[Senate Hearing 111-1215]
[From the U.S. Government Publishing Office]






                                                       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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                                                       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


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




       Available via the World Wide Web: http://www.gpo.gov/fdsys
                               __________
                               

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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

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                                                                   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:]
    
    
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    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:]
   
   
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           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:]


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    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:]
    
    
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    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:]
    
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    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:]
    
    
    
    
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    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:]
    
    
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           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:]
    
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    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:]
    
    
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    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:]
    
    
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      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:]
    
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    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:]
    
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    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:]
    
    
    
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    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.
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    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:]
    
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    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:]
    
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
    
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    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:]
    
     
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    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.
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    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.
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    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.
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       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:]
    
    
    
    
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    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:]
    
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    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:]
    
    
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        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:]
    
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    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:]
    
    
    
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    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.
    [The referenced study and remarks follow:]
    
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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.
    [The referenced letter follows:]
    
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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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