option responds to those who would urge you to focus on the mandates without real concern for petroleum reduction.

The alternative is to think outside of the box and consider a bolder strategy that includes efficiency, conservation and use of both alternative fuels and alternative technologies. The nation's energy situation seems to dictate a bold public policy. Fleet managers recommend the following:

Amend EPACT to allow additional compliance options. This would include full credit for use of biodiesel, hybrid electric vehicles and neighborhood electric vehicles. This fall 75% of new state vehicles and 90% of fuel provider vehicles must be AFVs, but fleets may not get credit for hybrid electric vehicles or full credit for the use of biodiesel.

Amend EPACT to provide credit for installing refueling infrastructure, as included in Senate Bill 388.

Strengthen voluntary programs, such as DOE's Clean Cities Program, that focus on niche markets where fuels such as natural gas are most efficient. Encourage the use of and remove obstacles to the use of other renewable energy-based fuels and fuel blends such as biodiesel and blends of biodiesel.

Resist any further mandates on state fleets or fuel provider fleets. Again, as GAO noted squeezing every drop of petroleum from these fleets by 2010 would result in only a 1% reduction in petroleum use.

Because refueling infrastructure is such a problem, focus on strategies that take advantage of the existing liquid fuel refueling infrastructure. Specifically, grant incentives for the development of hybrid electric vehicles and use of renewable fuels.

Provide significant economic incentives via grant programs and tax incentives.

For example, pass and fund SEC. 705 of Senate Bill 388, which establishes a grant program for local governments for covering the incremental cost of qualified alternative fuel vehicles. It authorizes $100 million for each of fiscal years 2002 through 2006, and limits individual grant awards to no more than $1 million.

Also, many fleet managers support the intent of Senate Bill 760, the CLEAR Act which is a tax issue and outside the jurisdiction of this Committee. The CLEAR Act could potentially help overcome the economic barriers facing vehicles, fuels and refueling infrastructure. The CLEAR Act, however, in its present form, is of little benefit to government or nonprofit fleets. We are hopeful that this can be corrected before any House or Senate markup. If not corrected, NAFA questions whether Congress should pass the legislation.

The challenge for the Senate Energy Committee will be to think outside the box. Some will urge you to take the easiest course of action, that is to force government agencies and companies to buy AFVs and use the fuels regardless of cost and regardless of the public policy benefit. Mandates have proven to be counterproductive. Too much time and resources have been spent by DOE, other federal and state agencies, fleets, fuel providers and manufacturers to make mandates work, all hoping that mandates will be the silver bullet. Too much has been spent for too little gain.

Thank you again for the opportunity to participate. I will be happy to answer any questions.

The CHAIRMAN. Thank you.

Dr. McCormick, why don't you go right ahead.

STATEMENT OF DR. J. BYRON MCCORMICK, PH.D., DIRECTOR, GLOBAL ALTERNATIVE PROPULSION CENTER, GENERAL MOTORS CORPORATION

Dr. MCCORMICK. I want to thank the members of the committee for the opportunity today to speak about General Motors' fuel cell initiative. I am Byron McCormick and I am responsible for GM's fuel cell program.

Based on the recent rate of progress in fuel cell technology, we are on the threshold of an historic opportunity. Instead of the historical evolution of technology by incremental improvements, we

now see our way to bold technology advances that will fundamentally change personal transportation for the new century.

Fuel cell vehicles running on hydrogen fuel are the ultimate environmentally friendly vehicles because the only emission is water. Fuel cell vehicles are more than twice as efficient as internal combustion engines, have no pollutant emissions, and are quiet.

Fuel cell vehicles promise two additional benefits; First, fuel cell vehicles will be supported by a broadly available, cost effective hydrogen refueling infrastructure. Such an infrastructure by its very nature would provide a single enduring framework for the evolutionary shift for personal transportation from petroleum to a mix of energy sources including renewables.

Secondly, the development of this technology will create more environmentally compatible distributed power generation possibilities. Power on today's electric grid could be supplemented by the generating capacity of cars in every driveway. For example, if only one out of 25 cars in California today was a fuel cell vehicle their generating capacity would exceed that of the electric grid in place today.

Recognizing the potential of fuel cells, approximately 4 years ago GM leadership decided to take some rather bold action and consolidated our programs and accelerated them greatly. We did this based on the notion that there are over six billion people in the world today, most of these people are young, they are globally aware, web-connected, and residing in emerging economies.

Secondly, we recognized that only 12 percent of the world's population have access to automobiles today. Therefore, a breakthrough in energy efficiency and emissions would absolutely be required to meet the demands of the future in a sustainable, high quality envi

ronment.

So our vision is as follows. We see fuel cells as the automotive power source for the future and we see hydrogen as the long-term fuel. Now, since we have talked a fair amount today about renewables and infrastructure, let me expand on the hydrogen infrastructure for a moment. The creation of a new robust, readily available hydrogen refueling network for these vehicles is clearly necessary. Hydrogen in the infrastructure could be derived from a mix of sources, including hydrocarbons as well as any source of electricity. In the first case, hydrogen is extracted from petroleum, natural gas, and renewable hydrocarbons such as ethanol via reformers or fuel processors which catalytically decompose the hydrocarbons into hydrogen and carbon dioxide.

Hydrogen can also be extracted from water using electrolysis, which uses electricity to dissociate the water. Electricity could come from conventional powerplants, renewable powerplants such as hydro, solar, wind, and geothermal sources. In this way, hydrogen fuel allows a transition for transportation from a reliance on petroleum to a robust diversity of energy sources including renewable energy.

The blending of these energy sources is seamless to the driver of the vehicle. He sees only hydrogen fuel and not whether it came from petroleum, natural gas, nuclear, or renewable.

To give you an idea of the rate of progress towards that vision, in the last 4 years the size and weight of our fuel cell stack tech

nology has decreased by approximately a factor of ten. In the past year our gasoline fuel processor technology, which strips hydrogen from gasoline, has decreased by a size factor of three.

Like today's gasoline cars, fuel cell vehicles must be able to handle a tremendous environmental range of conditions. We are now able to start fuel cells from freezing at minus 40 degrees C. in substantially less than a minute and our Hydrogen 1 demonstration fuel cell vehicle covered over 800 miles in one day in the Arizona heat, setting 15 performance and durability records earlier this

summer.

This progress is rapid and encouraging, but we are not there yet. We have not yet developed the full automotive performance levels, including reliability, durability, safety, and full compatibility to harsh weather extremes, including the ability to withstand all environmental and in-use abuse that automobiles and trucks are subjected to every day worldwide.

Achieving full automotive performance and affordability targets is key to customer acceptance and enthusiasm. These targets require huge investments that can only be responsibly made if we believe that the hydrogen infrastructure will be there to allow us to introduce fuel cell vehicles to the public. On the other hand, selective demonstration vehicles or captive fleet tests will not suffice to encourage major timely investment by energy producers in that hydrogen infrastructure.

Potential creators of the hydrogen infrastructure will not invest until they see a rapid expansion of hydrogen fuel cell vehicles, and even then there is an economic burden of supporting that infrastructure during the long period of transition from today's gasolinepowered fleets. Stewardship of this transition requires a carefully thought out plan which allows the automotive manufacturers, their materials and component suppliers, and potential hydrogen fuel providers and government regulatory bodies to progress hand in hand. This careful coordination must also take into account the technical, financial, and environmental realities that a successful transition requires.

As a closing thought, I believe that fuel cells and hydrogen-based transportation are the future. The pace of technical progress is accelerating and we cannot be left behind sitting on the sidelines. Now is the time for the U.S. Government and U.S. industry to create a partnership that can lead the world in the change to this vision.

Thank you and I look forward to responding to your questions. [The prepared statement of Dr. McCormick follows:]

PREPARED STATEMENT OF DR. J. BYRON MCCORMICK, PH.D., DIRECTOR, GLOBAL ALTERNATIVE PROPULSION CENTER, GENERAL MOTORS CORPORATION

I appreciate the opportunity to be here today to testify on behalf of General Motors. I am Byron McCormick, the Director of GM's Global Alternative Propulsion Center. I head the team that is developing fuel cells to power vehicles that people will want to drive and buy.

This is an exciting time in the automotive industry and for General Motors. Technology is clearly changing the way we live our lives for the better, and there's more to come. The subject today is fuel cell technology. This technology, when fully developed and deployed, will not only deliver revolutionary vehicles, but will change the way we think about the automobile and our environment.

We are on the threshold of an historic opportunity. Instead of the historical evolution of technology by incremental improvements, we now see our way to bold technology advances that will fundamentally change personal transportation for the new century. These advances have the potential to lead to the creation of commercially viable zero-emission, fuel-efficient fuel-cell vehicles with the functionality that Americans expect. Not only will fuel cells essentially remove the auto from the environmental equation by reducing tailpipe emissions to only water vapor and potentially shifting vehicles to renewable fuels-they will also offer the performance required for every type of vehicle: heavy duty commercial, sport utilities, trucks, mass transit or cars.

Fuel-cell vehicles running on hydrogen fuel are the ultimate environmentally friendly vehicles because the only emission is water. The fuel cell supplies electricity to an electric motor that powers the wheels. The fuel cell produces electricity by stripping electrons from hydrogen that travels through a membrane to combine with oxygen to form water. Fuel-cell vehicles are more than twice as energy efficient as the internal combustion engine, have no pollutant emissions, and are quiet. Beyond the advantages for vehicles, fuel cells in vehicles promise two additional benefits. First, once fully integrated into our daily lives, fuel-cell vehicles will be supported by a broadly available, cost-effective hydrogen-refueling infrastructure. Such an infrastructure by its very nature would provide an evolutionary shift of personal transportation from petroleum to a mix of energy sources including renewables.

Secondly, the development of this technology will create new more environmentally compatible distributed electric power generation possibilities. The automobile will have the potential to provide electrical power to homes and worksites. Power on today's electrical grid could be supplemented by the generating capacity of cars in every driveway. For example, if only one out of every 25 cars in California today was a fuel-cell vehicle, their generating capacity would exceed that of the utility grid. A typical mid-size fuel-cell vehicle would produce 50 to 75 kilowatts of electrical power, where a typical household may use 7 to 10 kilowatts at peak load.

Like any advancement that has the promise to completely change the dominant technology, fuel cell development is a major, costly, technical endeavor, which-if aggressively undertaken and sustained-should allow significant implementation in the 10 to 20 year timeframe. Our rate of progress today is very rapid. With an uninterrupted focus, our technological momentum should make this fuel cell vision possible.

It is clear that we are in an intense global competition for leadership in this_race to establish and commercialize fuel cell technologies. Toyota, Honda, Daimler, Ford, Volkswagen, Nissan, PSA, Hyndai, GM and others all have large programs. In Japan the Kyogikai, which are companies operating under government auspices, is developing a program for the implementation of fuel cell technology. Now is the time for the U.S. government and U.S. industry to create a partnership that can lead the world in the charge to achieve this vision.

Before I talk specifics, I should note for the record that the opportunity we are discussing today would not be possible without the long-term support of the Senators from New Mexico and the support of ERDA and then the DOE. The fledgling "fuel cells for transportation program" at Los Alamos National Laboratories-which I initiated, then headed from the mid 1970's through the 1980's-along with PEM fuel cell technology provided the technical spark for the recent worldwide explosion of PEM fuel cell activities.

Recognizing this potential, approximately four years ago at General Motors fuel cell activities were consolidated and accelerated. We were given one mandate by our management: Take the automobile out of the environmental debate. Regardless of whether the environmental debate is focused on air quality, climate, or overall sustainability, GM leadership recognizes that global conditions inspire bold, thoughtful

action.

1. There are over 6 billion people in the world today with over 10 billion expected later this century. Most of these people are young, globally aware, web-connected, and residing in emerging economies with escalating demand for personal transportation.

2. Only 12 percent of the world's population has automobiles today. Therefore a breakthrough in energy efficiency and emissions will be required to meet the demands of the future in a sustainable high-quality environment.

Our vision is as follows:

1. We see fuel cells as the long-term power source. The GM global fuel cell program seeks to create affordable, full-performance, fuel-cell-powered vehicles that meet customer preferences and demands and emit only water vapor from their tail

pipes. Such vehicles would be 50 to 100 percent more energy efficient than today's vehicles depending on design and drive cycle.

2. We see hydrogen as the long-term fuel. The creation of a robust, readily available hydrogen-refueling network for those vehicles will be accessible through refueling stations, as gasoline is dispensed today. Hydrogen in the infrastructure could be derived from a mix of sources including: 1) hydrocarbons; and 2) from any source of electricity.

In the first case, hydrogen is extracted from petroleum, natural gas and renewable hydrocarbons, such as ethanol, via “reformers" or fuel processors, which catalytically decompose the hydrocarbons into hydrogen and carbon dioxide.

Hydrogen can also be extracted from water using electrolysis, which uses electricity to dissociate water. Electricity would come from conventional power plants or renewable power such as hydro, solar, wind and geothermal sources. In this way hydrogen fuel allows a transition of transportation from reliance on petroleum to a robust diversity of energy sources including renewable energy. The blending of these energy sources is seamless to the driver of a vehicle; he sees only hydrogen fuel, not whether it came from petroleum, natural gas, nuclear or renewable energy;

There are three major challenges that we need to overcome to make this hydrogen economy a reality:

First, we need continued significant development in on-board hydrogen storage. Using hydrogen in a vehicle requires a completely new type of fuel tank. The challenge is to find a lightweight, compact tank that stores enough hydrogen at modest pressure for a lengthy drive.

Last month we took a major step toward clearing this hurdle. GM is acquiring a substantial minority ownership in QUANTUM Technologies. They are the industry leader in automotive hydrogen storage. QUANTUM Technologies has achieved performance that could allow us to introduce a fuel-cell vehicle in the future that will have a range equal to today's vehicles.

But we should not limit ourselves to partnerships between private companies. We need the government to partner with us on fundamental, long-term research and development as well. And not just on storage of hydrogen, but a full portfolio of technologies.

And that includes our second major challenge to a hydrogen economy developing clean and efficient methods of producing hydrogen. There are many substances from which hydrogen can be released, but it takes energy to do it. Eventually, we want to use a method that is renewable, and that has no adverse environmental impact. We're working closely with energy suppliers to investigate the best solutions.

The third challenge we have to overcome is developing business models for the deployment of a hydrogen infrastructure, and piloting technologies to support it. To address this GM joined with General Hydrogen's Geoffrey Ballard to announce last month a 25-year alliance between our companies.

As for the reality of this vision, we at GM have invested aggressively in what are called "enabling" technologies: fuel cells, reformers, electrolyzers and automotive electric propulsion. Our commitment is clear in the significance of our investmentover $100 million annually for several years to date, and growing. The acceleration has been spurred on by rapid technical progress.

To give you an idea of that rate of progress, in the last 4 years the size and weight of our fuel cell stack for a given power has decreased by a factor of 10. In the past year, our gasoline fuel processor has decreased in size by a factor of 3.

Like today's gasoline cars, fuel-cell vehicles must be able to handle a tremendous range of environmental conditions. We are now able to start fuel cells from freezing-minus 40°C-in substantially less than a minute, and our Hydrogen One demonstration fuel-cell vehicle covered over 800 miles in one day in the Arizona heat, setting 15 performance and durability records earlier this summer.

These milestones represent remarkable progress. Our rate of progress encourages us, but it is crucial to recognize that the race for fuel cell development is a marathon, not a sprint. No one should overlook that there remain major technical obstacles that must be conquered before these vehicles can be brought to market and can become commercially successful.

Let me be clear about the progress represented by fuel cell demonstration vehicles. The progress is rapid and encouraging, but we are not there yet. No one has achieved full automotive performance levels including reliability, durability, safety and full capability in harsh weather extremes including the ability to withstand all environment and in-use abuse that automobiles and trucks worldwide are subjected to every day. We must achieve these goals and affordability before this technology will be considered an option by our customers.

Achieving full automotive performance and affordability targets is key to customer acceptance and enthusiasm. These targets require huge investments that can only