rapidly became evident that, given the scope of natural gas technology development, the current natural gas contribution to the national energy economy, and the heightened concern with the environment, the Federal government should give natural gas-related RD&D a larger and much higher priority in DOE's policy initiatives and yearly budget.

The focus of DOE's research and development activities historically has been on coal and nuclear energy; in contrast, natural gas RD&D has received only minimal support from DOE and is, by necessity, cost-shared by private companies. For example in 1992, the gas industry and equipment manufacturers plan on spending over $195 million for gas utilization RD&D and at least $215 million for gas supply RD&D. These expenditure forecasts are more than 5 times greater than the FY 1991 DOE budget request for RD&D in these two areas.

At the same time, the past efforts of these participants have repeatedly demonstrated the value of investing in gas-related RD&D. These efforts have led to progress in end-use technologies such as low-NOx combustion systems, cofiring, fuel cells, gas heat pumps, gas absorption chillers, and natural gas vehicles, and in supply research such as tight formations and coalbed methane.

Further, the regulated gas industry also supports organizations that promote specific technologies. GRI is the natural gas industry's cooperative research and development organization with membership from the pipeline, local distribution company and producer segments of the industry. GRI plans, manages and raises funding for a comprehensive program in natural gas supply, distribution and utilization. Through GRI, together with co-funding by gas utilities, the gas industry already matches the amount of DOE gas RD&D funding. The American Gas Cooling Center, the Natural Gas Vehicle (NGV) Coalition and NGAGE (Natural Gas Alliance for the Generation of Electricity) devote their efforts to commercialization of specific types of gas equipment and applications. The AGA Laboratories also successfully perform R&D that has direct application to appliance and equipment innovations. IGT has established a Sustaining Membership Program in which over 50 gas companies support midterm research directed toward a wide variety of projects, primarily in gas utilization.

However, relative to attaining environmental goals and improving U.S. energy security, these industry-funded RD&D programs are limited by available funds. Inevitably, projects with greater benefits for gas users and realistic chances of early commercialization are pursued while more far-reaching projects that have a potentially high impact on society cannot be funded. If natural gas is to take the proper place in the nation's energy strategy, sustained accelerated RD&D is needed in these projects to increase end-use efficiency, and to lower emissions, supported by continuing research to increase energy supplies. Federal funding is the key to such accelerated research and development.

In addition to the development of new gas technologies, demonstrations and other technology transfer activities are necessary to ensure that the money spent in the research is not wasted. The gas industry has developed a

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solid record of success in transferring technologies to commercial use. We have worked with numerous manufacturing/commercialization partners to address the long list of issues to be overcome before successful transfer can take place. Yet many promising candidates remain, requiring further support to move from the laboratory to the marketplace.

Federally assisted technology transfer activities described in more detail in the section on specific RD&D funding recommendations will help more effectively translate the results of RD&D into widely accepted products, equipment, and processes. As pointed out in the DOE Interim Report, this can only be accomplished by building stronger partnerships between the public and private sectors.

THE IMPORTANCE OF GAS-RELATED RD&D

The United States needs an adequate DOE-funded natural gas research, development and demonstration program to meet future energy needs, reduce national security risks, and to help achieve ambient air quality standards in many areas of this country as well as to enable U.S. industry to remain competitive in today's world economy.

Natural gas can fill this important role because its attributes make it the most desirable fuel in a myriad of applications. Natural gas is the cleanest of all fossil fuels. Gas can be used as a substitute fuel for other fossil fuels to strengthen air pollution control, to reduce sulfur (SO2) and nitrogen oxide (NOx) emissions, as well as to control carbon monoxide and carbon dioxide emissions of other fossil fuels. Natural gas can also be used as a transportation fuel and thus help reduce the major source of air pollution in most urban areas. No other single fossil fuel is comparable to natural gas in producing environmental benefits across multiple applications.

The million-mile transmission and distribution pipeline network of the natural gas industry provides a safe and growing infrastructure to deliver environmental improvements to every region of the country. Further, natural gas can be converted into usable energy more efficiently and inexpensively than most other fuels.

Pending clean air legislation provides further incentives for DOE to increase its funding for development of natural gas utilization technologies. The combustion of fossil fuels, the central component of our nation's energy mix, will continue to power our economy for the foreseeable future. To meet federal and state clean air standards, significant advances in reducing emissions from combustion must be achieved.

Such significant advances can be made while also improving energy efficiency. For example, further research on electrochemical processes and thermodynamics could improve the process for transforming gas into usable energy, with even greater efficiency and essentially no adverse environmental impact. DOE can and must play a major role in gas technology development. Focused research in strategic areas will allow for the more efficient use of an abundant domestic resource, and thereby reduce our nation's reliance on foreign oil. It will also facilitate economic growth by enabling U.S. industry to compete in the global marketplace more effectively, while reducing pollution and using our own resources.

The gas industry recommends that DOE move rapidly to accelerate the development of natural gas technologies. We urge DOE to join the gas industry in sponsoring a 10-year RD&D program to significantly increase the efficiency and environmental benefits of gas use. This joint effort should begin in FY 1992 with DOE funding $215 million for natural gas RD&D, and the gas industry funding over $400 million.

This program is fully consistent with three of the major goals identified by DOE Secretary James D. Watkins in the Position Statement and Budget Overview for FY 19914. Respecting the environment, increasing energy efficiency and fortifying foundations are DOE goals that can significantly benefit from increased natural gas utilization technology development. Such technology development must also be fully supported by a continuing strong gas supply research and development program to help fulfill a fourth major DOE goal, namely to secure future energy supplies.

Both gas utilization and gas supply RD&D programs are described in more detail in the following sections of this FY 1992 budget recommendation by the gas industry. While the Gas Utilization section describes the recommended areas of intensified and focused RD&D in fossil energy and conservation, the Gas Supply section presents an FY 1992 proposal that is consistent with on-going DOE-sponsored research efforts. These recommendations are also fully supportive of the Gas Research Program Implementation Plan published by DOE in April 19905.

GAS UTILIZATION

The gas industry has always been in favor of funding levels that are consistent with sound fiscal policy. As shown in Attachment A, our recommendation of $165 million for utilization RD&D in FY 1992 will show increases above the FY 1991 gas utilization budget in fuel cells, natural gas vehicles, and low emissions combustion systems and energy efficiency-related conservation programs. Such increases are justified by the increased urgency to develop least-cost technology options for all consumers which will aid our nation in meeting the requirements of the new clean air legislation, and will help our nation enhance its energy security.

Specific Utilization RD&D Recommendations

The following are the gas industry's specific funding recommendations for gas utilization-related RD&D sponsored by DOE in FY 1992.

Stationary Emissions and Efficiency Solutions

1. Combustion System/Emission Control ($17.8 Million)

Because of the importance of this program to the nation as part of its energy strategy and in response to Clean Air Act legislation ultimately adopted, $17.8 million is needed to accelerate and focus combustion and burner RD&D efforts aimed at developing low emissions gas equipment for residential, commercial, industrial, and utility applications. This includes high-efficiency, low-emissions burners, burner systems, and new methods of post-combustion control for new as well as retrofit installations.

The DOE Interim Report identified the end-uses that are the biggest contributors to ozone precursor and acid deposition emissions 6. These were electric power generation, industrial processes, and the transportation sector. The first two sectors typically have large capital investments in fixed facilities. Imposition of additional air quality regulations and controls preferentially results in retrofits and/or additions of equipment in such facilities rather than new projects built from the ground up.

In the absence of low emissions burner systems, post-combustion control methods are often used for emissions control as an interim measure for compliance with new regulations. For large installations, state-of-the-art post-combustion controls such as selective catalytic reduction (SCR) systems are very costly to install and to maintain.

Allocating $6.0 million for the development of new methods of post-combustion emissions control will promote the search for practical, low-cost solutions to typical retrofit/add-on needs of electric generation and industrial process facilities. With such funding matched on an equivalent basis by the gas industry.