    [Senate Hearing 115-493]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-493

                              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. 1336                              S. 1876
    S. 1455                              S. 1981
    S. 1563                              S. 2030
    S. 1851

                                   __________

                                DECEMBER 5, 2017

                                   __________

    [GRAPHIC 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
    28-094                  WASHINGTON : 2019

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                   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

                          Brian Hughes, Staff Director
                    Patrick J. McCormick III, Chief Counsel
      Brianne Miller, Senior Professional Staff Member and Energy Policy
                                    Advisor
                 Mary Louise Wagner, 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
    Cassidy, Hon. Bill, a U.S. Senator from Louisiana................     1
    Manchin III, Hon. Joe, Subcommittee Ranking Member and a U.S.
      Senator from West Virginia.....................................     5

                                   WITNESSES

    Tillis, Hon. Thom, a U.S. Senator from North Carolina............     9
    Menezes, Hon. Mark, Under Secretary, U.S. Department of Energy...    10

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Cassidy, Hon. Bill:
        Opening Statement............................................     1
        Letter to Secretary Perry dated October 5, 2017 from Senators
          Cassidy, Barrasso and Murkowski............................     3
    Manchin III, Hon. Joe:
        Opening Statement............................................     5
        U.S. Department of Energy Press Release entitled ``High
          Concentrations of Rare Earth Elements Found in American
          Coal Basins'' dated November 29, 2017......................     7
    Menezes, Hon. Mark:
        Opening Statement............................................    10
        Written Testimony............................................    12
        Responses to Questions for the Record........................    28
    National Hydropower Association:
        Statement for the Record.....................................    51
    (The) Retail Industry Leaders Association:
        Letter for the Record........................................    52
    Tillis, Hon. Thom:
        Opening Statement............................................     9

                                     ----------

    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=C916913D-3DA3-454B-
    A1B0-F4CAD5587F22.

                              PENDING LEGISLATION

                                  ----------

                           TUESDAY, DECEMBER 5, 2017

                                   U.S. Senate,
                                Subcommittee on Energy,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:44 p.m. in
    Room SD-366, Dirksen Senate Office Building, Hon. Bill Cassidy,
    presiding.

                OPENING STATEMENT OF HON. BILL CASSIDY,
                      U.S. SENATOR FROM LOUISIANA

        Senator Cassidy [presiding]. Good afternoon. I call this
    meeting to order.
        Today the business before the Subcommittee is to receive
    testimony on several pieces of legislation relating to the
    applied energy programs at the Department of Energy.
        I would like to thank Under Secretary Mark Menezes for
    appearing before the Subcommittee today to provide the
    Department of Energy's perspective. A Louisiana native and
    fellow LSU Tiger, I introduced Under Secretary Menezes at his
    confirmation hearing. I am pleased to welcome him back today.
        A bill under consideration today is one I introduced with
    Senator Rubio, the Small Scale LNG Access Act of 2017. This
    legislation codifies a rule proposed by the Department of
    Energy to expedite the approval to small scale exports of
    natural gas.
        Small scale exports primarily target markets in the
    Caribbean, Central America and South America. These markets
    represent relatively untapped potential as the United States
    only exported approximately three billion cubic feet of natural
    gas to the region in 2016.
        An increase in exports of U.S. liquefied natural gas, or
    LNG, will decrease Caribbean and Central American reliance on
    Venezuelan fuel oil, increase economic opportunities and offer
    a cleaner burning fuel source for those nations. Reducing the
    time and investment required for small scale exports will
    simultaneously benefit U.S. production, manufacturing and
    construction jobs while also reducing trade deficits with the
    importing country.
        Increasing LNG exports, even on a small scale, will
    positively impact the economies of the U.S. and those receiving
    the U.S. gas.
        I would like to submit a letter for the record that I,
    along with Senator Barrasso and Chairman Murkowski, sent to
    Secretary Perry in support of the Department of Energy proposed
    rule. The letter highlights the U.S.'s ability to meet the
    demands of increased LNG exports and benefits of doing so.
        [The information referred to follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Cassidy. In addition, the Committee will consider
    three bills relating to energy storage.
        Just a few weeks ago in this room, the full Committee held
    a robust hearing on energy storage highlighting a number of
    opportunities and challenges associated with these
    technologies. Our accomplished panel of witnesses provided
    numerous thoughts on what a successful research development,
    demonstration and deployment program could look like.
        Today, we continue that conversation by considering S.
    1455, Senator Flake's Energy Storage Goals and Demonstration
    Projects Act; S. 1851, Senator Franken's Advancing Grid Storage
    Act; and S. 1876, Senator Wyden's Reducing the Cost of Energy
    Storage Act. In addition, we will consider Chairman Gardner's
    Reliable Investment and Vital Energy Reauthorization Act, a
    bill that previously was reported from this Committee last year
    and included in the energy bill as well as Senator Tillis'
    ceiling fan Energy Conservation Harmonization Act. Last, but
    not least, we will consider Senator Manchin's Rare Earth
    Element Advanced Coal Technologies Act which I am sure he will
    touch on during his opening statement.
        With that, I turn to Senator Manchin.

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

        Senator Manchin. Thank you, Mr. Chairman, for scheduling
    this hearing to discuss the seven bills on today's agenda. I
    would like to also thank our witnesses, our dear friend,
    Senator Tillis, and Mr. Menezes, for being here.
        I would like to briefly discuss my bill which is Senate
    bill 1563, the Rare Earth Element Advanced Coal Technologies
    Act, which ensures the Department of Energy and its partners
    have the resources to continue its vital research into
    developing and commercializing a domestic source of rare earth
    elements from coal and coal by-products.
        Rare earth elements are an essential component for products
    that Americans rely on every day. The list includes everything
    from smartphones to wind turbines, to electronic vehicles, to
    national defense systems critical to our national security. The
    United States does not have a domestic source of these critical
    minerals. I repeat. The United States does not have a domestic
    source of these critical minerals, and instead imports nearly
    all of its rare earth elements from China.
        The National Energy Technology Laboratory (NETL) in
    Morgantown, West Virginia, has explored the concept of
    extracting rare earth elements from coal and coal by-products
    for some time now, and Congress recognized it as a liability to
    have a growing dependence on foreign imports and began
    appropriating funds for NETL's Rare Earth Element Program in
    2014. The Consolidated Appropriation Act of 2017 provided $15
    million for NETL to develop prototype advanced separation
    technologies for rare earth elements from coal and coal by-
    products.
        My bill, Senate bill 1563, authorizes an annual
    appropriation of $20 million for the Department of Energy to
    continue its work on rare earth elements. I believe the
    Department of Energy's research will help set us on a path
    toward reestablishing domestic production of these critical
    minerals.
        My bill also directs Department of Energy to focus on the
    rare earth elements most critical to the national security
    interests of the United States. So far, NETL's Rare Earth
    Element Program has produced promising results.
        Just last week Secretary Perry announced that NETL found
    high concentrations of rare earth elements in coal samples
    taken from various locations across the country, including the
    Northern Appalachia, Central Appalachia and the Rocky Mountain
    Coal basins. According to the Department of Energy, the samples
    contain concentrations of rare earth elements exceeding 300
    parts per million, the necessary level to make commercial
    viability of these technologies a reality.
        Mr. Chairman, I would ask unanimous consent that the press
    release from the Department of Energy be entered into the
    record.
        Senator Cassidy. Without objection.
        [The information referred to follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Manchin. In conclusion, I am excited about the work
    that NETL is doing, and I believe we have a tremendous
    opportunity to continue to use our nation's abundant coal
    resources to strengthen our national security, introduce
    competition into the supply chain and ensure that America
    entrepreneurs have reliable access to these materials.
        I want to thank you again, Mr. Chairman, and I look forward
    to the hearing.
        Senator Cassidy. Our first witness, the Honorable Thom
    Tillis.

                    STATEMENT OF HON. THOM TILLIS,
                    U.S. SENATOR FROM NORTH CAROLINA

        Senator Tillis. Thank you, Chairman Cassidy, Ranking
    Member. I just want to thank you and your staff for your
    willingness to hear a bipartisan, commonsense, regulatory
    reform idea. Ranking Member Manchin, I also want to thank you
    and your staff. You have been very helpful.
        I think it is a real testament to the simplicity of what we
    are trying to do here in terms of the underlying bill.
        I am deferred from presenting the 30-page PowerPoint that I
    had to describe the technical aspects of this bill.
        [Laughter.]
        With your approval----
        Senator Cassidy. Approved.
        [Laughter.]
        Senator Tillis. I will just simply say that Senator
    Heinrich and I just tried to come together on something that
    makes perfect sense. We have two regulations that are going to
    be implemented over the course of the next two years that could
    disrupt the supply chains all the way from the manufacturers to
    the retail outlets, twice, or we can simply harmonize it by
    targeting the dates, delaying a date, having both regs go into
    place at the same time.
        It makes good sense, particularly for all the consumers
    that rely on ceiling fans to actually--I have had a ceiling fan
    in my house forever. As a matter of fact, my wife brought it to
    my attention. My last ceiling fan I purchased back when grunge
    rock was very popular. They last a long time, but it is a
    significant purchase. What we don't want to do is add cost and
    complexity to getting something as simple and as helpful as a
    ceiling fan in a home.
        So there are so many debates on regulatory reform to where
    we could really drill down and cause an impasse, but I don't
    think this is one of them. I think that this commonsense
    legislation, if we can work it in to the markup and get it
    passed, makes perfect sense and it is an example where
    Democrats and Republicans can come together when you see a
    commonsense solution.
        I appreciate your support and serious consideration of
    Senate bill 2030, the Ceiling Fan Energy Conservation
    Harmonization Act. That is all it is doing. Harmonizing
    regulations and moving forward. And I appreciate your serious
    consideration.
        Senator Cassidy. Mr. Menezes.

         STATEMENT OF HON. MARK MENEZES, UNDER SECRETARY, U.S.
                          DEPARTMENT OF ENERGY

        Mr. Menezes. Chairman Cassidy, Ranking Member Manchin,
    members of the Subcommittee, I thank you for inviting me here
    today to provide the Department's testimony on the seven bills
    currently pending before the Committee. I ask that my written
    statement be included in the record.
        I have the honor of serving as the Under Secretary of
    Energy at the Department of Energy, and I appreciate the
    expeditious action that this Committee took to conduct my
    hearing and to report me unanimously to the full Senate. It was
    greatly appreciated.
        Having been confirmed about a month ago, I have had the
    opportunity to see the successes and challenges facing the U.S.
    energy sector firsthand. The Department of Energy is an agency
    tasked with a number of important responsibilities. Among them,
    assuring our nuclear readiness, overseeing the nation's energy
    supply, carrying out environmental cleanup from the nuclear
    mission and managing the Department's 17 national laboratories.
        The Department of Energy is fostering an environment that
    promotes responsible investment, increased efficiency and
    development of new technologies as well as predictability and
    ease of access by the private sector to the national labs and
    facilities.
        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 a variety of technologies and 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 innovations that help drive American
    prosperity, security and competitiveness for the next
    generation.
        I have been asked to testify on multiple bills today which
    the Administration continues to review. They are, as mentioned:
    Senate bill 1455, the Energy Storage Goals and Demonstration
    Projects Act; Senate bill 1851, the Advancing Grid Storage Act;
    and Senate bill 1876, the Reducing Cost of Energy Storage Act.
    Let me pause here and remind the members that our Office of
    Electricity has an ongoing storage research office that looks
    at the materials, devices and systems and analyses necessary to
    help foster breakthrough technologies on battery storage. The
    specific national labs that are included in that are Sandia,
    Pacific Northwest and Oak Ridge. We partner with universities,
    utilities and industry, we have published 185 peer-reviewed
    publications, and we hold 122 patents in this area. We have--we
    are holding over 20 commercial licenses, and we have won nine
    R&D 100 awards. So we are pleased to see additional bills on
    this topic, and we look forward to working with the members on
    the storage bills.
        In addition to those three bills, as Ranking Member Manchin
    said, we're looking at his bill, 1563. And in addition to the
    comments that Ranking Member Manchin said, I'd like to point
    out to the Committee members that our Office of Rare Earth
    Elements at the Department has conducted over 1,000 rock
    samples in 14 states and came to the conclusions that were
    expressed by Ranking Member Manchin, in your comments.
        Senator Tillis described the ceiling fan bill. And again,
    this bill seeks to harmonize two of the rules that we had
    issued, one for the electric motors and one for the electric
    lights. They were on the same timetable initially; however,
    they were finalized at different times and because a statute
    separated those two technologies and devices, there was no way
    that we could link them up. So, unless Congress acts we are
    really unable to do the harmonization ourselves.
        Chairman Cassidy described the small scale LNG access and
    there's not anything I can add to his description of what it
    does in the reasons set forth, as he stated.
        And then finally, we have the Senate bill 1336, the
    Reliable Investment and Vital Energy Reauthorization Act, that
    is, the River Act.
        I look forward to discussing these bills in further detail
    and helping the Committee understand the impact these bills
    could potentially have on the Department. The Department
    appreciates the ongoing bipartisan efforts to address our
    nation's challenges and looks forward to working with the
    Subcommittee and Committee on the legislation on today's agenda
    and any future legislation.
        Our nation will achieve our economic energy and
    environmental goals by ensuring 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 and energy potential. Through research and
    development, collaboration at all levels of the government and
    the private sector, the Department of Energy and our national
    labs aim to support the America's energy renaissance.
        The Administration looks forward to continuing to work with
    Congress on legislation to enhance U.S. competitiveness and job
    creation.
        I thank you for the opportunity to be here today. I look
    forward to your questions and, if the Chairman wishes, I can
    give a very brief update on the situation in Puerto Rico and
    the Virgin Isles, just having returned from a trip there, you
    know, over the weekend.
        [The prepared statement of Mr. Menezes follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Cassidy. I think we have a bunch of folks who have
    to hustle, so I am going to ask you to hold that for a little
    bit.
        Senator Wyden wanted to make a short statement.
        Senator Wyden. Mr. Chairman, thank you, and it will
    literally be 30 seconds.
        First, I very much appreciate your putting my bill, S.
    1876, on the schedule and the reason why is to get renewable
    energy to the power grid. Our country needs fresh strategies to
    reduce the cost. That is the point of this legislation. I
    appreciate it.
        The second. This is a complement to what I have been
    working over the years to look at using the tax code to provide
    incentives to promote energy storage as well. I think the one-
    two punch is going to make it possible and particularly as we
    move to a tech neutral policy with respect to energy.
        So I thank you and I apologize to my colleagues and
    appreciate them letting me leap in for this 30 seconds.
        Senator Cassidy. I am not under a time constraint, so I am
    going to allow my Democratic colleagues to go because I think
    some of you all are. So, please proceed.
        [Laughter.]
        Senator Manchin. Thank you, Mr. Chairman.
        [Laughter.]
        Mr. Menezes, I want to thank you for being here, but also
    on the rare earth bill that we are working on, I was amazed to
    find out that nowhere in the country are we mining any of this,
    producing any. We are totally dependent for things we depend on
    almost every minute of every day on other countries supplying
    us the rare earth minerals that we need to do this.
        I know that you all have partnered up with Western
    University, of which our state is very proud. If we have, we
    have already mined--we are still mining coal. We have already
    mined a lot of coal.
        There are three elements and three aspects, I guess we
    would have to do. First of all, we have what we call the coal
    fines in ponds and slurry dumps and all that. We can go back
    and reprocess that and get an awful lot out of that also. Next,
    you have coal that you are mining, that we are mining, fresh.
    When we do that, we wash some of it. So if the washing process
    is changed when we are cleaning the coal, taking the ash and
    all the particulates out of it, that could be an easy source
    also. And next, we run what we call run-of-the-mine (ROM), just
    taking the rock and that without going through a wash plant.
        Are you all looking with NETL and partnering up on all
    three technologies trying to find the best and most cost-
    effective way? Or my biggest question, are we looking at it
    from a defense of our nation, a national defense perspective,
    that we have to be able to produce so much of this in this
    country so that we are not entirely, totally dependent?
        Mr. Menezes. Thank you for the question, Ranking Member
    Manchin. To answer your last question first.
        Yes, you know, 84 percent of these minerals are produced in
    China.
        Senator Manchin. Yes.
        Mr. Menezes. We at one time had a mine in Eastern
    California that was attempting to produce, was producing, but
    it no longer is. Yes, you are correct that we are not producing
    this and we are dependent, primarily, on China and other
    countries for these rare earth minerals.
        With respect to your first question, the short answer is
    yes. We are doing all of those. We are looking at all of those
    different aspects of trying to recover those rare earth
    minerals in the most cost-effective or efficient way to do
    that.
        Senator Manchin. I think what I am asking also, with the
    Department of Energy, is if you all are supporting and
    stressing that with the defense of our nation, the security of
    our nation, that we should be mandated and basically finding
    ways that we can produce this in the United States of America
    whether it is through coal or, if there is a different process
    that can be used, but coal seems to be the most logical since
    we are mining through strata to begin with. It would seem to me
    that it would behoove our country to take a position that we
    are going to produce so much domestically, knowing that we can,
    just for the defense of our own nation, for the security of our
    nation. But unless you all, the Department of Energy, take that
    position, it might not be taken up at the highest level.
        Do you all feel it is that important or have you gotten to
    those discussions yet or do you not feel like we are vulnerable
    with 84 percent dependent upon China with things that could go
    a little bit awry at any time? We have very little control over
    this.
        Mr. Menezes. Right.
        And Secretary Perry, you know, serves on the NSC.
        Senator Manchin. Yes.
        Mr. Menezes. And we also have NNSA within our jurisdiction.
        So readiness for our defense, our nuclear weapons program,
    I mean, our national security is one of our top priorities,
    should I say.
        Our Fossil Energy Office is working with those labs and the
    industries to, in fact, try to become more independent in our
    own production and supply of these materials. So, yes, I mean,
    I agree.
        Senator Manchin. But we are depending on your support
    because I think the State of West Virginia can produce what is
    needed to be produced if we have the technology and the support
    from NETL and support for NETL to work with WVU and the
    research people we have there. To find a way that we can
    extract and produce it right here in America.
        Mr. Menezes. And I appreciate your comments in talking to
    the program scientists who have been doing this. They were
    genuinely pleased to see your bill.
        Senator Manchin. Right.
        Mr. Menezes. So, it seems as though it is building on what
    we have been doing.
        Senator Manchin. Good.
        Mr. Menezes. It recognizes the work that has been going on
    and the need to continue it.
        Senator Manchin. Well, we appreciate your support on this,
    and tell Secretary Perry we appreciate his support very much.
        Thank you.
        Senator Cassidy. Senator Heinrich, I was going to let you
    go next, but my staff tells me I have to be some places too.
        [Laughter.]
        So, if you don't mind, knowing that you have a Committee.
        Our bill, Mr. Menezes, there has been bipartisan interest,
    and I am sorry that I am not hearing what you have to say about
    USVI and Puerto Rico.
        If you could submit that for the record, I would like to
    review that.
        There has been bipartisan interest in how we can make the
    grids more resilient for those two places.
        One thing that I have been trying to promote is that we
    would have some sort of mix, again, trying to find 60 votes of
    renewables and a microgrid, but the backstop being LNG.
        Now knowing that about 17 percent of the Puerto Rican grid
    right now is LNG but knowing that they have clearly got a grid
    that is vulnerable to storms empirically, we see that.
        What is the possibility of these floating gasification
    tankers going to the Caribbean Islands or a place like Puerto
    Rico and providing the backstop for the microgrids as we build
    that out? Is that pie in the sky or is that something that we
    can reasonably do?
        Mr. Menezes. Well, to be sure we have heard from many
    interested parties on a variety of ways to make improvements to
    the grid down there and making both their generation,
    transmission and distribution systems more resilient because as
    we know there will be additional extreme weather events on the
    island.
        Regarding LNG, indeed, those that are there have looked at
    modernizing, if you will, some of the generation there to be
    able to get off of the bunker oil that they currently are on.
        Senator Cassidy. Could they use the same turbines if we
    came in with a tanker that gasified LNG, pulls it up and
    provides the fuel, does everything else stay the same or do
    they have to change the turbines to adapt to a different fuel
    source?
        Mr. Menezes. Excellent question.
        As we've discovered, and others have known this, but a lot
    of their generation really has, you know, had not been properly
    maintained.
        There's a particular unit, Palo Seco, which is important to
    the San Juan area. It runs on bunker fuel. It's dated. It needs
    to be redone.
        And so, in this instance, were you to bring LNG there,
    right now we have, I think, two 30-megawatt, natural gas,
    modular units that have re-energized the grid around San Juan.
    It uses natural gas. That is being brought in by LNG. Now it's
    re-gasified, and that's what's powering it.
        Senator Cassidy. On the boat itself, I presume.
        Mr. Menezes. On the island.
        I'm not sure, I think it's re-gasified there. There is a
    re-gasification unit there, but I'm not sure that it's
    operating at this time.
        But the point being is that they're very desirous of
    getting off the bunker fuel.
        Senator Cassidy. But to the point, those are two temporary
    turbines. If they have a turbine in Haiti that is running off
    of bunker fuel and they bring in liquefied natural gas, can
    they use the same turbines that they are using now, just
    replacing the bunker fuel with the natural gas or do they
    actually need to replace the electricity generating unit?
        Mr. Menezes. We're looking at this right now, Senator
    Cassidy. I'm not sure that I can answer that question.
        Senator Cassidy. Let me also ask what is the possibility,
    because I think there is a lot of interest here and I am
    obviously mixing what you are going to say about Puerto Rico
    with finding a utility for liquefied natural gas. I think we
    could get bipartisan support, if it was somehow tied to
    increased use of renewables and a microgrid.
        You have been going to Puerto Rico. What is the feasibility
    of that?
        Mr. Menezes. Well, what we're doing is next week we are
    having a workshop where we are bringing in all of the parties
    that have made proposals on refurbishing generation, the
    transmission system and the distribution system. The staffs of
    this Committee have been invited, actually, the Chairman and
    Ranking Member have been invited. We expect their staffs to
    attend, as well as the House. But attending will be DOE, will
    be FEMA, the Corps, our labs that have been asked to do the
    resiliency modeling, the economic analyses, New York Power
    Authority, NYPA, and its consultant, Navigant, will be there,
    and all of the interested parties. The goal is to put
    everybody's best thinking there to look at an all-of-the-above
    strategy, to make it as resilient as we can and the placement
    of these.
        LNG is certainly one of the key fuel choices that are being
    looked at, as well as renewables, the integrated microgrids and
    to try to modernize the system.
        Senator Cassidy. Okay.
        Mr. Menezes. So that will occur next week and your staffs,
    your Committee staff has been invited to participate.
        Senator Cassidy. Thank you.
        Senator Heinrich.
        Senator Heinrich. Thank you, Mr. Chairman.
        I want to thank you, Mr. Chairman. I want to thank you for
    holding this hearing today, and I am certainly pleased to co-
    sponsor three of the bills on today's agenda.
        Mr. Menezes, congratulations on your recent confirmation.
        Mr. Menezes. Thank you, Senator.
        Senator Heinrich. I also want to say a special thank you to
    Senator Tillis for his testimony on our bill, S. 2030, and
    suggest that it might be time for him to consider a new ceiling
    fan.
        [Laughter.]
        Mr. Menezes, I wanted to ask you about the status of the
    reorganization at DOE and, in particular, do you know yet what
    specific areas that yourself and Under Secretary Dabbar are
    going to be responsible for?
        Mr. Menezes. Well, we have considered a realignment in
    several categories and we have been discussing our plans, what
    we've been thinking about, with the staffs of this Committee.
    We have also been meeting with other stakeholders on the Hill,
    particularly the appropriators, to talk about our ideas that we
    have. We have not made any announcements yet. We haven't made
    any final decisions yet. We have committed not to, frankly, do
    any realignment until after you all have completed your work on
    the budget, on the CR, and then it would, we would continue to
    get input.
        Senator Heinrich. Let me shift here----
        Mr. Menezes. But as a practical matter, you know, I think
    as we have told your staffs on the realignment, I would have
    the applied offices. Under Secretary Dabbar would have the
    science labs.
        Senator Heinrich. Okay.
        Mr. Menezes. And so, we're going to follow that kind of
    model.
        Senator Heinrich. Okay.
        Let me just shift gears on you real quick then.
        I was pleased to host in Albuquerque last year a summit
    that was focused just on energy storage. We had more than 200
    industry leaders, scientists and grid experts who came together
    from all around the country, as well as national labs, experts
    from Sandia and Los Alamos.
        One outcome of this summit was that New Mexico became the
    first state that requires investor-owned utility companies to
    include storage in their integrated resource plans. So they
    don't have to pick it, but they have to model it and see if it
    comes out cheaper than other alternatives.
        Do you think sufficient attention is being given to energy
    storage in utility system planning and is there a role for DOE
    and/or the labs to play in that process?
        Mr. Menezes. There's a big role for DOE and the labs to
    play.
        In looking at the bills submitted, for example, you may
    have different technical objectives whether it's stationary
    battery storage, if you will, or transportation and perhaps in
    some instances you can gain economies of scale or sharing of
    technologies in both, but generally for the reach goals and to
    make the breakthrough technologies, you're going to make sure,
    we would like to make sure, that you have metrics for each
    because we don't know whether or not, even if we have a
    transportation battery that works, it may not be able to just
    easily be grid scale. So we play a big role in that. And I
    think you would be pleased were the program folks with me to
    testify, I think that you would be pleased with the work that
    they have done. And as I had mentioned, the patents and the
    licenses that, you know, that they have.
        Regarding whether or not utilities are doing enough in the
    IRP, a lot of that is, of course, driven by their individual
    states, if they go through the IRP and whether or not it's a
    priority there. FERC, I think, can play a role in trying to
    make, send out, guidelines.
        Senator Heinrich. Right.
        Mr. Menezes. Right, as to, as you know, there's state
    jurisdictional and what is FERC jurisdictional.
        Senator Heinrich. Right.
        Mr. Menezes. And so if we had some clarity on that.
        Senator Heinrich. Let me ask you about that, that FERC
    piece, in following up, because last year FERC issued a
    proposed rule that would assure that energy storage is
    compensated properly for the flexibility that it provides to
    grid operations, things like frequency and voltage control.
        Do you believe that utilities and regulators have the tools
    that they need to properly model the market value of energy
    storage and is there a useful role for DOE and the labs to help
    power markets and regulators make sure that they accurately
    value the services that storage provides?
        Mr. Menezes. We do think that we have a role. We can
    certainly provide a collaborative forum, if you will, for these
    issues to be resolved because we know that we have differing
    markets throughout the country, across the country, rather, I
    should say, with differing rules. And so, not all have capacity
    markets, for example.
        Senator Heinrich. And some don't have rules.
        Mr. Menezes. And some don't have any rules. That is
    correct.
        Senator Heinrich. That is a good first step, I think.
        Mr. Menezes. But if, even if, in any event there's always
    how can you work with the states, with the commissions or with
    FERC.
        And indeed, in getting prepared for this hearing our
    program folks made it clear there's one of the bills, and I
    generally think this is kind of a good thing, I think it's
    Senator Franken's bill that talks about, you know, nothing in
    here will cloud the jurisdiction, if you will, of the various
    agencies. I can see that as a good thing because you don't
    really, necessarily, want to make that an issue in the bill
    itself.
        But on the other hand, they said, we want to make sure that
    we can continue to work with the state officials or the state
    commissioners who ask us, as a practical matter, how does this
    work? Right? How could it be priced? What is the cost? You
    know? How can it be integrated? Right? Basic questions like
    that. And so, those regulators come to us just to ask for
    technical assistance.
        Senator Heinrich. Right.
        Mr. Menezes. They don't ask our opinion as to whether they
    should have jurisdiction over something or not and we can't
    comment on that. But again, we're a source of information to
    help people understand. And then they can go with their pricing
    and figure out----
        Senator Heinrich. Make those decisions, yes.
        Thank you, I appreciate it, Mr. Chair.
        Senator Strange [presiding]. I was interested in the
    answer. That is great.
        I can save my questions for last. Senator King, if you
    would like to ask your questions, I recognize you.
        Senator King. Well, I was going to point out when Senator
    Heinrich leaves you and I are in charge. What part of the
    Constitution do you want to rewrite? We could, there is just
    the two of us here.
        Mr. Menezes, thank you and congratulations again on your
    confirmation.
        Mr. Menezes. Thank you.
        Senator King. There is a notice of proposed rulemaking
    which was submitted to FERC, I think, by the Department, called
    the Resiliency Rule. It seems to identify two main sources,
    nuclear and coal. Wouldn't storage have been a logical part of
    that proposal because storage is clearly a resiliency
    technology. Why was it left out?
        Mr. Menezes. Well, the rule was written generally. The rule
    was not written specifically for any fuel at all. You just have
    to simply meet the criteria of the rule, as it was in storage,
    but certainly, you know, qualify. It's a 90-day on-site fuel
    requirement, but it could be anything.
        The key about batteries is that it actually has to act like
    a fuel. In other words, it has to accept, receive the
    electricity, hold it over a short or longer period of time and
    then to be able to discharge electricity when----
        Senator King. So is your interpretation of the submission
    that it would, in fact, accommodate a storage component, if it
    met the other requirements of the rule?
        Mr. Menezes. It could, certainly.
        Senator King. Fine, thank you.
        Mr. Menezes. It's fuel neutral.
        Senator King. And let me ask, and I think you covered this
    somewhat with Senator Cassidy on Puerto Rico. Many of us think
    that Puerto Rico offers us a huge opportunity to build the grid
    of the 21st century instead of rebuilding a grid of the 20th
    century. There were some questions with regard to the Stafford
    Act that disaster funds can only be used to rebuild, not to
    build new.
        Do you know----
        Mr. Menezes. To restore--to restore not to rebuild.
        Senator King. Restore, yes.
        Do you consider that a limitation on our ability to do, for
    example, a more distributed grid using LNG and renewables? Is
    the Stafford Act an obstacle and, if so, I would appreciate for
    the record if you would let us know how we might fix that.
        Mr. Menezes. Well, thank you for the opportunity to talk
    about the Stafford Act. I know it's not the subject of the
    hearing, and I'm sure we could fill up the whole day of
    testimony on the Stafford Act.
        It has been the experience here that the Stafford Act does
    go through a process. And indeed, it is restore. And in this
    case, where the Corps went in and had to decide on whether or
    not restore would be tantamount to a rebuild, it created some
    confusion.
        Our role was to help play a role, rather, in making
    determinations. As a practical matter now we are moving toward,
    I think, triggering what's called the 428 under the Stafford
    Act and move toward a rebuild. And indeed, historically, you do
    have a transition from restoration to a rebuild.
        Senator King. So, the Stafford Act does allow----
        Mr. Menezes. It does.
        Senator King. ----some new infrastructure as opposed to
    just rebuilding or restoring what was already there.
        Mr. Menezes. It does.
        The Stafford Act probably did not anticipate a situation
    like Puerto Rico in that to restore, it was tantamount to
    rebuild.
        Senator King. Right.
        Mr. Menezes. And that caused lawyers, everybody, to look at
    it and to say well, do we have the authority and not FEMA that
    has to make the calls, was relying on DOE in a lot of respects.
        Senator King. Has that call been made? Are we moving toward
    a new form of grid or are we rebuilding the old one?
        Mr. Menezes. Well, as I said, we're now in anticipation of
    moving toward spending monies to a potential rebuild. We have
    put in place this workshop to put together a comprehensive plan
    on the rebuild as to what it would look like to make it more
    resilient so that we're not coming and doing the same kind of
    restoration the next time a hurricane hits.
        I just saw before coming over here we were getting briefed
    by NYPA in what was going on down there. We had modeled the
    hurricane tracking across Puerto Rico, I mean, just going
    back----
        Senator King. Well, as I understand it one of the problems
    is most of the generation is in----
        Mr. Menezes. South.
        Senator King. In the south.
        Mr. Menezes. Correct.
        Senator King. And the load is in the north.
        Mr. Menezes. That is correct.
        Senator King. There are these long transmission lines
    which, of course----
        Mr. Menezes. Across the mountains.
        Senator King. Across the mountains?
        Mr. Menezes. Yes.
        Senator King. Vulnerable?
        Mr. Menezes. Yes.
        Senator King. And transmission loss.
        Mr. Menezes. Yes.
        Senator King. So are we going to be able to build a more
    distributed grid?
        Mr. Menezes. We are. We're looking at distributed----
        Senator King. Whose call? Who makes this decision? Who
    decides what goes? Is it the Puerto Rico Power Authority or is
    it FEMA or is it you? Who makes the decision we are going to
    rebuild that high-tension line or we are going to do something
    different?
        Mr. Menezes. That's an excellent question. I mean, right
    now we're still restoring so those decisions are fairly easy to
    make. We're doing whatever it takes----
        Senator King. Sure.
        Mr. Menezes. ----to restore.
        Senator King. I understand that. But I am talking about the
    longer-term.
        Mr. Menezes. Yeah, the longer-term.
        We intend to submit this to the White House, to Congress,
    to the Corps. We will have it, and we will all be united on the
    priorities.
        The Corps has now let over $1 billion to floor and
    contractors to begin to rebuild. So we've got that amount to
    work with initially. We expect that whatever this group
    produces will likely have some cost scenarios. And so, it will
    probably need approval from Congress, in all honesty, to be
    able to do it. We look forward to working with everybody as we
    go forward.
        But next week will be the big gathering where we're going
    to try to make----
        Senator King. I would appreciate it----
        Mr. Menezes. ----consensus, if you will.
        Senator King. ----if you could keep this Committee informed
    of the steps and the plan and this process so that we can have
    an opportunity to review the progress, but not only the
    progress but the plans and structure of the response.
        Mr. Menezes. Yeah.
        Senator King. Final question.
        Mr. Menezes. Well, good.
        Senator King. Final question, I am out of time, but Senator
    Cassidy's bill talks about small, relatively small, exports of
    LNG and it said, it basically exempts them from the finding of
    public interest.
        But I remember voting on an amendment here a couple of
    years ago that said that those decisions had to be made within
    90 days or something and the Department was here and they said
    there was no problem. We are doing them rapidly anyway.
        My question is, and maybe you want to take this for the
    record, what is the timeframe for making these national
    interest decisions? Do we need this bill, I guess is the
    question, or is there a holdup or is there not?
        I would like, and you don't have to answer now, but----
        Mr. Menezes. Yeah, let me take that one for the record.
        Senator King. I appreciate it.
        Mr. Menezes. So we can have a timeframe.
        Senator King. Thank you, Mr. Chairman.
        Mr. Menezes. Can I?
        I was just going to say something else.
        Senator Strange. Well, if you want to, go ahead and finish
    your thought.
        Mr. Menezes. Well, I was just going to say that it's really
    an exciting project because we do have the labs that are doing
    modeling. The White House is in full backing of us to try to
    identify opportunities for microgrids, for example, you know,
    these would be integrated microgrids.
        Senator Strange. Sure.
        Mr. Menezes. So that, you know, both the structure, the
    grid, benefits as well as the individual places that take
    advantage of distributed generation.
        Senator King. And my understanding from a prior hearing is
    that the solar installations on Puerto Rico survived pretty
    well and also on the Virgin Islands, that there were some that
    were destroyed, but others survived, depending, I think the
    testimony was, on how they were built and, you know, this is a
    place where there is certainly an abundance of solar energy.
        We want to be sure that is part of the solution.
        Mr. Menezes. I mean, the fact is that those that were in
    the path of the storm did not survive well at all.
        We visited----
        Senator King. Well, that's contrary to the testimony we had
    from the Governor of the Virgin Islands----
        Mr. Menezes. Well----
        Senator King. ----who said that depending upon how they
    were built some survived amazingly. In fact, we saw photographs
    of some surviving amazingly well and they were in the track of
    the storm.
        Mr. Menezes. Right.
        Senator King. But I think it depends. He said it was how
    they were engineered.
        Mr. Menezes. He's talking about--in fact, we just saw these
    over the weekend.
        On St. Croix we passed and they were fairly close together,
    I mean, within several miles. We saw one solar array, probably
    a couple acres, nothing was touched. In fact, I have pictures
    here. They look fine. Okay?
        We literally went down the road toward the municipal
    building, believe it or not, where it was across from the
    municipal building a similar array totally trashed, okay.
        Now this was film. It wasn't like glass panes. It wasn't
    smashed like one of the arrays were on Puerto Rico. So the
    question was well, why? Right? I mean, clearly the hurricane
    passed over this area. As explained was in one area on the
    frame structure the boards that held the film lined up with the
    frame structure. On the one that was destroyed, they overlapped
    just by a couple of inches. And that lip was essentially like a
    wing and it caught it and they were tighter on the structure
    than the structure was on the ground and it literally lifted
    the whole thing and twisted it and it was amazing to be told.
    So, yes, to answer your question, those that told you that, in
    fact, that is true.
        My point----
        Senator King. I will follow up on this.
        Mr. Menezes. Yeah, yeah.
        Senator King. I don't want to take too much of the
    Senator's time.
        Mr. Menezes. No.
        Senator King. But I just don't want to miss this
    opportunity to do it right.
        Mr. Menezes. Exactly.
        Senator King. Thank you.
        Senator Strange. I appreciate that, Senator King. And I
    think you actually have taken my entire time which I----
        Senator King. Sorry.
        Senator Strange. ----which I am happy to concede to you
    because I was very fascinated by your line of inquiry there and
    what is going on in Puerto Rico.
        I do have some questions, but I am going to submit them for
    the record.
        You have had plenty of time to testify today, I know.
        I want to thank you, Mr. Menezes and Senator Tillis, for
    being here and remind my colleagues that questions for the
    record are due by the close of business on Thursday.
        With that, the hearing is adjourned.
        [Whereupon, at 3:27 p.m. the hearing was adjourned.]

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