    [Senate Hearing 115-353]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-353

    THE STATUS AND OUTLOOK FOR U.S. AND NORTH AMERICAN ENERGY AND RESOURCE
                                    SECURITY

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 18, 2017

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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

            Available via the World Wide Web: http://www.govinfo.gov

                                          ______

                         U.S. GOVERNMENT PUBLISHING OFFICE

     26-867                    WASHINGTON : 2018

                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                        LISA MURKOWSKI, Alaska, Chairman
    JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
    JAMES E. RISCH, Idaho                RON WYDEN, Oregon
    MIKE LEE, Utah                       BERNARD SANDERS, Vermont
    JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
    STEVE DAINES, Montana                AL FRANKEN, Minnesota
    CORY GARDNER, Colorado               JOE MANCHIN III, West Virginia
    LAMAR ALEXANDER, Tennessee           MARTIN HEINRICH, New Mexico
    JOHN HOEVEN, North Dakota            MAZIE K. HIRONO, Hawaii
    BILL CASSIDY, Louisiana              ANGUS S. KING, JR., Maine
    ROB PORTMAN, Ohio                    TAMMY DUCKWORTH, Illinois
    LUTHER STRANGE, Alabama              CATHERINE CORTEZ MASTO, Nevada

                          Colin Hayes, Staff Director
                    Patrick J. McCormick III, Chief Counsel
      Brianne Miller, Senior Professional Staff Member and Energy Policy
                                    Advisor
                       Severin Wiggenhorn, Senior Counsel
               Angela Becker-Dippmann, Democratic Staff Director
                    Sam E. Fowler, Democratic Chief Counsel
               Scott McKee, Democratic Professional Staff Member

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
    Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
      Washington.....................................................     2

                                   WITNESSES

    Webster, Jamie, Senior Director, Center for Energy Impact, Boston
      Consulting Group...............................................    11
    Mills, Mark P., Senior Fellow, Manhattan Institute...............    17
    Cheney, Stephen A., Brigadier General USMC (Ret.), Chief
      Executive Officer, American Security Project...................    25
    Coward, Robert, President, American Nuclear Society..............    34
    McGroarty, Daniel, Principal, Carmot Strategic Group Inc.........    40

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Birol, Dr. Fatih:
        Written Statement............................................     5
        Responses to Questions for the Record........................    93
    Cantwell, Hon. Maria:
        Opening Statement............................................     2
    Cheney, Brigadier General Stephen A.:
        Opening Statement............................................    25
        Written Testimony............................................    27
        Responses to Questions for the Record........................    74
    Coward, Robert:
        Opening Statement............................................    34
        Written Testimony............................................    36
        Responses to Questions for the Record........................    79
    McGroarty, Daniel:
        Opening Statement............................................    40
        Written Testimony............................................    42
        Responses to Questions for the Record........................    81
    Mills, Mark P.:
        Opening Statement............................................    17
        Written Testimony............................................    20
        Responses to Questions for the Record........................    71
    Murkowski, Hon. Lisa:
        Opening Statement............................................     1
    Webster, Jamie:
        Opening Statement............................................    11
        Written Testimony............................................    13
        Responses to Questions for the Record........................    68

    THE STATUS AND OUTLOOK FOR U.S. AND NORTH AMERICAN ENERGY AND RESOURCE
                                    SECURITY

                                  ----------

                             TUESDAY, JULY 18, 2017

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:35 a.m. in
    Room SD-366, Dirksen Senate Office Building, Hon. Lisa
    Murkowski, Chairman of the Committee, presiding.

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

        The Chairman. Good morning. The Committee will come to
    order.
        We are here today to consider the status of U.S. and North
    American energy and resource security, to review our
    production, our imports and our exports and where we are as a
    country, as a continent, in light of them.
        The good news, I think, is that we are in a much better
    place today than even a few short years ago. It was not long
    ago that peak oil and the need for LNG exports dominated policy
    discussions here on Capitol Hill. Prices were high, our
    production levels were low and our energy security was at risk
    as a result of outside decisions and disruptions, particularly
    those in the Middle East.
        But I think we have seen that times have changed, and I
    would say for the better, due to tremendous innovation and
    technological advances, our nation has moved away from energy
    scarcity and isolation. We are in the midst of a significant
    surge in oil and natural gas production with renewables making
    a noteworthy contribution.
        We have also taken steps to open up our markets, especially
    by lifting the ban on export of domestic crude oil which by all
    accounts stands as a smart, timely and beneficial move.
        Today we are far more energy secure than at any point in
    recent memory, and we have reached a point where energy
    dominance, to borrow the Administration's phrase, has become a
    real and legitimate policy goal.
        We are in a position to export energy to our allies,
    lessening their dependence on unfriendly and unpredictable
    regimes around the world. That will allow us to create new
    jobs, generate new revenues and improve our balance of trade,
    while also providing affordable and reliable energy supplies to
    countries around the world.
        OPEC no longer holds all of the cards when it comes to the
    price of oil. Our friends in Europe and Asia have an excellent
    new option to reduce their dependence on natural gas from
    Russia. This Administration, I think, deserves support for its
    efforts to increase access to keep these good trends going.
        Alaska is certainly ready to help strengthen our energy
    security. We are the most resource rich state in the nation. We
    currently account for six percent of the total energy
    production in the United States, but we have the opportunity to
    do a lot more.
        Given recent discoveries both onshore and offshore in
    Alaska, along with our long-standing efforts to produce in our
    national petroleum reserve, the non-wilderness portion of ANWR
    and our offshore Arctic, we can and should celebrate this 40th
    anniversary of the Trans-Alaska Pipeline System by agreeing to
    refill it. Doing so would help our economy, our budget and our
    energy security while at the same time making sure that we
    protect the environment.
        Of course, oil and gas are just a part of the energy
    security picture. We have abundant coal reserves, significant
    growth in renewable generation, a large nuclear fleet and a
    reliable electric grid. Yet, we should also recognize that some
    developments, especially those in nuclear energy, are not as
    positive and threaten our long-standing, global leadership in
    key fields.
        We cannot forget about our mineral security either. It is
    routinely ignored but increasingly critical to our future. We
    are becoming more and more reliant on minerals for everything
    from smartphones and solar panels to advanced defense systems,
    but our mineral security has fallen dramatically year after
    year. I believe that we have to pay greater attention to this,
    and we have to take steps to resolve it.
        This morning's hearing is also an opportunity to recognize
    our close ties with our neighbors, Canada and Mexico, which
    also have dynamic energy sectors. We have long had robust
    energy trade with both nations through both electric grids and
    pipeline systems. As we look to what the future will hold, we
    should consider not only our national security but also our
    continental security and the significant benefits that will
    provide to us.
        I want to welcome our distinguished panel who will help us
    understand what is happening in global markets and with
    geopolitics, from domestic production and export policies to
    potential sanctions on other nations. There is a lot to
    consider, to understand and to work through right now.
        I thank you all for being here to share your expertise with
    us, and I look forward to your testimony.
        At this time, I will turn to Ranking Member Cantwell for
    her comments.

                   STATEMENT OF HON. MARIA CANTWELL,
                      U.S. SENATOR FROM WASHINGTON

        Senator Cantwell. Thank you, Madam Chair. Thanks for
    scheduling today's hearing on energy and resource security.
        As we all know from the Quadrennial Energy Review that was
    done in the last Administration about the energy needs of our
    country moving forward, enhancements to our electricity grid
    for more renewable energy sources and the complexity of dealing
    with aged infrastructure and what I would call, probably,
    robust commodity competition on our rail lines and the
    structure of where energy is developed and moved to, has
    created new challenges.
        The Quadrennial Energy Review also pointed out the very
    important need to protect critical energy infrastructure from
    both physical and cybersecurity threats. I believe we must take
    this action very seriously in protecting our energy
    infrastructure from cybersecurity threats to ensure America's
    energy security of the future.
        As was just reported last week by the Washington Post, it
    is clear now that there were Russian government hackers who
    tried to infiltrate a U.S. nuclear power plant. I believe we
    need to act and we need to act now.
        Our grid and energy networks are under constant
    cyberattack. From 2012 to 2016, reported cyber incidents
    against U.S. critical infrastructure more than doubled. In
    December 2015, suspected Russian hackers infiltrated three
    Ukrainian utilities knocking out power to more than 225,000
    customers and they did it again to a utility north of Kiev
    earlier this year. Recently, the U.S. Department of Energy
    described the incident in Ukraine as ``step change in
    sophistication and intent of hackers.''
        My colleagues and I have repeatedly pressed the President
    and Secretary of Energy to take more aggressive cybersecurity
    action now. I would also say that our House colleagues need to
    get more serious about cybersecurity. As the Washington Post
    noted, ``Russian government hackers have already shown their
    interest in targeting U.S. energy and other utility systems.''
    In fact, the Russians have more than just a passing interest in
    infiltrating our grid. Just 10 days ago the Post reported that,
    ``Russian government hackers were behind cyber intrusive
    attacks into the business systems of U.S. nuclear power plants
    and other energy companies in what appears to be an effort to
    assess their networks.'' This should set off alarm bells across
    our government and energy sector and the general public, and I
    have requested a secure briefing on exactly what has transpired
    in this matter.
        In addition, the Christian Science Monitor has reported,
    ``Cyber spies linked to China's military targeted nearly two
    dozen U.S. natural gas pipeline operators stealing information
    that could be used to sabotage U.S. gas pipelines.''
        Although we have mandatory cybersecurity standards for
    electric utilities, natural gas and pipelines are merely
    subject to voluntary agreements issued by the Transportation
    Security Administration, which has a small staff to oversee
    millions of miles of pipelines that transverse the country.
        The security of our pipelines is not only important to
    prevent attacks, but also to protect the public. DOE's most
    recent Quadrennial Energy Review suggested it is important that
    we consider whether additional or mandatory cybersecurity
    guidelines are necessary for natural gas pipelines given their
    increased dependence between the electric and natural gas
    sectors.
        Now that we see these vulnerabilities that the Russians
    have exposed to hacking our grid and the cybersecurity threat,
    we need to take additional actions. So I want to make sure that
    we are pushing the Administration in helping plan for the
    future.
        Today, I am sending a letter to the Government
    Accountability Office to ask them to conduct an assessment that
    the United States must prioritize protection of our critical
    energy infrastructure and we cannot afford to wait before we
    have a large-scale attack. I hope to get an answer on where we
    are with our abilities on pipelines and making sure that our
    pipelines are secure for the future.
        Madam Chair, we also, obviously, learned from the
    Quadrennial Energy Review that we need to continue to diversify
    our energy mix and the consequence of climate change that
    threatens the well-being and increases geopolitical issues
    around the globe. In the G7, they noted the importance of
    ``reducing greenhouse gas emissions and accelerating the
    transition to a low carbon economy as a key contributor to
    enduring energy security.'' So I couldn't agree more. There is
    alot to do, and lots of changes have happened in the energy
    sector. We must prioritize those things that are going to help
    us be secure for the future.
        I look forward to hearing from the witnesses today.
        The Chairman. Thank you, Senator Cantwell.
        We will now begin with our panel.
        I would mention to colleagues that we had invited Dr. Fatih
    Birol, who is the Executive Director for the International
    Energy Agency. He has appeared before this Committee many times
    and up until yesterday we believed that we had been able to
    work a schedule. But he has not been able to work within the
    limitations that we had and not without great effort on his
    part as well.
        I appreciate his willingness to testify. Even though he is
    not with us, we do have his written testimony which will be
    included as part of the record.
        [The information referred to follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. We have a very distinguished panel today.
        We will begin with Mr. Jamie Webster. Mr. Webster is the
    Senior Director for the Center for Energy Impact at Boston
    Consulting Group.
        Mr. Mark Mills has also been before the Committee. He is a
    Senior Fellow at the Manhattan Institute.
        We have Brigadier General Stephen Cheney, who is the Chief
    Executive Officer for the American Security Project (ASP); and
    Mr. Robert Coward, who is the President of the American Nuclear
    Society. We welcome you to the Committee.
        Mr. Dan McGroarty will wrap the panel up. He is the
    Principal of Carmot Strategic Group.
        We would ask you to try to keep your comments to five
    minutes. Your full statements will be incorporated as part of
    the record.
        Mr. Webster, if you would like to lead us off?

    STATEMENT OF JAMIE WEBSTER, SENIOR DIRECTOR, CENTER FOR ENERGY
                    IMPACT, BOSTON CONSULTING GROUP

        Mr. Webster. Thank you very much, Chairman Murkowski,
    Ranking Member Cantwell and members of the Committee. I
    appreciate the opportunity to testify before you today on the
    current status and outlook of the U.S. North American energy
    security. I appear before you in my role as a Senior Director
    at the Boston Consulting Group's Center for Energy Impact and
    also a non-resident Fellow at Columbia University.
        The United States is undergoing an energy revolution that
    is expanding U.S. oil and gas capabilities in all ways, from
    production, to pipelines, refineries, storage facilities and
    export terminals. This has impacted the global supply balance,
    changed trade relationships and lowered prices for consumers.
    This increased energy security has allowed the United States to
    take a leading role as a global energy supplier.
        The U.S. Energy Information Administration has noted that
    the U.S. has now, for the fifth year in a row, the largest
    natural gas and oil producers in the world. For U.S. natural
    gas that production rise began in 2006 and has expanded more
    than one-third since that time. In light of this, U.S. energy
    security, as it relates to natural gas and the concerns about a
    lack of natural gas and the need for imports quickly vanished
    as Henry Hub dipped below $5.00 in 2008 and have not risen
    above that level, sustainably, since that point.
        Since that, since the price decline, the resilience of U.S.
    producers has been aided by finding new markets, with U.S. LNG
    now being offered for sale on a global basis. Far from
    imperiling U.S. energy security, these rising exports are
    actually increasing energy security for both the U.S. and the
    world. The ready export outlet will allow producers to keep
    natural gas flowing into homes and power plants at less cost,
    and exports of LNG are providing consumer countries with
    another choice of energy supplier, allowing them to negotiate
    better pricing and increasing market responsiveness.
        The U.S. is now expected to be one of the top three natural
    gas exporters in the world by 2020. To meet this there are
    expectations of export terminals on all three coasts. Along
    with that is a growth in natural gas storage which has expanded
    more than a trillion cubic feet in the past 10 years with more
    than 20 new fields added.
        Oil from the shale region started to grow after production
    in natural gas was hit by the lower prices and arguably had its
    first significant impact in 2011 when U.S. light, sweet crude
    began to replace imported barrels from OPEC's Nigeria. This was
    an important energy security turning point as it blunted the
    risk of production outages from this country. A reminder that
    Nigerian production outages caused by strife in the Nigerian
    Delta region were a key factor in raising global oil prices
    above $100 in 2008, that summer U.S. drivers paid as much as
    $4.72 per gallon for gasoline. This past Fourth of July
    weekend, 20 percent of consumers were able to get natural gas--
    gasoline for less than $2.00.
        There are concerns about the longer-term durability of
    North American energy security, particularly as it relates to
    oil. Those risks include: high decline rates; oil production in
    the shale regions decline by as much as 300,000 barrels a day,
    requiring substantial activity to keep going; drilled but
    uncompleted wells which are up by over 1,000 wells in the last
    year--the lack of being able to actually complete those is
    slowing down production growth; and a dependence on the Permian
    where most, 60 percent of production growth in the last year
    has actually come out of the Permian versus other places.
        Now there has been substantial growth in terms of rig
    productivity. A rig brought on today delivers 2.5 times as much
    productivity as a rig that was brought on in 2014, a credit to
    what the United States energy industry is able to do.
        The longer-term concern is the sufficiency in the global
    context that the U.S. oil is actually still a fairly small part
    of the system and a longer-term concern that there won't be
    enough investment to keep prices down in the three- to five-
    year timeframe.
        We've also had extremely strong growth in refined product
    and being able to store oil over 100 million barrels a day. One
    hundred million barrels has now been put into capacity over the
    last several years, expanded storage capacity has also
    supported the operational needs for refineries, with refineries
    now producing or being able to produce 18.1 million barrels a
    day of capacity. This is the fifth year in a row that they've
    grown.
        The advantage to increased production, pipeline refinery
    and storage capacity in the United States is an expansion of
    not just our own energy security, but the ability to extend
    that to other countries. Add to this impressive mix that the
    fact that the United States has the most transparent, frequent
    and capable energy data system in the world in the guise of the
    Energy Information Administration, and this allows the benefits
    of the U.S. to be known and transmitted to all market
    participants benefiting and increasing energy security in the
    U.S. but also globally.
        Thank you very much.
        [The prepared statement of Mr. Webster follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Webster.
        Mr. Mills, welcome.

     STATEMENT OF MARK P. MILLS, SENIOR FELLOW, MANHATTAN INSTITUTE

        Mr. Mills. Good morning. Thank you, Madam Chairman and
    thank you, Senators, for the opportunity to testify.
        I'd like to begin--I'm going to focus on geopolitics and
    security as well. I'd like to begin with, sort of, a mea culpa.
        It was about five years ago I published a paper titled,
    ``Unleashing a North American Energy Colossus.'' And in the
    introduction of that paper I suggested that it was time that we
    begin to think in different terms and stop talking about energy
    independence and think in more of terms of energy influence and
    even, I wrote, ``energy dominance.''
        Setting aside the fact that that word has gained political
    salience, I'd like to say that it is, in fact, obvious that the
    reality is America is already dominating global energy markets.
    No one in Moscow or Reade doubts that the global price collapse
    in gas and oil happened for any reason other than the fact of
    this astonishing revolution in the American shale fields.
    They're worried not about what has already happened, but what
    could yet happen.
        Henry Kissinger, who all of us know, is a great statesman
    and sometimes the greatness expands with the passage of time
    which is a wonderful thing for statesmen. He wrote something
    that was, I thought, very insightful in 1999 in his book. He
    said, and I quote that, ``Statecraft is the ability to
    recognize the real relationship of forces.'' Let me very
    briefly summarize some real forces, three real forces of
    geopolitics.
        The first reality is that oil petroleum is more important
    to the global security and to the United States today than it
    was at the time of the Epoch setting 1973 oil embargo. The
    world consumes 150 percent more oil today than it did then. Oil
    is the world's largest traded commodity and the largest single
    source of energy supply in civilization today. In fact, 95
    percent of all transportation, over 95 percent, is powered by
    fuel-burning engines. And 60 percent of all oil is now used
    to--for transportation. That share in 1973 was just one-third.
        The second reality is that every credible forecast says
    that petroleum, and especially these days its hydrocarbon
    cousin, natural gas, will be more, not less important in the
    coming two decades. This is true, notwithstanding what I would
    call a universal affection for alternative energy, political,
    universal affection and literally hundreds of billions of
    dollars spent over the last four decades trying to replace oil
    and natural gas as primary sources of the world's energy. There
    are simply no prospects for reducing today's already enormous
    consumption of global gas and global oil, never mind reducing
    the increase that will come as the world's economies expand.
    Really the only debate today, at the fundamental level, is how
    big the increase will be, not whether or not there will be an
    increase in global consumption of oil and natural gas.
        The third reality is, of course, the wild card that no one
    expected a decade ago or, in fact, I'd even say, expected five
    years ago, which is the emergence of the technology that we now
    call the shale revolution. The United States is now not just a
    major player, but also a major exporter and a growing exporter
    in world markets for both oil and natural gas. I think the
    magnitude of that revolution is still underappreciated. As much
    as we talk about it and hear about it, it's still fundamentally
    unappreciated.
        Let me put it in this context. The quantity of energy and
    the velocity with which the amount of energy produced by the
    shale fields of America that secured in the past decade is the
    largest, single increase of energy supply to the world that has
    ever occurred in history, period.
        I'll put it in domestic terms. The increase in domestic
    energy production, the shale fields of the United States over
    the last 10 years is 2,000 percent greater than the subsidized
    increase of combined increase of wind and solar in the United
    States. This is an astonishing transformation of energy markets
    which is still, I think, profoundly underappreciated.
        And the world has been doubly impacted by the shale
    revolution. It's not just that the United States can export
    fuels; it's that we have taken hundreds of billions of dollars
    of purchases off of global markets. This has deprived oil
    exporting nations of literally trillions of dollars and most of
    that depravation has been borne by OPEC nations and by Russia.
        Now as cheap domestic gas has also triggered a profound
    increase in domestic and foreign direct investment in
    manufacturing in the United States. Over the next several years
    we'll see the effect of that as something on the order of $160
    billion in private capital and foreign capital has been put
    into over 200 chemical manufacturing plants in the United
    States that are slated to come online over the next few years.
    This will have profound economic and geopolitical implications.
        What comes next? Let me, again, context what comes next
    briefly in two ways.
        First, the EIA and the IEA, but in particular, the Energy
    Information Administration's two-decade forecast still sees the
    shale fields supplying 600 percent more net new energy to
    America than wind and solar combined. And that forecast from
    EIA assumes that over the next two decades the shale industry
    can only do as much as it did in the past single decade. I'd
    like to go on record here saying that that is almost certainly
    going to be an underestimate. Shale will do more. The reason it
    will do more is because of the information revolution that's
    now underway.
        There's a lot of discussion about how old industries of all
    kinds from groceries and transportation and car rental, hotels,
    are being impacted by analytics and big data and machine
    learning, Internet of Things. The 80 percent of our economy is
    tied up in the old part of our economic infrastructure which is
    being unleashed and revitalized by the new information
    revolution.
        Why would it not be the case that algorithms, if you like,
    won't unleash more productivity of the shale fields? I will
    tell you that not only are they likely to, they're already
    beginning to and in fact, one can argue they'll have a bigger
    impact there for the very simple reason that the shale industry
    has so far, to use an awkward phrase, is a least digitalized of
    our old economy.
        So the--let me conclude by quoting from Dr. Birol, who
    recently said in an interview that we are now witnessing the
    second unleashing of the shale expansion of the United States
    in shale production. And he said then it was price that would
    determine how fast that new production would grow.
        I'd like to respectfully disagree with half of what he
    said. The data are already in. The shale industry is in big
    resurrection mode from new technologies and from what Jamie has
    just said about the improvement in productivity, but we have
    just begun to see what will happen is information technology
    unleashes the second shale revolution, what I've called Shale
    2.0.
        I think the only question is not so much what the price
    will be, is the extent to which policy helps or impedes the
    unleashing of the second shale revolution.
        Thank you very much.
        [The prepared statement of Mr. Mills follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Mills.
        Brigadier General Cheney?

    STATEMENT OF STEPHEN A. CHENEY, BRIGADIER GENERAL USMC (RET.),
           CHIEF EXECUTIVE OFFICER, AMERICAN SECURITY PROJECT

        General Cheney. Thank you, Chairperson Murkowski and
    Ranking Member Cantwell and members of the Committee for
    inviting me to testify at today's hearing.
        The American Security Project was founded in 2005 as a
    bipartisan initiative to tackle long-term challenges from a
    national security perspective, not encumbered by political
    bias. Our founders, Senators Kerry, Hagel, Hart and Rudman,
    asked to host the retired general and admirals to join ASP
    because their only interest was the security of our country.
        Our Chairperson, former New Jersey Governor, Christine Todd
    Whitman, and our entire board share a strong belief that energy
    security for the United States and how we produce energy is a
    national security issue of preeminent importance.
        My role in today's hearing will be to offer a perspective
    of a national security professional. Having spent over 30 years
    as a Marine I know that, for the military, assured access to
    energy is a prerequisite to any operation. In the last 15 years
    the military has learned the hard way that energy should not be
    taken for granted. Our supply lines in Iraq and Afghanistan
    were a constant target for insurgents. In response, all four
    services have taken significant steps to both increase energy
    efficiency and reduce their single source dependence on
    petroleum fuels. Our country can learn a lot from our
    military's experience.
        Before we can discuss where we are in energy security, we
    have to understand what we are asking. Energy security is
    generally defined as the ability to have uninterrupted access
    to energy resources at an affordable price. That's a start, but
    I don't think it's enough because of the indelible link with
    global affairs.
        Our nation's concept of energy security was defined in the
    American mind by the two oil crises of the 1970s. To ensure
    that nothing like that ever happens again should be our goal in
    building energy security; therefore, I would propose that we
    define energy security as the ability of a country to define
    its interest overseas independently from how it uses energy
    domestically.
        More importantly, energy security must not mean energy
    independence in the sense that all energy used in the United
    States comes from within its borders without international
    trade. In today's globalized world, this is neither attainable
    nor desirable. Even domestically-produced energy sources are
    subject to fluctuation in global commodity markets. We must see
    energy security in today's world as where countries, businesses
    and people share and compete in the global marketplace. In
    today's globalized world, if one country doesn't have security,
    their neighbors and allies don't have security either.
        Finally, I will argue that we must see energy security as a
    long-term process, not as a moment frozen in time. Some
    policies and actions could build security today while harming
    our future security. Climate change is already affecting
    security both at home and around the world, so we must make
    sure that we take the greenhouse gas emissions from energy into
    account less we trade increased energy security today for a
    warmer, more unstable world in the future.
        Thinking long-term, this way also means that we must invest
    now in scientific research and development into the next
    generation of energy technology. Factoring together each of
    these variables, my message to you Senators is that the current
    status of North American energy and resource security is good,
    but the outlook is hazy.
        There are few threats to America today that could stop our
    access to global energy markets, but I am concerned that there
    are emergent threats that could undermine our future security,
    if not addressed soon. Moreover, we must guard against bad
    policy that could undermine our future security.
        Our amazing increase in the production of oil and gas has
    given us some breathing room and the opportunity to invest in
    other long-term sources of energy. We cannot sit back and revel
    in our success with fossil fuels. We should not let our
    expertise in nuclear energy atrophy and ought to be pursuing
    small modular reactors. We ought to be continuing to support
    the rapid proliferation of renewables of all kinds to include
    wind, solar and biofuels. We ought to take advantage of this
    remarkable progress made in metallurgy and science to pursue
    fusion energy. We have seen far too many countries rely on a
    sole source of energy and look what has befallen many of them,
    not the least of which, perhaps, are Venezuela and Nigeria.
        We have a golden opportunity in front of us right now and
    we need to capitalize on it.
        Thank you.
        [The prepared statement of General Cheney follows:]

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        The Chairman. Thank you.
        Mr. Coward, welcome.

                STATEMENT OF ROBERT COWARD, PRESIDENT,
                        AMERICAN NUCLEAR SOCIETY

        Mr. Coward. Chairman Murkowski, Ranking Member Cantwell,
    members of the Committee, thank you very much for the
    opportunity to testify today.
        I am here in my role as President of the American Nuclear
    Society. Our society is dedicated to the peaceful use of
    nuclear science and technology. Our 11,000 members come from
    all sectors of the nuclear energy community: utilities,
    suppliers, national labs, universities, government agencies.
        We commend the Committee on its bipartisan work to
    modernize U.S. energy research and development and production
    policies.
        The focus for today is energy security, and by energy
    security I'm going to agree with Brigadier General Cheney, what
    we really mean is resiliency. I'm going to focus on the
    electricity and the electricity grid since that's my main area
    of experience. And for the grid, energy resiliency is a simple
    concept. Independent of whether the sun is shining, the wind is
    blowing, the coal pile is stocked or the natural gas pipeline
    is flowing, we have confidence in our ability to deliver
    electricity to the grid.
        If you think about the Polar Vortex in 2014 in the
    Northeast, coal piles froze, natural gas pipelines were choked.
    Without the nuclear plants that remained online, we very likely
    would have faced widespread blackouts.
        Nuclear power plants refuel every 18 to 24 months, so they
    don't rely on just-in-time fuel delivery or specific weather to
    operate at full power. Over the past 15 plus years, U.S.
    nuclear plants have operated over 90 percent of the time.
    Typically shutting down only for long-planned refueling. This
    is truly the definition of resilient.
        Resiliency also extends to stability and predictability of
    pricing and cost. A nuclear power plant can accurately predict
    the cost of the power it will produce for every day of the
    coming year and, often, for multiple years.
        Nuclear power plants also help anchor the electricity grid
    in the U.S. Grid operators rely on nuclear's roughly 20 percent
    share of power production to maintain stability as electricity
    demands rise and fall throughout the day. A crucial attribute
    as intermittent sources become a larger percentage of our
    generation portfolio.
        Energy security also demands that we generate power in ways
    that preserve our resources and protect our environment. This
    is where nuclear power begins to truly stand out.
        Nuclear power accounts for about 60 percent of all U.S.
    non-emitting electricity generation, emitting essentially no
    greenhouse gases or pollutants. Yes, nuclear power generates
    used fuel and other waste, however, those are small in volume,
    contained in space and can be handled and disposed of with
    safe, non-hazardous methods.
        Nuclear power plants also have a high energy density, very
    small, physical footprint. For example, the electricity
    generated from a 1,000-megawatt power reactor which typically
    sits on about 1.5 square miles would require about 50 square
    miles of solar panels or a wind farm over about 300 square
    miles of wind turbines.
        Finally, the U.S. nuclear power sector contributes to our
    national security, a factor sometimes as misunderstood as it is
    important. Almost all nuclear power programs around the world
    trace their technology back to U.S. origins. For decades, our
    role as the worldwide leader in nuclear technology has enabled
    us to positively influence the nuclear safety and non-
    proliferation norms of the world.
        Right now, dozens of nations are building nuclear power
    plants or actively considering adding nuclear to their
    portfolio for all the same reasons I described for us. These
    countries are going to proceed whether we participate or not.
    If U.S. suppliers cannot compete in this geopolitically
    significant marketplace, our competitors in Russia and China
    will and they will win. And it is unrealistic to think that
    U.S. suppliers can compete in world markets without a healthy
    nuclear power program here at home.
        Nuclear power is the ultimate, strategic, long-term asset;
    however, we increasingly find ourselves in a tactical, short
    attention span, ``what have you done for me yesterday'' world.
    As leaders and policymakers, we cannot allow our long-term
    energy and national security interests to be determined by how
    much electricity costs on a spot market at two a.m. on a Monday
    morning.
        Resilient, reliable, non-emitting and clean power plants
    are shutting down. We must be strategic.
        With that goal in mind, we recommend Congress consider the
    following strategic directions: support the current U.S.
    nuclear fleet--they are vital U.S. assets; equalize the level
    of subsidies, tax credits and regulatory costs for all non-
    emitting sources and fund continued R&D to extend the life of
    these valuable facilities; continue and expand support for the
    development of small modular and advanced reactor systems;
    continue to invest in the development of the next generation
    workforce and the research and development infrastructure at
    our national labs and universities; demonstrate forward
    progress on fixing our broken nuclear waste policy; and last,
    improve our nuclear export regulations and financing
    opportunities to ensure that U.S. nuclear manufacturers and
    suppliers can be competitive in the international markets. It's
    important.
        I thank you again for the opportunity to speak today,
    commend the Committee for its leadership in nuclear technology
    policy and I look forward to answering any questions.
        [The prepared statement of Mr. Coward follows:]

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        The Chairman. Thank you, Mr. Coward.
        Mr. McGroarty, welcome.

               STATEMENT OF DANIEL McGROARTY, PRINCIPAL,
                      CARMOT STRATEGIC GROUP INC.

        Mr. McGroarty. Thank you.
        My thanks to Senator Murkowski, Ranking Member Cantwell and
    members of the Committee for the opportunity to take part in
    the hearing this morning.
        I am Principal of Carmot Strategic Group, an issues-
    management firm based here in Washington, DC, and strategic
    resource issues are a core element in my practice.
        By way of disclosure, I advise Texas Mineral Resources,
    Graphite One, American Manganese and Rio Tinto, companies that
    are working to develop new sources of metals and minerals
    ranging from copper and graphite to cobalt, manganese and rare
    earths.
        I also run the American Resources Policy Network, a virtual
    think tank that focuses on all aspects of domestic non-fuel
    resource production, and I consult to the Institute for Defense
    Analyses, which supports the Department of Defense on issues
    related to strategic materials and resource security. In my
    testimony today, the views I express are my own.
        The focus of today's hearing, the outlook for U.S. and
    North American energy and resource security, offers a starkly
    differing portrait. On the energy side, as we've heard, the
    emergence of a vibrant oil and natural gas sector after
    generations of energy dependence, a resurgence so remarkable
    that we are now seeing the U.S. transformed into an energy
    exporter. On the hard-rock side of the resource sector, the
    picture is dramatically different, a deepening dependency on
    foreign supply for more and more metals and minerals.
        According to the most recent USGS Mineral Commodity
    Summary, the United States is now 100 percent import-dependent
    for 20 metals and minerals, up from 19 a year ago. Meanwhile,
    there are now 50 metals and minerals for which we are more than
    50 percent import-dependent, compared to 43 just one year ago.
    That's roughly half the naturally-occurring elements on the
    Periodic Table.
        As for where our metals and minerals come from, the USGS
    map shown here, the heat chart, shows which nations provide the
    minerals for which the U.S. is more than 50 percent dependent.
    Of the 50 metals on that list, China is a significant supplier
    of 28. That's up from 21 just one year ago. As just one
    indicator of our resource reliance on China, in the 206 pages
    of the current USGS report, the word ``China'' appears 384
    times.
        Let me share with the Committee a quick snapshot of the
    degree of our dependency. We are 100 percent dependent for
    graphite and manganese, needed in the lithium-ion batteries
    that power our electric cars as well as the drones flying over
    Iraq, Afghanistan and our southern border. We're 100 percent
    dependent for the rare earths used in wind turbines and in our
    F-35 Joint Strike Fighter. We're 100 percent dependent for the
    indium that conducts heat from our fingertips to our touch
    screens and enables our special operators' night vision
    goggles. We're 99 percent dependent on gallium needed for solar
    panels as well as missile defense radar. We're more than 80
    percent dependent on imported rhenium used in jet fighter
    turbines and more than 70 percent dependent for the tellurium
    used in solar panels and for the cobalt used in EV batteries
    and jet aircraft super-alloys. And this, in spite of the fact
    that the U.S. is resource rich, blessed with known resources of
    dozens of the critical metals and minerals that are shaping our
    21st century.
        Without in any way diminishing the dangers of our resource
    dependency, I do want to note some positive developments taking
    place, largely in the area of process improvements that point
    to the ability to extract minerals from unconventional sources.
    I'm talking about reclamation programs supported by the
    Department of Energy and the Critical Materials Institute to
    extract rare earths from coal deposits, from waste piles left
    behind by prior mining and to advance recycling efforts to
    recover metals from eWaste. Add to that, projects backed by the
    Defense Logistics Agency to encourage domestic production of
    metals and minerals needed for advanced weapons platforms.
        But in a $4 trillion federal budget, spending more than $10
    billion each day, every day, the collective funding for these
    innovative efforts amounts to just a few hours of federal
    spending at a time when state-backed enterprises from China and
    Russia are focused on locking up metals and mineral deposits
    worldwide. On a geo-political level, a resource war is
    underway, but for the U.S. the battle has not been joined.
        If we are serious about ensuring U.S. military power and
    reviving American manufacturing, we must reverse the deep
    dependency on foreign metals and minerals and treat American
    resource security with the same seriousness and one would hope,
    the same success, as our approach to American energy security.
        Thank you.
        [The prepared statement of Mr. McGroarty follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Mr. McGroarty, thank you. I appreciate your
    comments there just in reminding us some of the daily uses that
    we all take for granted and the vulnerability that we have.
        I would like to start off my questions this morning focused
    a little bit on oil, and specifically, to the oil export ban.
        It has been a couple years now, 19 months exactly, since we
    lifted the domestic ban on crude oil. There was a lot of
    discussion at that time about what may or may not come about
    were we to roll back that policy that had been in place for
    decades.
        There were some who said, nobody is going to want U.S. oil.
    There were those that predicted that the price would skyrocket
    if anybody did actually buy it. But instead what we have seen
    are prices that have been relatively moderate, even as our
    exports have now topped over a million barrels a day, just in
    some recent weeks.
        I guess I would direct this to you, Mr. Webster, and to
    you, Mr. Mills, in terms of where we are with the opportunities
    that we have as oil exporters and the international benefits
    that then come to it. Mr. Webster, you certainly referred to
    that. But again, there was a lot of speculation that there was
    going to be, not a doomsday scenario, but that some of the
    fears that have been talked about were going to materialize and
    19 months, perhaps, is not enough of a test case for us. Do you
    see this moving forward into the out years in terms of
    stability of prices and, again, just the opportunities that
    come with developing these alliances with other nations that
    are eager to receive our oil?
        Mr. Webster?
        Mr. Webster. Thank you, Chairman Murkowski, for that
    question and thank you for, I know you worked on this issue
    quite a bit when it was coming up. I remember your speech at
    the Brookings Institution some years ago to, kind of----
        The Chairman. We dared to raise the issue.
        Mr. Webster. Yes.
        The Chairman. And low and behold.
        Mr. Webster. I will answer your question on has there been
    enough time. I think there actually has been enough time, that
    this has been fantastic for U.S. producers, U.S. consumers and
    the concerns that this would really hamper U.S. refiners and
    cause them to stop investing and there would be a real loss is
    belied by the recent EIA report that refinery capacity in the
    United States has actually grown again. And so, this is despite
    the view that, you know, the concern that some had at the time
    that we'd be exporting our resource and leaving us in a worse
    spot.
        We're exporting, as you said, more than a million barrels a
    day at times to as many as 26 countries per the EIA. Prices and
    the differentials that are required to allow exports but still
    allow refineries to take on that oil have been there, so you
    have seen a lot of oil go in other places.
        The interesting thing is that it has given both domestic
    and international refiners a greater range of choice.
    Refineries don't just use one particular type of oil, so they
    can now more tailor make their slate of oils. That's why you're
    starting to see, actually, an increase in crude oil imports
    back into the United States as they are blending that increased
    production out of the United States, crude oil which is quite
    light, as you know, and blending it with other, sort of,
    material from other countries.
        This has been a benefit in that this extends U.S.
    production to other countries. And obviously, at least in my
    opinion, any oil that comes out of the United States is
    generally more stable than just about any other, sort of, oil
    in terms of that going forward.
        So I think it's been extremely positive.
        The Chairman. Mr. Mills, do you care to comment?
        Mr. Mills. Let me agree with Jamie and also thank you for
    your leadership on this. It was those of us in the community
    who thought we should export oil were, seemed to be a minority,
    even on both sides of the political aisle for quite a long
    time.
        I think it's unequivocally the case that the experiment of
    19 months has demonstrated the benefits overall for consumers
    everywhere, not just America. We've helped stabilize the world.
        Let me answer the question about what could be done next,
    where could we go? I think we have untapped opportunity to do
    far more. We're now a larger exporter of crude than five OPEC
    nations, four or five OPEC members. We could become one of the
    largest, by that I mean North America, one of the largest
    exporters of both crude and natural gas in the coming decades.
        This would be astonishingly impactful and very beneficial,
    not just to our security but to our economy and to the world
    because we play a role in, not only stabilizing prices, we're
    now, in effect, half of the throttle. It used to be OPEC was
    the entire throttle on oil prices. We now, we have our hands
    firmly on the wheel and one foot on the gas pedal as well which
    means that oil prices are going to be range bound in the future
    by American behavior.
        We could change the game, not just by helping the shale
    industry by getting out of the way, so to speak, but there's a
    lot more to be done yet. I mean, I'm saying the obvious to you
    but when you think of a combination of what Alaska can yet do
    and has not been unleashed to do, what the Gulf of Mexico is
    just starting to do and the new leases that the nation of
    Mexico has granted to foreign entities to begin producing from
    the shallow waters, the very productive shallow waters that
    they own. If we add to that the rest of the Atlantic Coast and
    the other conventional deep-water capacities we have which are
    getting better, this combination in the United States, I think,
    is reasonable to think in terms of, not just increasing a
    little bit, we could double, triple and quadruple our exports
    of oil and natural gas. This is profoundly impactful.
        And it doesn't mean, and I'll state for the record because
    when you, when one is bullish about oil and gas the implication
    is that one doesn't think that we should pursue alternatives
    for oil and gas. The reason in my opening remarks I pointed out
    the realities is that realities are what they are.
        Airplanes in the world fly on oil and they will for a long
    time. Most cars, even if Elon Musk is astonishingly successful,
    even more successful than he's already been, most cars will
    still burn oil 20 years from now. The world needs lots of oil
    and gas. We can do both, and we can generate the economic
    foundation if we're doing the alternatives by having cheap
    energy in the primary areas. And that's where all the United
    States, and in particular, unleashing that trapped oil that I'm
    very familiar with in Alaska that needs to get down in that
    pipeline and get into world markets.
        The Chairman. Thank you both.
        Senator Cantwell.
        Senator Cantwell. Thank you, Madam Chair.
        Gentlemen, I think in a different decade we would be here
    talking about supply disruptions and challenges, but today we
    are here and the issues of supply disruption now take a new
    twist and turn and that is the issue of cybersecurity.
        Brigadier General Cheney, you mentioned this. How much do
    you think we need to think about upgrading our security of our
    critical infrastructure as it relates to these recent attacks,
    both internationally and domestically?
        General Cheney. Well Senator, thanks for your question and
    there is no doubt cyber is a huge threat, a threat to our
    security, threat to our energy sources.
        As you well explained, there's been multiple attacks on all
    of our grids and if we just put our head in the sand and don't
    put the funding toward it or the research that's needed to
    counter these, it's going to get worse, significantly worse. If
    the Administration reduces funding to those opportunities that
    we have to counter cyber threats, then they're just going to
    get worse.
        So this is a tremendous threat to our national security,
    and it's worldwide. The military sees it every day, and that's
    why we created Cyber Command. We put our best and brightest
    over there to counter those threats. When you see what can be
    done to the grids worldwide and can be done here, it's a
    tremendous national security threat. So perhaps I'd rate it
    almost at the top.
        Senator Cantwell. Okay. So, what do you think are some of
    the things that we should be doing to pursue better alignment?
    Some of the things that are being done right now are, you know,
    voluntary. And what do you think we should be pursuing?
        General Cheney. Well, of course the vast majority of our
    utilities are privately owned in this country and enforcing
    upon them to do the research and then necessarily help to
    counter cyber threats is not the way to go about doing that.
        I think you need to fund that from the federal level. You
    need to do research and development on cyber. You need to have
    a healthy Cyber Command that's looking at these threats and you
    need to assist all the utilities in the country in countering
    these threats. DHS needs to be involved. They need to be
    robustly funded to counter the threat that's there.
        Senator Cantwell. One of the things that Senator Murkowski
    and I were able to do is have a discussion in the Pacific
    Northwest when we were out there looking at a variety of grid
    issues, both in Alaska and Washington. The State of Washington
    has gone to a great degree in getting the National Guard to
    also plan on a response side so there is a response mechanism
    to cyberattacks.
        Do you think that is a wise----
        General Cheney. It's absolutely wise.
        When you look at any catastrophic event that happens in
    this country, for instance, Superstorm Sandy, Katrina, they all
    become joint events. The Army, Navy, Air Force, Marines, Air
    Guard, the National Guard, all respond to those events. And I
    don't think you can segregate cyber from that type of
    catastrophic event where there's something that's going to
    happen. You have to have the Guard involved. They have to be
    planned.
        If all the power went out in your state, it's going to be
    chaos. You need the Guard to help put that chaos down or
    assist. So, undoubtedly, they have to be involved. And I think
    all of the Department of Defense needs to be involved.
        Senator Cantwell. Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Cantwell.
        Senator Cortez Masto is not here.
        Senator Heinrich.
        Senator Heinrich. General Cheney, I want to follow up on
    the question that Senator Cantwell brought up and take it one
    step forward because, kind of, there are the challenges
    inherent to managing a grid today where we have cyber threats
    that simply were not at the top of our mind when we designed
    this architecture and designed it for reliability and
    oftentimes don't upgrade the software on some of these controls
    because we just like it running the way it runs.
        I say this as somebody who was somewhat exposed to these
    things growing up in a utility household where my dad was
    responsible for a lot of that reliability.
        Have you thought about the next step of how changing the
    grid architecture itself moving from the 1970s, 1980s model of
    one-way generation as we get more distributed energy resources
    into that grid whether that is distributed generation, whether
    that is storage in exchange for, maybe, new transmission or new
    substations, et cetera, how that will impact the resiliency of
    the grid and what we should be thinking about as that natural
    evolution occurs?
        General Cheney. You know, Senator, great question.
        I think there's no doubt and I hear my contemporaries
    talking about oil and the future of oil, but you need to
    diversify your source of energy here. I mean, you can even look
    at Saudi Arabia today and they're thinking long, long-term that
    somehow they've got to wean them off this oil economy. The same
    thing applies to our infrastructure. The same thing applies to
    bases and stations.
        When I was a Base Commander down at Paris Island, we relied
    entirely on the local grid. If that grid went out, we had an
    alternative backup, an oil-fired power plant that would
    temporarily provide us power. But if we had a long-term source
    of our own power, as is being developed in the DoD today with
    net zero programs in the Air Force and Army at a huge number of
    bases, Fort Bliss, Nellis Air Force Base, what they're doing is
    going to a case where they would produce more power than they
    can consume and not have to depend on the local grid in case
    that goes down. It's a tremendous security issue. Your base
    would shut down if that was the case. So you have to diversify
    and these are some of the ways you can do that.
        Senator Heinrich. Right. We saw that just a few years ago
    with Kirkland Air Force Base as we saw gas come offline,
    natural gas losing pressure and having to shut down, doing
    millions of dollars of damage as we lost that source of energy.
        And you mentioned Saudi Arabia. I don't think you have to
    look to the other side of the world to realize how much things
    are changing, and a lot of it has to do with economics.
        You look at New Mexico and we have a chunk of that Permian
    Basin production. But at the same time, when you look at the
    electrical generation side of the scale which has seen more
    change than the transportation side, we are seeing two and
    three cents power from solar PPAs and from wind farm PPAs that
    are driving this change and driving an awful lot of economic
    development as a result.
        Which brings me to a question for you, Mr. Coward, because
    as you mentioned there are a lot of nuclear power plants that
    are currently shutting down because of economic conditions,
    because the reality is we do live in a spot market. And I don't
    know how you make ten cents power function in a four-cent spot
    market.
        So what are we doing to make the U.S. nuclear fleet more
    economically competitive at a time when you are seeing it
    undercut by a factor of two or three from other generation
    sources?
        Mr. Coward. Well, I think, if you look at the industry, got
    together, to use a phrase, about a year and a half ago, two
    years ago and said, we're going to leverage the experience, the
    insights, the knowledge of all of us in the industry and work
    together to identify all the various opportunities to be more
    efficient, more effective, eliminate non-value work. That
    program is working right now and we're seeing the costs go down
    some. There are still regulatory costs which the industry
    believes are higher than they need to be.
        I think the simple fact, I'll just cut to the end, I think
    the simple fact is a nuclear power plant can put power onto the
    grid. A reliably, well-run plant can put power onto the grid.
    It goes over the fence at about three cents a kilowatt-hour.
    When you add T&D, all the overhead from the utility system,
    that's how it gets to ten.
        It's competing right now with natural gas plants which are
    somewhere in the teens and it's competing with wind which is
    getting a little bit, which is getting about 2.3 cents a
    kilowatt-hour tax credit.
        And so, you know, you mix all that together and the reality
    is in the end, I'll be honest, a nuclear power plant is not
    going to compete with----
        Senator Heinrich. We can all play the levelization game,
    but you also get a benefit having to do with your insurance
    that is substantial. And so, if levelized everybody was going
    to say, okay, this is the future. Why aren't you attracting
    more investment?
        Mr. Coward. I think we're not attracting more investment
    because it is difficult for nuclear power to be the low-cost
    provider in a low-cost decision market. We don't believe the
    decision should be made on low-cost today. We believe decisions
    should be made on a strategic, longer-term, diversity,
    resiliency, security basis and that, just like some people buy
    an Accord instead of a Civic, that there are reasons to still
    promote a nuclear power program, that the value is there
    overall.
        Senator Heinrich. I think that is a tough sale to the
    consumer.
        Mr. Coward. We know that.
        The Chairman. Senator Heinrich, thank you.
        And my apologies, Senator King, I skipped right over you.
    Mea culpa, mea culpa. It is now to you.
        Senator King. I will find a way to get back at you,
    Senator.
        [Laughter.]
        Thank you very much. No problem at all.
        I have to note that I think every single one of you have
    mentioned EIA somewhere in your testimony and the data that was
    provided. The current Administration budget cuts EIA.
        We have also had quite a bit of discussion about energy
    reliability and the grid. The budget cuts the Electric Delivery
    and Energy Reliability Office in the Energy Department by 40
    percent. So I just note those data points in terms of our
    consideration of this budget.
        The Chair and I were at a conference this morning on the
    Arctic. Arctic sea ice has declined by two-thirds in about the
    last 15 years. I was in Greenland this time last year and saw
    what is happening there where the retreat of the ice sheet is
    accelerating in ways that no one imagined, even five or six
    years ago. There is a cost to this.
        General Cheney, I want to complement you on your testimony.
    You were balanced, and you talked about the costs and the
    benefits. I suggest you and Mr. Mills have lunch together and
    talk about that because the growth of the fossil fuel
    dependency is not an unalloyed good. We are going to spend a
    lot of money dealing with the consequences of climate change.
    We are going to be building walls. They may not be in Mexico,
    but they are going to be sea walls all up and down the coast of
    this country that are going to be incredibly expensive.
        And this is after spending most of my adult life in energy,
    my conclusion is there is no free energy lunch. Everything has
    a consequence. Everything has a result. Everything has a cost.
    I just think that is something we have to really focus on.
        Mr. Webster, a specific question. You mentioned about LNG
    and I understand the shale revolution, natural gas has been
    enormously beneficial to New England and to Maine. Here is my
    concern. Unrestrained LNG exports, explain to me how that
    doesn't relate, result, in higher domestic prices.
        I am a country lawyer from Brunswick, Maine, but if you
    drastically expand the sales and the demand with the supply
    somewhat constant, although I understand it is growing, there
    seems to me, increases in prices are inevitable.
        Mr. Webster. Thanks for your question, Senator.
        So there is some concern that prices might rise marginally
    because of exports. That was said, I think, in the first export
    application that was put in some years ago that I think that
    first one was that they might rise as much as six cents.
        With the rise of the Marcellus and the production growth
    that you've seen out of the Marcellus, you do have a lot of LNG
    export that can go elsewhere. The difference is that because of
    the increased cost on liquefaction, transport and then moving
    it to whatever market you're talking about, that price is still
    fairly cheap back here in the United States.
        Senator King. It is about----
        Mr. Webster. Sorry.
        Senator King. ----between $2 and $3 a million BTU?
        Mr. Webster. That sounds about right. That sounds about
    right, Senator, yeah.
        Senator King. And you think that is enough? I mean, I hope
    you are right.
        Mr. Webster. Yeah.
        Senator King. I don't know the answer but it just concerns
    me that we are not--there have been economic studies, but we
    are reaching a point on exports where there could be a more
    significant effect.
        Do you share that concern that there is some point?
        Mr. Webster. Actually, the more global concern right now,
    certainly over the next several years, is actually the concern
    that from a market standpoint that there's far too much natural
    gas in the world than actually it's looking for places on where
    it can actually find a home.
        You know, you've got increased exports out of the U.S.,
    increased exports out of Australia. The demand that was
    expected in a couple of different countries is not quite----
        Senator King. Well Australia is one of the cases that
    worries me because they went into exports in a big way and
    their domestic price increased very substantially, something on
    the order of 100 percent.
        You are not concerned? Do any of you want to comment on
    this problem? Is it not a problem? I don't understand how you
    drastically increase the demand for a product and don't
    increase the price and the market doesn't increase.
        Mr. Webster. I'll pass that on to Mr. Mills because I know
    he has something on this as well.
        But certainly, we've also increased, again, we've also
    increased production more than a third just in the last few
    years.
        Senator King. So----
        Mr. Webster. So you are right, you're increasing demand.
        Senator King. If you increase demand and increase
    production, I understand, you will end up with a similar price.
        Mr. Mills, are you worried about this at all or do you
    think we do not even have to consider the domestic effects?
        Mr. Mills. First Senator, I want to thank you for the
    opportunity to have lunch with the General. It would be a
    pleasure.
        [Laughter.]
        I suspect we'd probably have a lot of similar views--or
    more similar than dissimilar when you speak in five-minute
    bytes.
        I would say the fundamental--I don't have deep concerns
    about it, the short answer is.
        Australia did some structural things which, I would hope,
    we wouldn't do with respect to expanding domestic use of
    natural gas.
        The real, the underlying question, you're absolutely right,
    if you have a limited supply and demand rises, you end up
    getting price increases. This is, sort of, Economics 101. It's
    a given.
        The real question at the, sort of, high level of extraction
    is how big is the supply? If the supply can expand faster than
    demand, obviously.
        Senator King. Right.
        Mr. Mills. Right?
        So the real question is looking at global markets, to
    Jamie's point right now, where the supply has expanded much
    faster than demand. This is why LNG prices and gas prices are
    in free fall globally, to everybody's benefit, except Putin and
    Cutter.
        Our capacity to produce gas is so astonishing, I think it
    really has not been fully appreciated, not by this Committee,
    but in general. It is so astonishing and there's so much
    natural gas capacity, so much untapped capacity to produce it,
    that, I think, this really changes the game, not just the way
    you describe worrying about price pressures. But I think it has
    not been factored into how we think about alternatives.
        My point about being bullish on oil and gas is not that's
    what we should use, that's what we are using.
        Senator King. Right.
        Mr. Mills. There are, just as you correctly said, that
    there are, sort of, limits to, you know, what can happen in
    reality, this is the physics of energy are what they are.
        Oil is a very dense fuel. It's very good for flying
    airplanes with. It's much better than a battery for a car. It
    will take a lot of money, a lot of time, to beat it. So, the
    reality is that low cost energy is a benefit, not an alloyed
    benefit, but it is an overall benefit because we need new
    technologies.
        So, I would just----
        Senator King. As long as we also consider the externalities
    of the costs of climate change, for example.
        Mr. Mills. Well----
        Senator King. And those sea walls and other costs that we
    are going to have to bear.
        I am out of time. Can I just ask one question for the
    record, Madam Chair?
        Mr. McGroarty, a question for the record and I think you
    touched on this in your testimony which, by the way, was very
    good and very sobering.
        Do we have the minerals? Is this a case of us having to go
    abroad because they do not exist in this country? And if we do,
    what are the barriers to us being able to reduce our dependency
    on oversea sources for these critical minerals?
        If you could give a written response on that?
        Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator King.
        Know that we might actually get that on the next round,
    because I would like Mr. McGroarty to speak to that.
        We skipped over you already, Senator Cortez Masto, so now
    back to you.
        Senator Cortez Masto. Thank you. I appreciate that. And I
    apologize, excuse me, I have a Banking Committee going on at
    the same time.
        I am going to ask that question because I am from Nevada
    and mining is very important in our state and we tried to----
        [Inaudible comment from witness]
        Exactly, so listen--rare earths, as you well know, we tried
    to mine it and it was cost prohibitive. And I have watched over
    the years as China has taken the lead on this.
        In Nevada, as you well know, the innovation in clean energy
    is crucial. We have Tesla there. We have drones. This new area
    for renewable energy solar, hydroelectric, geothermal, is key.
        So I was going to ask you the same question. What do we
    need to do? What are the barriers? How do we address this and
    is it too late for us to start looking at how we start
    investing in these metals and minerals that are going to be
    important for our clean energy future?
        Mr. McGroarty. I hope it's not too late.
        We certainly are resource rich. Now, I'll be careful on
    that and say, do we know that we have resources, known
    resources, for many of these metals and minerals? And the
    answer to that would be yes.
        Do we know if they're economic or not? That's a different
    question, partly because of the barriers and the complexities
    of funneling capital and finding that out. Right?
        Part of that is the permitting process which is, kind of,
    sprawled and is notoriously lengthy and opaque. And I would say
    the cost of that is higher for us as a country when the metals
    and minerals are critical and strategic, when there's, you
    mentioned, Senator, Nevada, the Gigafactory, for instance,
    right?
        If you're looking to build EV batteries, you're going to
    need lithium. We know that from lithium-ion. The irony is
    lithium is the least in terms of volume. Why it's named that is
    a good question.
        Graphite, manganese, nickel, cobalt, okay? We have deep
    dependencies in all of those.
        And then the question is, to the extent that they come from
    countries where there is political uncertainty, possibly
    instability, where they are ranked very low in terms of, you
    know, Freedom House indices of whether they're free or not
    free. So, are we comfortable importing from those countries
    over time? The answer should be, if we could substitute our
    own, no. We should pursue the substituting of our own.
        Are we giving leverage to the Chinese, to the Russians and
    others? I cited on the heat map there this growing, rapidly
    growing, dependency on China which is mining these metals and
    minerals. So, the question is going to be we're in the midst of
    this technology revolution. We're going to need this stuff.
        I think we'd all like to see the United States
    manufacturing more of this, that we need, as opposed to being
    purchasers of it and then dependent for a price, dependent for,
    you know, geopolitical gamesmanship that could be played in the
    future of those kinds of things.
        We do it. We are fortunate in contrast to many other
    nations where they're as dependent on these technology metals,
    but they do not have the resource underneath their land in
    order to remedy their dependency.
        We, I think, are in a different place. The Committee is
    working on that, particularly on critical and strategic
    materials to create more incentives.
        I mentioned a few small programs where this is happening.
    There are some very interesting things going on with some
    government support, you know, this idea of extracting rare
    earths from materials adjacent or associated with coal deposits
    is a remarkable thing, right? And the Department of Energy is
    working on exploring that right now.
        The same thing with, I am not at all opposed, I'm not only
    for primary mining. I'm not opposed at all to reclamation work
    from, you know, waste piles that have been sitting around for
    generations or recycling, to the extent that we can efficiently
    and effectively, reclaim metals and minerals, half of the
    Periodic Table sitting in our iPhones, like micro amounts. Can
    we figure out a way to do that effectively and efficiently?
        Those are mines. Those are urban mines. And our dependency
    is so deep we have to get these materials from all of the
    above, new mines, reclamation, recycling, you name it.
        Senator Cortez Masto. I know my time is up, and thank you
    for the conversation.
        Your testimony was sobering. It is an area, I think, I can
    hear from my colleagues, we would love to have further dialogue
    and discussion on how we try to ensure that we are leading the
    country in some of these, mining that is necessary for the
    future of our technology and renewable energy and where we
    would want to lead here in this country.
        So thank you.
        Mr. McGroarty. Thank you.
        The Chairman. There is just such a codependency between the
    future for our renewables, and not just our renewables but in
    all aspects of economic growth, and these critical minerals.
    So, I appreciate that.
        Senator Cassidy.
        Senator Cassidy. Can I defer to----
        The Chairman. I am sure that Senator Hirono would be
    anxious to accept that deferral.
        Senator Hirono. You are actually on my list ahead of
    Senator Franken, but if Senator Franken is being deferred to by
    Senator Hirono, who has been deferred to by Senator Cassidy--
        [Laughter.]
        Senator Franken, you are up.
        Senator Hirono. I will go.
        Senator Franken. You will go?
        Senator Hirono. Yes.
        The Chairwoman recognizes me, so fine.
        I was intrigued by Mr. McGroarty, with your testimony
    because while we have all these rare minerals, it is, sort of,
    that we have gotten to a position where we have not really
    exploited what we have. Why was that? Is it because it was just
    so cheap to get all of these materials from outside of our
    country? What? Why did we allow this to happen?
        Mr. McGroarty. I think there is, yeah. We can blame Milton
    Friedman for that, right, I think, to some extent.
        I think what I would like to see added back into that
    equation is the potential dangers or costs associated with--
    that come from geopolitics, where, you know, it's always nice
    to have something for the cheapest possible price, but there
    are certain things where, Senator, you referenced the fact that
    we were mining for a period of time some rare earths out of the
    Mountain Pass Mine in California. It, you know, did not make
    it. It went bankrupt. Again, we're back at 100 percent
    dependencies.
        There are active efforts to remedy that and not all rare
    earths are created equal. So I wouldn't go into all the details
    as to why that particular deposit might not have been optimal
    for what we needed because there are 17 rare earths and, you
    know, you need to be specific about which ones you're after.
        But we, I think, a large part of it and this is something
    that this Committee knows well, but perhaps needs to be
    communicated far beyond this Committee, an understanding that
    our manufacturing might, our technology development is
    dependent on access to these things if we are going to win. You
    know, there's tremendous genius in America and a lot of
    innovation and inventiveness, but we need the materials, the
    materials science, in order to make those products here and
    make those advances here.
        Senator Hirono. I think that you describe an interesting
    scenario because for a state like Hawaii, I mean, we talk about
    depending on sources outside of our state for some very basic
    needs--such as in Hawaii we were the most oil-dependent state
    in the entire country for electricity.
        I want to ask, General Cheney, since 2006 Hawaii has cut
    its annual use of petroleum by 41 percent, or 20.2 million
    barrels, while renewable energy grew from 9.5 percent on the
    electricity side of the market in 2010 to 26.6 percent in 2016.
        The State of Hawaii has the most ambitious goals toward 100
    percent renewable and alternatives for our electricity. I would
    like to see a similar transition in the transportation sector.
        General Cheney, what policies do you recommend to
    accelerate the transition to electric vehicles or advanced
    biofuels that you referred to in your testimony?
        General Cheney. Senator, congratulations on your progress
    on using renewables. I think it's remarkable.
        And you'll see tremendous progress, particularly in the
    Midwest, with the use of wind energy states that are coming now
    upwards of 40 percent of their energy provided by wind. So they
    certainly recognize the advantages of it, as you have as well.
        When I heard Mark talk a little bit about aviation and
    their dependence on fossil fuels for their energy, FedEx has,
    at one time or another, fueled all their airplanes with biomass
    developed fuels. The United States Department of Defense has,
    at one time or another, put biomass fuels into almost all their
    aircraft. So there are ways to do this using biomass instead of
    just using straight fossil fuels that were not developed
    through biomass. That's one distinct way to encourage
    development on the biomass side of the house. The price of
    biomass fuels is coming down dramatically. And you will see
    this.
        The same thing applies on the hybrid and battery side of
    the house. My biggest concern when I was an Executive Officer
    of an Artillery Battalion in the desert was where's the next
    gas station? If I had some source of renewable power or a
    hybrid energy which would get us off that tether of fossil
    fuels which General Mattis said when he was in Iraq. He said,
    ``Please get me off this tether of fossil fuels'' because the
    logistic trains were being attacked universally. There are much
    better ways to get off that tether. So certainly the Senate and
    Congress can help us with that.
        Senator Hirono. So, there are ways that we can move much
    faster in terms of the transportation sector and the reliance
    on renewables and alternatives in the transportation sector
    because we seem to be doing a much better job of it in
    producing electricity for consumption, electrical consumption.
    But on the transportation side----
        General Cheney. It's not the same.
        Senator Hirono. It's not the same. If you wanted to move
    faster toward that kind of reliance on alternatives and
    renewables because we care about things like climate change. I
    would welcome any further ideas that you would have to
    incentivize to move in the transportation sector.
        I am running out of time; five minutes goes by awfully
    fast.
        Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Hirono.
        It looks like Senator Cassidy is prepared to defer to our
    colleague from Minnesota, Senator Franken. Everyone is
    generating good will this morning.
        Senator Franken. Well thank you, Madam Chair and thank you
    to the Senator from Louisiana.
        I was struck just now, General Cheney, when you talked
    about this tether to fossil fuels, to diesel fuel, I think,
    mainly for generators.
        You know, I used to do USO tours. At that time there was
    both Walter Reed for Army and Bethesda for the Marines. You
    would go to Walter Reed and there would be guys who had lost
    limbs, et cetera, TBI, and ask them what they did and they,
    very often, were truck drivers. You go to Bethesda and those
    guys got shot up in places like Fallujah, but what it was is
    the supply line. I know that when I talked to the military,
    they talked about solar, trying to make tents out of solar so
    that you don't have to rely on the more efficient, even more
    official generators could save lives.
        So when we are talking about security, I think that the
    first two gentlemen seemed to be talking mainly about domestic
    fuel production, but General Cheney, you have a different point
    of view. Can you elaborate on how increasing short-term energy
    security via increased fossil fuel production can have
    negative, long-term impacts on energy security?
        General Cheney. Well, I think I mentioned in my testimony
    and certainly in my written comments that this increase has
    given us breathing space now so there's obviously an advantage
    here, but long-term, I think we need to recognize we can't
    continue to rely entirely on fossil fuels.
        The number one consumer of fossil fuels in the country and
    maybe the world is the Department of Defense, and they know
    this and they recognize it and they're searching for
    alternative ways to source their energy. And they know that
    now.
        One quick comment about the soldiers who were in those
    logistics trains. Those young men and women got shot up too,
    so, I mean, they were in combat. They were on the front lines.
        Senator Franken. I understand that.
        General Cheney. I mean, they gave their lives for us to
    supply the fossil fuels to support our troops.
        Senator Franken. Yes, so much was IEDs though, yes.
        General Cheney. Yes, precisely.
        So I mean it, long-term, overreliance on this abundance,
    overabundance of fossil fuels is not a good thing. The DoD
    needs to diversify. Any good commander needs to know he has to
    have alternative sources of all things, let alone fossil fuel
    or energy.
        You will see that in terms of, also you mentioned the
    tents. Forward operating bases that are supplied their
    communications and electronics are, their energy, is supplied
    by solar arrays instead of having to hike batteries up there or
    diesel fuel to supply the generators. So there are ways for
    this to be done.
        Senator Franken. Well, I want to talk more about climate
    change and the Department of Defense because you are right
    about the Department of Defense using Algol fuels and other
    non-fossil jet fuels.
        This is from the report to Congress from the Department of
    Defense in 2015, ``Climate change is an urgent and growing
    threat to our national security contributing to increased
    natural disasters, refugee flows and conflicts over basic
    resources such as food and water. These impacts are already
    occurring and the scope, scale and intensity of these impacts
    are projected to increase over time.''
        General Cheney, I know that last week you spoke about the
    threat that climate change poses to national security at a
    House Science Committee Roundtable. Can you tell this Committee
    how the Department of Defense should be preparing for climate
    impacts and more broadly, how Americans should be thinking
    about the link between energy decisions and national security?
        General Cheney. Sure. Clearly this is a longer conversation
    than we have time for here, but I'll try to boil this down very
    quickly.
        As I mentioned last week, I put it into two categories,
    strategic and tactical. And when they said it's the number one
    threat, when you go back to Admiral Locklear in the Pacific
    Command, he was looking over his whole area of operation and he
    said catastrophic weather like Typhoon Haiyan is becoming much
    more common and he's got to respond to those. Climate change is
    a contributor. He recognized the threat.
        Refugee crisis, Bangladesh, foot and a half rise in sea
    level gives you 30 million refugees, not coming here, but
    they're going somewhere else in Asia.
        Senator Franken. It is destabilizing.
        General Cheney. Hugely destabilizing.
        That's the strategic side of the House, the Sahel in
    Africa. When the temperatures there start to rise to 140 and
    150 degrees Fahrenheit, those refugees are headed to Europe. If
    they think they have a migration problem now, just wait. So,
    that's the strategic side.
        On the tactical side, our bases and stations that are on
    the coast are going underwater. Norfolk is the prime example,
    our largest Naval base, which gets closed dozens of times a
    year now because of flooding, both from rain and sea level
    rise, is really having a problem with that. We're going to have
    to talk about relocation of our bases and stations that are on
    the coast, and I can delineate a number of these. The DoD
    understands that and looks at that and General Mattis, and now
    Secretary Mattis, has looked at that and said he understands
    climate change. He recognizes that as a threat. It's been
    written into the Quadrennial Defense Review before. Again, when
    you're talking long-term, strategic threat and where you're
    going to have instability, and in short-term, the tactical
    side, what bases and stations are going underwater and what you
    have to do to adapt to move those.
        Then getting to your other question about fossil fuels, the
    mitigation side of the House, get off your dependence on fossil
    fuels. Stop contributing CO2 to the atmosphere. Stop making the
    problem worse.
        Senator Franken. Thank you.
        Thank you, Madam Chair.
        The Chairman. Thank you, Senator Franken.
        Senator Cassidy.
        Senator Cassidy. Thank you, all.
        Now, General, just to be clear, as we speak of needing not
    being tethered to fossil fuel on the front line, it is not to
    say that a transport truck would not be by fossil fuel, I
    presume you just mean the electricity for the tents providing
    the power?
        General Cheney. Senator, not so. You could have hybrid
    vehicles for sure.
        Senator Cassidy. Now that presumes that we continue to
    fight only in deserts. If we are in an overcast area to have, I
    can only imagine, if you have something with, I don't know, 50
    troops and are in an overcast environment, you would need,
    probably, fossil fuel, correct?
        General Cheney. Well, like I said, if you had batteries
    that were recharged and they worked on a hybrid, just like
    Volvo stock----
        Senator Cassidy. It really does seem, though, a lot of ifs
    involved with that for something which absolutely needs
    certainty.
        Mr. Mills, I enjoyed your testimony because you point out
    some certainties that we actually, since the Arab oil embargo,
    have become more dependent upon fossil fuel. I will note,
    however, that we have actually decreased global greenhouse gas
    emissions in the United States as we transition from coal to
    natural gas. Fair statement?
        Mr. Mills, this is a little bit far afield, but I found
    your testimony very realistic if China, which gets 63 percent
    of its electricity from coal, converted to natural gas, any
    idea what the impact that would have upon global greenhouse gas
    emissions?
        Mr. Mills. Well, it would be a dramatic reduction in global
    gas, carbon dioxide emissions, for very obvious reasons.
        Senator Cassidy. As well as SOX and NOX, et cetera, right?
        Mr. Mills. Well, the air would get a lot cleaner in China.
    I've been to about a dozen cities in China, its particulate
    emissions are pretty severe.
        Senator Cassidy. I have actually seen graphs that show the
    SOX and NOX blowing from their coastal power plants falling on
    to Oregon, Washington and California. So not just globally, but
    locally, it would make our West Coast a little bit cleaner too.
        I just see that because you point out that for the
    foreseeable future petroleum and natural gas will be more, not
    less, important.
        I also like, now I will agree, that if we absolutely, that
    we produce, if we become energy secure, less dependent upon
    other countries, perhaps we need fewer troops committed to the
    Middle East to protect sea lanes. That would be something that
    would save a lot of young people's lives if we were not having
    to commit our troops to protect sea lanes for the sake of oil,
    if Israel develops Leviathan, as they appear to be, then that
    would, of course, insulate Israel from some of the shock.
        I also liked your point, Mr. Mills, the degree to which we
    develop LNG exports, this is implicit in what you were saying,
    and perhaps Israel and Azerbaijan and others develop their gas
    exports, Russia is weakened. Isn't that a wonderful thing? That
    in itself might forestall some conflict. I think we can all
    agree upon that, right?
        Mr. Mills. You bet.
        Senator Cassidy. So that is a tectonic plate, as you
    mentioned that is almost amazing.
        Now, somebody, I think I was told that Senator King was
    concerned. Do we have, oh, here we go, enough gas to fuel this,
    but Mr. Webster and Mills, perhaps you all followed up?
        I am told we have at least 93 years of proven,
    technologically, we can get it, natural gas reserves which more
    than enough insulates us from price increases even if we
    continue to export.
        Fair statement, Mr. Mills?
        Mr. Mills. I think it's fair and it's, in my view, an
    understatement of the magnitude of the resource that will be on
    tap through technology.
        Senator Cassidy. Now, I would argue that if we are going to
    increase our security through that subtle power you speak of in
    your testimony, of undermining the Russians' ability to come
    after us or to go after Europe by choking off their natural gas
    and if we are going to help China reduce their global
    greenhouse gas emissions by substituting natural gas for coal
    and thereby improve our West Coast environment as well, we
    actually need to do more exportation, more exploration of
    natural gas. Would anybody dispute that?
        [Panel shakes heads no.]
        I think that is, kind of, almost so self-evident.
        Mr. Mills. Sure it is.
        Senator Cassidy. So whatever we do with renewables which is
    laudable, the reality is we are going to have more of an impact
    upon global greenhouse gas emissions and our international
    domestic security by increased development of our natural gas
    as well as facilitation of that export. That is energy
    security.
        I yield back. Thank you.
        The Chairman. Thank you, Senator.
        Senator Manchin.
        Senator Manchin. Thank you, Madam Chairman.
        Thank all of you.
        I am so sorry. Sometimes our meetings run over and we are
    in different areas at different times, but I am glad to be
    here.
        We are introducing what we call the Appalachian Storage
    Hub. With all the newfound gas we have, with the wet gas we
    have especially in the Marcellus/Utica shale, now the
    Rogersville coming on and then West Virginia, Pennsylvania,
    Ohio and maybe even Kentucky too, hooking these up with a
    storage hub that basically would move some of our critical
    energy products that we have, which are now mostly located in
    the Southwest and giving us more opportunity and I think, more
    national security also because we are not in the path of a
    hurricane and we are pretty much protected by the mountains. So
    we think it would be a great opportunity. I don't know if you
    all know anything about that or have looked into that and what
    your opinion might be on moving that forward.
        Yes, Mr. Mills?
        Mr. Mills. Senator, you put your finger on something that's
    critical for the grid and also for general domestic energy
    security of the Northeast, which is starved for storage
    capacity, as you well know. Adding a gas storage capacity, both
    wet and dry gas, is probably the single most important and
    simple thing that can be done to increase domestic reliability
    on the grid which is becoming increasingly gas centric.
        If you look at the total amount of generation growth
    forecast for the next decade in the United States and in the
    Northeast, gas turbines are the go to. And you don't want to be
    dependent just on pipes, you need to have storage, 100 percent.
        Senator Manchin. Well, if we can get you all--can we get
    any written statements in support of that because we are
    working with the Department of Energy. I think they feel the
    same thing, but coming from the expertise that you all have
    would be tremendously helpful, sir, tremendously helpful.
        Mr. Mills. Be happy to do that, Senator.
        Senator Manchin. Next, speaking on reliability, in West
    Virginia we have been blessed with everything, but we are an
    all-in energy state. Everybody thinks it is all about just coal
    and just fossil, but really, we are trying everything that we
    can, but the baseload. There is a study being done by
    Department of Energy on the reliability of the grid.
        And I am so sorry, I am sure you might have talked about
    this previously with other Senators, but I am very much
    concerned about that because I remember the Polar Vortex. I
    know we almost went down, especially the PGM system was very
    razor thin of collapsing. With more dependable, reliable,
    affordable coal plants coming offline, have you all looked at
    the critical factor that we have there and the jeopardy that we
    are putting into the grid system?
        Mr. Mills. Well, let me make an observation that was in the
    news with respect to South Australia which echoes the direction
    that a lot of people hope the grid will go.
        As you know they have had several blackouts, one very
    recent. And the news and the Wall Street Journal said it was
    because we were exporting, they were exporting natural gas.
    That's not the reason the blackout occurred; it's because that
    part of Australia has 40 percent of its electricity currently
    coming from wind turbines. When you have wind subside, you have
    to have other capacity. If you can't import it and the import
    capacity is limited because the magnitude of the drop, you do
    rolling blackouts.
        The answer that Elon Musk has proposed is to build a
    battery plant which is good. Batteries work. I ran a battery
    factory for a while. I know a little bit about batteries. But I
    would like to point out that in order to store half a day of no
    wind in South Australia, Elon Musk would have to build 150 of
    the battery plants he's planning to build and he's building one
    which he says will be three times bigger than the world's
    biggest utility battery plant. And South Australia, I'll note
    for the record, has about one-third of the population of the
    grid of the Washington, DC, area.
        So, when you begin to think about these energy solutions,
    scale matters and that's where storing gas and building more
    gas turbines actually matters.
        Senator Manchin. Well, uninterruptible power, I mean, and I
    have understood it for a long time and tried to and a lot of my
    colleagues on both sides of the aisle, but on my side of the
    aisle, sometimes are in disagreement, but they just don't
    understand where the electricity, where it comes from. And it
    has to be uninterruptible.
        The only two things you have uninterruptible in the United
    States or in the world that I know of, is coal and nuclear.
    Everything else is interruptible. And the only third one that
    has surpassed or is equal to coal is natural gas, even though
    that is interruptible, but you are still in jeopardy.
        All of the renewables, God bless them, we like it. We like
    wind, solar, we like it all. So when people tell me they want
    everything on renewables, I say just tell me what five hours of
    the day you want your power, and I am happy to oblige you. I am
    happy to take care of you because that is what you are going to
    get and nothing more than that.
        But in some parts of the country, unless that system, that
    grid can back it up, they are in great peril and they don't
    really realize it.
        So we are looking at how do we continue to have a
    dependable, reliable delivery system? We need people like
    yourself speaking out in common sense until--see, I believe in
    my heart that we are going to find, eventually, commercial
    hydrogen, which is water vapors. I keep believing that. And
    maybe it will happen in our children or grandchildren's lives.
        There is going to be some magical, clean green that
    everybody's happy with. But until you get to that day, you have
    to be in the real world. And the real world is you better have
    so much reliable power and coal is going to play a major part,
    30 percent or more, for the next 20, 30 years. Do you all agree
    with that?
        Mr. Mills. Senator, coal use globally, as you know, is
    going up----
        Senator Manchin. Oh, it is not going down.
        Mr. Mills. Let me just echo your sentiment.
        Everyone agrees it would be nice to have different forms of
    energy. We need them at scale in reliability. In the world I've
    worked in for decades, as a physicist and looking at the
    physics of energy, we used to call that the search for
    unobtanium.
        [Laughter.]
        Senator Manchin. Unobtanium. Makes sense.
        Anybody else want to comment?
        General Cheney. If I----
        Well, Senator, what this has done is given us breathing
    room to pursue alternative sources of power. And I know Bob
    would certainly agree, small modular reactors, for instance,
    are possible----
        Senator Manchin. You are talking about nuclear, nuclear
    reactors, right?
        General Cheney. You can do that.
        Senator Manchin. Yes.
        General Cheney. Long-term, and I know some people laugh at
    fusion energy, but when you go outside and look at the sun,
    it's there. It can be done if you've got the right amount of
    research in it. And I think this is the time now to start
    investing long-term in some of those other sciences while we've
    got that ability to have an overabundance of oil and fossil
    fuels.
        Senator Manchin. Yes, Mr. Coward?
        Mr. Coward. What I would add, Senator, just is, you know,
    obviously I have not seen the DOE study, but I think this is a
    very important, critical subject for our entire economy and
    standard of living, the continued, you know, every time you
    flip the switch, it comes on.
        What I would suggest is, as we all move forward together,
    my organization, myself, we support the classic all-of-the-
    above. We should be pursuing all energy options. But as we go
    forward in the spirit of contingency, reliability, confidence,
    we need to make sure we don't inadvertently allow ourselves to
    make overly optimistic assumptions.
        And the one, the example I'll give you is in the last
    several years the energy storage industry has moved forward by
    leaps and bounds. A tremendous accomplishment, it's great for
    the country. Absolutely wonderful.
        I'm also the principal officer, I lead MPR, a leading
    specialty engineering company in the power industry. We were
    critical with our customer AES in delivering and building the
    largest battery energy storage facility in the world in
    Southern California. It went online in February. Its capacity
    is measured in tens of megawatts, tens of megawatt hours,
    alright? Which means that you take a large nuclear or coal-
    powered power plant and the largest battery storage, energy
    storage facility in the world, it handles minutes of capacity
    of that facility. So even though energy storage has--or an hour
    maybe.
        So even though energy storage has made great progress and I
    think it will continue to make great progress and it is a
    definite critical part of our infrastructure going forward, all
    of us have to make sure that the pace at which we assume
    technology development will occur is appropriate so we don't
    wake up one day and be disappointed.
        Senator Manchin. Well, West Virginia is happy to continue
    to provide the power that keeps the East Coast lit up.
        [Laughter.]
        If they shut us down, they are all going down, okay?
        [Laughter.]
        And it made it very difficult for our little state to
    produce the power we produce, but we have done it cleaner and
    better and made more advancements in the last 20 years than had
    ever been done in the history of the world. We still get the
    living crap kicked out of us every day by Washington.
    Unbelievable.
        Mr. Coward. Senator, I live in Virginia and I----
        Senator Manchin. I want to flip the switch every now and
    then and just say, hey, how did you like that?
        [Laughter.]
        Mr. Coward. I live in Virginia and I know that Virginia is
    one of the largest energy importers in the country, and we
    thank West Virginia.
        Senator Manchin. Well, we are happy to do it. We like to do
    the heavy lifting, and we will continue to do it.
        Thank you, Madam Chairman, I am so sorry.
        The Chairman. Thank you, Senator Manchin.
        I just have to say, I love these conversations.
        [Laughter.]
        I truly do.
        When I think about our energy potential, when I think about
    what it is that we have and how we are able to supply it.
        Senator Manchin, I have had an opportunity to go to your
    little state and see your all-of-the-above. We recognize the
    great contributions that come out of Nevada when we are talking
    about minerals.
        I talk about Alaska all the time, but you know, when we
    think about diversity of energy supply I think it is important
    to recognize that within this country we have a diversity of
    supply based on our enormous geography and recognizing where we
    each can be those experts, those suppliers, those real drivers
    to our local, state and national economies. I think that that
    is quite significant to recognize.
        You know, as much as contributes from the Gulf of Mexico,
    they talk about being the energy bread basket. Okay, that is
    one energy bread basket, but I think this is important to
    recognize that we all have so much to contribute in so many
    different areas. And oftentimes, we are just limited by the
    technologies that allow us to do a little bit more.
        Mr. Mills, you mentioned the digitalization of energy in
    your testimony. Dr. Birol also mentioned that in his written
    testimony. I should note for the record, he was actually here
    for a few moments. I really appreciate him making that effort
    to try to join us, but his schedule was very, very complicated
    this morning.
        But you think about that, the technology that we know today
    is what we know today, but the advances that we have made in
    the past 20 years, as has been noted by many of you, has just
    been nothing short of remarkable, beyond imagination. Think
    where we are going to be 10 years from now, 20 years from now,
    and particularly within the space of the renewables. I think we
    have so much that we can build out given, again, advancements
    in technologies.
        But I come back to our hardcore reality, and that is not
    meant to be a pun on words, but so much of this is going to
    depend on these resources, these mineral resources that will be
    required to build out these technologies of the future.
        For years we have talked about our vulnerability as a
    nation on oil. We still have that vulnerability when it comes
    to the Department of Defense and this extraordinary reliance on
    that fossil fuel. But I don't want us to go the same direction
    with our minerals as we used to be with our oil. So this needs
    to be an eyes wide open.
        I have advanced my critical minerals bill. It is actually
    part of our energy bill that I am hopeful we will have an
    opportunity to advance on the Senate Floor shortly.
        But how do we do more?
        This is a question for you, Mr. McGroarty, in terms of
    building the awareness that we have this increasing dependency.
    It is kind of tough to move forward sometimes unless people
    recognize that this is a problem for us, but that we do have
    solutions here. I think federal permitting reform is one of the
    things that we need to be looking at, but how do we build a
    growing awareness?
        I don't want to limit this to just Mr. McGroarty because,
    General Cheney, when we think about the implications, again,
    from a national security perspective, making sure that those
    who are part of this supply chain, understand that we have got
    to address this aspect of it as well.
        We are going to have to conclude the hearing here because
    we have a vote that is coming on, but I would like to have a
    little conversation about how we do more on the awareness of
    this as a dependency issue.
        Mr. McGroarty?
        Mr. McGroarty. Yup.
        Senator, it is really interesting to think, first of all, I
    mean, what we're up against is we have, we live in this
    marvelous world where so much of the things that we rely on
    every day seem to be magic and they just, kind of, happen. You
    know, there's a cloud and stuff goes up to the cloud and
    things, you know, energy moves to where it's needed and so on
    and so forth.
        I think we forget the physicality of things. Now the
    physicality of things is rooted in material science, and it's
    rooted in materials. So I think what this Committee does, what
    these kinds of programs do, but more of it is to remind people
    that we're now using a far larger portion of the Periodic Table
    than we ever used in the history of mankind and we have to be
    attentive to where these materials are coming from. We're very
    fortunate. We're very blessed that we have these resources
    here.
        I would say too, in some respects, it seems to me a very
    simple thing that government can do is even just an indication
    that you can send a signal to a market that there's a desire to
    source some of these products domestically and that that will
    have an effect.
        I mean, and I don't mean to, I'm not casting dispersions on
    things done or not done, but for instance, I'm very focused on
    the Gigafactory, figuring out where they're going to get their
    materials domestically for a variety of different reasons,
    jobs, national security, but also, you know, if you think about
    it today, we're getting the bulk of our cobalt comes from DRC
    Congo. We can't be comfortable about that because we're not
    comfortable about that it's getting refined and smelted in
    China, creating leverage there where if we need graphite we're
    100 percent dependent on graphite. We need manganese; we're 100
    percent dependent on manganese. We need lithium, a lot of that
    is coming from a triangle in South America which is prone to
    instability over time.
        So, figuring out how we could substitute with American-
    sourced materials is important, but the simplest way to do that
    is for someone to say we want American-sourced materials. We
    see that as a positive and communicating that clearly is a
    market signal that would cause capital markets to look around
    and say, well, who could that be? Where would that come from?
    You know?
        I sit here and I see the states and I think about, you
    know, Senator Franken is gone, but I could mention nickel and
    cobalt and there's Minnesota, on the upper part of Minnesota.
        The Chairman. We have graphite.
        Mr. McGroarty. Pardon?
        The Chairman. We have graphite.
        Mr. McGroarty. You have graphite. I was about to mention
    that. Thank you.
        [Laughter.]
        The Chairman. Yes.
        Mr. McGroarty. So we have all of these different options.
    Gosh, there's some lithium in Nevada that could be just making
    a very short trip to the Gigafactory.
        We lived and experienced the bad and the good of where our
    oil comes from and how we needed more of it for decades and the
    better part, you know, and how that skews national security and
    military strategy. I just don't think we're caught up yet in
    terms of this transformation that's happening in the rest of
    the Periodic Table and how much of it we need. And the stuff
    isn't fairy dust, you know?
        The Chairman. Anybody else want to weigh in there?
        I appreciate that, Mr. McGroarty.
        Mr. Mills. Senator, if I could add the elephant in the room
    with respect to mining in the United States.
        Early in my career I was, I worked for a Canadian mining
    company and spent time on the border of Alaska, the Northwest
    Territories.
        Canada mines a lot of its minerals. It's easier to open a
    mine in Canada than it is in the United States. That shouldn't
    be the case. So the elephant in the room is EPA and how we
    regulate. It's typically not the states, but it can be.
        Until we make an affirmative decision that we care about
    having mining here, I know if you talk to capital markets
    people would invest in mining. They'll tell you unequivocally,
    hold a hearing on it, and I think you will hear every one of
    them tell you the same thing. The capital risks are high
    because of the regulatory delays and uncertainty. As long as we
    keep that in play we'll continue to source rare earths and
    everything else from other nations.
        We provided 70 percent of the world's rare earths 20 years
    ago. As my colleague has just said, we now do zero. It's not
    because we ran out of rare earths. It's not because we don't
    have the technology to do it. We have some of the best miners
    on the planet and the best technology and the safest. But we've
    made an affirmative decision not to do it. I think that's a
    mistake.
        The Chairman. Well, I agree, and it is a concern.
        I think the statistic was that the United States ranks dead
    last or we are tied with Papua, New Guinea, in terms of the
    length of time it takes to permit a mine in this country. I
    think you are right. There has been a policy directive
    direction that has taken us on that path.
        But I think it is something that we need to critically look
    at and evaluate because our situation is such that more and
    more we expect, without question, that these resources are
    going to be made available to us. And it seems that more and
    more these resources are coming from places that would not
    think twice about perhaps squeezing us a little bit.
    Recognizing that vulnerability is something that, I think, we
    must address and we must consider from a broader policy
    perspective.
        Senator Cortez Masto, we have a vote going on, but thank
    you for staying throughout this very important hearing.
        I know that many of my colleagues, not only some of those
    that were coming in and out, we have had a little bit of
    preoccupation with another subject matter this morning, so I
    apologize for that. But know that you all have cleared my head
    and given me focus in the energy space, and I greatly
    appreciate that.
        Thank you for your participation this morning and for your
    ongoing leadership in these important areas.
        We stand adjourned.
        [Whereupon, at 12:22 p.m. the hearing was adjourned.]

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