AMERICAN STATISTICAL ASSOCIATION SPRING 2007 MEETING OF THE AMERICAN STATISTICAL ASSOCIATION COMMITTEE ON ENERGY STATISTICS WITH THE ENERGY INFORMATION ADMINISTRATION DAY 1 of 2 Washington, D.C. Thursday, April 19, 2007 2 1 PARTICIPANTS: 2 COMMITTEE ON ENERGY STATISTICS: 3 NAGARAJ K. NEERCHAL Department of Mathematics and Statistics 4 University of Maryland 5 DEREK BINGHAM Simon Fraser University 6 EDWARD A. BLAIR 7 University of Houston 8 CUTLER CLEVELAND Center for Energy and Environmental Studies 9 JAE EDMONDS 10 Pacific Northwest National Laboratory 11 MOSHE FEDER Research Triangle Institute International 12 BARBARA FORSYTH 13 Westat 14 WALTER W. HILL St. Mary's College of Maryland 15 NEHA KHANNA 16 Department of Economics Binghamton University 17 EDWARD KOKKELENBERG 18 19 PRESENTERS: 20 PHILLIP TSENG HOWARD BRADSHER-FREDRICK 21 ROBERT SCHNAPP BOB RUTCHIK 22 RUEY-PYNG LU MARIE LARIVIERE BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 3 1 OTHER PARTICIPANTS: 2 WILLIAM (BILL) WEINIG ALETHEA JOHNSON 3 ANTHONY RADICH CAROL BLUMBERG 4 MARK GIELECKI LAWRENCE STROUD 5 LOUISE GUEY-LEE GUY CARUSO 6 HOWARD GRUENSPECHT NANCY KIRKENDALL 7 BOB SMITH TANCRED LIDDERDALE 8 MIKE CONNER SUSAN HARRIS 9 WILLIAM (BILL) HELKIE STEVE EBEL 10 11 12 13 14 15 16 17 18 19 20 21 22 BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 4 1 P R O C E E D I N G S 2 (8:15 a.m.) 3 MR. NEERCHAL: I think we should 4 get started. First of all, welcome you all 5 to the ASA Committee on Energy Statistics. I 6 want to emphasize that this is an ASA 7 Committee, it is not an EIA Committee, which 8 is an advisory body to EIA. And EIA is free 9 to choose to take that advice whenever it 10 thinks it is appropriate. 11 I'm Nagaraj Neerchal; I'm the chair 12 of this Committee. This is my first chair 13 job here, I think. But I had some beautiful 14 experiences -- 15 MR. CLEVELAND: And you're doing a 16 great job. 17 MR. NEERCHAL: Pardon me? 18 MR. CLEVELAND: You're doing a 19 great job. 20 MR. NEERCHAL: Thank you. It's the 21 easiest job in the Committee, actually, 22 because you don't need to do any discussions BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 5 1 and -- 2 (Laughter) 3 MS. FORSYTH: I think we should 4 change that this year. 5 MR. NEERCHAL: So -- 6 MS. KIRKENDALL: I actually thought 7 we stuck you with the discussion. 8 MR. NEERCHAL: I think you may have 9 it, yes. The meeting is open to public, 10 public comments are welcome. Time will be 11 set aside at the end of each session inviting 12 public to make their comments. And there are 13 two microphones there. We would like you to 14 come to the microphone and make the comments 15 so that the transcription picks it up. And 16 whenever you have something to say, please 17 announce your name and affiliation, and then 18 make your comments. 19 All attendees -- I think that 20 includes everybody, including the EIA 21 employees, should sign the register in the 22 hall as you're entering in, and put down your BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 6 1 e-mail address. I think if you're new to 2 this room and this floor, the restrooms are 3 at the two ends. So you go out of the room 4 and either turn right or left. And there's a 5 drinking fountain on both sides. 6 We have Chrissy Campbell (?) and 7 Donna Arrington (?), two people from the ASA 8 meetings department here helping us. And if 9 you have any questions regarding the expense 10 reimbursements or any logistics issues, 11 please contact them, they'll be helping you. 12 So we do have a new transcriber by 13 the name of Christine, but she is asking me 14 to remind you that if any are speaking, 15 please bend over and this is not a mouse pad. 16 COURT REPORTER: Just project. 17 MR. CLEVELAND: We can't take these 18 with us? 19 SPEAKER: Actually, you can. 20 MR. CLEVELAND: I thought it was a 21 perk of some sort of -- 22 MS. KIRKENDALL: Yeah, it's a perk. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 7 1 Alethia thought that they would be a nice 2 token. And so -- they are a perk actually. 3 MR. NEERCHAL: But make sure that 4 you're close to the microphone, not too far 5 away from it. No, don't lean back and talk. 6 We have two new members: Ed Blair 7 from University of Houston, Ed Kokkelenberg 8 from Binghamton University, and John Weyant, 9 who is not here yet. When he comes, we'll 10 give him a warm welcome. I would like us all 11 to welcome our new members. Thank you for 12 agreeing to -- 13 (Applause) 14 MR. NEERCHAL: We have two people 15 helping from the EIA side this time, I think: 16 Bill and Alethia. And I think some of you 17 already corresponded. 18 So the EIA type of questions, 19 something you can direct to them, and 20 Alethia, when Bill was away on vacation -- 21 (Laughter) 22 MR. NEERCHAL: On his surgery, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 8 1 Alethia took care of the EIA liaison duties 2 and did a fantastic job. Thank you very 3 much. And they're responsible for putting 4 together this program and things like that 5 and making -- make sure that the chair looks 6 good and stuff like that, so it's a very 7 important job. 8 And we have Lawrence, who is 9 helping us with -- right, yeah, helping us 10 with the audiovisual thing. And the people 11 who are talking, they will get a microphone 12 if you want, or if they can stand at the 13 lectern and speak, whatever they want to. 14 SPEAKER: Okay. 15 MR. NEERCHAL: And once again, I'm 16 Nagaraj Neerchal, and I'm the chair. And if 17 you don't know where -- who to go to, just 18 come to me, I'll find out the person who can 19 help you. I won't help you necessarily. 20 All right, so I think we should 21 probably start with the introduction around 22 the room, including the audience members. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 9 1 I'm Nagaraj Neerchal once again. And I'm 2 from UMBC. I'm the chair of the Math and 3 Stat Department since July. 4 MS. KIRKENDALL: I'm Nancy 5 Kirkendall; I'm the Director of the 6 Statistics and Methods Group, and 7 orchestrater of this event. 8 MR. CARUSO: Guy Caruso, 9 Administrator of the Energy Information 10 Administration. 11 MR. KOKKELENBERG: I'm Edward 12 Kokkelenberg, Professor at SUNY Binghamton. 13 MS. KHANNA: Neha Khanna, State 14 University of New York, Department of 15 Economics. 16 MR. CLEVELAND: Cutler Cleveland, 17 Washington University, Professor in the 18 Department of Geography and Environment. 19 MR. HILL: I'm Walter Hill, St. 20 Mary's College of Maryland; currently the 21 chair of the Political Science department. 22 MS. FORSYTH: Barbara Forsyth, I'm BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 10 1 in Westat for another week. 2 (Laughter) 3 MR. BLAIR: Ed Blair. I'm at the 4 University of Houston. 5 MR. BINGHAM: Derek Bingham, Simon 6 Fraser University, Department of Actuarial 7 Science and Statistics. 8 MR. STROUD: Lawrence Stroud, 9 Statistics and Methods Group, EIA. 10 MR. HODGE: I'm Tyler Hodge with 11 the EIA short-term energy outlook team. 12 MR. EBEL: I'm Steve Ebel with 13 Lyondell Chemical, Houston. 14 MR. WEINIG: Steve, you'll need to 15 restate. 16 MR. EBEL: Steve Ebel with Lyondell 17 Chemical, Houston. 18 MS. BLESSING: Colleen Blessing, 19 EIA. 20 MS. MILLER: Renee Miller, EIA. 21 MS. BLUMBERG: Carol Blumberg, 22 Office of the SEIA. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 11 1 MR. DELEY: John Paul Deley, EIA's 2 records officer. 3 MR. BOURNAZIAN: Jake Bournazian, 4 EIA. 5 MS. WEIR: Paula Weir, Office of 6 Oil and Gas. 7 MS. LENT: Janice Lent, Statistics 8 and Methods Group, EIA. 9 MR. CONTI: John Conti, Director of 10 Integrated Analysis and Forecasting. 11 MR. RUTCHIK: Bob Rutchik, 12 Statistics and Methods group, EIA. 13 MR. BROENE: Tom Broene (?) SMG, 14 EIA. 15 MS. O'BRIEN: Christina O'Brien, 16 EIA. 17 MR. RASMUSSEN: Eric Rasmussen, EIA 18 Office of the Administrator. 19 MR. TSENG: Phillip Tseng, SMG, 20 EIA. 21 MR. BRADSHER-FREDRICK: Howard 22 Bradsher-Fredrick, SMG, EIA. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 12 1 MR. WEINIG: Bill Weinig, SMG, EIA. 2 MR. NEERCHAL: Thanks. And I think 3 without wasting too much time, I think that 4 we should get on with our agenda. I just 5 want to announce that -- this is a mandatory 6 announcement -- this is an ASA Committee, but 7 Nancy has the authority to adjourn this 8 meeting at any time she feels -- 9 MS. KIRKENDALL: So you all behave. 10 (Laughter) 11 MR. NEERCHAL: She feels that you 12 don't behave. So we can start with our 13 traditional session with Guy. 14 MR. CARUSO: Thanks, Nagaraj. 15 Welcome. Good morning, everyone, and 16 congratulations on your assumption of the 17 chairmanship. 18 Welcome to Ed and Ed. That's easy. 19 I know you're going to enjoy your time on the 20 committee, and we really appreciate all of 21 your time because I know you're all very 22 busy. And so this time is valuable, and we BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 13 1 value your advice. 2 I'm going to bring you all 3 up-to-date on some of the things that have 4 been going on in the EIA since our last 5 meeting in October, especially those that are 6 directly affecting some of the work we do 7 that you have given us advice on. And in 8 particular, looking forward to some of the 9 things that we are going to be doing in the 10 next one or two years that I know the 11 committee will have a chance to give us some 12 advice on. 13 So we really look forward to 14 talking to you these two days, and then 15 throughout the next couple of years about 16 some of these initiatives that are either 17 beginning now or will begin in fiscal '08. 18 Then I want to start with the budget, which 19 is already, I think, a significant departure 20 of our -- all of my previous reports to you. 21 We usually put the budget last 22 because it was usually bad news, but this BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 14 1 year it's good news, so I'm going to start 2 off with that and talk about some other of 3 the things that are going on here. 4 In the last six weeks or so, we 5 finally got a budget for Fiscal Year '07, and 6 the good news is that EIA was singled out in 7 the Department of Energy budget for an 8 increase above what most other organizations 9 were getting, which was a continuation of 10 their FY '06 budget in a continuing 11 resolution. 12 So EIA was given another 13 $5 million, which for us is very important 14 going from 85 to about 90, and even a bit 15 above what the administration had requested 16 for EIA. So I think that reflects the hard 17 work and the quality of work that the EIA 18 staff has done over these years to earn 19 Congress's trust in EIA. 20 So that's why I particularly think 21 that's good news. And a number of the things 22 that that will allow EIA to do this year have BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 15 1 been activities that you have given us advice 2 on, including a number of -- redesigning a 3 number of key oil and gas surveys, which 4 during a period of declining real budgets, I 5 think we all agree had suffered in terms of 6 quality that we wanted to maintain. And 7 certainly, the statistical accuracy that we 8 have gotten the advice from this committee 9 on. 10 We're also going to be able to 11 increase the modeling capabilities in both 12 the oil and gas area as well. 13 And then the mandated requirement 14 that was in the Energy Policy Act of 2005 15 that EIA start collecting, on a monthly 16 basis, biofuel data. They had mandated that 17 in that Act of 2005, but there had been no 18 monies appropriated for it in Fiscal '06. 19 And if we had not gotten this additional 20 money embedded in that $5 million increase, 21 we wouldn't have been able to do it. But we 22 now will do that, and we're in the process of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 16 1 planning for these new surveys, and I'm sure 2 we'll be seeking your advice on that. 3 And then there were two petroleum 4 marketing surveys that -- under the lower 5 numbered $85 million budget we would not have 6 been able to continue, and we will now 7 continue them. Then, one of the things we're 8 going to definitely -- be on the agenda this 9 session, and I think future agendas, is 10 enhancing the activities of NEMS that you all 11 have been familiar with over the years. 12 Especially -- it was designed in 13 the early '90s, the first Energy Outlook 14 using the current version of NEMS was I think 15 about '93 or so. 16 So it was definitely time, and it 17 is time for an enhancement. And I know John 18 Conti and his team are going to really be 19 working hard over the next couple of years to 20 do that. And then -- mentioned the 21 improvement in the quality and the 22 reliability of the oil data, and we're going BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 17 1 to certainly be working hard on that. And 2 with the additional marketing on the 3 reinstatement of the two marketing surveys. 4 And then, we are also looking to 5 improve -- the cost structure of the way we 6 collect oil data has suffered somewhat from 7 being -- or having had the Legacy systems 8 which are less efficient. 9 And that will certainly change, we 10 think, during Fiscal '07 and '08. The Weekly 11 Ethanol balance is increasingly important. 12 As many of you are aware, the amount of 13 ethanol in our gasoline pool is increasing 14 steadily. 15 And we expect it will double, and 16 perhaps triple, even within the next five 17 years. So the need to have better handle on 18 ethanol production, the blending into 19 gasoline, and what that all means for the 20 supply and demand for gasoline is critically 21 important, especially as we enter into the 22 driving season. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 18 1 And of course, it's gotten even 2 more attention recently as the President has 3 announced a goal of 35 billion gallons of 4 alternative fuels, including ethanol, by 5 2017. Even better news is the request that 6 went up in early February for Fiscal Year 7 '08, the administration is requesting over 8 $105 million for EIA in Fiscal '08 which is 9 more than a 17 percent increase over '07. 10 And that would allow us to continue 11 to do the improvements in the oil and gas 12 surveys that I mentioned, would provide even 13 more money for the enhancement of NEMS, as 14 well as the normal cost of doing business, 15 which is mainly salaries and benefits for EIA 16 employees and contractors as well as the 17 other fixed costs that we have to pay here as 18 part of the Department of Energy. 19 One of the things that's really 20 ramped up even in the last two to three 21 months is with the seating of the new 22 Congress, has been more service requests BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 19 1 from Congress for EIA. And they've 2 concentrated mainly on issues related to 3 global climate change. 4 We've done one report; we completed 5 one report for Senator Bingaman and five 6 other senators on the energy market and 7 economic impacts -- to reduce greenhouse gas 8 emissions using a cap-and-trade system with a 9 safety valve. And that was published I think 10 in about mid-January. 11 We are now working on another 12 request from Senators McCain and Lieberman on 13 a bill that would impose even more stricter 14 controls on carbon. We have requests in from 15 Senators Inhofe, Kerry and Snow. So I could 16 go on and on because we have probably about 17 10 outstanding requests that we're either 18 working on right now or in discussions with 19 the Hill staff that involve in some way 20 greenhouse gas emissions. 21 And so all the more 22 important -- some of the advice we've gotten BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 20 1 from you about the modeling and dealing with 2 these issues, and how important it is that we 3 do improve the modeling system that we have 4 now. 5 But we also expect that we'll be 6 doing some work on yet another attempt to 7 pass a bill on a Renewable Portfolio Standard 8 that Senator Bingaman tried very hard to get 9 into the Energy Policy Act of '05. He has 10 now, in co-authorship with Senator Domenici, 11 submitted another bill that would have a 12 Renewable Portfolio Standard, I believe, at 13 20 percent. 14 And the last time they tried it, 15 that was 10 percent. The percentage could be 16 15. But in any case, we do think that we'll 17 be getting a request to work on Renewable 18 Portfolio Standards as well. And there are a 19 number of other studies that have been 20 completed or are underway that are listed 21 here. 22 Main point is that this is a very BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 21 1 active new Congress, and EIA, as I pointed 2 out in the budget story, has gained the 3 respect and trust of many members, and that's 4 definitely good news. Of course, what that 5 does mean is we do get -- getting asked to do 6 a lot more. And many times, it comes without 7 specific funding. 8 So it clearly is a question of 9 priority-setting. It makes it very difficult 10 for -- particularly the long-term forecasting 11 area, because most of these requests are what 12 if we pass a bill; what if we change the law 13 on a particular thing, how does that change 14 the outlook, and therefore -- and NEMS is the 15 tool for answering many of those questions. 16 MR. CLEVELAND: Guy? 17 MR. CARUSO: Yes. 18 MR. CLEVELAND: Do you have to 19 produce a report for every request? And how 20 do you set priorities in terms of which ones 21 get done first, and how you roll them. 22 MR. CARUSO: That's an excellent BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 22 1 question. The answer is no, we don't have to 2 accept every request. And in the past, what 3 we've done is never say no directly, but 4 negotiate. So what we've tried to do is we 5 limit the scope of a request, because if it's 6 so open-ended it's going to take enormous 7 resources, we certainly let them know that 8 it's possible, but it may be six months 9 before -- so if you really want this in a 10 timely fashion, we need to focus the 11 assumptions and what you're targeting that to 12 do. 13 And in other cases, we try to get 14 similar requests, to combine them. So we 15 might have one from Kerry and Snow, which we 16 do, which is very similar to what we're doing 17 already for McCain and Lieberman or Inhofe, 18 or some -- so it's really mostly negotiation. 19 There are some organizations that 20 limit requests to chairmen or -- of either 21 committees or subcommittees or ranking 22 members. We don't have such a strict a rule BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 23 1 as that. But it's trying to match -- setting 2 priorities based on what resources we have, 3 and what impact that would have on other core 4 work. 5 So as I said, the brunt of most of 6 these requests fall on the Forecasting 7 office, John Conti's office. So you run the 8 risk that you actually could delay the AEO 9 publication or other key activities. So it's 10 a balancing act, but no hard-and-fast rules. 11 Wonder why it's not going. All 12 right. Okay, there we go. 13 We have finally completed all the 14 program guidelines for the new voluntary 15 reporting on greenhouse gas redesign, and we 16 expect that the new reporting forms will be 17 approved by OMB by next month. 18 And we do actually expect to begin 19 internet data collection by this fall. And 20 this been a long process, as Jae Edmunds 21 knows very well. I think it's been at least 22 two years in just getting approval of these BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 24 1 guidelines. 2 One of the areas that you have 3 worked very hard on and given us excellent 4 advice in collaboration on is the Form 914, 5 which is now the official natural gas 6 production data collection as of January of 7 '07, which was in the March issue of Natural 8 Gas Monthly. And it's been performing 9 extremely well in terms of the degree of 10 reporting error, reducing the amount of 11 error. 12 And we're pleased with the way 13 that's actually turned out. We now have a 14 much shorter time frame -- 60 days instead of 15 120. So I wanted to just bring you 16 up-to-date on that, and you had a number of 17 sessions with John Wood and others on that, 18 and that's worked out very well. 19 EIA was part of the formation of 20 the Department of Energy, and EIA was 21 actually put together -- officially put 22 together in 1977. And obviously, this makes BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 25 1 this 30 years. So the good news is we're 2 going to have a great anniversary celebration 3 later this year. And we certainly want this 4 committee, which has been a big part of that 5 history, to be involved in that. 6 And we're going to schedule a 7 session that will focus on ASA's 8 contributions to EIA, including a -- we're 9 looking at doing a two-day conference, which 10 will include a session with ASA. 11 The bad news is something I've 12 talked about in the past -- and that is a lot 13 of people, a lot of staff members were here 14 in 1977 when we began. And therefore, in the 15 federal government, 30 years is a magic 16 number for being able to retire at 55 years 17 old. 18 So we're projecting about 30 19 retirements this year, this calendar year. 20 And when you combine that with normal 21 attrition and the fact that we're a little 22 below our FTE ceiling, we're projecting 50 BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 26 1 new staff members to be hired in '07. The 2 last time I checked, we had about 15, so we 3 got about 35 net more to go. 4 So we've talked about this in the 5 past about how much we appreciate your advice 6 in terms of students or other colleagues that 7 might have appropriate candidates for -- not 8 only statisticians, mathematicians, 9 economists, and operations research. 10 So we again are working very hard 11 to get up to full -- to be able to 12 effectively use that, those monies that we're 13 getting. And just specifically on the ASA, 14 John Paul Deley is our kind of person who is 15 handling our history of EIA. And he is 16 putting together an index of all papers of 17 all the ASA meetings all the way back to '79. 18 And we would also be open to having 19 a web exhibit on the history page directly 20 related to ASA, this ASA committee, so more 21 on that later. 22 I think we're actually going to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 27 1 have a little discussion about that with you 2 all during the next day or so. 3 Then, the historic -- you're here 4 at a historic moment. This last week, for 5 the first time in 20 years, all of EIA, 6 except for the Dallas Field Office, is now in 7 Forrestal Building. And Nancy and her team, 8 which you're most familiar with, have moved 9 down here near -- guess it's two weeks ago, 10 and then the last of the Electricity folks 11 came last week. 12 We now have 525 EIA federal 13 employees and contractors in this building, 14 and mostly on the second floor but also on 15 the first and the basement. 16 And I think that -- we all believe 17 that that's going to improve our internal 18 communications. And we're already benefiting 19 from seeing the smiling faces of Bill Weinig 20 and Alethia every day. And I personally 21 appreciate that. So any questions that I can 22 answer about this or any other things that's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 28 1 concerning EIA and its direction? 2 If not, Nagaraj, once again, 3 welcome to EIA. And we really value the 4 advice we're going to get from you in the 5 next day or so. 6 MR. NEERCHAL: Thanks, Guy. 7 Nancy? 8 MS. KIRKENDALL: Well, I'll join my 9 welcome to Guy's for the committee. We hope 10 we have an interesting series of talks, and 11 hope we get lots of good advice. 12 In terms of SMG updates, as you 13 heard, we just moved down from the building 14 up the street. So we're now all down here in 15 the same building. This certainly will 16 facilitate discussions with people. Now 17 there's no more excuse not to just go drop 18 over and bug somebody about something. 19 In SMG, one of the reasons why 20 Alethia is taking on more of a responsibility 21 for the ASA meetings is that Bill thinks he 22 might actually retire soon. And so he has BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 29 1 been absolutely wonderful in trying to 2 prepare us for this transition. And for this 3 year, he and Alethia are sharing 4 responsibilities for the meeting, so she's 5 going to becoming more and more involved in 6 managing the meetings. 7 So thanks to both Bill and Alethia, 8 especially to Bill, for his continuing to 9 support the committee by making sure that 10 there's a smooth transition. 11 Another announcement for SMG is 12 that Janice Lent has joined us as our senior 13 mathematical statistician. She comes to us 14 from the Bureau of Transportation Statistics 15 and from the Bureau of Labor Statistics. One 16 of the areas that she has a lot of expertise 17 in is development indicies, and so we'll see 18 how that proceeds here in EIA. 19 So this is just a summary of some 20 of the things we talked about at the fall 21 meeting. And as you remember, Lawrence 22 Stroud and Phillip Tseng gave a talk about BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 30 1 using models to detect outliers in refinery 2 data. 3 The Committee suggested we needed 4 to be a little more careful in handling the 5 correlation in the data series, but also 6 suggested that we should look at regional 7 data. So we do plan to pursue this. We just 8 haven't had time over the last few months. 9 On suggestion from the external 10 study team, I'm not sure we went through a 11 lot of detail about all the recommendations 12 that we've received. But one of the 13 recommendations was that we should get some 14 of our high visibility weekly data series 15 classified as principal economic indicators. 16 And we have actually moved on that. 17 We sent in an application to OMB to make our 18 weekly natural gas storage report a principal 19 economic indicator. So we don't know the 20 outcome yet. OMB has promised to let us know 21 in May or June. They just haven't had time 22 to think about it. They said they liked our BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 31 1 application but they haven't thought about it 2 deeply. So that's some progress on one 3 recommendation. 4 They also recommended that we 5 should provide researcher access, 6 particularly to our commercial building 7 survey data and to our residential energy 8 consumption survey data at protected sites. 9 I think they had in mind particularly using 10 the Census Bureau's research data centers. 11 But any way of getting better 12 access to the data is I think what they 13 really intended. So Jake Bournazian will 14 talk to you tomorrow about some of the 15 options we're considering on that. 16 The other thing they talked about 17 is that we needed to have more collaboration 18 with academia. So one of the things that 19 Ruey-Pyng Lu is going to talk about is that 20 we have joined the National Institute of 21 Statistical Sciences as an affiliate member. 22 And we'll be operating a sort of a research BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 32 1 grants program for students, and possibly for 2 new researchers to try to get people to work, 3 researchers to work, on problems that we're 4 interested in. 5 And so Ruey-Pyng is going to talk a 6 little bit about that arrangement, and he's 7 going to go over four draft project 8 descriptions to try to get your input. What 9 we'd really like is to encourage people to do 10 work that we're really interested in. And so 11 you need to have something that's a short 12 description that people might read, but 13 detailed enough so that they'll know whether 14 or not they're interested in the topic and 15 what they need to do. 16 So there's kind of a little balance 17 there. And I'm sure we'll have good advice 18 on that from you. So that's a session 19 tomorrow morning. 20 Tomorrow morning? No, it's today. 21 MR. NEERCHAL: Afternoon. 22 MS. KIRKENDALL: It's today; I hear BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 33 1 it from the back, okay. 2 And then other recommendations from 3 the external study team, we'll be considering 4 in our strategic planning process. And 5 that's going to begin soon. I think we meet 6 next week, in fact. 7 Ruey-Pyng last time also talked 8 about estimating weekly stocks of other oils, 9 and I think Moshe recommended that we try 10 using an unobserved components model with 11 monthly seasonality. So Ruey-Pyng did that, 12 and he found that it was better than anything 13 else he had tried, so there's a little 14 success story. 15 And now we need to work with the 16 program office to show them what we've done 17 and see if they'll pick it up and use it. 18 Last time, George Lady talked about the EIA 19 quality project, and he's starting out 20 focusing on forecasting, and in particular, 21 he is starting out with NEMS. 22 He's continuing to work on this BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 34 1 project and he'll talk to you tomorrow 2 morning, to give you a better update. The 3 challenge that we haven't gotten to yet is 4 the how to do something similar. He has 5 ideas on how to handle NEMS in reasonable 6 ways. 7 We think steel (?) is different, 8 but there are other ways of handling it, but 9 then how do you something consistent on the 10 data side, because if you are going to have 11 an annual quality report, we ought to address 12 all of the areas. So that's work ongoing and 13 things to think about. 14 So in the spring meeting, I think 15 Stan Freedman talked about the functional 16 requirements document for the EIA's internet 17 data collection. We threw that out as IDC. 18 The functional requirements document was 19 adopted within EIA, and we're now in the 20 process of determining how our surveys, how 21 to actually implement it. 22 There are a couple of things being BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 35 1 considered. We found out that the National 2 Agricultural Statistic Service has a software 3 tool that they have developed already, and 4 they are willing to share it with us. 5 It may not be exactly what we 6 wanted, but it does a lot of the things that 7 we were interested in doing. So there's 8 always a debate -- do you adopt an existing 9 system and then adapt it to your needs or do 10 you build a new system? 11 And so that is going on. As you 12 heard from Guy, the greenhouse gas survey is 13 supposed to go live on that system this fall, 14 and the electric power surveys are going to 15 be new beginning in January of 2008. 16 So they need to be in the new 17 system in January. So there are going to 18 have to be some decisions soon and we will 19 have to march ahead. So I'm sure in the fall 20 meeting, we'll able to tell you even more. 21 We talked about how modeling can 22 suggest data needs, and you suggested to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 36 1 engage the energy modeling forum -- but one 2 way we've done that is to invite John Weyant 3 to join us. He's not here right now, but he 4 has agreed to join us. 5 The other thing was that you 6 suggested that we have better outreach, more 7 users' conferences and things, and we have 8 been having an annual NEMS conference for 9 many years, and that's slowly becoming 10 broader. I think in the last couple of 11 years, it was the forecasting conference 12 rather than just the NEMS conference. 13 This year, we actually had sessions 14 on electric power, and I think next year is 15 going to be even broader. So we are moving 16 towards an EIA-wide conference. This is 17 usually held in the spring in March. 18 We had a session on the 2006 MECS, 19 and I think you recommended incentives, 20 pre-mailing to respondents, and a variety of 21 other things. We didn't consider incentives 22 for that project. It's a little hard for BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 37 1 surveys of establishments to come up with 2 good incentives. 3 They did do a pre-mailing, and this 4 is partially because for the first time, 5 they're using Census Taker, which is the 6 Census Bureau's internet data collection 7 system. And it sounds like they've had -- I 8 mean, they're still in the middle of the data 9 collection process. But it sounds like they 10 have had very good response to the use of 11 Census Taker, and so hopefully that will help 12 response. 13 The other thing they did was to 14 have a short form for the survey, it's a very 15 large survey. And some very small 16 establishments can fill out a short form, and 17 they're hoping that that will help the 18 response rates among the smaller companies. 19 And finally, you've heard about the 20 30th anniversary. One thing I would like to 21 point out that's historic about this very 22 meeting is that Ed Kokkelenberg has joined BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 38 1 us. This is the first time we've had -- 2 MR. KOKKELENBERG: Am I historic? 3 MS. KIRKENDALL: Yes, it's 4 historic. This is the first time we've had a 5 former ASA Energy Committee member come back 6 for another round of appointments. And so he 7 served for six years -- was it in the early 8 '90s? 9 MR. KOKKELENBERG: I think so. 10 Maybe in the mid-90s -- 11 MS. KIRKENDALL: Just so it was 12 long enough ago that everybody has forgotten 13 that he did it. 14 MR. KOKKELENBERG: I remember that 15 NEMS was starting up then. 16 MS. KIRKENDALL: So it was during 17 the NEMS -- so there's a chance that in 18 another 10 or 20 years, you can come back and 19 be on the Committee again. Hopefully, it 20 will be a good enough experience you would 21 like to do that. 22 Then the last one is just -- this BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 39 1 was the relationship between crude oil prices 2 and natural gas prices was a paper given by 3 Jose Villar in Natural Gas Division. We have 4 done just a little bit more. There was Andy 5 Kydes, who works in the Office of Integrated 6 Analysis and Forecasting, had an intern who 7 looked at this project in the summer, and she 8 added coal prices, I think, to the model, and 9 was looking what to do with the trend term. 10 But on the other hand, she was just 11 a summer intern and so the work isn't really 12 complete. So we're still very interested in 13 this topic. The topic in general is 14 co-integration between data series and how 15 does that affect your forecasts. 16 So this work is still of great 17 interest to us, and it is one of the project 18 descriptions that we have put in for the 19 National Institute of Statistical Sciences' 20 student grants program, so maybe you can help 21 us write that up. And maybe you have a 22 student or two who might be interested in it, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 40 1 that would be even better. 2 That's the end of my talk. 3 So thank you. 4 MR. CARUSO: Nancy just reminded me 5 when she said about the work that the intern 6 did -- we also as part of our recruitment 7 enhancement with having to hire so many new 8 people, had a very expansive interns program 9 last year. 10 We had I think 24 interns. So 11 that's another area where if you have 12 students or acquaintances that you know that 13 might be interested, we're very open to that, 14 and it's about the right time of the year to 15 start hearing from them. 16 Thank you, Nancy. 17 MR. NEERCHAL: Thank you, Nancy, 18 and Guy. Questions for either Nancy or Guy? 19 MR. CLEVELAND: It's kind of moving 20 ahead to the -- this National Institute 21 thing, but on this point, I think we really 22 need to do more to advertise these BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 41 1 initiatives, like who knows about this intern 2 program. 3 This should be on that front page. 4 Now accepting applications for interns and 5 developing a communication network, which I 6 think we'll take about as part of the -- this 7 research part, I think, where you're going 8 to -- where you have list servs and 9 newsletters and e-mail lists, that you target 10 when these initiatives come out, that people 11 should be able to sign up for the list serv 12 on your website and things like that. 13 We'll talk more about that later, 14 but I think there's a lot you can do to 15 enhance your outreach effort. 16 MS. KIRKENDALL: Great. 17 MR. NEERCHAL: Any other questions, 18 comments? Thank you. Let's move on. 19 I think since we will not have 20 another discussion I think as you have said 21 we're going to -- the time is going to work 22 out I think, so John is -- so we'll go to the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 42 1 next session here. Phillip Tseng on Modeling 2 Regional Electricity Generation. 3 MR. TSENG: Good morning, 4 Mr. Caruso, Nancy, and members of the ASA 5 Energy Committee, and ladies and gentlemen. 6 Today, I will take about the modeling work I 7 have been working on for a long time. It's 8 Modeling Regional Electricity Generation. 9 Basically, I will cover a few 10 topics. I will talk about how we started, 11 why we started, and objectives of the 12 efforts, and the data sources, methodology, 13 and some of the preliminary findings, and I 14 have some questions on fuel switching, 15 because the methodology I used kind of bypass 16 explicit price representation. And I have 17 some other possible applications of the 18 model. If I have time, I'll probably go over 19 it. 20 We started the project about two, 21 three years ago, and the objective was to 22 increase regional details to the short-term BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 43 1 projections and analysis. And also, we 2 wanted to just understand what regional 3 markets are doing. 4 And we developed a methodology. I 5 think I gave a presentation with Dave 6 Costello, who passed away, unfortunately. 7 And we used a methodology -- it was a little 8 bit awkward to use, and it takes a lot of 9 effort to actually calibrate a model and to 10 generate satisfactory results. 11 And part of the reason we kind of 12 took so long to complete the model to this 13 stage is, we lost a valuable co-worker, and 14 as a result, we're kind of in transition for 15 a while. 16 Now to iterate the objectives. 17 As we move along, we learn more 18 about data. We thought, we think we can do 19 more with the datasets we have. 20 And so again the first objective is 21 project power generations from power plants, 22 burning fossil fuels, and we have regional BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 44 1 representations. And the second objective is 2 actually using the model to conduct scenario 3 analysis, and hopefully provide insights into 4 potential power flow problems. 5 We focus on fossil plants, because 6 in the short run, dispatching patterns of 7 other types of power plants are much less 8 responsive to changes to demand. Like 9 renewable, for example, we don't really have 10 control over when solar will dispatch or wind 11 will dispatch. 12 And nuclear power plants is more or 13 less baseload, and it has to around almost 14 all the time. Operators may be able to ramp 15 up the generation a little bit or ramp down a 16 little bit, but in general, nuclear is a 17 baseload power plant. 18 So only fossil fuel plants are used 19 to meet changes in demand patterns. The data 20 sources we have -- basically the EIA-826, in 21 the sales and revenue by end-use sectors. 22 And we use the EIA sales numbers and we have BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 45 1 the power control area data with a daily 2 24-hour load, and then from that we create 3 the demand curves -- average daily 24-hour 4 load demand curves. 5 And on the supply side, we use net 6 generation by generator -- I think we talked 7 about last time that data record is about 8 8,000 or 9,000 records, and we have the 9 generating capacity by fuel type. It's an 10 annual number, which covers about 20,000 11 generators. And from that net generation and 12 generation capacity, we create supply curves. 13 We will figure out a way to kind of identify 14 the supply curves, and then we use the demand 15 and supply representation to solve for 16 generation. 17 For the electricity region, we have 18 13 regions -- just for the lower 48, and we 19 modeled like Hawaii and Alaska separately, 20 because those two states are kind of 21 independent of the lower 48 states. And we 22 have -- for the Eastern Regions, we have nine BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 46 1 regions -- number 1 through 7, number 11, 12. 2 And for the Western Region, we have Mountain 3 and -- Pacific, excluding California -- and 4 California, so at the West End, we have three 5 regions, and Texas is a region by itself. 6 So this is the map which shows the 7 regions. This is the census region, and we 8 have Pacific, California, and Mountain in the 9 West, and we have nine regions in the East, 10 and Texas, we make it as one region. So 11 that's the basically three trading blocks, 12 and we allow trading, say, between the 13 Mountain region, Pacific, and California, and 14 then to east nine regions trading as one 15 trading block, and Texas is itself. 16 The challenges for us was 17 to -- yes? 18 MR. EDMONDS: Just to make sure I 19 understand -- when you're modeling, are you 20 trying to predict the demand and supply of 21 electricity at each hour of each day of the 22 year in each of these regions? Or BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 47 1 what -- can you just kind of get me on to the 2 time. 3 MR. TSENG: For the modeling 4 effort, the first step is to use the existing 5 historical data on demand side and supply 6 side, and then see if we can dispatch power 7 patterns for fossil fuel matching the 8 historical pattern. So the demand numbers 9 are historical numbers. For projection, then 10 we project monthly demand, and from the 11 monthly demand, we convert it to average 12 daily load, and then we solved (?) the model 13 is based on the average daily load. 14 So each month, we have a typical 15 month, a typical day, average day, and then 16 we have to convert the average day to 24-hour 17 load. And then we solve it hourly, so the 18 model is solved hourly, but with the 19 projection horizon is normally 24 to 36 20 months. So when we look at 36 months -- 21 MR. EDMONDS: It's 36 times that -- 22 MR. TSENG: Yeah. Each month we BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 48 1 solve 24-hour timestamps, so we get a typical 2 average day and we convert it to monthly. 3 MR. EDMONDS: All right. 4 MR. TSENG: So the projection of 5 demand is based on weather and income. So 6 what we're doing here is basically for the 7 reference case or the base case, is seeing 8 development methodology -- see if we can 9 actually replicate historical dispatching 10 patterns for fossil plants. 11 And also the challenge is we need 12 to provide a framework, because we want to 13 understand if that thing is beyond control 14 like power plant outages -- if somehow we 15 lose one or two nuclear power plants, that 16 could be 2,000 megawatts of power plant 17 generating capacity in the summer, what 18 happens? What happens to the power flow and 19 what happens to the generation capacity and 20 capability in meeting the demand? 21 So those are the kind of things 22 relevant to the modeling. And another thing BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 49 1 is when we do simulation analysis, sometimes 2 as -- actually, one very important aspect is 3 what happens if summer demand is higher than 4 normal, and what kind of power plants would 5 be used to meet the demand? 6 And what happens to the demand for 7 natural gas? Because a few years ago when 8 natural gas price was very high, relatively 9 much higher than even the crude oil prices in 10 BTU terms, some of the gas combined cycle 11 power plants, very efficient state-of-the-art 12 gas power plants, were shut down because of 13 the high prices. So there are a lot of 14 interactions between the electricity sector 15 and the natural gas market, and we wanted to 16 get some insight in terms of the interactions 17 in one sector and its impact on the other 18 one. 19 That's part of reason why we want 20 to build a model which can provide more 21 consistent information on demand for fossil 22 fuels. So that's the purpose of building a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 50 1 framework, so that the model should have a 2 capability to do those kind of analysis. 3 And of course for the users who run 4 the model, the short-term model is run on the 5 EViews. That's a software that many people 6 use for econometric simulation modeling. And 7 so the modeling framework has to be on 8 EViews, because it's easier to integrate the 9 electricity module into the framework of the 10 overall short-term regional forecast. 11 So with the next few slides I will 12 talk about the methodology, how do I create 13 the supply curve, because the generation 14 model is about how fossil fuel plants are 15 dispatched. And the question is, how can I 16 have a representation capture the supply 17 which the supply curve would incorporate the 18 capacity constraint? 19 So when we run the model, the model 20 solution would not go beyond available 21 capacity. So that's one of the issues in the 22 short run. In the long run, we can always BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 51 1 add new power plants. So what we did 2 actually is we used most up-to-date data, in 3 this case, it's year 2005, to project 4 generation for the next 24 months. And so 5 power plant owners -- normally, power plant 6 owners should dispatch power based on the 7 least cost power plant first. 8 If you'll look at a system, 9 however, there are some other factors, like 10 causing the accessibility of transmission 11 lines -- if some generators have to sign some 12 kind of a contract with the transmission 13 operators, so there are some contractual 14 issues. 15 And they send to the load centers 16 and transmission and distribution losses, and 17 also availability of fuels, because we look 18 at data and we see some power plants even 19 though it's a dual-fuelled, but even when we 20 see the prices, we see some power plants 21 would still use more expensive fuels sometime 22 in the year, just because of there's not BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 52 1 enough certain type of fuel. 2 For example, the gas and oil units, 3 the oil storage capacity will limit how much 4 a dual fuel units can burn residual fuel, for 5 example, even though residual fuel may be 6 cheaper sometimes in the year. 7 But once that cheaper oil is used, 8 it may take some time or logistic to bring 9 those fuel into the storage, and so we still 10 see some natural gas used. So those are the 11 consideration for our estimation of the 12 supply curve. 13 So we actually look at a system 14 cost instead of the variable cost of the 15 power generation to represent the supply 16 curve. So the construction of short-term 17 supply curves for coal and natural gas, 18 residual fuel, and diesel fuel uses observed 19 dispatching patterns instead of -- yes? 20 MS. KHANNA: Just a quick question. 21 Can you clarify what you mean by variable 22 cost? BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 53 1 MR. TSENG: Variable cost is -- for 2 example, you have a coal power plant, and 3 each power plant has certain conversion 4 efficiency. Coal is probably like 5 35 percent, for example, and so one unit of 6 coal, one BTU of coal, and we can get certain 7 units of electricity -- and then from that, 8 we can estimate a variable cost of generating 9 electricity from a coal power plant. 10 MR. LIDDERDALE: It's fuel cost. 11 MS. KHANNA: Fuel cost? 12 MR. TSENG: Yeah, basically it's a 13 fuel cost, but fuel cost is converted to unit 14 electricity cost when we incorporate 15 efficiency loss. 16 MS. KHANNA: Okay. 17 MR. TSENG: But system cost, then 18 there's transmission charge tariff, and then 19 also TMB loss. So from the end users' point 20 of view, end user only see the charge for the 21 end used electricity, but there's usually the 22 transmission loss of 5 to 7 percent. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 54 1 And so someone is paying for that 2 loss as well, so the end user probably would 3 prefer the cheapest electricity first. And 4 so when we look at this is -- since the 5 spatial consideration is one element in the 6 siting and building of infrastructure, so 7 sometimes power plants with higher variable 8 cost may be dispatched earlier because it's 9 closer to the load center. 10 So when we estimate a short-run 11 supply curve, we simply use observed pattern, 12 because we see -- what if this power plant is 13 dispatched first, then it must be cheaper, 14 for whatever reason. It could include the 15 cost, also could include institutional 16 factors, because sometimes, from what I have 17 heard, a big generator may have better 18 relationship with the transmission line 19 operators because of the volume, and so in 20 order to increase the utilization rates of 21 transmission line, those generators may have 22 some benefits in getting to the assigned, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 55 1 allotted capability of moving their products. 2 And that's one area. 3 And so the way I did it to 4 calculate the dispatching pattern is, we 5 assign -- first, we calculate the utilization 6 rate of all power plants, and if power plants 7 are utilized more, then they must be cheaper 8 in the system sense -- the cost of delivering 9 electricity to end users must be cheaper. 10 That's why those power plants are used more. 11 And I assigned the power plants 12 into 10 categories, basically 10 bins, and I 13 will have little bit more detailed when I 14 move down. And then I choose two functional 15 forms to fit a supply curve, and one for each 16 of the four types of fossil fuels: Coal, 17 gas, diesel, and residual fuel. 18 And then for each demand level, I 19 adjust for the non-fossil plants, and then I 20 can solve the model. 21 MR. KOKKELENBERG: Can I ask you a 22 question about that statement? BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 56 1 MR. TSENG: Yes. 2 MR. KOKKELENBERG: It says two 3 forms are selected to fit -- 4 MR. TSENG: Right. 5 MR. KOKKELENBERG: One for each, so 6 in other words, you have used two forms? 7 MR. TSENG: Okay. 8 MR. KOKKELENBERG: But not for 9 each. You only used one functional form for 10 each. 11 MR. TSENG: One kind for each, yes. 12 MR. KOKKELENBERG: Thank you. 13 MR. TSENG: Actually, I have 14 specific example here. So this is that the 15 way I did. Actually, I talked to my 16 co-worker, Dr. Hodge, he doesn't want to put 17 his name on the paper. But he actually put 18 in a lot of effort. For this part of the 19 work, he made very significant contribution. 20 What we did here is, first, we assigned the 21 bin numbers. For example, for coal here, if 22 capacity -- this is Texas -- and the capacity BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 57 1 numbers in megawatt, and for coal, we have 2 the bin number 1, is 4,623 megawatt, this is 3 the capacity. So what it means is you have 4 this much capacity with utilization rate of 5 more than 90 percent. So I put the numbers 6 in in bin number 1. 7 And in the next bin number 2 is 8 basically utilization rate between 80 and 90. 9 So that's the first column for coal. And 10 then here on the cumulative capacity, this is 11 how I estimate a supply curve. I simply say, 12 well, as we see that the cumulative capacity 13 tend to increase, and the maximum is 14 basically the capacity, total capacity of 15 coal in the region. And from that, I create 16 supply curves. 17 Before I estimate the supply 18 curves, I made some adjustments to the coal 19 power plants. And part of reason is, from 20 the data we have, we notice coal power plants 21 burn some natural gas, burn some oil. And 22 part of reason is coal operators, coal power BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 58 1 plant operators, probably have to do more 2 maintenance of the coal power plants than 3 natural gas or oil plant. 4 And for each time a coal power 5 plant is shut down, when it needs to restart, 6 and the way you restart a coal power plant, 7 you don't just light a match to the coal. 8 You need natural gas or oil. 9 And so we look in the data, we 10 assigned availability factor of 93 percent, 11 94 percent, and 96 percent to different 12 regions. Back to the functional form -- and 13 we actually select two types of functional 14 forms. And for the coal we use semi log 15 inverted functional form. And dependent 16 variable is coal cumulative capacity, and 17 independent variable is the bin number. 18 And for gas, diesel and residual 19 fuel, I selected the quadratic form; I used 20 semi log. Part of the reason is, if I used 21 the normal number, I get into negative 22 projected capacity, because the curve fit, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 59 1 the quadratic forms, tend to go down a little 2 bit, and then move up. So the selection of 3 the functional form is basically is trial and 4 error, and I get very good fit when I use 5 these two functional forms. These are some 6 of the results. For Texas, I used July 2005 7 data, you can see the coal supply curve. The 8 R (?) squares above 0.9 -- yes? 9 MS. KHANNA: A quick question. How 10 many observations are these results based on, 11 the reverse -- 12 MR. TSENG: For this run, we used 13 10 bin numbers, so you should see number 1 14 through 10 on the X axis. 15 MS. KHANNA: But how many 16 observations in your estimation data set? 17 MR. TSENG: For each month, we have 18 only -- creation of the supply curve. We 19 have 10 bins -- 20 MS. KHANNA: Uh-huh. 21 MR. TSENG: But in terms of the 22 number of power plants and number of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 60 1 generation numbers, I think for the U.S. 2 total, we have about 20,000 generators. We 3 have about 8,000 or 9,000 generation numbers. 4 Because for example, in Texas, if you have 5 two coal power plants, steam generators, then 6 the net generation number from the same power 7 plants is reported as one number. That's why 8 the net generation number will have a smaller 9 number of observations than the capacity. 10 And that's how we group the power plants into 11 10 bins, based on the utilization rate. 12 MR. CLEVELAND: But your curves 13 will only fill into 10 data points -- 14 MS. KHANNA: Ten data points, yes. 15 MR. CLEVELAND: Yeah. 16 MR. TSENG: Right, yeah. 17 MS. KHANNA: So it's not surprising 18 to get a really good fit. 19 SPEAKER: Yeah. 20 MR. CLEVELAND: So the axes here 21 are what? 22 MR. TSENG: Okay, the vertical -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 61 1 MR. CLEVELAND: Bins -- 2 MR. TSENG: The vertical axis is 3 that the natural log of capacity. 4 MR. CLEVELAND: Natural log of 5 capacity? Okay. 6 MR. TSENG: Yes. 7 MR. EDMONDS: Just to sort of see 8 if I understand this, what you've done is 9 you've created a dispatch ordering -- 10 MR. TSENG: Exactly. 11 MR. EDMONDS: Based on the 12 historical observation. 13 MR. TSENG: Yes. 14 MR. EDMONDS: So you look -- when 15 you did this, I guess, slide 11, if you had 16 plotted that, what you would've shown us was 17 that in bin 1, you've got -- those are just 18 running all the time. 19 MR. TSENG: Yes. 20 MR. EDMONDS: They're never off. 21 MR. TSENG: Almost, yes. 22 MR. EDMONDS: Right. And bin 2, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 62 1 they're running almost as much. 2 MR. TSENG: Right. 3 MR. EDMONDS: And bin 3 and so 4 forth, until you get to the higher bins like 5 8, 9, and 10. 6 MR. TSENG: Right. 7 MR. EDMONDS: Where they're only 8 coming on to hit your peak. 9 MR. TSENG: Right. 10 MR. EDMONDS: And like V, if it's 11 July, the hottest hour of the day -- 12 MR. TSENG: Right. 13 MR. EDMONDS: Those come on, but 14 otherwise, they're not -- 15 MR. TSENG: Yes. 16 MR. EDMONDS: So basically what 17 you've done is essentially a load curve, and 18 then on the right is your cumulative load 19 curve or a dispatch curve -- 20 MR. TSENG: Right. 21 MR. EDMONDS: For these units. And 22 that's just based on observation. Basically BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 63 1 you're saying for whatever reason, this is 2 what we see -- the behavior of -- in this 3 case Texas. 4 MR. TSENG: Right. 5 MR. EDMONDS: Texas electric 6 utility operators. 7 MR. TSENG: Yes. 8 MR. EDMONDS: But you 9 actually -- and there's another calculation 10 you could've done from those data, and 11 probably did on the side, which is to take a 12 look at those units and actually ask what's 13 the economics of the -- if you were the 14 operator and you're just looking at the 15 performance of those units, would -- 16 MR. GRUENSPECHT: Economic 17 dispatch -- 18 MR. EDMONDS: Yeah, how would I -- 19 SPEAKER: And the whole idea of 20 this, I think, is to avoid the -- if in fact 21 the generation of the load were all located 22 at one point, and there were no transmission BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 64 1 constraints. 2 MR. TSENG: Right. 3 SPEAKER: The two should give you 4 the same result. 5 MR. TSENG: Right. 6 SPEAKER: But this is sort of an 7 effort to pick up -- 8 MR. EDMONDS: Well, this is -- 9 SPEAKER: Affect -- 10 MR. EDMONDS: Really did -- 11 SPEAKER: Affected -- 12 MR. TSENG: Exactly. 13 SPEAKER: Yeah. 14 SPEAKER: Right. 15 SPEAKER: So -- 16 MR. GRUENSPECHT: So implicitly, 17 the notion is if they really did something 18 that seems like it would be out of order, 19 based on the second calculation that you've 20 described, then that implies -- because 21 unlike in most parts of our modeling, we tend 22 not to assume rational economic behavior, we BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 65 1 don't assume that people buy the right 2 refrigerator or the right light bulb or the 3 right copying machine. 4 MR. EDMONDS: Right. 5 MR. GRUENSPECHT: Usually in the 6 electricity sector, we think -- I mean, 7 people running this thing pretty much 8 understand which is cheaper, which is more 9 expensive, so if they -- 10 SPEAKER: Right. 11 MR. GRUENSPECHT: Use the more 12 expensive. 13 MR. EDMONDS: There's a reason. 14 MR. GRUENSPECHT: There's a reason. 15 MR. EDMONDS: Right. 16 MR. GRUENSPECHT: And we wanted to 17 reflect that -- 18 MR. EDMONDS: Yeah. 19 MR. GRUENSPECHT: Yeah. 20 MR. EDMONDS: And the only thing I 21 was going to ask you is how do those stack 22 up? And presumably, there were some real BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 66 1 insight -- I presume you probably did that 2 stack -- 3 MR. TSENG: Actually -- 4 MR. EDMONDS: And there are 5 probably some real insights that came out 6 of -- 7 MR. TSENG: At the very beginning 8 of this project, we actually did a 9 scattergram with the vertical axis as to 10 variable cost and the horizontal as capacity 11 utilization rate, and we found some low cost 12 with low utilization rate power plants, and 13 some high costs with high utilization rate, 14 and so we -- initially, we started with the 15 cost -- minimization algorithm, and we 16 realized it -- we couldn't replicate a 17 historical generation pattern, and then we 18 stepped back and we said, well, maybe the 19 system cost is the one. 20 And for system costs, the only 21 thing -- the only easiest way to pick up that 22 is looking at utilization rate, because BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 67 1 that's almost like reviewed preference type. 2 MR. EDMONDS: Oh, yeah. 3 MR. TSENG: What we see is really 4 what happened. 5 MR. EDMONDS: Yeah. 6 MR. TSENG: And the question is can 7 we pick up the reviewed preference and then 8 replicate a historical pattern. This is the 9 test. And there's always trade-off -- when 10 we pick up something, we use a methodology 11 which uses information ignoring certain other 12 types of information, then we miss certain 13 things. 14 MR. EDMONDS: Right. 15 MR. TSENG: Yes. 16 MR. EDMONDS: And so what you did 17 in -- when you got to figure 14, is you used 18 the historical behavior -- 19 MR. TSENG: Yes. 20 MR. EDMONDS: And then stepped 21 ahead one time period and did a comparison? 22 MR. TSENG: Okay -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 68 1 MR. EDMONDS: Essentially, if I 2 understand it, the green line -- 3 MR. TSENG: Yes. 4 MR. EDMONDS: Is fitting using your 5 bin system with the -- 6 MR. TSENG: Right. So the red line 7 is actually the table you saw. I calculated 8 cumulative capacity. 9 MR. EDMONDS: Exactly. 10 MR. TSENG: And then I fit the 11 curve. 12 MR. EDMONDS: Right. Okay, so it's 13 the same -- essentially, it's the curve -- 14 MR. TSENG: Yeah. 15 MR. EDMONDS: Fitted to the same 16 years of data? 17 MR. TSENG: Yes. 18 MR. GRUENSPECHT: So it's not out 19 of sample? 20 MR. EDMONDS: It's all in sample. 21 MR. TSENG: For the supply curve, 22 it's not out of sample, but when we do BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 69 1 projection and -- like for example, I use the 2 2005 data -- I have some results, and then I 3 can use the 2005 data to project 2004 or 2006 4 dispatching pattern, and that's out of 5 sample. Because I use the -- supply curve is 6 based on one year data, the monthly data to 7 create it -- yes, Ed? 8 MR. KOKKELENBERG: Basically, going 9 back to -- bin numbers are rather an 10 arbitrary assignment. You could've assigned 11 five bins or 5,000 bins. 12 And the assumption is when you put 13 it in, a fixed number of bins, that the steps 14 are equal -- 15 MR. TSENG: Right. 16 MR. KOKKELENBERG: In the way 17 you're using this in the model. 18 MR. TSENG: Yes. 19 MR. KOKKELENBERG: But the bin 20 number is basically a proxy for the history. 21 You look back and you say this one's used 22 90 percent, it goes in this bin, this one's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 70 1 used 80 percent and it goes on a different 2 bin. 3 MR. TSENG: Right. 4 MR. KOKKELENBERG: So you have a 5 time series model -- in effect, although you 6 have filtered the data so that you don't get 7 all the nuances of the time series 8 variations. 9 MR. TSENG: Well -- 10 MR. KOKKELENBERG: So if you -- and 11 if you went to more bins, you would get more 12 of that detail -- 13 MR. TSENG: That's -- 14 MR. KOKKELENBERG: You're really 15 using 2004 data, because of the -- well, 16 maybe you're not -- 17 MR. TSENG: No -- 18 MR. KOKKELENBERG: Because of the 19 way the bins are picked off -- 20 MR. TSENG: Actually, it -- 21 MR. KOKKELENBERG: And so why don't 22 you just use a time series model? BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 71 1 MR. TSENG: Okay, good question. 2 The time series data is -- you have time 3 series data of very aggregated generation; 4 right? 5 MR. KOKKELENBERG: Yeah. 6 MR. TSENG: And -- 7 MR. KOKKELENBERG: But you must 8 know the capacity utilization rates to be 9 able to get them into a bin. 10 MR. TSENG: The generation number 11 is monthly data -- 12 MR. KOKKELENBERG: Right. 13 MR. TSENG: And the capacity is 14 annual number -- 15 MR. KOKKELENBERG: So you just -- 16 MR. TSENG: So when you run 17 regression analysis, you're basically -- is 18 holding capacity constant. 19 MR. KOKKELENBERG: Yeah. 20 MR. TSENG: And -- 21 MR. KOKKELENBERG: Well, you're 22 doing that throughout the model. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 72 1 MR. TSENG: No -- I'm holding 2 capacity -- 3 MR. KOKKELENBERG: But -- 4 MR. TSENG: I'm holding capacity 5 constant -- 6 MR. KOKKELENBERG: Right. 7 MR. TSENG: But a dispatching 8 pattern of each month is different. 9 MR. KOKKELENBERG: So why don't you 10 just use that dispatching pattern plant by 11 plant and generate a time series model, 12 because it would absorb all of these 13 things -- it gets away from the economic 14 issues that were raised just as well as this 15 one does, but it doesn't make the assumptions 16 that the bins are equidistant apart, as it 17 were, no matter how many bins you push into 18 it. 19 MR. TSENG: Okay. 20 MR. KOKKELENBERG: Anyway, that's 21 something for a -- you're in the middle of a 22 presentation, and we're interrupting you -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 73 1 MR. NEERCHAL: Could I suggest a -- 2 MR. TSENG: Yeah. 3 MR. NEERCHAL: If you can maybe -- 4 MR. TSENG: Yeah, okay. 5 MR. NEERCHAL: Next five minutes 6 and -- 7 MR. TSENG: Right, okay. 8 MR. NEERCHAL: Finish and then we 9 can come back to the discussion. 10 MR. TSENG: Right. Certainly. And 11 this is the natural gas supply curve. And we 12 have the diesel fuel supply curve. And so on 13 the supply side, we created supply curve 14 based on historical generation pattern, and 15 then we'll also look at the monthly load, and 16 we convert the monthly to average. So this 17 is just one example to let you see how it 18 looks. 19 On the left-hand side is the 20 monthly -- you look at the 2005 January 21 through December monthly electricity demand, 22 and for July, I convert the monthly to an BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 74 1 average daily load curve, and that's the 2 shape. And the interesting part is if we 3 want to capture the behavior of the 4 generators, the normal monthly time series 5 data -- actually, many people tried using 6 econometric approach, but just couldn't 7 forecast the variations in demand. 8 When demand changes, the 9 dispatching pattern of coal, especially 10 natural gas, is very different -- depends on 11 the shape of the load curve, so the monthly 12 data can never pick up this 24-hour load 13 shape to reflect the differences in the peak 14 load demand. So before I solve the model, I 15 simply make some adjustment. I remove the 16 non-fossil power plants from the load. 17 So you saw the load curve I removed 18 from the load, and I make some adjustments 19 for -- the hydro generation I assume is 20 proportional to the load curve. And for 21 hydro storage, we make adjustment to increase 22 the evening (?) demand. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 75 1 And to solve the model, the 2 solution is simple. We look at each slides, 3 like our number 1, or, you know, like say 4 1:00 in the morning, and we have this demand 5 number and we go up, the model simply traced 6 the demand to supply, and they get a bin 7 number. And then from the bin number, 8 automatically, the model would generate 9 generation numbers from oil, gas and coal. 10 So that's automatically generated. 11 So we have generation by fuel type simply by 12 equating the demand to total supply. This is 13 for a single region, and for trading block 14 like the eastern trading block, then we're 15 looking at aggregation of the supply of the 16 nine regions, and you have this trading block 17 total supply, and you have trading block 18 total demand. 19 And you equate supply to demand to 20 find out the trading block generation by 21 different fuel types. The preliminary 22 findings we have is the projections is BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 76 1 actually quite satisfactory. The out of 2 sample tests performed satisfactorily for 3 historical 2004 and preliminary 2006 data. 4 And the model is capable of 5 capturing seasonal fluctuations. The shape 6 of the load curves may affect dispatching of 7 oil-based generators, because oil-based 8 generators are more peak load demand, and 9 when we use an average daily load curve, we 10 probably can flatten the load curve a little 11 bit if we have like actual every -- actual 12 daily load curves and we just try to solve 13 it, we could see higher oil dispatching, but 14 that part -- we can actually do something to 15 adjust the model behavior or the dispatching 16 order for the oil-fired units. And -- but 17 that's not directly from the data. 18 So far, everything the model is 19 doing is straightforward and no adjustment, 20 and these are the results. For the eastern 21 region, the coal and natural gas generation, 22 the model can pick up the seasonality. And BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 77 1 actually, the 2005 month one through month 12 2 is based on historical dispatching pattern, 3 and in 2004 and 2006, the out of sample model 4 runs. 5 And for the western region, the 6 model also can pick up the fluctuations. For 7 example -- you can see in mid month of -- 8 midyear of 2006, we have a spike in demand 9 for natural gas, and the model actually picks 10 up the spike. And Texas basically followed 11 seasonality very well. Not only the 12 seasonality, also the change in the level of 13 demand, and because we -- that this model 14 actually -- because -- models -- the load 15 curve instead of the monthly time series 16 data, because when we use average data, it's 17 very hard to pick up the fluctuations in the 18 load demand, especially the peak load demand. 19 The next question people ask is how 20 does a model perform in terms of -- how do 21 you evaluate a performance? So I selected 22 two methods. One is the mean absolute BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 78 1 percent -- percentage error, and the 2 calculation is very simple. For each 3 observation, I calculated difference divided 4 by the historical number, take the absolute 5 value, and sum them and divided by the number 6 of observations. In this case, I used year 7 2005, so the h is equal to 12; I have 12 8 months data. I can calculate the MAPE. Now, 9 also I can look at the 12th month percentage 10 difference. Simply sum them up and see how 11 does it work. 12 Part of the reason I look at the 13 second approach is in the natural gas market, 14 what people look is what happens to the 15 injection to the storage, like in the summer 16 months, if natural gas storage injection is 17 below normal, and then you can see futures 18 market in December, January, moving up, 19 because -- the anticipation is there may be 20 shortage, so that's why I look at it -- the 21 cumulative -- this is one -- another measure 22 in terms of specific applications in the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 79 1 market analysis. 2 For the mean absolute percentage 3 arrow for the 2005, for the east is a little 4 bit high, but for the west is below 5 3 percent, and for the Texas is below 6 3 percent. And why include other sample 7 calculation, which means I use 24 months to 8 calculate the mean absolute percentage error 9 for the east; for natural gas, it increases. 10 But for other months still less than 11 5 percent. Yes. 12 SPEAKER: Do you know what happened 13 there with natural gas, why did you get 14 this -- that's -- they're a double or nearly 15 double. 16 MR. TSENG: Part of the reason 17 is -- in this model, I mentioned earlier, 18 oil-fired units like diesel and residual fuel 19 units mostly are peak loaders, and I think 20 the load shape we use is probably not picking 21 up the actual load, but we're looking at 22 average. When we used average, then some of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 80 1 the peak load power plants would not be 2 picked up by the average load shape. 3 MR. EDMONDS: You might have had 4 some spikes for a few days in there that -- 5 MR. TSENG: Right, because 6 sometimes -- 7 MR. EDMONDS: A lot of gas, but on 8 the average, it's -- 9 SPEAKER: Right. 10 MR. TSENG: For example, weekday 11 and weekend peak load demand pattern is 12 different, because the weekday peak load 13 demand is probably high, because you have the 14 commercial end use. And for the weekend, you 15 don't have the commercial, so there may be a 16 few percentage difference. 17 MR. KOKKELENBERG: If you use the 18 median absolute percentage error, you might 19 find out if that's a good argument. 20 MR. TSENG: Right. So that's part 21 of the reason. For this exercise, because 22 the purpose is just to demonstrate this BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 81 1 methodology can work, but for -- the actual 2 use for other analysis, we can actually 3 calibrate the model a little bit more, 4 fine-tune the load curve, and also adjust a 5 bin number for the residual fuel power plants 6 and diesel fuel power plants so they'll be 7 used more. 8 That actually is modeling technique 9 which can be incorporated. For the 12th 10 month percentage difference, Texas actually 11 showed very good results here. And west is 12 very good, and east, and you have positive 13 numbers for both coal and natural gas and 14 that's the reason -- yes. 15 MR. FEDER: If I understand 16 correctly, your second performance measure is 17 not sensitive at all to any monthly or 18 seasonal inaccuracies in your predictions, 19 right? 20 MR. TSENG: That's basically 21 looking at -- 22 MR. FEDER: There's a cancellation BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 82 1 there, right? 2 MR. TSENG: For this one, there's 3 no cancellation, because it's absolute value. 4 MR. FEDER: No. The second one. 5 MR. TSENG: Yeah. For the second 6 one, there's cancellation, because the 7 purpose of looking at a second one is, if we 8 have a very hot summer, for example, in 2007, 9 if we have a very hot summer, and we expect 10 based on the model performance, you can see 11 that natural gas tend to spike up, and if we 12 can pick up the spike, then it implies demand 13 for natural gas will be higher than normal, 14 and then the seasonal injection to natural 15 gas storage in the north and northeast will 16 be below normal, and that has implication to 17 natural gas prices in the market. 18 And that's why we say -- it depends 19 on how we use the model. You actually have 20 different kind of criteria to evaluate a 21 performance of the model. 22 MR. LIDDERDALE: On the 12 month BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 83 1 percentage difference, wouldn't you expect 2 the coal air to offset -- 3 COURT REPORTER: Can you use the 4 microphone, please? 5 SPEAKER: You got to speak into the 6 mic. 7 MR. LIDDERDALE: Oh, I'm sorry. On 8 this 12-month percentage error, wouldn't you 9 expect the coal air to offset the gas air, 10 which is interesting that the east doesn't 11 have that offset? 12 MR. TSENG: The reason east doesn't 13 have the offset is because the residual 14 fuel -- in the east, I mentioned a few times, 15 we're not picking up the diesel fuel and 16 residual fuel generation very well, and part 17 of the reason is somehow, the ranking of 18 those power plants is in terms of numbers too 19 high, or the dispatching order is too low, 20 and that may require some offline adjustment. 21 So the model in issue here is -- I 22 think one is we need to do some adjustment to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 84 1 the residual fuel and diesel fuel dispatching 2 order, because from the calculation, 3 straightforward calculation, we cannot let a 4 model pick up this thing, and -- but from 5 modelist's point of view, I can change the 6 dispatching order and try to make it fit the 7 historical pattern, so that's one approach. 8 The other thing is, since we're 9 using the ranking based on the observed 10 utilization rate, we kind of miss the price 11 information. So under normal relative price 12 market structure, the model will perform 13 reasonably well, but if we have very drastic 14 change, like sometimes -- a few years back, 15 natural gas price was very high, and we could 16 see more residual fuel, and in the future, we 17 could see the relationship change. 18 And so that part is not picked up 19 in these kind of modeling framework, and 20 we're actually looking into possible ways to 21 capture the fuel switch. And there are 22 several ways to do it. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 85 1 And we're still trying. And once 2 that's done, I think the model behavior will 3 be a lot more consistent and better. 4 So the questions for the committee 5 will be -- we 'd like to have some guidance 6 and help in that area in terms of exactly 7 what is the best way to model the fuel 8 switching. And we thought of several ways. 9 One is looking at one year -- for example, in 10 2001 or 2002, we had a year where natural gas 11 was actually a lot more expensive than oil, 12 and then in 2005, oil is a lot more expensive 13 than gas. So we could look at the 14 historically -- two years and then try to 15 fish out the relative price relationship and 16 see how the dispatching pattern changed. So 17 that's one way to do it. 18 The other one is simply look at the 19 relative price of natural gas and oil and 20 look at a total generation, just look at a 21 time series data and come up with some kind 22 of coefficient, and then we can actually BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 86 1 simply apply the coefficient to the 2 dispatching equation. And basically, it's 3 like shifting the curve according to the 4 relative price. So each month, if we see the 5 price changes is drastic, then we shift the 6 supply curve -- for example, if natural gas 7 price increases, then we shift the natural 8 gas price to the left, and then in the 9 meantime, we shift the oil and supply curves 10 to the right. That's when the natural gas 11 prices have shifted to the left. 12 Yes? 13 MR. LIDDERDALE: Can't you also 14 consider treating distillate fuel and 15 residual fuel as exogenous to the dispatch 16 process, do econometric estimation of those, 17 and so you're only left with dispatching coal 18 and natural gas? In other words, distillate 19 fuel is almost 20,000 barrels a day, it 20 doesn't change. Residual fuel is certainly 21 price-elastic, but you may not be able to 22 accomplish it within the dispatch model. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 87 1 MR. TSENG: That's another option, 2 obviously. And then the question will be how 3 do we separate the residual fuel supply from 4 the dual fuel units, because some of the 5 natural gas power plants can burn residual 6 fuel? And we need to separate that. So 7 there's a lot of data issue. So that's 8 basically my presentation. 9 I have some other applications. I 10 think I will stop it here. 11 MR. NEERCHAL: I think we have 12 designated ASA discussion. Shall we do that 13 first? And then open it -- 14 MR. FEDER: Can I ask a question to 15 clarify? 16 MR. NEERCHAL: Sure. And I -- 17 MR. FEDER: Although I shouldn't be 18 allowed to -- 19 MR. NEERCHAL: I want to remind you 20 to please use your microphones -- 21 MR. FEDER: Maybe I shouldn't be 22 allowed to since I came in late, but when you BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 88 1 (inaudible) your regression models, are they 2 separate for each region or not, and is there 3 any way one region affects the other regions? 4 MR. TSENG: In the trading block, 5 like say if we look at the western block, you 6 have three regions. One region -- basically, 7 when you have trade, one region will affects 8 the other region. 9 MR. FEDER: But you still have 10 separate regressions for free chains for -- 11 MR. TSENG: Yes, each region has 12 its own demand and supply curves. 13 MR. NEERCHAL: Shall we go to 14 the -- I think Neha, you're the -- 15 MS. KHANNA: I'll keep this 16 short -- 17 MR. FEDER: We have a very tough 18 chairman this year. 19 MS. KHANNA: In the interest of the 20 number of questions -- 21 MR. NEERCHAL: No, we'll have time, 22 no problem, okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 89 1 MS. KHANNA: I'll keep it really 2 short. I think I have two broad suggestions 3 or comments. One is, I personally don't like 4 the use of bin numbers in a regression 5 equation-type setting, because the question 6 that -- the comment that Ed made, which is 7 essentially you're using something ordinal to 8 make a cardinal decision or to make a 9 cardinal conclusion. And that's just not a 10 very exciting way of doing this. 11 But I like the underlying 12 assumption that if a plant has a high 13 utilization rate, it must be that it's -- got 14 a low cost, so that is a good proxy for your 15 system cost. Can you not use the utilization 16 rate directly? Why even put it into bin 17 numbers? You're losing a lot information 18 there by taking 20,000 generators and putting 19 them into 10 bins, right? 20 MR. TSENG: Okay. 21 MS. KHANNA: Let me just put this 22 up, then you can answer -- they probably have BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 90 1 a lot of questions. So that's one question 2 that I had. The other question that I had 3 was, is there much historical variation in 4 the utilization capacity of generators over 5 time? 6 If there is, then that's something 7 your model is not going to pick up, because 8 you're assuming that it's not -- and observe 9 utilization rates and just project it from 10 there, and that thing is like changes in 11 relative prices, for example, that you talked 12 about looking at two years when there were 13 very different relative prices for oil and 14 natural gas, and see does that actually 15 affect utilization, which I think is a good 16 idea, but you have to first answer the basic 17 question: Do these utilization rates change 18 much at all, or are they determined by 19 something which is exogenous to the system 20 operator? 21 On the other hand, I noticed in 22 your graphs that the model seems to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 91 1 systematically overpredict coal use, coal 2 generation and underpredict gas 3 generation -- it's a little bit, but that's a 4 very systematic trend in there. That's a 5 little worrying. 6 And if you have something it gets 7 very systematic in there. Is there a 8 reason -- can you explain why it is that way? 9 And my last thing is -- actually -- on the 10 whole, though, I think your model is 11 performing relatively well because of its 12 ability to pick up the seasonality, and when 13 you show those spikes in the month, your 14 model seems to be able to resolve that, 15 predict that, so that's actually the positive 16 side of all of this. 17 And in anything you do from here, 18 you have to see what are you getting from 19 your efforts. 20 For example, is fuel such really a 21 big deal in the system or is it a very small 22 deal and are we chasing -- putting a lot of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 92 1 effort on trying to get a very marginal 2 improvement, given what you want to use in 3 model 4? And I'll stop there. 4 MR. TSENG: Okay. Well, actually 5 using the bin number -- originally, we 6 started the project looking at the raw data 7 directly, and the difficulty was when we look 8 at each region, like say for eastern region, 9 you have nine subregions, each region has 10 different number of observations. And so we 11 can calculate the utilization rate and then 12 just process the raw data. It creates 13 processing difficulties. That's one. And 14 the other thing is we didn't get really good 15 results. 16 MS. KHANNA: When you use 17 utilization rates directly? 18 MR. TSENG: Yes, when we use the 19 utilization rate -- 20 MS. KHANNA: When you say "good 21 results," what do you mean? 22 MR. TSENG: For example, the model BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 93 1 tend to -- just like you noticed -- as the 2 model tend to prefer a coal power plants, and 3 especially if you use the cost information, 4 then coal power plants dominate no matter 5 what you do. 6 Because by looking at the variable 7 costs, coal is the cheapest, because coal 8 fuel cost is a lot cheaper. When we use this 9 bin number approach, the rationale behind 10 this so-called ordinal approach, the way I 11 interpret is, you look at bin number 1, it 12 could be a proxy to $0.10, a penny per 13 kilowatt-hour, and then the bin number 10 14 could be equivalent to $0.10 per 15 kilowatt-hour. 16 So that's kind of the way I see it. 17 It's a proxy, because in reality, in the 18 end-use sectors, when people look at 19 electricity prices -- I think in New York, 20 you probably see $0.15 per kilowatt hour, you 21 probably -- you pay the bill. And in 22 Virginia, we pay probably like $0.08 or BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 94 1 $0.09. And so there's a price range, and for 2 the base load, it really doesn't matter that 3 much. 4 So that number actually has some 5 implications in terms -- how to interpret the 6 number, and we can probably do some 7 calculation, and then convert the bin numbers 8 to a cost information, but it's a system cost 9 and it's very hard to calculate. 10 The other thing is -- trying to get 11 cost information is, because the region is so 12 big, what we use is an average price. And 13 that creates a problem in terms of how to use 14 like -- for example, if we go back to -- if 15 you look at the map for the Mountain region, 16 I think Montana will pay a very different 17 natural gas price than Arizona. And so we 18 think sometimes more information doesn't mean 19 providing better results. 20 MR. GRUENSPECHT: But I think the 21 question really pointed more toward using not 22 the underlying cost information, but the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 95 1 utilization rate itself. 2 MR. TSENG: Right. 3 SPEAKER: Yeah. 4 MR. GRUENSPECHT: As I understood 5 the question, it wasn't saying go back to the 6 economic approach of trying to estimate the 7 dispatch curve based on fuel cost. It said 8 rather than put these things into bin numbers 9 based on their utilization rates, why not use 10 the actual utilization rates in the 11 regression -- not to go back to cost, not to 12 go back to -- for that economic dispatch. 13 But rather, the utilization rate is 14 a cardinal concept; 82.3 percent, this one is 15 64 percent, this one is 8 percent. Why not 16 just use those numbers directly? That I 17 think was the question. 18 MR. TSENG: Right. 19 MR. GRUENSPECHT: I don't know of 20 any good reason not to do it. 21 MR. TSENG: Actually -- actually at 22 the beginning, we were doing that. At the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 96 1 first round, when we were doing the 2 dispatching model, when I presented two years 3 ago, we were actually looking at actual 4 utilization rate. And the difficult part is 5 maintenance of a database is much more 6 difficult. 7 And we're seeing a range -- for 8 example, if a coal power plant -- utilization 9 rate is 85.51, and natural gas power plant's 10 is 84 percent, then you have probably more 11 problem -- the effects of picking coal power 12 plants is more pronounced in that approach, 13 when I did the calculation. 14 MS. KHANNA: That could be because 15 your model is mis-specified. Maybe you need 16 to add to that something like relative prices 17 or some other piece. But I still think that 18 may be a good starting point. I mean, use 19 that and then maybe add some of those results 20 to that model, which might help you make a 21 better prediction. 22 MR. NEERCHAL: I think you should BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 97 1 let Jae go next, because he was waiting for a 2 while. 3 SPEAKER: All right. 4 MR. EDMONDS: Yeah, just following 5 down this path a little bit, it's probably 6 something we don't appreciate going on here, 7 because you would think that if instead 8 of -- I can see the motivation for using the 9 bins because it makes the solution go faster. 10 But of course, crunching time is so 11 cheap that who cares? And so if you actually 12 take the dispatch curve literally, rather 13 than binning it, you would think that in fact 14 you would be getting these things spot-on. 15 So if you tell us is that, no, in 16 fact, if you take the dispatch curve 17 literally, and use that as your supply 18 schedule, that the performance deteriorates. 19 And that's what I don't get is, why would 20 performance deteriorate when you're in 21 fact -- with the assumption that in fact 22 those -- the capital stock is really fixed BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 98 1 and prices are fixed, why isn't that -- why 2 aren't you getting almost perfect 3 performance? 4 MR. TSENG: Okay. 5 MS. KHANNA: Because there's a lot 6 more noise in that information within the 7 bins. That's why. 8 MR. EDMONDS: But he is -- he is 9 actually doing -- he is going month by month, 10 and he's getting this dispatch curve. 11 MR. TSENG: Let me offer you one 12 example. In general, coal is preferred, 13 right? And so if in the same region, you 14 have utilization rate in the 80s for both 15 coal and natural gas, most likely, you will 16 have coal in the upper 80s and natural gas in 17 the lower 80s, using the same 18 region -- definitely there's a preference. 19 Now, if you put that model, put 20 that kind of information in the ranking in 21 the model, what happens -- how do you use the 22 capacity? What is the availability factor BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 99 1 for coal? If it's 100 percent, suddenly you 2 have this additional 10 or 12 percent coal 3 generation out of your model, and you cut 4 that equally -- percentage from natural gas, 5 so you have lower gas. I think that's what I 6 found out. And that's my experience, because 7 I tried, it didn't work. Because then the 8 ranking is very rigid, and when it's very 9 rigid, coal has definitely come out ahead. 10 MR. KOKKELENBERG: Can I ask a data 11 question? Are you aggregating this when you 12 did these tests by plant -- all coal within a 13 region or all gas within a region, or are you 14 taking the individual plants, individual 15 generators? 16 MR. TSENG: We are looking at 17 individual plants -- we're looking at 18 individual plants. 19 MR. KOKKELENBERG: And you're not 20 doing any aggregation when you were doing 21 that initial sort of testing. 22 MR. TSENG: Oh, yes, it was looking BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 100 1 at individual plants. 2 MR. KOKKELENBERG: Okay. 3 MR. EDMONDS: Plants or generators? 4 MR. TSENG: Okay. If a plant has 5 two different kind of generators, like coal 6 and gas, then you have two different 7 representation. But if a plant has two coal 8 power plants -- steam generators, then that's 9 aggregated to calculate the utilization rate, 10 and that capacity is reflected there. 11 MR. NEERCHAL: You had one -- 12 MR. TSENG: I still want to -- 13 SPEAKER: Go ahead. 14 MR. FEDER: Just to clarify what he 15 had said, when you have binned that in the 16 equation, it's not the dummy for the bin, 17 it's actually number of the bin, some -- 18 MR. TSENG: Yes, exactly. 19 MR. FEDER: Because if you're doing 20 it at the plant level or generator level, I 21 don't see why it would be necessary. I would 22 treat it as a dummy, right? I mean -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 101 1 MR. KOKKELENBERG: No, he's just 2 using bins. He's not using plant level data 3 in the results he presented today. 4 MR. NEERCHAL: Bin number. 5 MR. KOKKELENBERG: Just the bin 6 number. 7 MR. FEDER: But what does the model 8 say when you have a regression where the 9 number is a coefficient of the dependent 10 variable? It doesn't -- I mean, it's not 11 even a question whether the model performs 12 well or not -- what does it say? The 13 functional dependence is not meaningful. I 14 mean -- 15 MS. KHANNA: And actually, you 16 could choose your bin numbers to give you a 17 really nice fit -- 18 MR. KOKKELENBERG: It would better 19 fit that. 20 MS. KHANNA: Or really bad fit. 21 I'm sure you didn't do that because you just 22 picked 1 through 10. But that's a problem BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 102 1 with using something like a bin number, I can 2 just change them. 3 MR. NEERCHAL: And from the data 4 analysis point of view, I think it will be 5 nice to see where the individual plants fall 6 in that picture. I think that's what I would 7 like to see, that curve fitting -- and nice 8 to see where the individual points fall. The 9 plants that have been binned into sort of 10 bins, where do they fall in that with respect 11 to that curve. It would be interesting to 12 see. 13 MR. CLEVELAND: I think the problem 14 comes down to in the beginning, you pointed 15 out we expect this pure -- this variable cost 16 dispatching, which every rational independent 17 system operator will follow, except that 18 there are all these real world things. And 19 the problem is that you're not modeling those 20 real world things. We do not -- 21 MR. TSENG: No, I'm not, because -- 22 MR. CLEVELAND: It's congestion BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 103 1 pricing or distance from load center. And so 2 the reason -- I think if you use the raw 3 data, and you're not getting as good a fit, 4 it's because you're not modeling what's 5 causing the important deviations from what 6 (inaudible) dispatch. 7 And if you want to get a better 8 model, you're going to have to get at that. 9 And there's certainly a lot of work in the 10 literature which tries to deal with 11 congestion pricing and distance issues, and I 12 think you have more homework to do. This bin 13 approach is not very satisfactory, I'm afraid 14 to say. 15 MR. LIDDERDALE: If I may, I may be 16 to explain. My name is Tancred Lidderdale. 17 I'm supervisor of the Short-Term Energy 18 Outlook Team, which is the consumer of this 19 product, and has made great progress in the 20 work on this. The bin concept is sort of a 21 legacy approach, where effectively, he is 22 regressing cumulative capacity by one over BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 104 1 bin. Bin 1, 1 over 1; 100 percent, bin 10, 1 2 over 10, 10 Percent -- so effectively 3 regressing capacity against an ordinal 4 capacity utilization number. 5 One of the reasons for doing it 6 this way was in the calibration process, 7 where you have distillate plants that are 8 running at 10 percent capacity, how do you 9 move them up in the dispatch process? You 10 know, you could arbitrarily assign them some 11 higher utilization rate, just trying to get 12 them to work out. 13 Or we can take one plant and 14 designate it as a bin 1, just so that it's 15 forced to dispatch. So it was part of 16 convenience. So I think we have talked about 17 instead of going to the ordinal. If we had 18 100 bins, it would be -- bin 1 would be 19 representing 1 of 100 percent, bin 100 would 20 be 1 percent. 21 The obvious next step to go to the 22 cardinal approach of regressing cumulative BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 105 1 capacity against utilization rate. And I 2 think we have discussed that before, but at 3 this point, it's getting the basic approach 4 down that we -- it's a logical next step. 5 MR. FEDER: So the explanation is 6 valid, but still, what would you do over time 7 when the bin number will -- 8 MR. KOKKELENBERG: The bin number 9 stays the same. 10 MR. FEDER: Then the legacy would 11 become too much of a legacy. 12 MS. KIRKENDALL: The bin numbers 13 change every year, because the model will be 14 re-run every year. Every time there's a new 15 year, so this is based on 2005 data. 16 MR. EDMONDS: It's one year, 17 looking one year ahead. 18 MS. KIRKENDALL: It's one year of 19 base data to fit the model, and then you look 20 one year ahead and one year back to see how 21 you did. 22 SPEAKER: That's understood well, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 106 1 because I -- 2 MR. NEERCHAL: Jae, you want to go 3 first -- Howard? 4 MR. GRUENSPECHT: How would you 5 deal with forced outages? Because again, one 6 of the things that happens with these plants 7 is in a particular year, it may have a 8 load -- a coal plant -- and believe me, coal 9 plant may have a low dispatch for the reasons 10 of can't get it on to where the load is, but 11 another reason it put up a low dispatch in a 12 particular year is that it blew a steam tube, 13 and they had to take it out, and they weren't 14 allowed to run it. 15 So the question is, in a 16 year-to-year -- and you know, if you look at 17 the NERC -- I don't know if you call it now, 18 I guess you still call it NERC data -- forced 19 outage rates are pretty high, like for coal 20 plants are like 13 percent. 21 You know, that's not a scheduled 22 maintenance, that's just not available BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 107 1 because something went wrong. So I guess how 2 much -- in going out the next year, it seems 3 to me what you really want to look at is 4 really a couple of years of data, and you 5 want to distinguish -- if you have some coal 6 plant that's constantly running, and I'll use 7 your bin nomenclature -- 8 MR. TSENG: Yeah. 9 MR. GRUENSPECHT: Like in bin 10 40 percent utilization, say, I think that 11 tells you something, unless it's like very 12 unlucky -- drew the ace of spades five years 13 in a row -- you know, then you can take it as 14 really some issue in the system with getting 15 this plant running. 16 But in any given year, you wouldn't 17 want to draw a conclusion that just because 18 it ran at 40 percent last year when it maybe 19 blew a steam tube for several weeks in July, 20 does that mean that you have it running 21 40 percent, you know? So it seems that 22 looking at one year, you run the risk of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 108 1 picking up some of these random events. 2 And you would obviously want to 3 take account of new data, because the system 4 is changing -- new plants are being added, 5 load is changing. But on the other hand, 6 just looking at the latest data might sort of 7 overstate in the sense of -- in addition to 8 picking up the latest sort of changes in the 9 transmission system or other plants put on 10 line or load, you also may be overweighting 11 the sort of random outages. 12 MR. TSENG: Well, actually the 13 supply curve -- each month, I estimate a 14 supply curve based on the monthly dispatching 15 pattern. So the situation you just described 16 will be corrected the following month, right. 17 If you have unplanned outage of a coal power 18 plant in, say, March, then in April, this 19 flat curve will return to normal. 20 And by looking at that monthly 21 supply curve data, actually you can notice 22 the irregularity there. So that's very easy BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 109 1 to pick. And the other thing is, 2 theoretically, it's nice to just use the raw 3 data, for when you look at, say, 13 regions, 4 and you want to do scenario analysis and you 5 say, well, what happens if you shut down a 6 few power plants in certain regions? 7 Once I create the matrix, it's much 8 easier. Just go to the matrix and say which 9 region it is and how much capacity you lost, 10 in terms of processing. Maybe that's not as 11 important as you think, but in terms of using 12 the time series data, I think it really comes 13 down to the question, like Neha mentioned, 14 the model tend to overproject coal. 15 But using the actual time series 16 data, the model actually overproject coal a 17 lot more because of the relative ranking, 18 because if it's in the same region -- and 19 coal is always reporting higher utilization 20 rate than natural gas because coal is 21 cheaper, even though both power plants may be 22 using 80 percent. But because of the way the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 110 1 model structures, we have to make some 2 adjustment to the capacity of the coal power 3 plant. You know, what's the justification? 4 So that's another layer of difficulties. 5 MR. NEERCHAL: I think I'm going to 6 use my executive privilege here. I think 7 that I would ask Phillip to be available 8 during lunch, and maybe at the end of one 9 side of the lunch table, maybe we can 10 continue these discussions. It seems like a 11 very interesting sort of questions. 12 But before we break -- in fact, 13 before we eliminate the break and go to the 14 next session, what I would like to do is to 15 invite those who came a little bit later than 16 we did our introductions, to go ahead and 17 introduce yourself and announce your name and 18 affiliation. 19 MR. WEINIG: Please use your 20 microphone. 21 MR. NEERCHAL: I think we can start 22 with Moshe. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 111 1 MR. FEDER: I apologize for being 2 late. Moshe Feder, ASA Committee. 3 MR. NEERCHAL: Anybody in the 4 audience? 5 MS. KIRKENDALL: Jae, would you -- 6 MR. NEERCHAL: Audience -- oh, Jae? 7 MR. EDMONDS: I'm Jae. Pacific 8 Northwest National Laboratory. 9 MR. NEERCHAL: And Walter? 10 MR. HILL: I was here early. 11 SPEAKER: You're the same as you 12 where in the beginning? 13 (Laughter) 14 MR. GRUENSPECHT: No forced 15 outages. 16 MR. HILL: I'm Matt Breslin with 17 the EIA. 18 SPEAKER: Okay. 19 MR. NEERCHAL: We can figure where 20 we're going. 21 MR. MAYO: Mark Mayo. I'm with the 22 EIA, the Office of Oil and Gas. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 112 1 MR. CONNER: I am Mike Conner, EIA 2 Office of Oil and Gas, Petroleum Division. 3 MR. KYDES: Andy Kydes, Energy 4 Information Administration. 5 MS. JENNINGS: Alethea Jennings, 6 EIA. 7 MR. RADICH: Tony Radich, EIA. 8 MR. SCHAAL: Michael Schaal, EIA. 9 MR. NEERCHAL: So we go directly to 10 the breakout session, grab a cup of coffee or 11 doughnut or whatever you want to keep 12 yourself awake. So that's a warning. And be 13 back here at 11:45. 14 We are running a few minutes 15 behind, but the discussions are definitely 16 worth it. 17 (Recess) 18 MR. NEERCHAL: Let's get started. 19 I have the speaker and discussant here, so I 20 think it's a good crowd right there. I just 21 want to remind people that if you have not 22 introduced yourself at the microphone, this BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 113 1 is for the transcription purposes, please go 2 to one of the mics nearest to you and 3 announce your name and affiliation. 4 And also, as Renee was suggesting 5 just now, if you want to participate in this 6 discussion more actively, you can come in, 7 sit in any of these vacant chairs, but with a 8 request that whenever you ask a question or 9 make a comment, please announce your name 10 first, because again, this is for the 11 transcription purposes. 12 So if you agree to do that, you can 13 come and join the roundtable here, because 14 that definitely makes it for a more lively 15 discussion. That's what we really hope to. 16 MS. KIRKENDALL: Actually, why 17 don't the oil and gas people come. 18 Sue, and Mike, and Mark. 19 MS. HARRIS: I'm sorry? 20 MS. KIRKENDALL: Sue and Mike and 21 Mark, why don't you come sit at the table, so 22 if you have something to say, you can just BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 114 1 talk with everybody. 2 MS. HARRIS: I don't have anything. 3 I'm just here to listen. 4 (Laughter) 5 MS. KIRKENDALL: Sue? 6 There will be a presentation first, 7 and then there'll be some committee 8 discussion. But you guys know some things 9 that will contribute to the discussion, and 10 that's why you should be here. And Paul, if 11 you'd like to come too, whatever. 12 MR. BRADSHER-FREDRICK: I don't 13 know if Paul and Sue have introduced 14 themselves formally. You need to do that. 15 MS. HARRIS: Is there a mic? 16 MR. BRADSHER-FREDRICK: Yeah. 17 MS. KIRKENDALL: Well, there's a 18 mic at the table. Why don't you just sit at 19 the table. You can use the mic at the table. 20 SPEAKER: These people are coming 21 back? 22 MS. KIRKENDALL: They will, but BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 115 1 after our discussion. They're down in the 2 other breakout room, so they are not using 3 these chairs right now. 4 MR. BRADSHER-FREDRICK: My 5 presentation is short; there's just going to 6 be discussion afterward, yeah. 7 Shall we get started? 8 MR. NEERCHAL: You're on. 9 MR. BRADSHER-FREDRICK: Okay. 10 Good morning. I'm Howard 11 Bradsher-Fredrick. I'm with the Statistics 12 and Methods Group of Energy Information 13 Administration. Today I'm going to talk 14 about some work we've done comparing U.S. 15 Customs Service petroleum imports data with 16 EIA data. 17 You see the appropriate disclaimers 18 at the bottom of the first slide. 19 Sorry. Getting used to the 20 equipment here. Okay, this is the outline of 21 my presentation. I'll begin by introducing 22 the subject. Then I'll discuss the overall BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 116 1 goal of our work, and the short-term 2 objectives before I get to the preliminary 3 results that we have. 4 These results involve comparing the 5 geographical coverage on the two sources, 6 differences in definitions of the various 7 petroleum products, and finally how the data 8 compare. The last slide will show the 9 questions for the committee. 10 I should begin by mentioning that 11 EIA is always on the lookout for ways of 12 saving resources while not reducing data 13 quality. This is the impetus for this work. 14 Also, some of EIA's respondents 15 have made the suggestion that EIA should 16 study the use of Customs data and not ask 17 respondents for what they regard as, in their 18 opinion, essentially duplicative data. 19 The Customs Service data on each 20 import transaction -- collected that 21 information one record per transaction. 22 That's the way they keep it. These data are BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 117 1 disseminated to subscribers on a monthly 2 basis through the Census Bureau. Actually, 3 the Census Bureau disseminates a CD-ROM on 4 the 12th of the month following the 5 transactions. 6 EIA presently collects petroleum 7 product imports data on its EIA-814 survey 8 form, which is entitled, the Monthly Imports 9 Report -- and these data from EIA are also 10 very comprehensive. 11 Since EIA has access to this 12 alternative source of data at nominal cost, 13 how could this be useful in some way to make 14 our data more accurate, lessen the reporting 15 burden of our respondents or cut overall 16 costs? 17 The short-term objectives. In the 18 short-term, we're interested in how to best 19 use the Customs data. However, we need to 20 begin by comparing months of entry, 21 definitions, geographical coverage, some 22 historical data from the two sources, and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 118 1 consider the practicality of using these 2 alternative data, particularly cost, 3 timeliness, and any other considerations. 4 We'll get to the any other 5 considerations later. 6 Let's first talk about the Customs 7 Service data. They come on a CD-ROM, as I 8 mentioned. In a typical month, there are 9 about 45,000 import transactions. About 700 10 of these transactions per month involve 11 petroleum products. There are a total of 67 12 different petroleum product classifications 13 on the CD-ROM. 14 By comparison, EIA has 24 product 15 comparisons. Incidentally, the disc also 16 contains export data on a separate file. The 17 transaction month from the Customs Service 18 data comes from the entry data specified on 19 U.S. Customs form "Entry Summary." And the 20 pertinent fields, the ones we would be 21 particular interested in, are product code, 22 the country of origin, the district of entry, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 119 1 the quantity or volume, and the month of 2 product entry. 3 The EIA data. Let's first talk 4 about the month of entry. As I mentioned, 5 the Customs Service requested the designated 6 month to be drawn from the entry date on the 7 entry summary. This is also an option on the 8 EIA Form, but there are also three other 9 possibilities. And I got this information 10 from the instructions on the EIA-814 for the 11 respondents to determine the report month. 12 Geographical coverage. EIA 13 considers an import as a product entering the 14 50 states or the District of Columbia. The 15 Customs Service considers an import into 16 Puerto Rico or the Virgin Islands as an 17 import, in addition to the 50 states and the 18 District of Columbia. 19 Thus, products entering Puerto Rico 20 or the Virgin Islands are not included in EIA 21 data. I should point out that in all the 22 numerical data that I'm going to show for the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 120 1 Customs Service in this presentation, imports 2 into Puerto Rico and the Virgin Islands have 3 been removed. So the data should be 4 geographically comparable. 5 Let's talk about the comparison of 6 definitions. To generalize, EIA's 7 definitions are based upon the intended or 8 actual use of the product. On the other 9 hand, the Customs Service product definitions 10 are usually based upon the physical or 11 chemical properties of the product. 12 However, in some cases, the product 13 definition is based upon intended or actual 14 use of the product, but the Customs Service 15 intended usage definitions at times are very 16 narrow. So this is not necessarily a very 17 good formula for matches between the two. 18 Here's an example. And this is 19 sort of extreme from the Customs Service. 20 There are 13 categories of lubricants that 21 Customs has. Each has its own definition and 22 product code. This is one of them that you BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 121 1 can see up here. You'll notice that there's 2 a chemical criterion shown, a hydrocarbon 3 which contains by weight not over 50 percent 4 of any single hydrocarbon compound. But 5 there's also an intended usage specification 6 in italics, which is fairly narrow, 7 "insulating or transformer oils." 8 On the other hand, EIA has only one 9 petroleum product named "lubricant" as 10 opposed to the 13. It's fairly broad, but 11 includes a specified intended usage. I won't 12 read this, but you can have a look at it. 13 Here's another example comparing 14 Customs with EIA on a definition. You'll 15 notice that Customs defines special naphtha 16 as light oils and preparations; naphtha, 17 except motor fuel or motor fuel blending 18 stock, while EIA defines special naphtha as 19 oils with a boiling range equal to or greater 20 than 401 degrees Fahrenheit, which are 21 intended for petrochemical feedstock. 22 Here, one can see some basic BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 122 1 differences in the definitions that would 2 need to be investigated to determine how 3 different they really are. 4 Let's get to some numerical 5 comparisons here. And I notice that the 6 pointer doesn't work, so I'll have to try to 7 point out sections of the chart as I'm going 8 along. Here, I chose a month arbitrarily. 9 It was January 2005. 10 In this case, I began looking for 11 products that compared well numerically and 12 in terms of product definitions. And these 13 were the ones that seemed to do fairly well. 14 You notice on the left-hand side, we have the 15 Customs description, the EIA description on 16 the right-hand side, and the comparison of 17 the numbers that we have for that month. 18 You'll notice that these numbers 19 are reasonably close, and you'll notice that 20 the descriptions are reasonably close, at 21 least for the titles, even though there's 22 some slight variation, like finished motor BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 123 1 gasoline, Customs says, "unleaded, not 2 reformulated," while EIA's description is 3 "conventional." 4 You'll notice also that there are 5 no exact matches even though the 6 kerosene-type jet fuel is fairly close. Also 7 an interesting thing is when one sums up the 8 total petroleum products, you see numbers 9 that are reasonably close for the two. It 10 may give one the impression that perhaps 11 there's just a difference in classification 12 that just doesn't mesh very well. 13 When one now looks at nine months 14 from January to October 2005, and you look at 15 the data comparisons, I've shown the mean 16 absolute percent difference and the mean 17 percent difference in different columns here. 18 And you'll notice that these close 19 associations you saw in January seem to go 20 away when you start looking at a lot of other 21 months. Only crude oil seems to be fairly 22 consistent. I'm still not getting it. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 124 1 Well, that's okay. 2 I think everybody can see the two 3 columns. So crude oil is the only month 4 where the comparison seems to be fairly good, 5 and it's not very good anywhere else. And 6 you'll also notice we're looking at the mean 7 percent differences, the negative indicates 8 that EIA is higher, that it seems as though 9 EIA tends to be higher over the entire 10 course. 11 MR. NEERCHAL: There's a question 12 here. 13 MR. HELKIE: Well, what is it for 14 total petroleum products? 15 MR. NEERCHAL: Can you come to the 16 mic and state it? 17 MR. BRADSHER-FREDRICK: Yeah, I 18 didn't hear the question. 19 MR. HELKIE: What was the 20 difference for the total petroleum products? 21 MR. BRADSHER-FREDRICK: Actually, 22 over the ten months, I didn't make that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 125 1 computation. There was a lot of work, but it 2 could be done. I just have to add up all the 3 products, and I didn't do this. 4 MR. HELKIE: I had one just one 5 minor clarification. Did you add the Virgin 6 Islands or Puerto Rico back in or -- 7 MR. BRADSHER-FREDRICK: No, this is 8 without the Virgin Islands and Puerto Rico. 9 So presumably these numbers -- 10 MR. HELKIE: So these are taken out 11 of the EIA? 12 MR. BRADSHER-FREDRICK: I took it 13 out of the Customs. 14 MR. HELKIE: I mean took it out of 15 the Customs. 16 MR. BRADSHER-FREDRICK: So as I was 17 saying, you'll notice that these numbers tend 18 to be higher for EIA than for Customs. 19 Okay, the challenges with Customs 20 data. The product classifications in Customs 21 data are sometimes unreliable. For example, 22 EIA has noted many cases of gasoline -- in BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 126 1 effect motor fuel being reported to Customs 2 as special naphtha, in effect hydrocarbon 3 solvents. 4 Of course, Customs does attempt to 5 correct errors in their data. However, this 6 may be a particular problem with respect to 7 the date. It is sometimes questionable if 8 Customs applies revisions to the month in 9 which an import actually occurred, as opposed 10 to the month in which the revision was 11 processed. 12 This stands to reason that Customs 13 may be more worried about product 14 classifications in volumes rather than the 15 dates. 16 Another challenge is that Customs 17 data do not include a category of "unfinished 18 oils." EIA makes a distinction between 19 products that require further processing 20 versus those that do not. 21 This distinction isn't made by the 22 Customs Service. Thus, residual fuel oils BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 127 1 being imported with the intention of further 2 processing by a refinery would be reported to 3 EIA as an unfinished oil, while reported to 4 the Customs as a residual fuel oil. And this 5 isn't necessarily a small volume. In fact, 6 in January 2005, EIA shows 12 million barrels 7 of unfinished oil, which appears to have been 8 reported to the Customs as "residual fuel 9 oil." 10 I should mention that there have 11 been discussions with Customs on this issue 12 in the past. 13 It should be noted with regard to 14 the other considerations, that the monthly 15 data collected by EIA on the 814 survey 16 provide the means for selecting the frame to 17 serve as the basis for the weekly survey. 18 The weekly survey is a sample rather than a 19 census of importing companies. 20 Thus, without the company-level 21 data provided by the 814, EIA would need to 22 develop an alternative mechanism for BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 128 1 identifying companies to respond to the 2 weekly survey. 3 Also unlike EIA data, company-level 4 data cannot identified from Customs Service 5 transaction data. And also unlike EIA, 6 Customs transaction data do not provide a 7 means for distinguishing strategic petroleum 8 reserve imports from other imports. 9 Those are -- my last chart here 10 shows a section of an EIA data dissemination 11 that shows imports of crude oil for recent 12 months. It shows the strategic petroleum 13 reserve imports and the remaining imports. 14 You'll notice the small volumes in the 15 strategic petroleum reserve column, which is 16 the second column there from the left. But 17 although these numbers are small, they're 18 probably important to some of our users. 19 And the last slide are questions 20 for the Committee. What's the best way for 21 EIA to benefit from data comparisons with the 22 Customs Service? And what other further BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 129 1 research would you recommend that we do in 2 order to maybe shed more light on the issue? 3 Thanks. 4 MR. NEERCHAL: Can I ask a 5 question. I was wondering, could you say a 6 few things about what are the benefits of 7 doing the integration. What do we get from 8 the Customs data that's not in EIA or how 9 does it enhance it? 10 MR. BRADSHER-FREDRICK: I can throw 11 this to oil and gas. I could come up with an 12 answer, but maybe they might have better 13 answers. 14 MR. CONNER: This is Mike Conner. 15 MR. WEINIG: For the transcriber, 16 would you note your name, please? 17 MS. KIRKENDALL: He just did. 18 MR. BRADSHER-FREDRICK: He just 19 did. 20 MR. WEINIG: I'm sorry. 21 MR. CONNER: Part of this came 22 from -- I went out to a conference with the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 130 1 Foreign Trade Zones people and did a 2 presentation on the data we collect, and one 3 of their comments is, as Howard alluded to, 4 was, well, why are you collecting all this 5 data if you already have to report it to the 6 Customs Service? So there's that aspect to 7 it. 8 Then the other thing is, EIA 9 maintains people, computer systems, survey 10 forms, all the infrastructure that goes 11 around doing an import survey, and if the 12 data were available, we could, at least in 13 theory, eliminate some resource commitment to 14 that activity. 15 Then the other factor to consider 16 is, there's -- it's a fairly well-known fact 17 that the imports tend to be one of the more 18 difficult areas to maintain a frame, because 19 refineries and pipelines and things are 20 pretty hard to hide, but importers -- it 21 doesn't take a lot. You know, if you've got 22 an office and a telephone, you can pretty BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 131 1 much be an importer. 2 So keeping track of who all the 3 players are is a pretty big project for us. 4 And obviously, if the Customs and Census 5 already have that done and probably 6 ultimately do it better than we do it, then 7 clearly there'd be some benefits to trying to 8 use their data, for all those reasons. 9 MS. KIRKENDALL: In fact, you are 10 using the data now. We got the data. It's 11 just that we have to be very careful with it. 12 These are data that are submitted on Customs 13 forms, but they're collected by the Census 14 Bureau, and we have to be very careful how we 15 use them because they're protected. Those 16 data are not made public by the Census 17 Bureau, and they don't want us to make it 18 public either. 19 MR. CONNER: Right. 20 MS. KIRKENDALL: So there's a 21 constraint on the use of the data. We have 22 to be very careful. I think they -- our BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 132 1 staff, Mike and Mark and Sue and all try real 2 hard to use the data to try to improve our 3 data, make sure that we're capturing things 4 appropriately. But it takes a lot of 5 resources and effort to do that. So either 6 we're always in a catch-up looking at their 7 data or looking at our data trying to figure 8 out what matches, what doesn't match, what 9 should we do to make it better. And so -- 10 MS. HARRIS: I'm Susan Harris. We 11 also use our import data that we collect to 12 calculate and classify the demand number, if 13 you will, each month. And there are some 14 products that are not clearly defined in the 15 Census data. They may be contained in some 16 of the product categories, but they're not 17 clearly labeled. And so if we continue to 18 publish product supply information, then we 19 need to have those products clearly defined 20 in the Census information, and in some cases 21 they are not. 22 So in trying to map the information BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 133 1 with Census, you may not have categories 2 defined as isobutane. You may not have 3 categories defined as coke. You may not see 4 clearly defined ethanol categories. It's 5 very hard for us to determine within the 6 category's label what percentage of that 7 volume is isobutane, what percentage of it is 8 fuel ethanol? What percentage is contained 9 in that category that we want to include in 10 our import figures, and they're used in our 11 calculations product supply. 12 So that's one reason why -- another 13 reason why EIA is collecting their own import 14 data is because we do calculate product 15 supply information. And if we were to use 16 the Census data as it currently exists with 17 the problems that we're encountering with the 18 mapping, we would not be able to calculate 19 product supply for some of the products that 20 we currently do so. 21 So we have been trying to work with 22 Census to see if we can't resolve the issues BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 134 1 with these product classifications, but in 2 some areas, we've reached a point where we 3 need some further assistance from a different 4 level of expertise at that point. 5 MS. FORSYTH: Is the difference in 6 the -- I guess the classifications from the 7 two data sets or the two sources, is it 8 partly because commerce has one set of needs 9 and petroleum economists have other sets of 10 needs, so that somehow merging the two sets 11 of definitions wouldn't satisfy one of the 12 two sets of users? Is that the -- 13 MS. HARRIS: Uh-huh. 14 MS. FORSYTH: Okay. 15 MS. HARRIS: I think, as Howard 16 alluded to in the beginning, they're 17 collecting on a chemical base, and we're 18 collecting on the end use. And in some cases 19 they match up pretty well, but in other cases 20 they don't at all. 21 MS. FORSYTH: Since I don't know 22 anything about chemistry, I can say kind of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 135 1 cavalierly, you could report, let's say, 2 chemical categories rather than functional 3 categories, and what would be the cost to 4 your users if you did that? What would be 5 the cost to your users if you reported their 6 categories rather than yours? 7 MR. CONNER: Basically, our whole 8 sort of survey infrastructure over and above 9 the international trade stuff is based on 10 this end use capital. 11 MS. FORSYTH: So it's all -- 12 MS. HARRIS: All integrated. 13 MR. CONNER: So our data from the 14 refineries, the inventory holders, and all 15 the rest of them would have to be completely 16 redone. 17 MS. FORSYTH: Right. 18 MR. CONNER: And then one would 19 have to ask the question, well, okay, you've 20 been doing this way for decades. There must 21 be some -- 22 MS. FORSYTH: Reason why -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 136 1 MR. CONNER: Some value we needed 2 to maintain. 3 MS. HARRIS: Right. Presumably if 4 it was redone, something important would be 5 lost besides money and time. 6 MR. CONNER: Right, right. 7 MS. FORSYTH: Right, yeah. 8 MS. HARRIS: Okay. 9 MR. CONNER: All that being said, 10 we do use the export data from Commerce in 11 our product supply calculation. It's 12 imperfect; it doesn't have these unfinished 13 oils; we don't get exactly the right match-up 14 between the various products. And exports 15 are a smaller components of the total 16 equation, but we have gone through the 17 exercise of -- 18 MS. HARRIS: Same thing, right? 19 MR. CONNER: Dividing up all these 20 various codes on the export side. They're 21 not exactly the same codes as the imports, 22 but many of them are similar. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 137 1 MR. BINGHAM: David Bingham. I'm 2 kind of curious. So just to give you a 3 little bit of history. Back when they did 4 the Canada-U.S. Free Trade Agreement, there 5 was this harmonization of items going across 6 borders so that people could -- Canada could 7 measure the same things as the U.S. to make 8 sure that there was no dumping or anything 9 going on. And in doing that, they had to 10 change some of the systems of national 11 accounts. 12 So basically, one country was 13 measuring things one way and one country was 14 measuring the other things the other way and 15 they had historic timesavers to go with these 16 things. And eventually what they had to do 17 was sit down and say, okay, we measure 18 thousands of goods going across the borders 19 every day, and so what was classified as 20 onions now is broken up into five different 21 categories, right? 22 And that's not so bad, because you BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 138 1 could build a model that said, well, 2 75 percent of all onions is white onions and 3 things like that. 4 So my first question is, is there 5 any aggregate level at which things do match? 6 That would be one thing. 7 And the other question I would have 8 is, is it impractical to use the Customs data 9 to lower -- so rather than saying we're going 10 to use this instead, but use what you have 11 for Customs data, incomplete as it may be or 12 slightly mismatched as it might be, to lower 13 your own uncertainty estimates instead? 14 So I imagine that with everything 15 you report, you have some sort of variance 16 estimate or some sort of uncertainty 17 estimate. Maybe the best thing that can be 18 done with this data is to say these two 19 classifications seem to be highly correlated 20 with what we're measuring in their own way, 21 and we know that they're being classified 22 differently into maybe these two BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 139 1 classifications or these three 2 classifications going to one of EIA's. 3 Maybe the best thing is to say here 4 is the EIA reported number plus some other 5 stuff that we -- a particular model 6 that's -- here's the EIA number plus some 7 other stuff, and that resulting estimate is 8 going to have a lower uncertainty level. 9 Is that of any value at all to do 10 something like that? 11 SPEAKER: Uh-huh. 12 MR. BINGHAM: Is that impractical 13 to do because there are -- there's too many 14 items or too many -- 15 MR. CONNER: I think that's 16 essentially what we're doing. 17 MR. BINGHAM: Right, okay. 18 MR. CONNER: Is we're going through 19 the information that we have access to and -- 20 MR. BINGHAM: To building 21 individual models? 22 MR. CONNER: Well, not building BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 140 1 models necessarily, but comparing our data 2 against what Customs is giving. And where we 3 see discrepancies, we're trying to follow-up 4 on that on our side to get it resolved. 5 MR. BINGHAM: So what exactly does 6 that mean? I'm curious. So if they intend 7 on reporting some particular product one way 8 and maybe it's three products, but you would 9 view it as three products and they'd view it 10 as one, for instance, just because of the way 11 they're counting something or vice versa, how 12 do you mean -- how do you mean looking 13 into -- what's looking into it mean, and how 14 would you want to use that information? 15 MS. HARRIS: In some respects, we 16 have the three categories and compare it to 17 the one we have. 18 MR. BINGHAM: Okay, sure. 19 MS. HARRIS: We also use the 20 information to see if we have the same 21 companies reporting to us as reports to 22 Census. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 141 1 MR. BINGHAM: Sure. 2 MS. HARRIS: And the MOU that we 3 have with them allows us to use their data as 4 a frame reference to ensure that EIA is 5 collecting import information from the same 6 companies that are filing with Census. And 7 that's strictly what we're allowed to use the 8 data for, as a frame reference. 9 MR. BINGHAM: Okay. 10 MS. HARRIS: If we find categories 11 that don't match -- what Mike I think is 12 alluding to, and you can speak up for 13 yourself -- is that we try and contact those 14 companies as best we can and request that 15 they file with EIA, and capture the data that 16 way. That's what we're trying to do right 17 now. 18 MR. BINGHAM: Okay, so -- 19 MS. HARRIS: We don't typically 20 take the data and take the difference between 21 the two and expand our information; that's 22 not part of this MOU. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 142 1 MR. BINGHAM: Okay. 2 MS. HARRIS: We're trying to 3 capture those respondents that should be 4 filing with EIA and they're only filing with 5 Census. That's how we're trying to use the 6 information as a frame. But there are some 7 categories where we clearly don't have a 8 match, and those are the ones that we have 9 difficultly in resolving through the 10 information -- we have issues. 11 MR. NEERCHAL: Can I ask a quick 12 follow-up on that one? And if you make that 13 table, the categories that kind of 14 100 percent agreement and categories where 15 there's overlap, categories that are 16 split -- used in more ways than they do and 17 the other way around, what could be the kind 18 of a distribution now? What is the 19 percentage of categories where you have full 20 agreement? Do you have an idea? 21 MR. CONNER: I don't know. Did you 22 do that as part of -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 143 1 MR. BRADSHER-FREDRICK: Well, I 2 tried to, given my limited knowledge, and 3 it's a fairly limited number. It seems like 4 where one was reasonable confident, and 5 partly I was looking at data, too. So you 6 may be influenced when you start seeing data 7 matches or non-matches. 8 MR. HILL: Actually, I had the same 9 question. 10 MR. BRADSHER-FREDRICK: Okay. 11 MR. HILL: Maybe it was possible 12 to -- if you're reporting three different 13 numbers in an order, since it's reporting in 14 one way -- there's some way to look at the 15 data that in essence matches those? You 16 pointed out in maybe screen 13 here, that 17 best matching to be for kerosene-type jet 18 fuel, and then on the next slide, 19 kerosene-type jet fuel is actually the worst 20 match. 21 MR. BRADSHER-FREDRICK: Yeah, 22 that's right. It was good on one month and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 144 1 it was terrible on the others. 2 MR. HILL: Which makes it look like 3 it might be harder to make a guess. So 4 that's the 50 percent. Or it's the worst 5 example there. 6 MR. BRADSHER-FREDRICK: Yeah. And 7 EIA was high on every month except for that 8 first one, I think -- higher than Customs. 9 MR. HILL: The introduction was 10 that we want to try to reduce unnecessary use 11 of our time, and I guess having additional 12 categories is just the opposite effect that 13 you'll undercollect, more disaggregated data. 14 MR. BRADSHER-FREDRICK: Uh-huh. In 15 the paper there's a lot more information than 16 I showed here. I mean, you may have looked 17 at some of those long sets of tables that 18 show all the products. So I did do some 19 product comparisons, at least for one month 20 showing everything. So you can see some of 21 the attempts at some comparisons. 22 It seemed as though like LPG that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 145 1 we have -- when I combined the butylenes and 2 butane, and I've forgotten all of the 3 different types -- I guess propane, butane, 4 propylene and butylene, it seemed like the 5 numbers were fairly close early on, but then 6 this went away to some extent. 7 MR. HILL: I noticed that those are 8 one of the smaller -- noticed that kerosene 9 was one of the smaller category. LPG-1 10 with -- this maybe three times the kerosene 11 use. It maybe possibly with the smaller 12 categories there's more overhead but really 13 that's not the case either. 14 MR. BRADSHER-FREDRICK: I didn't 15 fix -- 16 MR. HILL: The smaller categories 17 are -- there's only one type of -- or a small 18 number of types of -- propane that you got to 19 use and so that's -- there's a more natural 20 match. I mean, that's not even true, which 21 would mean this -- the process of 22 disaggregating -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 146 1 MR. BRADSHER-FREDRICK: If you look 2 at the big table, it seems as though, like I 3 mentioned with the lubricants, that Customs 4 just has a huge number of slight 5 differentiations on things. I tried to 6 combine them and look at total aggregates and 7 compare these with EIA data, but you can see 8 in a lot of cases this just didn't come out 9 very well. 10 I did look at a second month, which 11 I didn't show in great detail -- October. 12 And one was seeing -- in terms of the total 13 products, one saw again a very close 14 comparison. It was like within one percent, 15 like January was, but you still saw 16 everything just -- probably no better, no 17 worse than this. And it probably should've 18 been somewhat worse, I don't remember. 19 But when one looked at all the 20 categories there -- so I mean, one could do 21 this exercise for several more months and see 22 if one starts seeing any patterns whatsoever. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 147 1 MR. NEERCHAL: Ed. 2 MR. BLAIR: Ed Blair. I have three 3 naïve questions. The first is, you've picked 4 out some that you hoped would match pretty 5 well, and I guess there were some that were 6 hopeless, like that unfinished oil. 7 MR. BRADSHER-FREDRICK: Uh-huh. 8 MR. BLAIR: Would there be a 9 benefit to being able to use Customs/Census 10 estimates for just these categories and not 11 for the ones that are hopeless? Are there 12 benefits in terms of frame maintenance, data 13 collection, reporting burden, or is it all or 14 nothing? 15 MR. CONNER: This is Mike Conner 16 again. That's one I guess we really haven't 17 considered all that closely. I mean, 18 conceivably you could say that, well, maybe 19 the answer is we have a survey that goes out 20 and collects some of those things that aren't 21 identified in the Census/Customs data, like 22 unfinished oils. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 148 1 And you could say, well, since 2 there's only a limited number of players who 3 would import unfinished oils -- refiners in 4 particular, that you could almost say, well, 5 okay, the frame for that is the same as the 6 frame of our refiners, and therefore it's 7 easier to do it. 8 The problem I guess would be that 9 then you would have to -- and then you'd say, 10 well, we'll use the finished products, except 11 that the finished -- the unfinished oils are 12 in the Census/Customs data. It's just that 13 they're classified as distillates and 14 residues and kerosenes and various other 15 things. 16 So you'd have to somehow I guess 17 back those back out of the Census/Customs 18 data. So I mean, yeah, I guess conceptually 19 you could do something like that. I don't 20 know that we've really looked at sort of the 21 cost benefit, whether the cost of doing that 22 would -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 149 1 MR. BLAIR: In any case, at the 2 risk of stating -- I hold on to my second 3 question -- at the risk of stating the 4 obvious, if it's in for diamond for dollar, 5 then there's no sense splitting the stuff 6 out. And if it is then the question is, is 7 there a way to make it work. 8 And my second question is, you've 9 shown a month where they matched real well, 10 and then you've shown over a period of 10 11 months that on average they didn't match very 12 well month-by-month, but I think you also 13 indicated that there's issues in terms of how 14 the two parties treat timing. 15 And so the question is, if we 16 accumulate it over the 10 months or if we 17 accumulate it over 6 months -- you know, you 18 talked about aggregation across categories, 19 how about aggregation over time from a user's 20 perspective? Is there anything magic about 21 one month? 22 MR. CONNER: And I think in the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 150 1 analysis of petroleum data, yes, there's a 2 lot of interest in individual months, because 3 of the seasonal variations and what goes on 4 and things like that. 5 MR. BLAIR: And if you note that 6 would shoot that, and then the third question 7 really would be a pipe dream, okay, you have 8 your particular way you have to classify the 9 data for consistency with everything you're 10 doing. Is there any room for negotiation on 11 the other side? I realize you can only 12 control what you can do, and I'm going to 13 guess that likewise, Customs has very 14 specific requirements -- for example, that 15 they use chemical composition for purposes of 16 auditability, and they may -- I don't know if 17 they have different tariff structures or 18 anything like that, but if nothing else, just 19 auditability. So -- 20 MS. HARRIS: And taxes. 21 MR. BLAIR: Yeah, right. 22 MR. CONNER: And as I recall, I BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 151 1 wasn't really heavily involved in this, but 2 from what I understand when we approached 3 Customs about creating an unfinished oils 4 category, their objection was what's the 5 difference between kerosene and unfinished 6 oils and kerosene and anything else? And the 7 answer is, well, nothing other than their 8 intended end use. And so they didn't really 9 care too much for that. So -- 10 MS. HARRIS: Since it had the same 11 chemical composition? 12 MR. CONNER: Right. 13 MS. HARRIS: Susan Harris again. I 14 can recall -- I've been here for a little bit 15 of time, and I can recall us collecting our 16 import form where at one point we did not 17 collect liquefied petroleum gases; that we 18 picked up the Census information and used it 19 for a period of time. 20 And we did collect all the other 21 finished products and the unfinished 22 products, but it was the LPGs primarily that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 152 1 we were relying upon for Census information. 2 And I'm trying to recall the exact year, but 3 I think it was back in the '70s that we 4 discontinued that, and we ended up collecting 5 it on our own import form because the data 6 became so unreliable when we started looking 7 at -- talking with other industry 8 associations. 9 We went to the GPA, and they would 10 raise issues about some of the products and 11 what we were seeing. And we just went back 12 and started adding it to the form. And I 13 believe this was back in the late '70s where 14 we added it on the form. 15 There were some calculations. I 16 think we ended up with FA and FV (?), and 17 there were some mixes going on. We had EP 18 mixes going on. We had started changing our 19 survey forms in the '70s and the '80s, I 20 think. And the classifications of how 21 they're figuring out the mixes, we had some 22 categories, percentages that we had to come BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 153 1 up with, and the information and the 2 calculations that we were doing weren't 3 giving us what we were looking for. So we 4 ended up adding to our forms themselves. And 5 so we have tried in the past only collecting 6 certain types of products, but currently, we 7 have gone through -- now we're collecting 8 everything. So -- 9 SPEAKER: Of course -- 10 MS. HARRIS: Not to say it couldn't 11 be done again, but -- 12 MR. CONNER: And in fact, the whole 13 thing would -- comparing the data works both 14 ways, because fairly recently, the EPA was 15 beating us up because they said that the 16 Customs data was showing more butane imports 17 than we had, so -- 18 MS. HARRIS: Right. So now we're 19 trying to -- 20 MR. CONNER: Goes both ways. 21 MR. NEERCHAL: Could I ask a 22 question? I don't know I should BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 154 1 even -- maybe this is the time to be off the 2 record, I guess. 3 Is there a political pressure for 4 us to use the other dataset? I mean, I'm 5 beginning to get the feeling that the effort 6 involved in making it really benefit 7 maybe -- you know, suppose you conclude that 8 it's not worth the effort of going through 9 this integration process, is that the end of 10 it? Should somebody -- no, no, no, you got 11 the time of efficiencies and so on? 12 MS. HARRIS: Actually, I've been 13 interested in trying to resolve some of the 14 mapping issues, only because of the frame 15 issue -- and also based on our resources. 16 We're constantly going and comparing 17 information trying to make sure that the same 18 companies that file with Census are filing 19 with EIA. 20 And at some point you reach a break 21 where it's not beneficial. They're so small. 22 Some of the companies only import once a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 155 1 month, and based on our current resources, 2 you have to ask yourself the question, do we 3 have 90 percent of the companies filing with 4 us, and should we then be using the Census 5 information to benchmark against some of the 6 other products and just putting in some other 7 calculation in there to capture the companies 8 that float in and out each month, or what 9 percentage are we actually capturing and 10 where is our -- at what point do you say I 11 don't need 100 percent of these respondents, 12 but I can get the additional volumes through 13 another method? 14 But that would be at a total level. 15 It still wouldn't be at the subcategories 16 I've been looking for. So we still have the 17 mapping issue even if you were to do that. I 18 still couldn't hit propane, couldn't hit 19 butane. I can hit a total, maybe, but I 20 wouldn't be able to get the breakdowns I've 21 been looking for. I still think -- I don't 22 think that resolves our mapping issue. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 156 1 MR. NEERCHAL: I think there's 2 something you can do, you don't have to do 3 every year. Something you can do every once 4 in a while perhaps. That kind of a 5 comparison made -- it's category comparison. 6 And that doesn't change very often, does it? 7 MS. KIRKENDALL: The categories 8 don't change very often. 9 MS. HARRIS: The categories don't 10 change. The volumes are obviously 11 very -- they fluctuate every month, 12 considerably. 13 MR. NEERCHAL: I see. 14 SPEAKER: As well as the 15 differences. 16 MS. HARRIS: As well as the 17 differences. Yeah, as you can see in the 18 charts, January might look good, but if you 19 look at 10 months, it's kind of -- there are 20 certain months that because of the 21 seasonality have particular problems. 22 MR. BRADSHER-FREDRICK: There's a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 157 1 question in the back? 2 MR. NEERCHAL: State your name, 3 please. 4 MR. HELKIE: Bill Helkie. I have a 5 comment more than a question, and my comment 6 is I think we're pooh-poohing a little bit 7 this territorial difference. This 8 territorial difference is huge, right? 9 Because you've got this -- at least I think 10 we still have this big Hess refinery in 11 Virgin Islands, right? 12 SPEAKER: Yes. 13 MR. HELKIE: I can tell you some 14 horror stories about that what that Hess 15 refinery did to macrodata in the 16 settlements, (?) okay? Basically because the 17 Bureau didn't do a very good job of doing a 18 territorial adjustment. So this going from 19 this -- from the Census definition of the 20 U.S. through the GDP and DOE definition of 21 the U.S. is not trivial. 22 And so I think if one decided that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 158 1 they wished to use Census data, after about 6 2 or 12 months, The Bureau of Economic Analysis 3 would come back and say, why didn't you ask 4 us? Because we really need that territorial 5 adjustment to make sense out of the GDP data. 6 So I just think it's not -- at least in the 7 old days, especially in the old days in the 8 '70s, when GDP data was 72 basis -- so the 9 GDP data constant price, what do you price 10 oil at in 1972? $2? 11 So you look at 1983 data, what was 12 the price of oil? $33? So you had a 16 13 times, okay? Where was the territorial 14 adjustment done on non-oil? So they're just 15 making incredibly huge errors in the GDP 16 estimate, right? 17 So we at the Fed, where I worked at 18 that time, would say, well, this is what the 19 PA (?) say GDP is, but it's screwed up 20 because of these inventory adjustments in 21 Virgin Islands. And here is what GDP really 22 is. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 159 1 They don't -- you would think it's 2 not much. It was 6/10ths, 7/10ths, 8/10ths 3 of a percentage point annual rates, and 4 sometimes bigger, okay? So that's not a 5 trivial issue -- the territorial adjustment. 6 MR. CONNER: This is Mike Conner 7 again. If I can just clarify the way we do 8 this. We do in fact have imports going into 9 the Virgin Islands or Puerto Rico. 10 But when we do our product supply 11 calculations and we do our reports and 12 things, we only consider the 50 states. And 13 the supply that comes from the Hess refinery 14 and other places in the territories is 15 reported as an import. If you look at our 16 country of origin tables, we have the Virgin 17 Islands and Puerto Rico listed as countries 18 of origin. When we do our reports for the 19 IAEA, we add those back in. 20 MR. HELKIE: But if you weren't 21 doing it, you couldn't do it. If you weren't 22 doing the survey, you couldn't do it, right? BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 160 1 If all you were doing was use the BA's 2 data -- I mean Census data, and you weren't 3 collecting the imports from the Hess 4 refinery, how could you do it? 5 MR. CONNER: I honestly don't know 6 it. 7 SPEAKER: I don't know. 8 MR. CONNER: Do you know how the 9 Census is handling -- 10 MR. BRADSHER-FREDRICK: Well, I'm 11 not sure how Census handles it, but the 12 transaction data just shows the imports in 13 the Virgin Islands and Puerto Rico. 14 MR. CONNER: But I believe -- 15 MR. HELKIE: There are imports 16 there, too, but they don't know what's coming 17 back on. 18 MR. BRADSHER-FREDRICK: Yeah, 19 that's right. 20 MR. HELKIE: And you got the 21 inventory change in the middle. So it's 22 not -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 161 1 MR. BRADSHER-FREDRICK: That's 2 right. 3 MR. HELKIE: Just really an 4 exercise. If you then report the data, I 5 think it will be a real issue in trying to 6 work it all out. So -- 7 MR. CONNER: I think there's a 8 Customs form that tracks -- and maybe 9 somebody knows this -- but I think there's a 10 Customs form that tracks movements from 11 territories to the 50 states. 12 MR. HELKIE: There might be, but I 13 remember in the old days, they got it from 14 you. 15 MR. CONNER: Right. And I'm not 16 sure how that -- 17 MR. HELKIE: Maybe they changed it. 18 MR. CONNER: Gets into this. 19 MR. HELKIE: I don't know. 20 MR. CONNER: That's actually one of 21 the reasons to go through this exercise, 22 because there's that kind of issue. There's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 162 1 also the whole thing with the Foreign Trade 2 Zones and the bonded products that we really 3 need to do some work on on our end to get 4 that right, and make sure that we're 5 collecting the data appropriately. So 6 there's a lot of different dimensions to this 7 thing. This is only one aspect of it, but to 8 the extent that we're able to better 9 understand these Census and Customs 10 numbers, it's going to be a benefit to EIA. 11 MR. HILL: But are Customs here 12 intentionally underreporting -- could you 13 have the (inaudible) again -- underreporting 14 because of things like taxes? That's maybe 15 another political issue. You may want to 16 underreport what's coming in at that level, 17 but then once it's in the country the proper 18 number of years. 19 MR. BRESLIN: Matt Breslin. I 20 don't think they underreport, if that's what 21 you're asking. But I get nervous with -- and 22 I might be incorrect, but I get nervous with BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 163 1 the classification of the product is 2 different because of the taxes applied to it. 3 I don't think that they 4 under-report anything. It's just that if 5 finished motor gasoline is "X" amount of 6 dollars or whatever and special naphthas is 7 this, they're going to report it as a special 8 naphtha to pay that, and that's where we 9 get -- when we are comparing -- unless we 10 research the company, we really have no idea 11 what it actually is. 12 MR. NEERCHAL: Any other comments? 13 Go ahead. 14 MR. BLAIR: No, I was just going to 15 say we need to bring our representatives -- 16 MR. BRADSHER-FREDRICK: Yeah. 17 SPEAKER: Oh, yeah. 18 MR. BRADSHER-FREDRICK: I think 19 others are coming back. 20 MR. NEERCHAL: I think they're kind 21 of trickling in. We'll wait for others to 22 show up and then do the summary. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 164 1 Let's have a break. 2 (Recess) 3 MR. NEERCHAL: We are back, more or 4 less. 5 We will start with the summary of 6 the two breakout sessions. We had designated 7 people taking -- 8 MS. FORSYTH: Sorry. 9 MR. NEERCHAL: I was going to 10 actually turn it over to you. 11 MS. FORSYTH: Well then -- 12 MR. NEERCHAL: So we had designated 13 people taking notes on this one so that they 14 can report to the entire Committee. I'm 15 going to invite Barbara to summarize this 16 session on Petroleum Imports Data. 17 MS. FORSYTH: Howard presented a 18 paper looking at similarities and differences 19 in two data sources on petroleum imports, or 20 at least I think that's -- I am going to 21 invite other members of the workgroup to 22 contribute at any time. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 165 1 At least one of the ideas was that 2 if Customs, one source of data, is collecting 3 information on petroleum exports that is 4 similar to data that EIA is collecting, then 5 perhaps there is some benefit to letting 6 Customs continue to collect that data and 7 benefit in someway from the either reduced 8 need to collect data on the part of EIA or 9 perhaps simply to enhance the data that EIA 10 currently uses. 11 And so I think there are some cost 12 and benefit considerations into comparing the 13 two data sources to see just how comparable 14 they are and how they could be used. 15 So I think Howard focused on three 16 comparisons between the two datasets. First, 17 the geographical comparison -- what counts as 18 an import and what counts as an import to 19 where in each dataset, then the definitions 20 of the petroleum categories, how much do they 21 match between the two datasets, and then 22 numerical comparisons. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 166 1 When you get categories that kind 2 of match, do you have similar estimates or 3 similar quantities of imports, and if you 4 do -- if you don't, what does it mean for how 5 you can use the data? 6 And I think most of our discussion 7 focused on the comparison of the definitions 8 of the petroleum products, and it's important 9 because, at least in part because people who 10 work with the import data on the Customs side 11 have different needs than people who work 12 with the data as end users in energy 13 statistics. 14 So the questions I think for the 15 Committee were what is the best way to make 16 use of EIA data and comparisons between the 17 data, and is there further research that the 18 Committee would recommend. 19 And I think we focused -- I think 20 we answered -- tried to give some suggestions 21 on both topics. But I think the petroleum 22 people actually discussed more on the best BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 167 1 way for EIA to benefit from the data. 2 And I think there was at least one 3 way that they could benefit, and that's in 4 monitoring the frame and assessing the frame 5 that EIA uses to gather data on petroleum 6 imports. And so at least my understanding 7 was that the frame and monitoring the frame 8 is one important contribution that using the 9 Customs data could provide. 10 And I think then the Committee 11 focused on expanding the research and 12 comparing the definitions, possibly looking 13 at different ways that the definitions match 14 and mismatch. 15 So are there Customs definitions 16 that tend to be broader than the EIA 17 definitions, and is that the standard kind of 18 mismatch, and if it is, can you take 19 advantage of it by possibly disaggregating, 20 or are there overlaps that aren't necessarily 21 hierarchical? And if those are more 22 prevalent in the mismatches, then how can you BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 168 1 take advantage of those kinds of mismatches, 2 and possibly use the data accordingly in a 3 different kind of disaggregation? 4 So I think looking into the natures 5 of the mismatches and the systematicity in 6 the mismatches was one research topic that 7 was suggested. 8 We talked about other ways of using 9 the Census data that might be more useful. 10 For example, aggregating them across time and 11 possibly getting better numerical matches, 12 but because of the specific needs of EIA, 13 aggregating across time it seems isn't a very 14 good use of resources. And I think that's 15 what I got from it. So if the Committee got 16 other things -- 17 MR. NEERCHAL: Anyone want to add 18 anything? Moshe, you were going to -- 19 MR. FEDER: Yeah. I'm -- 20 MR. CLEVELAND: Could I just ask 21 one question? I wonder what's in the ongoing 22 discussions you want -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 169 1 MR. FEDER: They want my time to be 2 limited. 3 MR. CLEVELAND: I just came at the 4 end, and I was watching the table comparing 5 EIA values versus Customs, and they seemed 6 very close in almost all cases. So I guess 7 the question is -- 8 MS. FORSYTH: For one month. 9 MR. NEERCHAL: For one single 10 month, yes -- 11 MS. FORSYTH: The particular ones 12 that were closest to -- 13 MR. NEERCHAL: January 2005. 14 MR. CLEVELAND: The naïve question 15 is why not just let Customs do it? 16 MS. FORSYTH: Exactly. 17 MR. CLEVELAND: So what are the 18 reasons not to have Customs do it? 19 MS. KIRKENDALL: Well, they don't 20 agree all the time, for one thing. 21 MR. BLAIR: And those were selected 22 categories. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 170 1 MS. FORSYTH: And the users need 2 different categories. 3 MS. KIRKENDALL: We have a wide 4 variety of products in both Census and in 5 EIA, and the ones that were on the screen are 6 the ten that actually matched. 7 MR. BINGHAM: Yes, what they 8 have -- 9 MS. FORSYTH: Kind of. 10 MS. KIRKENDALL: Kind of. 11 MR. BINGHAM: Would they have to 12 name, but they actually showed -- there was 13 another slide that actually showed a 14 ten-month average difference and some of them 15 were as high as 50 percent, that sort of 16 thing. So -- 17 MR. CLEVELAND: The EIA -- 18 MS. KIRKENDALL: Yeah, the one on 19 the -- closest on the first slide had an 20 average percent error -- I mean, an error of 21 50 percent. 22 SPEAKER: You mean 50 percent BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 171 1 difference -- 2 MS. KIRKENDALL: Right. 3 MS. FORSYTH: And the differences 4 were also systematic, so that EIA's numbers 5 tended to be lower. Do I remember that 6 correctly -- 7 SPEAKER: EIA's were higher -- 8 MS. FORSYTH: Higher. 9 MS. KIRKENDALL: I think EIA's were 10 higher. 11 MR. EDMONDS: Do these observations 12 all come from a common pool -- or are 13 different people collecting things at a 14 different point in the system? Obviously, 15 the tax guys are collecting it when they 16 collect their taxes. Is the EIA getting its 17 information from a different pool of 18 observations? 19 MS. KIRKENDALL: We don't think 20 it's supposed to be a different set of 21 observations -- 22 MR. KOKKELENBERG: Are they BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 172 1 sampling or are they Census -- 2 MS. KIRKENDALL: For the monthly, 3 it's supposed to be anybody who imported. 4 Now, that's a hard to frame to keep up 5 because people can come and go. So there's 6 always some challenges around the edges 7 figuring out is there a new importer or isn't 8 there, and is that a reason for the 9 differences, because we only ask the same set 10 of people to report. 11 I think there's a -- that we say if 12 you imported, you have to report this. But 13 I'm not sure a new importer would actually 14 know that he needed to do that, and he might 15 slip through the cracks. 16 MR. KOKKELENBERG: So the tax 17 people might be more accurate because they 18 have to collect the tax? 19 MR. HILL: I actually have raised a 20 question like that, and really the cursory 21 answer that's still in the audience is 22 they -- the answer was that the tax people BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 173 1 might get the product that has the lower tax. 2 So that -- a product might come in. There 3 are several ways of reporting it. The tax 4 people are more willing to see that listed as 5 the item that's the lower tax on it. And 6 then when it comes to EIA, they now see a 7 different -- that product was in a different 8 category. 9 MS. FORSYTH: I'm not sure there 10 were data on that, though. 11 MS. KIRKENDALL: No. 12 MR. EDMONDS: No, no, there was 13 not. 14 MS. KIRKENDALL: That was a guess. 15 MR. EDMONDS: So there really is a 16 different information set -- 17 MS. KIRKENDALL: The product 18 details just don't match very well at all. 19 Census tends to use the chemical composition. 20 EIA tends to use end use. Neither is 21 perfectly in that category, but that's sort 22 of a tendency, and so they just don't match. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 174 1 MR. EDMONDS: I think the answer to 2 my question is very clear, that it really is 3 two different sets of observations. That is, 4 you're asking the same people, but it's a 5 different set of observations. 6 MS. KIRKENDALL: Well, they can 7 send us this -- they are supposed to be based 8 on the Customs data. At least I think they 9 are. 10 MR. EDMONDS: They're filling out 11 two separate forms. 12 MS. KIRKENDALL: There's two 13 separate forms, and they don't match at all. 14 MR. EDMONDS: Right. And they are 15 being asked slightly different questions. 16 MS. KIRKENDALL: That's true. 17 MR. EDMONDS: It's two different 18 observations sets. 19 MR. BLAIR: At the end of the day, 20 yes. 21 MS. KIRKENDALL: At the end of the 22 day, yeah. Only there's supposed to be a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 175 1 linkage, and so that's what we're trying to 2 establish, and it's a little difficult. 3 MR. NEERCHAL: Correlated. 4 MS. KIRKENDALL: Yeah. 5 MS. FORSYTH: Some respondents 6 maybe in the same place you are. They are 7 like, okay, we got these Census 8 classifications, how do we turn this into 9 what is being questioned from EIA? I mean, 10 in the end, we would be working from a single 11 records -- a single record to produce both 12 sets of data? 13 MS. KIRKENDALL: Mike, got any 14 observations on that? You're the one who has 15 gone to some meetings where some of these 16 people may have talked to you. 17 MS. FORSYTH: I hope the question 18 is worth the effort. 19 No? 20 MR. CONNER: Actually, I'm not the 21 one that's done most of the work on this, but 22 it's my understanding -- hello -- I mean, we BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 176 1 do have at least anecdotal evidence to 2 support the notion that the product 3 classifications that we get on the Census 4 data are in fact being reported based on the 5 lower tax rate, because what happens is we 6 call the companies up and we say, well, we 7 notice that you got all this volume. 8 And then we ask them what it is and 9 they describe it to us. And we say, well, 10 okay. That's gasoline. Gasoline that was 11 reported on the other data as special 12 naphtha. So I mean, we do have at least 13 experience that suggests that that happens 14 quite frequently. 15 And what was the other part of the 16 question? 17 MR. BLAIR: Are the users 18 essentially using the same information to 19 answer both questions? 20 MS. KIRKENDALL: The respondents. 21 MR. BLAIR: The respondents. 22 MS. KIRKENDALL: Do the respondents BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 177 1 use the same information to fill out the two 2 sets of forms? 3 MR. CONNER: Yes. I mean, if this 4 isn't right, somebody tell me, but I don't 5 think they have two sets of import records 6 that they are using to fill out forms for 7 Customs versus forms for us. 8 MS. FORSYTH: Or two offices that 9 manage the separate data collections, because 10 that in essence would be the same thing. 11 SPEAKER: Mark. 12 MR. CONNER: Yes, that happens. 13 Yes, that actually does happen. So yes, in 14 that sense, we may be getting two different 15 people reporting to us. But it's also 16 possible in many cases to kind of draw 17 conclusions based on the company and the 18 activity that we know they're engaged in and 19 the location that the product comes in to. 20 You know, for example, that you're 21 going to get a lot more petrochemical 22 feedstocks coming into the Gulf Coast than BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 178 1 you are into New Jersey because -- and the 2 stuff coming into New Jersey is probably 3 going to New York Harbor and is probably 4 gasoline. So based on those kinds of sort of 5 other information that we have, we can get a 6 pretty good idea of what the product really 7 is. 8 MR. KOKKELENBERG: Isn't there a 9 North American Industrial Classification 10 System which would -- it may not have the 11 level of detail you want, but it specifies 12 all the products, and the plants that makes 13 those products. That used to be the Standard 14 Industrial Classification System. Now, it's 15 North American because of NAFTA. 16 MR. CONNER: Yes. I understand 17 what you're saying. If all this coding has 18 already been done for international trade, 19 then how come we're trying to put it into 20 different buckets, and the reason really is 21 because we're trying to take the import data 22 and fit it into the context of all the other BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 179 1 data that we're collecting from the U.S. 2 refiners, U.S. inventory holders, and various 3 other operations. 4 So we have to get our import data 5 to be consistent with all those other things 6 that we're collecting data on so that we can 7 calculate these demand figures, product 8 supply. 9 MR. NEERCHAL: Any other comments 10 or questions? 11 Thank you. 12 MS. KIRKENDALL: Thanks, Mike. 13 MR. NEERCHAL: Thank you, Mike. 14 Moshe, you're on. 15 MR. FEDER: Yes. We started by 16 talking about the Annual Energy Outlook, 17 which is one of EIA's most-read publications, 18 specifically the 2007 edition. But it turned 19 out in the discussion that the questions that 20 I'm going to describe to you, and some of the 21 questions that Cutler and others raised 22 actually have the general scope. And BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 180 1 fortunately, Howard was the group inspector, 2 and he helped put things in context of EIA in 3 general. So I think these are very 4 interesting questions. 5 For instance, I'm probably not 6 using the right term -- what do you attribute 7 certain components that say of E85 or other 8 fuels that have gasoline and ethanol in them, 9 and things like that, other biofuels, 10 questions of this sort. 11 And another question is corn. 12 Energy that's in corn, which is an 13 input -- in turn, how do you balance that 14 against the output, which is energy in the 15 ethanol. And a point that was made by Cutler 16 regarding the energy balance here -- we are 17 not talking about -- am I saying this 18 right -- thermodynamical balance. But it's 19 rather a social or economic definition of 20 what the balance should be. 21 And maybe you can break this -- 22 MR. CLEVELAND: I think we're BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 181 1 introduced to how EIA is now reporting 2 biomass and ethanol, because it's such a 3 growing fraction of our motor fuel 4 consumption, and it's an important political 5 issue as well. 6 So we need to keep track of it. 7 And I think there was one issue of how 8 should -- how do you, in an appropriate 9 mathematic way incorporate ethanol into the 10 tables. 11 And I think we were relatively 12 happy with the way they did that. There was 13 another issue of how people who were going to 14 use that information to ask different 15 questions had access to the information. So 16 there was debate on how the information was 17 presented in the tables themselves, and -- 18 MR. FEDER: I was referring to 19 specifically the question of the energy 20 balance, and it should zero out. Again, that 21 was actually the part of the question that 22 was posed to the Committee and what the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 182 1 Committee responded -- so I think I'll move 2 on to that, and then everyone can comment on 3 this. 4 One question that became quite 5 clear during the discussion is other 6 reporting changes that have been made, are 7 they sufficient. 8 And the answer that became apparent 9 is no, there's more to be done, particularly 10 as Cutler pointed out, people are seeking 11 information in the tables, and some can and 12 some cannot be found, although we did find 13 during the discussion in some footnotes and 14 some even more prominently stated comments on 15 the tables that you can find them, but not 16 necessarily where everyone thought they would 17 be. 18 Another question -- no, it's not 19 necessarily any deficiency of the table. It 20 is the complexity of the tables and the many 21 ways -- for instance, even E85 is not just 22 E85. It is in fact also -- anywhere from BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 183 1 E70, I believe, to E95, and what do you do 2 when you have a product which is mostly 3 gasoline, but has up to 15 percent ethanol in 4 it? Then there were two other questions, 5 which are closely related. 6 One was, if time and resources 7 permit, would anything else that we currently 8 model be added to the Annual Energy Outlook 9 tables. And two comments that were made on 10 that: one had to do with what Cutler said, 11 it's a political question, or maybe policy 12 issue, rather, that needs to be made. It is 13 not a professional or a statistical question. 14 And Ed raised the issue of oxygenates, which 15 I'm not sure I am qualified to talk about. 16 So maybe if there's any further 17 comments on that -- and the last question 18 that was made is about other liquid fuel 19 technologies on the horizon that we should 20 watch. And that again was -- the Committee 21 members that commented had thought that was 22 partially a policy issue, what should or BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 184 1 should not be looked at. And nothing obvious 2 was mentioned in this respect. 3 Ed, do you want to talk about the 4 oxygenates? I totally missed that particular 5 aspect. 6 MR. KOKKELENBERG: Basically, 7 oxygenates consisted of ethanol and some 8 chemical -- 9 MR. CLEVELAND: MTBEs -- 10 MR. KOKKELENBERG: Water, MTBE. 11 MR. FEDER: Okay. 12 MR. KOKKELENBERG: That's been 13 removed from the refiners. 14 So we don't need -- 15 MR. FEDER: So it's just ethanol 16 now, okay. 17 MR. KOKKELENBERG: It's kind of 18 historical information, and that's why -- 19 MR. FEDER: Okay. 20 MR. KOKKELENBERG: And that's 21 covered elsewhere. So -- 22 MR. FEDER: So I didn't miss much BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 185 1 then, okay. 2 So the main point perhaps that the 3 Committee certainly felt that there should be 4 more changes, yes. But the changes that were 5 made were clearly good and in the right 6 direction. 7 MR. CLEVELAND: Is Tony here? 8 MR. RADICH: Yes. 9 MR. CLEVELAND: He's in the back. 10 Yeah, he did, I think, a good job. 11 Mike -- I want to add two things to 12 that. One is I had made the -- Tony did a 13 good job of kind of showing how on the 14 transportation of petroleum tables we were 15 dealing with ethanol, so things balanced out 16 energetically, and they do, which is good. 17 Then I had a question of where in 18 the aggregate tables -- if someone wants to 19 come to the EIA and say how much ethanol do 20 we produce? Where do I find that number, 21 whether it was an E85 or E10 or E12 whatever 22 it is. Howard handed me the latest copy of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 186 1 2007, and indeed it is there in Table A2. 2 There's a line that says total ethanol 3 consumed in motor gasoline, E85, so you can 4 find that information there. 5 I would just suggest, given that 6 ethanol is such a hot button issue, that it 7 would be worth in some upcoming issue you put 8 a little thing in there, a little story about 9 the whole -- what you have done in terms of 10 system boundaries, how you're treating the 11 ethanol question from this overall system 12 boundary issue, not necessarily get into the 13 net energy issue because you don't want to go 14 there, I don't think. 15 But just telling people how EIA is 16 dealing with the system boundary issues, how 17 you're dealing with co-products as a little 18 story, because people are going to be 19 interested in how you actually do that now 20 that it's showing up more prominently in your 21 table. 22 SPEAKER: But as he was -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 187 1 MR. RADICH: Writing something for 2 issues and focus in AEO 2008, and my 3 supervisor is enthusiastically nodding -- 4 MR. KOKKELENBERG: In 2003, you did 5 a piece on biomass and ethanol, and that was 6 very helpful to me for re-reading before 7 coming to this meeting. Maybe that's the 8 kind of thing he is talking about updating, 9 because it was a standalone piece. But it 10 could refer to places in the AEO and 11 elsewhere where you could find more data, or 12 at least that's where the data series is, but 13 reproduce it in the standalone. 14 MR. FEDER: When I used to be at 15 Stats Canada many years ago, they used to 16 have a publication called The Daily, which 17 was most for newspapers to pick up and 18 republish. It was a very brief publication, 19 could be an item, half a page -- and that was 20 very useful for them because you didn't need 21 to be an expert to understand, and easily 22 quotable. Maybe something like that just on BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 188 1 ethanol or other biofuels would be useful. 2 I forgot to mention that in the 3 discussion, it turned out that EIA is moving 4 towards clarifying -- and not just 5 clarifying -- but using the same approach to 6 how components of energy are used the same 7 way across its products. So it's not just 8 for the Annual Energy Outlook, but in other 9 areas as well. 10 MR. EDMONDS: One thing I'd add to 11 this is that the presentation was very nice, 12 and what it did was it -- about the changes 13 in the way the tables are being put together, 14 and the accounting is being done. And it 15 actually took on a generic problem, which is 16 that over time, the simple energy system that 17 we grew up with, which was coal -- it was 18 coal when it left the ground and it stayed 19 coal until it turned into electricity, and 20 oil was oil and it stayed oil -- we burned it 21 in our cars and gas was gas, it never 22 changed. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 189 1 And we've entered a world in which 2 things are changing, that in fact you've got 3 gas to liquids going on out there, you have 4 the beginnings of coal to liquid technology, 5 you've got biofuels, which start off as a 6 solid. Now you in fact have a -- you know, a 7 solid category that's not just coal, but it 8 has got these biofuels in it. 9 And so the set of accounts is in 10 fact evolving in a way that is necessary to 11 reflect the fact that the simple energy 12 system that we had as kids is no longer with 13 us, and in fact, that system is a much more 14 sophisticated system. And so there were 15 other change -- and of course, it gets 16 highlighted in the bio. I mean, bio sort of 17 captures most of these problems. I mean, you 18 know, you have got a new form of solid, 19 you've got a transformation from a solid to a 20 liquid. 21 But it's occurring all over. And 22 so what you're finding is that there's a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 190 1 category that's no longer labeled oil when 2 you get to the end users, because the end 3 users really don't care what this thing 4 started off as. All they care about is that 5 it's a portable hydrocarbon that works in the 6 device they're using. And so there's this 7 change in vocabulary that now it's not oil in 8 the consumption, it's liquid fuels. 9 And so I think there's a more 10 general story that was told which I think is 11 a really important story, and sort of comes 12 out in the nuances of what Moshe and Cutler 13 were describing as they described what was 14 happening in ethanol. So that's just sort of 15 another perspective on this. 16 MR. CLEVELAND: And you also draw 17 in -- not only is coal no longer coal, but at 18 least in the case of coal, you were starting 19 with an energy feedstock. In the case of 20 ethanol, now it's -- you're over in the 21 agricultural sector, right? 22 MR. EDMONDS: Right. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 191 1 MR. CLEVELAND: One example, 2 obviously, we're interested in the price of 3 coal and oil, because they are feedstocks 4 from important energies that we use. 5 Is the EIA now going to be in the 6 business of dealing with corn prices, because 7 it's an important -- I don't know. 8 SPEAKER: I think we already are. 9 MR. EDMONDS: And in fact -- I mean 10 this is a problem because the work that I do 11 is just longer term. It is strategic kind of 12 modeling and analysis that -- we have already 13 been forced long ago to describe the energy 14 system, and incorporating how it might 15 evolve -- we were forced not only to take the 16 energy supplies and the graded resources and 17 all the forms of transformation, but we 18 actually are now forced to do -- to handle 19 all agriculture, and land use. 20 And in fact, you actually have to 21 compete -- if you want to grow biofuels, you 22 actually have to compete lands, you have to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 192 1 deal with these co-product issues that Cutler 2 raised, and the other thing, as you're 3 thinking forward into your modeling, what 4 does it mean for NEMS? Does it mean you 5 actually have to build an agricultural model, 6 and the land use and the land cover model, 7 but you also have to track the carbon 8 stocks and all of the above and below ground 9 bioentities. 10 MR. CLEVELAND: If you start 11 doing -- 12 MR. EDMONDS: That'll keep you 13 busy. 14 MR. CLEVELAND: If we start doing 15 cylolystic ethanol, then you bring forestry 16 in, too. 17 MR. EDMONDS: That's what I'm 18 saying. You have to cover all land use, all 19 land cover and you have to do the dynamic 20 stock of carbon calculations. You actually 21 have to grow the trees in the models. 22 SPEAKER: Right. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 193 1 MR. FEDER: Well, I was not joking, 2 but I asked if I eat corn and then ride my 3 bike, how does that energy compare to if I 4 use the corn to make ethanol and use it in my 5 car? I think one way it's counted, but I was 6 told that model -- 7 MR. EDMONDS: I think you're better 8 off in the car in terms of the energy to the 9 drive wheel, but inversely, in fact maybe 10 you're better off if you ride your bike. 11 MR. KOKKELENBERG: But in terms of 12 distance and time, there's nothing like 13 gasoline -- 14 MR. FEDER: Okay. 15 MR. KOKKELENBERG: That's what 16 you're trying to do. 17 MR. FEDER: All right. 18 MS. FORSYTH: But don't drink it. 19 MR. FEDER: Well, I'm afraid you're 20 being recorded. 21 MR. NEERCHAL: Any comment? Ed? 22 MR. KOKKELENBERG: No, that's okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 194 1 MR. NEERCHAL: Comment? Any more 2 comments? 3 I think I would like to invite the 4 public for comment on any of the sessions of 5 this morning. 6 MR. EBEL: Hi. 7 MR. NEERCHAL: Please identify 8 yourself to the transcriber. 9 SPEAKER: Look this way. 10 MR. EBEL: Steve Ebel with 11 Lyondell. I had a couple of questions. In 12 the earliest part -- and I'm attending this 13 as an interested consumer of this data and 14 trying to understand a little bit better 15 about how it's put together -- really two 16 questions. One of them was in the initial 17 presentation, there was a discussion of, 18 based on the additional budgeting provided 19 for this year that's going to allow for some 20 improvements in terms of the petroleum and 21 natural gas data collection and some of the 22 statistical modeling, I was just wondering if BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 195 1 someone could comment on exactly what 2 deficiencies are being addressed or what 3 improvements are being proposed. 4 And my second question is just to 5 understand a little bit better as far as 6 quality checks go, and how that's 7 incorporated into the routine collection of 8 data. 9 We were talking about import data, 10 for example, and when I tried to look at, 11 from an engineer's perspective, of mass 12 balance of supply-demand, how that impacts 13 stocks, and I'm not always able to make the 14 numbers add up. 15 Is there a routine process by which 16 the data is checked across not just the 17 individual pieces of the data, but how the 18 big picture adds up? 19 MR. FEDER: Can I just comment on 20 what you said? That actually is another 21 aspect of what I was worried about, the 22 discussion that I attended had to do BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 196 1 specifically with the Annual Energy Outlook, 2 but it turned out to be a question that 3 should apply to all of EIA's activities and 4 products. And I think the same should apply 5 to your question, right? 6 MR. EBEL: Uh-huh. 7 MR. FEDER: Anything that's done, 8 how consistent data should be, and again, how 9 should we verify and check -- 10 MR. EBEL: Right. On more of a 11 macro basis. 12 MS. KIRKENDALL: That's a big 13 question. In general, each data system that 14 we have does its own quality check, does its 15 own imputation. I think you're going to get 16 a comment from Sue. She's the manager of the 17 petroleum surveys. So she can tell you 18 something about what they do. 19 But basically all the different 20 survey systems at least use different quality 21 checks. They all do quality checks, and they 22 try to make sure we get the data out. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 197 1 But Sue, why don't you talk about 2 yours? 3 MS. HARRIS: Hi. I'm Susan Harris. 4 I'm here again. Susan Harris. I work in the 5 Office of Oil and Gas within EIA, and we're 6 responsible for collecting the survey forms 7 that you may know as the petroleum supply 8 survey forms, EIA-800 through the 820. We 9 also collect marketing information 782(a) (b) 10 and (c) forms, 821, collect pricing 11 information. 12 To address your question, we're 13 taking a look -- re-examining how we're 14 conducting the editing of our information 15 internally as well as externally. We do have 16 consistency checks within the surveys 17 themselves. We do aggregate the data across 18 all levels of the industry and look at the 19 supply and demand balance. 20 We compare the information to 21 historical five-year patterns. We look at 22 our information we collect on the monthly, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 198 1 and compare it to what we have on our weekly 2 information. And then we also look at other 3 industry information to see how we're 4 compared with that. 5 On the outside, going out to 6 industry, we are initiating a program to go 7 out and conducting additional site visits. 8 We have in the past gone to several companies 9 and conducted site visits, but because of 10 resources and budget constraints, we have had 11 to limit what we had been able to do. 12 And now, with our new budget in 13 '07, we're trying to initiate site visits 14 once again, to go out to companies and ask 15 them what validation they perform before they 16 send the information to EIA. 17 What consistency checks do you 18 perform when you collect the information and 19 put it on our forms before sending them in? 20 At both ends, we think we can do some 21 improvements. A better understanding of how 22 industry collects the data, what problems BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 199 1 they're encountering in trying to file forms 2 with the EIA so that we can work together as 3 a team so we get better and more accurate 4 information out to the public. 5 Did that answer your question at 6 all? 7 MR. EBEL: It did. Thank you. 8 MS. HARRIS: If you want to talk 9 offline, that would be good, too. Okay. 10 MR. EBEL: Thank you. 11 MR. NEERCHAL: I think I want to 12 add, as a Committee member for the number of 13 years now, that we periodically have sessions 14 dealing with data quality. We've had a 15 number of those so that it does come up to 16 the Committee level for discussion and 17 advice. Thank you very much, and I think I 18 have a couple of announcements. 19 We have lunch for the Committee, 20 presenters, and the invited guests downstairs 21 in a different room this time, it's room 22 number 2E081. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 200 1 It is the exact same corridor as 2 this one except six floors down. So same 3 corridor, six floors down, and -- it is just 4 12:10, so we're just only a few minutes 5 behind. 6 And also we need another head count 7 here. We have a reservation for dinner at 8 Clyde's -- Clyde's Gallery Place. It is on 9 707 7th Street near Chinatown, or in 10 Chinatown, and is accessible by Metro. 11 Can I please have a show of hands 12 who will be going for dinner? One, two, 13 three, four, five, six, seven -- dinner, 14 Moshe -- and you can always -- 15 MR. FEDER: Two for dinner. 16 MR. NEERCHAL: So I think you 17 can -- if you want to join, during lunch, 18 catch Bill and let him know that you will do 19 that so. 20 MR. FEDER: Okay. 21 MR. NEERCHAL: I just want to give 22 him an approximate number. All right? BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 201 1 And with that, I think -- what do 2 we do? Will I have to ask a move for adjourn 3 for adjourning, no? 4 MS. KIRKENDALL: No, I don't think 5 so. 6 MR. NEERCHAL: We just adjourn for 7 lunch. 8 (Whereupon, at approximately 9 12:20 p.m., a luncheon recess was 10 taken.) 11 12 13 14 15 16 17 18 19 20 21 22 BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 202 1 A F T E R N O O N S E S S I O N 2 (1:25 p.m.) 3 MR. NEERCHAL: I think we should 4 come to order here and start. 5 I would like to check to see that 6 we have our speaker and the discussants. 7 This afternoon, we have one plenary 8 session and two breakout sessions following 9 that, so there's -- 10 MS. KIRKENDALL: Actually, there 11 are two plenary sessions. 12 MR. NEERCHAL: Sorry. Two plenary 13 sessions and then a break and then directly 14 into the breakout session. And so we will 15 start with our first plenary session here. 16 And the speaker is Robert Schnapp; the title 17 is Clearance of Electricity Surveys. 18 MR. SCHNAPP: Good afternoon. My 19 name is Bob Schnapp. I'm the director of the 20 Electric Power Division. 21 I have come back again today to 22 talk to you about our Electricity 2008 BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 203 1 project. The point of this project is to 2 update our electric power survey forms to 3 have them operational by January 1 of 2008; 4 hence the title Electricity 2008. So what 5 I'm going to talk to you about today is I'm 6 just going to -- I've already briefed this 7 committee a couple of times on where we are 8 on the project, so I'll just give you an 9 update at this point on where we are. 10 And then I will talk to you about 11 just two of the forms. We are proposing to 12 merge about six forms into two and explain 13 what we're proposing there. And actually 14 after I speak, then Bob Rutchik will talk a 15 little bit more about one of them. 16 Review of data confidentiality 17 issues that we are addressing and then just 18 show you the Federal Register notice that we 19 have issued on April 4th. So I'm not going 20 to go through all of the phases of our 21 project, but just leave it to say that the 22 first phase, which is data requirements, we BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 204 1 had to figure out what we're going to be 2 collecting or changing. We've done that 3 because we have issued our Federal Register 4 notice, as I said, April 4th, the public has 5 60 days to comment. Then we would be 6 assessing those comments and going to the 7 Office of Management and Budget, which is in 8 phase two here, by September of 2007. And 9 then hopefully they would approve it by 10 November of 2007. 11 The third phase is data collection 12 and processing. We would have to change our 13 processing systems to accommodate the new 14 elements that we would be collecting, and 15 that would have to be done by the end of this 16 year in order to be operational for 17 January 1. And then phase four is 18 dissemination; we would have to modify our 19 publications to accept whatever changes that 20 we had. 21 Just briefly, and I'm going to go 22 over these, but in leading up to our Federal BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 205 1 Register notice, we met with a whole host of 2 stakeholders from all parts of industry, 3 consumer groups, environmental groups, 4 federal government, state government, and 5 this is just a list of some of the groups 6 that we've met with already. 7 So let me kind of get into the 8 heart of the matter. The first form that 9 we're proposing to create is a new form, 10 EIA-923, which is listed on the bottom. This 11 would be a merger of several forms: the 12 EIA-423, which collects cost and quality of 13 fossil fuels delivered to non-utility plants; 14 the 906 collects generation, consumption and 15 fuel stocks at electric plants that only 16 produce electricity; the 920 collects the 17 same information from the combined heat and 18 power plants; and the 767 is our 19 environmental form. 20 And we have proposed to move the 21 annual operational emissions information onto 22 this form. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 206 1 But the new form, the 923, as set 2 up has a couple of different schedules. We 3 would collect some plant-level information, 4 some prime-mover-level information, some 5 boiler-level information, and then there 6 would also be annual data that we would 7 collect from everybody. So let me get into a 8 little bit more detail here. 9 So first at the plant level for the 10 923, we would collect the quantity and 11 quality of the fossil fuel receipts. We 12 already collect the heat, sulfur, and ash 13 content, and the underlines in this slide 14 indicate those are new elements that we would 15 collect. So we're proposing to collect 16 mercury content for the first time. We 17 already collect the delivered cost of the 18 fuel, where we're proposing to collect the 19 cost of the commodity before it gets shipped. 20 So in other words, the mine mouth price of 21 coal. 22 The transportation modes, we would BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 207 1 probably collect the primary and secondary 2 modes of transportation. And then the Mine 3 Safety and Health Administration number. 4 That's the number that's assigned by MSHA to 5 each coal mine. And so we would be able to 6 kind of track the coal through the system 7 with that. And then we would also continue 8 to ask for ending stocks. 9 And what this would do is -- in 10 addition, we would also be collecting 11 consumption a little bit later on here, but 12 what we would have here is we would be able 13 to establish a balance on one form. So we 14 would start out -- we would actually tell the 15 respondent what their ending stocks were at 16 the end of last month, or beginning stocks of 17 this month. 18 We would add in receipts, subtract 19 consumption; the remainder should be their 20 ending stocks. If that doesn't equal what 21 they're reporting, then they actually -- on 22 our Internet data collection system, they BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 208 1 really couldn't even submit it. So they 2 would have to balance this form in order to 3 submit the data. And when they do, then the 4 data is quality assured right there. Yes? 5 MS. KHANNA: Suppose I made a 6 mistake, it was my ending stocks last month. 7 But I didn't realize it until this month I 8 started to report my data and realized that 9 things don't balance out. 10 MR. SCHNAPP: Right. 11 MS. KHANNA: Can I fix that 12 somehow? 13 MR. SCHNAPP: We have an adjustment 14 right here. 15 MS. KHANNA: Thank you. 16 MR. SCHNAPP: Yes, sir? 17 MR. FEDER: Since you're changing 18 the mode of collection, after all -- not 19 mode, but change instruments -- how are you 20 going to make sure that the time series 21 continuity will be there? Is there going to 22 be any parallel run of the old and new forms, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 209 1 or some way to assess the impact of this 2 change on the time series? 3 MR. SCHNAPP: I don't know why 4 there would be a change in the time series, 5 frankly. 6 MR. FEDER: But you don't -- 7 MR. SCHNAPP: As Bob will talk 8 about, we're going to go out and test the 9 form, though, to make sure that they're 10 replying accurately before we issue it in the 11 first place. 12 MR. FEDER: Well, sometimes 13 improved accuracy also produces a change in 14 the series. I mean, what we do is usually we 15 have a split sample in the year when we make 16 a transition, so we -- I'm not saying you 17 should do it, I'm just saying that's one 18 thing that people do -- to study the impact. 19 Actually, it's usually -- improvement -- you 20 wouldn't change if improvement wasn't 21 intended, but you want to know what the 22 magnitude of the improvement is and what BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 210 1 impact it has on the series so you can 2 measure it. 3 MR. KOKKELENBERG: Couldn't you get 4 that from the pilot study, though? 5 MR. SCHNAPP: I'll let Bob talk to 6 that when he comes up here. I think that we 7 could probably get something along those 8 lines, but I must say I don't really think 9 that's going to be a change. I'm having a 10 hard time imagining why it would be 11 different. But nevertheless, even if there 12 is a change, I must say that there are really 13 no resources to do that. 14 MR. HILL: Completely different 15 categories? 16 MR. SCHNAPP: No, the exact same 17 information. 18 MR. KOKKELENBERG: But Moshe's 19 point I think is valid. It's the unexpected 20 that could happen. You are switching forms, 21 asking the same questions. How will they 22 interpret it? BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 211 1 MR. FEDER: If you improve your 2 coverage, you're going to see changes, and if 3 you want to know if there was indeed a rise 4 in consumption or whatever, you wouldn't be 5 able to tell what it has to do with the 6 change in the instrument or because of the 7 true change. 8 MR. SCHNAPP: We'll take that under 9 advisement. We'll consult with Bob on that. 10 MR. FEDER: In our case, if I can 11 just take one more half a minute is, we 12 changed from a paper instrument to a 13 computer-aided interview, which certainly is 14 an improvement, because people are more frank 15 when they enter the responses into the 16 digital media, which is supposed to be 17 anonymous. But that created improved 18 measures that showed the change in the time 19 series. So for that year when it was done, 20 we had the split samples so we could compare. 21 And indeed we saw there was a change, and in 22 your case, surely you're making it to improve BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 212 1 reporting, and improvement does show a 2 change. So you want to know what in the past 3 was not measured that we're now measuring. 4 MR. SCHNAPP: We'll think about it. 5 MR. CLEVELAND: How does an 6 operator know how much mercury is in her or 7 coal, say? 8 MR. SCHNAPP: There are analyses 9 done of the coal before it's shipped and 10 after it's shipped. 11 MR. CLEVELAND: Okay. 12 MR. SCHNAPP: In the lab. Okay. 13 So anyways, so we're hoping that this balance 14 will help improve the quality of the data 15 that we're collecting. 16 Then there's information -- I don't 17 think this was the latest slide that I had, 18 but that's okay. We're going to be 19 collecting some information at the prime 20 mover level and some at the boiler level. We 21 would first collect net and gross generation 22 from the all-electric plants and just gross BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 213 1 generation from the combined heat and power 2 plants. We've unfortunately found that the 3 CHP plants are not grasping what we mean by 4 net generation. 5 And so it's a minor calculation for 6 us to estimate net generation from the gross 7 generation, so we will be doing that. That 8 will be collected at the prime mover level, 9 but the consumption, we will collect by fuel 10 type and heat content. 11 We currently collect it only at the 12 prime mover level. But we're proposing to 13 collect it at the boiler level for fossil 14 fuel plants that are 10 megawatts and 15 greater. This is the piece that's on the 16 environmental, the 767 form. The respondents 17 actually provide this information twice to 18 us. They first read the information, the 19 consumption information, at the boiler level, 20 then they aggregate it and report it to us 21 during the year at the prime mover level. At 22 the end of the year, they take that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 214 1 information that they have not aggregated up 2 and just at the boiler level on a monthly 3 basis and provide it to us in the 767. So we 4 think that this would actually reduce the 5 burden on industry, and we would still 6 continue to collect information that's 7 needed, particularly for environmental 8 analysis at the boiler level. 9 I have spoken to this group a 10 couple of times about issues of collecting 11 information from combined heat and power 12 plants and splitting the fuel that's in the 13 boiler between fuel that's used to produce 14 electricity and fuel for use of thermal 15 output. I think we're on the third life of 16 trying to do that, and I think we're going to 17 go to another one now, which is we would ask 18 them for total fuel consumption and electric 19 generation, and then we will try and figure 20 out what the split is. 21 We're in the process of trying to 22 develop a methodology to do that split, and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 215 1 we have already gotten an agreement from the 2 American Council for an Energy Efficient 3 Economy -- the other folks that represent the 4 combined heat and power plants -- they've 5 agreed to review the methodology with us to 6 make sure that it makes sense and is 7 accurate. 8 So we would continue to collect 9 annual data on the sources and disposition of 10 electricity -- sources being gross generation 11 and other incoming electricity. Disposition 12 would be station use, direct use, wholesale 13 sales, retail sales, and other outgoing 14 electricity. The one additional item we're 15 proposing to collect is wholesale revenues. 16 We apparently were not collecting that 17 before -- there was a hole in our series, so 18 we felt we needed to fill that in. 19 And then we would add on another 20 schedule for annual emissions data, and this 21 information is picked up again off the 767. 22 We collect by product disposition, cooling BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 216 1 system and flue gas desulfurization annual 2 operations. Those questions would not change 3 at all. 4 Moving on to the other proposed 5 merger -- let me just back up one second. It 6 is also possible that we could get the 7 FERC-423 added into all of that. And the 8 FERC-423 collects the same thing as the 9 EIA-423, except they collect it from 10 utilities, and we collect it from the 11 non-utilities. So that could be another 12 factor in here. 13 The other merged form is combining 14 the 860 with the 767. The 860 collects the 15 kind of static information: capacity, what 16 the prime mover is, the types of fuel that 17 they would be using, fuel switching 18 capabilities and what their plans are five 19 years into the future. 20 We are proposing to pick up the 21 static information off of the 767 and just 22 move it onto the 860. And so these are the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 217 1 items that we would again just pick up off of 2 the 767: plant configuration, air emissions 3 standards, boiler design parameters, NOx 4 emission controls, cooling system design 5 parameters and so on. 6 To move onto confidentiality, this 7 is a list of the data elements that we 8 currently hold confidential. So there's fuel 9 cost, which is on the 423; fuel stocks is on 10 the 906 and 920. The monthly retail sales, 11 revenue and number of customers for the 12 energy service providers only. So those are 13 the folks that are in retail competition in 14 the states. And that's collected on the 826. 15 Latitude and longitude on the 767 16 and 860. The maximum tested heat rate under 17 full load conditions on the 860, and then 18 there are electricity maps and power flow 19 cases that we collect. Those are also 20 collected by FERC. We merely ask for a copy 21 of that. They hold it confidential, so we 22 hold it confidential. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 218 1 So the next slide shows what we're 2 proposing to change in that list; first is to 3 make latitude and longitude not confidential. 4 To give you a little bit of background, some 5 of you may be familiar with it as I've 6 explained it before, is that we, for 7 Electricity 2002, which was two projects ago, 8 we submitted our proposal to the Office and 9 Management and Budget to change our forms at 10 that point, and were proposing not to hold 11 latitude and longitude confidential. 12 That was submitted to OMB on 13 September 11, 2001. And I called OMB a few 14 days later and said, did you want me to hold 15 latitude and longitude confidential? And I'm 16 not really asking just for the electric power 17 forms but I'm really asking for the 18 government, if you want this? Because EIA 19 had already begun removing a lot of 20 site-specific information off our Internet 21 site. 22 And they called back a few days BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 219 1 later and said, yes, please revise your 2 submission and then we will approve it as 3 confidential. 4 By the time we got around to the 5 next project, Electricity 2005, it was 6 getting a little bit difficult to defend 7 that, because the information is kind of all 8 over the Internet, and public utility 9 commissions have it in their files, which is 10 available to the public. 11 So our argument at the time was we 12 really don't want to have in one place a list 13 of locations for a terrorist who picked them 14 up off the Internet. So what we're 15 proposing -- now it's even more out in the 16 public domain. And in fact, there was an 17 interagency committee that was established 18 that gave out guidelines on what should be 19 held confidential. And what that said was 20 that if the information for the most part is 21 in the public domain already, you can't claim 22 it's confidential. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 220 1 So what we propose to do is to not 2 put the data onto the Internet, but we would 3 have the information in a file, and if people 4 asked us for it, we would give it out. So 5 that's what our Federal Register notice says. 6 MR. FEDER: Couldn't they go to 7 Google Maps and -- 8 MR. SCHNAPP: Exactly. Yes, they 9 could. They could get it anyplace, yes. 10 MS. KHANNA: If it's so easily 11 available, why just not make it available? 12 If I can get it by going to Google Maps or 13 actually to the EPS websites, why not -- why 14 would anyone even contact you for the 15 information? 16 MR. SCHNAPP: The idea is we're not 17 trying to make it easy for them. 18 MR. KOKKELENBERG: Why do you 19 collect it to begin with? 20 MR. SCHNAPP: Certainly inside the 21 Agency, people to do mapping to understand 22 where -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 221 1 MR. CLEVELAND: Information 2 resource. You kidding me? Any kind of 3 place/space information is really useful. 4 MR. KOKKELENBERG: So you do use 5 it? 6 MR. SCHNAPP: Yes. 7 MR. KOKKELENBERG: Okay. 8 MS. KHANNA: I would use it. 9 MR. SCHNAPP: We got calls from 10 outside the Agency for it as well. 11 MR. KOKKELENBERG: If you can get 12 it elsewhere -- 13 MR. SCHNAPP: They only get it from 14 us. Before we held it confidential, it was 15 in the public domain and EPA picked it up at 16 that point. 17 MR. NEERCHAL: But I think there's 18 a difference between something being 19 available as one piece at a time versus you 20 providing it as a spreadsheet. 21 MR. SCHNAPP: Right. 22 MR. NEERCHAL: I think there's a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 222 1 tremendous difference. 2 MR. SCHNAPP: So that was about as 3 much protection as we could give to it. 4 We've gotten some kind of -- the electric 5 utilities really don't want it in the public 6 domain at all; they want it confidential. 7 But I gave this presentation a few weeks ago 8 at an EIA conference, and one of the speakers 9 that I had brought was from the Edison 10 Electric Institute. 11 And when he heard these comments, 12 he said not sure we agree with you yet, but 13 that certainly gives me a lot -- feel a lot 14 better about you not putting it out on the 15 Internet. So -- 16 MR. CLEVELAND: So the information 17 that you can get in EPA's website on the 18 location of power plants is the data you've 19 collected? 20 MR. SCHNAPP: I believe it's from 21 when had collected it probably last in 2001. 22 MR. CLEVELAND: That's interesting. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 223 1 I was wondering where they came from. Not a 2 very accessible database in any case. 3 MR. SCHNAPP: Are you talking about 4 e-grids? 5 MR. CLEVELAND: I'm not sure. I 6 know I had a student who used it in a term 7 paper I think last year or the year before, 8 where I know there was -- she had made this 9 nice GIS of all the power plants in New 10 England, for example, where we're working. 11 She used it. It was latitude and longitude 12 data. So -- 13 MR. SCHNAPP: So another change 14 that we're proposing is that some of the 15 monthly data that we collect, we would 16 release nine months after the end of the 17 reporting year, hopefully that it would not 18 affect the ability of companies to compete. 19 In other words, the data would be aged enough 20 so that it wouldn't hurt them. 21 So if we're talking about the fuel 22 cost and the fuel stocks, the monthly sales BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 224 1 and revenue of the energy service 2 providers -- that information right now on 3 another form, our Annual 861 form, that they 4 provide the same information on an annual 5 basis -- that information is not 6 confidential. So to make this available to 7 the public nine months after the end of the 8 year, when we're going to be putting up the 9 annual data anyway, really didn't seem to be 10 too much of a stretch for us. 11 And the last item that we're 12 proposing is that in data tables that we put 13 out for elements where we have confidential 14 data, we have to figure out which cells to 15 hold confidential if there are not enough 16 observations. So for example, if there's a 17 state table and the columns are the different 18 sectors plus a total column, if just one 19 state in a column has to be withheld, now we 20 have to look inside the region to see what 21 else has to be withheld. 22 We might have to go to other states BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 225 1 in that column. Then we have to look across 2 the row and see if we have to withhold any 3 other data elements, because by simple 4 mathematics or algebra, you can figure out 5 what that number is if you don't withhold 6 another item. That's one table. Then you 7 have to go to complimentary tables as well. 8 We have a lot of demand, particularly from 9 the states, to have all their data available 10 to them. 11 So what we're proposing is not to 12 withhold those individual cells. We wouldn't 13 say out loud who is in that cell, but if you 14 personally knew who was in that cell -- you 15 know, if there was one or two observations, 16 you might have a little more information than 17 somebody else. But we're proposing to put 18 that out without the withheld symbol. 19 As I said, we issued our Federal 20 Register notice -- dates really are April 21 4th. Comments are due -- I think it's 22 June 4th. And we have put our proposed forms BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 226 1 on the website along with the Federal 2 Register notice, along with a spreadsheet, 3 which is a crosswalk from the 767 to the 923 4 and the 860 so that people can see where each 5 of the elements goes. It also lists the 6 elements that we wouldn't be collecting; 7 there's just a handful that we wouldn't 8 collect. 9 That was not our idea. When I gave 10 that presentation at the EIA conference, one 11 of the people most concerned with the 12 environment asked for that crosswalk. I 13 thought it was a great idea. So we put that 14 out there, and I think it will be useful to 15 them. 16 So those are the comments I had 17 today. 18 Am I supposed to take questions now 19 or wait after Bob? 20 MR. NEERCHAL: Maybe we'll have 21 Bob's and then take the comments together. 22 MR. SCHNAPP: Okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 227 1 MS. KIRKENDALL: Discussion should 2 follow. 3 MR. NEERCHAL: Yeah. 4 MR. RUTCHIK: All right. Good 5 afternoon. Can you hear me? I'm Bob Rutchik 6 of Statistics and Methods Group of EIA. But 7 before I start to discuss some of the details 8 and problems of combining the four electric 9 power surveys that Bob just discussed into 10 the EIA-923, I very much would like to 11 acknowledge the efforts in constructing the 12 survey of my colleagues, Lawrence Stroud, who 13 is here, and Carrie Uzkronic (?), who is not 14 here. 15 Carrie and Lawrence spent a lot of 16 thought and effort into designing the survey, 17 a copy of which you have in front of you, and 18 they should be acknowledged. 19 Now I got the technology down. 20 There are two purposes to this 21 presentation. First, I'm going to go into 22 more detail on how the EIA combined the four BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 228 1 electric power surveys that Bob just 2 outlined. Surveys with different respondent 3 populations, different data reporting levels, 4 different data, and different due dates into 5 the EIA-923. 6 To elaborate on the point that Bob 7 has made in past presentations, the idea is 8 to have a survey that's more efficient both 9 for respondents and for EIA. Plants will get 10 one survey instead of three in many cases. 11 Respondents hopefully will spend less 12 resources and time getting better data to 13 EIA. And EIA will save resources and survey 14 dissemination data collection, particularly 15 in data processing. 16 Combining the surveys has created 17 some problems in testing and notifying the 18 plants. The second part of the presentation 19 is to discuss and to get the Committee's 20 feedback on some of these problems, 21 specifically on planning and conducting a 22 cognitive and/or a field test, and helping BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 229 1 companies respond to the EIA-923. 2 MR. WEINIG: Bob. 3 MR. RUTCHIK: Yeah? 4 MR. WEINIG: Can I interrupt just 5 for a moment? The form that you distributed 6 is for the Committee, right behind Bob's 7 slides in your binders, and in your tab -- 8 MR. RUTCHIK: Okay -- 9 MR. WEINIG: For those who have 10 tabs, it's in Tab 5. 11 MR. RUTCHIK: It's about a 16-, 12 17-page survey. 13 MR. WEINIG: Both sides. 14 MR. RUTCHIK: Power plant 15 operations -- oh, he did? Okay, then it's 16 about eight or nine. But it's called the 17 EIA-923 Power Plant Operations. 18 MR. WEINIG: I'm sorry to have 19 interrupted you. 20 MR. RUTCHIK: No, that's fine. 21 As this diagram illustrates, the 22 respondent populations that have become BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 230 1 EIA-923, they're not separate. There is 2 overlap; there's overlap particularly between 3 the EIA-423 and the other three surveys. 4 There's overlap between the 423 and EIA-906 5 respondents with 50 or more megawatt 6 generating capacity than EIA-920 respondents, 7 our old friends who combined heat and power 8 plants with 50 or more megawatt generating 9 capacity, and also between 767 respondents 10 and the EIA-423 -- 767 respondents with 50 or 11 more megawatt generating capacity. 12 There is also some overlap between 13 the 906 and the 767. There is even 14 some -- not much, but some between EIA-920 15 and the 767. So eliminating all this overlap 16 is one efficiency for EIA. 17 Bob has discussed a lot of this 18 already. Combining the four populations into 19 the EIA-923 also means that respondents will 20 have to report data to EIA that they have not 21 reported to us before. As Bob pointed out, 22 there are data requirements that would be new BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 231 1 to all EIA-923 respondents. 2 One is the -- actually four 3 variables in Schedule 2. That's the EIA-423 4 cost and quality data that's been brought 5 into the 923. Then there's the data balance 6 in Schedule 4. And the data balance, as Bob 7 also alluded to, is the key element in the 8 collection. Because they'll now be one 9 survey processing system, EIA will be able to 10 double-check efficiently the integrity of the 11 receipts consumption and stocks data that we 12 collect. 13 Finally, new to all respondents 14 will be the annual revenues for sales from 15 resales in Schedule 7. Finally again, the 16 current cost and quality data, the data again 17 from the EIA-423, will be new data to a still 18 undetermined number of EIA-906, EIA-920, and 19 EIA-767 respondents with less than 50 20 megawatt generating capacity. 21 This slide, which you should have 22 as a handout with the copy of the EIA-923, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 232 1 summarizes the different data reporting 2 requirements for different plants. Again, at 3 the risk of repeating some of what Bob said, 4 the major difference in data report 5 requirements to the EIA-923 is between steam 6 electric plants with a 10 megawatt or greater 7 generating capacity and all other plants. 8 There will be a simple 9 diagram -- two circles, no connection, no 10 overlap. For consumption, Schedule 3 and 11 generation, Schedule 5, the difference is on 12 the level at which the data will be reported. 13 Like generation and consumption, but the 14 difference again will be in the level, plant 15 boiler and prime mover in Schedule 3. 16 It's for generation at the 17 generator level and at the prime mover level. 18 For the annual emissions operating data 19 Schedule 8, only steam electric plants with a 20 10 megawatt or greater generating capacity 21 will report these data, everybody else will 22 not. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 233 1 Further, Schedules 1 through 5 will 2 be both monthly and annual, and Schedules 6 3 through 8 will be annual. 4 And so I think this slide also 5 illustrates the testing question of how does 6 EIA design a test that includes enough plants 7 in each of the population subgroups. 8 And this I'll elaborate on a little 9 bit more shortly. This is another place 10 where hopefully the EIA will make the -- 923 11 will be more efficient. 12 Consolidating the four surveys into 13 one survey will also decrease the number of 14 due dates by which many respondents will have 15 to send surveys to EIA. Now for example, 16 many respondents have four due dates: one for 17 the monthly EIA-423, two for the 18 EIA-906 -- one monthly, one annually, and one 19 for the annual EIA-767. Now, these 20 respondents will have only two due 21 dates -- one monthly and one annual. 22 Still, there are some trade-offs BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 234 1 here, particularly for respondents. The 2 EIA-423 data are now reported 45 days 3 following the close of the reporting month. 4 For the EIA-923, these data will be reported 5 one month after the close of the reporting 6 month. The EIA-767 operational data on the 7 923 are now reported no later than April 30th 8 following the close of the reporting month. 9 On the EIA-923, it will be March 10 30th. This could have implications for 11 respondents' recordkeeping and reporting 12 systems. Will respondents have to change 13 them, and how much? And this again is a 14 further reason for an optimal testing and 15 notification strategy. 16 No. Back up. 17 SPEAKER: Okay? 18 MR. RUTCHIK: Yeah. Okay. 19 Going backwards. I think 20 Lawrence -- okay. Here we go. Sorry about 21 the technological glitch, which was my fault. 22 Now I want to discuss the testing BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 235 1 and respondent notification issues. At this 2 point, EIA probably will not have enough time 3 to do both a cognitive test and a field test. 4 Again, the survey is going to be fielded in 5 January. 6 If EIA has to pick one, we will do 7 a field test. The reason is that when we did 8 a cognitive test for the EIA-920, the 9 respondents told EIA that they can provide 10 EIA with fuel used to generate electricity 11 data, the key variable in the EIA-920. 12 Actual data collection on the 13 EIA-920, however, raised red flags about the 14 quality of the fuel used to generate 15 electricity data. At least with a field test 16 on the 923, EIA will collect and analyze data 17 and hopefully avoid what we did or did not do 18 when we cognitively tested the 920. 19 Whatever test we choose to do, the 20 basic problem is still the same. With 21 limited time, what is the best testing method 22 to ensure that EIA gets enough plants from BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 236 1 the subpopulations? Those who fill out the 2 survey annually, those who fill it out 3 monthly, and within these categories, those 4 who complete one set of schedules and those 5 who complete another. 6 Do we pick a random sample and hope 7 we get enough of the subpopulations, or do we 8 use some type of stratified sample? 9 When EIA actually fields the 923 in 10 January, getting the right schedules to the 11 right plants we think will not be that much 12 of a problem. With the Internet data 13 collection, we can use unique IDs or screener 14 questions to make sure a particular plant 15 gets the schedules it's supposed to complete. 16 On the paper form, we can use skip 17 patterns. The problem is prior to fielding 18 the survey and within the plant. Currently 19 as we have discussed, one plant can get up to 20 three surveys. That means three different 21 respondents or contacts any plant -- and 22 Lawrence has done some research on this. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 237 1 With EIA-923, one survey will be sent to a 2 plant, almost specifically to one contact. 3 This person will need to get the 4 different schedules to the right people or 5 departments within the plant. For example, 6 those who have the receipts data for 7 Schedule 2 and those who have the consumption 8 data for Schedule 3 and so on. There are two 9 aspects on this which we would like to get 10 the Committee's advice. What is the best way 11 to test a plant's ability to do this in a 12 cognitive or field test? 13 And assuming EIA learned a lot from 14 testing about a plant's ability to collect 15 data for the survey from different 16 departments within it, what is the best 17 notification strategy to reach the most 18 plants, or more specifically get the most 19 attention so we can help the respondents to 20 reply to the EIA-923? 21 Do we use a letter and a follow-up, 22 and what type of follow-up? Do we use an BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 238 1 e-mail and a follow-up, and what type of 2 follow-up -- do we use one mode, or do we use 3 a multimode strategy? 4 This is just to sum up the 5 questions that I'd like the Committee to 6 discuss. 7 Again, do we use a cognitive or a 8 field test? And two, what is the best design 9 to conduct a cognitive or field test with 10 limited time to get the most valid and 11 reliable results? And three, what is the 12 best strategy to notify respondents about the 13 EIA-923? 14 Thank you very much. 15 MR. NEERCHAL: I think we have two 16 designated discussants. 17 Ed, do you want to start? 18 MR. BLAIR: I'll be happy to start. 19 Ed Blair. I think I've got about six or 20 seven points. First of all, just a 21 background point. The comment has been made 22 that questions are unchanged, just BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 239 1 consolidated. There are I guess a couple of 2 new items. 3 MR. RUTCHIK: Yes. 4 MR. BLAIR: And this would be 5 repetitive reporting as I understand it, 6 where the same person, in effect, would be 7 reporting all the time. So whatever they 8 learned or didn't learn, at least they would 9 be consistent. Regarding the 10 questions -- the questions you were asking on 11 testing, I was really struck, being new to 12 the Committee and new to your management 13 procedures -- I was really struck by the fact 14 that this in no way resembled a 15 questionnaire. As I would understand it, it 16 was a form -- it was a tax form with sort of 17 a separate detached set of detailed 18 instructions to tell me how to figure out the 19 form. 20 And by looking at those 21 instructions, I could figure out, for 22 example, that in Schedule 2 that I should BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 240 1 record my receipts of fuel and my 2 transportation mode and my coal mine by 3 listing in effect source by source by source 4 by source, but I should put my cost of fuel 5 and quality of fuel -- that it was on me to 6 go ahead and aggregate that and calculate a 7 weighted average and give you a weighted 8 average off that. 9 So in a sense, it just really 10 strikes me very much as a business form on 11 some accounting document that somebody puts 12 together rather than a questionnaire. Along 13 those lines, it seems to me that cognitive 14 testing would be virtually useless to you. 15 The question is usability testing. We're 16 probably on the same page, just using 17 different semantics. 18 But the real issue here is 19 usability testing, but the thing to do is 20 give -- put the respondent on the job. Give 21 them the package and just watch them do it. 22 Just sit down and watch them do it, take BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 241 1 notes, consider videotaping them, maybe have 2 some of them do think-alouds so that they 3 give you some access into where they're 4 having problems, but also have some do a lot 5 without think-alouds in case think-alouds 6 somehow enhance the procedure. 7 But the main thing is 8 out-of-the-box usability testing. Just watch 9 somebody do it and watch the problems that 10 they're having as they do it. 11 Sort of a side point, obviously, to 12 do an expert review of the instrument before 13 any testing. But I'm sure that's already 14 been done. As far as stratification in doing 15 this, my pre-meeting response was, are the 16 response problems going to be obviously 17 different by groups? 18 And if so, which groups, and that 19 would be the basis for the stratification. 20 As I now understand that you're considering 21 stratification essentially based on -- you 22 know, some people do it monthly, some people BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 242 1 do it annually -- and I suppose that would 2 that would be a sensible thing. 3 The survey notification of how you 4 get the respondent -- I have to say this has 5 been characterized in the presentation as a 6 simplification of the respondents' world, and 7 that's not 100 percent clear to me. Once 8 you've carried on and talked about the fact 9 that somebody was going to have to run around 10 the plant to get a bunch of different people 11 to fill out a consolidated form that it used 12 to be that they all filled out their own 13 individual parts of. 14 But it seems to me that there's not 15 going to be any kind of deep insight. But 16 the thing to do is to let the respondents 17 tell you who would be the best person 18 naturally within their company, and who would 19 have charge for running around and getting 20 everybody onboard. 21 But absolutely, this is something 22 that's going to have to be tested or BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 243 1 pre-tested, because this seems to be -- if 2 everybody has already been filling up these 3 forms, this seems to be the place where it 4 could blow up; just not getting to the right 5 person or the data being transmitted 6 incorrectly. 7 Let me think -- what else -- just a 8 couple of small points. And this point has 9 already been made by Moshe earlier. 10 You know, if we're going to new 11 reporting for some people, consolidation of 12 respondent populations, very plausibly, data 13 continuity will be an issue. I understand 14 they've all been filling out this information 15 before -- all of this information before, but 16 to the extent that new people are on the job 17 or you're reaching into new companies. 18 Didn't sound like that to me. 19 But if you're sending new people 20 around the job -- just the idea, for example, 21 forcing respondents to face possible 22 inconsistencies in their information allows BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 244 1 for the possibility that there will be 2 discontinuity. So I wouldn't pass over that 3 issue as quickly as you seem inclined to do. 4 And then last, on the 5 confidentiality issue -- releasing data even 6 if confidentiality is compromised, I 7 suppose -- you know, this is not my issue. I 8 suppose you'll get this from public comment, 9 but I have to say, if I were in the industry 10 that would kind of stick in my throat a 11 little bit. 12 MR. FEDER: It could effect 13 response rates and also truthful reporting, 14 so you lose quality of data if you don't 15 guarantee confidentiality. 16 MR. BLAIR: Those are my comments. 17 Thank you. 18 MR. NEERCHAL: Thank you. 19 Barbara. 20 MS. FORSYTH: Yes. I agree with a 21 lot that Ed has said. First of all, I think 22 it's commendable that you have found a way to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 245 1 put together four forms that at least reduces 2 or eliminates some overlap in some of your 3 data collection. So I think that's 4 noteworthy and ambitious. I'm grateful 5 you're doing it even though I'm not a 6 supplier. There are a lot of things I don't 7 know about the data collection, and so when 8 you talk about a cognitive test as opposed to 9 pretest, I think we probably use the tools 10 differently. 11 MR. RUTCHIK: Field test. 12 MS. FORSYTH: But I do think there 13 are some -- if not cognitive testing, at 14 least site visit testing issues that -- maybe 15 usability or something else -- but especially 16 to the extent that you have new data 17 elements, which sounds to me like you do have 18 some new data elements -- and I can't tell 19 whether you've tested them already or not. 20 MR. RUTCHIK: No, we have not. 21 MS. FORSYTH: So that a reason for 22 finding a way of combining cognitive with BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 246 1 field testing might be to get some insight 2 into those new data elements, particularly if 3 they're important, which I think that 4 balancing act probably is, because as Moshe 5 and Ed have suggested, it may alter the data. 6 So let's see -- I think there are ways -- I 7 understand the major goal in doing testing is 8 to do it fast, because it has to be done in 9 January. 10 And I think there are ways to 11 combine cognitive and field test methods so 12 that you could get estimates, which I think 13 you need for some of your purposes -- with 14 some retrospective or respondent reactions 15 afterwards. The trick is, if you're going to 16 combine those two testing goals in a single 17 testing method, it has to be in a way that 18 you can respond to results from both. 19 So if you are going to have the 20 opportunity to respond to respondents' 21 complaints about burden or respondents' 22 complaints about how they've been notified, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 247 1 then it may be a waste of resources, at least 2 at this point, to ask about it. And so I 3 guess another -- for the purposes of speed, 4 it would be really nice to do a data 5 collection and then go back into a 6 retrospective site visit, tell us what 7 happened, tell us what didn't work. 8 But that would be useful to you 9 only if you're able to respond to what didn't 10 work in the time frame that you have. And 11 the advantage of separating them is that you 12 can get that respondent reaction early, 13 folded into your pretest, and see if what you 14 changed worked. 15 So it really depends on what your 16 time frame allows you to do and what you 17 think the biggest issues are for you to 18 address -- that estimation issue as opposed 19 to these operational issues. Or finding it a 20 mix of both that lets you take advantage of a 21 combined cognitive and pretest -- field test. 22 Let's see -- I didn't have a real BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 248 1 good sense for it -- we talk about 2 respondents at lots of levels. There is a 3 responding organization -- 4 MR. RUTCHIK: Right. Yeah. 5 MS. FORSYTH: And then within the 6 organization, there may be multiple 7 respondents. 8 MR. RUTCHIK: Right. The form 9 survey will go to a plant -- 10 MS. FORSYTH: Right. 11 MR. RUTCHIK: And within the plant, 12 we go to one contact, and that contact will 13 be the person who put the data together. 14 MS. FORSYTH: Filled it out. Yeah. 15 MR. RUTCHIK: But we assume, since 16 it's asking for a wide array of data, this 17 data could come from different departments 18 within the plant. 19 MS. FORSYTH: Right. 20 MR. RUTCHIK: So that person would 21 have to go to department A for this and 22 department B for that and department C -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 249 1 MS. FORSYTH: Right. So if I talk 2 about those department-level respondents on 3 the average -- I know it'll vary by those two 4 strata, but on the average, how many do you 5 expect per organization? How many people do 6 you expect to be involved in this? 7 MR. RUTCHIK: Within an 8 organization? I can honestly say I don't 9 have a good feel for that. 10 MS. FORSYTH: So that would be a 11 good reason to do a cognitive test ahead of 12 time, because I think your selecting a 13 notification strategy might vary depending on 14 how many people there are within an 15 organization and what their relationships 16 are. If they work closely together, then 17 notifying one of them is essentially 18 notifying all of them. 19 But if there are institutional 20 barriers between departments, as there often 21 are, then an alternative notification 22 strategy, possibly tailored to strata, might BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 250 1 be a better approach. So the bigger the 2 organization -- as you get larger 3 organizations, you might want to alter your 4 notification strategy to address individuals 5 more directly. 6 Let's see -- so the number of 7 respondents and relations between them -- I 8 think those are nice cognitive -- well, site 9 visit testing issues. For these new data 10 elements, you'll -- a nice site visit issue 11 is how well they match the records. And I 12 anticipate that you design them to match the 13 records. But that's a site visit issue. And 14 the difficulty of providing -- I don't know 15 which is bigger, the boiler or the plant. I 16 think probably the plant. 17 MR. RUTCHIK: Plant. 18 MS. FORSYTH: But looking at how 19 difficult it is, or the burden in providing 20 both, and how that's changed with the new 21 form, and kind of responding proactively to 22 that is another good site visit topic. I BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 251 1 think those are my suggestions. 2 MR. RUTCHIK: Thank you. 3 MS. FORSYTH: I hope it's helpful. 4 MR. RUTCHIK: They have been. 5 Thank you very much. 6 MR. NEERCHAL: Can we have a 7 discussion? 8 MS. KHANNA: Mr. Chairman? 9 MR. NEERCHAL: Okay. 10 MS. KHANNA: What I was going to 11 say -- that you somewhat try to accommodate 12 the number of people involved in answering 13 the -- or filling out the form, because some 14 things could be interpreted differently by 15 different people. And I'll give you just one 16 example, and this is probably the result of 17 my training in economics. 18 But you ask for data -- you ask for 19 information on costs and revenues. My first 20 question is, do you want me to include taxes 21 or not? And it's not clear on the form. I 22 mean, if I was not an economist, I probably BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 252 1 would just say, okay, here is the money I 2 gave somebody. But is that what you're 3 looking for, or are you actually looking for 4 some other information? Or do you want this 5 element separated out? 6 And that depending on who answered 7 the phone may interpret slightly differently. 8 MR. RUTCHIK: You mean within an 9 organization? 10 MS. KHANNA: Uh-huh. Somebody is 11 in a -- 12 MS. FORSYTH: An engineer? 13 MS. KHANNA: An undergraduate 14 degree is going to look at cost and revenues 15 and say -- net of taxes or gross of taxes. 16 And if somebody has an accounting degree, 17 he's probably going to say of course, gross 18 of taxes. 19 MR. NEERCHAL: Thank you. 20 MR. KOKKELENBERG: I just wonder 21 now how much of this site visit could be 22 conducted in this pilot study, pilot testing. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 253 1 But also, the question of who responds I 2 think is really the crucial one, and Barbara 3 made that point. Would it be possible in 4 this pilot testing to really discuss this 5 issue with those plants where you're 6 conducting these pilot tests? 7 My experience is that when you ask 8 a plant manager what did they do last year, 9 they look at it as another form from the 10 federal government and they hand it to the 11 least -- 12 MR. FEDER: Reliable? 13 MR. KOKKELENBERG: Not necessarily 14 the least reliable, but the least -- 15 SPEAKER: The last one -- 16 MR. KOKKELENBERG: Yes, the one 17 with the lowest opportunity cost -- 18 MR. RUTCHIK: We have seen that. 19 We have seen that. 20 MR. KOKKELENBERG: To work on this 21 thing, and they give them the last year's 22 form and say, this is what we did last year, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 254 1 fill it out and let -- 2 MR. RUTCHIK: If Stan Friedman (?) 3 was here, Stan would tell his only and 4 favorite story about cognitive testing. 5 This happened when we 6 were actually during our training about this 7 at the Census Bureau. And one gentleman in 8 there, and his quote was -- Stan's going to 9 kill me for stealing his material, but that's 10 tough. 11 I take great store in what I did 12 last year, and he said -- basically I take 13 last year's records, look at it, maybe make a 14 little juggle, and this is this year. And we 15 have seen instances where we tested, we have 16 gone to meetings, and the people who were in 17 charge had brought in the summer interns, 18 so -- yeah, we're all over the problem. 19 MR. KOKKELENBERG: Right. The 20 summer interns also -- 21 MR. RUTCHIK: Yeah. 22 MR. KOKKELENBERG: Okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 255 1 MS. FORSYTH: So in some ways you 2 kind of wish for a break in the time series, 3 suggest a -- 4 MR. KOKKELENBERG: But I think 5 asking how they go about this might open some 6 possibilities on how you might want to 7 proceed with this in the future. And what 8 kind of notification that you were talking 9 about -- how do you get three different 10 people now to coalesce into one. So that's 11 the only comments I have. 12 MR. BINGHAM: It's just a 13 curiosity. So if you were to go off and do 14 site testing what -- and if you learn 15 something, right, you learn that people are 16 going to interpret this question one way that 17 wasn't quite what you meant, that sort of 18 thing -- how would you communicate that more 19 clearly? 20 So you think, well, maybe this 21 particular element needs better explanation. 22 How would that change to when it's actually BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 256 1 rolled out? 2 MR. RUTCHIK: Hopefully we'd have 3 time to make that type of fix without 4 actually changing the element. 5 MR. BINGHAM: Right. 6 MR. RUTCHIK: Because if you change 7 an element, that's a clearance issue -- 8 MR. BINGHAM: So I'm kind of 9 curious to -- is it traditional to have, 10 like, an FAQ webpage and things like that go 11 along with the surveys, as a result -- 12 MR. RUTCHIK: I think some of our 13 surveys do have that. 14 MR. BINGHAM: Is it traditional? 15 Is it -- certainly the summer intern would go 16 right to the webpage, right? 17 MR. SCHNAPP: We have tutorials on 18 the Internet -- tutorials and help buttons. 19 MR. BINGHAM: So is all that going 20 to be updated and based on -- like, that kind 21 of resources exist based on those surveys? 22 MR. SCHNAPP: Absolutely. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 257 1 MR. BINGHAM: Okay. 2 MR. NEERCHAL: Occasionally, you do 3 some follow-up calls, though, right? You 4 know, when you get a form and follow-up calls 5 and I'm wondering that since you're 6 sending -- putting the responsibility of 7 distributing the task to different people 8 within the plant rather than directly sending 9 it to the separate respondents, when you do a 10 follow-up call, you may have a little bit of 11 trouble tracking people down, because you've 12 called the person, your contact person. 13 Then he has to go and find the 14 person who filled the other schedule. So 15 there's kind of a chain thing and I think 16 that you may not be quite as efficient as you 17 were before in the follow-up calls -- since 18 you're moving that responsibility one notch 19 away from yourself. 20 I don't know whether that's a 21 factor. I don't know how many follow-up 22 calls you make. I don't know -- I don't have BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 258 1 a feel for it whether it's an issue or not. 2 MR. SCHNAPP: For being late? 3 MR. NEERCHAL: For being late or -- 4 SPEAKER: Inconsistent. 5 MR. NEERCHAL: Not having the 6 correct number or you need some data quality 7 check for -- 8 MR. SCHNAPP: At the moment, we do 9 have monthly forms, which is what a big 10 portion of this is going to be. For the 11 monthly forms, there really aren't that many. 12 MR. NEERCHAL: Okay. 13 MR. SCHNAPP: Forms are 14 too -- well, say to 906 is due like 30 days 15 after than the reporting month, I would say 16 that probably another two weeks after that we 17 have close to 100 percent. 18 MR. NEERCHAL: Okay. Ed. 19 MR. BLAIR: Ed Blair. There have 20 been some comments around in a sense testing 21 the meaning of the items, testing the 22 instructions. At one level, I agree with the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 259 1 comments in that I went through the 2 instructions, and of course I don't own a 3 power plant so -- you know, kind of guessing 4 at what everything means. 5 But I went through the 6 instructions, I certainly found places where 7 there was some doubt in my mind. Having said 8 that, if it's the same questions and the same 9 instructions that the same people have been 10 filling out over time, and you have limited 11 time and resources, I personally would not 12 make that a huge priority. 13 That might be a to-do at some 14 point, but in that sense, the imperfections 15 that will exist are the imperfections that 16 have existed. I do think that the big issue 17 is literally some -- in effect, somebody's 18 ability to fill out this particular form. 19 And so I come back to my point of usability 20 testing in that regard, and this whole 21 question of how the handoff procedure is 22 going to work within organizations, because BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 260 1 that's absolutely workable. 2 SPEAKER: Okay. 3 MS. KHANNA: Well, actually 4 that's -- he said what I was going to say in 5 his last sentence. You're right, if it's 6 exactly the same person who's always been 7 filling out the form, whatever they're 8 interpreting it as, it doesn't matter. It's 9 not going to change. 10 But if you're merging three or four 11 different forms into one, the same person may 12 not be filling out the form. And that's 13 where it matters and that's what (inaudible) 14 the end. I think it covered the same point. 15 MR. BLAIR: I think so. And I 16 think this sample dates back to March 31st, 17 I'll put it on the table. (inaudible) will do 18 is show there's a data continuity problem. 19 MR. NEERCHAL: Thank you. 20 MR. RUTCHIK: Thank you very much. 21 I appreciate your comments. 22 MR. NEERCHAL: So we move on to the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 261 1 second plenary presentation of the afternoon. 2 MR. LU: Okay, good afternoon. 3 MR. NEERCHAL: Good afternoon, 4 Ruey-Pyng Lu. 5 MR. LU: My name is Ruey-Pyng Lu. 6 I'm from the Statistics and Methods Group of 7 EIA, and I'm going to present the new 8 research program we developed in association 9 with the National Institute of Statistical 10 Sciences. 11 This is the standard disclaimer. 12 It's a working document, okay? And we try to 13 get help and comments from you. 14 The purpose of my presentation is 15 to introduce you -- the name we call it, 16 Applied Methodology Student Research Program, 17 establishing with the NISS, and also ask your 18 guidance in how we're attracting students and 19 the new researchers to do their research for 20 us. 21 And my presentation will be giving 22 you what is the NISS, National Institute of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 262 1 Statistical Sciences, and what is this 2 Applied Methodology Student Research Program. 3 How is the student can apply? And we have 4 four projects as example presented here, and 5 then I will get your input how to better 6 enhance and advocate this. 7 National Institute of Statistical 8 Science was established in 1990, in the late 9 1980s, established a committee, trying to set 10 up a independent research institute. There 11 are several places being competing for this, 12 like the Bay Area, Texas and the Research 13 Triangle Park, and that was the Research 14 Triangle Park in North Carolina. 15 And it -- is a chance to perform, 16 stimulate, across disciplinary research 17 involving statistics, and generally they're 18 going to come from the complex data treatment 19 problems. And those will provide career 20 development for the statistician and 21 scientists, especially those for the 22 formative stage, the new researchers. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 263 1 In the parent organization of NISS, 2 this ASA, Biometric Society, IMS, Duke, North 3 Carolina State and UNC-Chapel Hill, and also 4 RTI. And it's governed by a Board of 5 Trustees. 6 So I believe this parent organizing 7 have the representative, and also some other 8 statistical and scientific communities. The 9 interesting thing is so far they have 15 10 industry affiliates and 10 government 11 agencies and the national labs. We just 12 joined them this year -- and 32 university 13 affiliates; those are the different -- either 14 the statistic department or mathematics 15 department. 16 So we have been talking with NISS 17 since last year. So we will say this is a 18 great way to go. So we may establish a new 19 research program, which is the response to 20 the external study. So we're going to engage 21 students, especially those in the graduate 22 program, to collaborate in doing some BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 264 1 research for us which are important to our 2 programs. 3 And the procedure to apply is 4 student can apply either the full-time summer 5 support or full-time or part-time during the 6 academic year, or in certain cases, they can 7 just get the co-operative agreement, they 8 come here to access our sensitive data, okay? 9 Because they think that the data is good to 10 their research. And in ordinary academic 11 year, they can be conducted at their 12 students' university. 13 And summer research, they can be 14 here onsite or either the -- students and 15 institution and with a couple of visit 16 possibly to the EIA, which means they come 17 here, consult with the EIA project sponsor, 18 and maybe access and utilize EIA data. Maybe 19 that's -- it's required to do their project. 20 So we're going to solicit students 21 from statistical science disciplines, okay, 22 like statistics, operation research, BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 265 1 economics, et cetera. 2 So if the faculty mentor can 3 identify a research area proposed by us and 4 define the research objective with EIA staff, 5 then they can submit a proposal. Then 6 they'll submit to the NISS, which NISS will 7 do the initial review, then after that, send 8 to us. We will select if it fit our needs, 9 then the award were based on the strengths of 10 the application. So -- and it maybe 11 renewable, it depends on the accomplishment, 12 and if we have future plans, to continue on. 13 So there are several potential 14 projects available, but I'm just giving you 15 four of them here, with some of them already 16 discussed last year or even today. So the 17 first one is the imputation and the editing 18 method so we can help our establishment 19 surveys. 20 The second one is a combined heat 21 and power plant -- how to allocate the fuel 22 in the previous form, the -- previous talk. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 266 1 Then the third one is a biodiesel 2 production and distribution, which is the hot 3 topic of biomass area. And the fourth one is 4 the cointegration of EIA projection models, 5 okay? 6 Our goal is trying to give students 7 some details which enhance their research 8 interest but it keeps it short, and we will 9 put these descriptions to the NISS; they will 10 put on their website right after this 11 Committee meeting. 12 So Project 1: Editing and 13 Imputation. So we want -- get a project 14 which can -- testing the alternative editing 15 and imputation methods for our establishment 16 surveys. Can this new model base or other 17 approaches, micro data editing improve our 18 accuracy micro data? So we will provide some 19 dataset for the student to analyze, and this 20 project had two parts. 21 We will like -- because they're 22 already editing lots -- editing procedures in BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 267 1 the imputation techniques. So student have 2 to know at least three different 3 alternatives, then propose -- and those 4 should be appropriate for a large-scale 5 production system. Then the student will 6 propose one or two methods which will improve 7 the imputation and the editing and they 8 empirically test the methods, which they'll 9 compare to what we're currently using. 10 The second one: Combined Heat and 11 Power Plant Fuel Allocation. So this is 12 related to the 923 forms. 13 And Stan Kaplan discussed this last 14 spring, 2006, in a meeting. So we would like 15 to have the proposal review our current and 16 past approach to take this problem in how the 17 combining heat and power being allocate; one 18 for the fuel for electricity, one for the 19 other -- for the heat, okay? 20 So we'd like to see the project 21 recommend a new technology to performing the 22 allocation, such as -- and it may not be BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 268 1 collect -- allocated data. So it may be 2 useful from the model, okay? 3 And Project 3 is the Biomass 4 Production. So this morning talk about the 5 biofuel and -- which is ethanol. Then we're 6 trying to do some related to the biodiesel, 7 okay? 8 According to the Energy Policy 9 Act -- so we -- EIA will do an inventory of 10 renewable fuel, okay? Also, we're going to 11 develop a projection for the future inventory 12 of the renewable fuels. 13 So this project will involve the 14 biodiesel production issues, such as how the 15 biodiesel is currently produced, and then who 16 are the major producers, and fuel quality, 17 and also the blended production and how they 18 ship the biodiesel. Then once they're 19 produced, how they distribute it, okay? 20 So they have to describe the 21 biodiesel distributor and how this biodiesel 22 will enter in the petroleum supply chain, and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 269 1 will that be put into the AEO or AER; and 2 what kind of blends to the blender or 3 wholesaler to distribute it? And we want to 4 have the final deliverables, which we can put 5 on our website, give the information to the 6 general public about biodiesel, okay? 7 The fourth project is the 8 cointegration, which this is in the 9 econometrics area, okay? So you can see our 10 four examples are in the different areas. 11 One in the statistics survey methodology, 12 then energy-specific, okay? 13 And this is econometrics. And 14 this -- projection models, Jose Vilas 15 discussed in last spring Committee meeting 16 here. So we want to know are there 17 cointegration relationships between the price 18 series, like all the different -- oil, gas, 19 coal, electricity, et cetera. 20 And how can EIA adapt either the 21 short or midterm models to accommodate these 22 relationships, okay? So there are two parts BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 270 1 here. Fitting the cointegration model. In 2 this, we're going to determine whether this 3 has changed over times -- now that means we 4 will have a time series to fit in. And 5 advantage or disadvantage, including the 6 trend and some other economical variables or 7 commodities, okay? So the frequency of the 8 time series of the data will be daily, 9 weekly, monthly, or annual. 10 The second part of this project is 11 we'd like to see the advising to us 12 concerning how the identified relationship we 13 can use in our models to enhance the EIA 14 projection capabilities. So the researcher 15 will develop sufficient understanding -- the 16 EIA model recommends how the finding can be 17 incorporated to our projection models. 18 My questions to you Committee 19 members will be what can EIA do to attract 20 interests of students, especially 21 interdisciplinary graduate program, and new 22 researchers in this EIA project, this is just BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 271 1 for example. And improve the project 2 descriptions, put on the website or in 3 other -- some other modes, and how we 4 advertise. 5 And we already communicated -- with 6 NISS will actively advertise this, put on 7 their website, while we need broader 8 exposure, too. 9 So that's my question and your 10 comments and suggestions. Okay? 11 MR. NEERCHAL: I think we will go 12 with the designated discussants first -- 13 MR. LU: Okay. 14 MR. NEERCHAL: And then we'll open 15 it up. Cutler? 16 MR. CLEVELAND: Thanks for that 17 nice summary. I think this is a great idea. 18 I think it will serve many useful purposes 19 for EIA, not the least of which is insight 20 into some questions that we have -- issues 21 that we have been debating -- discussing over 22 the past few years, but also -- getting your BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 272 1 information out there to a broader audience, 2 helping to fill some of these employment gaps 3 that you're facing by getting new students 4 involved, and getting faculty across the 5 country more aware of what you're doing and 6 interested in these issues. 7 So I think there's a lot of benefit 8 to this. I think the questions you've raised 9 there are easy. But I think there are some 10 more fundamental questions that we need to 11 talk about, and that is how to structure this 12 program? 13 It seems to me -- and maybe you 14 guys have thought about it more than what 15 you've presented here, but it's not clear 16 what -- this seems like sort of in-between a 17 summer internship and a real fellowship. And 18 I think that of, for example, the EPA Star 19 fellowships, which a couple of my students 20 have got, which are really prestigious highly 21 competitive awards that really attracts the 22 cream of the crop of students in the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 273 1 environmental field, and also gets a lot 2 of -- who oftentimes by the way end up going 3 to work for EPA afterwards -- those are real 4 fellowships that pay a real wage to students. 5 At the other end, you have 6 something like a summer internship, which you 7 guys already have. And the difference is 8 important because the product you get at the 9 end will be very different, and the type of 10 students and the experience they have will be 11 very different. So for example, if you want 12 someone to work on a project -- and this is 13 going to vary by institution because the 14 research programs are structured differently. 15 At BU, if you want a student to 16 work on this -- really dive into it for a 17 full academic year, you can't pay 18 them -- well, the way it works at BU is you 19 have to pay a student on a grant about $2,000 20 a month. If you pay $2,000 a month, you 21 trigger tuition remission for the student. 22 Now the student doesn't have to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 274 1 take -- he can take one or two classes 2 instead of four, and is expected to work more 3 or less half or three-quarters time on this 4 project. And different institutions have 5 different types of arrangements, where if you 6 want someone to really work on something as 7 an independent research grant, you have to 8 hit a certain financial threshold. 9 I guess my question to you is what 10 is the amount of money you're allocating to 11 this? What is the size award you're thinking 12 about? What are you really expecting from 13 students? If you're not going to generate 14 that kind of support, that's okay. 15 But what you're going to get out of 16 it, you're going to get a different type of 17 student applying for it, and you're going to 18 get a different return in the end in terms of 19 the quality and depth of the product, and a 20 different level of faculty involvement as 21 well, because they're going to be to spend 22 more time with a student who's funded on a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 275 1 grant that's going to generate that kind of 2 time, and a different -- a less amount of 3 time probably on something that's more of an 4 internship-like project. 5 So I think it would be good to have 6 a more of a feedback from you guys on what 7 you had in mind for this type of project. 8 MS. KIRKENDALL: Maybe what our 9 challenge is, we had everything in mind. I 10 don't know whether we need to be more 11 specific now, but NISS had told us that they 12 thought a $20,000 a year -- 13 MR. CLEVELAND: Okay. 14 MS. KIRKENDALL: Which sort of is 15 in -- 16 MR. CLEVELAND: So if that's in the 17 ballpark, then what would do this? 18 MS. KIRKENDALL: That's something 19 We might have to expect with something like 20 this. 21 MR. CLEVELAND: Uh-huh. 22 MR. KOKKELENBERG: Plus travel or BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 276 1 something like that if you -- 2 MS. KIRKENDALL: That would be 3 annual. 4 MR. KOKKELENBERG: Periodically. 5 MS. KIRKENDALL: That kind of 6 detail has to be worked out. 7 MR. CLEVELAND: So then that's in 8 the range of -- 9 MS. KIRKENDALL: We did want to 10 include something cheaper, too -- 11 MR. CLEVELAND: Yeah -- 12 MS. KIRKENDALL: Something that's 13 more of a little research project that could 14 be -- 15 MR. CLEVELAND: That's fine 16 MS. KIRKENDALL: Somebody to come 17 down for us summer or to work on a project 18 over the summer at their university. Yeah, 19 so we're really, at this point I guess, 20 because it's so new, we were keeping it open. 21 MR. CLEVELAND: It's good to be 22 open, but I think you need to have some BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 277 1 specificity in your guidelines so people know 2 what to propose, and maybe you could develop 3 a couple of different types of grants that 4 people could apply for. One which would be a 5 shorter term, smaller-scale project versus a 6 year-long fellowship in which they 7 could -- some of the things you put up there 8 would take two students two years to do -- 9 MS. KIRKENDALL: Yeah. 10 MR. CLEVELAND: Where some of them 11 were smaller things that they could do. So 12 it would be good to get people that type of 13 feedback. 14 MR. NEERCHAL: I think this is 15 something a lot of people want to say, can we 16 have Derek -- he's discussed -- 17 MR. CLEVELAND: I've got a bunch of 18 more important things to do. 19 MS. KIRKENDALL: He's not done. 20 MR. NEERCHAL: I understand, yeah. 21 MR. CLEVELAND: If you'll forgive 22 me. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 278 1 MR. NEERCHAL: You can probably to 2 these; make sure that he has a chance to do 3 that and then come back, because it becomes a 4 dialogue. 5 MS. KIRKENDALL: Ruey-Pyng Lu, come 6 sit down. 7 MR. NEERCHAL: We may just run out 8 of time. I don't want to drag this -- 9 MR. CLEVELAND: I'll just 10 bullet-point then some of the other questions 11 that I have. So that's one thing. 12 I think -- you need to be, in 13 regards to what we just talked about -- be 14 more explicit in terms of your project 15 description about the dates and the terms of 16 the contract -- again, that might vary by the 17 types of things that you offer. What are the 18 deliverables that you expect? Again, that 19 could be fairly project-specific. 20 You could provide more information 21 at your website. I think a one-page 22 description of each project with some generic BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 279 1 program-wide discussion on dates, 2 deliverables, eligibility, so on and so 3 forth. 4 Look at the EPA Star fellowship 5 website. It's a good template to use. 6 MR. NEERCHAL: How are the 7 projects -- 8 MR. CLEVELAND: The question is how 9 are their projects picked themselves? Who 10 does -- how do you guys decide what you want 11 to do to support? What's the review 12 procedure internally? What exactly does 13 renewability mean? We know that when NSF 14 says renewable, it means one thing, when NIH 15 says renewable, that means something 16 different. So I'm sure you have something in 17 mind. 18 And then advertising. I think 19 there's a lot of things we can talk about. 20 You need to get on the e-mail and listservs 21 for different departments in related 22 disciplines -- a bunch of contractors you BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 280 1 deal with, they have listservs. You have 2 places like the IAEE. 3 Dave Williams at IAEE could give 4 you his e-mail list. I'm sure he'll share it 5 with you. There's AARE. All these 6 professional organizations. For something 7 like this, they'll give you their e-mail list 8 probably to contact -- 9 SPEAKER: Probably their 10 newsletters. 11 MR. CLEVELAND: Their newsletters. 12 That has a time lag, though, so you need to 13 be aware of that. Blogs -- there are 14 probably 20 or 30 good blogs out there run by 15 academic energy economists that you would 16 reach a large audience. We can help you with 17 that. 18 In your homepage, you can post on 19 your homepage, which gets a lot of visits. 20 So I'm sure other people will have lots of 21 ideas on outreach as well. But it's a great 22 idea. This could really be a really a big BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 281 1 return on investment for you guys. 2 MR. BINGHAM: Derek Bingham. 3 So basically I'm just going to 4 continue Cutler's comments, because it's a 5 run-on sentence. And the other thing I'll 6 mention is that -- so I'm very enthusiastic 7 about this. I think it's a really neat idea, 8 and I think you can get a great return on 9 investment. But just like an academic would 10 receive a referee report that would start off 11 by -- I really like this paper. Here are the 12 20 ways it sucks. 13 And so I'm going to ask a whole 14 bunch of questions -- kind of what Cutler was 15 doing. 16 So a lot of these projects, some of 17 them look like research, and some of them 18 look like a summer intern for an 19 undergraduate. So if you're going to get 20 somebody to do a literature review for you, 21 that's an undergraduate project. 22 So the first comment is that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 282 1 vetting your projects and saying here are the 2 research topics. 3 The reason I'm saying that is that 4 there are going to be Master's students for 5 instance, who -- so a lot of this are kind of 6 Masters' level work, and the type of people 7 that you maybe targeting to hire when they're 8 done -- not all disciplines, not all 9 departments -- have a project or a thesis. 10 MS. KIRKENDALL: Uh-huh. 11 MR. BINGHAM: And so those are the 12 places that are going to most probably want 13 to engage you. And if there's research 14 potential, that's where you're going to find 15 the advisor willing to really back it, 16 because they know that someway, the student 17 training highly qualified personnel is going 18 to get them -- is going to be important for 19 the next grant. So maybe they'll be a 20 research paper on it. 21 So I think that highlighting that's 22 going to be important, because that will give BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 283 1 faculty interest -- I think at least. So 2 part of it's just engaging faculty, whatever 3 mechanism you can. So that's part of it. 4 Just check off all the things that 5 Cutler has mentioned. 6 So it's not -- when you talk about 7 the application process, which at this point 8 was a bit vague -- but I think that's 9 actually good. I think that being flexible, 10 while it can be detriment if nobody knows 11 what is going on, not locking yourself in too 12 deeply to "this is the way it must work" is 13 not the way to do it either. 14 So I think that you could leave 15 things flexible a bit. But the question is 16 how do -- if I want to really engage in work 17 with you guys, and I'm not here on this 18 Committee, I guess the question is how would 19 I begin to work with you, because you 20 mentioned working with an EIA rep -- how 21 would I even begin that process of saying 22 what is important to you? What is the real BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 284 1 question you're trying to solve? 2 And whether I have the talent to 3 even -- or even the skill set to really 4 advise the student to do that at a level that 5 would produce publications, which is the 6 currency in academics. 7 Anyway, that's a general question I 8 would have. 9 I do have a question. Why NISS? 10 You know, I didn't see in your 11 presentation what value NISS provides to you. 12 I didn't see how NISS provides EIA anything 13 other than just an administrative or -- 14 MS. KIRKENDALL: Well, we're 15 becoming an affiliate member of NISS. 16 MR. BINGHAM: Yeah? 17 MS. KIRKENDALL: So that's -- and 18 as part of NISS membership, they do something 19 for you. So NISS is operating this and 20 they're not charging us anything over and 21 above our membership fee. 22 MR. BINGHAM: Okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 285 1 MS. KIRKENDALL: And we do get 2 other benefits from belonging to NISS. 3 MR. BINGHAM: Okay. 4 MS. KIRKENDALL: It's worth 5 becoming a NISS member regardless of this 6 program. The fact that they were wiling to 7 entertain this program for us, because it 8 fits in exactly what they're trying to do, 9 too. My guess is if we can do a good job 10 putting together a good program, other 11 agencies might be interested in it, too, and 12 that would be fine with us. 13 MR. CLEVELAND: Whose money is it 14 that will be paying the students? 15 MS. KIRKENDALL: We'll pay the 16 students because -- 17 MR. CLEVELAND: Okay. They're 18 administering the program? 19 MS. KIRKENDALL: They're 20 administering the program -- 21 MR. CLEVELAND: Okay. 22 MS. KIRKENDALL: A source of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 286 1 contact with universities and industry and 2 other government agencies, and they're trying 3 to further this kind of collaborative work. 4 They already have a new researcher 5 program, which targets projects for faculty, 6 junior faculty, and I have thought that we 7 might be interested in that, too. And maybe 8 some of these projects would be suitable for 9 that level of work. 10 MR. NEERCHAL: But I think one 11 thing -- the key thing that's different 12 between what NISS has been doing so far and 13 this, I think most of their solicitation is 14 somewhat general. The researchers provide -- 15 MS. KIRKENDALL: Uh-huh. 16 MR. NEERCHAL: Come up with the 17 research problem, and you just -- it's 18 basically like a grant proposal, whereas here 19 it's more specific. You have a problem in 20 mind and in some cases, you even have a 21 methodology that you want to be researched 22 out. So I think it's -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 287 1 MS. KIRKENDALL: One of the things 2 is that we're not closing out other research, 3 but what we're saying is that these are 4 things that we're really particularly 5 interested in. 6 These are problems we have. There 7 may be data people could use. There's 8 methodologies that we think are cutting-edge 9 or close to it, and we're just not sure how 10 to use them, and we could use help in 11 figuring all that out. So what we would like 12 to establish is something that really 13 addresses some of our problems. 14 Now, if somebody came in and sent 15 us a project description that wasn't exactly 16 what we asked for, but we thought it too 17 addressed a project we were deeply interested 18 in, then we would entertain it. 19 MR. NEERCHAL: Uh-huh. 20 MS. KIRKENDALL: But what I'm 21 trying to do internally in the EIA, too, is 22 that this shouldn't only be funded out of my BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 288 1 office. Because then the program office who 2 has the problem in the first place doesn't 3 necessarily buy-in. 4 MR. NEERCHAL: All right, uh-huh. 5 MS. KIRKENDALL: So I would really 6 like -- I don't mind -- it's not a huge 7 amount of money anyhow. But what I would 8 like to have is have us partially fund and 9 have the program office kick in a little bit, 10 and it would really be better if the program 11 officer was the main contact with the 12 researcher, although there are some things 13 where maybe we should be involved. 14 MS. FORSYTH: The student benefits 15 that way, too, because they're more than a 16 kind of -- 17 MS. KIRKENDALL: We have different 18 points of view. We have somebody from the 19 program office, somebody from my office. 20 MR. LU: Yeah. For a CHP project, 21 it would be like a NISS people, and for 22 cointegration, it would be only OIE (?) -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 289 1 MR. BINGHAM: I missed some things 2 here because people have been jumping into 3 the pits. So I'm going to run -- if I just 4 run through this final -- 5 MR. NEERCHAL: Yes. 6 MR. BINGHAM: I have two quick, 7 quick things. There is some other problems 8 projects that I think -- I'm sorry, sources 9 of knowledge, which maybe I will piggyback 10 on. You probably know about this, which is 11 the MITACS, NPCDS training initiative. They 12 have a joint project with Stats Canada where 13 they have student internships that are kind 14 of run through this with the identified 15 specific projects. So I can get you some 16 information on that -- 17 MS. KIRKENDALL: That sounds good. 18 MR. FEDER: Actually, when I was in 19 Stats Canada, I had a student from -- one 20 from Canada and one from France coming and 21 working for me. 22 MR. BINGHAM: So the government has BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 290 1 actually created this -- these kind of 2 outreach things, much like what you're 3 talking about. So there's some structure and 4 probably some experiences they can 5 probably -- help you with. 6 MS. KIRKENDALL: Yeah, that would 7 be great. Thank you. 8 MR. BINGHAM: And SAMSI 9 actually -- which is the Statistics and the 10 Mathematical Sciences Institute in Triangle 11 Park actually -- 12 MS. KIRKENDALL: Uh-huh. 13 MR. BINGHAM: Has been running some 14 programs and occasionally they'll overlap. 15 So they had one on longitudinal data 16 analysis, but actually, we have a lot of 17 survey stuff that might actually been able 18 to -- you could actually suggest themes. 19 MS. KIRKENDALL: I think they 20 coordinate with NISS. 21 MR. BINGHAM: They do. They do? 22 Absolutely; we do all the time. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 291 1 MS. KIRKENDALL: Yeah, okay so -- 2 MR. FEDER: So some of that could 3 be SAMSI and NISS. I think this -- 4 MR. NEERCHAL: They are? 5 MR. FEDER: They are joint. 6 MR. NEERCHAL: One of them is a 7 superstatute (?) of the other. 8 MR. FEDER: I think they're just 9 the Big Guy (?) there. 10 MR. BINGHAM: One final comment. 11 And this might maybe make things too 12 entrenched than you'd like to, but one way to 13 do things actually is to reach out to a 14 couple of departments that have projects, and 15 you can imagine -- so maybe Cutler's 16 department has this, but I know BYU for 17 instance still has a Master's thesis project, 18 things like this. And you say something like 19 this: you'd like to propose that you have a 20 small course. 21 You want to program that's 22 small -- on statistical consulting and energy BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 292 1 statistics. And within that -- because what 2 I did when I ran our stat consulting course 3 was I just walked to researches on campus. I 4 said, hey, do you want our students to work 5 on your data for you? So you get some free 6 stuff, and they get to work with other 7 researchers and taught them other stuff. It 8 maybe actually not possible to build a course 9 around one or two of your research projects, 10 again, that's part of funding for a 11 department, at the same time, get some 12 students. 13 It could -- instead of being 14 something you have to fund, maybe they could 15 get faculty advising right from the course. 16 So I could imagine trying to do something 17 creative by building it into a program. 18 And that would probably be 19 something that would be a real selling point 20 for the program, and selling point for EIA as 21 well. 22 MR. NEERCHAL: I think we'll start BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 293 1 with Ed because he had his hand up first a 2 long time ago. 3 MR. BLAIR: Ed Blair. I'd like to 4 continue the run-on sentence, though I think 5 Derek just threw a wrench into it with his 6 last idea. 7 Simplifying things. I think you 8 need to decide what your objectives are. Do 9 you want work done at a reasonable rate? Or 10 are you trying to recruit students? What are 11 you trying to do? If you want work done at a 12 reasonable rate, then you specify in detail 13 the work you want, and you offer a Letter of 14 Contract. 15 MS. KIRKENDALL: Uh-huh. 16 MR. BLAIR: If this is really 17 different and this is about recruiting 18 students and recruiting your next generation, 19 then I think a lot of the comments that have 20 already been made really, really come into 21 play -- the amount of money that's involved, 22 the level at which you have detailed the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 294 1 project, as Nagaraj had just mentioned here. 2 Census I think has just started a 3 program, and they're explicitly interested in 4 recruiting Ph.D.s in Statistics and M.S.s, 5 and they're interested in improving the 6 quality of the applications that they get, so 7 that's specifically what it's about. 8 So with their program, they say 9 these are areas where we have problems. But 10 they don't say, here's what we want you to 11 do. They say here is an area where we have a 12 problem, if you think you can do something 13 interesting in this area, we're interested in 14 talking about it. But at the end of the day, 15 it's really about forming a relationship. 16 The other thing -- and this has 17 already been mentioned -- do you want a 18 relationship with the student or with the 19 instructor? 20 The academics who advise Census 21 told them you want the relationship with the 22 instructor, not with the student. So it's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 295 1 not the student who will be applying for the 2 fellowships under Census' program, it would 3 actually be instructors, who might not have 4 the ability to pay their student, but then 5 the idea is that you've formed a pipeline. 6 And I think this idea that Derek 7 just said about actually striking up 8 relationships with selected departments, 9 possibly even here in the D.C. area, will 10 have a class -- possibly even hire people who 11 can help you teach the class. 12 That's a guaranteed winner. 13 MR. NEERCHAL: Cutler -- Moshe? 14 MR. FEDER: What I was going to say 15 was already covered by them and by what he's 16 going to say now. 17 MR. NEERCHAL: Is also covered? 18 MR. CLEVELAND: Go ahead. 19 MR. FEDER: No, no, no. I said 20 you're going to say it out, it was a 21 perfectly -- I specified those people. 22 Generally it was said that this gentleman BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 296 1 said -- 2 MR. CLEVELAND: Ed? 3 MR. KOKKELENBERG: Much has been 4 covered. But one of the points that Blair 5 made was that Census is doing something in 6 this area. Last fall, I went around to a 7 number of agencies. Every one of them has 8 the same problem you have. Their staff is 9 disappearing and they need to recruit. This 10 is going to be used as a recruiting tool. 11 You're going to have to be competitive if 12 you're going to get recruits out of it. Now, 13 the other place which doesn't seem to operate 14 the same way as Census does is the Federal 15 Reserve Board. And I can give you the name 16 of a contact there. 17 They do have an intern and research 18 program that they bring people into pretty 19 much like Derek was saying, making the 20 relationships with the faculty. And I'll 21 pass that out to you later. 22 MS. KIRKENDALL: Okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 297 1 MR. KOKKELENBERG: That's all I 2 have to say. Thank you. 3 MR. NEERCHAL: Cutler, go ahead. 4 MR. CLEVELAND: No, go ahead. 5 MR. NEERCHAL: You know, I think 6 that Cutler's point about the analogy between 7 Star Grant I think is a very good one, 8 because I think what is good about Star Grant 9 is that you don't have to say it's an EPA 10 Star Grant. The moment you hear Star Grant, 11 you know it has something to do with EPA. 12 And they have been able to establish that 13 kind of a -- you can say it's an 14 environmental sciences provident. 15 I think that maybe you should 16 actually work towards that kind of a -- 17 brand-name recognition, so you have to kind 18 of come up with a reasonable marketing plan 19 saying that -- 20 MS. KIRKENDALL: It is not the 21 name. 22 MR. NEERCHAL: This is the Energy BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 298 1 Scholarship. 2 MR. CLEVELAND: Right. 3 MR. NEERCHAL: Something like 4 Energy Fellowship. 5 MR. CLEVELAND: A name, a logo. 6 MR. NEERCHAL: And that's where I 7 feel that if you go with the NISS format, 8 it's going to be NISS blank -- and then I 9 think the kind of projects -- kind of things 10 that NISS has been doing is -- and they 11 rotate from year to year. It is not the same 12 theme year to year. 13 So we know what -- as a faculty, I 14 am encouraging students to do this kind of 15 stuff. I know what I usually expect in a 16 NISS advertisement. I think you really need 17 to establish that kind of a separate 18 identity, the Energy-something. And 19 regardless of the discipline, you don't want 20 to only focus on Stat or E-Con alone -- 21 MS. KIRKENDALL: Right. 22 MR. NEERCHAL: And sort of, it's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 299 1 the Energy and blank, whatever. I think 2 that's a good point. 3 MR. CLEVELAND: I think Ed more 4 eloquently and succinctly said what I was 5 trying to say originally in terms of what are 6 you trying to be. Is it the relationship 7 with -- in terms of both the product and the 8 relationship -- you know, if you're after 9 some serious, really serious work on a 10 project, you need to go hire a contractor. 11 If you're after a relationship with 12 the student or the faculty member, if it's 13 really the faculty member, then the program 14 has to be structured in a way that if you're 15 not going to buy part of my time, then I want 16 to be involved in a different way, that's 17 fine. 18 The EPA program is really about the 19 student. And the student is the focus, and 20 it's all about the student and the faculty 21 member's involved in a more tangential way, 22 although it varies a lot by award. So it BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 300 1 seems to me you are geared more towards the 2 student on this. But I think you need to be 3 explicit about that. 4 MR. NEERCHAL: Yeah, okay. 5 MR. BLAIR: And just a real quick 6 add-on: I 100 percent agree with what Cutler 7 just said. I think what Census is 8 doing -- and this is what the academics 9 suggested to them -- that if you made it 10 sweet enough that you can get the professors 11 onboard even without buying their time -- and 12 so there's our $50,000, with the anticipation 13 that somebody goes bang, I mean I could pay 14 my guy for a couple of years. I'll do it. 15 MR. NEERCHAL: Uh-huh. 16 MR. EDMONDS: I think one thing you 17 might do that would set yourself apart, in 18 addition to funding these students' research, 19 particularly if you're trying to attract 20 people to EIA as opposed to any just sort of 21 generally getting work done, would be to take 22 the best of these papers and create a vehicle BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 301 1 in which you could provide a publication, and 2 that's like something that's at your 3 disposal. 4 You have access to the ability to 5 do peer review, and that creates something 6 that would set you apart and give -- both the 7 students and the faculty would be interested 8 in that, because that's something that you 9 know -- you could make that something that's 10 attractive. 11 MR. CLEVELAND: That's a good idea. 12 MR. NEERCHAL: Neha? 13 MS. KHANNA: My last comment is, 14 there's a slight disconnect or -- not a 15 disconnect -- but a tension between getting 16 work done and hiring people, because I 17 understand you can only hire U.S. nationals. 18 So you need to think about what is it that 19 you want, because if it's going to be a tool 20 to really build a relationship, you're not 21 really interested in the foreign student 22 who's really good because you can't hire BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 302 1 them. 2 MR. KOKKELENBERG: Whether he is 3 good or bad or indifferent? 4 MS. KHANNA: Right, right. Just 5 something to keep in mind. And I believe the 6 Star fellowships are open to everyone. I'm 7 not sure. 8 MR. CLEVELAND: I'm not sure 9 either. 10 MS. KHANNA: Not sure. I don't 11 remember either. 12 MR. NEERCHAL: I think it's 13 actually in Star thing, it goes to NSF. It's 14 a NSF-EPA joint thing. I think it's U.S. 15 citizen only. 16 MS. KHANNA: NSF is open to 17 non-citizens as long as they're permanent 18 residents. 19 MR. NEERCHAL: No, I think they 20 have quite a few of them just physically -- 21 MS. KHANNA: It could be. Because 22 as I said, I'm not sure, but I know it's just BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 303 1 a question for you to think about because 2 it's going to determine your pool. 3 MR. NEERCHAL: I think it depends 4 on the level of the stipend also. I think 5 Star is a good comparison because that's been 6 a successful program. 7 MS. KHANNA: And I think once you 8 do figure out how big this program is going 9 to be, I think it would be very important in 10 your administrator's budget area to ramp up 11 money (?) for it so that it becomes something 12 that is committed to your work in a five-, 13 seven-year period unless -- because you don't 14 want to start building up a brand name and 15 then two years later, say, oops, so sorry, 16 we've got a request from the Hill and we 17 can't do this. 18 MR. NEERCHAL: Right. I think 19 another related point is that the way you 20 have said the research project here, this 21 will require a staff from here to be involved 22 in a -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 304 1 MS. KIRKENDALL: Uh-huh. 2 SPEAKER: Right. 3 MR. NEERCHAL: Close contact with 4 the student. That is sometimes -- you're 5 targeting -- some people are also named, and 6 they become very busy with some other 7 project. And all of a sudden, you have 8 actually given this fellowship to the student 9 and the student doesn't have the kind of 10 support that student is expecting. 11 And that's not very good. I think 12 that again kind of makes a strong case for 13 you to make it less specific. That way, the 14 student and the student's mentor at the 15 university take ownership of making the 16 deliverables happen. And if I have a student 17 working with me as a Ph.D. student, I want 18 that person to graduate. So I'm going to do 19 whatever it takes, right? 20 MS. KIRKENDALL: Right. 21 MR. NEERCHAL: And especially, I 22 know his money is running out. That's your BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 305 1 graduation day, the last date of your 2 paycheck. Something like that, and work 3 towards it. I think here, you're taking on a 4 lot more responsibility. That's kind of 5 dangerous, because you're not that student's 6 mentor, you know? I don't want to give a 7 project to another's -- among my colleague's 8 advice, because I know it's dangerous. 9 MS. KIRKENDALL: Uh-huh. 10 MR. CLEVELAND: Yeah, that's a good 11 point. I agree with that. On the other 12 hand, I do like the idea of having -- you 13 guys need help in certain areas. Some of 14 those things are things that we've struggled 15 a lot with over the years, and I like the 16 idea of essentially asking for help. And if 17 you make it attractive enough for the faculty 18 member to get involved in a substantive way, 19 and if your person on this side is going to 20 cooperate to some minimum level to get them 21 information in a timely way, I think there 22 could be some real progress here. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 306 1 But you're right that you 2 do -- some of these projects will -- you guys 3 need to pony up, have the institutional 4 commitment of making sure the point person is 5 going to respond in a timely way to the 6 student and faculty. But I do like the idea 7 of targeted areas. If you don't do that, 8 then you're going to start getting -- are you 9 then moving more towards, you know an NSF 10 model, where we're funding energy research, 11 and you're going to get every kind of 12 proposal under the sun. 13 MS. KIRKENDALL: Right. 14 MR. CLEVELAND: Which may not be a 15 bad thing, but -- 16 MR. KOKKELENBERG: You need a 17 committee to vet it. 18 MR. CLEVELAND: Yeah. I'm not sure 19 you had the -- it's a different kettle of 20 fish. 21 MS. KIRKENDALL: Uh-huh. 22 MR. BINGHAM: So just some final BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 307 1 thoughts. We're really going on in the same 2 lines. 3 I think it's going to converge to 4 what I was going to say. In Canada, there's 5 a model, this MITACS -- this one they call 6 MITACS -- I don't know what the acronym 7 stands for any longer. 8 But they've got a model which ends 9 up funding a student pretty well. But 10 there's a kick-in -- they transfer $5,000 to 11 the advisor to support the research. That 12 doesn't buy them -- there's no overhead in 13 Canada. 14 So basically, there's $5,000 more 15 for research somewhere along the way. And 16 I'm not saying we should necessarily do this, 17 but this -- as I said, there's two types of 18 currencies, I guess. The first one I 19 mentioned was publication. The other one is 20 actually currency. And sometimes it doesn't 21 take a lot, right? 22 MS. KIRKENDALL: Uh-huh. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 308 1 MR. BINGHAM: Doesn't -- they don't 2 have to give $50,000 to the advisor to buy 3 them out of teaching or pay summer salary or 4 something like that, but just enough to allow 5 them to go to a conference and present this 6 work -- something like that that's going to 7 allow them to have a little bit of extra 8 money to support the students -- and 9 sometimes officially, it's supposed to go 10 into sending the student places, which is 11 what I've done with it, but it's not always 12 used that way. 13 MS. KIRKENDALL: Uh-huh. 14 MR. BINGHAM: So that may be 15 something you'd want to add on. 16 You seem to have a good idea in the 17 sense you want research, you want work to be 18 done, you want to have a pool of people 19 who -- some of these people will come and 20 they'll stay and they'll do great work for 21 you. 22 MS. KIRKENDALL: Uh-huh. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 309 1 MR. BINGHAM: And these are all 2 goals but they're not necessarily strict 3 goals. So you do want them -- the crystal 4 link that will then come in and write that 5 Jaws (?) paper. So restricting yourself to 6 just the people who can be hired may be too 7 restrictive for you. 8 So I think that keeping it flexible 9 and allowing people to kind of come in and 10 mould a project would be beneficial. I think 11 the key thing is to highlight what the 12 benefits are before people get involved and 13 what are the basic -- what are the ground 14 rules when they put those -- 15 MR. NEERCHAL: Learning objectives? 16 MR. BINGHAM: So anyway. You've 17 obviously hit -- so this is the one thing we 18 all know about. So -- 19 MR. NEERCHAL: Using the new 20 language that I'm getting used to is the 21 learning objectives, I write it down. 22 So I think we will close the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 310 1 session on that note, and I think this is 2 definitely something I'm sure people will be 3 coming and talking to you -- 4 MS. KIRKENDALL: Uh-huh. 5 MR. NEERCHAL: Whatever ideas they 6 have. Is there someone who has not 7 introduced themselves -- I think I should 8 have probably done it in the beginning of the 9 session. This is for the purpose of the 10 transcription, obviously. 11 MS. WAUGH: Hi. Shauna Waugh with 12 the Statistics and Methods Group. 13 MR. NEERCHAL: Anyone else? So 14 otherwise, we're just going to break, and 15 directly from the break to the breakout 16 sessions. 17 (Recess) 18 MR. NEERCHAL: Can we start this 19 session? 20 I think that anyone who has not 21 introduced themselves, come to a microphone 22 and please introduce themselves for the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 311 1 transcription. I think I should do it the 2 beginning of each session. Anyone who is 3 here for the first time today who has not 4 gone to the mic and introduced themselves, 5 please introduce themselves. 6 MS. KIRKENDALL: There was a bunch 7 of you back there. I recognize some of you. 8 One is Patty -- 9 MR. NEERCHAL: Go to a microphone, 10 say your name and affiliation. 11 MR. GIELECKI: Hi, I'm Mark 12 Gielecki, and I work on the renewables team 13 with -- called Nuclear Electric and Alternate 14 Fuels, EIA. 15 MS. GUEY-LEE: I'm Louise Guey-Lee, 16 I work in Nuclear Renewable and Alternative 17 Fuels with Marie. 18 MR. GIELECKI: We are here for 19 Marie. 20 MS. NORMAN: I'm Karen Norman, I am 21 with SMG. 22 MR. DOGETS: I'm Vlad Dogets, on BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 312 1 the coal team, and this is my first week 2 here. 3 MR. CLEVELAND: Oh, fresh meat. 4 MR. LINDSTROM: I'm Perry 5 Lindstrom. I do the U.S. greenhouse gas 6 inventory that EIA does. And it's not my 7 first week here. 8 MS. CHOU: I am Patty Chou from 9 CNEAF. I am here to support Marie. 10 MS. KIRKENDALL: Thanks, Patty. 11 SPEAKER: Geez. 12 MS. JOYCE: Mary Joyce, I work on 13 the Alternative Fuels part of CNEAF. 14 MR. CLEVELAND: What is this, a 15 Marie fan club here? 16 MR. NEERCHAL: Thank you. 17 So we'll start, Marie, you're on. 18 MS. LaRIVIERE: Can everybody hear 19 me, or do I need the microphone? 20 Guys, can you hear me? 21 SPEAKERS: Yes. 22 MS. LaRIVIERE: Okay. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 313 1 MR. NEERCHAL: Mic is better 2 though. 3 COURT REPORTER: It needs to be 4 recorded. 5 MR. NEERCHAL: Better with mic. 6 MS. LaRIVIERE: Is it on? 7 COURT REPORTER: Yes. 8 MS. LaRIVIERE: You can hear it, 9 okay. 10 So today I am going to be 11 discussing some new methodology the EIA has 12 implemented with regards to municipal solid 13 waste. 14 Let me just ask, anybody in the 15 room have any interest in or experience with 16 MSW? Raise your hand. 17 MR. CLEVELAND: I generate a lot of 18 waste. 19 MS. LaRIVIERE: That's fair. 20 So I think I'm just going to give 21 quick definition so everybody's on the same 22 page. MSW is just all residential solid BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 314 1 waste and non-hazardous institutional 2 industrial and commercial waste. Basically 3 anything you would find in a landfill, this 4 is MSW. 5 Our objectives are twofold. EIA's 6 objectives are to split MSW into its biogenic 7 and non-biogenic components so that we can 8 assign it to renewable and non-renewable 9 waste. 10 Our objectives today are to get 11 some advice from the Committee on three 12 things: We are looking for advice on 13 forecasting the split; advice on the 14 methodology used to calculate the split, and 15 this will be for next year's redo of the 16 paper. 17 And we're looking for a Holy Grail 18 of BTU values which would be a single source 19 that we could get a BTU value for all the 20 components of MSW. I don't know if it 21 exists; I don't know if anybody has any 22 ideas. But if you do, please let me know. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 315 1 MR. CLEVELAND: Can you flip back 2 to that first slide -- 3 MS. LaRIVIERE: Yeah. 4 MR. CLEVELAND: So why are we 5 interested in splitting into biogenic and 6 non-biogenic? 7 MS. LaRIVIERE: Let me get to that. 8 So this is why. The EIA has 9 historically classified MSW as renewable, as 10 a renewable fuel, but we've done it because 11 the view has been that MSW is mainly 12 biogenic components -- biomass, like wood, 13 paper, paper products, things like that. But 14 it's true that MSW has some parts in it that 15 are not biogenic, and so concerns have been 16 raised that maybe we shouldn't be saying MSW 17 is a wholly renewable fuel if some parts of 18 it are not biogenic, therefore not renewable. 19 So to answer these questions, what 20 I did was I came up with a methodology, and I 21 calculated the shares of heat content in MSW 22 from biogenic and non-biogenic, and we used BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 316 1 that to break the MSW consumption, the 2 electricity produced, into renewable and 3 non-renewable parts. And we did this using 4 EPA data and various BTU sources. 5 Our finding was that the heat 6 content of MSW is increasing, and we'll get 7 to why that is. 8 Yes, you have a question? 9 So we're going to start with EIA's 10 definition. And to be fair, it should be 11 noted that there are a million different 12 definition of renewable energy. This is just 13 one of them, and this is the one that EIA 14 uses. The important part to note here -- oh, 15 I don't know if you guys can see this laser 16 pointer, but naturally replenishing. 17 So MSW is not naturally 18 replenishing. It's replenishable, it's 19 replenished every day, but it doesn't happen 20 by a biological, ecological cycle; it happens 21 because we create it. So even though it's 22 replenishing, it's not what we would call BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 317 1 naturally replenishing. And EIA says that 2 renewable energy resources include biomass, 3 hydrogen, geothermal, solar wind, and ocean 4 energy. 5 So part of MSW is biomass, but part 6 of it not biomass. This is where it gets 7 tricky. The contents of municipal solid 8 waste are as follows. On the left you'll see 9 we have the biogenic portion; on the right, 10 non-biogenic. So what's biogenic? Biogenic 11 is roughly equivalent to biomass, which is 12 what you saw in the previous slide right 13 here, renewable energy resources include 14 biomass. 15 So the part here that's biogenic is 16 what we will consider as the renewable part 17 of MSW. The non-biogenic part would then be 18 the non-renewable part. This definition up 19 here is currently being decided on. We don't 20 have one in our EIA glossary, so we're 21 working on this, but basically if something 22 is biogenic, it's produced by the actions of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 318 1 organisms, and this would exclude fossil 2 fuels. And that's why we say living 3 organisms. 4 So you can see on the left: 5 Textiles, yard trimming, food waste, wood, 6 leather, paper, and paper products, these are 7 all natural biogenic products. On the right, 8 synthetics, we have plastics and we have 9 rubber. Here, this side is going to be 10 important later on, but what we need to know 11 here is that biogenic on the left and 12 non-biogenic on the right. In general, 13 biogenic materials have a lower heat content 14 per unit weight than do non-biogenic 15 materials. 16 MR. CLEVELAND: Marie, where are 17 metals and minerals? 18 MS. LaRIVIERE: Metals and minerals 19 are not combusted, so -- 20 MR. CLEVELAND: (Inaudible) 21 MS. LaRIVIERE: And sometimes 22 they're left in the waste stream when it's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 319 1 combusted, but we set their BTU values equal 2 to zero. So -- 3 MR. NEERCHAL: Is it the higher the 4 BTU value, the better fuel -- is that -- 5 MS. LaRIVIERE: It produces more 6 energy. If you combust something with higher 7 BTU value per unit weight, yes. 8 MR. NEERCHAL: All right. 9 MS. LaRIVIERE: So this is what we 10 do with MSW, now that we know what's in it. 11 There are basically four things that happen 12 to any MSW that's created. We landfill 13 it -- this is what happens to the vast 14 majority of MSW -- we recycle it; plastics 15 are recycled at a different rate than glass, 16 than metals. 17 We combust it, which is what we're 18 going to talk about today -- and compost, 19 which is what would happen to things like 20 yard trimming and residential food wastes. 21 This is a historical trend of what 22 happens to MSW. You can see that in 1960 BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 320 1 we're looking at about 7 percent recycled, 2 93 percent landfilled. If you fast forward 3 to today to 2005, what we're interested in is 4 the yellow part. It's about 16 percent, I 5 think in 2005, that's combusted with energy 6 recovery. 7 MR. EDMONDS: Is there a pathway 8 from the landfill to recoverable methane? 9 MS. LaRIVIERE: Yes, the landfill 10 is where the landfill gas comes from. 11 MR. EDMONDS: Right. So there is a 12 pathway -- 13 MS. LaRIVIERE: Is that what you're 14 asking? 15 MR. EDMONDS: An energy pathway 16 that -- 17 MS. LaRIVIERE: Yes, absolutely. 18 Energy can come out of the discards at the 19 top. 20 MR. EDMONDS: Okay. 21 MS. LaRIVIERE: So we're looking at 22 this -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 321 1 SPEAKER: Marie -- 2 MS. LaRIVIERE: Yes, go ahead. 3 MS. KHANNA: Very quick question. 4 What happened between 1980 and 1990 that -- 5 MS. LaRIVIERE: This is when mostly 6 municipal solid waste plants came online. 7 People started to realize that we were having 8 issues with MSW, we were creating too much of 9 it, and this is when all the plants started 10 coming online, and then we had a ruling in 11 like 1994, that -- 12 MR. GRUENSPECHT: In 1978, there 13 was a bill passed called PERPA that said that 14 the utilities had to buy stuff from 15 independent generators. And that really made 16 the industry possible. I think people wanted 17 to burn some waste before -- 18 MS. LaRIVIERE: Right, right. 19 MR. GRUENSPECHT: But since the 20 electric utility didn't have to buy it, 21 didn't want to buy it, they kind of didn't 22 have much to do with it. So it was BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 322 1 that -- and then there was this other thing 2 that's -- 3 MS. LaRIVIERE: The constraint -- 4 MR. GRUENSPECHT: Going to get 5 worse. 6 MS. LaRIVIERE: Right. Municipal 7 solid waste generators were deemed qualifying 8 facilities under PERPA, so electrical sales 9 had to buy the MSW at a voided cost. So this 10 is when all these plants started coming 11 online. 12 So the combustion with energy 13 recovery is basically combustion in municipal 14 solid waste, waste energy plants, where it's 15 burned just like coal is burned -- in a 16 boiler, the heat is used to generate steam, 17 the steam is used to turn a turbine, and we 18 get electricity. 19 So what we're concerned with here 20 is this electricity that comes out, we're 21 classifying it all as renewable energy right 22 now. But again, because municipal solid BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 323 1 waste is not all biogenic, what we're saying 2 is that not all the electricity should be 3 allocated to renewable energy. 4 So this is how I went about doing 5 the split. You guys all have a handout that 6 looks something like this, if you want to 7 follow along. It's not too complicated, but 8 I thought you might like to look at some 9 numbers. 10 So on the left we have the 11 materials groups, and then in the discards 12 column, we have the amount of MSW that's 13 generated minus the amount that's recycled, 14 and there a different recycling rate 15 per -- for each materials group. It just 16 came out today, so maybe it's on the top of 17 your -- 18 MR. NEERCHAL: It is the last page 19 in the packet. Yes. 20 MS. LaRIVIERE: You got it? Okay. 21 So we take -- 22 SPEAKER: Hot off the press. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 324 1 MS. LaRIVIERE: That's right. We 2 take the total weight of MSW that's available 3 for combustion, and we separate it into the 4 biogenic and non-biogenic fuel groups, then 5 we take the BTU per ton factors that we have 6 for each materials group and we multiply it 7 by the number of tons, and this gives you 8 your weighted BTU per ton value, for an 9 average ton of MSW. 10 And then you can calculate the 11 shares of biogenic and non-biogenic just by 12 dividing the amount of the total heat 13 content. The amount of the heat content 14 contributed by the total heat content, and 15 then that gives you -- in this example, you 16 have 44 percent of your total heat content 17 from MSW is non-biogenic in 2005, and 18 56 percent is biogenic. 19 You can do this for all data years. 20 MS. KHANNA: Really quick question. 21 MS. LaRIVIERE: Yes. 22 MS. KHANNA: Why are you interested BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 325 1 in calculating the average heat content of 2 MSW when you have all the breakdowns? 3 MS. LaRIVIERE: I'm sorry, can you 4 repeat that? 5 MS. KHANNA: You said you just 6 calculated the average heat content of MSW. 7 MS. LaRIVIERE: Oh, because we 8 wanted to know how the heat content is 9 increasing by year. So when you get the 10 average heat content, you can make a nice 11 trend line to see how the heat content is 12 increasing over time, and this is going to be 13 used by the forecasting office. 14 MS. KHANNA: And that's only going 15 to depend on the shares of the -- 16 MS. LaRIVIERE: Right. 17 MS. KHANNA: So we can just 18 subtract the shares -- 19 MS. LaRIVIERE: Well, unfortunately 20 all we have is national level data of the 21 shares, so we assume that this share applies 22 to every plant. So it's basically doing the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 326 1 same thing. Does that make sense? Am I 2 answering it? 3 MS. KHANNA: You just sort of 4 generated one number out of ten, but there's 5 no additional information on that one number 6 that you got out of the ten. 7 That's okay -- 8 MS. LaRIVIERE: I'm sorry, I 9 don't -- 10 MR. CLEVELAND: I believe the model 11 requires an input, an average heat content -- 12 MS. KHANNA: Okay. Thank you. 13 MR. CLEVELAND: Correct? 14 MS. LaRIVIERE: Yes, thank you. 15 So we did this for all the data 16 years, and for the years that EPA didn't have 17 data, we interpolated. And unfortunately, we 18 didn't have perfect data, so we had to make 19 some assumptions. Some were more important 20 than others, and some had bigger effects on 21 the data than others. First of all, as I was 22 just saying, the data that comes from EPA is BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 327 1 a mixture of MSW, but it's at the national 2 level, so we have to assume that it applies 3 to all MSW combusted at any waste energy 4 plant. 5 Next is that MSW input materials 6 were classified as biogenic or non-biogenic 7 according to their predominant composition, 8 so for example, rubber from tires is 9 predominantly synthetic rubber with a little 10 bit of natural rubber left in it, so we call 11 that synthetic. Textiles -- of course there 12 are nylons, but there's also cotton and wool, 13 and we classified it as organic. 14 Other plastics was assigned to heat 15 content -- that was the average heat content 16 of all the other resins, because we didn't 17 know what was in other plastics. Unassigned 18 other, this is a category in the EPA 19 report -- it's just other waste; we just 20 divided it equally by weight into the 21 biogenic and non-biogenic groups. 22 This is what you were asking about BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 328 1 before, the BTU values of glass and metal 2 were set at zero. This is because there's 3 two different types of MSW combustion plants: 4 There's Refuse Dry Fuel where they take out 5 the larger pieces like appliances and things 6 like that, and they also take out glass and 7 metals for recycling, and then they shred it, 8 compact it, and then burn it. 9 But there's also mass burn where 10 they just dump from a truck into the boiler 11 and they burn it. So we had no way of 12 knowing if there was going to be glass or 13 metal in the combustion, so we set the BTU 14 values equal to zero because they don't 15 combust anyways. 16 MR. CLEVELAND: When you do the 17 dump, does the non-combustible stuff reduce 18 or affect the heating value of the stuff? 19 MS. LaRIVIERE: In some cases it 20 can reduce the heating value; it can actually 21 pull heat out of the combustion process. But 22 we don't know enough to assign a value, and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 329 1 we also don't know who is combusting Refuse 2 Dry Fuel and who is combusting the mass burn. 3 And then the last assumption that we made is 4 that unspecified BTU values were assumed to 5 represent higher heating value, which is the 6 gross heating value of the fuel, as opposed 7 to the net. 8 MR. BINGHAM: Is the heat 9 content -- are those fixed costs, or is that 10 something that's kind of recalculated? 11 MS. LaRIVIERE: The heat 12 content -- like the BTU values? 13 MR. BINGHAM: Yeah. So for 14 instance, for textiles, you got 13.8 million 15 BTU per ton, but if the composition of the 16 textiles were to change and there's more 17 nylon than there are -- 18 MS. LaRIVIERE: Yeah, absolutely, 19 that can change. 20 MR. BINGHAM: So does that get 21 re-measured often or -- 22 MS. LaRIVIERE: It depends on what BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 330 1 source we use for the BTU values, and what 2 they include in their textiles. So that's 3 why we're looking for something like -- from 4 an MSW perspective, what they would call 5 textiles. 6 Because EPA calls something 7 textiles that might be a different definition 8 for what somebody else uses, and the 9 definition is what's going to change the BTU 10 value. 11 MR. CLEVELAND: So are these heat 12 contents -- higher heating values or low 13 heating values? 14 MS. LaRIVIERE: The higher heating 15 values. The higher heating values. In some 16 cases, it wasn't specified -- if they were 17 higher heating or lower heating, then we 18 assumed them to be higher heating values. 19 So we had some issues with the data 20 also -- we'll talk about these. EIA collects 21 MSW data from its respondents, and what we 22 get is a BTU per ton value for the MSW that BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 331 1 they combust. 2 But unfortunately, what they report 3 to us is just an overall BTU value, so we 4 don't have the components of their 5 combustion, so we don't have enough data from 6 them to split into their biogenic and 7 non-biogenic parts. So we had to use other 8 data that would show us what was actually in 9 the MSW waste stream. 10 So we used the EPA data, and 11 therefore the number that you will see coming 12 up is not representative of the number that 13 we get reported from our respondents. 14 BTU values, we got from best 15 available sources, and it's possible that 16 they might have been developed using 17 different procedures, because not all of the 18 values came along with the documentation of 19 how they calculated their data, their 20 numbers. And again, EPA did not collect data 21 for all the years. So we had to do some 22 interpolations. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 332 1 So these are our results. It's a 2 pretty obvious trend line. You can see on 3 average year over year, the heat content of 4 MSW is increasing. And this is the shares, 5 this is what we're going to use to split our 6 MSW. You can see that in 1989, it's about 7 35 percent non-biogenic and about 65 percent 8 biogenic. And if you come to 2005, it's 9 about 45 percent non-biogenic and 55 percent 10 biogenic. And if you just go on a couple of 11 years, it hits 50-50. 12 And this is with all the years that 13 we interpolated. So this slide is with just 14 the data years, and you can see that the 15 trend looks almost exactly the same. 16 The line fits a little bit better 17 here, but same trend, of course. So there 18 are two reasons this is happening: There's 19 an increasing amount plastics in the 20 municipal solid waste stream without an 21 accompanying increase in the recycling rate. 22 And we've a decreasing round of BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 333 1 paper and paperboard in the waste stream 2 because of increased recycling. And plastic 3 has very high heat content, and paper and 4 paperboard have lower heat content. 5 So the changing ratios of these two 6 are mainly what's affecting the heat 7 contents. 8 This is what EIA is going to do 9 with our split. Starting in 2001, we started 10 collecting MSW as an independent fuel from 11 landfill gas; prior to that they were one 12 fuel. So we can start our split in 2001. 13 The biogenic portion is going to be reported 14 as renewable waste energy, and non-biogenic 15 will be other non-renewable energy, or other 16 non-renewable waste. 17 So where you saw that 56 -- it's 18 55/45, you take it -- and we have a total MSW 19 consumption number down here at the bottom, 20 you can see the total for 2005 is 299, and we 21 just split it -- 55 percent will be the 22 renewable waste energy, and 45 percent will BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 334 1 be the other non-renewable waste. 2 We're going to take the historical 3 trends in heat content and forecast them 4 forward to use for the split in the NEMS 5 model. And we're going to ask for some 6 advice on this, and we have a person here 7 today who's going to be doing the split, 8 which is not me. You can talk to him. 9 So these are our questions. Again, 10 advice forecasting the split, a methodology 11 suggestion for future years. This is a done 12 deal for this year. The paper is about to go 13 out, hopefully, on the webpage. And again, 14 we're looking for a single source of BTU 15 values for MSW, which I don't think exists, 16 but if you can find it -- yes, Mark? 17 MR. GIELECKI: Nice job, first of 18 all. 19 MS. LaRIVIERE: Thank you. 20 MR. GIELECKI: Second -- 21 SPEAKER: Could you come to the 22 mic, please. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 335 1 MR. CLEVELAND: He's president of 2 the Marie fan club. 3 (Laughter) 4 MR. GIELECKI: Nice job. 5 MS. LaRIVIERE: Thanks, Mark. 6 MR. GIELECKI: It occurs to me that 7 in those states that count MSW as part of 8 their renewable portfolio standard, if all of 9 a sudden we split MSW into renewable and 10 non-renewable component, it may mess up all 11 those RPSs. 12 MS. LaRIVIERE: It's not just the 13 states. It has applications to industries 14 also that are burning MSW. But yes, that's a 15 good point. 16 MR. GIELECKI: But it'll mess up 17 the split. That's all. 18 MR. CLEVELAND: Where are these 19 data showing up in the different EIA 20 publications and series? 21 Do you have that for me? 22 MS. LaRIVIERE: I can talk to you BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 336 1 about that. So this will show up in -- 2 MR. CLEVELAND: So renewable waste 3 energy -- and so where does that show up? 4 MS. LaRIVIERE: Well, this will 5 come out in our Renewable Energy Annual, and 6 the other parts of renewable waste energy are 7 landfill gas -- what else, Louise? 8 MS. GUEY-LEE: What are the 9 other -- 10 MS. LaRIVIERE: Of renewable waste 11 energy. Landfill gas -- 12 MS. GUEY-LEE: Other biomass -- 13 MS. LaRIVIERE: And other biomass. 14 But in here, the series will be the 15 generation of -- 16 MR. CLEVELAND: That's how it shows 17 up in the power sector. 18 MS. GUEY-LEE: Yeah, the series 19 will be the electricity generation, energy 20 consumed for electricity, energy consumed for 21 combining power, energy consumed for 22 steam only -- wherever MSW is consumed, we BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 337 1 have to divide it up between renewable and 2 non-renewable. 3 And that's in the electric power 4 publications; it will have some effect in 5 renewables. Definitely greenhouse gases. 6 MS. LaRIVIERE: It's already come 7 out in last month's Electric Power Monthly. 8 They did the split. 9 Any other question? Go ahead. 10 MR. NEERCHAL: I think you're the 11 designated discussant. 12 MS. KIRKENDALL: Me? No. 13 MS. LaRIVIERE: This is a breakout 14 session. 15 MR. NEERCHAL: Come back later. 16 MS. LaRIVIERE: She's going to 17 report out on the discussion. 18 MS. KIRKENDALL: You'll report it 19 later on. 20 MS. KHANNA: I'm reporting? 21 MR. CLEVELAND: No, no. 22 MS. KHANNA: Good. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 338 1 MR. CLEVELAND: It's not true. 2 MS. KHANNA: That's not true. 3 Somebody who I don't know reported. 4 MS. KIRKENDALL: Vijay, who's not 5 here, so it's Neha -- we wrote down Neha -- 6 MS. KHANNA: Oh, I see -- well, 7 okay. 8 MR. NEERCHAL: It's not a good 9 answer for not paying taxes. You know that. 10 MS. KHANNA: I have a question 11 anyway. Partly a suggestion, too. Going 12 back to your question about forecasting the 13 split, which is -- from the slides that you 14 showed us, you've got two straight lines, 15 essentially. 16 MS. LaRIVIERE: Right. 17 MS. KHANNA: Which is going to lead 18 you into trouble very soon. 19 MS. LaRIVIERE: Right. 20 MS. KHANNA: So really, you have to 21 try and find some kind of asymptote to those 22 lines. And the only way -- your dealer is BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 339 1 not going to give you those asymptotes 2 because they're essentially a straight line. 3 So I think probably the easiest way to do 4 this is to find out from the MSW industry, 5 from landfill operators, do they have a sense 6 of where this is going to pop up, where is 7 this recycling is going to top out or where 8 is -- yeah, where is recycling, what fraction 9 of the waste is actually going to get 10 recycled, and then sort of finesse -- put 11 that as the upper limit, and fit a function 12 that's going to asymptote to that. 13 MR. CLEVELAND: Uh-huh. 14 MS. KHANNA: Because otherwise 15 you're going to run into negative territory. 16 MS. LaRIVIERE: Right. We talked 17 to EPA, their Solid Waste Division, and all 18 they could really say to us was that they 19 have a national policy in place designed to 20 increase the recycling rates of all 21 materials. Doesn't really help in 22 forecasting what's going to go where, so -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 340 1 MR. CLEVELAND: It's not just 2 recycling, it's also the composition of the 3 stream itself, which is -- it gets to 4 household consumption, all kinds of crazy 5 stuff. 6 MS. LaRIVIERE: Right. 7 MR. GRUENSPECHT: Do you rank the 8 problem by 2030, or is it general enough that 9 you know -- 10 MS. LaRIVIERE: Well, it -- 11 MR. GRUENSPECHT: It crosses, I'm 12 sure. 13 MS. LaRIVIERE: It crosses in a 14 couple of years. 15 MR. GRUENSPECHT: That's a steep 16 slope. 17 MS. LaRIVIERE: Right. 18 MR. GRUENSPECHT: You wouldn't run 19 in to a problem by 2030. 20 MR. CLEVELAND: That's a steep 21 slope, though. 22 MS. KHANNA: Yeah, I mean -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 341 1 MS. LaRIVIERE: Right. 2 (Laughter) 3 MR. EDMONDS: It may be a problem, 4 but you're not going to violate any laws of 5 conservation. 6 SPEAKER: Laws of nature. 7 MR. EDMONDS: Right. 8 MR. CLEVELAND: No, but you're 9 going to pretty quickly get to -- the 10 non-renewable stream is going to be bigger, a 11 lot bigger, faster. 12 MS. LaRIVIERE: Right. And it's 13 interesting because -- 14 MR. EDMONDS: It may be 15 implausible, although physically possible -- 16 MS. LaRIVIERE: The weights of the 17 MSW stream is -- the weight is still mainly 18 biogenic, but the heat content, because of 19 the increase in plastics, is now shifting 20 towards the non-biogenic side. We just don't 21 know where it's going to -- where it's going 22 to stop. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 342 1 MS. KHANNA: Aren't plastics being 2 recycled more and more? 3 MS. LaRIVIERE: No. Well, not 4 according to the EPA data. More plastic is 5 being recycled, but more plastic is being 6 created. So the recycling rate, through 2005 7 at least is staying -- they should have 8 another publication out in the end of 2007. 9 We'll see if anything changes. 10 But there's just such a drastic 11 increase in the amount of plastic produced 12 that it's not doing much. 13 MR. NEERCHAL: What is the source 14 of that MSW data at EPA? What is the basis 15 of it? 16 MS. LaRIVIERE: It's called 17 Municipal Solid Waste in the United States 18 Facts and Figures, and it first came out in 19 1990, and then like '95 through 2000, and 20 then every two years after that. It's in the 21 sources on the PowerPoint. 22 MR. BINGHAM: So you know the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 343 1 recycling rates of plastics? 2 MS. LaRIVIERE: Yes. 3 MR. BINGHAM: Do you also know how 4 much is being produced every year? 5 MS. LaRIVIERE: They give all that 6 in the report. 7 MR. BINGHAM: Does any of this 8 information actually help you try to 9 build -- can any of this information be used 10 to build a forecast, because if plastics are 11 driving the trend, is there any way to kind 12 of use that as a proxy for forecast? 13 MS. LaRIVIERE: It's possible, 14 yeah. I'm not sure -- Bob, do you have any 15 ideas? 16 MR. GIELECK: We can't hear back 17 here. 18 MS. LaRIVIERE: Oh, I'm sorry. 19 It's possible, but I'm just not sure -- 20 MR. GIELECK: So my question was 21 this: I guess part of the question to the 22 Committee was how to forecast, how to build a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 344 1 forecast in the future. I was kind of 2 curious, if recycling rates are known and the 3 amount of plastics that are produced are 4 known, and plastics are producing a lot of 5 the trend driving the system, can knowledge 6 about the plastics industry and recycling 7 rates somehow help give a proxy to the 8 forecast, be assertive (?) instead? That's 9 kind of -- 10 MR. CLEVELAND: The problem is 11 recycling rates are very local and regional. 12 Not really -- lot of it's nothing national -- 13 MR. NEERCHAL: County by county. 14 MR. BINGHAM: Yeah. 15 MR. GIELECK: But you mentioned you 16 did have rates. 17 MS. LaRIVIERE: We have a national 18 average rate the EPA gives which -- 19 SPEAKER: A model, if you want to 20 say -- 21 MS. LaRIVIERE: Right. 22 SPEAKER: What are the driving BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 345 1 forces behind the observed trend and national 2 recycling rates. 3 MS. LaRIVIERE: Right. 4 SPEAKER: The rate has been -- if 5 you actually know the recycling rate and you 6 know the amount of plastics produced, doesn't 7 that help you tell you something about the 8 composition of the waste? 9 MS. LaRIVIERE: It does, and it 10 tells us -- 11 SPEAKER: We are trying to 12 forecast -- 13 MS. LaRIVIERE: Right. 14 SPEAKER: Future recycling rates. 15 MS. LaRIVIERE: It tells us -- 16 SPEAKER: Better than that, or 17 should we do better than that, I guess 18 constantly. 19 MS. LaRIVIERE: We've got to 20 consummate -- it's like some percentage, I 21 don't know, maybe 13 percent of plastic is 22 recycled, whatever, and then you have the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 346 1 production that's increasing every year. So 2 it tells us that plastics are going to be 3 increasing in the wastestream. 4 MR. EDMONDS: What you're saying is 5 that -- when you're doing your forecast 6 model, you actually back up one step and 7 actually produce, essentially, an estimate of 8 plastics with a recycling rate which then 9 gives you the flow off into MSW. Same thing 10 for the biological material, with a recycle 11 rate -- and then actually have a structural 12 model that -- 13 MS. LaRIVIERE: That's part -- 14 MR. EDMONDS: You might get a 15 better job than just taking a trend. 16 MR. BINGHAM: So that's what I was 17 trying to say. 18 MS. LaRIVIERE: If I understand you 19 correctly, I think that that's already part 20 of this model, because the data that we use, 21 the weights on the methodology sheet that I 22 handed out are the -- it's the amount created BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 347 1 in the U.S. minus the amount recycled. So 2 the recycling rate is already incorporated 3 for each year. 4 MR. BINGHAM: Great. I got nothing 5 then. 6 MS. LaRIVIERE: Me neither. 7 Because we know that the non-biogenic part is 8 going to keep increasing, but it's really not 9 going to increase to 100. So we just don't 10 know -- 11 MR. CLEVELAND: Is this one of our 12 research projects for students? 13 MS. KIRKENDALL: Yeah. 14 MR. CLEVELAND: There you go. 15 MS. KHANNA: So I have to ask you a 16 question. Somewhere during the presentation, 17 you mentioned that the EIA does collect NSW 18 data from the plants. 19 MS. LaRIVIERE: Uh-huh. 20 MS. KHANNA: What exactly -- what 21 is the information that you collect, and how 22 difficult is it going to be collect more BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 348 1 information? 2 MS. LaRIVIERE: Very difficult to 3 collect more. And what we do collect is the 4 heat content of their fuels. 5 MS. KHANNA: Average of that. 6 MS. LaRIVIERE: Average, like where 7 we have -- this here, this is what we collect 8 from them, so we could make the same graph 9 from them with their data. 10 MS. KHANNA: At the current level? 11 MS. LaRIVIERE: And theirs is 12 increasing, too. It's lower -- I think it's 13 like a little bit under 10 to a little bit 14 under 11 in the same time period. 15 And who knows? Maybe they are 16 combusting MSW in a location that has a 17 higher rate of plastics recycling or 18 something like that. 19 But their heat content is also 20 increasing, but it would be -- I don't know, 21 in my opinion, a burden on the people that 22 fill out the surveys to say what they're BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 349 1 burning, because a lot of these places 2 literally just -- a truck will back up to a 3 bay, dump out what's in it and then a claw 4 will pick it up and dump into an incinerator, 5 and nobody ever looks at it. 6 MS. KHANNA: So I'm clutching, 7 grasping straws here, okay? 8 MS. LaRIVIERE: No. I know, 9 appreciate it. 10 MS. KHANNA: If you know at the 11 plant level the average heat content of a 12 MSW, okay? So you've got that information 13 for every plant except for year 2005. 14 MS. LaRIVIERE: Right. 15 MS. KHANNA: But then you have the 16 national average, which the EPA has given 17 you? 18 MS. LaRIVIERE: Uh-huh. 19 MS. KHANNA: So you can tell 20 something about that local plant as how it 21 compares to some sort of average. 22 MS. LaRIVIERE: Right. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 350 1 MS. KHANNA: So if you have a local 2 plant that has a higher heat average, heat 3 content, average heat content than the 4 national average, one could assume that this 5 one burns more plastics. 6 MS. LaRIVIERE: Right. 7 MS. KHANNA: And if you have that 8 data historically for (inaudible) maybe we 9 can get some idea of trends at recycling 10 rates, trends of shares at the bottom level 11 and use that to somehow aggregate up to a 12 national trend. 13 Like I said, it's clutching at 14 straws but from what you have got, it seems 15 to be the only thing. 16 MS. LaRIVIERE: That's true. 17 That's an idea. 18 Bob, do you think you can work with 19 that? 20 SPEAKER: You and I need to discuss 21 this a little more before we actually 22 implement it, and that's to get a 25-year BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 351 1 forecast. 2 MS. LaRIVIERE: Right. 3 MS. KHANNA: Oh, it will be a 4 terrible forecast, I promise you. 5 MR. SMITH: Right, it'll have to, 6 it's something that every year, when we get a 7 new trend -- 8 MS. KHANNA: But it won't be a 9 straight line. 10 MR. SMITH: A new trend -- 11 MS. LaRIVIERE: It's certainly not 12 going to be correct, but it's less incorrect. 13 MR. SMITH: It's better than what 14 we have right now. 15 MS. LaRIVIERE: Right. 16 MR. WEINIG: Could you join us at 17 the table? 18 MR. SMITH: Sure. 19 MR. WEINIG: This is part of the 20 discussion, and if you just announce for the 21 transcriber who you are. Your name and the 22 sequence. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 352 1 MR. SMITH: Sure. I'm Bob Smith. 2 I work in EIA Office of Integrated Analysis 3 and Forecasting Renewable Energy. 4 MS. LaRIVIERE: Any other 5 questions? Yes. 6 MR. EDMONDS: Just out of 7 curiosity, I was looking at your table, the 8 MSW consumption, renewable and non-renewable 9 energy. In 2002, there's a spike? 10 MS. LaRIVIERE: Yes. 11 MR. EDMONDS: And I was wondering 12 whether or not that was something that's a 13 story that goes with it. 14 MS. LaRIVIERE: I knew that 15 somebody was going to ask that question. 16 This happens because the electric utilities 17 in this year just reported an increasing 18 consumption of municipal solid waste. 19 Without going in to the plant level data, we 20 don't know exactly what happened. 21 But these things change year to 22 year just with flow and who's burning and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 353 1 who's not. So I don't know the answer to 2 that question, but it wasn't the electric 3 utilities, as opposed to somebody else who is 4 combusting MSW. That's all I can tell you. 5 MS. KHANNA: One other question: in 6 the data that EIA collects, do you actually 7 collect the total weight of MSW that's burned 8 at each plant? 9 MS. LaRIVIERE: Yes. Right, yes. 10 MS. KHANNA: So you know the share 11 of the U.S. MSW that's burned in the plant? 12 MS. LaRIVIERE: Yes. 13 MS. KHANNA: Then it's possible to 14 do the forecast and the -- look at the trend 15 in each plant. 16 MS. LaRIVIERE: Right. 17 MS. KHANNA: And then look at the 18 weighted average of what's not in -- 19 MS. LaRIVIERE: It's better than 20 what we're doing now. 21 MR. NEERCHAL: These are small 22 areas. Most -- BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 354 1 MS. KHANNA: Of course, this is 2 grasping for straws, and you have to make 3 assumptions about those averages changing or 4 not changing and see what's happening, and it 5 will be okay. It may end up giving a 6 straight line. Who knows? 7 MS. LaRIVIERE: Is that it? You 8 guys were much nicer than you were this 9 morning. Made me a little bit nervous. 10 MR. NEERCHAL: They're getting 11 tired. 12 MR. CLEVELAND: Philip always gets 13 hammered; that's because he does all the 14 electricity, which is a no-win proposition. 15 (Laughter) 16 MS. LaRIVIERE: I just want to say 17 thank you. 18 SPEAKER: You had the whole 19 committee -- 20 MS. KHANNA: Can I see this? 21 MS. LaRIVIERE: Yes. 22 MS. KHANNA: This three questions BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 355 1 since I was completely unaware I was supposed 2 to be doing this -- methodology for 3 suggestions will continue. Thank you. 4 Hey, I was not informed. 5 MS. LaRIVIERE: Okay, I'm done. 6 MR. GRUENSPECHT: Just a little 7 background, side ground -- it's challenging 8 though, because so many of the laws and even 9 some of the single (?) law will have five or 10 six different -- and for purposes of one 11 section of the law, all the MSW will be 12 "renewable" and literally say for purposes of 13 this section, renewable includes -- and a 14 list will include solid wastes. So it will 15 include all of it, and then some other part 16 of the same law, it will say -- here's money 17 to do this work on renewable, and for 18 purposes of this section, renewable includes, 19 and it doesn't include it at all. 20 In the state renewable portfolio 21 standards, some of them do, some of them 22 don't. EIA's role is not to be -- we can't BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 356 1 decide for other -- although I got to say, we 2 sent this to the municipal waste people, and 3 they were pretty unhappy, and they of course 4 pointed right to this section of some law 5 that this is renewable, so how could you say 6 it's not? 7 But given that in the same law 8 there's another section that says it's not 9 renewable at all, we consider this to be a 10 very Solomon-like solution -- expect 11 literally carried out, we actually cut the 12 baby in half, and it's interesting in the 13 states with renewable standards, some of them 14 count it, some of them don't count it. 15 Environmental groups typically prefer not to 16 be counted. Big city mayors who have these 17 plants typically prefer to be counted, 18 surprisingly enough. 19 MR. CLEVELAND: Sure. 20 MR. GRUENSPECHT: We can't -- you 21 know, it's not that we're trying to impose 22 our will on other policy people, and I think BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 357 1 in the paper, there's sort of explicit 2 language to that effect. Like, we're just 3 trying to provide the components that you 4 count whatever you want. I mean, the 5 biogenic is there, the non-biogenic is there. 6 You want to count them both, count them both. 7 If you count them none, count them none. 8 MR. CLEVELAND: All right. 9 MR. GRUENSPECHT: We just have to 10 have to have something that we do that's 11 consistent with our system. There is no way 12 we're going -- the policy people feel that 13 we're trying to torque their debate. They 14 get very antsy, depending on which side it 15 feels like -- 16 MR. CLEVELAND: It's good I think 17 you called biogenic and non-biogenic, because 18 you don't say renewable and non-renewable. 19 MR. GRUENSPECHT: Right. We then 20 have to decide -- but then we've a planned 21 definition of renewable, where you put it, 22 and we say we put it -- this one here and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 358 1 this one there -- you put it wherever you 2 like. But that's really the approach that 3 we're trying to take. We are not trying to 4 bury it in aggregates of renewable or 5 non-renewable that somebody who has a 6 different opinion or wants to have a 7 different law can't have the law or the 8 opinion that they want, but we still have to 9 put it somewhere, and we have to do it in a 10 way that we think is consistent with -- 11 MR. CLEVELAND: I think it's 12 entirely consistent with the way -- because 13 you're literally burning oil. 14 MR. GRUENSPECHT: Yeah. 15 MR. CLEVELAND: So that you 16 are -- I think it's a very defensible 17 position from your perspective that when 18 you're burning plastic and rubber, you're 19 burning oil. So why would you put it in, why 20 would you -- 21 MR. GRUENSPECHT: There is an awful 22 lot of religion in this topic. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 359 1 MR. CLEVELAND: I know the -- 2 MR. GRUENSPECHT: I think they'd 3 say -- many of the same people who would love 4 you to burn -- take a tree and chop it up 5 into woodchips and burn it in a boiler will 6 object violently if you take a tree, turn it 7 into a newspaper, read it, and then put it in 8 a boiler. 9 The first one is good renewable 10 energy. The bad one is burning some 11 recyclable -- what they consider something 12 that should be recycled in a different way. 13 So again, everyone -- we're not trying to 14 form value judgments -- you could tell what 15 mine are -- but it's a very -- we can't solve 16 that for people. 17 I think you definitely get caught 18 in the crossfire, as I think Marie has found 19 out, you know? 20 MS. LaRIVIERE: There is a lot of 21 contention over renewable versus 22 replenishable, because -- I mean, as long as BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 360 1 people are around, MSW is going to keep 2 coming, so why are we saying that if it's 3 replenishable, it's not renewable? But it 4 does contain petroleum products, and nobody 5 is going to say you burn a barrel of oil, 6 that's renewable, so -- a lot of definitions 7 have to be, we're adding biogenic to our 8 glossary on the website, so that -- 9 MR. GRUENSPECHT: But this actually 10 fits -- if there's a theme, it fits in a 11 little bit with the reorganization of the 12 some of the tables. I was just looking a lot 13 harder at all these issues. 14 MR. CLEVELAND: That's why I said 15 that. I think you're on -- philosophically 16 and methodologically -- I think you're okay, 17 from what EIA is doing across the board, and 18 let the other people, the other people -- 19 MR. GRUENSPECHT: Let the other 20 people beat the crap out of us. 21 SPEAKER: Right. 22 MR. CLEVELAND: Which is entirely BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 361 1 consistent with -- 2 SPEAKER: I will say, well, the 3 Committee said it was good. 4 MR. CLEVELAND: Exactly -- has 5 given us this less. 6 MR. EDMONDS: We told you to do it, 7 and let us do it. What's the heat rate of 8 one of these plants? I mean if -- you're 9 throwing glass and refrigerators in, then you 10 must knock the socks off of the heat rate for 11 one of these things. What kind of -- 12 SPEAKER: I think they're -- 13 MR. EDMONDS: Just the dynamics 14 inside the -- 15 MR. GRUENSPECHT: Would know if 16 there was someone here, they would probably 17 know, I think that's been probably pretty 18 high. They are probably up 13-, 14,000 per 19 kilowatt hour, BTUs for kilowatt hour. It's 20 a lot higher than coal plant, which would be 21 like ten, or our natural gas plant would be 22 like 7000 in an efficient one. So it's BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 362 1 probably pretty high, but on the other hand, 2 if you've got to pay to haul the stuff away 3 otherwise -- 4 MR. EDMONDS: Yeah. 5 MR. GRUENSPECHT: They had it under 6 control. For a long time, this industry, 7 they had trouble like -- I mean at the end of 8 I guess Bush 41 administration, there was a 9 big issue of mercury emissions and people 10 surrounding the plant and the whole mercury 11 in particular, but like -- apparently the 12 industry is kind of moving along. They are 13 not building any -- but certainly they're 14 cash cows, the ones that are there, mayors 15 and the staff really love them. 16 So it's kind of fascinating. It's 17 like, again, the politics of Washington, but 18 like -- you had a Democratic Party which 19 often has a lot of strong environmental 20 concerns, but also has a lot of big city 21 mayor concerns. It's very funny to see these 22 things get fought out, because it's not the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 363 1 Ds versus the Rs. 2 MR. EDMONDS: Yeah. 3 MR. GRUENSPECHT: It's very much of 4 a where you are and -- yeah, it's another 5 source of revenue. If these things qualify 6 for renewal portfolio standard, if they 7 qualify for production tax credits, more 8 money for city that has it. You know, the 9 mayor is going to fight for that. 10 It's a good thing to get on this 11 while the numbers are still in -- what are 12 they, means of PTU. 13 MS. KHANNA: Come up here, Mark. 14 MR. EDMONDS: While the units are 15 still small, and get the accounting and get 16 this all straightened away before they 17 potentially can get to be big numbers. 18 MR. CLEVELAND: But they're not 19 building any new -- 20 MR. EDMONDS: They aren't building 21 any now. 22 MR. CLEVELAND: Yeah, they're not BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 364 1 building any now. 2 SPEAKER: Too much public 3 opposition. 4 SPEAKER: I would just think 5 there's a -- one thing that you said reminded 6 me of a -- not only do we have the RPS issue, 7 we now have renewable energy certificates, 8 which of course value the renewable 9 attributes. 10 SPEAKER: Right. 11 SPEAKER: What do they do now? 12 SPEAKER: Now they were showing 13 that MSW is not all created equal, what 14 happens to those attributes? How are they 15 handled? It presets a whole new -- 16 SPEAKER: Whoever sets up the 17 program will have to decide. 18 SPEAKER: Difficult. 19 SPEAKER: It's not our -- 20 MS. LaRIVIERE: This is not yet, 21 this is just EIA though, it's not like 22 Congress is redefined. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 365 1 SPEAKER: Right, I understand that. 2 MR. GRUENSPECHT: Although we 3 counted it all renewable before, some states 4 said no. This counts zero, so it wasn't like 5 our -- what we -- people who have a problem 6 with what we do always claim that what we do 7 affects what they can what law they can pass 8 and generally, that's sort of bullshit, I 9 mean, this is not -- in the states that we're 10 able to get it included, they were powerful 11 enough to get it included. 12 In the states where they weren't 13 powerful enough to get it included, and the 14 people who were against it, because they 15 think it's dirty, not good. But now they 16 have ammunition, because now they have got 17 something to look at and say aha. 18 Again, this -- I mean, no one has 19 advocated for this solution. Everyone has 20 advocated either include it all or exclude it 21 all. 22 MS. KIRKENDALL: It's perfect. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 366 1 MS. KHANNA: Because the one part 2 as the non-biogenic faction goes up, it 3 essentially means it's becoming a dirtier and 4 dirtier fill in terms of dioxins -- 5 MR. GRUENSPECHT: It's becoming 6 less renew -- certainly less renewable. 7 MS. KIRKENDALL: Yeah, yes. 8 MR. CLEVELAND: And it definitely 9 contributes more to climate change, too. 10 MS. KIRKENDALL: Yeah. 11 MR. GRUENSPECHT: So if we go to 12 renewable replenishable, because we think 13 they'd be using the plastic anyway, then the 14 argument that I think some of the -- 15 MR. EDMONDS: The plastic if it 16 went to a landfill, it would have been tied 17 up for a very long time. 18 That does not degrade, right? 19 MR. GRUENSPECHT: That's my point. 20 That doesn't degrade. 21 MR. CLEVELAND: A good for carbon 22 sequestration. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 367 1 MR. GRUENSPECHT: Which we also 2 track here. 3 MR. EDMONDS: I guess she got about 4 two quads (?) in this stuff. 5 MR. GRUENSPECHT: Not that much. 6 MR. EDMONDS: A trillion BTU, 7 1900 -- 8 MR. GRUENSPECHT: That's 100, it's 9 200. 0.3 quads. Those numbers that you 10 have, Marie. 11 MS. LaRIVIERE: It's about -- it's 12 trillion DTUs, so 200 trillion BTUs. 13 MR. GRUENSPECHT: That's 0.2 quads. 14 MS. LaRIVIERE: One, two, three, 15 yes. 16 MR. EDMONDS: You're in trillions 17 of BTU. 18 MS. LaRIVIERE: Right. 19 MR. EDMONDS: Six more zeroes to 20 quads, right? 21 MR. GRUENSPECHT: No. 22 MS. LaRIVIERE: Three. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 368 1 MR. EDMONDS: Three more. 2 So if you're in thousands of 3 trillions, then you're in -- 4 MR. GRUENSPECHT: But we're in 5 hundreds of trillions. 6 MS. LaRIVIERE: Two hundred. 7 MR. EDMONDS: I thought this was 8 1,968 trillion BTU. 9 MS. LaRIVIERE: What slide are 10 you -- 11 MR. EDMONDS: This methodology 12 page. 13 MS. LaRIVIERE: This is the BTUs 14 per ton -- this isn't -- 15 MR. EDMONDS: I thought that was 16 the total of BTUs attributed -- that reads -- 17 MS. LaRIVIERE: But this is how 18 much heat when you burn a ton. This is not 19 the electricity generated. 20 MR. EDMONDS: You're grading the 21 heat per ton. 22 MR. CLEVELAND: In multiplying BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 369 1 column one by column two to get column three, 2 which is joints of ETUs, and the bottom 3 number there is about two quads. 4 MR. GRUENSPECHT: If that's all -- 5 MR. CLEVELAND: But that's all the 6 trash. 7 MR. GRUENSPECHT: Okay. That's all 8 the MSW, but you're -- only 2 percent of it's 9 going into -- 10 MR. CLEVELAND: So it's two out of 11 100 quads. 12 MR. GRUENSPECHT: What you're 13 tracking to roughly two quads. 14 MS. LaRIVIERE: This is the 15 availability -- yeah, I do. This is what's 16 available for combustion. This does not 17 necessarily mean this is what is combusted. 18 MR. EDMONDS: Right. And I 19 understand, so what is combusted is only like 20 16. 21 MS. LaRIVIERE: So what's combusted 22 is 16 percent of this, or something like BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 370 1 that. 2 MR. GRUENSPECHT: Do you have that 3 slide where you showed the amount going to 4 landfill that was the biggest piece of it. 5 So lot of it's not combusted. 6 Let's find that slide. 7 MR. EDMONDS: Right. This was the 8 potential energy content of all the MSW. 9 MR. GRUENSPECHT: But only the 10 yellow is being combusted. 11 MR. EDMONDS: Right. 12 MR. GRUENSPECHT: So that's only -- 13 MR. CLEVELAND: What are these 14 numbers? 15 MS. LaRIVIERE: This is to give us 16 the million BTU per ton MSW. The numbers on 17 the left is the million tons that are 18 discarded. 19 MR. CLEVELAND: So that's a total, 20 the MSW wastestream in the country? 21 MS. LaRIVIERE: Yes, after the 22 recycling. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 371 1 MR. CLEVELAND: After recycling. 2 MR. GRUENSPECHT: Dark blue on that 3 picture. 4 MS. LaRIVIERE: It's composting. 5 MR. GRUENSPECHT: So this is both 6 light blue and yellow? 7 MS. LaRIVIERE: Discards and 8 combustion. 9 MR. CLEVELAND: Okay. 10 MS. LaRIVIERE: So that we have 11 16 percent of that. 12 MR. CLEVELAND: I got you. So 13 we're at 16 percent of -- 14 MR. EDMONDS: Two quads. 15 MR. CLEVELAND: I got it. 16 MS. LaRIVIERE: So it's not a lot 17 of energy -- it's not a lot, but it's just 18 one of those little things that needed to be 19 taken care of. 20 MR. CLEVELAND: EIA's stirring the 21 pot again. 22 SPEAKER: Think of it like Michael BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 372 1 Corleone. 2 We solve all our problems on the 3 same day. 4 MR. CLEVELAND: It's interesting 5 how flat, how unimpressive the recycling -- I 6 mean, if you look at where we are, the dark 7 blue, and look at where we are now compared 8 to even 15 years ago, it hasn't really gone 9 up a whole lot. 10 MS. KHANNA: There's only so much 11 of the work -- will get us. 12 MR. CLEVELAND: Interesting. 13 MR. EDMONDS: But of course you get 14 10-year time stamps and then -- 15 MR. CLEVELAND: Compare 1990 to 16 2005, you go from, what, 12-15 percent to 17 20 percent. Over 15 years. It's not a -- 18 MS. LaRIVIERE: Right. EPA was not 19 too excited about this section, because we're 20 basically showing that the recycling hasn't 21 increased, but they're saying that they're 22 actively trying to increase the recycling BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 373 1 rates, but even their our own data shows that 2 it's not really happening. So who knows? 3 MS. KHANNA: There is not much 4 incentive to recycle in North America. 5 MR. CLEVELAND: You get to start 6 hitting people in the pocket books if you've 7 going to do anything there. 8 MR. GRUENSPECHT: It's actually a 9 democratic solution. 10 MR. EDMONDS: Howard, we can do 11 that study. 12 MR. GRUENSPECHT: Actually, I did 13 that study. 14 SPEAKER: What is it? 15 MR. CLEVELAND: Pay as you throw. 16 Pay as you throw. 17 MS. LaRIVIERE: There are some 18 cities I think where you can find a few -- if 19 they find recyclable -- 20 MR. CLEVELAND: EPA has got a nice 21 map of their website of all the pay as you 22 throw programs around the country, and BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 374 1 they're starting to pop up. 2 MS. LaRIVIERE: Who knows when 3 this -- five years down the road this might 4 be slightly different. But that would 5 certainly have the effect on the wastestream 6 for the heat content. 7 MR. CLEVELAND: Of course, the 8 problem is that as you mentioned, there's a 9 scale effect. The fact that you're 10 producing -- you might be recycling more, but 11 you're consuming more, too -- 12 SPEAKER: Right. 13 MR. CLEVELAND: It's overwhelming. 14 MS. LaRIVIERE: Thank you for all 15 your recommendations. 16 (Recess) 17 MR. NEERCHAL: We're back on the 18 record. 19 MS. KIRKENDALL: Back on record. 20 SPEAKER: Are we here tomorrow? 21 MS. KIRKENDALL: Yes, we're here 22 tomorrow. Same place. 8:30, it says. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 375 1 MR. NEERCHAL: Neha, do you want to 2 do the summary of the session on MSW? 3 MS. KHANNA: Thanks. 4 Yes, so our session was on how to 5 allocate municipal solid waste between what 6 the agenda says as renewable and 7 non-renewable, but what the presentation said 8 was biogenic and non-biogenic, and that's an 9 important distinction because these are 10 politically charged words -- renewable and 11 non-renewable, and they take on different 12 meanings in different contexts. 13 So what was biogenic was something 14 that was essentially created by a living 15 organism. So textiles, yard trimmings, these 16 things were biogenic. 17 Non-biogenic components of 18 municipal solid waste is essentially 19 petroleum products. Different kinds of 20 plastic and rubber, synthetic rubber. So the 21 question, the basic problem I understood was 22 that they need a forecast from a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 376 1 modeling -- well, one is just the data issue 2 that we want to track this, and the second is 3 that it forms an input into NEMS. And we 4 want to know what part of this is biogenic, 5 what part of is not biogenic, and if you look 6 at the data, which is actually not firsthand 7 data that's collected by the EIA, but it's 8 data that the EPA collects at a national 9 level and makes it over to the EIA, you've 10 got two very straight trend lines, which is 11 that the non-biogenic component is rising and 12 the biogenic component is falling. 13 And the main reason for this is 14 increased recycling of plastics for paper and 15 paper products. And therefore a larger share 16 of plastics in the wastestream. 17 The energy impact or importance of 18 that as a plastic have a much higher heat 19 rate. So now per unit of input, which I have 20 forgotten -- but per unit of input, we're now 21 generating a lot more heat from municipal 22 solid waste than we were 15-20 years ago. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 377 1 And that's important from a NEMS 2 perspective, and from a state's renewable 3 energy portfolio standards perspective, 4 depending on what they're calling renewable. 5 Some states call municipal solid waste 6 renewable, others don't. The main question 7 for the Committee was how can we forecast the 8 split? If you look at the split, it's 9 currently 45-55, which used to be maybe 10 MS. LaRIVIERE: Like 35-65. 11 MS. KHANNA: They're just 12 essentially two straight lines that are 13 converging, so the issue is when you project, 14 forecast forward, they cross over, and very 15 soon you're going to go to plus 100 and 16 negative numbers, and that just doesn't work, 17 so how can they forecast these shares? The 18 second issue, big issue, was the source of 19 the heat content. 20 Now, from the EPA, I understand 21 that they have heat contents for various 22 categories of municipal solid wastes. But BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 378 1 they're calculated in different ways; they're 2 from different sources, and it's not clear if 3 they're all exactly comparable or not. And 4 so there was a general question put out, if 5 you know some source, please let us know 6 because we'd like to have that information. 7 Essentially, the Committee did not 8 give very good advice. But I think it's 9 because not much information is available. 10 And I think that's the Achilles' heel of the 11 problem. 12 The two major suggestions that came 13 out was if there's some standalone 14 information, let's say from the plastics 15 industry or from the recycling industry that 16 we can use to somehow guide our forecast, and 17 not just have straight lines running into the 18 future, that could be useful, but it doesn't 19 look like that information is readily 20 available and especially since there's a lot 21 of local variation on things like recycling 22 rights. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 379 1 The only other suggestion was 2 called it grasping for straws -- and I think 3 that's what it is, which is that the EIA does 4 collect data at the park level. 5 These municipal solid waste 6 combusted -- I should say, we were talking 7 about that 16 percent of the MSW that's 8 actually combusted. So it's a small portion. 9 About 0.2 quads, right? So since the EIA 10 does collect at the plant level the average 11 heat content of the municipal solid waste 12 that's combusted, that gives us some idea of 13 how that plant compares to some kind of 14 national average, and these data are 15 available historically. 16 So maybe we can use these plant 17 level data to look at local trends, and from 18 there back out to national trend, because we 19 know the fraction of the total national MSW 20 that's being burned at each plant. Given all 21 the issues with special considerations and 22 everything else, but there doesn't seem to be BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 380 1 that much more data available. And I think 2 that's pretty much where we left it as far as 3 the questions went. 4 MS. LaRIVIERE: You have a good 5 memory. 6 MR. NEERCHAL: Thank you. Anything 7 Committee members want to add something to -- 8 MS. KHANNA: Well, actually, I do 9 have one more thing, which is Maria -- Maria 10 came with her fan club and it's growing. 11 MR. NEERCHAL: Thank you. 12 Walter, do you want to summarize 13 the other breakout session? 14 MR. HILL: Certainly. The other 15 breakout session dealt with growth rates for 16 petroleum supply, years 1995 to 2004. The 17 main problem was that -- clients want year to 18 year growth rates in the petroleum supply; 19 the example given was March 2004 to March 20 2005. 21 Data come out -- data are delayed 22 when the -- so that's a problem is that to BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 381 1 give clients -- the clients want information 2 before the last data are out. The problem is 3 to try to find some way of estimating the 4 growth rate as soon as possible. 5 Several different methods were 6 suggested, and it was noted that the units 7 used were barrels per day, and so that things 8 like obvious calendar effects, 9 months -- February has fewer days some years 10 than others, so those sorts of calendar 11 effects are taken out. An equation used was 12 called the gold standard, which is sort of 13 the official number used to measure that 14 annual growth. But that gold standard number 15 does not come out soon enough for the 16 analysts. 17 Weekly data are available. There's 18 sometimes been talk about how the weekly data 19 are calculated. It's a Friday to a Friday. 20 That's a -- per Friday, the week starts on a 21 Friday. We interrupted Carol a couple of 22 times. I admit now that we interrupted her BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 382 1 there to deal with the issue of having a time 2 series analysis within the data. There 3 wasn't a time series given in the main 4 presentation, there's some time series now, 5 but that was only in the computer -- and that 6 would come up on the screen if -- suppose a 7 week, come back in a week to revisit this. 8 Remember, last year, the Committee 9 was often told that we should recommend and 10 we should -- EIA should be given more and 11 more money. I noticed at the initial session 12 this morning -- 13 MS. KIRKENDALL: It worked. 14 MR. HILL: It worked, yes. And as 15 in this presentation, it's noted that they 16 have a local budget's been cut, so that, I 17 mean, we should make a recommendation that 18 more money should -- should go to the library 19 here, so you get better data. 20 MS. BLUMBERG: They were asking 21 about some stuff, and I actually had used my 22 emeritus status from Winona State to get some BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 383 1 of the publications, because I could no 2 longer access certain things from EIA, 3 because once the library was 4 disassembled -- also most of the databases 5 that were not energy-specific were done. 6 Like Lexis-Nexis has disappeared and other 7 things. So I'm saying that would -- as a 8 researcher, I'm missing that a lot. So then 9 I have to go -- I do that at home now and I 10 need to pay for that, you know? 11 MR. HILL: It was a running joke 12 last session with -- 13 MS. BLUMBERG: 65,000. 14 MR. HILL: Mixed results in that. 15 SPEAKER: Candidature literature 16 came up. 17 MR. HILL: So various methods of 18 trying to estimate. Somebody said there what 19 you're trying to do is forecast the real 20 annual growth -- 21 SPEAKER: Very interesting. 22 MR. HILL: That's I think the way BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 384 1 you put it -- you try forecasting the annual 2 growth with the data that are available 3 before the annual growth number's out, it's 4 the problem. 5 A number of the estimates make use 6 of weekly data, and there are various ways, 7 given that the weeks appeared -- Friday to 8 Friday weeks appeared different within each 9 one of the months, the question about which 10 sets of weeks do you use and how do you 11 weight the various periods. And there's a 12 month-to-month type of -- there's a monthly 13 type of estimate. 14 different ways of 14 trying to do the estimate. 15 There was a summary table. I've 16 looked at the paper a bit last night and had 17 trouble trying to keep track -- you should 18 note other people had trouble keeping track 19 of the 14 methods -- that series of methods, 20 used to try to make that -- making that 21 estimate. 22 And several different criteria used BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 385 1 to determine whether or not an estimate was 2 good or not. 3 One method was a biased estimate 4 but had a smaller variance. That was 5 interesting because I know (inaudible) that 6 what comments -- for lectures, students find 7 that surprising that you want -- it may make 8 sense that you have a biased estimate with a 9 small variance. It turns out that may be one 10 of the best estimates. 11 Another possible criteria was to 12 see whether or not the estimates were off by 13 one or two percent against what eventually 14 became known as the correct estimate, the 15 gold standard. And that those varied quite a 16 bit whether or not you're within one or two 17 percent of the correct number. Also noted 18 was whether or not the sign of the estimate 19 was correct, whether or not the direction was 20 correct, which -- I know analysts, when they 21 see business reports, I know some analysts 22 are very excited about that, although I may BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 386 1 be less so, but if that's what the 2 clients -- so if that's what the clients care 3 about, you don't have to worry about this 4 estimate. 5 It sounded like they were more 6 unhappy if that -- if the sign was correct 7 but you had reported one -- 1/10th of a 8 percent rather than 3 percent, but you have 9 the correct sign, they were more concerned 10 that you have the correct sign as opposed to 11 having the incorrect sign of 0.1 -- it's like 12 a 0.1 percent and 0.1 percent positive as 13 opposed to -0.2 percent, gave an example like 14 that. 15 The analysts were unhappy with the 16 sign problem, even though the magnitude of 17 the error was smaller. We spent a little 18 time talking about -- since there may be a 19 psychological problem in terms of -- we used 20 that word -- psychological problem in terms 21 of the clients, and the comments about maybe 22 other -- re-educating the public on the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 387 1 variety of the estimates. 2 It was mentioned that estimates are 3 written with cones -- sort of plus and minus, 4 margin of error -- call it margin of error, I 5 feel, of the estimate. A word like 6 "preliminary" was used and may be we should 7 tell people that there's a -- or you should 8 tell people there's a preliminary estimate 9 and another estimate is coming out later. 10 Given the range of estimates -- she had a 11 couple of comments about which procedures to 12 use or not to use. 13 A specific one that should be 14 avoided. The PSM over the -- the PSA. She 15 mentioned one that should not be sued, but 16 made no general recommendation about which 17 estimate procedure is to be recommended. We 18 spent a little time talking about seasonal 19 effects. I guess there was some mixed 20 feeling within the Committee whether or not 21 seasonal effects were taken care of or not. 22 And other comments about possibly BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 388 1 time series effects would improve the 2 estimates. 3 Reported confidence I think also 4 came up in our discussion. And maybe that 5 could be reported and it would be understood 6 that there's error within the estimate when 7 it comes out, the early estimate, when it 8 comes out. 9 MR. FEDER: I think we all felt it 10 was very interesting, and I hope to see the 11 next stage, next time or whenever, when it 12 matures. 13 MR. NEERCHAL: Anything else? 14 MR. FEDER: Yes. One comment on 15 the seasonality. I guess the point was made 16 these -- because they were looking on ratios 17 of similar months across years, the 18 seasonality is already factored out by that, 19 and indeed at the end we did see some -- one 20 slide was time series analysis, where there 21 was no significance I guess for -- nothing 22 was significant just because of that. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 389 1 So seasonality was -- and what I 2 was suggesting to Carol is to repeat the 3 analysis by not looking at ratios but 4 actually the raw series and see if there's 5 anything that you can get without doing this 6 ratio, which does tend to wipe out some 7 potentially interesting patterns in the 8 series. 9 MR. BLAIR: There was a specific 10 suggestion from Ed to look at how BEA handles 11 this situation, because they've dealt with 12 it. 13 MR. KOKKELENBERG: One other thing 14 was -- no matter how you measure the shorter 15 time periods, be consistent, and that 16 diminishes the error. You may have said that 17 Walter, and I may have misunderstood. 18 MR. HILL: I think you brought it 19 up initially. You had a phrase like apples 20 and oranges don't mix. 21 MR. KOKKELENBERG: No, the issue 22 was that if you're measuring annual by a BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 390 1 proxy of monthly plus some noise, you want 2 to -- and then you're looking at differences, 3 the ratio, rather than the levels, make those 4 two error terms exactly equal, the whole 5 thing collapses to zero, and then you don't 6 have any error in your growth rate estimate. 7 So consistency was a hobgoblin of this 8 particular problem rather than (inaudible) 9 said that, was that -- 10 MR. FEDER: There was a one little 11 question -- I mean, the whole exercise is to 12 allow for timely, speedy estimates before you 13 can use the gold standard or anything better 14 than that, so there's always a compromise 15 what you use -- if you want to, and then I 16 guess that led to the confidence bands idea 17 is that what do we do if we publish something 18 which is not something we can trust with 19 money but it's good enough for now. 20 How do you make the public aware of 21 it? And so we did say why don't you publish 22 it with a caution -- there was a nod from the BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 391 1 people that that won't work. 2 Then Barbara suggested, why don't 3 you publish it with a confidence bond so you 4 can visually see that we're not publishing 5 something -- by we I mean you -- something 6 that's definite but is something that you can 7 use to appreciate what you do and what you do 8 not, willing to bet your money on. 9 MR. EDMONDS: It may be your 10 concern making things like it's not a common 11 slide, here's our estimate, but it's not 12 significantly different from zero. I mean, 13 this sounds like that's the issue, whether or 14 not you hit a positive or negative estimate 15 of a -- 16 MR. FEDER: That was a 17 psychological question. Right, right. 18 MR. NEERCHAL: I would like to 19 invite the public for comments, if they have 20 any comments from any of the sessions? 21 MS. KIRKENDALL: The public is 22 quiet. BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382 392 1 MR. NEERCHAL: They managed to get 2 to sleep. Thank you very much. 3 I think before we break for the 4 day, I think we'll have some logistics for 5 tonight. 6 MR. WEINIG: For those of you who 7 are on the Committee or coming to dinner or 8 otherwise with the Committee, the name of the 9 restaurant is the Gallery Place -- Clyde's 10 Gallery Place, and the address is 707 7th 11 Street, NW, in the Chinatown area. Now, you 12 can use the Metro, if you like, on a 13 north-south path from over here, I'm sorry, 14 about two blocks away, we can get to it on 15 the yellow and the green line, to just take 16 it to Gallery Place, Chinatown. 17 MR. NEERCHAL: And we'll be here 18 tomorrow. 19 (Whereupon, at approximately 4:51 20 p.m., the MEETING was adjourned.) 21 * * * * * 22 BETA COURT REPORTING www.betareporting.com 202-464-2400 800-522-2382