VZCZCXRO7712
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #4331/01 1782331
ZNR UUUUU ZZH
P 272331Z JUN 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 9412
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 03 BEIJING 004331 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EAP/CM PSECOR, GWARD AND EEB/ESC SIMONS, HAYMOND, WECKER 
DOE OEA FOR BISCONTI, GEBERT, NAKANO 
TREASURY FOR OASIA DOHNER, CUSHMAN 
USDOC FOR 4420/ITA/MAC/CEA/MCQUEEN 
USTR FOR BHATIA/STRATFORD/WINTER/ALTBACH/MCCARTIN 
 
E.O. 12958: N/A 
TAGS: ECON ENRG EINV EPET EFIN SENV TRGY KNNP CH
SUBJECT:  CHINA/ENERGY - PDAS FREDRIKSEN HOLDS WIDE-RANGING ENERGY 
DISCUSSIONS WITH NDRC ENERGY BUREAU 
 
 
------- 
SUMMARY 
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¶1. BEGIN SUMMARY:  United States Department of Energy (DOE) 
Principal Deputy Assistant Secretary for Policy and International 
Affairs Katharine Fredriksen discussed a wide range of bilateral 
energy issues during a meeting with National Development and Reform 
Commission (NDRC)/Energy Bureau Deputy Director-General XU Yongsheng 
on June 12, 2007.  The meeting included discussions relating to 
upcoming bilateral energy meetings (i.e. Energy Policy Dialogue, Oil 
and Gas Industry Forum), expansion of proposed biofuel and 
industrial energy efficiency frameworks, status of Global Nuclear 
Energy Partnership (GNEP), and an impending letter relating to 
China's special oil levy that Secretary Bodman will send to NDRC 
Chairman MA Kai.  DDG Xu requested that Washington consider moving 
the venue of the September EPD and OGIF events from San Francisco to 
the East Coast or the Midwest because the Vice Chairman will have 
other meetings in New York City and Chicago. DDG Xu mentioned that 
the EPD has always been a closed door dialogue between the two 
governments on policy issues. (Note: This is to respond to DOE's 
request that a U.S. Industry workshop be considered in conjunction 
with EPD during the conclusion of the Second EPD).  DOE will submit 
a draft agenda of EPD by June 15 and NDRC will fax its detailed 
consideration for OGIF to DOE/Beijing Office immediately.  PDAS 
Fredriksen passed along a Chinese version of the draft biofuel 
roadmap to NDRC for revisions.  The NDRC suggested that the current 
USG proposal on biofuel roadmap be broadened to biomass energy 
production, which could include electricity generation, biogas, and 
biofuel.  PDAS Fredriksen then discussed NDRC hosting a delegation 
from DOE to discuss and finalize the plans for conducting the 
Industrial Energy Efficiency Assessments program as agreed to during 
the September EPD and SED I.  NDRC stated that they want to have a 
broader energy efficiency agreement to be signed during the Third 
EPD.  However, NDRC did agree to a delegation from DOE in 
July/August to finalize plans to implement the Efficiency 
Assessments once an MOU is signed.  NDRC offered a draft 
conservation MOU for DOE review and comment.  NDRC prefers to 
coordinate EPD and OGIF through DOE/Beijing Office; biomass and 
energy efficiency frameworks via PDAS Fredriksen of PI and PDAS 
Mizroch (Office of Energy Efficiency and Renewable Energy.)  END 
SUMMARY. 
 
--------------------------------------------- --------- 
NDRC: EPD, OGIF DATES SET, BUT NDRC WANTS VENUE CHANGE 
--------------------------------------------- --------- 
 
¶2. (SBU) National Development and Reform Commission (NDRC) Energy 
Bureau Deputy Director-General (DDG) Xu Yongsheng began the meeting 
by stating that NDRC Vice Chairman Chen Deming has three planned 
events while visiting the U.S. during September 9-12, 2007: Energy 
Policy Dialogue (EPD); the Oil and Gas Industry Forum (OGIF); and GE 
meetings in New York and Chicago.  Due to travel time constraints, 
Vice Chairman Chen will most likely only attend the closing ceremony 
for the OGIF, but plans to be present for all of the EPD.  DDG Xu 
requested that the Department of Energy (DOE) move the planned 
location of the meetings from California to either the East Coast or 
the Midwest to accommodate Vice Chairman Chen's tight schedule.  The 
NDRC has formulated its initial thoughts on the EPD topics and will 
pass along its thoughts through DOE's Beijing Office.  NDRC also 
raised the question about how to communicate with each other on 
these two events.  NDRC prefers coordination through DOE's Beijing 
Office. The NDRC's Point of Contact is Gu Jun, Division Director, 
Department of International Affairs.  DDG Xu closed discussions on 
the OGIF and the EPD by noting that the NDRC considers the EPD to be 
a "closed" government policy forum. 
 
 
------------------------------- 
GNEP STATEMENT REVIEW UNDERWAY 
------------------------------- 
 
¶3. (SBU) In response to Principal Deputy Assistant Secretary (PDAS) 
Fredriksen's query on the status of Beijing's review of the Global 
Nuclear Energy Partnership (GNEP) Statement of Principles (SOP), DDG 
Xu stated that the NDRC will pass along its comments soon.  In a 
related matter, the NDRC is unclear whether it is appropriate to 
invite new GNEP members before finalizing the SOP.  DDG Xu noted 
that doing so could delay the finalizing the SOP.  In response, PDAS 
Fredriksen noted that non-full fuel cycle countries invited to 
participate in GNEP would have no say in drafting the SOP.  This 
means that inviting new non-full fuel cycle participants and the 
work on the SOP could move in parallel, according to PDAS 
 
BEIJING 00004331  002 OF 003 
 
 
Fredriksen. 
 
------------------------ 
BIOFUEL ROADMAP PROPOSAL 
------------------------ 
 
¶4. (SBU) DDG Xu stated that the NDRC wants to collaborate on biomass 
energy production rather than the biofuel roadmap that they 
previously agreed to undertake.  The expanded biomass cooperation 
could include electricity generation, biogas, and biofuels, which 
will be more in-line with the Chinese Government's own broader 
biomass fuel strategy.  In response, PDAS Fredriksen noted that the 
NDRC had requested during an April 2007 high-level NDRC visit to the 
National Renewable Energy Lab (NREL), led by DDG Xu, that DOE and 
China collaborate in developing a biofuel roadmapping exercise for 
China.  There could be budgetary implications by delaying the 
roadmapping exercise in order to create a broader biomass project, 
the PDAS added. PDAS Fredriksen passed along a draft of Chinese 
version of the proposed U.S.-China Biofuels Collaboration to NDRC 
for comments. DDG Xu stated that the NDRC fully understands United 
States Government budgetary issues and will do its best to ensure 
that the change does not significantly delay implementation and will 
get back to DOE as soon as possible with edits to expand the 
proposal.  Regarding coordination, NDRC wants to have direct contact 
with PDAS Fredriksen and PDAS for Energy Efficiency and Renewable 
Energy John Mizroch. 
 
--------------------------------------------- ----- 
NDRC LOOKING FOR BROADER PLAN ON ENERGY EFFICIENCY COLLABORATION 
--------------------------------------------- ----- 
 
¶5. (SBU) In response to PDAS Fredriksen's request for a DOE 
industrial energy efficiency assessment team visit to Beijing, DDG 
Xu stated that the NDRC wants to have a broader energy efficiency 
agreement in place before moving forward with an industrial energy 
efficiency initiative.  PDAS Fredriksen noted that DOE Secretary 
Bodman signed such an agreement with MOST during the first US-China 
Strategic Economic Dialogue (SED) meeting. Moreover, there has been 
a significant amount of bilateral discussions in the EPD held in 
September 2006 as well as SED on establishing an industrial energy 
efficiency program.  DDG Xu stated that DOE's agreement with MOST 
relates merely to science and technology issues.  The NDRC is the 
lead Chinese Government agency for energy efficiency and as such, an 
overarching agreement must be signed by them, even though energy 
efficiency is NOT within the Energy Bureau's authority. [Note: the 
NDRC's lead interlocutor for energy efficiency issues was unable to 
attend the meeting.  Energy efficiency related activities are 
handled by the Department of Energy Conservation and Resources 
Protection.  End Note.] The EPD would be a good occasion for signing 
such an agreement, according to DDG Xu. 
 
¶6. (SBU) DDG XU stated that the NDRC passed its proposal for an 
energy efficiency agreement to DOE on 20 May, but had so far not 
received any comments on the draft.  PDAS Fredriksen replied that 
she looked at the NDRC proposal for the first time on June 11. 
(Note: PDAS Fredriksen observed that the NDRC's draft obviously did 
not make it through DOE's email firewall.  This demonstrates the 
need for the NDRC to confirm DOE's receipt of such documents by 
working with DOE's Beijing Office, said PDAS Fredriksen. End Note) 
The NDRC's proposal calls for cooperation in several areas handled 
by other agencies in the United States Government, such as labeling 
conducted by the Environmental Protection Agency (EPA), according to 
PDAS Fredriksen, thus DOE could not enter into agreements on 
subjects under the jurisdiction of other United States Government 
agencies. Increasing the scope of the original industrial energy 
efficiency collaboration such as EnergyStar would necessarily 
involve engaging multiple agencies (i.e. DOE and EPA) for the United 
States and China, with each country responsible for managing their 
respective interagency coordination. 
 
¶7. (SBU) PDAS Fredriksen went on to reiterate that the DOE position 
is that bilateral cooperation on energy efficiency issues are much 
better served by completion of a series of discrete projects, such 
as conducting the energy audit for 8 to 10 of the largest energy 
consumers within Chinese industry firm, rather than trying to manage 
projects under an umbrella agreement.  In that regard, working 
together on the industrial energy efficiency assessment plan would 
be a good first step in energy efficiency cooperation.  DDG Xu 
stated that the NDRC appreciates DOE willingness to work on 
industrial energy efficiency, but must have an overarching agreement 
in place first.  DOE should make edits to the draft NDRC umbrella 
agreement as quickly as possible to ensure that it is ready to be 
signed during the EPD, said DDG Xu.  However, DDG XU agreed to DOE's 
 
BEIJING 00004331  003 OF 003 
 
 
request to send an 8-10 person industrial energy efficiency 
assessment team to Beijing in July or August to finalize details of 
the audit plan, and should be coordinated through the NDRC's 
International Cooperation Department. 
 
------------ 
PUNT WRAP-UP 
------------ 
 
¶8. (SBU) PDAS Fredriksen provided the NDRC with a record of the 4th 
Joint Coordinating Committee Meeting under the U.S.-China Peaceful 
Uses of Nuclear Technology (PUNT) Agreement signed between NDRC and 
DOE.  DDG Xu noted that although the NDRC did not attend this PUNT 
meeting, it has a close working relationship with China Atomic 
Energy Authority (CAEA), which implements PUNT activities and 
follows PUNT developments closely.  PDAS Fredriksen closed the PUNT 
discussions by noting that DOE has arranged a visit to the Savannah 
River nuclear facility and a meeting with Secretary Bodman for a 
delegation led by the CAEA's Chairman, Sun Qin. 
 
---------------------------------- 
SPECIAL OIL LEVY LETTER ON ITS WAY 
---------------------------------- 
 
¶9. (SBU) PDAS Fredriksen and DDG Xu closed their meeting by 
discussing China's Special Levy on Earnings from Petroleum.  PDAS 
Fredriksen stated that Secretary Bodman will be sending a letter to 
NDRC Chairman Ma asking for him to work with the Ministry of Finance 
(MOF) to find a solution that will not discourage or inhibit 
investment in production and to reconsider the oil profit levy 
because of its impact on contractual obligations by United States 
oil companies doing business in China as well as Chinese companies. 
The United States had a similar windfall tax in the 1970's, but 
repealed the tax after discovering it discouraged production, said 
PDAS Fredriksen.  DDG Xu stated that NDRC Chairman Ma will be told 
to expect the letter.  PDAS Fredriksen and DDG XU agreed that since 
this is a taxation issue, China's MOF is the lead agency for this 
matter and DDG Xu observed that the levy applies equally to both 
foreign and domestic companies. 
 
--------------------------- 
PARTICIPANTS AND CLEARANCES 
--------------------------- 
 
¶10. (U) United States participants: 
 
Katharine Fredriksen, PDAS, Office of Policy and International 
Affairs, DOE 
Lee Gebert, Staff, Office of Policy and International Affairs, DOE 
James Quinn, Technology Manager, Industrial Technology Program, 
Office of Energy Efficiency and Renewable Energy, DOE 
Maria Holleran-Rivera, Staff, DOE China Office 
Brian Jones, Economic Officer, Embassy Beijing 
 
Chinese participants: 
 
Xu Yongsheng, DDG, Energy Bureau, NDRC 
Gu Jun, Division Director, Department of International Affairs, NDRC 
 
Liang Zhipeng, Deputy Director, Renewable Energy Division, Energy 
Bureau, NDRC 
Liu Deshun, Director, International Cooperation Division, Energy 
Bureau, NDRC 
Cheng Xin, International Cooperation Division, 
Energy Bureau, NDRC 
Qin Zhi Jun, Power Division Engineer, Basic Industries 
Department, NDRC 
Liu Hong, Oil Stockpiling Office, Energy Bureau, NDRC 
Dong Wan Cheng, (need title), NDRC 
Li Chao, Department of International Affairs, NDRC 
 
 
¶11. (U) PDAS Fredriksen cleared this cable. 
 
Randt