[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                 STRATEGIC PETROLEUM RESERVE DISCUSSION 
                  DRAFT AND TITLE IV ENERGY EFFICIENCY

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

                                 HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 30, 2015

                               __________

                           Serial No. 114-36
                           
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov
                    
                             ______________
                             
                        U.S. GOVERNMENT PUBLISHING OFFICE
96-166                       WASHINGTON : 2015                        
                    
________________________________________________________________________________________ 
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].  
                   
                    
                    
                    
                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                     Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               JERRY McNERNEY, California
JOSEPH R. PITTS, Pennsylvania        PAUL TONKO, New York
ROBERT E. LATTA, Ohio                ELIOT L. ENGEL, New York
GREGG HARPER, Vice Chairman          GENE GREEN, Texas
DAVID B. McKINLEY, West Virginia     LOIS CAPPS, California
MIKE POMPEO, Kansas                  MICHAEL F. DOYLE, Pennsylvania
ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         JOHN P. SARBANES, Maryland
BILL JOHNSON, Ohio                   PETER WELCH, Vermont
BILLY LONG, Missouri                 JOHN A. YARMUTH, Kentucky
RENEE L. ELLMERS, North Carolina     DAVID LOEBSACK, Iowa
BILL FLORES, Texas                   FRANK PALLONE, Jr., New Jersey (ex 
MARKWAYNE MULLIN, Oklahoma               officio)
RICHARD HUDSON, North Carolina
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     2
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................    10
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    13
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   135

                               Witnesses

Christopher A. Smith, Assistant Secretary for Fossil Energy, 
  Department of Energy...........................................     3
    Prepared statement...........................................     6
Christopher Peel, Corporate Senior Vice President and Chief 
  Operating Officer, Rheem Manufacturing Company (on behalf of 
  the Air-Conditioning, Heating, and Refrigeration Institute)....    34
    Prepared statement...........................................    37
Kateri Callahan, President, Alliance to Save Energy..............    45
    Prepared statement...........................................    47
John W. Somerhalder II, Chairman, President, and CEO, AGL 
  Resources (on behalf of the American Gas Association)..........    57
    Prepared statement...........................................    59
Frank Thompson, President, Sweetwater Builders, Inc. (on behalf 
  of the National Association of Home Builders)..................    65
    Prepared statement...........................................    67
Elizabeth Noll, Energy Efficiency Advocate, Natural Resources 
  Defense Council................................................    80
    Prepared statement...........................................    82
    Answers to submitted questions...............................   186
Rona Newmark, Vice President, Intelligent Efficiency Strategy, 
  EMC Corp. (on behalf of the Information Technology Industry 
  Council).......................................................   100
    Prepared statement...........................................   102
Mark Wagner, Vice President, U.S. Government Relations, Johnson 
  Controls, Inc. (on behalf of the Federal Performance 
  Contracting Coalition).........................................   107
    Prepared statement...........................................   109

                           Submitted Material

Discussion draft of the Strategic Petroleum Mission Readiness 
  Plan \1\.......................................................     3
Discussion draft of Title IV--Energy Efficiency and 
  Accountability \2\.............................................     3
Statement of the American Public Gas Association.................   136
Statement of the Business Council for Sustainable Energy.........   143
Statement of the Geothermal Exchange Organization................   148
Statement of the National Consumer Law Center....................   149
Statement of NiSource, Inc.......................................   151
Statement of ASHRAE..............................................   154
Statement of the Alliance to Save Energy and the American Council 
  for an Energy-efficient Economy................................   162
Statement of the United States Chamber of Commerce...............   164
Statement of the Leading Builders of America.....................   165
Statement of the Retail Industry Leaders Association.............   169
Statements of the American Council for an Energy Efficient 
  Economy, et al.................................................   170
Statement of the Center for American Progress....................   171
Statement of 500 architectural firms.............................   177
Statement of Window & Door Manufacturers Association.............   184

----------
\1\ Available at: http://docs.house.gov/meetings/IF/IF03/
  20150430/103401/BILLS-114pih-
  Strategicpetroleumreservediscussiondraft.pdf.
\2\ Available at: http://docs.house.gov/meetings/IF/IF03/
  20150430/103401/BILLS-114pih-
  TitleIVenergyefficiencyandaccountabilitydiscussiondraft.pdf.

 
   STRATEGIC PETROLEUM RESERVE DISCUSSION DRAFT AND TITLE IV ENERGY 
                               EFFICIENCY

                              ----------                              


                        THURSDAY, APRIL 30, 2015

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:16 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman of the subcommittee) presiding.
    Members present: Representatives Whitfield, Olson, Barton, 
Shimkus, Latta, Harper, McKinley, Kinzinger, Johnson, Long, 
Ellmers, Flores, Mullin, Hudson, Rush, McNerney, Tonko, Engel, 
Green, Doyle, Sarbanes, Loebsack, and Pallone (ex officio).
    Staff present: Nick Abraham, Legislative Associate, Energy 
and Power; Charlotte Baker, Deputy Communications Director; 
Will Batson, Legislative Clerk; Allison Busbee, Policy 
Coordinator, Energy and Power; Patrick Currier, Counsel, Energy 
and Power; Tom Hassenboehler, Chief Counsel, Energy and Power; 
Brandon Mooney, Professional Staff Member, Energy and Power; 
Caitlin Haberman, Democratic Professional Staff Member; Rick 
Kessler, Democratic Senior Advisor and Staff Director, Energy 
and Environment; and John Marshall, Democratic Policy 
Coordinator.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Today the committee is going to continue its 
work on the discussion draft of our energy bill that we have 
been working on with the Democrats. We began the dialogue last 
week with a hearing on the energy work force title to the bill, 
and today we are going to be focusing on the Strategic 
Petroleum Reserve and the energy efficiency part of the 
legislation.
    The current debate over the SPR is a familiar one to those 
who have witnessed how America's dramatically changing energy 
landscape has rendered many existing policies out of date. The 
Strategic Petroleum Reserve was created under the Energy Policy 
and Conservation Act of 1975, and has since served as an 
insurance policy in the form of an emergency stockpile of oil. 
However, much has changed over the last 40 years, and there is 
bipartisan agreement that we are overdue to update the SPR to 
reflect the needs of 2015 and beyond.
    One of the problems that we are having, of course, relates 
to infrastructure issues associated with the SPR. Specifically, 
the oil boom is underway near the SPR's location in Louisiana 
and Texas, and is already stretching the local infrastructure 
to its limits. This raises questions whether there is 
sufficient infrastructure available to successfully draw down 
the SPR in the case of an emergency. DOE and others have found 
that the 40 year old stockpile is in a poor state of repair, 
raising doubts about whether it is ready to be utilized in a 
timely and efficient manner. There are also questions about the 
legal trigger tapping the SPR, and whether it constrains the 
President from anticipating problems justifying a release. So 
we are going to be looking at lot at the SPR, and we appreciate 
our witness here today, who will address that issue.
    The bill also will contain a number of energy efficiency 
provisions. Many of them certainly deal with the way the 
Federal Government, by far the nation's largest energy user, 
can do more for less. This includes provisions that would 
certainly emphasize the importance of energy savings 
performance contract for Federal facilities. There are also 
requirements for DOE to look into potential energy savings from 
Federal data centers, and through the use of thermal 
insulation, as well as other ideas that may help reduce Federal 
energy expenditures.
    So we have two panels of witnesses this morning. On the 
second panel I think we have five or six witnesses. The first 
we have our guest from the Federal Government, who I will 
introduce in just a minute, but with that, I will yield back 
the balance of my time.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    Today, this subcommittee continues its work on the 
discussion draft of our bipartisan energy bill. We began the 
dialogue last week with a hearing on the energy workforce title 
to the bill. And now, we move on to the provisions dealing with 
the Strategic Petroleum Reserve (SPR) and energy efficiency.
    The current debate over the SPR is a familiar one to those 
who have witnessed how America's dramatically-changed energy 
landscape has rendered many existing policies out of date. The 
SPR was created under the Energy Policy and Conservation Act of 
1975, and has since served as an insurance policy in the form 
of an emergency stockpile of oil. However, much has changed 
over the last 40 years, and there is bipartisan agreement that 
we are overdue to update the SPR to reflect the needs of 2015 
and beyond.
    For one thing, fears of increased dependence on oil from 
unfriendly producers and unstable regions has been replaced by 
the reality of growing American production as well as rising 
imports from Canada. The risk remains of a supply disruption 
necessitating an SPR release, but the nature and extent of the 
risk has changed.
    In addition, as noted in the Department of Energy's recent 
Quadrennial Energy Review, there are many infrastructure issues 
associated with the SPR. Specifically, the oil boom is underway 
near the SPR's locations in Louisiana and Texas and is already 
stretching the local infrastructure to its limits. This raises 
questions whether there is sufficient infrastructure available 
to successfully draw down the SPR in an emergency. Further, DOE 
and others have found that the 40-year old stockpile is in a 
poor state of repair, raising doubts about whether it is ready 
to be utilized in a timely and efficient manner. There are also 
questions about the legal trigger for tapping the SPR and 
whether it constrains the President from anticipating problems 
justifying a release.
    The SPR provisions in the discussion draft require DOE to 
conduct a strategic review of the SPR with an eye towards 
reforming the program for the near and long-term. This review 
will address issues about the proper size, configuration, and 
location of the SPR, as well as any necessary repairs and 
infrastructure additions to the system. It will also explore 
potential legal changes regarding what triggers an SPR release. 
This review will help Congress as we consider the next steps in 
updating the nation's emergency oil stockpile.
    The bill also contains a number of energy efficiency 
provisions. Many of them deal with ways for the federal 
government, by far the nation's largest energy user, to do more 
with less. This includes provisions that would help expand the 
use of energy savings performance contracts for federal 
facilities. There are also requirements for DOE to look into 
potential energy savings from federal data centers and through 
the use of thermal insulation, as well as other ideas that may 
help reduce federal energy expenditures. It also eliminates the 
potentially costly and unrealistic requirement that federal 
buildings use no fossil fuel generated energy by 2030.
    The draft bill also contains measures affecting the private 
sector, which has been the source of most energy efficiency 
breakthroughs over the years. This includes greater legal 
certainty for the Energy Star program, the inclusion of Smart 
Grid capability on Energy Guide labels, and voluntary 
verification programs for several appliances. It also clarifies 
DOE's role in setting model building codes, and prevents a 
proposed residential gas furnace efficiency standard from being 
finalized until the agency gathers more evidence on whether it 
is technologically feasible and economically justified.
    Both SPR and energy efficiency are two topics on which we 
should be able to agree on the path forward. I look forward to 
a discussion on these critical components of our energy bill.

    [The discussion draft of the Strategic Petroleum Mission 
Readiness Plan is available at: http://docs.house.gov/meetings/
IF/IF03/20150430/103401/BILLS-114pih-
Strategicpetroleumreservediscussiondraft.pdf.]

    [The discussion draft of Title IV--Energy Efficiency and 
Accountability is available at: http://docs.house.gov/meetings/
IF/IF03/20150430/103401/BILLS-114pih-
TitleIVenergyefficiencyandaccountabilitydiscussiondraft.pdf.]

    Mr. Whitfield. Mr. McNerney, are you going to be making a 
statement for your side, or is Mr. Rush going to----
    Mr. McNerney. Thank you, Mr. Chairman. No, I don't have a 
prepared statement at this point.
    Mr. Whitfield. Sorry?
    Mr. McNerney. I don't have a prepared statement----
    Mr. Whitfield. OK. All right. Is there anyone else on our 
side that would like to make a statement this morning? OK. I 
will tell you what we will do, when Mr. Rush gets here, we will 
give him an opportunity to make an opening statement. But, at 
this time, I would like to introduce our only witness on the 
first panel, and that is Christopher Smith, who is the 
Assistant Secretary for Fossil Energy at the Department of 
Energy.
    Mr. Smith, thank you very much for being with us again, and 
I would like to recognize you for 5 minutes for your opening 
statement. So be sure the microphone is on, and, as you know, 
the red light will come on when your 5 minutes is up, so thank 
you very much.

  STATEMENT OF CHRISTOPHER A. SMITH, ASSISTANT SECRETARY FOR 
              FOSSIL ENERGY, DEPARTMENT OF ENERGY

    Mr. Smith. Well, thank you very much, Mr. Chairman, for 
giving me the opportunity to appear before this Committee. 
Chairman Whitfield, Ranking Member Rush, and members of the 
Committee, it is my pleasure to appear before you today to 
discuss the Strategic Petroleum Reserve. The Strategic 
Petroleum Reserve provides strategic and economic security 
against foreign and domestic disruptions in the oil supply by 
an emergency stockpile of crude oil. It also fulfills United 
States obligations under the International Energy Program, 
which avails the United States of International Energy Agency 
assistance through its Coordinated Energy Emergency Response 
Plan.
    As you know, earlier this month the Department announced 
the award of contracts for the purchase of crude oil sold 
during last year's sale. Under terms of these contracts, which 
were funded by the $239 million in receipts from the test sale, 
BP Products North America and Noble Americas will deliver more 
than two million barrels to the reserve's Bryan Mound site in 
Freeport, Texas. Deliveries are expected to be completed by 
July 31.
    I would like to elaborate on the 2014 test sale, because it 
did a couple of important things. First, it resulted in the 
delivery of nearly five million barrels of crude oil over a 47 
day period, and brought in more than $460 million in receipts. 
A portion of those receipts was used to fund the Northeast 
Gasoline Supply Reserve, which was established as a result of 
Superstorm Sandy in 2012. This reserve consists of one million 
barrels of government owned gasoline stored in three locations 
in the Northeast. At the same time, the test sale evaluated 
drawdown and sales procedures, and validated the operational 
capability to draw down the Strategic Petroleum Reserve.
    I would like to talk about that drawdown capability for a 
moment. The Strategic Petroleum Reserve is a network of 60 
operational caverns at four sites in Louisiana and Texas, with 
a total design capacity of 713 million barrels of crude oil, 
and currently holding 691 million barrels available for release 
in the event of a supply disruption. The infrastructure and 
equipment to support drawdown, including storage caverns and 
well bores, is both large and complex. This aging 
infrastructure, which has performed capably to meet every 
emergency release throughout the SPR's history, requires 
progressive--requires progressively more maintenance every 
year, and is in need of modernization.
    With regard to modernization, the Department has initiated 
work on a comprehensive long term strategic review of the 
Strategic Petroleum Reserve in response to changing market and 
energy security dynamics. This review will be guided by the 
recommendations contained in reports conducted by the GAO and 
the Department's Inspector General. It will also be informed by 
the recommendations from the Administration's recently released 
quadrennial energy review.
    The QER underscores the Administration's support for an 
effective Strategic Petroleum Reserve modernization program 
that would address infrastructure issues, and reflect current 
market and energy security concerns. Specific recommendations 
include investing as much as $2 million to increase the 
incremental distribution capacity of the Strategic Petroleum 
Reserve, and implementing a life extension program for key 
Strategic Petroleum Reserve components, including surface 
infrastructure and additional brine drive caverns. The QER also 
recommends that Congress update the Strategic Petroleum 
Reserve's release authorities in the Energy Policy and 
Conservation Act to expressly include disruptions in the global 
oil market as release triggers to revise release requirements. 
Finally, the QER recommends the integration of the President's 
authorities to release products from the refined petroleum 
product reserve into a single unified authority. These release 
authorities should be tailored to the purpose of a product 
reserve, which may differ in some respects from the purposes of 
a crude oil reserve.
    With that, Mr. Chairman, I would be happy to answer any 
questions that the subcommittee may have.
    [The prepared statement of Mr. Smith follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Whitfield. Mr. Smith, thank you very much, and at this 
time I would like to recognize Mr. Rush for his opening 
statement.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. I want to thank you, Mr. Chairman, and, Mr. 
Chairman, I want to welcome our esteemed witness. Thank you for 
holding this hearing today on two very important, but yet 
completely unrelated issues, the SPR and the energy efficiency 
standards.
    Mr. Chairman, I agree with the underlying assumption that 
it is time to engage in a comprehensive review of the SPR, 
which was originally authorized under the Energy Policy and 
Conservation Act of 1975 in order to reduce the domestic impact 
of a disruption in supplies of petroleum products due to 
unforeseen or unavoidable circumstances. And I commend 
Secretary--for initiating the process to conduct a 
comprehensive review of the SPR, following both in July 2014 
DOE Office of Inspector General report, and the GAO office 
study issued in September of last year, recommending that the 
Department do so.
    Mr. Chairman, circumstances have changed significantly 
since the SPR was established back in the 1970s, so it makes 
sense to examine future SPR requirements regarding size, 
composition, and geographic location to make sure that the 
country is better suited to deal with any potential and future 
disruptions. Additionally, what little funding comes from--I 
think it also behooves us to consider the resources necessary 
to operate the SPR, and to ensure its long term sustainability 
in order to preserve the infrastructure and the maintenance of 
these sites.
    Mr. Chairman, as for the other panel, regarding a 
completely different topic, I must say that I hope that we will 
hold an additional hearing on DOE energy efficiency standards, 
where members will have an opportunity to hear from the agency 
in a direct manner. While engaging industry and other 
stakeholders as we will do today should be a part of the 
process, that should not preclude having agency officials come 
before this Committee to inform members on the reasoning, and 
the justification, behind promulgating the very standards that 
are under discussion.
    Mr. Chairman, many of the energy efficiency measures 
contained in the draft bill are non-controversial, and are 
bipartisan in nature, such as Section 4114, which modifies the 
definition of renewables to include thermal energy under the 
Federal renewable energy purchase requirements established in 
Section 203 of EPAC 2005. This language represents an example 
of DOE, industry, and energy efficiency advocates all working 
together to come up with a legislative fix that all sides have 
agreed to.
    However, there are other provisions, similar provisions, as 
a matter of fact, of this bill that are not bipartisan, and do 
not reflect agreement on the part of the various stakeholders. 
For instance, Section 4115, which would repeal a key portion of 
Section 433 of the Energy Independence and Security Act, the 
provision that requires Federal buildings to be designed to 
result in decreased consumption of fossil fuels by 2013, is one 
section, among others, that we will definitely have to examine 
further and continue to work on before we reach bipartisan 
consensus.
    Mr. Chairman, as this is only a discussion draft, and will 
undergo significant changes, I am satisfied with engaging 
today's expert witnesses so that we may be better informed on 
how to improve this draft as we move forward through the 
legislative process. But, Mr. Chairman, we need to have 
additional hearings and additional work. I know that you will 
agree with me, Mr. Chairman. With that, I yield back the 
balance of my time.
    Mr. Whitfield. Gentleman yields back the balance of his 
time, and at this point, Mr. Smith, we once again thank you for 
your statement, and I will recognize myself for 5 minutes for 
questions.
    Back in 2014, GAO issued a report entitled ``The Changing 
Crude Oil Markets'', allowing exports has price and other 
implications, and the size of the strategic reserve should be 
re-examined. In the letter that you had sent to us, you 
indicated that DOE has initiated the process for conducting a 
comprehensive re-examination of the appropriate size of the SPR 
in light of current and future market conditions. I was just 
curious, what is the status of that review, and do you have a 
timetable of when you all might complete that?
    Mr. Smith. Well, thank you very much, Mr. Chairman, for the 
question. So indeed, we think it is very important to undertake 
a comprehensive strategic review, which I believe is the 
position of the Committee, and we have already started that 
process. As we know, and as was noted in your statement, there 
are many factors that have changed since the Strategic 
Petroleum Reserve was initially created in the '70s. So our 
comprehensive review is looking at a very wide range of issues. 
Looking at modernization, looking at distribution capability, 
looking at issues that are driven by the appropriate size of 
the reserve.
    So we are already started on that process, we are working 
on that, and we believe that the total review will take several 
months to complete, towards a year for the culmination of that 
report.
    Mr. Whitfield. Are you personally concerned--I talked a 
little bit about the infrastructure issue, and because of the 
shale boom, and the capacity limitations that we have, are you 
concerned at all about the infrastructure aspect of this?
    Mr. Smith. Well, I am, Mr. Chairman. One note, I imagine 
that our team who is managing this process would bristle at the 
characterization of the SPR being in a poor state of repair. I 
think we have got a tremendous team that is doing all the 
things that they need to do to make sure that the SPR is ready. 
And, indeed, every time we have had a test sale, or we have had 
to use the SPR, that team has performed admirably.
    That said, it is an aging asset. We have well bores that 
have been in place for decades. And as you drill into these 
salt structures, they move over time, and it causes issues. So 
not only are we concerned about ensuring that we are funding 
this in a way that allows it to keep up with deferred 
maintenance, but also many infrastructure issues, such as the 
direction of the pipelines, the inflow of crude, the types of 
crude that are coming into the refineries in the Gulf of Mexico 
has changed, and we think it is important for us to consider 
all these things. So we think these, you know, we agree with 
the Committee's conclusion that these are critical things to 
study and analyze.
    Mr. Whitfield. I think you had indicated there is something 
like 691 million barrels of crude oil, in storage.
    Mr. Smith. Right.
    Mr. Whitfield. Is most of that heavy sour crude, or is 
there light sweet as well?
    Mr. Smith. So we have got a total of 691 million barrels of 
crude in storage right now. That is split between sweet and 
sour, so we have got approximately 260 million barrels of 
sweet. We have about 430 million barrels of sour, so we have a 
split between----
    Mr. Whitfield. Yes.
    Mr. Smith [continuing]. Sweet and sour.
    Mr. Whitfield. And do you happen to know the number of 
gallons of crude that are in public storage in our country 
today?
    Mr. Smith. I don't have that number off the top of my head, 
Mr. Chairman.
    Mr. Whitfield. I was told that it was in the neighborhood 
of 500 million barrels. Does that sound right to you, or have 
you heard about----
    Mr. Smith. That might be a reasonable number, Mr. Chairman. 
I don't know what the figure is off the top of my head.
    Mr. Whitfield. OK. Well, thank you very much. And, Mr. 
Rush, you are recognized for 5 minutes.
    Mr. Rush. I want to thank you, Mr. Chairman. Secretary 
Smith, in your testimony you stated that the SPR is a network 
of 60 operational--at four storage sites in Louisiana and 
Texas, with a designed capacity of 713.5 million barrels, and 
115 operational well bores. I would imagine that these 
facilities see a lot of wear and tear over the years, and 
require quite a bit of upkeep and maintenance. What is the 
state of these facilities, and how are they maintained? Is 
there a funding stream dedicated to the upkeep and maintenance 
of these facilities? And what can we, as members of Congress, 
do to assist you in maintaining these facilities?
    Mr. Smith. Well, thank you very much, Ranking Member Rush, 
for that question. We request appropriation every year that we 
use to maintain the SPR, and ensure that the Strategic 
Petroleum Reserve is ready for a drawdown. In our budget 
request that the President recently released, we did ask for a 
total of $257 million for the Strategic Petroleum Reserve, 
which was an increase over budget requests in previous years. I 
guess the marks we are seeing right now would result in a $45 
million decrease in the amount that we requested, which does 
impact our ability to tackle some of the deferred maintenance 
that we think is important.
    As I briefly noted, some of these well bores are 20, 30 
years old. As you are drilling through the cap rock, and into 
these caverns, you do have movement over time that compromises 
the well bores. There are lots of above ground issues that you 
have to deal with to ensure that all of your pumps, your 
compressors, your valves, corrosion issues are taken care of. 
So it is our intent to ensure that we are chipping into some of 
this deferred maintenance backlog, and, indeed, that was 
reflected in the request that we made in this budget submission 
and the Congressional justification that we submitted.
    So we do have a plan to ensure that we are ready to 
execute. Historically we have always been able to accomplish 
the mission, and I think that is a testament to the folks that 
we have working down in Louisiana and Texas, on these sites. 
But there is work that has to be done on an ongoing basis, and 
we think that funding that at appropriate levels is very 
important.
    Mr. Rush. What were some of the most important lessons that 
we learned from the operational test sale, in terms of 
evaluating the drawdown and sales procedures, as well as 
analyzing potential commercial infrastructure investments?
    Mr. Smith. So we learned a number of things. First of all, 
it was a $5 million test sale. We were successful in getting 
all five million barrels pushed to market. We did learn some 
things about some shortcomings. We noticed some issues with 
the--distribution group--or pipeline system that probably needs 
to be addressed. We also specifically identified a metering 
skid at one of the sites that, if--anything sold has to go 
through a single metering skid, so if you have two 
opportunities to move crude out of that site, you would have to 
do it sequentially, one after the other.
    That is a significant bottleneck, and something that we 
could address, and--just by putting in a new metering skid, 
would be able to significantly increase the capacity of that 
site. And these were things that we noted in our Congressional 
justification for the 2016 budget that we recently submitted.
    Mr. Rush. Now, the reduction in the 2016 budget, can you 
project the ramifications of that? Is that going to 
significantly affect, or drastically affect, your ability to 
achieve your mission?
    Mr. Smith. Well, we think that these things are important. 
One of the reasons why we did the test sale was to identify 
areas of improvement, bottlenecks, things that we had to do to 
improve the distribution capabilities of the Strategic 
Petroleum Reserve. It is a valuable asset, but you do have to 
maintain it, you do have to manage it, so we think that it is 
critically important to not only take care of the deferred 
maintenance that we are concerned about, but also to make 
specific upgrades, such as the additional metering skid, that 
would increase our ability to serve more than one offtake at a 
time. And that would, as a result, increase the Strategic 
Petroleum Reserve's ability to push crude into the market in 
the case of an emergency.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Whitfield. Gentleman's time has expired. Mr. Pallone, 
did you want to make an opening statement?

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Sure. Sorry that I was late, I was at the 
other hearing, on 21st century cures. I will try to cut back on 
it, but I did want to yield a minute to Mr. Welch, so, Mr. 
Chairman, I just want to say that I think I have made it clear 
that I am interested in working with you and Chairman Upton on 
energy legislation, but I am concerned about the format of 
today's hearing. I can't recall a time when this subcommittee 
has crammed two completely unrelated topics into one hearing, 
and I think it does a disservice to members, and to the subject 
matter, because both of these subjects are important, and 
really warrant not only separate legislative hearings, but also 
they should be preceded by more oversight.
    With regard to the specific proposals before us, I 
recognize they do not represent anything more than discussion 
drafts of potential legislative language that could go into an 
energy bill. However, as this efficiency title is currently 
constituted, I would not be in a position to support it, or to 
recommend that others support it. In particular, I am opposed 
to language in the discussion draft that repeals Section 433 of 
the Energy Independence and Security Act signed into law by 
President George Bush. Section 433 established groundbreaking 
energy efficiency performance standards for the design of new 
Federal buildings, and those Federal buildings undergoing major 
renovation, rightly ensuring that new Federal buildings be 
designed to result in decreased consumption of fossil fuels. 
The draft would prohibit from promulgating a final rule 
updating efficiency standards for gas furnaces until an 
advisory group completes an analysis and determination.
    And I certainly understand that there are concerns out 
there, but stakeholders have been working toward a resolution 
mutually agreeable to all parties. Now, however, some 
stakeholders apparently decided to try to do an end run by 
proposing this language, halting DOE's efficiency efforts from 
moving forward, and the draft sets up an opponent dominated 
advisory panel, and gives more weight to the anti-efficiency 
factors being examined in the analysis. In my opinion, this 
greatly sets back any progress made toward good faith efforts 
to sincerely resolve concerns with the DOE's proposal.
    The building code efficiency provisions in the draft is 
another area of great concern to me. As currently outlined, 
changes to DOE standards authority in this area would do great 
harm to what has been a very successful and impactful program. 
That said, I do want to make clear I do believe there is a 
sincere effort on both sides to try to find common ground, and 
I remain optimistic that we can develop a bipartisan energy 
package. We are early in our process, and there are many ideas 
from both sides of the aisle that have not yet been considered. 
In raising these issues up front, I hope that we can have a 
more concerted bipartisan collaboration moving forward.
    Mr. Chairman, last week the Obama Administration released 
its first installment of the quadrennial energy review. I know 
it was mentioned at a previous hearing by Mr. Doyle, and this 
is a great government-wide effort to look at key aspects of the 
Nation's energy infrastructure that contains many useful 
insights, including some recommendations that would require 
legislation. We need to review that report carefully, because I 
think it provides us with an opportunity for our committee to 
work closely with the administration to put together meaningful 
energy legislation that addresses the four areas of your 
architect of abundance framework, and that the President, I 
think, ultimately would sign.
    So let me thank you again for holding this hearing, for 
your hard work in bringing these provisions forward, and for 
your willingness to work with us to make this into a product 
that we might all be able to support. And I would like to yield 
the remainder of my time to Mr. Welch.
    Mr. Welch. Thank you very much, Mr. Pallone. Thank you, Mr. 
Pallone and Mr. Rush, for your leadership on energy efficiency, 
and I really am grateful to our chairman, Mr. Whitfield, and 
Chairman Upton, for their focus on this.
    Energy efficiency is such an area where we can work 
together and make real progress. It saves money, creates jobs, 
it is better for the environment. We have made progress, Mr. 
McKinley and I, in other sponsored legislation that President 
Obama is going to sign into law this afternoon, and it is only 
a beginning.
    What we know is that energy efficiency is literally the 
lowest cost electricity resource for utilities, and from 2008 
to 2012 new efficiency improvements from utility programs and 
appliance standards have avoided the need for more than 275 
power plants. So we have got an opportunity to focus on the 
common ground where, whatever the fuel source, less is more. It 
can be nuclear, it can be coal, it can be solar, if we find 
efficiency, we are going to put people to work retrofitting our 
homes and our commercial buildings. We are going to save on 
fuel bills, and we are going to do a significant improvement of 
the economy. So I am grateful to the bipartisan approach we 
have got, and there is work to be done, and I am glad this 
committee is going to do it. Thank you, Mr. Pallone, and I 
yield back.
    Mr. Whitfield. Gentleman yields back. At this time, 
recognize the gentleman from Texas, Mr. Barton, for 5 minutes.
    Mr. Barton. Am I asking questions or giving a statement?
    Mr. Whitfield. Questions.
    Mr. Barton. Questions. OK, I didn't know. I just got here. 
I have got two hearings going on, and I am still asleep because 
Mr. Doyle's baseball team is so good that we are getting up now 
before dark to start practicing to try to be competitive with 
them.
    Mr. Doyle. Got to get up earlier than that.
    Mr. Barton. Yes. Well, that is probably true. But arrogance 
sometimes leads to its own downfall, so Honorable Mr. Smith, we 
are glad to have you here today.
    I think you know that I have introduced a bill that would 
repeal the current ban on crude oil exports. It also has a 
section that requires the Department of Energy to conduct a 
study, and to send the results of that study to this Committee, 
and the Senate Energy Committee, within 120 days about the 
status of the SPR, what we should do with it. Do you know if 
the Department of Energy supports that part of the repeal bill?
    Mr. Smith. So, just to understand the question, 
Congressman, do we support the issues on export, or just 
support doing the study on the----
    Mr. Barton. The study. The study on the--I can make it a 
two part question.
    Mr. Smith. OK.
    Mr. Barton. Unless you just want to say yes, yes, which I 
will yield back to the Chairman.
    Mr. Smith. I want to make sure I understand the question.
    Mr. Barton. Yes. No, I have had some discussions off camera 
with the Secretary of Energy about repealing the crude oil 
export ban. My question to you, since this hearing is on energy 
efficiency, and what to do with the Strategic Petroleum 
Reserve, is whether the Department supports that part of the 
bill repealing the ban on crude oil exports that requires a 
study of the Strategic Petroleum Reserve, and that that study 
be reported to the Congress within 120 days?
    Mr. Smith. Yes. Well, thank you for the question, 
Congressman, and the clarification. So we certainly do support 
the idea of doing a comprehensive review of the Strategic 
Petroleum Reserve. In fact, that is a process that we already 
have underway. We, of course, will comply with the law as 
written. I would say that a comprehensive study that looks at 
infrastructure issues, that looks at subsurface issues, that 
looks at geologic issues, that looks at market issues, all the 
things that would help us come to some conclusions over the 
appropriate size and the scope of work that it needs to do to 
modernize the Strategic Petroleum Reserve. It would be 
difficult to do that in 120 days. That is----
    Mr. Barton. Do you have a timeframe that you would prefer? 
We wanted to get it back fairly quickly, but since our bill 
hasn't had a legislative hearing yet, we are very flexible.
    Mr. Smith. Right.
    Mr. Barton. Would 180 days be better? Would you like a 
year? What is the magic number?
    Mr. Smith. Well, 180 days would be better than 120 days. I 
think the estimate that we would make for doing a piece of work 
of that magnitude was several months, so it would be 
considerably longer than the current 120 days that you have 
proposed. But that said, we have got a great team, and we will 
accomplish what we can in the time that we are given. But in 
order to address what we think are fundamentally, and 
comprehensively a different set of conditions than we had when 
the Strategic Petroleum Reserve was initially put in place, 
back in the '70s, but that is actually a big piece of work----
    Mr. Barton. Right.
    Mr. Smith [continuing]. And we would like to make sure that 
we have time to get that right.
    Mr. Barton. When we put the SPR in place, we were importing 
lots and lots of oil, and oil production in the United States 
was going down. Today we are increasing our production, oil 
imports are going down, refined product exports are going up. 
Current law precludes the President from using the Strategic 
Petroleum Reserve, except in times of national emergency. He 
has some discretion in declaring that emergency, and Congress 
has had issues with past Presidents when they have declared it.
    What is your opinion of giving the President, or the 
Secretary of Energy, the discretion to perhaps actually make--I 
won't say routine sales of crude oil, but make it easier to 
sell crude oil in the world market when there is not a national 
emergency, given the fact our oil production is increasing like 
it is, and we have the potential--I am not saying we will ever 
do it, but we have the potential to be totally energy 
independent, and not import any crude oil at all?
    Mr. Smith. Right. Well, thank you for that question, 
Congressman. So the authorities to export crude to other 
countries would fall under the purview of the Department of 
Commerce, and of the Office of the President, so I dont demur 
answering on their behalf. What I can say is that we think it 
is extremely positive that we are, for the first time in 
decades, producing more oil domestically than we have to import 
from other countries. That has been I think a tremendous 
improvement, in terms of our energy security and economic 
development.
    I would note that we are still importing----
    Mr. Barton. Right.
    Mr. Smith [continuing]. 7.6 million barrels per day, so we 
still are importing significant quantities of oil here in the 
present time. But in terms of the authorities to export, I 
mean, that would be a question for Congress. We follow the 
statute, in that there are exceptions and waivers that have to 
be handled by Department of Commerce, and by the Office of the 
President.
    Mr. Barton. My time has expired, but it is refreshing to 
know that at least the Department of Energy wants to do what 
the Congress tells it to do.
    Mr. Whitfield. Yes, we are excited to hear about that.
    Mr. Barton. I am honored to hear that. With that, I yield 
back.
    Mr. Whitfield. Where would Mr. Pallone--Chair at this time, 
will recognize the gentleman from New York, Mr. Tonko, for 5 
minutes.
    Mr. Tonko. Thank you, Mr. Chair. Assistant Secretary Smith, 
in your testimony you indicated that DOE has started a review 
of the SPR, and you mentioned a few of the issues that DOE will 
examine, including the size, the composition, and the 
geographic location of the reserve. It sounds as if the reserve 
assumes it would largely keep the present overall structure in 
place, with perhaps some modifications. And maybe that is what 
we should do, but is the Department also going to re-evaluate 
whether maintaining a Strategic Petroleum Reserve is the best 
way to promote energy security?
    And might I just say, I don't doubt the need for emergency 
planning, and specific authorities for action in case of an 
emergency, given the importance of this resource to our 
economy, but with the changes in our oil markets, and private 
investment in infrastructure for oil and gas, and the changes 
in demand for different refined products, I am wondering 
whether the SPR, which we conceived in the midst of a very 
different environment, is still the proper overall structure. 
So can you address whether or not we are going to re-evaluate, 
whether we maintain that SPR?
    Mr. Smith. Well, thank you, Congressman, for that question. 
So, if you look at global oil prices right now, you see markets 
are currently very well supplied, and--as was noted by 
Congressman Barton from Texas, we are producing more oil 
domestically than we have in the past. We are producing more 
barrels domestically than we import from other countries, so 
some of those situations have changed.
    However, we do believe that the Strategic Petroleum Reserve 
does still provide a critical element of energy security for 
our nation. It is the largest energy stockpile in the world. It 
is, I think, an important tool that we have to handle not only 
disruption of physical barrels, but also the impacts that price 
increases might have on the U.S. economy.
    So in our study we will look at the size of the SPR. I 
think that is important to consider, what the appropriate size 
of the Strategic Petroleum Reserve would be. And we will look 
at infrastructure issues, we will look at fundamentally how the 
Strategic Petroleum Reserve operates. But I would say that it 
is certainly our conclusion, and my personal conclusion, as the 
official who oversees the site, that this is an important 
resource for national security, and we think that its core 
mission remains vital.
    Mr. Tonko. And in terms of its structure, you believe it 
will best serve us in the event of an emergency?
    Mr. Smith. Well, Congressman, that is something that we 
will evaluate in the study. I mean, there are structural issues 
that we can tackle, in terms of what infrastructure needs to be 
in place. We have made changes, in terms of, for example, 
setting up the Northeast Gasoline Reserve last year as a 
response to weaknesses that we saw in the aftermath of 
Superstorm Sandy in 2012. So there are steps that we are taking 
to say, well, we understand what the statute says, and we 
understand the design of the Strategic Petroleum Reserve.
    We are making steps as we go forward to ensure that we are 
using authorities that we have to ensure that the reserve 
remains relevant, and we will try to think broadly, in terms of 
doing a strategic review, so that we consider what other 
changes might be appropriate.
    Mr. Tonko. Thank you for that. And you also recommend that 
Congress update the definition of a severe energy supply 
interruption, to include criteria focused on disruptions in the 
global oil market, whether those disruptions result in a 
problem with U.S. oil imports or not. Would you elaborate on 
that thinking, please?
    Mr. Smith. Well, it is tied to a--I guess an observation 
has already been made. The Strategic Petroleum Reserve was 
created back in the '70s in a very different environment than 
the environment we have now. We operate under EPCA, and over 
the years, over the decades since the early '70s, the statute 
that we have now is a patchwork of changes, and addendums, and 
amendments that have been put in place over the years. So there 
are some ambiguities about authorities. There are some issues 
of regional resources perhaps being deployed in a way that is 
more appropriate for a national resource.
    And so it is our view that, as we look at the language that 
authorizes us to use the reserve, given that that has been 
changed piecemeal, bit by bit, over decades, starting from a 
point which is very structurally different than the global 
markets right now, we do think it would be judicious and 
appropriate to take a look at--all of the language that gives 
authorization, and streamline that, and make it suitable for 
today's markets.
    Mr. Tonko. Thank you very much, and with that, I will yield 
back, Mr. Chair.
    Mr. Rush. Mr. Chair?
    Mr. Whitfield. Sorry, Mr. Rush?
    Mr. Rush. Mr. Chairman, I just wanted to--the Committee, 
and all the--there is a gentleman in the room, on the left side 
there, white hair, very handsome gentleman, that is former 
member Dave McCurdy from Oklahoma. He is the president of the 
American Gas Association, and I just didn't want him to sit in 
this room without us giving him his due. He was a fine 
gentleman, and true friend, and just an outstanding member of 
Congress. So he is there. The handsome guy with the white hair.
    Mr. Whitfield. And we know he was an outstanding baseball 
player as well for the----
    Mr. Rush. I don't know why--is there a provision that he 
can join your side and be on your team?
    Mr. Whitfield. Yes, absolutely.
    Mr. Rush. Because you are going to need him. And----
    Mr. Whitfield. He looks like he is getting younger, to me, 
every single day. No, we are glad you are here. Thank you so 
much, and thank you for reminding us of that.
    At this time I would like to recognize the gentleman from 
Texas, Mr. Olson, for 5 minutes.
    Mr. Olson. I thank the Chair. And good morning, and 
welcome, Mr. Smith. I know you are a fellow Texan, grew up in 
Fort Worth. You served our country, a West Point graduate, in 
the Army. Thank you for your service. I promise I won't talk 
about the state of affairs between your Army and my Navy, and 
that big football game that happens every year, but I do want 
to talk about the state of affairs of the SPR.
    It is a big part of my home life. The Bryan Mound is about 
20 miles down the road from my home, and the Big Hill is about 
an hour east in Winnie. In your QER, DOE talks about some big 
changes for the SPR. You want billions of dollars more spending 
to fix the system. And, as has been mentioned, our world has 
been turned upside down these past years with this energy 
production. We have plenty of crude here in parts of the 
country where we usually have to import or anticipate a 
shortage. I would like to delve into some of those issues, but 
I first have a question on the specific type of crude in the 
SPR.
    These days we are barely exporting light crude. Much of the 
crude we do import--I am sorry, importing light crude. Much of 
the crude we do import is heavier. It seems that this crude is 
most at threat of a supply disruption. And with the huge amount 
of oil we have here at home, are you happy with the current 
balance of light versus heavier crudes in the SPR, as you 
mentioned, I think, the balance is between 260 billion barrels 
of light crude, sweet crude, and then 430 barrels of sour, 
heavier crude. Are you happy with that balance, and how would 
you adjust it if you are not happy with it?
    Mr. Smith. Well, thank you for the question, Congressman. 
So, indeed, our balance between sweet and sour is 260 for sweet 
barrels, and then 430 for sour. As we go through our process of 
looking at our long term strategic review, I think that is 
something that we will be considering, along with 
infrastructure. There are issues of cavern storage, and how we 
blend different types of crudes, and what caverns we would 
place them into. So, as you note, the mix of crude that 
refiners are using in the Gulf of Mexico has changed over the 
years.
    You know, late '90s, early 2000s, refiners put lots of 
money into upgrading refineries to run heavier crudes. Now we 
are seeing that there are more light crudes that are becoming 
available here as the Bachman in South Texas comes online. 
These are all things, I think, that we have to consider. I 
wouldn't categorically state that right now we think we have 
the right balance. In fact, the very reason why this Committee 
is encouraging us to do the study, and--that we have already 
embarked on that path is that we think that we need to address 
these issues. We think they are very important.
    Mr. Olson. Thank you. This is not news, but our crude 
supplies, and even the direction of some pipelines, have 
changed in recent years. For refined products, we are a major 
global supplier now, and at the same time some allies remain 
very reliant on imports. In some scenarios, an SPR release 
might not be as effective as it was in the past. My question is 
this, with this new market reality, should we be focused on the 
SPR here at home, and making sure our allies upgrade their 
reserves overseas? Allies like South Korea, where you served 
during the Army. Anything we should do with our allies to make 
sure they have their own SPRs?
    Mr. Smith. Well, thank you, Mr. Congressman.
    Mr. Olson. I will take the promotion.
    Mr. Smith. OK. Apologies to the Chairman. So I--just 2 
weeks ago--so we work very closely with the IEA, the 
International Energy Agency, that helps us align petroleum 
reserves throughout the world. I will make a couple of notes on 
that. Just 2 weeks ago I was in Szechuan Province, Chengdu, 
China at an IEA event, and then a few days later I was in New 
Delhi, India at a separate IEA event. We have also spent time 
in China looking at, you know, creating a stronger 
communication between ourselves and the officials in China who 
manage their reserves. So we have a very strong understanding 
that, you know, we can't do this by ourselves. We wouldn't 
endeavor to do it by ourselves. I think it is a more powerful 
tool when we are part of the potential to use the Strategic 
Petroleum Reserve as part of a collective action.
    So indeed we are taking steps along those lines. We think 
these are important steps to take. And, in fact, we have, just 
last year, signed a historic agreement with China to create a 
greater sense of transparency between ourselves and China so 
that we understand issues there, with regard to their energy 
stockpile. We think these are important steps, and they are 
ones that we continue to push on.
    Mr. Olson. Thank you. Out of time.
    Mr. Whitfield. Chair recognizes at this time, Mr. Doyle of 
Pennsylvania for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman. Mr. Smith, thank you 
for testifying before our Committee today. We all know how much 
the landscape has changed since 1975, when we first passed the 
legislation to create the SPR. And I was glad that you 
mentioned the recently released QER in your testimony. It 
suggests that energy security should be more broadly defined 
than just oil security. What other sources do you think should 
be included, and how should we protect them?
    Mr. Smith. So, to make sure I understand the question, 
Congressman, I have spoken to recommendations in the QER that 
had to deal with the Strategic Petroleum Reserve, and you are 
thinking how do we think about energy security more broadly?
    Mr. Doyle. Yes. The report suggested that we shouldn't 
think of it as just oil security, but we should think of it 
more broadly. So is it suggesting security measures, or how we 
view other sources, natural gas, or whatever?
    Mr. Smith. Well, with regard to the petroleum reserve, the 
scope of the study that we have discussed here would be 
specific to the petroleum reserve, including crude and refined 
products. So the scope of that discussion wouldn't change. What 
I will say is that we do work very closely across offices 
within Department of Energy. So there are four applied offices 
within DOE. I run the Office of Fossil Energy, which includes 
oil, natural gas, clean coal, carbon capture and sequestration, 
the Strategic Petroleum Reserve. There is a separate office 
that looks at energy efficiency and renewable energy.
    Mr. Doyle. All right.
    Mr. Smith. A separate office that looks at--Office of 
Electricity, and a separate office that looks at nuclear 
energy. So we do work very closely. In fact, one of the things 
that Secretary Moniz has integrated since he has come to the 
Department are cross cutting teams to ensure that, in our 
budgeting process, we are very explicitly creating teams that 
break down those silos. So when we are thinking about energy 
security, and we are thinking about job creations, when we are 
thinking about all the important things about energy 
reliability, and reducing greenhouse gas emissions, that we are 
breaking down those silos, and we are thinking across borders. 
So that is something that is already in place, and we think is 
being expressed in the way that we are putting together our 
budgets and executing our programs.
    Mr. Doyle. Thank you. In your testimony you also 
highlighted the QERs recommendation to consolidate the 
authority for the Northeast Home Heating Fuel Reserve and the 
Northeast Gasoline Supply Reserve into a single unified 
authority. And, additionally, you suggested that these release 
authorities should be aligned and tailored to the purposes of a 
product reserve, rather than that of a crude oil reserve. Can 
you expand upon why you think this consolidation is beneficial, 
and how the release authority would be different for a product 
reserve, rather than a crude oil reserve?
    Mr. Smith. Well, thank you, Congressman, for that question. 
So Part B, Title 1 of EPCA dictates the steps we would have to 
take in order for the Northeast Gasoline Reserve, which is part 
of the Strategic Petroleum Reserve. That language is very much 
geared towards a national shortage, and very much geared 
towards crude oil. It is not geared towards a regional event, 
the type of event that we saw in the aftermath of Superstorm 
Sandy, and it is not geared toward the needs of communities who 
are suffering shortfalls or shortages in a supply of products. 
So we think it would be appropriate to amend that so that the 
triggers for releasing the gasoline reserve would be 
appropriate for the types of emergencies you might see there, 
so that, we bought this insurance policy against shortages. We 
want to make sure that we are able to deploy that insurance 
policy in ways that are appropriate for the types of 
emergencies that it is meant to cover.
    With the NEHHOR, the Northeast Home Heating Oil Reserve, 
there are a couple triggers that might trigger these with 
NEHHOR. One is that a differential in the current price, that 
it had to exceed a moving average by 60 percent. We think that 
is a tremendously difficult bar to make. And, in fact, once you 
have gotten to that point, you have probably gone beyond the 
point which the reserve would be useful. There is also language 
that says a regional supply shortage of significant scope and 
duration would trigger the ability to use NEHHOR, which we 
think is probably a bit more appropriate.
    But between the NEHHOR, the Northeast Home Heating Oil 
Reserve, the crude reserve national resource in the Gulf of 
Mexico, the SPR, and the Northeast Gasoline Reserve, and any, 
you know, future thing that we might have for products, we do 
think that we need to go back and, you know, again, as we 
mentioned, this patchwork of legislation that has been created 
over the years, we think it would be appropriate to look at all 
of that, and make sure that it is streamlined for the markets 
of today, as opposed to the markets of yesterday.
    Mr. Doyle. Great. Thank you very much. I yield back.
    Mr. Whitfield. At this time the Chair recognizes the 
gentleman from Ohio, Mr. Latta, for 5 minutes.
    Mr. Latta. Well, I thank the Chairman, and I thank you for 
having this hearing today, and I appreciate our witness and his 
testimony this morning. If I could just kind of go back to a 
question that the Chairman asked initially, and then I think 
part of the answer was dealing with the infrastructure side. 
Did I understand you said something about the direction of the 
pipeline? Did I understand you to say that?
    Mr. Smith. Yes, Congressman. So, as we have created a lot 
more crude--so we mentioned that we are producing more crude 
domestically than we import, and that is for the first time in 
many years. We have a lot more crude that is coming from North 
Dakota, so it is going from north down south. We have a lot 
more crude that is being produced in South Texas, out of the 
Eagle Ford Shale. And so previously you had pipeline networks 
that--you had the Strategic Petroleum Reserve in the Gulf of 
Mexico, and you could push oil from the SPR in the Gulf of 
Mexico up to the rest of the country. Now you are seeing some 
of those pipelines have reversed because they are bringing 
crude from new sources of production, in North Dakota and in 
Texas, and it has come into the Gulf of Mexico.
    And so that complicates the original construct of the SPR, 
which was to have this centrally located large stockpile of 
hundreds of millions of barrels that you could simply, through 
pipelines, push out to the rest of the country. Given that some 
of those pipelines were reversed, it makes us re-think some of 
those things, and also makes the waterborne transport of crude 
a lot more important than it probably was back in the '70s.
    Mr. Latta. Now, when you look at your strategic overall 
plan that you are looking at into the future, is that something 
that you are really going to emphasize, then, on the direction?
    Mr. Smith. Indeed, Congressman. When we think about what 
infrastructure you need, what marine transport you need, what 
pipeline systems you might be employing, what should be the 
balance of crude, what should be the size of the Strategic 
Petroleum Reserve, what types of crude the refiners are using, 
those are all factors that we will be considering when we 
undergo this comprehensive review. And it will help us 
crystallize these issues, and make very specific 
recommendations about investments that we need to make to make 
sure that we have got the reserve that is suitable for the 
markets of today, as opposed to the markets of the early '70s.
    Mr. Latta. Thank you, because--and also you had mentioned 
earlier, in your response, that we have about 7.6 million 
barrels of oil that we are importing every day today, and also 
we all know it has been alluded to this morning what has 
happened with our shale development in this country, and really 
what we have been able to do in this country to help ourselves. 
But in light of all that, if something would happen on an--if 
there would be an international supply disruption at this time, 
are we prepared to meet that with the current setup of what we 
are with the SPR?
    Mr. Smith. Well, thanks for the question, Congressman. So, 
we have noted many of the shortcomings, the market has changed, 
some of the pipelines go in different directions, but, one 
thing I can say is that, not only through the test sale, but, 
through the release that we had for the disruption that came 
from the unrest in Libya, that the team of professionals we 
have running the Strategic Petroleum Reserve down in the Gulf 
of Mexico, and Texas, and Louisiana, have always been 
successful at pushing oil into markets, and in doing the things 
that the SPR was meant to do.
    Now, that is not to say that, going forward, we don't have 
some concerns. We do think that there is some modernization 
that needs to occur. We do have some deferred maintenance that 
we are concerned about, and we want to make sure that that 
mission readiness continues. But we are focused on remaining 
ready. We utilize the resources that we have in our disposal. 
But going forward, we do have some serious concerns, which is 
the reason why we have asked for some increase in budgets in 
this Congressional justification for the 2016 budget, and that 
the study that we are going to be undertaking will be looking 
at issues of modernization. We think those are important 
points.
    Mr. Latta. Thank you. Mr. Chairman, I yield back the 
balance of my time.
    Mr. Whitfield. At this time the Chair recognizes the 
gentleman from California, Mr. McNerney, for 5 minutes.
    Mr. McNerney. Thank you, Mr. Chairman, and thank you, 
Assistant Secretary, for testifying this morning, and for your 
work in this area, and for all the constant field work that you 
do. Now, one thing you mentioned in your opening remark was the 
aging drawdown infrastructure by saying that it needs more 
maintenance--what specifically would be the best actions to 
take, how much would they cost, and could that be paid for by 
drawdown profits?
    Mr. Smith. So I will talk a bit about the first part of the 
question, which is what we think needs to be done, and then I 
will try to address the second part of your question. So in 
terms of deferred maintenance, I think every year we get an 
appropriate, we take that appropriate, we do what we need to do 
to in order to remain mission ready. And mission readiness is--
this is an energy security asset, and so the team in the Gulf 
of Mexico is focused on mission readiness.
    So what we need to do in the immediate term, for the budget 
that we are requesting for 2016, there are issues with valves, 
there are issues with compressors, there are issues with pumps. 
There are some well bore work-overs that need to be 
accomplished. We have included funding in our request for the 
transfer metering skid at Big Hill, which would allow them to 
push oil in two different directions to two different buyers at 
the same time, as opposed to the one bottleneck that they have 
currently, where they can only move oil to one buyer. We think 
in the immediate term that these are important things to 
undertake, in terms of ensuring that we are taking care of that 
deferred maintenance, and that we continue to be ready.
    Going forward, we have a modernization effort that is 
referred to in the Quadrennial Energy Review. That would have 
to do deal with further surface infrastructure for life 
extension. So again, this was an asset that was put in place 
decades ago. If you are going to move decades into the future, 
there are lots of things you have to do to make sure that 
equipment that is getting to its sell by date is getting 
renovated, it is getting fixed, it is getting replaced, in some 
cases.
    So that would be surface infrastructure, everything we need 
to move oil around the surface, and that is the pumps, and 
valves, and all that equipment to move oil around. It would 
include brine disposal caverns, so we use brine to push oil and 
out of the caverns, and so there would probably be some new 
brine drive caverns that we would have to work on. And then 
disposal wells as well. So, brine has to be disposed of when it 
is utilized, and so those are things that would be included in 
the life extension.
    Beyond that, there are some other issues to deal with, 
marine capacity, marine distribution. That is also envisioned 
in the Quadrennial Energy Review, and will be considered in the 
strategic study that will be undertaken.
    Mr. McNerney. OK. Well, last year it said you grossed $468 
million by your test sale. What was the average price per 
barrel in that sale?
    Mr. Smith. Congressman, I don't know that number off the 
top of my head. I would be happy to respond for the record. But 
it was consistent with whatever the market price was at the 
time. It was higher than it is today.
    Mr. McNerney. Higher than today, but is it higher than it 
was when the oil was purchased and put into the reserve?
    Mr. Smith. Well, the oil is purchased over time, right, so 
the----
    Mr. McNerney. Right.
    Mr. Smith [continuing]. Comparison that I can make is that 
when we did the test sale we sold 5 million barrels. Receipts 
from that sale were somewhere in the order of magnitude of $500 
million. We took part of those funds and used them to create 
the Northeast Gasoline Reserve, which is a million barrels of 
gasoline that we have in three sites in the northeast. That was 
the reserve that we created to respond to Superstorm Sandy. We 
had enough left over after that to replace almost all of the 
oil that we had sold in the first place.
    So we sold at a much higher level than we bought back, 
which means we sold the oil, and created a new reserve, 
including all the storage, and paying for the maintenance and 
operation on a go forward basis, and still had enough left to 
buy back all the oil that we sold in the first place. So it was 
good timing, and good execution on----
    Mr. McNerney. OK. Well, that sort of answers the second 
part of my first question that you didn't answer the first time 
through. OK. So, with that, I will yield back, Mr. Chairman.
    Mr. Whitfield. Gentleman yields back. At this time 
recognize the gentleman from West Virginia, Mr. McKinley, for 5 
minutes.
    Mr. McKinley. Thank you. Let me get the first question out 
of the way as quickly--I want to hear from you whether or not 
you support what Secretary Moniz came and testified to us back 
in January, I believe it was, that the operation of the Nettle 
facilities at Morgantown and Pittsburgh will remain as is into 
the future. In fact, we talked about a 10 year time period. Do 
you agree with that?
    Mr. Smith. Yes.
    Mr. McKinley. OK. So I don't need to go to part two 
question on that. So the other issue is, building back off the 
question having to do with the gasoline storage in the 
northeast, I am just curious about that, because I know the 
crude can be stored for some period of time, but there is a 
shelf life for gasoline. Can you share with us a little bit 
about how often you are turning that over? Because that 
gasoline can't stay there forever.
    Mr. Smith. Right. Thank you, Congressman, for that 
question. So we didn't go and construct new tankage. We rented 
tankage that is in place, and so these are in existing 
commercial facilities, so part of our maintenance that we are 
paying for all the time includes ongoing turnover over that 
product, so----
    Mr. McKinley. So it is being refreshed, is what you are 
saying?
    Mr. Smith. Yes, Congressman.
    Mr. McKinley. OK, that is fine, so we don't have that 
issue. Because I know there are serious problems with gasoline 
over a period of time if it is not turned over. So let me go to 
the next question, that has to do with this storage of the 
crude in the salt minutes, primarily down, I guess, in the Gulf 
region, having faced a lot of the pushback, and understandable, 
the pushback of the brine discharge from the operation, and the 
Marcellus and the Utica operation that the environmentalists--
and understandably. I would share the concern, what are we 
doing with this brine reserve that is coming back up again?
    So I am curious, since you have produced somewhere in the 
neighborhood of close to 700 million barrels of brine, what 
would you do with it?
    Mr. Smith. Thank you for that question. So we have got a 
very experienced team of environmental professionals that are 
part of the Strategic Petroleum Reserve that ensure that we are 
complying with all state, local, and Federal regulations in 
terms of disposal of brine. We do have brine drive caverns in 
place that we use to manage the brine. We need the brine to 
push the oil out of the caverns.
    Mr. McKinley. So when it comes back up, you are putting it 
someplace--mechanically, I want to be able to be clear, not 
talk in 30,000 feet. When it comes back out, where does it go?
    Mr. Smith. It probably would be good to answer that 
question for the record, Congressman, because I want to make 
sure that we get all the details correct. But what I can say is 
that that is an operation that we have got decades of 
experience managing, that we are managing consistent with all 
the state and local regulations.
    Mr. McKinley. How do you deal with--apparently there are 
some issues in the salt mines with structural integrity that is 
breaking down, in some cases, and obviously, as you know, crude 
is not typically found in a salt environment, so you are going 
to have some interaction between the chemical composition of a 
crude oil and the salt in the walls of the container. How does 
this work in the breakdown? What are we doing to assure us that 
we have long term stability in our storage with our reserves?
    Mr. Smith. Well, we do have an extensive testing program 
that is looking at sampling from a statistical sample of the 
caverns on an ongoing basis, so we have a very granular and 
fine understanding of the quality and the state of the crude 
that we have in all of the caverns. Generally the reason why 
you store crude in the salt caverns is the sale is not soluble 
in crude, whereas it is soluble in water, right? So you use the 
water to actually create the space in the cavern, and then you 
fill that with crude, so you have got essentially these 
enormously large pressure vessels that are full of crude, but 
the salt itself is not soluble in crude, which is what makes it 
very appropriate for storage.
    Mr. McKinley. So you are indicating there is no chemical 
interaction between the two?
    Mr. Smith. What I am saying is----
    Mr. McKinley. Careful with that.
    Mr. Smith. I am saying that salt is generally not soluble 
in crude, and that we have an extensive testing program so that 
we have a very fine understanding of the state of the crude, 
sweet and sour, all the various caverns, 60 caverns throughout 
four different sites, so that, on an ongoing basis, we always 
understand exactly what crude we have in the caverns, we know 
what refineries they are suitable for, and that we are 
consistent with all the standards for delivering those 
refineries, both----
    Mr. McKinley. OK. In the timeframe that I have left on--is 
that apparently, as I said earlier, we are finding some 
developing structural integrity problems--can you give us a 
sense of how many of those--if we are storing close to 700 
million barrels in crude, how much of that is in areas that are 
questionable?
    Mr. Smith. Well, what I can say is that every cavern that 
we have crude in right now is certified. It is understood it is 
safe, all right? We have had to decommission a couple caverns 
over the last few years. Our biggest challenge is that you are 
drilling through cap rock into these salt structures, and that 
over time they do move, so they pinch the well bores, they 
compress the well bores, they deform the well bores. And so, on 
an ongoing basis, we have got a program of remediation where we 
are having to inspect the well bores on an ongoing basis. And 
part of the funds that we had requested for this budget period, 
increasing funding from last year to this year, was to ensure 
that we are able to do the appropriate number of work-overs.
    One final thing I will say is that if there is an issue of 
safety in any cavern, it means we don't operate that cavern. So 
we don't operate any cavern that is going to create an 
environmental issue. We don't operate any cavern that is going 
to be a--create a safety issue. We decommission those caverns 
if they create a----
    Mr. McKinley. OK. If you can get back to me on--I am over 
on time. If you could get back to me on those two answers that 
left--one was percent, and the other question.
    Mr. Smith. All right. I would be happy to.
    Mr. McKinley. Thank you very much.
    Mr. Whitfield. At this time the Chair recognizes the 
gentleman from Vermont, Mr. Welch, for 5 minutes.
    Mr. Welch. Thank you very much, Mr. Chairman. Mr. Smith, 
thank you. The Strategic Petroleum Reserve has been with us for 
a while, and can perform a number of very useful functions, 
including taking some of the pressure off the spike in gas 
prices when consumers are getting hammered. In fact, we passed 
a law, that I was one of the co-sponsors of, to suspend 
shipments, this is back in '08, suspend shipments to the SPR 
because gas was 3.73 a gallon. And, in fact, the evidence 
indicated that it was about--adding about a quarter at--of a 
cost--a quarter a gallon at the price of the pump. Obviously, 
we are in a different situation now, and as we have re-filled 
it, we are paying less than we were paying then. What has been 
the experience of SPR with respect to how it can have an impact 
on the price that consumers pay at the pump? I know that is not 
its primary objective, but it is an incidental effect.
    Mr. Smith. Well, thank you, Congressman, for that question. 
So I guess--two separate issues. So one of the things that the 
Strategic Petroleum Reserve, just its existence, but also its 
utilization in a crisis, can do is have an impact not only on 
ensuring that we have appropriate supply in a disruption, but 
also on global oil markets. I will note that global oil markets 
and global crude markets are different. You do have an 
internationally fungible global crude market, and an 
internationally fundable global product market. We import and 
export product. In fact, we are a net exporter of refined 
products.
    So if the question is, when we are filling the caverns, do 
we have an impact on prices, we just bought five million 
barrels to replace the barrels from the test sale. We kept an 
eye on that as we made that announcement, and we didn't see an 
appreciable impact on prices. We are concerned about impacts on 
consumers, so that is something that we keep an eye on.
    Mr. Welch. One other question. The quadrennial energy 
review mentions that Congress should update the SPR release 
authorities to allow it to be used more effectively to prevent 
economic harm in emergencies. Do you recommend any specific 
legislative steps that are needed in order to accomplish that?
    Mr. Smith. Thank you for that question, Congressman. So, 
indeed, one of the disconnects well, first of all, to reiterate 
a point that I had an opportunity to make earlier, we operate 
primarily under EPCA, which is, right now, after decades, is a 
patchwork of amendments, and addendums, and changes. So we do 
see a disconnect between the market of today and the market 
that was perhaps foreseen back in the early '70s. So changes in 
the legislation and authorities, that would allow us to be more 
proactive with the petroleum reserve would be welcome. Changes 
that would centralize some of the authorities so that, right 
now we have different authorities for regional product 
reserves, and the Strategic Petroleum Reserve.
    And, importantly, they are in some cases, for example, the 
Northeast Gasoline Reserve is managed under Title B, Section 1, 
and that is a national standard, so you have a regional reserve 
for products that would be released based on a standard that is 
set for a national reserve that has crude in it. And so we 
think that addressing all those issues would be positive to 
make sure that that is its effect.
    Mr. Welch. Well, we would welcome your specific 
recommendations on how best to do that.
    Mr. Smith. I really look forward to the opportunity to work 
with the Committee on that.
    Mr. Welch. All right. Thank you. I yield back.
    Mr. Whitfield. Chair recognizes the gentleman from Ohio, 
Mr. Johnson, for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman, and Assistant 
Secretary Smith. Thank you so much for being here with us 
today. A couple of quick questions on a little bit of a 
different subject, then I will get back to some questions about 
the QER. Are you confident that your department is treating 
applications by Canadian LNG companies consistently with NAFTA 
obligations?
    Mr. Smith. Thank you very much for that question, 
Congressman. So we currently have two applicants for--two 
Canadian applicants before the Department for authorization to 
export liquefied natural gas. To be clear, what we authorize 
is--we give the applicant the authorization--or we rule on 
their application to export the molecule. Other entities look 
at environmental issues, including the FERC. So we have got two 
applications that are before us right now. So the commitment 
that we have made is that we are going to treat applicants in 
Canada, applicants in Mexico, and applicants in the United 
States in a way that is open, it is transparent, it is fair, it 
is consistent.
    So under Section 3 of the Natural Gas Act, we are compelled 
to make a public interest determination for any natural gas 
that is exported from the United States. It is our reading of 
that statute that that applies to natural gas that might be 
exported via Canada, via Mexico, or via the United States. So 
whether you are a mile north or a mile south of that border, we 
have to do that public interest determination.
    Mr. Johnson. I understand that, but it--I guess I am a 
little confused, because it is my understanding that that is 
not being applied in the case of Mexico, but it is being 
applied in Canada. And are you concerned that Canada could, in 
fact, exercise jurisdiction over the export of LNG derived from 
Canadian natural gas for U.S. projects, such as Jordan Cove and 
Oregon LNG? And the reason that I ask this question is because 
they are experiencing the same slow rolling, slow moving 
process for liquid natural gas export permits that American 
companies are.
    Mr. Smith. Right.
    Mr. Johnson. And it is going to come to a head at some 
point.
    Mr. Smith. Well, I won't speculate on what the Canadian 
government is going to do. I think Canadian government is going 
to do what is appropriate for the citizens of Canada, just as 
we are doing what is appropriate for the----
    Mr. Johnson. Yes, but it could have dire implications for 
here at home, because a lot of the gas that we have here at 
home, in the Marcellus and other places, are destined to go to 
places like Canada. And so it does have economic implications 
here at home.
    Mr. Smith. Well, indeed, Congressman, and as we make 
these--well, first, I wouldn't concur with the characterization 
of this process, slow rolling. I mean, we have already----
    Mr. Johnson. We can debate that, because they have been 
sitting there for years, and there are 38, only five of them 
had been addressed. We were assured by Secretary Moniz that 
these were going to be looked at more quickly, and we are not 
seeing LNG export permits being granted.
    Mr. Smith. Well, indeed, Congressman, we are. We have 
authorized 5.7 billion cubic feet of natural gas----
    Mr. Johnson. How many permits have you authorized?
    Mr. Smith. For four different----
    Mr. Johnson. Four out of 38. Mr. Smith, in my view, that is 
slow rolling, when America's economy is dependent upon the 
jobs, and the energy independence that this brings.
    Mr. Smith. Well, Congressman, right now there are zero 
applicants sitting in front of us for a decision right now. 
There is an important process that these companies have to go 
through that----
    Mr. Johnson. Well, you know why that is, right? You know 
why that is? They are not going to put the hundreds of millions 
of dollars into doing the environmental assessments and the 
FERC process when they know these permits are going to sit in 
the Department of Energy for extenuating periods of time. They 
have got to have some idea that they are going to get a return 
on their investment. But----
    Mr. Smith. In fact, they are spending millions of dollars 
to go through those process, because they are going through 
that FERC process. So we work very closely with FERC. As those 
applicants have finished that process, then they come to 
Department of Energy. The last application that we got that 
came out of FERC, we turned that around in 1 day.
    So the companies will make the decision whether to either 
spend the money on the environmental work or not, and that is 
up to the companies. The market will decide that. As the 
companies make those investments, as they get financing, as 
they sell the gas, they will then come to the Department. Once 
that work is done, it puts us in a situation where we can make 
that----
    Mr. Johnson. My time is expired almost. Point of 
clarification, then. Are you telling me that the roughly 33 
permitting applications that are sitting in the Department of 
Energy, that none of that has gone through the FERC process, 
and that none of that is waiting on the Department of Energy 
for action?
    Mr. Smith. Those applicants that have gone through FERC, 
that have completed the re-hearing process, have come to us, 
and we have made decisions on those applicants.
    Mr. Johnson. So you are saying that none of those other 33 
are waiting on the Department of Energy?
    Mr. Smith. The rest of those 33 are doing all the other 
work that they have to do to complete these decadal multi-
billion dollar projects. They are big projects, and they do 
take some time, but we are moving expeditiously on this. We are 
getting these applications out as we are ready to make the 
decisions because they have done the work. They come to us, and 
we write the orders.
    Mr. Johnson. Sorry for exceeding my time, Mr. Chairman. I 
yield back.
    Mr. Whitfield. At this time the Chair recognizes the 
gentleman from New York, Mr. Engel, for 5 minutes.
    Mr. Engel. Thank you very much, Mr. Chairman. Welcome, Mr. 
Secretary. New York and the northeast region of the U.S. are 
particularly vulnerable to gasoline disruptions as a result of 
hurricanes and other natural events, and Hurricane Sandy, or 
Superstorm Sandy, in 2012 was a good example of that. It caused 
widespread issues related to the availability of gasoline.
    In response, to help build a more secure and resilient 
energy infrastructure, the Energy Department did establish the 
first Federal regional refined petroleum product reserve, 
containing gasoline. The reserve, I am told, currently holds 
one million barrels of gasoline to help strengthen regional 
fuel resiliency in the northeast. So let me ask you if you 
could please talk about efforts related to the setup and 
operation of the northeast reserve. Did you have to overcome 
any unforeseen challenges, and are there any issues that have 
yet to be resolved?
    Mr. Smith. Thank you, Congressman, very much for that 
question. So, as you pointed out, the establishment of the 
Northeast Gasoline Reserve was an important step that we took 
after some of the disruptions that we noted in Superstorm 
Sandy. So, as a result of that, we created a reserve in the 
northeast that would have gasoline in place. That includes 
700,000 barrels that are stored in the New York Harbor area, 
and that is in two separate facilities. We have 200,000 barrels 
that are in a terminal in Massachusetts, and then 100,000 
barrels that are stored at terminals south of Portland, Maine.
    So those three different geographic locations make up the 
Northeast Petroleum Reserve. The funding that we used for 
purchasing the gasoline, we also used to procure storage 
capacity, and maintenance, and ongoing expenses for the 
reserve. So that the resources are in place. We have put in 
place all of the IT, and the procedural systems that we would 
need to have in place in order to actually move those barrels 
out into the market in the case of a disruption.
    We worked very closely with potential buyers of gasoline 
out of those reserves to ensure that we are, on an ongoing 
basis, exercising the capabilities to make sure that not only 
have we purchased this insurance policy, but we are ready to 
use it, and to deploy it in case of a future emergency. So that 
is the steps that we have taken to date.
    Mr. Engel. It is also my understanding that the DOE 
operates a network of pipelines as part of the Strategic 
Petroleum Reserve, including the Northeast Reserve, so I would 
like to know a bit more about that. Do you have available 
information on how many miles of pipelines does DOE operate as 
part of the SPR?
    Mr. Smith. I don't have that number off the top of my head, 
Congressman, but I would be happy to take that question for----
    Mr. Engel. And get back to me? How is that system managed? 
Can you help me understand a little more about----
    Mr. Smith. Al right.
    Mr. Engel [continuing]. Management of that system?
    Mr. Smith. So the Strategic Petroleum Reserves--our Deputy 
Assistant Secretary, Mr. Bob Corbin, is based here in 
Washington, D.C. He works very closely with me. We have the 
management office down in the Gulf of Mexico that has a center 
in New Orleans that oversees those operations. And so, between 
that operational center in New Orleans, and our center here in 
Washington, D.C., we oversee all the activities of the 
Strategic Petroleum Reserve, including the Northeast Home 
Heating Oil Reserve, and the newly created Northeast Gasoline 
Reserve, is all managed by the SPR.
    Mr. Engel. Is the safety of the pipeline network subject to 
oversight by DOT's Office of Pipeline Safety?
    Mr. Smith. So one clarification I will make, because there 
is not an extensive pipeline network that is actually owned and 
maintained by the SPR. Again, I will be happy to give some 
details of that question for the record, to ensure that we are 
being clear on that. But we certainly are complying with all 
state and Federal regulations for all assets that we manage.
    Mr. Engel. But help me to understand who is responsible for 
regulating those pipes.
    Mr. Smith. So if the strategic petroleum has a release that 
goes into an existing commercial pipeline network, then that 
pipeline would be operated and regulated by whatever the 
appropriate Federal and State statutes oversee that 
infrastructure. Just like if we put crude into a barge, and we 
sell it to someone who is going to take that water-borne to 
another location, then there would be a federal, state, and 
local regulations for those transportation assets, even if we 
don't own them.
    Mr. Engel. OK. Thank you. Thank you, Mr. Chairman.
    Mr. Whitfield. At this time we will recognize the gentleman 
from Texas, Mr. Flores, for 5 minutes.
    Mr. Flores. Thank you, Mr. Chairman. Mr. Smith, thank you 
for your testimony today. Going to the QER for a minute, the 
QER recommends that Congress authorize an additional $1 \1/2\ 
to $2 billion to increase the incremental distribution capacity 
of the SPR. That request hasn't appeared in front of Congress. 
Can you tell me why?
    Mr. Smith. Well, thanks for the question, Congressman. So 
in our 2016 budget request, you know, we did have some funds 
for maintenance issues within the Strategic Petroleum Reserve. 
It did not include these recommendations from the QER. And, 
indeed, as you note, the QER was just released, right? So, we 
look forward to working with Congress to refine further details 
on that, but the QER literally is hot off the presses as of 
last Tuesday.
    Mr. Flores. OK. Thank you. And the QER also says that the 
DOE will analyze the need for additional or expanded regional 
product reserves, in particularly like the one you talked about 
in the northeast. These will be in the southeast and on the 
west coast. Will the DOE formally request funding from Congress 
in advance in an annual budget submission?
    Mr. Smith. Thank you, Congressman. So we are undergoing 
these studies now, in real time, so I will demur from making 
any specific predictions about when we would make a 
recommendation, or even what the review will state. So the 
whole purpose of going through this comprehensive review, 
looking at everything from subsurface issues, to market issues, 
to infrastructure, to need for regional reserves will help us 
flesh out what needs to happen. And, indeed, future efforts 
certainly would have funds appropriated, and we will be working 
with Congress, based on the results of the study.
    Mr. Flores. OK. So we can assume that if the DOE study 
indicates that you should have these regional product reserves, 
then you will formally ask Congress for the appropriation?
    Mr. Smith. So, Congressman, certainly, if we do determine 
that there is new work that needs to be done that requires 
appropriation that would require us to work with Congress, yes.
    Mr. Flores. OK. Good. Will you provide to the Committee for 
the record the September 2011 DOE study that is entitled 
``Refined Petroleum Product Reserve, Assessment of Energy 
Security Needs, Cost and Benefits'' that is referenced on Page 
2-34 of the QER?
    Mr. Smith. We can provide that.
    Mr. Flores. OK. Thank you. Mr. Chairman, that is all I 
have. I yield back.
    Mr. Whitfield. Gentleman yields back. At this time I would 
recognize the gentleman from Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman, and, again, good to see 
you again, Assistant Secretary Smith. First of all, I would 
like to talk to you about LNG permitting exporting, and thank 
you for coming last Congress to our natural gas caucus to talk 
with us. Of course, expansion of exporting of natural gas is 
important to our producers in our area, but also to our friends 
and allies around the world. But today we are talking about the 
Strategic Petroleum Reserve, which is also important.
    In March 2014 Department of Energy conducted a test sale 
from the SPR to demonstrate drawdown and distribution capacity. 
In November the DOE reported that pipeline capacity is limited, 
and drawdown of significant scope may post a challenge. The 
same issues were addressed in the quadrennial energy review, 
and the budget that was submitted was for $51 million for 
operations and flexibility, and the QER recommends 1.5 to two 
billion increase in distribution capacity. Obviously 51 million 
is relatively low, compared to the 2 billion, and I am going to 
see how we can get you some of those funds. Does the DOE 
anticipate using funds from additional test sales to fund 
requirements laid out in the QER? Do you have that ability?
    Mr. Smith. Yes. Well, thank you for the question, 
Congressman. First of all, we don't have plans for a future 
test sale. The last test sale we felt was very important in 
order to exercise the operational and procedural capabilities 
of the SPR, and so that is why we undertook that sale. We don't 
have plans for a future sale.
    Mr. Green. OK. But does the Department have the ability, if 
you have a sale, to utilize that funding for your budgetary 
needs?
    Mr. Smith. There is----
    Mr. Green. It may not be appropriated by the 
appropriations.
    Mr. Smith. So under statute we have got a fairly limited 
number of things that we could use those funds for. We could 
use them to buy other petroleum products. We could use it for 
storage or transit of petroleum. But under statute, there are 
some limits to----
    Mr. Green. OK.
    Mr. Smith [continuing]. What we could use those funds for. 
But, again, to reiterate, the test sale was driven by the need 
to exercise the operational capabilities of the----
    Mr. Green. Well, and I am glad you do it, because what you 
found out, that there were some issues that needed to be dealt 
with. During an emergency, what actions or authorities are 
available to alleviate those issues you found out?
    Mr. Smith. So some of the issues that we found out were 
drivers for the 2016 Congressional justification for the budget 
that the President issued for the 2016 budget, including the 
additional metering skid at that Big Hill. So in terms of major 
kind of infrastructure issues, I mean, that was probably one of 
the main things that we were already kind of moving to address, 
but, obviously, we need funding to do that.
    Mr. Green. OK. Does the DOE support additional pipeline 
construction and tank storage to deal with the constraints that 
you found?
    Mr. Smith. Congressman, I think that the specific answer to 
what we would recommend to do next, with regards to 
infrastructure, will be driven by the strategic review. We do 
know that, as we noted, we have got aging infrastructure, and 
so the life extension program that we have thought through 
would include some surface infrastructure thing, including 
tankage, including pipelines to move things around the SPR, 
including pumps and compressors, brine drive caverns, brine 
disposal wells. So those would all be things that we would have 
to put in place as part of the life extension.
    So we have got a rough outline of what we think that would 
look like, and you have seen some rough numbers in the QER. I 
think there was an estimate of between 700 and $900 million for 
that piece of work. The details of what that would look like 
are--that is what we are going to be driving towards in this 
review that we are undertaking.
    Mr. Green. OK. I know a significant part of the SPR is 
actually just east of Houston, between Houston and Beaumont.
    Mr. Smith. Indeed.
    Mr. Green. Was that where the test was done, or was it 
other locations that we have the reserve?
    Mr. Smith. The test sale was out of Big Hill, and brine 
Mound was where the crude came from, for that sale.
    Mr. Green. OK. Because I always joke that if we have 
infrastructure problems in Texas with oil and gas, then the 
rest of the country really must be in bad shape, because we 
have a lot, and we still need to build more. Mr. Chairman, I am 
out of time, and I appreciate the time. Thank you.
    Mr. Whitfield. Thank you. I am sorry to say, Mr. Smith, 
there are no more questions for you today. But we do appreciate 
your being with us, and talking about this important issue. And 
I just wanted to also bring to your attention that Mr. Rush and 
I, and Mr. Pallone, and Mr. Upton had sent a letter to 
Secretary Moniz sometime in March, just asking about four or 
five questions about the SPR review process that you are 
undertaking now. And if you see him in the hall, or at the 
coffee table, would you ask him if he could give us a reply? We 
would appreciate it.
    Mr. Smith. I will do that, Mr. Chairman.
    Mr. Whitfield. Thank you very much, and thanks again for 
being with us. We look forward to working with you on this 
issue. And at this time I would like to call up the second 
panel of witnesses. And we will have you all come up, and then 
what I am going to do is just introduce each one of you before 
your 5 minute opening statement. So you all just have a seat, 
and then we will get started.
    In the second part of this hearing, we are going to be 
focused on the energy efficiency aspect, and I want to thank 
each and every one of you for joining us this morning, and 
thank you also for your patience. And, as I said, I am going to 
introduce you individually, and then you will make your opening 
statement.
    So our first witness this morning is Mr. Christopher Peel, 
who is the corporate Senior Vice President and Chief Operating 
Officer for Rheem Manufacturing Company, on behalf of the Air-
Conditioning, Heating, and Refrigeration Institute. So, Mr. 
Peel, thank you. You are recognized for 5 minutes. Just be sure 
to turn your microphone on, and get it up close enough, because 
somehow it is difficult to hear in this room. So, thank you.

STATEMENTS OF CHRISTOPHER PEEL, CORPORATE SENIOR VICE PRESIDENT 
 AND CHIEF OPERATING OFFICER, RHEEM MANUFACTURING COMPANY (ON 
  BEHALF OF THE AIR-CONDITIONING, HEATING, AND REFRIGERATION 
   INSTITUTE); KATERI CALLAHAN, PRESIDENT, ALLIANCE TO SAVE 
 ENERGY; JOHN W. SOMERHALDER II, CHAIRMAN, PRESIDENT, AND CEO, 
AGL RESOURCES (ON BEHALF OF THE AMERICAN GAS ASSOCIATION; FRANK 
 THOMPSON, PRESIDENT, SWEETWATER BUILDERS, INC. (ON BEHALF OF 
  THE NATIONAL ASSOCIATION OF HOME BUILDERS); ELIZABETH NOLL, 
ENERGY EFFICIENCY ADVOCATE, NATURAL RESOURCES DEFENSE COUNCIL; 
RONA NEWMARK, VICE PRESIDENT, INTELLIGENT EFFICIENCY STRATEGY, 
  EMC CORP. (ON BEHALF OF THE INFORMATION TECHNOLOGY INDUSTRY 
  COUNCIL); AND MARK WAGNER, VICE PRESIDENT, U.S. GOVERNMENT 
  RELATIONS, JOHNSON CONTROLS, INC. (ON BEHALF OF THE FEDERAL 
               PERFORMANCE CONTRACTING COALITION)

                 STATEMENT OF CHRISTOPHER PEEL

    Mr. Peel. Thank you, Chairman. Chairman Whitfield, Ranking 
Member Rush, and members of this subcommittee, I appreciate the 
opportunity to be here with you to talk about some energy 
policy issues that are important to manufacturers and our 
customers. I would like to begin by thanking you for your work 
on the recent passage of S-535, which included language 
providing regulatory relief for grid enabled water heaters that 
are positive for the environment and our customers in rural 
America. I would also like to thank you for inviting me to 
testify this morning.
    My name is Chris Peel. I am the Chief Operating Officer for 
Rheem Manufacturing Company. Rheem was founded in the 1920s, is 
headquartered in Atlanta, and is a global industry leader, with 
seven U.S. based factories and distribution centers. Rheem 
designs and manufactures furnaces, air conditioners, water 
heaters, and refrigeration equipment. We have a proud history 
of developing innovative high efficiency products which reduce 
energy consumption, and help customers save on their utility 
costs. I am here on behalf of AHRI, a trade association that 
represents 315 manufacturers of HVAC, refrigeration, and water 
heating equipment. AHRI's members employ over 100,000 people in 
the U.S.
    I am here today because we care about serving our 
customers, enhancing safety and reliability, supporting our 
employees, and improving the environment. With these priorities 
in mind, I ask the subcommittee to address three issues that 
are vitally important, transparency in stakeholder engagement 
in the rulemaking process, the expected impact of the DOE's 
proposed efficiency standards for residential furnaces, and the 
value provided by voluntary independent verification programs.
    The DOE is planning to issue 23 new regulations affecting 
our industry between now and 2018. This ambitious schedule has 
caused a reduction in the constructive interaction between 
stakeholders and DOE, resulting in oversights involving 
economic assumptions and technical issues. Rather than working 
together to achieve what are very common objectives, we find 
ourselves in a situation where we need to ask for congressional 
intervention.
    In my view, new efficiency standards achieve the greatest 
public benefit when industry, interested NGOs, and government 
officials work together to create consensus drive standards. We 
also believe this is the goal envisioned by DOE's own process 
rule, which involves early input from stakeholders as a means 
to achieve successful regulations through the appropriate 
analysis and utilization of real world inputs. The outcomes 
will be better balanced, and achieve the intended benefits for 
the economy and the environment.
    A recently proposed residential gas furnace standard is an 
example of a rule created with insufficient input from 
industry. DOE is poised to finalize a new energy efficiency 
standard for residential furnaces that would raise the national 
minimum efficiency from 80 to 92 percent. To achieve the higher 
efficiencies of a 92 percent furnace, both the product and the 
installation become significantly more complex and costly for 
the consumer.
    DOE estimates that replacing an existing 80 percent furnace 
with a 92 percent furnace will cost the majority of consumers 
an average of $660 more. This could rise to $2,200, depending 
on the installation. Out of the more than 20 million 80 percent 
furnaces currently installed, the majority are in the South, 
where the customer payback will seldom be realized. Therefore, 
we recommend consideration of legislative efforts that would 
give time and space to finalize this rule until all 
stakeholders are able to work together to ensure the proposed 
regulations will achieve our efficiency objectives without 
needlessly penalizing families and small businesses.
    I also wish to thank Representatives Latta, Cooper, and 
Blackburn, who have introduced H.R. 1785, the Volunteer 
Verification Program Act, which will assure consumers that the 
HVAC and water heating products they installed in their homes 
truly meet the applicable Federal efficiency levels, while 
conserving taxpayer resources, and providing certainty for 
manufacturers. This is the proverbial win-win-win scenario, and 
I thank you and the staff for including this measure in the 
draft bill.
    Under H.R. 1785, DOE and stakeholders would work 
collaboratively on negotiated rulemaking to establish criteria 
under which the Federal Government would certify independent 
programs and rely on such VIVPs to verify efficiency ratings. 
DOE would, of course, retain its enforcement authority to 
periodically inspect and test products to ensure compliance. As 
DOE budgets and priorities can fluctuate year to year, we 
believe that industry and our customers are best served by 
VIVPs. Our industry spends millions of dollars, and thousands 
of employee hours, every year to certify and verify that our 
efficiency ratings are accurate. VIVPs, such as AHRI's program, 
has, for 50 years, successfully held manufacturers accountable 
to the high standards that our customers deserve and expect.
    Finally, Chairman Whitfield, Ranking Member Rush, and 
members of the Subcommittee, I appreciate the chance to appear 
this morning, and I look forward to answering any questions you 
might have, and to working together with you and your staff on 
these priorities.
    [The prepared statement of Mr. Peel follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Whitfield. Thank you, Mr. Peel. And our next witness is 
Ms. Kateri Callahan, who is the President of the Alliance to 
Save Energy, and you are recognized for 5 minutes.

                  STATEMENT OF KATERI CALLAHAN

    Ms. Callahan. Thank you, Mr. Chairman, and Ranking Member, 
and members of the subcommittee. I really appreciate the 
opportunity to testify today. The Alliance to Save Energy is a 
bipartisan, non-profit coalition of about 140 businesses and 
organizations that span the entire economy. Our sole mission is 
to advance energy efficiency, and we do this to drive economic 
growth, to preserve the environment, and to enhance our 
national security. We have a proud 38 year history of 
bipartisan leadership from House and Senate lawmakers who serve 
as honorary members of our board, and I am delighted that, of 
the 16 congressional leaders, we have five who are members of 
this committee, Congressman McKinley, Congressman Welch, 
Congressman Tonko, Congressman Burgess, and Congressman 
Kinzinger. These forward-thinking leaders demonstrate clearly 
that energy efficiency is truly the sweet spot in our our 
national debate over energy policy.
    Since the founding of the alliance, our country has made 
huge strides in driving energy efficiency into our economy, and 
a lot of this progress can be traced directly to the work of 
Congress over the past 4 decades. Since Congress began 
lawmaking on efficiency, we have actually doubled our country's 
energy productivity. That means that we are getting twice as 
much gross domestic product from each unit of energy that we 
consume, as we did in the 1970s. And this translates into huge 
savings. ACEEE is announcing today that Americans, just last 
year, will save $800 billion on their collective energy bill. 
The policies now on the books are going to continue to deliver 
gains. The EEIA estimates and forecasts that our energy 
productivity will increase 50 percent or more just on a 
business as usual case. But we believe that we can, and must, 
do better if we are going to remain globally competitive. And 
since we still waste about half of the energy that we consume, 
there is ample room for improvement.
    The Alliance has a goal to again double our energy 
productivity in this nation by 2030, and if we do this, we see 
that American families could see their utility bills fall by 
over $1,000 a year, and we could create 1.3 million new jobs. 
But we can only deliver these benefits to Americans if Congress 
provides a policy infrastructure to support aggressive energy 
efficiency implementation.
    We are very encouraged by action in the 114th Congress 
today. We were thrilled that the first energy bill that went to 
the President, and will be signed today, is S-535, and we thank 
the Chairman and the members of the Committee who worked so 
hard to move this bipartisan bill through the full House. We 
view S-535 as a strong indicator that the comprehensive energy 
legislation you are creating will include meaningful efficiency 
policies. And the draft title already does contain some of 
these policies, but, like the Ranking Member, we are deeply 
concerned that some of the provisions will actually impede or 
roll back progress that we are making.
    So first let me run through quickly those provisions that 
we support. We support all the provisions in Chapter 1 which 
deal with improving Federal energy efficiency, with the 
exception of the repeal of the fossil fuel consumption 
requirements. We could support this repeal if it were coupled 
with strong efficiency goals, as it is in other legislation 
pending before the Congress. We also support the provisions in 
Chapter 2 that safeguard the integrity of the Energy Star 
program, and require energy guide labels to include information 
on the smart grid capability of products. We support all the 
provisions included in Chapter 4, as these enable energy and 
water efficiency measures in Federal buildings. And finally, we 
support Chapter 5, which enable schools to make efficiency 
upgrades.
    As much as we support these provisions, we have very, very 
strong objections to the provisions included in Chapter 3. 
Building energy codes are a critical policy tool for advancing 
energy efficiency in the largest consuming sector of our 
economy, and they have been very effective. As a result of a 38 
percent improvement in the codes that we have seen in recent 
years, we have seen a reduction of $44 billion annually in the 
energy bills of American families.
    The Department of Energy has played a key and critical role 
in delivering improvements in the building energy codes, and we 
believe that it is imperative that the Department continue to 
engage in every step of the code making process, from 
development, to adoption, to implementation. The Alliance, 
therefore, urges the committee to strike the current provisions 
in Chapter 3 and to replace them with the building energy code 
provisions that are contained in the newly reintroduced 
McKinley-Welch Energy Savings and Competitiveness Act. These 
provisions actually strengthen model building codes to make new 
homes and commercial buildings more energy efficient, and they 
also work with the states and the private sector to improve the 
transparency of the code writing process.
    The McKinley-Welch bill was carefully developed to address 
concerns of both advocates, builders, and code making bodies. 
In addition, their bill deals with the up-front cost of 
efficiency by ensuring that the upgrades are valued in the 
appraisal and the mortgage underwriting process. The provision, 
known as the Save Act, enjoys the support not only of advocates 
like me, but also of the National Association of Realtors, the 
Chamber of Commerce, and many, many others. So as the Committee 
continues its work, we urge members to review the many 
bipartisan energy efficiency bills that are emerging, or being 
reintroduced, and in particular we ask the Committee to 
consider not just the building energy provisions in the 
McKinley-Welch bill, but all of the provisions in that bill 
which have broad-based bipartisan support.
    So I commend the Chair and the committee for seeking to 
include energy efficiency as a pillar of national energy 
policy, and we are hopeful that, as the committee continues its 
work, the energy efficiency title will be made much more robust 
so we can achieve that goal, and we can offer, as the Alliance 
to Save Energy, our full throated support. Thank you.
    [The prepared statement of Ms. Callahan follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
    
    Mr. Whitfield. Well, thank you, Ms. Callahan. I was 
wondering why Congressman McKinley was asking us to pay 
particular attention to your testimony, but when you refer to 
him as a forward-thinking leader, I mean, I understand.
    Our next witness is Mr. John Somerhalder, who is the 
Chairman and President and CEO of AGL Resources, and he is 
testifying on behalf of the American Gas Association. So you 
are recognized for 5 minutes.

              STATEMENT OF JOHN W. SOMERHALDER II

    Mr. Somerhalder. Thank you. Good morning, Chairman 
Whitfield, Ranking Member Rush, and members of the committee. 
Again, I am John Somerhalder, both the past Chairman of AGA, 
and Chairman, President, and CEO of AGL Resources. I am proud 
that my company serves many of the states represented on this 
Committee, including New Jersey, Illinois, Virginia, Texas, 
Florida, California, and Maryland. We support the Committee's 
discussion draft because it will remove inappropriate barriers 
to the use of clean, energy efficient, cost-effective natural 
gas.
    Gas utilities have shared your focus around greater energy 
efficiency for a long time. Sixty-eight million residential gas 
consumers today use the same amount of gas that 38 million 
customers used in 1970. Every year gas utilities spend about 
$1.5 billion on energy efficiency, and help customers save 136 
trillion BTUs of energy, and reduce about 7.1 million metric 
tons of carbon dioxide. We are proud of what we do as a company 
as well. Since 2011, our AGL utilities have invested $188 
million in energy efficiency programs. We have helped 45,000 
customers purchase high efficiency furnaces. We have helped 
save enough energy to--and natural gas to heat 80,000 homes for 
a year, and we have delivered the highest 1 year energy savings 
by a gas only utility in the U.S. history just last year.
    We support your efforts to find a common sense standard for 
residential furnaces. Under DOE's own analysis, only a third of 
homeowners will be better off under its proposed rule, and 
about a third of low income customers will be worse off. We 
think DOE's assumptions are also too rosy. They don't fully 
reflect the cost to consumers. Our data shows that an average 
customer would be forced to pay an additional $350 in the unit 
cost for the furnace, and an additional $1,500 up to $2,200 for 
the installation of that unit. The Gas Technology Institute 
predicts that the proposed rule would impose an additional 
$44.9 million in energy costs, and produce an additional 
348,000 tons of CO2 per year. We cannot support an 
efficiency standard that imposes higher costs, requires more 
energy, and provides more emissions.
    Section 4124 of the discussion draft would require DOE to 
stop its rulemaking and start a negotiated rulemaking involving 
a broader group of stakeholders. As discussed--have discussions 
between AGA and other stakeholders have shown over the past 
several months, there are alternatives that would meet our 
shared goals for energy savings and consumer benefits. The 
negotiated rulemaking process included in the discussion draft 
will help us reach that consensus.
    As you know, Section 4115 would repeal Section 430 of the 
Energy Independence and Security Act of 2007, a provision that 
bans all fossil fuel generated energy use in new and renovated 
Federal buildings by the year 2030. The fossil fuel ban was 
passed when the government thought U.S. supplies were 
dwindling. It had good intentions, but DOE's own analysis shows 
the cost to taxpayers would jump from $30 million today to over 
$500 million in 2019, and over $1.1 billion in 2030, almost a 
4,000 percent increase from today's cost. It simply is not 
practical.
    We also support a provision sponsored by Representatives 
Blackburn and Schrader, H.R. 1273. Model building energy codes 
are developed by private organizations. States and local 
governments choose to either adopt the new standards, or to 
maintain their current standards. DOE has too often taken on an 
inappropriate advocacy role in co-development. The provisions 
would introduce greater transparency in the Department of 
Energy's technical support of co-development, specifically 
prohibiting DOE funding or personnel from involvement in any 
advocacy related to code adoption.
    Finally, Section 4142 clarifies that the term of a utility 
energy service contract can extend beyond 10 years, but not 
exceed 25 years, correcting a Department of Defense 
interpretation. A 10 year term severely limits a utility's 
ability to help the DOD reach its energy security, energy 
efficiency, and renewable energy goals. At AGL Resources, we 
understand the importance of these types of projects. Since 
2003 we have worked on 10 projects, totaling roughly $31 
million, in Georgia, Virginia, and Florida to provide these 
vital energy efficiency programs.
    Mr. Chairman, thank you for the opportunity to testify 
today. I look forward to questions from the Committee.
    [The prepared statement of Mr. Somerhalder follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Whitfield. Thank you very much. And our next witness is 
Mr. Frank Thompson, who is President of Sweetwater Builders and 
he is testifying on behalf of the National Association of Home 
Builders. And you are recognized for 5 minutes.

                  STATEMENT OF FRANK THOMPSON

    Mr. Thompson. Chairman Whitfield, Ranking Member Rush, 
members of the committee, I am pleased to appear before you 
today on behalf of the 140,000 members of the National 
Association of Home builders, and to testify in support of the 
Strategic Petroleum Reserve discussion draft, and Title 4 on 
energy efficiency. My name is Frank Thompson. I am a home 
builder from Western Pennsylvania.
    As a longtime leader in the drive to make new and existing 
homes more energy efficient, while prioritizing housing 
affordability, NAHB, is uniquely positioned to analyze the 
impact of this legislation on home building, remodeling, and 
rental housing industries. NAHB supports this discussion draft. 
Of importance to NAHB, this draft includes provisions from H.R. 
1273, introduced by Representatives Blackburn and Schrader, 
that use model building energy codes to encourage meaningful 
energy savings for residential construction that are achievable 
and cost-effective.
    As a single family home builder in Western Pennsylvania, I 
deal with energy codes, the baseline energy efficiency 
requirements for buildings every day, and I understand how 
different energy efficient features impact the performance of a 
home. I also participate in the development of these codes 
because they so intimately affect the way I build. The earlier 
versions of these codes focused on consumers, helping them 
reduce their utility bills with affordable improvements to 
their home. Over the last few years, however, I have seen 
negative trends.
    First, while it does not write or publish the codes, the 
Department of Energy participates in the development of the 
codes by providing technical assistance, needed building 
science research, energy modeling, and analysis that only DOE 
can provide. But NAHB has concerns that technical assistance 
has been broadly interpreted to allow representatives from DOE 
to advocate for or against certain technologies, picking 
winners and losers, and seeking aggressive and costly 
requirements.
    Another unfortunate trend in energy codes is the failure to 
consider the true economic costs when seeking further energy 
reductions. We know how valuable the energy savings are to the 
consumer, but even with these savings there is a significant 
upfront investment. The 2012 version of the residential code 
had such significant cost increases that it would take the 
average family 13.3 years to recoup those costs through utility 
savings. Some parts of the country, including the entire State 
of Kentucky, and parts of Illinois, saw payback periods in 
excess of 16 or 17 years. Meeting an energy code is a 
requirement for every single home, including low cost housing--
or, excuse me, low income housing. Increasing housing costs for 
all homebuyers will have the unintended consequence of reducing 
housing affordability. For every $1,000 increase in the price 
of a home, 246,000 households will be priced out of a mortgage.
    This proposed legislation will drastically improve the 
manner by which model building energy codes are developed by 
establishing guidelines for DOE that increase transparency, and 
ensure an open and fair process. This legislation will also 
require any code supported by DOE to be cost effective, 
allowing homeowners to recoup any investment in 10 years or 
less. NAHB strongly supports the discussion draft, and urges 
the Committee to swiftly pass this as legislation.
    NAHB would also like to weigh in on Section 4124 of this 
draft, which addresses a flawed DOE rule on non-weatherized gas 
furnaces included in any final legislation. This provision 
would require DOE to convene a representative advisory group of 
interested stakeholders to help analyze the impacts of the 
proposed rule, and determine whether it is technically 
feasible, and economically justified, and if not, participate 
in a negotiated rulemaking.
    I thank you for this opportunity, and welcome your 
comments.
    [The prepared statement of Mr. Thompson follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
        
    
    Mr. Whitfield. Thank you, Mr. Thompson. And at this time 
our next witness is Elizabeth Noll, who is an energy efficiency 
advocate for the Natural Resources Defense Council, and you are 
recognized for 5 minutes.

                  STATEMENT OF ELIZABETH NOLL

    Ms. Noll. Thank you, Mr. Chairman. Mr. Chairman, members of 
the subcommittee, thank you for the opportunity to participate 
in today's hearing. My name is Elizabeth Noll. I am an energy 
efficiency advocate at the Natural Resources Defense Council, 
here to share our views on national policies and programs that 
lead to increased investments in energy efficiency.
    What would you say if I told you today we can save 
Americans money, promote job growth, cut pollution, with a 
solution that is affordable, easy to implement, proven 
effective, and what your constituents want? That solution is 
energy efficiency. And states across the country are seeing job 
growth, broad public support for energy efficiency. Take 
Illinois, \2/3\ of clean energy jobs--clean energy workers are 
employed in energy efficiency, and a recent poll showed 70 
percent of likely voters strongly support increased energy 
efficiency to meet the state's energy needs.
    In state after state, support for using efficiency to meet 
future energy needs is the same or higher. Pennsylvania, 97 
percent, Virginia, 95 percent, Ohio, 94 percent, and Michigan, 
92 percent. Meanwhile, Federal programs, like the Department of 
Energy's Appliance Efficiency Standards Program, first 
authorized by Congress in 1987, will save American 1.8 trillion 
on their utility bills through 2030, and just last year those 
standards avoided more pollution as comes from nearly 500 
million cars.
    Let me take a moment now to thank the Committee for their 
leadership in helping pass the Energy Efficiency Improvement 
Act of 2015 just last week. It shows once again that efficiency 
has bipartisan support. And let us not forget that Ronal Reagan 
signed the first efficiency standard legislation almost 30 
years ago. The bill now on the President's desk was a good 
start, but we must go further. Every American home, building, 
and appliance that we make more efficient saves money, cuts 
pollution, and moves our nation closer to a more sustainable 
and prosperous future.
    Some of the provisions before you today will bring energy 
savings to your constituents, and others will increase the 
Federal Government's leadership, leading to innovation in the 
private sector as well. However, I would like to highlight 
three troubling provisions that we would strongly oppose, which 
are further detailed in my written testimony.
    First, Section 4124 would block the Department of Energy 
from finalizing a much needed update to the efficiency 
standards for non-weatherized gas furnaces. If Congress blocks 
the standard, it will only hurt your constituents, especially 
moderate and low income families struggling to pay their energy 
bills. As proposed in March, these standards would save the 
average consumer $600 over the life of the furnace. Renters, 
who are often low income customers, especially benefit from 
minimum standards. Without an improved standard, property 
owners are likely to continue to buy cheaper, less efficient 
models, which means higher bills for those tenants. Congress 
needs to strengthen existing programs and policies, not delay 
or weaken them.
    Next, Section 4115 is counterproductive to cutting 
pollution in Federal buildings. Phasing out fossil fuels has 
enormous potential to reduce pollution, and that is a place 
where the Federal Government can show leadership, and leverage 
the enormous benefit of efficiency to reduce the $6 billion it 
spends on its own buildings. And finally, Section 4131 would 
hamstring the process for adopting model building energy codes 
that deliver valuable savings for homeowners and renters in 
your districts, and across the nation. Smart Federal policies 
are essential to achieving the energy efficiency progress that 
consumers want, and America needs. And we know manufacturers 
will continue to innovate and rise to meet these efficiency 
standards, while delivering the same or better performance and 
options, as they have done.
    In closing, Congress should reject any proposal to delay, 
weaken, or repeal the clean energy programs that have proven 
effective, and instead continue passing meaningful energy 
policies that Americans want. Thank you.
    [The prepared statement of Ms. Noll follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Whitfield. Thank you. And our next witness is Ms. Rona 
Newmark, who is Vice President, Intelligent Efficiency Strategy 
at EMC Corporation, and she is testifying on behalf of the 
Information Technology Industry Council. And you are recognized 
for 5 minutes, Ms. Newmark.

                   STATEMENT OF RONA NEWMARK

    Ms. Newmark. Chairman Whitfield, Ranking Member Rush, and 
members of the committee, thank you for inviting the 
Information Technology Industry Council, also known as ITI, to 
testify today on the important issue of energy efficiency 
legislation, and specifically the Energy Efficient Government 
Technology Act. I am EMC Corporation's Vice President of 
Intelligent Energy Efficiency Strategy. EMC is a leading IT 
company providing products and services to enable customers to 
move to cloud computing, and to gain value through analysis of 
big data, all within trusted computing environments. The 
company is headquartered in Massachusetts, and supports a broad 
range of customers.
    At EMC I am charged with reviewing EMC's products and 
strategies in the areas of energy efficiency and energy 
efficiency standards. I also help lead efforts within the 
company, and the industry, to view efficiency at a system level 
to provide the best net energy savings to accomplish particular 
results.
    As you know, ITI is the global voice of the technology 
sector. The 60 companies in ITI are leaders and innovators in 
information and communications technology, including hardware, 
software, and services. These companies, including my own, are 
committed to innovation, to developing the energy efficient 
solutions demanded by our customers, and to helping drive 
sustainable economic growth, and energy independence across our 
nation's economy. ITI has had a fruitful history of working 
with the Committee on energy efficiency and productivity. 
Enactment of the bipartisan Energy Efficient Government 
Technology Act, Sections 4111 and 4112 of the discussion draft 
would be another important milestone in this regard. EGTA is 
not a regulatory approach. Rather, ITI believes the Federal 
Government can be a useful partner and leader in leveraging 
information and communications technology for increased energy 
efficiency and productivity, giving taxpayers improved ROI.
    Data centers and the Internet of things will be essential 
to future U.S. sustainable growth. We are only beginning to 
learn what opportunities lie ahead for smarter buildings, 
smarter manufacturing, and smarter transportation systems, not 
to mention the smarter fill in the blank we have yet to invent. 
EGTA recognizes this, and emphasizes the right role for the 
Federal Government in encouraging further progress and 
innovation. ITI thanks Representatives Eshoo, Kinzinger, Welch, 
McKinley, and Tonko for introducing EGTA again this year. We 
also thank the Committee for EGTA's inclusion within the 
discussion draft as Sections 4111 and 4112, and we strongly 
urge EGTA's adoption this year.
    Thank you. I look forward to answering your questions.
    [The prepared statement of Ms. Newmark follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
            
    Mr. Whitfield. Ms. Newmark, thank you. And our next witness 
is Mr. Mark Wagner, who is Vice President and U.S. Government 
Relations for Johnson Controls, and he is going to be 
testifying on behalf of the Federal Performance Contracting 
Coalition. And you are recognized for 5 minutes.

                    STATEMENT OF MARK WAGNER

    Mr. Wagner. Thank you, Mr. Chairman, Mr. Rush, and members 
of the Committee. I am Mark Wagner of Johnson Controls, and 
representing 10 energy service companies that form the Federal 
Performance Contracting Coalition. We work to help the Federal 
Government reduce energy consumption through energy saving 
performance contracts, or ESPCs. I would like to briefly 
discuss the benefits of ESPC, and outline our coalition's 
support for pending legislation that would improve the program.
    ESPCs are a tremendous tool for the Federal Government 
because agencies can get energy efficient equipment, such as 
new lighting, building controls, HVAC equipment, chillers, 
boilers, renewable energy assets, at no upfront cost to the 
government. The energy service companies leverage private 
sector capital to make the investment. We design and install 
the equipment, and put in place a plan to measure and verify 
the savings.
    Three important parts of this deal. As you can see from the 
slide, first the agency gets a facility upgrade, with new 
building equipment, and they lower their energy consumption. 
Second, the agency pays off the investment with the savings on 
its utility bill, but never pays more than it was already 
paying for its utilities. Thirdly, then it realizes all the 
savings after the investment is paid off. Most importantly, 
these savings are guaranteed by the energy service company.
    Let me give you an example of an ESPC project that Johnson 
Controls is doing at Fort Bliss in Texas. We have installed 
building controls at 120 buildings, put in energy efficient 
lighting, electric motors, chillers, building insulation, and a 
4.7 megawatt photovoltaic array with 5,500 solar panels. It is 
a $100 million investment of private sector capital which will 
save the installation $150 million. We are also working with 
the base on technology for a micro-grid to improve energy 
security in the event of an adverse occurrence on the grid. 
This is just one example of the many ESPCs that provide 
multiple benefits to the Federal Government, and to taxpayers. 
ESPCs are a well-established program. According to the 
Department of Energy, approximately 600 performance contracts, 
worth $5.3 billion of investment, have been awarded to 25 
agencies in 49 states, with a net savings of $3 billion to the 
Federal Government.
    Let me now talk about several legislative provisions 
designed to improve the ESPC program. We have been very 
supportive of the energy savings through Public-Private 
Partnership Act of 2015 that was introduced by Representatives 
Kinzinger and Welch, thank you very much. This legislation will 
ensure that the Federal agencies are utilizing, to the fullest 
extent possible, all cost effective measures for energy 
conservation measures. It streamlines the ESPC statute, 
providing consistency and clarification, and it promotes 
transparency and accountability across the government. This is 
now Section 4141 of your bill.
    Specifically, it would require reporting on the progress of 
ESPCs. It would encourage agencies to act on their required 
audits. It would clarify that agencies cannot arbitrarily limit 
the terms and use of energy related operation and maintenance 
savings. It would make the definition of Federal buildings 
consistent with provisions in the law, and it would clarify 
other important provisions for ESPC, such as the sale, transfer 
of energy incentives, rebates, or credits, as well as the type 
of projects for which ESPC can be used. These are all important 
details to update and clarify the existing statute, which will 
make ESPCs an even more powerful tool for the Federal 
Government.
    In addition, we support clarifying the use of ESPC for 
efficiency gains in data centers, which are extremely energy 
intensive. We are supportive of the repeal of the Federal 
building fossil fuel reduction, as long as it is packaged 
together with extended energy efficiency goals for the 
government, which currently expire at the end of this year. We 
are supportive of long term utility energy service contracts, 
as long as they include measurement and verification of energy 
savings, as well as guarantee or assurance of savings.
    Other important provisions that we hope the Committee will 
consider, in--Section 432, changing may to shall showing--would 
ensure that the government would act on cost-effective savings, 
extending energy efficiency goals for the Federal Government, 
which expire at the end of this year, as I mentioned, ensure 
that agencies set ESPC goals on an annual basis, and report on 
their progress, and add alternatively fueled vehicles in their 
infrastructures measures allowed under ESPCs.
    Finally, many of you are aware that the Congressional 
Budget Office scores any attempt to update the ESPC statute. 
Members of this--members of the Energy and Commerce Committee 
have tried to resolve the situation, and we are appreciative of 
that. The Senate budget contains a fix to the scoring problem 
for the Senate--in Senate legislation. We encourage the House 
to continue to pursue annualized scoring for ESPC to fix the 
CBO scoring problem.
    Thank you for your support of ESPC, and the opportunity to 
testify today.
    [The prepared statement of Mr. Wagner follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
           
    Mr. Whitfield. Thank you, Mr. Wagner. Thank all of you for 
your testimony, we appreciate it very much. And I will 
recognize myself for 5 minutes of questions.
    As you know, we have this draft legislation, and we hear a 
lot in Congress today around the country about lack of 
bipartisanship. In this bill, there are 14 titles in the energy 
title of this bill--or 14 sections, and on 12 of those sections 
we do have Democratic support. So the three areas that there is 
not agreement on relates to the furnaces, relates to the fossil 
fuel, and relates to the building codes. Now, if you have 
bipartisanship for 12 out of 14 titles, that is pretty good, I 
would say. So I want to address those three areas that there is 
some disagreement on, and I want to tell you why we put those 
in there.
    I think Mr. Thompson, Mr. Somerhalder, and Mr. Peel all 
touched on it, but first we will focus a little bit on Mr. 
Thompson's remarks. DOE, obviously, has been a leader in 
recommending and promoting efficiency, and originally they were 
really good ad providing technical assistance. But many people 
around the country, I don't care where you live, or what part 
of the country you live in, are saying they were becoming more 
of an advocate. They are getting closer to dictating and saying 
what will and will not be done.
    And one example of that was the--recently they came out 
with the standards on the hot water heaters that were being 
used in demand response programs by rural electric cooperatives 
around the country. And the cost would double under those 
standards, so Congress came together and delayed the 
implementation until some further refinements could take place. 
That passed the House, passed the Senate, sent to the 
President. Now we are hearing the same thing about furnaces. 
And we all know that efficiency--we all know this, that, you 
can promote good jobs because you promote industries to 
manufacture new products that are better, you save energy 
costs, you help improve the environment.
    But if you also are significantly increasing the upfront 
cost, the furnaces--I hear you are talking about $600, but then 
installing it is even more. So, we are just trying to buy a 
little balance here. I don't think DOE, as much as they have 
expertise, they don't have all of the answers, and so that is 
why we are having these hearings. And manufacturers--it really 
creates--and you, Mr. Peel, in your testimony you were asking--
you were saying we need congressional intervention here. And I 
think you specifically talked about 23 new regulations coming 
by EPA in appliance sector. Would you elaborate on that a 
little bit, about what it does mean to you and your employees?
    Mr. Peel. Well, first of all, we have had some positive 
experiences along the way with DOE when we go through a process 
that involves stakeholder input along the way, and we have got 
recent examples of that as well. We also appreciate that the 
DOE is under pretty intense pressure to complete a bunch of 
regulations in a compressed timeframe. The unfortunate 
consequence for manufacturers is we have to react to those. One 
makes the rules, the other has to implement the rules.
    So the important thing for us is to be at the table, and 
make sure that that information, if there are challenges, for 
example, on gas furnaces, that those get brought to bear in the 
discussions, and that we end up with what is the best overall 
solution----
    Mr. Whitfield. Right.
    Mr. Peel [continuing]. For the industry, for consumers, and 
they make sense economically.
    Mr. Whitfield. And you think that this draft, with the 
advisory council, basically does provide that additional 
protection----
    Mr. Peel. I do.
    Mr. Smith [continuing]. And input? Which should benefit 
everyone in America that certainly has to buy an appliance.
    Mr. Thompson, the building codes, would you elaborate just 
a little bit on why this building code issue is so important?
    Mr. Thompson. I think there are several important factors, 
and it starts with creating model building codes that are 
affordable and adoptable by states. And we are seeing continued 
growing resistance by states to adopt building codes. If we 
look at a map, and I think that was included in my written 
testimony there, we see about \1/3\ of the states that have 
adopted the 2012 or 2015 IECC, about \1/3\ on 2006 and earlier, 
or they don't have a state energy code.
    Much of the discussion is about the cost increases that 
come along with adopting those codes, and so we do need to 
strike a balance that represents the significant impact that 
these codes have on housing affordability, the 10 year 
requirement that would be included in the bill, with also the 
3, 5, and 7 year analysis would go a long way to providing 
transparency in the process as to what the real simple payback 
cost is going to be to people. Get states to have codes 
presented before them that they can adopt, and then we can also 
talk about the compliance component, which DOE is in the midst 
of a pilot program currently that will start to help us better 
understand just what true rates of compliance we have, and that 
perhaps there is a significant amount of energy to be saved by 
increasing those compliance rates, and focus on that.
    Mr. Whitfield. And you all do support the building code 
section that is in this draft?
    Mr. Thompson. Absolutely.
    Mr. Whitfield. OK. And I know my time is expired, but one 
other thing I just want to mention. We have many members of 
Congress that are really focused on energy efficiency. Peter 
Welch has been one of those. David McKinley has been one of 
those. And we do want to come up with a good product here, but 
we want some balance as well.
    At this time I recognize the gentleman from Illinois for 5 
minutes.
    Mr. Rush. I want to thank you, Mr. Chairman. Mr. Chairman, 
one of the more contentious issues before us today that has 
been included in this discussion draft, as you well know, is 
Section 4124, which would prohibit the Department of Energy 
from promulgating a final rule amending efficiency standards 
for non-weatherized gas furnaces and mobile home furnaces. Mr. 
Chairman, my office has held several meetings with stakeholders 
on both sides of this issue, and I think it would be most 
beneficial for members to hear directly from DOE on these 
issues, and other issues, before we settle on language in any 
final draft.
    Today, however, we have some of the interested stakeholders 
that have been taking part in discussions with DOE to try and 
build consensus and come up with language that all sides could 
agree with, as was done in previous cases, including most 
recently the water heaters provision that Congress passed just 
last week with bipartisan support. As I understand it, Mr. 
Chairman, the language in today's discussion draft has not been 
agreed to by the very stakeholders, and the conversation is 
continuing.
    My view is that there would be a much better chance of 
getting bipartisan support for Section 4121 if the interested 
parties would follow the example set by the Water Heaters 
Coalition and come up with language that DOE, industry, energy 
efficiency advocates, and consumer groups could all support.
    With that, Mr. Chairman, I have a couple of questions that 
I want to ask both Mr. Somerhalder and Ms. Noll. To the both of 
you, we have received conflicting testimony from the two of you 
regarding the impact that this rule would have on low income 
consumers. Mr. Somerhalder, can you give us your perspective on 
this issue, and then I would like to hear from Ms. Noll for 
your perspective as well.
    Mr. Somerhalder. Yes. Ranking Member Rush, what we see from 
our low income customers is the decision to repair, replace 
their furnaces, when they make those decisions, if they have 
limitations in their ability to use an 80 percent versus a 92 
percent furnace, because of venting requirements, and other 
requirements that are unique to the higher efficiency furnaces, 
they have to make a tough decision about what to do. That can 
be everything from not replace, to use electric resistance 
heaters, or some other form of heating.
    So what we see is that, because of the limitations, there 
can be a decision to go with a product that is more costly, if 
they do replace this. I mean, you heard the numbers of $350 
more for the unit itself, up to around $2,000 to install that 
won't pay off because of the use of energy, and how quickly 
that would pay off. And the end result is they either would 
need to make a decision to replace a unit, and then incur 
higher costs, or they may make a decision to switch to another 
form of energy that is less cost effective, and could produce 
more emissions. So we do see that impacting the low income----
    Mr. Rush. Ms. Noll, would you respond, please?
    Ms. Noll. Yes. Thank you, Mr. Rush. First I would like to 
begin by saying that all Americans benefit from standards, 
particularly the low income, who oftentimes are renters, and 
pay the higher portion of their energy bill, and the property 
owner is the one that is choosing the furnace, or the water 
heater, whatever appliance is going into that home.
    I would also like to say that this is a proposal right now. 
It has tremendous benefit in energy savings, in consumer 
savings, and environmental benefit, and that we recognize a 
small percentage of installations that would face challenges, 
and incur a higher cost. But we have also seen that, just in 
this last year, new technologies and solutions have entered 
into the market, and helped overcome these challenges. And as 
we see those increasingly deployed, we think that that has a 
great opportunity to help provide solutions to these customers 
that are going to be facing these challenges.
    So we think the Department needs to move forward with their 
open and transparent process, and get input from stakeholders 
on this rule, and find ways of making it even better. And I 
think that, from our perspective, this is not an either/or 
situation, this is an and/also. We also support the great 
utility programs, and the state programs, and bolstering those 
programs to help these vulnerable populations get into the high 
efficiency furnaces, have improved weatherization that is going 
to have benefits to them, and improved comfort, and improved 
indoor air quality.
    And we commend the gas utilities, like AGL Resources and 
others, that serve their customers well through these utility 
programs. And those are the kind of things that complement the 
minimum standards, and ensure that all Americans have at least 
a minimum level of cost-effective efficiency that will serve 
them, and they can count on. Thank you.
    Mr. Rush. Mr. Chairman, I yield back.
    Mr. Olson. As fate would have it, I have the gavel at the 
time I am speaking, so I give myself 5 minutes for a couple of 
questions.
    My first one is for you, Mr. Somerholder. One provision of 
the discussion draft would scrap Section 433 of the Energy 
Independence and Security Act. It would allow Federal buildings 
to use fuels like natural gas past 2030, something currently 
being phased out. In essence, current law bans one of our most 
efficient and affordable resources of energy right now. Can you 
talk about some benefits that we would lose if natural gas is 
phased out from Federal buildings, and do you believe that 
tackling Section 433 is important?
    Mr. Somerhalder. We believe the provision to reduce 433 is 
very important, because natural gas is American, it is 
affordable, as you pointed out, and it is very efficient. 
Heating a building, as an example, with a high efficiency 
furnace, or an 80 percent efficiency furnace, is a very 
efficient way to heat that building, with very affordable 
natural gas, American natural gas. So the ability to use 
natural gas, not limit that option, does provide customer 
benefit, savings in those buildings, savings for taxpayers. So 
we very much support a way to continue to use clean American 
natural gas in Federal buildings.
    Mr. Olson. Thank you. Next question is for you, Mr. 
Thompson. As you know, the draft bill touches on the issue of 
DOE's involvement in model building codes. The draft talks 
about transparency and about public comment. I am interested in 
your thoughts on how we reach consensus there. What caught my 
attention, though, was the issue of payback periods and cost 
effectiveness. Before the private sector even thinks about 
making an investment, they have to know when, and if, they 
would get into the black. I have heard some complain that this 
isn't always true with energy savings. I would like to talk to 
you about the cost and benefits.
    Again, Mr. Thompson, today's draft bill says that when DOE 
supports a change to the model building code, that change must 
pay itself back in under 10 years. Do you think that is 
important, and is that realistic?
    Mr. Thompson. Thank you for that very thoughtful question. 
I think it is absolutely important, and if we intend to move 
families from less energy efficient homes to more energy 
efficient homes, we need to do it in a way that is affordable 
to them. And in a number of polls that have been conducted, and 
one in particular by the National Association of Home Builders, 
it really tried to identify, by demographic groups, how long 
they were willing to wait for a payback of that investment. All 
of them fell short of the 10 year requirement. So it is a bit 
of a stretch, from a home buyer perspective, to be willing to 
wait that long to get a simple payback on their investment 
there.
    If we are going to continue to drive people to more energy 
efficient homes, let us remember we need affordability. And 
this is in a marketplace that is currently very limited by 
financial limitations on qualifications to buyers, and 
limitations on appraisals, and how they recognize the values of 
energy efficient improvements to that home.
    Mr. Olson. Thank you. Mr. Peel, to follow up on that, do 
you think the government has done a good job of considering 
whether energy efficiency standards are cost effective? If not, 
what can improve that process?
    Mr. Peel. I think the results are mixed. I think we have 
seen some good analysis, and those have made it through the 
process through a collaborative effort, and many of them signed 
into law. We also see, with the furnace rule that is on the 
table today, some differences in views around what the actual 
costs would be, and what the payback periods would be. Again, 
all we are asking for here is a seat at the table so we can 
openly discuss those issues, make sure everyone is aware, and 
build the consensus that we think we can get on this.
    Mr. Olson. So the key is a seat at the table, not some law 
parts of the bill, but just to actually have some voice in this 
process? That is what you would be happy with?
    Mr. Peel. Yes. Yes, Congressman.
    Mr. Olson. And my final question again is for you, Mr. 
Somerhalder. There seems to be a great deal of concern about 
DOE's gas furnace rule. A number of groups say it is too 
expensive and hard to meet, and this is an issue we touched in 
today's discussion draft. Are there some ways we can avoid 
conflicts like this in the future?
    Mr. Somerhalder. We agree that there are benefits to reach 
consensus on this, because we all do want higher energy 
efficiency as we move forward. We need to do that in a way that 
is not only affordable, but we need to do that in a way certain 
customers really can't even convert because they don't have 
access to side walls for the venting requirements. And products 
are becoming available, but there are still limitations to how 
those products can be used. So we absolutely need to work 
together to come to consensus so that all the customers can 
find a way to continue to lower their costs, and to help 
improve the environment. So we very much support a consensus 
process. As Mr. Peel has pointed out, we have had good success 
with that in the past. There are certain pieces of information 
that need to be considered now, and we will be able to find a 
way, we believe, to reach consensus.
    Mr. Olson. Well, thank you. My time has expired. We now 
recognize Mr. Tonko from New York for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair. I am often stating that 
energy efficiency should be recognized as our fuel of choice, 
so I was very pleased when I heard that the Committee would be 
legislating in this area. But this draft, I have to state, is a 
real disappointment. There are a few worthy provisions, but 
there are many others that undermine advances that we should be 
taking in efficiency.
    The provision on DOE's pending gas furnace rule in the 
discussion draft is of great concern to me. About 40 percent of 
the energy delivered to the residences is used for space 
heating, and natural gas and propane furnaces account for 
nearly \1/2\ of that. It may be higher now, since prices may 
have enticed some to switch heating fuels. Either way, that is 
a lot of energy, and gas prices may be low now, but experience 
tells us that is likely to change.
    So DOE's new rule on gas furnaces would save consumers a 
great deal of money on their annual outlays for fuel costs, and 
the furnaces that deliver these savings are already on the 
market, and make up a significant part of the current furnace 
market. The comment period is still open, and this rule appears 
to be well justified, very well justified. I am not persuaded 
there is any reason to delay these standards.
    So, Mr. Peel, you state that DOE's rule is based on, 
``errors involving economic assumptions and technical issues''. 
But later in your testimony you cite DOE's analysis in support 
of your position that this rule should be delayed. Do you have 
information other than DOE's analysis that supports your 
position that ``the additional cost of installation cannot be 
economically justified''?
    Mr. Peel. I do have access to information. I don't have it 
here today. I used DOE's numbers as a conservative estimate. 
They are consensus numbers from--DOE would agree to those 
numbers. There are concerns beyond just the payback. The 
installation complexity is a big issue as well. These are all 
issues that we would bring to the table in a consensus building 
session.
    So, once again, to reiterate, we are not opposed to energy 
efficiency increases for weatherized gas furnaces. We want to 
make sure that the realities of the market are understood when 
we set these standards. So, for example, most appliances have a 
range of efficiencies that you can progress through, a 
continuum. Gas furnaces actually change technology between 80 
and 90 percent, and so it is actually a different installation. 
It is not like installing a more efficient air conditioner, 
which is very similar to installing a less efficient air 
conditioner.
    So those are the kind of things that we want to be 
communicating with the DOE and other stakeholders to make sure 
that it is understood so we can really understand what the 
payback numbers are. And my feeling is that, with the data we 
have, with the data DOE has, and other data that we have heard 
today, somewhere in there lies the answer. And----
    Mr. Tonko. OK.
    Mr. Peel [continuing]. Getting together to communicate it 
is the key.
    Mr. Tonko. Well, I would appreciate you sharing any of that 
information with the committee. These are durable goods. They 
last a long time, and I think we should implement standards 
that save energy at this level as early as possible. And given 
these furnaces, as I stated, are already in the market, there 
are clearly possible savings there.
    To Ms. Noll and Ms. Callahan, there seems to be some 
disagreement about the provision of this bill on building 
standards. Again, residences and commercial buildings stand for 
a long time. Is the provision on building codes consistent with 
having DOE do all it can to support the adoption of progressive 
building codes for energy efficiency?
    Ms. Callahan. You want me to go first?
    Mr. Tonko. Sure----
    Ms. Callahan. Thank you----
    Mr. Tonko [continuing]. Please.
    Ms. Callahan [continuing]. Congressman, I appreciate that 
question. Let me say, as I said in my testimony, that we 
believe that the building code provisions that are in the bill 
currently should be struck. And I have an easy answer for the 
Ranking Member of where you find bipartisan agreement on 
building energy codes that will provide more transparency, and 
will ensure that DOE plays an appropriate, and a strong role in 
delivering its model energy codes, and that is the bill by Mr. 
McKinley and Mr. Welch. We have negotiated those provisions 
over a number of years to address the concerns of the 
stakeholders, and the concerns of builders, and the concerns of 
all the folks that are involved in this process. So we think 
that is where you can get broad bipartisan support.
    I want to address a couple of points, I think, where there 
is perhaps some obfuscation in the testimony that you have 
heard. Model energy codes are not set by DOE. They are set by 
independent code making bodies. These are people from all 
across the United States, city officials, builders like Mr. 
Thompson, code officials, elected officials. They come 
together, and they establish the code. Once that code is 
established, DOE certifies it, if it saves energy, and then the 
states adopt it, and the localities implement and enforce the 
codes. So I think that that process, DOE has played an 
important role, but they cannot control the process. It is 
handled in other places.
    I also want to state that 39 states right now already 
either the 2009, the 2012, or the 2015 code in place. This is 
working. And with respect to the the simple payback, I think 
one thing that is very important to note, NAHB's own surveys 
show that 9 out of 10 Americans will pay two to three percent 
more for energy efficient homes. That translates on a $100,000 
home to $2,000.
    Most people mortgage their homes, and so when they add in 
the efficiency upgrade to that mortgage, it is 30 years to pay 
it off. And the savings that they get on their energy bill day 
one, when they move in, are greater than that additional cost. 
So I think that the codes are there, the codes need to keep 
going. Thank you.
    Mr. Whitfield. Gentleman's time has expired.
    Mr. Tonko. We wanted to hear from Ms. Noll, though. It was 
addressed to both.
    Mr. Whitfield. All right, go ahead.
    Mr. Tonko. If we could, please?
    Ms. Noll. I will be very brief. I would just say that we 
achieve better model codes when the Department of Energy is 
able to contribute their expertise, and these model codes do 
increase the efficiency that can save Americans an enormous 
amount of money in our nation.
    Mr. Tonko. I thank you for that, and Mr. Chair, as I yield 
back, I suggest that we have got a ways to go before we live up 
to the title of our bill. And with that I yield back.
    Mr. Whitfield. At this time I recognize the gentleman from 
Ohio, Mr. Latta, for 5----
    Mr. Latta. Well, thank you very much, Mr. Chairman, and, 
again, I appreciate the panel for being here today, and I also 
appreciate the Chairman for including two of my bills in this 
efficiency discussion draft: the Energy Star Program Integrity 
Act and the Voluntary Verification Program Act. Both of these 
pieces of legislation will help manufacturers and consumers, 
while strengthening the Energy Star program. I would also like 
to ask the Chairman for unanimous consent to enter into the 
record two letters in support of the Energy Star Program 
Integrity Act: one from the U.S. Chamber of Commerce, and the 
other from the Retail Industry Leaders Association.
    Mr. Whitfield. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Latta. Thank you, Mr. Chairman. I appreciate that.
    Mr. Peel, if I could ask, why does the IVP give you more 
predictability than a DOE run program?
    Mr. Peel. There are really three reasons why the IVP helps 
us. The first is that the predictability you mentioned is all 
about consistent funding. We know, as an industry, we are going 
to fund the program year over year. It is not subject to budget 
cuts, or other DOE priorities, so we can count on resources 
being available to test our equipment to make sure that it 
complies with energy efficiency regulations.
    It is also cost effective. There is no taxpayer burden for 
this, and it has been proven effective. We have been doing it 
for 50 years, and we get better and better and better at it. It 
would be very difficult to duplicate. And what makes it work so 
well is that competition is the driver, is what keeps the 
integrity of the program. Each manufacturer competes with each 
other, but it is a common system that allows us to verify that 
everyone plays on a level playing field, and abides by the 
rules.
    Mr. Latta. Thank you. And, Ms. Callahan, if I could ask--
why do you believe the Energy Start Integrity Act, which the 
gentleman from Vermont and I introduced, is important?
    Ms. Callahan. Well, the Energy Start program itself is 
very, very important. It has proven very effective in saving 
consumers money, and in drawing in investment from 
manufacturers, bringing new technologies forward. We are 
concerned that if there is a continuation of class action suits 
that are not necessary, in our opinion, that that will cool the 
sort of fervor of manufacturers for participating in this very 
important program. And the savings that have been coming 
through it since inception in the '90s are very, very 
significant, and we have got great consumer products now with 
the Energy Star label, and we don't want to see that program 
diminish in any way.
    Mr. Latta. I just want to follow up, I want to make sure I 
heard that correctly, that without the Energy Start Integrity 
Act, that--you believe that the manufacturers would stop 
participating?
    Ms. Callahan. I don't know that--whether they would stop or 
not, but I think certainly it would be an impediment to them to 
continue because of the extra cost, and the risk involved. So I 
wouldn't say that it would stop all manufacturers, but I 
certainly think that it would cool their attraction to the 
program, and cause some concern.
    Mr. Latta. And let me just follow up briefly, then, also, 
do you think that the Act would prohibit all lawsuits against 
non-compliant Energy Star products?
    Ms. Callahan. Absolutely not. I mean, it is very narrowly 
crafted so that if a product has been certified, and then found 
not to be in compliance, and there are corrective measures put 
forward by EPA, and those corrective measures are taken, that 
is where the protection comes. But if somebody is not in 
compliance, if somebody is not following the EPA guidelines, 
and refusing to cooperate, and come under the framework of EPA, 
they could still be sued.
    Mr. Latta. Thank you very much, Mr. Chairman. I will yield 
back.
    Mr. Whitfield. Gentleman yields back. The reason we were 
having a discussion up here, we have a vote on the House floor. 
It is just one, so we are going to keep this process going, but 
some people have gone to vote, and they will come back.
    At this time I will recognize the gentleman from 
Pennsylvania, Mr. Doyle, for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman, and welcome to all the 
panelists. I think it is very helpful to hear from a range of 
industries and stakeholders on these issues. This is a draft 
document, and I do think we have some work to do on it, but the 
goal here is to see how we can use technology to save energy, 
but it has to be affordable too, and I think that is a key 
ingredient. I want to especially say hello to Frank Thompson, a 
gentleman that I have known I think my entire 21 years in 
Congress, and have worked with in the Pittsburgh area for a 
long time, so, Frank, it is good to see you.
    Let me just first ask quickly, Mr. Somerhalder, in your 
testimony you talked about how Section 433 of the Energy 
Independence and Security Act of 2007, the fossil fuel ban, is 
deeply flawed, and this current discussion draft eliminates the 
ban. But as Mr. Wagner mentioned, Senator Hogan and Manchin 
have a bill that would repeal this requirement, but also 
strengthen several existing Federal energy efficiency 
provisions to ensure large energy savings in the coming years. 
I am just curious, is the Hogan-Manchin bill something that you 
could support, or is there a way to make sure we use this as an 
opportunity to focus on more efficiency?
    Mr. Somerhalder. Yes. Our major priority is clearly to make 
natural gas available to these buildings because of the 
attributes I talked about. But we have been involved in the 
energy standards, and, in a consensus process, looking at what 
you talked about, those standards that could be put in place. 
So replacing it with a set of standards that we have been 
involved in, we can support that as a way to move forward, and 
make sure natural gas is used in those buildings as well.
    Mr. Doyle. Good.
    Mr. Somerhalder. And that is a good example of where 
consensus can reach compromise.
    Mr. Doyle. Right. That is great. And that is----
    Mr. Whitfield. So is he saying that they do support the 
Senate bill?
    Mr. Somerhalder. Yes. We have already officially made 
comments that we can support that, because we were involved in 
a part of that process, and involved in those standards.
    Mr. Doyle. Good. That is something that is good to know as 
we work on the discussion.
    Frank, let me ask you--you know the district I represent. I 
don't have a lot of new homes being built. We know the new 
homes are pretty energy efficient, but a lot of the older homes 
that are built before the '90s aren't so energy efficient, and 
the homes in my neck of the woods, in the Mon Valley, and parts 
of the city of Pittsburgh, were built in the 1920s and 1930s, 
and I have a lot of row houses in my district. And I have a lot 
of senior citizens in my district that aren't going to be re-
mortgaging their houses, or doing anything like that. When 
their furnace goes, they have got to pay.
    And so we want to have a system--and I just want to express 
this, I am all for energy efficiency. I have been a big 
proponent of it my entire time in Congress, but I also worry 
about a little bit about some of the older residents that I 
represent in the Allegheny counties that--probably second only 
to Dade County, Florida in the number of senior citizens that 
live in these older homes that, if they were told that they had 
to replace the furnace, and then do some structural changes to 
these older homes, I just worry what that does to them, cost-
wise.
    And I just want to know what are, we have had a lot of 
successes with new housing, and making them more energy 
efficient. What do you think are some of the major successes 
that we have in making older homes more efficient, aside from, 
we have tax credits in the Tenant Star Program, but what other 
ways do you think we can encourage energy efficiency in these 
older homes? And maybe you could just speak a little bit to 
these urban areas like mine, that have houses that are stacked 
together in rows, and how that works if you have to change 
venting systems and that?
    Mr. Thompson. Well, I think there were three questions 
there, so let me start with the furnace provisions there. And I 
think some of the flaws in what DOE has presented, and why we 
need to get this advisory group together, and get the 
stakeholders at the table, and improve on what they have 
proposed are the exact circumstances you described there, and 
the consequences there of trying to bring that new technology, 
that condensing furnace, into a structure that wasn't built 
that way. And it could be thousands of dollars that they aren't 
going to go out and take a mortgage. They are going to have to 
come out of pocket for it, so we need to find some alternatives 
that are going to address those situations there.
    In terms of how we best address continuing to improve 
energy efficiency in older homes, I think we need to continue a 
lot of the programs, the tax incentives, that have been in 
place. They work. We need to make sure that they are going to 
continue to be there, because the reality is that the greatest 
energy users, the gas guzzlers, so to speak, amongst houses are 
those older homes.
    Mr. Doyle. Right.
    Mr. Thompson. And it is very costly to come in and retrofit 
them. So let us keep some programs out there that are going to 
help temper those costs.
    Mr. Doyle. Great. Thanks, Frank. I see my time is up, Mr. 
Chairman. Thank you very much.
    Mr. Thompson. Thank you.
    Mr. Olson. The Chair recognizes Mr. McKinley from West 
Virginia for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman, and given the 
timeframe, I am not going to be able to get to all my questions 
that I had, but let us just see if we could focus on--when I 
came to Congress 4 years ago, that was--the thing I left was an 
engineering practice that dealt deeply into energy efficiency. 
So we have some working knowledge that we are bringing to the 
table, and what we have done the first few years was nibble 
around the edges of energy efficiency as we try to educate the 
public, and the other members, about what we have to do.
    And one of the most important things that I think we are 
about--Tonko and I are embarking on is now we are going to try 
to dive deeply into the issue of turbines, and look at that. 
When we are talking about single turbines at 35 percent, and 
combined capacities of maybe 60 at best, more likely at 45 or 
50 percent. So we are looking at what we can do with that.
    We know that this bill that we have, that we are putting 
forth, is going to provide some form of demonstration project 
that we can look at the steam injection, raising lit 
temperatures. We can increase pressure ratios. We know all 
these things are going to improve so it is probably the most 
efficient bill that we could pass on efficiency, is looking at 
how we create electricity.
    So is it too early? I am going to ask that to you, Mr. 
Somerhalder. Coming from the Gas Association, do you think this 
Congress is ready to take on such a huge subject as to reduce 
and improve the efficiency of our turbines and our electric 
generation? Because we know that China and Japan are very 
actively out there, participating in a robust fashion, and we 
are going to wind up playing second fiddle.
    Mr. Somerhalder. Exactly, and, as an association, and as a 
company--we supply today combined cycle turbines at central 
stations that have efficiencies of around 60 percent. They have 
been engineered that well, so we know the industry is capable 
of finding a way to continue to improve efficiencies. And we 
have seen the benefit of distributed generation, from micro-
turbines, to combined heat and power, to fuel cells. And so we 
do believe that we need to put in place research and incentives 
to continue to make progress on that, because those are 
additional ways to make sure that we are the most efficient and 
the most cost effective for the consumers in the long run.
    So that, in addition to using very efficient furnaces, 
whether they are 80 percent or 92, for heating, all that 
together can produce a very good result. So we support 
additional effort in those areas.
    Mr. McKinley. Well, we are going to make an all-out effort 
to see if we can't get--if nothing else, just to get the 
dialogue going to educate the American public as well as--what 
the problems are, because just imagine, what other entity would 
be acceptable at 60 percent efficiency? If we let the Post 
Office off at 40 percent of their deliveries weren't 
appropriate--so, having said that, let me go back to Mr. 
Thompson on homes.
    A component of my practice had been designing and building 
homes, and I knew that one of the issues we were facing there 
was indoor air quality. And, again, it is a process of 
education. I don't think Congress and the American public 
understand a lot of these issues that we are dealing with on 
Clean Air Act really have a genesis back in their home. Because 
we know that we spend 90 percent of our time indoors, and 60 
percent of our time in our homes. But yet we are not addressing 
some of those problems. So I am curious, you, as a home 
builder, and the Home Builders'--what are you doing, from an 
association, to address these issues of indoor air quality?
    Mr. Thompson. As the building codes have continued to 
tighten up, the air changes per hour in a house, and we saw 
that in the 2012, and reinforced in the 2015 codes of reducing 
those air changes per hour. That potential is increased. It has 
got to be resolved through mechanical ventilation, which is a 
requirement in the building code, if you are less than five air 
changes an hour.
    Interestingly enough, a number of the states that adopted 
the 2012 IECC chose to move that number that was in the IECC 
from three air changes an hour back up to five or over. I 
believe only one of those states kept it at that because it is 
a danger level there, and we are getting into a lot of 
uncharted territory that we need more building science to best 
understand how we can maintain air quality, minimize mold, and 
continue----
    Mr. McKinley. Right.
    Mr. Thompson [continuing]. To have energy efficiency.
    Mr. McKinley. And in the time I have, my concern is that 
what we are seeing is SOx and NOx gases 
have been decreasing, and CO2 emissions have--but 
yet we are seeing more asthma attacks, and as a result--it is 
not because of the coal fired power plants. We believe there is 
science--justify, from the American Lung Association and 
others, that a lot of this is having to do with our indoor air 
quality.
    Mr. Thompson. Yes, sir.
    Mr. McKinley. So the asthma increase is not because of coal 
and gas fired power plants.
    Mr. Thompson. Yes, sir.
    Mr. McKinley. Thank you very much for you time, and I 
apologize for----
    Mr. Olson. Thank you. And I apologize, the vote has popped 
up--so we will have a brief recess. Members who come back might 
have some questions, so please stand by for maybe 5 minutes or 
so. I apologize so much for this, but we stand in recess.
    [Whereupon, at 1:07 p.m., the subcommittee recessed, to 
reconvene at 1:11 p.m. the same day.]
    Mr. Olson. Order. So please bear with us, patience.
    Mr. McNerney. Mr. Olson, I move the bill. There have been a 
few changes around here.
    Mr. Olson. Well, I was called Chairman the previous panel, 
so good changes. Don't tell Mr. Rush. And the Chair recognizes 
the gentleman from Vermont for 5 minutes, Mr. Welch.
    Mr. Welch. Thank you very much. It is really tremendous to 
be here, and to be with people that a lot of us but me very 
much have been working with on this question of energy 
efficiency. It is also very reassuring to me to see how, in my 
view, Congress has really come a long way. You know, we have 
been locked down in this important debate about climate change, 
and tough challenges about our energy policy that have a lot of 
very valid issues to them, but they shouldn't get in the way of 
us making process in this space of energy efficiency that is so 
vital.
    Because even if we are going to achieve climate change 
goals, 40 percent of those, and this was under the Waxman-
Markey bill, were going to be achieved through energy 
efficiency. And that common ground that we have, Mr. Olson, of 
saving money, I am kind of cheap in Vermont, motivates me, but 
it also creates jobs. Lot of folks out there doing work to put 
good people to work building homes, doing retrofits. That all 
matters. So I am delighted about that.
    I am also delighted about all the energy efficiency bills 
that are going to be part of this, that I and our colleagues 
have had a part in. Mr. Cartwright, who is not on our 
committee, but his Streamlining Efficiency for Schools Act has 
been great. Mr. Kinzinger just came in, and--working with him 
on energy savings through public/private partnership, and the 
Utility Energy Service Contract Improvement Act. Mr. Latta, who 
was speaking a little bit earlier, and I have been working on a 
number of bills. So there is a lot of momentum.
    And I was just talking to one of the people here, who was 
telling me that he just came from the Senate, and there is a 
lot of discussion over there. It is hard to believe, but they 
are actually acknowledging the work that we are doing over here 
in the House. So they are pretty slow over there, but they are 
kind of catching up, so we are happy about that. And we have 
got a lot to do.
    And this afternoon, as I mentioned, Mr. McKinley and I, we 
are going to be at the White House for a bill signing. Now, 
from my perspective, we probably should do more, but I think we 
are really making real progress, and it is bipartisan. And, by 
the way, it feels a lot better to be getting something done 
instead of just fighting all the time, you know what I mean? 
OK. So let us keep it up.
    But on that topic, there are a couple of issues that are 
tough. Mr. Whitfield had mentioned this before. You know, there 
were a number of areas, 12 areas, where there is bipartisan 
agreement, a few where there aren't. My hope is we can work 
those out. Building codes is one. You know, building codes, I 
think, can be very helpful. They have got to be reasonable. So 
how you address that should be with a focus on what is 
practical. But I don't think we just say no building codes. I 
think there have got to be some standards that make sense, but 
they have to fit what is realistic in the real world. And that 
is a judgment call. It is not a right or wrong kind of 
situation, so let us see that as a tool, but pledge to work in 
a practical way, dealing with people who are in the field, 
dealing with some of our regulators who have the interest of 
energy efficiency.
    And also there is a question here about repealing Section 
433 of the Energy Independence and Security Act. That was 
designed to move our government buildings away from fossil fuel 
usage. It does have some implementation challenges. Let us work 
to figure out how we can square that circle, not have that be 
something we just don't resolve, and I think we can do it. But 
I do have a couple of questions for Mr. Somerhalder, who is out 
in the field. And I want to know about this rule with the DOE, 
and I assume you have expressed your concerns to the DOE, and I 
am wondering what their response has been.
    Mr. Somerhalder. Yes. We have a part of expressing concerns 
and comments. To this point, even though we have expressed 
those concerns, we still need more understanding of some of the 
data, and some of the technical information, and some of the 
models that had been used to come up with these cost estimates.
    Mr. Welch. OK. I only have a little more time, so let me 
just follow up on that. If we pass the time out on the FERS 
rule, are the gas utilities committed to increasing the 
efficiency of the units, and will they work quickly to get that 
rule finalized within a year?
    Mr. Somerhalder. Yes. We have spent the last several months 
as well in very detailed discussions on how to do this. The 
units are very efficient, either the 80 percent or the 92 plus 
percent. It is really some of the retrofit venting issues that 
have to be resolved to see where they can cost-effectively be 
applied. And so----
    Mr. Welch. OK.
    Mr. Somerhalder [continuing]. A lot of those issues, we are 
committed to work with DOE and the other stakeholders to reach 
consensus.
    Mr. Welch. OK. I appreciate that. Thank you very much. I 
yield back.
    Mr. Olson. Gentleman's time has expired. The Chair 
recognizes the gentleman from Illinois, Mr. Kinzinger, for 5 
minutes.
    Mr. Kinzinger. Well, thank you, Mr. Chairman, and, to 
Congressman Welch, it is great working with you on all this, 
and you have been a leader not just in this Congress, but 
Congresses prior, and it is an honor to join you in a lot of 
this, and so I just want to personally congratulate you on all 
this hard work, and I want to thank the Chairman for holding 
the hearing today. I want to thank all of you for being here. I 
know it is a time commitment, a travel commitment. And, again, 
as Peter said, this is a real opportunity to show that 
Washington, D.C. works sometimes. And we get all the news for 
when we fight, and when we go back and forth, but there are a 
lot of things where people get to work together.
    And this is such an open process, and I want to thank the 
Chairman for bringing forward the draft. And I understand that 
some members have taken issue with certain provisions in the 
draft, but, given the bipartisan nature of the vast majority of 
the text, it is my hope that we are going to be able to work 
with each other to produce a final product that most, if not 
all, of this committee can support.
    I would also like to thank a number of members from across 
the aisle for working with me on getting some really good 
efficiency related provisions into this draft. I mentioned 
Peter Welch. I also want to specifically mention Congresswoman 
Eshoo's work on the Energy Efficient Government Technology Act 
to update Federal data center efficiencies, and Congressman 
McNerney for his help in drafting and introducing the Thermal 
Insulation Efficiency Improvement Act. I would also like to add 
quickly that insulation is, in many cases, the unsung hero in 
improving the energy efficiency of our homes and buildings.
    Just a few questions, and then I will yield back my time. 
Mr. Wagner, you mentioned in your testimony the scoring of 
ESPCs and UESCs has caused consternation in the industry for 
quite some time. Lately there has been some work by the House 
and Senate budget conferees to fix the issues, although we 
haven't quite made it to that point yet. Given the inclusion of 
ESPC and UESC language in the discussion draft, would you mind 
explaining in a little further detail what savings guarantees 
ESPCs and UESCs offer the Federal Government, and also the 
potential impact a scoring change will have, saving the Federal 
Government the badly needed funding?
    Mr. Wagner. Well, thanks for that question, Congressman, 
and, first of all, let me thank you, and Congressman Welch, for 
your leadership, particularly on the performance contracting 
coalition. Your bipartisan leadership is really appreciated.
    You know, the scoring problem has really been vexing us for 
over a decade, and it seems to have only gotten worse. In a 
nutshell, we basically have the problem where CBO cannot 
reconcile the savings on the discretionary side of the ledger 
with the ESPC contract, which is mandatory spending in their 
mind. They don't give the offset, if you will, for the savings, 
even though the savings are guaranteed by the contractor. And 
that has just been problematic under the scoring rules.
    So the Senate legislation will fix that, and I know the 
House has been looking at that, and we appreciate everyone on 
this Committee who has been diving into try to solve this 
problem. So what happens is, when you have a number of the 
provisions that we have in the discussion draft here, they 
actually hold--CBO will score them, because they assume that 
ESPC will be used to implement those provisions, and therefore 
a score. And it is sometimes not just the ESPC legislation per 
se, it might be other things, like trying to extend a Federal 
goal for energy reduction overall. So this has really hampered 
your ability in the past to try to pass legislation in this 
Committee.
    So if we can crack that nut on the scoring problem, and fix 
it, then you will have a pathway to clearly be able to amend 
the statute--as I said in my testimony earlier, to update it, 
to make those clarifications, and maybe even expand the scope 
of what we can do under ESPC.
    Mr. Kinzinger. Yes, hopefully we can get there. And do you 
believe that the FPC member companies have the ability to meet 
the $4 billion directive issued by the President, and also, on 
top of that, what else can we be doing to get the Federal 
Government to be----
    Mr. Wagner. Absolutely we can meet that goal, and even do 
more, and I think agencies are trying hard to do that, and I 
know the Administration is committed. And, with your help and 
leadership, to continue to prod agencies to do that. But I will 
say that some of these legislative provisions will help because 
it will unlock some of the things that agencies are trying to 
do, and clarify some of the things that have been causing them 
confusion. So that is why the legislation here that you are 
working on is very important.
    Mr. Kinzinger. Ms. Newmark, I am not going to ask you a 
question because I am running out of time, but I do want to 
point out that you touch on the use of intelligent efficiency, 
and I gather you believe that the Federal Government could play 
a larger role in the use of intelligent efficiency, and more 
specifically in data centers. I guess maybe in 10 seconds do 
you want to elaborate on that?
    Ms. Newmark. Sure. I think the point I was trying to make 
is that the whole is often greater than the sum of the parts. A 
one percent, or half a percent improvement in efficiency in 
every piece of equipment still only gives you a half a percent 
improvement. If we can look at how those systems work together 
and get a 10 percent improvement, we all win. And in this case 
we use less energy, and spend less money.
    Mr. Kinzinger. Great. And I wish I could have given you 
more time, but thank you all for being here, and I will yield 
back, Mr. Chairman.
    Mr. Olson. Gentleman's time has expired. The Chair 
recognizes the lady from California, Ms. Eshoo, for 5 minutes.
    Ms. Eshoo. Thank you very much, Mr. Chairman. I appreciate 
the subcommittee holding this important hearing, and I want to 
thank you, and Mr. Whitfield, and the minority for extending 
the legislative courtesy to me to come here and join you today, 
since I am not a member of the subcommittee, but a member of 
the full committee. So thank you to all the witnesses. We 
always depend on really highly informed witnesses to enhance 
our work, so I appreciate the inclusion of my bill, the Energy 
Efficient Government Technology Act, in the discussion draft of 
the subcommittee. I appreciate it very much. I have been at 
this for a while, as some of you know.
    Sections 4111 and 4112 of the discussion draft are nearly 
identical to the provisions of the legislation that I just 
mentioned, and it is wonderful to introduce--and he is leaving, 
Mr. Kinzinger. Maybe he can hear me. Introduced with him, and I 
am grateful to him for his leadership, and there are three 
other members of this subcommittee that are also co-sponsors of 
the legislation. It is really a non-controversial bill. I know 
everyone would like to say that about their legislation, but I 
think the test was on the floor in the last Congress, when 375 
members in the House of Representatives voted for the 
legislation last year, so I think the proof is in the pudding.
    I think it is important to appreciate, as Ms. Newmark just 
said so succinctly, some of the facts that surround this issue. 
Today the world generates more data in 12 hours than was 
generated in all of human history prior to 2003. That is really 
something to digest, isn't it? And we should all have enormous 
pride in that, because we really are the mothers and fathers of 
the generation of that data, in terms of the technology. And, 
of course, I always have to brag and crow about my Silicon 
Valley congressional district. So these billions of gigabits of 
data have to be stored and processed at data centers, which are 
really the backbone of the 21st century economy, and they can, 
and should be, highly efficient.
    The Federal Government is our nation's largest land owner, 
employer, and energy user, and the Federal Government, I think, 
should lead by example by improving energy efficiency of its IT 
infrastructure and data centers, and we have them across the 
entire enterprise. We have lots of it. We have lots of it. So 
the legislation would require the agencies to develop plans to 
implement best practices, purchase more energy efficient 
information and communications technologies, and submit to 
periodic evaluation, which I think is really important--we 
don't always do that in the government--of their data centers 
for energy efficiency. So Congress can track, and the American 
people can track the progress that we are making.
    And the bill also requires the agencies to formulate 
specific performance goals, which I think is really important 
as well, and a means to calculate the overall cost savings from 
the improvements. So I think that if we get this in place, we 
have the opportunity, by reducing the government's data center 
energy bill anywhere from 20 to 40 percent. I really don't know 
who could ever be against this, honestly. It is like walking 
past a $1,000 bill on the sidewalk and not picking it up. So I 
think that--and it has been estimated that we could save $5 
billion, that is with a B, in energy costs through 2020, which 
is not too far away from us right now.
    So I appreciate the support that has all of the support, 
not only groups and organizations, advocates, industry groups, 
the American Council for an Energy Efficient Economy, the 
Alliance to Save Energy, the Information Technology Industry 
Council, people that I work with all the time, U.S. Green 
Building Council, which is really very important as well, all 
of them, as well as the sponsors. And I think that we have a 
real opportunity to do something that I think everyone across 
our country would say, you know what, Congress, bravo. It makes 
sense, and it is going to save taxpayer money, and, for a 
change, the Federal Government, as an entity, will be 
instructive to the rest of the country, and--because we adopted 
a very smart policy. So I thank all of you.
    Ms. Newark, thank you for what you said in your written 
testimony, and--pointing out that we began this effort in 2006, 
but sometimes the gestation period is longer. So I am willing 
to wait for that. I thank all of you. And, again, Mr. Chairman, 
thank you for your legislative courtesy, I appreciate it very 
much, and kudos to Mr. Kinzinger. I will make sure I find him 
on the floor and thank him. And Mr. Whitfield, thank you, my 
friend. I appreciate it. I yield back.
    Mr. Olson [presiding]. Thank you. No more speakers--I ask 
unanimous consent that the following statements and letters be 
submitted for the record: number one, American Public Gas 
Association letter; number two, the Business Council for 
Sustainable Energy letter; number three, Geothermal Exchange 
Organization letter; number four, Consumer Federation of 
America, and the National Consumer Law Center; number five, 
NiSource; number six, ASHRAE; number seven, Alliance to Save 
Energy, and American Council for an Energy Efficient Economy; 
number eight, U.S. Chamber of Commerce; number nine, Leading 
Builders of America; number 10, Retail Industry Leaders 
Association; number 11, Alliance for Individual Efficiencies; 
number 12, a Center for Progress report entitled, ``Buildings 
of Tomorrow are Here Today''; and finally, number 13, a letter 
from nearly 500 architectural firms in support of Section 433. 
I would like to put that in the record without objection. 
Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Olson. And thank you so much to all the witnesses. On 
behalf of Chairman Whitfield, who is from Kentucky, watch the 
Kentucky Derby this weekend, the biggest event there in 
Kentucky, and without objection, we are adjourned.
    [Whereupon, at 1:29 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    We have made significant progress in recent weeks as our 
bipartisan energy bill is beginning to take shape, and today we 
address two key components--updating the Strategic Petroleum 
Reserve (SPR) and improving the federal government's energy 
efficiency initiatives.
    It has been a full 40 years since the SPR was created in 
the aftermath of the Arab Oil Embargo as an emergency stockpile 
of oil. Fortunately, we never had the occasion to use the 
nearly 700 million barrel reserve except for relatively small 
withdrawals. Nonetheless, it continues to serve a useful role 
just in case we ever do have a major disruption in oil 
supplies.
    The Department of Energy's Quadrennial Energy Review has 
highlighted the fact that the SPR is showing its age. In fact, 
DOE and others are concerned that it is currently in no shape 
to respond to an emergency and that many upgrades are needed. 
We agree, and need to consider how to modernize the SPR.
    But before we draw conclusions about what to do, our draft 
bill requires DOE to build on the work in the Quadrennial 
Energy Review and conduct a long-range strategic review of the 
SPR and recommend a plan of action.
    On energy efficiency, we believe the federal government 
should first take all sensible steps to minimize its own energy 
use. Energy Savings Performance Contracts are one vehicle that 
allows the private sector to apply its energy efficiency 
expertise to federal facilities at no cost to the taxpayer. 
Provisions in the draft bill facilitate wider use of Energy 
Savings Performance Contracts throughout the federal 
government. There are other steps the federal government can 
take to reduce energy use, and the draft bill contains measures 
directed toward that end.
    The bill also has provisions dealing with energy efficiency 
in appliances and buildings, including improved information for 
consumers about energy use and more rigorous analysis of 
efficiency standards.
    Though we may not agree on all the provisions discussed 
today, this hearing continues a very useful discussion that I 
hope will lead to bipartisan energy legislation.
                              ----------                              

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]