    [Senate Hearing 115-318]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-318

                              PENDING LEGISLATION

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON ENERGY

                                     OF THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                       on

                          S. 186           S. 1799
                          S. 1059          S. 1860
                          S. 1337          H.R. 1109
                          S. 1457

                                   __________

                                OCTOBER 3, 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

     27-432                 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
                                     ------

                             Subcommittee on Energy

                             CORY GARDNER, Chairman

    JAMES E. RISCH                       JOE MANCHIN III
    JEFF FLAKE                           RON WYDEN
    STEVE DAINES                         BERNARD SANDERS
    LAMAR ALEXANDER                      AL FRANKEN
    JOHN HOEVEN                          MARTIN HEINRICH
    BILL CASSIDY                         ANGUS S. KING, JR.
    ROB PORTMAN                          TAMMY DUCKWORTH
    LUTHER STRANGE                       CATHERINE CORTEZ MASTO

                          Colin Hayes, Staff Director
                    Patrick J. McCormick III, Chief Counsel
      Brianne Miller, Senior Professional Staff Member and Energy Policy
                                    Advisor
               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
    Gardner, Hon. Cory, Subcommittee Chairman and a U.S. Senator from
      Colorado.......................................................     1
    Manchin III, Hon. Joe, Subcommittee Ranking Member and a U.S.
      Senator from West Virginia.....................................     2

                                   WITNESSES

    Danly, James, General Counsel, Federal Energy Regulatory
      Commission.....................................................     7
    McNamee, Bernard, Deputy General Counsel, U.S. Department of
      Energy.........................................................    15

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    American Chemistry Council:
        Statement for the Record.....................................     3
    Danly, James:
        Opening Statement............................................     7
        Written Testimony............................................     9
        Responses to Questions for the Record........................    29
    Edison Electric Institute:
        Letter for the Record........................................    33
    Gardner, Hon. Cory:
        Opening Statement............................................     1
    Inhofe, Hon. James M.:
        Statement for the Record.....................................    35
    Manchin III, Hon. Joe:
        Opening Statement............................................     2
    Markey, Hon. Edward J.:
        Statement for the Record.....................................    36
    McNamee, Bernard:
        Opening Statement............................................    15
        Written Testimony............................................    17
    Northeast Public Power Association:
        Letter for the Record........................................    38
    Oklahoma Utilities:
        Letter for the Record........................................    39

                                   __________
    The text for each of the bills which were addressed in this hearing can
    be found on the Committee's website at: https://www.energy.senate.gov/
    public/index.cfm/hearings-and-business-meetings?ID=4E54A5F4-134D-4D11-
    B6DC-41D3A59AFA06

                              PENDING LEGISLATION

                                  ----------

                            TUESDAY, OCTOBER 3, 2017

                                   U.S. Senate,
                                Subcommittee on Energy,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:31 p.m. in
    Room SD-366, Dirksen Senate Office Building, Hon. Cory Gardner,
    Chairman of the Subcommittee, presiding.

                OPENING STATEMENT OF HON. CORY GARDNER,
                       U.S. SENATOR FROM COLORADO

        Senator Gardner [presiding]. The Subcommittee will come to
    order.
        Good afternoon, everyone. Thank you for being here.
        The Subcommittee comes together today for a legislative
    hearing on a variety of legislation. As always, I appreciate
    the opportunity to work with the Subcommittee's Ranking Member,
    Senator Manchin, to address key topics in the energy space.
        This legislative hearing will allow us the opportunity to
    receive testimony from and ask questions of key personnel from
    the two agencies that would be responsible for implementing the
    changes laid out in the various pieces of legislation before us
    today.
        My bill, the Responsible Disposal Reauthorization Act,
    would extend the life of a uranium mill tailings disposal site
    in Western Colorado through 2048. This disposal site, itself,
    is a former uranium and vanadium mill that produced roughly 2.2
    million tons of tailings during its 20-year operation. Those
    mill tailings were made available for use in the 1950s and
    1960s as fill material and sometimes mixed with concrete and
    mortar.
        We continue to find and remediate sites with these tailings
    mixed in them, and we need a safe and secure place to store
    them which is what the Grand Junction Disposal Site provides.
    The site is a valuable asset to the Department of Energy (DOE)
    which should continue to be used until it is full.
        I am proud to be an original co-sponsor of Senator
    Heinrich's Energy Technology Maturation Act, a bill that would
    further the Department of Energy's ability to commercialize the
    technology that results from their R&D programs. Without an
    emphasis on this commercialization, we risk leaving too many
    great ideas on the shelves of our national labs. DOE needs a
    variety of tools at their disposal to get these worthwhile
    technologies to market, and this bill adds a few more of those
    to the toolbox.
        The Ranking Member's bill, Capitalizing on American Storage
    Potential, looks to expand the eligibility of regional energy
    storage projects for the loan guarantee program.
        We will also be discussing Senate bill 186, the Fair
    Ratepayer Accountability Transparency and Efficiency Standards
    Act; S. 1457, the Advanced Nuclear Technologies Act; S. 1860,
    the Parity Across Reviews Act; and H.R. 1109, to amend Section
    203 of the Federal Power Act, a bill very similar to S. 1860.
        I would like to welcome our two witnesses today, Mr. James
    Danly and Mr. Bernard McNamee.
        I will first turn to Senator Manchin, for his opening
    comments.

                  STATEMENT OF HON. JOE MANCHIN III,
                    U.S. SENATOR FROM WEST VIRGINIA

        Senator Manchin. Thank you, Chairman Gardner, and I want to
    thank you for holding this hearing and thank you all for being
    here today.
        I would like to also thank our witnesses from the
    Department of Energy and FERC. It is very important to have you
    both here before us.
        The proposals before Congress, before the Committee, cover
    a range of energy and electrical issues but I want to highlight
    two, in particular, which Chairman Gardner has just briefly
    gone over.
        Senate bill 1799, the Energy Technology Maturation Act, led
    by Senators Heinrich and Chairman Gardner, will help the
    national laboratories work with the private sector to
    commercialize innovative energy technology. I was happy to co-
    sponsor this bill and look forward to ensuring it helps the
    National Energy Technology Laboratory, we know it as NETL, in
    Morgantown, West Virginia, as it works to bring the technology,
    the development around coal, rare earth elements and natural
    gas to market.
        I would also like to briefly discuss my bill which is
    Senate bill 1337, the Capitalizing American Storage Potential
    Act which I introduced with my friend, Senator Capito, also
    from West Virginia. I ask consent that this statement from the
    American Chemistry Council, in support of Senate bill 1337, be
    submitted to the record.
        Senator Gardner. Without objection.
        [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Manchin. West Virginia and the greater Appalachian
    region has an extraordinary opportunity in its hands. The quad
    states of West Virginia, Ohio, Pennsylvania and Kentucky
    possess certain attributes that make the region a prime
    location for an energy storage hub. The region's shale
    formations, the Marcellus and Utica, contain abundant wet
    natural gas and natural gas liquids (NGL) like ethane, butane
    and propane.
        In order to access the vast resources of natural gas in
    Appalachia, we must also remove and separate out the NGLs.
    NGLs, like ethane, are the building blocks of thousands of
    other consumer products that you and I use every day, including
    clothing and footwear, electronics, food packaging and
    aerospace equipment.
        I would also note that as cars become more fuel efficient
    they must become lighter which means the increased use of
    plastics out of manufacturing and the increased portions of
    NGLs. The environmental benefits are notable.
        A reliable supply of these products is a critical piece of
    the consumer product's supply chain and, therefore, our
    national economy.
        Coupled with expanding energy infrastructure in the region,
    geologic storage, which is naturally occurring, a storage hub
    for NGLs will play a role in attracting much needed
    manufacturing investment and associated economic activity. The
    development and construction of a hub to store these high-value
    products in underground geological formations could ultimately
    lead to a petrochemical manufacturing hub and a revitalization
    of the area's manufacturing center.
        In fact, a report released earlier this year by the
    American Chemistry Council estimated that the development of a
    storage hub would drive up to $36 billion in new investment,
    68,706 direct and indirect jobs and about $2.9 billion in
    annual tax revenues. West Virginia is a state that is rich in
    natural resources, and I believe the Appalachian storage hub
    offers an excellent chance for geographic diversification of
    our manufacturing sector.
        Additionally, the hub will help insulate our nation from
    supply disruptions due to ongoing extreme weather events in the
    Gulf, and I don't think we have to elaborate on that. It is
    just horrible.
        Senate bill 1337 highlights the importance of federal
    support and partnerships to innovative projects like this one.
    This bill reflects the role that the government can play in
    revitalizing the Appalachian region by further clarifying the
    scope of eligibility for the Title 17 loan program.
        Mr. Chairman, you know as well as I do, the importance of
    R&D funding, particularly funding that partners the public and
    private sectors.
        While I recognize the fiscal challenges we face, I believe
    that it is important, very important, that we work hard to
    ensure that effective programs are sustained.
        I look forward to discussing this bill today because a
    storage hub is an efficient utilization of our natural energy
    resources and will lead to economic development and greater
    energy security.
        I have been working diligently with the stakeholders
    involved, as well as with Secretary Perry, who visited West
    Virginia this summer to learn more about this opportunity and
    continues to work with us on it right now.
        I look forward to working in a bipartisan way to find
    opportunities for this Committee to support that effort, and I
    want to thank the Chairman for being so kind and working with
    me.
        Mr. Chairman.
        Senator Gardner. Thank you, Senator Manchin.
        Mr. Danly is our first witness. He is the General Counsel
    for the Federal Energy Regulatory Commission. We will begin
    with your testimony.

              STATEMENT OF JAMES DANLY, GENERAL COUNSEL,
                  FEDERAL ENERGY REGULATORY COMMISSION

        Mr. Danly. Chairman Gardner, Ranking Member Manchin, I very
    much appreciate the opportunity to come today to testify.
        My name is James Danly, and I am the General Counsel of the
    Federal Energy Regulatory Commission. Before I begin, I just
    want to mention that I'm coming here as a staff witness and the
    views that I present today are not those of the Commission as a
    body or those of any individual commissioner.
        I've been asked to appear in order to testify on three
    bills today. The first two would modify Section 203 of the
    Federal Power Act, and the third would modify Section 205 of
    the Federal Power Act.
        The first two bills, as I said, modify Section 203. Section
    203 of the Federal Power Act subjects to the Commission's
    approval a number of different types of financial transactions
    among jurisdictional entities. These bills together seek to
    amend Section 203 in order to establish a $10 million cap for
    the ``merge or consolidate'' subsection of Section 2013. Right
    now, there is no such limit. The value of these bills is that
    they would both bring that ``merge or consolidate'' subsection
    into conformity with the remaining subsections of Section 203
    and they would help relieve an administrative burden on the
    agency and relieve regulatory burden on the jurisdictional
    entities that are seeking to conduct these relatively small
    transactions. In my view, exempting the transactions that are
    below this reasonable $10 million threshold does not present
    any problem for market power or rate prices going forward.
        The third bill, which modifies Section 205, is another
    matter. Ordinarily, when a public utility seeks to amend its
    tariff it has to make a filing under Section 205 with a 60-day
    time limit. In the almost invariable course of the Commission's
    activity the Commission takes action, one way or another,
    within that 60 days on that filing to amend the tariff. In
    exceptionally rare circumstances the Commission does not act
    within those 60 days and the tariff filings, the tariff changes
    go into effect by operation of law.
        This bill seeks to alter Section 205 so as to allow for
    parties agreed in the 205 proceeding to seek rehearing should
    they not like the outcome of the rates going into effect by
    operation of law.
        As the Subcommittee considers whether or not to adopt this
    legislation, I would urge it to keep in mind several points.
    The first one is that even as Section 205 is currently
    constituted there is still redress available for aggrieved
    parties under Section 206. Second, the legislation may not
    produce the intended relief that, I believe, the Subcommittee
    is looking for. It may not provide, as a practical matter, the
    relief that, I think, the bill might be thought to. And I can
    get into details with that, if you're interested, in questions.
    And lastly, I think that the language of the bill might be a
    little bit overbroad to accomplish that narrow goal.
        So, with that, I just want to thank you for the chance to
    speak about these bills, and I look forward to any questions
    you might have.
        [The prepared statement of Mr. Danly follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Gardner. Thank you, Mr. Danly.
        Mr. McNamee, the Deputy General Counsel for Energy Policy
    at the Department of Energy, thank you for joining us.

      STATEMENT OF BERNARD McNAMEE, DEPUTY GENERAL COUNSEL, U.S.
                          DEPARTMENT OF ENERGY

        Mr. McNamee. Thank you, Senator.
        Chairman Gardner, Ranking Member Manchin and members of the
    Subcommittee, I am the Deputy General Counsel for Energy Policy
    at the Department of Energy and it's a privilege and honor to
    represent the Department here today. I just want to thank you
    for the opportunity to testify before you on behalf of the
    Department.
        The Department of Energy is an agency tasked with a number
    of important responsibilities, many of them you already know,
    but among them are assuring the nuclear readiness, overseeing
    the nation's energy supply, carrying out the environmental
    cleanup from the nuclear mission and managing the Department's
    17 national labs.
        In support of the Administration's goals of establishing
    energy dominance and economic competitiveness, the Department's
    energy and science programs are focused on research and
    development across the variety of technologies and variety of
    fuel sources.
        By carefully setting priorities and focusing on the most
    promising research, the Department and its national
    laboratories will continue to support the world's best
    enterprise of scientists and engineers. These are the great men
    and women who create the innovations that help drive American
    prosperity, security and competitiveness for the next
    generation.
        I've been asked to testify on multiple bills today which
    the Administration continues to review. They are: Senate bill
    1059, the Responsible Disposal Reauthorization Act; Senate bill
    1337, the Capitalization on America's Storage Potential Act;
    Senate bill 1457, the Advanced Nuclear Energy Technologies Act;
    and Senate bill 1799, the Energy Technology Maturation Act. I
    look forward to discussing these bills in further detail and
    answering your questions.
        The Department also appreciates the ongoing bipartisan
    efforts to address our nation's energy challenges and looks
    forward to working with the Subcommittee and the entire
    Committee on legislation on today's agenda and into the future.
        Our nation will achieve our economic, energy and
    environmental goals by ensuring that the United States
    continues to be a leader in energy technology, development and
    delivery and by unleashing America's ingenuity to unlock our
    natural resources.
        Through research and development, collaboration at all
    levels of government and the private sector, the Department of
    Energy and our national labs aim to support America's energy
    renaissance.
        The Administration looks forward to continuing to work with
    Congress on the legislation to enhance U.S. competitiveness and
    job creation as a whole.
        I would ask that my written testimony be entered into the
    record. I thank you for the opportunity to be here and look
    forward to your questions.
        Thank you.
        [The prepared statement of Mr. McNamee follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Gardner. Thank you.
        Your written testimony will be entered into the record.
    Thank you for that.
        Thank you both for being here today.
        Senator Heinrich, Senator Manchin and I have already
    bragged about your legislation in our opening comments. Did you
    want to make a few opening comments here? We will get to you in
    questions in a little bit, but do you want to make an opening
    statement?
        Senator Heinrich. I will keep it short and just say, I sure
    appreciate you holding this hearing and we are excited to get
    this legislation moving. Thank you for participating and being
    a co-sponsor, both you and the Ranking Member.
        Thank you very much.
        Senator Gardner. We will start with our questions.
        Mr. McNamee, in your testimony you talked about the Grand
    Junction disposal site, that it is the only active site managed
    by the Department of Energy's Office of Legacy Management and
    that it collects low-level radioactive waste, primarily from
    the local area.
        Could you talk about the assessment that went behind the
    support of finding the cost effectiveness of extending the
    facility authorization for another 25 years is appropriate? Is
    it appropriate, in your judgment, to extend the facility use
    period?
        Mr. McNamee. The Department has not taken a specific
    position on the bill for the actual disposal site itself. As
    you're aware, there's about--there's sufficient space in order
    to keep that site available and taking what has been on
    average, about 2,700 cubic yards of material a year and it
    could be extended for up to 85 years. So your legislation is
    within that time period.
        Senator Gardner. Great.
        I understand that it has about 250,000 cubic yards of
    additional material that the site could accommodate, so thank
    you.
        Mr. McNamee. That's correct.
        Senator Gardner. I want to turn to the Heinrich/Manchin/
    Gardner legislation. The bill under discussion would expand the
    authorization for the Department of Energy and its national
    labs to focus on the commercialization of innovative
    technologies, as we have discussed.
        Could you talk a little bit more about the effectiveness of
    the existing Technology Commercialization Fund program at DOE
    and what we have seen from that existing fund?
        Mr. McNamee. The existing fund has available to it, under
    the way that Congress has structured funding, about $20 million
    a year in order to provide funding. And it is focused currently
    on providing a way to bring the technologies that's being
    developed by the labs and the other national entities under DOE
    in order to help not only create the innovation but also giving
    an opportunity for the private sector. And that has been under
    this Administration, particularly Secretary Perry, trying to
    make sure that there's more access.
        This bill enhances that approach making sure that,
    especially, small businesses would have access to that
    technology and have an ability to tap into certain funds in
    order to bring that to market.
        Senator Gardner. Is that one of the biggest challenges the
    current fund has, that inability or perhaps not quite as robust
    ability to have the participation from the private sector
    partnerships that you have just described?
        Mr. McNamee. I don't have the specific information about
    the challenges they've had, in that sense, but clearly, being
    able to make sure that small businesses have access to the
    great technology and insights that the labs have is an
    important thing. And so, therefore, this legislation is
    consistent with that.
        Senator Gardner. Thank you.
        Senator Manchin.
        Senator Manchin. Thank you, Mr. Chairman.
        Mr. McNamee, on the proposed Appalachian storage hub, it is
    a regional hub providing storage for natural gas liquids. I
    think you are familiar with what we are trying to accomplish.
    It is in a quad state--West Virginia, Pennsylvania, Ohio and
    Kentucky.
        I have been encouraged by Secretary Perry's interest in the
    project. He came to West Virginia and we went over the entire
    project, the opportunities we might have. And the storage hub
    promotes the efficient utilization of the natural resources,
    energy resources, we have.
        So I would like to give you a chance today to provide the
    Committee with a DOE perspective on that hub, if you all had a
    chance to go in depth on it? And for the security of our
    nation? And the other part of my question is going to be--it
    has been a very busy hurricane season, as we have seen, and
    every time we hear of a hurricane even coming close to the
    coast in the Southwest, we know gasoline prices, shortages--
    there will be every excuse in the world and every reason in the
    world to start changing the flow of energy. This would
    stabilize, I believe, the entire country. Your insight on that
    would be very much appreciated.
        Mr. McNamee. Thank you, Senator Manchin.
        You're correct that the idea of this energy hub has created
    great interest. As you mentioned, Secretary Perry, I believe in
    July, attended a conference dealing with this in Morgantown,
    West Virginia.
        Senator Manchin. Right.
        Mr. McNamee. And clearly the energy renaissance that has
    taken place in this country has been phenomenal in terms of not
    only in its gas production, but its natural gas production and
    especially in the Utica and Marcellus shale production.
        What's happened in this area of the country, especially
    where your legislation and where the discussion about the
    energy hub would be, would be in the center of one of the major
    centers for that and also expand from it, centers that are
    usually perceived for this sort of activity in the Southwest
    United States.
        The----
        Senator Manchin. Did you all consider the protection as far
    as the natural geographical location and protection from the
    severe weather storms that we are having?
        Mr. McNamee. Yes, sir.
        It clearly, that even being in this central location of the
    country away from the hurricane centers, makes a large
    difference. It also makes a difference that the resource is
    there and so there's not as much transportation cost.
        Senator Manchin. Right.
        Mr. McNamee. You know, through the pipelines or otherwise
    and that will also provide--I believe as I've understood it,
    that the theory behind this hub is also that it will attract
    other businesses to the area in order to create an economic
    engine to provide new jobs to a region that's been so hard hit.
        Senator Manchin. Right.
        Mr. McNamee. You know, because of the challenges on
    environmental issues and coal issues.
        Senator Manchin. Yes. It would be a win/win for all of us.
        Mr. Danly, if I may. Last week, as a follow-up to a report
    that was released in August, Secretary Perry sent a proposal to
    FERC directing FERC to write a rule which will enhance
    reliability and resilience of our electric grid by more
    appropriate valuing of the central reliability services that
    many plans and financial straits offer but are not compensated
    for. Do you know?
        It is especially timely because we have seen several recent
    natural disasters putting the grid in danger. I know how close
    we came in January 2014 during the Polar Vortex--the frigid
    temperatures resulted in a record of 141,132 megawatts called
    up on in PJM to meet the demand. We came close to lights out
    and we have had them testify before us before, all the
    different carriers, and PJM especially.
        Following the winter of 2014, AEP reported that nearly 90
    percent of its coal plants that were scheduled for retirement
    ran during the vortex. That means without that, the lights
    would have gone off.
        So we keep talking about the reliability that we have to
    have in the grid system. I am curious what FERC intends to do
    following the order and what are the Commission's next steps?
        Mr. Danly. Thank you, Senator.
        You're right. Last week under Section 403 the Secretary
    exercised his privilege to initiate a rulemaking. Today, the
    Commission issued a notice, a schedule notice, that invited
    comments and reply comments. Right now the Commission is
    internally reviewing the Notice of Proposed Rulemaking (NOPR)
    that was put forward by the Secretary. We're reviewing the
    options that are available and we are in the process of
    building the record by soliciting these comments and reply
    comments. Once they're assembled we're going to review them and
    take the appropriate action within the 60-day timeframe
    established by the NOPR.
        Senator Manchin. I know FERC is very much aware of the
    baseload plants and basically I think we have baseload today,
    and the definition of baseload means uninterruptible power,
    that is going to be coal and nukes.
        Natural gas plants are coming on strong replacing a lot of
    the baseload plants. Natural gas is considered a baseload today
    in our grid delivery, in the delivery system to the grid, but
    it is still interruptible and it can still have some concerns
    with that.
        I do not know how you all are weighing that on potential
    disasters we may have or with blackouts or terrorist attacks or
    cyberattacks and things of that sort?
        Mr. Danly. It would be premature at this point, with the
    Notice of Proposed Rulemaking only having come out on Friday
    and us noticing the request for comments to assemble the record
    at this point, for me to even imagine what the method of
    approach in the subject is going to be. Rest assured the
    Commission is diligently working and reviewing the rulemaking
    proposal, and it is attempting to assemble as many comments as
    it can.
        Senator Manchin. Thank you.
        Thank you, Mr. Chairman.
        Senator Gardner. Thank you, Senator Manchin.
        Senator Heinrich.
        Senator Heinrich. Mr. McNamee, as you know DOE's recent
    staff report on power markets actually concluded that the grid
    is currently operating reliably. I was surprised by Secretary
    Perry's directing FERC to implement cost-based rates in fully
    competitive markets for bulk power in what is an apparent
    attempt to subsidize both nuclear- and coal-fired generation.
        What was the basis for the Secretary to conclude that there
    is an urgent need based on reliability given the outcome of
    that report and its conclusions?
        Mr. McNamee. Thank you, Senator.
        As you know, the reasons for issuing the NOPR were stated
    by the Secretary, both in his letter and the preamble to the
    NOPR.
        But to your specific question, the difference was pointed
    out both in the letter and in the grid study about the
    difference between reliability and resiliency.
        And so, as discussed in the NOPR and identifying both from
    the grid study, the staff report by DOE, comments by NERC and
    others, there is a difference between reliability and
    resiliency and that the conclusions in those commentaries, both
    the staff report and by NERC, observed and to be honest, FERC
    has had a technical conference trying to deal with some of the
    resiliency issues, to identify that there are issues about fuel
    security being able to be available, not just today, but during
    extreme events. That's the driving thrust and the difference
    between reliability and resiliency, sir.
        Senator Heinrich. Mr. Danly, what has been FERC's approach
    to addressing long-term issues of grid reliability and
    resiliency? Does FERC pick generation technologies and fuels in
    competitive markets or is that a matter best left to state and
    local officials?
        Mr. Danly. Senator, historically, FERC has not decided what
    fuel would be used. Our job is to, or I should say, the
    Commission's job is to ensure that when the electricity is
    generated we can make certain that the wholesale markets
    produce just and reasonable rates.
        Senator Heinrich. I think that is a very reasonable
    approach. I would just want to warn all of my colleagues, I
    think if you want to go down this slope of picking winners and
    losers without letting the markets make those decisions, it may
    take you places you did not expect to go.
        Senator Gardner. Thank you, Senator Heinrich.
        We will go another round here. We both have additional
    questions.
        Mr. Danly, I want to talk a little bit about the Section
    205 issue that you brought up and a question of whether it
    actually provides the kind of relief that, I think, was
    intended by the legislation, whether or not the expansion might
    be a little too broad and not get to the relief that they are
    looking for.
        Regarding Senate bill 186, is it possible that this
    legislation could limit the delegation of authority of the FERC
    Commissioners to staff in the event of a loss of a quorum?
        Mr. Danly. I'm sorry, can you say that again?
        Senator Gardner. Is it possible that Senate bill 186 could
    limit the delegation authority of the FERC Commissioners to
    staff in the event of a loss of a quorum?
        Mr. Danly. I have not thought about that subject
    specifically, Senator, but I don't see why delegation orders
    aren't still possible given this bill, if it's passed.
        Senator Gardner. Okay.
        I understand that the proposed bill tries to resolve some
    infrequent situations of an activity at FERC, but would you
    talk a little bit about how the incentives for action or
    inaction would be different under the proposed law versus
    current law----
        Mr. Danly. Um.
        Senator Gardner. ----and would we end up with additional
    split decisions as a result?
        Mr. Danly. Right.
        So, the--thank you.
        The reason why this may not practically affect the relief
    that I think the bill is aiming toward is that should we have a
    case of a deadlock and that be the reason for inaction and
    therefore, the reason for the rates going into effect by
    operation of law, like we did in the ISO New England Forward
    Capacity Auction rate case which everybody here presumably
    remembers pretty well.
        The likelihood of the party, the aggrieved party, seeking
    rehearing and then getting an order on rehearing is virtually
    zero. If you have a deadlock in the first instance, you're
    likely to have a deadlock in the second.
        Though it is important that we have procedures for review,
    both in the form of rehearing at the Commission and then
    judicial review after the fact, the under--courts that sit in
    review of agency decisions have to review an order of that
    agency that sets out the reasoning that the agency has for the
    decision.
        Even if we were to afford the possibility of a rehearing
    which would not produce an order under these circumstances and
    even if it managed to get into a Court of Appeals, which it
    likely wouldn't given the precedent from the DC Circuit, the
    Court of Appeals would simply remand back to the agency anyway
    because there would be no reasoning upon which to base its
    review of the action. So I simply believe it to be, probably,
    not a promise of relief to the parties who are aggrieved by the
    rates that go into effect.
        Senator Gardner. Thank you.
        Mr. McNamee, nuclear energy made up roughly 20 percent of
    the utility scale generation in the U.S. in 2016. It is a no-
    carbon-footprint source of energy, a reliable source.
        How important is it to the energy security of the United
    States that we continue the research and development of nuclear
    sector technology?
        Mr. McNamee. Thank you, Senator.
        You're correct that nuclear is an important part of both
    the reliability of the--reliability and resiliency--of the
    electric grid, as demonstrated in the staff report.
        But I think your question also goes further in discussing
    it more broadly and its best we, in regards to the legislation
    before you talked about it, advanced nuclear technology, that
    we don't take a particular position on this legislation. It is
    clear that the Department has been very robust in trying to
    develop advanced nuclear reactors and making sure that America
    continues to be a leader in nuclear technology.
        That is something, you know, whether it be small nuclear
    reactors or the various types of water reactors, it's something
    that's important that the Department is engaged in every day. I
    understand that this legislation's intent is to advance that as
    well.
        Senator Gardner. Thank you, Mr. McNamee.
        Mr. McNamee, again, the 2005 Energy Policy Act amended the
    Federal Power Act in an attempt to reduce the 203 review
    workload of FERC by streamlining its review structure and
    raising the monetary threshold that triggered the reviews which
    had not been changed from the $50,000 level it was set at in
    1935.
        Can you explain how unclear language in 2005, in the Energy
    Policy Act (EPAct 2005), actually had the opposite effect of
    increasing the workload?
        Mr. McNamee. I believe, Senator, that might be more
    appropriate for my colleague to answer.
        Senator Gardner. Mr. Danly?
        Mr. Danly. You're asking about the amendment for 203 to
    make the $10 million threshold?
        Senator Gardner. Correct.
        Mr. Danly. As written before there was a single provision
    rather than the split provisions for the different types of
    transactions in Section 203, and with EPAct 2005 that was split
    into different sections and a $10 million threshold was applied
    to each of the sections with the exception of the ``merge or
    consolidate'' section which is the one that's at issue here.
        When that happened, we had before had a $50,000 threshold
    for everything because it was a single provision with that
    single value. And now, every one of the different types of
    transactions are subject to a threshold of $10 million except
    for ``merge or consolidate.''
        The effect after the Commission gave its reading of what
    the statutory language meant was that there was no minimum
    conception whatsoever from ``merge or consolidate'' and this
    would be a step in bringing the entirety of 203 back to the
    effective regime we had in the previous version which was to
    allow a threshold for all of the different types of
    transactions subject to Commission approval.
        Senator Gardner. Mr. Danly, Mr. McNamee, we have run out of
    Senators here, so thank you very much for your time and
    testimony today on the legislation before us.
        We will keep the record open until tomorrow, close of
    business, if any member wishes to submit questions for the
    record, and we ask for your timely response should additional
    questions be submitted.
        Thank you, to both of you, for your time and testimony
    today.
        With that, the Committee is adjourned.
        [Whereupon, at 3:00 p.m. the hearing was adjourned.]

                          APPENDIX MATERIAL SUBMITTED

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