Order Code RL34497
Advanced Research Projects Agency - Energy
(ARPA-E): Background, Status, and
Selected Issues for Congress
Updated June 20, 2008
Deborah D. Stine
Specialist in Science and Technology Policy
Resources, Science, and Industry Division

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Advanced Research Projects Agency - Energy:
Background, Status, and Selected Issues for Congress
Summary
In August 2007, Congress authorized the establishment of the Advanced
Research Projects Agency - Energy (ARPA-E) within the Department of Energy
(DOE) as part of the America COMPETES Act (P.L. 110-69). Modeled on the
Defense Advanced Research Projects Agency (DARPA), ARPA-E would support
transformational energy technology research projects with the goal of enhancing the
nation’s economic and energy security.
Proponents of ARPA-E contend that additional science and technology would
help respond to the nation’s need for clean, affordable, and reliable energy.
Opponents question whether ARPA-E is necessary to develop new technologies,
when existing energy technologies are not fully utilized due to insufficient policies
to encourage their implementation. ARPA-E proponents counter that ARPA-E is
needed to catalyze the energy marketplace by accelerating research that will bridge
the gap between basic research and industrial product development.
The Bush Administration questions whether the DARPA model can be used for
the energy sector and is concerned that it might redirect funds away from current
DOE research activities, particularly the DOE Office of Science. Instead, the
President’s FY2009 budget requests funding for six new technology transfer
collaborations. ARPA-E proponents doubt that DOE can achieve ARPA-E’s goals
with its existing structure and personnel, as opposed to the ARPA-E’s innovative
R&D management design.
Congress authorized $300 million for ARPA-E in FY2008 and “such sums as
are necessary” for FY2009 and FY2010. Congress subsequently appropriated no
funds for FY2008. The Administration requested no funds for ARPA-E in FY2009.
Congress is currently debating whether to fund ARPA-E in FY2009, and if so, the
amount that should be appropriated. Budget constraints may present Congress with
a dilemma: which is more important, existing DOE energy R&D activities, such as
the Office of Science, proposed DOE activities such as the technology transfer
collaborations and Energy Frontier Research Centers, or ARPA-E? An alternative
is to incorporate some ARPA-E or another research management model, such as the
CIA’s In-Q-Tel venture capital activity, into existing DOE programs.
Some have proposed funding ARPA-E through a mechanism that differs from
the usual single-year appropriations process to enhance its ability to conduct risky
research without being subject to the annual appropriations cycle, political and
financial pressures, and resource fluctuations that might stifle innovation. One
option is for Congress to provide a multi-year advance appropriation. Another is for
Congress to identify a revenue source. Some of the funding sources that have been
proposed are repeal of oil industry tax and other incentives; gasoline tax; oil company
profit tax; federal oil and gas royalties; climate change cap-and-trade program; and
Strategic Petroleum Reserve funds. On the basis of past experience, however, each
of these proposals would face challenges in Congress.

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Contents
Overview of ARPA-E Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Funding and Outcome Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Legislative Origins and Policy Debates Prior to ARPA-E Authorization . . . . . . . 4
Legislative Origins in the 109th and 110th Congress . . . . . . . . . . . . . . . . . . . . 5
Policy Debates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Is ARPA-E Needed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
How Much Funding Should ARPA-E Receive? . . . . . . . . . . . . . . . . . . 9
Will ARPA-E Work? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Bush Administration Response to ARPA-E Authorization . . . . . . . . . . . . . . . . . 10
Ongoing Congressional Debate Over ARPA-E Funding . . . . . . . . . . . . . . . . . . . 12

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Advanced Research Projects Agency -
Energy: Background, Status, and
Selected Issues for Congress
In August 2007, Congress authorized the establishment of the Advanced
Research Projects Agency - Energy (ARPA-E).1 Modeled on the Defense Advanced
Research Projects Agency (DARPA) in the Department of Defense (DOD), ARPA-E
would be a new organization within the Department of Energy (DOE). It would
support transformational energy technology research projects with the goal of
enhancing the nation’s economic and energy security. Congress authorized $300
million for ARPA-E in FY2008 and “such sums as are necessary” for FY2009 and
FY2010. Ultimately, Congress appropriated no funds for FY2008. The
Administration requested no funds in FY2009. Congress is currently debating
whether to fund ARPA-E in FY2009.
Overview of ARPA-E Design
As outlined in the America COMPETES Act (P.L. 110-69, §5012), the goal of
ARPA-E would be to enhance the economic and energy security of the United States
through the development of technologies that reduce energy imports, reduce energy-
related greenhouse gas emissions, and improve energy efficiency in all economic
sectors. In addition, ARPA-E would aim to ensure that the United States is a
technical leader in developing and deploying advanced energy technologies.
According to the act, ARPA-E would achieve this goal by identifying and
promoting revolutionary advances in fundamental sciences and translating scientific
discoveries and cutting-edge inventions into technological innovations. ARPA-E
would focus its efforts on accelerating transformational technological advances in
areas that industry, by itself, is not likely to undertake due to technical and financial
uncertainty. As stated in §5012, the agency’s programs would accelerate novel early-
stage energy research with possible technology applications; the development of
techniques, processes, and technologies and related testing and evaluation; research
and development (R&D) of manufacturing processes for novel energy technologies;
and coordination with nongovernmental entities to demonstrate technologies and
research applications to facilitate technology transfer.
1 America COMPETES Act (P.L. 110-69), §5012. For more information, see CRS Report
RL34328, America COMPETES Act: Programs, Funding, and Selected Issues, and CRS
Report RL34396, The America COMPETES Act and the FY2009 Budget, both by Deborah
D. Stine.

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CRS-2
To achieve these goals, ARPA-E would make awards to academic institutions,
companies, research foundations, and trade and industry research collaborations as
well as consortia of these organizations that could additionally include federally
funded research and development centers (FFRDCs). According to the act, the
criteria for selecting projects would include novelty, scientific and technical merit,
the demonstrated capability of the applicant to successfully carry out the proposed
project, future commercial applications of the project, and the feasibility of
partnering with one or more commercial entities, as well as additional criteria
established by the director of ARPA-E.
Management
The management of ARPA-E, as described in the act, is modeled on that of
DARPA (see Box 1). DARPA has a well-known history of catalyzing innovative
technologies such as the Saturn rocket engine used for moon flights, the pilotless
Predator planes used in Iraq and Afghanistan, computer-aided design, global
positioning satellites, the computer mouse, and the Internet. DARPA seeks to
sponsor revolutionary, high-payoff research that “bridges the gap between
fundamental discoveries and their military use.”2 According to its director, “DARPA
will take a chance on an idea with no data. We’ll put up the money to go get the data
and see if the idea holds. That is the highest-risk type of research you can have.”3
The act states that ARPA-E would be managed by a presidentially appointed
director, who would report to the Secretary of Energy. The director would approve
all new programs, develop funding criteria, establish technical milestones to assess
program success, and terminate programs not achieving their goals. The director
would have the authority to appoint 70 to 120 scientific, engineering, and
professional personnel without regard to civil service laws and to determine their
compensation. The director would be responsible for ensuring that ARPA-E
activities are coordinated with, and do not duplicate, DOE and other federal programs
and laboratory activities; the program managers would establish R&D goals and
select projects based on merit.
Both the director and the program managers would be permitted to seek advice
on the overall direction of ARPA-E and specific program tasks from a new ARPA-E
advisory committee or existing DOE federal advisory committees. Additional
sources of advice provided for in the act include the President’s Council of Advisors
on Science and Technology (PCAST), professional organizations, and disciplinary
societies.4
2 Testimony of Dr. Anthony Tether, Director, Defense Advanced Research Projects Agency,
in U.S. Congress, House Committee on Science, The Future of Computer Science Research
in the United States, hearing, 109th Cong., 1st sess., May 12, 2005, H.Hrg. 109-14
(Washington, DC: GPO, 2005) at [http://science.house.gov/commdocs/hearings/full05/
may12/tether.pdf].
3 Anthony Tether as quoted in Stephen Barr, “The Idea Factory That Spawned the Internet
Turns 50,” Washington Post, April 7, 2008.
4 For a description of these organizations, see CRS Report RL34454, Science and
(continued...)

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CRS-3
Box 1. DARPA Management Design Keys
How does DARPA differ from the typical business-as-usual federal R&D
management model? According to DARPA, it has maintained the following management
principles over its 50-year history:

Management: DARPA is a small, flexible, and flat organization with substantial
autonomy and freedom from bureaucratic impediments. At DARPA, there is a complete
acceptance of failure if the payoff of success was high enough. Management does focus
on good stewardship of its taxpayer funds, but imposes little else in terms of rules.
Management views their job as enabling DARPA’s program managers.

Staff: Program managers are selected to be technically outstanding and entrepreneurial.
The best DARPA Program Managers have always been freewheeling zealots in pursuit
of their goals. The technical staff is drawn from world-class scientists and engineers with
representation from industry, universities, government laboratories and Federally Funded
Research and Development Centers. Technical staff are assigned for 3-5 years and
rotated to assure fresh thinking and perspectives. Necessary supporting personnel
(technical, contracting, administrative) are “hired” on a temporary basis to provide
complete flexibility to get into and out of an area without the problems of sustaining the
staff.

Projects: DARPA’s activities are project-based. All efforts are typically 3-5 years long
with strong focus on end-goals. Major technological challenges may be addressed over
much longer times, but only as a series of focused steps. The end of each project is the
end. It may be that another project is started in the same technical area, perhaps with the
same program manager and, to the outside world, this may be seen as a simple extension.
For DARPA, though, it is a conscious weighing of the current opportunity and a
completely fresh decision. The fact of prior investment is irrelevant.

Source: DARPA, “DARPA Over the Years,” webpage at [http://www.darpa.mil/body/
overtheyears.html].
Funding and Outcome Evaluation
The act authorizes an Energy Transformation Acceleration Fund in the
Department of the Treasury, with $300 million of funding authorized for FY2008 and
“such sums as are necessary” for FY2009 and FY2010. ARPA-E’s budget request
and appropriations are to be separate and distinct from the rest of DOE’s budget.
After ARPA-E has operated for four years, the National Academy of Sciences (NAS)
is to evaluate how well ARPA-E is achieving its goals and mission.
Should funds be appropriated for ARPA-E, no more than 50% may be used for
coordination with nongovernmental entities for technology demonstration and
research applications to facilitate technology transfer. At least 2.5% must be used for
technology transfer and outreach activities. No funds may be used for construction
of new buildings or facilities until August 2012.
4 (...continued)
Technology Policymaking: A Primer, by Deborah D. Stine.

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CRS-4
The ARPA-E director would submit an annual report, describing projects
supported in the previous year, as part of the annual budget request to Congress. The
director would also submit strategic vision roadmaps to Congress no later than
October 1, 2008, and October 1, 2011. The roadmaps are to describe the strategic
vision ARPA-E would use to determine its future technology investments for the
subsequent three fiscal years.
Legislative Origins and Policy Debates
Prior to ARPA-E Authorization
The DARPA model has frequently been proposed as a structure for improving
the management of federal R&D. For example, an “advanced civilian technology
agency” was proposed in the 100th and 101st Congresses.5 In 1992, an NAS report
recommended that the government consider a civilian technology corporation or a
civilian technology agency in limited areas including energy research.6 In 1993, the
Progressive Policy Institute made a similar proposal.7 In 1992, presidential candidate
Bill Clinton and Senator Al Gore proposed the creation of a civilian advanced
research agency to support research on renewable technologies and renewable fuels.8
From 1977-2000, DOE had an Advanced Energy Projects (AEP) division to
“explore the feasibility of novel, energy-related concepts that evolve from advances
in basic research,” and “high-risk, exploratory concepts which do not readily fit into
an existing DOE program area but which could lead to applications that span
scientific or technical disciplines.”9 In 1995, DOE placed AEP’s activities were
under a new Computational and Technology Research program. This reorganization
was formally stated in DOE’s 1997 budget request. Funding for the program was
reduced in FY1998 and FY1999, and the AEP program was terminated in FY2000.10
5 Proposals during the 101st Congress, 2nd session, included S. 1978, H.R. 3833, H.R. 4715,
and S. 2765. These are discussed in U.S. Congress, Office of Technology Assessment,
Making Things Better: Competing in Manufacturing, OTA-ITE-443 (Washington, DC:
GPO), February 1990.
6 National Academy of Sciences, National Academy of Engineering, and Institute of
Medicine, The Government Role in Civilian Technology: Building a New Alliance
(Washington, DC: National Academy Press, 1992).
7 Will Marshall and Martin Schram, Mandate for Change (New York: Berkeley Books,
1993).
8 Bill Clinton and Al Gore, Putting People First: How We Can All Change America (New
York: Random House, 1992).
9 Department of Energy, “Advanced Energy Projects: FY 1995 Research Summaries,”
DOE/ER-0660T, September 1995 at [http://www.sc.doe.gov/bes/archives/summaries/
Advanced_Energy_Projects_Summary_Book_FY1995.pdf]. Sarah Adee, “Power Up,” IEEE
Spectrum, September 2007 at [http://spectrum.ieee.org/sep07/5484].
10 A history of this organization is at [http://www.sc.doe.gov/bes/BES_history.html].

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CRS-5
The Homeland Security Act of 2002 (P.L. 107-296) established a Homeland
Security Advanced Research Projects Agency (HSARPA) in the Department of
Homeland Security.11 According to the act, HSARPA is to “(A) support basic and
applied homeland security research to promote revolutionary changes in technologies
that would promote homeland security; (B) advance the development, testing and
evaluation, and deployment of critical homeland security technologies; and (C)
accelerate the prototyping and deployment of technologies that would address
homeland security vulnerabilities.”
Legislative Origins in the 109th and 110th Congress
Against this historical backdrop, in October 2005, a committee of the NAS
recommended the establishment of ARPA-E in its report Rising Above the Gathering
Storm.12 In November 2005, during the 109th Congress, the House Minority Leader
released an innovation agenda that proposed to create a new DARPA-like initiative
within DOE.13 In 2007, this same concept was part of an updated “Innovation
Agenda” proposed by the Speaker of the House at the beginning of the 110th
Congress.14
In the January 2006 State of the Union address, President Bush announced the
American Competitiveness Initiative (ACI), the Administration’s response to the
concerns about U.S. competitiveness that were similar to those expressed in the
America COMPETES Act. Instead of endorsing the ARPA-E concept, however, the
Administration proposed an Advanced Energy Initiative (AEI). The Administration
has continued its support for the ACI and the AEI into the 110th Congress.15
Although some analysts questioned whether ARPA-E was the best policy option
to respond to the nation’s energy challenges,16 the proposal recommended in the NAS
report became the basis for congressional hearings and debates in the 109th and 110th
11 For more information on HSARPA, see CRS Report RL34356, The DHS Directorate of
Science and Technology: Key Issues for Congress, by Dana A. Shea and Daniel Morgan.
12 The National Academies, Rising Above the Gathering Storm: Energizing and Employing
America for a Brighter Economic Future (Washington, DC: National Academy Press, 2007),
p. 154. This report was initially released in pre-publication form in October 2005.
13 U.S. Congress, Office of Congresswoman Nancy Pelosi, “Pelosi: Unveils Innovation
Agenda, Part of Vision for a Stronger America,” press release, November 15, 2005, at
[http://www.house.gov/pelosi/press/releases/Nov05/innovation.html].
14 U.S. Congress, Speaker Nancy Pelosi, The Innovation Agenda: 110th Congress at
[http://www.speaker.gov/issues?id=0016], April 27, 2007.
15 U.S. President (G.W. Bush), American Competitiveness Initiative, Domestic Policy
Council/Office of Science and Technology Policy, February 2006, at [http://www.ostp.gov/
pdf/acibooklet.pdf]; Advanced Energy Initiative, National Economic Council, February 2006
at [http://www.whitehouse.gov/stateoftheunion/2006/energy/energy_booklet.pdf]; and
“Advanced Energy Initiative 2008” at [http://www.ostp.gov/pdf/fy08_aei_one_pager.pdf]
and “Energy Security for the 21st Century” at [http://www.whitehouse.gov/infocus/energy/].
16 See for example, David Goldston, “Misspent Energy,” Nature, 447:130, May 10, 2007 at
[http://www.nature.com/nature/journal/v447/n7141/pdf/447130a.pdf].

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CRS-6
Congresses and eventually served as the outline for ARPA-E as authorized in the
America COMPETES Act. (See Box 2.)
Box 2. ARPA-E Management Design Keys
How does ARPA-E differ from the typical business-as-usual federal R&D
management model? In congressional testimony, members of the committee that wrote
the National Academies report recommended ARPA-E should have four objectives that
would distinguish it from current DOE activities:
1. Bring a freshness, excitement, and sense of mission to energy research that
will attract many of our best and brightest minds — those of experienced
scientists and engineers, and, especially, those of students and young
researchers, including those in the entrepreneurial world.
2. Focus on creative, out-of-the-box, potentially transformational research that
industry cannot or will not support.
3. Utilize an ARPA-like organization that is flat, nimble, and sparse, yet
capable of setting goals and making decisions that will allow it to sustain for
long periods of time those projects whose promise is real, and to phase out
programs that do not prove to be productive or as promising as anticipated.
4. Create a new tool to bridge the troubling gaps between basic energy
research, development, and industrial innovation. It can serve as a model for
how to improve science and technology transfer in other areas that are
essential to our future prosperity.
Source: Testimony of Dr. Charles M. Vest, in U.S. Congress, Senate Committee on Energy and
Natural Resources, Protecting America’s Competitive Edge — Energy, hearings, 109th Congress,
2nd sess., February 14, 2006, S.Hrg. 109-358 (Washington: GPO, 2006), available at
[http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Testimony&Hearing_ID=152
6&Witness_ID=4320]. Testimony of Dr. Steven Chu, in U.S. Congress, House Committee on
Science, Should Congress Establish “ARPA-E”, The Advanced Research Projects Agency -
Energy?, hearings, 109th Congress, 2nd sess., March 9, 2006, H.Hrg. 109-39 (Washington: GPO,
2006).
Policy Debates
In the 109th Congress, the Senate Committee on Energy and Natural Resources
and the House Committee on Science held hearings on ARPA-E.17 The chairman of
the House Committee on Science stated that he was an “open-minded skeptic”
regarding ARPA-E, and pointed out that the recommendation for its establishment
was based on four assumptions that he considered questionable:
17 U.S. Congress, Senate Committee on Energy and Natural Resources, “PACE Energy Act,”
hearing, 109th Cong., 2nd session, February 15, 2006 (Washington, DC: GPO, 2006) at
[http://www.gpoaccess.gov/chearings/index.html]; U.S. Congress, House Committee on
Science, “Should Congress Establish ‘ARPA-E,’ The Advanced Research Projects Agency
- Energy?,” hearing, 109th Congress, 2nd session, March 9, 2006 (Washington: GPO, 2006)
at [http://www.gpoaccess.gov/chearings/index.html]

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CRS-7
! The problem with the energy market is that the supply of new
technologies is insufficient;
! The supply of new technologies is constrained because of a lack of
fundamental research;
! A sensible way to promote more fundamental research is to apply
the DARPA model to a civilian energy sector; and
! Implementing the DARPA model is the best way to improve energy
research, given tight federal budgets.18
In the 110th Congress, the House Committee on Science and Technology held
a similar hearing. In his opening statement, the committee chairman stated that,
among several policy goals and objectives, DARPA has succeeded largely because
it continued to foster a culture of innovation. The key for ARPA-E success, he said,
is that it be a similarly nimble organization with minimal administrative layers and
the ability to quickly start and stop research programs. According to the chair,
“Investment in ARPA-E must be seen as the first step in boosting energy research
and development to a level that addresses the scale of our challenge, and the true cost
of doing transformational research.”19
The Administration formally opposed the authorization of ARPA-E during the
110th Congress:
The Administration supports the conceptual goal of ARPA-E “to overcome the
long-term and high-risk technological barriers in the development of energy
technologies.” However, the Administration continues to strongly object to this
provision due to serious doubts about the applicability of the national defense
model to the energy sector and because a new bureaucracy at the DOE would
drain resources from priority basic research efforts. The Administration believes
that the goal of developing novel advanced energy technologies should be
addressed by giving the Secretary of Energy the flexibility to empower and
reward programs within existing DOE offices to fund unique, crosscutting, and
high-risk research.20
The following sections discuss several key questions debated during the House
Science and Technology and Senate Committee on Energy and Natural Resources
hearings held regarding ARPA-E in the 109th and 110th Congress.21 This analysis
18 U.S. Congress, House Committee on Science, “Should Congress Establish ‘ARPA-E,’ The
Advanced Research Projects Agency - Energy?,” hearings, 109th Congress, 2nd session,
March 9, 2006 (Washington, DC: GPO, 2006) at [http://www.gpoaccess.gov/chearings/
index.html].
19 U.S. Congress, House Committee on Science and Technology Committee, “Establishing
the Advanced Research Projects Agency-Energy (ARPA-E),” hearing, 110th Cong., 1st
session, April 26, 2007, at [http://www.gpoaccess.gov/chearings/index.html].
20 U.S. President (George W. Bush), “S. 761 — America Creating Opportunities to
Meaningfully Promote Excellence in Technology, Education, and Science Act,” Statement
of Administration Policy, April 23, 2007 at [http://www.whitehouse.gov/omb/
legislative/sap/110-1/s761sap-s.pdf].
21 U.S. Congress, Senate Committee on Energy and Natural Resources, “PACE Energy
(continued...)

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CRS-8
incorporates issues discussed in hearing charters, Members’ statements and
questions, and the statements and responses of those providing expert testimony.
Is ARPA-E Needed? Is ARPA-E needed when the federal government and
industry already invest a great deal in energy R&D? A related question is whether
In-Q-Tel,22 the Central Intelligence Agency (CIA) venture capital firm that provides
funding to identify, develop, and deliver technologies of interest to the intelligence
community, is a better model for the energy marketplace than DARPA. (See Box 3.)
Proponents state that ARPA-E will address organizational problems at DOE by
being small and flexible, unlike existing DOE organizations, which they believe are
risk-averse and do not sufficiently interact with each other to reach the nation’s
energy goals. In addition, proponents argue that ARPA-E should focus on
breakthrough research, using emerging basic research in areas such as
nanotechnology to develop totally new technologies, as opposed to existing programs
that have already identified paths forward and tend to focus on incremental advances.
Further, unlike current programs, ARPA-E is designed to bridge the gap between
basic research and industrial development — not to get products to the marketplace,
but to transform the marketplace by accelerating research.
In response to the claim that ARPA-E will be more flexible and less risk-
adverse, critics point out that the new organization will still be within DOE, so there
is no guarantee that DOE management will let it take more risks than existing
programs. In response to the claims that ARPA-E would bridge the gap between
basic research and industrial development and that existing applied programs tend
to focus on incremental advances, some critics argue that reforming DOE’s existing
programs would be better than creating a new organization.
Advocates for ARPA-E indicated that candidate energy technologies are not yet
at a stage where venture capital investment, such as occurs with In-Q-Tel, would
provide the best return. At some point, however, ARPA-E research may lead to
technologies appropriate for venture capital. At that stage, it might be appropriate
to incorporate a venture capital component into ARPA-E’s design. Just as DARPA
has evolved over 50 years, ARPA-E may need to evolve as well, some witnesses
said.
21 (...continued)
Act,” hearing, 109th Cong., 2nd session, February 15, 2006 (Washington, DC: GPO, 2006)
at [http://www.gpoaccess.gov/chearings/index.html]; U.S. Congress, House Committee on
Science, “Should Congress Establish ‘ARPA-E,’ The Advanced Research Projects Agency
- Energy?,” hearings, 109th Congress, 2nd session, March 9, 2006 (Washington: GPO, 2006)
at [http://www.gpoaccess.gov/chearings/index.html]; U.S. Congress, House Committee on
Science and Technology Committee, “Establishing the Advanced Research Projects
Agency-Energy (ARPA-E),” hearing, 110th Cong., 1st session, April 26, 2007 (Washington,
DC: GPO, 2007) at [http://www.gpoaccess.gov/chearings/index.html].
22 For more information on In-Q-Tel, see [http://www.inqtel.org/].

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CRS-9
Box 3. In-Q-Tel Management Design Keys
In 2001, a panel of the Business Executives for National Security (BENS)
conducted an analysis of the In-Q-Tel model. It found that In-Q-Tel has the following
characteristics that differentiate it from the typical business-as-usual federal R&D model.
In-Q-Tel
!
Can make equity investments;
!
Has fewer bureaucratic constraints;
!
Is not required to comply with the Federal Acquisition
Regulations (FAR) requirements;
!
Can obligate funds in multi-year increments, i.e., “no year”
money;
!
Is not restricted by civil service personnel policies;
!
Engages only in unclassified projects;
!
Has the cachet of being associated with the CIA; and
!
Has a flexible deal structure modeled after commercial
contractual/investment vehicles.
The BENS panel also described the differences between the In-Q-Tel model and a
private venture capital firm. In-Q-Tel, BENS states, is better described as a “technology
accelerator” than a venture capital firm, as In-Q-Tel
!
Places its value proposition on obtaining IT [information
technology] solutions, not foremost on return on equity or asset;
!
Deals always result in a product or service (e.g. feasibility
assessment, test product or prototype);
!
Investments are more likely to provide value to the portfolio
companies beyond cash: Investment is “smart money” in its
portfolio companies; that is, In-Q-Tel provides portfolio
companies with intellectual capital, technology-related
experience and the Agency as a potential test-bed; and
!
Due diligence process is more strict: In-depth investigation into
the company’s structure and financial status as well as the ability
of the proposed technology to meet the Agency problem domain
is completely evaluated before forming a contract.
The BENS panel found that “In-Q-Tel’s potential advantage to the CIA outweighs
the risk. In-Q-Tel should continue as the CIA’s entrepreneurial and innovative venture
facilitating the delivery of new technology to the CIA.”

Source: Business Executives for National Security, Accelerating the Acquisition and
Implementation of New Technologies for Intelligence: The Report of the Independent Panel on the
Central Intelligence Agency In-Q-Tel Venture, June 2001 at [http://www.bens.org/
mis_support/nqtel-panel-rpt.pdf].
How Much Funding Should ARPA-E Receive? The NAS report
proposed that funding for ARPA-E start at $300 million the first year and increase
gradually over five or six years to $1 billion per year. At that point, the program’s
effectiveness would be evaluated and appropriate actions taken, according to the
report.

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CRS-10
One issue discussed in hearings was whether the level of authorized funding for
ARPA-E is sufficient to support the research necessary for ARPA-E to reach its
goals. Some noted with concern that the proposed $300 million in FY2008 was less
than 0.02% of the transportation and energy industries’ annual revenues, a level they
believed was insufficient relative to the potential return. Some suggested that if it is
to be successful, ARPA-E needs to be funded at a level comparable to DARPA —
about $3 billion per year.23
Some of those testifying did not believe ARPA-E should be funded due to
budget constraints. ARPA-E, they argued, would be funded by shifting resources
from DOE’s Office of Science. Increasing funding for the DOE Office of Science
is also a goal of the America COMPETES Act. Some hearing witnesses expressed
concern that dilution of DOE Office of Science resources might influence DOE’s
acceptance of ARPA-E, and hinder its success. Supporters of ARPA-E agreed that
funding for the DOE Office of Science is the highest priority and testified that
funding for ARPA-E should not be redirected from that office.
Some witnesses expressed concerns that a risk-tolerant agency like ARPA-E
could not survive if it was subject to the annual appropriations cycle, political and
financial pressures, and resource fluctuations that might stifle innovation. To
overcome this potential challenge, some testifying proposed dedicated funding (see
below).
Will ARPA-E Work? Some critics believe that what is preventing the United
States from reaching its energy goals is not federal funding for innovative, high-risk
research, but rather a lack of private-sector investment in basic research, failure to
effectively transfer new energy technologies to the marketplace, or some combination
of these. They point out the lack of a captive customer: energy has a broad and
diverse public and private market, while DARPA has DOD as its single primary
customer, guaranteeing a solid base of demand. ARPA-E proponents indicated that
ARPA-E is needed for “translational research.” This type of research identifies the
most pressing market needs, selects and funds the most promising scientific
approaches to enable breakthrough products, and brings the best candidates of those
products to the brink of production.
Bush Administration Response
to ARPA-E Authorization
Although President Bush signed the America COMPETES Act into law because
it shares the goals of the ACI, he did not support ARPA-E. A White House fact sheet
stated that “The bill creates over 30 new programs that are mostly duplicative or
counterproductive — including a new Department of Energy agency to fund
23 DARPA’s FY2008 budget is $3.0 billion. Its FY2009 request is $3.3 billion. For more
information, see [http://www.darpa.mil/body/budg.html].

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late-stage technology development more appropriately left to the private sector.”24
After final passage of the act, Raymond Orbach, DOE Under Secretary for Science,
stated that although the goal of the newly authorized agency is “laudable,” its
structure needs to be developed.25 Dr. John H. Marburger, director of the White
House Office of Science and Technology Policy, testified that the FY2009 budget
does not request funding for ARPA-E because “the Administration believes very
strongly that the basic research programs at the DOE Office of Science are a higher
leverage investment and in greater need of funding than new DOE programs.”26
Rather than create ARPA-E, the Secretary of Energy has issued a new policy on
technology transfer that espouses goals similar to that of ARPA-E.27 As a result of
this policy, DOE will now pool funds from the Office of Science and other programs
to fund six new collaborations that integrate basic and applied research. According
to DOE, funding for these collaborations will be based on congressional language
that requires DOE to set aside 0.9% of its applied energy research and development
budget for technology transfer.28 For FY2009, DOE has also proposed $100 million
for a new Office of Science program, Energy Frontier Research Centers (EFRCs) “to
accelerate the rate of scientific breakthroughs needed to create advanced energy
technologies for the 21st century...[and to] pursue the fundamental understanding
necessary to meet the global need for abundant, clean, and economical energy.”29
24 U.S. President (G.W. Bush), “America COMPETES Act of 2007,” Fact Sheet, August
9, 2007, at [http://www.whitehouse.gov/news/releases/2007/08/20070809-6.html].
25 American Institute of Physics, “Ray Orbach on FY2008 Funding Bill: ‘The Clock is
Ticking,’” newsletter, FYI Number 97, September 21, 2007, at [http://www.aip.org/fyi/
2007/097.html].
26 Testimony of Dr. John Marburger, III, Director, White House Office of Science and
Technology Policy, House Committee on Science and Technology, Funding for the America
COMPETES Act in the FY2009 Administration Budget Request, hearing, 110th Congress, 2nd
session, February 14, 2008 at [http://democrats.science.house.gov/Media/File/
Commdocs/hearings/2008/Full/14feb/Marburger_Testimony.pdf].
27 See the press release at [http://www.doe.gov/print/5977.htm] and the policy statement at
[http://www.doe.gov/media/Policy_Statement_on_Technology_Transfer.pdf]. The
technology transfer policy states “This Policy Statement builds upon the stimulus provided
by the technology transfer provisions contained in the Energy Policy Act of 2005 and other
recent legislative actions such as the ‘America COMPETES Act’ that seek to improve the
transfer of energy technologies from the Department’s Facilities to products and
applications that address public and private needs.”
28 This may be a reference to Section 1001 of the Energy Policy Act (P.L. 109-58):
“TECHNOLOGY COMMERCIALIZATION FUND. — The Secretary shall establish an
Energy Technology Commercialization Fund, using 0.9 percent of the amount made
available to the Department for applied energy research, development, demonstration, and
commercial application for each fiscal year, to be used to provide matching funds with
private partners to promote promising energy technologies for commercial purposes.”
29 For more information, see Department of Energy, Energy Frontier Research Centers,
webpage at [http://www.sc.doe.gov/bes/EFRC.html].

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CRS-12
Ongoing Congressional Debate
Over ARPA-E Funding
An issue for Congress is whether to fund ARPA-E in FY2009, and if so, how
much and how long. The America COMPETES Act authorized $300 million for
FY2008, and “such sums as necessary” for FY2009 and FY2010. Some have
proposed providing an advance appropriation supporting ARPA-E for several years,
rather than the usual one-year appropriation. Another option is to identify a
dedicated revenue source for ARPA-E. Some of the funding sources that have been
proposed are
! repeal of oil industry tax and other incentives;30
! gasoline tax;31
! oil company profit tax;32
! federal oil and gas royalties;33
! climate change cap-and-trade program;34 and
! Strategic Petroleum Reserve funds.35
An analogous situation might be research supported through the Ultra-Deepwater and
Unconventional Natural Gas and Other Petroleum Resources Program,36 authorized
by the Energy Policy Act of 2005 (P.L. 109-58), which receives funding of $50
30 House Committee on Science and Technology, “Chairman Gordon Presses Establishment
of ARPA-E as a Key to Clean Energy Independence,” press release, May 9, 2008, at
[http://science.house.gov/press/PRArticle.aspx?NewsID=2189].
31 For more information on the federal excise tax on gasoline, see CRS Report RL30304,
The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History, by
Pamela J. Jackson.
32 For more information on use of oil company profits, see CRS Report RL34044, The Use
of Profit by the Five Major Oil Companies, by Robert Pirog.
33 Testimony of Melanie Kenderdine, Vice President, Gas Technology Institute in U.S.
Congress, House Committee on Science, “Should Congress Establish ARPA-E, The
Advanced Research Projects Agency - Energy?,” hearings, 109th Congress, 2nd session,
March 9, 2006, H.Hrg. 109-39 (Washington: GPO, 2006) at [http://science.house.gov/
commdocs/hearings/full06/March%209/Kenderdine.pdf]. For an example of oil and gas
royalties, see CRS Report RS22567, Royalty Relief for U.S. Deepwater Oil and Gas Leases,
by Marc Humphries.
34 Testimony of Melanie Kenderdine, Vice President, Gas Technology Institute in U.S.
Congress, House Committee on Science, “Should Congress Establish ARPA-E, The
Advanced Research Projects Agency - Energy?,” hearings, 109th Congress, 2nd session,
March 9, 2006, H.Hrg. 109-39 (Washington: GPO, 2006) at [http://science.house.gov/
commdocs/hearings/full06/March%209/Kenderdine.pdf]. For more information on cap-and-
trade programs, see CRS Report RL33846, Greenhouse Gas Reduction: Cap-and-Trade
Bills in the 110th Congress, by Larry Parker, Brent D. Yacobucci, and Jonathan L. Ramseur.
35 For more information on the strategic petroleum reserve, see CRS Report RL33341, The
Strategic Petroleum Reserve: History, Perspectives, and Issues, by Robert Bamberger.
36 For more information, see [http://www.fossil.energy.gov/programs/oilgas/ultra_and_
unconventional/index.html].

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million per year derived from royalties, rents, and bonuses from federal onshore and
offshore oil and gas leases.37 Based on past experience, however, all of these
proposals would face challenges in Congress.
Several bills introduced in May and June of 2008 propose funding ARPA-E.
A number of climate change bills (S. 2191, S. 3036, H.R. 6186) propose long-term
funding ARPA-E as part of a cap-and-trade program.38 In addition, an energy bill
(H.R. 6067) proposes exchanging Strategic Petroleum Reserve crude and direct funds
from a prior sale, with some of the resulting funding ($100 million) directed to fund
ARPA-E until those funds are expended.39
Appropriations for ARPA-E would be in the Energy and Water Development
appropriations bill.40 Due to budget constraints, Congress may need to decide
whether funding for existing DOE energy R&D activities, the proposed technology
transfer collaborations and Energy Research Frontier Centers, or ARPA-E is more
important. An alternative is to reform existing DOE programs by incorporating some
ARPA-E or In-Q-Tel type aspects.
According to press reports, on June 17, 2008, the House Committee on
Appropriations Subcommittee on Energy and Water approved $15 million to fund
ARPA-E when it reported the FY2009 Energy and Water Development
Appropriations Act.41 CRS Report RL34417, Energy and Water Development:
FY2009 Appropriations, coordinated by Carl Behrens, provides updates on the status
of FY2009 appropriations discussions in this area.
37 For more information, see CRS Report RL33493, Outer Continental Shelf: Debate Over
Oil and Gas Leasing and Revenue Sharing, by Marc Humphries.
38 For more information on these bills, see CRS Report RL33846, Greenhouse Gas
Reduction: Cap-and-Trade Bills in the 110th Congress, by Larry Parker, Brent D.
Yacobucci, and Jonathan L. Ramseur.
39 For more information on this bill, see CRS Report RL33341, The Strategic Petroleum
Reserve: History, Perspectives, and Issues, by Robert Bamberger.
40 See CRS Report RL34417, Energy and Water Development: FY2009 Appropriations,
coordinated by Carl E. Behrens.
41 Ben Geman, “House Panel Boosts Renewables Funding, Cuts GNEP Nuclear Effort,”
Energy and Environment Daily, June 18, 2008.

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