[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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.gpo.gov/fdsys
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
__________
U.S. GOVERNMENT PUBLISHING OFFICE
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you, Senator.
Senator Whitehouse.
Senator Whitehouse. Madam Chair, I will waive my opening
statement. I stand by yesterday's opening statement.
Senator Boxer. Which was so good.
Senator Whitehouse. Thank you.
[Laughter.]
Senator Boxer. Thank you very much.
Senator Bond.
OPENING STATEMENT OF HON. CHRISTOPHER S. BOND,
U.S. SENATOR FROM THE STATE OF MISSOURI
Senator Bond. Thank you very much, Madam Chair.
People today are talking about a new poll that shows that
people want Government to take action to cut carbon emissions.
Sounds like a nice idea. But it is also like asking how many
people want a free lunch.
When pollsters ask the American public how much they are
willing to pay to fight the emissions they claim for global
warming, the results are much different. A Rasmussen poll found
that 79 percent of Americans oppose paying even $100 per year
more in higher taxes and/or higher utility costs to fight
global warming. According to the poll, the majority of 56
percent did not want to pay a single penny to fight global
warming.
And that is what I am hearing back home. It is not that
Missourians do not care about the environment. We do. We have
always supported measures, responsible measures, to clean up
the environment. But what we do not want to do is kill jobs and
raise energy taxes. What we do not want to do is strangle the
economy with a deep recession.
Rural Missourians who depend on electric co-ops for power
rose up to send this message. And what you see today are over
30,000 signed cards demanding that we keep power bills
affordable. Thirty-thousand Missourians object to unfair
proposals that would hurt the Midwest and hurt consumers in my
State. They want to live with reasonable and responsible
regulations, not burdensome mandates.
These are cards that were brought to my office by the
Association of Missouri Electric Co-ops. The head of the
Missouri Co-ops, Barry Hart, is here testifying later today. I
thank him for his leadership and the sacrifices he has made to
come up here. He will share with the committee how cap and
trade legislation, like Waxman-Markey or Kerry-Boxer, will
raise Missouri electricity rates up to 26 percent starting in
2011, 2012, and rising to 42 percent higher as soon as 2020.
Missourians do not understand why we would slap ourselves
with energy taxes when it would do nothing, and I will
emphasize nothing, to change world temperatures. That is what
the scientists at EPA have told us. If EPA acts alone with a
bill like Kerry-Boxer, it will have an impact on world
temperatures almost too small to measure because China and
India have already said flatly that they will not agree to
strangle the growth of their economy to pull people out of
poverty through mandated carbon reductions, which means not
enough energy to supply the jobs they need.
America can do better. We can cut carbon emissions without
raising energy taxes, killing jobs, if we go to zero carbon
nuclear power, low carbon hybrid and electric transportation,
advanced fuels, and wind and solar where they make economic
sense. That is the path that Congress should take. That is the
path that Missourians want to see.
And I thank the Chair.
Senator Boxer. OK. Thank you very much, Senator.
I am going to take my 2 minutes to respond to some of what
has been said, and then we are going to get right to the
panelists.
First of all, this poll is very interesting and so are all
the messages you received from your constituents, which are
very, very important.
But I think it is important to look at a poll, a CNN poll,
which showed in April that only 44 percent of the people
supported cap and trade system, which we call Pollution
Reduction Investment, but cap and trade system. And now, after
they have learned more about it because there have been lots of
ad wars back and forth and discussions like this one we are
having here that get covered, 60 percent favor it, and it has
been described to them not in very glamorous terms.
It says under a proposal called cap and trade, the Federal
Government would limit the amount of greenhouse gases companies
could produce in their factories. If companies exceeded those,
they would have to either pay a fine or pay money to other
companies that produce smaller amounts of greenhouse gases.
Would you oppose or favor this proposal? Sixty percent favor
it.
And I am going to put in the record, I ask unanimous
consent, the CNN story that goes with it. It says 60 percent of
those questioned say they favor cap and trade, a Democratic
sponsored plan in which the Federal Government explains it.
Thirty-seven percent oppose, and it goes on to say that this
comes out as the Senate Environment Committee holds a hearing
on this legislation, and that this legislation includes
provisions to hold down costs to consumers in certain
industries.
And it says Republicans say the bill would destroy jobs and
increase taxes and energy costs. But the bottom line that I
found is interesting is the youth, the divide on generations,
colleagues. And I see some young people in the audience. I
would say the survey indicates a generational divide with 68
percent of Americans under age 50 supporting cap and trade. But
those 50 and older split on the issue. And a Democratic divide
there. It says that 3 in 4 Democrats back it, 6 in 10
Independents back it, but only 4 in 10 Republicans.
So, it is a very interesting situation here.
Now, I would also say I will put in the record also an
analysis that shows that under our bill, 161 nuclear power
plants would be developed as opposed to the Alexander plan,
which is 100 plants paid for by the rate payers. And the reason
is, once there is a price put on carbon, it makes nuclear much
more affordable.
In addition, we have a nuclear title in the bill. Some want
it more robust. Senator Carey is working with Senator Graham on
just that, Senator Lieberman when it gets to the floor. But
right now we have an R&D investment in nuclear waste management
in our bill. We support safe and clean nuclear energy industry
through provisions to support worker training, which are funded
in the bill.
So, we are moving forward. I see that Senator Barrasso has
arrived so----
Senator Bond. Madam Chair, may I interrupt to ask unanimous
consent to have entered in the record the Rasmussen Poll which
shows that 77 percent would not be willing to spend more than
$100 for reducing global emissions?
Senator Boxer. Yes. And happily, our bill does not cost
more than $100.
Senator Barrasso.
[The referenced CNN poll follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
OPENING STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM THE STATE OF WYOMING
Senator Barrasso. Thank you very much, Madam Chairman. I
know that I have only 2 minutes when I was prepared to talk a
little longer. But I will tell you that I have concerns about
that, and I would like to have my entire statement as a part of
the record.
Senator Boxer. Yes. And you could go 3 minutes.
Senator Barrasso. Thank you very much, Madam Chair.
Well, the warning signs are all around us that this energy
tax bill is going to lead to lost jobs, higher energy prices,
and I think will do very little in terms of an environmental
gain. But you do not have to take my word for it. Here is an
Investors Business Daily, Cap and Fade. The sub-headline is the
Senate has finally rolled out its long awaited cap and trade
bill to slash carbon dioxide. Looking at its Draconian
restrictions on the U.S. economy, it is hard to believe its
supporters are serious.
The editorial goes on to state that the Boxer-Kerry energy
tax bill will take $9.4 trillion from the gross domestic
product, will kill 2.5 million jobs, gasoline prices will go
up, electricity rates will nearly double. The editorial
concludes the only way to meet Boxer-Kerry's goal will be to
push the economy into a state of permanent recession. A
permanent recession.
Jim Manzi, a Senior Fellow at the Manhattan Institute,
wrote in the D.C. Examiner that the House passed energy bill
would be a terrible deal for American taxpayers. If the law
works precisely as intended, in about 100 years we should
expect surface temperatures to be about one-tenth of 1 degree
Celsius lower than they would otherwise be. The expected costs
to the American people are at least 10 times that of the
expected benefits. So the American people are going to bear the
brunt of the lost jobs and higher energy costs all for just
one-tenth of 1 degree in 100 years.
The person who actually wrote the most about the cap and
trade was Thomas Crocker, who is a University of Wyoming
professor. He has written in the Wall Street Journal as a
critic, now, of this, saying that cap and trade's flaws, if
applied to climate change, and they are extensive. I think Doug
Elmendorf stated, as we have heard in testimony in the Senate
in the last couple of weeks, the fact that jobs turn up
somewhere else for some people does not mean that there are not
substantial costs, substantial costs, borne by people,
communities, firms and affected industries and affected areas.
We have seen this in manufacturing. We have seen it with the
Rust Belt.
The warning signs are all around us. We need to heed them
in terms of our economy to ensure that Americans who do not get
green jobs are able to keep the red, white and blue jobs that
they have and to continue to power the country.
To me, that is the way to make America's energy as clean as
we can, as fast as we can, without raising energy prices on the
American families.
Thank you, Madam Chairman.
[The prepared statement of Senator Barrasso was not
received at time of print.]
Senator Boxer. Thank you, Senator, you are very eloquent.
Those exact words almost were used by those who were fighting
the acid rain cap and trade program. To the words. To the very
words. And it proved completely incorrect.
So, we are going to go to the panel. I want to hold up.
Since you held up a chart, we are going to have our little
chart wars today. You hold up one, we hold up one. It is kind
of equal time.
Senator Barrasso. Could I have my editorial on Cap and Fade
included then in the record as well since----
Senator Boxer. Without a doubt about it. Yes. Yes.
Senator Barrasso. Thank you, Madam Chairman.
[The referenced editorial was not received at time of
print.]
Senator Voinovich. Madam Chairman, could I have my
statement also included----
Senator Boxer. Yes. The entire statement will be put in the
record.
Senator Voinovich. And the information that we have on what
this would cost----
Senator Boxer. Yes, all of your information, Senator
Voinovich. Senator, anything you want. Anything you want.
Senator Voinovich. Wonderful. Thank you.
[The referenced information was not received at time of
print.]
Senator Boxer. All right. The U.S. must seize opportunity
in global clean energy markets. This is a quote from John
Doerr, the venture capitalist who helped launch Google and
Amazon. Now, Google is here represented. So this is not from
Government people. This is from the private sector, the people
who know what really makes our economy go, more than we do, if
I could say.
As we sit here today, we are in danger of letting the
energy technology revolution pass us by. John Doerr, venture
capitalist. The global clean energy market is estimated to
reach $500 billion a year by 2020. Despite early U.S.
leadership, German, Spanish and Chinese firms have gained
market share. U.S.-China solar manufacturing market share
changed from 2001 to 2008. In 2001, we had 28 percent. China
had 1 percent. In 2008, the U.S. has 6 percent and China has 29
percent. So, ladies and gentlemen, all of this talk about gloom
and doom? It is correct. But it applies if we do not act.
We are going to get to our panel, and we are going to start
with Peter Brehm, Vice President of Business Development and
Government Relations, Infinia Corporation.
Welcome.
STATEMENT OF PETER BREHM, VICE PRESIDENT, BUSINESS DEVELOPMENT
AND GOVERNMENT RELATIONS, INFINIA CORPORATION
Mr. Brehm. Thank you very much, Madam Chairman.
Chairman Boxer, Ranking Republican Inhofe and members of
the committee, I am Peter Brehm, Vice President of Business
Development and Government Relations for Infinia. We are
headquartered in the State of Washington, and we have
operations in California, Maryland, Michigan, Massachusetts and
New Mexico. I represent Infinia on the Board of Directors of
the Solar Energy Industries Association, which is also one of
the reasons that I am here.
It is an honor to appear before you to testify on behalf of
Infinia and the Solar Energy Industries Association. I would
also note that we are strong supporters of BlueGreen Alliance
and the Apollo Alliance, and I work quite extensively and have
in the past with Mr. Reicher as well.
In the 5 minutes I will be speaking to you today, enough
sunlight will shine upon the United States to satisfy America's
energy needs for an entire month.
Let me first tell you a bit about my firm. Infinia has
developed and manufactures the Infinia Solar System, a unique,
high performance solar power system that uses a Stirling engine
and a parabolic mirror to convert sunlight, which is free, into
electricity, which is valuable. Our system is not a PV or solar
panel-based system, but instead a unique U.S.-developed and
manufactured concentrating solar power system.
Each of our Infinia Solar Systems produces 3 kilowatts of
grid-quality electricity. Our systems do not consume water,
which is in short supply in the West, nor do we need flat or
graded ground to operate.
Notably, we manufacture here in the United States, and at a
time when the auto industry is facing historic difficulties,
our technology is perfectly suited to be manufactured on
automobile factory lines.
I will diverge from my testimony a bit just to respond to
Senator Voinovich's comments earlier. I would like to note that
two of our most significant vendors, which we are very proud
of, are based in Ohio, MSG Molded Fiberglass Companies, they
make the fiberglass backing for our solar panels----
Senator Voinovich. I know them very well.
Mr. Brehm. You know them very well. They are an excellent
company and they have done great work with us. Another one is
Zigent Automotion Systems in Ohio, and they actually are a
robotics firm, and they place our mirrors on those same panels.
And I also note that our initial Stirling engine technology
was developed in cooperation and with the great assistance of
the folks at NASA Glenn.
Our technology is only one of many that are being developed
and in commercial use. The greatest challenge the U.S. solar
industry faces is scaling up production and distribution of
solar technology in order to continue to drive down prices and
be on par with or below the price of traditional fossil fuels.
The outlook for solar is bright, pardon the pun,
particularly if Congress levels the field by enacting strong
climate change legislation. Recently, the U.S. solar industry
has demonstrated remarkable growth with the annual rate of
solar distributed generation installations increasing by more
than 80 percent in 2008. Last year, solar produced over 8 times
as much energy as in 1985, and already this year 40 percent
more than last year.
This is great, but not nearly enough. More can be done, and
more should be done, if the United States is going to put a
serious dent in emissions of greenhouse gases.
There is a very significant potential for growth of solar
energy in the United States with the price signals and
incentives that could be provided this legislation.
Infinia is a growing company that currently employs over
140 people, and if a robust climate change bill is enacted, our
growth rate will double. Good, high paying clean energy jobs
will be created here in the United States.
We believe this climate change policy is a key step in a
comprehensive national energy policy. The proposed legislation
will spur tremendous demand for all renewable energy
technologies. We encourage the committee to strengthen the
proposed legislation to ensure that more of the demand for
renewable energy technology and products will be supplied by
U.S. manufacturers.
Solar energy will create thousands of jobs, install half a
gigawatt of solar capacity and avoid more than 1 million tons
of carbon emissions in 2009. These numbers will more than
double in 2010.
With the right incentives, a fair regulatory environment
and the right economic environment, there will be no limit to
how much solar energy can contribute to the solution. For the
solar industry, a robust climate change bill will send a clear
price signal on the cost of emitting carbon, which currently
has no market price other than the cost to our global
environment that will be paid by our children and
grandchildren. This price signal will affect long-term
generational planning and project financing and may mark a
paradigm shift in the Nation's energy future.
In the more immediate term, solar and other renewable
energies need to receive allowances in the early years of the
program in order to scale up the industry and bring down the
costs so we can more effectively satisfy the [unclear] of a
carbon-free clean energy. Those allowances can come from
Federal deployment programs for distributed generation and
utility-scale renewables and from allowances going to the
States and localities for renewables.
For Infinia, it is particularly important that some of
those State allowances go toward the manufacturing development
of incentives for solar and other domestic renewals energy
technologies. It would be a huge missed opportunity if we
replaced oil imported from the Mideast with renewable energy
technology from overseas.
In addition, we encourage the committee to consider the
inclusion of Senator Sherrod Brown's IMPACT, Investments for
Manufacturing Progress and Clean Technology, bill or similar
proposals into this climate change legislation to spur the
development and manufacture of renewable energy technologies in
the U.S.
We believe this comprehensive legislation should include
the following features. A robust cap and trade----
Senator Boxer. Mr. Brehm. Are you almost done?
Mr. Brehm. I am almost done. A Federal renewable energy
standard, transmission policy, national retail net metering,
and reasonable access to Federal lands.
Thank you very much.
[The prepared statement of Mr. Brehm follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Very good. Thank you very much.
Dan Reicher, Director, Climate Change and Energy
Initiatives at Google.
Welcome.
STATEMENT OF DAN W. REICHER, DIRECTOR, CLIMATE CHANGE AND
ENERGY INITIATIVES, GOOGLE
Mr. Reicher. Chairman Boxer and members of the committee,
my key message today is that the critical need to address the
climate crisis provides us with an unprecedented opportunity to
rebuild our energy system with vast economic security and
environmental benefits.
By putting significant limits on carbon emissions and
adopting strong, complementary energy policies, we can create
millions of new jobs, reduce our dangerous dependence on
foreign energy, and protect ourselves from a global climate
crisis.
Google published a scenario last year called Clean Energy
2030, which outlines one potential path to a clean energy
future. In sum, the Clean Energy 2030 proposal reduces U.S.
CO2 emissions about 50 percent below the baseline
projection while creating 9 million new jobs and net savings of
$800 billion.
At the global level, the International Energy Agency
estimates that between 2007 and 2030, the world will need to
invest $26.3 trillion in energy infrastructure to meet
currently projected energy demand. As venture capitalist John
Doerr has also said, this massive global energy spending could
make clean energy technology the biggest economic opportunity
of the 21st century.
The ability of the U.S. to seize this historic economic
opportunity will be influenced to a large extent by actions
taken by Government to put a significant price on carbon
emissions. But a significant price on carbon, while absolutely
necessary, is not sufficient to address the climate problem,
and importantly, will not put the U.S. in position to seize the
extraordinary opportunities that will come with rebuilding the
global energy economy.
My primary focus today is on four complementary energy
policy mechanisms that will be essential to taking advantage of
these opportunities.
First, we must significantly increase public funding of
research and development of advanced energy technologies. In
1980, 10 percent of the total government R&D investment was in
energy. Today, it is only 2 percent. The Federal stimulus
package has certainly provided a shot in the arm for clean
energy projects, but there is a serious risk of falling off a
funding cliff when these investments run out.
We were encouraged when President Obama called for
investing $15 billion per year over the next decade in clean
energy technologies and took note when Secretary Chu said that
energy R&D spending must move closer to the level in the high
tech industry, which are generally around 10 percent of sales.
A failure to invest, Madam Chairman, becomes glaringly
apparent when we realize that barely a fifth of the top 30
manufacturers of wind turbines, solar panels and advanced
batteries are American. In contrast, all 5 of the world's
leading Internet technology companies are from the U.S. And the
Internet itself was the product of federally funded R&D work by
DARPA in the 1970s.
Second, we must increase the capital available to deploy
these advanced technologies at commercial scale. Moving from a
Nation that derives 70 percent of its power from fossil
technologies to one based largely on clean energy will require
literally trillions of dollars of investment.
The challenge is that raising this kind of a capital,
especially for innovative technologies, is not easy. The
problematic step of moving a technology from a small pilot
project often funded by venture capital to full commercial-
scale projects financed largely by the banks is frequently the
point at which many promising energy technologies die. Indeed,
we call it the Valley of Death.
At Google, we are major supporters of pending bipartisan
Senate legislation that would create a Federal Clean Energy
Deployment Administration to provide various types of credit
support to drive private investment in Valley of Death
projects. CEDA would be an independent administration within
DOE with a Senate-confirmed administrator and board of
directors.
Third, we must build a bigger and smarter electric grid to
harness energy efficiency and renewable energy. A smarter grid
will let us see our energy use, measure it, price it, and
manage it to get the most out of every watt. And a bigger grid
will allow us to tap our Nation's vast clean energy resources
and deliver them where we need them.
At Google, we are working to advance the smart grid on
several fronts. Among these, our engineers have developed a
simple secure and free software tool called Google Power Meter
that gives consumers an easy means to see their home
electricity on their computer or smart phone.
Fourth and finally, we must set national standard to
accelerate the uptake of clean air and more efficient
technologies. Google supports the adoption of both a strong
national energy renewable standard and a strong national energy
efficiency resource standard. State renewable energy and energy
efficiency standards have sparked new industries and created
thousands of jobs.
Before I wrap up, let me mention two examples of where a
price on carbon and complementary energy policies can be
catalytic. One is solar thermal power, where early on DOE-
funded demonstration projects proved the technology and where
today State renewable standards are driving demand and
Government-backed finance is helping plants get built.
Looking ahead, an advanced geothermal energy technology
called EGS presents another opportunity where a strong energy
policy and a price on carbon could drive a new industry that
could produce cheap, renewable power 24 hours a day year round
and nationwide.
In conclusion, let me stress that we need both a
significant price on carbon and complementary energy policies.
A significant price will definitely send a signal about the
need to reduce carbon emissions, but it will not by itself
ensure that the technologies that can address the problem are
invented and deployed here in the U.S. with massive resulting
economic and security benefits.
And while smart energy policies can strongly advance
solutions to the climate crisis, they will not ensure that
these solutions can compete straight up with fossil fuels
without a significant carbon price.
Thank you.
[The prepared statement of Mr. Reicher follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much.
Mr. Foster.
STATEMENT OF DAVID FOSTER, EXECUTIVE DIRECTOR, BLUEGREEN
ALLIANCE
Mr. Foster. Good morning, Madam Chair, members of the
committee, and thank you, Senator Klobuchar, for that kind
introduction.
My name is David Foster. I serve as the Executive Director
of the BlueGreen Alliance, a national partnership of six major
labor unions and two national environmental organizations. We
bring together 8 million members from the steelworkers, the
largest manufacturing union in North America, communication
workers, laborers, service employees, utility workers and
teachers with the Sierra Club and Natural Resources Defense
Council. We touch virtually every corner of the country in our
pursuit of good jobs, a clean environment and a green economy.
I am especially pleased to be given the opportunity to
testify before the Environment and Public Works Committee on
this critical issue, and we look forward to working with you
throughout the process to pass clean, comprehensive climate
change legislation that creates and retains millions of family
sustaining green jobs and finances the transition to a clean
energy economy.
To maximize its economic success, this package must be
comprehensive. It must deal with every piece of the puzzle,
capping carbon emissions, providing incentives for job
creation, investing in clean energy, preventing carbon leakage,
and setting mandates for energy efficiency and renewable energy
production.
Some say that it would be easier to pass one piece of the
puzzle and then try to move on to the next. But doing so
underestimates the complexity of the problem, sends
contradictory messages to our energy markets, and most
importantly, fails to solve the underlying climate crisis.
Capping carbon emissions will create the necessary
incentives for America to develop its clean energy economy.
Without the certainty of true emissions reduction, we can
achieve neither our environmental goals nor our job creation
goals.
We also need to include a strong national renewable
electricity standard and energy efficiency resource standard
such as those introduced by the Senators Udall of Colorado and
New Mexico.
The transition to a clean energy economy is the most
important opportunity for strengthening and expanding American
manufacturing in my lifetime. As evidenced by Gamesa in
Pennsylvania, the ClipperWind facility in Cedar Rapids, Iowa,
ATI Casting in LaPorte, Indiana, the Pauwels Transformers
facility in Washington, Missouri, and many, many more, our
workers can produce the steel, glass, precision parts and
cement needed by our clean energy industries, but only if we
provide them with the proper investment and protections.
We can do this by including a robust manufacturing title in
the bill which would ensure that strengthening and revitalizing
America's manufacturing base is a priority. There is no reason
why America and its workers should not lead the world in green
manufacturing.
A critical component is providing adequate allocations to
energy intensive and trade exposed industries. While the Kerry-
Boxer bill addresses this issue, it does not provide sufficient
allowances to ensure that energy intensive industries are not
put at a competitive disadvantage. This is a vital provision
for preventing the leakage of jobs and carbon pollution, and I
appreciate that the Chair and committee have agreed to work
with us to ensure that these industries are kept whole.
In addition, the legislation should include a longer-term
border adjustment provision to limit carbon leakage, ensure the
fair treatment of American workers, and provide an incentive to
other countries to negotiate industry sectoral agreements as
those allocations phaseout. We were supportive of the House
ACES bill and hope that this model can be included in Senate
legislation.
I cannot emphasize enough to the committee how critical
both the rebates and border measure are to the success of the
climate bill. As part of the manufacturing title, climate and
energy legislation should also provide incentives to help our
manufacturing base convert to the clean energy economy. We
appreciate the inclusion in funding of clean vehicle
manufacturing provisions and hope that Senator Brown's IMPACT
Act will also be included and funded.
Programs like the Retrofit for Energy and Environmental
Performance and investments in improved building codes will
finally put forth a dedicated effort to make buildings and
homes more energy efficient. We also believe that national
minimum standards are an essential part of any program
receiving support from the Federal Government to spur
residential energy efficiency. The State and Local Investment
in Energy Efficiency and Renewable Energy, included in the
bill, will provide the dedicated investment to support
deployment of critical technologies and practices.
Our work force must have all the necessary tools and
knowledge to successfully work in green jobs. We can do this by
offering training for all who want the opportunity. We believe
that the Green Jobs Act of 2007 gives us the best framework,
and we thank you for providing allowances to fund this
provision.
Along with training, we must open doors to certain
communities that are too often left out. The Green Construction
Careers Demonstration Project provides an outlet that will
promote quality employment practices that are accessible to low
income communities and workers.
I want to close by telling the story of the R.E. Burger
power plant in Shadyside, Ohio. A coal-fired power plant
originally built in the 1940s, Burger needed to be fitted with
new pollution control equipment. That equipment proved to be
too costly, and the owners were preparing to close the plant
and lay off hundreds of workers in an already economically
depressed area.
Thankfully, with the help of Utility Workers Local 350,
FirstEnergy decided to retrofit the plant and convert to
biomass. This proved to be more cost effective and saved the
jobs of over 100 employees and the creation of another 200
jobs. The Burger plant today is poised to become one of the
largest biomass-fueled plants in the country.
After comprehensive climate legislation is enacted, we will
see more and more plants like Burger. Many will be retrofitted
with carbon capture technology and some switched to natural gas
or biomass. We will see concentrated solar power plants built
where there has never been a power plant before. We will see
wind farms going up alongside oil derricks. We will see
buildings erected that emit zero carbon pollution and produce
zero waste.
We look forward to working with you to pass what could and
should be the greatest job creating bill ever passed by the
U.S. Congress.
Thank you.
[The prepared statement of Mr. Foster follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. So, Mr. Klesse, I just would like to ask
you, do you see any truth in what I have just stated, or are we
so many miles apart here?
Mr. Klesse. Thank you, Chairman. Chairwoman. No. First off,
we are not against working on the climate change issue.
Senator Boxer. Good.
Mr. Klesse. I stated that. The military is talking about
the climate change. I was speaking about fuels and the sourcing
of fuels. We do import crude oil today, and we also import some
products. The domestic refining industry, though, the jobs are
here in the United States. The fuels are generated here in the
United States from crude oil that comes from all over the
world.
Senator Boxer. Right.
Mr. Klesse. If we want more crude oil, which is a whole
different subject, and we are not in that business, so it is
very easy for me to speak about it, we should let the industry
drill, and we should figure out how to hold them accountable.
And as I said, we are not in that business.
Senator Boxer. I understand.
Mr. Klesse. But I was talking about fuels. And if you--the
actions that are being taken will adversely affect the domestic
refining industry. It will cause jobs to leave. Those fuels
will have to be sourced elsewhere.
Senator Boxer. Thank you.
Mr. Klesse. No, green jobs, just, if I can, we are
supportive of green jobs. We are not against green jobs.
Senator Boxer. Good.
Mr. Klesse. I told you we have a wind farm. So, we are not
again those.
Senator Boxer. Good. Well, I am glad we have some areas
where we can----
Mr. Klesse. We have a lot of areas of agreement.
Senator Boxer. Good. I am very glad. I want you to know,
just in the bill, because it may, and I want to share this with
you afterwards because my time is expiring here, I want you to
see what we have tried to do to lessen the blow on the
refineries, because we do have a lot of allowances going in
that direction. But I will show you after this is over, if
you----
Senator Klesse. If I could just comment on----
Senator Boxer. I must----
Mr. Klesse. In your State of California, at 2 percent
allocation, Valero will have to buy, just for California, $850
billion of carbon credits in one form of another, and that is
adjusted for the 2 percent.
Senator Boxer. Well, let me again reiterate. What we are
doing in our bill is we are trying to ease the burden on the
smaller refiners, and we have a study here we will put in the
record at the way we are easing the burden on oil. So, we will
talk to you about it. We will take a look at it.
And because of the extended answer, I must ask one other
question to Mr. Brehm. In your testimony, you discussed the
potential for growth of the U.S. solar industry. Can you
describe the types of jobs that the cap on carbon in this bill
and the additional investment in renewable energy will create?
The types of jobs.
Mr. Brehm. As you know from my testimony, we are
particularly supportive, and for our company in particular, of
U.S. manufacturing jobs. We think those are actually the
highest valued, most important jobs because that is where the
U.S. has fallen behind in recent years. So, primarily
manufacturing. But also, obviously, installer jobs, development
jobs, project jobs, the operating jobs of solar facilities so
really quite a plethora of across the spectrum jobs and real
job generators.
Senator Boxer. Thank you.
Senator Inhofe.
Senator Inhofe. Thank you, Madam Chairman.
Mr. Klesse, you just stated, the very last thing you
stated, in the State of California you would be forced, under
these provisions, to buy $850 billion what of allowances?
Mr. Klesse. Assuming that carbon sells for $20 a ton----
Senator Inhofe. OK.
Mr. Klesse. We would be obligated to buy $850 billion a
year----
Senator Inhofe. Just in California?
Mr. Klesse. Just in California.
Senator Inhofe. Who is going to ultimately pay that?
Mr. Klesse. Obviously, the refining business is a very low
margin business. I know many people do not believe that. But it
is. Valero, for instance, in 2006 made as much money as it had
made in 25 years before that in the golden age of refining. So
we will pass that cost through.
Senator Inhofe. Exactly. So the people of California are
going to be paying the $850 billion that you have to pay.
Mr. Klesse. And they will see the price of fuels go up
dramatically.
Senator Inhofe. Yes. OK.
Mr. Klesse, you did not, you alluded to, but did not have
time in your opening statement, to talk about all of these
organizations in terms of jobs. This is a job panel. We are
going to have the National Security Panel in a few minutes. But
this is--the CVO has testified to Congress that this, cap and
trade, this type of arrangement, would cost a lot of jobs. EPA,
CBO, EIA, CRA, the Heritage Foundation, all concluded that the
bill would cause job loss.
For example, EIA predicts cap and trade would cost some 2.3
million jobs or 800,000 manufacturing jobs by 2030. Do you
agree with that figure?
Mr. Klesse. I agree that there will be a significant loss
of jobs.
Senator Inhofe. Mr. Vassey.
Mr. Klesse. And I would also add that our people in
Paulsboro, New Jersey, where we have a refinery, the building
trade union came out yesterday and said very clearly they have
no expectation of making solar panels in New Jersey.
Senator Inhofe. OK. Mr. Vassey, you commented on the United
States relative to Japan and Western Europe. I did not quite
get that in terms of emissions.
Mr. Vassey. What our basic suggestion is is that you may be
looking at the metrics a little wrong from the point of view of
how industry is measured in this. If you look at overall carbon
emissions of the industrial sector as a percentage of each
country's overall emissions, the United States has the lowest
at 11.5. Our major trading partners, which just also happen to
be those countries trying to push us in this direction, are
substantially higher----
Senator Inhofe. Where is China on that?
Mr. Vassey. China is at 28 percent to our 11.5 percent.
Senator Inhofe. All right. Now, if we all agree, and I
think everyone does, in terms of the 2.3 million jobs, then if
some of those jobs are going over, obviously if we cannot
produce the energy here, those jobs are going to have to find
some place where there is energy. Logically, it could be China.
It is my understanding that China is cranking out currently
some two coal-fired generating plants a week.
Now, if that is the case, would it not be reasonable to
assume that if those jobs go from here, where it is 11.5, to
China's where it is 28, we could end up with a net increase in
emissions by having cap and trade only applying to the country
of the United States?
Mr. Vassey. That is the principle of leakage, which we are
trying to point out is that it is pretty obvious that the
energy intensive industries that are global will have options
to produce in countries where they are wanted.
Senator Inhofe. All right. And Mr. Klesse, you talked about
the petrochemical jobs. Do you have any--you may want to do
this for the record--any specific details in terms of the jobs
that we have already lost? We have information from the NAM and
others, but do you have any concerning your specific situation?
Mr. Klesse. Well, I can comment on Valero. We have reduced
personnel in Delaware City. This reflects not only the current
economics in the economy, but clearly with this legislation, we
will have to reduce and shut down other units. We also have an
effort to reduce our costs in Paulsboro, New Jersey, and across
our system.
We have shut down units in Aruba, which is outside of the
United States but does supply the United States with feed
stocks. We have idled that refinery. And one of our competitors
has idled a refinery in New Jersey.
Senator Inhofe. All right. Well, let us get for the record
specific numbers of people in jobs so we can plug that into the
information, the testimony that we have from all of these
groups that are already mentioned.
Let me make just one--my time has expired--just make one
comment about what I think is going to happen.
When we had the bill, the Markey bill, the Markey-Waxman
bill, it passed the House by 219, a bare majority. Some of us
are old enough to remember, back in 1993 and 1994 the BTU tax,
which was a similar thing in terms of energy costs that we
passed on to the American people as we have been talking about.
That also passed the House by 219 votes, a bare majority, the
same majority. And of course, it did not get anywhere in the
Senate.
So I certainly hope that you folks can get into as much
detail as you can in terms of the numbers of jobs,
manufacturing jobs, Valero jobs, where you think they would go,
how that would affect our economy, and do that for the record.
Thank you very much.
Senator Boxer. Thank you, Senator Inhofe.
Mr. Klesse. Madam Chair, I need to correct. My people tell
me I said billions, and it is $850 million a year.
Senator Boxer. That is a big difference.
Mr. Klesse. It is only a few zeros.
[Laughter.]
Senator Boxer. Well, the reason that is important----
Mr. Klesse. It is $850 million a year----
Senator Boxer. Yes. And we think you are going to be able
to cover that. And we are going to put in the record the
Stanford study that shows that the profits will be preserved
for these companies. But we will, this is a Stanford research
study because of the allowance we are giving out, it is
entered.
But I am so happy you corrected the record because my heart
stopped myself when you said billions because we have, we
believe, covered the problem.
Senator Cardin.
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Senator Cardin. Thank you, Madam Chair. And let me thank
all of the witnesses for their testimony.
Let me just urge people to take a look at this entire bill.
There are significant amounts of allocations that go to help
the consumers and to help industries in transition, which is
not reflected in the numbers that we are given. So, I think you
need to take a look at what this bill does in its entirety.
And let me talk for a moment about leakage. I heard Senator
Voinovich, in his opening statement, talk about the concern
about the provision in the House bill which, by the way, is not
in the jurisdiction of this committee, so it will be taken up,
Senator Carper, in the Finance Committee.
We are concerned about leakage. I think that is an issue we
need to work together on. I have urged our negotiators in
Copenhagen to deal with enforcement. And I would hope that we
would get the support of industry here working with our
colleagues around the world to say look, we do need an
enforcement provision in the Copenhagen agreements.
We need to set reasonable targets in Copenhagen, we need to
have a mechanism to achieve those targets, we need to deal with
the financing issues of third world nations, and we need to
deal with enforcement.
And we would be far better off if Copenhagen deals with
enforcement so that there is an international regime that says
that if a country does not do its obligations internationally,
such as China or India or any other country, when their
products enter the international marketplace that there will be
an assessment on that----
[Audio gap.]
We just work together and get that into the Copenhagen
agreement. I have not heard very much from industry helping us
in putting the focus where it should be in the negotiations
that are taking place internationally. And I agree with Senator
Voinovich that it would be far better than to try to do deal
with this through the WTO and individual countries acting.
So, there are answers to these questions. So, let us work
in a constructive way.
Mayor Nutter, I agree completely with your point that where
we are looking at the source, where most of the new jobs are
going to come in America, are going to come from the new
technologies, the technologies that were developed here. This
is going to create jobs in our communities.
I have already given examples in my own State of Maryland
with the new technologies for automobiles and trucks in White
Marsh. I could have used the algae ethanol technology that is
being advanced by a relatively small company in downtown
Baltimore that is developing this technology that we hope will
be able to give us alternative fuels that will not have a
disruption on our food chain, which is important, I think, for
our economy.
And Mr. Brehm, on solar technology, Maryland is a leader on
solar technology. The number you gave, I think you said a 40
percent increase in the first 6 months from last year. That is
an incredible growth rate, and I know it is still a relatively
small part of the overall mix. But if we can duplicate that
type of growth in solar production, that could have a dramatic
impact on meeting our needs and creating jobs here locally.
What do we need to do in order to duplicate that and make
sure that continues?
Mr. Brehm. Well, clearly the policies advocated by, that
would be put in place by this bill, would set the base for the
entire renewable energy industry. Because once you get
certainty on price on carbon, then people start to make the
long-term commitments, the long-term planning.
And then, as some of my colleagues have also commented,
incentives it would put in play, that can be put in play to
encourage U.S. manufacturing of these technologies, would be
hugely beneficial. And I happen to be familiar with, of course,
Senator Brown's impact data. But I believe there are some other
opportunities out there as well.
The combination basically, this bill here creates a demand.
Some other acts that Congress could take on would then create
the supply.
Senator Cardin. Let me, I think that is a critical point.
Predictability is so important for investment. Industry knows
how to adjust if they know what to expect, and investors will
deal with that. I agree with Senator Alexander on the point of
nuclear investors. One of the reasons we have been unable to
get investors in nuclear energy is because of the uncertainty.
We have got to change that.
This bill, I think, in a way does change it. Not in a way.
It does change it, because it gives a predictable return for
energy sources that have a friendlier carbon footprint. That is
going to be good for investors in nuclear energy as it will be
in solar energy.
That is what, I think, is the most exciting thing about
this bill, Madam Chair, is that we unleash the American economy
with predictability so investors can invest and the creative
ingenuity can solve this problem and create jobs and keep jobs
here in America.
Thank you.
Senator Boxer. Thank you very much.
Senator Alexander.
Senator Alexander. Thank you, Madam Chairman.
I want to go back to Mr. Klesse for just a minute. You
mentioned a figure which I think is accurate that refiners in
America would have to buy about $63 billion of allowances a
year. Am I accurate about that?
Mr. Klesse. That is assuming $20----
Senator Alexander. The $20. But it could be more than that
over time?
Mr. Klesse. It could be.
Senator Alexander. But let us say, conservatively, that it
is $20. Basically, what you are in the business of is taking
oil that comes from all around the world, but mostly in the
United States, is that right, and turning it in, and refining
it in a way that we can drive it in our cars and trucks?
Mr. Klesse. We take oil from all over the world and refine
it. But more oil is imported today than is produced
domestically.
Senator Alexander. So, in the scheme of things, the way
this bill works, you are responsible for the oil, the fuel that
all of us use. If I drive to work in a car, I do not pay
anything under this cap and trade bill. You pay it for me, in
effect, with the allowances that you would buy every year. Is
that right?
Mr. Klesse. I would pay for the allowances. We would get
the allowance, but everything above that we have to assume the
cost.
Senator Alexander. Yes, but what you were saying in answer
to one of the questions was that $63 billion a year basically
would be passed on to the gasoline taxes and fuel taxes we pay.
Correct?
Mr. Klesse. It has to be. This business is very efficient.
Our total----
Senator Alexander. Well, let me just ask, have you computed
how much of an increase in gas, in fuel prices, that would be?
Mr. Klesse. There are numerous studies out. We have used in
the middle, the 77 cents which in 2019 is the half way. It
assumes no international offsets. If you take that number, and
today we have $2.50 gasoline, so it would be a third. It is a
30 percent increase.
Senator Alexander. A 30 percent increase. So that is----
Mr. Klesse. That is from this regulation----
Senator Alexander. From $2.50 to $3.30 or $3.40?
Mr. Klesse. That would be correct in 2019.
Senator Alexander. Now, we have had testimony from, among
others, Dr. David Greene of Oakridge Laboratory, which
basically says that an economy-wide cap and trade is a poor way
to reduce carbon because it has the effect of raising the
price, as you just said, 80 cents, but it is constructive but
insufficient impact on vehicle travel and fuel consumption. In
other words, that while we bear a lot of pain from the effect
of an economy-wide cap and trade on our fuel prices, we might
not change our behavior. Do you know anything about, is that
true?
Mr. Klesse. Yes. I understand the questions would be
clearly does the higher price, in that range, actually change
consumer habits.
Senator Alexander. And your experience is?
Mr. Klesse. Our experience would be in Europe and in Canada
that it may not.
Senator Alexander. That it may not. So, we might have the
situation where fuel, being 30 percent of all of the carbon we
produce in the United States, we raise the price but do not
reduce the carbon. So basically, all we have done with this
bill is raise the price of gasoline and fuel.
Mr. Klesse. That is correct. It is a tax, but it also
places this industry at a competitive disadvantage
internationally. This is a very global business.
Senator Alexander. Let me ask Ms. Gordon, and to other
witnesses, many of you have mentioned clean energy or green
energy. Do you mean by that any form of energy that is carbon-
free? Do you have a definition for it?
Ms. Gordon. I think that low carbon technologies is usually
what we say.
Senator Alexander. Low carbon or no carbon?
Ms. Gordon. Yes.
Senator Alexander. So, would you agree that if we have
subsidies and incentives or focus that we ought to look at the
whole wide range of low carbon or no carbon----
Ms. Gordon. Sure. I think we should look at a range. We
should look at a range that includes cost competitive
technologies and measure those the way we measure technology in
general.
Senator Alexander. Does anyone on the panel disagree with
that? As we generally speak of clean or green technologies,
would you agree that we ought to be equally interested in all
forms of say, electricity production that would produce no
carbon or low carbon electricity. Anyone want to comment on
that?
Mr. Brehm. I am speaking for myself and my company. I
actually do not know the Solar Energy Industries Association
position on nuclear, but we are located actually in eastern
Washington, where Hanford is, Hanford Nuclear Site is, Pacific
Northwest National Lab, and we are actually very pro-nuclear.
We believe that nuclear and solar, in particular, are very
complementary.
Senator Alexander. That winds up, my time is about up, but
I would like to mention is, according to the Department of
Energy, the direct jobs produced by 100 new nuclear reactors
would be 250,000. That would be three times as much as building
180,000 wind turbines. Seventy percent of our carbon-free
electricity is nuclear, and as I listened to the whole range of
panelists, no one mentioned nuclear power, which we invented,
which produces 70 percent of our carbon-free electricity, which
the rest of the world is using, and we have not started a new
nuclear plant in 30 years.
So my plea is, and Senator Cardin mentioned that, he has
been a consistent supporter of nuclear power, so if have got a
form of energy that will solve our problem, and I will
conclude, Madam Chairman, with this comment. My view is that if
we built 100 nuclear plants, if we electrify half the cars and
trucks, and if we had mini-Manhattan Projects in energy R&D, we
could reach the Kyoto goals in 2030.
We have got 40 Republican Senators who support what I just
said and many Democrats. I do not know why we do not do it.
Mr. Brehm. May I respond? As far as I am concerned you may.
Is this appropriate, Madam Chair?
Senator Boxer. Well, just if you could make it brief
because we are over the time. Go ahead.
Mr. Brehm. Again, as I pointed out, we are certainly very
pro-nuclear. But to answer your point earlier, where you talked
about France, France also views nuclear and solar as being very
complementary. In spite of the fact that France gets 70 percent
of their power from nuclear energy, they just implemented one
of the strongest pro-solar feed in tariffs in the world. So,
they are very complementary technologies.
Senator Alexander. I agree.
Senator Boxer. OK.
Senator Specter.
Senator Specter. Thank you, Madam Chairwoman.
Mayor Nutter, it is quite a compliment to the city of
Philadelphia that you have been selected to present the
testimony for the United States Conference of Mayors. The
testimony that you have given is a win-win situation here on
green jobs and energy saving.
Mr. Nutter. Yes.
Senator Specter. I note that you have allocated more than
$33 million to retrofitting and job training for young people,
$14.1 from the formula allocation from the stimulus package and
$19 million, $11 million from the Community Development Block
Grants. But the city of Philadelphia has put up $8 million on
its own, and it provides some 800 trainees with as little as 2
weeks' training on weatherizing and retrofitting.
What kind of an impact do you think that will make on other
considerations like crime control in the city of Philadelphia?
So that, by putting these people to work, it obviously is a
real problem, so you attack the issue in a number of
directions, jobs, energy efficiency and crime control.
Mr. Nutter. Senator Specter, it goes without saying that
for the city of Philadelphia specifically, which presently,
unfortunately, has an unemployment rate of 10.7 percent, and
many economists, local economists, anticipate that will grow,
putting people to work has to be our No. 1 priority.
And I would only suggest here that the best anti-crime
program is a job, that when people are working, they are much
less likely to be involved in negative or illegal activities.
That is why we have focused so much of our dollars in the green
economy area.
Just this past Monday, I was at a press conference with
Maxwell Education Group. They received a $150,000 grant from
Workforce Investment, economic recovery dollars. Twenty-four
men graduated from their training program. That particular
program is 8 weeks. Monday was their last day of training.
Every one of them will walk into a job this week. Five of those
24 individuals are ex-offenders, six of them are military
veterans most having just recently served in our international
war efforts.
These programs work, and they put people to work. All 24 of
those men who graduated on Monday are dislocated workers. None
of them were currently employed. All of them will be employed
by the end of this week.
Senator Specter. The important factor, Mayor Nutter, is
that the jobs you are giving them will have application in the
private sector as well.
Mr. Nutter. Well, Senator, all 24 of them will be working
in private sector jobs. None of them will be working for me or
for the city of Philadelphia. The industry is demanding so many
workers that there is capacity out there for these individuals.
They will all be working in the private sector.
These are not make work jobs. These are not what anyone
might think of public service jobs. These are private sector
jobs paying a good wage. These individuals will be able to
sustain themselves.
And the opportunity for entrepreneurship in this particular
industry, I believe, is limitless. People will go from training
to entry level jobs and eventually many of those individuals
will start companies of their own. And for us, of course,
everyone working, paying taxes is what will help turn America's
cities around.
Senator Specter. I turn now to Mr. David Foster, another
Pennsylvanian, a representative of the BlueGreen Alliance
launched by the United Steelworkers and also by the Sierra Club
in 2006.
I note at the outset that the United Steelworkers, which is
very much concerned about jobs and very much concerned about
foreign imports and what China and India are doing, has
endorsed the House bill.
I was particularly interested in the part of your testimony
where you specified that the studies which you have conducted
on renewable electricity standards show that there is the
potential for creating some 850,000 manufacturing jobs, and you
specified quite a number of States. And when it turns to
Pennsylvania, 42,000 new jobs will be created.
There have been a lot of comments on the committee about
job loss and about impact on the traditional American
industries. And there is no industry more zealous of its
standing than the Steelworkers. Leo Girard, the president,
scoffs at the idea of protectionism and says I want to talk
about law enforcement. The Chinese are violating our trade laws
under WTO.
My question to you is, explain the confidence level of the
United Steelworkers in supporting this kind of legislation when
we have heard so many objections raised by some members of this
committee on the jobs issue.
Mr. Foster. Thank you very much, Madam Chairman.
Senator Specter, I think you have pointed at a very
critical issue, and it underscores the fact that, while there
is a problem with carbon leakage, as we think about climate
change solutions, there is a simple and elegant solution. And
we achieved that in the work we did with the House committee in
a three-pronged approach that said energy intensive industries
need assistance through allowance allocations during the early
years of the regime.
Then we need to have a push to have international sectoral
agreements, and we need to frame that up and urge our
negotiators and the world's negotiators to take part in trying
to solve these industry by industry in the energy intensive
trade exposed industries. And if that does not work, then we
need to have a date certain at which border adjustments would
back stop that effort.
And if we do that, we are creating a system that allows us
to go forward with great confidence that American industrial
workers who are among the cleanest of producers of products in
the global economy, that has been stated and I wholeheartedly
agree with that, that those workers can participate in the
global economy, produce the products that we need to build a
clean energy infrastructure in this country, and do so with the
assurance that their jobs are going to continue on into the
future.
Senator Specter. Thank you very much.
Thank you, Madam Chairwoman.
Senator Boxer. Thank you, Senator Specter.
Senator Barrasso.
Senator Barrasso. Thank you very much, Madam Chairman.
I would like to continue a little bit talking about some of
the impacts on the economy, and Mr. Klesse, if I could, you
know, I appreciate your testimony today. It is good to hear
from folks really on the ground who will feel the impact of
this cap-and-tax scheme first hand.
Green jobs are being touted as our economic salvation, but
I believe we need all the jobs, green jobs as well as the red,
white and blue jobs that power our country. I do not think we
ought to be here in this room picking winners and losers when
it comes to American jobs.
I have concerns about the impact that this will have, the
bill will have, on electricity consumers in the Rocky Mountain
West. And in Wyoming, coal provides roughly 95 percent of our
electricity.
I know Senator Inhofe already asked about mandates in this
bill and what they were going to do to your power production
costs. I believe you said they were going to be increased. Then
he asked what was going to happen as a result of that in terms
of, you know, the costs, would they be passed on directly to
consumers, your customers, and you said yes, they would.
So, what do you see happening specifically in the Rocky
Mountain West, places that are more reliant on coal? Are they
going to be disadvantaged by this bill?
Mr. Klesse. Well, I am in the oil business, the refining
business. So coal is much harder for me to speak about.
However, we agree on energy generation, power, that it should
come from nuclear, coal, natural gas, geothermal where it can,
solar if it is appropriate. But we should not be penalizing
these core businesses.
When I speak, we have four USW unions, different locals, at
our plant. When I speak to the rank and file people, they
understand this issue very quickly. And even though the
general, Leo Girard, has his coalition, very clearly the rank
and file people are very concerned.
The refining industry is under stress. We have CAFE
standards coming in, which is lowering the carbon footprint. We
also have the RFS and those are, in fact, reducing carbon
emissions. But they also then are affecting the domestic
refining business and this type of legislation just compounds
it.
But on coal, it is very difficult for me to give----
Senator Barrasso. And then, the cost to the consumer as the
result of all of this?
Mr. Klesse. It has to go up. It is a tax, the tax will be
passed through. I was going to say earlier, our total cash
operating costs in refining, cash operating, are 10 cents a
gallon. That does not include profit or depreciation. So this
is a very low cost, very pennies business.
Senator Barrasso. And Mr. Vassey, if I could, someone said
that the new regulations and Federal spending to mitigate these
greenhouse gas emissions are going to create new job
opportunities for some sectors of the economy. But those jobs,
I believe, are going to come at the expense of activity
elsewhere in the economy.
So, in terms of your State of Virginia, what do you see
happening, kind of 10 years from now, in terms of manufacturing
and the expenses of that and the costs if this bill becomes
law?
Mr. Vassey. What we see, as we testified earlier, the
companies that are in the global commodities business, those
that are in paper, that is about 15,000 employees, Senator
Inhofe, those that are in chemical and plastics, that is
another 40,000. Those are the companies that are going to be in
jeopardy because they will have options elsewhere.
But also, they have very limited margins, just like
refining, that they have to work with, and any fluctuation in
their supply chain or in their regulatory burden they cannot
pass through. Customers will not pay it.
The other things that I will share with you, we see decline
in that, which is not good. We do not see immediate replacement
with this provision. There needs to be some address to that.
The other thing in my testimony, I said that just the threat of
this coming will have immediate consequences.
And to your question about coal, we had a meeting this week
with some of the coal producers, and we have now learned, which
I would encourage the committee to review, many of the
independent coal producers in Appalachia are being brought out
by Eastern European companies for the express purpose that they
are looking down the line and trying to preserve their family,
their particular investment.
But the Eastern Europeans, as we understand it, see this as
an opportunity that the United States is going to cap and trade
their economy, but they will have access to raw materials so
they can be the steel producer of the world in Eastern Europe.
I think that is something worth knowing, that acquisition of
American companies.
Senator Barrasso. When you used the phrase opportunities
elsewhere, you were not talking about cross-State border, you
were talking about jobs moving, leaving the country and going
overseas. Is that a correct assessment of your evaluation?
Mr. Vassey. We do not see these companies as non-
competitive. That is not the issue. The issue is that their
margins and their pricing for consumer products they simply
cannot pass along. So, they will find a place. They will find a
way, they always have, to produce and sell in this economy.
Senator Barrasso. Thank you.
Thank you, Madam Chairman.
Senator Boxer. Senator Whitehouse.
Senator Whitehouse. Thank you, Madam Chair.
Mr. Vassey, I was delighted by the focus of your testimony
on the problem of leakage and the promise that I hope that
brings of the industry representatives paying more attention to
the problem of enforcement.
I have detected a decidedly mixed message from industry on
the question of trade enforcement because it has been so
advantageous for CEOs and management to offshore jobs, find
lower wage rates overseas, and it has not been in their best
interests to push very hard at the fact that those overseas
jobs often violate environmental laws and treaty requirements,
labor laws and treaty requirements, workplace safety laws and
treaty requirements.
So, I see that David Foster is here. I know that the cost
of the offshoring hits the labor community particularly hard as
jobs gets picked out of America and moved by management to
foreign countries to seek that labor advantage and the parallel
advantages of that environmental law, bad labor law, bad
workplace safety conditions.
And so, I am hoping that what we see here is the beginning
of an industry-labor coalition that will take what had been our
policy of conspicuous non-enforcement and change that and also
work very hard to assure, as both of you wish to, to assure
that this bill, when it goes forth, particularly including the
package that comes out of the Finance Committee that relates to
the border adjustments, is really tough.
And if we have to tangle with the WTO a little bit on this
subject, I am perfectly happy to do that. But this is, I just
wanted to make that point. Both of you are here. It is not
often that industry and labor are in such apparent agreement,
and I wanted to take a moment to highlight that, and I will
give you a chance to make a brief comment on that if there is
time.
But I wanted to ask Dan Reicher something, which is that we
have talked a lot about the smart grid, and smart grid has
become jargon to a lot of us who are very familiar with these
issues.
Google is a very forward looking company. You have a very
forward looking position in that company. I would like to ask
you to take a few minutes to try to make real for people who
may be watching some of the kinds of changes that might happen
in the middle class American home, that people might see as the
consequences of smart grid and how that will work itself out in
the lives of consumers.
And the core area of that question is what kind of products
might we be building here in America to make those new
services, technologies, appliances possible?
Mr. Reicher. Thank you, Senator Whitehouse. First of all,
the smart grid seems to mean a million different things to a
million different people. But I think, when all is said and
done, what it does is it gives people a lot better information
about their own energy use, whether it is in their home, in
their factory, in their business.
And I think where energy technology and information
technology, ET meets IT as we put it, where that intersection
is, we can do so much, I think, to deal with some of the
problems we are talking about today, to lower the costs of
energy use, to green up energy supply. There is so much we can
do.
And at Google we are very, very excited about it. We have
launched a product, we call it Google Power Meter, we give it
away for free. It is a piece of software, and it lets people
know in near real time how much electricity they are using in
their home. You can go on your smart phone, you can go on your
laptop. I have provided some handouts today that will show you
what you get. But when you go on your laptop, you go to the
home page where you might show your stocks and your weather and
the sports scores, and you will also see how much electricity
you are using in real time.
And it is quite extraordinary what people discover. One of
my colleagues found out that he was paying for the washers and
dryers in his apartment building. Another discovered what that
second refrigerator in the garage with the one six-pack of beer
in it was really costing him. Another woman discovered that the
pump in her pool had been operating non-stop for years.
The electric motor in my furnace, I did not realize that it
was 40 years old, and every time it popped on I was hitting
1,000 watts. The furnace person said do not bother replacing
your furnace, it is not worth it. Replace that little electric
motor and you are going to dramatically cut your electricity
use.
So it is quite extraordinary. And when we get to the
biggest appliance in the house, which is the plug-in vehicle
which is on its way, what we are going to be able to do with
the integration of that into the grid is quite extraordinary.
What we do not want to do is be plugging in millions of
these cars of a hot day in the summertime at the same moment
and taking the grid down. What a smart grid will allow us to do
is figure out when those cars should best charge up over the
evening into the next morning. They will allow us to store that
intermittent electricity that comes from solar and wind that is
problematic for various reasons.
So, Senator, I think this whole area of the smart grid is
so exciting. And that is why it is companies like Google and
Microsoft and on and on who are really seeing the opportunity
here. So, have at it. I think the President yesterday
announcing $5 billion in spending on advanced meters is really
going to lay a good foundation, and I think this bill could do
an awful lot more.
Senator Whitehouse. Thank you, Chairman.
Senator Boxer. Thank you, Senator.
Let us see. We are going to Senator Udall, and next Senator
Carper and then Senator Merkley, unless our other colleagues
come back. Go ahead.
Senator Udall. Thank you, Madam Chair.
Mr. Reicher, a little over 10 years ago, Google, as a
company, was based out of a garage with only a handful of
employees. Last year it had annual revenue of over $21 billion,
triple the amount in just 3 years.
Why would a company like Google, which has a successful
business in advertising, in search engines and information
technology, be looking at clean technology and energy
efficiency as a new business opportunity? And what kinds of
energy projects has Google already done in this area, and what
kind of results does Google hope to achieve as a company and as
a part of society?
Mr. Reicher. Thank you, Senator Udall.
First of all, you know, Google, those instantaneous
searches that everyone has come to rely on in their lives, they
do take some electricity. So, we recognize that. We have done a
lot to green up and reduce the energy use in our data centers
all over the country. So that was Google's entry point into
this.
But I have to say, more importantly, this intersection I
said between energy technology and information technology, we
are quite convinced is really, really promising to help us deal
with the big challenge we have as a country, and frankly, as a
way to make some money for companies of all sorts.
So, as I said, we have launched this product called Google
Power Meter. We have also built a fleet of plug-in vehicles,
and we have been testing them for the last few years. And you
know what? They actually work. They plug into a system at
Google that, on a sunny day, is powered by the sun. Our
employees use them in their day-to-day business, driving around
Northern California. And they really have shown us that you can
do so much with these plug-in electric vehicles.
So, we are convinced that this whole area of the grid and
the net coming together holds such great promise for our
country and for the world, and frankly, I think this bill
provides some allowances for the smart grid, and we are very
appreciative of that.
We think the R&D need is great, and we have to continue to
invest in these kinds of technologies to move them forward. But
all in all, it is a great package, and I think it is the good
news in this whole story. Thanks.
Senator Udall. To follow up a little on that, you have
spent time in the energy sector and in the Department of
Energy, and now you are really in this entrepreneurship venue.
And so I wanted to ask you, with that background, when we hear
Senators say, and the naysayers many of them, that we cannot
achieve these goals, and we cannot get the reduction in terms
of 20 percent by 2020, do you believe that American creativity
and ingenuity and innovation are going to, when we put the
signal in the market, the price signal out there, are we going
to able to achieve many of these things earlier than we think?
Mr. Reicher. Absolutely. And it is curious, Senator, that
this whole conversation this morning has really avoided what is
really, I think, the low hanging fruit, which is energy
efficiency. The low hanging fruit. And you know what? This is
low hanging fruit that grows back. That old incandescent light
bulb you replaced with the compact fluorescent you are going to
replace again with an LED bulb.
So, there is great ability, here and now, to get the kind
of savings that we need to deal with our climate emissions
problem. So, I think we overstate the costs of meeting this
important challenge, and I think we understate the opportunity
that could come in growing some major businesses in this
country.
So, energy efficiency is the place to start. But going
beyond that, as you say, what is the innovation pipeline
producing? It is producing extraordinary opportunities. We saw
the kind of companies that just a couple of days ago the Energy
Department announced it was investing in all over the country
with a whole range of technologies that promise vast savings in
terms of carbon emissions and energy savings.
I will highlight, and I think it is something that is very
important to your State, is the whole opportunity with advanced
geothermal. Not too many feet below the surface of the earth is
just a vast, vast energy and increasingly we know how to drill
down there at low cost, we know how to extract it.
It is a great complement for the oil and gas industry
because they know how to get to those depths. So, let us put
these industries together. Let us put geothermal and oil and
gas together and really take advantage of what is a highly
attractive energy source and one, frankly, that is base load.
It is 24 hours a day, 365 days a year, and increasingly it is
on a very impressive price trajectory.
Senator Udall. Thank you. Thank you to all of our
panelists. And thank you, Madam Chairman.
Senator Boxer. Thank you.
Senator Voinovich.
Senator Voinovich. Thank you, Madam Chairman.
I have heard a lot of--I am sorry I did not hear you, Mr.
Vassey. But Mr. Vassey, have you ever talked to Mr. Foster?
Mr. Vassey. No, sir.
Senator Voinovich. Mr. Foster, some of the things that you
talked about in your testimony, your concern about
manufacturing and the allowances and how it works, and you have
got some recommendations on how we can improve this piece of
legislation. I would assume your concern that the allowances in
the bill are not enough to take care of manufacturing, that the
cost of energy will be passed on to your members, and
therefore, it is going to cost them more to do business.
What I am concerned about here, the big picture, is this.
The allegation is that we need cap and trade and set limits on
emission so that we have the incentive to get people to do
things that they ordinarily might not want to do.
From what I have heard here, Mr. Brehm, you have gone
forward and done some very unique things working with a couple
of businesses in Ohio. The question I have is, did you take
advantage of any of the programs that are available in the
Department of Energy for you do to this, or did you do this on
your own?
Mr. Brehm. Senator, a combination. We are a recipient of a
number of grants from the DOE, from the department that Dan
used to run, Energy Efficiency and Renewable Energy. In fact,
we are working on some of those R&D projects with companies in
Ohio, and we are working on some of the production and the
manufacturing with companies in Ohio which were more done with
private funds. But a combination.
Senator Voinovich. The concept of the bill is that we
charge for allowances, that raises money, and there is more
money for incentives. The question I have got is that if we
concentrated on the incentive part of this, would we not be far
better off than to create a gigantic new process where we give
out allowances, or we pay for allowances and so forth, and
really got at the real issue here, and the issue is technology.
And everybody analogizes, I do not know if you are familiar
with this, with the Clean Air Act which had the acid rain
provisions, and I was familiar with that as Governor at Ohio.
At the time we put that into effect, there were 15 years of
work to deal with NOx-Ox, mercury, we
were not talking about greenhouse gases. And we were able to
move forward with it.
The problem, as I see it big picture-wise, is we do not
have the technology in many of these areas. Mr. Klesse, for
example, you get 2 percent of the allowances, you have got 44
percent of the problem. How do you reconcile some of these
things? If he gets 2 percent of the allowances, they raise the
cost of gasoline, that is passed on to the people in Ohio, and
they provide the allowances, so they provide the money for the
incentives for you to do what you want to do. And it just seems
like we are just kind of going around in a circle.
Mr. Klesse, I will just ask you this. What is your solution
to this? I understand that refineries, you guys are going to
stop refining oil here, you are going to get it refined
overseas because of the cost. Even if you do that, you are
still going to pass a big cost on to your customers. What is
the solution to this? How do you deal with this?
Mr. Klesse. Well, we see this program as very unfair to
this industry. We already have CAFE standards coming in, the
RFS, renewable fuel standards, in, so we see these things
happening. We also are supportive. I agree with the comments on
efficiency. There is tremendous opportunity in efficiency. When
I started working as an engineer, we had an investment tax
credit. We could have a lot of positive initiatives here to
encourage industries, smart grids, all of those, to make
investments to improve efficiencies.
But this bill is inherently unfair, penalizes the refining
and oil business directly, and is legislatively picking winners
and losers.
Senator Voinovich. I would just like to comment, too, that
I introduced a bill with Senator Dorgan called the National
Energy Security Act. And one of the biggest things we talked
about was the grid. And Mr. Reicher, you talked about the grid.
Now, we are putting $3.5 billion into the grid. Most people say
if we really want to do the grid, we are probably going to have
to spend $60 billion to do it the right way.
I guess that, from my perspective, maybe our priorities are
not in line. And Mr. Foster, I want to call you afterwards and
talk to you about what your group is concerned about. Because I
think there are some things here that could be reconciled,
where we could come up with something that would move us
forward but not get us engaged in a large system where we are
collecting allowances, paying for allowances, giving allowances
away and end up with a set up that raises, increases everyone's
costs, and does very little to really reduce the emissions.
Mr. Reicher. Senator, if I could very quickly. You said----
Senator Boxer. Make sure to answer quickly because we are
running out of time.
Mr. Reicher. You said technology is the issue. Technology
is part of the issue. But until we put a significant price on
carbon emissions that really reflects the true impacts they are
having on the global climate, we are not going to drive the
kind of change that we need.
It needs to be a combination of technology and policy if we
are going to see the sort of changes we need that are going to
be both good for the economy and good for the environment. And
that is what is behind this bill. And either EPA is going to do
it, or the Congress is going to do it, one way or the other.
Senator Boxer. Thank you very much, Mr. Reicher. And thank
you, Senator.
Senator Udall. I mean, Senator Carper. I almost gave you a
second round.
Senator Carper.
Senator Carper. One of the Toms. One of the Toms gets to go
next.
Let me say, Madam Chair, it is a good panel. And some of
these folks I have the privilege of knowing. It is great to see
the Mayor of Philadelphia, our neighbor to the north. I
understand there is a baseball team in Philadelphia. You are
playing ball there very soon, we hope. Good luck. A lot of
Phillies fans down in Delaware, as you know.
Mr. Klesse, has anyone ever mispronounced your name?
Mr. Klesse. Yes.
Senator Carper. Today? In the last hour, probably. Thanks
for bearing with us. It is so nice to have you here. Valero is
one of any number of companies that are going to refinery
operations in Delaware City.
I came out of the Navy in 1973. I had been a naval flight
officer. And I moved from California to Delaware and got a
Masters in Business Administration. I took a course in my first
semester, and I had to do a research project on a company that
had problems, really, with the law. And Getty, at the time,
owned the refinery in Delaware City and they had long standing
problems with Clean Air Act compliance.
And I ended up, literally, in my first semester at
Delaware, in my first months at the University of Delaware,
doing a fair amount of research on the refinery there. There
have been a lot of owners since that time. We think Valero
actually is one of the better operators and the more
responsible operators with more of an environmental conscience
than some of the others. So, we appreciate that.
And I appreciate what you said earlier about--you have, I
think you said, a 50-megawatt windmill operation at your
headquarters, and I think you said you are also into ethanol,
and we would welcome that kind of diversification. I hope your
shareholders do as well.
I almost fell out of my seat, though, and I think my
colleagues did as well when, I think you said to Senator Boxer,
that it looked like you would be spending for your operations,
your refinery operations in California, $850 billion in a year.
Corrected, you said $850 million in California in a year.
And I have looked at your testimony, and I am up to page 3, and
my staff here behind us has been trying to help me figure new
on some numbers, and I just want make sure we got this correct.
I will just quote your testimony. It says industry-wide, we
estimate the compliance costs for process emissions with carbon
at $20 a ton to be $4.1 billion a year. And that is, I think,
nationwide, I believe in a year, for all refineries. And your
portion of that would be, I suppose, less than maybe one-
quarter. But in any event, I presume that is what we are
talking about industry-wide, $4.1 billion a year. You estimate
the costs of consumer emissions to be about $63 billion a year,
for a total cost to domestic refiners, and potentially to
consumers, of more than $67 billion a year.
That is a lot of money. I think we all agree with that. And
I ask myself, well, figure out for us, if you can, how much
gasoline and how much diesel fuel do we use when we drive our
cars and trucks and they came back and said about, today, about
450 billion gallons of gas and diesel refined and consumed
annually.
If I do my math right, and I divide 450 billion gallons
into $67 billion, it works out to, I am told, somewhere between
13 and 15 cents per gallon. I think that is a correct number.
And I am told this is by 2020.
When I heard this $850 billion number, I was real price
sticker shocked. When I think of 13 to 15 cents per gallon by
2020, I just want to say we can remember back only a year or so
ago when we saw such price volatility that the price of
gasoline in my State, and I think all of the States, probably
went up by 13 cents per gallon in a month, maybe in some places
in a week. And we are talking about an increase of 13 to 15
cents over the next decade, by 2020.
Are my assumptions reasonably correct? Is 13 to 15 cents
per gallon pretty much on target?
Mr. Klesse. If you use $20 per ton, and nothing else
changes, then I would say your numbers are exact. But that is
not what we expect to happen at all. Nor do any of these
reports that are published, including the DLE. We have a wide
range of numbers that go all the way up to $1.50 by 2019 or
2020. It depends on what you assume for the cost of carbon. In
my number, it is $87 a ton.
Senator Carper. Let me just ask the Chair a question, if I
could.
Senator Boxer. Yes.
Senator Carper. I have been told by others that the costs
of carbon per ton will probably, initially, be less than $20
and eventually it is going to rise. Do we have a cap?
Senator Boxer. We do. We have a soft collar, as you
probably know.
Senator Carper. What is that? What does that mean, Madam
Chair?
Senator Boxer. Well, it means that the bottom is $11 and
the top is $28, and if it gets to $28, we have an allowance
reserve fund where those allowances are sent out so we that we
will not see prices over $28 because absolutely, and this is
something we did, Senator Carper, if I can just say, this is
something we did because industry was concerned about carbon
going up too high, and also others were concerned about market
manipulation.
By the way, I am going to add time on to you.
We also have the ability to go for offsets as well. So, I
think, given all of that, I feel very good with that 13 cents
that you quoted.
Could you just put Senator Carper back to a minute please?
Mr. Klesse. Can I----
Senator Carper. Let me just finish one more point because
my time is limited. And I would welcome the opportunity to
continue the conversation beyond this hearing.
But just doing the math, back of the envelope math, if we
say 15 cents per gallon with carbon at $20 a ton, if we go up
to $28 a ton, that would raise the price to roughly 20 cents
per gallon. Does that sound like even wildly in the range of--
--
Mr. Klesse. That does and those are correct numbers.
However, this cap increases every single year. It has the
ability to increase. We also do not think the allowances will
be adequate.
A cap and trade program means anybody can trade. You and I
can trade in this business. People will hoard them. We have
seen this with the RFS and the renewable fuel standard where we
have to buy RINs. RINs have gotten very high. It was never the
EPA's expectation that RINs would get up to 18 or 19 cents a
gallon.
So, these businesses, there are a lot of players and people
act in their self-interest.
Senator Carper. All right.
Mr. Klesse. And the cap goes up every year.
Senator Carper. Fair enough. Thank you for engaging this
dialogue with us today, and I just look forward to continuing
it. And again, to all of our witnesses, a lot of encouraging
stories, including the launching yesterday of Fisker Automotive
in----
Senator Boxer. I would like to----
Senator Carper [continuing]. GM plant comes alive again,
and we are going to be starting to build in a couple of years
vehicles that will get 100 miles or so per gallon, and the
plant hybrids, and we are going to be deploying the first
windmill farm off the coast of Delaware, probably in about 3
years. And the idea here is to eventually have windmill farms
up and down the East Coast to provide a powerful vehicle like
the vehicle we are building here.
I still think there will probably be plenty of opportunity
for our refineries to make a buck as well.
Thank you very much.
Senator Boxer. Senator, thank you very much.
So, here is what we are going to do. Our last questioner,
we are going to shut it down after Senator Merkley and go to
our next panel because we are running late.
Senator Merkley, please proceed.
Senator Merkley. Thank you very much, Madam Chair.
Mr. Reicher, you mentioned that Google is providing free
software. I am assuming that I have to get a digital
replacement for my mechanical electric meter to interface with
that in some way?
Mr. Reicher. Senator, you have two options. You either get
a replacement for your current meter, and there are many of
those on the way or already arrived, and in fact, the money
yesterday from the President is going to speed that up. Or even
simpler, you can clip a little tiny device on your fuse box,
and those are readily available as well. They are inexpensive.
You do not even need the smart meter.
Senator Merkley. Is Google giving those away with the
software?
Mr. Reicher. Not at this point.
[Laughter.]
Senator Merkley. You would have about a million calls after
this hearing because----
Mr. Reicher. I will not announce that here.
Senator Merkley. I am sure a lot of Americans will find
this a very interesting idea. I just wanted to publicize that a
little bit. Thank you. What does one of those little clip on
devices cost to put on your fuse box?
Mr. Reicher. The devices are, today, around $150. And we
are expecting they are going to come down very significantly in
price when they go to mass market.
Senator Merkley. Well, I am going to be calling my utility
company and find out when I can get a meter or whether they are
going to subsidize that cost. That is very helpful. When people
start monitoring how they are using energy, they change
practices. So, thank you for mentioning that.
I wanted to shift to the personal vehicle plan that is part
of the overall Google energy plan. And I believe that personal
vehicles now produce about 20 percent of the carbon dioxide in
the U.S. economy. Is that a roughly accurate estimate?
Mr. Reicher. I do not know. It is in that range, but I do
not know.
Senator Merkley. I believe transportation is about 60
percent of the carbon dioxide, and personal vehicles are about
a third of that, I believe. So, I was going to pin you down a
little bit on how much that particular piece of the plan would
reduce the carbon dioxide produced in the personal vehicle
sector. And you may not have a reading on that----
Mr. Reicher. Well, I will say, and Senator Alexander talked
about replacing half the fleet with plug-in vehicles, if we
move to do two things, increase our use of plug-in vehicles and
green up the electric grid by whatever means from solar to wind
to geothermal to nuclear and beyond, we will have very
significant impacts in the personal transportation sector on
greenhouse gas emissions.
Senator Merkley. At one point, I heard it described this
way. And I think this is a little out of sync with the numbers
in your studies, but I will mention it and have you give your
version. It was that if we enable every vehicle, every vehicle,
so at a 100 percent transition, if you will, to go at least 30
miles on electricity, that we would reduce 70 to 80 percent of
the carbon dioxide produced by personal vehicles.
Does that fit, or do you have a different version of that
statistic? I realize, in your plan, by 2030 we do not get to
100 percent doing the first 30 miles on electricity, but----
Mr. Reicher. It is in that range. And the difficulty in
making the estimate is that you really have to know the state
of the electric grid, how green is the grid at that point in
time. But the faster we green up the grid, by whatever means,
the more that the emissions from the personal automobile sector
are going to go down.
But what is exciting about it is that it is a very
efficient way to run a vehicle, and I think these hybrid gas-
electrics will give people both the ability to lower their fuel
bills but at the same time have some confidence that, you know,
when that 30 miles on electricity is up, there is another
several gallons in the tank that they can continue with.
Senator Merkley. Well, I want to really emphasize how much
potential carbon dioxide savings are here. Because if we can
reduce 70 percent of 20 percent, that is a substantial,
substantial amount, about 14 percent of the carbon dioxide
produced in our economy.
And if we look at it this way, this plan we are putting out
right now aims to reduce 20 percent below the 2005 levels, but
we are zeroing in on 9 percent already. So that means we really
only have to reduce 1 percent per year over the next 11 years
to meet our 2020 target. And here we are talking about just
personal vehicles with the potential to reduce up to 14
percent.
So, you lay out three strategies. One is new sales, more
and more new sales being plug-ins and full electric cars. A
second is having the remaining conventional vehicle sales
significantly increase their mileage from 22 to 45, which I
think you note is the European standard for 2012. And the third
is to accelerate turnover of the older cars.
In your vision, taking those theoretical goals, how do we
convert, if we were to actually say let us set mileposts, and
let us make those happen, what type of legislative strategy
would be most effective?
Mr. Reicher. Well, I think, first and foremost, what this
committee is focused on, which is put a significant price on
carbon emissions, and do it by an efficient mechanism from a
business perspective. I think that will dramatically drive
change.
Second, the direction we are headed in terms of increasing
the fuel efficiency standards for regular vehicles. I mean, I
think third, if we are going to really accelerate the
introduction of plug-in vehicles of all sorts, I think
incentives can help. I think investment in battery technology
which is the real rub here can help a great deal. And then I
think making sure that we have got a grid that is able to
charge up large numbers of these vehicles and getting that
ready, I think, is the third.
Senator Merkley. Thank you very much. Our time is expired.
Thank you, Madam Chair.
Senator Boxer. So, Senator Sanders, you came in the nick of
time.
Senator Sanders. I was cheating. I was watching TV.
Senator Boxer. OK. Unless there is a Republican who comes
in, if they do, I will give them time, we are going to move to
the national security panel after Senator Sanders.
Senator Sanders. Mr. Reicher, the State of Vermont,
although Senator Boxer may argue with me, I think the State of
Vermont is leading the country in terms of energy efficiency,
and in fact, we are consuming less electricity now than we did
a couple of years ago.
If the country was aggressive in terms of energy
efficiency, how many jobs do you guess that we can create over
a period of years?
Mr. Reicher. Well, Senator, first, Vermont has an exemplary
record when it comes to energy efficiency improvements. It is a
good race that Vermont has with California, frankly, so I
applaud all that you are doing there and know some about what
is going on.
In terms of job creation, another point that was not made
today is that among the highest producing areas of energy in
terms of job creation is, in fact, energy efficiency. You know,
going in and retrofitting a home is real, real jobs, doing all
the sorts of things to improve energy use in a commercial
building or in a factory. Those are real labor intensive jobs.
They are good jobs. They are jobs that the unions like. They
are jobs that electricians and plumbers and builders really
love.
So, the job creation potential in energy efficiency is
extraordinary. We are talking hundreds of thousands. We are
talking potentially millions of jobs. Just look at the low
income weatherization program. The billions we are now going to
be spending there over the next couple of years. Major, major
job creation in areas of the country that desperately need it.
Senator Sanders. Let me ask you this. Do you believe that
this committee should require that allocations for electric
utilities go at least, in part, to energy efficiency, just like
allocations for natural gas?
Mr. Reicher. I do think that would be a wise improvement to
the pending bill.
Senator Sanders. OK. Let me ask Kate Gordon a question. And
Mr. Mayor, you can jump in on this as well.
We spend, depending on the year, hundreds of billions of
dollars a year importing oil from Saudi Arabia and other
foreign countries. If, over a period of time, we invested those
hundreds of billions of dollars in energy efficiency and
sustainable energy in this country, wind, solar, geothermal,
biomass and other technologies, in energy efficiency in mass
transportation, do you have a guess as to how many kinds of
jobs we could create?
Ms. Gordon. It is a tough question. We do know that jobs in
transit, our transit investments create about nine times the
number of jobs as similar investments, in new highways, for
instance. And I think it is a critical point that we cannot
just talk about the current amount that we spend on existing
technologies. We have to talk about reducing how much we use
technologies and moving to new technologies.
Massive investments in energy efficiency create jobs and
bring bills down. Major investments in transit systems and in
clean vehicle manufacturing, as are in this bill, bring driving
times down, bring vehicle miles traveled down, make those miles
more efficient, that has an impact on consumer costs just as
great, if not more, than the amount that we spend on the
technology.
Senator Sanders. Mr. Mayor, let me ask you this. I mean, I
think in Vermont, and I am sure in Philadelphia, most people do
not think it makes a lot of sense every year to be spending
hundreds of billions of dollars making the sheiks in Saudi
Arabia a little bit richer. What do you think about that?
[Laughter.]
Senator Sanders. I know that is a tough question. But you
can go on the record here.
Senator Boxer. I hope that your team gets as many soft
balls tonight.
[Laughter.]
Mr. Nutter. All right, Senator. Thank you. We are looking
forward to it.
Senator Sanders, first let me say thank you very much for
the question and also your leadership with regard to the EECBG,
and of course your previous service as a Mayor in Burlington.
The fact of the matter is, as a Mayor, I try to do my best
to stay pretty focused on the narrow area of domestic policy. I
do not get engaged in many conversations about what might be
going on in Saudi Arabia.
But what I can tell you is that the city of Philadelphia
owns 450 buildings and facilities. We want to retrofit every
one of them. That is a job that cannot be outsourced somewhere
else. You have to do that work right in our city. We are
seeking to reduce our energy costs just for the city of
Philadelphia by 30 percent through our Green Works Philadelphia
Plan by 2015. That is real money.
Senator Sanders. A 30 percent reduction?
Mr. Nutter. A 30 percent reduction in our own city energy
costs by retrofitting our buildings, making them smarter, more
energy efficient and taking other steps. All of that work would
have to be done in Philadelphia. Those are jobs right here in
our city.
So, there will be thousands of jobs created through the
green economy, whether it is by the work that we do. Earlier,
in my testimony, I do not remember if you were sitting there or
not, Philadelphia is a city of mostly row homes. We have 400,00
houses that pretty much have flat roofs or can certainly take
solar panels, green roofs, white roofs, the Dow Chemical
Company, which just took over Roman Haus, has materials that
can be used for that application, those are all jobs in the
city.
Senator Sanders. Great. Thank you very much, Mr. Mayor.
Senator Boxer. I just want to say to the panel, to all of
the panelists, from the majority witnesses to the minority
witnesses, we greatly appreciate your time. You have been
terrific, every single one of you and really helping us as we
move this bill forward. Thank you very, very much.
So, we are going to go right to the next panel. I promised
Senator Klobuchar. I just want to make sure everybody knows, if
you get any questions from the committee, we need them at the
end of close of business today, the answers. I do not expect
you will. I have not heard of any. Do you have any? OK, there
will be some questions. They have to be in tonight.
I am going to ask folks if they could depart because we
have an extremely distinguished panel waiting to come in, Hon.
John Warner, Kathleen Hicks, Vice Admiral Dennis McGinn, Major
General Robert Scales, Drew Sloan, Lieutenant Colonel James
Carafano.
Ladies and gentlemen of our next panel, we thank you so
very much for your patience. I do have some good news for you.
There will be no opening statements by Senators on this panel,
so we are going to get right to the testimony. We are greatly
honored by your service to country, by your presence here
today, and for your willingness to help us tackle this very
important issue.
Just for the rules, we are going to start with our esteemed
Senator John Warner. And we are going to go straight down the
panel. If you can keep your remarks to about 5 minutes, we
would appreciate it. I am not going to cut you off if you go 30
seconds over, but then I will start tapping this little gavel
only because we have two more panels today to hear from, and we
want to get all of you in.
So, we will begin with someone who needs no introduction. I
was mentioning, Senator, that I personally really missed you
from this committed, and everyone has kind of agreed. But I was
out there wishing you were sitting here once again.
Senator Inhofe. Let me echo her remarks, Senator Warner. We
do miss you. And of course, he and I were on two committees
together so we spent a lot of time together.
Senator Boxer. I know. Well, Senator Inhofe and I are in
agreement on this, at least.
[Laughter.]
Senator Boxer. So, Senator Warner, please proceed.
STATEMENT OF HON. JOHN WARNER,
U.S. SENATOR (RETIRED)
Senator Warner. Well, thank you very much, Madam Chairman,
and my long-time friend, Jim Inhofe. I can remember campaigning
for you when you first ran for the Senate in your wonderful
State. And other friends around this table.
I will tell you, when I look back, I spent half of my adult
professional life in this U.S. Senate. And I hope that, when
your time comes, that you feel as I do. It was worth every day
of it. I miss it daily, but life, as Thomas Jefferson said, you
have got to step off the path of public life and let those
following behind take over. And that I do.
But I commend you on the hearing today. Seriously, I have
been involved in this for some time. This was a good hearing. I
mean good, constructive exchange of viewpoints and tough
questions. And that is what is most severely needed.
So, unless you wish to give me the oath of office----
Senator Boxer. No, just please proceed.
Senator Warner. But under the Ethics Law, I am permitted to
accept your invitation which I do, most respectfully, to join
you today. I shall be very brief. Hit that gavel at 5 and I
will stop instantly.
I thought long and hard about what I might add today other
than contribute my written statement. So, I just thought I
would say what I have done since I last appeared before you.
First, I want to say how privileged I am to be with this
distinguished panel. I cannot see all the way to the end.
[Laughter.]
Senator Warner. I have appeared with many of them before on
other panels and particularly my friend Vice Admiral McGinn
here. Senator Inhofe, here is a top gun, and let me tell you,
he has an extraordinary career in aviation like yours. And we
fly by the seat of our pants. We have been to what, eight or
nine States together, basically to carry forward, and listen to
the people out there. It has been fascinating.
I would say that the American public has a high level of
interest in this subject. And they are anxious to learn. And
that puts upon those of us in our respective positions the
obligation to help them learn so that they can formulate their
own opinions and be a constructive part of the dialogue on this
issue which is, in every respect, as complicated and as tough
and as challenging as the health care issues before this august
Congress today.
So, I have had that privilege to travel to the States. My
basic message is the linkage between our climate global
considerations, the desire for our country, and many, to try
and seek higher efficiency use of their energy, new renewable
sources, and the whole galaxy of issues that are coupled with
energy. And last, how all that is tied in to our national
security.
And members of our panel today, I am going to yield the
floor to them because I have covered the subject with the
committee, and I have some of it in my statement. But I think
this is a chance for them to give a new perspective on it, and
I am anxious to hear their testimony.
Very quickly, the Pew Foundation, which I basically work
for, and the Center for Naval Analysis, which Admiral McGinn
and I work on, had the concept that there is an awful lot of
discussion going on in Washington, but we need to go out and
listen a little bit and perhaps share with those in the States
what we know about it back here and learn from them what they
think they know about it and what they want to know in greater
detail. And that we have done.
Then I want to commend the departments and agencies of the
Federal Government under the leadership of the President and
others. Madam Chairman and members of the committee, they are
moving out. And you will hear a most impressive story about the
Department of Defense. As you may recall, when our mutual
friend, now Secretary of State Clinton, was on this committee,
the two of us teamed up and on the Armed Services Committee put
in the legislation requiring the Department of Defense to begin
to work in their out year quadrennial 4-year projections of
what the roles and missions might be of the men and women of
the Armed Forces.
The bottom line is, that when we talk about national
security, our thoughts are with them because when the
President, as Commander in Chief, issues the order to go, be it
a humanitarian situation like the tsunami or the fragile
collapse of Somalia years ago, they are the ones that have to
drive the airplanes, fly them to ships, bringing forth the
platforms that lift capability to try and bring a measure of
relief in the humanitarian situations and a measure of
stability in those where sovereign nations are collapsing.
The intelligence community is doing a great deal of study
on this. Admiral Blair, the Director of National Intelligence,
recently said the intelligence community judges, and I repeat
judges, it made a judgment, that global climate change will
have an important implication on our U.S. security for the next
20 years. That is our top person in intelligence.
The CIA has originated its own program. And I must say, I
went out and visited--I have worked with the CIA for all of the
many, many, many years I have been here and when I was in the
Department of Defense. It is not a spy mission. It is simply
utilizing their vast array of collection devices to gather
information, synthesize it, and let it be made known for the
general public use as well as the policymakers and the
Government. And I commend them, particularly Director Panetta,
who has put this into going.
So, there is growing progress in our Government. Then there
is growing progress in other nations of the world. I listened
to the leakage issue, and that is a vital one. But at the same
time we are confronting the leakage issue, we have got to be
aware that nations are moving out and taking the positions
which this country dominated for a number of years. For
example, Japan is leading in batteries, Germany in photovoltaic
cells, Korea in the components for nuclear power plants,
Denmark the wind energy, and in China and India, pretty well
across the board in all those things.
Now, they are investing in trying to get the solutions that
the United States and other nations will need when they finally
confront the issue of climate change and decide what they are
going to do. I just generically say they are the black boxes,
they are the silver bullets to help decide how we do
sequestration, how we do the plug-in systems, all of those
things.
They are out there putting that technology and putting the
stock on their shelves. So, when the United States, and we
will, as sure as I am sitting here, someday this country is
going to move forward unifiedly, executive branch and
legislative branch, and begin to temp our role in dealing with
this. Those black boxes we will have to buy from the shelves in
these nations.
So, I will yield the floor.
[The prepared statement of Senator Warner follows:]
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much.
And now we turn to a minority witness who is here, and we
welcome you, Major General Robert H. Scales, retired.
STATEMENT OF MAJOR GENERAL ROBERT H. SCALES,
U.S. ARMY (RETIRED)
Mr. Scales. Thank you very much, Madam Chairperson. It is
indeed an honor to address this hearing on the national
security implications of the Clean Energy Jobs and American
Power Act.
Our intellectual and popular culture thrives on speculating
about the horrific effects of mega-disasters. But the
historical record strongly suggests that such devastating
disasters rarely if ever result in large scale wars. In fact,
more often than not, sadly, wars cause pandemics, starvation
and societal dislocation rather than result from them.
If the more popular climate change models are right,
perhaps some time in the very distant future glacial fed rivers
might dry up, sea levels might rise and areas of the planet
might become more waterless. Some environmental scientists
conclude that such a climatic crisis would precipitate human
friction in the form of mass migration away from ocean fronts,
river valleys and regions of the world that suffer from
drought.
The problem is that even if such disasters occur, they will
not likely be a cause for serious wars, particularly a war
between a major competitor and the United States. In fact, a
brief turn through the historical record suggests that periods
of great societal stress causing enormous suffering and
dislocation reduce the likelihood of state versus state
conflict.
Mass misery caused by climatic and environmental disasters
occurs so slowly that populations adjust through migration and
societal atrophy. Such phenomena create social miasma that
inhibits rather than fuels aggression. In a word, states about
to collapse from the consequences of natural disasters are more
concerned with survival than picking a fight with a global
competitor.
Wars that affect major nation-states will be precipitated
in the future by the same factors that have ignited conflict
for millennia. A far greater strategic threat, at least in the
shorter term defined by the next 20 years, will come from a
dramatically reduced access to raw and refined fossil fuels
that likely be an unintended consequence of this bill.
This argument rests on two premises. First, that fossil
fuels will continue to power our war making capability for
generations. And second, that this bill may reduce our ability
to surge fossil fuel production should we face the threat of a
large scale major war in the future.
There is no scientific evidence that suggests that wars
will be propelled and sustained by any power source other than
fossil fuels in the future. Dominance in machine warfare on the
land, sea and in the air requires fuels that generate the
greatest combustion and heat from the smallest volume. Only
fuels derived from petroleum will be capable of propelling
aircraft, most ships and ground vehicles on and over
battlefields where performance is measured by how efficiently
fuels can be transferred into energy.
Industrial age machines must still be produced in large
numbers to win against a large scale competitor. Ships,
vehicles, guns and aircraft will continue to be made
predominantly from steel, aluminum, rubber and titanium. And
all of these machines and the material to support them must be
transported to the theater of war and across and over the
battlefield with fossil fueled engines.
This bill might well over the decades slowly diminish the
ability to produce fossil fuels in the strategic confines of
American territory. According to one study, refining capacity
could plummet because the cost of doing business would soar.
Production at U.S. refineries would drop while production in
countries that do not limit greenhouse emissions would rise.
We have no assurance that off shore refining would take
place in regions secure from foreign power influence. According
to several studies, the United States would have to increase
its petroleum imports by one-fifth by 2030 as our domestic
production would plummet by as much as 25 percent. Should we
suffer such consequences, the ability of the United States to
surge its wartime energy production might well be held hostage
to foreign influence.
This bill would reduce American industrial capacity as the
very industries essential for the production of war fighting
material would move overseas. Recent studies suggest that this
bill would result in a loss of industrial production of over 6
percent by 2030 and a consequent loss of over half a million
manufacturing jobs, many of those in the defense industry.
Nothing in this bill will reduce the likelihood of American
involvement in future wars, nor will it improve America's war
making capabilities. Indeed, over the decades, the consequences
of this bill might well reduce American influence and retard
our ability to deter and fight wars in the future.
Thank you.
[The prepared statement of Mr. Scales follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much.
And now we go to a majority witness, and I am just going to
take a minute to let everybody know who Drew Sloan is.
Drew Sloan is pursuing a joint MBA and MPA from Harvard
Business School and Harvard Kennedy School. He spent 5 years in
the U.S. Army where he served in Afghanistan and Iraq. He was
awarded two Bronze Stars and a Purple Heart. He graduated from
the United States Military Academy at West Point in 2002. And
we are just so honored to welcome you here today. Thank you.
STATEMENT OF ANDREW SLOAN, CAPTAIN, U.S. ARMY (RETIRED);
FELLOW, TRUMAN NATIONAL SECURITY PROJECT
Mr. Sloan. Thank you.
Madam Chairwoman, Ranking Member Inhofe, members of the
committee, ladies and gentlemen, it is my honor to be here with
you today to discuss this very important issue of climate
change and national security.
I give the following testimony under the assumption that
the world's climate is changing, and the burning of fossil
fuels and increased deforestation are the main drivers of that
change. Furthermore, in the coming years, this change will lead
to more severe and frequent precipitation events and prolonged
periods of drought for many areas. These are environmental
changes, but they will have human impacts, both here and
abroad.
The effects of climate change are the ambushers on the
horizon. Our great military cannot take a hill that will stop
temperatures from rising, or wage a counterinsurgency against a
storm surge. An exquisitely coordinated bombing campaign cannot
stop glaciers from melting nor can all the ships in our Navy
prevent sea levels from rising. However, while the military
cannot stop climate change, it will be the institution that
will be forced to deal with it.
As a former infantry officer with combat experience, I
believe I have an appreciation for what I think our forces will
face if we do not act decisively against climate change. Please
allow me to present a potential climate change induced security
threat.
In Bangladesh, 10 percent of the country's 155 million
citizens live just 2 to 3 feet above sea level. Storm surges,
magnified by rising sea levels, could very conceivably create a
quasi-permanent state of flooding. This flooding of sea water
would damage water sources and ruin crops. Water and food
become increasingly scarce, and sanitation levels begin to
plummet, opening the door for diseases such as malaria and
cholera.
People, potentially millions of people, will be forced to
relocate but have no good options as to where to go. India, by
this time, will have completed the wall that they are already
building to keep the Bangladeshis out, so they will not be able
to go there. The central government in Dhaka will potentially
be overwhelmed by these events.
With nowhere for people to go, refugee camps will be
created, and a case for a humanitarian mission will be made. As
if often the case, anger, bitterness and hopelessness will
spread throughout these camps, and like the mosquitoes born in
the stagnant water left after the floods, extremism will be
born and spread as well.
In a relatively short span, climate change has turned the
already poor nation of Bangladesh into a failed state,
potentially destabilized an entire region, sparked a
humanitarian crisis, and created a breeding ground for
extremists. All of these conditions will necessitate a response
from our national security apparatus.
This conceivable situation is what I think of when I
picture what General Anthony Zinni, former CENTCOM Commander,
was referring to when he acknowledged that failing to reach our
greenhouse gas emissions will force us to pay a price in
military terms that will involve human lives and exact a human
toll. This is the human face of climate change, and this is the
national security threat.
While the situation I described above is hypothetical, the
threat and demands it would place on our military are not that
abstract. In fact, in 2004, when a tsunami devastated large
portions of Indonesia, it was the American military that
responded. In 1992, America sent its military into Somalia to
feed those forced into starvation by prolonged periods of
drought. A military response is required largely because the
military was, and remains, the only institution capable of such
a response.
While these actions of benevolence and generosity arguably
depicted America at its best, they were not without cost.
Operations in Indonesia cost an average of $5 million a day.
When relief turned into peacekeeping in Somalia, 16 Army
Rangers lost their lives.
As a changing climate increases the severity of droughts in
Africa and the intensity of storms in Asia, the demand for an
American response will increase as well. Not only will this be
costly in dollar and human terms, but it will also likely
impede the military's ability to adequately address the more
conventional threats that are sure to arise. As climate change
wreaks havoc across the world, so, too, will it wreak havoc on
the military's ability to properly handle the Nation's national
security interests.
I stand here before you today as a former infantryman, as a
graduate of West Point, as an educated citizen to unequivocally
urge this body to chart a new path away from the climate change
ambush, to pass legislation that meets the threat of climate
change head on by stimulating our economy and our people
through the creation of a clean, new energy system for America.
America can and must do better. The security of our Nation
depends upon it.
Thank you, and I have also submitted a written statement.
[The prepared statement of Mr. Sloan follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you so much, Mr. Sloan.
Lieutenant Colonel James Jay Carafano. Is that correct?
Carafano?
Mr. Carafano. Yes, Madam.
Senator Boxer. And you are a minority witness, and please
proceed.
STATEMENT OF LIEUTENANT COLONEL JAMES JAY CARAFANO, U.S. ARMY
(RETIRED); DEPUTY DIRECTOR, THE KATHRYN AND SHELBY CULLOM DAVIS
INSTITUTE FOR INTERNATIONAL STUDIES; AND DIRECTOR, DOUGLAS AND
SARAH ALLISON CENTER FOR FOREIGN POLICY STUDIES, THE HERITAGE
FOUNDATION
Mr. Carafano. Thank you. I have just five points to make.
First, you know, I would like to say how constructive and
productive I think this hearing is and how excited I am to look
forward to it. What I have heard here today really makes me
optimistic because I really believe that both sides share
common goals. And I think that is the most important thing,
that both sides, everyone interested in this debate, is
interested in keeping this country safe, free and prosperous.
I also think that everyone shares a common goal that the
United States would be a good steward of our global
environment. So, I find that encouraging and productive and a
good basis for moving forward.
The second reason why I think this hearing is amazingly
important is because it does state in the Preamble of the
Constitution that providing for the common defense is the
fundamental obligation of Government, and I think it would be
irresponsible to consider any major piece of legislation that
is going to impact on such a vast swath of our economy and
really drive our future and not think about and ponder the
national security implications of what is being done.
That leads me to my third point, which is my perspective
for answering your questions in the way I have. And it really
combines some three things. The first is my 25 years of
military service, a lot of which was spent dealing with
strategy and policy issues. But I had a concomitant career that
went along with that, much like General Scales, which is as a
historian, and much of my historical work has been not just on
military history but really looking at where the lines of
military history and science and culture and public policy,
economic and business, intersect, which I think is relevant
particularly to this issue.
And the third is, as a professor who researches a lot of
what is euphemistically called now wicked problems, which is
complex public policy problems and deciding how do you find the
right way to look at the right problem to get to the right
answer.
And this leads me to my fourth point, and here is my
concern. My concern is that making the case for any major piece
of legislation based on a conclusion of its long-term impact on
either the environment or energy production is incredibly
problematic. I make that statement because in order to draw
those kinds of conclusions you have to construct a complex
system, and a system which in the end is so complex that I
think it is incredibly unrealistic to think that you can
actually draw anything other than merely subjective conclusions
about how the future is going to unfold.
I just might illustrate that with an example. Many of you
have probably heard of or read Jared Diamond's absolutely
terrific book called Collapse, in which he does a terrific job
talking about historically why societies, some societies, fade
from the scene. Well, Diamond lists 12 variables alone that
impact on how human environment interactions work out.
And he reaches those conclusions and analysis based on
really drawing over a century of history and archeology. And he
is looking backward with hindsight. He is not looking forward
to where, and you see as the case studies unfold, human
decisions and environmental change constantly change the nature
of the problem every day.
So, what my argument is is arguing from a complex systems
approach that we can predict how the environment, human
decisions and conflict and violence and humanitarian needs will
work out over the long term is simply incredibly unrealistic,
and using that as an argument either for or against this bill I
just think is incredibly inappropriate.
This leads to my fifth and last point, which is what my
recommendation would be. My recommendation would be to focus on
the traditional short-term methods of cost-benefit analysis to
determine the impact of this legislation and it would have on
national security.
So, I think there are realistic issues to address as if our
economy does decline, that will impact on our ability to fund
defense and defend ourselves. And if our economy does decline
and that impacts on the global economy in general, well that is
much more likely to create situations of humanitarian concern
and spiraling violence. And so I think that has to be weighed
against what benefits in the short term you would actually gain
from this legislation.
So I would urge you to make that the focus on your
deliberations. What are the costs and benefits in the short
terms of this legislation rather than ruminating on what are
the long-term implications 30, 40, 50 years down the road to
either our ability to ensure our national security or to ensure
the readiness and the cleanness of energy and be a good steward
of our planet.
Thank you.
[The prepared statement of Mr. Carafano follows:]
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Mr. Crane, thank you for those very
important words and also your very specific recommendations. We
really appreciate it.
Our second majority witnesses is Ralph--how do I say it?
Mr. Izzo. Izzo.
Senator Boxer. Izzo. And Ralph Izzo is the Chairman and
Chief Executive Officer and President of Public Service
Enterprise Group Incorporated.
STATEMENT OF RALPH IZZO, CHAIRMAN, PRESIDENT, AND CHIEF
EXECUTIVE OFFICER, PUBLIC SERVICE ENTERPRISE GROUP
Mr. Izzo. Madam Chairman, PSEG owns and operates a large
fleet of power plants. Roughly half of our power comes from
nuclear generation, while the remainder is fueled equally by
coal and natural gas.
We are investing over $1 billion in energy efficiency,
solar generation and offshore wind. And we serve more than 2
million electric and gas customers, many of whom struggle to
pay their bills.
So PSEG cannot be defined strictly as a nuclear company,
strictly as a coal company, a renewable company or a regulated
utility. We have all of these interests under one corporate
umbrella.
As such, we have had to think hard about the challenges and
tradeoffs associated with climate change. We conclude that our
company, our customers and our Nation urgently need this
Congress to establish a national cap and trade system. I
applaud you and Senator Kerry for your bill engaging in this
critical dialogue.
There are many provisions in the bill that my company
supports, but some that we do not. But we choose not to let
perfection be the enemy of the good. We must continue the drive
to final congressional action.
First, without action, our industry is paralyzed. Those in
our industry who are already subject to carbon regulation,
including PSEG, are responding by making low carbon investment
choices. But uncertainty about a national program slows or
transition to a green economy. Those in our industry not
subject to carbon regulation recognize that they soon will be.
If Congress does not act, the EPA will. The EPA has already
announced its intention to regulate greenhouse gases under the
Clean Air Act by March of next year.
We all know how markets respond to uncertainty. Investment
is cautious, innovation is stifled, job creation is tepid. The
uncertainty about carbon regulation hangs over decisions about
retrofitting coal plants to reduce their emissions, pursuing
new nuclear, or investing in offshore wind. It is bad for
investors, it is bad for customers, and it is bad for
employees.
Only Congress can give us the certainty of a sustainable
national cap and trade program. This program should supersede
existing regional programs to create an even and predictable
playing field for investment as the bill before this committee
does.
However, to ensure sustainability, we cannot overburden
customers with cost increases. That is why a price collar that
minimizes price volatility and limits the price of carbon while
maintaining the integrity of the cap is a critical provision.
It is also vital to distribute an adequate number of carbon
allowances to customers through their regulated electric
utilities. Providing allowances to utilities and mandating that
the savings be passed to customers is the most direct way to
minimize cost increases. This was part of the allowance
compromise agreed to by members of the Edison Electric
Institute. This agreement recognized the need to balance
protections for customers in coal heavy regions with
protections for customers who are already paying higher prices
for cleaner generation. I commend this committee for preserving
this framework.
The second reason for moving ahead promptly on climate
change is that America is losing ground to other countries.
Germany and England have robust offshore wind industries.
Israel and Denmark are deploying electric vehicle
infrastructure. China is becoming the world's primary source
for solar panels.
Putting a price on carbon is the single most important step
toward making America a leader in this new energy economy. It
will encourage investments in energy efficiency, in renewable
energy, in energy storage, nuclear power, electric vehicles and
other low carbon solutions. In short, it will create jobs.
Fueled by strong State level policies, a local New Jersey
company is hiring 100 workers to make inverters for solar
panels for PSEG to mount on our utility poles. We need to drive
this kind of job creation nationally.
The third, final and most important reason we cannot delay
action on climate change is that scientists say we are quickly
running out of time. The latest data sends an unmistakable
message that climate change is already occurring and faster
than predicted.
This issue will always be difficult. There will always be
regional disputes and concerns about impacts on customers. But
we must overcome these challenges sometime if we are going to
confront climate change, create jobs and make America a leader
in the low carbon economy.
Thank you for listening.
[The prepared statement of Mr. Izzo follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you, Mr. Izzo. I found your remarks to
be very important.
I am going to ask Senator Gillibrand to introduce our next
witness because she actually arranged that this very important
witness be heard.
Senator.
Senator Gillibrand. Thank you, Madam Chairwoman. I
appreciate you allowing me to introduce a fellow New Yorker.
Mr. Kevin Law is not just a fellow New Yorker, but also the
President and Chief Executive Officer of the Long Island Power
Authority, also known as LIPA. LIPA is the second largest
public utility in the United States, serving more than 1.1
million customers from Montauk to Far Rockaway.
Mr. Law also serves on a number of important organizations
such as the Advanced Energy Research and Technology Center
located at SUNY Stony Brook, as well as the New York State
Smart Grid Consortium.
Madam Chairman, I am so happy that he could be here with us
today to discuss this very important legislation and his
efforts to advance energy efficiency and consumer protection
programs all across Long Island.
Senator Boxer. Well, thank you so much, Senator, for all
your hard work. And I just want to say that, for those who are
here from New York and outside of New York, the role that the
Senator from New York has played in this, putting together this
bill and focusing on many of the aspects, including the way cap
and trade would work and also making sure we take a look at
ways to incentive clean cars, especially in her home State.
So, I am just so glad you are here today. I know how hectic
you are.
Mr. Law, you got a very good introduction; please proceed.
STATEMENT OF KEVIN S. LAW, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, LONG ISLAND POWER AUTHORITY
Mr. Law. Well, I appreciate that. Thank you very much,
Senator Boxer and my home State Senator, Senator Gillibrand.
Thank you very much for those kind words.
I will be brief. I have submitted written testimony, and I
ask that be entered into the record.
Senator Boxer. Without objection.
Mr. Law. Again, I want to thank you for the opportunity to
brief you on things that are going on in New York and on Long
Island. I want to thank Governor David Paterson, who has
challenged LIPA and is leading the way in New York in terms of
energy efficiency and renewable energy, and challenging the
utilities to help address the goals of New York State.
I support your efforts for this bill. The old ways of doing
things in terms of generating electricity and distributing
electricity are no longer working. And they are not going to
allow us to address our energy challenges and economic
challenges for the future. We have a 21st century high tech
world with a 20th century low tech grid. And we need to be
doing things differently.
We also need partnerships. No one entity can do it alone.
We need the Federal Government to play its role, we need the
State government and the local governments and the utilities,
because no utility can do it alone either. And so we appreciate
your efforts here with this legislation.
New York, Senator, is already operating under a cap and
trade system. We are part of the Regional Greenhouse Gas
Initiative, which is part of 10 Northeastern and Mid-Atlantic
States throughout the country that are participating under
RGGI. And guess what? The sky did not fall.
[Laughter.]
Mr. Law. The program has been operating well, and all of
the utilities have been cooperating. So I share that news with
you.
As for LIPA, we are doing some very exciting things that I
think the rest of the country can follow. We have a Solar
Pioneers Program, and we have placed over 2,000 customers with
solar panels to date. We are also doing the largest solar
energy project in New York State's history, a 50-megawatt
project.
But here is the key, and from the testimony this morning
with your colleagues. Before LIPA started that solar program,
there were only two companies on Long Island who were involved
with the installation and maintenance of solar panels. Today,
several years later, we have over 30 companies on Long Island
involved with the installation and maintenance of solar panels.
It is all about jobs. And we have demonstrated that we can
create jobs.
We are also exploring the country's largest offshore wind
project in the country. I am doing that with Consolidated
Edison, an investor-owned utility. Remember, LIPA is a public
utility, we do not have shareholders, we only have rate payers.
We are working on that with ConEdison and other State entities
and agencies, and we know that is also something that can also
create jobs. So, we are in the process of exploring that.
But one of the best programs that we have going is
Efficiency Long Island. It is the largest energy efficiency
program for any public utility in the country. It is a $924
million program over the next 10 years, and the goal of that
program is reduce our peak demand. The goal is help our
customers lower their bills and to allow LIPA to avoid having
to build the next power plant.
This program is the power plant we do not have to build.
That is why efficiency, we believe, is the next best resource
and the cheapest resource for both our rate payers and our
environment.
So, I believe this legislation can work. I have submitted
testimony with parts that we like and some parts where we
suggest a couple of minor tweaks. But if we are going to enter
into and prepare for a clean energy economy, we need to start
investing in our energy future today.
We are doing that on Long Island, we are doing that in New
York State with the help of Senator Gillibrand and Senator
Schumer and Governor Paterson, and we know the rest of the
country could do it.
We look forward to working with you and other utilities
across the country to show that this can work.
Thank you, Senator.
[The prepared statement of Mr. Law follows:]
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you. And I wanted to point out that we
have worked very closely with ANGA, the American Natural Gas
Association, and they have been very, very helpful. And there
has been so much news about natural gas finds. It is very good
news, I think, for the environment.
And now we turn our two witnesses that were cordially
invited by the minority. We welcome you here. The first one is
Barry Hart, Chief Executive Officer, Association of Missouri
Electric Cooperatives.
Thank you for being here.
STATEMENT OF BARRY HART, CHIEF EXECUTIVE OFFICER, ASSOCIATION
OF MISSOURI ELECTRIC COOPERATIVES
Mr. Hart. Thank you, Senator Boxer. I thank the committee
for inviting me to participate today.
I am proud to represent all of the great folks back in
Missouri, the Show Me State, that own their own electric co-
ops. I do appreciate this opportunity, and I want to thank
Senator Bond for calling me. But I also want to thank our
junior Senator, Senator McCaskill, for what she is doing for
our State. And I would be remiss if I did not tell the Governor
of our State, Jay Nixon, hi from the Nation's capital. He is a
good friend of mine.
Let me give you an idea of our customer mix in Missouri,
who we represent and their situation. That might give you a
snapshot of what is going on out there. Presently, electric
cooperatives in Missouri represent 2 million people that are
getting electricity from 40 not-for-profit consumer-owned
electric cooperatives.
These consumer-owned electric cooperatives operate in the
best interests of the consumer who owns them. And because we
have done a good job of that over the years, we have 91 percent
customer satisfaction ratings in our State. We are very proud
of that.
Let me give you a snapshot of some of our members in these
small rural communities in Missouri. One-third of our members
are 65 years of age or older, 83 percent of that group are
retired and are living on a fixed income. Half of our
households in our State earn less than $40,000 a year.
It is tough times for these folks. They work in the ag,
timber and tourism industries. And they cannot, a lot of times,
pass these additional costs along. So that makes them sensitive
to price increases.
We have a long history in our State of working for our
members, bringing electricity to the communities and economic
development for our rural communities. We like to lead the way
in rural Missouri.
We would like to continue that commitment today in working
on the energy issues of our country and our State. We are very
proud of the fact that as co-ops in Missouri we were the first
in our State to develop large scale wind projects. Presently in
Northwest Missouri we have 300 megawatts of wind under
contract. And our communities are supporting those projects.
We are also investing in efficiency for our members. We
have dedicated $31 million of co-op member money toward Energy
Star appliances, energy audits, ground source heat pumps, and
CFLs. We are very proud of the fact that in the last year we
have installed 2 million CFLs in our members' homes.
We are also one of the first utilities in the Midwest to
join the Chicago Climate Exchange, and we are trying to do
something about our carbon footprint in Missouri.
Our consumers started looking at this issue right after the
House passed the legislation. They started hearing about all of
these different studies that were done, and the studies had
conflicting costs associated with them. So, they asked us to do
our own study. And because our consumers asked us, we felt we
had better get on it.
So, we asked all of the investor-owned utilities, the
municipal utilities and co-ops in our State, the people that
are generating electricity every day, to come together and look
at the Waxman-Markey bill and tell us how much it is going to
cost our consumers.
The results are staggering, and it got our members'
attention. They are looking at 12 to 26 percent rate increases
in 2012, which could go up to 50 percent under different cost
scenarios. The impacts to our State are a lot larger than what
a lot of people thought. We also are looking at 20 to 42
percent rate increases in 2020, and those could reach as high
as 77 percent under the worst case scenario.
As we review the Senate bill, and we know you have put a
lot of hard work into this bill, and as some of the other
testifiers have said, you have tried to work on consumer
protections. But this bill is not good for Missouri. I have to
be honest with you. We only get out of this bill 60 percent of
the carbon credit allocations that we need, and we have to pass
those costs on to our consumers.
And I agree with some of the earlier testifiers that the
carbon credit allocations need to benefit consumers because
they are the ones that we are asking to pay the bill.
We want to work with the Senate, any Senate committee, any
of the Senators, to get a bill that protects consumers and
meets the goals of the United States of America. And we will
stand ready to work with anybody, anywhere, anytime to meet
that test.
Presently, we do not think the committee's bill meets that
test. I am going to take it back to our consumers in Missouri.
I am going to present it to them. And I will get back with both
of our Senators and let them know what the consumers are
telling me back home.
Thank you for the opportunity. But I do have to caution
you, I am just afraid that if I take that 60 percent allocation
back to our members, our consumers in our State, they are going
to tell me to ask both of my Senators to vote no on this bill.
Thank you for the opportunity.
[The prepared statement of Mr. Hart follows:]
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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.
[The referenced document follows:]
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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.
[The referenced information follows:]
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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.
[The referenced EPA document follows:]
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. Thank you very much.
I am going to think about that, when ice and frost our
enemies of life since Greenpeace thinks our bill is too weak, I
think you took that point a little out of context.
[Laughter.]
Senator Boxer. But I guess if you are a polar bear, ice is
good. If you are an ice skater--but no, we will get there
later. But thank you.
I felt that your points were very well done. Hey, you have
to start the clock. Have you put a cost to your plan? It is a
public-private partnership and it is pretty big, visionary.
Mr. Sims. It is, Madam.
Senator Boxer. So what do you put as a cost to taxpayers of
this?
Mr. Sims. We have not, but we will do that. We have a
number of people on it right now. I will get that back to the
committee.
Senator Boxer. Please. Because I am looking at this, and I
am thinking, you know, one of the interesting things about the
approach we are taking is that the 7,500 largest polluters, as
you know, will have to buy the allowances. It is a polluter pay
type of a program. Now, my colleague calls it a tax. It is not
a tax because if you clean up your act, and you figure out how
to get the carbon out of the air, you do not have to do
anything. So, it is not a tax. It is polluter pay.
So, the point is, that is different than taxpayer pay. And
that is why I ask you for the price that you would put on these
things. It may be that they are very worthwhile, some of these
ideas. So I am very interested in hearing from you.
Mr. Sims. Can I make a quick suggestion in that regard?
Senator Boxer. Please do.
Mr. Sims. Speculating, as well do, on the outcome of this
debate and this legislative process, if it is the case, Madam
Chair, that the bill passes, a bill like this passes, I think,
being practical, as my member companies tend to be, I think a
lot of folks we can reasonably project that the regulations
that would be written to implement such a bill will be, like it
or not, in the courts for a number of years. I think all sides
will probably be suing, quite frankly, to change those
regulations.
And part of the reason that we are putting forward things
that we think can be done in the near term is that these are
things that can be done in the near term, possibly while the
outcome of this debate continues to go forward.
So, our member companies are out there on the ground now,
actually trying to make these things work, and we are looking
for whatever assistance we can to push that ball forward.
Senator Boxer. I hear your point. I think it is an
interesting point. I would, however, say do not underestimate
that there would be lawsuits over some of the things that you
put on the list. It is just the way it is. And the question is,
how swiftly it moves. It took time, but we finally got the
ruling from the Supreme Court that carbon is covered by the
Clean Air Act.
So, we need to move forward. And I would suggest to you
that the one way we know we have lawsuits is if we do not move
forward on that because the Supreme Court has ruled. So,
whether EPA does it or we figure out a more flexible way to do
it, it shall be done.
I guess I want to ask our representative of the Native
American tribes here, since she is representing one tribe but
she did talk about the Alaska Tribes, this idea that ice is the
enemy, and frost. When I visited Alaska, well, I actually
visited Greenland and Alaska--when I visited Greenland and we
met with the tribes there, they are just devastated with the
melt. Devastated. I mean, everything that they have done for
generations is changing.
So, I wonder if you could comment on that. I mean, I just
do not agree with that comment.
Ms. Sharp. Sure. Absolutely. A lot of thoughts went through
my mind as I heard the testimony. You know, when you think of
Chief Seattle's quote, I do not know how many of you have ever
read Chief Seattle's quote, he talks about what we do to the
earth we do to ourselves, all things are connected. And it
seems that there is a collective value.
And we, as native people, have a deep reverence for the
natural world, the natural environment, because we receive air,
we can breathe, we receive water, we receive food that
nourishes and feeds our bodies. And so, we see an intimate
relationship with all aspects of the physical environment, and
the degradation of any one physical aspect on the earth has a
domino effect.
The glaciers that I mentioned in the Upper Quinault that
feed the Anderson Glacier, that is now gone. That water
provides essential water flows for salmon, and the salmon are
essential to our culture and our value system, and that
maintains our continuity as a people.
Senator Boxer. Thank you. I think that is beautifully
stated.
Mr. Young, my fellow Californian, could you describe why
wastewater facilities are vulnerable to the expected impacts of
global warming and how those impacts are addressed in the
adaptation provisions of out bill?
Mr. Young. That impacts I think that we are talking about
are because of location. Because of the immediate impact of
flooding, of rising sea water inundating already perhaps
challenged facilities. This causes the opportunity for sanitary
sewer overflows, for impacts on public health, for
contamination in our streams and rivers, and all of these
impacts that are there.
How the adaptation section of this bill can help is with
the challenge grants that are offered so that the most serious
problems can rise to the top of the list, and the most serious
partnerships can be made between the local agencies and the
Federal Government to go out and solve those issues in a
partnering way, to be able to come up with solutions that can
be applied throughout the country.
Senator Boxer. Thank you.
Senator Inhofe.
Senator Inhofe. Thank you, Madam Chairman. Well, first of
all, on the consumer polluter pays, let me quote the Director
of CBO, Director Elmendorf, he said at any point in which we
are putting a price on carbon emissions that would be passed
through to the cost to consumers, is it possible to design a
system using the revenue it generates to ensure no net increase
in the overall burden to consumers. His answer is no.
Mr. Sims, you raise some questions that I think are
significant in terms of preemption that we would want to make
sure that, the argument has been made that you have to pass
legislation to preempt the Clean Air Act. Does this, in any
way, preempt that?
Mr. Sims. I think that, and I will admit, Senator Inhofe
and Senator Boxer, that I am still reading the bill. I would
have liked to have built it in 25 pages. I am sure we all would
have liked to. It is just not possible to do that. So, we are
still examining it.
But I know that there is no provision, as far as I know,
that would specifically preempt additional action by EPA. Now,
obviously EPA is going to have to write the regulations to
implement much of this bill. So that is going to happen
regardless.
I think our concern was that if the Congress does not act
in some fashion, does not provide some legislative and
regulatory certainty, we are going to continue to have
problems. Our members agree with that. By the same token, we
are concerned if Congress does not act, and the EPA goes
forward. The EPA does not have the tools under the Clean Air
Act to adequately regulate greenhouse gases. Clearly. I do not
think their recent change is going to regulate farms and cows
with--farms that have 25 cows on it.
Senator Inhofe. And I would also say what provisions of the
bill would help us get more natural gas out of the ground?
Mr. Sims. I think there is an irony, Senator. You make a
great point. I am afraid that a good piece of this bill and
other bills that we are seeing come out of the Congress are
aimed, ostensibly, at increasing America's energy independence
while at the same time they have elements that are decreasing
our ability to move toward that goal with regard to natural gas
and oil development.
We have enough natural gas, we have enough oil,
domestically, specifically off our coast, and with oil shale,
to move completely to energy independence. But I am afraid we
are not going in that direction.
Senator Inhofe. Yes, well, the last thing that I asked you
was if it is in the bill or if you have seen it because some of
these answers, as you mentioned the carbon capture
sequestration, is there anything in the bill that would remove
the barriers to that?
Mr. Sims. There are. And I think a lot of the details will
still be worked out. As I said, a lot of the devil that will be
in the details from this bill, I think, will come in the
writing of the regulations. So, frankly, from our perspective
there is a lot of stuff that needs to be filled out, and no one
really knows what some of these details are going to be until
those regs get written and the inevitable court challenges get
adjudicated.
Senator Inhofe. Well, I think you bring out a good point
when you talk about getting some of these resources, like
natural gas, in previous--and I want to get this into the
record, in each one of our hearings the new report that came
out just last week from CRS designated or revealed that
American's combined recoverable natural gas, oil and coal
reserves as the largest on earth. We are No. 1.
Now, the problem is that we are precluded from developing
83 percent of that by regulatory obstacles that are out there.
Do you see anything in this bill that would relieve any of
those obstacles that are there?
Mr. Sims. I am afraid to say no, Senator.
Senator Inhofe. One of the concerns I have is, if you get
beyond this bill, some of the same people who are promoting
this bill are also for some of the other provisions, for
example, doing away with hydrologic fracturing. You mentioned
getting more of the oil and gas. Obviously, if you remove
hydrologic fracturing, you would have a real serious problem
doing that. I think you would agree with that.
Mr. Sims. Senator, I would say there is a tremendous irony
in that threat as well. One industry that would probably be
hurt the worst by shutting off or slowing down our natural gas
production is wind. Wind energy, as most of us I think now
understand, is an intermittent resource, and it desperately
needs natural gas to help balance out the load. The two work
well together, hand in hand.
Senator Inhofe. Yes, well, I think what I am saying is that
the one thing that bothers me more about the debate than
anything else in when people say, oh, we are concerned about
the dependency on foreigners for our oil, gas, our energy, when
in fact the reason we are is our regulations over here. And if
we wanted to be energy independent, all we need to do is get
rid of these barriers that are there. And these are legislated.
I am talking about moratoria for offshore drilling and you
mentioned the immense oil shale and methane hydrate deposits.
Those are huge, and they are not even considered in this
conclusion that we are No. 1 in terms of reserves.
Mr. Sims. Right.
Senator Inhofe. We have far more than China, far more than
Saudi Arabia. It is mind boggling to me that, in this debate,
we never talk about doing something to reduce those barriers.
I see a lot of shifting around over here. Do you disagree?
Do any of you guys really want to keep the barriers there so
that we cannot produce our own, develop our own resources?
Dr. Frumhoff.
Mr. Frumhoff. I would be happy to respond. Thank you,
Senator.
I think the challenge is to make sure we have a level
playing field that takes into account the true price and cost
of energy use, which this bill would establish through putting
a price on carbon. Once you have a price on carbon, along with
other corollary policies, then the appropriate mix of energy
resources can be better----
Senator Inhofe. Yes, but that was not my question. My
question was, should we not develop our own resources?
Mr. Frumhoff. I think we have to look at the cost of
extraction. Obviously, in the case of offshore drilling the
cost of extraction, the environmental and societal costs of
extraction are very high. If we have lower cost ways of
essentially achieving the same energy benefits through the low
hanging fruit of energy efficiency----
Senator Inhofe. Well, how do we find out if we are not able
to go after 83 percent of those resources reserves that are out
there? How can you determine what the costs are?
Mr. Frumhoff. Well, most environmental assessment with
which I am familiar suggest that the environmental costs of
that extraction would be very high. And that is why I think it
has been wise to look for other approaches to achieve our
energy independence and to reduce carbon at the same time.
Senator Boxer. Thank you, Senator.
I am just going to put into the record, Mr. Sims, I know
you have not read the whole bill, but if you look at section
191, subtitle H, what you will find is a whole natural gas
section. And the natural gas industry is working with us, the
American Natural Gas Association, because different from the
House bill, and different from Lieberman-Warner, we have a
natural gas title here, subtitle, and what we allow for is, if
you are plugging up a leak from a natural gas pipeline, that is
an allowable offset.
That is No. 1, and it huge for them. It is very good for
them. And second, there is an authorization to help them build
cleaner plants. So, please know that we agree with you that
natural gas is very important, it is very abundant apparently,
and we are working with them to do even more. But we have come
a long way.
And at this point, is it Senator Whitehouse? Or is Senator
Udall first?
Senator Udall followed by Senator Whitehouse. OK.
Senator Udall. Thank you, Madam Chair.
Senator Boxer. Oh, I am so sorry. In between the two of you
is Senator Alexander. Forgive me.
Senator Udall. He has been waiting there, patiently.
Madam Chair, thank you for your very kind comments about my
advocacy for tribes. I think you also have been very attentive
to tribal needs, and in particular, worked hard, I think, to
protect California tribes, and you are a real champion of
tribal sovereignty.
With that, let me ask President Sharp. It is my
understanding that the Quinault Indian Nation, and other Indian
tribes, have been engaged extensively over the past several
years to establish intergovernmental cooperation at State and
Federal levels. We have had some success in improving the
coordination and cooperation with Indian tribes in this
legislation so far.
But what would you suggest we do to strengthen provisions
to support tribal participation in such forums in this
legislation?
Ms. Sharp. I think, probably, the main thing that we would
seek is that tribes have a direct and specific policy, what I
call policy and regulatory deference. Tribes are in the best
position to know and understand the problems that we confront
and face at home. We have extensive oral history throughout
many generations.
And we would like to be able to blend western science with
traditional knowledge. And to be able to do that effectively,
tribes should be given regulatory and policy deference as we
develop our own standards, our regulatory structures, as well
as how that impacts our economy within reservation lands.
Senator Udall. Now, this legislation that we expect to pass
here through the committee in the next couple of weeks is
expected to be combined with the Senate Energy Committee, and
we also hope to include legislation on tribal energy being
developed by the Senate Indian Affairs Committee.
Should this legislation be improved to encourage and
facilitate tribal development of clean, renewable energy?
Ms. Sharp. Absolutely.
Senator Udall. What would you suggest there?
Ms. Sharp. I would suggest that, if Congress and Members of
Congress in leadership could take a step back to really
understand that tribes, in this particular issue, need to be
direct participants. We have advanced these issues locally,
regionally, nationally and internationally operating under this
assumption. We are facing a global crisis that is of
apocalyptic concern.
In those circumstances, it is not right for us, for me as a
policymaker of one jurisdiction, to operate in a vacuum. Not
only a human vacuum, a mankind vacuum, but to look at the
interests that transcend borders. And leadership in this era,
in this time, demands and requires that all public policymakers
draw on all information, economic information, cultural,
historic information, scientific information.
And so, I would strongly encourage that this Congress
realize the value that Indian country brings when tribes do
collaborate with the Federal Government on restoration efforts
that blend traditional knowledge. The benefits are multiplied.
And we are at an era where it is such a crisis, we need all
information to make calculated decisions moving into the
future.
Senator Udall. Thank you. That is very well put.
Mr. Schweiger, in New Mexico, we are already seeing the
early impacts of climate. The Jemez Mountains west of Santa Fe
saw the biggest average increase in temperature and decrease in
moisture of anywhere else in the State in 2008. Those change
likely contributed to a massive Pinion Pine forest die off in
the mountains that we have not seen in a long, long time.
Now, natural resource adaptation is an unfamiliar phrase to
many folks, even those who may be familiar with traditional
conservation efforts. Could you describe a few examples of the
types of projects that would be pursued under this legislation,
including the investments made in communities and the jobs that
would be created and preserved?
Mr. Schweiger. Thanks, Senator. I think the great challenge
we have today is that the ecosystems that we have tried to
protect in previous actions may, in fact, be disconnected from
the resources themselves. And there are some places where we
need to create corridors where wildlife--and we also need to
take steps to protect stream sides from over warming through
planting of buffer strips and reducing the temperatures of
stream side corridors.
We also, I believe, have opportunities to take steps to
deal with coastal sea level rise and invest in protecting
habitats that will someday be submerged while than allow those
habitats to be built upon today.
So, there are a number of things that we can do. I also
think that, you know, we need to remember that in order to stay
even with climate change today, the animals, birds and plants
need to be moving at about 30 to 43 feet per day according to
the best calculations that we have seen. So, it means that we
need to help them move either up slope or move further north to
make those adjustments.
It is going to redefine conservation. And frankly, I think
there are a lot of really good minds working on what that looks
like because it is not going to be the same thing as we had 40
or 50 years ago. We need to rethink how we manage natural
resources to protect the living resources and plants to help
them adjust to the climate consequences that we are causing.
Senator Udall. Thank you, and thank you to the entire
panel.
Thank you, Madam Chair.
Senator Boxer. Thank you, Mr. Schweiger. That was really
fascinating to listen to you.
Senator Alexander.
Senator Alexander. Thanks, Madam Chairman. And thanks to
the witnesses for being here.
A couple of things for the record. First, the Chairman and
I have gone back and forth a little bit about the costs of wind
power versus nuclear plants. I accept the National Academy's
conclusions that climate change is real and that humans have
probably caused most of it recently. And I hope the Chairman
will accept the report of the National Academy of Sciences of
July that says the cost of making 20 percent of our electricity
from wind power is about the same as making 20 percent of our
electricity from nuclear power.
Senator Boxer. Senator, honestly, I do not remember
discussing the cost. I was talking about the rate payers'
costs.
Senator Alexander. Well, that is who pays for each one.
Senator Boxer. OK.
Senator Alexander. The cost to the rate payer for nuclear,
according to the National Academy, is 6 cents to 13 cents over
the lifetime per kilowatt hour and 4 cents to 10 cents for wind
over its lifetime. And the wind does not include the
transmission power or the back-up power. You have to build, you
know, natural gas or coal or nuclear plants to back them up
because the wind does not blow but a third of the time. And it
does not include the taxpayers' subsidy, which over 10 years--
--
Senator Boxer. I am going to add back a minute to your time
because I want to----
Senator Alexander. I just wanted to----
Senator Boxer. No, no. I think this is important.
Senator Alexander. But the rate payers would pay the same.
Senator Boxer. OK. I think it is important to note that
taxpayers picked up the bill for the Price-Anderson Act. And
that is always forgotten.
Senator Alexander. No, Madam.
Senator Boxer. It is in there.
Senator Alexander. May I correct that? Because----
Senator Boxer. Well, after the certain amount of billions,
then the taxpayer is for catastrophic. We know that.
Senator Alexander. Well, each, let me see if I remember
right, you have got 104 nuclear reactors, they each are
responsible up to the first $10 billion?
Senator Boxer. Ten billion dollars.
Senator Alexander. So, anything above 104 times $10 billion
the taxpayer would be responsible for, but the taxpayer takes
care of disasters every time we have one of that magnitude.
Senator Boxer. Well, if I could say, it is quite a
different situation. But I mean, if you know what happened in
Chernobyl, I do not see that happening with wind power.
Senator Alexander. That was in Russia, Madam.
Senator Boxer. Yes, and Three Mile Island----
Senator Alexander. The taxpayer has never paid a penny of--
--
Senator Boxer. But that is not the issue. The issue is, if
we do not have to, why do we not repeal? I will join you in
repealing it, because I think that would make it much more
attractive to the American people if they did not have to worry
about the possibility of a catastrophic----
Senator Alexander. I would do that if you would join me in
repealing in the $170 billion subsidy for wind power that we
will be paying over 10 years to make 20 percent of our energy.
Senator Boxer. Well, let us talk. I doubt that we will
reach a meeting of the minds for a lot of reasons----
Senator Alexander. Probably not.
Senator Boxer. But I have to say, I have to say, really, I
think nuclear is going to be part of the mix. And this is the
last point. I think what we have argued about more than the
cost is that at the end of the day there will be more nuclear
plants built under the Kerry-Boxer bill than under your plan to
build 100 plants. That is what the studies show.
And for some reason, you continue to make the point that
nuclear is the answer when, in fact, in our bill there will be
more nuclear plants built under out bill than under your build
100 plants now scenario.
Senator Alexander. Well, my problem with that, Madam
Chairman, and I would like to discuss this with you, is that
the bill that we are writing here will be combined with the
renewable energy bill, which favors wind and excludes nuclear.
So, we have a national windmill policy that encourages and
subsidizes building windmills, and we have not started a
nuclear power plant in 30 years.
Senator Boxer. Well, let us talk about the loan guarantees.
You want to talk about that for nuclear? I mean, let us face
it----
Senator Alexander. I would like us to have a carbon-free
electricity standard----
Senator Boxer. I love it.
Senator Alexander. Where all forms of carbon-free energy
would be treated the same.
Senator Boxer. That is fine. That is fine. But you forget,
what you forget every time we have this conversation, which I
enjoy, is the Price-Anderson Act, you forget about that, you
forget about the loan guarantees, you forget about a lot of the
things.
I think what we should do, just because it is an
intellectual debate, which I think is worthy of our time but
probably not now, these poor people. But why do we not sit down
and I will make a list of all the Government subsidies that the
nuclear industries get, and I will make a list of all that the
wind gets----
Senator Alexander. Good.
Senator Boxer. And you do the same.
Senator Alexander. I will.
Senator Boxer. And let us sit down and compare. But at the
end of the day, they are both very important to the future here
because they are clean, and that is good.
Senator Alexander. And I had included in the record the
other day the estimates that over the next, the subsidies for
wind are about 10 times that for nuclear, and they are much
more than any other form of renewable energy.
But I accept your invitation, and I look forward to doing
this. I just wanted to make sure that it was noticed that the
rate payers, the cost of wind, according to the National
Academy of Sciences, the rate payers would pay about the same
in each case.
Senator Boxer. OK, OK.
Senator Alexander. Now, I would also like to include in the
record what I think is a pioneering study done by the Nature
Conservancy, if I may, Madam Chairman, which is entitled Energy
Sprawl or Energy Efficiency: Climate Policy Impacts on Natural
Habitats in the United States of America, and remarks I made on
the perils of energy sprawl to the Resources for the Future on
October 5, 2009. I would like to include that in the record.
Senator Boxer. Absolutely.
Senator Alexander. The recommendations of the Nature
Conservancy paper, I hope, are something this committee would
take seriously. They warned that over the next 20 years new
energy production, especially biofuels, which we are learning
more about, and wind power, will consume a land mass larger
than the State of Nebraska, and they made some suggestions for
how we might deal with that.
The first insight was the size of the [unclear]. The second
was they noted the widely varying amounts of land consumed by
different production, for example, in terms of biomass, to
equal the production of one nuclear reactor, you would have to
continuously forest an area the size of the Great Smoky
Mountains with hundreds of trucks running up and down the
mountain every day with wood chips.
And in terms of when, I would point out, that a row of 50-
story wind turbines along the entire 2,178 mile Appalachian
Trial, 50-story wind turbines, would generate the same amount
of electricity produced by four nuclear reactors on 4 square
miles.
And they suggested site selection was important, talking
about the impact on wildlife. To Mr. Schweiger, let me ask you.
Have you thought about the renewable energy sprawl and its
effect on wildlife? I think some of the State wildlife
commissions may have.
And specifically, ExxonMobil pleaded guilty in Federal
Court to killing 85 birds that came into contact with crude oil
or pollutants that are protected by the Migratory Bird Treaty
Act which dates back to 1918. They paid $600,000 in fines.
The wind turbines we have today kills between 75,000 and
275,000 birds a year, according to the Bird Conservancy. If we
make 20 percent of our electricity from wind turbines, that
would be 1.4 million birds per year. What would be the fine for
killing 1.4 million birds per year? At one wind farm near
Oakland, California, it estimates that its turbines kill 80
Golden Eagles a year.
Have you thought about that in your Federation, and do you
think the Migratory Bird Act ought to apply to other forms of
energy production?
Mr. Schweiger. Well, let me answer your first question
first. In terms of land use impacts, I think we need to be
thoughtful and careful about where we place those systems so
that we avoid destroying the fragile ecosystems that are truly
important to overall, you know, life on earth. And I think that
with some great care going into that, we can do that.
Second, we need to pay very close attention to the types of
technology deployed and how they are done. I think there have
been vast improvements in wind turbines, and I think we need to
continue to develop, you know, approaches that avoid bird
strikes and strikes of bats and other things.
Senator Alexander. Do you think the Migratory Bird Treaty
Act ought to apply to other forms of energy production?
Mr. Schweiger. Well, I think the Migratory Bird Treaty Act
ought to be enforced wherever it is a problem.
Senator Alexander. So, if it kills 1 million birds a year,
then who, the wind developers are responsible for that just as
oil developers are for----
Mr. Schweiger. I think that we need to be careful of what
we are doing with wildlife and make sure that we protect birds
as a resource of this country.
I would also point out to you that I spent a week in Prince
William Sound where Exxon caused the pollution there, and the
oil that they spilled is still there. It just under the sand
about 6 of 8 inches and I traveled around with some scientists
looking at that over the entire system. So, it continues to
still have a tremendous impact on not just birds, but other
life as well. I think Exxon got away with a lot.
Senator Alexander. I think the fine was fine. I think they
should be fined for killing 85 birds. I was just suggestion
that 100 nuclear reactors on 100 square miles might kill fewer
birds and disturb less wildlife than 186,000 wind turbines and
19,000 new miles of transmission lines.
Senator Boxer. OK.
Senator Whitehouse.
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Senator Whitehouse. Thank you, Madam Chair. I was impressed
by the examples of the effects that Dr. Frumhoff gave us of,
essentially the effects that already underway, as a result of
what we have already released.
And by your testimony, Mr. Schweiger. Your testimony was
backed by a considerable number of hunters and fishermen. And I
was wondering if you had any specifications at this point of
which games species, or which game species habitats, would be
most immediately affected, and what sort of hunters or
fishermen are at greatest risk of having their, you know, the
habitats that they go out and hunt and fish in, compromised in
some way, and how soon all of that is going to happen? When
will we see the leading edge of that and where?
Mr. Schweiger. Well, that is a great question. I think we
are already seeing the leading edge of it. For example, if you
look at the natural range of brook trout in the Appalachians,
you will see that the southern half of the Appalachians have
lost a lot of their original brook trout habitat and that
habitat that remains is not in good shape. It is rated moderate
to poor where at one time it was actually good habitat, and it
had vibrant brook trout.
So, when you look at the brook trout range, it goes into
Pennsylvania and New York. Most of that south of Pennsylvania
and New York is in bad shape. North of mid-State New York it is
in better shape. So, you see it. It is compounding from the
southern Apps going north.
The other example I use in my book is the pronghorn
antelope. You know, there is a study now from the University of
Oregon that suggests that if we continue doing what we are
doing now, we will see the sage brush step habitats contracted
to a few counties in Wyoming over the next several decades. And
if that happens, pronghorn antelope becomes a remnant
population in a very small place.
Senator Whitehouse. Thank you.
Mr. Young, your testimony is particularly important to
somebody like me from a coastal State. As you have suggested,
many of water and wastewater treatment facilities are at the
coastline and at risk.
We have seen estimates from the Environmental Protection
Agency that the current deficit of water and wastewater
infrastructure in this country is $662 billion, I think between
now and 2019, if I remember the year correctly. I assume that,
at least to your knowledge, these additional liabilities of
plants at risk either from storm surge or sea level rise would
be in addition to that built-in cost. Do you know that?
Mr. Young. Yes. That is absolutely correct. And the only
range of numbers is given as an opportunity, and it is further
described in details by regions of the United States in the
report. But depending on the timeframe in which you actually do
address the problems, whether you wait until it is longer into
the impacts of the climate change or whether you begin a
proactive program to start earlier.
Senator Whitehouse. One of the reasons I mention that, just
peripherally, is that we have a very severe unemployment
problem and at the same time a water and wastewater deficit,
and one would think we could bring those two together and start
building out our water and wastewater infrastructure now while
we need the jobs. But I do not necessarily think that is for
this committee and this hearing right now.
My last question will be to Dr. Frumhoff from the Union of
Concerned Scientists. This will be a question about the science
of climate change.
We are still here in the Senate in an environment in which
we are still frequently told that there are scientists that
disagree with the fundamental premise of climate change, that
manmade carbon emissions are affecting our climate in ways that
are adverse for our interests.
How would you characterize the nature of the debate? I am a
lawyer, and I could find lawyers who will say that the income
tax is unconstitutional. I can find people who will say that
they have been taken up in alien spaceships, and they now wear
tinfoil over their heads.
In the scientific community, is it just a fringe that is
disbelieving this? Or is it a real, live actual scientific
debate right down the middle, evenly balanced on both side, or
somewhere in between? How would you describe the nature of the
debate in the overall scientific community?
Mr. Frumhoff. Thank you, Senator. Well, you can certainly
find individuals with Ph.Ds. in science who would characterize
the science of climate change as highly uncertain. But the
broadly cast consensus in the scientific community is
otherwise.
Probably the best way to represent that for you, Senator,
is by quoting from a letter that was sent to the Senate from 18
scientific societies with relevant expertise in the United
States, including the American Geophysical Union, the American
Meteorological Society, the American Association for the
Advancement of Science and 15 other scientific societies.
``As you consider climate change legislation, we, as
leaders of scientific organizations, write to state the
consensus scientific view. Observations throughout the world
make it clear that climate change is occurring and that
rigorous scientific research demonstrates the greenhouse gases
emitted by human activities are the primary drivers. These
conclusions are based on multiple lines, independent lines of
evidence, and contrary assertions are inconsistent with an
objective assessment of the vast body of peer-reviewed
science.''
I could not agree with that statement more.
Senator Whitehouse. OK. Inconsistent with the----
Mr. Frumhoff. It was an objective assessment of the vast
body of peer-reviewed science.
Senator Whitehouse. Thank you.
Senator Boxer. Thank you. I think that is important. Can we
get that letter to put in the record, sir?
Mr. Frumhoff. Absolutely.
Senator Boxer. Thank you very much.
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Senator Whitehouse. Madam Chair, could I ask unanimous
consent to put an additional letter in the record? This one is
from the Reinsurance Association of America regarding the way
in which they have had to adapt to the effects of climate
change in the insurance industry.
Senator Boxer. Without objection.
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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.
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