[Senate Hearing 111-376]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-376
 
                    PERSILY AND HOFFMAN NOMINATIONS

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                                   TO

 THE NOMINATIONS OF LARRY PERSILY TO BE FEDERAL COORDINATOR FOR ALSAKA 
NATURAL GAS AND TRANSPORTATION PROJECTS, AND PATRICIA A. HOFFMAN TO BE 
                     ASSITANT SECRETARY OF ENERGY.

                               __________

                            FEBRUARY 2, 2010


                       Printed for the use of the
               Committee on Energy and Natural Resources



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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Begich, Hon. Mark, U.S. Senator From Alaska......................     7
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Hoffman, Patricia A., Nominee to be an Assistant Secretary of 
  Energy for Electricity Delivery and Energy Reliability, 
  Department of Energy...........................................     5
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     2
Persily, Larry, Nominee to be Federal Coordinator for Alaska 
  Natural Gas Transportation Projects............................     8

                                APPENDIX

Responses to additional questions................................    19


                    PERSILY AND HOFFMAN NOMINATIONS

                              ----------                              


                       TUESDAY, FEBRUARY 2, 2010

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:40 p.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman, 
chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. OK. Why don't we get started?
    The committee meets this afternoon to consider 2 
nominations of importance to the Nation's energy security, that 
of Larry Persily, who is to be the Federal coordinator for 
Alaska natural gas transportation projects, and that of 
Patricia Hoffman to be the Assistant Secretary of Energy for 
Electricity Delivery and Energy Reliability.
    The Office of Federal Coordinator was established in 2004 
to expedite the licensing and construction of a pipeline to 
transport natural gas from the North Slope of Alaska to markets 
in the lower 48 States. Construction of the pipeline is a 
considerable engineering challenge, may cost $30 billion or 
more, which may explain why, after 40 years of discussion, work 
has yet to begin. But it will employ thousands and unlock 
enormous sources of domestic energy.
    This is the reason that Congress created this Office of 
Federal Coordinator, to help expedite the project. In Mr. 
Persily, the President has nominated someone who has worked on 
this issue in the Alaska State government for much of the past 
12 years.
    The Office of Electricity Delivery and Energy Reliability 
was established in 2005 to help modernize the Nation's electric 
grid, to enhance the security and reliability of our energy 
infrastructure, and to help recover from energy supply 
disruptions. The position of Assistant Secretary of Energy for 
Electricity Delivery and Energy Reliability was established in 
2007 to give the job stature commensurate with its importance. 
Ms. Hoffman has served as the Principal Deputy Assistant 
Secretary since November 2007 and has held senior positions in 
the office before that.
    We are fortunate to have 2 highly qualified nominees for 
these important positions, and I strongly support both 
nominees. I am pleased to welcome them to the committee today.
    Let me recognize Senator Murkowski for her statement.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    I would like to also welcome both of the nominees that are 
before us today, Ms. Hoffman and Mr. Persily, neither of whom 
are strangers. The committee has had the pleasure of hearing 
from Ms. Hoffman on smart grid policy in the past, and I look 
forward to continuing to work with her, should she be 
confirmed.
    While the other committee members may not be as familiar 
with Mr. Persily, I do know him very well. I know that my 
colleague Senator Begich had intended to come and introduce 
him. I just saw him on the floor, and he is presiding until, I 
understand, 3 p.m. So he is going to try to come in later.
    But I would agree with your comments, Mr. Chairman. I 
believe that Larry Persily is an excellent choice to take over 
the agency that we created in 2004 to coordinate the permitting 
and the environmental review to help get this pipeline built to 
move Alaska's natural gas to the markets in the lower 48.
    I have known of Larry since the 1970s, when he and his late 
wife, Lesley, were the publishers of a small newspaper in 
Wrangell. This is a little community that I grew up in as a 
child. Then, when I was in the legislature, I had the privilege 
of working with him. He was with the Department of Revenue, and 
we had an opportunity to work on some fiscal policy issues. At 
that time, he specialized in oil and gas policy development.
    He is exceptionally, exceptionally knowledgeable about the 
problems that we have confronted in past efforts to get a gas 
line built in Alaska, and he knows how important it is to make 
this project work for Alaska's future and for the Nation. Larry 
will work tirelessly to overcome the hurdles and get companies 
on the same page to commit to building a line and then get it 
permitted and inspected in both this country and through Canada 
so that it can be built on time, on budget.
    I certainly know from his work in Juneau, for both 
Republican and Democratic administrations, that he is not one 
to let partisan pressures stand in the way of building the 
project. Larry, I think it is fair to say, will bring some 
refreshing candor.
    [Laughter.]
    Senator Murkowski. We laugh at it, a little politically 
correct there. But I think candor is necessary when you have 
something of the significance and import as we are looking at 
with this gas line.
    Just last Friday, 1 of the 2 companies working to build the 
line, the TransCanada-Exxon partnership, announced in its open 
season application filing that the line was going to cost 
somewhere between $32 billion and $41 billion to build. Mr. 
Chairman, that is a lot of money. Even around here, that is a 
lot of money. It is going to be the largest infrastructure 
project that most of us have ever seen.
    Mr. Persily knows that it is vital that this line get 
built. Northern Alaska, both on shore and off shore, 
potentially contains 368 trillion cubic feet of conventional 
natural gas. That means that nearly 18 percent of the Nation's 
total prospective natural gas market is dependent on getting 
this resource to market.
    That gas is worth a lot to America more than just its 
likely $2.5 trillion value. It is forecast to actually save 
American consumers about $50 billion on their gas bills in the 
first 4 years after the line would go into operation because of 
the downward pressure that it would cause on the gas prices 
initially.
    For the private sector, the line will produce about 15,000 
jobs during construction, and produce between 400,000 to more 
than a million jobs nationwide when you consider the steel, the 
compressor plants, and all the equipment that this project will 
entail. The project also is forecast to provide the Federal 
Treasury more than $100 billion in taxes in the first 20 years 
alone.
    Now, being a long-time Alaskan, Larry knows how important 
it will be to get the economics of this project right, and that 
permitting and construction proceed without a hitch. 
Construction delays caused by the 15 Federal agencies that will 
be involved in overseeing the line's construction we know can 
add literally hundreds, if not billions, of dollars of cost to 
a project of this size and cost the Federal Treasury billions 
eventually in lost tax revenues.
    I think we have all been a bit disappointed that in the 
nearly 6 years since we in Congress approved a loan guarantee 
and expedited permitting for this pipeline, that it has not 
advanced farther than it has toward construction. But we now 
have 2 projects that are under design, the TransCanada project 
and the Denali project of ConocoPhillips and BP, both of which 
have spent more than $100 million in preparation for their open 
seasons.
    I and all Alaskans hope that somehow all the parties will 
come together, concentrate on financing and building a single 
project, and that Alaska's vast reserves of clean-burning, 
carbon-reducing natural gas can get to market and get to market 
soon. I am confident that Mr. Persily has the knowledge and the 
persistence to help that come to pass.
    I welcome him before the committee and commend him for 
agreeing to step up to take on this Herculean task of 
overseeing construction of the largest private construction 
project in world history. Certainly wish him the best of luck 
and welcome his insights on the project.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Let me just see if Senator Menendez wishes to make any 
statement here before we call the witnesses forward?
    Senator Menendez. No, Mr. Chairman. I have huge interest in 
the Alaska issue, but--not seriously.
    [Laughter.]
    Senator Murkowski. We welcome it.
    Senator Menendez. I know. But I do have interest with Ms. 
Hoffman. So I will wait for questions.
    The Chairman. All right.
    Could I just ask the 2 nominees to please come to the 
witness table here? The rules of the committee, which apply to 
all nominees, require that nominees be sworn in connection with 
their testimony.
    If each of you would raise your right hand? Do you solemnly 
swear that the testimony you are about to give to the Senate 
Committee on Energy and Natural Resources shall be the truth, 
the whole truth, and nothing but the truth?
    Mr. Persily. I do.
    Ms. Hoffman. I do.
    The Chairman. Please be seated.
    Before you begin your statements, I will ask 3 questions 
that we address to each nominee who comes before this 
committee. First question, will you be available to appear 
before this committee and other congressional committees to 
represent departmental positions and respond to issues of 
concern to the Congress?
    Ms. Hoffman. I will.
    The Chairman. Mr. Persily.
    Mr. Persily. I will.
    The Chairman. Second question, are you aware of any 
personal holdings, investments, or interests that could 
constitute a conflict of interest or create the appearance of 
such a conflict should you be confirmed and assume the office 
to which you have been nominated by the President?
    Ms. Hoffman.
    Ms. Hoffman. My investments, personal holdings, and other 
interests have been reviewed by both myself and the appropriate 
ethics counselors within the Federal Government. I have taken 
appropriate action to avoid any conflicts of interest. There 
are no conflicts of interest or appearances thereof to my 
knowledge.
    The Chairman. Mr. Persily.
    Mr. Persily. My investments, personal holdings, and other 
interests have been reviewed both by myself and the appropriate 
ethics counselors within the Federal Government. I have taken 
appropriate action to avoid any conflicts of interest. There 
are no conflicts of interest or appearances thereof to my 
knowledge.
    The Chairman. All right. The third question is, are you 
involved with or do you have any assets held in a blind trust?
    Ms. Hoffman.
    Ms. Hoffman. No, sir.
    The Chairman. Mr. Persily.
    Mr. Persily. No, sir.
    The Chairman. All right. Our practice here in the committee 
is at this point to allow nominees to introduce any family 
members that they might have present, if they would like to do 
that.
    Ms. Hoffman, did you have anybody you want to introduce?
    Ms. Hoffman. I certainly do. I would like to introduce my 
husband, James Hoffman, and my 2 sons, Michael and John.
    The Chairman. Very good. We welcome them.
    Mr. Persily.
    Mr. Persily. Thank you, Mr. Chairman.
    I would like to introduce my parents, Bernard and Claire 
Persily, who just moved to Fairfax, Virginia, recently from 
Chicago. My brother Andy Persily and his wife Lesley are here.
    I also have friends from college who have decided to come 
and watch--Tom Walsh from Detroit, Toni Apgar from Vermont, and 
Craig Schumacher from Indiana. Long-time friends from Alaska, 
Kim Elton and Mary Lou Elton. Kim is now with the Department of 
the Interior. Friends Alison Reardon and Pat Pourchot and Kate 
Tesar are also here.
    Thank you.
    The Chairman. I think you have named more people than we 
have present.
    [Laughter.]
    The Chairman. We welcome them all.
    Mr. Persily. I wasn't sure if I needed the votes.
    [Laughter.]
    The Chairman. You might. You never know.
    Ms. Hoffman, why don't you go ahead and make your opening 
statement? Then we will have Mr. Persily make his, and then we 
will have some questions.

 STATEMENT OF PATRICIA A. HOFFMAN, NOMINEE TO BE AN ASSISTANT 
    SECRETARY OF ENERGY FOR ELECTRICITY DELIVERY AND ENERGY 
                RELIABILITY DEPARTMENT OF ENERGY

    Ms. Hoffman. Thank you.
    Good afternoon, Chairman Bingaman, Ranking Member 
Murkowski, and distinguished members of this committee. It is a 
great honor and privilege to appear before you today as 
President Obama's nominee to be Assistant Secretary for the 
Office of Electricity Delivery and Energy Reliability.
    I would like to thank Secretary Chu and the department's 
senior leadership for their support.
    I come before you today with great appreciation and respect 
for the magnitude and complexity of work that is required to 
advance the electric sector, as well as meet the commitment to 
respond to emergency events by providing critical assessment 
and recovery support.
    During my time at the department, I have been proud to work 
on and be a part of investments and innovations that enhance 
our energy security and reliability through public- private 
partnerships. Such efforts include demonstration of an advanced 
industrial gas turbine, advancing micro turbines and 
reciprocating engine research, the expansion of phasor 
measurement units, and composite conductors.
    I am excited to be part of this innovation at the 
Department of Energy and the opportunity to provide leadership, 
especially in the areas of renewable integration, smart grid, 
energy storage, and emergency response. If confirmed, I will 
work for results, drawing on my experience in managing public-
private partnerships.
    I pledge to work closely with this committee and work with 
Congress to address the myriad of State, regional, and national 
electric issues that we face in a reasonable and equitable way.
    Thank you once again for this opportunity to testify this 
afternoon and, if confirmed, serve as Assistant Secretary for 
the Office of Electricity Delivery and Energy Reliability. I 
look forward to answering any questions that you may have.
    [The prepared statement of Ms. Hoffman follows:]

   Prepared Statement of Patricia A. Hoffman, Nominee For Assistant 
Secretary for Electricity Delivery and Energy Reliability Department of 
                                 Energy

    Good morning, Chairman Bingaman, Ranking Member Murkowski and 
distinguished members of this committee. It is a great honor and 
privilege to appear before you today as President Obama's nominee to be 
Assistant Secretary for the Office of Electricity Delivery and Energy 
Reliability at the United States Department of Energy. I would like to 
thank Secretary Chu and the Department's senior leadership for their 
support. I would also like to take a brief moment to introduce and 
thank my husband of 20 years, James Hoffman, and our two sons, Michael 
and John, for their support.
    I come before you today with great appreciation and respect for the 
magnitude and complexity of work that is required to advance the 
electric sector as well as to meet the commitment to respond to 
emergency events (all hazards) by providing critical assessment and 
recovery support.
    I have worked at the Energy Department for fifteen years on a 
variety of technologies and programs in support of the electric sector, 
utilizing my Masters Degree in Ceramic Science and Engineering from 
Penn State University. During my time at the Department, I have been 
proud to work on investments and innovations that enhance our energy 
security and reliability, including through public-private 
partnerships, such as our efforts demonstrating an advanced industrial 
gas turbine. We successfully demonstrated a forty percent efficient 
turbine achieving the original design goals for the program\1\. Solar 
Turbines Incorporated went on to commercialize this technology as the 
MercuryTM 50 product for distributed generation 
applications. This kind of work not only shows the potential of DOE 
investments in innovation, but it also shows the tangible results of 
our work on delivering electricity reliably to American consumers.
---------------------------------------------------------------------------
    \1\ Report to Congress: Comprehensive Program Plan for Advanced 
Turbine Systems, July 1993. page 11.
---------------------------------------------------------------------------
    When Thomas Edison opened the Pearl Street Station in 1882 with a 
hundred kilowatt ``Jumbo dynamo'' distributed generator, he could 
hardly have foreseen the pivotal role electricity would play in the 
development of American society. Although the demand for electricity 
initially drove the station's construction, electricity ultimately 
stimulated and enabled technological innovations that reshaped America. 
Today, the availability of and access to electricity is something that 
Americans simply take for granted. While most people cannot describe 
what electricity is or where it comes from, we all recognize it as a 
vital and constant part of our daily lives, powering our personal 
electronics and heating our homes, supporting our transportation, 
financial, food and water systems, and helping maintain our national 
security.
    Meeting our future electricity needs will require time, hard work, 
and multiple solutions. We will need to pursue a combination of 
options, including advanced generation and transmission technologies, 
demand response programs, and improved efficiency. That said, perhaps 
the greatest challenge will be in developing the appropriate network of 
wires, storage, and intelligent solutions to deliver electricity 
reliably, responsibly and efficiently. As this committee knows, 
transmission will be critical to bring the electricity from wind 
generation from the areas with strong wind resources to the densely 
populated demand centers of this country and if confirmed, I look 
forward to working with Congress on this challenge.
    If confirmed, I will work for results, drawing on my experience at 
the Department in managing public-private partnerships. I pledge also 
to work closely with this Committee and with the Congress to address 
the myriad of state, regional and national electricity issues we face 
in a reasonable and equitable way. My goal will be to make measurable 
progress in integrating clean energy resources into the grid, while 
maintaining a reliable and secure electric system.
    Thank you once again for the opportunity to testify this morning 
and if confirmed, to serve as Assistant Secretary for the Office of 
Electricity Delivery and Energy Reliability.
    I look forward to answering any questions that you may have.

    The Chairman. Thank you very much.
    I see Senator Begich has arrived, and you might want to go 
ahead and make any introductory comments you would like to 
before Mr. Persily gives his statement.

          STATEMENT OF HON. MARK BEGICH, U.S. SENATOR 
                          FROM ALASKA

    Senator Begich. Thank you, Mr. Chairman. I appreciate it.
    Senator Murkowski saw me presiding and was trying to figure 
out how I was going to be here and there at the same time. 
Magic occurred, and someone relieved me without me asking. So I 
am able to be here.
    Thank you again, Chairman Bingaman and Ranking Member 
Murkowski and my colleagues on the committee. I appreciate this 
opportunity to address the committee today on an appointment 
that is the highest importance to Alaska.
    I also want to thank President Obama and his administration 
for their support of this project and for their wisdom in 
appointing Larry Persily to oversee the Office of Federal 
Coordinator for the Alaska gas pipeline project.
    Simply put, I can think of no other Alaskan or American who 
is better qualified or more capable of handling this task. I 
have known Larry for many years throughout his career, 
including work as a journalist, to Deputy Commissioner of the 
Alaska Department of Revenue.
    It goes without saying that the largest private sector 
construction project in North America, the Alaska gas pipeline, 
is important to the economic future of the State of Alaska and 
for our energy security for our country. But it is also a key 
source of clean-burning energy for the lower 48 States by 
supplying up to 4 million cubic feet a day of natural gas. 
Construction on this project alone offers the equivalent of 
some 6,000 full-time jobs, high-paying jobs, over a 
year period.
    The key, of course, is can conventional gas from Alaska be 
competitive in the North America market, potentially flooded in 
newfound shale gas reserves? I believe the answer is simply 
yes. It is not only important for our jobs in this country but, 
again, for our national security.
    The position to which Larry is nominated plays a 
fundamental role in hopefully proving me right. Both industry 
and our citizens will benefit from a robust, swift, and certain 
environmental and permitting process for the pipeline project. 
All parties need reliable information to make good decisions, 
and reducing the bureaucratic delays reduces tariff costs that 
will make or break the project financially and ultimately save 
consumers money.
    This position is charged with coordinating the work by 22 
Federal agencies and up to 2,000 miles of 4-inch high-pressure 
steel pipeline. It crosses the permafrost tundra, major rivers, 
avalanche zones, and the international borders. Actually, we 
should all thank Larry for being brave enough to take on this 
challenge in tackling a daunting task and approving him before 
he really truly becomes aware of the task we set him on because 
we don't want him to back out.
    Larry's strengths are particularly suited to the task at 
hand. That is, with his knowledge of the project and the 
Government processes and critical thinking skills, he is well 
equipped to use the tools provided to the Alaska Natural Gas 
Pipeline Act of 2004 to save time and money without 
shortchanging the public's interests.
    It is an important job for my State and for our country, 
and I am proud to recommend Larry as an ideal person to do it. 
I trust your hearing today will see your questions answered and 
that you will forward his nomination to the full Senate for 
confirmation shortly.
    With that, I will conclude my comments. Mr. Chairman, I am 
happy to answer any questions. I do have another meeting, as we 
all do, that I have to rush off to. But I am happy to answer 
any questions.
    But again, thank you for the opportunity to speak.
    [The prepared statement of Senator Begich follows;]
    The Chairman. Thank you very much for making the time to be 
here and to introduce Mr. Persily.
    I don't have any questions of you, Senator Begich. Let me 
ask if either of our colleagues do? They don't appear to. So we 
will excuse you and appreciate your strong endorsement of the 
nominee.
    Senator Begich. Thank you, Mr. Chairman.
    The Chairman. Mr. Persily, why don't you go right ahead and 
give us your statement.

 STATEMENT OF LARRY PERSILY, NOMINEE TO BE FEDERAL COORDINATOR 
         FOR ALASKA NATURAL GAS TRANSPORTATION PROJECTS

    Mr. Persily. Thank you.
    Chairman Bingaman, Senator Murkowski, and members of the 
committee, thank you for allowing me this opportunity to 
present myself and the hopes for an Alaska natural gas 
pipeline.
    Senator Begich, thank you for that introduction.
    If confirmed for the position of Federal coordinator for 
Alaska natural gas transportation projects, I pledge to devote 
my energy, my knowledge, and ingenuity to the prospect of a 
very large and very long steel pipe to bring North Slope 
natural gas to America's consumers.
    The entire project could require 2.5 million tons of steel, 
maybe more. That is 5 times as much steel as went into building 
the trans-Alaska oil pipeline 35 years ago. At an estimated 
construction cost now approaching $40 billion, the pipeline, 
its compressors, gas treatment plant would be the largest 
private sector project ever in North America.
    The superlatives are overwhelming, even for a State so 
proud of its geographic superlatives. The world's largest 
natural gas treatment plant, an estimated 50 million worker 
hours just to build the pipeline itself, more than 5,000 
bulldozers, backhoes, loaders, graders, trucks, trailers, and 
side boom pipe layers to dig the earth, move the equipment, and 
set the inch-thick steel pipe into place.
    Tens of thousands of more workers to build the equipment, 
the tools and pipe for the job, and even more to get everything 
to the work site. The economic benefits of a secure domestic 
energy supply would spread across North America, along with the 
environmental benefits of clean- burning natural gas.
    The President supports this project, and I appreciate his 
confidence in nominating me for this position. If confirmed, I 
will work to ensure that the companies that are willing to take 
the financial risk receive fair and expeditious Federal reviews 
for the permits, leases, rights of way, and certificates 
required for the project. That includes continuing to work with 
agencies to ensure that the environment is fully protected 
during construction and operation.
    If confirmed, I will work closely with the State of Alaska 
and the provincial, territorial, and Federal Governments of 
Canada to continue the close coordination essential for a 
successful project.
    If confirmed, I will ensure, Mr. Chairman, that you and 
this committee, Congress, and the executive branch have all the 
information needed to understand the project, how it could fit 
into the national energy policy, the substantial financial 
risks of the project and the equally substantial rewards to the 
Nation, and the issues that must be resolved before anyone can 
order ribbon for the ground-breaking.
    But first, I realize I need to convince you of my 
qualifications for the job. I have not run for office since 
student body president at Purdue University almost 40 years 
ago. I have never been a Federal employee or welded a section 
of steel pipe. But I have worked on the Alaska gas line issue 
and oil and gas issues generally as a State official for the 
better part of the past dozen years.
    Through my 30-plus years in Alaska, I have studied the 
history, the stacks of reports on the North Slope gas line, 
which was first proposed when oil and gas were discovered at 
Prudhoe Bay in 1968. I served as Deputy Commissioner at the 
Alaska Department of Revenue, Associate Director of the State's 
Washington, DC, office, and currently as an oil and gas aide to 
the co-chair of the State House Finance Committee.
    I know the issues, the history, and the players, and have 
worked hard to earn their respect. I know what has and hasn't 
worked through the years. If confirmed, I intend to look for 
what will work to get this project underway.
    As a kid, I remember the unused coal bin in our basement. 
The previous owner had switched to natural gas. I also remember 
the hopper cars from the steel mills near our home in south 
Chicago, pouring molten slag that lit up the sky so much we 
would drive over and park just to watch.
    I know a lot more now about natural gas and steel pipe than 
I did then, but I am still fascinated at how all the pieces fit 
together. I appreciate your consideration of my nomination and 
ask that you allow me to play a role in fitting together the 
pieces of an Alaska natural gas pipeline.
    Thank you. I would be pleased to answer any questions.
    [The prepared statement of Mr. Persily follows:]

Prepared Statement of Larry Persily, Nominee to be Federal Coordinator 
             for Alaska Natural Gas Transportation Projects

    Chairman Bingaman, Senator Murkowski and members of the committee, 
thank you for allowing me this opportunity to present myself and the 
hopes for an Alaska natural gas pipeline.
    Senator Begich, thank you for that introduction.
    If confirmed for the position of Federal Coordinator for Alaska 
Natural Gas Transportation Projects, I pledge to devote my energy, my 
knowledge and ingenuity to the prospect of a very large and very long 
steel pipe to bring North Slope natural gas to America's consumers.
    The entire project could require two and one-half million tons of 
steel, maybe more. That's five times as much as went into building the 
trans-Alaska oil pipeline 35 years ago.
    At an estimated construction cost approaching $30 billion, the 
pipeline, its compressors and gas treatment plant would be the largest 
private-sector project ever in North America.
    The superlatives are overwhelming, even for a state so proud of its 
geographic superlatives.

   The world's largest natural gas treatment plant.
   An estimated 50 million worker hours just to build the 
        pipeline itself.
   More than 5,000 bulldozers, backhoes, loaders, graders, 
        trucks, trailers and side-boom pipe layers to dig the earth, 
        move the equipment and set the inch-thick steel pipe in place.
   Tens of thousands more workers to build the equipment, tools 
        and pipe for the job, and even more to get everything to the 
        work sites.

    The economic benefits of a secure, domestic energy supply would 
spread across North America, along with the environmental benefits of 
clean-burning natural gas. The president supports the project, and I 
appreciate his confidence in nominating me for this position.
    If confirmed, I will work to ensure that the companies willing to 
take the financial risk receive fair and expeditious federal reviews 
for the permits, leases, rights-of-way and certificates required for 
the project. That includes continuing to work with agencies to ensure 
that the environment is fully protected during construction and 
operation.
    If confirmed, I will work closely with the State of Alaska and the 
provincial, territorial and federal governments of Canada to continue 
the close coordination essential for a successful project.
    If confirmed, I will ensure that this committee, Congress and the 
executive branch have all the information needed to understand the 
project, how it could fit into a national energy policy, the 
substantial financial risks, the equally substantial rewards to the 
nation, and the issues that must be resolved before anyone can order 
ribbon for the groundbreaking.
    But first, I realize I need to convince you of my qualifications 
for the job.
    I have not run for office since student body president at Purdue 
University almost 40 years ago. I have never been a federal employee or 
welded a section of steel pipe.
    But I have worked on the Alaska gas line issue--and oil and gas 
issues generally--as a state official for the better part of the past 
dozen years. Through my 30-plus years in Alaska, I have studied the 
history, the stacks of reports on the North Slope gas line which was 
first proposed when oil and gas were discovered at Prudhoe Bay in 1968.
    I have served as deputy commissioner at the Alaska Department of 
Revenue, associate director of the state's Washington, D.C., office 
and, currently, as oil and gas aide to the co-chair of the state House 
Finance Committee. I know the issues, the history and the players, and 
have worked hard to earn the respect of those involved in the gas line 
effort.
    I know what has and hasn't worked through the years. If confirmed, 
I intend to look for what else will work to get this project under way.
    As a kid, I remember the unused coal bin in our basement--the 
previous owner had switched to natural gas. I also remember the hopper 
cars from the steel mills near our home in South Chicago, pouring 
molten slag that lit up the sky so much we would drive over and park, 
just to watch.
    I know a lot more now about natural gas and steel pipe than I did 
then, but I'm still fascinated at how all the pieces fit together to 
fuel the nation.
    I appreciate your consideration of my nomination, and ask that you 
allow me to play a role in fitting together the pieces of an Alaska 
natural gas pipeline.
    With your permission, I will submit my statement for the record, 
and I would be pleased to answer any questions.
    Thank you.

    The Chairman. Thank both of you for your statements.
    Let me start with a few questions, and we will just do 5-
minute round of questions here.
    Mr. Persily, first, I have been reading all these articles, 
like most of us have perhaps, about the enormous increase in 
the reserves of shale gas, which have been discovered in the 
last few years here in the lower 48. In your view, is the 
pipeline still needed in light of these very large increases 
and projected reserves in the lower 48?
    Mr. Persily. Mr. Chairman, I believe the pipeline is still 
needed. Alaska gas could still secure a place in the market. We 
are talking about gas deliveries 2020--starting 2020, 2011. If 
the Alaska pipe can--if the developers of the Alaska pipe can 
secure the financial commitments to develop the project and 
serve notice on the market that we will be there on that date 
with gas at competitive rates, there will be a place in the 
market for Alaska gas.
    The Chairman. Maybe you could try to sort out for me how 
these 2 projects relate to each other, the TransCanada-
ExxonMobil project and the BP-ConocoPhillips Denali project. 
How do those relate to each other? Are they just sort of on 
parallel tracks going forward, or how is a decision finally 
made as to what gets built?
    Mr. Persily. Mr. Chairman, there are 2 partnerships both 
essentially developing the same project in terms of taking 
natural gas from the North Slope into Alberta, connecting with 
the North American distribution grid. You have, as you said, 
TransCanada-Exxon are developing a project where they are 
partners. BP and Conoco are trying to develop their own 
project. But eventually, it is going to become one project. No 
one expects there is 2 pipes.
    There is going to have to be some day a commercial deal 
between the 3 major North Slope producers. TransCanada, the 
State of Alaska certainly will be involved--hopefully, the 
Federal Government, too. But it is going to be a commercial 
deal that involves all four of those companies.
    The Chairman. All right.
    Ms. Hoffman, let me ask you about this whole issue of cyber 
security. I think when you testified to this committee last 
May, you said, ``Smart grid is both a means to enhance grid 
security, as well as a potential vulnerability.''
    In your view, has the department been able to ensure that 
the Recovery Act funds for the smart grid are being used to 
enhance grid security rather than to increase cyber security 
vulnerabilities?
    Ms. Hoffman. Thank you, Mr. Chairman.
    With respect to my statement, enhancing energy security, 
what smart grid does is bring information sensors to the 
industry so that we can real time evaluate and analyze what is 
happening on the electric system. It can be a vulnerability 
because we are accessing information. We are connecting 
different parts of the network together, providing more 
information that is flowing throughout the system.
    With the investment grants, smart grid investment grant 
projects, we are requiring that the awardees, the selectees, do 
a cyber security plan, which will define the cyber security 
strengths and weaknesses of their proposals. We will engage the 
national laboratories, as well as other Federal agencies, to 
make sure that we have done a proper and thorough analysis of 
the cyber security strength and weaknesses for each of the 
grantees.
    The Chairman. One of the issues that arose when we were 
marking up our legislation this last summer, the bill that is 
currently on the Senate calendar for consideration, the 
department had not taken any position on the cyber security 
legislation that we were considering. Do you know if that is 
still the case, or has the department taken a position on the 
cyber security legislation that we included in that bill we 
reported in June?
    Ms. Hoffman. I am not familiar with all of the details of 
that legislation. I remember looking at that legislation, and 
the department was looking at technical comments for that 
legislation.
    Some of the comments focused around vulnerabilities versus 
immediate threats. The department will--I will be glad, if 
confirmed, to work with the committee and provide comments for 
the record.
    The Chairman. Thank you very much.
    Senator Murkowski.
    Senator Murkowski. Mr. Chairman, I know that the Senator 
from New Jersey is not interested in pursuing the questions to 
Mr. Persily on the gas line, although maybe he has changed his 
mind because it was very interesting testimony, Larry. But I 
would be happy to let Senator Menendez go first, and then I 
will ask a series of questions to Mr. Persily.
    Senator Menendez. Thank you. Thank my colleague for her 
courtesy. I appreciate it.
    I know that the Alaska line is very important. I just don't 
have any questions about it.
    But, Ms. Hoffman, thank you very much for your willingness 
to serve. I want to pursue something that is very important to 
the people of New Jersey, and that is the Energy Policy Act of 
2005 that authorized the DOE to conduct a National Electric 
Transmission Congestion Study and, based on that study, to 
designate national transmission corridors.
    In 2007, the department conducted such a study and 
designated all or part of Ohio, West Virginia, Pennsylvania, 
New York, Maryland, Virginia, Delaware, the District of 
Columbia, and New Jersey a transmission corridor. That is an 
enormous area that really doesn't strike me as a corridor. I 
don't think that all those States would consider themselves in 
the context of the country, all of that as a corridor.
    Or does it seem necessary given the fact that DOE's 
congestion study stated, in the eastern interconnection, ``a 
relatively small portion of constrained transmission capacity 
causes the bulk of the congestion cost that is passed through 
to consumers. This means that a relatively small number of 
selective additions to transmission capacity could lead to 
major economic benefits for many consumers.''
    So I know that the department is in the process of updating 
its congestion study for the eastern interconnect. As a matter 
of fact, as I understand it, it is past due. So my first 
question is what is the status?
    Ms. Hoffman. Thank you, Senator.
    The status is that the department is now reviewing the 2009 
congestion study. We hope to have it released later on this 
year. We are in the process of just internal review and 
approval.
    Senator Menendez. Later on this year?
    Ms. Hoffman. Yes.
    Senator Menendez. How late are we talking about?
    Ms. Hoffman. My assessment of the review process, probably 
will be late spring, early summer.
    Senator Menendez. Late spring. Will it attempt to narrow 
the enormous transmission corridor that has been designated for 
the eastern United States?
    Ms. Hoffman. Senator, the congestion study is a study of 
congestion in the United States. So the 2009 study that we are 
working on is looking at where there are congested areas as 
part of our transmission and distribution network.
    The identification of congestion in the United States is 
really the identification of where there are problems in the 
United States. So with the congestion study, what we would like 
to do is make sure that we are identifying the problems that 
are in the United States with the ability to bring generation 
to demand.
    As we identify the congestion in the United States, there 
are multiple solutions that we would like to look at in 
relieving congestions. Congestion can be eliminated by demand 
response and energy efficiency. It also can be alleviated by 
onsite generation, as well as transmission.
    So the congestion study that will be released for the 2009 
congestion study will look at where there are problems in the 
United States for potential solutions. Once that congestion 
study is released, we hope to have--we will have, not we hope. 
We will have a comment period, and I look forward to working 
with members of this committee, as well as the States, to 
address any issues that arise from the release of the 
congestion study.
    Senator Menendez. I appreciate your answer. I know you are 
obviously prepared for it since you are reading from a 
statement. But let me explore it a little further.
    You know, there are 2 ways to solve a problem. I can solve 
it with a blunderbuss, or I can solve it, when it is possible, 
with a surgeon's scalpel. There is a difference. So, I can say 
this whole--the easy way is this whole area that has previously 
been talked about is our solution, or I can seek to narrow the 
scope of it to make it more tenable for all of those States 
that are involved.
    So my concern is do you--you will be in this role, and as I 
understand it, this will be immediately underneath your 
authority. Will the congestion study be detailed enough to show 
the projected congestion on every transmission line within the 
corridor? Again, will the corridor be redrawn to only be as 
large as is necessary to relieve congestion?
    That is a fundamental overarching question. We will see 
what that means. But the question is if we are just going to 
take it and say, well, it is easier to have this big swath, 
that, to me, is not a responsive answer. I want to know that we 
are going to be able to look at this and say what is necessary 
for the transmission, but let us not just make it the easiest 
way, which means cutting through all of these States. I mean, 
it is just pretty amazing to me.
    Ms. Hoffman. I understand your perspective. In looking at 
congestion, we will define areas of the United States that 
exhibit congestion. It will be based on information that 
includes congested transmission lines, the price signals, as 
well as all that will contribute to the definition or defining 
of congested regions in the country.
    The corridor designation does not occur until after--may or 
may not occur until after the congestion study is released and 
there is comments on the congestion study.
    Senator Menendez. If I may, one last, final question, Mr. 
Chairman? I think I would like to have a conversation with you 
outside of the hearing to get a better sense of this before I 
make a judgment here.
    But will the study reflect the recent decrease in 
electricity demand due to the economic downturn and the energy 
conservation gains from the Recovery Act? Or is that outside 
the scope of the study?
    Ms. Hoffman. The data baseline for the study may have just 
started the analysis of when the economic downturn has 
occurred. We will go back and take a look at that and make sure 
that that is reviewed.
    Senator Menendez. OK. I appreciate your answers. I am still 
somewhat unsettled, to be honest with you, and I look forward 
to an opportunity to have a conversation.
    Ms. Hoffman. I look forward to the conversation. Thank you, 
Senator.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Mr. Persily, you will recall that it was here in this 
committee back in 2004 that we worked through, and ultimately 
passed, the Natural Gas Pipeline Act of 2004, and there was a 
great deal of excitement back home that, ta-da, we are on our 
way. The gas line is coming.
    We are now in 2010, and Alaskans are, appropriately, asking 
questions. As you mentioned, there is good news on the horizon. 
You have mentioned the open season with TransCanada and Exxon, 
and then Denali will be advancing theirs in these next several 
months.
    But you have been focused on this professionally, and just 
from your own personal interest, for decades now. Why haven't 
we been able to move things more quickly? What are the 
roadblocks that we face? What can be done to help accelerate 
this project that I think we all agree is in the Nation's best 
interest and, clearly, in our State's best interest?
    Mr. Persily. Thank you, Senator.
    It is just the complexity of the project. The size is what 
you need to make it economical. It has got to be big enough so 
the unit cost of moving molecules to market is low enough, but 
that size is such a hurdle to overcome.
    We are looking now at $40 billion in construction. Shippers 
on the line are going to have to sign firm transportation 
commitments, pledges, to either ship their gas or pay for the 
empty space, firm transportation commitments on that line for 
20, 25 years. Those are going to be worth $130 billion, give or 
take.
    That is a tremendous risk. No company is going to commit to 
those kind of numbers unless they have done all their homework 
in advance, excruciatingly slow homework perhaps to the public, 
from the public's view of it. But there is a lot of money at 
stake, a lot of complexity.
    It has taken longer than everyone has wanted. I guess we 
could sit here and talk about how good things take time. 
Hopefully, I think--I believe we are closer now than we were 
then. But right now, we are looking for the commercial deal 
between project sponsors, the shippers who are going to pledge 
basically the money to cover the mortgage on that project. The 
State is involved in talks with them, and hopefully working--
the Office of Federal Coordinator, working with this committee 
and Congress, can see if there is anything more the Federal 
Government can do to help the project or things we shouldn't do 
that would make it worse.
    Senator Murkowski. I think that is an important thing to 
keep in mind. We always think about those things that we might 
want to do proactively. But we also need to recognize that 
oftentimes unintentionally at the Federal level or at other 
levels we are putting up roadblocks or not removing barriers 
that would allow us to move closer.
    You have been focused certainly in these past years working 
in the legislature and with the Governor's office, looking at 
this line from the State's perspective. In your role, should 
you be confirmed, which we certainly hope that you will be, to 
the role of Federal coordinator, looking at it from a different 
lens. How do you think that you can contribute a different 
perspective from your background, working with the State on 
these issues, now viewing things through the Federal lens?
    Mr. Persily. Senator, I guess what I would bring to it is I 
just deal in reality. I have got to admit I am not much on 
process. I don't do vision statements very well. But, to me, 
the reality----
    Senator Murkowski. We know what the vision is on this.
    Mr. Persily. Right. Getting to the end of the line. But we 
have to look at the reality of the numbers, the risk, the 
problems involved in this. Just because we want it isn't going 
to make it happen.
    So, hopefully, working with the parties, the State, the 
Canadian government, certainly the producers, and TransCanada, 
the ones who are going to be putting their companies' value on 
the line, and seeing what can be done, where we can identify 
roadblocks, what can be done to remove them, see which parties 
are willing to take risk. Then with risk comes reward.
    Senator Murkowski. Mr. Chairman, my time is just about 
over. I have got a couple more for Mr. Persily and then one for 
Ms. Hoffman. But I defer to Senator Risch if----
    The Chairman. Senator Risch, did you have some questions? 
All right. Go right ahead.
    Senator Murkowski. OK. I will keep going with you.
    In terms of the cost estimates that have been released just 
last week, the TransCanada-Exxon group came back and indicates 
that we are looking at a project somewhere between $30 billion 
and $40 billion. When we were talking about what might be 
necessary for loan guarantees back in 2004, I think we were 
looking about an $18 billion project.
    There are some who would suggest that it just costs too 
much. In view of what is happening in the lower 48 with our 
abilities to produce shale gas, some speculate that, somehow or 
other, the Alaska line is just not worth it. Can you speak to 
those comments?
    Mr. Persily. Senator, it is worth it in that the Nation 
certainly is looking to natural gas to a much larger extent in 
the future, in the decades ahead, as a preferable, cleaner-
burning fuel of choice. Alaska, as you stated so eloquently in 
your statements, has a lot of natural gas. We just need to get 
it to the buyers.
    Certainly, the transportation costs will be higher to move 
Alaska natural gas from the North Slope to North American 
markets, but our production costs will be lower than shale gas. 
We have got a producing field at Prudhoe Bay. We produce 
billions of cubic feet a day right now. We reinject it into the 
ground to enhance oil recovery, but it won't cost that much 
more to produce it and put it into a pipe and move it to 
market.
    So I think as the developers of the Alaska project work out 
the numbers, they know that they have to be competitive on 
price when they get to market. That is one of the hurdles they 
are working on. They know that a consumer wants natural gas at 
the burner to--unlike wild salmon, where we know people will 
pay more for wild Alaska salmon, gas is a commodity. We just 
have to be competitive in the market on price.
    Senator Murkowski. I think it is important that folks 
recognize that the process, when you are dealing with shale 
gas, is entirely different than what we have up north.
    We get focused about what we need to do within Alaska to 
advance this project, and sometimes you actually forget that in 
order to deliver Alaska's gas to the American market, we have 
to go through a foreign country. We are going through Canada.
    Your predecessor in this job, Drue Pearce, pioneered this 
office. She set things up and had been very aggressive working 
with our Canadian counterparts to make sure that all aspects 
along the way are going to be working. Can you just speak to 
the issues that confront this project as we deal with our 
neighbors to the north?
    Mr. Persily. Sure, Senator. Obviously, Canada has its own 
regulatory process to go through. It has land issues with First 
Nations, which the Canadian Federal Government is going to have 
to deal with. Canada faces many of the same socioeconomic 
issues that Alaska faces when you build a mega project through 
an area.
    But I have worked through the years with several Canadian 
officials. As you said, Drue Pearce, who started this office, 
set up an excellent working relationship with the Canadians, 
and I don't think that is going to be an insurmountable problem 
for this project. Canada would see many benefits from this just 
like the United States would.
    Senator Murkowski. Which, again, is very important to point 
out.
    I have just got one more question for you, Larry, and this 
is regarding the authority that the coordinator has under the 
Alaska Natural Gas Pipeline Act. You have some authority to get 
the project built without governmental permitting delays, and 
it specifically grants you the authority to preclude Federal 
agencies from insisting on permitting conditions that aren't 
required by law that you would find prevent or would impair the 
construction or operation of the pipeline. How would you 
envision exercising that kind of authority?
    Mr. Persily. Senator, my understanding is we are going to 
have to do it at the Office of Federal Coordinator, if I am 
confirmed, work up regulations on that. There is going to have 
to be a public process so that if we identify a problem with a 
particular agency, that there is a public process where we can 
accept comments, gather information based on working off the 
regulations, which we are going to have to adopt.
    Senator Murkowski. Let me ask you a question, Ms. Hoffman, 
on the transmission aspect. Under the stimulus dollars that the 
Congress authorized last year, there was $80 million that went 
to the Office of Electricity Delivery and Energy Reliability to 
advance the regional transmission plans. That language directed 
you, in consultation with the FERC, to undertake this resource 
assessment and analysis of demand and transmission 
requirements.
    You are also directed to provide technical assistance for 
transmission planning. But there was nothing in the language 
that inserted an alternative energy requirement for 
transmission planning. Yet in just about a month ago, December 
18, there was a press release that came from the department 
that announced 6 funding awards that expressly states that 
awards made to transmission planners would fund work for 
project options for alternative electricity supplies and the 
associated transmission requirements.
    How are you defining ``alternative?'' By defining 
``alternative'' for these grants, are you expressly leaving out 
any other resources?
    Ms. Hoffman. Thank you, Senator.
    That is a very good question. In defining ``alternatives,'' 
as you presented the statement, I have realized that 
``alternatives'' has been used in multiple purposes with 
respect to the interconnection planning. The interconnection 
planning solicitation announced awards for the East, West, and 
URCA to do a system-wide analysis.
    The alternatives was looking at multiple scenarios or 
alternative futures as the transmission planning organization 
assessed resources. So we are going to look at multiple 
options. The solicitation requested everybody look at all forms 
of generation, energy storage, demand response, and energy 
efficiency. So, from that perspective, it is inclusive of all 
generation technologies or all alternative energy technologies.
    But the solicitation also requested that the 
interconnection look at alternative scenarios. So, i.e., if 
WECC is looking at a goal to increase clean energy technologies 
to meet the administration's clean energy future, it would look 
at a scenario to minimize carbon emissions, as well as look at 
the potential deployment of other technologies that the States 
would like to deploy in each of their areas.
    Senator Murkowski. So not necessarily alternative energies, 
but alternative----
    Ms. Hoffman. Futures.
    Senator Murkowski [continuing]. Futures.
    Ms. Hoffman. Yes, Senator. Thank you.
    Senator Murkowski. Thank you for that.
    Mr. Chairman, I don't have any further questions, but I 
would hope that the committee would view Mr. Persily and Ms. 
Hoffman's nominations with favor and, hopefully, move them 
expeditiously through the committee.
    The Chairman. All right. If you have no questions, Senator 
Risch, then we will make provision for members to file any 
additional questions that they would have of either witness by 
5 p.m. tomorrow.
    With that, the committee will stand in adjournment.
    Thank you both.
    [Whereupon, at 3:26 p.m., the hearing was adjourned.]

                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

  Responses of Patricia A. Hoffman to Questions From Senator Murkowski

    Question 1. What is the Obama Administration's position on whether 
the over $4 billion in smart grid grants authorized by last year's 
stimulus bill are subject to federal tax? If the IRS decides to tax the 
smart grid grants, do you anticipate any recipients declining the award 
and returning the funding to the Treasury?
    Answer. The Department of Energy and the Administration are working 
diligently to resolve the tax issue regarding the Smart Grid Investment 
Grants. As you know, this issue arises not from anything specific to 
DOE's programs or the funding announcements, but rather is a general 
matter of how federal grants are treated under tax law. For that 
reason, Congress made some explicit exemptions In the Recovery Act. For 
example, the Recovery Act specifies that grants under the 48c program 
are tax exempt. However, no such provision was included with respect to 
the Smart Grid grants. We are working closely with the Treasury 
Department and the Internal Revenue Service on this issue and 
presenting relevant information in order for the IRS to release a final 
decision. Regardless, we are working with recipients to make sure that 
these Smart Grid projects go forward.
    Question 2. What are the Intellectual Property implications with 
the DOE smart grid grants? Will the Department claim IP rights to the 
infrastructure developed with federal grant money?
    Answer. Since the Smart Grid Investment Grants (SGIG) do not 
involve research and development, there is no patent rights clause 
included in the SGIG awards and no patent waiver is necessary. Thus, 
the government gets no rights in any inventions associated with SGIG.
    Question 3. How is the Office of Electricity handling cyber 
security efforts? How are you coordinating with the rest of DOE and 
within the Administration? Has the Department started to establish an 
independent national energy sector cyber security organization to 
institute research, development, and deployment priorities, as directed 
by the FY10 Energy and Water Appropriations bill?
    Answer. Cyber security is a critical priority for the Department 
and the Office of Electricity in particular. The Department has been 
working with the energy sector and other stakeholders to reduce the 
risk of energy disruptions due to cyber attacks for several years. The 
Department uses the ``Roadmap to Secure Control Systems in the Energy 
Sector'' published in 2006 as a guide in formulating its program 
activities. We are also working closely with the National Institute of 
Science and Technology, energy sector stakeholders, and other partners 
within the Administration to address cyber security for the Smart Grid. 
With regards to the national energy sector cyber security organization 
set out in our FY 2010 appropriations bill, we have released a Notice 
of Intent seeking comments and plan to release a Funding Opportunity 
Announcement this spring.
    Question 4. Pursuant to the Energy Policy Act of 2005, the 
Department of Energy is required to assess transmission congestion and 
designate National Interest Electric Transmission Corridors. The most 
recent assessment was due in 2009. What is the status of that effort 
and when can the Committee expect to see the Department's report?
    Answer. We are working diligently on the draft study and plan to 
release it in the next few months. We will share it with the committee 
as soon as it is ready. The study will be open for public comments when 
the study is released. Only after the comment period is closed and the 
comments have been considered, will the Secretary consider whether 
National Interest Electric Transmission Corridor designation is 
necessary.
    Question 5. Do you believe that existing planning processes at the 
regional level have been working well? Do you believe FERC should have 
authority to overturn decisions made in these regional plans to 
construct particular transmission lines and/or mandate interconnection-
wide planning?
    Answer. Collaboration among DOE, FERC, and regional and state 
partners is critical in ensuring a reliable and secure transmission 
system. Balancing regional and federal interests is a challenge with 
which this committee and the Department will both continue to wrestle 
as we continue our efforts to modernize the grid. Interconnection-wide 
planning is important to achieving results. The Western Renewable 
Energy Zones--Phase I Report has demonstrated progress. The Electric 
Reliability Council of Texas (ERCOT) study entitled Competitive 
Renewable Energy Zones (CREZ) documented the cost and transmission 
requirements for connecting significant amounts of wind to this system 
reliably. Although the Department is encouraging the development of 
several scenarios (called alternative futures), consensus will be 
required and regional interconnection planning requires oversight by 
FERC for transparency and reliability review.
    Question 6. Can you describe the Eastern Interconnection Planning 
Collaborative and what you see as its ultimate objectives? Will the 
plans coming out of this effort have any binding effect on the states?
    Answer. The Eastern Interconnection Planning Collaborative (EIPC) 
was organized as a voluntary effort involving all of the entities in 
the interconnection that have been recognized by the North American 
Electric Reliability Corporation (NERC) as Planning Authorities. These 
entities realize that the electricity industry has entered a period of 
transformative change that will affect the technologies the industry 
uses and how the industry is structured and organized. The EIPC's 
central purpose is to perform the iterative long-term assessments that 
will be needed to guide and manage this transition. The Department 
recognized the worth of this effort and has supported the work through 
grants under the Recovery Act to EIPC and similar entities in the 
Western and Texas Interconnections. However, the Department also 
believes that if these collaborative efforts are to be successful, the 
states must be actively involved in and informed by them. For this 
reason, the Department has also issued separate grants to stateoriented 
entities in the three interconnections, and required that the industry-
based grantees (such as EIPC) bring the states into their planning 
processes. Under present law, however, the plans that emerge will not 
be legally binding on any of the participants.
    Question 7. DOE is simultaneously awarding funding for transmission 
planning and new smart grid deployments. Given that many smart grid 
devices, such as energy storage or real time monitoring, can complement 
or even decrease the need for transmission expansion, how will these 
transmission planning studies incorporate new smart grid technologies?
    Answer. Transmission planning and smart grid technology are 
inextricably linked. Your question highlights the need for a process to 
evaluate alternative scenarios--the interconnection-wide planning 
process. As we modernize the grid to gain access to real time data and 
improve storage, we will be able to adjust our planning and responses 
to the needs of the system because it will be more flexible and 
adaptive to demand response and energy efficiency savings furthered 
enabled by the smart grid.
    Question 8. What role is DOE playing to ensure standards 
harmonization, as well as product testing and certification, in order 
to facilitate market and consumer adoption of new grid applications?
    Answer. DOE has been working with the private sector, other 
government agencies, and academia for several years to support 
standards harmonization and the development of interoperability and 
cyber security standards for the Smart Grid. In 2007, the Energy 
Independence and Security Act (EISA) assigned the National Institute of 
Standards and Technology (NIST) primary responsibility to coordinate 
development of a framework and protocols to achieve interoperability of 
smart grid devices. Under the American Recovery and Reinvestment Act , 
DOE provided NIST with $10 million to carry out its responsibilities 
under EISA. NIST recently issued the ``NIST Framework and Roadmap for 
Smart Grid Interoperability Standards, Release 1.0'' which provides for 
the development of a robust framework for conformity testing and 
certification.
    Question 9. Many new technologies, such as electric vehicles, have 
implications not only for the Office of Electricity, due to the 
increased strain on the grid, but also for other areas within the 
Department, such as buildings and batteries. How will you coordinate 
the RD&D efforts with the other DOE offices in order to accelerate 
their rollout?
    Answer. The Secretary has made breaking down stovepipes a top 
priority at the Department. Under his leadership and with the close 
involvement of Undersecretary Johnson, the Office of Electricity, the 
Office of Energy Efficiency and Renewable Energy, and other offices are 
working closely to make sure that we take a systems approach to our 
investments including smart buildings and electric vehicles. If 
confirmed, I will continue to make sure that our research is 
coordinated with work underway in other offices to promote secure and 
reliable energy across the country.
                                 ______
                                 
   Response of Patricia A. Hoffman to Question From Senator Stabenow

    The Office of Electricity (OE) is in the midst of executing 
financial assistance awards for the Smart Grid Investment Grant 
program, funded through the Recovery Act. Grantees must comply with Buy 
American requirements in the Recovery Act where applicable. The Buy 
American provisions require that manufactured goods used in a covered 
project must be made in the U.S. The Department of Energy has an 
obligation to ensure that the Buy American requirements are complied 
with. I understand that the Office of Energy Efficiency and Renewable 
Energy is issuing a Request for Information to survey relevant markets 
for Buy American-compliant products.
    Question 1. Please describe the Department's approach to ensuring 
compliance with Buy American requirements for the OE programs, and 
provide your views on whether additional steps could be taken to ensure 
that items such as meters purchased with federal funding are compliant 
with the Buy American provisions. Has OE considered issuing a Request 
For Information or other proactive action to provide grantees with 
adequate information to ensure their use of Buy American compliant 
products?
    Answer. The Buy American provisions of the ARRA apply to the 
construction, alteration, maintenance or repair of a public building or 
public work. The Buy American provisions of ARRA, as codified by OMB in 
2CFR 176, are a part of the Terms and Conditions for any ARRA funded 
work. OE is not currently considering a Request for Information (RFI) 
at this time, but the Department is communicating with all grantees 
regarding Buy American to ensure compliance with requirements from 
ARRA. Additionally, the Department takes the oversight and transparency 
components of ARRA very seriously, and we will continue to work with 
our recipients to ensure proper use of these funds.
                                 ______
                                 
     Response of Patricia Hoffman to Question From Senator Menendez

    Ms. Hoffman, in 2007 the Department of Energy conducted a study of 
electric transmission congestion and as a result of that study the 
Department designated all or part of Ohio, West Virginia, Pennsylvania, 
New York, Maryland, Virginia, Delaware, the District of Columbia and 
New Jersey a transmission corridor. This enormous area really does not 
strike me as a corridor, nor does it seem necessary given the fact that 
DOE's congestion study stated that in the Eastern Interconnection:
          a relatively small portion of constrained transmission 
        capacity causes the bulk of the congestion cost that is passed 
        through to consumers. This means that a relatively small number 
        of selective additions to transmission capacity could lead to 
        major economic benefits for many consumers.

    I know that the DOE is in the process of updating its congestion 
study for the Eastern Interconnect. When will it be released? Why has 
it not already been released? Will that study be detailed enough to 
show congestion on a transmission line by transmission line basis? Will 
the study reflect the decrease in electricity demand caused by the 
economic downturn and conservation gains from the Recovery Act? Based 
upon that study will the Department reevaluate its transmission 
corridor designations and attempt to make them as narrow as possible?
    Answer. I appreciate the concerns that you expressed during the 
hearing, and I can assure you that I will take them into consideration 
as this process moves forward. That process has several additional 
steps before we would make any decisions about corridor designations . 
As you noted during the hearing, the Department is still updating the 
congestion study. We expect the revised study to be released in the 
next few months. At that time, the study will be published in draft 
form for public comment so that stakeholders in New Jersey and 
elsewhere can provide input for the Department. Only after considering 
public comments will we finalize the Congestion Study. As the name 
suggests, the study will identify congested areas. Any decision to 
designate corridors based on the study would come at a later date, and 
again, would be part of a process that is also open to comments.

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