricity Imports: In addition to reforming the power sector, another option is
exporting electricity from Central Asia to South Asia. The World Bank has done
some work in this area, and the U.S. hosted a conference in Istanbul in June to
bring together officials from the region to look at this. Transporting power across
borders offers a number of advantages that simply cannot be achieved otherwise:
In addition to providing supplies to South Asia, it can provide new markets for
countries like Tajikistan and Kyrgyzstan. The U.S. believes that regional cooperation and integration are key elements of long-term energy security in this region.
We support regional integration because we are confident that it will benefit the
economy and security of all South Asian countries. It will create stronger partners
and bring member countries closer together. Through USAIDs South Asia Regional
Initiative for Energy (SARI/Energy), we have focused on regional approaches to
meet South Asias energy security needs through increased trade, investment and
access to clean energy. Energy linkages between South Asia and Central Asia can
strengthen the energy security of both regions.
Clean Coal: Indias dependence on its domestically-produced coal raises many
other environmental concerns. Power plants are also the main source of Indian
emissions of carbon dioxide, the most important greenhouse gas. These high emissions, along with emissions from other sources, have made all four of Indias largest
citiesNew Delhi, Mumbai, Chennai and Kolkataamong the most polluted in the
world leading to serious health consequences for inhabitants. The Coal Working
Group has been meeting since July 2005 with several key goals: increased collaboration on clean fossil energy technologies; creating an attractive investment climate
for domestic and foreign investment in the energy sector; and developing an efficient
and environmentally sound energy infrastructure.
Indias agreement to take part in the FutureGen Project is important since the
project will create the technology to produce a near-zero emissions coal-fired power
plant that will produce hydrogen and sequester carbon dioxide underground, enabling greater use of coal in an environmentally sustainable way when the technology
is eventually used in other coal-fired power plants. We strongly support the IEAs
Clean Coal Center and their work with India. In May 2006, the IEA and the World
Coal Institute co-hosted a workshop, Coal for Sustainable Energy: Clean Development and Climate Change in New Delhi, India. To the extent that India expands
its use of cleaner energy technology, the result will be reduced air pollution locally,
regionally, and globally. We have also encouraged by the IEAs efforts to work with
India on developing a strategic petroleum reserve.
During Indian Prime Minister Singhs visit last year, President Bush stated that
the United States and India have built a relationship of great potential as we face
this centurys challenges. Among those challenges is that of ensuring energy security. The U.S. and India are working together to address this crucial challenge.
Thank you for the opportunity to testify today.

The CHAIRMAN. Thank you very much.

Senator Bingaman, would you like to proceed first?
Senator BINGAMAN. Thank you very much, Mr. Chairman and let
me focus on the set of issues that I think are probably the most
controversial in connection with this Indian/American proposal,
and do so by reference to an article that was in the Washington
Post in March of this year, where it saidit was quoting our
former colleague, Senator Sam Nunn, as saying, If I were still in
Congress, I would be skeptical and looking at conditions that could
be attached, in connection with this agreement. It says he was

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briefed by the State Department, said that he is concerned that it
could lead to the spread of weapons-grade nuclear material, unleash a regional arms race with China and Pakistan, and make it
more difficult for the United States to win support for sanctions
against nuclear renegades, such as Iran and North Korea. Then it
says that Nunn is a board member of General Electric. It also
states in this article, the Bush administration originally sought a
plan that would have allowed India to continue producing material
for 6-10 weapons each year but the new plan would allow India
enough fissile material for as many as 50 weapons a year. Then it
goes on to quote Senator Nunn as saying, The current agreement
certainly does not curb in any way the proliferation of weaponsgrade nuclear materials. Id ask Mr. Simons, as the spokesman for
the State Department, what your response is to Senator Nunns
concerns.
Mr. SIMONS. Thank you, Senator, for that question. I think the
important point here and it has been pointed out by Secretary Rice
as well as a number of other administration officials in their various testimonies, is that our initiative essentially brings India into
the tent. It makes India a partner for the first time in more than
30 years, in global nonproliferation. So this is the point the administration has been stressing in support of this initiative: basically,
it gives us an opportunity to work with the Indians to bring them
in as a player, as a contributor to future solutions as opposed to
as an outlier and India really has been an outlier for the past 30
years. I think that the chairman made a good point in his. I believe
he wrote a response back to the Wall Street Journal addressing
some of these points and we would endorse some of the same arguments that the chairman made in his article back, which is that
we do focus now on transparency for the first time. We have a window into Indias nuclear problem for the first time, into its program. And we do think that by creating this type of partnership,
we are more likely to see successful results more broadly in terms
of our global nonproliferation policy.
Senator BINGAMAN. Let me ask about one other aspect of Senator
Nunns criticism. He says that among the conditions he would attach to the legislation is the requirement that it could not take effect until the President certifies that India pledges not to produce
nuclear material such as plutonium and highly enriched uranium
for weapons. The current agreement, certainly does not curb in any
way the proliferation of weapons-grade nuclear material, Nunn
says. And then he goes on to say, India was a lot better negotiator
than we were, Nunn asserted, while the administration has said
it has no intention of aiding Indias nuclear weapons program, the
reality could be the opposite, he said. The administration has a
high burden to explain this. How do you explain the conclusion
that Senator Nunn has, that this agreement will, in fact, aid Indias nuclear weapons program and allow them to produce substantially more weapons than they otherwise would be able to?
Mr. SIMONS. Senator, I think part of this question Ill need to
consult with my nonproliferation colleagues and give you a more
detailed answer for the record but as a general point, I think it is
important to stress that by separating its civilian and its military
nuclear components and by providing access, full access by the

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IEA, to its civilian components, we really do bring India into the
tent. We engage them as a partner and weve already started to see
some benefits from that in terms of India working with us and
working with the IAEA more closely with respect to the Iranian
nuclear question. I think it would be useful to question whether
that type of cooperation would have been possible in the absence
of the U.S./India Nuclear Agreement.
Senator BINGAMAN. My time has expired, Mr. Chairman. Thank
you.
The CHAIRMAN. Thank you for the questions, Senator Bingaman.
I might add that I did write an in-depth letter in response. It is
not here. I can give it to you for your perusal but it even goes one
step further, having a recall that I wrote that letter. Since then,
the United States has put on the table a fissile material cut-off
treaty to curb the production of fissile material and it is interesting
that a member of that team, working on that is India, which Im
not sure we would have had working for that goal, had India not
been party to this agreement with us, what we have. Id like to ask,
to move ahead on some other issues. On April 4, the Climate Conference sponsored by the Energy and Natural Resources Committee, panelists noted that action by major developing countries
like China and India is critical to address climate change. What
role will energy cooperation agreements play in providing options
to expand greenhouse gas emission-free energy, Mr. Pumphrey?
Mr. PUMPHREY. Thank you, Mr. Chairman. The activities that we
have undertaken in the energy dialogue are very much focused on
moving towards cleaner technologies, energy efficiency and renewable energy. We believe that all of these efforts will support having
India move to a less greenhouse gas intensive framework and a
less greenhouse intensive future. Currently, they are very dependent on coal and coal that is burned in older powerplants, so we are
working with them on newer coal-burning technologies as well as
looking at the introduction of natural gas in areas that it can then
take the place of coal, as well as moving ahead on renewables. I
should mention that India is also an active member of the Asian/
Pacific Partnership, which is a new, multi-lateral group that is
looking at innovative ways to move new technologies into the marketplace to help address our concerns about greenhouse gas emissions.
The CHAIRMAN. I have a number of questions but Im going to
hold here now, because there are a number of Senators. So let me
proceed and see what we can do with working our way through
them getting questions out.
Senators Bunning, Thomas, Craig and Salazar.
Senator BUNNING. Thank you, Mr. Chairman. Either can answer
this. It is for both of you. What is, with the strong alliance and
strong reliance on foreign oil, what measures has India pursued to
diversity its energy policy, what initiatives are being taken in India
within its own five energy bureaus, to ensure a comprehensive energy policy is implemented? Either or.
Mr. PUMPHREY. Senator, Ill be glad to start and then
The CHAIRMAN. But please, we have a devil of a time hearing
you.

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Mr. PUMPHREY. Im sorry. Okay. Let me get up closer then. India
has been making efforts in many areas to reduce this dependence
on oil. One of the most significant has been the introduction of
compressed natural gas into its vehicle fleet in New Delhi. They
have one of the highest penetration rates for gasand this is directly backing out gasoline and diesel fuel. They are also looking
at ways, as I mentioned in my opening statement, to bring even
greater volumes of natural gas in the marketplace and make those
available. We have begun discussions with them on the possibility
of increased use of biofuels for the transport sector, so there are a
number of areas in which they are beginning to operate. The other
area that I mentioned that we think is very important is that recognizing their reliance on imported oil, they are taking steps to increase their stockpiles, to start stockpiling oil in case of emergencies, to guard against the disruptions that may take place. So
they are looking at it from both ends in terms of diversifying away
from the role of oil as well as guarding against their vulnerability
to
Senator BUNNING. Is it a comprehensive plan? In other words,
are they looking to taking coal and making liquid fuels out of it
and other synthetic-type energy products?
Mr. PUMPHREY. There have been discussions on looking at ways
to incorporate coal liquefaction technologies. But I think you raise
a very important point that within India, traditionally there have
been the five different groups that have had responsibilities in the
energy sector. Our understanding is that the Planning Commission
is working very hard to try to bring together those elements to
come up with a comprehensive crosscutting energy policy.
Senator BUNNING. In other words, they do not have one presently?
Mr. PUMPHREY. They have come up with an initial plan but
again, it is a problem that I think weve wrestled with ourselves
in terms of coming up with a comprehensive plan.
Senator BUNNING. In your testimonies, both of you said that the
government of India is shaping the regulatory environment necessary to attract international investments. What specifically is
being done by the Indian Congress and Prime Minister at this
time?
Mr. PUMPHREY. In one particular area, they are looking at coming up with a framework for investment in a natural gas pipeline
infrastructure. They have recently passed a new pipeline act that
allows for the creation of a regulatory body to develop the Rules for
Investment so that they can bring in foreign investment in that
sector. So that is one of the very real time areas that we are having
conversations with them about and lending our experience.
Senator BUNNING. Let me ask the last question I will on this
round. Could you describe the benefits of Indias participation in
the FutureGen alliance?
The CHAIRMAN. Well, thats a good one.
Mr. PUMPHREY. We see the FutureGen alliance as a very important step forward in demonstrating technologies for utilizing coal.
We believe that their presence not only in helping to fund the activities through their participation in the Steering Committee but
also bringing some of their expertise to the table, will bring an im-

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20
portant dimension of a major coal-burning country to the table in
the design and understanding of the operation of this and hopefully
the transfer of these approaches to carbon sequestration back to
their own economy.
Senator BUNNING. In other words, you think that their scientists
are online and up to speed in this technology?
Mr. PUMPHREY. I would actually prefer to consult with my experts in fossil energy on that in more detail but
Senator BUNNING. Would you give us a written response then?
Mr. PUMPHREY. I would certainly be glad to.
[The information follows:]
Indias scientific and technology communities are very interested in the
FutureGen technology and science associated with sequestration. They also recognize the potential of this technology for their country in terms of using their coal
resources to meet their growing energy needs while mitigating the impacts on climate change. However, in general, their scientists and engineers do not have extensive experience with the primary technology upon which FutureGen is based, namely, advanced coal gasification to produce power and hydrogen. By its involvement
in FutureGen, India can gain the engineering and technical experience on
FutureGen technology that they can extrapolate and apply to their own needs. Participation by India and other countries is important to gaining an understanding
and acceptance of the FutureGen near-zero atmospheric emission coal concept, and
in so doing, make this technology broadly available to address environmental and
climate change issues associated with the use of coal, a strategic and globally diverse energy resource.

Senator BUNNING. Thank you very much. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Senator. Senator, I think your questions are right on, exactly what we need to know about. It doesnt
do us any good to just keep hearing about these great potential relationships. It is what is actually going to happen to exchange with
the United States so that we can both improve. We from them,
them from us. Thats the whole purpose. We ought to hear more
about that from the next panel, I hope. Thank you for your questions. Lets see, the next one we have is Senator Thomas. It is your
turn, please.
Senator THOMAS. Thank you, Sir. I think it is very important
that we are working with India in terms of the economic growth
and the relationship there. Why is nuclear poweror is itthe
highest priority in terms of energy for India? Either of you.
Mr. SIMONS. We think nuclear power is going to be one very important component of Indias energy future. All the other major
Asian-emerging countries have large nuclear programs, which are
growing. They have all decidedChina, Korea, Japanthat nuclear must be an important component of their energy futures but
those other countries are much farther ahead than India in terms
of making nuclear a big part of their energy equation. Japan has
about 30 percent of its electricity in nuclear, Korea about 35 percent. Now of course, these countries are more advanced, also, economically. But Indias isolation alsoand its inability to cooperate
on civilian nuclear issues, has also held back and retarded the
growth of nuclear in India. So when the Indian government puts
forward a forecast and says that in 20 years, theyd like to get up
to about 20 percent of their total electricity production in nuclear,
I think that demonstrates that nuclear is going to be a very important component

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Senator THOMAS. Let me interrupt.
Mr. SIMONS. Its not the only answer.
Senator THOMAS. You said they havent made much progress in
terms of nuclear negotiations. They havent signed a nuclear treaty,
a nonproliferation treaty.
Mr. SIMONS. Essentially they have been cut off from civilian nuclear cooperation from a lot of countries because theyve been outside of the mainstream. So, I bring them into the mainstream
Senator THOMAS. But they still are not interested in doing that
now? I mean, isnt that what the nuclear nonproliferation is about,
so that you can go ahead with energy development without being
concerned about the defense aspect of it?
Mr. SIMONS. Thats right, but India, of course, chose a different
path 30 years ago and so they isolated themselves from what would
perhaps have been a more rapid development of their civilian nuclear side. Now, with this agreement with the United States, assuming that it goes through, we will have the opportunity, to some
extent, to jumpstart that nuclear cooperation and to make sure
that nuclear plays a similar, important part in Indias energy future, as it does in say, the energy future of the United States,
France, Japan, and the other Asian countries that have decided
that they need to have a large nuclear program.
Senator THOMAS. Yes, I understand that. I guess sometimes I
wonder why we would have a different arrangement on nonproliferation with them than we do with anyone else. There is
nothing wrong with suggesting that if you can go into the nuclear,
that you ought to understand that it is for energy and not for other
purposes. What is Indias level of consumption of energy, in terms
of other countries and so on, Mr. Pumphrey?
Mr. PUMPHREY. The most recent review that we have done
through the Energy Information Administration, they rank about
fifth in the world in terms of energy consumption. Last year, I believe they were sixth, so they are moving sort of upwards relative
to other major countries. They have passed Germany in this past
year, in terms of their energy consumption.
Senator THOMAS. You mentioned that they are working on
FutureGen and other coals and that they have a fairly high supply
of coal, is that right?
Mr. PUMPHREY. Thats correct. They have very large supplies of
coal.
Senator THOMAS. But they are working at ways of conversion of
coal as well?
Mr. PUMPHREY. Into other fuels in terms ofyes.
Senator THOMAS. Gas?
Mr. PUMPHREY. Yes, or liquids, right.
Senator THOMAS. Diesel or whatever?
Mr. PUMPHREY. There is great interest in doing that. Perhaps
there has been interest expressed in technologies such as in-situ
gasification of coal as well.
Senator THOMAS. Okay. Are we working with them then, on cooperating with other energy development as well as nuclear? Or
are we just focusing on nuclear?
Mr. PUMPHREY. We have approached the dialogue in a very broad
basis. We feel that as Mr. Simons had mentioned, that you need

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a portfolio approach to how you solve your long term energy problems. Diversity is a key for energy security solutions. So while the
public debate has been on nuclear, weve pushed very hard in areas
of coal development, gas development.
Senator THOMAS. Why is there public debate on nuclear?
Mr. PUMPHREY. The issues concerning the new arrangements
under the agreement.
Senator THOMAS. Yes, I understand. That is part of the problem.
Thank you.
The CHAIRMAN. Thank you, Senator.
Senator Craig.
Senator CRAIG. Thank you very much, Mr. Chairman. I think
bringing India into the fold is extremely important. The Senator
from Montana questioned appropriately why they are now just
coming, because they did choose a different path early on and then
I believe during the Clinton years, as a result of the explosion of
some nuclear devices, we put them out on a shelf and really kept
them there for a time. This initiative in bringing them onboard is
extremely important in the long-term. I think all of us are concerned about the growth of nuclear communities and what it means
and how waste or the by-products are controlled and managed. Mr.
Simons, do you see a risk that the U.S./India civil nuclear cooperation deal could lead to a nuclear arms race in South Asia?
Mr. SIMONS. We support this deal because we do believe it will
actually help to counter global proliferation. We believe it will have
a positive, a net positive impact in terms of our global nonproliferation strategy. So the answer is no.
Senator CRAIG. Could the absence of it result in that?
Mr. SIMONS. Well, once again, we do see this as a very, very important opportunity to establish a different type of strategic relationship with India, one that will help bring India into the fold.
Senator CRAIG. Mr. Chairman, Im certainly no Indian expert but
I did have the privilege of going there a spring ago on a different
issue. It was just prior to our Secretary of State being there. Efforts were well underway toward bringing us to where we are today
and I think for any of us who failed to recognize what India is and
what India could be and our relationships with them miss a great
opportunity, not only for ourselves but for the rest of the world as
it relates to their potential. Obviously, they are technological abilities, our involvement with them in high-tech, what they hope to accomplish for their own nation, many of us have been concerned
about moving ahead in climate change without bringing India and
China along and why we rejected Kyoto because of that, in part not
in total and why they rejected it, obviously, was that they needed
to grow and they needed to feed their people and succeed and I
think this relationship is extremely important from what I understand of it.
My last question, Mr. Pumphrey. A strategic partnership has
been proposed between DOEs National Energy Technological Laboratory and Indias National Funnel Power Corporation as well as
discussions about potential collaboration between DOEs National
Renewable Energy Laboratory and Indias Minister of Non-conventional Energy Sources and with the India Oil Corporation. I believe
collaborative efforts between these laboratories are extremely im-

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portant. How broad do you see this for our total laboratory complex
and Ill let my bias show and for our lead nuclear lab in Idaho?
[Laughter.]
Mr. PUMPHREY. Thank you, Senator. There has been long-standing cooperation between those two laboratories leading up to the
time of this new and enhanced dialogue. The NETL has been working with NTPC on coal combustion issues. We are now looking at
and discussing the possibility of developing what you described as
a new strategic relationship. Those discussions are ongoing so I
dont really have the knowledge to be able to tell you exactly how
those will be defined and where they will be but certainly, Id be
glad to get back to you. With the National Renewable Energy Laboratory, again theyve been working closely with NMES in some
areas and they are just initiating new discussions of areas of collaboration. In terms of looking at the rest of the laboratory complex, we are still evaluating the types of science cooperation that
we can have in place. There is a new science and technology agreement in place, which the lack of that agreement used to be a hurdle to these collaborative efforts and so, our Office of Science is beginning the effort to look at areas for future collaboration.
Senator CRAIG. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you very much, Senator. I hope your relationship between your lab and them grows and flourishes and multiplies, Senator.
Senator CRAIG. Mr. Chairman, the great hurdle we have and I
think weve accomplished in part through EPAct but weve got to
work with DOE, and their ability to outreach and bring in and incorporate within their formal agreements and their financial arrangements, outside interests. Because the work we do today at our
laboratories, while it is national, it is international in scope but
weve held it awfully close to chest for so long, thinking the Federal
Government could finance it all. Now we have a great opportunity
to both private and publicly finance some of these new technologies
but weve got to figure out how we design those relationships and
we are well behind in that design instead of ahead of it. Thats my
concern.
The CHAIRMAN. Well, whatever questions I had of the two of you,
Im going to submit them in writing. Well yield now to the two on
this side who came late but they want to ask questions. But I just
want to say that what Im least impressed with about today is the
lack of a significant discussion about the interplay between American companies and American institutions and American research
and India with reference to diversification of their energy sources
and I just would talk particularly about nuclear. Were clearly,
when you look at what theyve got, it is a very, very ancient and
old-fashioned approach to nuclear power, saying that with no sense
of pejorative-ness attached, if you just look at it. It is obviously
its not going to stay there. Its obvious it is not going to stay there
and it would seem to me that you all and America and maybe us,
have to get a little bit more anxious about making sure we enter
this play, this foray, to get some development of technology and the
development of business relationships.
India is going to go and prosper and as you look at the makeup, Im hopeful that their projections are way off because their pro-

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24
jections for nuclear in the future are way too small because they
are predicated upon an India that starts with a nuclear that is behind schedule. If you start with that as your baseline and keep off
of it, 25 years from now, youre stillunless somebody there has
built with a lot of hope and said, lets change what were doing,
and I think thats our role as Americans and maybe even this committee. Maybe we should do what Senator Lugar did and maybe we
should explore the idea of doing something specifically as a Nation
on the exchange of technology and business in the fields of energy
with them unless that is happening and I think I will askif Senator Bingaman wants to join me, Ill ask him to ask Secretary
Bodman what he thinks about what Im just saying and is there
something that he thinks we ought to be doing that maybe were
not doing. With that, Im going to now yield to Senator Salazar and
Senator Dorgan, in that order.
Senator Salazar.
Senator SALAZAR. Thank you very much, Mr. Chairman and
thank you Senator Bingaman, for holding this hearing. Two quick
questions. The first is on coal gasification. When I look at what is
happening in the United States, China and India and the amount
of coal that we have in those three countries and what were doing
to burn coal for our energy needs, can you, Mr. Pumphrey, comment on what it is that India is doing relative to exploring technologies on coal gasification? Weve described in this committee
that coal for us is like oil is to Saudi Arabia. What is it that India
is doing on that front?
The CHAIRMAN. Very good.
Mr. PUMPHREY. Senator, I think at this point I should really get
back to you on that question. I need to go back and consult with
the specialists we have rather than giving you information that Im
not sure of myself. But Id be certainly glad to provide that for you.
[The information follows:]
COAL GASIFICATION

There are several integrated gasification combined cycle (IGCC) activities planned
or being discussed with India including:
(1) The U.S. Agency for International Development (USAID) has contracted with
Nexant (San Francisco, CA), under its Greenhouse Gas Pollution Prevention (GEP)
Project to conduct a $2-million feasibility study on IGCC power generation technology. India is interested in this clean coal technology to increase generation efficiency, protect the environment, and reduce CO2 emissions. The Department of Energys National Energy Technology Laboratory is providing technical assistance to
USAID in managing the project.
This study is being carried out in three phases. In Phase A, IGCC technologies
were surveyed and compared with conventional and advanced pulverized coal (i.e.,
subcritical and supercritical PC), circulating fluidized bed combustion (CFBC), and
pressurized fluidized bed combustion (PFBC) technologies to confirm the economics,
efficiency advantages, environmental benefits, and other salient features of IGCC
technology under Indian conditions, particularly in using high-ash Indian coals. In
Phase B, the three most promising gasifiers were selected for pilot plant coal testing. Based on the tests results, a further screening analysis of the three gasifiers
was conducted. A system optimization was also conducted to select the best process
configuration to provide the basis for a detailed design and cost estimate of a 100MWe IGCC demonstration plant in Phase C. Project financing sources and a roadmap to commercialize the IGCC technology in India will also be explored in Phase
C. Nexant plans to complete the Phase C study in September 2006. An IGCC workshop is being planned in New Delhi on September 19, 2006, with the National Thermal Power Corporation (NTPC), the Ministry of Power, and other interested organi-

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zations to disseminate the study results and to discuss implementation of the
planned 100-MW demonstration plant.
(2) India has joined the FutureGen international partnership to create a near-zero
atmospheric emissions coal-fired power plant that will produce hydrogen and sequester carbon dioxide below ground.
(3) Under the Asia Pacific Partnership (APP), we are discussing the possibility of
workshops and site visits on IGCC with India (and China) under both the Power
Generation & Transmission and the Cleaner Fossil Energy Task Forces. The first
proposed event is during meetings on zero emissions coal technologies, (such as
IGCC and carbon capture & storage), during Japans Clean Coal Days in early September. This would be the first official activity under the Cleaner Fossil Energy
Task Force. India will be invited to participate.
(4) Underground Coal Gasification (UCG) has several important economic and environmental benefits relevant to Indias energy goals. This area of energy exploitation would require solutions to numerous technical issues. At least two technical
issues first have to be resolved: research is needed to ensure that proper site selection provides both the desired conditions for suitable UCG processes and that usable
groundwater resources are not adversely impacted. Several activities to discuss exploitation of UCG are planned under the U.S.-India Energy Dialogue Coal Working
Group and the APP Coal Mining Task Force, including plans for a UCG Workshop
in India during November that will examine these technical issues. The U.S. and
India will co-sponsor this workshop with the other APP countries invited to participate.

Senator SALAZAR. I think it would be important because I think

as we looked at both India and China, we are making steps here
in the broad portfolio of energy development that this committee
has been pushing and certainly coal gasification is part of that. It
would be very interesting to see what it is that India is doing, so
I would ask you to do that. May I ask you the same question with
respect to biofuels? You are part of the International Energy Cooperation. Many of us on this committee have been pushing very
hard for a whole new chapter of renewables, based on biofuels
across America. Can you comment, Mr. Pumphrey or Mr. Simons,
on what you know is happening in biofuels in India?
Mr. PUMPHREY. On the question of biofuels, we are just beginning to engage in that discussion with the Indians about their research. We know that the Indian Oil Corporation has research activities that are underway and we have scheduled this week a
meeting of our oil and gas Working Group, one of the five Working
Groups, which has a more in-depth discussion of biofuels as one of
the topics and to look at collaboration on biofuels for the future. So
again, on the specifics, I would have to respond to you later, perhaps after weve gotten a better understanding. But we see it as
a very important area to work collaboratively with India on how to
move biofuels into the marketplace.
[The following was received for the record:]
BIOFUELS

The Government of India (GOI) is expected to announce a comprehensive policy

for use of 20 percent bio-diesel for the entire country by early next year. The Planning Commission has already submitted its report to the Ministry of Rural Development, which will now work on presenting the proposal before the cabinet. According
to a GOI official, the use of bio-diesel will result in a savings of $4.6 billion annually on imports of crude oil. The GOI is planning to produce 13 million tons of alternative fuel every year. This will require 11 million hectares of land and create 11
million jobs. During a July 2006 visit to DOEs National Renewable Energy Laboratory (NREL), a delegation from India discussed several potential areas of cooperation in bioenergy. The Indian Oil Corporation (IOC) is seeking collaboration on the
following proposed topics:
Biorefinery studies to ethanol and biodiesel
Life cycle assessments of biofuels

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Biochemical processing of petroleum for nitrogen, sulfur and metal removal as
well as biocracking, and bio de-waxing.
In addition, various DOE and NREL officials visited the IOC Research Center
outside New Delhi in the first half of 2006 at which biodiesel was discussed. The
Ministry of Petroleum and Natural Gas (MOPNG) has a policy to purchase Biodiesel, which is based on an Indian adaptation of the ASTM D6751 standard for
100% biodiesel to be used as a blending agent up to 20% in high speed diesel (HSD).
There is an additional standard for B-5 HSD. Other research activities have been
on the properties of ethanol blends in Indian light duty vehicles.
The IOCs R&D Center has planned programs to examine the value chain of biodiesel from plantation, production, and utilization to environmental assessment. It
has been using a laboratory scale plant of 100 kg/day capacity for transesterification, with design of larger capacity plants in the offing. These large scale
plants are useful for centralized production of biodiesel. Production of biodiesel in
smaller plants (e.g., 5 to 20 kg/day) may also be started at decentralized level in
villages.
A bio-diesel blend from IOC is being used in buses in Mumbai as well as in
Rewari, and in Haryana, on a trial basis. Twenty buses are being run on 5% biodieseldiesel blends and their smoke, fuel efficiency and drivability is being compared with another set of twenty reference buses. Encouraged by these results, the
Haryana Roadways has requested IOC to extend trials on all the 180 buses of
Gurgaon depot. The IOC has also entered into a MOU with Indian Railways to
study the complete value chain of biodiesel. In line with that, the IOC has planted
about fifty thousand saplings of Jatropha on 62 hectares of railway land at
Surendranagar in Gujarat. This project is the only one of its kind in India, where
every aspect of Jatropha Biodiesel would be studied.

Senator SALAZAR. Mr. Simons, do you have anything to add to either one of those two questions?
Mr. SIMONS. I have nothing to add, Senator.
Senator SALAZAR. I would just say this, Mr. Chairman. I think
that given the global competitiveness that were dealing with, with
both China and with India, the billion people in India, the billionthree in China, that having a good understanding of what is happening in those two countries relative to energy development would
something that would be very useful for all us. So I would hope
that is information that can be developed, both by DOE and the
International Working Group that youre on, Mr. Pumphrey as well
you, Mr. Simons. Thank you very much, Mr. Chairman.
The CHAIRMAN. Thank you.
Senator Dorgan.
Senator DORGAN. Mr. Chairman, I came late and have to leave
early because of other obligations so I will not take the committees
time. I do want to say
The CHAIRMAN. Youre welcome.
Senator DORGAN. No, I do just want to say that while I think our
relationship with India is very, very important, I have great misgivings about anything that I believe will undermine the issues of
nonproliferation, stopping the spread of nuclear weapons is, I believe, one of the most important things that is ahead of us and I
think a good many people have raised significant questions about
this agreement relative to our ability to stop the spread of nuclear
weapons. So I thank you for holding this hearing, Mr. Chairman.
I regret I cant be here for all of it.
The CHAIRMAN. Thank you. With that, gentlemen, you have
heard that we are interested in things you dont know enough
about, to put it mildly and thats no aspersions, thats just the
truth. So if you can dig some of it up and respond so Senator
Salazar will get it, even if you didnt appear, if the person didnt

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27
appear, you can get it from your Department and submit it so well
know. I think that will be helpful. With that, we thank you for giving us your morning and you will get home in time for lunch.
Thank you very much.
The next panel consists of three different people. They might
shed a light on some of the subjects, Senator Salazar, that you
raised and others. One of them is Dr. David Victor, director of the
program of energy and sustainable development, Stanford University and the other is Mr. Michael Gadbaw, vice president of international law and policy, General Electric Company, Washington,
D.C. and the other is Mr. Daniel Poneman, Principal with the
Scowcroft Group, Washington, D.C. So were going to start as I
started. It doesnt make any difference which way we go but were
going to start with Dr. David Victor. Would you please make sure
that you talk right into the mic so we can hear you, sir? And talk
loud, if you dont mind.
STATEMENT OF DR. DAVID G. VICTOR, DIRECTOR, PROGRAM
OF ENERGY AND SUSTAINABLE DEVELOPMENT, STANFORD
UNIVERSITY

Dr. VICTOR. Thank you very much, Mr. Chairman and thank you
for the opportunity to testify in front of your committee. With your
permission, Id like to put my full written testimony.
The CHAIRMAN. Its in.
Dr. VICTOR. I will just concentrate on three points. I think the
first and most important point for us to have in mind when we look
at this arrangement is the context for this deal, which is that in
the energy business, there arent any easy choices. All of the options for supplying energy have trade-offs, pluses and minuses.
Furthermore, were talking about an arrangement by through
which we are trying to affect choices that are made in other countries. Over those choices, we have very, very limited leverage. So
it is in this context where we have pluses and minuses for all
major energy sources, where we have limited leverage over the
choices of other countries, that I think we should look at this nuclear arrangement. In that light, I think this is an extraordinary
opportunity. Id like to say a little bit about Indias interests in this
and then a little bit about the United States interests.
Concerning Indias interests, the single most important thing
here is the demand for electricity and India is rising exponentially.
I dont think anybody knows how rapidly it will rise in the coming
two decades but Indias enormous success with its economic reforms, along with its considerable success in reforming its electric
power market means the demand for electricity is rising at least
as rapidly as the Indian economy is rising and there is some evidence that demand for power is rising even faster than the economy. Right now, as several of the panelists will remark, coal is
king in the Indian electric power system and actually I think the
position of coal in the power system in India is getting much
stronger. Thats because almost all of the other options for power
supply are much less attractive economically than coal. In particular, natural gasthere is enormous promise for natural gas but
natural gas prices have been rising sharply in India. Several people
have commented on the new natural gas finds but they are in the

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distant future and the situation today is that the real price of natural gas in India, as in the United States, has risen to something
like three times the level it was previously.
The other thing that has happened in the Indian power sector is
there have been large reforms in the coal sector and those reforms
have encouraged private business and they in particular have encouraged private business to invest disproportionately in coal. This
sets up Indias interests on power sector reform and on this deal,
which is that India would like to remain dependent on coal and
thats an extremely important part of Indias power system but
they are very concerned about excessive reliance on coal. They are
investing in advanced coal, as weve heard from the previous panel
and they are also looking very carefully at the non-coal options.
This deal, in particular, makes the nuclear part of the non-coal options much more attractive. I think it is fair to say that it would
be impossible for India to expand significantly its nuclear power
sector without some kind of cooperative arrangement such as the
one we are talking about today.
The third point I would like to make, very briefly, is the implications of all this for the United States. In my written testimony, Ive
done some simple calculations on the implications for global warming. Put very simply, this deal makes it possible to save something
on the order of 100 million tons of carbon dioxide per year by the
year 2020, possibly much more, possibly less but thats the scale of
the problem. To put that number into perspective, that is almost
as large as the entire European Unions efforts to implement the
Kyoto Protocol. The reason the number is so large is because the
Indian power sector is growing exponentially and because it is
dominated by coal. So were talking about replacing the most carbon intensive fuel with the least carbon intensive.
The CHAIRMAN. You say this deal. Which deal?
Dr. VICTOR. This is the partnership between the United States
and India and in particular, the aspects of the partnership that relate to nuclear fuel and a nuclear technology.
The last point I would like to make about this is that I think we
should look at this arrangement not only in terms of the potential
carbon savings for this particular arrangement but also because if
this is successful, this creates a new model for engaging with developing countries because our efforts under the Kyoto Protocol to engage the developing countries in controlling their emissions of
greenhouse gases have been largely a failure, because those countries understandably will not accept caps on their emissions. This
arrangement shows a different way of doing things, which is to
identify areas that are already in these countries interests, in this
case, cleaner power, rebalancing away from coal and also in our interests. The savings here are on the order of 100 million tons per
year. The savings from similar kinds of deals in the clean coal part
of India werent gas in China or nuclear in China, could offer similar savings and be dramatically more effective than what we have
seen to date. Thank you, Mr. Chairman.
[The prepared statement of Dr. Victor follows:]

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PREPARED STATEMENT OF DAVID G. VICTOR, DIRECTOR, PROGRAM ON ENERGY
SUSTAINABLE DEVELOPMENT, STANFORD UNIVERSITY

AND

INTRODUCTION

The debate over the India nuclear deal has been too one-dimensional. Nearly all
commentary has focused on whether this proposal would undermine efforts to contain the proliferation of nuclear weapons. Dissent along these lines has been based
on a series of largely overblown claims. And the singular focus on proliferation has
allowed the debate to lose sight of other ways that this deal is in the interests of
the United States and India alike.
Chief among those other reasons is environmental. The fuller use of commercial
nuclear power, if done to exacting standards of safety and protection against proliferation, can play an important role as part of a larger strategy to slow the growth
in emissions of the gases that cause global warming. Thats because nuclear power
emits essentially no carbon dioxide (CO2), the most prevalent of these so-called
greenhouse gases. While this benefit is hardly the chief reason for initiating this
deal, with time it will become one of the main benefits from the arrangement. The
nuclear deal probably will lead India to emit substantially less CO2 than it would
if the country were not able to build such a large commercial nuclear fleet. The annual reductions by the year 2020 alone will be on the scale of all of the European
Unions efforts to meet its Kyoto Protocol commitments. In addition, if this arrangement is successful it will offer a model framework for a more effective way to engage
developing countries in the global effort to manage the problem of climate change.
No arrangement to manage climate change can be adequately successful without
these countries participation; to date the existing schemes for encouraging these
countries to make an effort have failed; a better approach is urgently needed.
ECONOMIC GROWTH, ELECTRIC POWER AND THE OPTIONS FOR SUPPLY

Evaluating the environmental benefits of this deal requires, first, understanding

the basic factors that affect investment in the Indian electric power market. From
the 1970s through much of the 1990s Indias economy was famous for its low rate
of growth; with low growth came low demand for electricity. A series of economic
reforms, initially introduced in the wake of a financial crisis in 1991 but strengthened over the many years since, has changed that situation dramatically. Indias
economy enjoyed an average annual growth rate of around 7% from 1994-2004. Most
analysts expect growth to be sustained at 8% over the next few years if not longer.
Indias population is young; and an important fraction is well-educated and increasingly engaged with the world economy. To be sure, the Indian economy has many
deep flaws. India has made no progress in solving the development problem in the
rural areas where most Indians live, and Indias democracy is notorious for its political gridlock. All that said, there is palpable evidence that Indias economic reforms
have finally taken hold.
Higher growth has led directly to higher demand for electricity. While the exact
future needs for power remain uncertain, there is considerable evidence that electric
demand will grow at roughly the same rate as the economy. Some factors will tend
to dampen the growth in demand for power. For example, economic growth is expected to cause a shift in the Indian economy away from energy-intensive manufacturing and also engender investments that make the economy more efficient in its
use of energy. But other factors will cause demand for electricity to accelerate.
Among them is an improvement in power quality that is likely to accompany the
extensive efforts to reform Indias electric power system that have been under way
for 15 years. While reformers have found it difficult to make progress, these reforms
are beginning to take effect in some parts of the country. Those effects are evident
not only in the improved performance of some of the countrys power utilities, but
also in the rising role for privately owned (and generally more reliable) power
plants. In industry, for example, reliable power is essential; many companies are
taking matters into their own hands and building their own plants. And where electricity is more reliable, Indians will consume more of it.
There are many projections for total demand for electricity. In Figure 1,* I show
the International Energy Agencys projections, which envision a doubling of power
demand from the present to 2020. Barring an economic catastrophe, I would be surprised if demand for electric power were dramatically lower than these projections.
And it is possible that demand could be higher if India discovered, as China has
* Figures 1-3 have been retained in committee files.

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in recent years, that demand for electricity rises even faster than economic output.
For now, lets use these projections to illustrate the stakes.
At present, the total size of Indias electric power system is 124 GW. Of that, coal
comprises 55%, hydroelectric 26%, natural gas 10%, renewables 5%, and nuclear
makes up only 3% of total installed capacity. Looking to the future, India has five
main options for providing the bulk of its electric needs:
Hydroelectric. Official Indian plans call for much greater use of hydro, but in practice, India has found this option increasingly difficult to deploy due to local opposition to dams. This pattern is evident in all large democracies and there is no evidence that it will become significantly easier to site domestic hydro facilities in the
future. While there are possibilities of hydro imports from Bhutan and Nepal, such
international projects are invariably fraught with political uncertainty. Overall,
hydro will probably play a declining role in the future Indian system; projections
that claim otherwise are probably wishful thinking and unlikely to be realized.
Renewables. India makes extensive use of biomass digesters in rural areas and
wind and solar energy in a few states. Given Indias aggressive and expanding renewable energy program, particularly in wind power, the projection shown in Figure
1 (about 6 GW of installed renewable electricity generation capacity by 2020) is certainly too low. However, even assuming India were to continue its aggressive push
on renewable energy, renewables are not likely to represent more than 10% of installed capacity by 2020. More importantly, renewable power generators, notably
wind turbines, are intermittent. They are available less frequently than conventional power plants, contributing to the unlikelihood that renewables will supply
more than 5% of Indias total electricity by 2020 even given optimistic assumptions.
Natural gas. Until recently, most analyses of the Indian power sector envisioned
that gas would play a much larger role in the future. Gas is attractive because it
is the cleanest of the fossil fuels and because the capital cost of gas plants is much
lower than for all the other main rivals such as nuclear, coal, and hydro. Thus, gas
plants have been especially attractive to private investors who are wary of sinking
large amounts of capital into projects where regulatory rules are in flux. Indeed,
nearly all foreign-owned private power plants in India are fired with gas. (In other
developing countries, most privately-owned power plants are gas fired). However,
the price of gas has risen sharply in the last four years. For two decades gas prices
were regulated at approximately $3/mmbtu and supplies were controlled by the
state transmission and marketing monopoly. Over the last decade a private gas
market has emerged, with prices much higher than those in the historic government-managed market. India has built three terminals to import LNG as a supplement to its own domestic gas supplies, and has plans to build several others. The
workings of that gas market are the best indicator of the real price of gas in India.
The most recent large transaction, in which India purchased a spot cargo of LNG
from Algerias Sonatrach, put delivered prices at above $10/mmbtu. Our group at
Stanford is heavily involved in analyzing this gas market, and we expect delivered
gas prices will remain highperhaps not as high as $10, but probably in the range
of $7-$8/mmbtu.1
Nuclear. Until now, nuclear power has been controlled by the central government,
mainly for non-energy purposes (namely weapons), and has not been exposed to
commercial accountability. In addition, Indias domestic uranium reserves are quite
meagerthe Atomic Energy Commission estimates that domestic resources could
support only 10 GW of installed nuclear capacity.2 Thus, not surprisingly, nuclear
energy has played only a small role in the power sector. Whether and how that
could change is at stake in this deal.
The India nuclear deal would provide for full civil nuclear cooperation between
the U.S. and India. By enabling India to import modern nuclear energy technology,
as well as uranium, a properly regulated deal would in effect alleviate the historical
restrictions placed on civilian Indian nuclear power.
Coal. In the past and in the foreseeable future coal is expected to provide most
of Indias electricity. In fact, coal has not met its full market potential in the last
decade because coal supplies are unreliable (partly because the railroad network is
badly in need of investment) and of notoriously low quality. Both those impediments
to coal sector growth are being alleviated. India has begun to encourage private investment into coal mines and pithead power plants that will send the coal by wire
to the national electric grid rather than via railcars. In addition, the country has
adopted favorable rules to encourage investment in the inter-state power grid, ena1 Jackson, Mike (2006). India: challenges to growth, in Fundamentals of the World Gas Industry, 2006. Petroleum Economist.
2 Presentation by Kakodkar, Anil: Chairman, Atomic Energy Commission (2005). Energy in
India for the Coming Decades.

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bling the grid to move much larger quantities of electricity.3 At the same time,
changes in import tariffs are making it easier to import high quality coal from other
countries; those imports, in turn, are inducing Indias domestic coal industry to perform better. These reforms are set to have a huge impact on growth in coal-fired
capacity. India is soliciting bids for five new 4 GW coal-fired power projects (known
as the ultra mega power projects)two of which will produce electricity at coal
pitheads in the interior of the country and three coastal plants that will import foreign coal supplies.
In this context, the question for the Indias energy future centers on the rivals
to coal. Where alternative fuels can be successful, the share left to coal will decline.
All the rivals have problems. For hydro and renewables those problems are severe,
and the United States, in any case, has no ability to influence them. For gas the
severity of the problems created by high gas prices are not yet known. On the one
hand, high prices have discouraged (but not stopped) investment in plants that use
gas. Indeed, some investors who would have built gas-fired power plants are now
looking closely at coal. On the other hand, barely a month passes without the announcement of new gas discoveries in India (in particular the large resources discovered off the countrys east cost). These new gas supplies may eventually help to
lower the price of gas, which in turn will allow for a much larger gas-fired generation capacity.
For nuclear, the future is really wide open. So long as Indias nuclear industry
remains isolated, it is hard to see that India will build more than the occasional
reactor as the cost basis for nuclear equipment will be too high and fuel needed for
such reactors will not be available. Some critics have claimed that allowing exports
of fuel for use in Indian commercial reactors will free up domestic fuel supplies for
use in the nuclear weapons program. The more likely outcome is that India simply
will not expand its commercial reactor fleet so that the military program can obtain
the fuel it needs.
It is hard to predict with certainty how the costs of the different options will unfold. In Table 1, I focus on the main contenders: nuclear, coal, and natural gas. I
show estimates for nuclear power drawn from a study by a group at MIT evaluating
nuclear power in developed countries (high and medium cost estimates) and also
from a study that focuses on nuclear power options in the Indian context (low cost)
but used a notably low capital cost estimate. The coal numbers provide an approximation for costs of a new pulverized coal planttechnology widely available in
Indiafor a plant that meets U.S. environmental standards, as well as a conventional plant in India. The estimates for gas are based on the Indian experience and
levelized costs are shown at different pricesfrom the low price for public gas
(which is essentially unavailable for new power plants) to various feasible private
gas prices.
Table 1.CARBON IMPLICATIONS OF INDIA NUCLEAR DEAL
Generation options

US cents/kWh

NuclearLight Water Reactor

High Cost 1 .......................................................................................
Medium Cost 1 .................................................................................
Low Cost 2 ........................................................................................
Pulverized Coal
U.S. Context 1 * ................................................................................
Indian Context 3 * ............................................................................
Natural Gas
Public Supplier ($2.86/mmbtu) 3 ....................................................
Private Supplier ($5/mmbtu) 3 ........................................................
Private Supplier ($8/mmbtu) 3 ........................................................

6.7
4.2
3.8
4.2
3.9
4.6
6.9
10.1

1 Massachusetts Institute of Technology (2003). The Future of Nuclear Power: An Interdisciplinary MIT Study.
2 Bharadwaj, Anshu, Rahul Tongia, and V.S. Arunachalam (2006). Whither Nuclear Power?
Economic and Political Weekly 41(12): 1203-1212.
3 Adapted from Shukla, P.R., et al. (2004). Electricity Reforms in India: Firm Choices and
Emerging Generation Markets
* Both coal calculations based on assumed delivered cost of US$1.20/mmbtu.

3 In fact, Indias power regulations indirectly encourage projects that transmit power long distances across state lines because such inter-state investments are governed by federal regulators
and can be managed more reliably than projects that are exposed to the whims of state regulators.

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Three things are clear from Table 1. First, at the high gas prices typical of todays
market, gas-fired electricity is extremely expensive. Second, while there are many
uncertaintiesespecially for nuclear powerthe cost of coal and nuclear are comparable. Third, the costs noted in Table 1 may exaggerate the cost advantage of coal
because coal-fired electricity has larger environmental consequences. (The U.S.
Context number is for a plant capable of meeting current U.S. environmental
standards; the Indian Context number includes some particulate control but only
monitoring of other pollutants). If these are taken into account, nuclear power would
be even more competitive with coal.
CO2 AND GLOBAL CLIMATE CHANGE

While there remains some divergence in opinion in the United States about the
causes of global changes in climate and the severity of the global climate problem,
the risk of unacceptable changes in climate will undoubtedly rise with increasing
atmospheric concentrations of CO2 and other greenhouse gases. It is impossible to
predict the outcomes from climate change with complete certainty. (Indeed, the most
worrisome possible changes are the least certain, such as possible catastrophic rise
in sea level, a change in ocean currents, or the destruction of vast ecosystems like
the Amazonian rainforest). Looking at the totality of the evidence, however, it is
hard to escape the conclusion that a prudent and risk-averse policy strategy toward
the threat of global climate change must include a substantial effort to control emissions. And because those emissions emanate globally, such a strategy must be pursued globally.
The CO2 savings implications of replacing coal with a range of installed nuclear
capacities are provided in Figure 2 above. Because there is considerable uncertainty
as to the exact amount of new nuclear capacity likely to arise from the deal, Figure
2 shows a line rather than any particular point. Indias track record of installing
power plants, combined with the difficulties that are likely to arise in a shift to a
truly commercial nuclear power program, suggest to me that new nuclear capacity
could be in the range of 10-20GW by 2020. The State Department has proposed that
20GW of new nuclear capacity could be built by 2020this represents a middle-ofthe-road estimate provided by Secretary of State Condoleezza Rice in her April 5th
remarks to the Senate Foreign Relations Committee. Under this scenario, by displacing 20GW of capacity that would otherwise be coal-fired, the new nuclear capacity would save 145 million tonnes of CO2 per year.4 Indian Prime Minister
Manmohan Singh has recently suggested that the India nuclear deal could have
even larger implications, arguing that it might lead India to install up to 40GW of
new nuclear capacity by 2015.
In Figure 3, I put the CO2 savings from a 20 GW buildout of nuclear power into
perspective by comparing it with other relevant emission estimates. The annual savings from the Indian deal could be nearly as large as the entire commitment of the
25 EU nations to reducing emissions under the Kyoto Protocol. This single arrangement in India would exceed the total carbon savings from the 100 largest developing
country projects under the Kyoto Protocols Clean Development Mechanism (CDM).
At present, the CDM is the only mechanism for engaging developing countries in
the effort to control greenhouse gas emissions.
BEYOND INDIA: ENGAGING DEVELOPING COUNTRIES

Until now, developing countries have adamantly refused to limit their emissions
of greenhouse gases. These countries are wary that the possible high costs of climate
change mitigation will jeopardize their development goals. The result of that opposition is the CDMa system that compensates developing countries for the full extra
cost of any policies to control emissions. The CDM was a good idea in principle, but
in practice it is not working well. The scheme has become mired in red tape as countries and investors try to establish their baseline levels of emissions and the reduction in emissions from each project. (The difference between the baseline and the
reduced level is the key to the CDM conceptthat difference becomes a credit that
can be used to offset emission obligations elsewhere in the world, such as in Europes emission trading system). The problems have encouraged gaming and they
have caused CDM investors to focus on activities that are easy to quantify and
which are marginal in nature. Indeed, energy projects account for just 17% of the
4 Jackson, Mike, et al. (2006). Greenhouse Gas Implications in Large Infrastructure Investments in Developing Countries: Examples from China and India (working paper, Program on
Energy and Sustainable Development, Stanford University).

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CDM pipeline. Almost none of the energy projects are of the type that will lead to
fundamental changes in countries energy systems.5
If the India nuclear deal is successful, it will frame a new approach to engaging
developing countries in a climate strategy. This approach would focus on finding
game-changing policies that align with reluctant countries interests.6 Rather than
involving hundreds of small and marginal projects, this style of engagement would
focus on just a handful of large pivotal actions involving just a few critical countries.
This concept is incidentally at the core of the Asia-Pacific Partnership on Clean Development and Climate, whose six members, including India and the U.S., account
for half the worlds greenhouse gas emissions. That Partnership has promise, but
it remains young. Success with this nuclear deal could offer a credible example of
practical actions that the Partnership could encourage.
PROLIFERATION, INDIAN POLITICS AND THE FUEL CYCLE

My brief in this testimony is to focus on the possible environmental benefits of

the India nuclear deal. I close, though, with a brief word on proliferation.7
My sense is that the claims about proliferation risks stemming from this deal
have been overblown for three reasons. One is that many observers are reluctant
to treat India differently from other states that have acquired nuclear weapons. Yet
that argument is not sustainable. Indiain contrast with Pakistan, among others
has not been the locus for proliferation of weapons technologies to other states and
possibly terrorists. Nor has India taken the kind of aggressive stance with its nuclear weapons program that has been evident in Iran or North Korea.
A second reason for these hyperbolic claims about proliferation is critics have
imagined the world as they would like ita world before Indias nuclear test and
when the NPT was intact and functioningrather than the world as it really is.
Both these reasons have been covered extensively and I will say no more on them.
The third reason is that critics have imagined that the U.S. somehow got hoodwinked by Indiafor example, the list of facilities that are exempt from external
scrutiny is longer than most U.S. analysts would like. This is a valid concern, but
I think it misses the point because it imagines the India nuclear deal as a construct
entirely of U.S. interests when, in fact, it is the product of a nascent cooperation
between two democracies that must pay attention to how the deal plays locally. It
is striking how much hostility the deal has engendered in the Indian press, as Indian nationalists portray this as an erosion of Indias sovereign prerogative to sustain a nuclear weapons program. In such settings I think it is imperative that we
give extensive deference to those who were able to negotiate a deal that (probably)
has navigated these contours of Indian domestic politics while also delivering what
is most essential for the U.S. to gain from the arrangement.
The world is in the early stages of recrafting the fuel cycle. Among the proposals
is the Administrations Global Nuclear Energy Partnership (GNEP). The IAEA has
a proposal. A tailored proposal is emerging as the logical solution to the troubles
with Irans nuclear programwith off-site fuel production and storage. Similarly,
success with the India nuclear deal can establish a practical framework for a new
fuel cycle for India. Many in the anti-proliferation community have been uneasy
about this shift in fuel cycles, but such a shift strikes me as inevitable. And a practical demonstration with a responsible country could go a long way to making these
visions a practical reality with adequate protections against proliferation.

The CHAIRMAN. Thank you very much.

Mr. Poneman.

5 Wara, Michael (Forthcoming, 2006). Measuring the Clean Development Mechanisms Performance and Potential.
6 See T.C. Heller and P.R. Shukla (2003). Development and Climate: Engaging Developing
Countries in: J.E. Aldy et al., Beyond Kyoto: Advancing the International Effort Against Climate
Change. Pew Center on Global Climate Change.
7 I am mindful that many others have written much more extensively on these subjects. Notably, Levi, Michael A., and Charles D. Ferguson (2006). U.S.-India Nuclear Cooperation: A Strategy for Moving Forward, Council on Foreign Relations, CSR No. 16. and Squassoni, Sharon
(2006). U.S. Nuclear Cooperation With India: Issues for Congress, CRS Report for Congress.
Congressional Research Service.

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34
STATEMENT OF DANIEL B. PONEMAN, PRINCIPAL, THE
SCOWCROFT GROUP

Mr. PONEMAN. Thank you, Mr. Chairman. It is an honor to appear before the committee and I also would just submit my written
testimony for the record and summarize here.
The CHAIRMAN. Its done.
Mr. PONEMAN. I would also note that I am speaking in my personal capacity and not as a member of any institution or organization. I would also like to just focus on three basic points. No. 1, I
do believe that U.S. interests are best served by a wide-ranging,
deep and broad cooperation with India in energy. I cannot improve
upon the comments of our administration colleagues on the panel
before or Dr. Victor. I think it is clear that across the full range
of diverse energy sources, be it biomass synthetic fuels, clean coal
or whateverwe need to and Mr. Chairman, you noted it in your
remarkswe need to deepen and strengthen that cooperation and
indeed, this forms only a part of a much broader degree of strategic
engagement the United States, I think, must have with India,
given that we are the worlds two most populous democracies, we
have coherent interests across a broad array of international security interests and we are clearly much the better for being able to
work very cooperatively with India.
My second point. Nuclear power can play an indispensable role
in meeting the growing need for the large amounts of electricity
that the world needs without aggravating greenhouse gas emissions. Once again, Dr. Victor, I think, provided some very stunning
statistics in this degree but I would note that I have been working
in these issues for 30 years, over 30 years, starting as an intern
in the Senate, after the first Indian nuclear test in 1974, and it is
remarkable to witness, as we have in the last few years, how public
perceptions of nuclear have evolved in a remarkable direction.
Were not there yet but we are now seeing large increases in deployed nuclear power being considered in India, in China, in Russia, indeed in this country. It is critical, it seems to me, that as
part of any coherent strategy, to minimize greenhouse gas emissions, that we pursue with all vigor, all sources of energy, certainly
including nuclear.
This brings me to my third point. We must, it seems to me, pursue that nuclear option in a way that minimizes the threats of nuclear weapons proliferation. Just consider. If you look at the MIT
study of a few years back, merely to maintain the current share of
deployed nuclear power as a source of electricity, at about 17 percent of global supplies, could imply, at the growth rates that weve
already heard of energy consumptions, the deployment of something like 1,000 nuclear powerplants by mid-century. If you associate with that expansion of nuclear power, a similar expansion of
nuclear fuel facilities, of enrichment capabilities and reprocessing
capabilities, and if you consider the nuclear weapons threats to
those facilities entail, in terms of providing possible access to weapons-grade uranium and weapons-grade plutonium, we face a critical national security threat. That is why I have supported President Bushs proposals in February 2004, to minimize the spread of
enrichment and reprocessing facilities, that is why I believe that
the Global Nuclear Energy Partnership the President promoted

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35
earlier this year and its reliable fuel assurance, are critical contributors to that nonproliferation effort.
In that respect, I would like to note that I think that it may well
be that India, once it is engaged in nuclear cooperation with the
United States, based on the agreement for cooperation and the
safeguard agreements, which we are all now anticipating will go
through, India may be in a position to make a single contribution
to the reduction of nuclear proliferation risks. I would note that in
the July 18 Joint Statement between President Bush and Prime
Minister Singh, Prime Minister Singh committed to refrain and I
quote, from transfer of enrichment and reprocessing technologies
to stats that do not have them and to supporting international efforts to limit their spread. Now, there have been a number of proposals from President Bush, from President Putin, from the International Atomic Energy Agency, Mr. El Baradei, the Director General there, on how one might do that. But I would like to suggest,
for the consideration of the committee, one possibility that may be
worthy of consideration. It is expected as it has been noted here
today, that India will purchase a number of nuclear reactors from
foreign suppliers. I would certainly hope that these would include
U.S. reactors, all of which require enriched uranium fuel as do
many of the foreign suppliers of reactors as well. India could, for
example, offer to lease nuclear fuel from the suppliers of the nuclear reactors and other existing nuclear fuel suppliers. Suppliers
would then retain title to that material and that material would
never fall by legal title, into the hands of the user of the fuel. The
spent fuel extracted from the reactor could either be stored in India
or exported for storage in another country. Either way, the material would remain safeguarded and India would claim no right to
extract or access the plutonium contained in the spent fuel. The
IAEA could guarantee a back-up fuel supply to reassure the Indian
government against the risk of an arbitrary cut-off of leased fuel.
I emphasize this is a voluntary concept.
By voluntarily refraining from enriched uranium or reprocessing
plutonium for its civilian program, India would show international
leadership, it would kick-start international efforts to provide fuel
assurances in exchange for country pledges to refrain from enrichment and reprocessing and by offering an economical, reliable nuclear fuel solution to countries like Iran and Brazil, nuclear fuel
leasing would reduce any justification for engaging in fuel cycle activities that would support nuclear weapons development. Nuclear
fuel leasing would imbed the emerging U.S./Indian cooperation and
civil nuclear energy into the warp and woof of global nonproliferation efforts. Moreover, it would not erode the NPT bargain, since
India would show greater restraint than the treaty requires by voluntarily refraining from enrichment and reprocessing, neither of
which are expressly prohibited by the treaty. Obviously, this is no
panacea but I do believe it is an idea worthy of consideration and
I would note that all of our best aspirations for a large-scale rapid
deployment of new nuclear power will be jeopardized, critically perhaps, if we dont find some way, as the power expands, to limit the
access to the critical enrichment and reprocessing technologies that
bring with them the nuclear weapons threat that we have been

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fighting so hard and so long to avoid. Thank you, Mr. Chairman
and members of the Committee.
[The prepared statement of Mr. Poneman follows:]
PREPARED STATEMENT

OF

DANIEL B. PONEMAN, PRINCIPAL, THE SCOWCROFT GROUP

Mr. Chairman, it is an honor to appear before the Committee on Energy and Natural Resources to discuss the prospects for energy cooperation between the United
States and India, with particular focus on the role nuclear power can play in meeting those needs.
I will focus my remarks on three aspects of this issue: the U.S.-Indian energy relationship, the role of nuclear power in our energy future, and the need to ensure
that our nuclear future minimizes the threat of the spread of nuclear weapons. Now
that the Senate has acted on the U.S.-Indian civil nuclear cooperation initiative, and
the Executive Branch has taken up the issue for negotiations with the Government
of India and consultations in the Nuclear Suppliers Group, I do not propose to address that subject. Instead, I will base my comments on the assumption of a U.S.Indian agreement for cooperation in the peaceful uses of nuclear energy, and of all
requisite safeguards and approvals having been obtained from the International
Atomic Energy Agency and the Nuclear Suppliers Group.
I would like to offer three perspectives for the Committees consideration. First,
U.S. interests would be best served by a wide-ranging, robust relationship promoting
energy cooperation in all aspects. There is broad and deep consensus in our country
in favor of strengthening relations between India and the United States. As the
worlds most populous democracies, we have much in common: our dedication to promote democracy and freedom, our commitment to promote human rights and fight
terror, our efforts to increase trade and investment between our two nations, our
cooperation to improve public health and to provide energy for our people while protecting our environment. We can do much together to promote the security of each
of our nations and that of the international community.
In the energy arena, the initiatives announced by President Bush and Prime Minister Singh this past March represent an important step in building the U.S.-Indian
energy relationship. These include Indias participation in the FutureGen international partnership to create a zero-emissions coal-fired power plant, its membership in the International Thermonuclear Experimental Reactor (ITER), and its work
with the United States and other Asian nations in the Asia-Pacific Partnership on
Clean Development and Climate. It would be in our national interest to see these
efforts prosper, and to strengthen cooperation across the full range of fossil and renewable energy technologies not only at the government-to-government level but
also at the business-to-business level. Expanding bilateral commercial relations between our two countries will help strengthen the political ties that bind us, thereby
facilitating effective cooperation in tackling difficult political and security issues.
Second, nuclear power can play an indispensable role in meeting the growing need
for large amounts of electricity without aggravating greenhouse gas emissions. I have
been working on nuclear energy issues for over thirty years. The years since then
have witnessed many trials and tribulations for nuclear power. In addition to the
concern that nuclear energy programs might be misused to,help develop nuclear
weapons, the Three Mile Island and Chernobyl accidents reduced public confidence
in the safety of nuclear power. Further, the chronic unresolved question of how ultimately to dispose of nuclear wastes in this and many other nations has also dogged
efforts to rebuild public confidence in nuclear power.
But attitudes toward nuclear power are changing. In part, the increased public
support for nuclear power has reflected the intensive efforts of the nuclear industry
to address the issues of public concern, including through the development of new
and improved nuclear reactor designs of greater safety and efficiency. In addition,
the citizens of the world are increasingly and properly concerned about the growing
impact of global warming, rooted in the inexorable increase of global energy demand
and the alarming growth of greenhouse gas emissions should the world rely excessively on fossil fuels to meet that demand.
But it is not enough to chronicle changes in public attitude. Given the rate of projected increases in energy consumption over the coming decades, according to the
2003 MIT Study on the Future of Nuclear Power, the world will need to exercise
all of its optionsincreased efficiency in electricity generation and use, expanded
use of renewable energy sources, capture and sequestration of carbon dioxide emissions from fossil-fueled plants, and increased use of nuclear powerin order to
make a significant impact on global warming. The MIT Study further concluded
that, for nuclear power simply to maintain its current share of about 17 percent of

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total installed electricity generating capacity, it will need to grow from about 366
reactors today to 1000 or more reactors of 1000MWe capacity. Indiawith its size,
its population, its growth rates, and its existing commitment to nuclear poweris
likely to comprise a key component in the global nuclear energy scene for the rest
of this century.
Third, the promise of nuclear power can only be fully realized fwe take aggressive
measures to combat the spread of nuclear weapons. It may be, as I have just suggested, that the world is on the verge of a major expansion in the fleet of nuclear
reactors providing electricity in India and, indeed, around the world. But this future
will only be realized if nuclear power is successful in addressing all relevant concerns: cost, safety, waste management, and proliferation risks. For the balance of
my remarks, I will focus on managing the proliferation risks.
Even as we envisage the possibility of a major expansion of nuclear power around
the world, we are also confronting serious challenges in combating the spread of nuclear weapons, most notably in Iran and North Korea. While nuclear reactors themselves are not the central problem in promoting weapons proliferation, a massive
expansion of nuclear power could be accompanied by a commensurate expansion of
fuel cycle facilities capable of enriching uranium to use as nuclear power fuel and
of processing spent fuel to separate out the plutonium from uranium and fission
products. Those fuel cycle technologies can also be used to produce nuclear weapongrade uranium and plutonium, and therefore do pose a significant proliferation risk.
If the product of any fuel cycle plants are, in fact, diverted from peaceful to explosive purposes, it could not only lead to nuclear weapons possession by terrorists or
other adversaries, but also abruptly destroy the public confidence critical to the survival of nuclear as a viable energy source.
It is therefore critical, as we seek to promote the expansion of nuclear power, that
we pay equal attention to preventing the proliferation of nuclear weapon capabilities. That is why President Bush was correct, in my view, in proposing in February
2004 that we take steps to minimize the spread of enrichment and reprocessing facilities, and why his proposal earlier this year under the Global Nuclear Energy
Partnership to provide for a reliable fuel assurance also should be pursued with
vigor.
And in this respect, it may well be that India, once it is engaged in civil nuclear
cooperation with the United States, may be in a position to make a signal contribution to the reduction of nuclear proliferation risks. In the July 18, 2005, Joint Statement by President Bush and Prime Minister Singh, the Prime Minister committed
to refrain from transfer of enrichment and reprocessing technologies to states that
do not have them and [to] supporting international efforts to limit their spread.
There have been a number of suggestions and proposals regarding how the international community might effectively limit the spread of enrichment and reprocessing technologies. Proposals in this arena have come from people in and out of government, from leaders including President Bush and President Putin, as well as
from the Director General of the International Atomic Energy Agency, Mohamed
ElBaradei.
How could India support these efforts, as pledged in the July 18 joint statement?
It is expected that India will decide to purchase a number of nuclear reactors from
foreign suppliers. I would certainly hope that these would include U.S. reactors, all
of which require enriched uranium fuel. India could offer to lease nuclear fuel from
abroad. Suppliers would lease enriched uranium fuel to Indian reactors, but title to
the material would never pass. The spent fuel extracted from the reactor could either be stored in India or exported for storage in another country. Either way the
material would remain safeguarded, and India would claim no right to extract or
access the plutonium contained in the spent fuel. The IAEA could guarantee a backup fuel supply to reassure the Indian Government against the risk of an arbitrary
cut-off of leased fuel.
By voluntarily refraining from enriching uranium or reprocessing plutonium for
its civilian program, India would show international leadership. It would kick-start
international efforts to provide fuel assurances in exchange for country pledges to
refrain from enrichment and reprocessing. By offering an economical, reliable nuclear fuel solution to countries like Iran and Brazil, nuclear fuel leasing would reduce any justification for engaging in fuel-cycle activities that would support nuclear
weapons development.
Nuclear fuel leasing would embed the emerging U.S.-Indian cooperation in civil
nuclear energy into the warp and woof of global nonproliferation efforts. Moreover,
it would not erode the NPT bargain, since India would show greater restraint than
the treaty requires by voluntarily refraining from enrichment and reprocessing, neither or which are expressly prohibited by the treaty.

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38
Nuclear fuel leasing is no panacea. It would not purport to prevent all clandestine
efforts to divert civilian nuclear programs to explosive purposes, or to block dedicated bomb builders who are pursuing purely military programs. It would, however,
help reduce the risk that the global growth of atomic energy will lead to nuclear
catastrophe. And for that India would justly earn the worlds lasting gratitude.
I would be happy to respond to any questions the Committee may have.

The Chairman. Thank you very much.

Mr. Gadbaw.
STATEMENT OF R. MICHAEL GADBAW, VICE PRESIDENT AND
SENIOR COUNSEL, GENERAL ELECTRIC COMPANY

Mr. GADBAW. Mr. Chairman and members of the committee,

thank you for the opportunity to provide a perspective on the role
of commercial nuclear energy in the U.S./India strategic cooperation. Id like to ask that my full testimony be put in the record and
I will summarize.
The CHAIRMAN. It will be made part of the record.
Mr. GADBAW. The growing partnership between the United
States and India has profound implications for a wide range of
issues that play into Americas enduring national interests. Among
them, Asian stability, global nonproliferation, Indian economic development and the renaissance of the nuclear industry.
GE supports the implementation of this historic agreement, because we believe the strategic partnership that it will advance will
serve the interests of both our countries in promoting global peace,
security, nonproliferation and economic development.
GE has had a unique vantage point from which to observe the
evolution of this relationship and I have personally had occasion to
travel extensively in India, most recently in March after the agreement was signed, when I had a chance to talk to the Department
of Atomic Energy and other private sector and government officials
about this agreement. We believe in the vision that President Bush
and Prime Minister Manmohan Singh articulated in their Joint
Statement in March regarding the role the United States and India
must play together in addressing the challenges facing the world
in this century. We have seen how the economic reforms launched
by Manmohan Singh as Finance Minister in 1991 have committed
India to a course of development through open markets, global
trade, and investment.
Together with many U.S. and Indian companies, GE has participated directly in the benefits of this evolving economic and political
relationship. As economic reforms have stimulated unprecedented
Indian economic growth, we have seen an increasing demand for
U.S. products and technology, in aviation, power generation, rail,
healthcare, and advanced materials benefiting the workers and
suppliers. The opening of the civilian nuclear relationship will
deepen the support for American jobs. For every order we receive
for a 112 gigawatt powerplant, we anticipate U.S. exports in the
neighborhood of $1 billion, which would equate to supporting
around 10,000 U.S. jobs.
As you evaluate the policies needed to ensure the success of this
agreement, I encourage you to look at how these policies work together. No longer can we divide policy into distinct compartments,
separating security from economics, public policy from private commerce. Government officials and the private sector must work to-

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39
gether to fully integrate the commercial and national security dimensions of government policies.
Leading U.S. companies like General Electric, will play a crucial
role in translating the strategic vision of U.S./Indian energy cooperation into a reality. Take for example, Americas interests in
revitalizing the nonproliferation regime to include a responsible nuclear India. As they do business in India, U.S. companies will bring
global standards of compliance and processes to safeguard the
international legal regime controlling nuclear technologies. Moreover, nuclear cooperation will require intense and ongoing interaction among governments, local energy providers, and U.S. nuclear suppliers, which will help to increase the transparency of Indians nuclear program while tightening the relationships between
the U.S. and Indian energy sectors.
Indias economy is growing dramatically with the potential to lift
hundreds of millions out of poverty. To sustain its current growth
trajectory, India will have to increase its energy consumption by
around 4 percent annually.
Although coal, oil and natural gas dominate Indias current energy mix, Indias future will increasingly rely on nuclear energy.
This is partly due to resource constraints. Nuclear power has longterm advantages for Indias development. India has large reserves
of coal but its high ash content poses significant environmental
problems. Nuclear energy is a cleaner resource. Further, unlike imported gas, oil and LNG, nuclear power would improve Indias energy security and lessen its geopolitical anxiety over foreign energy
sources. The Indian government has set an ambitious target for its
nuclear expansion. It hopes to achieve a nuclear capacity of around
10,000 megawatts by 2011, 2012 and it has recently announced a
doubling of its need by 2020, to 40,000 megawatts.
Given Indias desire to expand its nuclear capacity so quickly and
significantly, U.S. nuclear suppliers have an excellent opportunity
to participate in Indias energy development and expanding the energy supply will also require broader improvements in Indias infrastructure, creating even more opportunities for American companies.
U.S. companies can help the United States become an integral
partner in Indias economic development. As the last U.S. owned
nuclear technology company, GE is committed to do its part.
ABWRAdvanced Boiling Water Reactoris the most modern and
advanced design ever built with installations in Japan and Taiwan.
ABWR has already received NRC certification. Looking to the future, GEs ESBWR, the economic-simplified boiling water reactor is
cheaper and safer than existing reactor technologies.
France and Russia started early in cultivating political channels
into Indias nuclear market but American companies have the capability to take a leading position as India seeks new reactors. GE
not only has great technology but also a history of a successful
partnership in India.
U.S. nuclear suppliers can thrive in the Indian market but government policies must enable them to act rapidly and effectively.
This means that U.S. policy-makers must be sensitive to the link
between security and economics. It is not enough to focus only on
formal nonproliferation agreements between India and the United

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40
States, i.e., IAEA or NSG, the nuclear suppliers group. The U.S.
Government must think broadly about a range of policies that
counts for the needs of commerce.
One pressing example is nuclear compensation and liability. The
International Atomic Energy Agencys convention on supplementary compensation for nuclear damage establishes an updated
global system for compensation in the event of a nuclear incident
outside the United States. We are pleased that Senate consent to
ratify was approved in May by the Senate Foreign Relations Committee and is ready for action by the full Senate. We hope that
your committee will work promptly on any necessary implementing
legislation. This initiative is vital if U.S. companies are to engage
in foreign nuclear markets.
The U.S./Indian strategic alliance driven by nuclear energy cooperation opens an array of opportunities for U.S. companies. General Electric is ready to support this endeavor. We are confident
that with appropriate government policy and advocacy support,
U.S. companies can take a leading role in developing Indias energy
capabilities. In the end, American commerce underpins the national security goals that animate the U.S./India deal and give substance to the deals domestic aspiration, the renaissance of Americas civilian nuclear industry. Thank you.
[The prepared statement of Mr. Gadbaw follows:]
PREPARED STATEMENT OF R. MICHAEL GADBAW, VICE PRESIDENT
COUNSEL, GENERAL ELECTRIC COMPANY

AND

SENIOR

Mr. Chairman and Members of the Committee, thank you for the opportunity
today to provide a perspective on the role of commercial nuclear energy in U.S.India strategic cooperation. The burgeoning partnership between the United States
and India has profound implications for a wide range of issuesAsian stability,
global non-proliferation, Indian economic development, and the renaissance of the
nuclear industrythat play into Americas enduring national interests.
GE supports the implementation of this historic agreement, because we believe
the strategic-partnership that it will advance will serve the interests of both our
countries in promoting global peace, security, non-proliferation, and economic development.
GE has had a unique vantage point from which to observe the evolution of this
relationship. We believe in the vision that President Bush and Prime Minister
Manmohan Singh articulated in their joint statement of March 1, 2006, regarding
the role the United States and India must play together in addressing the challenges facing the world in this century. We have seen how the economic reforms
launched by Manmohan Singh as Finance Minister in 1991 have committed India
to a course of development through open markets, global trade, and investment.
Ratified and affirmed through a series of democratic elections and successive governments, these policies have created political, economic, and commercial linkages
and understandings between our two countries on ways to increase our mutual security and address the threats we face from intolerance, terrorism, and the spread of
weapons of mass destruction.
Together with many U.S. and Indian companies, GE has participated directly in
the benefits of this evolving economic and political relationship. As economic reforms
have stimulated unprecedented Indian economic growth, we have seen the increasing demand for U.S. products and technology in aviation, power generation, rail,
healthcare, and advanced materials benefiting our workers and suppliers. The opening of the civilian nuclear relationship will deepen this support for American jobs.
For every order we receive for a 1.5 GW power plant, we anticipate U.S. exports
in the neighborhood of $1 billion, which would equate to supporting about 10,000
U.S. jobs.
THE COMMERCIAL ROLE IN STRATEGIC ENERGY COOPERATION

As you evaluate the policies needed to ensure the success of this agreement, I encourage you to took at how these policies work together. No longer can we divide

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41
nuclear policy into distinct compartments, separating security from economics, public policy from private commerce. Consequently, government officials and the private
sector must work together to fully integrate the commercial and national security
dimensions of government policies.
Secretary of State Condoleezza Rice recognized in her July 10, 2006, speech that
there is a new spirit of partnership between India and the United States
and that spirit of partnership arises, first and foremost, from our people,
from deep ties and shared aspirations that bind our democratic societies.
. . . The relations between our people point a way forward for cooperation
between our governments.
The U.S.-India relationship will be cemented through social and especially economic exchange. Government policy should be designed to encourage and expand
those channels of private activitynowhere more than the nuclear energy sector,
where international security, national economic development, and commercial innovation come together.
Leading U.S. companies like General Electric will play a crucial role in translating the strategic vision of U.S.-Indian energy cooperation into a reality. Take
Americas interest in revitalizing the non-proliferation regime to include a responsible nuclear India. As they do business in India, U.S. companies will bring global
standards of compliance and processes to safeguard the international legal regime
controlling nuclear, technologies. Moreover, nuclear cooperation will require intense
and ongoing interaction among governments, local energy providers, and U.S. nuclear suppliers, which will help to increase the transparency of Indias nuclear program while tightening the relationships between the U.S. and Indian energy sectors.
INDIAS ENERGY NEEDS

Indias economy is growing dramatically, with the potential to lift hundreds of

millions out of poverty. But India needs a huge expansion of power generation to
fuel its demand for energy. India currently produces over 139 GWe of electricity,
some 2 percent of which is nuclear (2.7 GWe).1 To sustain its current growth trajectory, India will have to increase its energy consumption by around 4 percent annually.2
Although coal, oil, and natural gas dominate Indias current energy mix (constituting roughly 52, 34, and 7 percent of Indias energy consumption, respectively),3
Indias future will increasingly rely on nuclear energy. This is partly due to resource
constraints. A study by the Nuclear Power Corporation of India Limited, which is
owned by the Indian government, analyzes the power generation potential of Indias
resource base. Whereas Indias 38 billion tons of coat could produce 7,614 GWeyears of electricity, and its 12 billion tons of oil and natural gas could produce 5,833
GWe-years, it has enough thorium (225,000 tons) to produce more than 155,502
GWe-years.4 Moreover, importing uranium to augment its indigenous supply of
61,000 tons costs less per unit of electricity generated than importing coat, oil, or
gas.5 Nuclear energy also becomes important due to Indias strategy for economic
growth. Nuclear power has long-term advantages for Indias development: India has
large reserves of coal, but its high ash-content poses significant environmental problems; nuclear energy is a cleaner resource. Further, unlike imported gas, oil, and
LNG, nuclear power, would improve Indias energy security and lessen its geopolitical anxiety over foreign energy sources.
The Indian government has set ambitious targets for Indias nuclear expansion.
It hopes to achieve a nuclear capacity of about 10,000 MWe by 2011-12 and 40,000
MWe by 2020.6 By 2052, according to Indias Department of Atomic Energy, India
hopes to have a nuclear capacity of 275 GWe, with nuclear technologies providing
20 percent of Indias overall fuel mix (up from 2 percent today). Coal, by contrast,
1 Report

on Growth of Nuclear Energy in India, Department of Atomic Energy, 2004.

Ganguty, Testimony before the Committee on Foreign Relations, U.S. Senate, Energy
Trends in China and India: Implications for the United States, July 26, 2005.
3 India,
Country Analysis Briefs, U.S. Energy Information Administration, http://
www.eia.doe.gov/emeu/cabs/India/Full.html (as of December 2005).
4 Indias Vision: Nuclear Energy, Nuclear Power Corporation of India, Ltd. (NPCIL), presentation by S. Vedmoorthy to the India Energy Symposium, March 2, 2006.
5 A Strategy for Growth of Electrical Energy in India, Department of Atomic Energy, http:/
/www.dae.gov.in/publ/doc10/index.htm (as of July 17, 2006). Other sources estimate Indias uranium supply to be as high as 78,000 tons. See Ashley J. Tellis, Atoms for War? U.S.-Indian Civilian Nuclear Cooperation and Indias Nuclear Arsenal, Carnegie Endowment for International
Peace, June 2006, http://www.carnegieendowment.org/files/atomsforwarrevised1.pdf.
6 NPCIL, 2006. Originally, the 2020 target was 20,000 MWe; the Indian government recently
doubled it.
2 Sumit

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will go from constituting more than half of Indias installed electrical capacity to
about 46 percent by 2052, oil and gas from 24 percent to 15 percent.7
Given Indias desire to expand its nuclear capacity so quickly and significantly,
U.S. nuclear suppliers have an excellent opportunity to participate in Indias energy
development. And expanding the energy supply will also require broader improvements in Indias infrastructure, creating even more opportunities for American companies.
OPPORTUNITIES FOR U.S. NUCLEAR SUPPLIERS

U.S. companies can help the United States to become an integral partner in Indias economic development. As the last U.S.-owned nuclear technology company,
GE is committed to do its part. GEs ABWR (Advanced Boiling Water Reactor) is
the most modern and advanced design ever built, with installations in Japan and
Taiwan. ABWR has already received NRC certification. Looking to the future, GEs
ESBWR (Economic Simplified Boiling Water Reactor) is cheaper and safer than existing reactor technologies.
France and Russia started early in cultivating political channels into Indias nuclear market. But American companies have the capability to take a leading position
as India seeks new reactors. GE not only has great technology, but also a history
of successful partnerships in India. The Indians know this from their experience
with the Tarapur BWR site, built by GE, which is the lowest-cost source of energy
in India according to officials of the Indian Department of Atomic Energy.
Furthermore, India recognizes the political importance of Americas decision to
draw closer to it. America has enabled India to enter the nuclear fold. The Indian
government understands the inconsistency, then, of excluding competitive American
companies from participating in Indias new commercial opportunities.
U.S. GOVERNMENT POLICIESUNDERSTANDING THE SECURITY-COMMERCE LINK

U.S. nuclear suppliers can thrive in the Indian market, but government policies
must enable them to act rapidly and effectively. And the U.S. government must
make clear its expectation that U.S. companies will succeed in India as they have
succeeded elsewhere. Government engagement and advocacy are essential.
Again, this means that U.S. policymakers must be sensitive to the link between
security and economics. Commerce between America and India creates the linkages,
the transparency, and the safeguards that advance our national securitybut commerce requires a conducive policy environment. Although crucial, it is not enough
to focus only on formal non-proliferation agreements between India and the United
States, IAEA, or NSG. The U.S. government must think broadly about a range of
policies that accounts for the needs of commerce.
One pressing example is nuclear liability: The International Atomic Energy Agencys Convention on Supplementary Compensation for Nuclear Damage (CSC) establishes an updated, global system for compensation in the event of a nuclear incident
outside the United States. We are pleased that Senate consent to ratify was approved in May by the Senate Foreign Relations Committee and is ready for action
by the full Senate. We hope that the Senate Energy and Natural Resources Committee will work promptly on any necessary implementing legislation. This initiative
is vital if U.S. companies are to engage foreign nuclear markets. Without a system
ensuring compensation and nuclear liability protection, U.S. companies will find the
risks of doing business prohibitive. Moreover, key stateslike Japan, South Korea,
Canada, Ukraine, China, and not least Indiaare waiting for America to take the
lead in joining the CSC, which the United States promoted and was the first country to sign in 1997. They could be persuaded to join if America does so first. The
CSC would then reflect a global standard for nuclear liability that could be used
to structure legal arrangements with others as well. If America fails to take the
lead, however, the CSC will lose momentum and the opportunity could be lost to
establish a global standard for compensation and dealing with legal liabilities in
this important area.
CONCLUSION

The U.S.-Indian rapprochement, driven by nuclear-energy cooperation, opens an

array of opportunities for U.S. companies. General Electric is ready to support this
endeavor. We are confident that, with appropriate government policy and advocacy
support, U.S. companies can take a leading role in developing Indias energy capabilities. in the end, American commerce underpins the national security goals that
7 Department

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animate the U.S.-India deal, and gives substance to the deals domestic aspiration:
the renaissance of Americas civilian nuclear industry.
Thank you for your time and attention.

The CHAIRMAN. Thank you very much.

Senator Bingaman.
Senator BINGAMAN. Thank you all for being here. Let me ask,
first of all, Mr. Poneman, ask you about your suggestion. I think
it is a constructive suggestion that perhaps India could be persuaded to lease the nuclear fuel that they need in new reactors
from abroad. But is there anything in the works or anything that
has occurred that would lead us to believe they might be willing
to do that? Im just not aware of it. I mean, I like the idea but it
just strikes me that now that they have negotiated the agreement
that they negotiated with us, there is no incentive for them to do
anything like that. It is the kind of thing that might have been
part of a negotiation but it was not.
Mr. PONEMAN. Thank you very much for the question, Senator.
I think this is on. Id make, I guess, a couple of comments. I think
I would certainly, as a tactical negotiating matter, I cannot get to
the point that you just made in the sense that if one were to make
this as part of a deal, ones leverage would have been greater earlier. There is no question about that. That having been said, the
watch word that we have always heard from the Indian government is something that is asked of them cannot go beyond the July
18 Joint Statement from last year between the Prime Minister and
the President. And when I first mentioned this concept to an Indian colleague, my attention was invited to that line in the Joint
Statement, which I quoted in my prepared statement, which said
that India agrees not to export these enrichment or reprocessing facilities and to support international efforts to prevent their spread.
So I think if you couch it in terms of the July 18th Joint StatementAand B, make sure that it is framed as an opportunity
and an option, which having gotten through the gates of the safeguards agreement and the 123 Agreement and the rest, that they
could voluntarily do, I think there is a chance. I think that it is
better to light one candle than curse the darkness. Im not under
any illusions that it is something that would be rapidly and warmly embraced today by the Indians. But I think under those other
circumstances it might be possible.
Senator BINGAMAN. Are you under the impression that this is
something that our own administration would advance to the Indians as an initiative they might consider?
Mr. PONEMAN. Well, having served on the National Security
Council for 6 years, I am cautious about speaking for a government
Im no longer a member of. I have discussed this idea with members in the administration. I have found, I think, generally positive
reactions to the idea, whether they would choose to put it forward
in a negotiation with the Indians, I would not presume on their behalf.
Senator BINGAMAN. Mr. Gadbaw, let me ask you. In your statement, you make the general statement here, toward the beginning
of your testimony, General Electric supports the implementation of
this historic agreement because we believe the strategic partnership that it will advance will serve the interests of both our coun-

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tries in promoting, and then you have a variety of things it is going
to promote, one of which is nonproliferation. How do you see that?
How do you reach the conclusion that this agreement will promote
nonproliferation?
Mr. GADBAW. Senator, that really comes from a judgment looking
at this relationship over quite a number of years. I, in my role in
General Electric, got involved with India, really in the early nineties and I have seen that countryat that time, coming to the
United States and came to GE and representatives asking why is
India not even on the radar here in the United States. A lot of
things have happened over the last 15 years that have brought our
two countries much closer together. As we as a company look out
over the next 10 years, we see India as a country that will be the
kind of allay that the United States wants. So it is really about our
alignment of interests in the broadest sense of the term. I think
this agreement is one step in that longer process. I dont think it
freezes in time our mutual interests. So I think in a broad sense,
it brings those interests together around nonproliferation and
brings India into cooperation with us, particularly in this civilian
nuclear area. In that particular area, in the scope of this agreement, I think American companies being part of that market,
bringing their approach to compliance with the export control laws,
both in the United States and with India, working with our suppliers to create an understanding of how to implement and enforce
those rules, will actually set a standard that will enhance the ability to control the proliferation of this technology and advance our
mutual interests. So I see both in a macro sense and in a micro
sense, this alignment of interests working towards what I think are
both countries interests in controlling the proliferation of nuclear
weapons. India has had a great track record in that regard, despite
the fact that it is in a neighborhood that is a very difficult one.
Senator BINGAMAN. My time is up, Mr. Chairman. Thank you.
The CHAIRMAN. Well, Senator Bingaman, you got right to the
point. One of the most important things we discuss here today is
obviously this issue. Question. How do you test the waters? How
do you see it will move? It would seem to me and I would just put
this to one of you, perhaps Mr. Poneman first. It would seem to be
that if I were them, I wouldnt be very interested unless it was a
broader-scoped agreement that involved a number of countries, not
just India. I mean, India would say, what are you doing talking
about us as if we are in some way most apt to be violative of this
process. We are cleaner than most. We would be more apt to be
okay without any of this agreement. We probably are not going to
be proliferators, which I think is a fair statement. They could make
that not offend me, based on their performance. So answer with me
whether this should be a broader-based agreement and how does
that happen and is it happening?
Mr. PONEMAN. Senator, I could not agree more. I am looking at
this as a global issue.
The CHAIRMAN. Okay.
Mr. PONEMAN. I am thinking of this in terms, for example, of
President Bushs initiative in February 2004, to minimize those
states around the world that are engaged in the commercial enrichment of uranium and reprocessing of plutonium from spent fuel.

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My suggestion is thatand of course, we now have the G8 having
considered this and President Putin having his initiative. I think
what is very, very important is to drain the notion of singling out
a Nation as part of this equation. If it is to work, it must be voluntary, it must be consensual. Very few countries will simply
knuckle under and say, Im going to do this because you want me
to do this. But when you think of aircraft, when you think of automobiles, when you think of a number of commodities, there is a
very rich vein and history about leading. I think there is a very attractive proposition, an attractive may I say commercial proposition
to be put to a number of nations that says, hey look, rather than
mining the uranium, milling, converting, enriching, fabricating the
fuel, going through all those headaches and being saddled with a
bunch of spent fuel you dont know what to do with, why dont you
lease it from this company? Well give you a good price. Well give
you a 10-year guarantee. Discounts could be applied. You could
have assurances of supply and backstopping arrangements from
the IAEA. My suggestion is to really echo a couple of points, one
from you, Mr. Chairman, that if we are to make this a meaningful
relationship, it cant be just the rhetoric, its got to be practical and
I think this is practical and then to echo my colleague, Mr.
Gadbaw, when he talks about getting commercial interests to align
with our national security interests. If we can get this whole discussion in that context and at the same time, talk about it, yes,
more broadly, I think India could play a leadership role in having
something like this become an effective mechanism.
The CHAIRMAN. Who is taking the lead in this idea of leasing?
Mr. PONEMAN. Well, there have been a number of governments
that have discussed it. I think you will recall that when Prime
Minister Howard was visiting President Bush just a few weeks ago,
there was some discussion in the run-up to that visit in Australia
about nuclear fuel leasing. I have, with a number of my colleagues,
many of whom are well known to this committee, published an article that proposed an idea like this. It is an idea that, I think, is
certainly waiting to receive more public support but Im just trying
to see if it might engender some support.
The CHAIRMAN. Hasnt Russia thought about it, too?
Mr. PONEMAN. Absolutely and we had a very, I think, constructive visit a few weeks ago from Mr. Karnataka, the head of Atom
Prom as it has now been renamed and I think that theirnow that
we have discussions that have begun between the United States
and Russia about the possibility of peaceful nuclear cooperation. I
think this is a very ripe subject for discussion in that channel, Sir.
The CHAIRMAN. Mr. Gadbaw, as a member of GE, youve spoken
here about great potential for commerce in exchange for ideas that
would cause growth in India and in other countries that are partners with India and youre assuming in that regard that we would
be their friends and would make, would have some potential for
working with them. Could you talk a little bit on the record with
this committee about how you see that atmosphere at this point?
Mr. GADBAW. I think the atmosphere is quite positive for working commercially with India and it has really developed, evolved
over again, the last 15 years, as our interests have converged. I see
in India growth across a whole range, particularly in the infra-

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structure area. Weve seen their airlines go out and lease and purchase U.S. planes. Weve seen more of our generation equipment
sold there, whether it is work being done in the coal gasification
area and the natural gas area, in the rural electricification area.
We are seeing work with the railways, the Indian railways, to improve their efficiency, whether it is with new equipment or in signaling devices and in the healthcare business. We have a very active healthcare business in India. This is true across the entire Indian subcontinent. That is, in every part of India, this dynamism
that has been unleashed by these economic reforms is demonstrating itself.
So we have a chance now to step up as India is asking us for
help in its most critical area of need that is in bridging this energy
gap that they have. I think unfortunately, neglected over the years.
Nuclear will be a piece of that and this agreement will ensure that
everything we do in the civilian nuclear sector will be subject to the
strike controls of the IAEA but it will also, I think, create an understanding between the two countries about how we need to work
together in these commercial areas and it says to India that we,
the United States, want to work with them to serve their needs
and in return, we want to talk to them about how we can work together to address some of these pressing global issues.
The CHAIRMAN. Might I just close by asking any or all of you to
just comment with some closing remarks with reference to how you
see us as a committeeyou know what our jurisdiction is to pass
laws that would put the United States in the position of stating a
policy toward another country or create a policy that would be an
enhancement, enhancing of a certain kind of activity. Do you see
anything we ought to be doing in light of the new openness and of
the fact of us proceeding so far so fast with India? Should we be
doing something that we are not doing? Lets start on your end
with you, Mr. Gadbaw.
Mr. GADBAW. Well, as I mentioned in my testimony, I hope that
the committee will look carefully at the Convention on Supplementary Compensation.
The CHAIRMAN. Yes.
Mr. GADBAW. Which is not just relevant to India but actually is
relevant to every country where we are trying to sell nuclear equipment, including places like Canada, where U.S. companies have
had to forego sales because of the absence of a international regime. That will require possibly implementing legislation and we
would hope that the committee would look at that. Thank you.
The CHAIRMAN. Okay, we will take a look at that. One or two
things from you, Sir?
Mr. PONEMAN. Mr. Chairman, first I would echo my colleagues
support of prompt Senate action on the supplementary funding convention because I believe not just in this instance but for the whole
industry. The second point I would make is that I think with the
full range of energies that you have heard discussed today and
really, the opening of a new chapter in the U.S./Indian relationship, that perhaps there may be some channels that you could pursue as a committee and as individual members in terms of reaching
out to our Indian colleagues so that they fully and deeply appreciate the opportunities that this relationship presents. I would cer-

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tainly hope that the United States industry is able to quickly take
advantage of this critical new opening and I think that with your
stature and leadership, you can make a signal contribution there.
Thank you.
The CHAIRMAN. Thank you.
Dr. Victor.
Dr. VICTOR. My impression is that the country is in urgent need
of a strategy to deal with the global warming problem and I know
this committee has spent much time on that issue and all that I
would urge is that it lay down a marker that this particular arrangement with India can be part of an overseas element of the nations global warming strategy. I would also urge that we have
some discussions, not only about this in the context of India, which
has happened somewhat accidentally because of the larger discussions about the U.S./India relationship on nuclear power, but also
very similar kinds of arrangements could exist for China, where
emissions of carbon dioxide are growing even more rapidly.
The CHAIRMAN. Senator Bingaman, did you have anything to
wrap up? Thank you very much, gentlemen. It has been a pleasure
having you and youve really contributed here today. We appreciate
it.
[Whereupon, at 11:40 a.m., the hearing was adjourned.]

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APPENDIX
RESPONSES
RESPONSES

OF

TO

ADDITIONAL QUESTIONS

DAVID PUMPHREY

TO

QUESTIONS FROM SENATOR DOMENICI

ENERGY EFFICIENCY

Question 1a. The DOE has initiated an energy dialogue with India through
working groups that address energy efficiency, civil nuclear power, coal, and renewables among other topics. In your testimony, you highlight the importance of improved energy efficiency.
How will improved energy efficiency shape the future demand for energy in India?
Answer. How India pursues the energy efficiency options it has in each of its consuming sectors will determine the pace of growth in future energy demand. It has
been estimated by the Renewable Energy & Energy Efficiency Partnership (an international NGO, funded by a number of governments including: Australia, Austria,
Canada, Ireland, Italy, Spain, the Netherlands, the United Kingdom, the United
States and the European Commission) that the Indian economy could reduce its energy consumption by as much as 23% from current levels. The industrial sector accounts for about 48% of Indias commercial energy consumption, but energy savings
of up to 30% have been estimated through retrofitting in this sector. In the power
sector, which is plagued by high transmission and distribution losses, nearly 25,000
MW equivalent of capacity creation could be achieved through improved efficiency.
In the commercial sector, the use of heat pumps, load management systems & control, refrigeration systems/freezers, high-efficiency boilers, building control, insulation, window coating & films, power factor correction systems and combined heat
& power plants could help achieve energy savings. A number of steps could also be
taken to reduce energy demand in the transportation sector.
INDUSTRY INFRASTRUCTURE

Question 1b. How will India achieve the necessary investments to fund industry
infrastructure?
Answer. India will need to improve its investment climate if it is to attract the
private foreign capital it needs to build the infrastructure its energy sector requires.
This will require action by the national and state governments to address various
investor concerns such as sanctity of contracts, tariff reform, transparency and a
level playing field. Recently we have seen progress on key investor issues and believe over time India will begin to attract much of the infrastructure investment it
requires.
RESPONSES

OF

DAVID PUMPHREY

TO

QUESTIONS FROM SENATOR BINGAMAN

STAFFING

Question 1. Does the Department of Energy directly fund any staff positions at
the U.S. Embassy in India to monitor energy and science issues?
Answer. No, the Department of Energy does not currently fund any staff positions
at the U.S. Embassy in India.
RENEWABLE ENERGY MOU

Question 2. What is the status of the agreement between the National Renewable
Energy Laboratory or the DOE and Indias Ministry of non-conventional resource in
for renewable energy, particularly solar?
Answer. The National Renewable Energy Laboratory (NREL) had two Memoranda
of Agreement with Indias Solar Energy Center, which later became part of the Ministry of Nonconventional Energy Sources (MNES). The latest one expired in March,
2005, and there is not currently an MOU in place. The Minister of Non-Conven(49)

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tional Energy Sources (MNES) recently met with experts at the National Renewable
Energy Lab to discuss potential areas of collaboration. These areas include solar
thermal power generation, low wind speed technology research & development, renewable energy resource assessment and the use of resource data in relevant analysis tools. DOEs EERE and Office of Policy and International Affairs are working
with MNES officials currently under the U.S.-India energy dialogue.
SCIENTIFIC EXCHANGE

Question 3. Has the Department considered exchanges of scientific personnel between our national laboratories and the equivalent Indian scientific laboratories
funded through the Council of Scientific and Industrial Research or the Ministry of
Atomic Energy?
Answer. To our knowledge there has been no scientific exchange between DOE
laboratories and the Counsel of Scientific and Industrial Research (CSIR) or the
Ministry of Atomic Energy. However, the new Science Counselor at the U.S. Embassy in New Delhi has recently made a proposal to Dr. Mashelkar, the Director
of the CSIR, to open a dialogue between the DOE national labs and the CSIR labs.
One of the outcomes could be an exchange of scientific personnel.
SCIENTIFIC COLLABORATION

Question 4. My understanding is that the Department of State has finalized the

master S&T agreement between the U.S. and India, particularly with respect to intellectual property, has the DOE taken action(s) to implement scientific collaboration now that this umbrella agreement is in place?
Answer. The Office of Science of the U.S. Department of Energy (DOE) is interested in starting a dialogue with appropriate counterparts in India as a follow-on
to several initiatives that have begun relative to increasing scientific collaboration
between our two countries. The U.S. side has interest in high energy physics, nuclear physics and fusion energy sciences while Indias interests include collaboration
in biotechnology, nanotechnology, climate research, and other areas. Collaboration
already exists in high energy physics and nuclear physics on a lab-to-lab basis.
NANOSCIENCE/NANOTECHNOLOGY

Question 5. In my visit to the Indian Institute of Technology, their Cal. Tech., I

was briefed by their international projects office who were actively collaborating
with countries such as France to develop joint advances in the areas of nanoscience
and biomass to methane conversion. They indicated no such collaboration existed
with the U.S. much less the DOE. Now that the master S&T agreement is in place
would the DOE please reach out to this world class institution?
Answer. Nanosciences/nanotechnology will be a strategic focus area in the new
S&T agreement. As part of the Indo-U.S. S&T Forum (established in 2000), there
have been several meetings and workshops on nanosciences/nanotechnology. A
nanotechnology conclave was hosted in collaboration with Confederation of Indian
Industry (CII) in February of 2006. There has also been an ongoing collaboration
between the Jawaharlal Nehru Center in Bangalore and UC Santa Barbara. The
DOE will continue to collaborate on these technologies under the auspices of the
S&T agreement.
FORECASTING

Question 6. What are we doing to help India better forecast its future energy demands? (The ministries in India are organized by fuel and basically no one is
charged with doing an aggregate forecast.)
Answer. India understands the significance of the forecasting information as it
goes directly into government planning. The closest counterpart to DOEs Energy Information Administration (ETA) is Indias Petroleum, Planning, and Analysis Cell
(PPAC). An Energy Information Exchange MOU was signed in February 2006 between the EIA and PPAC at the Ministry of Petroleum and Natural Gas. The agreement seeks to improve Indian energy analysis and forecasting. The parties jointly
determined at their first meeting in June 2006 that the first step is to improve the
quality of Indian energy data. Unlike the companies operating in the U.S., companies operating in India are not required through legislation to report energy data
to the government, causing some difficulty. This challenge to national data collection
will grow as private sector participation in Indian grows. Therefore, the next step
for the Energy Information Exchange MOU will involve a technical workshop about
improving the quality of Indian energy data. The timing and location for this workshop will be determined over the coming months. After data quality issues have

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been addressed, EIA and PPAC intend to focus more specifically on forecasting
issues. Continuing an exchange of ideas in the areas of data forecasting and statistical accuracy is an essential part of the ongoing U.S.-India Energy Dialogue.
IEA

Question 7. How are we helping India to participate in the IEA?

Answer. DOE has been actively encouraging India to participate in IEA activities.
Indias formal participation in IEA activities dates back to April 1998 when an
agreement was signed to establish cooperation. India designated its Ministry of
Power to be the nodal agency for this cooperation which has since included a series
of energy policy data workshops: the January 2004 IEA-India Workshop on Indian
Emergency Oil Stocks; Indian participation in the October 2004 IEA Emergency Response Exercise for IEA non-member countries; the October 2004 workshop on Energy Efficiency Standards and Labeling; a range of informal contacts and ad hoc Indian participation at IEA events; and participation in the IEA Committee on NonMember countries. We want to continue to develop a closer relationship between the
IEA and India by expanding the engagement to all areas of the Agencys work.
RESPONSES

OF

DAVID VICTOR

TO

QUESTIONS FROM SENATOR DOMENICI

Question 1. In your testimony, you analyze the potential climate implications and
conclude that impact on greenhouse gases will become one of the main benefits
from the arrangement. You state that annual savings from the Indian deal could
be nearly as large as the entire commitment of the 25 EU nations to reducing emissions under the Kyoto Protocol. You also discuss the potential for a framework
emerging from the Asia-Pacific Partnership that would apply to U.S. engagement
with developing countries on climate strategy. What steps should the U.S. take to
encourage such engagement with India and developing countries?
Answer. The United States must show tangible progress from this alternative
frameworksuch as from the Asia Pacific Partnership (APP) that is presently taking shape. However, the framework will work only if it truly demonstrates a path
that is complementary to what has emerged within the Kyoto Protocol. The major
developing countries are seeing substantial resources flow into Kyoto projects under
a scheme known as the Clean Development Mechanism (CDM). Nearly 1,000
projects are in the CDM pipeline right now. Many of those projects are of dubious
quality, but the CDM is nonetheless a real entity that is producing real investment.
So far, the APP is not. The developing countries will be wary of any scheme to reduce carbon emissions that delivers many meetings but no action. The APP is a
good idea, as I outlined in my testimony, but the fact that there has been trouble
even getting the money needed for meetings has been interpreted as a warning signal that the very governments whose participation is essential are not committed
to the process.
Moreover, the framework I proposewhether through the APP or some alternative institutionwould work by engaging the industrial ministries, power companies, gas companies, and other institutions that are actually responsible for building
and operating the energy infrastructure. Unlike Kyoto and many other diplomatic
institutions, this framework would not focus solely on the diplomatic and environmental regulatory apparatus, but also on the factors that drive performance in the
energy industry. The businesses and institutions that actually build energy infrastructure rarely focus on international diplomatic activities. They will be wary of
wasting their time if the effort does not yield practical outcomes.
I am deeply concerned that the United States is on the edge of destroying its
credibility within the APP due to the lack of tangible progress. The funding fiasco
earlier this summer resonated around the world. At the very least, the United
States should demonstrate its commitment to the process of the APP by reliably
meeting its basic funding obligations without signaling disarray to the outside
world.
As for particular projects, I strongly suggest that the United States focus on a few
large efforts that demonstrate clear progress rather than a multitude of peripheral
activities of limited impact. The U.S.-India nuclear framework could be one such
large project.1 Advanced coal combustion technology represents another opportunity
for the United States to engage China or India through cooperative development
and testing of technologyto date, the technology has advanced further in China
and the prospects are better there than in India. In my testimony, I also highlight
1 David G. Victor, Nuclear Power for India is Good for us All, International Herald Tribune
(oped, March 17th 2006).

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the potential for the United States to lend its support to gas pipeline projects to deliver supplies to China and India, which could offset increased installation of coalfired generating capacity in these rapidly growing countries.2
RESPONSES

OF

DAVID VICTOR

TO

QUESTIONS FROM SENATOR BINGAMAN

Question 1. Your paper explains that the carbon reduction benefit from nuclear
power is based on 20,000 MW or about 20 additional 1000 MW reactors being built
by 2020 with enough carbon savings as the entire commitment of 25 EU nations
under the Kyoto protocolwhat do you estimate the total cost of such a project and
do you think 20 reactors could be built in India in the next 14 years?
Answer. The costs are unknown with precision but they are probably in the range
of $26-40 billion current dollars. The low figures, which are implausible but not impossible, reflect the lowest credible numbers that have emerged from analysts of the
Indian power sector ($1300/kW capacity; see citations in my testimony). The high
number reflects the most likely cost (approximately $2000/kw) for the current new
generation of light water reactors, although those numbers are likely to decline with
experience.
It is feasible, but difficult, to build 20 reactors in 14 years. The effort would begin
with perhaps a few orders for foreign reactors as well as a few Indian projects; in
parallel, diligent efforts would be needed by the Indians to streamline licensing procedures (akin to the new build/operate licensing scheme devised in the United
States), and new units realistically might come online by about 2015 with a couple
new reactors per year thereafter. In that framework, it will be hard to reach 20 but
an aggressive program could deliver that number. Much higher numbers have been
suggested, but I doubt those are feasible. Indias interest in very large coal-fired
power projects also makes it less likely that they will build fewer reactors unless
nuclear proves to be highly competitive.
Question 2. As compared to their coal reserves, does India have sufficient stocks
of uranium to operate 20 reactors or would they have to import it?
Answer. They will need to import fuel, and the United States should welcome that
fact because import dependence will allow the U.S., working with other countries
and with the IAEA, to frame a new multilateral fuel cycle. The ideas surrounding
such a fuel cyclein which supplies of fuel and fuel services would be controlled
by a limited consortium of countrieshave been discussed for some time but practical steps to implementation have been few. Potential fuel importers are wary; a
successful scheme must allay their fears, and there is no better place to start than
with a country that must import and which is prone to work toward a new fuel cycle
in a diligent manner.
Some analysts have claimed that imports of fissile material for Indias commercial
nuclear reactor program will allow India to divert domestic supplies into weapons
production. I do not agree and think that argument is based on a false comparison.
If India cant create a viable commercial reactor program (which includes imports
of fuel) then it wont build many new commercial reactors (if any). The ore and
fissile material it has will be devoted to weapons and there wont be a competition
between military and commercial nuclear power. Outsiders wont have much influence on the trajectory of the military program. What is at stake here is just the
commercial enterprise, and the fuel, more or less, is not fungible between the two.
Question 3. What would be the incentive for India to build Integrated Gasification
Combined Cycle plants based on their coal reserves as compared to importing uranium fuel?
Answer. Right now there are few incentives for commercial power companies in
Indiaincluding the state-controlled NTPC (which is the largest operator of coal
plants in the country)to pursue IGCC. There are some discussions about IGCC in
India and some small cooperative programs (notably with the U.S.). But IGCC cant
compete with supercritical technologies for coal. Supercritical technologies are proven and they boost fuel efficiency by a large margin; IGCC is still seen as risky and
distant, especially when utilized in the context of Indias low grade coals. (There are
some IGCC technologies that work with low grade coals, and there have been some
tests using Indian coal; but small scale tests are quite different from operational
commercial plants in the Indian context.)
Implicit in the question is the thought that India will favor coal because it is
available domestically and, by the same logic, it will be wary of nuclear reactors because they will require fuel imports. I dont think that is the right way to analyze
2 See generally, Jackson et al., Greenhouse Gas Implications in Large Scale Infrastructure
Investments: Examples from China and India, PESD Working paper, Stanford University
(http://iisdb.stanford.edu/pubs/21061/ChinalandlIndialInfrastructurelDeals.pdf).

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the Indian policy choices today. If the U.S. and other countries are successful in creating a viable multilateral fuel cycle, then fears about fuel insecurity will abate.
Moreover, India is already adopting policies to become dependent upon imported
coalespecially in western India where coal-fired power plants are located far from
Indias coal fields (which are predominantly in the northeast of the country) and it
is relatively easy to import coal by ship from reliable and low-cost suppliers such
as South Africa and Australia. In short, both the coal and nuclear futures imply dependence on imported fuel and the Indian government has equally good prospects
in making both fuel supplies equally secure. For coal, that security will come from
the world market where coal is increasingly a fungible commodity. For nuclear, that
security would come from a viable multilateral fuel cycle.

RESPONSE

OF

R. MICHAEL GADBAW

TO

QUESTION FROM SENATOR DOMENICI

Question 1. In the area of nuclear technologies, what opportunities exist for U.S.
industry versus countries such as Russia and France that appear poised to exploit
Nuclear Suppliers Group provisions allowing cooperation with India?
Answer. India originally planned to build eight new reactors. Reportedly, the Indian cabinet has already approved six for construction: four by the Russians and
two by the French. Moreover, the French may well be positioned to obtain the remaining two contracts as well.
Nevertheless, India recently announced another string of reactor projects beyond
the original eight, and we understand that U.S. and Canadian suppliers would be
invited to compete for them. The Indian government understands the importance of
American companies being able to compete fairly for opportunities in India. As S.K.
Jain, chairman and managing director of the state-run Nuclear Power Corporation
of India, Ltd. (NPCIL), noted in June 2006, India is interested in having a significant American supplier presence, and is considering American technologies like the
Advanced Boiling Water Reactor (ABWR).1
As soon as permitted under U.S. law and regulations, General Electric is committed to playing a major role in Indias construction of new civilian nuclear power
plants. GEs state of the art boiling water reactor (BWR) designs offer significant
cost and safety advantages, and India has a wealth of positive experience with GEs
earlier generation BWR reactor at Tarapur. This experience and the quality of GEs
technology open the opportunity for the United States to supply a significant portion
of the 40,000 MW of nuclear power India would like to build by 2020.
Nevertheless, the French and Russian governments and their associated nuclear
companies are clearly working hard to capture large shares of the Indian nuclear
market. The most important requirement for U.S. commercial participation in that
market will be to ensure that all governmentally related barriers are addressed in
a coordinated and timely manner. The United States might consider a formal approach to the governments of France, Japan, and Russia to ensure that no government jumps the gun by allowing its companies to exchange prohibited technology
with India. At the same time, the United States government should work with the
U.S. industry to identify all actions that must be taken to allow U.S. exports of civilian nuclear technology to India, and should develop a plan for coordinating the efforts of the U.S. and Indian governments to allow U.S. suppliers to obtain necessary
licenses at the earliest possible time.
Most immediately, the United States should ratify the Convention on Supplementary Compensation for Nuclear Damage (of which it is a signatory and prime
mover) and pass any necessary implementing legislation. U.S. leadership will put
us in the strongest position to ensure that India and other countries that currently
lack nuclear liability and compensation regimes will join the Convention. As signatories, they would be required to adopt appropriate liability and compensation
legislation, and participate with the United States in this multilateral regime. The
treaty creates an insurance system to protect nuclear suppliers from unlimited liability, while also ensuring compensation for those injured in the very unlikely
event of a nuclear incident. The liability issue is critical for U.S. suppliers, which
do not enjoy the protection provided by state ownership. This is in sharp contrast
to French and Russian suppliers, whichunderwritten by their governmentsare
proceeding to do business in China and India despite the absence of nuclear liability
regimes there. Without effective protection against liability, however, U.S. nuclear
companies will not be able to engage those foreign markets.
1 T.S.

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RESPONSES

OF

R. MICHAEL GADBAW

TO

QUESTIONS FROM SENATOR BINGAMAN

Question 1. GE has a very long history in India, not just nuclear, but everything
from consumer goods to advanced R&D conducted at your Jack Welch center in
Bangalore. Given your experience at the Tarapur reactors with the know-how for
reactor design transferred to the Indians, how will GE protect a similar technology
transfer for their advanced boiling water reactors especially under the Indian Atomic Energy Acts disclosure and inspection provisions?
Answer. It is unclear how much India is focusing on technology transfer. After
1974, India was cut off from foreign technology support, and was forced to move forward on its own, developing its pressurized heavy water reactor (PHWR) technology
indigenously. It is proud of that technology, and considers it internationally competitivemore advanced, in Indias view, than the current Canadian technology. Rather, Indias interest in foreign participation appears to relate more to capacity requirements: India would like to develop a 40,000 MW capacity by 2020, but NPCIL,
the national nuclear company, can only complete 12,000 MW of that goal; foreign
involvement would help realize the remainder, and the Indians are unlikely to apply
regulatory requirements that frustrate that objective.
Nevertheless, maintaining safeguards on technology transfer remains an important consideration, and the U.S.-India deal allows for ample protections in this regard. Under this historic deal, Indias civilian nuclear program will be more transparent than ever before, and put under IAEA safeguards, which will provide greater
protection against illegal transfer and use of foreign technologies. India has a record
of respecting such safeguards, as was the case with the Tarapur 1 and 2 plants supplied in the 1960s.
The 123, IAEA, and NSG agreements required under the U.S.-India deal are designed to ensure that the participation of U.S. companies in the Indian nuclear market will not lead to unauthorized use of American technologies. In the private
sphere, moreover, the contracts we establish with the Indian government and other
relevant entities will prohibit misuse and provide for compliance with the USG-GOI
agreement. India has demonstrated that it will honor such commitments.
GE is fully committed to compliance with U.S. trade control rules, including those
administered by the Departments of Energy and Commerce and the Nuclear Regulatory Commission. Working with its businesses, employees, partners, and customers in India, GE will ensure that technology transfers to India accord with all
applicable laws and regulations. In addition, we take measures to protect our valuable trade secrets and company proprietary information regardless of export control
requirements. We require suppliers, partners, and contractors that have access to
company proprietary information to protect such information.
Question 2. One of the unknowns is the licensing of a large 1,000 MW reactor by
the Indian Atomic Energy Regulatory BoardIndian reactors typically are smaller
in power, 200-500 MW, than the large reactors developed by GE which are 1,000
MW or more. Do you expect any licensing issues with your reactors?
Answer. We do not expect any licensing problems with respect to the capacity of
our reactors. GE will offer to supply reactors such as the ABWR, which has already
been licensed in the United States, Japan, and Taiwan, and the ESBWR, which is
in the process of being licensed in the United States. GE is confident that these advanced designs will meet Indian regulatory requirements or can be modified if necessary to do so. Reportedly, Indias Atomic Energy Regulatory Board has already
begun to work with the U.S. Nuclear Regulatory Commission in order to facilitate
potential licensing of these designs in India.
We note also that Russia is already in the process of constructing two pressurized
water reactors of 1,000 MW each at Koodankulam, Tamil Nadu. NPCIL has made
explicit its willingness to authorize at least ten reactors of 1,000 MW each. Influential Indian companies expect to build nuclear plants with even greater capacity. Vedanta Resources plans to build a 2,400 MW reactor, Reliance Energy a 2,000 MW
reactor; Tata Energy may enter the arena as well. All are seeking international
partners. Altogether, this signals that the Indian government accepts and supports
a major advance in the capability of Indias nuclear plants, and welcomes foreign
participation in that process.

[Responses to the following questions were not received at the

time the hearing went to press:]

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QUESTIONS

FOR

DANIEL PONEMAN FROM SENATOR BINGAMAN

Question 1. Many have said that aiding Indias civilian nuclear program, even
under IAEA safeguards, will only free up fuel to make plutonium for their unsafe
guarded weapons programdo you find that statement to be true?
Question 2. Unlike the U.S., India integrated their civilian R&D program with
their military nuclear program, how hard will it be to separate civilian facilities not
only physically local to a military one but the people as well?
Question 3. Do you think the Indians will be receptive to U.S. embassy led enduse inspections of nuclear equipment exported to their facilities to ensure they are
not re-exported elsewhere?
Question 4. Your proposal of fuel leasing goes back to the Eisenhower Atoms for
Peace programbut the central flaw of the program is it denies India any indigenous capability for self sufficiency in nuclear fuel productionthey are reliant on
other nations. India has a long tradition of non-alignmentdo you think they will
be receptive to such a tying arrangement?
QUESTION

FOR

PAUL SIMONS FROM SENATOR DOMENICI

Question 1. Without nuclear power, how will India meet its energy-mix needs?
QUESTIONS

FOR

PAUL SIMONS FROM SENATOR BINGAMAN

Question 1. The 1978 Nuclear Nonproliferation Act amended the Atomic Energy
Act to provide enhanced safeguard measures and sanctions for non-nuclear weapons
states that violate criteria with respect to proliferation or militarizing nuclear energy. In each case the President has the ability to exempt a non-nuclear weapon
state that violates the conditions set forth in the Act, by submitting to Congress a
waiver and having the Congress enact a resolution accepting the waiver as it pertains to a cooperation agreement or enacting a resolution of disapproval as it pertains to an exempted export. This process actually worksthe Congress failed to reject to exports of fuel to the Indian Tarapur reactors in 1979 and 1980. Why do we
need to enact new legislation to exempt India from law which has worked in the
past?
Question 2. The Global Nuclear Energy Partnership involves reprocessing spent
nuclear fuel and fast breeder reactors, it is my understanding that Indias Fast
Breeder Reactor and some reprocessing facilities will stay on the military facilities
listdo you recommend extending the program to India?
Question 3. Do you have a nuclear cooperation agreement in place with India? If
not why are we enacting legislation when we have not seen such an agreement?
Question 4. The principal avenue by which we collaborated with India in R&D
was through loan repayment funds deposited in India accounts under the P.L. 480
program. My understanding is those funds are now long gone. Would it be advantageous to set up a fund similar to the IsraelU.S. Bi-national Industrial Research
and Development Fund where revenue from supported projects is used to repay the
R&D grant?

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