    [Senate Hearing 111-1215]
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                                                           S. Hrg. 111-1215

     LEGISLATIVE HEARING ON S. 1733, CLEAN ENERGY JOBS AND AMERICAN POWER
                                      ACT

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                                    HEARING

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                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   ----------

                                OCTOBER 28, 2009

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                                                           S. Hrg. 111-1215

     LEGISLATIVE HEARING ON S. 1733, CLEAN ENERGY JOBS AND AMERICAN POWER
                                      ACT

    =======================================================================

                                    HEARING

                                   before the

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                OCTOBER 28, 2009

                                   __________

      Printed for the use of the Committee on Environment and Public Works

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                   COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                         ONE HUNDRED ELEVENTH CONGRESS
                                 FIRST SESSION

                      BARBARA BOXER, California, Chairman
    MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
    THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
    FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
    BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
    BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
    AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
    SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
    TOM UDALL, New Mexico
    JEFF MERKLEY, Oregon
    KIRSTEN GILLIBRAND, New York
    ARLEN SPECTER, Pennsylvania

                        Bettina Poirier, Staff Director
                     Ruth Van Mark, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                OCTOBER 28, 2009
                               OPENING STATEMENTS

    Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland     1
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     2
    Specter, Hon. Arlen, U.S. Senator from the State of Pennsylvania.     3
    Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee..     3
    Klobuchar, Hon. Amy, U.S. Senator from the State of Minnesota....     4
    Voinovich, Hon. George V., U.S. Senator from the State of Ohio...     5
    Bond, Hon. Christopher S., U.S. Senator from the State of
      Missouri.......................................................    54
    Barrasso, Hon. John, U.S. Senator from the State of Wyoming......    58

                                   WITNESSES

    Brehm, Peter, Vice President, Business Development and Government
      Relations, Infinia Corporation.................................    59
        Prepared statement...........................................    62
        Response to an additional question from Senator Klobuchar....    68
    Reicher, Dan W., Director, Climate Change and Energy Initiatives,
      Google.........................................................    70
        Prepared statement...........................................    73
        Responses to additional questions from Senator Klobuchar.....    85
        Response to an additional question from:
            Senator Inhofe...........................................    86
            Senator Alexander........................................    87
    Foster, David, Executive Director, BlueGreen Alliance............    88
        Prepared statement...........................................    91
        Response to an additional question from:
            Senator Boxer............................................    99
            Senator Sanders..........................................   100
        Responses to additional questions from Senator Klobuchar.....   101
    Nutter, Hon. Michael A., Mayor, Philadelphia, Pennsylvania;
      Trustee, U.S. Conference of Mayors.............................   103
        Prepared statement...........................................   106
        Response to an additional question from:
            Senator Sanders..........................................   118
            Senator Klobuchar........................................   119
    Gordon, Kate, Senior Advisor, Apollo Alliance....................   120
        Prepared statement...........................................   123
        Response to an additional question from Senator Sanders......   130
        Responses to additional questions from Senator Klobuchar.....   131
    Klesse, Bill, Chief Executive Officer, President, and Chairman,
      Valero Energy Corporation......................................   133
        Prepared statement...........................................   135
        Response to an additional question from Senator Klobuchar....   146
        Responses to additional questions from:
            Senator Inhofe...........................................   148
            Senator Voinovich........................................   152
            Senator Alexander........................................   154
    Vassey, Brett A., President and Chief Executive Officer, Virginia
      Manufacturers Association......................................   156
        Prepared statement...........................................   158
        Response to an additional question from:
            Senator Klobuchar........................................   173
            Senator Voinovich........................................   175
    Warner, Hon. John, U.S. Senator (retired)........................   245
        Prepared statement...........................................   248
        Responses to additional questions from:
            Senator Klobuchar........................................   254
            Senator Vitter...........................................   255
    Hicks, Kathleen, Deputy Under Secretary of Defense for Strategy,
      Plans, and Forces, U.S. Department of Defense..................   257
        Prepared statement...........................................   259
        Responses to additional questions from Senator Klobuchar.....   265
    McGinn, Dennis, Vice Admiral, U.S. Navy (retired); member,
      Military Advisory Board, Center for Naval Analysis.............   268
        Prepared statement...........................................   270
        Responses to additional questions from:
            Senator Klobuchar........................................   278
            Senator Alexander........................................   280
    Scales, Robert H., Major General, U.S. Army (retired)............   282
        Prepared statement...........................................   284
        Responses to additional questions from:
            Senator Klobuchar........................................   287
            Senator Alexander........................................   288
    Sloan, Andrew, Captain, U.S. Army (retired); Fellow, Truman
      National Security Project......................................   289
        Prepared statement...........................................   291
        Responses to additional questions from Senator Klobuchar.....   295
    Carafano, James Jay, Lieutenant Colonel, U.S. Army (retired);
      Deputy Director, the Kathryn and Shelby Cullom Davis Institute
      for International Studies; Director, Douglas and Sarah Allison
      Center for Foreign Policy Studies, The Heritage Foundation.....   297
        Prepared statement...........................................   299
        Responses to additional questions from Senator Klobuchar.....   310
        Response to an additional question from Senator Alexander....   311
    Crane, David, Chief Executive Officer, NRG Energy, Inc...........   341
        Prepared statement...........................................   343
        Response to an additional question from Senator Sanders......   349
        Responses to additional questions from:
            Senator Inhofe...........................................   350
            Senator Alexander........................................   352
    Izzo, Ralph, Chairman, President, and Chief Executive Officer,
      Public Service Enterprise Group................................   354
        Prepared statement...........................................   356
        Response to an additional question from Senator Sanders......   367
    Law, Kevin S., President and Chief Executive Officer, Long Island
      Power Authority................................................   368
        Prepared statement...........................................   370
        Response to an additional question from Senator Sanders......   377
    Keohane, Nathaniel O., Ph.D., Director, Economic Policy and
      Analysis, Environmental Defense Fund...........................   378
        Prepared statement...........................................   380
        Response to an additional question from:
            Senator Sanders..........................................   393
            Senator Inhofe...........................................   394
    Bluestein, Joel, Senior Vice President, ICF International........   396
        Prepared statement...........................................   398
        Response to an additional question from:
            Senator Sanders..........................................   403
            Senator Inhofe...........................................   404
    Hart, Barry, Chief Executive Officer, Association of Missouri
      Electric Cooperatives..........................................   405
        Prepared statement...........................................   407
    Johnson, Dustin ``Dusty,'' Chairman, South Dakota Public
      Utilities Commission...........................................   424
        Prepared statement...........................................   426
        Response to an additional question from Senator Sanders......   436
        Responses to additional questions from Senator Inhofe........   437
    Wilson, Shari T., Secretary, Maryland Department of the
      Environment....................................................   706
        Prepared statement...........................................   709
        Response to an additional question from Senator Sanders......   717
        Responses to additional questions from:
            Senator Inhofe...........................................   718
            Senator Alexander........................................   722
    Young, Ronald E., President, California Association of Sanitation
      Agencies.......................................................   724
        Prepared statement...........................................   726
        Responses to additional questions from Senator Inhofe........   735
    Frumhoff, Peter C., Ph.D., Director, Science and Policy, and
      Chief Scientist, Climate Campaign, Union of Concerned
      Scientists.....................................................   737
        Prepared statement...........................................   739
        Response to an additional question from Senator Sanders......   789
        Responses to additional questions from Senator Inhofe........   790
    Schweiger, Larry J., President and Chief Executive Officer,
      National Wildlife Federation...................................   792
        Prepared statement...........................................   794
        Responses to additional questions from Senator Inhofe........   858
        Response to an additional question from Senator Voinovich....   862
    Sharp, Fawn, President, Quinault Indian Nation...................   863
        Prepared statement...........................................   866
        Response to an additional question from Senator Boxer........   870
        Responses to additional questions from Senator Inhofe........   892
    Sims, James T., President and Chief Executive Officer, Western
      Business Roundtable............................................   895
        Prepared statement...........................................   898
        Response to an additional question from Senator Sanders......   907
        Responses to additional questions from Senator Inhofe........   908
    Green, Kenneth P., Ph.D., Resident Scholar, American Enterprise
      Institute, prepared statement..................................  1021

                              ADDITIONAL MATERIAL

    U.S. Environmental Protection Agency, Office of Atmospheric
      Programs: EPA Analysis of the American Clean Energy and
      Security Act of 2009, H.R. 2454 in the 111th Congress, June 23,
      2009...........................................................  1047
    U.S. Department of Energy, Energy Information Administration,
      Office of Integrated Analysis and Forecasting: Energy Market
      and Economic Impacts of H.R. 2454, the American Clean Energy
      and Security Act of 2009, August 2009..........................  1100
    Environmental Defense Fund: Cutting Global Warming Pollution for
      a Dime a Day...................................................  1182
    Statement from the National Association of Home Builders, April
      24, 2009.......................................................  1185
    Testimony of the Competitive Enterprise Institute, October 28,
      2009...........................................................  1201

     LEGISLATIVE HEARING ON S. 1733, CLEAN ENERGY JOBS AND AMERICAN POWER
                                      ACT

                                  ----------

                          WEDNESDAY, OCTOBER 28, 2009

                                           U.S. Senate,
                     Committee on Environment and Public Works,
                                                        Washington, DC.
        The full committee met, pursuant to notice, at 9:30 a.m. in
    room 406, Dirksen Senate Office Building, Hon. Barbara Boxer
    (chairman of the full committee) presiding.
        Present: Senators Boxer, Inhofe, Baucus, Carper,
    Lautenberg, Cardin, Sanders, Klobuchar, Whitehouse, Udall,
    Merkley, Gillibrand, Specter, Alexander, Voinovich, Bond,
    Barrasso, and Crapo.
        Senator Boxer. The meeting will come to order. We are very
    happy to see the witnesses here. We are going to have 2 minute
    openings today and rounds of 5 minutes each. I am going to pass
    on an opening statement and call on Senator Cardin.

             OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
                U.S. SENATOR FROM THE STATE OF MARYLAND

        Senator Cardin. Well, Madam Chair, let me just thank all of
    our witnesses that are here, and I am really looking forward to
    today's hearing.
        We are going to have a chance to talk about jobs and
    economic opportunity, national security, utilities and
    adaptation. I am particularly pleased that on the fourth panel
    Secretary Shari Wilson--and I will have a little bit to say
    about her later--the Secretary of the Maryland Department of
    the Environment, because I am proud of what Maryland has done
    in the leadership on global climate change establishing its own
    State program on climate change, and I think it is going to be
    very helpful to the committee.
        Let me just underscore, I guess, two points, Madam Chair,
    as we start the second day of hearings on the legislation that
    you have brought forward.
        First, this is a bill that will create jobs in our
    community. I mentioned yesterday what is happening in White
    Marsh with new battery technology for the auto industry. We are
    very proud of that technology. We are very proud of the jobs it
    is creating in my own State of Maryland. We see this as a real
    opportunity to expand technology that was developed in the
    United States, to keep jobs and create jobs in America.
        And second, let me just bring to the committee's attention
    an article that appeared in the Washington Post this morning
    about the impact on coastal areas of global climate change with
    rising sea levels. And they talk about the risk to the natural
    environment in the State of Maryland as well as to the
    residential development along our coast.
        This is an urgent issue, Madam Chair, that needs to be
    dealt with now, for the sake of our national security, for the
    sake of our environment, for the sake of the property values of
    people who live in the coastal areas. For all these reasons, it
    is important that we get the job done this year, and I applaud
    you for your leadership.
        Senator Boxer. Thank you so much.
        Senator Inhofe.

              OPENING STATEMENT OF HON. JAMES M. INHOFE,
                U.S. SENATOR FROM THE STATE OF OKLAHOMA

        Senator Inhofe. I would very much like to inquire as to
    what we are doing here. Our side feels very strongly that they
    would like to have 5 minute openings. Since we have four
    panels, it is an all day situation. Would that be acceptable?
        Senator Boxer. Well, Senator, let me explain----
        Senator Inhofe. I do not plan to take that much----
        Senator Boxer. Well, yesterday we were here for quite a
    while. We have four panels today. Is that right, four? So, we
    did get to speak a lot. I have waived my opening time. We have
    2 minutes. If a Senator feels they must go over a minute, I am
    not going to shut them down. So, why do we not just go? I have
    given up my time, but you go right ahead.
        Senator Inhofe. All right. That, well----
        Senator Boxer. So, if you go over a minute, that is fine.
        Senator Inhofe. Well, anyway, we are going to have a lot of
    discussion hopefully today about jobs and get out of some of
    the personal attacks and those things that we had to experience
    yesterday.
        I do look forward to the number of witnesses that we have.
    We have some from Valero Energy, which I consider to be very
    well informed on the problems that exist out there and how we
    are going to meet those problems, as well as the Virginia
    Manufacturers Association, both to talk about how the recession
    has hurt their operations and their employees. And they will
    talk about how the Waxman-Markey bill will make things even
    worse, less refined products produced here in America and fewer
    jobs.
        I think some of these things we do understand. I would only
    say this about yesterday, that I thought it was a little bit
    overbearing to have spent 30 minutes just having Senator Kerry
    talk about how the world is coming to an end, and the only way
    to save the world is to pass the largest tax increase in
    history. And I do not think that is realistic.
        I would say this, though, to my good friend, the Chairman
    of the committee, that if you look at the polling data, the
    American people have caught on. I mentioned yesterday that it
    was kind of strange that after the August recess 60 days ago,
    everyone was really uptight because they had heard from the
    American people. But now they have forgotten what the American
    people have said.
        However, the polling data, now I am looking at it right
    now, I have been in kind of shock. The most recent poll just
    last week came out in Politico is 45 percent of the people rate
    the economy as the most important issue, then they go on down
    to 21 percent on spending, 20 percent on health care, 9 percent
    on the wars, just 4 percent on climate change.
        So, I think there is an awareness out there that has not
    been there before, Madam Chairman, and I am somewhat rejoicing
    in that. I give back my time.
        Senator Boxer. Thank you very much.
        Senator Specter.

               OPENING STATEMENT OF HON. ARLEN SPECTER,
              U.S. SENATOR FROM THE STATE OF PENNSYLVANIA

        Senator Specter. Thank you, Madam Chairwoman.
        My comments will be limited to introducing the
    distinguished Mayor of Philadelphia, who is on the panel. Mayor
    Nutter is the 98th Mayor of the city of Philadelphia. It is
    interesting to visit the Mayor's reception room to see his 97
    predecessors on the wall. It is a long, distinguished and
    illustrious group.
        Philadelphia is the sixth largest city in the country. In
    1938, Philadelphia was the biggest city in the country. With
    Mayor Nutter's leadership, we are going to move up to five,
    four and [unclear] surpassing one of the cities, New York, to
    the World Series where the Phillies will be undertaking an
    important venture on behalf of our city a little later today.
        [Laughter.]
        Senator Specter. But the Mayor brings a very important
    perspective to a very critical issue. He has a background from
    the Wharton School of Business, became politically active,
    worked on the City Council, elected in 1991, and now elected to
    the Mayor's job.
        I have worked with him very closely for many years and look
    forward to his testimony and his continued outstanding
    leadership of our great city.
        Thank you, Madam Chairwoman.
        Senator Boxer. Thank you so very much.
        And next is Senator Alexander.

              OPENING STATEMENT OF HON. LAMAR ALEXANDER,
                U.S. SENATOR FROM THE STATE OF TENNESSEE

        Senator Alexander. Thanks, Madam Chairman.
        Sometimes a story helps. A couple of weeks ago, I was
    visited by the Chairman of a French company who is the largest
    maker of turbines in the world for nuclear plants. He told me,
    of course, France gets 80 percent of its electricity from
    nuclear power. We hear a lot about Germany and solar. Germany
    gets 1 percent of its electricity from solar.
        France gets 80 percent from nuclear power, and Germany is
    buying power from France. And jobs from Spain are moving to
    France because France has among the lowest electric rates in
    Europe. And it has among the lowest carbon emissions in Europe.
    That is France.
        This French company is selling, because of all of the
    technology they have developed in France over the last 30 years
    while we have not started one new nuclear plant, France is
    selling turbines all around the world. To Russia, India, the
    countries that are developing power, but especially in China.
    This French president of the company told me that China is
    starting a new nuclear plant every 3 months. China is building
    132 nuclear plants, and we have not started one in 30 years.
        My objection to this bill is--I see the problem. I agree
    with the problem. But I see no need for us to send
    manufacturing jobs overseas by deliberately raising prices of
    electricity by putting a cap and trade on fuel which raises the
    price of carbon but does not reduce carbon.
        Deliberately raising rates and relying on solar and wind
    when we have had 60 years of experience with nuclear power,
    invented it, and by building 100 new nuclear plants in 20 years
    and electrifying half our cars and trucks in 20 years, and
    doubling our energy research and development on recapturing, on
    how to capture carbon from coal plants, on how to make solar,
    which is now four or five times the cost of other electricity
    in our region, cost competitive, on making better advanced
    batteries and on recycling used nuclear fuels.
        If we build 100 nuclear plants, the President led us to do
    that, if you led us to electrify half our cars and trucks, if
    we had mini-Manhattan Projects on alternative energy, we could
    reach our carbon goals by 2030 without a national energy tax,
    without sending jobs overseas, and without imposing on
    Americans higher costs for the energy and electricity.
        So, my final question, as my 3 minutes comes to an end, is,
    if the United States were to create a nuclear navy in the
    1950s, which we did, and it had led the world for 60 years,
    which it has, and if it had done everything we wanted it to do,
    and if sailors have lived safely on top of it for all that
    time, then if we wanted to continue to have a strong military,
    would we stop building nuclear ships and start subsidizing
    sailboats? No, we would not.
        So, my question is, I do not have a problem with the
    problem, but why are we developing this solution when we have
    another one staring us right in the face?
        I look forward to hearing from the witnesses on that
    subject.
        Senator Boxer. Senator Klobuchar. Welcome.

               OPENING STATEMENT OF HON. AMY KLOBUCHAR,
                U.S. SENATOR FROM THE STATE OF MINNESOTA

        Senator Klobuchar. Thank you very much, Madam Chairman.
        I would like to welcome all of our panelists, especially
    from the State of Minnesota, Dave Foster, who has been at this
    for a long time. He heads up the Blue Green Alliance, and he
    has worked representing miners in Minnesota for nearly 7 years.
    As you know, my grandpa was an iron ore miner, worked a
    thousand feet underground in the mines in Ely, Minnesota, and
    at the same time always had that respect for the outdoors and
    loved to hunt and loved to fish.
        And so, when Dave had this idea of starting up this
    BlueGreen Alliance, which is a combination of the workers in
    our State and the environmental groups to say we can have a net
    gain here, we can do this together, we can actually do things
    that are good for the environment and bring jobs in at the same
    time, at the time was rather novel. I remember Paul Wellstone
    leading rallies with Dave on this topic.
        And now we have actually seen it in our State, as I was
    saying yesterday in my opening. We have seen a huge increase in
    our green jobs, as compared to a lot of our other jobs in our
    State. We have a 25 percent by 2025 renewable electricity
    standard that has brought all kinds of jobs into our State. And
    we are seeing iron ore mines finally with this economic
    recession starting to open up again, and before that time, were
    actually doing better than they had in decades. We have seen
    how we can make this work together, and that is what Dave
    stands for.
        And to have all of these steelworkers standing there saying
    they want to see an energy bill is a great thing in our State.
        So, thank you very much for being here, Dave, and I look
    forward to hearing from the Mayor and the rest of the panelists
    as well.
        Senator Boxer. Senator, thank you very much.
        Senator Voinovich.

            OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
                  U.S. SENATOR FROM THE STATE OF OHIO

        Senator Voinovich. Thank you, Madam Chairman.
        The impact of this legislation on jobs, workers and Ohio
    families is at the height of my concerns with this legislation.
    Again, it seems to me we are failing to harmonize our
    environment, energy, economic and national security interests.
    The bill will cost my State of Ohio and the country jobs. This
    is without dispute, despite wild claims of green job creation.
    There is no credible analysis that suggests that this bill will
    be a net job creator.
        In fact, this legislation includes a form of unemployment
    insurance for those who will lose their jobs because of its
    implementation. It is very disturbing that this is included in
    what proponents call a jobs bill. Ohio has already lost enough
    jobs, and some of it is because we have switched from coal to
    natural gas.
        The job losses also will stem from the bill's onerous
    mandates and requirements. Further, the Senate Energy Committee
    passed a bill containing a mandatory renewable electricity
    standard, or RES, and the majority leader has indicated that he
    is going to merge that with this bill. This creates a system of
    overlapping and redundant requirements that will inhibit the
    cost effective admission reductions and will drive energy
    prices up.
        Indeed, the theory under cap and trade is that we set a cap
    and allow companies to comply with the most efficient means
    possible. No so with this bill.
        The other things that I would like to mention is that there
    are provisions in here for what we call a border tax, or border
    adjustment. We have researched this thoroughly, and those
    provisions violate the WTO. What we are really going to need,
    Madam Chairman, is an international agreement that would deal
    with those countries that fail to comply with the new standards
    that the countries will set, very much like we had with nuclear
    proliferation arms reduction.
        And so much of what we should be doing here is going to be
    reflected upon what comes out of Copenhagen in December. And
    that is why I think it is really important that we understand
    for us to unilaterally pass this legislation without airing
    some of the major problems that we have, for example, whether
    we are going to use the year 1990 or the year 2005 to determine
    what are caps are going to be, is something that needs to be
    discussed.
        We also need to deal with allowances and whether they are
    going to be paid for or not paid for. Senator Alexander
    mentioned France. France wants no allowances, no free
    allowances. They want the allowances to be paid for. Germany,
    on the other hand, has said we have to have allowances so we
    can predict steel in our manufacturing.
        So, these things are going to have to be worked out on the
    international level if we expect to make some sense out of our
    efforts to reduce greenhouse gases, not only in this country
    but in the world.
        [The prepared statement of Senator Voinovich follows:]

                    Statement of Hon. George V. Voinovich,
                      U.S. Senator from the State of Ohio

        The impact this legislation will have on jobs, workers and
    Ohio families is at the heart of my concerns with the Kerry-
    Boxer proposal. Again it seems we are failing to harmonize our
    environment, energy, economic and national security concerns.
        That this bill will cost my State of Ohio and the country
    jobs is without dispute. Despite wild claims of green job
    creation, there is no credible analysis that suggests that this
    bill will be a net job creator. In fact, this legislation
    includes a form of unemployment insurance for those who will
    lose their jobs because of its implementation legislation. It's
    very disturbing that this is included in what proponents call a
    ``jobs bill.'' Ohio has already lost too many jobs, with
    unemployment now at 11 percent.
        The job losses will stem from the bill's onerous mandates
    and requirements. Further, the Senate Energy Committee passed a
    bill containing mandatory renewable electricity standard, or
    RES, and the majority leader has indicated his intent to merge
    the cap/trade bill and the energy bill together.
        This creates a system of overlapping and redundant
    requirements that will inhibit cost effective emissions
    reductions and will drive energy prices up. Indeed, the theory
    under cap and trade is that we set a cap and allow companies to
    comply by the most efficient means possible. Not so with this
    bill. Here, we set a cap and then mandate how companies comply.
        Residential consumers, small businesses, manufacturers and
    industrial operations all depend on reliable and affordable
    energy. The consequences of fuel switching from coal to natural
    gas are particularly troubling for our industrial workers and
    for vulnerable consumers like the elderly and those living in
    poverty. Our environmental policies have already resulted in a
    sharp increase in the use of natural gas for electric power
    generation--accounting for almost 94 percent of the increase in
    domestic demand for natural gas since 1992.
        As history has proven, the demand for natural gas can send
    ripple effects throughout the economy because of its use as
    both a fuel and a feedstock for the production of everything
    from fertilizer, to plastics, to the heating of homes. It has
    contributed to a loss of over 3.1 million U.S. manufacturing
    jobs. \1\ In fact, the recession in Ohio began in 2001 when
    natural gas demand spiked. As an example, the chemistry
    industry has gone from a $19 billion trade surplus in 1997--the
    most successful export industry in U.S. history--to becoming a
    net importer of chemicals.
    ---------------------------------------------------------------------------
        \1\ U.S. Department of Labor.
    ---------------------------------------------------------------------------
        I find provisions in the bill that actually encourage fuel
    switching particularly short sighted. In fact, a CEO of one of
    the Nation's largest utilities told me that we would regret the
    move to natural gas as it will hamper our manufacturers and
    create a ``leap-frog'' effect over much needed investments in
    CCS and nuclear technologies.
        Many people down-play the impacts that this policy will
    have on our economy. And although the ``green jobs'' movement
    is trying to convince us that rationing energy resources will
    save the world and our economy, there is little to support
    these claims.
        As I mentioned yesterday, the American Council for Capital
    Formation (ACCF), having performed the only comprehensive
    analysis of the Waxman bill that I'm aware of, concluded that
    by 2020 the House bill could reduce household income in my home
    State of Ohio by up to $261 per year on average, increase
    energy costs by up to 20 percent, and result in a net loss of
    more than 100,000 jobs.
        Under this bill, these numbers are sure to go up. This is
    because the 2020 cap is tighter, the pool of distributed
    allowances is smaller, and there is no Clean Air Act or State
    program preemption. Today, I'd like to ask to have the entire
    ACCF report submitted for the record.
        Recognizing that the bill will put U.S. manufacturers at a
    disadvantage to overseas competition, proponents seek to offset
    compliance and fuel and input costs through a system of
    rebates. Yet many manufacturers from my State won't qualify for
    the rebates, and the bill's costly requirements will force
    plant closures and relocation overseas. These include tire,
    semi-conductor, textile manufacturers and refiners, for
    example.
        This is bad for the environment and the economy. Some of my
    colleagues would like to insulate our Nation's manufacturers by
    including a ``border tariff'' provision. But this is likely
    inconsistent with WTO requirements.
        My goals throughout this process are to keep Nation's
    economy, and that of Ohio, on a sure footing while decreasing
    emissions. This bill just doesn't get the job done and in fact
    is a threat to the jobs and economy.

        [The referenced analysis follows:]

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you, Senator.
        Senator Whitehouse.
        Senator Whitehouse. Madam Chair, I will waive my opening
    statement. I stand by yesterday's opening statement.
        Senator Boxer. Which was so good.
        Senator Whitehouse. Thank you.
        [Laughter.]
        Senator Boxer. Thank you very much.
        Senator Bond.

            OPENING STATEMENT OF HON. CHRISTOPHER S. BOND,
                U.S. SENATOR FROM THE STATE OF MISSOURI

        Senator Bond. Thank you very much, Madam Chair.
        People today are talking about a new poll that shows that
    people want Government to take action to cut carbon emissions.
    Sounds like a nice idea. But it is also like asking how many
    people want a free lunch.
        When pollsters ask the American public how much they are
    willing to pay to fight the emissions they claim for global
    warming, the results are much different. A Rasmussen poll found
    that 79 percent of Americans oppose paying even $100 per year
    more in higher taxes and/or higher utility costs to fight
    global warming. According to the poll, the majority of 56
    percent did not want to pay a single penny to fight global
    warming.
        And that is what I am hearing back home. It is not that
    Missourians do not care about the environment. We do. We have
    always supported measures, responsible measures, to clean up
    the environment. But what we do not want to do is kill jobs and
    raise energy taxes. What we do not want to do is strangle the
    economy with a deep recession.
        Rural Missourians who depend on electric co-ops for power
    rose up to send this message. And what you see today are over
    30,000 signed cards demanding that we keep power bills
    affordable. Thirty-thousand Missourians object to unfair
    proposals that would hurt the Midwest and hurt consumers in my
    State. They want to live with reasonable and responsible
    regulations, not burdensome mandates.
        These are cards that were brought to my office by the
    Association of Missouri Electric Co-ops. The head of the
    Missouri Co-ops, Barry Hart, is here testifying later today. I
    thank him for his leadership and the sacrifices he has made to
    come up here. He will share with the committee how cap and
    trade legislation, like Waxman-Markey or Kerry-Boxer, will
    raise Missouri electricity rates up to 26 percent starting in
    2011, 2012, and rising to 42 percent higher as soon as 2020.
        Missourians do not understand why we would slap ourselves
    with energy taxes when it would do nothing, and I will
    emphasize nothing, to change world temperatures. That is what
    the scientists at EPA have told us. If EPA acts alone with a
    bill like Kerry-Boxer, it will have an impact on world
    temperatures almost too small to measure because China and
    India have already said flatly that they will not agree to
    strangle the growth of their economy to pull people out of
    poverty through mandated carbon reductions, which means not
    enough energy to supply the jobs they need.
        America can do better. We can cut carbon emissions without
    raising energy taxes, killing jobs, if we go to zero carbon
    nuclear power, low carbon hybrid and electric transportation,
    advanced fuels, and wind and solar where they make economic
    sense. That is the path that Congress should take. That is the
    path that Missourians want to see.
        And I thank the Chair.
        Senator Boxer. OK. Thank you very much, Senator.
        I am going to take my 2 minutes to respond to some of what
    has been said, and then we are going to get right to the
    panelists.
        First of all, this poll is very interesting and so are all
    the messages you received from your constituents, which are
    very, very important.
        But I think it is important to look at a poll, a CNN poll,
    which showed in April that only 44 percent of the people
    supported cap and trade system, which we call Pollution
    Reduction Investment, but cap and trade system. And now, after
    they have learned more about it because there have been lots of
    ad wars back and forth and discussions like this one we are
    having here that get covered, 60 percent favor it, and it has
    been described to them not in very glamorous terms.
        It says under a proposal called cap and trade, the Federal
    Government would limit the amount of greenhouse gases companies
    could produce in their factories. If companies exceeded those,
    they would have to either pay a fine or pay money to other
    companies that produce smaller amounts of greenhouse gases.
    Would you oppose or favor this proposal? Sixty percent favor
    it.
        And I am going to put in the record, I ask unanimous
    consent, the CNN story that goes with it. It says 60 percent of
    those questioned say they favor cap and trade, a Democratic
    sponsored plan in which the Federal Government explains it.
    Thirty-seven percent oppose, and it goes on to say that this
    comes out as the Senate Environment Committee holds a hearing
    on this legislation, and that this legislation includes
    provisions to hold down costs to consumers in certain
    industries.
        And it says Republicans say the bill would destroy jobs and
    increase taxes and energy costs. But the bottom line that I
    found is interesting is the youth, the divide on generations,
    colleagues. And I see some young people in the audience. I
    would say the survey indicates a generational divide with 68
    percent of Americans under age 50 supporting cap and trade. But
    those 50 and older split on the issue. And a Democratic divide
    there. It says that 3 in 4 Democrats back it, 6 in 10
    Independents back it, but only 4 in 10 Republicans.
        So, it is a very interesting situation here.
        Now, I would also say I will put in the record also an
    analysis that shows that under our bill, 161 nuclear power
    plants would be developed as opposed to the Alexander plan,
    which is 100 plants paid for by the rate payers. And the reason
    is, once there is a price put on carbon, it makes nuclear much
    more affordable.
        In addition, we have a nuclear title in the bill. Some want
    it more robust. Senator Carey is working with Senator Graham on
    just that, Senator Lieberman when it gets to the floor. But
    right now we have an R&D investment in nuclear waste management
    in our bill. We support safe and clean nuclear energy industry
    through provisions to support worker training, which are funded
    in the bill.
        So, we are moving forward. I see that Senator Barrasso has
    arrived so----
        Senator Bond. Madam Chair, may I interrupt to ask unanimous
    consent to have entered in the record the Rasmussen Poll which
    shows that 77 percent would not be willing to spend more than
    $100 for reducing global emissions?
        Senator Boxer. Yes. And happily, our bill does not cost
    more than $100.
        Senator Barrasso.
        [The referenced CNN poll follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               OPENING STATEMENT OF HON. JOHN BARRASSO,
                 U.S. SENATOR FROM THE STATE OF WYOMING

        Senator Barrasso. Thank you very much, Madam Chairman. I
    know that I have only 2 minutes when I was prepared to talk a
    little longer. But I will tell you that I have concerns about
    that, and I would like to have my entire statement as a part of
    the record.
        Senator Boxer. Yes. And you could go 3 minutes.
        Senator Barrasso. Thank you very much, Madam Chair.
        Well, the warning signs are all around us that this energy
    tax bill is going to lead to lost jobs, higher energy prices,
    and I think will do very little in terms of an environmental
    gain. But you do not have to take my word for it. Here is an
    Investors Business Daily, Cap and Fade. The sub-headline is the
    Senate has finally rolled out its long awaited cap and trade
    bill to slash carbon dioxide. Looking at its Draconian
    restrictions on the U.S. economy, it is hard to believe its
    supporters are serious.
        The editorial goes on to state that the Boxer-Kerry energy
    tax bill will take $9.4 trillion from the gross domestic
    product, will kill 2.5 million jobs, gasoline prices will go
    up, electricity rates will nearly double. The editorial
    concludes the only way to meet Boxer-Kerry's goal will be to
    push the economy into a state of permanent recession. A
    permanent recession.
        Jim Manzi, a Senior Fellow at the Manhattan Institute,
    wrote in the D.C. Examiner that the House passed energy bill
    would be a terrible deal for American taxpayers. If the law
    works precisely as intended, in about 100 years we should
    expect surface temperatures to be about one-tenth of 1 degree
    Celsius lower than they would otherwise be. The expected costs
    to the American people are at least 10 times that of the
    expected benefits. So the American people are going to bear the
    brunt of the lost jobs and higher energy costs all for just
    one-tenth of 1 degree in 100 years.
        The person who actually wrote the most about the cap and
    trade was Thomas Crocker, who is a University of Wyoming
    professor. He has written in the Wall Street Journal as a
    critic, now, of this, saying that cap and trade's flaws, if
    applied to climate change, and they are extensive. I think Doug
    Elmendorf stated, as we have heard in testimony in the Senate
    in the last couple of weeks, the fact that jobs turn up
    somewhere else for some people does not mean that there are not
    substantial costs, substantial costs, borne by people,
    communities, firms and affected industries and affected areas.
    We have seen this in manufacturing. We have seen it with the
    Rust Belt.
        The warning signs are all around us. We need to heed them
    in terms of our economy to ensure that Americans who do not get
    green jobs are able to keep the red, white and blue jobs that
    they have and to continue to power the country.
        To me, that is the way to make America's energy as clean as
    we can, as fast as we can, without raising energy prices on the
    American families.
        Thank you, Madam Chairman.
        [The prepared statement of Senator Barrasso was not
    received at time of print.]
        Senator Boxer. Thank you, Senator, you are very eloquent.
    Those exact words almost were used by those who were fighting
    the acid rain cap and trade program. To the words. To the very
    words. And it proved completely incorrect.
        So, we are going to go to the panel. I want to hold up.
    Since you held up a chart, we are going to have our little
    chart wars today. You hold up one, we hold up one. It is kind
    of equal time.
        Senator Barrasso. Could I have my editorial on Cap and Fade
    included then in the record as well since----
        Senator Boxer. Without a doubt about it. Yes. Yes.
        Senator Barrasso. Thank you, Madam Chairman.
        [The referenced editorial was not received at time of
    print.]
        Senator Voinovich. Madam Chairman, could I have my
    statement also included----
        Senator Boxer. Yes. The entire statement will be put in the
    record.
        Senator Voinovich. And the information that we have on what
    this would cost----
        Senator Boxer. Yes, all of your information, Senator
    Voinovich. Senator, anything you want. Anything you want.
        Senator Voinovich. Wonderful. Thank you.
        [The referenced information was not received at time of
    print.]
        Senator Boxer. All right. The U.S. must seize opportunity
    in global clean energy markets. This is a quote from John
    Doerr, the venture capitalist who helped launch Google and
    Amazon. Now, Google is here represented. So this is not from
    Government people. This is from the private sector, the people
    who know what really makes our economy go, more than we do, if
    I could say.
        As we sit here today, we are in danger of letting the
    energy technology revolution pass us by. John Doerr, venture
    capitalist. The global clean energy market is estimated to
    reach $500 billion a year by 2020. Despite early U.S.
    leadership, German, Spanish and Chinese firms have gained
    market share. U.S.-China solar manufacturing market share
    changed from 2001 to 2008. In 2001, we had 28 percent. China
    had 1 percent. In 2008, the U.S. has 6 percent and China has 29
    percent. So, ladies and gentlemen, all of this talk about gloom
    and doom? It is correct. But it applies if we do not act.
        We are going to get to our panel, and we are going to start
    with Peter Brehm, Vice President of Business Development and
    Government Relations, Infinia Corporation.
        Welcome.

    STATEMENT OF PETER BREHM, VICE PRESIDENT, BUSINESS DEVELOPMENT
             AND GOVERNMENT RELATIONS, INFINIA CORPORATION

        Mr. Brehm. Thank you very much, Madam Chairman.
        Chairman Boxer, Ranking Republican Inhofe and members of
    the committee, I am Peter Brehm, Vice President of Business
    Development and Government Relations for Infinia. We are
    headquartered in the State of Washington, and we have
    operations in California, Maryland, Michigan, Massachusetts and
    New Mexico. I represent Infinia on the Board of Directors of
    the Solar Energy Industries Association, which is also one of
    the reasons that I am here.
        It is an honor to appear before you to testify on behalf of
    Infinia and the Solar Energy Industries Association. I would
    also note that we are strong supporters of BlueGreen Alliance
    and the Apollo Alliance, and I work quite extensively and have
    in the past with Mr. Reicher as well.
        In the 5 minutes I will be speaking to you today, enough
    sunlight will shine upon the United States to satisfy America's
    energy needs for an entire month.
        Let me first tell you a bit about my firm. Infinia has
    developed and manufactures the Infinia Solar System, a unique,
    high performance solar power system that uses a Stirling engine
    and a parabolic mirror to convert sunlight, which is free, into
    electricity, which is valuable. Our system is not a PV or solar
    panel-based system, but instead a unique U.S.-developed and
    manufactured concentrating solar power system.
        Each of our Infinia Solar Systems produces 3 kilowatts of
    grid-quality electricity. Our systems do not consume water,
    which is in short supply in the West, nor do we need flat or
    graded ground to operate.
        Notably, we manufacture here in the United States, and at a
    time when the auto industry is facing historic difficulties,
    our technology is perfectly suited to be manufactured on
    automobile factory lines.
        I will diverge from my testimony a bit just to respond to
    Senator Voinovich's comments earlier. I would like to note that
    two of our most significant vendors, which we are very proud
    of, are based in Ohio, MSG Molded Fiberglass Companies, they
    make the fiberglass backing for our solar panels----
        Senator Voinovich. I know them very well.
        Mr. Brehm. You know them very well. They are an excellent
    company and they have done great work with us. Another one is
    Zigent Automotion Systems in Ohio, and they actually are a
    robotics firm, and they place our mirrors on those same panels.
        And I also note that our initial Stirling engine technology
    was developed in cooperation and with the great assistance of
    the folks at NASA Glenn.
        Our technology is only one of many that are being developed
    and in commercial use. The greatest challenge the U.S. solar
    industry faces is scaling up production and distribution of
    solar technology in order to continue to drive down prices and
    be on par with or below the price of traditional fossil fuels.
        The outlook for solar is bright, pardon the pun,
    particularly if Congress levels the field by enacting strong
    climate change legislation. Recently, the U.S. solar industry
    has demonstrated remarkable growth with the annual rate of
    solar distributed generation installations increasing by more
    than 80 percent in 2008. Last year, solar produced over 8 times
    as much energy as in 1985, and already this year 40 percent
    more than last year.
        This is great, but not nearly enough. More can be done, and
    more should be done, if the United States is going to put a
    serious dent in emissions of greenhouse gases.
        There is a very significant potential for growth of solar
    energy in the United States with the price signals and
    incentives that could be provided this legislation.
        Infinia is a growing company that currently employs over
    140 people, and if a robust climate change bill is enacted, our
    growth rate will double. Good, high paying clean energy jobs
    will be created here in the United States.
        We believe this climate change policy is a key step in a
    comprehensive national energy policy. The proposed legislation
    will spur tremendous demand for all renewable energy
    technologies. We encourage the committee to strengthen the
    proposed legislation to ensure that more of the demand for
    renewable energy technology and products will be supplied by
    U.S. manufacturers.
        Solar energy will create thousands of jobs, install half a
    gigawatt of solar capacity and avoid more than 1 million tons
    of carbon emissions in 2009. These numbers will more than
    double in 2010.
        With the right incentives, a fair regulatory environment
    and the right economic environment, there will be no limit to
    how much solar energy can contribute to the solution. For the
    solar industry, a robust climate change bill will send a clear
    price signal on the cost of emitting carbon, which currently
    has no market price other than the cost to our global
    environment that will be paid by our children and
    grandchildren. This price signal will affect long-term
    generational planning and project financing and may mark a
    paradigm shift in the Nation's energy future.
        In the more immediate term, solar and other renewable
    energies need to receive allowances in the early years of the
    program in order to scale up the industry and bring down the
    costs so we can more effectively satisfy the [unclear] of a
    carbon-free clean energy. Those allowances can come from
    Federal deployment programs for distributed generation and
    utility-scale renewables and from allowances going to the
    States and localities for renewables.
        For Infinia, it is particularly important that some of
    those State allowances go toward the manufacturing development
    of incentives for solar and other domestic renewals energy
    technologies. It would be a huge missed opportunity if we
    replaced oil imported from the Mideast with renewable energy
    technology from overseas.
        In addition, we encourage the committee to consider the
    inclusion of Senator Sherrod Brown's IMPACT, Investments for
    Manufacturing Progress and Clean Technology, bill or similar
    proposals into this climate change legislation to spur the
    development and manufacture of renewable energy technologies in
    the U.S.
        We believe this comprehensive legislation should include
    the following features. A robust cap and trade----
        Senator Boxer. Mr. Brehm. Are you almost done?
        Mr. Brehm. I am almost done. A Federal renewable energy
    standard, transmission policy, national retail net metering,
    and reasonable access to Federal lands.
        Thank you very much.
        [The prepared statement of Mr. Brehm follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Very good. Thank you very much.
        Dan Reicher, Director, Climate Change and Energy
    Initiatives at Google.
        Welcome.

       STATEMENT OF DAN W. REICHER, DIRECTOR, CLIMATE CHANGE AND
                       ENERGY INITIATIVES, GOOGLE

        Mr. Reicher. Chairman Boxer and members of the committee,
    my key message today is that the critical need to address the
    climate crisis provides us with an unprecedented opportunity to
    rebuild our energy system with vast economic security and
    environmental benefits.
        By putting significant limits on carbon emissions and
    adopting strong, complementary energy policies, we can create
    millions of new jobs, reduce our dangerous dependence on
    foreign energy, and protect ourselves from a global climate
    crisis.
        Google published a scenario last year called Clean Energy
    2030, which outlines one potential path to a clean energy
    future. In sum, the Clean Energy 2030 proposal reduces U.S.
    CO2 emissions about 50 percent below the baseline
    projection while creating 9 million new jobs and net savings of
    $800 billion.
        At the global level, the International Energy Agency
    estimates that between 2007 and 2030, the world will need to
    invest $26.3 trillion in energy infrastructure to meet
    currently projected energy demand. As venture capitalist John
    Doerr has also said, this massive global energy spending could
    make clean energy technology the biggest economic opportunity
    of the 21st century.
        The ability of the U.S. to seize this historic economic
    opportunity will be influenced to a large extent by actions
    taken by Government to put a significant price on carbon
    emissions. But a significant price on carbon, while absolutely
    necessary, is not sufficient to address the climate problem,
    and importantly, will not put the U.S. in position to seize the
    extraordinary opportunities that will come with rebuilding the
    global energy economy.
        My primary focus today is on four complementary energy
    policy mechanisms that will be essential to taking advantage of
    these opportunities.
        First, we must significantly increase public funding of
    research and development of advanced energy technologies. In
    1980, 10 percent of the total government R&D investment was in
    energy. Today, it is only 2 percent. The Federal stimulus
    package has certainly provided a shot in the arm for clean
    energy projects, but there is a serious risk of falling off a
    funding cliff when these investments run out.
        We were encouraged when President Obama called for
    investing $15 billion per year over the next decade in clean
    energy technologies and took note when Secretary Chu said that
    energy R&D spending must move closer to the level in the high
    tech industry, which are generally around 10 percent of sales.
        A failure to invest, Madam Chairman, becomes glaringly
    apparent when we realize that barely a fifth of the top 30
    manufacturers of wind turbines, solar panels and advanced
    batteries are American. In contrast, all 5 of the world's
    leading Internet technology companies are from the U.S. And the
    Internet itself was the product of federally funded R&D work by
    DARPA in the 1970s.
        Second, we must increase the capital available to deploy
    these advanced technologies at commercial scale. Moving from a
    Nation that derives 70 percent of its power from fossil
    technologies to one based largely on clean energy will require
    literally trillions of dollars of investment.
        The challenge is that raising this kind of a capital,
    especially for innovative technologies, is not easy. The
    problematic step of moving a technology from a small pilot
    project often funded by venture capital to full commercial-
    scale projects financed largely by the banks is frequently the
    point at which many promising energy technologies die. Indeed,
    we call it the Valley of Death.
        At Google, we are major supporters of pending bipartisan
    Senate legislation that would create a Federal Clean Energy
    Deployment Administration to provide various types of credit
    support to drive private investment in Valley of Death
    projects. CEDA would be an independent administration within
    DOE with a Senate-confirmed administrator and board of
    directors.
        Third, we must build a bigger and smarter electric grid to
    harness energy efficiency and renewable energy. A smarter grid
    will let us see our energy use, measure it, price it, and
    manage it to get the most out of every watt. And a bigger grid
    will allow us to tap our Nation's vast clean energy resources
    and deliver them where we need them.
        At Google, we are working to advance the smart grid on
    several fronts. Among these, our engineers have developed a
    simple secure and free software tool called Google Power Meter
    that gives consumers an easy means to see their home
    electricity on their computer or smart phone.
        Fourth and finally, we must set national standard to
    accelerate the uptake of clean air and more efficient
    technologies. Google supports the adoption of both a strong
    national energy renewable standard and a strong national energy
    efficiency resource standard. State renewable energy and energy
    efficiency standards have sparked new industries and created
    thousands of jobs.
        Before I wrap up, let me mention two examples of where a
    price on carbon and complementary energy policies can be
    catalytic. One is solar thermal power, where early on DOE-
    funded demonstration projects proved the technology and where
    today State renewable standards are driving demand and
    Government-backed finance is helping plants get built.
        Looking ahead, an advanced geothermal energy technology
    called EGS presents another opportunity where a strong energy
    policy and a price on carbon could drive a new industry that
    could produce cheap, renewable power 24 hours a day year round
    and nationwide.
        In conclusion, let me stress that we need both a
    significant price on carbon and complementary energy policies.
    A significant price will definitely send a signal about the
    need to reduce carbon emissions, but it will not by itself
    ensure that the technologies that can address the problem are
    invented and deployed here in the U.S. with massive resulting
    economic and security benefits.
        And while smart energy policies can strongly advance
    solutions to the climate crisis, they will not ensure that
    these solutions can compete straight up with fossil fuels
    without a significant carbon price.
        Thank you.
        [The prepared statement of Mr. Reicher follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        Mr. Foster.

       STATEMENT OF DAVID FOSTER, EXECUTIVE DIRECTOR, BLUEGREEN
                                ALLIANCE

        Mr. Foster. Good morning, Madam Chair, members of the
    committee, and thank you, Senator Klobuchar, for that kind
    introduction.
        My name is David Foster. I serve as the Executive Director
    of the BlueGreen Alliance, a national partnership of six major
    labor unions and two national environmental organizations. We
    bring together 8 million members from the steelworkers, the
    largest manufacturing union in North America, communication
    workers, laborers, service employees, utility workers and
    teachers with the Sierra Club and Natural Resources Defense
    Council. We touch virtually every corner of the country in our
    pursuit of good jobs, a clean environment and a green economy.
        I am especially pleased to be given the opportunity to
    testify before the Environment and Public Works Committee on
    this critical issue, and we look forward to working with you
    throughout the process to pass clean, comprehensive climate
    change legislation that creates and retains millions of family
    sustaining green jobs and finances the transition to a clean
    energy economy.
        To maximize its economic success, this package must be
    comprehensive. It must deal with every piece of the puzzle,
    capping carbon emissions, providing incentives for job
    creation, investing in clean energy, preventing carbon leakage,
    and setting mandates for energy efficiency and renewable energy
    production.
        Some say that it would be easier to pass one piece of the
    puzzle and then try to move on to the next. But doing so
    underestimates the complexity of the problem, sends
    contradictory messages to our energy markets, and most
    importantly, fails to solve the underlying climate crisis.
        Capping carbon emissions will create the necessary
    incentives for America to develop its clean energy economy.
    Without the certainty of true emissions reduction, we can
    achieve neither our environmental goals nor our job creation
    goals.
        We also need to include a strong national renewable
    electricity standard and energy efficiency resource standard
    such as those introduced by the Senators Udall of Colorado and
    New Mexico.
        The transition to a clean energy economy is the most
    important opportunity for strengthening and expanding American
    manufacturing in my lifetime. As evidenced by Gamesa in
    Pennsylvania, the ClipperWind facility in Cedar Rapids, Iowa,
    ATI Casting in LaPorte, Indiana, the Pauwels Transformers
    facility in Washington, Missouri, and many, many more, our
    workers can produce the steel, glass, precision parts and
    cement needed by our clean energy industries, but only if we
    provide them with the proper investment and protections.
        We can do this by including a robust manufacturing title in
    the bill which would ensure that strengthening and revitalizing
    America's manufacturing base is a priority. There is no reason
    why America and its workers should not lead the world in green
    manufacturing.
        A critical component is providing adequate allocations to
    energy intensive and trade exposed industries. While the Kerry-
    Boxer bill addresses this issue, it does not provide sufficient
    allowances to ensure that energy intensive industries are not
    put at a competitive disadvantage. This is a vital provision
    for preventing the leakage of jobs and carbon pollution, and I
    appreciate that the Chair and committee have agreed to work
    with us to ensure that these industries are kept whole.
        In addition, the legislation should include a longer-term
    border adjustment provision to limit carbon leakage, ensure the
    fair treatment of American workers, and provide an incentive to
    other countries to negotiate industry sectoral agreements as
    those allocations phaseout. We were supportive of the House
    ACES bill and hope that this model can be included in Senate
    legislation.
        I cannot emphasize enough to the committee how critical
    both the rebates and border measure are to the success of the
    climate bill. As part of the manufacturing title, climate and
    energy legislation should also provide incentives to help our
    manufacturing base convert to the clean energy economy. We
    appreciate the inclusion in funding of clean vehicle
    manufacturing provisions and hope that Senator Brown's IMPACT
    Act will also be included and funded.
        Programs like the Retrofit for Energy and Environmental
    Performance and investments in improved building codes will
    finally put forth a dedicated effort to make buildings and
    homes more energy efficient. We also believe that national
    minimum standards are an essential part of any program
    receiving support from the Federal Government to spur
    residential energy efficiency. The State and Local Investment
    in Energy Efficiency and Renewable Energy, included in the
    bill, will provide the dedicated investment to support
    deployment of critical technologies and practices.
        Our work force must have all the necessary tools and
    knowledge to successfully work in green jobs. We can do this by
    offering training for all who want the opportunity. We believe
    that the Green Jobs Act of 2007 gives us the best framework,
    and we thank you for providing allowances to fund this
    provision.
        Along with training, we must open doors to certain
    communities that are too often left out. The Green Construction
    Careers Demonstration Project provides an outlet that will
    promote quality employment practices that are accessible to low
    income communities and workers.
        I want to close by telling the story of the R.E. Burger
    power plant in Shadyside, Ohio. A coal-fired power plant
    originally built in the 1940s, Burger needed to be fitted with
    new pollution control equipment. That equipment proved to be
    too costly, and the owners were preparing to close the plant
    and lay off hundreds of workers in an already economically
    depressed area.
        Thankfully, with the help of Utility Workers Local 350,
    FirstEnergy decided to retrofit the plant and convert to
    biomass. This proved to be more cost effective and saved the
    jobs of over 100 employees and the creation of another 200
    jobs. The Burger plant today is poised to become one of the
    largest biomass-fueled plants in the country.
        After comprehensive climate legislation is enacted, we will
    see more and more plants like Burger. Many will be retrofitted
    with carbon capture technology and some switched to natural gas
    or biomass. We will see concentrated solar power plants built
    where there has never been a power plant before. We will see
    wind farms going up alongside oil derricks. We will see
    buildings erected that emit zero carbon pollution and produce
    zero waste.
        We look forward to working with you to pass what could and
    should be the greatest job creating bill ever passed by the
    U.S. Congress.
        Thank you.
        [The prepared statement of Mr. Foster follows:]

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        Senator Boxer. Thank you very much, Mr. Foster.
        It is our pleasure to welcome Mayor Michael Nutter, the
    Mayor of Philadelphia, Pennsylvania.

      STATEMENT OF HON. MICHAEL A. NUTTER, MAYOR OF PHILADELPHIA,
            PENNSYLVANIA; TRUSTEE, U.S. CONFERENCE OF MAYORS

        Mr. Nutter. Madam Chairman Boxer, Ranking Member Inhofe and
    members of this committee, I want to thank you for the
    opportunity to testify on the Clean Energy Jobs and American
    Power Act.
        I also want to thank my Senator, Senator Arlen Specter, for
    the wonderful introduction, very complimentary, and I
    appreciate that. The Senator and I have a long-standing working
    relationship on behalf of Philadelphia and some Pennsylvanians
    for a long period of time.
        My name is Michael A. Nutter, Mayor of the city of
    Philadelphia and a Trustee of the United States Conference of
    Mayors. I am pleased to be here today on behalf of the
    Conference in full support of this legislation, and I would
    ask, Madam Chairwoman, that my full testimony be submitted for
    the record.
        Senator Boxer. Without objection.
        Mr. Nutter. Thank you.
        The United States Conference of Mayors has been urging
    Congress to pass a comprehensive climate protection plan that
    reduces our Nation's greenhouse gas emissions, encourages
    renewable energy, increases energy efficiency and enhances our
    economic security. The bill before us today will achieve these
    outcomes.
        As all of you know well, our Nation finds itself at a
    difficult time. Faltering city, State, Federal and global
    economies, rising national security challenges further
    complicated by rising environmental threats, now define the
    first decade of this new century. We must confront these
    challenges with courage, vision and action.
        And that is exactly what this committee is doing today in
    moving forward with this important legislation. If we do this
    right, we will chart a new direction that will increase our
    energy independence, reinvigorate our economy and create new
    jobs in the process.
        I would like to discuss how this legislation will not only
    protect our environment, but will also support economic
    recovery and longer-term economic growth.
        On behalf of the Nation's mayors, I want to thank you,
    Chairwoman Boxer, Ranking Member Inhofe and the members of this
    committee for recognizing the important role that city and
    local governments must play in a comprehensive climate
    protection plan by including commitments to the Energy
    Efficiency and Conservation Block Grants Program, also known as
    EECBG.
        Cities in our metro areas are not only the economic engines
    of the United States economy, but they also represent some of
    the biggest users of total energy consumed. Local governments
    are responsible for transportation networks, water and
    wastewater systems, building code enforcement, fleets of
    vehicles, solid waste disposal and recycling collection. These
    activities are a source of many of our emissions. But cities
    are also a source of innovative solutions that will have a
    significant impact on reducing greenhouse gas emissions and
    energy consumption while also creating new jobs.
        Under ARA, the city of Philadelphia will receive $14.1
    million in EECBG funding. We have developed a plan that makes
    immediate investments in energy efficiency and conservation
    while leveraging and extending these investments into the
    future, generating jobs and economic benefits that will be
    realized over the coming months and years ahead.
        In 1997, our Streets Department replaced all of our red
    light traffic signals with LEDs, saving $8.4 million and over
    40 million tons of greenhouse gas emissions over 10 years.
    Using EECBG money and other leveraged funds, we will convert an
    additional 58,000 yellow and green traffic signals and replace
    27,000 red LED lights. The project will save our city $1
    million in electric costs every year.
        There are enormous potential returns to energy saving
    investments in building retrofits. The debt incurred to fund
    the improvements will quickly be offset by reduced energy
    operating costs. With EECBG and other leveraged funds, again we
    will be offering low interest loans to commercial, industrial
    and institutional property owners that wish to undertake
    building energy efficiency retrofit projects. In addition,
    $500,000 in matching grants for building energy efficiency
    improvements will be made available to small businesses.
        Besides the EECBG, there are numerous other programs
    contained in this legislation that are good for both the
    economic and job creation fronts. I wanted to highlight a few
    that are going on in Philadelphia and what this legislation can
    do for us in the future.
        In 2008, we installed a new solar hot water system on a
    riverside correctional facility, the first in the Nation. The
    additional cost of a solar heating system is expected to pay
    for itself through lower energy costs in less than 9 years.
    Over its useful life, estimated at 25 years, the solar system
    will save over $1 million and reduce emissions by over 1
    million pounds of CO2.
        There is potential to develop and deploy solar at scale. We
    have acres and acres of public rooftops, also knowing as
    housing in Philadelphia, row homes in our city that could
    support similar installations. The city of Philadelphia
    currently spends $19 million annually on housing preservation
    and weatherization, supporting about 3,600 projects a year. An
    expanding building and retrofit program contained in this bill
    could become part of a pipeline to retool Philadelphia's work
    force to meet a growing demand in the private market for
    building retrofit.
        A new job training program developed by our Energy
    Coordinating Agency will certify new weatherization
    specialists. Some of this training can be completed in as
    little as 2 weeks, allowing unemployed and underemployed
    Philadelphians to transition rapidly into a sector with
    tremendous opportunity. The total number of trainees is
    expected to be over 800 in the first 2 years of operation.
        Our Nation cannot remain economically competitive if we
    continue down a path where petroleum is our primary source of
    power for the transportation sector. This means that all
    federally assisted transportation investments must--and this
    legislation does--emphasize sustainable transportation.
        Philadelphia has already decreased its transportation
    greenhouse emissions by nearly 10 percent from its 1990 levels.
    But we have established a further goal of reducing emissions by
    10 percent by 2015. My experience in Philadelphia is
    characteristic of so many cities that are moving forward with
    these kinds of investments.
        Let me conclude by saying that I have provided a few
    examples of the energy and climate work underway in our city,
    and I am just one example of what many mayors across America
    are doing in our Nation. These innovative practices and
    programs stimulate the economy, create jobs and protect our
    environment. At the same time, we know that the potential to do
    more exists, including creating millions of new jobs in
    advanced and growing opportunity through this work and we have
    only scratched the surface.
        I congratulate you, Chairman Boxer, Senator Kerry and
    members of the committee for your hard work on this critically
    important legislation. The Nation's mayors support your
    efforts, and we encourage the Senate to move quickly to enact
    comprehensive energy and climate legislation during this
    Congress.
        Thank you, Madam Chairwoman.
        [The prepared statement of Mr. Nutter follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you so much, Mr. Mayor.
        Our next speaker is Kate Gordon, Senior Policy Advisor to
    the Apollo Alliance.
        Welcome.

               STATEMENT OF KATE GORDON, SENIOR ADVISOR,
                            APOLLO ALLIANCE

        Ms. Gordon. Thank you, Chairman Boxer and members of the
    committee. Thanks so much for inviting me here today to talk
    about how a strong comprehensive energy and jobs bill can
    bolster the American economy, usher in a new era of sustainable
    growth and create millions of high quality jobs.
        After September 11th, this country faced a recession that
    we combated through unsustainable investments in financial
    paper and real estate. The next recession, the one we are in
    now, is much deeper and is hitting Americans much harder. Since
    December 2007, the ranks of the unemployed have increased by
    over 7 million people and the unemployment rate now stands at
    close to 10 percent.
        While the investments made through the Recovery Act
    successfully staved off deep economic crisis, the American
    economy is still in search of its next economic generator. The
    need for an economic strategy that keeps our workers in their
    jobs while creating a whole host of new, good jobs has never
    been so urgent.
        Clean energy investments are the key to America's new
    sustainable growth strategy. Despite inconsistent support from
    the Federal Government, these industries have already proven
    themselves to be growth areas for the future. Investments in
    wind, solar photovoltaic and biofuels grew by 50 percent
    between 2007 and 2008 and are expected to exceed $325 billion
    within a decade.
        Jobs in wind energy generation grew by 23 percent, solar
    generation by 19 percent between 1998 and 2007, outpacing the
    3.7 percent job growth in the rest of the U.S. economy
    experienced over the same period. But until the Federal
    Government truly commits to a low carbon future, investment and
    employment in these industries will just never grow to the
    scale needed to truly drive an economy-wide resurgence.
        While many of the pioneering renewable energy technologies
    were invented here, today American companies control only 6 of
    the world's top 30 companies in solar, wind and advanced
    batteries. Our European and Asian competitors have moved
    aggressively to support renewable energy and in the process
    have developed greater renewable capacity as well as stronger
    industrial growth. In fact, China's leaders are investing $12.6
    million an hour to green their economies. As David Sandalow,
    Assistant Secretary for Policy and International Affairs at the
    Energy Department recently put it, if they invest in 21st
    century technologies and we invest in 20th century
    technologies, they will win.
        Our clean tech industry is impressive, but by global
    standards we are playing in a garage band. And we must--and
    should--become Bruce Springsteen.
        By taking decisive action to limit and reduce climate
    pollution, the Clean Energy Jobs and American Power Act will
    send a clarion call through the world that America is ready to
    step up and take action to curb climate change. It will also
    send the signal many of companies have been waiting for, that
    this country is serious about opening up vast new markets for
    clean energy investment. Where there is clean energy
    investment, clean energy jobs will follow.
        The Apollo Alliance has long made the case that investment
    in clean energy is not just good environmental policy, it is
    good economic development policy. Recent studies support these
    claims. Jobs in the clean energy economy have grown nearly 2
    and half times faster than overall jobs in the economy. An
    analysis by the Center for American Progress and the Political
    Economy Research Institute found that an investment package
    combining the Recovery Act and House bill on climate would
    create a net 1.7 million new jobs in the economy.
        These employment opportunities, it is important to note,
    will be across all sectors of the economy and will provide a
    unique opportunity to rebuild our middle class through job
    creation in sectors particularly hard hit by recent recessions.
        Fully 55 percent of all new jobs in these emerging
    industries are projected to be in the manufacturing and
    construction industries. These are industries that provide a
    living wage and high-quality jobs for the 68 percent of working
    Americans who do not have a 4-year college degree. Jobs in
    manufacturing and construction are also more likely to serve
    middle-skill workers and are more likely to be unionized,
    providing higher wages, better benefits and greater access to
    job training.
        In addition to providing market certainty for clean energy
    investments through predictably decreasing limit on carbon
    emissions, this bill makes important investments in expanding
    renewable power and energy efficiency projects, domestic
    manufacturing of efficient vehicles, and green collar jobs
    programs.
        And my fellow panelists have said some important things
    about these provisions, and I would highlight some of the
    provisions that they talked about, particularly those that
    funnel money through State and local governments. We know that
    this is one of the best ways to stimulate the American economy.
    The bill contains the SEED accounts, the Energy Efficiency
    Conservation Block Grant Program, and the money for clean
    vehicles, which will provide needed incentives to scale up our
    industries to meet growing demand.
        We look forward to the coming weeks when there will be
    opportunities to make this bill more comprehensive and to
    strengthen several of its critical provisions. I would
    particularly point to a couple of areas.
        One, while the act includes important cost protections for
    energy intensive industries, it should also invest directly in
    thousands of other domestic manufacturing firms ideally placed
    to meet new clean energy technology demands. And Apollo has
    worked very hard on this issue, talked to hundreds of small
    manufacturing firms across the country who tell us they need
    investments to retool and become part of these industries. We
    encourage you to include IMPACT and Senator Bingaman's
    Restoring American Manufacturing Leadership in this bill.
        We also applaud the Climate Change Worker Assistance
    Program----
        Senator Boxer. Could I ask you to----
        Ms. Gordon. Yes, I am almost done.
        And we would encourage you to also include community
    economic development provisions in that bill.
        As the committee considers this bill, please, we encourage
    you to put the American economy on the road to a stronger
    economy through investments in these clean energy and good jobs
    in American workers. The path we are on now, it is important to
    note, is not working. It is leading to unemployment,
    environmental degradation and dependence on other countries.
        With your leadership, we know we are up to the challenge--
    --
        Senator Boxer. I am sorry. All right. Thank you.
        Ms. Gordon. Thank you so much.
        [The prepared statement of Ms. Gordon follows:]

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           And now, that completes the Democratic witnesses. And now
    we have the Republican witnesses.
        The first one is Bill, I want to make sure I pronounce it
    right, Mr. Klesse.
        Mr. Klesse. Klesse.
        Senator Boxer. Klesse. Bill Klesse, Chairman and CEO of
    Valero Energy Corporation.
        Welcome, sir.

     STATEMENT OF BILL KLESSE, CHIEF EXECUTIVE OFFICER, PRESIDENT,
                AND CHAIRMAN, VALERO ENERGY CORPORATION

        Mr. Klesse. Thank you, Madam Chairman, Senator Inhofe and
    other committee members. I am honored to be here today----
        Senator Boxer. Is your microphone on, sir?
        Mr. Klesse. Yes. Representing an independent refiner,
    Valero Energy Corporation. And also, I come before you as the
    Chairman of the National Petrochemical & Refiners Association,
    which represents over 450 businesses that make reliable and
    diverse products for all Americans.
        The implications of this legislation are devastating for
    the American people and for the American refining and
    petrochemical industries. One of our chief concerns is that
    this legislation provides foreign refiners and petrochemical
    operations a competitive advantage to American businesses.
        You must remember that we are a global business. India,
    China, Europe and other countries provide intense competition
    to American refiners. With the recession, increasing regulation
    and now the potential costs associated with this legislation,
    results are devastating, not only to our businesses, but to the
    millions of Americans who work in or around this industry.
        Today, refiners and petrochemical plants are idling units,
    closing facilities, hundreds of jobs are being lost. This
    legislation will force U.S. refiners to further reduce or close
    even more operations. It is entirely counterproductive to
    lifting our economy out of this recession, and it will drive
    refining production to other countries.
        In addition to exporting one of the last great American
    manufacturing sectors that is globally competitive, you will
    simply be transferring the carbon dioxide emissions overseas,
    making the overall impact on the environment negligible or even
    worse.
        Are we a country willing to ruin the American industry that
    literally fuels our economy? The legislation has nothing to do
    with national energy security. In fact, given the negative
    effect this legislation would have on our industry, we are
    actually talking about a threat. America's safety is threatened
    by increased imports of refined products and the Pentagon's
    ultimate reliance on military fuels produced in unstable
    regions of the world.
        As to the consumer, this legislation will impose huge new
    costs. Close to 3 million tons of CO2 are emitted
    each year transporting people and goods across our great
    Nation. Even at a low carbon price of $20 per ton, the refining
    sector will have to purchase $63 billion in carbon credits
    every year. In addition to placing an unmanageable financial
    strain for cash on refiners, consumers will feel much of this
    burden in the form of higher fuel costs.
        We all desire a broad menu of safe, reliable, low cost
    fuels. Today's vehicles operate primarily on traditional
    gasoline and diesel fuel. Emerging technologies will be part of
    the fuel mix, but are still years away from commercial
    viability and affordability.
        This legislation attempts to raise all product prices so
    that other less economic products look better to the consumer.
    Is this really fair to the American consumer or to our
    industry? As diesel fuel prices increase, what happens to the
    jobs in railroads and trucking?
        The NPRA is not opposed to energy policies that promote
    alternative fuels. We support a balanced and realistic energy
    policy rooted in true fuel diversity. We must invest in future
    technologies, but not at the expense of the economic fuels that
    we have today.
        My company has a 50-megawatt wind farm in the Texas
    Panhandle next to our refinery. We are also very active in the
    ethanol business. We support programs that include meaningful
    global participation and ensure that the U.S. can continue to
    compete in the global markets. We support a national program
    with realistic carbon emissions. However, policies should not
    pick winners and losers.
        We support the actions of this committee. The adverse
    impacts of the proposed legislation to our workers are
    staggering. Valero refinery employees live in your State,
    Chairman Boxer, Senator Inhofe, and other members of this
    committee, Delaware, New Jersey, Tennessee and Louisiana. These
    are real people. Many did not graduate from college, instead
    learned a critical skill. They work hard. These are people with
    families. They educate their kids, they pay taxes, they have
    good health benefits and solid retirement. They are the heart
    of the country. They are the middle class. We are in favor of
    green jobs, but not at the expense of the heartland red, white
    and blue jobs.
        Valero and the NPRA and its members are ready to work with
    you and to create a policy that will protect the interests of
    the American consumer, preserve good paying jobs, enhance U.S.
    competitiveness in the world and achieve a desired
    environmental objective.
        Thank you.
        [The prepared statement of Mr. Klesse follows:]

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            Senator Boxer. Thank you very much, sir.
        Mr. Vassey. And let me say, Brett A. Vassey, President and
    CEO, Virginia Manufacturers Association.
        Welcome.

      STATEMENT OF BRETT A. VASSEY, PRESIDENT AND CHIEF EXECUTIVE
              OFFICER, VIRGINIA MANUFACTURERS ASSOCIATION

        Mr. Vassey. Thank you, Chairman Boxer, Senator Inhofe and
    members of the committee for the opportunity to testify before
    you today on this bill.
        I am the President and CEO of the VMA from Richmond,
    Virginia. We are the trade association for manufacturers and
    industrial suppliers to manufacturers for 87 years. Our members
    employ over 120,000 Virginians. We produce over 400 megawatts
    of renewable energy from our facilities, and finally, we make
    everything from ships to chips. That is our logo.
        We are also very proud we are from the Commonwealth, the
    fourth year running the No. 1 State for business as ranked by
    Forbes Magazine.
        So, there is additional information in the testimony I
    submitted on the economic impact, and I will, in the interest
    of time, just get to the points.
        My testimony today is going to be specifically addressing
    the cap and trade provisions of this bill. Due to the time
    constraints, I am only going to address three of the four
    issues. In my written testimony, those issues are going to be
    specific to the credit allocation, to the issue we are bringing
    forward of capacity confiscation, and to, finally, leakage,
    which is addressed only in part in this bill.
        On the credit allocation, this system allows political
    leaders to choose winners and losers in the economy. The
    important thing about this is the system risks global
    manufacturing because they make decisions on future capital
    investments today. Congress and the EPA allocating credits is a
    critical decision before you because States like Virginia and
    other States will lose opportunities to compete and create jobs
    in the future as long as this is a threat hanging over the
    heads of those looking 3 to 5 years where they are going to
    invest. I will explain in just a moment why that is linked to
    leakage.
        But the second issue is productive capacity confiscation,
    and this is important for us. To avoid paying for emissions
    credits, only point sources such as manufacturers that comprise
    only 3 percent of all businesses in the Commonwealth, mind you,
    will be forced to involuntarily accept limits on their
    emissions. This limitation ignores the fact that Virginia's
    industrial sector emits less CO2 today that it did
    in 1990.
        Additionally, in accepting lower allowable emission rates,
    the companies involved will be restricting each of their
    regulated facilities to a correspondingly lower allowable
    production rate. Energy equals production. This is productive
    capacity confiscation, and there is no provision in this bill
    to compensate Virginia's, or any State's, affected businesses
    for the productive capacity that the Federal Government will be
    confiscating from us.
        Now, on to leakage. The truth is cap and trade, from our
    perspective, is simply a tax on energy, and it is regressive on
    manufacturing because of its intense nature. There is nothing
    in this bill that stops leakage to more favorable nations, and
    there will be more favorable nations.
        Virginia, for instance, if we eliminated all CO2
    emissions from all sources, China's growth alone would replace
    it in 77 days. On this note, it is my opinion, which I would
    like to share with the committee, that there is a gentleman
    named Mr. Tom Mullikin, he is environmental attorney with Moore
    & Van Allen out of Charlotte, North Carolina, who has produced
    a very substantial body of work on this issue and has changed
    the thinking of many global leaders on the impact of leakage.
    And I suggest that he could be somebody very helpful to you.
        Mullikin's findings, basically, his finding is basically
    that due to productivity of American manufacturers and their
    workers and the efficiency of our facilities, our Nation's
    carbon emissions from industry are only 11.5 percent of the
    country's overall carbon emissions whereas the EU's is 16.2,
    Japan's is 21.5 and China's is 28.
        In other words, the U.S. is the largest manufacturing
    economy in the world, and if it were to grow the industrial
    base rather than limit it, we may grow GHG emissions slightly
    in this country, but we would lower the overall global
    emissions to the world.
        And to give you evidence of that, since 1997, Virginia
    manufacturers have increased its gross State product--excuse
    me, since 1997, the Virginia industrial sector has increased
    its gross State product per kilowatt hour of electrical input
    from $2 to $3.14. What that means is we are 64 percent more
    efficient in production that we were just in 1997. And I would
    dare say if you challenge your State, you will find the same
    data.
        Industrial businesses understand the importance of
    environmental stewardship, voluntarily spending millions. In
    Virginia, we spend nearly $1.72 billion just in compliance
    costs on environmental regulations. We commend the efforts of
    this body to legitimately address this complex scientific issue
    while affording equal protections to the economy. These are not
    mutually exclusive principles.
        You already know the studies published by NAM, the Heritage
    Foundation and others which I will not recite. But in your
    materials you do have a letter dated June 6, 2008, from 10
    Senators of this body signed also by our Senator, Jim Webb,
    stating that there must be protections for manufacturing jobs
    in the then Lieberman-Warner bill. But the most important
    statement they made is this bill must include enhanced
    safeguards to ensure a truly equitable and effective global
    effort that minimizes harm to the U.S. economy and protects
    American jobs. We agree.
        In closing, the VMA wants Congress to develop responsible
    policies that protect domestic jobs and the environment. We are
    concerned that these bills will cap industrial competitiveness
    and trade domestic manufacturing jobs abroad for entirely
    undefined environmental benefit. We can do better, and we must
    do better.
        Thank you for the opportunity.
        [The prepared statement of Mr. Vassey follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you so much.
        So, we are now going to be, each of us, having 5 minutes
    each to question. And we will go with the early bird rule.
        I would like to start off, Mr. Klesse, with you, because
    you said something very strongly, and I know you feel it, and
    that is American security is threatened by this legislation, by
    the Kerry-Boxer legislation. Those are your words.
        I would just like to say the opposite is true. And I am
    going to put into the record, to go along with your statement,
    the Center for Naval Analysis. They did a paper called National
    Security and the Threat of Climate Change. And some of the
    people on there are General Gordon Sullivan, Admiral Frank
    Bauman, Lieutenant General Lawrence Farrell, and they are from
    every area of our military, Anthony Zinni. So, I am just going
    to say I am putting three pages into the record.
        One statement here is projected climate change poses a
    serious threat to America's national security. The other is
    climate change acts as a threat multiplier for instability in
    some of the most volatile regions of the world. And another is
    the U.S. should commit to a stronger national and international
    role to help stabilize climate change at levels that will avoid
    significant disruption to global security and stability.
        So, I just wanted to put this into the record because one
    of the reasons that we have so much strong support from these
    groups of military people, and also we have seen reports from
    the CIA, and I am going back to Republican Administrations, is
    because of the threat if we do nothing.
        And another point I want to counter, because you are very
    clear on what you are saying, is that you worry about the jobs
    in California, and of course, Senator Feinstein and I we are
    very worried. As we look at the studies of job creation, I
    think that Ms. Gordon spoke to this, Mr. Foster and Mr. Brehm,
    the one area of growth that we have seen, even with this
    horrible recession which, as you know, has put out of work so
    many people basically starting with the housing sector and the
    lack of construction, has been clean energy jobs.
        And we have seen, you know, 400 new solar businesses spring
    up. We have seen 125,000 new jobs. We have seen this, the
    percentages are there already, even without this legislation.
        So, I have not yet seen a study that shows that we are not
    going to be dependent on domestic oil. Our goal is to stop
    sending $1 billion out of the country for foreign oil, which we
    get from countries who do not like us, and keep the $1 billion
    here.
        [The referenced paper follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               Senator Boxer. So, Mr. Klesse, I just would like to ask
    you, do you see any truth in what I have just stated, or are we
    so many miles apart here?
        Mr. Klesse. Thank you, Chairman. Chairwoman. No. First off,
    we are not against working on the climate change issue.
        Senator Boxer. Good.
        Mr. Klesse. I stated that. The military is talking about
    the climate change. I was speaking about fuels and the sourcing
    of fuels. We do import crude oil today, and we also import some
    products. The domestic refining industry, though, the jobs are
    here in the United States. The fuels are generated here in the
    United States from crude oil that comes from all over the
    world.
        Senator Boxer. Right.
        Mr. Klesse. If we want more crude oil, which is a whole
    different subject, and we are not in that business, so it is
    very easy for me to speak about it, we should let the industry
    drill, and we should figure out how to hold them accountable.
    And as I said, we are not in that business.
        Senator Boxer. I understand.
        Mr. Klesse. But I was talking about fuels. And if you--the
    actions that are being taken will adversely affect the domestic
    refining industry. It will cause jobs to leave. Those fuels
    will have to be sourced elsewhere.
        Senator Boxer. Thank you.
        Mr. Klesse. No, green jobs, just, if I can, we are
    supportive of green jobs. We are not against green jobs.
        Senator Boxer. Good.
        Mr. Klesse. I told you we have a wind farm. So, we are not
    again those.
        Senator Boxer. Good. Well, I am glad we have some areas
    where we can----
        Mr. Klesse. We have a lot of areas of agreement.
        Senator Boxer. Good. I am very glad. I want you to know,
    just in the bill, because it may, and I want to share this with
    you afterwards because my time is expiring here, I want you to
    see what we have tried to do to lessen the blow on the
    refineries, because we do have a lot of allowances going in
    that direction. But I will show you after this is over, if
    you----
        Senator Klesse. If I could just comment on----
        Senator Boxer. I must----
        Mr. Klesse. In your State of California, at 2 percent
    allocation, Valero will have to buy, just for California, $850
    billion of carbon credits in one form of another, and that is
    adjusted for the 2 percent.
        Senator Boxer. Well, let me again reiterate. What we are
    doing in our bill is we are trying to ease the burden on the
    smaller refiners, and we have a study here we will put in the
    record at the way we are easing the burden on oil. So, we will
    talk to you about it. We will take a look at it.
        And because of the extended answer, I must ask one other
    question to Mr. Brehm. In your testimony, you discussed the
    potential for growth of the U.S. solar industry. Can you
    describe the types of jobs that the cap on carbon in this bill
    and the additional investment in renewable energy will create?
    The types of jobs.
        Mr. Brehm. As you know from my testimony, we are
    particularly supportive, and for our company in particular, of
    U.S. manufacturing jobs. We think those are actually the
    highest valued, most important jobs because that is where the
    U.S. has fallen behind in recent years. So, primarily
    manufacturing. But also, obviously, installer jobs, development
    jobs, project jobs, the operating jobs of solar facilities so
    really quite a plethora of across the spectrum jobs and real
    job generators.
        Senator Boxer. Thank you.
        Senator Inhofe.
        Senator Inhofe. Thank you, Madam Chairman.
        Mr. Klesse, you just stated, the very last thing you
    stated, in the State of California you would be forced, under
    these provisions, to buy $850 billion what of allowances?
        Mr. Klesse. Assuming that carbon sells for $20 a ton----
        Senator Inhofe. OK.
        Mr. Klesse. We would be obligated to buy $850 billion a
    year----
        Senator Inhofe. Just in California?
        Mr. Klesse. Just in California.
        Senator Inhofe. Who is going to ultimately pay that?
        Mr. Klesse. Obviously, the refining business is a very low
    margin business. I know many people do not believe that. But it
    is. Valero, for instance, in 2006 made as much money as it had
    made in 25 years before that in the golden age of refining. So
    we will pass that cost through.
        Senator Inhofe. Exactly. So the people of California are
    going to be paying the $850 billion that you have to pay.
        Mr. Klesse. And they will see the price of fuels go up
    dramatically.
        Senator Inhofe. Yes. OK.
        Mr. Klesse, you did not, you alluded to, but did not have
    time in your opening statement, to talk about all of these
    organizations in terms of jobs. This is a job panel. We are
    going to have the National Security Panel in a few minutes. But
    this is--the CVO has testified to Congress that this, cap and
    trade, this type of arrangement, would cost a lot of jobs. EPA,
    CBO, EIA, CRA, the Heritage Foundation, all concluded that the
    bill would cause job loss.
        For example, EIA predicts cap and trade would cost some 2.3
    million jobs or 800,000 manufacturing jobs by 2030. Do you
    agree with that figure?
        Mr. Klesse. I agree that there will be a significant loss
    of jobs.
        Senator Inhofe. Mr. Vassey.
        Mr. Klesse. And I would also add that our people in
    Paulsboro, New Jersey, where we have a refinery, the building
    trade union came out yesterday and said very clearly they have
    no expectation of making solar panels in New Jersey.
        Senator Inhofe. OK. Mr. Vassey, you commented on the United
    States relative to Japan and Western Europe. I did not quite
    get that in terms of emissions.
        Mr. Vassey. What our basic suggestion is is that you may be
    looking at the metrics a little wrong from the point of view of
    how industry is measured in this. If you look at overall carbon
    emissions of the industrial sector as a percentage of each
    country's overall emissions, the United States has the lowest
    at 11.5. Our major trading partners, which just also happen to
    be those countries trying to push us in this direction, are
    substantially higher----
        Senator Inhofe. Where is China on that?
        Mr. Vassey. China is at 28 percent to our 11.5 percent.
        Senator Inhofe. All right. Now, if we all agree, and I
    think everyone does, in terms of the 2.3 million jobs, then if
    some of those jobs are going over, obviously if we cannot
    produce the energy here, those jobs are going to have to find
    some place where there is energy. Logically, it could be China.
    It is my understanding that China is cranking out currently
    some two coal-fired generating plants a week.
        Now, if that is the case, would it not be reasonable to
    assume that if those jobs go from here, where it is 11.5, to
    China's where it is 28, we could end up with a net increase in
    emissions by having cap and trade only applying to the country
    of the United States?
        Mr. Vassey. That is the principle of leakage, which we are
    trying to point out is that it is pretty obvious that the
    energy intensive industries that are global will have options
    to produce in countries where they are wanted.
        Senator Inhofe. All right. And Mr. Klesse, you talked about
    the petrochemical jobs. Do you have any--you may want to do
    this for the record--any specific details in terms of the jobs
    that we have already lost? We have information from the NAM and
    others, but do you have any concerning your specific situation?
        Mr. Klesse. Well, I can comment on Valero. We have reduced
    personnel in Delaware City. This reflects not only the current
    economics in the economy, but clearly with this legislation, we
    will have to reduce and shut down other units. We also have an
    effort to reduce our costs in Paulsboro, New Jersey, and across
    our system.
        We have shut down units in Aruba, which is outside of the
    United States but does supply the United States with feed
    stocks. We have idled that refinery. And one of our competitors
    has idled a refinery in New Jersey.
        Senator Inhofe. All right. Well, let us get for the record
    specific numbers of people in jobs so we can plug that into the
    information, the testimony that we have from all of these
    groups that are already mentioned.
        Let me make just one--my time has expired--just make one
    comment about what I think is going to happen.
        When we had the bill, the Markey bill, the Markey-Waxman
    bill, it passed the House by 219, a bare majority. Some of us
    are old enough to remember, back in 1993 and 1994 the BTU tax,
    which was a similar thing in terms of energy costs that we
    passed on to the American people as we have been talking about.
    That also passed the House by 219 votes, a bare majority, the
    same majority. And of course, it did not get anywhere in the
    Senate.
        So I certainly hope that you folks can get into as much
    detail as you can in terms of the numbers of jobs,
    manufacturing jobs, Valero jobs, where you think they would go,
    how that would affect our economy, and do that for the record.
        Thank you very much.
        Senator Boxer. Thank you, Senator Inhofe.
        Mr. Klesse. Madam Chair, I need to correct. My people tell
    me I said billions, and it is $850 million a year.
        Senator Boxer. That is a big difference.
        Mr. Klesse. It is only a few zeros.
        [Laughter.]
        Senator Boxer. Well, the reason that is important----
        Mr. Klesse. It is $850 million a year----
        Senator Boxer. Yes. And we think you are going to be able
    to cover that. And we are going to put in the record the
    Stanford study that shows that the profits will be preserved
    for these companies. But we will, this is a Stanford research
    study because of the allowance we are giving out, it is
    entered.
        But I am so happy you corrected the record because my heart
    stopped myself when you said billions because we have, we
    believe, covered the problem.
        Senator Cardin.
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        Senator Cardin. Thank you, Madam Chair. And let me thank
    all of the witnesses for their testimony.
        Let me just urge people to take a look at this entire bill.
    There are significant amounts of allocations that go to help
    the consumers and to help industries in transition, which is
    not reflected in the numbers that we are given. So, I think you
    need to take a look at what this bill does in its entirety.
        And let me talk for a moment about leakage. I heard Senator
    Voinovich, in his opening statement, talk about the concern
    about the provision in the House bill which, by the way, is not
    in the jurisdiction of this committee, so it will be taken up,
    Senator Carper, in the Finance Committee.
        We are concerned about leakage. I think that is an issue we
    need to work together on. I have urged our negotiators in
    Copenhagen to deal with enforcement. And I would hope that we
    would get the support of industry here working with our
    colleagues around the world to say look, we do need an
    enforcement provision in the Copenhagen agreements.
        We need to set reasonable targets in Copenhagen, we need to
    have a mechanism to achieve those targets, we need to deal with
    the financing issues of third world nations, and we need to
    deal with enforcement.
        And we would be far better off if Copenhagen deals with
    enforcement so that there is an international regime that says
    that if a country does not do its obligations internationally,
    such as China or India or any other country, when their
    products enter the international marketplace that there will be
    an assessment on that----
        [Audio gap.]
        We just work together and get that into the Copenhagen
    agreement. I have not heard very much from industry helping us
    in putting the focus where it should be in the negotiations
    that are taking place internationally. And I agree with Senator
    Voinovich that it would be far better than to try to do deal
    with this through the WTO and individual countries acting.
        So, there are answers to these questions. So, let us work
    in a constructive way.
        Mayor Nutter, I agree completely with your point that where
    we are looking at the source, where most of the new jobs are
    going to come in America, are going to come from the new
    technologies, the technologies that were developed here. This
    is going to create jobs in our communities.
        I have already given examples in my own State of Maryland
    with the new technologies for automobiles and trucks in White
    Marsh. I could have used the algae ethanol technology that is
    being advanced by a relatively small company in downtown
    Baltimore that is developing this technology that we hope will
    be able to give us alternative fuels that will not have a
    disruption on our food chain, which is important, I think, for
    our economy.
        And Mr. Brehm, on solar technology, Maryland is a leader on
    solar technology. The number you gave, I think you said a 40
    percent increase in the first 6 months from last year. That is
    an incredible growth rate, and I know it is still a relatively
    small part of the overall mix. But if we can duplicate that
    type of growth in solar production, that could have a dramatic
    impact on meeting our needs and creating jobs here locally.
        What do we need to do in order to duplicate that and make
    sure that continues?
        Mr. Brehm. Well, clearly the policies advocated by, that
    would be put in place by this bill, would set the base for the
    entire renewable energy industry. Because once you get
    certainty on price on carbon, then people start to make the
    long-term commitments, the long-term planning.
        And then, as some of my colleagues have also commented,
    incentives it would put in play, that can be put in play to
    encourage U.S. manufacturing of these technologies, would be
    hugely beneficial. And I happen to be familiar with, of course,
    Senator Brown's impact data. But I believe there are some other
    opportunities out there as well.
        The combination basically, this bill here creates a demand.
    Some other acts that Congress could take on would then create
    the supply.
        Senator Cardin. Let me, I think that is a critical point.
    Predictability is so important for investment. Industry knows
    how to adjust if they know what to expect, and investors will
    deal with that. I agree with Senator Alexander on the point of
    nuclear investors. One of the reasons we have been unable to
    get investors in nuclear energy is because of the uncertainty.
    We have got to change that.
        This bill, I think, in a way does change it. Not in a way.
    It does change it, because it gives a predictable return for
    energy sources that have a friendlier carbon footprint. That is
    going to be good for investors in nuclear energy as it will be
    in solar energy.
        That is what, I think, is the most exciting thing about
    this bill, Madam Chair, is that we unleash the American economy
    with predictability so investors can invest and the creative
    ingenuity can solve this problem and create jobs and keep jobs
    here in America.
        Thank you.
        Senator Boxer. Thank you very much.
        Senator Alexander.
        Senator Alexander. Thank you, Madam Chairman.
        I want to go back to Mr. Klesse for just a minute. You
    mentioned a figure which I think is accurate that refiners in
    America would have to buy about $63 billion of allowances a
    year. Am I accurate about that?
        Mr. Klesse. That is assuming $20----
        Senator Alexander. The $20. But it could be more than that
    over time?
        Mr. Klesse. It could be.
        Senator Alexander. But let us say, conservatively, that it
    is $20. Basically, what you are in the business of is taking
    oil that comes from all around the world, but mostly in the
    United States, is that right, and turning it in, and refining
    it in a way that we can drive it in our cars and trucks?
        Mr. Klesse. We take oil from all over the world and refine
    it. But more oil is imported today than is produced
    domestically.
        Senator Alexander. So, in the scheme of things, the way
    this bill works, you are responsible for the oil, the fuel that
    all of us use. If I drive to work in a car, I do not pay
    anything under this cap and trade bill. You pay it for me, in
    effect, with the allowances that you would buy every year. Is
    that right?
        Mr. Klesse. I would pay for the allowances. We would get
    the allowance, but everything above that we have to assume the
    cost.
        Senator Alexander. Yes, but what you were saying in answer
    to one of the questions was that $63 billion a year basically
    would be passed on to the gasoline taxes and fuel taxes we pay.
    Correct?
        Mr. Klesse. It has to be. This business is very efficient.
    Our total----
        Senator Alexander. Well, let me just ask, have you computed
    how much of an increase in gas, in fuel prices, that would be?
        Mr. Klesse. There are numerous studies out. We have used in
    the middle, the 77 cents which in 2019 is the half way. It
    assumes no international offsets. If you take that number, and
    today we have $2.50 gasoline, so it would be a third. It is a
    30 percent increase.
        Senator Alexander. A 30 percent increase. So that is----
        Mr. Klesse. That is from this regulation----
        Senator Alexander. From $2.50 to $3.30 or $3.40?
        Mr. Klesse. That would be correct in 2019.
        Senator Alexander. Now, we have had testimony from, among
    others, Dr. David Greene of Oakridge Laboratory, which
    basically says that an economy-wide cap and trade is a poor way
    to reduce carbon because it has the effect of raising the
    price, as you just said, 80 cents, but it is constructive but
    insufficient impact on vehicle travel and fuel consumption. In
    other words, that while we bear a lot of pain from the effect
    of an economy-wide cap and trade on our fuel prices, we might
    not change our behavior. Do you know anything about, is that
    true?
        Mr. Klesse. Yes. I understand the questions would be
    clearly does the higher price, in that range, actually change
    consumer habits.
        Senator Alexander. And your experience is?
        Mr. Klesse. Our experience would be in Europe and in Canada
    that it may not.
        Senator Alexander. That it may not. So, we might have the
    situation where fuel, being 30 percent of all of the carbon we
    produce in the United States, we raise the price but do not
    reduce the carbon. So basically, all we have done with this
    bill is raise the price of gasoline and fuel.
        Mr. Klesse. That is correct. It is a tax, but it also
    places this industry at a competitive disadvantage
    internationally. This is a very global business.
        Senator Alexander. Let me ask Ms. Gordon, and to other
    witnesses, many of you have mentioned clean energy or green
    energy. Do you mean by that any form of energy that is carbon-
    free? Do you have a definition for it?
        Ms. Gordon. I think that low carbon technologies is usually
    what we say.
        Senator Alexander. Low carbon or no carbon?
        Ms. Gordon. Yes.
        Senator Alexander. So, would you agree that if we have
    subsidies and incentives or focus that we ought to look at the
    whole wide range of low carbon or no carbon----
        Ms. Gordon. Sure. I think we should look at a range. We
    should look at a range that includes cost competitive
    technologies and measure those the way we measure technology in
    general.
        Senator Alexander. Does anyone on the panel disagree with
    that? As we generally speak of clean or green technologies,
    would you agree that we ought to be equally interested in all
    forms of say, electricity production that would produce no
    carbon or low carbon electricity. Anyone want to comment on
    that?
        Mr. Brehm. I am speaking for myself and my company. I
    actually do not know the Solar Energy Industries Association
    position on nuclear, but we are located actually in eastern
    Washington, where Hanford is, Hanford Nuclear Site is, Pacific
    Northwest National Lab, and we are actually very pro-nuclear.
    We believe that nuclear and solar, in particular, are very
    complementary.
        Senator Alexander. That winds up, my time is about up, but
    I would like to mention is, according to the Department of
    Energy, the direct jobs produced by 100 new nuclear reactors
    would be 250,000. That would be three times as much as building
    180,000 wind turbines. Seventy percent of our carbon-free
    electricity is nuclear, and as I listened to the whole range of
    panelists, no one mentioned nuclear power, which we invented,
    which produces 70 percent of our carbon-free electricity, which
    the rest of the world is using, and we have not started a new
    nuclear plant in 30 years.
        So my plea is, and Senator Cardin mentioned that, he has
    been a consistent supporter of nuclear power, so if have got a
    form of energy that will solve our problem, and I will
    conclude, Madam Chairman, with this comment. My view is that if
    we built 100 nuclear plants, if we electrify half the cars and
    trucks, and if we had mini-Manhattan Projects in energy R&D, we
    could reach the Kyoto goals in 2030.
        We have got 40 Republican Senators who support what I just
    said and many Democrats. I do not know why we do not do it.
        Mr. Brehm. May I respond? As far as I am concerned you may.
    Is this appropriate, Madam Chair?
        Senator Boxer. Well, just if you could make it brief
    because we are over the time. Go ahead.
        Mr. Brehm. Again, as I pointed out, we are certainly very
    pro-nuclear. But to answer your point earlier, where you talked
    about France, France also views nuclear and solar as being very
    complementary. In spite of the fact that France gets 70 percent
    of their power from nuclear energy, they just implemented one
    of the strongest pro-solar feed in tariffs in the world. So,
    they are very complementary technologies.
        Senator Alexander. I agree.
        Senator Boxer. OK.
        Senator Specter.
        Senator Specter. Thank you, Madam Chairwoman.
        Mayor Nutter, it is quite a compliment to the city of
    Philadelphia that you have been selected to present the
    testimony for the United States Conference of Mayors. The
    testimony that you have given is a win-win situation here on
    green jobs and energy saving.
        Mr. Nutter. Yes.
        Senator Specter. I note that you have allocated more than
    $33 million to retrofitting and job training for young people,
    $14.1 from the formula allocation from the stimulus package and
    $19 million, $11 million from the Community Development Block
    Grants. But the city of Philadelphia has put up $8 million on
    its own, and it provides some 800 trainees with as little as 2
    weeks' training on weatherizing and retrofitting.
        What kind of an impact do you think that will make on other
    considerations like crime control in the city of Philadelphia?
    So that, by putting these people to work, it obviously is a
    real problem, so you attack the issue in a number of
    directions, jobs, energy efficiency and crime control.
        Mr. Nutter. Senator Specter, it goes without saying that
    for the city of Philadelphia specifically, which presently,
    unfortunately, has an unemployment rate of 10.7 percent, and
    many economists, local economists, anticipate that will grow,
    putting people to work has to be our No. 1 priority.
        And I would only suggest here that the best anti-crime
    program is a job, that when people are working, they are much
    less likely to be involved in negative or illegal activities.
    That is why we have focused so much of our dollars in the green
    economy area.
        Just this past Monday, I was at a press conference with
    Maxwell Education Group. They received a $150,000 grant from
    Workforce Investment, economic recovery dollars. Twenty-four
    men graduated from their training program. That particular
    program is 8 weeks. Monday was their last day of training.
    Every one of them will walk into a job this week. Five of those
    24 individuals are ex-offenders, six of them are military
    veterans most having just recently served in our international
    war efforts.
        These programs work, and they put people to work. All 24 of
    those men who graduated on Monday are dislocated workers. None
    of them were currently employed. All of them will be employed
    by the end of this week.
        Senator Specter. The important factor, Mayor Nutter, is
    that the jobs you are giving them will have application in the
    private sector as well.
        Mr. Nutter. Well, Senator, all 24 of them will be working
    in private sector jobs. None of them will be working for me or
    for the city of Philadelphia. The industry is demanding so many
    workers that there is capacity out there for these individuals.
    They will all be working in the private sector.
        These are not make work jobs. These are not what anyone
    might think of public service jobs. These are private sector
    jobs paying a good wage. These individuals will be able to
    sustain themselves.
        And the opportunity for entrepreneurship in this particular
    industry, I believe, is limitless. People will go from training
    to entry level jobs and eventually many of those individuals
    will start companies of their own. And for us, of course,
    everyone working, paying taxes is what will help turn America's
    cities around.
        Senator Specter. I turn now to Mr. David Foster, another
    Pennsylvanian, a representative of the BlueGreen Alliance
    launched by the United Steelworkers and also by the Sierra Club
    in 2006.
        I note at the outset that the United Steelworkers, which is
    very much concerned about jobs and very much concerned about
    foreign imports and what China and India are doing, has
    endorsed the House bill.
        I was particularly interested in the part of your testimony
    where you specified that the studies which you have conducted
    on renewable electricity standards show that there is the
    potential for creating some 850,000 manufacturing jobs, and you
    specified quite a number of States. And when it turns to
    Pennsylvania, 42,000 new jobs will be created.
        There have been a lot of comments on the committee about
    job loss and about impact on the traditional American
    industries. And there is no industry more zealous of its
    standing than the Steelworkers. Leo Girard, the president,
    scoffs at the idea of protectionism and says I want to talk
    about law enforcement. The Chinese are violating our trade laws
    under WTO.
        My question to you is, explain the confidence level of the
    United Steelworkers in supporting this kind of legislation when
    we have heard so many objections raised by some members of this
    committee on the jobs issue.
        Mr. Foster. Thank you very much, Madam Chairman.
        Senator Specter, I think you have pointed at a very
    critical issue, and it underscores the fact that, while there
    is a problem with carbon leakage, as we think about climate
    change solutions, there is a simple and elegant solution. And
    we achieved that in the work we did with the House committee in
    a three-pronged approach that said energy intensive industries
    need assistance through allowance allocations during the early
    years of the regime.
        Then we need to have a push to have international sectoral
    agreements, and we need to frame that up and urge our
    negotiators and the world's negotiators to take part in trying
    to solve these industry by industry in the energy intensive
    trade exposed industries. And if that does not work, then we
    need to have a date certain at which border adjustments would
    back stop that effort.
        And if we do that, we are creating a system that allows us
    to go forward with great confidence that American industrial
    workers who are among the cleanest of producers of products in
    the global economy, that has been stated and I wholeheartedly
    agree with that, that those workers can participate in the
    global economy, produce the products that we need to build a
    clean energy infrastructure in this country, and do so with the
    assurance that their jobs are going to continue on into the
    future.
        Senator Specter. Thank you very much.
        Thank you, Madam Chairwoman.
        Senator Boxer. Thank you, Senator Specter.
        Senator Barrasso.
        Senator Barrasso. Thank you very much, Madam Chairman.
        I would like to continue a little bit talking about some of
    the impacts on the economy, and Mr. Klesse, if I could, you
    know, I appreciate your testimony today. It is good to hear
    from folks really on the ground who will feel the impact of
    this cap-and-tax scheme first hand.
        Green jobs are being touted as our economic salvation, but
    I believe we need all the jobs, green jobs as well as the red,
    white and blue jobs that power our country. I do not think we
    ought to be here in this room picking winners and losers when
    it comes to American jobs.
        I have concerns about the impact that this will have, the
    bill will have, on electricity consumers in the Rocky Mountain
    West. And in Wyoming, coal provides roughly 95 percent of our
    electricity.
        I know Senator Inhofe already asked about mandates in this
    bill and what they were going to do to your power production
    costs. I believe you said they were going to be increased. Then
    he asked what was going to happen as a result of that in terms
    of, you know, the costs, would they be passed on directly to
    consumers, your customers, and you said yes, they would.
        So, what do you see happening specifically in the Rocky
    Mountain West, places that are more reliant on coal? Are they
    going to be disadvantaged by this bill?
        Mr. Klesse. Well, I am in the oil business, the refining
    business. So coal is much harder for me to speak about.
    However, we agree on energy generation, power, that it should
    come from nuclear, coal, natural gas, geothermal where it can,
    solar if it is appropriate. But we should not be penalizing
    these core businesses.
        When I speak, we have four USW unions, different locals, at
    our plant. When I speak to the rank and file people, they
    understand this issue very quickly. And even though the
    general, Leo Girard, has his coalition, very clearly the rank
    and file people are very concerned.
        The refining industry is under stress. We have CAFE
    standards coming in, which is lowering the carbon footprint. We
    also have the RFS and those are, in fact, reducing carbon
    emissions. But they also then are affecting the domestic
    refining business and this type of legislation just compounds
    it.
        But on coal, it is very difficult for me to give----
        Senator Barrasso. And then, the cost to the consumer as the
    result of all of this?
        Mr. Klesse. It has to go up. It is a tax, the tax will be
    passed through. I was going to say earlier, our total cash
    operating costs in refining, cash operating, are 10 cents a
    gallon. That does not include profit or depreciation. So this
    is a very low cost, very pennies business.
        Senator Barrasso. And Mr. Vassey, if I could, someone said
    that the new regulations and Federal spending to mitigate these
    greenhouse gas emissions are going to create new job
    opportunities for some sectors of the economy. But those jobs,
    I believe, are going to come at the expense of activity
    elsewhere in the economy.
        So, in terms of your State of Virginia, what do you see
    happening, kind of 10 years from now, in terms of manufacturing
    and the expenses of that and the costs if this bill becomes
    law?
        Mr. Vassey. What we see, as we testified earlier, the
    companies that are in the global commodities business, those
    that are in paper, that is about 15,000 employees, Senator
    Inhofe, those that are in chemical and plastics, that is
    another 40,000. Those are the companies that are going to be in
    jeopardy because they will have options elsewhere.
        But also, they have very limited margins, just like
    refining, that they have to work with, and any fluctuation in
    their supply chain or in their regulatory burden they cannot
    pass through. Customers will not pay it.
        The other things that I will share with you, we see decline
    in that, which is not good. We do not see immediate replacement
    with this provision. There needs to be some address to that.
    The other thing in my testimony, I said that just the threat of
    this coming will have immediate consequences.
        And to your question about coal, we had a meeting this week
    with some of the coal producers, and we have now learned, which
    I would encourage the committee to review, many of the
    independent coal producers in Appalachia are being brought out
    by Eastern European companies for the express purpose that they
    are looking down the line and trying to preserve their family,
    their particular investment.
        But the Eastern Europeans, as we understand it, see this as
    an opportunity that the United States is going to cap and trade
    their economy, but they will have access to raw materials so
    they can be the steel producer of the world in Eastern Europe.
    I think that is something worth knowing, that acquisition of
    American companies.
        Senator Barrasso. When you used the phrase opportunities
    elsewhere, you were not talking about cross-State border, you
    were talking about jobs moving, leaving the country and going
    overseas. Is that a correct assessment of your evaluation?
        Mr. Vassey. We do not see these companies as non-
    competitive. That is not the issue. The issue is that their
    margins and their pricing for consumer products they simply
    cannot pass along. So, they will find a place. They will find a
    way, they always have, to produce and sell in this economy.
        Senator Barrasso. Thank you.
        Thank you, Madam Chairman.
        Senator Boxer. Senator Whitehouse.
        Senator Whitehouse. Thank you, Madam Chair.
        Mr. Vassey, I was delighted by the focus of your testimony
    on the problem of leakage and the promise that I hope that
    brings of the industry representatives paying more attention to
    the problem of enforcement.
        I have detected a decidedly mixed message from industry on
    the question of trade enforcement because it has been so
    advantageous for CEOs and management to offshore jobs, find
    lower wage rates overseas, and it has not been in their best
    interests to push very hard at the fact that those overseas
    jobs often violate environmental laws and treaty requirements,
    labor laws and treaty requirements, workplace safety laws and
    treaty requirements.
        So, I see that David Foster is here. I know that the cost
    of the offshoring hits the labor community particularly hard as
    jobs gets picked out of America and moved by management to
    foreign countries to seek that labor advantage and the parallel
    advantages of that environmental law, bad labor law, bad
    workplace safety conditions.
        And so, I am hoping that what we see here is the beginning
    of an industry-labor coalition that will take what had been our
    policy of conspicuous non-enforcement and change that and also
    work very hard to assure, as both of you wish to, to assure
    that this bill, when it goes forth, particularly including the
    package that comes out of the Finance Committee that relates to
    the border adjustments, is really tough.
        And if we have to tangle with the WTO a little bit on this
    subject, I am perfectly happy to do that. But this is, I just
    wanted to make that point. Both of you are here. It is not
    often that industry and labor are in such apparent agreement,
    and I wanted to take a moment to highlight that, and I will
    give you a chance to make a brief comment on that if there is
    time.
        But I wanted to ask Dan Reicher something, which is that we
    have talked a lot about the smart grid, and smart grid has
    become jargon to a lot of us who are very familiar with these
    issues.
        Google is a very forward looking company. You have a very
    forward looking position in that company. I would like to ask
    you to take a few minutes to try to make real for people who
    may be watching some of the kinds of changes that might happen
    in the middle class American home, that people might see as the
    consequences of smart grid and how that will work itself out in
    the lives of consumers.
        And the core area of that question is what kind of products
    might we be building here in America to make those new
    services, technologies, appliances possible?
        Mr. Reicher. Thank you, Senator Whitehouse. First of all,
    the smart grid seems to mean a million different things to a
    million different people. But I think, when all is said and
    done, what it does is it gives people a lot better information
    about their own energy use, whether it is in their home, in
    their factory, in their business.
        And I think where energy technology and information
    technology, ET meets IT as we put it, where that intersection
    is, we can do so much, I think, to deal with some of the
    problems we are talking about today, to lower the costs of
    energy use, to green up energy supply. There is so much we can
    do.
        And at Google we are very, very excited about it. We have
    launched a product, we call it Google Power Meter, we give it
    away for free. It is a piece of software, and it lets people
    know in near real time how much electricity they are using in
    their home. You can go on your smart phone, you can go on your
    laptop. I have provided some handouts today that will show you
    what you get. But when you go on your laptop, you go to the
    home page where you might show your stocks and your weather and
    the sports scores, and you will also see how much electricity
    you are using in real time.
        And it is quite extraordinary what people discover. One of
    my colleagues found out that he was paying for the washers and
    dryers in his apartment building. Another discovered what that
    second refrigerator in the garage with the one six-pack of beer
    in it was really costing him. Another woman discovered that the
    pump in her pool had been operating non-stop for years.
        The electric motor in my furnace, I did not realize that it
    was 40 years old, and every time it popped on I was hitting
    1,000 watts. The furnace person said do not bother replacing
    your furnace, it is not worth it. Replace that little electric
    motor and you are going to dramatically cut your electricity
    use.
        So it is quite extraordinary. And when we get to the
    biggest appliance in the house, which is the plug-in vehicle
    which is on its way, what we are going to be able to do with
    the integration of that into the grid is quite extraordinary.
        What we do not want to do is be plugging in millions of
    these cars of a hot day in the summertime at the same moment
    and taking the grid down. What a smart grid will allow us to do
    is figure out when those cars should best charge up over the
    evening into the next morning. They will allow us to store that
    intermittent electricity that comes from solar and wind that is
    problematic for various reasons.
        So, Senator, I think this whole area of the smart grid is
    so exciting. And that is why it is companies like Google and
    Microsoft and on and on who are really seeing the opportunity
    here. So, have at it. I think the President yesterday
    announcing $5 billion in spending on advanced meters is really
    going to lay a good foundation, and I think this bill could do
    an awful lot more.
        Senator Whitehouse. Thank you, Chairman.
        Senator Boxer. Thank you, Senator.
        Let us see. We are going to Senator Udall, and next Senator
    Carper and then Senator Merkley, unless our other colleagues
    come back. Go ahead.
        Senator Udall. Thank you, Madam Chair.
        Mr. Reicher, a little over 10 years ago, Google, as a
    company, was based out of a garage with only a handful of
    employees. Last year it had annual revenue of over $21 billion,
    triple the amount in just 3 years.
        Why would a company like Google, which has a successful
    business in advertising, in search engines and information
    technology, be looking at clean technology and energy
    efficiency as a new business opportunity? And what kinds of
    energy projects has Google already done in this area, and what
    kind of results does Google hope to achieve as a company and as
    a part of society?
        Mr. Reicher. Thank you, Senator Udall.
        First of all, you know, Google, those instantaneous
    searches that everyone has come to rely on in their lives, they
    do take some electricity. So, we recognize that. We have done a
    lot to green up and reduce the energy use in our data centers
    all over the country. So that was Google's entry point into
    this.
        But I have to say, more importantly, this intersection I
    said between energy technology and information technology, we
    are quite convinced is really, really promising to help us deal
    with the big challenge we have as a country, and frankly, as a
    way to make some money for companies of all sorts.
        So, as I said, we have launched this product called Google
    Power Meter. We have also built a fleet of plug-in vehicles,
    and we have been testing them for the last few years. And you
    know what? They actually work. They plug into a system at
    Google that, on a sunny day, is powered by the sun. Our
    employees use them in their day-to-day business, driving around
    Northern California. And they really have shown us that you can
    do so much with these plug-in electric vehicles.
        So, we are convinced that this whole area of the grid and
    the net coming together holds such great promise for our
    country and for the world, and frankly, I think this bill
    provides some allowances for the smart grid, and we are very
    appreciative of that.
        We think the R&D need is great, and we have to continue to
    invest in these kinds of technologies to move them forward. But
    all in all, it is a great package, and I think it is the good
    news in this whole story. Thanks.
        Senator Udall. To follow up a little on that, you have
    spent time in the energy sector and in the Department of
    Energy, and now you are really in this entrepreneurship venue.
    And so I wanted to ask you, with that background, when we hear
    Senators say, and the naysayers many of them, that we cannot
    achieve these goals, and we cannot get the reduction in terms
    of 20 percent by 2020, do you believe that American creativity
    and ingenuity and innovation are going to, when we put the
    signal in the market, the price signal out there, are we going
    to able to achieve many of these things earlier than we think?
        Mr. Reicher. Absolutely. And it is curious, Senator, that
    this whole conversation this morning has really avoided what is
    really, I think, the low hanging fruit, which is energy
    efficiency. The low hanging fruit. And you know what? This is
    low hanging fruit that grows back. That old incandescent light
    bulb you replaced with the compact fluorescent you are going to
    replace again with an LED bulb.
        So, there is great ability, here and now, to get the kind
    of savings that we need to deal with our climate emissions
    problem. So, I think we overstate the costs of meeting this
    important challenge, and I think we understate the opportunity
    that could come in growing some major businesses in this
    country.
        So, energy efficiency is the place to start. But going
    beyond that, as you say, what is the innovation pipeline
    producing? It is producing extraordinary opportunities. We saw
    the kind of companies that just a couple of days ago the Energy
    Department announced it was investing in all over the country
    with a whole range of technologies that promise vast savings in
    terms of carbon emissions and energy savings.
        I will highlight, and I think it is something that is very
    important to your State, is the whole opportunity with advanced
    geothermal. Not too many feet below the surface of the earth is
    just a vast, vast energy and increasingly we know how to drill
    down there at low cost, we know how to extract it.
        It is a great complement for the oil and gas industry
    because they know how to get to those depths. So, let us put
    these industries together. Let us put geothermal and oil and
    gas together and really take advantage of what is a highly
    attractive energy source and one, frankly, that is base load.
    It is 24 hours a day, 365 days a year, and increasingly it is
    on a very impressive price trajectory.
        Senator Udall. Thank you. Thank you to all of our
    panelists. And thank you, Madam Chairman.
        Senator Boxer. Thank you.
        Senator Voinovich.
        Senator Voinovich. Thank you, Madam Chairman.
        I have heard a lot of--I am sorry I did not hear you, Mr.
    Vassey. But Mr. Vassey, have you ever talked to Mr. Foster?
        Mr. Vassey. No, sir.
        Senator Voinovich. Mr. Foster, some of the things that you
    talked about in your testimony, your concern about
    manufacturing and the allowances and how it works, and you have
    got some recommendations on how we can improve this piece of
    legislation. I would assume your concern that the allowances in
    the bill are not enough to take care of manufacturing, that the
    cost of energy will be passed on to your members, and
    therefore, it is going to cost them more to do business.
        What I am concerned about here, the big picture, is this.
    The allegation is that we need cap and trade and set limits on
    emission so that we have the incentive to get people to do
    things that they ordinarily might not want to do.
        From what I have heard here, Mr. Brehm, you have gone
    forward and done some very unique things working with a couple
    of businesses in Ohio. The question I have is, did you take
    advantage of any of the programs that are available in the
    Department of Energy for you do to this, or did you do this on
    your own?
        Mr. Brehm. Senator, a combination. We are a recipient of a
    number of grants from the DOE, from the department that Dan
    used to run, Energy Efficiency and Renewable Energy. In fact,
    we are working on some of those R&D projects with companies in
    Ohio, and we are working on some of the production and the
    manufacturing with companies in Ohio which were more done with
    private funds. But a combination.
        Senator Voinovich. The concept of the bill is that we
    charge for allowances, that raises money, and there is more
    money for incentives. The question I have got is that if we
    concentrated on the incentive part of this, would we not be far
    better off than to create a gigantic new process where we give
    out allowances, or we pay for allowances and so forth, and
    really got at the real issue here, and the issue is technology.
        And everybody analogizes, I do not know if you are familiar
    with this, with the Clean Air Act which had the acid rain
    provisions, and I was familiar with that as Governor at Ohio.
    At the time we put that into effect, there were 15 years of
    work to deal with NOx-Ox, mercury, we
    were not talking about greenhouse gases. And we were able to
    move forward with it.
        The problem, as I see it big picture-wise, is we do not
    have the technology in many of these areas. Mr. Klesse, for
    example, you get 2 percent of the allowances, you have got 44
    percent of the problem. How do you reconcile some of these
    things? If he gets 2 percent of the allowances, they raise the
    cost of gasoline, that is passed on to the people in Ohio, and
    they provide the allowances, so they provide the money for the
    incentives for you to do what you want to do. And it just seems
    like we are just kind of going around in a circle.
        Mr. Klesse, I will just ask you this. What is your solution
    to this? I understand that refineries, you guys are going to
    stop refining oil here, you are going to get it refined
    overseas because of the cost. Even if you do that, you are
    still going to pass a big cost on to your customers. What is
    the solution to this? How do you deal with this?
        Mr. Klesse. Well, we see this program as very unfair to
    this industry. We already have CAFE standards coming in, the
    RFS, renewable fuel standards, in, so we see these things
    happening. We also are supportive. I agree with the comments on
    efficiency. There is tremendous opportunity in efficiency. When
    I started working as an engineer, we had an investment tax
    credit. We could have a lot of positive initiatives here to
    encourage industries, smart grids, all of those, to make
    investments to improve efficiencies.
        But this bill is inherently unfair, penalizes the refining
    and oil business directly, and is legislatively picking winners
    and losers.
        Senator Voinovich. I would just like to comment, too, that
    I introduced a bill with Senator Dorgan called the National
    Energy Security Act. And one of the biggest things we talked
    about was the grid. And Mr. Reicher, you talked about the grid.
    Now, we are putting $3.5 billion into the grid. Most people say
    if we really want to do the grid, we are probably going to have
    to spend $60 billion to do it the right way.
        I guess that, from my perspective, maybe our priorities are
    not in line. And Mr. Foster, I want to call you afterwards and
    talk to you about what your group is concerned about. Because I
    think there are some things here that could be reconciled,
    where we could come up with something that would move us
    forward but not get us engaged in a large system where we are
    collecting allowances, paying for allowances, giving allowances
    away and end up with a set up that raises, increases everyone's
    costs, and does very little to really reduce the emissions.
        Mr. Reicher. Senator, if I could very quickly. You said----
        Senator Boxer. Make sure to answer quickly because we are
    running out of time.
        Mr. Reicher. You said technology is the issue. Technology
    is part of the issue. But until we put a significant price on
    carbon emissions that really reflects the true impacts they are
    having on the global climate, we are not going to drive the
    kind of change that we need.
        It needs to be a combination of technology and policy if we
    are going to see the sort of changes we need that are going to
    be both good for the economy and good for the environment. And
    that is what is behind this bill. And either EPA is going to do
    it, or the Congress is going to do it, one way or the other.
        Senator Boxer. Thank you very much, Mr. Reicher. And thank
    you, Senator.
        Senator Udall. I mean, Senator Carper. I almost gave you a
    second round.
        Senator Carper.
        Senator Carper. One of the Toms. One of the Toms gets to go
    next.
        Let me say, Madam Chair, it is a good panel. And some of
    these folks I have the privilege of knowing. It is great to see
    the Mayor of Philadelphia, our neighbor to the north. I
    understand there is a baseball team in Philadelphia. You are
    playing ball there very soon, we hope. Good luck. A lot of
    Phillies fans down in Delaware, as you know.
        Mr. Klesse, has anyone ever mispronounced your name?
        Mr. Klesse. Yes.
        Senator Carper. Today? In the last hour, probably. Thanks
    for bearing with us. It is so nice to have you here. Valero is
    one of any number of companies that are going to refinery
    operations in Delaware City.
        I came out of the Navy in 1973. I had been a naval flight
    officer. And I moved from California to Delaware and got a
    Masters in Business Administration. I took a course in my first
    semester, and I had to do a research project on a company that
    had problems, really, with the law. And Getty, at the time,
    owned the refinery in Delaware City and they had long standing
    problems with Clean Air Act compliance.
        And I ended up, literally, in my first semester at
    Delaware, in my first months at the University of Delaware,
    doing a fair amount of research on the refinery there. There
    have been a lot of owners since that time. We think Valero
    actually is one of the better operators and the more
    responsible operators with more of an environmental conscience
    than some of the others. So, we appreciate that.
        And I appreciate what you said earlier about--you have, I
    think you said, a 50-megawatt windmill operation at your
    headquarters, and I think you said you are also into ethanol,
    and we would welcome that kind of diversification. I hope your
    shareholders do as well.
        I almost fell out of my seat, though, and I think my
    colleagues did as well when, I think you said to Senator Boxer,
    that it looked like you would be spending for your operations,
    your refinery operations in California, $850 billion in a year.
        Corrected, you said $850 million in California in a year.
    And I have looked at your testimony, and I am up to page 3, and
    my staff here behind us has been trying to help me figure new
    on some numbers, and I just want make sure we got this correct.
        I will just quote your testimony. It says industry-wide, we
    estimate the compliance costs for process emissions with carbon
    at $20 a ton to be $4.1 billion a year. And that is, I think,
    nationwide, I believe in a year, for all refineries. And your
    portion of that would be, I suppose, less than maybe one-
    quarter. But in any event, I presume that is what we are
    talking about industry-wide, $4.1 billion a year. You estimate
    the costs of consumer emissions to be about $63 billion a year,
    for a total cost to domestic refiners, and potentially to
    consumers, of more than $67 billion a year.
        That is a lot of money. I think we all agree with that. And
    I ask myself, well, figure out for us, if you can, how much
    gasoline and how much diesel fuel do we use when we drive our
    cars and trucks and they came back and said about, today, about
    450 billion gallons of gas and diesel refined and consumed
    annually.
        If I do my math right, and I divide 450 billion gallons
    into $67 billion, it works out to, I am told, somewhere between
    13 and 15 cents per gallon. I think that is a correct number.
    And I am told this is by 2020.
        When I heard this $850 billion number, I was real price
    sticker shocked. When I think of 13 to 15 cents per gallon by
    2020, I just want to say we can remember back only a year or so
    ago when we saw such price volatility that the price of
    gasoline in my State, and I think all of the States, probably
    went up by 13 cents per gallon in a month, maybe in some places
    in a week. And we are talking about an increase of 13 to 15
    cents over the next decade, by 2020.
        Are my assumptions reasonably correct? Is 13 to 15 cents
    per gallon pretty much on target?
        Mr. Klesse. If you use $20 per ton, and nothing else
    changes, then I would say your numbers are exact. But that is
    not what we expect to happen at all. Nor do any of these
    reports that are published, including the DLE. We have a wide
    range of numbers that go all the way up to $1.50 by 2019 or
    2020. It depends on what you assume for the cost of carbon. In
    my number, it is $87 a ton.
        Senator Carper. Let me just ask the Chair a question, if I
    could.
        Senator Boxer. Yes.
        Senator Carper. I have been told by others that the costs
    of carbon per ton will probably, initially, be less than $20
    and eventually it is going to rise. Do we have a cap?
        Senator Boxer. We do. We have a soft collar, as you
    probably know.
        Senator Carper. What is that? What does that mean, Madam
    Chair?
        Senator Boxer. Well, it means that the bottom is $11 and
    the top is $28, and if it gets to $28, we have an allowance
    reserve fund where those allowances are sent out so we that we
    will not see prices over $28 because absolutely, and this is
    something we did, Senator Carper, if I can just say, this is
    something we did because industry was concerned about carbon
    going up too high, and also others were concerned about market
    manipulation.
        By the way, I am going to add time on to you.
        We also have the ability to go for offsets as well. So, I
    think, given all of that, I feel very good with that 13 cents
    that you quoted.
        Could you just put Senator Carper back to a minute please?
        Mr. Klesse. Can I----
        Senator Carper. Let me just finish one more point because
    my time is limited. And I would welcome the opportunity to
    continue the conversation beyond this hearing.
        But just doing the math, back of the envelope math, if we
    say 15 cents per gallon with carbon at $20 a ton, if we go up
    to $28 a ton, that would raise the price to roughly 20 cents
    per gallon. Does that sound like even wildly in the range of--
    --
        Mr. Klesse. That does and those are correct numbers.
    However, this cap increases every single year. It has the
    ability to increase. We also do not think the allowances will
    be adequate.
        A cap and trade program means anybody can trade. You and I
    can trade in this business. People will hoard them. We have
    seen this with the RFS and the renewable fuel standard where we
    have to buy RINs. RINs have gotten very high. It was never the
    EPA's expectation that RINs would get up to 18 or 19 cents a
    gallon.
        So, these businesses, there are a lot of players and people
    act in their self-interest.
        Senator Carper. All right.
        Mr. Klesse. And the cap goes up every year.
        Senator Carper. Fair enough. Thank you for engaging this
    dialogue with us today, and I just look forward to continuing
    it. And again, to all of our witnesses, a lot of encouraging
    stories, including the launching yesterday of Fisker Automotive
    in----
        Senator Boxer. I would like to----
        Senator Carper [continuing]. GM plant comes alive again,
    and we are going to be starting to build in a couple of years
    vehicles that will get 100 miles or so per gallon, and the
    plant hybrids, and we are going to be deploying the first
    windmill farm off the coast of Delaware, probably in about 3
    years. And the idea here is to eventually have windmill farms
    up and down the East Coast to provide a powerful vehicle like
    the vehicle we are building here.
        I still think there will probably be plenty of opportunity
    for our refineries to make a buck as well.
        Thank you very much.
        Senator Boxer. Senator, thank you very much.
        So, here is what we are going to do. Our last questioner,
    we are going to shut it down after Senator Merkley and go to
    our next panel because we are running late.
        Senator Merkley, please proceed.
        Senator Merkley. Thank you very much, Madam Chair.
        Mr. Reicher, you mentioned that Google is providing free
    software. I am assuming that I have to get a digital
    replacement for my mechanical electric meter to interface with
    that in some way?
        Mr. Reicher. Senator, you have two options. You either get
    a replacement for your current meter, and there are many of
    those on the way or already arrived, and in fact, the money
    yesterday from the President is going to speed that up. Or even
    simpler, you can clip a little tiny device on your fuse box,
    and those are readily available as well. They are inexpensive.
    You do not even need the smart meter.
        Senator Merkley. Is Google giving those away with the
    software?
        Mr. Reicher. Not at this point.
        [Laughter.]
        Senator Merkley. You would have about a million calls after
    this hearing because----
        Mr. Reicher. I will not announce that here.
        Senator Merkley. I am sure a lot of Americans will find
    this a very interesting idea. I just wanted to publicize that a
    little bit. Thank you. What does one of those little clip on
    devices cost to put on your fuse box?
        Mr. Reicher. The devices are, today, around $150. And we
    are expecting they are going to come down very significantly in
    price when they go to mass market.
        Senator Merkley. Well, I am going to be calling my utility
    company and find out when I can get a meter or whether they are
    going to subsidize that cost. That is very helpful. When people
    start monitoring how they are using energy, they change
    practices. So, thank you for mentioning that.
        I wanted to shift to the personal vehicle plan that is part
    of the overall Google energy plan. And I believe that personal
    vehicles now produce about 20 percent of the carbon dioxide in
    the U.S. economy. Is that a roughly accurate estimate?
        Mr. Reicher. I do not know. It is in that range, but I do
    not know.
        Senator Merkley. I believe transportation is about 60
    percent of the carbon dioxide, and personal vehicles are about
    a third of that, I believe. So, I was going to pin you down a
    little bit on how much that particular piece of the plan would
    reduce the carbon dioxide produced in the personal vehicle
    sector. And you may not have a reading on that----
        Mr. Reicher. Well, I will say, and Senator Alexander talked
    about replacing half the fleet with plug-in vehicles, if we
    move to do two things, increase our use of plug-in vehicles and
    green up the electric grid by whatever means from solar to wind
    to geothermal to nuclear and beyond, we will have very
    significant impacts in the personal transportation sector on
    greenhouse gas emissions.
        Senator Merkley. At one point, I heard it described this
    way. And I think this is a little out of sync with the numbers
    in your studies, but I will mention it and have you give your
    version. It was that if we enable every vehicle, every vehicle,
    so at a 100 percent transition, if you will, to go at least 30
    miles on electricity, that we would reduce 70 to 80 percent of
    the carbon dioxide produced by personal vehicles.
        Does that fit, or do you have a different version of that
    statistic? I realize, in your plan, by 2030 we do not get to
    100 percent doing the first 30 miles on electricity, but----
        Mr. Reicher. It is in that range. And the difficulty in
    making the estimate is that you really have to know the state
    of the electric grid, how green is the grid at that point in
    time. But the faster we green up the grid, by whatever means,
    the more that the emissions from the personal automobile sector
    are going to go down.
        But what is exciting about it is that it is a very
    efficient way to run a vehicle, and I think these hybrid gas-
    electrics will give people both the ability to lower their fuel
    bills but at the same time have some confidence that, you know,
    when that 30 miles on electricity is up, there is another
    several gallons in the tank that they can continue with.
        Senator Merkley. Well, I want to really emphasize how much
    potential carbon dioxide savings are here. Because if we can
    reduce 70 percent of 20 percent, that is a substantial,
    substantial amount, about 14 percent of the carbon dioxide
    produced in our economy.
        And if we look at it this way, this plan we are putting out
    right now aims to reduce 20 percent below the 2005 levels, but
    we are zeroing in on 9 percent already. So that means we really
    only have to reduce 1 percent per year over the next 11 years
    to meet our 2020 target. And here we are talking about just
    personal vehicles with the potential to reduce up to 14
    percent.
        So, you lay out three strategies. One is new sales, more
    and more new sales being plug-ins and full electric cars. A
    second is having the remaining conventional vehicle sales
    significantly increase their mileage from 22 to 45, which I
    think you note is the European standard for 2012. And the third
    is to accelerate turnover of the older cars.
        In your vision, taking those theoretical goals, how do we
    convert, if we were to actually say let us set mileposts, and
    let us make those happen, what type of legislative strategy
    would be most effective?
        Mr. Reicher. Well, I think, first and foremost, what this
    committee is focused on, which is put a significant price on
    carbon emissions, and do it by an efficient mechanism from a
    business perspective. I think that will dramatically drive
    change.
        Second, the direction we are headed in terms of increasing
    the fuel efficiency standards for regular vehicles. I mean, I
    think third, if we are going to really accelerate the
    introduction of plug-in vehicles of all sorts, I think
    incentives can help. I think investment in battery technology
    which is the real rub here can help a great deal. And then I
    think making sure that we have got a grid that is able to
    charge up large numbers of these vehicles and getting that
    ready, I think, is the third.
        Senator Merkley. Thank you very much. Our time is expired.
        Thank you, Madam Chair.
        Senator Boxer. So, Senator Sanders, you came in the nick of
    time.
        Senator Sanders. I was cheating. I was watching TV.
        Senator Boxer. OK. Unless there is a Republican who comes
    in, if they do, I will give them time, we are going to move to
    the national security panel after Senator Sanders.
        Senator Sanders. Mr. Reicher, the State of Vermont,
    although Senator Boxer may argue with me, I think the State of
    Vermont is leading the country in terms of energy efficiency,
    and in fact, we are consuming less electricity now than we did
    a couple of years ago.
        If the country was aggressive in terms of energy
    efficiency, how many jobs do you guess that we can create over
    a period of years?
        Mr. Reicher. Well, Senator, first, Vermont has an exemplary
    record when it comes to energy efficiency improvements. It is a
    good race that Vermont has with California, frankly, so I
    applaud all that you are doing there and know some about what
    is going on.
        In terms of job creation, another point that was not made
    today is that among the highest producing areas of energy in
    terms of job creation is, in fact, energy efficiency. You know,
    going in and retrofitting a home is real, real jobs, doing all
    the sorts of things to improve energy use in a commercial
    building or in a factory. Those are real labor intensive jobs.
    They are good jobs. They are jobs that the unions like. They
    are jobs that electricians and plumbers and builders really
    love.
        So, the job creation potential in energy efficiency is
    extraordinary. We are talking hundreds of thousands. We are
    talking potentially millions of jobs. Just look at the low
    income weatherization program. The billions we are now going to
    be spending there over the next couple of years. Major, major
    job creation in areas of the country that desperately need it.
        Senator Sanders. Let me ask you this. Do you believe that
    this committee should require that allocations for electric
    utilities go at least, in part, to energy efficiency, just like
    allocations for natural gas?
        Mr. Reicher. I do think that would be a wise improvement to
    the pending bill.
        Senator Sanders. OK. Let me ask Kate Gordon a question. And
    Mr. Mayor, you can jump in on this as well.
        We spend, depending on the year, hundreds of billions of
    dollars a year importing oil from Saudi Arabia and other
    foreign countries. If, over a period of time, we invested those
    hundreds of billions of dollars in energy efficiency and
    sustainable energy in this country, wind, solar, geothermal,
    biomass and other technologies, in energy efficiency in mass
    transportation, do you have a guess as to how many kinds of
    jobs we could create?
        Ms. Gordon. It is a tough question. We do know that jobs in
    transit, our transit investments create about nine times the
    number of jobs as similar investments, in new highways, for
    instance. And I think it is a critical point that we cannot
    just talk about the current amount that we spend on existing
    technologies. We have to talk about reducing how much we use
    technologies and moving to new technologies.
        Massive investments in energy efficiency create jobs and
    bring bills down. Major investments in transit systems and in
    clean vehicle manufacturing, as are in this bill, bring driving
    times down, bring vehicle miles traveled down, make those miles
    more efficient, that has an impact on consumer costs just as
    great, if not more, than the amount that we spend on the
    technology.
        Senator Sanders. Mr. Mayor, let me ask you this. I mean, I
    think in Vermont, and I am sure in Philadelphia, most people do
    not think it makes a lot of sense every year to be spending
    hundreds of billions of dollars making the sheiks in Saudi
    Arabia a little bit richer. What do you think about that?
        [Laughter.]
        Senator Sanders. I know that is a tough question. But you
    can go on the record here.
        Senator Boxer. I hope that your team gets as many soft
    balls tonight.
        [Laughter.]
        Mr. Nutter. All right, Senator. Thank you. We are looking
    forward to it.
        Senator Sanders, first let me say thank you very much for
    the question and also your leadership with regard to the EECBG,
    and of course your previous service as a Mayor in Burlington.
        The fact of the matter is, as a Mayor, I try to do my best
    to stay pretty focused on the narrow area of domestic policy. I
    do not get engaged in many conversations about what might be
    going on in Saudi Arabia.
        But what I can tell you is that the city of Philadelphia
    owns 450 buildings and facilities. We want to retrofit every
    one of them. That is a job that cannot be outsourced somewhere
    else. You have to do that work right in our city. We are
    seeking to reduce our energy costs just for the city of
    Philadelphia by 30 percent through our Green Works Philadelphia
    Plan by 2015. That is real money.
        Senator Sanders. A 30 percent reduction?
        Mr. Nutter. A 30 percent reduction in our own city energy
    costs by retrofitting our buildings, making them smarter, more
    energy efficient and taking other steps. All of that work would
    have to be done in Philadelphia. Those are jobs right here in
    our city.
        So, there will be thousands of jobs created through the
    green economy, whether it is by the work that we do. Earlier,
    in my testimony, I do not remember if you were sitting there or
    not, Philadelphia is a city of mostly row homes. We have 400,00
    houses that pretty much have flat roofs or can certainly take
    solar panels, green roofs, white roofs, the Dow Chemical
    Company, which just took over Roman Haus, has materials that
    can be used for that application, those are all jobs in the
    city.
        Senator Sanders. Great. Thank you very much, Mr. Mayor.
        Senator Boxer. I just want to say to the panel, to all of
    the panelists, from the majority witnesses to the minority
    witnesses, we greatly appreciate your time. You have been
    terrific, every single one of you and really helping us as we
    move this bill forward. Thank you very, very much.
        So, we are going to go right to the next panel. I promised
    Senator Klobuchar. I just want to make sure everybody knows, if
    you get any questions from the committee, we need them at the
    end of close of business today, the answers. I do not expect
    you will. I have not heard of any. Do you have any? OK, there
    will be some questions. They have to be in tonight.
        I am going to ask folks if they could depart because we
    have an extremely distinguished panel waiting to come in, Hon.
    John Warner, Kathleen Hicks, Vice Admiral Dennis McGinn, Major
    General Robert Scales, Drew Sloan, Lieutenant Colonel James
    Carafano.
        Ladies and gentlemen of our next panel, we thank you so
    very much for your patience. I do have some good news for you.
    There will be no opening statements by Senators on this panel,
    so we are going to get right to the testimony. We are greatly
    honored by your service to country, by your presence here
    today, and for your willingness to help us tackle this very
    important issue.
        Just for the rules, we are going to start with our esteemed
    Senator John Warner. And we are going to go straight down the
    panel. If you can keep your remarks to about 5 minutes, we
    would appreciate it. I am not going to cut you off if you go 30
    seconds over, but then I will start tapping this little gavel
    only because we have two more panels today to hear from, and we
    want to get all of you in.
        So, we will begin with someone who needs no introduction. I
    was mentioning, Senator, that I personally really missed you
    from this committed, and everyone has kind of agreed. But I was
    out there wishing you were sitting here once again.
        Senator Inhofe. Let me echo her remarks, Senator Warner. We
    do miss you. And of course, he and I were on two committees
    together so we spent a lot of time together.
        Senator Boxer. I know. Well, Senator Inhofe and I are in
    agreement on this, at least.
        [Laughter.]
        Senator Boxer. So, Senator Warner, please proceed.

                    STATEMENT OF HON. JOHN WARNER,
                         U.S. SENATOR (RETIRED)

        Senator Warner. Well, thank you very much, Madam Chairman,
    and my long-time friend, Jim Inhofe. I can remember campaigning
    for you when you first ran for the Senate in your wonderful
    State. And other friends around this table.
        I will tell you, when I look back, I spent half of my adult
    professional life in this U.S. Senate. And I hope that, when
    your time comes, that you feel as I do. It was worth every day
    of it. I miss it daily, but life, as Thomas Jefferson said, you
    have got to step off the path of public life and let those
    following behind take over. And that I do.
        But I commend you on the hearing today. Seriously, I have
    been involved in this for some time. This was a good hearing. I
    mean good, constructive exchange of viewpoints and tough
    questions. And that is what is most severely needed.
        So, unless you wish to give me the oath of office----
        Senator Boxer. No, just please proceed.
        Senator Warner. But under the Ethics Law, I am permitted to
    accept your invitation which I do, most respectfully, to join
    you today. I shall be very brief. Hit that gavel at 5 and I
    will stop instantly.
        I thought long and hard about what I might add today other
    than contribute my written statement. So, I just thought I
    would say what I have done since I last appeared before you.
        First, I want to say how privileged I am to be with this
    distinguished panel. I cannot see all the way to the end.
        [Laughter.]
        Senator Warner. I have appeared with many of them before on
    other panels and particularly my friend Vice Admiral McGinn
    here. Senator Inhofe, here is a top gun, and let me tell you,
    he has an extraordinary career in aviation like yours. And we
    fly by the seat of our pants. We have been to what, eight or
    nine States together, basically to carry forward, and listen to
    the people out there. It has been fascinating.
        I would say that the American public has a high level of
    interest in this subject. And they are anxious to learn. And
    that puts upon those of us in our respective positions the
    obligation to help them learn so that they can formulate their
    own opinions and be a constructive part of the dialogue on this
    issue which is, in every respect, as complicated and as tough
    and as challenging as the health care issues before this august
    Congress today.
        So, I have had that privilege to travel to the States. My
    basic message is the linkage between our climate global
    considerations, the desire for our country, and many, to try
    and seek higher efficiency use of their energy, new renewable
    sources, and the whole galaxy of issues that are coupled with
    energy. And last, how all that is tied in to our national
    security.
        And members of our panel today, I am going to yield the
    floor to them because I have covered the subject with the
    committee, and I have some of it in my statement. But I think
    this is a chance for them to give a new perspective on it, and
    I am anxious to hear their testimony.
        Very quickly, the Pew Foundation, which I basically work
    for, and the Center for Naval Analysis, which Admiral McGinn
    and I work on, had the concept that there is an awful lot of
    discussion going on in Washington, but we need to go out and
    listen a little bit and perhaps share with those in the States
    what we know about it back here and learn from them what they
    think they know about it and what they want to know in greater
    detail. And that we have done.
        Then I want to commend the departments and agencies of the
    Federal Government under the leadership of the President and
    others. Madam Chairman and members of the committee, they are
    moving out. And you will hear a most impressive story about the
    Department of Defense. As you may recall, when our mutual
    friend, now Secretary of State Clinton, was on this committee,
    the two of us teamed up and on the Armed Services Committee put
    in the legislation requiring the Department of Defense to begin
    to work in their out year quadrennial 4-year projections of
    what the roles and missions might be of the men and women of
    the Armed Forces.
        The bottom line is, that when we talk about national
    security, our thoughts are with them because when the
    President, as Commander in Chief, issues the order to go, be it
    a humanitarian situation like the tsunami or the fragile
    collapse of Somalia years ago, they are the ones that have to
    drive the airplanes, fly them to ships, bringing forth the
    platforms that lift capability to try and bring a measure of
    relief in the humanitarian situations and a measure of
    stability in those where sovereign nations are collapsing.
        The intelligence community is doing a great deal of study
    on this. Admiral Blair, the Director of National Intelligence,
    recently said the intelligence community judges, and I repeat
    judges, it made a judgment, that global climate change will
    have an important implication on our U.S. security for the next
    20 years. That is our top person in intelligence.
        The CIA has originated its own program. And I must say, I
    went out and visited--I have worked with the CIA for all of the
    many, many, many years I have been here and when I was in the
    Department of Defense. It is not a spy mission. It is simply
    utilizing their vast array of collection devices to gather
    information, synthesize it, and let it be made known for the
    general public use as well as the policymakers and the
    Government. And I commend them, particularly Director Panetta,
    who has put this into going.
        So, there is growing progress in our Government. Then there
    is growing progress in other nations of the world. I listened
    to the leakage issue, and that is a vital one. But at the same
    time we are confronting the leakage issue, we have got to be
    aware that nations are moving out and taking the positions
    which this country dominated for a number of years. For
    example, Japan is leading in batteries, Germany in photovoltaic
    cells, Korea in the components for nuclear power plants,
    Denmark the wind energy, and in China and India, pretty well
    across the board in all those things.
        Now, they are investing in trying to get the solutions that
    the United States and other nations will need when they finally
    confront the issue of climate change and decide what they are
    going to do. I just generically say they are the black boxes,
    they are the silver bullets to help decide how we do
    sequestration, how we do the plug-in systems, all of those
    things.
        They are out there putting that technology and putting the
    stock on their shelves. So, when the United States, and we
    will, as sure as I am sitting here, someday this country is
    going to move forward unifiedly, executive branch and
    legislative branch, and begin to temp our role in dealing with
    this. Those black boxes we will have to buy from the shelves in
    these nations.
        So, I will yield the floor.
        [The prepared statement of Senator Warner follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you, Senator, very much.
        Our next speaker is Kathleen Hicks, Deputy Under Secretary
    of Defense for Strategy, Plans, and Forces, United States
    Department of Defense. Thank you very much.

    STATEMENT OF KATHLEEN HICKS, DEPUTY UNDER SECRETARY OF DEFENSE
      FOR STRATEGY, PLANS, AND FORCES, U.S. DEPARTMENT OF DEFENSE

        Ms. Hicks. Thank you, Senator Boxer, members of the
    committee, ladies and gentlemen. It is an honor to appear
    before you today to testify on DOD's views on how climate
    change relates to U.S. national security.
        As the Deputy Under Secretary of Defense for Strategy,
    Plans, and Forces, I am responsible for advising the Under
    Secretary of Defense for Policy and the Secretary of Defense on
    all matters pertaining to the development of U.S. national
    security and defense strategy, including the ongoing
    Quadrennial Defense Review to which Senator Warner referred.
        Let me begin by stating that DOD takes climate change
    seriously because of its significant implications for national
    security. Our strategic planning efforts look 20, 30, even 50
    years into the future. We attempt to account for all factors
    that may affect how our military may be used and what
    capabilities we may need.
        Climate change is a stress that has the potential to cause
    a rise in global temperatures, a rise in sea levels, an
    increasing frequency in severity of weather events, among other
    manifestations. These stresses carry with them clear
    geopolitical implications. Displaced populations, contributing
    to border tension and increased conflict, damage to agriculture
    posing risk to food supplies, and an increased global demand
    for humanitarian and disaster relief operations place a
    potentially serious burden on the U.S. military and
    international forces.
        The effects of climate change are characterized by a degree
    of variability and uncertainty for a range of forecasting and
    modeling scenarios. Although specific climate change effects
    and outcomes cannot be predicted with accuracy or certainty,
    there are general trends in climate change that are reasonably
    expected to occur and that, out of prudence, we must account
    for in planning and conducting DOD activities.
        Even under the most modest predictions, climate change will
    aggravate existing trends of population growth, dense coastal
    settlement, resource scarcity, poor governance and
    environmental degradation. Absent significant forestalling of
    climate effects, DOD's requirement to support civil authorities
    and contingency responses, both domestically and abroad, is
    likely to grow.
        DOD also recognizes the strong linkage between global
    energy consumption and climate change. We cannot address one
    without impacting the other, and both have operational and
    economic consequences. Our dependence on traditional
    nonrenewable fuel sources constitutes a liability for our
    forces worldwide. This necessitates that a sizable portion of
    our force structure is dedicated to just keeping gas tanks
    topped off, and that instead of spending money on our people
    and on developing new capabilities, we are buying and burning
    fuel to haul fuel.
        In the more distant future, as hydrocarbons grow more
    scarce and world demand continues to grow, the competition for
    upstream sources also increases, carrying with it the potential
    for conflict. U.S. Joint Forces Command General James Mattis
    has spoken from his field command experience in Iraq of the
    need to unleash us from the tether of fuel.
        In mountainous underdeveloped terrain such as U.S. and
    allied forces face in Afghanistan, the need for fuel for
    everything from diesel generators to keep our modern war
    fighting systems up and running to the energy needed to power
    armored MRAF vehicles is a daunting logistical challenge and
    puts our soldiers, sailors, airmen and marines at greater risk
    as enemies target our logistics tail.
        If we could free ourselves from the tether of nonrenewable
    fuel sources, we could greatly improve our war fighting
    agility. Alternative sources of energy have significant add-on
    implications for stabilization and reconstruction activities as
    well where providing energy to the local populace has been a
    continued challenge. Failure to provide for basic population
    needs can undermine the legitimacy of U.S. assistance efforts
    and host nation governments.
        DOD is the single largest energy consumer in America. It
    accounts for nearly 1 percent of the Nation's energy use and
    nearly 80 percent of the Federal Government's consumption.
    DOD's energy use is roughly on par with Nigeria and Bangladesh,
    which have populations of 140 million and 150 million
    respectively.
        With military installations across America, operating bases
    throughout the world, and the significant requirement of combat
    forces, powering the military is both an immense task and an
    immediate problem that has a direct impact on our ability to
    fight wars today.
        As the largest consumer, we have a responsibility to be the
    smartest. DOD has long been a source of innovation for the
    United States.
        In conclusion, as climate sciences advance and new
    observations give us fresh insights, we will regularly
    reevaluate climate change risks and opportunities in order to
    develop policies and plans to manage its effect on DOD's
    operating environment, missions and facilities.
        Managing the national security effects of climate change
    necessitates that we work collaboratively through a whole of
    government approach with both traditional allies and new
    partners.
        Thank you.
        [The prepared statement of Ms. Hicks follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        Next, another majority witness, Vice Admiral Dennis McGinn,
    U.S. Navy retired and a member of the Center for Naval Analysis
    Advisory Board.
        Welcome.

     STATEMENT OF VICE ADMIRAL DENNIS MCGINN, U.S. NAVY (RETIRED);
       MEMBER, MILITARY ADVISORY BOARD, CENTER FOR NAVAL ANALYSIS

        Mr. McGinn. Madam Chairman, Senator Inhofe and members of
    the committee, it is an honor for me to appear before you to
    talk about these critical national security subjects. I am here
    representing the CNA Military Advisory Board consisting of a
    dozen former Generals and Admirals representing all four
    services.
        Let me start by summarizing some of our key findings from
    the two reports which you mentioned earlier, Madam Chairman.
        First, our economic, energy, climate change and national
    security challenges are all inextricably linked. As Senator
    Warner said, you just cannot address one without taking into
    consideration the effects on the other.
        Our past pattern of energy use is responsible, in a very
    significant way, for our economic situation today, not just
    nationally but globally. We therefore must make a long range
    comprehensive view to develop effective national policies and
    make real and positive changes in the ways in which we power
    America. A business as usual approach, continued over-reliance
    on fossil fuels, or small incremental steps simply will not
    create the kind of future security and prosperity that the
    American people and our great Nation deserve.
        The time to act is now. And the time to act boldly is now.
    Without U.S. leadership and decisive action by our Nation,
    fierce global competition, instability and conflict over
    dwindling supplies of fossil fuels and increasing global
    warming will be a major part of the future strategic landscape.
        Moving expeditiously toward clean and sustainable energy
    choices to power America can lessen that danger, improve
    global, national and sub-national economic security, and help
    us to confront the serious challenge of global climate change
    and energy insecurity.
        If we do not address these challenges in a bold way and in
    a timely way fragile governments have great potential to become
    failed states and desperation and hopelessness will drive whole
    populations at a scale never seen before to be displaced. And
    this turmoil and power vacuum will create a fertile breeding
    ground around the world for extremism and the terrorism that
    surely follows.
        The United States military will be called to respond to
    these new threats from humanitarian assistance and disaster
    relief up to the higher potential for regional war. As
    Secretary Hicks has pointed out, the Pentagon has already
    started to prepare contingency for such scenarios and will
    focus on the issue in its 2010 Quadrennial Defense Review, as
    will the State Department in its Quadrennial Diplomacy and
    Development Review.
        At the same time, increasing demand for, and dwindling
    supplies of, fossil fuels will add greatly to instability
    created by climate change in many of the very same places that
    are worst hit by climate change. America's current energy
    posture constitutes a serious and urgent threat to our national
    security, militarily, diplomatically and economically.
        We need to carefully avoid the temptation to ignore these
    connections and take only small steps to address narrow issues.
    Large, interconnected security challenges require bold
    comprehensive solutions. We must recognize that we, as a
    Nation, are at a pivotal moment in history. Those who say that
    now is not the time to act fail to recognize the gravity and
    the urgency of our energy and climate change challenges.
        But they also, as was pointed out by the previous panel,
    fail to recognize the tremendous opportunity. There is a new
    multi-billion dollar revolution in clean technology around the
    world, and there is compelling evidence that clean energy
    policies are powerful economic drivers and energy efficiency,
    being the cleanest fuel that never need be mined, drilled or
    burned, and it represents a barely tapped resource that holds
    enormous power for all economies around the world.
        The same is true for a whole host of clean and sustainable
    energy choices. There is a general agreement that there may not
    be a silver bullet to meet our growing energy needs, but surely
    there is a lot of silver buckshot that can be used to
    constitute a viable portfolio of energy sources that are not
    reliant on greenhouse gas producing feed stocks or processes.
        Most importantly, America's leadership and key partnerships
    around the world in addressing these truly global challenges
    will act as a powerful catalyst for international collaboration
    to better address a whole host of pressing issues. The United
    States has an opportunity and an obligation to lead.
        We can, as America has in the past, address the most
    pressing issues of our time. Through thoughtful dialogue,
    effective leadership and united action we can transform
    daunting challenge into sustained security and prosperity
    across the Nation and across the world.
        Thank you, Madam Chairman, and I look forward to your
    questions.
        [The prepared statement of Mr. McGinn follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Senator Boxer. Thank you very much.
        And now we turn to a minority witness who is here, and we
    welcome you, Major General Robert H. Scales, retired.

             STATEMENT OF MAJOR GENERAL ROBERT H. SCALES,
                          U.S. ARMY (RETIRED)

        Mr. Scales. Thank you very much, Madam Chairperson. It is
    indeed an honor to address this hearing on the national
    security implications of the Clean Energy Jobs and American
    Power Act.
        Our intellectual and popular culture thrives on speculating
    about the horrific effects of mega-disasters. But the
    historical record strongly suggests that such devastating
    disasters rarely if ever result in large scale wars. In fact,
    more often than not, sadly, wars cause pandemics, starvation
    and societal dislocation rather than result from them.
        If the more popular climate change models are right,
    perhaps some time in the very distant future glacial fed rivers
    might dry up, sea levels might rise and areas of the planet
    might become more waterless. Some environmental scientists
    conclude that such a climatic crisis would precipitate human
    friction in the form of mass migration away from ocean fronts,
    river valleys and regions of the world that suffer from
    drought.
        The problem is that even if such disasters occur, they will
    not likely be a cause for serious wars, particularly a war
    between a major competitor and the United States. In fact, a
    brief turn through the historical record suggests that periods
    of great societal stress causing enormous suffering and
    dislocation reduce the likelihood of state versus state
    conflict.
        Mass misery caused by climatic and environmental disasters
    occurs so slowly that populations adjust through migration and
    societal atrophy. Such phenomena create social miasma that
    inhibits rather than fuels aggression. In a word, states about
    to collapse from the consequences of natural disasters are more
    concerned with survival than picking a fight with a global
    competitor.
        Wars that affect major nation-states will be precipitated
    in the future by the same factors that have ignited conflict
    for millennia. A far greater strategic threat, at least in the
    shorter term defined by the next 20 years, will come from a
    dramatically reduced access to raw and refined fossil fuels
    that likely be an unintended consequence of this bill.
        This argument rests on two premises. First, that fossil
    fuels will continue to power our war making capability for
    generations. And second, that this bill may reduce our ability
    to surge fossil fuel production should we face the threat of a
    large scale major war in the future.
        There is no scientific evidence that suggests that wars
    will be propelled and sustained by any power source other than
    fossil fuels in the future. Dominance in machine warfare on the
    land, sea and in the air requires fuels that generate the
    greatest combustion and heat from the smallest volume. Only
    fuels derived from petroleum will be capable of propelling
    aircraft, most ships and ground vehicles on and over
    battlefields where performance is measured by how efficiently
    fuels can be transferred into energy.
        Industrial age machines must still be produced in large
    numbers to win against a large scale competitor. Ships,
    vehicles, guns and aircraft will continue to be made
    predominantly from steel, aluminum, rubber and titanium. And
    all of these machines and the material to support them must be
    transported to the theater of war and across and over the
    battlefield with fossil fueled engines.
        This bill might well over the decades slowly diminish the
    ability to produce fossil fuels in the strategic confines of
    American territory. According to one study, refining capacity
    could plummet because the cost of doing business would soar.
    Production at U.S. refineries would drop while production in
    countries that do not limit greenhouse emissions would rise.
        We have no assurance that off shore refining would take
    place in regions secure from foreign power influence. According
    to several studies, the United States would have to increase
    its petroleum imports by one-fifth by 2030 as our domestic
    production would plummet by as much as 25 percent. Should we
    suffer such consequences, the ability of the United States to
    surge its wartime energy production might well be held hostage
    to foreign influence.
        This bill would reduce American industrial capacity as the
    very industries essential for the production of war fighting
    material would move overseas. Recent studies suggest that this
    bill would result in a loss of industrial production of over 6
    percent by 2030 and a consequent loss of over half a million
    manufacturing jobs, many of those in the defense industry.
        Nothing in this bill will reduce the likelihood of American
    involvement in future wars, nor will it improve America's war
    making capabilities. Indeed, over the decades, the consequences
    of this bill might well reduce American influence and retard
    our ability to deter and fight wars in the future.
        Thank you.
        [The prepared statement of Mr. Scales follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        And now we go to a majority witness, and I am just going to
    take a minute to let everybody know who Drew Sloan is.
        Drew Sloan is pursuing a joint MBA and MPA from Harvard
    Business School and Harvard Kennedy School. He spent 5 years in
    the U.S. Army where he served in Afghanistan and Iraq. He was
    awarded two Bronze Stars and a Purple Heart. He graduated from
    the United States Military Academy at West Point in 2002. And
    we are just so honored to welcome you here today. Thank you.

       STATEMENT OF ANDREW SLOAN, CAPTAIN, U.S. ARMY (RETIRED);
                FELLOW, TRUMAN NATIONAL SECURITY PROJECT

        Mr. Sloan. Thank you.
        Madam Chairwoman, Ranking Member Inhofe, members of the
    committee, ladies and gentlemen, it is my honor to be here with
    you today to discuss this very important issue of climate
    change and national security.
        I give the following testimony under the assumption that
    the world's climate is changing, and the burning of fossil
    fuels and increased deforestation are the main drivers of that
    change. Furthermore, in the coming years, this change will lead
    to more severe and frequent precipitation events and prolonged
    periods of drought for many areas. These are environmental
    changes, but they will have human impacts, both here and
    abroad.
        The effects of climate change are the ambushers on the
    horizon. Our great military cannot take a hill that will stop
    temperatures from rising, or wage a counterinsurgency against a
    storm surge. An exquisitely coordinated bombing campaign cannot
    stop glaciers from melting nor can all the ships in our Navy
    prevent sea levels from rising. However, while the military
    cannot stop climate change, it will be the institution that
    will be forced to deal with it.
        As a former infantry officer with combat experience, I
    believe I have an appreciation for what I think our forces will
    face if we do not act decisively against climate change. Please
    allow me to present a potential climate change induced security
    threat.
        In Bangladesh, 10 percent of the country's 155 million
    citizens live just 2 to 3 feet above sea level. Storm surges,
    magnified by rising sea levels, could very conceivably create a
    quasi-permanent state of flooding. This flooding of sea water
    would damage water sources and ruin crops. Water and food
    become increasingly scarce, and sanitation levels begin to
    plummet, opening the door for diseases such as malaria and
    cholera.
        People, potentially millions of people, will be forced to
    relocate but have no good options as to where to go. India, by
    this time, will have completed the wall that they are already
    building to keep the Bangladeshis out, so they will not be able
    to go there. The central government in Dhaka will potentially
    be overwhelmed by these events.
        With nowhere for people to go, refugee camps will be
    created, and a case for a humanitarian mission will be made. As
    if often the case, anger, bitterness and hopelessness will
    spread throughout these camps, and like the mosquitoes born in
    the stagnant water left after the floods, extremism will be
    born and spread as well.
        In a relatively short span, climate change has turned the
    already poor nation of Bangladesh into a failed state,
    potentially destabilized an entire region, sparked a
    humanitarian crisis, and created a breeding ground for
    extremists. All of these conditions will necessitate a response
    from our national security apparatus.
        This conceivable situation is what I think of when I
    picture what General Anthony Zinni, former CENTCOM Commander,
    was referring to when he acknowledged that failing to reach our
    greenhouse gas emissions will force us to pay a price in
    military terms that will involve human lives and exact a human
    toll. This is the human face of climate change, and this is the
    national security threat.
        While the situation I described above is hypothetical, the
    threat and demands it would place on our military are not that
    abstract. In fact, in 2004, when a tsunami devastated large
    portions of Indonesia, it was the American military that
    responded. In 1992, America sent its military into Somalia to
    feed those forced into starvation by prolonged periods of
    drought. A military response is required largely because the
    military was, and remains, the only institution capable of such
    a response.
        While these actions of benevolence and generosity arguably
    depicted America at its best, they were not without cost.
    Operations in Indonesia cost an average of $5 million a day.
    When relief turned into peacekeeping in Somalia, 16 Army
    Rangers lost their lives.
        As a changing climate increases the severity of droughts in
    Africa and the intensity of storms in Asia, the demand for an
    American response will increase as well. Not only will this be
    costly in dollar and human terms, but it will also likely
    impede the military's ability to adequately address the more
    conventional threats that are sure to arise. As climate change
    wreaks havoc across the world, so, too, will it wreak havoc on
    the military's ability to properly handle the Nation's national
    security interests.
        I stand here before you today as a former infantryman, as a
    graduate of West Point, as an educated citizen to unequivocally
    urge this body to chart a new path away from the climate change
    ambush, to pass legislation that meets the threat of climate
    change head on by stimulating our economy and our people
    through the creation of a clean, new energy system for America.
        America can and must do better. The security of our Nation
    depends upon it.
        Thank you, and I have also submitted a written statement.
        [The prepared statement of Mr. Sloan follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you so much, Mr. Sloan.
        Lieutenant Colonel James Jay Carafano. Is that correct?
    Carafano?
        Mr. Carafano. Yes, Madam.
        Senator Boxer. And you are a minority witness, and please
    proceed.

     STATEMENT OF LIEUTENANT COLONEL JAMES JAY CARAFANO, U.S. ARMY
    (RETIRED); DEPUTY DIRECTOR, THE KATHRYN AND SHELBY CULLOM DAVIS
    INSTITUTE FOR INTERNATIONAL STUDIES; AND DIRECTOR, DOUGLAS AND
     SARAH ALLISON CENTER FOR FOREIGN POLICY STUDIES, THE HERITAGE
                               FOUNDATION

        Mr. Carafano. Thank you. I have just five points to make.
        First, you know, I would like to say how constructive and
    productive I think this hearing is and how excited I am to look
    forward to it. What I have heard here today really makes me
    optimistic because I really believe that both sides share
    common goals. And I think that is the most important thing,
    that both sides, everyone interested in this debate, is
    interested in keeping this country safe, free and prosperous.
        I also think that everyone shares a common goal that the
    United States would be a good steward of our global
    environment. So, I find that encouraging and productive and a
    good basis for moving forward.
        The second reason why I think this hearing is amazingly
    important is because it does state in the Preamble of the
    Constitution that providing for the common defense is the
    fundamental obligation of Government, and I think it would be
    irresponsible to consider any major piece of legislation that
    is going to impact on such a vast swath of our economy and
    really drive our future and not think about and ponder the
    national security implications of what is being done.
        That leads me to my third point, which is my perspective
    for answering your questions in the way I have. And it really
    combines some three things. The first is my 25 years of
    military service, a lot of which was spent dealing with
    strategy and policy issues. But I had a concomitant career that
    went along with that, much like General Scales, which is as a
    historian, and much of my historical work has been not just on
    military history but really looking at where the lines of
    military history and science and culture and public policy,
    economic and business, intersect, which I think is relevant
    particularly to this issue.
        And the third is, as a professor who researches a lot of
    what is euphemistically called now wicked problems, which is
    complex public policy problems and deciding how do you find the
    right way to look at the right problem to get to the right
    answer.
        And this leads me to my fourth point, and here is my
    concern. My concern is that making the case for any major piece
    of legislation based on a conclusion of its long-term impact on
    either the environment or energy production is incredibly
    problematic. I make that statement because in order to draw
    those kinds of conclusions you have to construct a complex
    system, and a system which in the end is so complex that I
    think it is incredibly unrealistic to think that you can
    actually draw anything other than merely subjective conclusions
    about how the future is going to unfold.
        I just might illustrate that with an example. Many of you
    have probably heard of or read Jared Diamond's absolutely
    terrific book called Collapse, in which he does a terrific job
    talking about historically why societies, some societies, fade
    from the scene. Well, Diamond lists 12 variables alone that
    impact on how human environment interactions work out.
        And he reaches those conclusions and analysis based on
    really drawing over a century of history and archeology. And he
    is looking backward with hindsight. He is not looking forward
    to where, and you see as the case studies unfold, human
    decisions and environmental change constantly change the nature
    of the problem every day.
        So, what my argument is is arguing from a complex systems
    approach that we can predict how the environment, human
    decisions and conflict and violence and humanitarian needs will
    work out over the long term is simply incredibly unrealistic,
    and using that as an argument either for or against this bill I
    just think is incredibly inappropriate.
        This leads to my fifth and last point, which is what my
    recommendation would be. My recommendation would be to focus on
    the traditional short-term methods of cost-benefit analysis to
    determine the impact of this legislation and it would have on
    national security.
        So, I think there are realistic issues to address as if our
    economy does decline, that will impact on our ability to fund
    defense and defend ourselves. And if our economy does decline
    and that impacts on the global economy in general, well that is
    much more likely to create situations of humanitarian concern
    and spiraling violence. And so I think that has to be weighed
    against what benefits in the short term you would actually gain
    from this legislation.
        So I would urge you to make that the focus on your
    deliberations. What are the costs and benefits in the short
    terms of this legislation rather than ruminating on what are
    the long-term implications 30, 40, 50 years down the road to
    either our ability to ensure our national security or to ensure
    the readiness and the cleanness of energy and be a good steward
    of our planet.
        Thank you.
        [The prepared statement of Mr. Carafano follows:]

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you.
        I think I will pick up on that point. The message is you
    cannot predict the future so do not pass complex legislation. I
    mean, that is kind of what you are saying. And I just want to
    say, if we had that attitude, we would not have passed the
    Clean Air Act, the Safe Drinking Water Act, the Endangered
    Species Act. We would not have passed a lot of things, even the
    National Highway System. I mean, that was shocking when Ike
    proposed it.
        So, I just do not think that is quite the way I would
    approach legislation. I think the important point you are
    making is, of course, we cannot predict exactly what will
    happen. But we should be conservative here. We should look at
    what the experts are telling us, which is going to mean I am
    going to turn to Vice Admiral McGinn.
        The Major General and Vice Admiral were just completely on
    opposite sides, and both of you are very, very clear. So I want
    to say, from my point of view, obviously, I think I know Vice
    Admiral McGinn's work on this. The point that Major General was
    making is that, and I wrote down the notes here, is that there
    is literally little chance that any of the impacts of climate
    change would involve a big war between the great powers. I
    mean, that is what he said. He is shaking his head, so I did
    get that right.
        But is it not true, Vice Admiral, that right now what we
    seem to be facing more than that fear is instability,
    terrorism, the kinds of things that Mr. Sloan talked about? The
    dangers that we are facing right now in two wars where our
    young people like Mr. Sloan, you know, are giving so much and
    gave so much, did not have to do with two great powers, they
    had to do with terrorism and instability.
        And is it not true that that threat is exactly what we are
    worried about here, not the clash between two nations who need
    oil? You know, I just hope you would expand on that.
        Mr. McGinn. When I was in the Pentagon 50 yards from the
    American Airlines flight that hit on September 11th, I was not
    concerned about it being a great power war. There was no
    mistake in my mind we were at war. We had come to that
    conclusion, and I had convened my inner circle as the Deputy
    Chief of Naval Operations for Warfare requirements after the
    first airplane on a clear September day hit the first tower in
    New York.
        It is about instability. It is about threats to America's
    well-being, not just measured by the things that happen inside
    our borders, but how the things that happen inside our border
    can be influenced by places far away that have an increased
    level of instability.
        I would also point out that while I think the adage is
    those who ignore the lessons of history are doomed to repeat
    them, that is an argument that can cut both ways in this
    debate. And if General Scales and I were sitting here 100 years
    ago as uniformed members of our respective services, he would
    be arguing against this damned infernal combustion engine
    taking out the cavalry and the horses have been really agile
    and they are good. I would be arguing against putting those
    damn boilers on perfectly good sailing ships. So this idea of
    change and predictability goes back in our history.
        The thing that is different today is that we have never
    before on this planet had close to 7 billion people, which we
    will have in 2011. We have never had the unprecedented level of
    per capita use multiplied by that 7 billion people. We have
    never had information technology that gives us an ability to
    understand what is going on to a much greater level, not with
    certainty, but to a much greater level that we ever have in the
    past.
        And we have a whole host of indicators, warnings and trends
    that tell us climate change is bad for national security.
        Senator Boxer. I want to ask Kathleen Hicks this question.
    Again, when Major General Scales was talking about the fear
    that he had that we would not have enough oil and all the rest,
    is it not true that our greatest vulnerability in the energy
    sphere, and I would again quote Vice Admiral McGinn, and I
    wrote it down, he said our current energy posture is a national
    security threat if all those, our current energy posture is a
    national security threat.
        Are we not stronger when, for example, America steps out
    and takes the lead in making jet fuel out of algae, and we do
    not have to go the sheiks and we do not have to spend $1
    billion a day? I mean, is that not what you are looking at, the
    ability to not be dependent on folks who do not like us?
        Ms. Hicks. Senator, I think that really is the crux of the
    debate here. I think, as Jim Carafano pointed out, everyone is
    beginning from the same premise of wanting to secure the
    Nation. What I hear as the fundamental divide is whether or not
    to embrace change, whether or not lead and adapt, or have that
    fear of not being able to succeed in doing so.
        So, what we are not talking about, really, is the
    opportunity cost of doing nothing and that opportunity cost is,
    as you suggest, Senator, that we are tied down by fuel, that
    fuel is a real day-to-day today, not a future concern only, a
    today concern for our forces in the field who are tethered to
    that fossil fuel tail.
        Can we change that overnight? No. But if we do not stop
    working on solutions, we will never get to a different future.
    We will never shape that future for ourselves.
        Senator Boxer. Thank you very much.
        Senator Inhofe.
        Senator Inhofe. Well, Ms. Hicks, I just really appreciate
    that last statement that you made, that this is something that
    is not here now, it is not available at this time, and can we
    look into the future and say yes, this would be nice when we
    get to the point that we have all of these things.
        To me, I agree with the Chairman, that is the crux of the
    problem, when we have just this week, well, first of all, let
    me just stipulate to what the EPA Director said when I asked
    the question, in the event we pass legislation like this for
    the United States, is this going to have a reduction in overall
    emissions? And the answer is no. I think logically we all know
    that so let us keep that in mind.
        But when we have a report that just came out by CRS that
    says America's combined recoverable natural gas, oil and coal
    reserves is the largest on earth, but the problem is that 83
    percent of it we cannot get to. So let me just ask you a
    question, Admiral McGinn. Would you not agree that, do not look
    way down in the future, let us look at tomorrow, let us look at
    today, we need to have the availability of fossil fuels. Now,
    is that not true, do you not agree to stipulate to that?
        Mr. McGinn. Senator, I agree, and I would say that the age
    of fossil fuel has been very, very good to the United States of
    America starting back with Colonel Drake in 1854 in
    Pennsylvania discovering this oil. It has been very good. And
    we are not going to transition off it overnight.
        Senator Inhofe. OK, then----
        Mr. McGinn. But it is just that we need to start, and we
    need to start in significant ways, not small incremental steps.
        Senator Inhofe. Well, let me ask you real quick. These have
    to be short answers because I am operating under this short
    timeframe. When the statement that you made, General Scales,
    that there is no scientific evidence to suggest that wars would
    be propelled and sustained by any power other than fossil
    fuels, I know you are talking about now and in the near future.
    Colonel Carafano, do you agree with that statement?
        Mr. Carafano. You know, I went to Bob, because he is a
    historian. But my point would be that, in the short term, is
    that you have to look at what is the competitiveness structure
    of the United States. And so, my concern is that when you start
    take away jobs and economic growth, this is the single most
    important fuel to the defense industrial base.
        And that limits your ability, more than anything else, to
    respond, and that stair steps down. As the United States is a
    lesser and less capable power, that increases instability. So,
    it is overall the climate and the economy in the short term
    which I think creates the kind of world that we are trying to
    avoid here.
        Senator Inhofe. Yes, I understand that. You wanted to say
    something, General Scales?
        Mr. Scales. Yes, sir. Two quick points. If Dennis and I
    were to have a conversation 100 years ago over cavalry versus
    coal powered ships, we would at least have been able to discuss
    the looming probability that oil-fired burners were just around
    the corner, that by 1918 or 1919, the great navies of the world
    had already started to convert from coal.
        Senator Inhofe. OK----
        Mr. Scales. My point is this, Senator. I do not see any
    evidence right now, within the next 20 of 30 years, that some
    other form of fuel will propel our war making machinery. And my
    concern is that if we reduce our availability of refined
    petroleum products over the next 20 or 30 years, that might
    reduce our ability to go to war. It is just that simple.
        Senator Inhofe. Yes, and I agree with that. And I will not
    ask for a response, Admiral McGinn, because my time is expiring
    pretty fast here.
        The only thing I want to get to here, and I think it is
    very important for every member of the panel to recognize, at
    least publicly recognize the fact that we have to have fossil
    fuels today to fight wars. This is a national security issue.
    And when we have, we have the largest reserves in the world.
    And yet, politically, we cannot develop 83 percent of it.
        Would you not agree that we need to, if you really feel
    sincere about not depending upon foreign countries, our
    enemies, perhaps depending on them for our ability to fight a
    war, should we not develop our own resources? What do you
    think, Colonel?
        Mr. Carafano. Yes, sir.
        Senator Inhofe. Is there anyone who would disagree that we
    need to develop our own resources?
        Mr. McGinn. We do need to develop our own resources. But we
    need to recognize that there is an opportunity cost. If we
    place too much of our time and effort and resources into the
    continuation of our track record of fossil fuel, there is a
    tremendous opportunity cost for not doing other things that are
    going to have much, much better returns in jobs in the near
    term and in national security and prosperity in the long term.
        Senator Inhofe. We are talking about fighting a war today,
    General Scales. You have got to have fossil fuels to do it.
    Right now, we have fossil fuels, but we are importing fossil
    fuels from countries that could cut us off. There is a risk
    there. And when are looking at our opportunity to develop
    fossil fuels without, not at the expense of anything else, wind
    or anything else, but to develop them because we have these
    reserves, can you think of any reason not to do it?
        Mr. Scales. I cannot, Senator. But I would also agree with
    Dennis, that we need to push the limits of science, we need to
    find different fuels, we need to find alternative sources, we
    need to conserve. All of that is absolutely essential for
    national security. I am worried about the next 20 years when,
    whether we are fighting a war against a major power or a failed
    state is attempting to attack us, at the end of the day, we
    still have to fuel the machines and right now, the only
    alternative is fossil fuels.
        Senator Inhofe. And Senator Warner, do you not think we
    should develop our own resources?
        Senator Warner. Absolutely. And if I might interject, there
    has been a lot of discussion here this morning about nuclear
    power. I was privileged to be a party of a navy where we had
    over 100 platforms operating safely as they have been
    throughout almost the entire history of the Naval Reactor
    Program. We ought to draw on that technology, as the Senator
    from Tennessee said and put together a strong package as a part
    of any legislation to help the nuclear industry come back again
    to the strength it once was in this country.
        And it seems to me you have to package that, also, with
    greater access to this 80 percent. And when you get down to
    legislating, colleagues, you know it is those types of packages
    that will balance off the cap and trade which is so intensely
    felt on part of this hearing room as well as the energy sources
    of nuclear and drilling on the other side. And it is that type
    of package you have got to put together, Madam Chairman, to get
    this bill through.
        You are at a fork in the road right now as to whether or
    not Congress is going to lay down the road map for this
    country, or we are going to just rely on the executive branch
    and the inherent power of the agencies and the departments.
        Senator Boxer. Exactly. I am going to put into the record,
    without objection, the study that was just done by U.C.
    Berkeley, University of Illinois and Yale University about job
    growth, because the Lieutenant Colonel talks about the
    instability of losing, but there is job growth associated with
    this. Some studies say 2 million jobs, some say more, some say
    1 million jobs. I think it is very key.
        And I just have to again say our reliance on foreign oil is
    what Vice Admiral McGinn, Senator John Warner and others are
    concerned about. The current energy posture of America is a
    national security threat now. Not even 20 years later. Now. And
    I think we have a young man who had his boots on the ground,
    and I think he has very strong views about that.
        Senator Cardin.
        [The referenced study follows:]

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Cardin. Thank you, Madam Chair. And let me really
    thank this entire panel not only for your testimony today but
    for your service to our country. We very much appreciate
    everything that you have done. I think this panel has been
    extremely helpful to us in dealing with this subject.
        And it is always an honor to have Senator Warner with us.
    There was no greater champion of national security here in the
    U.S. Senate, and I consider myself fortunate to have served
    with Senator Warner in the U.S. Senate. So, it is a pleasure to
    have you back before our committee.
        I think the point that Senator Warner raised, the point
    that our Chairperson raised, about national security on our
    energy sources here, we can do everything that we can to deal
    with oil, we just do not have enough of it. I have joined with
    Senator Alexander in saying that we have to do a better job
    with nuclear. We need the whole package for the sake of our
    national security, including the much stronger emphasis on
    alternative and renewable energy sources and better
    conservation.
        So, Senator Warner has brought to our attention many times
    the direct threat that our energy policies pose to our national
    security, including climate change and sea level increases and
    the effect that it will have on our military facilities.
        One thing to me is somewhat shocking is the significant
    increase in expenditures by our military on energy. It has gone
    up 500 percent over the last 9 years. And that is just funding
    countries that are our most challenging are far as our military
    is concerned. So, it is counterproductive to our own national
    security, and we have to do a much better job with the energy
    policy.
        I want to take advantage of this panel, if I might, on an
    area that has not gotten as much attention, and that deals with
    the fact that we do allocate in this bill for preventing
    international deforestation and allowances for international
    adaptation, which some say, well, gee, is that not just
    humanitarian aid by America? I see that as part of our energy
    strategies and our international strategies, and it very much
    has a national security focus.
        I want give it first to Admiral McGinn, if you would. How
    important is it for the United States to speak about the
    financing of global climate change issues and adaptation and
    deforestation funds as we go toward an international agreement,
    we hope, in Copenhagen, but as we work with other countries?
    How important is it for the United States to show leadership on
    the financing of these issues?
        Mr. McGinn. I think it is very important, Senator. I mean,
    there are some that over 50 years ago would have said that the
    Marshall Plan was primarily a humanitarian relief program. But
    in fact, it was at the core of creating a new world order and
    creating a much more secure place for the United States and for
    Europe.
        In terms of this new challenge, there are so many good
    things that come from investment of time and effort by the
    military, by the whole intergovernmental process, in resources,
    in technical assistance, that can create relationships with
    nations and with the militaries that can really help to make a
    difference to mitigate and to adapt to the potential effects of
    climate change. So, I think it is a very, very important part
    of our strategy going forward for our defense and national
    security strategy.
        Senator Cardin. Thank you. Senator Warner, you have
    negotiated with a lot of our friends around the world, and you
    know how much they look to the United States as far as
    leadership on issues. As far as helping to finance the
    consequences of global climate change internationally, how do
    you see the United States as far as leadership is concerned?
        Senator Warner. Well, I think the United States should be a
    leader. But we have got to be mindful that we are in very
    competitive world, and so many of our principal competitors, as
    was clearly brought out in this excellent dialogue today, do
    not follow the framework of laws and human consideration in
    this country.
        So, we have got to strike a balance. We would not want to
    put forward legislation that is going to put us at a
    disadvantage in this competitive world. So, you were right when
    you raised the point Copenhagen is the forum. Maybe not this
    sessions coming up in December, but there will be a subsequent,
    and a subsequent, and that issue has got to be agreed upon by
    all nations for a fair playing field.
        Senator Cardin. You know, that is an extremely important
    point. Even if we have the most successful outcome from
    Copenhagen that many of us hope for, that we establish targets
    and a mechanism to achieve those targets, and we have the
    financing and enforcement, it is the beginning. It is not the
    end of this process. There is a lot more work that is going to
    have to be done in all of our countries, including, after we
    pass this bill, we still have a lot more work to be done.
        Thank you, Mr. Chairman.
        Senator Lautenberg [presiding]. As acting chairman, I know
    that Senator Alexander is next.
        Senator Alexander. Thanks. Thanks, Senator Lautenberg,
    thanks very much.
        I want to thank the witnesses for being here, and I want to
    take particular advantage of Senator Warner being here and try
    to rely on his experience, both as a legislator and his
    military experience. And Admiral, you may have something to add
    here, too.
        I would like to look at the next 20 years. As I think
    Senator Warner knows, I agree with him that climate change is
    real, that humans are causing it. My problem is with the
    solution. I think the economy-wide cap and trade has some real
    disadvantages.
        One, it does not work with fuel. It raises the price of
    fuel, but it does not reduce much carbon. We have had plenty of
    testimony on that, and that is 30 percent of carbon. Something
    else has to deal with fuel.
        Second, it is a problem with manufacturing, which is under
    stress anyway, because it is going to raise the costs in
    manufacturing, and manufacturing may, probably will, go
    overseas looking for cheap energy. And that is a problem for
    us.
        And three, it deliberately raises the price of energy when
    our goal for ourselves and for the world, in my view, ought to
    be cheap energy so we can have a prosperous economy and so we
    can relieve hardship for poor people.
        So, I have suggested a different way for the next 20 years,
    which I believe is simpler and will work, which does not
    include a national energy tax, and I believe there is broad
    bipartisan agreement for it.
        No. 1, build 100 nuclear plants in 20 years. No. 2,
    electrify half the cars and trucks in 20 years. And No. 3, four
    mini-Manhattan Projects of the kind the six would talk about to
    make solar costs competitive, to find ways to recapture for
    coal plants, to make electric batteries that will take our cars
    400 miles instead of 100 miles, and to find ways to recycle
    used nuclear waste in a way that does not isolate plutonium.
        By my computations, if we did that, at the end of 20 years
    we would be producing about 40 percent of our electricity from
    carbon-free nuclear, we would be producing maybe 5 or 10
    percent from solar and wind and other forms like that, about 10
    percent from hydroelectric, about 25 percent from natural gas,
    and we would actually reach the Kyoto goals for 2030 without a
    national energy tax.
        But my problem is, and this is my question for you, every
    time we have a panel here, we talk about wind, which is 1 and
    1.5 percent of our electricity, we talk about solar, which is
    promising but negligible. Even in Germany, where they are head
    over heels for solar, it is 1 percent of their electricity. We
    talk about biomass, which scientists are reminding us, if you
    haul hundreds of trucks, I mean, just to create the equal of
    one nuclear plant in electricity, you would have to
    continuously forest an area 1.5 times the size of the Great
    Smoky Mountain National Park with hundreds of trucks today. So,
    all of those things are a long way away.
        Yet we have China with 132 nuclear reactors. We have Japan,
    two a year, Russia, two a year, other countries moving ahead of
    us. And we have not built one in 30 years.
        So, if you were again the Secretary of the Navy, and we
    were going to war, and we had created a nuclear navy 60 years
    ago, and it was doing exactly what we wanted, and we had had
    thousands of sailors living on top of reactors safely for 60
    years, would we stop building nuclear ships and start
    subsidizing sailboats?
        I mean, why is that panel after panel never mentions
    nuclear power except reluctantly when we invented it, it is
    available, and we know we can build 100 plants in 20 years with
    Presidential leadership?
        Senator Warner. Well, Senator, you have no stronger
    proponent of urging the Congress and the country to accept the
    reality that we have to move to a vastly expanded base of our
    energy from nuclear power. It is the zero emitter of greenhouse
    gases, as you well know.
        But let us come back to it. I think we agree on that. But
    you raise a larger question. How much can we do in terms of
    legislation now, and how much must we do in subsequent years?
        I think this very complicated subject is not unlike
    building a great cathedral. You are going to lay a foundation,
    hopefully in this session of Congress, and in the next maybe
    begin to build on it slowly. Because it is an enormous
    educational process that has to be undertaken with the Nation's
    public, which inherently believe they want cleaner air and
    cleaner fuel and this and this and this, all of which is part
    of this evolution of energy and climate change.
        But let us look at the means by which we can find, in this
    session of Congress, a package of steps, good, forward looking
    steps, one being nuclear on which we can agree, and put them
    together, and then recognize what we have to do in the ensuing
    years.
        It is going to be like building that cathedral, and
    frankly, I will not be around when the final capstone is put on
    that cathedral. But that is the way great edifices and great
    things are achieved. I know the Chairman feels very strongly
    about trying to put forward some legislation. I just hope that
    you can package together that which you can agree on.
        But let me make one thing clear. It has to be bipartisan.
    It really does. It has to be a concurrence of all of us
    reflecting the views of our diverse citizenships, the needs,
    and in this complex world of competition, we have got to remain
    strong.
        It is easy for me to sit here and not having to vote as do
    you, but I am most respectful for what you are trying to do in
    this committee and in other committees, and I think you can
    achieve some milestone in this Congress. I hope you succeed.
        Senator Boxer [presiding]. Well, the plan is that we get
    our bill out, and it gets married up with other bills. And
    Senator Kerry is working with Senator Lindsey Graham now, which
    is really very encouraging, to try and get to that sweet spot
    that you described. That is what we are trying to do.
        Now, next on my list, I will go through, Specter is not
    here, Klobuchar, so it would go to Senator Whitehouse next.
        Senator Whitehouse. Thank you, Chairman.
        First, let me extend a particular welcome to Senator
    Warner. I could not be happier that he is back. It was a
    pleasure working with him during the time that we overlapped,
    and he represents, represented, both represents and
    represented, I think, our institution at its very, very best.
    So it gives us honor that you are back here, and it gives me
    great personal pleasure that you are here. Thank you for the
    many kindnesses that you showed me as a new Senator finding my
    way around this place. You reached across the aisle and were
    extraordinarily generous and I appreciate that.
        Senator Warner. Well, I thank you Senator. And do not
    forget what I told you one day in private. Look at your future.
        Senator Whitehouse. Why do we not leave it private? That
    would be embarrassing.
        [Laughter.]
        Senator Whitehouse. Admiral McGinn, I want to clarify a
    point because some of the comments, I think, might leave the
    suggestion that it is our intention that we turn our naval
    forces, for instance, to sail power or to turn away from
    fueling battleships with whatever the best fuel is for their
    tactical purposes.
        As I understand it, this bill does nothing to interfere
    with the military's selection of the appropriate--the most
    appropriate fuel, to carry out its mission. The focus of this
    particular panel, as I understand it, is that the missions that
    our military will have to address will be more dangerous, more
    frequent, more widespread, if we cannot control our climate and
    if we cannot control our role in intoxicating our atmosphere
    with carbon pollution.
        And the means that we go about doing that, as I understand
    it, is to put a price on the pollution that, and it is just
    major polluters, that the major polluters have been getting
    away with for free for years. And by putting a price on it, you
    allow the market to adapt to the real cost of their product, as
    opposed to that implicit subsidy that they have been enjoying.
        But nothing about this says that an aircraft carrier has to
    put up sails and can only go in the wind. If it is running on a
    nuclear plant, if it is running on bunker fuel, whatever it is
    running on, as I understand it, is not affected by this
    legislation. Is that correct?
        Mr. McGinn. As I understand it, it is not. You are right,
    Senator. I would commend to the committee's study a speech that
    was given on the 14th of October this year by the present
    Secretary of the Navy, Secretary Mabus, in which he outlined
    some very bold and far reaching measures that the Department of
    the Navy, both the Navy and the Marine Corps, were undertaking
    to lower the carbon boot print, if you will, to increase the
    portfolio of energy choices and the energy efficiency with
    which we use those choices in a very, very great way. It is a
    terrific speech, very specific on the goals, and I did not see
    a sail on an aircraft carrier once in that speech.
        I will say that on the 13th of October, the Naval Air Test
    Center, Patuxent River, fired up an F-404 engine, the engine
    that powers the F-18 Super Hornet, powered by bio-based fuel.
    And they intend to fly a Super Hornet that has become
    affectionately known as the Green Hornet in April of this year,
    entirely fueled by bio-based fuel.
        Are we going to suddenly convert all of our military
    applications from petroleum to bio-based? No. But we are
    starting to take some measures. And every percent, every
    gallon, that we can get to break our--the stranglehold of
    petroleum on our Nation, is that much further down the road we
    are toward better security.
        Senator Whitehouse. And on that subject, could you just
    touch briefly on the national security consequences of our
    national dependence on a foreign oil supply? The military could
    move off it and decide that it is only going, you know, in a
    time of real emergency, that it would only use domestic fuel
    services. But the cost to the general economy, if we were
    interrupted in our foreign sources of fuel, I think would be
    fairly considerable. Would you, how do you evaluate that?
        Mr. McGinn. I do not think it would be, in the overall
    sense of national security, it would be a terrible situation to
    find ourselves in where we had to allocate increasing amounts
    of existing available domestic fuel oil to military purposes,
    and as you say, it would devastate our economy and thereby have
    a terribly bad effect on the overall national security.
        Senator Whitehouse. So, our present reliance on foreign oil
    is a national security risk?
        Mr. McGinn. It is.
        Senator Whitehouse. Thank you.
        Senator Boxer. Thank you, Senator, very much.
        So, in the absence of a Republican, we will go to Senator
    Udall.
        Senator Udall. Thank you, Madam Chair.
        Senator Warner, it is great to have you back here with us
    again. A number of Republican Governors from California to
    Connecticut are reducing greenhouse gas emissions in their
    States as part of binding programs. Other Republican Governors
    in States like Utah and Florida have also embraced action on
    climate change. As you well know, John McCain is one of the
    original fathers of climate change legislation in the Senate.
    And you played a key role when you were in the Senate and on
    this committee, and also what you are doing today.
        Do you believe there is bipartisan support? You mentioned
    the word bipartisan, and you really emphasize that. Do you
    believe there is bipartisan support in the country for
    legislation to set binding national targets to reduce
    greenhouse gas pollution and to move to a more secure energy
    future?
        Senator Warner. Senator, I very definitely believe that. As
    a consequence of having the privilege of conducting many, many
    town meetings, I suppose that is participating in many, many
    town meetings and talking to a number of universities, I
    visited Colorado recently and the Air Force Academy and the
    University of Colorado, politics really does not feed into
    these discussions. It is a thirst and a desire for a better
    understanding of what this all about. They feel the need. They
    want to participate. They just need an avenue and some
    leadership.
        And currently, the Governors of the several States are
    providing strong leadership, together with the legislatures.
    And particularly the university and college structure, the
    educational institutions. That is why I think it is so
    important for the Congress to join in providing some
    uniformity.
        Because you take the average power supplying mechanisms in
    our country, they do not serve just one State, they serve six
    or seven or eight States in a region. And the complexity of the
    environmental initiatives in the various States drive them to
    the, you know, common denominator somehow that they can figure
    it out.
        So, the need for this road map which is really the province
    and the province alone of the U.S. Congress is really needed as
    early as possible. And I agree with you 100 percent. I commend
    the Governors for their leadership, and there is a strong
    feeling of bipartisanship as we traverse the land and listen to
    the people.
        And thank you for your courtesies. Under the Ethics Laws, I
    cannot communicate with any of you when I am in your States.
    But I try to get in and out without causing you any problems.
        [Laughter.]
        Senator Udall. I bet you are glad you are not doing town
    hall meetings in this climate we have right now.
        Senator Warner. Well, I am. But I must tell you, in sharp
    contrast, they are very constructive.
        Senator Udall. Yes. Yes. Let me ask you about the
    situation, and I think you mentioned this in your testimony,
    that we are facing right now. The Administration sees that
    climate change is a major issue, and we have heard from the
    Under Deputy Secretary here, and we have heard that in many
    ways from this panel.
        So, they are moving forward with an aggressive effort at
    the EPA, which is very limited under the Clean Air Act as to
    what they can do. But they can do a lot, and they are going to
    try to regulate 7,500 of these business entities that eject
    more than 25,000 tons of carbon dioxide.
        The other side of it, and that is what I would like you to
    talk to, is, you know, if we do nothing, then the
    Administration proceeds down that path. If we move forward,
    there is so much we can do in the Congress to help the various
    sectors, to help people that are at the lower end of the scale,
    all of those kinds of things.
        Do you think the more prudent path is really the path of
    Congress acting rather than this more blunt approach that the
    Administration is taking?
        Senator Warner. Very definitely. As I said, we are at a
    fork in the road, and right now we just cannot leave it to the
    executive branch. It seems to me that Congress has got to lay
    down a map.
        But it would seem to me, and I may be little presumptuous,
    the President has been a strong advocate of this whole concept.
    But at some juncture, and it is up to the leadership of the
    Congress, of course, but it would seem to me the President
    ought to join in as these several committees are beginning to
    try to strike a consensus among the bills, and say, look, I
    have left to you the initiative, but this is a framework of the
    essential points I deem necessary in such package of
    legislation as the Congress may tackle in this last remaining
    months of this session of Congress.
        I would hope that he would look upon that. I realize that
    the health bill is all consuming at the moment. But this is
    equally important. You have Copenhagen when the eyes of the
    world are going to be examining on where is the United States
    at this session.
        Senator Udall. Thank you, that is very constructive. And
    thank you to all of the panel for your service. Thanks, Madam
    Chair.
        Senator Boxer. Yes. And Senator Warner, I think there will
    be some good news out of this committee next week. So, stay
    tuned.
        Senator Warner. I will be staying tuned.
        Senator Boxer. In terms of moving forward with this work
    that we have to do because the window of opportunity is
    closing. It really is. And we have wasted some time.
        So, here is the situation. If nobody else shows up, the
    order is Merkley and Lautenberg. OK?
        Senator Merkley.
        Senator Merkley. Thank you very much, Madam Chair, and
    thank you to members of the panel.
        I would like if you all could comment on a different aspect
    of the national security energy puzzle, and that is the funds
    that flow overseas when we purchase energy, and those funds
    that go to Venezuela, that go to Saudi Arabia, and according to
    some reports, end up in the hands of folks who do not have
    particular sync, they are not in sync with the United States,
    with all of our values and objectives.
        So, maybe we could explore a little bit your thoughts on
    the national security issues that are raised by the $1 billion
    we spend overseas on oil.
        Ms. Hicks. Senator, let me take the first stab at that. I
    think you have really hit the nail on the head with your
    question. When we cede control of our energy strategy to
    foreign actors, and in many cases it is quite small subset of
    foreign actors, we really put our own national security at
    great risk given our incredible reliance on it. So, again, I
    think you have got the problem quite right. It is not just the
    states, it is what happens to the funds at the sub-state level.
        We have, or course, in the internal environment, Al Qaeda
    and other transnational terrorist movements that prey upon
    various sources of funding, and the more that we can do to
    control that aspect of the problem, the better off we are in
    terms of our security.
        So, a comprehensive energy strategy by the United States is
    incredibly important to solving that problem.
        Mr. Carafano. Senator, I think the question you have to ask
    yourself is if the price of taking money out of the hands of
    bad actors crippling your economy in the short term. And if the
    answer is yes, then you have to ask yourself is the cure worse
    than the disease? And then you also have to ask yourself, what
    other alternative mechanisms can we use to keep money from
    going into the hands of bad actors? And that has to be, I
    think, part of the discussion.
        Senator Merkley. Yes, Vice Admiral.
        Mr. McGinn. 2008, Senator, was, or should have been, a
    wake-up call for America and our dependence on foreign oil. We
    shipped $386 billion outside of our economy to pay for our oil
    bill, to pay for our, as President Bush said it in his State of
    the Union several years ago, to pay for our addiction to oil.
        And as you rightly point out, this goes to, in many cases,
    state-funded oil companies. That money finds itself to the Hugo
    Chavez Fund and other actors in the Middle East that are
    counter to our interests and to our beliefs, in many cases.
        So, what should we have learned? Oil was $140 a barrel. It
    is about half that, or maybe a little bit more, right now. It
    will go up. There is no doubt about it. No matter how much
    drilling we do in this country, no matter how much domestic we
    try to squeeze out, the price of oil will go up. And every $10
    increase in a barrel of oil costs the Department of Defense
    nearly $2 billion that is taken out of our ability to pay for
    other things, war fighting capability.
        That should be the wake-up call. We cannot let it happen
    again. We have got to start moving in a different direction.
        Senator Merkley. One of the questions that I think it is
    worth wrestling with is whether we should have a coherent
    national strategy to reduce our importation of oil. We affect
    it indirectly through this bill in all kinds of ways, but not
    in terms of targeted milestones.
        But we had testimony earlier today that changing just our
    passenger transportation strategy could reduce the amount of
    oil we import by 44 percent. And I think about what we could do
    in air transportation, where biofuels can substitute, freight
    transportation where there is a non-profit working in Oregon
    that reshapes all the air foils in trucks and puts automatic
    air pressure in the tires, which boosts mileage, home heating
    oil which can be converted to natural gas.
        So, I just want to pose the question, should we have a
    coherent national plan, if not to reduce our oil imports to net
    zero, maybe to reduce them by 80 percent to a level where no
    particular supplier could exert either a huge oil shock to our
    economy or a huge national security risk by constraining our
    access?
        Mr. Sloan. Senator, I think the more important question is
    not reducing imports, per se, but is lessening our use of
    fossil fuels by making ourselves more efficient and kind of
    embracing clean energy technologies that invigorate the economy
    as a whole. Restricting fuel market access is not where we
    should be headed, I do not believe. I think really the focus is
    on kind of innovating within, using our resources more
    efficiently and progressing from there.
        Senator Merkley. Any other thoughts?
        Senator.
        Senator Warner. Well, let me give you an example. When I
    visited the Air Force Academy, they put this booklet together
    for my visit and actually for other reasons, but it really sets
    forth how the Air Force Academy as an island, right there in
    Colorado, is going to making and conserving its own energy. It
    is going to run itself, totally free of the domestic
    availability of energy around it.
        I find that all forms of initiatives are out there within
    the private sector and in the public sector, working. What they
    need is a framework plan. And you have got to devise a stream
    of funding. How many times in these town meetings have people
    said to me, if we could only get a small grant, we have got an
    idea which we can develop and contribute. Of course, the cap
    and trade system is to be that funding stream.
        But if you can just begin to at least find a funding stream
    to help, whether it is nuclear energy or others, get started
    and get off the ground now.
        Senator Merkley. Thank you so much. My time is up. I will
    just close by noting that I appreciate your comment, your
    testimony, Senator, that the young leaders at the Air Force
    Academy really get this issue. And that certainly corresponds
    with what I have seen on university campuses in the State of
    Oregon.
        Thank you.
        Senator Boxer. Thank you so much.
        Senator Lautenberg.
        Senator Lautenberg. Thanks, Madam Chairman.
        I do want to say publicly about how inspired we are by the
    leadership of Senator Boxer. She has decided that this cause of
    ours deserves as much attention as it can get and persisted,
    and here we are, and thus a lot of time invested, but that is
    what we have to do.
        And I thank all of the witnesses for being here. I disagree
    with one or two, which we will try to get to.
        Senator, I was in the Army. So, we can smile at one
    another. John Warner and I shared something. Senator Whitehouse
    said you gave him information as a young man. You gave me
    information, leadership, as a mature man, a little more than a
    young man. We both wore the uniform of our country in World War
    II. I think you also spent some time in Korea or with the
    Korean War. So, our experiences may or may not be relevant.
        But when I see what is happening, and General Scales, I
    thank you for your service to country as well as Admiral McGinn
    and the other little, see what happens when you are so young?
    We do not get to quite acknowledge your service. But each of
    you is owed a debt of gratitude by our country.
        General Scales, in your remarks, you talked about a
    climatic crisis precipitating human friction, mass migration,
    you outlined things that might happen. But you say the problem
    is that even if such disasters occur, they will not be a
    serious cause for war, particularly a war between a major
    competitor and the United States.
        And I look at what is happening now, as we all see, about
    what is happening in Afghanistan, and how madmen can bring us
    in time to our knees, even though we have the weapons, we have
    the troops, we have bravery, we have systems. But here they
    are. And there are more of them than there are of us in the
    final analysis. They are not afraid of our guns. They are not
    afraid of our might. And they do not give a damn about their
    lives.
        So, what kind of a war can be precipitated? I see a
    disaster. And Admiral McGinn, we have had a chance to meet and
    talk in the past. Is there going to be a restructuring of the
    Navy that is going to cost lots of money? Is it worth it if we
    have to do it?
        Senator Warner, do you see a major restructuring of
    equipment?
        Senator Warner. My good friend, I thank you for your
    comments on how both of us were privileged to wear the uniform
    in years past, and I certainly enjoyed the work that we did
    together.
        I would defer to this wonderful witnesses right here. I
    have appeared with her a number of times, and she works under
    the tutelage of a wonderful professional, Secretary Flournoy,
    who I met recently, and they are looking forward 4 years into
    how are United States military and Quadrennial Defense Review
    are to be restructured, the policies revised to confront the
    very thing that you mentioned.
        Just a little historical footnote. In World War II, we did
    not experience that type of suicidal attacks in any way near
    the percentage we see now, except for the last battle in
    Okinawa and subsequent conflicts. But this is something we have
    go to confront, this suicidal tendency----
        Senator Lautenberg. Confront or even acknowledge. Because
    the price that these people are willing to pay is so enormous,
    as we see now in Afghanistan and have seen in Iraq. And when
    people are trying to say they do not care so much about their
    lives, but they all care about their families' lives, and they
    will do anything to reach our shores if their countries are
    underwater. And I think that is what is going to precipitate--
    --
        Senator Warner. Ask Secretary Hicks. She is working on that
    4-year progression, together with others in your department, on
    how we are going to change strategies to confront the very
    thing that the Senator raises.
        Ms. Hicks. Senator, we are about three-quarters of the way
    through our Quadrennial Defense Review which, as you know, is
    the congressionally mandated review we undertake at the
    beginning of every Administration.
        We look out actually about 20 years and we look, in
    particular, at sort of 5-year time lines, 5 years out, 5 years
    beyond that, et cetera. And the world you are depicting, we do
    see in the future.
        I do not want to say that to undermine the very important
    point Major General Scales made, which is that we do think
    state-on-state warfare is something to worry about in the
    future. We in no way dismiss or diminish the importance of
    preparing the United States, and through the capabilities of
    the United States military, for handling that kind of
    challenge.
        But the fact of the matter is the world is simply more
    complex. And as the Secretary likes to say, our Secretary likes
    to say, this is not about fighting the wars we wish we were
    fighting. This is about fighting the wars we are in and the
    wars we will have to fight in the future.
        That will require quite a bit of rebalancing of our forces.
    That does not necessarily mean substantial shifts in funds,
    because some things cost more than other things. But it does
    require substantial shift in mind set and how we think about
    the types of challenges in the future.
        The fact of the matter is that there are lots of different
    trends out there that are worrisome. Climate change is really
    an accelerant to a lot of trends we already see that could--it
    threatens the most those states that are least able to cope
    with those sorts of challenges to population, to water
    resources, to migration, to disaster. And as such, it can
    create, as we have already seen in some states where there is a
    lack of governance, it creates these ungoverned spaces, these
    opportunities for actors that counter U.S. interests to really
    come in and start to take over a population.
        Senator Lautenberg. Thank you. Madam Chairman, General
    Scales wants to----
        Senator Boxer. Yes. Yes.
        Mr. Scales. Could I just? A couple of quick points.
        Senator Lautenberg. Yes, please.
        Mr. Scales. First of all, I do not see the future as being
    a cataclysmic state-on-state type of war either. What my point
    earlier was is that what motivates the Taliban is not being
    denied oil or the rising tide of rivers in Afghanistan. It is
    an ideological religious motivation, not the fact that they are
    economically deprived.
        And the other point, if I may, just add the point about
    fuel consumption. Yes, state-on-state warfare does demand large
    amounts of fuel. But I have been to Afghanistan. I was there
    last year. And if you look at the amount of fuel that is needed
    to fight a non-state enemy or an enemy like the Taliban, it is
    enormous.
        That tether that fuels helicopters, and MRAPs and M1 Abrams
    and all the rest of that is an enormous fuel drain. And it
    would be unfortunate that if we had our ability to produce,
    refine and transport that fuel to a theater of war.
        Senator Boxer. We are going to bring this to a close. I so
    appreciate, Senator Lautenberg, your questioning, because you
    have just made the case for our bill. We need homegrown fuels
    because it will always be important. And that is why in my
    State, where they are turning, you know, we are seeing jet fuel
    being produced from algae and I think, Vice Admiral, you
    discussed a bio-mass fuel that is being used.
        When it is homegrown, we do not have to worry about getting
    it from parts of the world that our friend Mr. Sloan had to go
    to, you know, and risk his life on a daily basis and win all
    those incredible commendations.
        I just want to say what an incredible panel this has been
    and how energized I am. Even those of you who did not agree
    with our approach.
        Lieutenant Colonel, I just have to say, I know that your
    testimony was written on Heritage Foundation stationery, and
    you said you were speaking for yourself. But I have to say you
    did them proud today with your, you know, the way you presented
    it.
        But there is a flaw in what you said. And I do this as a
    friend so that we can continue this conversation. To put out a
    scare testimony that there is going to be scarcity and
    shortages and lack of jobs, that is totally untrue. The
    opposite is true.
        We are going to have a different mix of energy. That is
    true. And we are going to see jobs moving into other sectors
    across the line. But there are going to be more jobs here, more
    businesses here, better jobs that you cannot export.
        And yes, it has a cost. There is no doubt. Thirty cents a
    day for the average family. And you know, that cost does not
    take into account what we save when we avoid the ravages of
    global warming, one of which is what you are talking about, all
    of you today, most of you today, not all of you, which is the
    real possibility that we are going to have to go to war and
    send young people to war because of the instability caused by
    the climate and the refugees and the water problems and all the
    famine and all the things, the droughts that go with it.
        So, yes, the studies show that there will be more jobs,
    that we will not have shortages, we will free ourselves from
    imported oil slowly over the time. But all of you have been so
    great.
        And I want to thank my staff. I was so taken with Vice
    Admiral McGinn's comment that they already turned it into a
    chart.
        [Laughter.]
        Senator Boxer. They are remarkable using solar energy. No,
    I am only kidding.
        America's current energy posture constitutes a serious and
    urgent threat to national security, militarily, diplomatically
    and economically. This is a quotable phrase. And it is what I
    believe, it is what a lot of members of the committee believe,
    it is certainly what Senator Kerry believes. It is why we place
    such stock in your testimony. And part of our wonderful
    coalition in support of our work is a huge number of young
    people and people all the way up the age stream who believe
    that we are doing the right thing for our national security.
        So, again, my deepest, deepest thanks. And I am also going
    to place in the record a press release and statement from the
    CIA that they are opening up a Center on Climate Change and
    National Security. They view this as a serious threat now, and
    they want to get ready for it as the years go on.
        So thank you very much. We stand adjourned. We are going to
    come back at 2:15 p.m. for our next panel.
        [Recess.]
        [The referenced press release and statement follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. I want to welcome all of you. You are panel
    three in our hearing marathon today. I am so very pleased. This
    record that you are going to make today is so very important.
    And today we are going to hear from utilities how you feel
    about what we are contemplating doing here in the Kerry-Boxer
    bill.
        So, we are going to go from this way to this way, and we
    will start with David Crane, President and Chief Executive
    Officer, NRG Energy.
        Welcome.

    STATEMENT OF DAVID CRANE, CHIEF EXECUTIVE OFFICER, NRG ENERGY,
                                  INC.

        Mr. Crane. Thank you, Madam Chairman, and thanks for this
    opportunity to discuss legislation on climate change which is
    an issue which we consider to be the transcendent challenge to
    our generation of American leadership.
        And I want to salute you and the member of your committee,
    Senator Kerry and your staffs for starting this important work
    in the Senate.
        As a major fossil fuel user, we have long recognized the
    challenge of climate change to our company. But rather than
    oppose it, years ago we chose to transform that challenge into
    an opportunity, and we are 3 years into our $15 billion
    RepoweringNRG Program, which involves advanced nuclear, wind,
    solar, biomass and post-combustion carbon capture projects in
    active development across the country,
        To date, we have spent hundreds of millions of dollars on
    this effort. As a merchant power company, we have no rate
    paying public to pass that cost onto. Indeed, we can only
    recover that money if we control costs and risks and make these
    low carbon projects work in the marketplace.
        But today's market does not put a price on carbon
    emissions. Right now, the easiest and cheapest thing for us to
    do to is to emit all the carbon produced as a byproduct to our
    generation process into the atmosphere, and we are allowed to
    do that for free.
        So, for our investments in these new low and no carbon
    technologies to work, the Senate needs to act now to make
    carbon emissions part of the economic equation for NRG as well
    as for the rest of the economy.
        Your draft legislation, I believe, tacitly recognizes that
    effective Federal climate change legislation will, in fact, be
    our national energy policy for the next two generations. In
    that regard, I want to compliment you and this Administration
    for your focus on encouraging renewable generation, and I would
    note that NRG has a multi-billion dollar investment plan for
    renewables already well underway.
        But I would also caution, with respect to renewables, that
    there are inherent issues of intermittency, limited-scale
    expense and geographic constraints. There are serious
    limitations. We need to build a zero carbon base load
    foundation under our wind farms and solar fields, and that
    foundation is new advanced nuclear power.
        And it is zero carbon nuclear that will provide the juice
    for our personal transportation system based on a nationwide
    fleet of electric cars, dramatically reducing both tailpipe
    emissions and the transfer of American wealth to the oil
    exporting nations.
        Right now, NRG's $10 billion 2,700-megawatt South Texas
    Project is on the short list to receive DOE loan guarantees. We
    are confident that it will succeed, be built on budget and be
    on line in the later part of the next decade, along with at
    least two of the other projects presently under consideration
    by the DOE.
        But three new nuclear plants by 2020 does not a nuclear
    renaissance make. We need 75 new nuclear units by 2050 simply
    to maintain nuclear power's current share of electricity
    production. And to double it, we need to build at least 150 new
    units.
        The nuclear title in your bill is a good start. But in
    addition to support for worker training and R&D, it needs more
    support for domestic manufacturing capability, siting on
    suitable Federal land, additional but shorter lived loan
    guarantees, and efficient approval processes to safely handle a
    much larger volume of projects.
        The de-carbonization of the electricity sector is the
    single biggest step we can take to reduce greenhouse gas
    emissions. But simple math tells me that if the goal is 83
    percent carbon reduction by 2050, we need also to de-carbonize
    the private transportation sector as well.
        Your bill, again to its credit, recognizes the importance
    of the electrification of the transportation sector but is, I
    believe, too modest in its goals. We need legislation that will
    incent a commercial foothold strategy that will quickly capture
    a significant market share for electric vehicles among actual
    American consumers in key American cities that themselves have
    taken meaningful steps to deploy an electric car ecosystem
    right now.
        In addition to the huge benefits in tailpipe emission
    reductions, the electrification of our transportation sector
    will provide the cure to our national addiction to foreign oil
    and will substantially reduce the $400 billion of annual wealth
    transfer that currently takes place from the U.S. to the oil
    producing nations. Keeping that $400 billion at home is
    important to me, not just as the CEO of NRG, but as an
    American.
        As to the general market-based format of your bill, we
    support all of its key structural elements. But we would
    respectfully suggest four areas for your potential
    consideration.
        First, avoid under allocating transitional allowances in
    the power sector in order to assure the ability of the power
    sector to deploy game changing clean technologies. Second, act
    affirmatively to limit the EPA's ability to use existing Clean
    Air Act provisions to regulate greenhouse gas. Third, increase
    the supply of offsets and act now to establish EPA criteria to
    ensure a supply of early offsets that will be valid for
    compliance. And fourth and finally, ensure the market stability
    reserve program is large enough to provide a suitably firm cap
    on allowance prices.
        Thank you.
        [The prepared statement of Mr. Crane follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Mr. Crane, thank you for those very
    important words and also your very specific recommendations. We
    really appreciate it.
        Our second majority witnesses is Ralph--how do I say it?
        Mr. Izzo. Izzo.
        Senator Boxer. Izzo. And Ralph Izzo is the Chairman and
    Chief Executive Officer and President of Public Service
    Enterprise Group Incorporated.

        STATEMENT OF RALPH IZZO, CHAIRMAN, PRESIDENT, AND CHIEF
           EXECUTIVE OFFICER, PUBLIC SERVICE ENTERPRISE GROUP

        Mr. Izzo. Madam Chairman, PSEG owns and operates a large
    fleet of power plants. Roughly half of our power comes from
    nuclear generation, while the remainder is fueled equally by
    coal and natural gas.
        We are investing over $1 billion in energy efficiency,
    solar generation and offshore wind. And we serve more than 2
    million electric and gas customers, many of whom struggle to
    pay their bills.
        So PSEG cannot be defined strictly as a nuclear company,
    strictly as a coal company, a renewable company or a regulated
    utility. We have all of these interests under one corporate
    umbrella.
        As such, we have had to think hard about the challenges and
    tradeoffs associated with climate change. We conclude that our
    company, our customers and our Nation urgently need this
    Congress to establish a national cap and trade system. I
    applaud you and Senator Kerry for your bill engaging in this
    critical dialogue.
        There are many provisions in the bill that my company
    supports, but some that we do not. But we choose not to let
    perfection be the enemy of the good. We must continue the drive
    to final congressional action.
        First, without action, our industry is paralyzed. Those in
    our industry who are already subject to carbon regulation,
    including PSEG, are responding by making low carbon investment
    choices. But uncertainty about a national program slows or
    transition to a green economy. Those in our industry not
    subject to carbon regulation recognize that they soon will be.
        If Congress does not act, the EPA will. The EPA has already
    announced its intention to regulate greenhouse gases under the
    Clean Air Act by March of next year.
        We all know how markets respond to uncertainty. Investment
    is cautious, innovation is stifled, job creation is tepid. The
    uncertainty about carbon regulation hangs over decisions about
    retrofitting coal plants to reduce their emissions, pursuing
    new nuclear, or investing in offshore wind. It is bad for
    investors, it is bad for customers, and it is bad for
    employees.
        Only Congress can give us the certainty of a sustainable
    national cap and trade program. This program should supersede
    existing regional programs to create an even and predictable
    playing field for investment as the bill before this committee
    does.
        However, to ensure sustainability, we cannot overburden
    customers with cost increases. That is why a price collar that
    minimizes price volatility and limits the price of carbon while
    maintaining the integrity of the cap is a critical provision.
        It is also vital to distribute an adequate number of carbon
    allowances to customers through their regulated electric
    utilities. Providing allowances to utilities and mandating that
    the savings be passed to customers is the most direct way to
    minimize cost increases. This was part of the allowance
    compromise agreed to by members of the Edison Electric
    Institute. This agreement recognized the need to balance
    protections for customers in coal heavy regions with
    protections for customers who are already paying higher prices
    for cleaner generation. I commend this committee for preserving
    this framework.
        The second reason for moving ahead promptly on climate
    change is that America is losing ground to other countries.
    Germany and England have robust offshore wind industries.
    Israel and Denmark are deploying electric vehicle
    infrastructure. China is becoming the world's primary source
    for solar panels.
        Putting a price on carbon is the single most important step
    toward making America a leader in this new energy economy. It
    will encourage investments in energy efficiency, in renewable
    energy, in energy storage, nuclear power, electric vehicles and
    other low carbon solutions. In short, it will create jobs.
    Fueled by strong State level policies, a local New Jersey
    company is hiring 100 workers to make inverters for solar
    panels for PSEG to mount on our utility poles. We need to drive
    this kind of job creation nationally.
        The third, final and most important reason we cannot delay
    action on climate change is that scientists say we are quickly
    running out of time. The latest data sends an unmistakable
    message that climate change is already occurring and faster
    than predicted.
        This issue will always be difficult. There will always be
    regional disputes and concerns about impacts on customers. But
    we must overcome these challenges sometime if we are going to
    confront climate change, create jobs and make America a leader
    in the low carbon economy.
        Thank you for listening.
        [The prepared statement of Mr. Izzo follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you, Mr. Izzo. I found your remarks to
    be very important.
        I am going to ask Senator Gillibrand to introduce our next
    witness because she actually arranged that this very important
    witness be heard.
        Senator.
        Senator Gillibrand. Thank you, Madam Chairwoman. I
    appreciate you allowing me to introduce a fellow New Yorker.
        Mr. Kevin Law is not just a fellow New Yorker, but also the
    President and Chief Executive Officer of the Long Island Power
    Authority, also known as LIPA. LIPA is the second largest
    public utility in the United States, serving more than 1.1
    million customers from Montauk to Far Rockaway.
        Mr. Law also serves on a number of important organizations
    such as the Advanced Energy Research and Technology Center
    located at SUNY Stony Brook, as well as the New York State
    Smart Grid Consortium.
        Madam Chairman, I am so happy that he could be here with us
    today to discuss this very important legislation and his
    efforts to advance energy efficiency and consumer protection
    programs all across Long Island.
        Senator Boxer. Well, thank you so much, Senator, for all
    your hard work. And I just want to say that, for those who are
    here from New York and outside of New York, the role that the
    Senator from New York has played in this, putting together this
    bill and focusing on many of the aspects, including the way cap
    and trade would work and also making sure we take a look at
    ways to incentive clean cars, especially in her home State.
        So, I am just so glad you are here today. I know how hectic
    you are.
        Mr. Law, you got a very good introduction; please proceed.

       STATEMENT OF KEVIN S. LAW, PRESIDENT AND CHIEF EXECUTIVE
                  OFFICER, LONG ISLAND POWER AUTHORITY

        Mr. Law. Well, I appreciate that. Thank you very much,
    Senator Boxer and my home State Senator, Senator Gillibrand.
    Thank you very much for those kind words.
        I will be brief. I have submitted written testimony, and I
    ask that be entered into the record.
        Senator Boxer. Without objection.
        Mr. Law. Again, I want to thank you for the opportunity to
    brief you on things that are going on in New York and on Long
    Island. I want to thank Governor David Paterson, who has
    challenged LIPA and is leading the way in New York in terms of
    energy efficiency and renewable energy, and challenging the
    utilities to help address the goals of New York State.
        I support your efforts for this bill. The old ways of doing
    things in terms of generating electricity and distributing
    electricity are no longer working. And they are not going to
    allow us to address our energy challenges and economic
    challenges for the future. We have a 21st century high tech
    world with a 20th century low tech grid. And we need to be
    doing things differently.
        We also need partnerships. No one entity can do it alone.
    We need the Federal Government to play its role, we need the
    State government and the local governments and the utilities,
    because no utility can do it alone either. And so we appreciate
    your efforts here with this legislation.
        New York, Senator, is already operating under a cap and
    trade system. We are part of the Regional Greenhouse Gas
    Initiative, which is part of 10 Northeastern and Mid-Atlantic
    States throughout the country that are participating under
    RGGI. And guess what? The sky did not fall.
        [Laughter.]
        Mr. Law. The program has been operating well, and all of
    the utilities have been cooperating. So I share that news with
    you.
        As for LIPA, we are doing some very exciting things that I
    think the rest of the country can follow. We have a Solar
    Pioneers Program, and we have placed over 2,000 customers with
    solar panels to date. We are also doing the largest solar
    energy project in New York State's history, a 50-megawatt
    project.
        But here is the key, and from the testimony this morning
    with your colleagues. Before LIPA started that solar program,
    there were only two companies on Long Island who were involved
    with the installation and maintenance of solar panels. Today,
    several years later, we have over 30 companies on Long Island
    involved with the installation and maintenance of solar panels.
    It is all about jobs. And we have demonstrated that we can
    create jobs.
        We are also exploring the country's largest offshore wind
    project in the country. I am doing that with Consolidated
    Edison, an investor-owned utility. Remember, LIPA is a public
    utility, we do not have shareholders, we only have rate payers.
    We are working on that with ConEdison and other State entities
    and agencies, and we know that is also something that can also
    create jobs. So, we are in the process of exploring that.
        But one of the best programs that we have going is
    Efficiency Long Island. It is the largest energy efficiency
    program for any public utility in the country. It is a $924
    million program over the next 10 years, and the goal of that
    program is reduce our peak demand. The goal is help our
    customers lower their bills and to allow LIPA to avoid having
    to build the next power plant.
        This program is the power plant we do not have to build.
    That is why efficiency, we believe, is the next best resource
    and the cheapest resource for both our rate payers and our
    environment.
        So, I believe this legislation can work. I have submitted
    testimony with parts that we like and some parts where we
    suggest a couple of minor tweaks. But if we are going to enter
    into and prepare for a clean energy economy, we need to start
    investing in our energy future today.
        We are doing that on Long Island, we are doing that in New
    York State with the help of Senator Gillibrand and Senator
    Schumer and Governor Paterson, and we know the rest of the
    country could do it.
        We look forward to working with you and other utilities
    across the country to show that this can work.
        Thank you, Senator.
        [The prepared statement of Mr. Law follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Well thank you so much, Mr. Law. There is a
    very can-do New York spirit there.
        Now, I want to make sure that I pronounce your name right.
    So is it Nathaniel Keohane?
        Mr. Keohane. Keohane.
        Senator Boxer. Oh, Keohane. See, I made you Hawaiian.
        Mr. Keohane. Exactly. I wish I were Hawaiian sometimes.
        [Laughter.]
        Senator Boxer. Keohane. K E O H A N E. That is a challenge.
        Mr. Keohane is the Director of Economic Policy and Analysis
    at the Environmental Defense Fund. I want to welcome you and
    point out that EDF has been such an important, pragmatic
    partner to all of us as we sat down with business, with labor,
    with environmentalists, with all of the stakeholders. You have
    been really a stand out, and I want to thank you.
        And Mr. Keohane is another majority witness.

     STATEMENT OF NATHANIEL O. KEOHANE, PH.D., DIRECTOR, ECONOMIC
            POLICY AND ANALYSIS, ENVIRONMENTAL DEFENSE FUND

        Mr. Keohane. Thank you, Madam Chair, and thank you for your
    leadership on this critical issue. I am honored to be here
    today.
        Congress has an unprecedented opportunity right now to put
    the American economy on a strong footing for the 21st century.
    A cap on global warming pollution will ensure that we lead the
    world in the next generation of clean energy technologies.
        And the innovation and investment unleashed by a carbon cap
    will help jump start our economy today while paying rich
    dividends later in the form of cleaner air, enhanced energy
    security, and most of all a livable planet to pass on to our
    children and grandchildren.
        Now, in the process, a carbon cap will transform the public
    commons into a valuable asset. That asset is a public trust,
    and allocating its value wisely and equitably is a crucial test
    of any climate bill. This is the issue I would like to focus on
    today.
        My message is simple. Consumer protection is the bedrock
    principle of allowance allocation. By directing a substantial
    portion of allowance value to households through multiple
    channels, as I will explain, Congress can ensure that the
    program is easily affordable for American families.
        As part of that package, local utilities have an important
    role to play in helping to protect consumers. Congress should
    design the legislation to guarantee that households receive the
    full allowance value intended for them while preserving
    incentives for common sense investments in energy efficiency.
        So, as I said just now, the allowances created by a carbon
    cap represent a valuable public asset. A wise allocation of
    that asset should be guided by three core principles. First,
    invest in the transition to a growing clean energy economy.
    Second, preserve and strengthen American manufacturing by
    preventing carbon leakage. And third, protect consumers. This
    is the bedrock principle.
        In allocating allowances, we should focus first and
    foremost on keeping the program affordable for American
    families. There is no single best way to do this, no one size
    fits all approach. Instead, we should use a variety of
    channels. Because low income households are vulnerable even to
    small changes in energy costs, those households should be fully
    protected. Because we all have a stake in solving climate
    change, a generous broad-based dividend to every American
    family must be part of the package.
        And because how electricity is generated varies widely in
    different areas of the country, local utilities can provide a
    useful channel for directing allowance value to households in a
    way that accounts for regional variation.
        Let me spend a minute on the local utilities. The Kerry-
    Boxer bill, like legislation passed by the House, gives a large
    share of allowances to local distribution companies, or LDCs,
    for the benefit of their rate payers, including residential
    rate payers or households. I will show why this approach makes
    sense.
        But first I want to underscore that in giving allowances to
    LDCs, the legislation should be absolutely clear that the value
    must flow to consumers. Safeguards to ensure this can include
    clear language specifying that consumers must receive the full
    value of allowances, requirements that LDCs publish detailed
    plans before receiving any allowance value, mandatory audits to
    ensure that those commitments are being met, and strong
    enforcement provisions. All of those provisions are included in
    the Kerry-Boxer legislation.
        At the same time, I would also say that care should be
    taken to ensure that the method of allocating allowance value
    does not dampen incentives to take advantage of cost effective,
    common sense ways to reduce energy use. This could be done with
    something as simple as a monthly check made out to each
    household where the size of the check was the same regardless
    of the amount of energy consumed.
        Now, back to the rationale for having the LDC approach in
    the first place. Even as we look ahead to the new clean energy
    economy, it is only fair to take into account our starting
    point, that is the current patterns of electricity generation
    that have arisen for geographical and historical reasons. In
    fact, as I show in my written testimony, electricity
    consumption is far and away the most significant source of
    regional variation in household level emissions. On the other
    hand, once you account for differences due to electricity,
    there is little regional variation from other sources.
        Those facts tell me three things. First, allocating
    allowances to LDCs makes sense as a way of smoothing out
    regional differences. Second, as we build a new low carbon
    energy infrastructure, these regional disparities will
    disappear, and the LDC allocation can be phased out
    accordingly. And third, we will need other mechanisms in
    addition to the LDC allocation, including dedicated auction
    revenue for low income households as well as a broad-based
    consumer dividend to every American family.
        Allowance allocation is sometimes caricatured as complex.
    But the bottom line is easy to grasp. By investing in the
    transition to a clean energy economy, preserving jobs, and
    above all, protecting American families, we can tackle climate
    change, achieve real energy security and strengthen our
    economy.
        The House legislation provided an excellent start. Now it
    is time for the Senate to finish the job.
        Thanks for much. I look forward to your questions.
        [The prepared statement of Mr. Keohane follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        OK, our next majority witness, and our last majority
    witness on this panel, Joel Bluestein, President, Energy and
    Environmental Analysis Incorporated, ICF International.
        Welcome, sir.

        STATEMENT OF JOEL BLUESTEIN, SENIOR VICE PRESIDENT, ICF
                             INTERNATIONAL

        Mr. Bluestein. Thank you very much.
        Good afternoon. My name is Joel Bluestein. I am a Senior
    Vice President at ICF International.
        We became part of ICF International almost 3 years ago. ICF
    is a consulting firm headquartered in Fairfax, Virginia, that
    provides objective technical analysis to public and private
    sector clients including U.S. Government agencies, but does not
    take advocacy positions on these topics.
        I am happy to be here today to discuss the potential role
    of natural gas in addressing greenhouse gas emissions.
        Many people expect that natural gas will play an important
    role in achieving greenhouse gas reduction. This is not
    surprising since natural gas has the lowest carbon content of
    all fossil fuels. It can be used in very efficient
    technologies, and it can be used effectively in power
    generation, transportation and direct in-use applications.
        At the same time, there is concern for some that gas could
    play too large a role, that a massive dash to gas will occur in
    the electric power sector and that North American gas supply is
    too limited to support this increased gas consumption.
        My two messages are, one, the recoverable U.S. natural gas
    resource is understood today to be much larger than ever
    before, and two, a variety of projections show that natural gas
    can play a significant role as part of a greenhouse gas
    mitigation strategy without causing economic upheaval and
    hardship.
        As a point of reference for the estimates of the natural
    gas resource, U.S. consumption of natural gas has been in the
    range of 22 trillion to 23 trillion cubic feet per year for the
    last 12 to 15 years. The most recent estimate of the U.S.
    natural gas resource is this year's report of the Potential Gas
    Committee, a nonprofit independently governed entity associated
    with the Colorado School of Mines.
        The PGC's most recent report, the 2008 assessment released
    in June 2009, estimates that the total U.S. natural gas
    resource base, at the end of 2008, was 2,074 trillion cubic
    feet, more than 36 percent higher than the 2006 estimate. This
    total reflects the highest level in the committee's 44-year
    history and represents about 90 years of supply at current
    consumption levels.
        The big change in this new assessment is a greatly
    increased evaluation of the shale gas resource largely due to
    the development and application of new drilling and production
    techniques. These advances have allowed shale gas to evolve
    from a small component of the gas resource to the major gas
    component. The Barnett shale formation near, and actually
    underneath, Fort Worth, Texas, by itself currently accounts for
    approximately 10 percent of U.S. natural gas production.
        The increased supply from these resources has fundamentally
    changed the supply demand balance for natural gas in North
    America.
        Turning to the role of natural gas in greenhouse gas
    reduction, interestingly the base case modeling performed by
    the U.S. EPA and EIA, of the Waxman-Markey bill, and by
    extension, of the Kerry-Boxer bill, does not show a dash to
    gas. These projections show gas use flat or slightly declining
    even in the power sector.
        The key drivers of these results are very low energy demand
    growth, very high reliance on offsets, and higher reliance on
    new low emitting technologies such as renewables, nuclear, and
    coal with carbon capture and storage.
        Under these conditions, there will be limited demand for
    gas. However, most analysts expect that the supply of offsets
    will be significantly less than the maximum allowed under the
    bills and that some of the technologies may be slow to reach
    wide application.
        The EIA has run a scenario with no international offsets
    and no new nuclear or CCS technology which results in a 15
    percent increase in gas consumption in 2020 and a 25 percent
    increase in 2030. Even with this significant increase in
    natural gas consumption, the well head price of gas increases
    by $1 per million BTU in 2020, and actually does not increase
    from the base case in 2030.
        So, even a significant increase in gas consumption does not
    result in a major increase in the long-term price of gas.
    Moreover, these cases do not include the most recent data on
    expanded natural gas supply, which could reduce the price
    impacts.
        Finally, I want to note that one of the important changes
    in the Senate bill relative to the House bill is the delay in
    direct regulation of fugitive methane emissions. This allows
    the generation of offsets from methane sources through 2020,
    which would otherwise be precluded.
        Since the use of offsets is one of the most important cost
    control measures in the bill, the ability to increase the
    supply of offsets could be important to ameliorate allowance
    prices.
        Overall, we expect that compliance with greenhouse gas
    legislation will require the use of a diverse mix of clean
    technologies including gas, coal with CCS, renewables, nuclear
    and energy efficiency. We do not expect any one technology to
    dominate.
        That said, we expect that several of these options are
    unlikely to be widely available until at least 2020. Thus, we
    do see an increased role for natural gas at least through that
    time, especially if the availability of offsets is limited and
    the economy is revitalized.
        Fortunately, the new drilling and production techniques
    have expanded our natural gas supply options and should allow
    us the flexibility to use gas cost effectively as one of the
    options for greenhouse gas reduction.
        Thank you for the opportunity to testify, and I look
    forward to your questions.
        [The prepared statement of Mr. Bluestein follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you. And I wanted to point out that we
    have worked very closely with ANGA, the American Natural Gas
    Association, and they have been very, very helpful. And there
    has been so much news about natural gas finds. It is very good
    news, I think, for the environment.
        And now we turn our two witnesses that were cordially
    invited by the minority. We welcome you here. The first one is
    Barry Hart, Chief Executive Officer, Association of Missouri
    Electric Cooperatives.
        Thank you for being here.

     STATEMENT OF BARRY HART, CHIEF EXECUTIVE OFFICER, ASSOCIATION
                   OF MISSOURI ELECTRIC COOPERATIVES

        Mr. Hart. Thank you, Senator Boxer. I thank the committee
    for inviting me to participate today.
        I am proud to represent all of the great folks back in
    Missouri, the Show Me State, that own their own electric co-
    ops. I do appreciate this opportunity, and I want to thank
    Senator Bond for calling me. But I also want to thank our
    junior Senator, Senator McCaskill, for what she is doing for
    our State. And I would be remiss if I did not tell the Governor
    of our State, Jay Nixon, hi from the Nation's capital. He is a
    good friend of mine.
        Let me give you an idea of our customer mix in Missouri,
    who we represent and their situation. That might give you a
    snapshot of what is going on out there. Presently, electric
    cooperatives in Missouri represent 2 million people that are
    getting electricity from 40 not-for-profit consumer-owned
    electric cooperatives.
        These consumer-owned electric cooperatives operate in the
    best interests of the consumer who owns them. And because we
    have done a good job of that over the years, we have 91 percent
    customer satisfaction ratings in our State. We are very proud
    of that.
        Let me give you a snapshot of some of our members in these
    small rural communities in Missouri. One-third of our members
    are 65 years of age or older, 83 percent of that group are
    retired and are living on a fixed income. Half of our
    households in our State earn less than $40,000 a year.
        It is tough times for these folks. They work in the ag,
    timber and tourism industries. And they cannot, a lot of times,
    pass these additional costs along. So that makes them sensitive
    to price increases.
        We have a long history in our State of working for our
    members, bringing electricity to the communities and economic
    development for our rural communities. We like to lead the way
    in rural Missouri.
        We would like to continue that commitment today in working
    on the energy issues of our country and our State. We are very
    proud of the fact that as co-ops in Missouri we were the first
    in our State to develop large scale wind projects. Presently in
    Northwest Missouri we have 300 megawatts of wind under
    contract. And our communities are supporting those projects.
        We are also investing in efficiency for our members. We
    have dedicated $31 million of co-op member money toward Energy
    Star appliances, energy audits, ground source heat pumps, and
    CFLs. We are very proud of the fact that in the last year we
    have installed 2 million CFLs in our members' homes.
        We are also one of the first utilities in the Midwest to
    join the Chicago Climate Exchange, and we are trying to do
    something about our carbon footprint in Missouri.
        Our consumers started looking at this issue right after the
    House passed the legislation. They started hearing about all of
    these different studies that were done, and the studies had
    conflicting costs associated with them. So, they asked us to do
    our own study. And because our consumers asked us, we felt we
    had better get on it.
        So, we asked all of the investor-owned utilities, the
    municipal utilities and co-ops in our State, the people that
    are generating electricity every day, to come together and look
    at the Waxman-Markey bill and tell us how much it is going to
    cost our consumers.
        The results are staggering, and it got our members'
    attention. They are looking at 12 to 26 percent rate increases
    in 2012, which could go up to 50 percent under different cost
    scenarios. The impacts to our State are a lot larger than what
    a lot of people thought. We also are looking at 20 to 42
    percent rate increases in 2020, and those could reach as high
    as 77 percent under the worst case scenario.
        As we review the Senate bill, and we know you have put a
    lot of hard work into this bill, and as some of the other
    testifiers have said, you have tried to work on consumer
    protections. But this bill is not good for Missouri. I have to
    be honest with you. We only get out of this bill 60 percent of
    the carbon credit allocations that we need, and we have to pass
    those costs on to our consumers.
        And I agree with some of the earlier testifiers that the
    carbon credit allocations need to benefit consumers because
    they are the ones that we are asking to pay the bill.
        We want to work with the Senate, any Senate committee, any
    of the Senators, to get a bill that protects consumers and
    meets the goals of the United States of America. And we will
    stand ready to work with anybody, anywhere, anytime to meet
    that test.
        Presently, we do not think the committee's bill meets that
    test. I am going to take it back to our consumers in Missouri.
    I am going to present it to them. And I will get back with both
    of our Senators and let them know what the consumers are
    telling me back home.
        Thank you for the opportunity. But I do have to caution
    you, I am just afraid that if I take that 60 percent allocation
    back to our members, our consumers in our State, they are going
    to tell me to ask both of my Senators to vote no on this bill.
        Thank you for the opportunity.
        [The prepared statement of Mr. Hart follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. And our next minority witness is Brett Hart,
    no, it is Dustin Johnson. I have got to get this right. I have
    got my wrong panel here. Dustin Johnson, Commissioner, South
    Dakota Public Utilities Commission, and Mr. Johnson is serving
    as the Commission's Chairman. Congratulations, Mr. Chairman.
    And we are honored to have you with us.

     STATEMENT OF DUSTIN ``DUSTY'' JOHNSON, CHAIRMAN, SOUTH DAKOTA
                      PUBLIC UTILITIES COMMISSION

        Mr. Johnson. Thank you very much.
        Good afternoon Madam Chairman, Ranking Member Inhofe,
    members of the committee.
        I am Dusty Johnson. I am Chairman of the South Dakota
    Public Utilities Commission, and since I was elected 5 years
    ago statewide, it has been my great pleasure to fight for
    consumers. And I love doing it, and I know you all do as well.
    These folks have earned their money, and they should not have
    to spend any more than they have to on their natural gas and
    electric bills.
        And that is really what brings me here today. I understand
    the desire to reduce our carbon footprint. And I think we
    should. But I am concerned that this bill is not fair, and I am
    concerned that it hurts consumers, especially Midwestern
    consumers, far more than it has to.
        What do I mean? Well, this bill, I think, first hurts
    Midwestern consumers by significantly increasing their utility
    bills. Our analysis indicates that bills in South Dakota are
    going to go up 25 percent between now and 2012. And that is
    just to pay for allowances. That is not to clean up anything,
    or to build anything new. That is just to pay for the
    allowances. And that is about a quarter of a billion dollars a
    year hit for South Dakota. And I just do not know how you can
    take a quarter of a billion dollars out of South Dakota every
    year and not hurt families and businesses.
        Of course, those price spikes are going to come at a time
    when we are already seeing electricity prices increase pretty
    significantly, and we are seeing that in South Dakota. Black
    Hills Power has already asked us for a 27 percent rate
    increase, Xcel Energy has asked us for an 11 percent rate
    increase, and most of those costs are related to Xcel trying to
    get cleaner.
        Let us be honest. Building new wind power, building new
    transmission lines, converting coal power plants to natural gas
    power plants, as they are doing, that stuff does not come
    cheap. And we are getting greener in South Dakota. We are very
    proud of that. But that does cost serious money.
        So I think that is my big concern. You get that double-
    barreled shot of folks having to pay for allowances while at
    the same time having to pay to green up their energy sources.
    That is going to have an impact on consumers, and I do not
    think anybody can deny that. You all have heard CBO Director
    Elmendorf has testified that the House bill would cut the
    Nation's GDP by 3.5 percent over the lifetime of the bill, and
    that impact is going to be disproportionately felt in States
    like mine.
        Why? Because this bill, in a lot of ways, picks regional
    winners and losers. You look at California. Under this bill,
    California would receive 12 million more carbon allowances than
    it needs. And little South Dakota would be left about 3 million
    allowances short. Other Midwestern States are left in similar
    situations. And that is going to mean a very real transfer of
    jobs and billions of dollars from our Nation's Heartland to the
    coasts.
        That is, I think, one clear example of how this bill, at
    least in its current form, is bad for the Midwest. And I think,
    is an example of a provision that is more about politics than
    about the environment.
        Now listen. I am a politician. And I understand that
    politics is about the art of compromise. But I think this bill
    that tries to give a little bit of something to everybody in
    some ways has obscured the central role of carbon regulation.
    What do I mean? Well, I think in some ways this bill gives our
    country a fish when we need a fishing pole.
        People have talked about softening the impact to consumers
    by giving some of them rebates. But I do not want Americans to
    be more dependent on a check from the Federal Government to pay
    their utility bills. If we want to reduce our carbon footprint,
    and again I think we should, if we should do it, then let us go
    do it. Let us invest that money in nuclear and in energy
    efficiency and in research and development. Let us solve the
    problem rather than making us more reliant on the Federal
    Government to pay those bills.
        I should mention that I am not alone here. The National
    Association of Regulatory Utility Commissioners, and these are
    the folks who are fighting for consumers every day, they do not
    oppose this bill. But they do agree with me on a whole lot of
    this. They agree allowances should be given based primarily on
    emissions, that compliance revenues should be invested in
    technology and efficiency, that the utility sector should
    receive a full portion of allowances, and that State
    commissions need more flexibility.
        I am no Neanderthal and neither are my regulatory
    colleagues. I believe the globe is warming, and I think we
    should reduce our carbon footprint. One hundred percent of the
    generation that has come on line in South Dakota in my 5 years
    as an energy regulator has been renewable or low carbon. We
    have invested $1 billion in wind, we have new transmission
    lines, we have a thousand green jobs, and the ACEEE recently,
    just last week, named South Dakota one of the most improved
    States in the entire country in the last year because of our
    energy efficiency efforts.
        I believe in a low carbon future. We are making strides in
    South Dakota, and I am hopeful that we can improve this bill so
    that it moves us farther down the field in the right way.
        Madam Chairman, thank you very much for the time.
        [The prepared statement of Mr. Johnson follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much, Mr. Johnson.
        I am going to start with you because you said a few things
    that I want to correct in the record. You talked about being a
    champion of consumers. I am so proud of you for that, because I
    am considered a champion of consumers. I got the award from the
    Consumer Federation of America a while back, and I am very
    proud of that.
        So, let us talk about that because I would not support a
    bill that was not fair to consumers. Do you know what
    percentage of the allowances go to protecting consumers in the
    Kerry-Boxer bill?
        Mr. Johnson. Well, I have seen different numbers. But I
    think your central point, Madam Chairman, is absolutely right.
    A lot of the allocation revenue does go----
        Senator Boxer. Do you know the percent I am talking about?
        Mr. Johnson. I do not, Madam.
        Senator Boxer. OK. It is 70 percent. OK. So, first thing is
    that we are in agreement. Now, it may be at the end of the day
    it needs to be higher to meet your needs. But I do want to make
    that point that, and Senator Klobuchar has been very, she is
    not here now but I want to give her a shout out because she
    really worked hard on that piece, and that is why at the end of
    the day the costs for an average American family is 30 cents a
    day.
        Now, you also talked about, and I could not agree with your
    more, you do not want people to be dependent on the Federal
    Government. Do you want people to be dependent on foreign oil?
    I doubt it. That is a patriotic issue, too.
        So, I think the issue is, how do we do this in the right
    way where we become energy independent, create jobs for our
    people, and keep consumers whole? I think we share those goals.
        Now, I want to work with you and your Senators to make sure
    that this bill meets those standards for your State. But I have
    to say, you know, some of the things you said about a hit on
    the economy of 3 percent is not correct. We even do better than
    the House bill. The House bill, the analysis is one-quarter of
    a percent in 2020. And at the end of the day, there will be 250
    percent larger economy when we get to 2050 instead of a 251
    percent. And that does not include any of the unforeseen costs
    that could come. For example, if we just had one Katrina a
    year, that is $100 billion.
        So I think what we need to do, all of us, is to step back
    from this and say, what is best for our country? You and I
    agree on so many principles. We have got to take care of
    consumers, we have to make sure they are treated fairly, we
    want to create jobs and we want to make sure that people can
    get what they need.
        And that is the whole purpose of our bill. I guess what I
    want to ask the rest of the panel is, the minority witnesses
    are, you know, very concerned about the impact of this on
    consumers and on the economy. I wonder if any of you can sort
    of repackage your enthusiastic statements, because I think it
    is sort of a gloom and doom, frightened of the future type of
    picture that I get over there, so different than the picture
    that I got from Mr. Izzo, Mr. Law and Mr. Crane. So, whoever
    would like to take the time.
        Mr. Crane. Thank you, Madam Chairman. What I would just add
    on----
        Senator Boxer. Where are you headquartered? I did not ask.
        Mr. Crane. Princeton, New Jersey.
        Senator Boxer. OK.
        Mr. Crane. I would just add two points. First of all, since
    we started studying the impact of various sort of cap and trade
    regimes on the economy, I have seen so many different studies,
    you know, linear model progressions and the like, and they all
    come out with extremely different answers. We see them from the
    Government, we see them within U.S. cap, we have done studies
    of our own. And I would just add two points to the comments you
    made.
        First, the one thing that has been common to all studies is
    what you assume about how many nuclear power plants and how
    much success we have in deploying clean coal has a huge impact
    on the outcome, particularly in the 2020 to 2040 factor. So
    that, to me, is a really important part of the overall package.
        The second point I would make, Madam Chairman, while I have
    seen a lot of studies about cap and trade under the House bill,
    and I am starting to see it on your Senate bill, what we have
    not seen is what the impact on our economy is going to be if we
    allow the EPA to act to regulate carbon. And from my
    perspective, while we are unable to quantify that right now,
    the consequences of that are very worrisome to our company.
        Senator Boxer. Please, Mr. Izzo.
        Mr. Izzo. We, too, are worried about customer impacts. We
    have modeled that, and it looks like our customers under the
    EPA numbers could see anywhere from a 5 to 6 percent rate
    increase by 2015. And those are customers who are already
    probably paying a lot more than other parts of the country
    which will see a greater percentage increase, but at the end of
    the day will still be paying a lot less for their electricity.
        We never dispute that this legislation will cause an
    increase in electric rates. By increasing the allocations to
    consumers, you mitigate against that. We will be cleaning the
    air, we will be making the world a better place, and we will be
    investing, and I know of no investment that comes freely, we
    will be investing in job creation. We say that from experience.
    We have created those jobs already under the RGGI regime in
    the----
        Senator Boxer. So, in other words, the person, I see South
    Dakota here under the House bill, the average consumer would
    pay $5 a month more. That is the average. We think we have made
    that slightly better. Maybe it is at $4 or $4.50 for your
    people.
        But if that same person gets a job, we anticipate the
    creation of 2 million jobs, I think that is a very good
    solution if we go into this clean energy future.
        Mr. Law and Mr. Keohane, if you want to add. And then we
    will go to Senator Inhofe, and I will give him an extra minute
    for his questions.
        Mr. Law. Yes, Senator, I think that something that people
    need to distinguish is the difference between rates and bills.
    There are a lot of things that go into the rates that the
    utilities have and the goal of the programs, and the
    legislation, to become smarter with the energy that we use, and
    more efficient, is to help our customers lower their bills.
        So there is not a lot we can do about rates in terms of a
    lot of our costs are fixed. But we can try to help our
    customers lower their bills by----
        Senator Boxer. By being energy efficient. That is your
    point.
        Mr. Law. Exactly. Exactly.
        Senator Boxer. That is a really important point.
        Mr. Keohane. I want to build on that point and make a
    couple of very quick other ones. First, the EPA in its analysis
    of the House legislation actually estimated savings of
    household utility bills. Now that reflects, like any modeling
    result, that reflects the assumption that went into the
    analysis. But I think the point that makes is that, when you
    look at the best analysis that is out there, the most careful
    analysis that is out there, you get a very different picture
    than what we heard before.
        I also want to just repeat, every credible economic
    analysis, because I have looked at them all, says and shows
    that we can grow our economy very robustly with a cap on
    carbon. As you said, Madam Chair, the economy will be much
    larger in 2020 and 2030 and 2050 than it is today, regardless
    of what we do. What this is about is protecting our future and
    making an investment in the future, but it is something that we
    can absolutely afford.
        I wanted to say one more thing in response to what Chairman
    Johnson said. This cap is exactly what we need to drive the
    innovation and the development of the investment that he
    mentioned. We do not need the Government figuring out which
    projects to devote the money to. We need this system, this
    market-based system, to figure out how to unleash that
    innovation.
        Senator Boxer. OK, I am going to give Senator Inhofe the
    extra time I used because I feel it is only fair.
        I do want to put in the record for Mr. Johnson and Mr.
    Hart, here is something about the Great Plains, regional
    climate impacts on the Great Plains. Think about this in your
    mind. Projected changes in long-term climate and more frequent
    extreme events such as heat waves, droughts, heavy rainfall
    will affect many aspects of life in the Great Plains. These
    include the region's already threatened water resources,
    essential agricultural and ranching activities, unique natural
    and protected areas and the health and prosperity of its
    inhabitants.
        So, here is the point. You take the $5 a month that is the
    average that people would pay. You put that into that equation.
    If we can avoid these other disasters from happening, how much
    better their lives will be. Putting a price on carbon creates
    the incentives for all these new technologies that you will be
    carrying.
        And you are a young man, you will be carrying these out,
    the energy efficiency, as Mr. Law pointed out, that you would
    get. And I think, at the end of the day, it is an exciting
    story of America stepping out and leading the world, not this
    frightening let us pull the cover over our heads because we
    fear the future.
        And the more I hear from all of the panelists, they are all
    excellent, whatever side they are on, whether they are on
    Senator Inhofe's side or my side, I am coming down to a sense
    that this is about the future versus the past. I love to take
    the best parts of the past. I am getting older. I love the
    past. I loved the 1950s, the 1960s, the 1970s. But at the end
    of the day, it is my grandkids and your kids, it is their
    world. I think if we are not fearful, we can do this the right
    way. But I so appreciate this panel.
        [The referenced document follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. And Senator Inhofe, you get some extra time.
        Senator Inhofe. All right. Well, I could have used that
    yesterday.
        Senator Boxer. I am sorry, we cannot go back to the future.
    If I could, I would.
        Senator Inhofe. All right. Well, first of all, I would
    think that this bill would do nothing to address your concerns
    since it will result in no temperature changes because China
    and other developing nations refuse to accept binding emission
    targets to keep carbon below any amount.
        But let us go ahead, since I am also in the Heartland and
    the Midwest, I would like to have both of you respond to this.
    Because I have seen the same charts. I have seen how we are
    going to be treated. Oklahoma is right between you guys. So,
    would you like to, can you help me understand why we still
    believe that our costs would be greater?
        Well, first of all, let me say to you, Commissioner, I just
    left your Senator Thune, he said to say hello. And it is good
    to see you, Mr. Hart, over in Arkansas.
        Mr. Johnson. Well, thank you very much, Senator.
        I do want to make clear that regional disparities are some
    of the things that bother us the most. No one on this panel has
    argued for inaction. No one on this panel has said that carbon
    should not come with some price. The concerns that have been
    raised have been primarily around regional disparities. And I
    do think that is a big problem.
        We start talking about a postage stamp a day, or we talk
    about $100 a year, those are national numbers. And I think they
    gloss over the very real, and the very problematic, regional
    disparities. You know, $5 for South Dakotans, I do not believe
    it. Most of that analysis has been done on flawed presumptions
    that the energy that is created in South Dakota is used in
    South Dakota. The Federal Government has not allowed us to do
    that. We have a lot of hydroelectric facilities in South Dakota
    and 80 percent of that power leaves the State.
        And so, all of the numbers I have seen about South Dakota
    are based on some very, very flawed assumptions.
        Senator Inhofe. Any comment, Mr. Hart?
        Mr. Hart. Senator, in Missouri, I mean that is why, because
    there are all these different studies, the people that live in
    Missouri wanted to know from the people generating kilowatt
    hours, whether it is wind farms, nuclear, natural gas, hydro,
    they want their professionals, the men and women generating
    kilowatt hours, to tell them, this is what it is going to cost
    us.
        Now, the numbers I see under the different scenarios, one
    was $25 a ton for carbon, another one was $50 a ton for carbon.
    Various assumptions they made under different cases, but the
    rate increases, you are talking about 42 to 77 percent.
        Senator Inhofe. The example you used this morning----
        Mr. Hart. Those are people that are generating kilowatt
    hours every day. And I guess the regional disparity is what the
    people that live in Missouri are keying in on, too. They are
    telling all of us that they do not understand why utilities in
    California get 100 percent allocation of emissions and Missouri
    gets 68.
        Senator Inhofe. Yes. Let us keep in mind, too, that the
    costs that are going to be, now, if we are using the State of
    Missouri, we have heard your Senator, Kit Bond talk about how
    much it is going to cost the farmers. But there are other costs
    other than what we are talking about today. We are talking
    about the cost of fertilizer, the cost of all of things that
    affect, of course, we will have that panel tomorrow.
        Let me ask you, Commissioner Johnson, you said in your
    statement, I am going to quote it here, the Chairman's mark
    includes a reserve fund with soft collar that this mechanism
    will not do enough to protect consumers. Could you explain that
    to me?
        Mr. Johnson. I think the real concern you see in all of
    this modeling is when you get an allowance price that climbs up
    higher than what a lot of us plug in to our studies, $15 or
    $20. That is where I think the real fear comes in, Madam
    Chairman.
        And I understand that. I think some people are looking for
    some level of confidence, that even if things get bad,
    consumers are not going to take the brunt of it, particularly
    Midwestern consumers.
        And I understand what the reserve, the strategic reserve,
    is supposed to do. I read a number of economic analyses on it
    that indicate, perhaps, that it will not be as successful as we
    all hope that it will be. It seems to me that some sort of a
    hard collar would give us more confidence that, at the end of
    the day, the burden is not falling too squarely on the backs of
    Midwestern consumers.
        Senator Inhofe. All right. Well, Commissioner, also, I do
    not recall just in what context you used that term a quarter of
    a billion dollars. Now what was that? Would you repeat that
    sentence for me?
        Mr. Johnson. Almost every single load serving entity in
    South Dakota that has performed an analysis indicates that in
    the short term, utility prices would rise 25 percent in South
    Dakota.
        We spend $1 billion a year on natural gas and electricity
    in South Dakota. I am not a mathematician, but I take $1
    billion times 25 percent and I get $250 million a year.
        I think that shows why talking about a postage stamp a day
    or $100 a year may make sense for our country. Maybe for the
    country the costs are reasonable. But there are regional
    disparities that essentially punish some parts of this country
    far more than they can afford to be punished.
        Senator Inhofe. When you said that, I did not do the math
    because I figured you already had it. But you only have what,
    800,000 people?
        Mr. Johnson. We have only 800,000 people, just over 300,000
    households and it ends up being a big ticket item.
        Senator Inhofe. OK. So, you have done your math on the
    households, 300,000.
        Mr. Johnson. It is $850 a year.
        Senator Inhofe. Well see, this is the problem that we have,
    because we have seen these analyses way back to and including
    the treaty that this all started with 10 years ago, the Kyoto
    Treaty. And all the way through that, and through the 2003
    bill, the McCain-Lieberman bill, the 2005 bill, the Warner-
    Lieberman bill in 2008, all of these analyses done by MIT, by
    all of these other groups, they come in the same consistent
    pattern. It does hit the Heartland more, that the costs we are
    talking about is somewhere between $300 billion and $400
    billion a year. And that is huge. And it affects different
    parts of the country in a different way.
        Mr. Hart, you said in your opening statement, I wrote this
    down, you said that you have a 91 percent customer satisfaction
    rate. Are you proud of that?
        Mr. Hart. We are pretty proud of that.
        Senator Inhofe. You should be.
        Mr. Hart. We do what our consumers tell us to do. They are
    supporting our wind development in the State. They like that we
    are going there.
        Senator Inhofe. What do you think would happen to that 91
    percent if you have this increase that we are talking about?
        Mr. Hart. I am not sure. I think it is going to go
    downward.
        Senator Inhofe. Yes. I would think so.
        Mr. Hart. I think whatever policy is developed has got to
    have the support of the consumers. Whether you live in Missouri
    or Iowa or Arkansas or California or New York, we have got to
    get the people of this country, who love their country, to
    support the policy.
        Here is another problem. This is tough pill for Missourians
    to swallow. The last power plant, base load power plant we
    built in Missouri came on line in 1983. I have done a lot of
    research on this. What was going in 1983? It was after the Arab
    oil embargo, our country was wanting us to get away from
    dependence on other countries. We could not generate
    electricity with gas because there was a Federal law that was
    passed that said you could not generate electricity with oil or
    gas.
        We were going to build, our primary project that we wanted
    to build, was a nuclear project in the region. We had all the
    financing put together, we invested $80 million in site
    development, we submitted to the NRC, our members did. A week
    after we submitted the license, the moratorium was put on
    nuclear licensing. So now nuclear is not an option to our
    members.
        This is 26 years ago. Our only option in Missouri was coal.
    And the Federal policy at that point in time, in the history of
    this country, was encouraging consumers to go with coal. And so
    now, 26 years later, for our consumers to feel like, because
    they live in Missouri they are going to be penalized, it is a
    tough pill to swallow.
        Senator Inhofe. The problem is not are there other
    resources out there because, I have said in the last two
    panels, recently it has been documented that we are No. 1 in
    terms of our resources, our reserves in coal, gas and oil. It
    is a matter that 83 percent of that is off limits. As you point
    out, the moratoria are killing us. If we really want to wean
    ourselves off of foreign oil, let us go ahead and develop our
    resources that we have here.
        Madam Chairman, my time has expired, but I have two letters
    for the record to submit. First is from the American Public
    Power Association, the association is represented here although
    not necessarily the whole association. The second is a
    statement from the Public Service Commission of North Dakota,
    outlining their concerns.
        [The referenced information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        I would like to put into the record two documents, too, at
    this point. One is the map that shows the modest impact on
    electricity rates, including in your parts of the country, and
    then also page 1 of the EPA analysis that says the cap and
    trade policies outlined in these bills would transform the way
    the U.S. produces energy. The average loss in consumption per
    household will be relatively low, and this is the key thing,
    the impacts of climate policy are likely to vary comparatively
    across geographic regions.
        You keep saying California. I also would put a third
    document into the record that says green States to get few
    rewards in U.S. climate bill. And we are a green State with
    extensive energy efficiency.
        [The referenced EPA document follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

           Senator Boxer. But I thank you all, and we will go now to
    Senator Gillibrand.
        Senator Gillibrand. Thank you, Madam Chairwoman, and thank
    you witnesses for being here. Your testimony is very important
    to this national debate, and I am very grateful for your
    leadership and opinions and sharing your expertise with all of
    us.
        I would like to direct my conversation, initially, to Mr.
    Law. I would like it if you could please describe for me, for
    the panel, and for our attendees the kind of work that you are
    doing for your customers as part of the Efficiency Long Island
    Program and how energy efficient investments are saving your
    customers money by reducing energy consumption.
        Mr. Law. Thank you very much, Senator Gillibrand. Our
    Efficiency Long Island Program, as I said, is about a $1
    billion program over the next 10 years.
        We have had a new base load power plant on Long Island that
    just came on line this year. It cost $1 billion. And now it
    will have to be fed fossil fuels for the next 30 years to
    operate. I would rather invest the next $1 billion, and give it
    back to our customers, in the form of helping them become
    smarter with the energy that they use.
        We do that in the form of rebates to help them buy Energy
    Star appliances, lighting appliances, pool motors, furnace
    motors, air conditioning units, dehumidifiers, things like
    that. The goal there is to help them lower their consumption
    and lower their bills. When they lower their consumption, that
    allows us to reduce our peak demand. And the goal of the
    program, for LIPA, is to avoid having to build that next power
    plant.
        So, it helps LIPA, it helps the customer in terms of lower
    bills. And again, we find that it is not only the right thing
    to do, but trying to site a power plant, nobody wants one in
    their backyard, and then trying to finance it, and then having
    to deal with the emissions, and then having to feed it fossil
    fuels, are all challenges.
        We find it is better to help our customers become smarter
    with the energy they use, and that is the goal and the purpose
    of Efficiency Long Island.
        Senator Gillibrand. Thank you. Mr. Keohane, can you discuss
    how prioritizing efficiency in the utility sector would benefit
    customers nationwide, and do you believe that a minimum
    requirement for efficiency would enhance the consumer
    protection from this legislation?
        Mr. Keohane. Thank you, Senator. I think, first of all, it
    has been shown time and again through, I think, a variety of
    very successful programs across the country that wise, smart
    investments in cost effective energy efficiency can be very
    effective ways of reducing consumers' bills. I think there are
    also ways that consumers can take advantage of those common
    sense approaches.
        I think in terms of the--in the context of allowance
    allocation, I think the most important principle is that the
    value go to those consumers for their benefit, and if it can be
    shown that the best way to do that is cost effective energy
    efficiency investments, as we have seen in some areas in the
    past, I think that is terrific.
        But I would say the bedrock principle there is just make
    sure that allowance value does protect the consumers and that
    it goes to their benefit.
        Senator Gillibrand. Thank you. Now, for Mr. Crane, and this
    is for the whole panel, can you discuss the development of
    utility scale renewable projects and your thoughts on the
    potential growth of large scale projects in the next decade?
        Mr. Crane. Well, I think right now, as much as this
    Administration has tried to stimulate renewable projects, the
    absence of a tax appetite, the dropping of fossil fuel prices,
    and the absence of financing from Wall Street, which has not
    really recovered as you all know from your State, makes large
    scale renewable projects very, very difficult, and quite
    frankly, the Department of Energy Loan Guaranty Program right
    now is critical.
        Our company is hoping to build what would be the largest
    solar thermal project in Senator Udall's State, but without
    the--because the technology is emerging and all those other
    problems, without the loan guaranty from the DOE, it is just
    not going to happen.
        So, it is a challenging environment. But our company, Mr.
    Izzo's company, many companies are pursuing these projects in
    the hope that we can overcome all of these. So, we are all hard
    at work at this.
        Mr. Izzo. Senator, the primary obstacle to growing
    renewables is the fact that the current technology just is not
    competitive with the current market price for electricity. By
    having a cap and trade system, you will more accurately reflect
    long-term costs. That gap will narrow.
        Having said that, that will then lend itself to large scale
    renewable development in certain parts of the country. Absent a
    national renewable portfolio standard, you will not see growth
    in renewables. Therefore, it is no surprise that over 70
    percent of the renewables that have been installed in the last
    2 years in this country have been in those States with
    renewable portfolio standards.
        Senator Gillibrand. Anyone else before my time----
        Mr. Hart. I might say the electric cooperatives nationwide
    have set up what they call a National Renewable Energy
    Cooperative, and the idea there is to pool resources to see if
    we can tap into some of the expertise in Missouri on wind, and
    New Mexico, co-ops down there doing the solar, if we can pull
    all those folks together and come up with a national
    initiative.
        But the investment tax credits are a huge catalyst to
    getting financing for renewable energy, and I have heard a lot
    of the wind developers tell me that if we could just get those
    investment tax credits extended for a longer period of time, it
    is going to make it easier for them to finance them. So, that
    is something you might want to consider.
        Senator Gillibrand. Thank you.
        Senator Boxer. Thank you.
        Senator Bond.
        Senator Bond. Thank you, Madam Chair, and my good friend
    Barry. I apologize. I have a couple of other committees that I
    have to work on.
        I want to straighten out a few things, Madam Chair. I made
    a mistake yesterday when I said your bill would provide $16
    billion less than Waxman-Markey. When we now have had an
    opportunity to review the targets, and how it operates, we now
    see that it does not provide 35 percent of the program
    allowances. This is what Waxman-Markey provides.
        But when you take a number of slices out of the pie, it is
    a smaller pie. And so we have $1.46 billion fewer allowances,
    and that means that there will be a shortfall of about $4.4
    billion allowances. Multiplying that by the estimated price per
    allowance reveals a $133 billion shortfall. If it is
    complicated, it is taking us some time to analyze----
        Senator Boxer. I will give you some more time. I will give
    you another minute. If I am going to give you a minute, I just
    want you to understand that that went in to the Deficit
    Reduction Trust Fund. So, that was the reason we did the
    haircut.
        But the pie, in terms of the percentages, remained the
    same. But we did have to take across-the-board cuts for deficit
    reduction, and they only went out 10 years. We went out to 2050
    and we wanted to have a deficit neutral bill.
        But you are absolutely right on the point. You are
    absolutely correct. There is less in there because of Deficit
    Reduction Trust Fund. But go ahead. We will add a minute to
    you.
        Senator Bond. OK. I wanted to add another point that we
    talked about cap and trade. You said that it worked for acid
    rain. I happened to be the lead Republican sponsor on the Byrd-
    Bond amendment, some people back home call it the Bond-Byrd
    amendment. That worked because we had a ready solution to acid
    rain production.
        There is no affordable technology ready to remove carbon
    from coal and sequester it. 2020 is what Secretary Chu said.
    With no low carbon type of coal, the main strategy Missouri
    utilities would have to use to meet the mandates here would be
    to move more production to nuclear power. And Barry, if
    Missouri power generators are forced to switch from coal to
    natural gas, what would that do to power rates in Missouri?
        Mr. Hart. Under that study that I talked about earlier, it
    is the worst case scenario. If we switch to natural gas, you
    are looking at by 2012, 46 percent and by 2020, 77 percent. So
    that is the worst case scenario for our State.
        Senator Bond. How would your co-op members react if
    Congress passes this legislation that really burdens coal
    dependent regions like the Midwest?
        Mr. Hart. They may not be very happy, and I might not be
    back here next year. I am not sure.
        Senator Bond. What I really worry about is how do you think
    employers in Missouri would react to the higher power bills?
    Would you see some of the smaller businesses that are energy
    intensive moving out of the region?
        Mr. Hart. That is a hard one to factor in. But I know
    businesses that--we are in a recession right now, so it is
    tough for small business. One thing we know, too, in Missouri
    is a lot of our small businesses are the entities that create
    the jobs.
        Senator Bond. Well, I think everybody knows that small
    business is the job producing core, and we seem to be
    steamrolling small businesses in a lot of things that we are
    doing up here. That is why it worries me.
        We previously submitted a study from the Food and
    Agricultural Policy Research Institute and the University of
    Missouri working with Iowa State and others. It said that a
    farmer, a row crop farmer of corn and soy beans, 1,900 acres,
    would see $11,000 cost initially going to $32,000. I imagine a
    significant number of your customers are row crop farmers. What
    would that do if you put that extra burden on their operations?
    Would they stay in business, or would they be hard pressed to
    make ends meet?
        Mr. Hart. I think they are going to be hard pressed. But I
    know the one segment that I have heard from a lot is the dairy
    industry. Their difficulty is that they are very energy
    intensive----
        Senator Bond. Right. I think ATTRA is doing a study on
    dairy and livestock, and this would be, I assume, equally
    devastating to them. We have a lot of sources we can use. The
    point I have been making is we can reduce emissions, but we
    cannot do so if people are losing their jobs and cannot afford
    to buy power.
        We have a lot of biomass in Missouri. Some six-sevenths of
    our 14 million of timber is scrub timber. You can burn that
    with coal. But to do that, you have to stay in business. And
    obviously we need more nuclear in Missouri. I assume when
    working with the other utilities you are looking for these
    cleaner energy solutions, and for Missouri it seems to me that
    the wind does not blow very frequently except in Jefferson City
    when the General Assembly is in session. I would think that
    biomass would a better--pardon, nuclear would be a better
    source for you. What is your view on it?
        Mr. Hart. Well, first of all I want to make sure everyone
    knows that I did not say that about Jefferson City.
        [Laughter.]
        Senator Bond. I did.
        Mr. Hart. Yes. You can get away with it. But I just think
    that if Senators can work to minimize this impact on consumers,
    whether they are residential, the elderly on fixed incomes, I
    was telling them, Senator, that one-third of our membership is
    Missouri is over 65----
        Senator Bond. A lot of us are.
        Mr. Hart. And 80 percent of those are on fixed income. If
    we can work all of these different segments, people that are
    using electricity in this country, we might be able to come up
    with policy that is going to be successful.
        Senator Bond. Thank you.
        Mr. Hart. But the consumers have to support it.
        Senator Bond. Thank you, Madam Chair.
        Senator Boxer. Yes. And speaking of senior citizens, AARP
    sent us a letter. I am going to put it in the record. They are
    excited about the possibilities here.
        [The referenced letter was not received at time of print.]
        Senator Boxer. Senator Lautenberg.
        Senator Lautenberg. Thanks, Madam Chairman. When you
    mentioned senior citizens, I was ready to take the microphone.
        [Laughter.]
        Senator Boxer. Well, I am one as well.
        Senator Lautenberg. I am sorry that I was late in arriving.
    We have a couple of other committees that are meeting at the
    same time.
        But I did want to welcome Ralph Izzo here. He is the Chief
    Executive of Public Service Electric and Gas and has been a
    real leader in terms of understanding the needs of the
    community, but understanding also that you have to communicate
    with the customers and let them know what we are about.
        And it has resulted in a really nice relationship even
    though people understand that there is going to have to be some
    extra money spent. And we hate to see it. Recession is really
    still very heavily among working people, and job loss is not
    something that we face lightly. But the fact of the matter is
    that we are where we are.
        Mr. Izzo, what has been the response from your customers to
    the aggressive actions that PSEG has done, whether it has been
    distributing light bulbs, whether it is pleading for a more
    careful use, et cetera?
        Mr. Izzo. We survey our customers once a quarter on how we
    are doing, how quickly we are answering the phone, how do you
    like what we are doing in terms of community outreach, and we
    get consistently high marks from customers for our aggressive
    actions in promoting renewable energy sources and energy
    efficiency.
        In addition to that, the extra benefit that I, quite
    candidly, did not anticipate is the enormous pride our
    employees feel at being active in the community and now being
    viewed not as the electric company and the monopoly, but
    someone who is trying to preserve the planet for their children
    and their grandchildren.
        Senator Lautenberg. You know, we have the good fortune in
    New Jersey to be on the coast. It is a wonderful coast. But the
    fact is that we are to the east of States that have a lot of
    material being sent up into the air from coal burning plants,
    et cetera. So, there is some imbalance.
        Mr. Johnson, I kind of look to you when I say that. And no
    one needs lecture the other party. But I will tell you this.
    When South Dakota had floods and terrible things happening, we
    were there to help them through a natural disaster. And so it
    is at this time. And while it does, when you say it, it sounds
    terrible, we should not have to penalize one State to get to
    another.
        But in the distribution of expected increases in costs, New
    Jersey looks like it might be $3, South Dakota $5 a month. It
    is not pleasant to contemplate. People with modest incomes feel
    those kinds of things very seriously.
        So, I would urge you to look at this and see what kind of--
    to use the cliche around here that says, what goes around comes
    around. There are very few States that have not, at some time
    or other, been there with their hand out, with a plea for the
    Federal Government, please, come help us, move our citizens
    away from flooded areas, et cetera, et cetera. So we are all in
    this together.
        And we also know one other thing. I will reduce my
    philosophizing in a minute when the clock hits over here. But
    the fact of the matter is we have a sick patient. This patient
    is not strong. This patient is weak. The patient needs
    medicine. The medicine tastes terrible. But that is the
    condition that the country is in. We are still in recession, we
    are overrun by inadequate infrastructure development, et
    cetera.
        But if we are called upon, we all spring together to put on
    a uniform as I did a long time ago, and you do what you have
    to. I am not telling you what kind of message to give to the
    South Dakotans, but the fact of the matter is there may be a
    little imbalance here, but we are all looking for the same
    outcome, and that is a safer place for our children to grow,
    for our plants, for our wildlife, so that we can breathe the
    air and enjoy life.
        Thanks, Madam Chairman.
        Senator Boxer. Thank you.
        Senator Udall.
        Senator Udall. Thank you, Madam Chair. Mr. Bluestein, your
    testimony notes that the major recent supply increases of
    natural gas provide us with a powerful option to reduce
    greenhouse gas emissions with a widely available fuel using
    existing infrastructure.
        In the climate debate, there has been concern that fuel
    switching would cause natural gas prices to increase for
    manufacturers and fertilizer to increase for farmers. Are these
    fears based on an outdated understanding of the natural gas
    supplies that are now available in the U.S.?
        Mr. Bluestein. Yes, I think they are. As I said earlier,
    these new shale gas resources are really changing our
    fundamental understanding of North American gas supply. And
    they are really just starting to take off. As that resource was
    starting to take off, we had the economic downturn, and the
    demand for gas came down, and some of the drilling actually
    reduced because there was less demand.
        So, I do not think we have really even yet seen the reality
    of how large this resource could be, and I think that will be
    good news for industrial gas users and feedstock industries
    like ammonia that rely on natural gas.
        Senator Udall. And could you give us an idea of the
    magnitude just in the last couple of years?
        Mr. Bluestein. In terms of the resource, you know, the
    National Petroleum Council in its study in 2003 estimated--let
    me just check my numbers--the shale resource at, I think, less
    than 100 TCF. We did a study, it was done really about 18
    months ago, we estimated it at 385 TCF. The Potential Gas
    Committee, in its study that came out in June, estimated it at
    616 TCF. So it is really growing by leaps and bounds. And as I
    said, I do not know if we have fully evaluated it yet.
        Senator Udall. Now, I understand that you have studied the
    impact of a proposal made by the American Natural Gas
    Association to enact a so-called Bridge Fuel Credit, a new
    emissions credit based upon additional use of natural gas to
    reduce greenhouse gas emissions. Could you explain how such a
    credit would work and what its impacts would be?
        Mr. Bluestein. Well, the idea of this proposal is to
    provide a credit for any entity that uses natural gas to reduce
    greenhouse gas emissions by increasing the use of natural gas
    relative to a higher emitting fuel. We did an analysis of that
    proposal for the American Natural Gas Alliance.
        There were several steps. The first was to develop a
    baseline that is comparable to the EPA and EIA modeling as a
    reference case. We then added in an estimate of the increased
    gas supply that is available now. So, not surprisingly when you
    account for that additional supply, you find that gas
    consumption goes up, and gas prices go down, relative to the
    baseline.
        We then added the incentives for increased gas use, and we
    found, again, moderate increase in gas consumption and a
    decrease in allowance prices relative to the baseline and a
    slight increase in gas consumption, about 6 percent, with the
    increased use of gas.
        So, back to your first question. Using gas to reduce
    emissions in the near term, not a huge increase in gas prices
    and actually a decrease in the CO2 allowance price
    as a result of the program.
        Senator Udall. And do you have any recommendations on where
    you think the best use of natural gas is? Is it in the
    transportation sector? Is it in the electric power sector?
        Mr. Bluestein. Yes, I think that, you know, one of the
    strengths of natural gas is that is has very wide
    applicability. It is a very clean fuel, and as I said in the
    beginning of my testimony, I think it can be used effectively
    throughout the economy, power generation, transportation, there
    is a great opportunity, direct use by consumers, and of course,
    it is an important feed stock.
        So, I think in the past there has been a feeling that we
    have to decide, is it better to use it here or there. I think
    that the hope is, with the greater resource, we do not have to
    worry about that.
        Senator Udall. Thank you. And I thank the whole panel.
        Mr. Crane, you mentioned that NRG was putting a plant in
    Dona Ana in Dona Ana County in New Mexico. And I just want to
    thank you for moving into the solar energy business and
    bringing it into southern New Mexico, and it is great to have
    you here today.
        Thanks to the whole panel.
        Thank you, Madam Chair.
        Senator Boxer. Thank you. Unless a Republican shows up, we
    have Whitehouse, Carper and Cardin.
        Senator Whitehouse.
        Senator Whitehouse. Thank you, Madam Chair.
        Commissioner Johnson, you, in your testimony, let me read
    this, say that these bills all envision softening the impact to
    consumers by providing some of them to low and middle income
    rebates to pay their utility bills. But I do not want more
    Americans more dependent on the Federal Government to pay their
    utility bills. If we need to reduce carbon, then let us do it.
    Let us put that money toward energy efficiency and toward
    research and development.
        I think you are onto a very, very good point. But I want to
    let you know about a particular glitch that you might not be
    aware of, which is that when the allowance revenues are
    returned to the local electric utility or utility distributing
    companies, if we in Congress take a further step of saying that
    this is where they should be spent, the wizards at the
    Congressional Budget Office have determined that that is an
    expenditure of money by the Federal Government that needs to be
    offset with new revenues to meet our pay goal requirements.
        So, we are a little bit handcuffed here in Congress by
    CBO's scoring methodology so that when we take, let us say the
    round number is $1 billion. You put $1 billion back into the
    local distributing companies, no cost. You say, and you should
    spend half of it on efficiency, now we have to offset $500
    million with revenues.
        So, we are in a bit of a pickle. And I could not agree with
    you more about the direction you seek. I think the place to go
    is not back into the bill, because we will tell you that. The
    place to go is to your friends at NARUC and to your fellow
    utility commissioners.
        Because you can say, in your ratemaking process, OK,
    fellows, you are getting all of this money coming in from the
    Federal Government for these purposes. We want you to come in
    and show us how it is going to work, and you can put them under
    pressure to make sure that efficiency and R&D is where it goes
    in a way that we really are inhibited from doing by these
    peculiar CBO constraints.
        Mr. Johnson. Well, Senator, thank you very much for that
    clarification. I would agree that the State level is a
    fantastic place, really the best place to do energy efficiency.
    I do wonder if research and development are not better done at
    an national level. And I also wonder about nuclear.
        Senator Whitehouse. It could well be. I was really focusing
    on the efficiency part, and I feel that is very important.
        Mr. Johnson. Well, I agree with you 100 percent. I do also
    really believe in nuclear; it is tough to overstate how
    important it is going to be if we are going to get to 83
    percent carbon reduction by 2050.
        Senator Whitehouse. We have good--I think you will be happy
    with the way this comes out on nuclear. There is a new nuclear
    era coming, and we just need to make sure we do it right and
    that we work as hard as we can to have the nuclear byproducts
    be manageable and there is technology that allows them, in
    fact, ultimately to be used as fuel. And we need to make sure
    that we develop that because that is the hazard.
        Mr. Johnson. Well, Senator, thank you very much. You do
    give me reason for optimism that it is going to get better
    because I think actually, right now, the nuclear title is
    rather weak. But I will take your word for it, and we will wait
    for better wording.
        Senator Whitehouse. The other question that I have is for
    Mr. Izzo and Mr. Law. You both run major utility operations. I
    cut my teeth as a new lawyer doing the public utility
    regulatory work for the Attorney General's Office in Rhode
    Island. And way back in the 1980s, we did the first
    conservation-based rates with what was then called Narragansett
    Electric and New England Electric System. Now it is all
    National Grid.
        So I have been familiar for some time with the predicament
    that electric utilities are in when they make money by selling
    kilowatt hours, but we need to reduce those kilowatt hours and
    improve the fuel mix in ways that may be less immediately cost
    effective for the utilities.
        There has been some disaggregation of the electric utility
    industry and to GenCos and DisCos and TransCos, and I am
    wondering what your advice is to us on the best way to
    structure the electric utility operating environment so that
    the conservation efforts can become a profit center. I think
    you have a vital role in conservation. I hope even the lead
    role. Does a ConsCo that goes along with the TransCos and
    DisCos and GenCos make sense, or can you just do it with the
    rate adjustments and rate neutrality?
        Mr. Izzo. We are not huge fans of the rate neutrality
    approach. We think it makes sense, but we do not worry about
    that a lot. What we are trying right now in New Jersey that is
    working very well is that we have a $250 million program
    whereby a light bulb looks the same way on my P&L statement as
    a circuit breaker. So, we have redefined the assets that we can
    put into what is called our rate base and earn a profit on. And
    that is a home run for the customer and for our shareholders.
        Senator Whitehouse. Mr. Law.
        Mr. Law. Thank you, Senator. As the head of a public
    utility without shareholders and only rate payers, I almost
    think we have a little bit of a higher standard to strive for
    because we are not trying to show a profit. We are not-for-
    profit. So, not every decision we can make a cost-benefit case
    on. Sometimes we need to look at things as investments. And I
    think we need to be investing in diversifying the portfolio of
    fuels used in our system now and by encouraging our customers
    to become more efficient.
        So, one of the ways we are doing that in the entire State
    of New York, for both the regulated utilities and the public
    utilities, is, you know, the concept of decoupling revenue
    recoupment because, at least for the investor-owned utilities,
    at the end of the day they need to cover their costs and show a
    profit. And if you are going to encourage all of your customers
    to use less energy while your costs are still fixed, you are
    going to lose money.
        So, part of the incentives to get the utilities to be more
    aggressive in promoting renewables and efficiency is to allow
    them to recoup or decouple some of the moneys that they will
    likely lose.
        Senator Whitehouse. Thank you. I appreciate it, Madam
    Chairman. I look forward to working with you all.
        Senator Boxer. Thank you.
        Senator Carper.
        Senator Carper. John, thanks so much for being with us and
    not just today, because I know you have been with us before,
    and we appreciate your advice and counsel and your willingness
    to come back again today and subject yourself to this.
    Hopefully, it is not too bad.
        Let me just start off by asking a question maybe of Mr.
    Izzo and Mr. Crane and Mr. Keohane. You pronounce your name
    Keohane, do you not?
        Mr. Keohane. Keohane.
        Senator Carper. I asked five different people up here, and
    I got five different answers. But Nathaniel's right, is it not?
        [Laughter.]
        Senator Carper. Just a question for each of you. I think,
    in the past, each of your organizations, I believe have
    supported the notion of multi-pollutant legislation. And I, as
    you may recall, have long supported a 4-P approach, I believe
    it just makes sense from a business perspective and a public
    health perspective as well.
        We have had a fair amount of discussion about the wisdom,
    or lack thereof, of adding 3-Ps to the climate bill, sulfur
    dioxide, nitrogen oxide and mercury. And I would ask, if adding
    3-P legislation in the form of an amendment to the climate bill
    does not slow momentum to passage, would you be supportive of a
    multi-pollutant approach?
        Mr. Crane. On behalf of NRG, we would support that. But we
    do not, I mean, you had a key condition there. I mean we think
    the urgency of climate change legislation, if it did slow it
    down, that would give us pause. But we support your 3-P
    legislation and leave it up to you as to how you actually get
    it through.
        Senator Carper. Fine. Thank you.
        Mr. Izzo. Senator Carper, we have been, and remain,
    supporters of your 3-P legislation. It is an essential part of
    regulatory clarity for us going forward in our industry. I try
    to convince myself that I am a moderately OK CEO, but I will
    never try to convince myself that I am intelligent legislative
    strategist. So, I leave that decision to this committee. We
    would love to see it if it could, indeed, go right through with
    that.
        Senator Carper. OK. Thanks so much.
        Mr. Keohane.
        Mr. Keohane. Well, Senator, I know you have been a leader
    on this, and we would certainly, absolutely support a
    comprehensive approach, and I think we have long been behind a
    comprehensive approach to air pollution regulation. I think the
    priority for us is, right now, making sure we get a climate
    bill. And if we can also get the strong 3-P bill along with
    that or as part of that, and still move that climate bill and
    get that protection, I think that would be terrific.
        Senator Carper. All right. Thanks. Thanks very much.
        I will go back to you, if I could, Mr. Izzo. I think you
    mentioned in your testimony that you support a 50-50 allocation
    distribution of local electric-local distribution company
    allowances. I am not sure what all is involved in striking that
    compromise within EI, but I just want to thank you. I know how
    hard we have struggled with it here. And for those of you who
    actually worked to deliver that baby, thank you very much.
        But that is, I think, 50 percent distributed on historical
    emissions and 50 percent distributed on generation. That is
    correct, is it not?
        Mr. Izzo. That is correct.
        Senator Carper. The 50 percent distributed based on
    generation, which we also know affectionately as output, would
    greatly help nuclear energy. Is that correct?
        Mr. Izzo. That is correct to the extent that you are
    selling into a competitive market.
        Senator Carper. Would you elaborate on that, please?
        Mr. Izzo. Well, if you are in a competitive market, the
    least efficient unit is what sets the price. Typically, the
    least efficient unit is the one with the highest cost fuel,
    which would be a natural gas unit. And a natural gas unit,
    because it emits carbon, will see a higher price. The nuclear
    power plant will not see a higher price because its fuel does
    not entail any carbons. So, your costs as a nuclear plant
    operator, of which we are one, does not go up but the price you
    receive does go up.
        Senator Carper. All right. I want to ask you and Mr. Crane,
    I will start with Mr. Crane. In terms of the potential for
    offshore wind for generating electricity on the East Coast and
    maybe the Mid-Atlantic, what kind of future do you see for that
    for our region of the country?
        Mr. Crane. Well, I think offshore wind has a very important
    future, because I think one of the things that we have had
    regional difference here is that basically offshore wind in
    the--I think it is called the Mid-Atlantic Bite, is basically
    the only large scale renewable resource that the Northeastern
    States have. And it is close to the load centers.
        But right now the obstacles to getting offshore wind in the
    United States are pretty substantial. I mean, we do not have
    the infrastructure they have in Europe with, you know, purpose-
    build ships needs to be developed and other--you know, you need
    to have someone who takes the responsibility to build it. And
    you know, the building season is not that long in the Northeast
    United States.
        So, I think there are obstacles, but I think there are
    several companies that are pursuing it, and I think it is an
    ideal area for a public-private partnership, and you know,
    Delaware, New York and New Jersey, I think, are all leaders in
    this area.
        Mr. Law. Senator, can I chime in on that one?
        Senator Carper. Please do, Mr. Law.
        Mr. Law. You might have missed my comments in the
    beginning----
        Senator Carper. I did.
        Mr. Law. LIPA and ConEdison, an investor-owned utility in
    New York City, and some other State entities are exploring what
    could be the country's largest offshore wind farm. It is about
    13 miles off of the coast of the Rockaways, near Coney Island,
    to educate you geographically, Senator. And here is why we are
    looking at that.
        One, we are looking at a private-public partnership to
    share the costs and share the power and share the risks. But
    unfortunately, all of the users were called load. And the load,
    in the New York City metropolitan area, is in New York City and
    on Long Island. We have got about 8 million people. All of our
    wind and hydropower is Upstate New York.
        What we need to do, and what we will be doing, is comparing
    the cost of trying to import hydro and wind from Upstate New
    York, where it is plentiful, on congested transmission lines
    down to the load. Or might it actually be easier, more cost
    effective, to build it 13 miles off the coast, so you eliminate
    the aesthetic impact issues, and only have to do it 13 miles
    underneath the seabed to the substations on the Island.
        So that is what we are looking at right now. Because at the
    end of the day, we think it is actually going to be cheaper to
    build a large scale offshore wind farm in the ocean than try to
    bring it down through the Adirondacks and the Catskills into
    where the population centers are.
        Senator Carper. OK. Good. Thanks very much.
        Senator Boxer. Thank you so much, Senator.
        Senator Cardin.
        Senator Cardin. Thank you, Madam Chair. And let me thank
    all of our witnesses on this panel.
        Mr. Crane, I just want to underscore the point that you
    made and then refer to one of your facilities in Maryland, that
    climate change framework that will unleash the power of
    American capitalism and the innovative genius of American
    entrepreneurs. You promised that, given that framework, you can
    produce low carbon energy technologies.
        Let me just point out one of your facilities that we are
    particularly proud of as far as the plans, and that is the
    facility located in the Vienna Steam Station, which is a 170-
    megawatt oil-fired generating station located along the
    Nanticoke River in Vienna, Maryland.
        We understand that you are in the process of developing a
    new biomass and solar facility in Dorchester County, which will
    not only be good for the environment, will not only be good for
    what we are trying to accomplish on an energy policy in this
    country.
        Dorchester, Maryland, has one of the highest unemployment
    rates in Maryland. And this, we look at it as creating jobs for
    the people on the Eastern Shore of Maryland. And I just really
    want to underscore--I think this project puts it all together
    for us, and I just really wanted you to know that we are
    watching what you are doing, and we are very proud of the plans
    that you have in regard to the Eastern Shore of Maryland.
        Mr. Crane. Well, Senator Cardin, I appreciate that. But I
    wish you had not said it in front of Mr. Izzo because he is
    sort of our competitor in the area. But you have told him all
    our secret plans.
        [Laughter.]
        Senator Cardin. Mr. Izzo, I have a deal for you that you
    will not be able to refuse.
        [Laughter.]
        Mr. Crane. But I think that, you know, our Vienna Plant is
    a 1970 zero oil-fired plant which rarely ever runs. But the
    great things about these old plants is they are perfect sites
    for redevelopment with renewables, and it really does not need
    to be either/or because they have the transmission system built
    around it. And the fact that we are looking at biomass and
    photovoltaic solar there, it is the type of thing that can be
    done in large parts of the country. It just takes a little bit
    of creativity.
        Senator Cardin. And we look forward to more creativity from
    the members of the panel.
        Madam Chair, if I could, I want to reserve my last 2 and a
    half minutes to introduce the first witness of the next panel.
        Senator Boxer. Well, Senator Merkley, you are it. And
    unless a Senator from the other side comes, we are going to
    move to the next panel.
        Senator Merkley. Thank you, Madam Chair. I appreciate all
    of your testimony and particularly getting to the nitty gritty
    of the allocations which is something that we all immersed in
    as we try to figure out how to make this really work where the
    rubber hits the road.
        Mr. Law, I appreciated your public power perspective, and
    the increase in the allocation for renewable energy and energy
    efficiency is something that we have worked hard on on this
    committee. And I appreciate your support to keep raising it.
        Based on your comments on allowance allocations and
    increased investment in energy efficiency, I wonder if you
    could comment on the concept that we have considered at various
    moments, which is to require that utilities use a portion of
    their allowance specifically for energy efficiency.
        Mr. Law. I support that. And we support that. And again, it
    is way to, I guess, incentivize and encourage the utilities to
    help their customers to become more aggressive in the area of
    energy efficiency. So, we like that. I think, as I also pointed
    out, I am a public utility. LIPA is a public utility and is
    part of the APPA and the LPPC. I do not speak on behalf of all
    public utilities. But I am speaking on behalf of LIPA and the
    State of New York and what we support in New York.
        Senator Merkley. Do you have any sense of how to strike the
    balance between addressing the additional costs to consumers
    versus investment in energy efficiency?
        Mr. Law. It is a challenge, especially when you come from a
    utility like mine where we have the second highest rates in the
    Nation already, not something that we are proud of, but
    something that is historical. Things that happened before I got
    there. But it is the challenge.
        I think most customers, again regardless of their party
    affiliation or their political affiliation, I think they
    support efforts for renewable energy, energy efficiency. But
    when you ask them are you willing to pay more, you know, for
    that, that is when the tough part comes because people are
    hurting today because of the economic conditions.
        And so it something that we need to be stronger in
    encouraging our investments in that because, as I think Senator
    Lautenberg said before, our system is working, it is reliable,
    it is working OK. But it could be a whole lot better. And we
    need to make some tough decisions to invest in our energy
    future if we are ever going to get to a clean energy economy.
        Senator Merkley. Thank you. Mr. Johnson, I think you were
    making the case also to allow investment in renewable or clean
    energy investments. So, there are three possibilities of
    helping to address costs, investing in energy efficiency, which
    then reduce costs over the long term, and clean energy.
        Would you expand a little bit on your advocacy on the clean
    energy side of the equation?
        Mr. Johnson. Thanks very much, Senator. I think, in the
    perfect world, each State would be given broad flexibility to
    determine how they would distribute in rebates to ease consumer
    impact, in energy efficiency research and development, and in
    investments in other things. To me, some States are so far
    along the energy efficiency path that the low hanging fruit is
    gone, and they may want to target those dollars into a
    different arena.
        In South Dakota, I would tell you, we would place a great
    value on energy efficiency. I mean to me, that is the first
    power source. And if you are not doing almost everything you
    can cost effectively for energy efficiency, then I think it is
    tough to talk about doing anything else.
        But listen, some States are not set up to do that. And I
    would really ask that the U.S. Senate try to maintain maximum
    flexibility for States to design a system that will work best
    for their consumers.
        Senator Merkley. I am going to give back the rest of my
    time because I know we are anxious to get on the next panel. I
    thank you all very much for you insights.
        Senator Boxer. And Senator Merkley, I think one our
    problems that we have had with CBO is that, if we try to do
    what you want, which a lot of us do, and the utilities are
    split on it, it is terrible for our deficit problem. We have to
    take a haircut, put more money into deficit reduction. It makes
    no sense.
        Senator Merkley. I am well aware. You might recall that I
    sat down with CBO on this very problem.
        Senator Boxer. You called them. I know, it has been very
    difficult.
        Senator Whitehouse. Did you make any progress?
        Senator Merkley. I can explain it to you in profound
    detail, but----
        Senator Whitehouse. It made no sense.
        [Laughter.]
        Senator Boxer. I do not know of anybody that has made any
    progress with it. They just do not seem to use any logic. Oh,
    do not tell them that I said, that, OK?
        [Laughter.]
        Senator Boxer. All right. Thinking out loud. Not good.
        First of all, I know, Mr. Izzo, you never heard a word that
    Senator Cardin said about the plans for Maryland, right?
    Because I noticed that you were not really listening.
        [Laughter.]
        Senator Boxer. Let me just thank this panel. You have been
    terrific, every single one of you. And I just would leave us
    with an analogy that, as I look at the chart, and yes, it is
    going to cost consumers $5 a month, but by the way there are
    some even offsets to that for our lower income consumers. That
    is why AARP and Public Citizen and Consumer Union are very
    happy with the way we are moving on the bill. And we want to
    work with you. We want to keep working to make this a better
    product.
        But you know, some of us are moms and dads, some of us are
    grandmas and grandpas as well, and some of us are uncles and
    aunts, and I think if we knew that our kids were in trouble and
    we had to get a better lock for the house, and it cost money,
    $50, plus you had to hire someone to put that lock in, maybe it
    was $100, it would be worth it. They would be safe.
        And I think sometimes we get so involved in something that
    is not as large as what we are dealing with here. And we are
    seriously dealing with an issue that requires us all to pull
    together. We have got to come together.
        And Mr. Hart is right. If the American people do not
    support us, it is not going to work. Just as in your situation,
    if your consumers do not understand it. And I have to tell you
    in our State, which is not perfect but it is close----
        [Laughter.]
        Senator Boxer. Our consumers are so driven with the notion
    that they can be part of the solution. And when Mr. Law
    explained, it is a lot about the rate, yes, but it is also
    about what you pay in the end. And in our State, we have
    realized this. So, our energy efficiency, and if Bernie Sanders
    I would explain, we are still Number One in that score. Because
    we get it. Our rates may be high, Mr. Johnson, but because we
    employ so much energy efficiency, the low hanging fruit that
    everyone can do, at the end of the day, they are doing OK.
        Now, they can always do better. I wish they did not have to
    pay anything at all. But the bottom line here is, let us
    continue to talk, because I sense from everybody's comments
    that we all want the same thing.
        So thank you very much and we will move on to the next
    panel. Thank you very much.
        So, our next panel, Senator Cardin is going to introduce
    our first witness, so I will not. She is Shari Wilson, then we
    have Ronald Young, Peter Frumhoff, Larry Schweiger, Fawn Sharp,
    Jim Sims and our last witness was ill and could not be here,
    Dr. Green, and we wish him well.
        Ladies and gentlemen, thank you very much for being here.
    We are going to start with our witness from Maryland. So,
    Senator Cardin, why do you not introduce her, and we thank that
    last panel. They were quite terrific. This has been quite a day
    for us all.
        Senator Cardin. Chairman Boxer, I know I speak for the
    Members of the Committee, thank you for the very informative
    hearing that has been put together today.
        I am very proud to introduce Shari Wilson. Shari Wilson not
    only serves as Maryland's Secretary of the Environment, she is
    also Chair of the Maryland Commission on Climate Change.
    Governor O'Malley has made this a top priority of his
    administration. In that role, Secretary Wilson has been
    integral in creating and implementing our State Climate Action
    Plan, which outlines Maryland's adaptation efforts and goals.
        Maryland has been one of the Nation's leaders in addressing
    climate change. Maryland is a member of the Regional Greenhouse
    Gas Initiative, the multi-State effort that is already
    benefiting from a cap and trade program. Maryland was one of
    those States that pressed for the so-called California Waiver
    in order to control greenhouse gas pollutions from the mobile
    sector.
        And Maryland is one of the few States in America to
    actually produce a statewide plan to address climate change in
    a proactive way. And one of the main reasons that Maryland is
    in the forefront of these efforts is Shari Wilson.
        We are fortunate to have her in Maryland, and we are very
    fortunate, I think, to have her help on this panel. I am
    pleased to welcome Shari Wilson to our committee.
        Senator Boxer. Ms. Wilson, go right ahead.

    STATEMENT OF SHARI T. WILSON, SECRETARY, MARYLAND DEPARTMENT OF
                            THE ENVIRONMENT

        Ms. Wilson. Thank you very much. Good afternoon, Chairman
    Boxer and members of the committee. It is a privilege to be
    here.
        The past several weeks have been filled with optimism for
    public health and the environment in Maryland, with landmark
    legislation being introduced to restore the Chesapeake Bay and
    now hearings on the Clean Energy Jobs and American Power Act.
        Senator Cardin, we appreciate your leadership in all of
    these efforts, and we are right there with you, of course.
        Adaptation. This is word that is the shorthand for the
    changes we, as a society, need to make to be better prepared
    for the changes that we are and will continue to experience as
    a result of climate change. Whether it is making sure that our
    critical infrastructure--and expensive, I might add,
    infrastructure--for water, sewer and transportation is
    protected, or whether it is making sure new investments, a
    private home or a public road use design standards that will
    withstand the increased frequency of storms or floods or
    surges, we need to start making different decisions now to make
    sure we are targeting our investments smartly.
        To date, efforts to adapt a climate change across our
    country lack cohesion. There are no clear roles, no clear
    responsibilities at the Federal, State or local level. We lack
    the necessary data and resources to comprehensively and
    efficiently prioritize our actions to adapt. We do, though,
    have the knowledge and tools and tremendous public health,
    economic and environmental motivations to better prepare.
        The Clean Energy Jobs and American Power Act provides that
    needed structure, clarifying responsibilities, the framework
    for the data and assessments that need to be completed, and
    funding to get this work underway.
        As is the case with greenhouse gas reductions, States have
    not waited for Federal action. To reduce greenhouse gas
    emissions, as Senator Cardin just mentioned, 10 States in the
    Regional Greenhouse Gas Initiative developed and are now
    successfully implementing a market-based regional cap and trade
    program to reduce emissions from the electricity generating
    sector. Likewise, to adapt to climate change, 30 States have
    adopted climate action plans. Four of those include adaptation
    strategies.
        In 2007, Governor O'Malley ordered that we in Maryland
    prepare a climate action plan. Over 100 Marylanders,
    representing the private, the academic and the public sectors,
    came together to do so. And a key part of that plan is our
    adaptation strategy.
        Adaptation plans are absolutely necessary for public
    health, economic and environmental reasons. Using Maryland as
    an example, we have over 3,000 miles of coastline, and over the
    past century we have experienced a foot of sea level rise, and
    projections show that we could experience another 2 to 3.4 feet
    of rise. We lose 580 acres a year to shoreline erosion;
    projections include projected losses of up to 161,000 acres
    lost of marshland.
        These risks includes increased erosion along our streams,
    rivers and coastal shorelines, sediment being one of our major
    pollutants that we are dealing with the in the Chesapeake Bay,
    increased droughts and effects on water supply, groundwater
    tables, the likelihood of salt water entering our fresh water
    supplies and impacts on agricultural production, numerous
    economic consequences related to coastal property protection
    and the livelihoods that rely on clean water. And it includes
    threats to our historic resources, and once those are lost, we
    of course know they are lost forever.
        The Clean Energy Jobs and American Power Act requires a
    national adaptation strategy. It requires Federal planning, and
    it requires State plans. It requires research to better develop
    our understanding of impacts to our water supply, our drinking
    and wastewater infrastructure, and it provides for mechanisms
    to mitigate impact on forestry and agriculture. It provides
    assessments funding, data collection and mapping funding to
    integrate the adaptation strategies nationally, at the State
    level, and at the local level.
        All of these adaptation policies necessitate addressing a
    range of policies to make sure they protect vulnerable areas.
    It ranges from insurance to flood protection to health
    assessments and agricultural preservation. These raise local,
    State and Federal policy issues and a national framework to
    comprehensively shift our country to an effective adaptation
    strategy.
        This bill that you are hearing today provides that clear
    national strategy. It involves coordinates plans, it is the
    only way to ensure effective prioritization of our expenditures
    to make sure we have regional coordination and to set data and
    assessment priorities for the country.
        It also provides much needed dedicated funding to get this
    work underway as soon as possible. In particular----
        Senator Boxer. I am going to ask you to sum up. OK?
        Ms. Wilson. Yes, thank you. The coastal and Great Lakes
    adaptation program acknowledges and prioritizes the unique
    challenges that are faced by coastal States. This is a critical
    part of the adaptation strategy and we applaud the inclusion of
    the provisions in this bill.
        Thank you for your consideration of Maryland's viewpoints
    today, and we look forward to working with you on any questions
    you may have.
        Thank you.
        [The prepared statement of Ms. Wilson follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you so much.
        Our next panelist is Ronald E. Young, President of the
    California Association of Sanitation Agencies. And we are very
    happy to have you here, sir.

    STATEMENT OF RONALD E. YOUNG, PRESIDENT, CALIFORNIA ASSOCIATION
                         OF SANITATION AGENCIES

        Mr. Young. Thank you, Madam Chair.
        Today, I represent my local agency, which is a water and
    wastewater agency that recycles water for about 100,000 people.
    I represent the California Association of Sanitation Agencies,
    which includes 124 publicly owned treatment works that treat
    wastewater for over 25 million people in California.
        And I also have the honor of representing the National
    Association of Clean Water Agencies, NACWA. They represent over
    300 POTWs nationwide which serve over 80 percent of the sewered
    communities in this Nation.
        I am grateful to appear, and I am pleased that this bill,
    S. 1733, represents a solid step toward finding solutions for
    water sector climate change impacts. And we support this
    endeavor.
        The POTW owners and operators believe we can play an
    important role in participating in climate change solutions. We
    generate sources of renewable energy, such as digester gas,
    biosolids, and biodiesel. If harnessed, these resources can
    reduce greenhouse emissions. And we also produce recycled
    water, and this is a climate resilient water supply.
        Water supply and water quality services are like the canary
    in the coal mine. POTWs will be among the first and hardest hit
    by climate change. This is because most communities use gravity
    as their source of energy to convey wastewater to the treatment
    plants. These treatment plants are located at the lowest end in
    the watershed. In coastal areas, the plants are often located
    along the coast or in tidal estuaries.
        Even in the case of inland locations, these outfalls and
    plants are located in river valleys and flood plains.
    Therefore, our agencies acutely experience the effects of
    either sea level rise or storm surge events attributable to
    climate change.
        In the West, and particularly in California, my State, we
    are also experiencing a severe drought, and it has wreaked
    economic havoc on the entire State. The impact of unpredictable
    precipitation and decreased water content in the snow pack has
    resulted in a statewide effort to reduce water consumption.
    This reduction is being done through conservation. It is also
    forcing consideration of construction of alternative water
    supply production such as recycling and desalination plants.
        Climate analyses indicate that modified weather patterns,
    depending on the region, will produce too much or too little
    water. For example, severe storms that can lead to surges of
    wastewater flows that can overwhelm collection systems and
    treatment plants. Alternatively, drought conditions lead to
    reduced flows and increased concentration of pollutants that
    compromise wastewater flows.
        Other impacts that we believe our agencies expect to
    encounter include rising sea levels that inundate
    infrastructure and cause health risks, warmer ambient surface
    water temperatures that will likely lead to new regulatory
    requirements and associated treatment needs, and decreased
    potable water supplies requiring greater reuse and recycling of
    wastewater effluent.
        Today, I am proud to present this report that NACWA and the
    Association of Metropolitan Agencies are releasing. It is a
    study on the impacts and challenges the wastewater community
    expects to encounter. It is entitled Confronting Climate
    Change: An Early Analysis of Water and Wastewater Adaptation
    Costs.
        I provide a copy of the study and request that it be
    included into the record as part of the formal committee
    record.
        Senator Boxer. That will be done.
        Mr. Young. Thank you.
        The most important finding in this report is that climate
    change impacts on agencies will impose costs as high as $900
    billion by the year 2050, depending on how quickly we reduce
    emissions in the meantime. This is in addition to the existing
    half a trillion dollar funding gap for water infrastructure.
    That is a total of almost $1.5 trillion.
        The report found agencies would need to address the issues
    of bigger rainstorms, higher treatment requirements, more
    energy demands, more shutdowns of service because of these
    calamities, more emergency situations, and less safe and
    reliable water supplies.
        There are opportunities, though, and these come with the
    energy that can be produced from our wastewater solids. We
    believe that up to 10 times as much energy can be produced from
    the solids out of wastewater as is required to treat our
    wastewater.
        So, one of the things that is very important for this
    legislation is, and we request, that the committee explicitly
    identify biogas and biosolids as renewable energy sources for
    purposes of meeting the goals and objectives of this bill.
        In conclusion, CASA and NACWA support the comprehensive
    climate change legislation, and we believe the bill will put us
    on the path toward reversing and avoiding catastrophic impacts
    of climate change.
        I look forward to answering your questions.
        [The referenced report was not received at time of print.]
        [The prepared statement of Mr. Young follows:]

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        Senator Boxer. I am very proud to have that support, and I
    will let Senator Kerry know about your comments.
        Our next witness is Dr. Peter Frumhoff, Chief Scientist,
    Climate Campaign, Union of Concerned Scientists.
        Welcome.

     STATEMENT OF PETER C. FRUMHOFF, PH.D., DIRECTOR, SCIENCE AND
        POLICY, AND CHIEF SCIENTIST, CLIMATE CAMPAIGN, UNION OF
                          CONCERNED SCIENTISTS

        Mr. Frumhoff. Thank you. Madam Chair and distinguished
    members of the committee, thank you for the opportunity to
    speak with you today.
        I am Dr. Peter Frumhoff, Director of Science and Policy at
    the Union of Concerned Scientist and Chief Scientist of our
    Climate Campaign. I have been privileged to serve as a lead
    author on multiple reports of the Intergovernmental Panel on
    Climate Change and guide several assessments on climate change
    impacts on the United States.
        The Union of Concerned Scientists strongly supports the
    inclusion of sound domestic and international climate
    adaptation investments as an essential complement to emissions
    reductions within the Clean Energy Jobs and American Power Act
    of 2009.
        As you know, the U.S. National Academy of Sciences and
    virtually every major U.S. and international scientific body
    with relevant expertise have affirmed that global warming is
    underway now and primarily human caused.
        The climate related impacts are expected to increase in
    severity and extent, and meeting the climate challenge requires
    two approaches, both swift and deep reductions in our emissions
    of heat trapping gases and investments in adaptation to help us
    cope with those impacts that are now unavoidable.
        Now, the reason why adaptation is so essential is that
    substantial further warming is locked in due to the heat
    trapping gases that we have already emitted. Much of that heat
    has been absorbed by the earth's oceans. As the oceans release
    that heat, the atmosphere will continue to warm for the next
    several decades.
        Further, the carbon dioxide that we have already released
    through our burning of fossil fuels and clearing of forests
    lingers in the atmosphere for several decades, continuing to
    warm the climate.
        Smart investments to prepare for now unavoidable impacts
    are essential, for example, to ensure that our Nation's low
    lying coastal infrastructure from New Orleans to Boston are
    resilient to rising sea levels, that our public health systems
    can cope with more frequent extreme heat and changing disease
    vectors, and that our cities and industries and ecosystems can
    address and cope with the additional stress that climate change
    will increasingly place on our Nation's fresh water resources
    through declining snow packs and more frequent and more severe
    floods and droughts.
        It is also directly in our national interest to help the
    most vulnerable developing nations cope with now unavoidable
    climate change. I am pleased that the proposed legislation
    includes provisions that support international adaptation and
    would respectfully submit that those investments could well be
    increased.
        But adaptation alone is not sufficient. Beyond the next few
    decades, the cost, and indeed, the feasibility of adaptation,
    depends on how swiftly we reduce our emissions. In June of this
    year, a team of more than 30 of our Nation's top scientists
    released a major assessment of global climate change impacts on
    the United States. This peer-reviewed Federal report, initiated
    and largely carried out under the Bush administration,
    documents extensive impacts across our Nation if we do not
    swiftly reduce our heat-trapping emissions.
        By the end of this century, for example, if we do not
    swiftly reduce emissions, extreme heat waves as severe as
    Chicago experienced in 1995, killing more than 700 people, are
    conservatively projected to occur every year in Indianapolis,
    Minneapolis and other Midwestern cities.
        If we do not swiftly reduce emissions, an average summer in
    Missouri is projected to have more than 2 months of days over
    100 degrees Fahrenheit. An average summer day in Pennsylvania
    is predicted to feel like a summer day does today in Georgia or
    Alabama.
        If we do not swiftly reduce emissions, in Minnesota,
    Michigan and Wisconsin, heavy down pours, twice as frequent now
    as they were a century ago, are projected to increase further
    and cause widespread flooding, damage to infrastructure and
    delay planting of crops.
        If we do not swiftly reduce emissions, in New York, New
    Hampshire, Vermont and Maine, the winter snow season is
    conservatively projected to be cut in half and reduced to just
    a week or two in Pennsylvania. The ski industry across the
    Northeast, for example, stands to lose up to $800 million in
    annual revenue.
        U.S. leadership is reducing heat trapping emissions by
    levels and great and perhaps ultimately greater than those
    proposed within the Clean Energy Jobs and American Power Act,
    is essential to keep these and other impacts from becoming
    legacies of climate disruption that we leave for our children
    and grandchildren.
        The opportunity in front of us is to reap the multiple
    benefits of U.S. leadership to a vibrant clean energy economy.
    I and my colleagues at the Union of Concerned Scientists are
    pleased to support this legislation and to work with this
    committee to ensure that the Act maintains and strengthens
    provisions to reduce emissions and adapt to those changes we
    can no longer avoid.
        We strongly encourage that this historic legislation be
    reported out of this committee and passed by the full Senate as
    fully as swiftly as possible.
        Further information on climate science, impacts and
    solutions is included in my written submission.
        Thank you.
        [The prepared statement of Mr. Frumhoff follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you.
        Next we hear from Larry Schweiger, President and Chief
    Executive Officer of National Wildlife Federation.
        Welcome.

    STATEMENT OF LARRY J. SCHWEIGER, PRESIDENT AND CHIEF EXECUTIVE
                 OFFICER, NATIONAL WILDLIFE FEDERATION

        Mr. Schweiger. Thank you, Senator.
        Good afternoon, Madam Chairman and members of the
    committee. I want to thank you and the other members who have
    sponsored this important bill and for the work that you are
    doing to advance this bill of this day.
        Thanks also for the opportunity to testify on behalf of the
    National Wildlife Federation and our over 4 million members and
    supporters across America.
        This bill before us addresses the most compelling challenge
    of our time. It means more jobs, less pollution, and greater
    security for every American. It includes sensible provisions to
    minimize the costs for families in all parts of the country,
    provides fair distribution of resources to solve our energy
    needs, and helps vulnerable people in developing countries cope
    with climate change while protecting nature.
        Congress must enact a two-part agenda. It must cap and
    reduce pollution to levels dictated by science to avoid the
    most dangerous consequences. And it must provide dedicated
    funding to address the inevitable impacts of global warming on
    nature.
        The Federation supports the strongest CO2
    targets possible. The 20 percent near-term reduction is a
    modest, easily achievable target and is the minimum starting
    point for moving forward on this problem.
        The fourth report of the Intergovernmental Panel on Climate
    Change warns that in the lifetime of a child born today, some
    20 to 30 percent of the world's plants and animals will be on
    the brink of extinction if we do not take bold action now. A
    million species could be denied to our children and our
    grandchildren if we allow current carbon emissions to continue,
    if we fail to safeguard nature from the worst impacts of
    climate change.
        Because of this, we are pleased that the Chairman's mark
    provides long-term dedicated funding for natural resources. I
    would like to highlight the work of Senator Baucus and Senator
    Whitehouse on these provisions particularly. The investments
    provide essential public and private sector jobs, especially in
    rural areas where local economies are dependent on natural
    resource activities.
        Our country is blessed with an abundance of natural wealth.
    It provides food, shelter and economic and spirituality
    vitality. Unique landscapes define us as Americans. I think Ken
    Burns in his film recently spelled that out clearly to all of
    us.
        Born and raised as a hunter and angler, I can say that my
    wildlife heritage has helped me forge family values, and I hope
    to pass this on to my children. I think that is true of many
    other American families from generation to generation.
        These hearings are about whether Congress and all of
    America will step up to its moral duty. If we do, one day we
    will be able to look our children and grandchildren in the eye
    and be proud of our conservation heritage. If we fail to act
    now, the alternative is almost unimaginable. It is not an
    exaggeration to call what we are facing a climate crisis. This
    will be the defining challenge of the 21st century.
        For years, commentators have framed climate change such as
    melting of Arctic sea ice and rising of seas as mere possible
    outcomes in the distant future. In fact, these and other
    profound ecosystem changes and climate feedbacks are well
    underway and are occurring far more rapidly that scientists
    recently projected.
        I just wrote a book called Last Chance: Preserving Life on
    Earth which I will provide to the committee and ask that it be
    included in the record. I believe we are facing our last chance
    to protect life on earth as we have known it. If we fail to cap
    pollution, nothing we can do on the adaptation front will save
    endangered wildlife or conserve ecosystems, including parks,
    marine sanctuaries, refuges and forests that support the
    economy and protect our quality of life.
        If we cap pollution but fail to make investments in
    protecting and restoring our natural resources, we will have
    accomplished only half of the job. Any solution must do both.
    It must cap pollution and use some of the resources generated
    to repair the current and future damages caused by global
    warming.
        I must ask. Are we ready to talk about a world without
    polar bears, without vast sage brush depth and free roaming
    antelopes? Are we willing to talk about a world without ice
    fishing or deep snows in the winter, a world with insufficient
    river flow in the summertime to support salmon and trout, a
    world where coastal wetlands teeming with wildlife is just a
    memory?
        The choice is ours. The time is now.
        The National Wildlife Foundation and our partners are
    committed to doing all that we can to safeguard nature from a
    warming world. We are working with scientists, resource
    managers and a coalition of over 700 hunting and fishing and
    conservation organizations from every State in the Union. Just
    the other night, we had over 13,000 sportsmen on the phone with
    Senator Warner talking about this very issue.
        This bill offers America a better way to power our future
    and to protect our planet. America has always worked best when
    we work together. Let us work together not to meet our moral
    obligations to future generations.
        Thank you.
        [The referenced book was not received at time of print.]
        [The prepared statement of Mr. Schweiger follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Senator Boxer. Thank you. Thirteen thousand people on one
    phone call with Senator Warner.
        Mr. Schweiger. We had 11,000 on another with Ted Roosevelt.
        Senator Boxer. It is extremely impressive.
        I want to make sure I pronounce our next witness's tribe in
    the right way here. Fawn Sharp is easy to say. But is it
    Quinault?
        Ms. Sharp. Yes, it is Quinault. It is also pronounced in
    French as Quinault. There is a Quinault wine. But we pronounce
    it Quinault.
        Senator Boxer. Quinault Indian Nation.
        Ms. Sharp. Yes.
        Senator Boxer. From Washington State, is that correct?
        Ms. Sharp. That is correct.
        Senator Boxer. Welcome.

       STATEMENT OF FAWN SHARP, PRESIDENT, QUINAULT INDIAN NATION

        Ms. Sharp. Thank you. I thought you were going to ask about
    my name pronunciation. I do want to comment, with regard to
    Senator Whitehouse, I was introduced by a Narragansett official
    last week and he pronounced my name Fawn Shop.
        [Laughter.]
        Senator Whitehouse. You know, that is not bad for Rhode
    Island.
        [Laughter.]
        Ms. Sharp. Thank you. Senator Boxer, Senator Inhofe and
    members of the committee, I am truly honored, indeed, to
    present testimony on behalf of the Quinault Indian Nation. The
    Quinault Indian Nation truly appreciates the committee's
    efforts and dedication. My testimony was prepared in
    consultation with several of the tribal organizations and
    tribes throughout the United States, including the National
    Congress of American Indians.
        We applaud the committee for expanding this bill to include
    important tribal provisions that were not in the House bill,
    H.R. 2454, namely, inclusion of the BIA funding as an eligible
    purpose of Department of the Interior natural resources
    adaptation funding, an extra alternative funding possibility
    for natural resources adaptation on tribal lands, as well as
    inclusion of tribal land as an eligible recipient of funds
    under the Supplemental Agricultural Reductions Program which
    significantly increase and extend it from 0.25 percent for 2
    years to 1 percent throughout the life of the bill, and
    finally, the required consultation with the Secretary of the
    Interior when EPA determines the tribal set-asides.
        I have also reviewed the adaptation provisions of the
    recently released Chairman's proposed amendment to the bill and
    express overwhelming appreciation and support for these
    additional provisions that were not included in the original
    version. I have identified them in more detail in the expanded
    version of my testimony that has been submitted for the record.
        Senator Boxer. We will put that in.
        Ms. Sharp. Today, we urge congressional leadership to move
    forward with legislation to help the United States prepare and
    adapt for the challenges of climate change and to attain the
    goals of energy independence and security. We look forward to
    working with Congress and the Administration in the development
    of climate change legislation to ensure that tribal needs and
    concerns are adequately addressed.
        I begin my remarks by stating a very important fact.
    Indigenous peoples, including American Indians, Alaskan Natives
    and Hawaiian Natives are among the most vulnerable to the
    impacts of climate change in the world. This fact is recognized
    by the Intergovernmental Panel on Climate Change.
        In the United States, according to the GAO office, 86
    percent of Alaskan Native Villages are threatened by flooding
    and erosion because of warming temperatures. Thirty-one
    villages are imminently threatened, and 12 villages have opted
    to relocate permanently.
        Since 1928, my neighbor to the North, the Hoh Tribe, has
    been plagued with flooding every 10 years. The result is severe
    soil erosion that has reduced the reservation from 443 acres to
    400 acres. For more than a decade, the Hoh Tribe has been
    aggressive in its efforts to get the reservation relocated
    before extreme river flows and increases in sea level
    completely wash the land, the people and the future of the Hoh
    Tribe into the ocean.
        At home, the Quinault Indian Nation is proactively
    addressing the uncertainties and impacts of climate change by
    developing risk assessment, adaptation, and mitigation plans by
    July 2010.
        During my first year as tribal President, I was confronted
    face-to-face with impacts of climate change. I received an
    urgent call from our scientists who had discovered massive dead
    fish washed ashore our pristine coastline. This was known as
    the Dead Zone. It affected the entire West Coast of Washington
    and the shores of Oregon. The shore was riddled with dead fish
    from every spectrum of the food chain. It was not a singular
    fish.
        In the last year, actually, earlier this month, I took a
    helicopter flight over the Anderson Glacier. This glacier,
    which feeds the Quinault River, is one of four. We have been
    monitoring this glacier quite closely over the last 20 years.
    The University of Washington has photos and has been monitoring
    it since the turn of the century.
        In the last 20 years, we noticed that it receded 1,700
    feet. When I took the flight earlier this month, the entire
    glacier is gone. It disappeared.
        We are heartened that the Senate and House committees have
    recognized the nation-to-nation relationship between the
    Federal Government and tribes by including us in many critical
    provisions like renewable energy, domestic adaptation and
    natural resources adaptation.
        We seek to be sovereign partners in the climate change
    programs. We seek equitable shares of the allocations provided
    to States and tribes.
        Finally, I have two other recommendations that I would like
    to note in my remarks. We ask that the committee direct the GAO
    to prepare a report on climate change and tribal nations in the
    Lower 48. There have been two GAO reports on the impacts of
    climate change to Alaska native villages, once in 2003 and once
    in 2009. A report on climate change and tribal nations in the
    Lower 48 would document for Congress and the Administration the
    widespread cloud of destruction that awaits our reservations,
    our people and our livelihood.
        Last, section 372, the Additional Provisions Regarding
    Indian Tribes, we ask that contain a disclaimer to protect
    treaty and other federally reserved tribal rights.
        Thank you.
        [The prepared statement of Ms. Sharp follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        I just want to make sure that you are aware that Senator
    Udall of New Mexico has really been our point person. So, the
    thank yous that you gave in my direction I am going to say,
    without Senator Udall, I do not think we would have done as
    good a job as we did. So, I just wanted to make that public
    because he worked so hard, he and his staff.
        And now last, but not least, our minority witness. I want
    to just say that poor Senator Inhofe came in, and he said what
    happened to my other witness, because he had two. Well, his
    other witness got H1N1 and there was not enough time.
        But here is the really interesting thing. Tomorrow, his--
    another witness got H1N1. But there was time to replace that
    witness with another witness. But we wish both of those
    witnesses well.
        Now, Mr. Sims, I am going to welcome you back to the Senate
    where, as I understand it, you worked for 12 years including as
    Chief of Staff to former Senator Robert Kasten, Jr., and then
    you worked in the White House as President George W. Bush
    Director of Communications for the Energy Group, which was led
    by Vice President Cheney, and now you serve as Chief Executive
    Officer of the Western Business Roundtable.
        So, we are very pleased to welcome you back to your old
    homestead.
        Mr. Sims. Thank you.
        Senator Inhofe. I might also add that since we only have
    one minority witnesses, you can have 10 minutes instead of 5
    minutes.
        Senator Boxer. Well----
        [Laughter.]
        Mr. Sims. I am not sure I would ask for that.
        Senator Boxer. Well, with unanimous consent, we will give
    you 7. How is that?

       STATEMENT OF JAMES T. SIMS, PRESIDENT AND CHIEF EXECUTIVE
                  OFFICER, WESTERN BUSINESS ROUNDTABLE

        Mr. Sims. I will be efficient regardless since we are a
    pro-efficiency group.
        Madam Chair, thank you very much. Mr. Ranking Member and
    members of the committee, it is good to be back here. I feel
    like the Senate is really my home in a lot of ways.
        The members of the Western Business Roundtable, Senator
    Boxer, we are a very wide ranging, broad based group of
    members, and I think it is fair to say that of our 50 or so
    members, we probably have 50 different views on what to do
    about climate change.
        We do have a number of things that we do agree upon,
    though, and I have entered those into my statement as long as
    that can be placed in the record. I would appreciate that.
        Senator Boxer. Absolutely.
        Mr. Sims. I would also mention that I am the co-founder and
    the former head of what is not known as the Geothermal Energy
    Association. I am a very strong proponent of renewable energy
    and have a lot of experience in that area. My job these days
    running a large, broad based organization is to promote more of
    everything.
        Regrettably, our organization is not able to lend our
    support to your bill as it currently stands today. What I
    wanted to do, and I hope I present this in the right way, is to
    put forth some additional ideas and suggestions, constructive
    things that can be done in addition to a bill like this or in
    lieu of a bill like this, whatever the Congress is trying to
    do.
        Our members, and I am very proud of this, our members are
    companies that are out there right now trying to develop the
    exact technologies, greenhouse gas mitigation, CCS technologies
    that will get us to the point where we will be able to grow our
    economy and mitigate greenhouse gas emissions.
        So, we would like to make a couple of concrete suggestions
    for the Congress and the committee, of course, to consider.
        We suggest the launching of four major initiatives, public-
    private partnerships, along the lines and with the same
    intensity as this country entered into when we put a man on the
    Moon in less than a decade. A number of members have talked
    about some of these very initiatives. For example, we would
    like to see a public-private partnership put together that
    would specifically build and deploy at least six 500-megawatt
    pilot projects near zero emission coal-fired power plans that
    can demonstrate a wide variety of CCS technologies.
        Now, a lot of people are talking about these technologies.
    Frankly, a lot of them are on the drawing board. We believe we
    need to get out there in the field, and this is going to
    require some assistance from the Government, to start building
    these kinds of technologies.
        We would also like to see a major initiative to build out
    our infrastructure to support compressed natural gas and
    electric vehicle fleets. That is something that I think a lot
    of support exists on both sides of the aisle. We would also
    like to kick start the construction of at least three coal-to-
    clean liquids and/or coal-to-gas facilities to help us convert
    the energy locked up in coal in cleaner and cleaner ways.
        Finally, we would like to see a dramatic acceleration, I
    think all would agree with this, a dramatic acceleration of our
    build-out of the high voltage electric transmission system. I
    would add that we feel very strongly, however, that as that
    process goes forward, we need to make sure that we do not
    restrict access to the grid. We should build lots of wind,
    solar, geothermal, clean coal, nuclear, et cetera, and all
    should have access to that grid.
        We also would recommend, and I think, Madam Chair, there is
    no disagreement on this, a much more aggressive push on energy
    efficiency. And I would also add process efficiency. Energy
    efficiency looking at building envelopes and standards, those
    are obviously going to get stronger, and they should. But also
    there are tremendous efficiencies that can be reaped through
    industrial processes, whether it is power generation,
    manufacturing, et cetera. Obviously, the more efficient we are
    in those processes, the more production we can have with a
    comparable decrease in emissions.
        We also believe, and I think there are a number of members
    that also agree with this, that we need to find a way, if we
    are going to make CO2 sequestration really work, we
    have got to find a way to deal with the legal liability issue.
    We have Price-Anderson for the nuclear industry. I think we are
    going to have to look at some kind of a structure so that,
    whether it is a Governor or a county or the U.S. Government,
    when we start seriously sequestering CO2
    underground, we have to understand and know that we are not
    going to have, quite frankly, a flurry of lawsuits, because
    that is going to prevent those projects from going forward.
        We also believe that we need a massive build-out. The
    massive build-out of clean energy technologies that we are all
    seeking, renewables in particular, are also going to require a
    major increase in this country's ability to do mining and
    mineral development.
        Now, most folks do not put these 2 and 2 together, but if
    you think about it, a 3-megawatt wind turbine, those are the
    big ones that you see now going all over the country, one of
    those wind turbines requires 335 tons of steel, that is one
    turbine, 4.7 tons of copper, 1,200 tons of concrete, aggregate
    and cement, 3 tons of aluminum, and 1 ton of something we call
    rare earth elements.
        And I think many of you are starting to hear more and more
    about the fact that rare earth elements, which are used in wind
    turbines as part of the permanent magnets, they help us create
    the electricity. Right now, our country, like it or not, is
    dependent on one nation for 99 percent of all the rare earth
    elements that we import. The nation is China. And the reason
    that is important is that the Chinese, as they are building out
    their wind power manufacturing and deployment capabilities,
    they are talking now about restricting their exports of those
    rare earth elements.
        The point being that if want to build a lot more
    renewables, we are also going to need to have to do a lot more
    environmentally sound and sensitive mining and minerals
    development.
        Madam Chair, I want to make one note on climate adaptation.
    There are a lot of things going on in climate adaptation. I
    think they are all good. Frankly, I am one who believes, and I
    do not think anyone would dispute this, the climate is always
    changing. Humans are having a role in that.
        But the fact is we need to be careful about adapting to
    whatever climate we have in our future. I would note, this is a
    little controversial, I think there is a truth in this issue
    that frankly is best summed up by Patrick Moore, who is one of
    the founders of Greenpeace, who makes the point that ice and
    frost are the enemies of life.
        Now, that is not to say that we should not be concerned
    about global warming. It is to say that as the globe warms,
    which everyone says it is going to, that some of the
    catastrophic predictions of species extinctions probably, I
    believe, are not true. That is not to say that we should not be
    working to try to prepare for ourselves for any climate
    adaptation that comes down our path.
        Madam Chairman, thank you very much.
        [The prepared statement of Mr. Sims follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Boxer. Thank you very much.
        I am going to think about that, when ice and frost our
    enemies of life since Greenpeace thinks our bill is too weak, I
    think you took that point a little out of context.
        [Laughter.]
        Senator Boxer. But I guess if you are a polar bear, ice is
    good. If you are an ice skater--but no, we will get there
    later. But thank you.
        I felt that your points were very well done. Hey, you have
    to start the clock. Have you put a cost to your plan? It is a
    public-private partnership and it is pretty big, visionary.
        Mr. Sims. It is, Madam.
        Senator Boxer. So what do you put as a cost to taxpayers of
    this?
        Mr. Sims. We have not, but we will do that. We have a
    number of people on it right now. I will get that back to the
    committee.
        Senator Boxer. Please. Because I am looking at this, and I
    am thinking, you know, one of the interesting things about the
    approach we are taking is that the 7,500 largest polluters, as
    you know, will have to buy the allowances. It is a polluter pay
    type of a program. Now, my colleague calls it a tax. It is not
    a tax because if you clean up your act, and you figure out how
    to get the carbon out of the air, you do not have to do
    anything. So, it is not a tax. It is polluter pay.
        So, the point is, that is different than taxpayer pay. And
    that is why I ask you for the price that you would put on these
    things. It may be that they are very worthwhile, some of these
    ideas. So I am very interested in hearing from you.
        Mr. Sims. Can I make a quick suggestion in that regard?
        Senator Boxer. Please do.
        Mr. Sims. Speculating, as well do, on the outcome of this
    debate and this legislative process, if it is the case, Madam
    Chair, that the bill passes, a bill like this passes, I think,
    being practical, as my member companies tend to be, I think a
    lot of folks we can reasonably project that the regulations
    that would be written to implement such a bill will be, like it
    or not, in the courts for a number of years. I think all sides
    will probably be suing, quite frankly, to change those
    regulations.
        And part of the reason that we are putting forward things
    that we think can be done in the near term is that these are
    things that can be done in the near term, possibly while the
    outcome of this debate continues to go forward.
        So, our member companies are out there on the ground now,
    actually trying to make these things work, and we are looking
    for whatever assistance we can to push that ball forward.
        Senator Boxer. I hear your point. I think it is an
    interesting point. I would, however, say do not underestimate
    that there would be lawsuits over some of the things that you
    put on the list. It is just the way it is. And the question is,
    how swiftly it moves. It took time, but we finally got the
    ruling from the Supreme Court that carbon is covered by the
    Clean Air Act.
        So, we need to move forward. And I would suggest to you
    that the one way we know we have lawsuits is if we do not move
    forward on that because the Supreme Court has ruled. So,
    whether EPA does it or we figure out a more flexible way to do
    it, it shall be done.
        I guess I want to ask our representative of the Native
    American tribes here, since she is representing one tribe but
    she did talk about the Alaska Tribes, this idea that ice is the
    enemy, and frost. When I visited Alaska, well, I actually
    visited Greenland and Alaska--when I visited Greenland and we
    met with the tribes there, they are just devastated with the
    melt. Devastated. I mean, everything that they have done for
    generations is changing.
        So, I wonder if you could comment on that. I mean, I just
    do not agree with that comment.
        Ms. Sharp. Sure. Absolutely. A lot of thoughts went through
    my mind as I heard the testimony. You know, when you think of
    Chief Seattle's quote, I do not know how many of you have ever
    read Chief Seattle's quote, he talks about what we do to the
    earth we do to ourselves, all things are connected. And it
    seems that there is a collective value.
        And we, as native people, have a deep reverence for the
    natural world, the natural environment, because we receive air,
    we can breathe, we receive water, we receive food that
    nourishes and feeds our bodies. And so, we see an intimate
    relationship with all aspects of the physical environment, and
    the degradation of any one physical aspect on the earth has a
    domino effect.
        The glaciers that I mentioned in the Upper Quinault that
    feed the Anderson Glacier, that is now gone. That water
    provides essential water flows for salmon, and the salmon are
    essential to our culture and our value system, and that
    maintains our continuity as a people.
        Senator Boxer. Thank you. I think that is beautifully
    stated.
        Mr. Young, my fellow Californian, could you describe why
    wastewater facilities are vulnerable to the expected impacts of
    global warming and how those impacts are addressed in the
    adaptation provisions of out bill?
        Mr. Young. That impacts I think that we are talking about
    are because of location. Because of the immediate impact of
    flooding, of rising sea water inundating already perhaps
    challenged facilities. This causes the opportunity for sanitary
    sewer overflows, for impacts on public health, for
    contamination in our streams and rivers, and all of these
    impacts that are there.
        How the adaptation section of this bill can help is with
    the challenge grants that are offered so that the most serious
    problems can rise to the top of the list, and the most serious
    partnerships can be made between the local agencies and the
    Federal Government to go out and solve those issues in a
    partnering way, to be able to come up with solutions that can
    be applied throughout the country.
        Senator Boxer. Thank you.
        Senator Inhofe.
        Senator Inhofe. Thank you, Madam Chairman. Well, first of
    all, on the consumer polluter pays, let me quote the Director
    of CBO, Director Elmendorf, he said at any point in which we
    are putting a price on carbon emissions that would be passed
    through to the cost to consumers, is it possible to design a
    system using the revenue it generates to ensure no net increase
    in the overall burden to consumers. His answer is no.
        Mr. Sims, you raise some questions that I think are
    significant in terms of preemption that we would want to make
    sure that, the argument has been made that you have to pass
    legislation to preempt the Clean Air Act. Does this, in any
    way, preempt that?
        Mr. Sims. I think that, and I will admit, Senator Inhofe
    and Senator Boxer, that I am still reading the bill. I would
    have liked to have built it in 25 pages. I am sure we all would
    have liked to. It is just not possible to do that. So, we are
    still examining it.
        But I know that there is no provision, as far as I know,
    that would specifically preempt additional action by EPA. Now,
    obviously EPA is going to have to write the regulations to
    implement much of this bill. So that is going to happen
    regardless.
        I think our concern was that if the Congress does not act
    in some fashion, does not provide some legislative and
    regulatory certainty, we are going to continue to have
    problems. Our members agree with that. By the same token, we
    are concerned if Congress does not act, and the EPA goes
    forward. The EPA does not have the tools under the Clean Air
    Act to adequately regulate greenhouse gases. Clearly. I do not
    think their recent change is going to regulate farms and cows
    with--farms that have 25 cows on it.
        Senator Inhofe. And I would also say what provisions of the
    bill would help us get more natural gas out of the ground?
        Mr. Sims. I think there is an irony, Senator. You make a
    great point. I am afraid that a good piece of this bill and
    other bills that we are seeing come out of the Congress are
    aimed, ostensibly, at increasing America's energy independence
    while at the same time they have elements that are decreasing
    our ability to move toward that goal with regard to natural gas
    and oil development.
        We have enough natural gas, we have enough oil,
    domestically, specifically off our coast, and with oil shale,
    to move completely to energy independence. But I am afraid we
    are not going in that direction.
        Senator Inhofe. Yes, well, the last thing that I asked you
    was if it is in the bill or if you have seen it because some of
    these answers, as you mentioned the carbon capture
    sequestration, is there anything in the bill that would remove
    the barriers to that?
        Mr. Sims. There are. And I think a lot of the details will
    still be worked out. As I said, a lot of the devil that will be
    in the details from this bill, I think, will come in the
    writing of the regulations. So, frankly, from our perspective
    there is a lot of stuff that needs to be filled out, and no one
    really knows what some of these details are going to be until
    those regs get written and the inevitable court challenges get
    adjudicated.
        Senator Inhofe. Well, I think you bring out a good point
    when you talk about getting some of these resources, like
    natural gas, in previous--and I want to get this into the
    record, in each one of our hearings the new report that came
    out just last week from CRS designated or revealed that
    American's combined recoverable natural gas, oil and coal
    reserves as the largest on earth. We are No. 1.
        Now, the problem is that we are precluded from developing
    83 percent of that by regulatory obstacles that are out there.
    Do you see anything in this bill that would relieve any of
    those obstacles that are there?
        Mr. Sims. I am afraid to say no, Senator.
        Senator Inhofe. One of the concerns I have is, if you get
    beyond this bill, some of the same people who are promoting
    this bill are also for some of the other provisions, for
    example, doing away with hydrologic fracturing. You mentioned
    getting more of the oil and gas. Obviously, if you remove
    hydrologic fracturing, you would have a real serious problem
    doing that. I think you would agree with that.
        Mr. Sims. Senator, I would say there is a tremendous irony
    in that threat as well. One industry that would probably be
    hurt the worst by shutting off or slowing down our natural gas
    production is wind. Wind energy, as most of us I think now
    understand, is an intermittent resource, and it desperately
    needs natural gas to help balance out the load. The two work
    well together, hand in hand.
        Senator Inhofe. Yes, well, I think what I am saying is that
    the one thing that bothers me more about the debate than
    anything else in when people say, oh, we are concerned about
    the dependency on foreigners for our oil, gas, our energy, when
    in fact the reason we are is our regulations over here. And if
    we wanted to be energy independent, all we need to do is get
    rid of these barriers that are there. And these are legislated.
    I am talking about moratoria for offshore drilling and you
    mentioned the immense oil shale and methane hydrate deposits.
    Those are huge, and they are not even considered in this
    conclusion that we are No. 1 in terms of reserves.
        Mr. Sims. Right.
        Senator Inhofe. We have far more than China, far more than
    Saudi Arabia. It is mind boggling to me that, in this debate,
    we never talk about doing something to reduce those barriers.
        I see a lot of shifting around over here. Do you disagree?
    Do any of you guys really want to keep the barriers there so
    that we cannot produce our own, develop our own resources?
        Dr. Frumhoff.
        Mr. Frumhoff. I would be happy to respond. Thank you,
    Senator.
        I think the challenge is to make sure we have a level
    playing field that takes into account the true price and cost
    of energy use, which this bill would establish through putting
    a price on carbon. Once you have a price on carbon, along with
    other corollary policies, then the appropriate mix of energy
    resources can be better----
        Senator Inhofe. Yes, but that was not my question. My
    question was, should we not develop our own resources?
        Mr. Frumhoff. I think we have to look at the cost of
    extraction. Obviously, in the case of offshore drilling the
    cost of extraction, the environmental and societal costs of
    extraction are very high. If we have lower cost ways of
    essentially achieving the same energy benefits through the low
    hanging fruit of energy efficiency----
        Senator Inhofe. Well, how do we find out if we are not able
    to go after 83 percent of those resources reserves that are out
    there? How can you determine what the costs are?
        Mr. Frumhoff. Well, most environmental assessment with
    which I am familiar suggest that the environmental costs of
    that extraction would be very high. And that is why I think it
    has been wise to look for other approaches to achieve our
    energy independence and to reduce carbon at the same time.
        Senator Boxer. Thank you, Senator.
        I am just going to put into the record, Mr. Sims, I know
    you have not read the whole bill, but if you look at section
    191, subtitle H, what you will find is a whole natural gas
    section. And the natural gas industry is working with us, the
    American Natural Gas Association, because different from the
    House bill, and different from Lieberman-Warner, we have a
    natural gas title here, subtitle, and what we allow for is, if
    you are plugging up a leak from a natural gas pipeline, that is
    an allowable offset.
        That is No. 1, and it huge for them. It is very good for
    them. And second, there is an authorization to help them build
    cleaner plants. So, please know that we agree with you that
    natural gas is very important, it is very abundant apparently,
    and we are working with them to do even more. But we have come
    a long way.
        And at this point, is it Senator Whitehouse? Or is Senator
    Udall first?
        Senator Udall followed by Senator Whitehouse. OK.
        Senator Udall. Thank you, Madam Chair.
        Senator Boxer. Oh, I am so sorry. In between the two of you
    is Senator Alexander. Forgive me.
        Senator Udall. He has been waiting there, patiently.
        Madam Chair, thank you for your very kind comments about my
    advocacy for tribes. I think you also have been very attentive
    to tribal needs, and in particular, worked hard, I think, to
    protect California tribes, and you are a real champion of
    tribal sovereignty.
        With that, let me ask President Sharp. It is my
    understanding that the Quinault Indian Nation, and other Indian
    tribes, have been engaged extensively over the past several
    years to establish intergovernmental cooperation at State and
    Federal levels. We have had some success in improving the
    coordination and cooperation with Indian tribes in this
    legislation so far.
        But what would you suggest we do to strengthen provisions
    to support tribal participation in such forums in this
    legislation?
        Ms. Sharp. I think, probably, the main thing that we would
    seek is that tribes have a direct and specific policy, what I
    call policy and regulatory deference. Tribes are in the best
    position to know and understand the problems that we confront
    and face at home. We have extensive oral history throughout
    many generations.
        And we would like to be able to blend western science with
    traditional knowledge. And to be able to do that effectively,
    tribes should be given regulatory and policy deference as we
    develop our own standards, our regulatory structures, as well
    as how that impacts our economy within reservation lands.
        Senator Udall. Now, this legislation that we expect to pass
    here through the committee in the next couple of weeks is
    expected to be combined with the Senate Energy Committee, and
    we also hope to include legislation on tribal energy being
    developed by the Senate Indian Affairs Committee.
        Should this legislation be improved to encourage and
    facilitate tribal development of clean, renewable energy?
        Ms. Sharp. Absolutely.
        Senator Udall. What would you suggest there?
        Ms. Sharp. I would suggest that, if Congress and Members of
    Congress in leadership could take a step back to really
    understand that tribes, in this particular issue, need to be
    direct participants. We have advanced these issues locally,
    regionally, nationally and internationally operating under this
    assumption. We are facing a global crisis that is of
    apocalyptic concern.
        In those circumstances, it is not right for us, for me as a
    policymaker of one jurisdiction, to operate in a vacuum. Not
    only a human vacuum, a mankind vacuum, but to look at the
    interests that transcend borders. And leadership in this era,
    in this time, demands and requires that all public policymakers
    draw on all information, economic information, cultural,
    historic information, scientific information.
        And so, I would strongly encourage that this Congress
    realize the value that Indian country brings when tribes do
    collaborate with the Federal Government on restoration efforts
    that blend traditional knowledge. The benefits are multiplied.
    And we are at an era where it is such a crisis, we need all
    information to make calculated decisions moving into the
    future.
        Senator Udall. Thank you. That is very well put.
        Mr. Schweiger, in New Mexico, we are already seeing the
    early impacts of climate. The Jemez Mountains west of Santa Fe
    saw the biggest average increase in temperature and decrease in
    moisture of anywhere else in the State in 2008. Those change
    likely contributed to a massive Pinion Pine forest die off in
    the mountains that we have not seen in a long, long time.
        Now, natural resource adaptation is an unfamiliar phrase to
    many folks, even those who may be familiar with traditional
    conservation efforts. Could you describe a few examples of the
    types of projects that would be pursued under this legislation,
    including the investments made in communities and the jobs that
    would be created and preserved?
        Mr. Schweiger. Thanks, Senator. I think the great challenge
    we have today is that the ecosystems that we have tried to
    protect in previous actions may, in fact, be disconnected from
    the resources themselves. And there are some places where we
    need to create corridors where wildlife--and we also need to
    take steps to protect stream sides from over warming through
    planting of buffer strips and reducing the temperatures of
    stream side corridors.
        We also, I believe, have opportunities to take steps to
    deal with coastal sea level rise and invest in protecting
    habitats that will someday be submerged while than allow those
    habitats to be built upon today.
        So, there are a number of things that we can do. I also
    think that, you know, we need to remember that in order to stay
    even with climate change today, the animals, birds and plants
    need to be moving at about 30 to 43 feet per day according to
    the best calculations that we have seen. So, it means that we
    need to help them move either up slope or move further north to
    make those adjustments.
        It is going to redefine conservation. And frankly, I think
    there are a lot of really good minds working on what that looks
    like because it is not going to be the same thing as we had 40
    or 50 years ago. We need to rethink how we manage natural
    resources to protect the living resources and plants to help
    them adjust to the climate consequences that we are causing.
        Senator Udall. Thank you, and thank you to the entire
    panel.
        Thank you, Madam Chair.
        Senator Boxer. Thank you, Mr. Schweiger. That was really
    fascinating to listen to you.
        Senator Alexander.
        Senator Alexander. Thanks, Madam Chairman. And thanks to
    the witnesses for being here.
        A couple of things for the record. First, the Chairman and
    I have gone back and forth a little bit about the costs of wind
    power versus nuclear plants. I accept the National Academy's
    conclusions that climate change is real and that humans have
    probably caused most of it recently. And I hope the Chairman
    will accept the report of the National Academy of Sciences of
    July that says the cost of making 20 percent of our electricity
    from wind power is about the same as making 20 percent of our
    electricity from nuclear power.
        Senator Boxer. Senator, honestly, I do not remember
    discussing the cost. I was talking about the rate payers'
    costs.
        Senator Alexander. Well, that is who pays for each one.
        Senator Boxer. OK.
        Senator Alexander. The cost to the rate payer for nuclear,
    according to the National Academy, is 6 cents to 13 cents over
    the lifetime per kilowatt hour and 4 cents to 10 cents for wind
    over its lifetime. And the wind does not include the
    transmission power or the back-up power. You have to build, you
    know, natural gas or coal or nuclear plants to back them up
    because the wind does not blow but a third of the time. And it
    does not include the taxpayers' subsidy, which over 10 years--
    --
        Senator Boxer. I am going to add back a minute to your time
    because I want to----
        Senator Alexander. I just wanted to----
        Senator Boxer. No, no. I think this is important.
        Senator Alexander. But the rate payers would pay the same.
        Senator Boxer. OK. I think it is important to note that
    taxpayers picked up the bill for the Price-Anderson Act. And
    that is always forgotten.
        Senator Alexander. No, Madam.
        Senator Boxer. It is in there.
        Senator Alexander. May I correct that? Because----
        Senator Boxer. Well, after the certain amount of billions,
    then the taxpayer is for catastrophic. We know that.
        Senator Alexander. Well, each, let me see if I remember
    right, you have got 104 nuclear reactors, they each are
    responsible up to the first $10 billion?
        Senator Boxer. Ten billion dollars.
        Senator Alexander. So, anything above 104 times $10 billion
    the taxpayer would be responsible for, but the taxpayer takes
    care of disasters every time we have one of that magnitude.
        Senator Boxer. Well, if I could say, it is quite a
    different situation. But I mean, if you know what happened in
    Chernobyl, I do not see that happening with wind power.
        Senator Alexander. That was in Russia, Madam.
        Senator Boxer. Yes, and Three Mile Island----
        Senator Alexander. The taxpayer has never paid a penny of--
    --
        Senator Boxer. But that is not the issue. The issue is, if
    we do not have to, why do we not repeal? I will join you in
    repealing it, because I think that would make it much more
    attractive to the American people if they did not have to worry
    about the possibility of a catastrophic----
        Senator Alexander. I would do that if you would join me in
    repealing in the $170 billion subsidy for wind power that we
    will be paying over 10 years to make 20 percent of our energy.
        Senator Boxer. Well, let us talk. I doubt that we will
    reach a meeting of the minds for a lot of reasons----
        Senator Alexander. Probably not.
        Senator Boxer. But I have to say, I have to say, really, I
    think nuclear is going to be part of the mix. And this is the
    last point. I think what we have argued about more than the
    cost is that at the end of the day there will be more nuclear
    plants built under the Kerry-Boxer bill than under your plan to
    build 100 plants. That is what the studies show.
        And for some reason, you continue to make the point that
    nuclear is the answer when, in fact, in our bill there will be
    more nuclear plants built under out bill than under your build
    100 plants now scenario.
        Senator Alexander. Well, my problem with that, Madam
    Chairman, and I would like to discuss this with you, is that
    the bill that we are writing here will be combined with the
    renewable energy bill, which favors wind and excludes nuclear.
    So, we have a national windmill policy that encourages and
    subsidizes building windmills, and we have not started a
    nuclear power plant in 30 years.
        Senator Boxer. Well, let us talk about the loan guarantees.
    You want to talk about that for nuclear? I mean, let us face
    it----
        Senator Alexander. I would like us to have a carbon-free
    electricity standard----
        Senator Boxer. I love it.
        Senator Alexander. Where all forms of carbon-free energy
    would be treated the same.
        Senator Boxer. That is fine. That is fine. But you forget,
    what you forget every time we have this conversation, which I
    enjoy, is the Price-Anderson Act, you forget about that, you
    forget about the loan guarantees, you forget about a lot of the
    things.
        I think what we should do, just because it is an
    intellectual debate, which I think is worthy of our time but
    probably not now, these poor people. But why do we not sit down
    and I will make a list of all the Government subsidies that the
    nuclear industries get, and I will make a list of all that the
    wind gets----
        Senator Alexander. Good.
        Senator Boxer. And you do the same.
        Senator Alexander. I will.
        Senator Boxer. And let us sit down and compare. But at the
    end of the day, they are both very important to the future here
    because they are clean, and that is good.
        Senator Alexander. And I had included in the record the
    other day the estimates that over the next, the subsidies for
    wind are about 10 times that for nuclear, and they are much
    more than any other form of renewable energy.
        But I accept your invitation, and I look forward to doing
    this. I just wanted to make sure that it was noticed that the
    rate payers, the cost of wind, according to the National
    Academy of Sciences, the rate payers would pay about the same
    in each case.
        Senator Boxer. OK, OK.
        Senator Alexander. Now, I would also like to include in the
    record what I think is a pioneering study done by the Nature
    Conservancy, if I may, Madam Chairman, which is entitled Energy
    Sprawl or Energy Efficiency: Climate Policy Impacts on Natural
    Habitats in the United States of America, and remarks I made on
    the perils of energy sprawl to the Resources for the Future on
    October 5, 2009. I would like to include that in the record.
        Senator Boxer. Absolutely.
        Senator Alexander. The recommendations of the Nature
    Conservancy paper, I hope, are something this committee would
    take seriously. They warned that over the next 20 years new
    energy production, especially biofuels, which we are learning
    more about, and wind power, will consume a land mass larger
    than the State of Nebraska, and they made some suggestions for
    how we might deal with that.
        The first insight was the size of the [unclear]. The second
    was they noted the widely varying amounts of land consumed by
    different production, for example, in terms of biomass, to
    equal the production of one nuclear reactor, you would have to
    continuously forest an area the size of the Great Smoky
    Mountains with hundreds of trucks running up and down the
    mountain every day with wood chips.
        And in terms of when, I would point out, that a row of 50-
    story wind turbines along the entire 2,178 mile Appalachian
    Trial, 50-story wind turbines, would generate the same amount
    of electricity produced by four nuclear reactors on 4 square
    miles.
        And they suggested site selection was important, talking
    about the impact on wildlife. To Mr. Schweiger, let me ask you.
    Have you thought about the renewable energy sprawl and its
    effect on wildlife? I think some of the State wildlife
    commissions may have.
        And specifically, ExxonMobil pleaded guilty in Federal
    Court to killing 85 birds that came into contact with crude oil
    or pollutants that are protected by the Migratory Bird Treaty
    Act which dates back to 1918. They paid $600,000 in fines.
        The wind turbines we have today kills between 75,000 and
    275,000 birds a year, according to the Bird Conservancy. If we
    make 20 percent of our electricity from wind turbines, that
    would be 1.4 million birds per year. What would be the fine for
    killing 1.4 million birds per year? At one wind farm near
    Oakland, California, it estimates that its turbines kill 80
    Golden Eagles a year.
        Have you thought about that in your Federation, and do you
    think the Migratory Bird Act ought to apply to other forms of
    energy production?
        Mr. Schweiger. Well, let me answer your first question
    first. In terms of land use impacts, I think we need to be
    thoughtful and careful about where we place those systems so
    that we avoid destroying the fragile ecosystems that are truly
    important to overall, you know, life on earth. And I think that
    with some great care going into that, we can do that.
        Second, we need to pay very close attention to the types of
    technology deployed and how they are done. I think there have
    been vast improvements in wind turbines, and I think we need to
    continue to develop, you know, approaches that avoid bird
    strikes and strikes of bats and other things.
        Senator Alexander. Do you think the Migratory Bird Treaty
    Act ought to apply to other forms of energy production?
        Mr. Schweiger. Well, I think the Migratory Bird Treaty Act
    ought to be enforced wherever it is a problem.
        Senator Alexander. So, if it kills 1 million birds a year,
    then who, the wind developers are responsible for that just as
    oil developers are for----
        Mr. Schweiger. I think that we need to be careful of what
    we are doing with wildlife and make sure that we protect birds
    as a resource of this country.
        I would also point out to you that I spent a week in Prince
    William Sound where Exxon caused the pollution there, and the
    oil that they spilled is still there. It just under the sand
    about 6 of 8 inches and I traveled around with some scientists
    looking at that over the entire system. So, it continues to
    still have a tremendous impact on not just birds, but other
    life as well. I think Exxon got away with a lot.
        Senator Alexander. I think the fine was fine. I think they
    should be fined for killing 85 birds. I was just suggestion
    that 100 nuclear reactors on 100 square miles might kill fewer
    birds and disturb less wildlife than 186,000 wind turbines and
    19,000 new miles of transmission lines.
        Senator Boxer. OK.
        Senator Whitehouse.
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        Senator Whitehouse. Thank you, Madam Chair. I was impressed
    by the examples of the effects that Dr. Frumhoff gave us of,
    essentially the effects that already underway, as a result of
    what we have already released.
        And by your testimony, Mr. Schweiger. Your testimony was
    backed by a considerable number of hunters and fishermen. And I
    was wondering if you had any specifications at this point of
    which games species, or which game species habitats, would be
    most immediately affected, and what sort of hunters or
    fishermen are at greatest risk of having their, you know, the
    habitats that they go out and hunt and fish in, compromised in
    some way, and how soon all of that is going to happen? When
    will we see the leading edge of that and where?
        Mr. Schweiger. Well, that is a great question. I think we
    are already seeing the leading edge of it. For example, if you
    look at the natural range of brook trout in the Appalachians,
    you will see that the southern half of the Appalachians have
    lost a lot of their original brook trout habitat and that
    habitat that remains is not in good shape. It is rated moderate
    to poor where at one time it was actually good habitat, and it
    had vibrant brook trout.
        So, when you look at the brook trout range, it goes into
    Pennsylvania and New York. Most of that south of Pennsylvania
    and New York is in bad shape. North of mid-State New York it is
    in better shape. So, you see it. It is compounding from the
    southern Apps going north.
        The other example I use in my book is the pronghorn
    antelope. You know, there is a study now from the University of
    Oregon that suggests that if we continue doing what we are
    doing now, we will see the sage brush step habitats contracted
    to a few counties in Wyoming over the next several decades. And
    if that happens, pronghorn antelope becomes a remnant
    population in a very small place.
        Senator Whitehouse. Thank you.
        Mr. Young, your testimony is particularly important to
    somebody like me from a coastal State. As you have suggested,
    many of water and wastewater treatment facilities are at the
    coastline and at risk.
        We have seen estimates from the Environmental Protection
    Agency that the current deficit of water and wastewater
    infrastructure in this country is $662 billion, I think between
    now and 2019, if I remember the year correctly. I assume that,
    at least to your knowledge, these additional liabilities of
    plants at risk either from storm surge or sea level rise would
    be in addition to that built-in cost. Do you know that?
        Mr. Young. Yes. That is absolutely correct. And the only
    range of numbers is given as an opportunity, and it is further
    described in details by regions of the United States in the
    report. But depending on the timeframe in which you actually do
    address the problems, whether you wait until it is longer into
    the impacts of the climate change or whether you begin a
    proactive program to start earlier.
        Senator Whitehouse. One of the reasons I mention that, just
    peripherally, is that we have a very severe unemployment
    problem and at the same time a water and wastewater deficit,
    and one would think we could bring those two together and start
    building out our water and wastewater infrastructure now while
    we need the jobs. But I do not necessarily think that is for
    this committee and this hearing right now.
        My last question will be to Dr. Frumhoff from the Union of
    Concerned Scientists. This will be a question about the science
    of climate change.
        We are still here in the Senate in an environment in which
    we are still frequently told that there are scientists that
    disagree with the fundamental premise of climate change, that
    manmade carbon emissions are affecting our climate in ways that
    are adverse for our interests.
        How would you characterize the nature of the debate? I am a
    lawyer, and I could find lawyers who will say that the income
    tax is unconstitutional. I can find people who will say that
    they have been taken up in alien spaceships, and they now wear
    tinfoil over their heads.
        In the scientific community, is it just a fringe that is
    disbelieving this? Or is it a real, live actual scientific
    debate right down the middle, evenly balanced on both side, or
    somewhere in between? How would you describe the nature of the
    debate in the overall scientific community?
        Mr. Frumhoff. Thank you, Senator. Well, you can certainly
    find individuals with Ph.Ds. in science who would characterize
    the science of climate change as highly uncertain. But the
    broadly cast consensus in the scientific community is
    otherwise.
        Probably the best way to represent that for you, Senator,
    is by quoting from a letter that was sent to the Senate from 18
    scientific societies with relevant expertise in the United
    States, including the American Geophysical Union, the American
    Meteorological Society, the American Association for the
    Advancement of Science and 15 other scientific societies.
        ``As you consider climate change legislation, we, as
    leaders of scientific organizations, write to state the
    consensus scientific view. Observations throughout the world
    make it clear that climate change is occurring and that
    rigorous scientific research demonstrates the greenhouse gases
    emitted by human activities are the primary drivers. These
    conclusions are based on multiple lines, independent lines of
    evidence, and contrary assertions are inconsistent with an
    objective assessment of the vast body of peer-reviewed
    science.''
        I could not agree with that statement more.
        Senator Whitehouse. OK. Inconsistent with the----
        Mr. Frumhoff. It was an objective assessment of the vast
    body of peer-reviewed science.
        Senator Whitehouse. Thank you.
        Senator Boxer. Thank you. I think that is important. Can we
    get that letter to put in the record, sir?
        Mr. Frumhoff. Absolutely.
        Senator Boxer. Thank you very much.
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        Senator Whitehouse. Madam Chair, could I ask unanimous
    consent to put an additional letter in the record? This one is
    from the Reinsurance Association of America regarding the way
    in which they have had to adapt to the effects of climate
    change in the insurance industry.
        Senator Boxer. Without objection.
        [The referenced letter follows:]

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        Senator Boxer. So, our last questioner is Senator Cardin.
        The floor is yours.
        Senator Cardin. Well, thank you, Chairman Boxer. I think I
    started off the first round of questioning this morning----
        Senator Boxer. You did.
        Senator Cardin. I think it was this morning.
        Senator Boxer. It feels like it has been----
        Senator Cardin. It has been a long day with a lot of
    witnesses and a lot of good information to help us in our work,
    and I just think the last exchange between Dr. Frumhoff and
    Senator Whitehouse was particularly important. We want our
    actions based on good science, which is likely to happen.
        I just think of Maryland, my own State, and in my lifetime,
    I have seen the impact of sea level rising in Maryland. In my
    lifetime. And if Secretary Wilson is correct, and we do not
    take action, and we see a 2.5- to 3.5-foot increase in sea
    level in the Chesapeake Bay, it is going to have a devastating
    impact. You do not need a Ph.D. degree to understand what is
    going to happen. We have already seen significant flooding at
    the U.S. Naval Academy.
        Yes, I understand which is the Ocean State here, Senator
    Whitehouse. We have this friendly debate----
        Senator Boxer. We have an ocean on our side.
        [Laugher.]
        Senator Cardin. Right. And you do. It is a beautiful ocean.
    But you do not have as much coastline as we do. We have 3,000
    miles of coastline in Maryland alone.
        Senator Boxer. OK, let us just say we have plenty.
        [Laughter.]
        Senator Cardin. Right. You have plenty. And you are
    impacted like we are all impacted on the sea level increase.
        Senator Boxer. I just have to remind you of the West Coast
    every once in a while.
        Senator Cardin. Right. We come out there every once in a
    while. And we do appreciate, Chairman Boxer, you recognition of
    the adaptation problems of the coastal areas and the
    allocations that you have made.
        I guess my point is that I have been to the developed areas
    along our coast, and I know the vulnerability. I have been to
    the reserves, Blackwater Reserve, and look at the acreage that
    we have lost because of sea level and erosion. And know that if
    we do not take action, and we lose these assets, it is going to
    cause irreversible damage to my State of Maryland, to the
    Chesapeake Bay and to your country.
        So, we have got to be judged by good science. But we do
    know the impact of what is happening here, and we have got to
    take action, and the good part about this bill is that this
    bill takes action to deal with the underlying problem of global
    climate change by setting targets for us to meet.
        But then you also deal with the damage that has been caused
    as a result of global climate change, right here in America and
    along or coastal ways. We thank you for that.
        Secretary Wilson, I want to get you engaged a little bit in
    some of the green infrastructure that we are doing in Maryland,
    how important that is, some of our programs and dealing with
    the way that we deal with runoff, and how important is green
    infrastructure in trying to develop the right strategy to
    counter the damages that are being done as a result of global
    climate change.
        Ms. Wilson. The green infrastructure is, it ranks right up
    there at the top of adaptation strategies that a State, a
    coastal State, can take to deal with the effects of sea level
    rise.
        By way of example, with the State of Maryland's Climate
    Action Plan and the adaptation strategy, we have got some
    strategy implementation underway already, and one of those
    strategies is to ensure that we put in place living shorelines
    instead of hard bulkheads wherever possible. They are better
    able to absorb sea level rise, and they also greatly improve
    habitat.
        So, for example, with the green infrastructure funded
    through the ARA funding process, we have jump started our
    living shorelines projects along the shoreline of the
    Chesapeake Bay. It is a critical part of how we can adapt.
        And I think that is the point of the testimony here today
    is that there are things we need to be doing right now to get
    adaptation underway. The 2 to 3.4 feet of sea level rise you
    mentioned, that is in a lowered emissions reduction scenario.
    So, we know we have got these impacts coming, and this act puts
    in place a procedure and a process and a way for the country to
    get adaptation on the ground now, including the green
    infrastructure projects.
        Senator Cardin. I think that is a very valuable point. The
    point is that, if we are successful in dealing with global
    climate change, if not only the United States acts but we act
    at Copenhagen, and there is an international commitment, and we
    in fact meet our international standards and reduce our
    warming, we still have to deal with the consequences of global
    climate change. And this legislation provides the wherewithal
    by investing in green infrastructure, by dealing with remedial
    programs, engaging the States. It is not all the Federal
    Government. We need the help our States. We need the work in
    the private sector. It is a team effort.
        I just thank you all for starting. The States, many States,
    not just Maryland, many States, Madam Chairman have really
    moved forward aggressively on this issue in so many different
    ways, giving us, I think, the blueprint for a national program
    where America can truly be an international leader on
    preserving our environment for future generations.
        And thank you all very much.
        Senator Boxer. So, Senator Cardin, I checked it. California
    has 1,340 miles of coastline.
        Senator Cardin. Well, I think the Chesapeake Bay, somebody
    can correct me, I think the Chesapeake Bay has 3,000 miles.
        Ms. Wilson. Over 3,000.
        Senator Boxer. OK, well that is because you go this way,
    and this way----
        Senator Cardin. Right. We have a flow a lot. Look, I really
    think you do deserve one-third the money that we----
        Senator Boxer. Whoa. OK. You mean, never mind the 40
    million people. OK, I got it.
        [Laughter.]
        Senator Boxer. Let me say how much I appreciate this panel.
    Terrific, all of you, just terrific. You are going to get some
    questions from colleagues, and we are asking that you really
    turn them around in 24 hours. I know that is difficult.
        Mr. Sims, I had a question, and I did not even want to
    bother you with it. I tried to look it up. Who are the members
    of the Western Business Roundtable? They are not in, can I just
    look them up in the----
        Mr. Sims. I will send them to you.
        Senator Boxer. OK, because they are not in the Web site.
        Mr. Sims. They are not on the Web site.
        Senator Boxer. So we will officially ask you for that.
        Mr. Sims. We will send you our membership list.
        Senator Boxer. I appreciate that very much.
        Mr. Sims. Can I ask just one favor in return?
        Senator Boxer. Yes.
        Mr. Sims. I did not get a chance to talk about this, but I
    want to enter this in the record if that is OK?
        Senator Boxer. Yes.
        Mr. Sims. Madam Chairman, you have a reading list that is
    lengthier than any of us, so I hesitate to ask you to really
    take a look at something. But I think you should look at this.
    It is very short. It is an analysis done by one of my members
    who is an engineer and a very smart one. And what he does is,
    he simply goes through and he does cast some very serious
    doubt, which I think you should pay attention to, the
    contention that some of these bills, it was not specific to
    this one, would create all of these millions of green jobs. I
    would recommend that you take a look at it.
        Senator Boxer. I will. And I will also put in the record,
    at the same time, the recent studies that have just come out by
    U.C. Berkeley and University of Illinois, and also the Pew
    Charitable Trust that shows, and the Center for American
    Progress, there are just many of them. But we will put them all
    in together, and of course, we are happy to look at you. Who is
    this person? What is his name?
        Mr. Sims. Kimball Rasmussen, who is the CEO of Deseret
    Power.
        [The referenced information follows:]

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