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ENERGY EFFICIENCY AND ALTERNATIVE 

FUEL VEHICLES 

HEARING 

BEFORE THE

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON

S. 963 

S. 1000 

S. 1001 

JUNE 9, 2011 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 
(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

JEFF BINGAMAN, New Mexico, Chairman 

RON WYDEN, Oregon 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

MARIA CANTWELL, Washington 

BERNARD SANDERS, Vermont 

DEBBIE STABENOW, Michigan 

MARK UDALL, Colorado 

JEANNE SHAHEEN, New Hampshire 

AL FRANKEN, Minnesota 

JOE MANCHIN, III, West Virginia 

CHRISTOPHER A. COONS, Delaware 

LISA MURKOWSKI, Alaska 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

MIKE LEE, Utah 

RAND PAUL, Kentucky 

DANIEL COATS, Indiana 

ROB PORTMAN, Ohio 

JOHN HOEVEN, North Dakota 

DEAN HELLER, Nevada 

BOB CORKER, Tennessee 

ROBERT M. SIMON, Staff Director 

SAM E. FOWLER, Chief Counsel 

MCKIE CAMPBELL, Republican Staff Director 

KAREN K. BILLUPS, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS 

Page 

Bingaman, Hon. Jeff, U.S. Senator From New Mexico ........................................ 1 

Book, Mr. Kevin, Managing Director, Research, Clearview Energy Partners, 

LLC ........................................................................................................................ 64 

Callahan, Ms. Kateri, President, Alliance to Save Energy .................................. 7 

Coons, Hon. Christopher A., U.S. Senator From Delaware ................................. 39 

Crasi, Tony, President, the Crasi Company, Inc., Cuyahoga Falls, OH ............. 18 

Damiano, Philip, Chief Operating Officer, Velcro USA, Manchester, NH .......... 28 

Hogan, Kathleen, Deputy Assistant Secretary for Energy Efficiency, Office 

of Energy Efficiency and Renewable Energy, Department of Energy ............. 2 

Karr, Shane, Vice President, Federal Government Affairs, Alliance of Automobile Manufacturers .......................................................................................... 54 

Murkowski, Hon. Lisa, U.S. Senator From Alaska ............................................... 35 

Portman, Hon. Rob, U.S. Senator From Ohio ....................................................... 38 

Rusco, Frank, Director, Natural Resources and Environment, Government 

Accountability Office ............................................................................................ 57 

Scripter, Jay, Vice President, Sustainability, Owens-Illinois, Perrysburg, OH . 32 

Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire .............................. 36 

Silver, Jonathan, Executive Director, Loan Program Office, Department of 

Energy ................................................................................................................... 72 

APPENDIXES 

APPENDIX I 

Responses to additional questions .......................................................................... 89 

APPENDIX II 

Additional material submitted for the record ........................................................ 113 

(1) 

ENERGY EFFICIENCY AND ALTERNATIVE 

FUEL VEHICLES 

THURSDAY, JUNE 9, 2011 

U.S. SENATE, 

COMMITTEE ON ENERGY AND NATURAL RESOURCES, 

Washington, DC. 

The committee met, pursuant to notice, at 9:34 a.m. in room SD– 

366, Dirksen Senate Office Building, Hon. Jeff Bingaman, chairman, presiding. 

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. 

SENATOR FROM NEW MEXICO 

The CHAIRMAN. We’ll go ahead and get started. Senator Murkowski is on her way, but asked us to proceed. 

Our hearing today will relate to 3 bills. The bills are the Reducing Federal Energy Dollars Act of 2011, that’s introduced by Senator Carper, S. 963; the Energy Savings and Industrial Competitiveness Act of 2011, introduced by Senator Shaheen and Senator 

Portman, this is S. 1000; and the Alternative Fuel Vehicles Competitiveness and Energy Security Act of 2011, S. 1001, introduced 

by Senator Wyden. 

S. 963 focuses on improving energy efficiency within the Federal 

Government. S. 1000 is a multi-title efficiency bill, includes 

strengthening building codes, energy efficiency financing options 

for buildings and for manufacturers, as well as business-oriented 

energy initiatives from the 111th Congress, such as the Supply 

Star program. 

S. 1001 consists of several proposals to help address some of the 

challenges with bringing alternative fuel vehicles to the wider market. We’ve worked aspects of this problem in the past. I hope the 

testimony today will help guide us as we work to integrate these 

bills into a complete policy. 

One point I’d like to raise early on is that I do have concerns 

about the proposal to sell oil from the Strategic Petroleum Reserve 

to fund other projects, even when those are worthwhile projects. So, 

that’s a subject we’ll undoubtedly get a chance to debate and discuss. 

We look forward to hearing the testimony. Why don’t we go 

ahead. 

We have 2 panels today, and let me introduce the first panel, and 

we will hear from them, and then have questions for them. Then 

we will move to the second panel after that. 
2 

On the first panel, Ms. Kathleen Hogan, who is the deputy assistant secretary in the Office of Energy Efficiency and Renewable 

Energy in the Department of Energy. 

Thank you for being here again today. We appreciate it—you are 

a regular and welcome testifier to our committee. 

Kateri Callahan is the President of the Alliance to Save Energy. 

Thank you very much for being here. 

Mr. Tony Crasi is the President of Crasi, the Crasi Company in 

Cuyahoga Falls, Ohio. Thank you for being here. Did I foul-up your 

name? Was it OK? 

Mr. CRASI. No, the name’s good. 

The CHAIRMAN. OK. I mispronounced the town. 

[Laughter.] 

The CHAIRMAN. Tell me the right pronunciation. 

Mr. CRASI. Cuyahoga Falls. 

The CHAIRMAN. Cuyahoga. It’s not spelled Cuyahoga though. 

[Laughter.] 

The CHAIRMAN. OK. All right. 

Mr. Damiano, Philip Damiano is the Chief Operating Officer 

with Velcro USA in Manchester, New Hampshire. Thank you very 

much for being here. 

Mr. Jay Scripter is Vice President for Sustainability with OwensIllinois in Perrysburg, Ohio. Thank you very much for being here. 

So, why don’t we start and have each of you take about 5 minutes and give us your views on these bills, or whatever else you 

think we need to understand, and we will include your entire statement in the record as if read. 

Dr. Hogan, why don’t you go ahead? 

STATEMENT OF KATHLEEN HOGAN, DEPUTY ASSISTANT SECRETARY FOR ENERGY EFFICIENCY, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY 

Ms. HOGAN. OK. Good morning, Chairman Bingaman, Ranking 

Member Murkowski, and members of the committee. Thank you for 

the opportunity to discuss the Department of Energy’s energy efficiency and advanced vehicle program. 

The administration is still reviewing the draft legislation for this 

hearing, and does not have a position at this time, so my statement 

will really provide you with information on the DOE programs and 

opportunities to spur investment in efficiency and advanced vehicles. 

As we know, energy efficiency is the fruit already on the 

ground—a fast, low-risk, economical way to address climate change 

and energy security concerns, build domestic jobs that cannot be 

exported, and help businesses and homeowners save money. We 

also know we need to aggressively pursue advanced clean energy 

technologies and advanced manufacturing to meet these objectives 

and enhance U.S. global competitiveness. 

Ensuring the Federal Government leads in clean energy is important to this effort. Due to its sheer size, the Federal Government offers taxpayers significant savings in energy bills through 

greater efficiency, as well as a test bed for advanced technologies. 
3 

The Federal Government has made substantial progress against 

sustainability goals mandated in EPAct 2005, EISA 2007, and the 

Executive Order 13514 as signed by President Obama in October 

2009. For example, the Federal Government has reported meeting 

its 15 percent statutory goal for improving facility energy intensity, 

and surpassing its 5 percent goal for renewable electric energy production. So, we continue to work toward a 30 percent intensity goal 

by 2015, and a 7.5 percent renewable energy goal by 2013, as well 

as other goals. 

To meet these goals, energy service performance contracts will be 

highly critical, even given the very good year we had in fiscal year 

2010, with contracts totaling more than $560 million. 

In addition, allowing non-electric renewable energy, thermal energy, to count toward the renewable goal would let the Federal 

Government count some of the most cost-effective means to displace fossil energy as they make progress. 

Building codes also provide energy bill savings. Taxpayers locking in the best in cost-effective energy efficiency at the time of 

building construction lowers the overall cost of home or building 

ownership. Critical to effective building codes is sound analysis of 

code proposals, timely adoption practices, effective training and 

compliance. DOE is working in each of these areas, including with 

a number of states and other jurisdictions, developing model training and compliance programs to improve overall savings from 

codes. 

Energy-conserving appliance standards are another important 

step the administration has taken to save energy in homes and 

businesses. Since 2009, January, the DOE has finalized new efficiency standards for more than 20 household and commercial products which are projected to cumulatively save consumers between 

$250 billion and $300 billion over the next 20 years. 

S. 1000 sets product standards for a number of product categories. Some are based on consensus agreements—agreements 

among manufacturers and a diverse set of other stakeholders. 

These consensus standards can be a very effective way to provide 

for greater consumer savings while reducing litigation risk and giving manufacturers certainty for planning their investments. We’ve 

already issued direct final rules for 2 rulemakings covering five 

products in S. 1000 based on these agreements. The bill sets product standards for 3 more such product categories. While not commenting on the particular product categories in S. 1000, our analyses do show that proposed rules for standards we have examined 

offer significant benefits to consumers. 

Improving industrial energy efficiency is also important for saving energy, money, creating jobs, and enhancing U.S. competitiveness. DOE has a balanced industrial portfolio offering technical assistance to save industry money today as well as developing advanced manufacturing processes and materials with a focus on U.S. 

competitiveness and a clean energy future. 

We know that in the manufacturing area—particularly where 

manufacturing overlaps with advanced transportation efforts— 

breakthroughs are particularly important due to our transportation 

sector accounting for two-thirds of the United States oil consump-
4 

tion and contributing one-third of the Nation’s greenhouse gas 

emissions. 

Alternative fuel vehicles do hold great promise for reducing our 

dependence on oil, and an important step is meeting the President’s goal to have the U.S. become the first country with a million 

electric vehicles on the road by 2015. S. 1001 provides many ways 

to break the dependence on oil and move toward a clean energy future. 

In conclusion, I want to thank the committee for the opportunity 

to provide these comments. As we complete our review of these 

bills, we may have technical suggestions, and we would look forward to sharing them with the Congress and working on these 

issues. I’m happy to answer any questions committee members 

may have. 

[The prepared statement of Ms. Hogan follows:] 

PREPARED STATEMENT OF KATHLEEN HOGAN, DEPUTY ASSISTANT SECRETARY FOR

ENERGY EFFICIENCY, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY, 

DEPARTMENT OF ENERGY

Chairman Bingaman, Ranking Member Murkowski and Members of the Committee, thank you for the opportunity to discuss the Department of Energy’s (DOE’s) 

energy efficiency and Advanced Vehicles Technology Programs. The Administration 

is still reviewing the Reducing Federal Energy Dollars Act of 2011 (S. 963), the Energy Savings and Industrial Competitiveness Act of 2011 (S. 1000), and the Alternative Fuel Vehicles Competitiveness and Energy Security Act of 2011 (S. 1001). 

While the Administration does not take a position at this time, my statement will 

provide you with information on work DOE is already doing to create jobs, build 

a new clean energy economy, and help save consumers and businesses money 

through improved energy efficiency. 

At EERE, we work to remove the barriers to the rapid conversion of innovative 

research into commercial products, manufacturing, and jobs. And we work with 

other federal, state, and local governments to speed the adoption of these American 

innovations. The new businesses in clean energy production, installation, and operation are playing a key role driving economic growth and job creation. 

The market for clean energy technology is growing quickly and many countries 

have mounted aggressive national efforts to capture market share. China, for example, has moved quickly to dominate the development of next generation clean energy 

products through low-cost production and investments in research infrastructure. As 

the President said, ‘‘this is our generation’s Sputnik moment.’’ To show his clear 

commitment to our future, he has asked for a significant increase in funding for energy efficiency and renewable energy in the FY12 budget proposal, even in a budget 

which moves overall domestic discretionary spending to the lowest levels in a generation. 

To win the future, we have to be a nation that makes, creates, and innovates. 

Across the country, we are seeing strong evidence that the out-build and out-innovate pillars the Administration has put forward are paying off. In October of last 

year, for example, manufacturing posted its first twelve-month gain in more than 

ten years, and has added close to 250,000 jobs since the December 2009 low. The 

Administration continues to be optimistic about the prospects for manufacturing in 

the recovery. 

Manufacturing remains one of the most globally competitive economic sectors we 

have. It also is one of the most visible economic sectors we have, with middle-class 

Americans clearly understanding the impact that strengthened manufacturing has 

on their lives and their communities. 

The challenges we face mean that we need to move with unprecedented speed and 

scale. Success is measured by private innovation and investment but can begin with 

well-crafted federal programs that will help achieve a number of important goals: 

• A vigorous and profitable residential and commercial building retrofit industry, 

costeffectively saving 30-50 percent of the energy used in existing buildings; 

• Solar energy, offshore wind energy, and geothermal plants fully competitive 

with conventional sources of electricity; 
5 

1http://www.whitehouse.gov/sites/default/files/blueprintlsecurelenergylfuture.pdf 2http://www1.eere.energy.gov/vehiclesandfuels/pdfs/vehicleslfs.pdf 3http://www.bls.gov/news.release/cesan.nr0.htm 

• Fuels that can be drop-in replacements for gasoline, diesel fuel, or jet fuel 

priced competitively with products produced from petroleum; 

• Large fleets of electric and hybrid cars supported by a network of charging stations to support them; and 

• Trucks with over 50% improvement in fuel economy. 

Small federal investments have led to major breakthroughs like the invention of 

the internet and Global Positioning Systems or ‘‘GPS’’ found in most cellular devices 

today. Similarly, EERE investments past, present, and future are critical to achieving these goals. As one example, in 2009, the U.S. had only two, relatively small, 

factories manufacturing advanced vehicle batteries, and produced less than two percent of the world’s hybrid vehicle batteries.1 But over the next few years, thanks 

to investments from the American Recovery and Reinvestment Act of 2009 (Recovery Act) in battery and electric drive component manufacturing, and electric drive 

demonstration and infrastructure, the U.S. will be able to produce enough batteries 

and components to support 500,000 plug-in and electric vehicles per year. High volume manufacturing, coupled with battery technology advances, design optimization, 

and material cost reductions, could lead to a drop in battery costs of 50 percent by 

2013 compared to 2009, which will lower the cost of electric vehicles, making them 

accessible to more consumers. 

These kinds of breakthroughs are especially important in the transportation sector, which alone accounts for approximately two-thirds of the United States’ oil consumption and contributes to one-third of the Nation’s greenhouse gas (GHG) emissions.2 After housing, transportation is the second biggest monthly expense for most 

American families.3 As the President said in his recent energy speech, ‘‘In an economy that relies so heavily on oil, rising prices at the pump affect everybody.’’ Emphasizing that ‘‘there are no quick fixes,’’ the President outlined a portfolio of actions which, taken together, could cut U.S. oil imports by a third by 2025. 

The draft legislation being addressed today focuses on three areas: 

• Clean energy in the Federal sector 

• Energy efficiency in the industrial sector and building codes 

• Alternative fuel vehicles 

General comments are provided on each of these three areas, but the Department 

has no comments on the specific content of the legislation, as these bills are currently under review by the Administration. 

CLEAN ENERGY IN THE FEDERAL SECTOR

Constructing and operating Federal facilities in a sustainable manner has numerous welldocumented benefits, including: 

• Saving taxpayer dollars through optimized life-cycle cost-effective actions; 

• Enhancing employee productivity through the provision of safe, healthy and environmentally appealing workplaces; 

• Reducing environmental impacts through decreased energy, water, and materials use; and 

• Moving the overall market conditions toward higher performance, through the 

Federal demand for sustainable facilities. 

These benefits are sizable, in part, due to the size of the Federal Government. The 

Federal Government is estimated to use about 1.6 percent of the Nation’s total energy, occupy nearly 500,000 buildings, operate more than 600,000 vehicles, and purchase more than $500 billion per year in goods and services. 

The Federal government is making substantial progress toward its sustainability 

goals mandated in EPAct 2005, EISA 2007, and Executive Order 13514, signed by 

President Obama in October, 2009. For example, in FY 2010, the Federal Government reported a 15 percent decrease in site-delivered Btu per square foot compared 

with baseline year 2003. This meets the EISA statutory reduction goal for FY 2010. 

FY 2010 was also the highest level year to date for the use of Energy Savings 

Performance Contracting with these contacts totaling more than $560 million in investment in Federal facilities. This type of performance-based contracting is extremely important to meeting the Federal sustainability goals due to the pressures 

on Federal appropriations and increasing goals for reduced energy intensity, energy 

savings goals that increase to 30% by 2015. 
6 

4http://www.whitehouse.gov/issues/energy-and-environment 

5http://www.energy.gov/news/9582.htm 

6See, for example: McKinsey and Company (2007). Reducing U.S. Greenhouse Gas Emissions: 

How Much at What Cost? (http://www.epa.gov/cleanenergy/documents/suca/cost-effectiveness.pdf) 

and Lazard Associates. Feb. 2009. Levelized Cost of Energy Analysis Version 3.0. 7http://www1.eere.energy.gov/industry/about/pdfs/itplprogramlfactlsheet.pdf 

In FY 2010, Federal agencies also reported purchasing or producing renewable 

electric energy representing 5.2 percent of the Federal Government’s electricity use, 

achieving the EPAct 2005 goal of five percent. This more than doubled renewable 

energy use as a percentage of total facility electricity use since 2003. The five percent goal remains in place until FY 2013, when it will increase to 7.5 percent under 

current statute. Not counted in this metric is the significant amount of non-electric 

renewable energy produced and purchased by the Government that displaces the 

need for additional electric generation. This includes thermal energy, such as solar 

hot water and space heating, geothermal energy, steam from biomass, and landfill 

methane. 

DOE is also making progress to improve the transparency of Federal building energy efficiency, as required under EISA 2007, Section 432. DOE expects to have a 

web-based system that provides information on the energy efficiency of metered 

buildings and on the cost-effective improvement opportunities that exist in Federal 

facilities publicly available by Fall 2011. 

ENERGY EFFICIENCY IN THE INDUSTRIAL SECTOR AND BUILDING CODES

The Energy Savings and Industrial Competitiveness Act (S.1000) outlines new 

provisions for building codes, appliance standards, and industrial energy efficiency 

among other areas. 

Energy-conserving appliance standards are one of the significant steps the Administration has taken to save energy in homes and businesses nationwide, and pave 

the way toward a clean energy future for our country.4 Since January 2009, the Department of Energy has finalized new efficiency standards for more than twenty 

household and commercial products, which are projected to cumulatively save consumers between $250 billion and $300 billion over the next 20 years.5 These standards can provide an immediate and economically responsible way to increase the nation’s energy security while protecting the environment. Improvements in energy efficiency can be made today to yield significant near-term and long-term economic 

and environmental benefits for the nation.6

In 2007, Congress recognized the importance of negotiated consensus standards, 

amending the Energy Policy and Conservation Act (EPCA) to allow for an expedited 

rulemaking process in the event a representative group of stakeholders could reach 

agreement. Several DOE rules currently under development and review overlap 

with the proposed consensus standards. Although the agency cannot presuppose the 

level of the final standards, it is seriously considering these consensus recommendations. The agency’s preliminary analyses accompanying the proposed rules for these 

standards suggest that the potential net benefits from these recommended levels 

could yield tens of billions of dollars in fuel savings and lower greenhouse gas emissions. 

U.S. industry accounts for about one-third of U.S. energy use while contributing 

to about 12% of U.S. Gross Domestic Product7. Improving industrial energy efficiency will result in saving money and enhancing U.S. competitiveness in the 

world’s manufacturing sector. By partnering with the private sector, DOE has already managed to save more than 9.3 quadrillion Btu of energy and reduced carbon 

emissions by over 206 million metric tons. 

Supply chain energy efforts can make an important contribution to overall industrial efficiency and the competitive position of domestic suppliers. Analysis suggests 

that a large part of the carbon footprint for many consumer products can be attributed to the supply chain—from raw materials, transport, and packaging to the energy consumed in manufacturing processes—on the order of 40 to 60 percent. DOE 

and the Environmental Protection Agency (EPA) both have existing initiatives that 

address supply chain efficiency, such as Save Energy Now® at DOE and ENERGY 

STAR. For example, through its national Save Energy Now® initiative, DOE encourages manufacturing companies to engage their supply chains in energy and carbon management, while at EPA, ENERGY STAR has engaged whole industries to 

support their customers and supply chains in building effective energy management 

programs. Specifically, DOE and EPA develop processes and resources to assist companies in promoting energy management to their industrial suppliers and customers. Save Energy Now® LEADER Companies make a voluntary commitment to 

reduce their energy intensity by 25 percent in 10 years. Many of these companies 
7 

are interested in improving the efficiency of their supply chains as well. ENERGY 

STAR boasts a growing group of corporations that have used ENERGY STAR to influence key suppliers to effectively manage energy. 

DOE is also working with Superior Energy Performance (SEP), a voluntary certification program helping to provide industrial facilities with a roadmap for achieving 

continual improvement in energy efficiency while maintaining competitiveness. A 

central element of SEP is implementation of the International Organization for 

Standardization (ISO) 50001 energy management standard, with additional requirements to achieve and document energy intensity improvements. DOE is working 

through SEP to bring ISO 50001 to the U.S. Upon its publication this American National Standards Institute-accredited program is anticipated to provide companies 

with a framework for fostering energy efficiency at the plant level and a consistent 

methodology for measuring and validating energy efficiency and intensity improvements. This new framework has the opportunity to be an important tool to integrate 

into supply chain efforts. 

ALTERNATIVE FUEL VEHICLES

Few technologies hold greater promise for reducing our dependence on oil than 

alternative fuel vehicles. The Administration has set a goal to have the United 

States become the first country with a million electric vehicles on the road. Meeting 

this goal will help the United States become a leader in the clean energy economy, 

while capitalizing on the ingenuity of American industry. Manufacturing products 

needed for the clean energy economy will generate long term economic strength in 

the U.S., creating jobs across the country while reducing air pollution and greenhouse gas emissions. The Administration supports the goal of utilizing alternative 

fuel technologies to break our dependence on oil and to move toward a clean energy 

future. The DOE looks forward to working with Congress to achieve these objectives. 

DOE’s Vehicle Technologies Program is helping the Nation lead the way in alternative fuel vehicle innovation. DOE has helped reduce the cost of PHEV Lithium 

Ion batteries to $650 per kilowatt-hour, a 35% reduction from the 2008 baseline of 

$1,000 per kilowatt-hour. This is making oil alternatives competitive in general 

while specifically increasing U.S. competitiveness in the global market. 

CONCLUSION

In conclusion, the Department of Energy thanks the Subcommittee for the opportunity to comment on these proposed initiatives. We look forward to working with 

Congress to develop strong, effective clean energy policy to ensure U.S. leadership 

on these global issues and in the clean energy economy. I am happy to answer any 

questions Committee Members may have. 

The CHAIRMAN. Thank you very much. 

Kateri Callahan, go right ahead. 

STATEMENT OF KATERI CALLAHAN, PRESIDENT, ALLIANCE 

TO SAVE ENERGY 

Ms. CALLAHAN. Great. Thank you very much for having me here 

to testify this morning. 

I represent the Alliance to Save Energy, which is a nonprofit coalition of businesses, consumers, and government and environmental 

leaders who have all come together to advance energy efficiency 

worldwide. 

We are privileged and honored to have Senator Shaheen leading 

our organization as an honorary chair, and to have had the longterm participation and leadership of Senator Bingaman, and also 

the Ranking Member Senator Murkowski, and Senator Udall, who 

is not here today, serve as congressional vice chairs to the alliance. 

The 2 energy efficiency bills that are before the committee today 

are needed urgently by American consumers who are struggling 

with the rising cost of energy. Our estimates show that the average 

household in America is going to pay $5,700 this year to fuel their 

cars and their homes, which is up 17 percent from just a year ago. 
8 

Deployment of off-the-shelf energy efficient products and practices is a proven and a cost-effective way of reducing these energy 

costs. For example, our study showed that over the course of the 

last 4 decades, because of the improvements in efficiency, we are 

now able to offset the need for 50 quads of energy in our economy. 

That’s about half of our annual energy use. In doing that, we are 

saving Americans $500 billion a year. 

But notwithstanding these gains, there is more that we can do 

and we must do. I think this committee is well aware that the U.S. 

is expected to grow its energy demand by about 20 percent over the 

next 2 decades. If fully implemented, energy efficiency can meet all 

of this new demand while ensuring that America remains competitive in the global marketplace. 

There’s a problem, though. Due to market barriers, these savings 

won’t happen without strong and effective government policies, like 

those that are contained in the Shaheen-Portman bill. 

S. 1000 truly represents, I believe, the people’s voice in national 

policies, as the senators worked with businesses, with our groups, 

with other associations and advocates from across the country to 

develop smart and cost-effective policies that make up this bill. 

The number of diverse businesses and organizations lining up behind the bill is phenomenal. We topped 100 yesterday, and the endorsements are continuing to roll in. 

So why is there this broad support? It’s because the bill has a 

variety of practical provisions that help American manufacturers, 

that help American businesses, government agencies, and homeowners. For example, it establishes a revolving loan program to 

help manufacturers retool, to reduce their waste, and become more 

competitive. It expands the Department of Energy’s Loan Guarantee Program to cover energy efficiency upgrades that will help 

reduce the cost of operating commercial and municipal buildings, 

while creating construction jobs. It creates a rural energy efficiency 

loan program that’s going to allow rural electric coops to offer 

microloans, which will open up opportunities for energy improvements to homeowners and small businesses around the country. 

But by far the greatest potential impact of this bill is from the 

provision on building energy codes. If we achieve the goals of this 

provision by 2030, we will save about the total amount of energy 

used in Florida every year, and which, in turn, will save tens of 

billions of dollars. 

But, why energy building codes? Homeowners, tenants, and 

building owners can’t walk through a building and know its efficiency. They have to trust that the buildings they buy and lease 

are built to a minimum level of efficiency that won’t expose them 

to outrageous energy costs, just like they trust that these buildings 

are built to minimum standards to protect their health and safety. 

Survey after survey by consumer groups, the NAHB, and the National Association of Realtors, among others, show that Americans 

want energy-efficient homes and that they’re willing to pay a premium for them. Consumers are smart in this regard. 

We’ve done studies through an affiliated group, BCAP, showing 

that building new homes to meet the current best practice energy 

code do add some costs—about $800 on average up-front. But they 

delivered $240 on average in energy savings every single year. So, 
9 

a typical homeowner, then, would, through the savings, pay back 

the out-of-pocket costs after just 10 months, which is really a blip 

in a typical 30-year mortgage. 

We have a sampling of 28 States where we’ve done this, but I 

took a couple from the committee. So, Senator, in your home State 

of New Mexico, the payback period is only 8 months, and a homeowner saves $200 each and every year. In North Dakota, the homeowner also comes out ahead after 8 months, but the annual savings 

are greater—at $340. The list goes on. Even in Idaho and Michigan, the break-even point is less than a year. We think this is a 

pretty good deal for consumers. 

Before closing, I also want to highlight the Federal energy management provisions both in S. 1000 and in Senator Carper’s bill. 

The U.S. Government is the Nation’s largest energy consumer, 

accounting for about 1.6 percent of our total energy use, and that 

costs taxpayers money—a lot—$24.5 billion annually. Cost-effective 

energy efficiency improvements can save taxpayer dollars and improve the reliability and security of achieving Federal missions, including our defense missions. 

The alliance supports the objectives of these provisions, but we 

hope to work with the authors to ensure that these provisions work 

practically with the other executive orders and laws that are in 

place, and do not overwhelm or overburden agencies. 

In conclusion, the 2 energy efficiency bills before the committee 

today make use of America’s most abundant energy resource—energy efficiency; they cost-effectively address the critical economic 

challenges that we face of high energy bills and the need to create 

jobs; and, very importantly, particularly to me, is that the 

Shaheen-Portman bill demonstrates that energy efficiency policy 

can transcend partisan politics, and that it can be a key, and a first 

pillar, in sound national policy. 

On behalf of the Alliance to Save Energy, I strongly encourage 

this committee to act swiftly on both of these important bills before 

you today. 

Thank you for your time, and I look forward to your questions. 

[The prepared statement of Ms. Callahan follows:] 

PREPARED STATEMENT OF KATERI CALLAHAN, PRESIDENT, ALLIANCE

TO SAVE ENERGY

Good morning, Mr. Chairman, my name is Kateri Callahan and I am the President of the Alliance to Save Energy. I am delighted to be here today to testify in 

support of S. 1000, the Energy Savings and Industrial Competitiveness Act of 2011, 

and S. 963, the Reducing Federal Energy Dollars Act of 2011. 

The Alliance to Save Energy (‘‘the Alliance’’) is a bipartisan, nonprofit coalition 

of business, government, environmental, and consumer leaders committed to promoting energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security. The Alliance, founded in 1977 by Senators 

Charles Percy and Hubert Humphrey, currently enjoys the leadership of Senator 

Jeanne Shaheen, one of the principal authors of S. 1000, as Honorary Chairman. 

Former Pacific Gas and Electric Corporation President, Chairman and CEO Peter 

Darbee serves as our Co-Chairman, and Senators Jeff Bingaman, Lisa Murkowski, 

Mark Udall, Susan Collins, Richard Lugar, and Mark Warner, and Representatives 

Ralph Hall, Steve Israel, Ed Markey, Paul Tonko, and Michael Burgess, serve as 

Honorary Vice-Chairs. We are deeply honored that both the Chairman and the 

Ranking Minority Member of this Committee serve as Honorary Board members of 

the Alliance. More than 170 companies and organizations support the Alliance as 

Associates. 
10 

* Figure has been retained in committee files. 

On behalf of the Alliance Board, Associates and staff, I commend Senators 

Shaheen and Portman for their partnership on this important legislation, which is 

the product of many months of hard work and cooperation. S. 1000 truly represents 

the ‘‘people’s voice’’ in calling for sound energy policy. Businesses, trade associations, 

consumers, environmentalists, state and city officials, advocates for low-income families, energy efficiency experts, and others have come together, working with the 

bill’s authors, to find ways for the government to help all of us through energy efficiency through this legislation. A letter of support for S. 1000 from over 75 businesses and organizations including the U.S. Conference of Mayors and the American 

Institute of Architects, to mention but two, is attached. 

Most importantly, the Senators have crafted legislation that can draw the strong 

bipartisan support necessary to achieve its enactment into law, which in turn will 

deliver huge energy cost savings to American consumers and businesses, and will 

benefit our economy and national energy security. 

Energy efficiency is America’s most abundant energy resource, and one with a 40- 

year, demonstrated history of being the cheapest, quickest and cleanest way to extend our nation’s energy supplies. Energy efficiency currently contributes more toward meeting our country’s energy needs than any other single resource, including 

oil, natural gas, coal, and nuclear power. Without the energy efficiency improvements we’ve made since 1973, we would need about 50 percent more energy to 

power today’s economy than we are currently using (see figure below)*. Effective 

public policy—like that embodied in S. 1000 —has allowed America to tap into the 

energy efficiency resource. For example, much of the hundreds of billions of dollars 

in savings over the past 40 years has been due to public policies on appliance efficiency standards, building energy codes, consumer information and incentive programs, and technology development and deployment—many of the policy tools that 

comprise S. 1000. 

Notwithstanding the past efficiency gains, energy demand in the United States 

is still expected to grow approximately 20 percent by the year 2035. If fully implemented, energy efficiency can meet this new demand while ensuring that America 

remains competitive in the global marketplace. A 2009 report by McKinsey and 

Company, for example, estimated that a $500 billion investment in unlocking energy 

efficiency’s potential could yield gross energy savings of $1.2 trillion and a reduction 

in projected non-transportation energy use of 23 percent in 2020. 

Energy efficiency is the best assistance we can provide to consumers struggling 

to pay high energy bills. In 2011, we project the average American household will 

spend a combined $5,700 a year on residential and transportation energy use, a cost 

which has grown 17 percent since 2010 and 24 percent since 2009. Besides reducing 

bills directly for those who implement efficiency measures, energy efficiency, by reducing demand, reduces energy price pressure across the board, and does so more 

quickly and cost-effectively than any other option. Energy efficiency also reduces the 

amount of oil we import, reduces air pollution, strengthens the economy by freeing 

consumer dollars for other purposes, lessens stress on the electric grid and on energy and water infrastructure, and forestalls the need for costly new investments 

in electricity generating capacity. 

Further, energy efficiency is a major U.S. industry with continuing untapped potential. The American Council for an Energy-Efficient Economy (ACEEE) claims 

that in 2004 some $43 billion was spent on efficient equipment and services, supporting 1.6 million jobs. With the right policies, the energy efficiency services sector 

is expected see a 2- to 4-fold increase in jobs between now and 2020. 

ENERGY SAVINGS AND INDUSTRIAL COMPETITIVENESS ACT

The Energy Savings and Industrial Competitiveness Act (S. 1000) uses a variety 

of low-cost tools to reduce barriers for private sector energy users and to drive adoption of off-the-shelf efficiency technologies. These tools include loans for building efficiency upgrades, assistance for manufacturers, updates to building codes and appliance standards, and energy-saving practices within the federal government. 

S. 1000 has great potential for energy savings and job creation. According to 

ACEEE selected provisions of the bill could save almost six quadrillion Btu of energy annually by 2030, worth tens of billions of dollars. S. 1000 would create a 

wealth of economic opportunities. Through financial and technical support, as well 

as provisions to overcome existing market barriers, S. 1000 enables the advancement of an energy efficient economy with investment at home that will create jobs 

and improve American competitiveness globally. This bill supports American businesses and protects the bottom line. 
11 

BUILDING ENERGY CODES

By far the greatest potential impact of S. 1000 is from Section 101 on building 

energy codes. ACEEE estimates that this provision, if it meets its goal of zero-netenergy buildings by 2030, could save 4.4 quadrillion Btu of energy per year, about 

the total annual energy use today in the state of Florida, and would save consumers 

tens of billions of dollars. Besides saving homeowners money, more efficient buildings due to this provision will increase home comfort, improve local air quality, reduce our dependence on foreign oil, help the economy by putting money into the 

hands of consumers, and reduce stress on the power grid and natural gas supplies. 

Building energy codes set a minimum level of energy efficiency for new buildings 

and building alterations that protects consumers and businesses from high utility 

costs. Builders do not pay a home’s utility bills, so they do not have a direct incentive to invest in energy efficiency. Homeowners, tenants, and building owners typically do not have the information or the expertise needed to make informed decisions. For example, few of us know the R-value of the insulation in our walls or the 

Seasonal Energy Efficiency Ratio of our air conditioners—and if we did, we would 

not know whether they were good or bad. We need to be able to trust that the buildings we buy and lease meet a minimum standard that protects us from outrageous 

energy bills, just as we trust these buildings are built to minimum standards to protect our health and safety. 

Importantly, codes make American homes more affordable. The Building Codes 

Assistance Project (BCAP), affiliated with the Alliance to Save Energy, recently 

looked at the added building cost and energy savings of meeting the current 2009 

International Energy Conservation Code (IECC) model energy code for homes in the 

most obvious way possible, i.e., without using any of the opportunities for smarter 

design that a good architect or builder would employ. In every instance studied, the 

payback period for the additional investment required to meet the code was less 

than two years—and then the homeowner would continue, for years and years, to 

reap the benefits of the energy cost savings. We sampled some of the home states 

of Senators on the Energy and Natural Resources Committees. In New Mexico, the 

savings pay back the out-of-pocket costs after just 8 months, and the homeowner 

saves a net $200 each year after that. In North Dakota, the homeowner comes out 

ahead after 8 months, and the annual savings are $340.00. In Louisiana, the annual 

savings are $190, so the homeowner breaks even in 9 months. In Idaho and Michigan, the break-even point is 11 months. The national average is $840 added cost 

and $240 annual savings with break-even in 10 months. A chart is attached listing 

costs and savings in the 28 states that BCAP examined. 

Thus, it should be no surprise that consumers want more efficient homes. In a 

recent national survey by Consumers Union and BCAP of over 5,000 consumers, 82 

percent agreed that homeowners have a right to a home that meets minimum efficiency standards. 74 percent believe that energy codes help ensure that homeowner 

and taxpayer dollars are used wisely and efficiently by requiring that new homes 

will be ‘‘built right the first time.’’ A survey by the National Association of Home 

Builders found that just over half of consumers would be willing to pay up to 

$11,000 more for a new home that saved $1000 a year in energy bills. The National 

Association of Realtors found that energy efficiency is an important consideration 

in choosing a home for 90 percent of home buyers. Codes provide the best guarantee 

of those energy savings. 

Several programs, such as Energy Star and the U.S. Green Building Council’s 

LEED program, have proven successful and established public support in the market for energy efficiency at levels above code. However, these programs capture only 

a minority of the market. There are more than one million Energy Star homes now, 

but more than one hundred million are not. We need strong codes to build minimum 

efficiency into all new buildings to reap the economic, environmental, security, and 

consumer benefits of energy efficiency. 

The proposal in S. 1000 would not federalize building codes. It uses the existing 

codes infrastructure, increases regulatory transparency, and takes cost-effectiveness 

into account, while guiding codes toward better, more efficient buildings. 

The S. 1000 provision would: 

• Direct DOE to set national energy savings targets for residential and commercial codes and to ensure model codes are available that meet the targets, 

• Set targets for improved building compliance with the codes, as well as for state 

adoption, and 

• Authorize increased financial and technical assistance to the states, local governments, and national model code-setting bodies. 
12 

Similar codes legislation that passed the Energy and Natural Resources Committee in the last Congress received support from manufacturers, utilities, natural 

gas consumers, environmental groups, consumer advocates, efficiency experts, 

states, and others. 

Homes and commercial buildings are the largest energy-using sector of the economy, responsible for 40 percent of both energy use and carbon dioxide emissions, 

and for 70 percent of all electricity use. Inadequate codes lock inefficiency into buildings that will last for several decades. If we do not implement more effective building energy codes now, we will not be able to implement a sensible energy policy, 

and homeowners will see money fly out their windows and doors, for many years 

to come. 

APPLIANCE STANDARDS

The appliance standards provisions in Subtitle B of S. 1000 reflect consensus 

standards for appliances and equipment that have already been reported out by this 

committee in the Implementation of National Consensus Appliance Agreements Act 

(S. 398). The consensus provisions will save consumers an additional $43 billion 

through 2030 according to ACEEE. While some of the standards can be issued by 

DOE, others require legislative action. 

Very importantly, the standards contained in S. 1000 do not have any scoring or 

budgetary impact. Additionally and also importantly, federal efficiency appliance 

standards have a long and rich history of Republican as well as Democratic support. 

The first federal energy efficiency standards for appliances were enacted in 1987 

under President Reagan. The National Appliance Energy Conservation Act of 1987 

(NAECA), followed by additional legislation signed by Presidents Reagan, George 

H.W. Bush, and George W. Bush in 1988, 1992, 2005 and 2007, set national standards for residential and commercial appliances and equipment. ACEEE estimates 

that these bipartisan standards have reduced U.S. energy use by 3.6 percent (3.6 

quadrillion Btu per year, greater than the total annual energy consumption of Louisiana), saved taxpayers more than $300 billion in energy bills, created a net 

340,000 American jobs, and reduced energy-sector pollution nationwide. 

The standards create regulatory certainty for manufacturers, allowing for long 

term investment and job creation. Ever since legislation enacted in 1987, Congress 

has only adopted specific standards when there is a consensus among all the interested stakeholders, including manufacturers, efficiency advocates, consumer groups, 

and states, as is the case with the provisions contained in this bill. 

Energy efficiency standards prohibit the production and import of energy-consuming products less efficient than the minimum requirements. Covered products 

include furnaces, air conditioners, water heaters, refrigerators and freezers, washers, dryers, motors, lamps, and other residential and commercial products. These 

standards keep low quality appliances—whose competitive sticker prices conceal 

high operating costs—out of the marketplace, while still providing consumers with 

a broad array of product sizes and features. Because of these standards, a typical 

refrigerator sold today uses 70 percent less energy than those sold in the 1970s. 

In short, federal standards have been tremendously successful in reducing energy 

use and air pollution, saving consumers money, creating jobs, lessening strain on 

the electric grid, and minimizing regulatory burden. These standards are very much 

a part of a comprehensive approach to energy efficiency, and I urge the Committee 

to continue to support these standards until enactment. 

INDUSTRIAL ENERGY EFFICIENCY

One area where S. 1000 directly helps businesses is in the industrial efficiency 

provisions. The United States has lagged behind other industrialized countries in 

industrial energy efficiency, harming our global competitiveness by increasing costs. 

S. 1000 contains a number of important provisions that will support and promote 

greater industrial energy efficiency, including: 

1) Manufacturing Revolving Loan Funds (Sec. 301): The bill directs the Department of Energy to provide funding to eligible lenders for a revolving loan 

program to help commercial and industrial manufacturers implement clean energy technologies and processes for reducing industrial energy intensity and improving competitiveness. To be eligible, community and economic development 

lenders must lead a partnership that includes a state government agency and 

a private financial institution. Federal funds must be cost-matched by non-federal funds at least dollar for dollar. The program is designed to accelerate the 

implementation of industrial and commercial applications of technologies and 

processes to improve energy efficiency, power factor or load management, and 

to enhance industrial competitiveness. ACEEE estimates this provision could 
13 

save about 550 trillion Btu of energy in 2030, one of the most significant provisions in the bill. 

2) Technical Assistance and Technology Assessment (Sec. 302-308): Many industrial firms, especially small and medium-sized manufacturers, have limited 

means to keep up with and implement best practices. The bill would strengthen 

technical assistance to improve the competitiveness, energy efficiency, and environmental performance of American industry. The Future of Industry Program 

would enhance the nation’s network of Industrial Assessment Centers (IACs) 

and coordinate their work with the National Institute of Standards and Technology (NIST) Manufacturing Extension Partnership (MEP), the Small Business 

Administration, and other regional, state, local and utility programs to deliver 

technical assistance. Further, the bill would support industrial energy efficiency 

and competitiveness through technology assessments and road maps of energyintensive industries (such as steel, aluminum, forest products, chemicals, food 

processing, metal casting, and information technology), and a National Academy 

of Sciences study on advanced energy technology manufacturing. These studies 

would provide valuable information to both the private and public sectors on opportunities, challenges, and potential for research, technical assistance, and 

commercialization support to strengthen competitiveness and economic opportunity while improving energy and environmental performance. The Sustainable 

Manufacturing Initiative would provide onsite technical assessments and advice 

to manufacturers in coordination with other private and public sector organizations. 

3) Electric Motor Rebate Program (Sec. 321): The bill authorizes a program 

to incentivize the use of more energy efficient motors. According to DOE, motors 

account for more than 25 percent of electricity in the United States, and many 

of them operate inefficiently. 

4) Supply Star program (Sec. 311): Tackling efficiency throughout the supply 

chain, including product sourcing, development, distribution, use and disposal, 

provides much needed relief to businesses’ bottom line. Many companies take 

active advantage of this, such as Wal-Mart, which saves hundreds of thousands 

of dollars annually through its Supplier Energy Efficiency Program. However, 

many smaller businesses cannot dedicate the staff or resources to discover their 

energy saving potential. The Supply Star program would provide assistance to 

businesses of all sizes to help them achieve significant savings. 

Supply Star, which would be undertaken by DOE, would be designed to identify 

and promote practices, recognize companies, and recognize products that use highly 

efficient supply chains in a manner that conserves energy, water and other resources. In addition to promoting existing efficient supply chain practices, this program would collect and disseminate data on supply chain energy resource consumption, develop and disseminate metrics for evaluating supply chain energy resource 

use, and develop sector-level guidance for improving supply chain efficiency. DOE 

would also be directed to work with industry and small business to improve supply 

chain efficiency through sharing best practices, providing benchmarking opportunities, and supporting professional training. This provision is from Senator Bingaman’s bill in the 111th Congress, S. 3396, which was reported favorably by this committee in the last Congress. 

Collectively, these provisions will enable the United States to be more energy efficient in industry and manufacturing and increase our global competitiveness. 

ENERGY EFFICIENCY FINANCING

A major barrier to greater efficiency is a lack of capital. While energy efficiency 

measures save money over time by reducing energy bills, they often require an upfront investment. One of the most significant approaches in the bill would help to 

provide the financing necessary for implementing energy efficiency projects. Among 

the financing provisions in the bill are the following: 

Energy Efficiency Upgrades for Existing Buildings (Sec. 202): The bill expands the DOE Title XVII Loan Guarantee Program to include commercial, industrial and MUSH (municipal, university, schools and hospitals) building efficiency upgrades. This should help overcome a key barrier to making efficiency 

upgrades to these buildings by making access to capital easier through the DOE 

loan guarantee program. This provision was originally part of S. 3780, The Recovery Through Building Renovation Act, introduced by Sens. Shaheen and 

Landrieu in the 111th Congress. $400 million is authorized for period of ten 

years for a range of financing mechanisms including loans, power purchase 

agreements, energy service agreements (ESCOs), property assessed clean en-
14 

ergy bonds or similar tax assessment based programs, aggregate on-meter assessments, and other mechanisms deemed appropriate by DOE. 

A 2009 McKinsey & Company study found that an investment of $73 billion 

by the private sector in making existing commercial buildings more energy efficient would provide net present value savings of $104 billion and save $11 billion annually by the year 2020. 

Rural Energy Savings Program (Sec. 201): Another equally important provision that would provide valuable support to customers of rural electric utilities 

is the Rural Energy Savings Program. This provision would direct the U.S. Department of Agriculture to make zerO–Interest loans to rural public utilities 

and electric cooperatives to support low-interest, small loans for energy-efficiency upgrades to their rural small business and residential customers. Rural 

utility customers could use the loans to improve the efficiency of their homes 

through upgrades to the building envelopes, heating and cooling equipment, and 

manufactured homes. They could pay back the loans through an addition to 

their utility bills (on-bill financing). These low-interest loans would pay for 

themselves through the energy savings generated, resulting in a lower overall 

bill. The bill authorizes sufficient appropriations to leverage $2 billion in loans 

to electric co-ops. Because these loans remove the up-front cost for many customers who do not have the necessary capital, they unlock huge savings potential for rural Americans. 

In addition to energy savings generated by the program, which ACEEE estimates at 60 trillion Btu annually by 2020, these projects would also create thousands of jobs for home contractors to perform these energy upgrades, and would 

help small utilities, many with aging power infrastructure, manage their loads. 

FEDERAL ENERGY MANAGEMENT

In addition to our support of S.1000, the Alliance commends Senator Carper for 

his leadership in federal energy management, including his introduction of S. 963, 

the Reducing Federal Energy Dollars Act of 2011, several provisions of which are 

mirrored in S. 1000. The United States government is the nation’s largest energy 

consumer, accounting for 1.6 quadrillion Btus (quads) or about 1.6 percent of the 

nation’s energy use in FY 2008. Federal energy consumption cost $24.5 billion in 

that year. Cost-effective energy efficiency improvements in Federal buildings, equipment, and vehicles would save taxpayer dollars, reduce foreign oil dependency, and 

improve the reliability and security of achieving federal agency missions, including 

in national defense. The federal government should lead by example in energy efficiency, helping to bring new technologies and ideas into widespread use and showing what is possible. Many agencies and managers are trying to do this, but there 

is still much room for improvement. 

S. 963 is intended to: 

• Enhance reporting requirements related to individual buildings and to agency 

energy and water use (Sec. 3), 

• Strengthen energy efficiency standards and update designs for new federal 

buildings (Sec. 4, 10), 

• Require smart meters and sub-meters in applicable federal buildings (Sec. 6), 

• Require improved energy management in agency computers (Sec. 7), 

• Enhance commissioning (that is, the calibration of buildings systems to meet 

design specifications and improve performance) and recommissioning of Federal 

buildings (Sec. 11), 

• Expand the scope of energy savings performance contracts (ESPCs) to include 

vehicles and certain other equipment, include leased facilities, and add hydroelectric generation at federal dams (Sec. 9), 

• Require a survey of renewable energy potential at Federal facilities (Sec. 5), 

• Count renewable thermal energy use at federal facilities and renewable energy 

generation on Federal and Indian lands toward meeting federal renewable energy purchase obligations (Sec. 8), and 

• Call on GAO to audit and report on progress in federal energy management 

(Sec. 12). 

Some of these measures also appear in Title IV of S. 1000, including the adoption 

of computer power saving techniques (Sec. 401), updating federal building designs 

(Sec. 402); and the inclusion of thermal energy in federal renewable energy purchasing requirements (Sec. 406). Complementing S. 963, S. 1000 includes a smart 

metering provision focused on identifying and reporting best practices (Sec. 403), a 

federal energy management data collection provision (Sec. 404), a provision to allow 
15 

electric vehicle infrastructure (not the vehicles) in ESPC financing (Sec. 405), and 

a report on federal data center consolidation (Sec. 407). 

The Alliance supports these objectives. We are especially pleased to see attention 

to federal building recommissioning and ongoing energy management in S. 963, as 

well as to more capital-intensive retrofits. We note the General Services Administration’s (GSA) interest in commissioning and a workshop we organized last year for 

GSA on the topic. In the workshop various federal agencies, builders, designers, 

property managers, commissioning professionals, and other experts provided valuable insights and suggestions that could be used to strengthen the bill’s commissioning provisions. 

We do have a concern with the potential impact of some of the requirements in 

the bill on agencies that already are required to meet existing law and executive 

orders regarding energy management, and we look forward to working with Senator 

Carper and the Committee to make certain that the provisions of the bill ultimately 

will build on existing law and executive orders in practical, effective ways. For example, mandated DOE federal energy management reports are now a few years delayed, and web-based building-level reporting required in the Energy Independence 

and Security Act of 2007 has not yet been implemented. It is important that new 

reporting requirements not overwhelm DOE and other agencies, but instead ensure 

the most useful, actionable information in a timely manner. It also is important that 

federal building energy efficiency standards work effectively with the building code 

process that is the subject of Section 101 of S. 1000. In that regard, federal building 

standards are now applied only to new federal buildings even though the model 

codes and standards they reference also apply to alterations and retrofits. Federal 

standards for building alterations should be at least as stringent as those that we 

call on states to apply to private sector buildings. 

CONCLUSION

The Energy Savings and Industrial Competitiveness Act of 2011 will increase the 

use of energy efficiency technologies in the residential, commercial and industrial 

sectors of our economy. This bipartisan legislation uses a variety of low cost tools 

to reduce barriers to the implementation of energy efficiency projects and drive the 

adoption of off-the-shelf technologies that will save businesses and consumers 

money, help reduce American dependence on imported oil, and reduce pollution, 

while also fostering job creation. The authors of the legislation—and the myriad of 

businesses, consumers, state and local agencies, and environmental and efficiency 

advocates who worked with the authors to craft this important bill—understand 

that efficiency technologies are available today, that they can be fully deployed in 

every state in the Union, that they pay for themselves through energy savings relatively quickly, and most importantly, that sound and cost-effective public policies 

are the key to unleashing this abundant, clean and quickly deployable national resource. 

The important energy efficiency provisions in S. 1000 and S. 963 will help to 

speed the transition to a more energy-efficient economy, increasing both our economic competiveness and our energy security for generations to come. The Alliance 

looks forward to working with senators and staff to help enhance these bills and 

the energy savings, cost savings, and energy reliability and security they can help 

achieve. 

On behalf of the Alliance to Save Energy, I strongly urge the Committee to approve S. 1000, and I hope the Committee will work with the Senate leadership to 

bring this legislation to the Senate floor as soon as possible. 

But while the Shaheen-Portman bill will go a long way, at relatively low cost to 

the government, to tapping into the country’s energy efficiency resource, and is already comprehensive in nature, touching many segments of the economy and consumers across the country, I note that if the Congress adopted not only S. 1000 and 

S. 963 but also a few other bills, the impact on energy demand—and therefore on 

energy costs to consumers and business, U.S. global competitiveness, the environment, and our national energy security—would be even more immense. 

Therefore, I take this opportunity to mention a few other efficiency proposals worthy of bipartisan support that could work synergistically with the provisions in S. 

1000 and S. 963. In particular I would highlight a proposal on which Sen. Bennet 

is working to consider energy efficiency in mortgage underwriting so that the consumer value of efficiency can be reflected in home purchases and loans. Improvement and extension of the tax incentives for energy efficiency in new and existing 

homes, commercial buildings, industry, and vehicles, on which Sen. Bingaman has 

taken the lead along with Sen. Snowe, also will effectively complement the policies 

in S. 1000. And I hope this committee will take up the need for disclosure to con-
16 

sumers of their energy usage information, as addressed in Sen. Udall and Sen. 

Brown’s e-KNOW bill. 

Thank you Mr. Chairman and Members of the Committee for your time and attention, and I would be glad to respond to any questions you may have. 

ATTACHMENTS

Incremental Cost Analysis 

One of the major barriers to adopting the latest model energy code is the concern 

that it would be expensive. To address this issue, BCAP quantified the incremental 

construction cost of upgrading to the 2009 IECC in each state where such an analysis was feasible. 

The True Cost of Building a New Home 

Updating from current practice to the 2009 IECC would result in a weighted average incremental cost of $840.77 per new home. However, the average annual energy 

savings would be $243.37. 

When amortized over a thirty year loan with a 20 percent down payment, the additional upfront cost on a mortgage would be significantly lower. In fact, when factoring in energy savings, the homeowner would see net savings within the first year! 

Please see the other side for state-specific information. 

State Weighted Average 

Incremental Cost 

Median Energy 

Savings 

Mortgage Payback 

(Months) 

Alabama $668.76 $205.00 10 

Arizona $570.38 $217.00 8 

Colorado $922.73 $239.50 12 

Connecticut $897.42 $235.00 12 

Georgia $675.36 $206.00 10 

Idaho $872.81 $235.50 11 

Iowa $863.69 $260.50 10 

Kansas $1,403.96 $468.50 9 

Kentucky $773.92 $336.00 7 

Louisiana $572.43 $188.50 9 

Massachusetts $910.99 $200.50 10 

Mississippi $699.54 $211.50 10 

Michigan $965.19 $274.00 11 

Minnesota $1,873.00 $315.00 21 

Missouri $1,607.74 $459.00 11 

Nevada $777.15 $228.50 10 

New Mexico $619.18 $233.50 8 

New York $835.82 $259.00 10 

North Carolina $1,129.93 $221.50 17 

North Dakota $903.79 $343.00 8 

Ohio $803.04 $229.00 11 
17 

1 American Council for an Energy-Efficient Economy & Appliance Standards Awareness 

Project, Appliance and Equipment Efficiency Standards: A Money Maker and Job Creator. January 2011. http://www.standardsasap.org/documents/A111.pdf 

State Weighted Average 

Incremental Cost 

Median Energy 

Savings 

Mortgage Payback 

(Months) 

Pennsylvania $697.79 $240.50 9 

South Carolina $546.37 $207.00 8 

South Dakota $1,331.27 $405.00 10 

Utah $825.20 $242.00 10 

Virginia $582.07 $225.00 8 

Wisconsin $556.18 $220.00 7 

Weighted Incremental Cost $840.77 $243.37 Avg: 10.25 

months 

We believe these cost estimates are conservative and represent an upper bound 

on incremental cost, as they utilize only traditional building techniques and do not 

take advantage of certain technologies or performance trade-offs that would lower 

these costs further and improve energy performance. 

For more detailed cost data on all of the states listed above, as well as information on the methodology used, please review BCAP’s complete incremental cost analysis model and report (http://bcap-ocean.org/resource/incremental-cost-analysis). 

The Building Codes Assistance Project—June 2011 

June 9, 2011. 

Hon. JEANNE SHAHEEN, 

520 Hart Senate Office Building, Washington, DC. 

Hon. ROB PORTMAN, 

B40D Dirksen Senate Office Building, Washington, DC. 

DEAR SENATOR SHAHEEN AND SENATOR PORTMAN, 

We the undersigned represent a broad-based coalition of energy efficiency and environmental organizations, small and large businesses, public interest organizations 

and faith organizations. 

We commend your work on the Energy Savings and Industrial Competitiveness 

Act of 2011, which was introduced on May 12, 2011. Your bill will help to deploy 

energy efficiency across all sectors of our economy; save consumers and businesses 

money, help make us more competitive globally and reduce our dependence on imported sources of energy at a critical time. We look forward to working with you 

in the coming months to see that this important legislation is enacted into law. 

We specifically commend those provisions in your bill that will help to drive job 

creation. For example, the Energy Savings and Industrial Competitiveness Act will 

include a state partnership manufacturing revolving loan fund to finance investments in manufacturing process equipment though the issuance of federal bonds. 

With this fund, domestic manufacturers can fine-tune their equipment, reduce utility related overheads, and strengthen their bottom-line. 

Your legislation would also advance targets for national model building energy 

codes. Buildings currently consume 40% of all energy used in the United States. The 

Energy Savings and Industrial Competitiveness Act would support regular updates 

to the existing national model building codes. Building codes help investors overcome the market barriers that impede energy savings in this sector, and reduce energy costs for businesses. 

Similarly, appliance standards provisions contained within the Energy Savings 

and Industrial Competitiveness Act will cut home energy costs to consumers by $43 

billion through 2030.1 Existing federal appliance standards have saved taxpayers 
18 

* Full list of signatures has been retained in committee files. 

more than $300 billion in energy bills and reduced national energy use by 3.6% annually. This provision is identical to S. 398, which was recently reported by the Senate Energy and Natural Resources Committee with a bipartisan 18-4 vote. 

The Energy Savings and Industrial Competitiveness Act also contains a provision 

based on the Rural Star legislation which was passed by the House of Representatives last year. This program would create a loan program through rural public utilities and electric cooperatives to finance energy efficiency improvements for rural 

utility customers. Sponsors of the original bill estimate that it will create 20,000 to 

40,000 jobs to conduct and implement these energy improvements. 

Another important bill from last session, Supply Star, is also included in the Energy Savings and Industrial Competitiveness Act. This bill was reported favorably 

by the Senate Energy and Natural Resources Committee. Supply Star would promote energy efficiency improvements throughout the supply chain, including savings 

from product sourcing, development, distribution, use and disposal. This bill would 

provide crucial support to small businesses in reducing unnecessary energy expenditures. 

As the nation’s largest energy consumer, it is critically important that the federal 

government lead by example. The Energy Savings and Industrial Competitiveness 

Act contains several provisions which will improve the energy efficiency of federal 

agencies. Rather than squandering taxpayer’s dollars on needless energy costs, the 

Energy Savings and Industrial Competitiveness Act implements practical, cost effective measures to tackle federal energy consumption. These provisions include personal computer power saving techniques, advanced metering, building upgrades and 

more. 

By fully deploying the power of energy efficiency, we can help create new jobs, 

save energy, save money, and reduce carbon emissions. Energy efficiency takes effect faster than other policies designed to address our energy needs. Well designed 

programs such as those contained in the Energy Savings and Industrial Competitiveness Act will help those American families and businesses who are struggling 

today to lower their energy costs. Moreover, energy efficiency policies offer Americans protection from rising energy costs caused by political instability abroad, and 

moves us towards energy independence. We again commend your leadership in developing this comprehensive package, and offer our support in helping to advance 

this important bill toward enactment by the 112th Congress. 

Sincerely,* 

AMERICAN INSTITUTE OF ARCHITECTS. 

U.S. CONFERENCE OF MAYORS. 

The CHAIRMAN. Thank you very much. 

Mr. Crasi, go, go right ahead. 

STATEMENT OF MR. TONY CRASI, PRESIDENT, THE CRASI 

COMPANY, INC., CUYAHOGA FALLS, OH 

Mr. CRASI. Good morning, Chairman Bingaman, Ranking Member Murkowski, and members of the committee. 

My name is Tony Crasi. I am a builder, remodeler, a graduate 

architect, a licensed energy rater, and an energy advocate from 

Ohio. I’m pleased to testify today on behalf of the National Association of Home Builders on energy efficiency in buildings and Senate 

Bill 1000. 

My expertise is single family home design, building, and renovation, but NAHB also represents thousands of construction professionals, suppliers, and others in the real estate sector, including 

commercial builders and remodelers. 

Our industry has suffered an extreme decline in the past few 

years from which a recovery is yet to begin. Falling from a height 

of over 2 million homes in 2006, the industry recorded the lowestever rate of building permits for single family and multi-family construction, of 534,000 in February 2011. Poor sales performance, 

foreclosures, appraisal issues, and lack of access credit have further 
19 

stalled our industry’s recovery. In sum, we’re just simply not building as many homes as we used to. 

We believe that efforts to retrofit nearly 130 million existing 

homes, accomplished through a variety of incentive programs, is a 

more effective national policy approach to improve building efficiency. Not only are fewer homes being built today, but the vast increases in efficiency in new housing documented by EIA shows that 

the top of the line homes are already saving substantial amounts 

of energy. Additional requirements for the most energy-efficient 

homes and buildings will not deliver the most meaningful energy 

savings, and only serve to increase costs for new construction. 

U.S. Census data shows that over 94 million homes were built 

before 1990 without modern energy codes. The information I have 

provided in my testimony demonstrates that retrofitting 12 million 

of the oldest stock pre-1940 homes could save consumers over $18 

billion a year in energy costs, while repaying the up-front cost in 

less than 7 years. We fully support efforts to provide retrofit incentives to millions of American families in existing homes, which consume most of the energy in our sector. This is truly an effective 

way to dramatically improve energy performance on the broadest 

scale. 

Energy code requirements for new homes have increased substantially over the last few years. The upcoming addition of the 

residential code is over 30 percent more efficient than the 2006 

version. Bestowing additional authority to the DOE to implement 

even greater efficiency requirements, including setting goals of a 

net-zero, is financially unrealistic. 

We also have a serious concern about DOE’s role in code activities, since we were sidelined on a specific Freedom of Information 

Act request for technical information on DOE’s calculation of a 30 

percent increase in code stringency. A detailed explanation is included in my written report. 

NAHB is an ardent supporter of energy efficiency in both new 

and existing housing. But an effective energy policy must direct 

limited Federal resources at the largest part of the problem—that 

is, older homes and buildings. This is why we support sections 201 

and 202 of Senate Bill 1000. Both of these provisions are aimed at 

improving the efficiency of existing stock. 

Regarding section 101 and greater efficiency in building codes, 

NAHB looks forward to working with Senators Portman, Shaheen, 

and Coons to make additional refinements to address our concerns 

with the unique economic dynamics of requiring net-zero energy 

goals, and improving basis-determining metrics—determination 

metrics. 

That said, NAHB supports provisions in section 101 to require 

DOE to consider the economic impact of setting code standards to 

encourage greater transparency at DOE, and that efficiency gains 

in appliances and other building components be considered when 

developing future efficiency targets. These changes vastly improve 

the bill, and NAHB supports the changes. 

In conclusion, we urge the committee to consider—carefully consider—the role of DOE in the development of model energy codes 

before granting authority and resources. Rather, we hope the committee could direct resources to consumers to incentivize retro-
20 

* Figures 1–3 have been retained in committee files. 

fitting older homes and buildings, save money for American families, create jobs in a hard-hit industry. 

I appreciate the opportunity to testify today, and I look forward 

to answer questions. Thank you. 

[The prepared statement of Mr. Crasi follows:] 

PREPARED STATEMENT OF TONY CRASI, PRESIDENT, THE CRASI COMPANY, INC., CUYAHOGA FALLS, OH 

On behalf of the 160,000 members of the National Association of Home Builders 

(NAHB), I am pleased to testify today on S. 1000—The Energy Savings and Industrial Competitiveness Act of 2011 (ESICA). My name is Tony Crasi, I am owner and 

founder of The Crasi Company and I have been designing and building custom 

homes in the surrounding Akron, Ohio area for the past 24 years. I am a builder, 

remodeler, graduate architect, and licensed energy rating professional. NAHB represents the single and multifamily home construction and development, light commercial construction, remodeling, and building supply chain industries. In 2010, less 

than 10% of NAHB’s total membership had more than $15 million in gross receipts 

with 96% of NAHB’s builder members falling below that threshold. NAHB is a true 

representative of small business interests and I appreciate the opportunity to provide input on the impact of this legislation on the thousands of small businesses 

in our industry and the millions of consumers they serve. 

On the heels of the worst economic downturn since the Great Depression, the 

housing industry is still reeling with staggering unemployment of 18% in April 

2011, weak recovery, and a total loss of 1.4 million jobs in the industry since peak 

employment. Dropping from a height of two million new homes constructed in 2006, 

new home sales were approximately 370,000 in 2009. The decline in housing was 

significantly greater and more profound than those experienced by a number of 

other industry sectors. Also during this time of decline, the housing industry has 

had to face a remarkable increase the number of regulatory actions and implementation of new requirements for construction that have the potential to further forestall a housing recovery once the demand for new housing returns. 

Despite the downturn and sluggish recovery, the housing industry has made outstanding strides by initiating, encouraging, and promoting energy-efficient, green, 

and sustainable design and construction of new homes and buildings throughout the 

nation. Data from the Department of Energy (DOE) shows dramatic declines in the 

amount of energy consumed by new homes in the last few decades and it is a testament to new home builders’ commitment to the goals of efficiency and to saving 

money for consumers. 

With substantial amounts of energy lost in the nearly 130 million existing homes 

in the current stock, it is incredibly important to develop an effective national energy policy that is not punitive to consumers who benefit from the most-efficient 

new homes. Rather, the policy must promote an effective retrofit plan for older, lessefficient housing that allows builders and remodelers to apply the benefits of energy 

efficiency for all housing. 

I. HOUSING INDUSTRY BACKGROUND

The entire housing industry was hit hard by the economic downturn. Sales of both 

new and existing homes fell sharply, followed by a precipitous decline in home values, increased foreclosures, and an inability for the market to absorb the influx of 

inventory that flooded the market following the collapse. The market for new homes 

has lagged far behind far longer than most expected. In order to understand the impact of these market dynamics on energy policy, it is incredibly important to consider the substantial absence of newer, more-energy efficient homes that were supposed to exist, but simply do not. This absence is often not factored into the majority 

of studies, research, and estimations on ‘‘building’’ energy consumption, often used 

to justify specific policy approaches. This is a significantly important qualifier because many policy proposals that espouse a set number of energy savings are often 

subject to and dependent upon the existence of one million (or more) new homes per 

year—-a number which is, unfortunately, not a reality in the current housing market—see Figures 1a and 1b.* 

The early months of 2011 have also not provided any positive news for housing. 

Housing construction has reflected poor sales performance as total building permits 

in 2011 have been the lowest on record since 1960. Single family housing starts are 
21 

1 EIA, Residential Energy Consumption Survey (RECS), 2009. http://www.eia.gov/consumption/ 

residential/reports/electronics.cfm (accessed 6/2/11) 

currently at the lowest ever recorded despite low mortgage rates and generally high 

affordability indices. An additional constraint in the current housing market that 

further depresses new home construction is the lack of reliable and adequate credit. 

Credit is the life blood of the housing sector and many NAHB members are experiencing serious problems trying to access Acquisition, Construction and Development 

loans to build new homes. The loss of these new homes that should have been built 

to replace older stock, coupled with the ongoing uncertainty about a housing recovery, means that fewer new and more energy-efficient homes will be available for 

homeowners that may then be relegated to staying in older, less-efficient housing 

longer than expected. 

II. COMMERCIAL BUILDINGS

As an umbrella trade association, NAHB represents a variety of members that not 

only construct single family and multifamily homes, but also commercial buildings. 

NAHB also represents building owners and managers, remodelers, realtors, and a 

host of professionals affiliated with the housing and commercial construction industry, including many building supply companies and trade associations. Thereby, 

NAHB is similarly concerned, as are other commercial real estate organizations, 

about the impacts of additional energy requirements on new commercial construction. Because commercial construction varies greatly in operational use and composition—i.e., warehouses, multifamily buildings, mixed-use buildings, etc.—the energy profiles of commercial buildings tend to vary more widely, as do costs for installing (or retrofitting) energy efficiency features in such buildings. Financing options for commercial buildings are also much different than individual homeowners 

seeking a residential mortgage, and in many cases, lenders are reluctant to provide 

capital without a demonstrated return on investment (ROI) that fits a specific economic timeframe (e.g., 10 years). These financing restrictions sometimes make it 

very difficult to effectively accommodate upfront costs, specifically when some features—including aggressive efficiency requirements—do not have a ROI that falls 

within a lender’s specified range. 

III. ENERGY PERFORMANCE OF NEW HOMES AND EXISTING BUILDINGS

Over the last two decades, NAHB has led the way in developing, promoting, and 

encouraging the growth of residential green—and energy-efficient—construction. 

Since the early 1990s, NAHB members have been pioneers in sustainability, long 

before the trendy moniker ‘‘green’’ became mainstream. In 2009, NAHB, along with 

many stakeholders, commended the approval of the ICC-700 National Green Building Standard (‘‘the Standard’’), the first and only residential green construction 

standard approved by the American National Standards Institute (ANSI)— 

www.nahbgreen.org. Setting a high bar for single family and multifamily home construction, remodeling, and land development, the Standard is an affordable, rigorous, and legally-defensible benchmark for residential green throughout the nation. 

Unlike privately-developed green rating systems, the Standard carries the approval 

of ANSI which makes it compliant with relevant federal laws—National Technology 

Transfer Act (P.L. 104-113)—and directives that instruct federal agencies to utilize 

public and consensus-based industry standards in lieu of privately-developed or government-crafted criteria, (see OMB Circular A-119A (revised, February 1998)). 

With the growth of green building, the introduction of the Standard, and substantial increases in energy efficiency requirements and rigorous energy codes, energy 

performance in new homes has skyrocketed delivering tremendous savings. According to the Energy Information Administration (EIA), there were 76.6 million occupied housing units in the United States in 1978, using a total of 6.96 quads for 

space heating. Although the number of homes increased 45% to 111.1 million by 

2005, the homes used significantly less energy for heating—just 4.30 quads. The 

EIA attributes the decline largely to improved energy efficiency of heating equipment, better window design, and insulation to more effectively seal homes.1

To be sure, significant improvements in appliance efficiency have also helped reduce energy loss, although some of the gains in envelope improvements and appliance efficiency have been offset by a substantial increase in electronics usage. For 

example, EIA reports that in 2009, the average household had an average of 2.5 

televisions with a screen size of 37-inches or larger, 76% of U.S. homes had a personal computer, 79% of homes had a DVD player, 43% of homes had a DVR, and 

at least one-third of all households had at least four electronic devices plugged in 
22 

2 Ibid. 

and charging at home.2 As much energy as builders might be able to save in envelope improvements and appliance efficiencies, it is impossible for builders to control 

the fundamentals of consumer choice that, as EIA confirms, significantly affect the 

energy profile of a home, even one constructed to the strictest standards. 

Nonetheless, new home builders have done a lot within in the structure of a home 

to improve energy performance. The introduction of modern energy codes in the 

early 1990s has significantly improved the efficiency of new construction. In fact, 

the EIA reports that homes built between 1991 and 2001 consumed 2.5% of total 

energy in the U.S.—see Figure 2. Thus, if all the new homes built between 1991 

and 2001 consumed zero energy, it would have saved only 2.5%. 

Older, existing homes consume virtually all of the energy in the residential sector. 

Homes constructed prior to the introduction of modern energy codes comprise the 

vast majority of the homes in the stock today, meaning the most inefficient housing 

is the most plentiful—see Figure 3. 

NAHB fully supports efforts to incentivize retrofitting the oldest, least-efficient 

stock. As a national energy policy priority, any efforts to improve the efficiency of 

residential and commercial buildings in the U.S. must include provisions that seek 

to save the energy lost in older homes and buildings. As described above, newer 

homes are the most energy efficient that they have ever been and with sizeable 

jumps in stringency from the last iteration of the national model code to the next 

(of more than 30%), additional requirements to further increase the efficiency will 

not deliver the most meaningful savings. Rather, layering on additional efficiency 

requirements on the most-efficient housing will only increase the cost for these ‘‘hybrid’’ homes. 

Representing over 10,000 remodelers, NAHB has consistently championed incentives for consumers to upgrade older housing, including ongoing support for incentives under Sections 25C and 25D of the Internal Revenue Code. NAHB has lobbied 

alongside many efficiency and environmental organizations for extensions of a variety of tax incentives that improve building efficiency in both residential and commercial buildings. Currently, NAHB is working diligently to promote a retrofit incentive for commercial buildings that has garnered the support of more than 80 organizations—corporate entities, environmental advocates, efficiency groups, trade 

associations, etc. (see attached letter dated May 5, 2011). The most effective national energy policy is going to be that which directs federal resources at the largest 

part of the problem and NAHB is proud of its supportive advocacy on this critical 

issue. 

IV. ENERGY IMPACT OF RENOVATIONS ON OLDER HOUSING

In order to demonstrate energy savings and cost impacts for efficiency improvements in a variety of housing, we have provided specific examples of various levels 

of code compliance and the resultant savings and cost paybacks for certain features. 

Using the REM Design Software, energy usage calculations and resulting savings 

from various retrofit measures or code features can be demonstrated. Based on a 

1,400 square-foot home—one story, three bedrooms, attached garage and full basement—in the Akron, Ohio (Zone 5) climate, the table in Figure 4 demonstrates the 

energy profiles and cost for a pre-1940 home, a pre-1940 home with a retrofit, a 

2009 IECC-compliant home, and a net-zero energy home. 
23 

Figure 4.—Energy Features and Cost/Savings Calculations 

Pre-1940 

Home 

Pre-1940 Home 

w/Retrofit 2009 IECC Home Net-Zero Energy Home 

Features 

Ceiling Insulation R-0 R-50 R-38 R-60 

Above-Grade Wall Insulation R-0 R-15 R-21 R-31 

Foundation Wall Insulation R-0 R-10 R-10 R-20 

Windows (10) U-0 U-0.29 U-0.35 U-0.29 

Air Infiltration Rate 30 ACH 7 ACH 7 ACH 1.5 ACH 

Heating Equipment 80% AFUE, 

110 BTU 

95% AFUE, 

60 BTU 

90% AFUE, 

60 BTU 

95% AFUE, 

40 BTU 

Cooling Equipment None 13 SEER, 1.5 Ton 13 SEER, 1.5 Ton 14 SEER, 1.5 Ton 

Hot Water Heater 40 Gal, 

0.56 EF Gas 

40 Gal, 

0.62 EF Gas 

40 Gal, 

0.62 EF Gas 

40 Gal, 

0.62 EF Gas 

Refrigerator Pre 1986, 

1,700 Kw/Yr 

Energy Star, 

500 Kw/Yr 

Energy Star, 

500 Kw/Yr 

Energy Star, 

500 Kw/Yr 

Annual Energy Cost/Year $2,580.00 $1,085.00 $860.00 $0.00 

Upfront Costs $10,405.00 $40,038.00 

Annual Energy Savings $1,522.00 $0.00 

Payback to Consumer 6.83 Years 46.56 Years 

AASource: REM Design Software; Calculations and Methodology by Tony Crasi, June 2011. 
24 

3 Housing Economics.com, http://www.nahb.org/generic.aspx?sectionID=734&generic 

ContentID=103543&channelID=311, accessed June 7, 2011 

The data shows that upgrading an older, less-efficient, pre-1940 home can save over $1,500 per year in energy costs with an upfront cost of $10,405.00. More importantly, however, is that the energy-savings payback to the consumer is only 6.83 

years for this investment. In less than a decade, the family that lives in the retrofitted home could recoup their costs in energy savings. On the other hand, making 

a newer home—compliant with the 2009 IECC—into a net-zero energy structure 

would cost a little more than $40,000. While having no energy bill is certainly a feature that most homeowners would likely enjoy, very few consumers, if any, would 

probably be able to finance an additional $40,000 upfront into their mortgage product or property taxes and insurance. Furthermore, the future homebuyer would also 

have to wait nearly five decades to recoup these upfront costs. 

The good news is that there is ample opportunity to save substantially more energy by improving older homes, with much more meaningful energy savings paybacks to consumers. According to the American Community Survey, in 2009, there 

were 18,266,689 pre-1940 homes in the United States. Improving 12 million pre1940 homes to save $1,522 per year in energy costs would result in more than $18 

billion per year for consumers. Additionally, the REM Design software also calculates that a retrofit of this scale would similarly save 240 million tons of carbon 

dioxide per year. 

Not only would such a retrofit program save energy for consumers and reduce carbon dioxide emissions, but it can also create jobs in our struggling industry. For example, NAHB estimates from economic data shows that the direct impacts of remodeling at the national level, which includes the number of jobs and income created, 

as well as the amount of government revenue generated (based on national averages 

to capture impacts on the aggregate economy), was 1.11 jobs and $30,217 in taxes 

from every $100,000 spent on residential remodeling in 2008.3 A national policy approach to provide incentives for retrofits to the oldest, least-efficient stock would 

reap tremendous energy savings, reduce greenhouse gas emissions, and create jobs 

in the construction industry. NAHB strongly encourages the Committee to consider 

a retrofit plan that is equally-accessible to all qualified contractors, encourages retrofits in all parts of the U.S., and that is consumer-focused rather than providing 

more money and authority to DOE to layer energy requirements on newer housing. 

V. AN APPROPRIATE ROLE FOR DOE IN NATIONAL MODEL CODES

The national model codes development process is an arduous and complicated way 

to convene stakeholders interested in the health, life, safety, structural soundness— 

and more recently—energy efficiency of homes and buildings to set minimum standards for new construction. The national model codes organizations—International 

Code Council (ICC) and ASHRAE—coordinate and publish the final editions of codes 

and standards for single family and multifamily/commercial buildings, as established through a lengthy process involving several meetings of thousands of building 

code officials, builders, efficiency advocates, State and local governments, product 

suppliers, etc. At these hearings, stakeholders vote on proposals to incorporate 

changes to existing codes and once published, State and local governments are encouraged to adopt the new codes, or adopt a modified-code that can address Statespecific or geographic needs without impacting the stringency of the newly-minted 

national models. 

Energy codes are developed on three-year cycles (next edition is 2012 International Energy Conservation Code (IECC) for residential, 2013 for ASHRAE) and 

NAHB, as well as the DOE and many others, have participated in the development 

of the national model energy codes for several years. By proposing modifications 

that improve efficiency, yet remain cost-effective, NAHB has supported a number 

of code changes to vastly increase the efficiency of newer codes. For example, any 

stakeholders, including DOE, attended the last cycle of code hearings for the 2012 

IECC (held during Fall 2009) with proposals supporting a 30% increase in stringency over the 2006 edition. NAHB’s 30% proposal was voted down, but the DOE’s 

30% proposal was approved by the ICC. Because many things can comprise a 30% 

increase in stringency, NAHB informally sought information from DOE on how it 

calculated its 30% jump, but our request was ignored. 

To be sure, the DOE carries a heavy weight in the codes development process and 

at the code hearings and many are extremely deferential to the preferences of DOE. 

Nonetheless, NAHB feels strongly that DOE should not be allowed to withhold information from a regulated industry group that is attempting to figure out how to 

comply with a DOE-developed code change. Thus, in April 2010, NAHB submitted 
25 

* Attachment has been retained in committee files. 

a formal Freedom of Information Act (FOIA) request to DOE to seek the calculation 

methodology used to determine the DOE’s 30% increase in energy savings for the 

2012 IECC. The initial response from DOE came from Deputy Assistant Secretary 

Kathleen Hogan in June 2010 and stated that ‘‘no responsive documents were 

found’’—see attached letter dated June 7, 2010. Because DOE had already given 

public presentations indicating that the ‘‘new code’’ was ‘‘30.6%’’ above the 2006 edition, NAHB understood that DOE definitely had the information available on its calculations, so we appealed the FOIA response. 

Thankfully, some Members of this Committee helped facilitate a more constructive response from DOE. After more than a year of back-and-forth with DOE and 

one of its national labs, NAHB received a communication on June 2, 2011, indicating that DOE can provide some of the information on its calculations, following 

a review by its FOIA Officer. A detailed timeline (Appendix A)* is attached to this 

statement demonstrating NAHB’s efforts to obtain this information and DOE’s responses to our requests for the mathematical and technical calculations behind its 

30% code increase. NAHB has tried unsuccessfully for over a year to simply discover 

how the federal agency in charge of calculating and determining code efficiencies 

was doing the job it is already assigned to do under existing law. 

In light of this experience, NAHB is extremely concerned that this Committee 

could bestow additional authority on DOE to become even more engaged in national 

model codes, to establish code targets that are based on even greater stringencies, 

loftier goals, and even more complicated calculations and analyses. The inability to 

obtain technical information from DOE in a timely manner, or even at all, is of 

great concern to NAHB. Thus, it is critical that the Committee examines the most 

appropriate role for DOE in the codes process before granting additional authority, 

and more importantly, providing more federal resources for DOE. 

VI. S. 1000—THE ENERGY SAVINGS AND INDUSTRIAL COMPETITIVENESS ACT (ESICA)

NAHB is pleased to have contributed as a stakeholder in the process of developing 

the ESICA legislation and looks forward to continuing to provide additional input 

as it is considered by the Committee. The ambitious legislation seeks to provide incentives for retrofitting older homes for consumers in rural areas by addressing energy inefficiencies in existing housing. Although NAHB still has some concerns 

about the practical implementation of provisions that set goals for new residential 

and commercial buildings to be ‘‘net zero energy’’ by 2030, NAHB is encouraged that 

additional work to further refine and streamline the path to higher efficiencies, 

while carefully considering the cost impacts on new building, will be examined. 

Section 101—Greater Energy Efficiency in Building Codes 

Although NAHB disagrees with the underlying premise for including a provision 

to substantially increase energy code stringency in new construction, for the many 

reasons identified above, NAHB does support important additions in this section 

that seek to shine a greater light on the activities of DOE as it relates to the development of national model codes and standards. Ultimately, NAHB would prefer to 

rework this section to clarify the role of DOE, including more clearly defining its 

intended job as a technical advisor. As proven, the model codes and standards development process continues to deliver substantial increases in efficiency stringency, a 

trend that is not expected to stop. NAHB and others in the real estate community 

deserve access to the technical expertise and resources of DOE to help achieve these 

demanding goals for new buildings. Thus, NAHB strongly encourages the Committee to consider the appropriate role for DOE and how it can more effectively 

serve the groups that will ultimately have to finance, construct, own, lease, and 

manage the most energy-efficient buildings ever built. 

NAHB fully supports the inclusion of provisions in this section that seek to address the existing lack of consideration of any economic impact of code requirements, the lack of transparency regarding technical requests for information from 

DOE, and the removal of arbitrary percentage-based targets that have consistently 

existed in previous versions of legislation on this topic. NAHB applauds efforts to 

allow DOE to consider the energy efficiency of other features in a home when making determinations on code targets—e.g., lighting, appliances, renewable energy systems, etc., as these traditionally rest outside the jurisdiction of the codes and have 

been unable to be effectively evaluated when determining overall efficiency gains. 

NAHB also supports efforts to allow public comment and compliance with the Small 

Business Regulatory Enforcement Fairness Act (5 U.S.C. 601; P.L. 104-121) when 

establishing targets, as this will provide greater opportunities to evaluate and ex-
26 

4See 22 U.S.C. 16512(d)(3) (‘‘The obligation shall be subject to the condition that the obligation is not subordinate to other financing’’); id. § 16512(g)(2)(B) (‘‘The rights of the [Energy] Secretary, with respect to any property acquired pursuant to a guarantee or related agreements, 

shall be superior to the rights of any other person with respect to the property’’) 

pose real cost impacts on small businesses and offer an additional layer of transparency in any instance where DOE is engaged. 

Areas of concern that NAHB hopes to continue to work on include establishing 

the ‘‘net zero energy’’ goal for all new homes and buildings by 2030, a basis determination of the 2009 IECC, and the inclusion of ‘‘life-cycle cost effective’’ indices 

that are current parameters in the legislation for creating code targets. In both residential and commercial, the practical reality of having a ‘‘net zero energy’’ building 

is financially unrealistic. In a home, it may likely be easier to construct a ‘‘net zero 

energy’’ structure, albeit a very expensive one, but ‘‘net zero energy’’ commercial 

buildings are essentially impossible to finance and build, particularly within the 

confines of the current financing and investment structure facing commercial real 

estate. 

Indeed, NAHB understands that ‘‘net zero energy’’ building is an aspirational goal 

and that the DOE may have the flexibility to adjust it along the way, but we remained concerned that the target date would be codified legislatively. As NAHB has 

come to learn first-hand, specified targets and dates in federal legislation can often 

be espoused as tacit mandates for the many outside Washington that must deal 

with the implementation of codes and standards at the State and local levels. NAHB 

is pleased to continue to work with the Committee to find an appropriate path forward to support voluntary advanced codes that more adequately consider the unique 

dynamics of financing residential and commercial construction projects during this 

fragile period of recovery. 

Section 201—Rural Energy Savings Program 

NAHB supports Section 201 to provide low interest loans to consumers to install 

energy efficient technologies that will save energy for American families, create jobs, 

and reap environmental rewards. NAHB supports provisions to establish demonstration programs that help implement measurement and verification approaches to energy audits and investments in energy performance improvements with measurable 

results. NAHB believes that tracking energy savings improvements in older, lessefficient homes is important to demonstrate voluntary efforts already underway to 

reduce overall energy use in the building sector. Without meaningful incentives to 

retrofit the millions of less-efficient existing homes, true energy savings in the residential sector will never materialize. 

Section 202—Building Energy Retrofit Loan Credit Support Program 

NAHB supports the goals of Section 202, but hopes for additional refinements to 

make such a loan guarantee program meaningful for real estate. As with any loan 

guarantee authorization, section 202 must be crafted to allow for fiscally austere 

measures that limit DOE’s exposure to financial risks in the event of a borrower’s 

default on a government-backed retrofit obligation. In this regard, ‘‘guidelines’’ required by section 202 to implement the new loan guarantee program should include 

assessments of a borrower’s creditworthiness, the building’s loan to value ratio, and 

the building’s history and expectations in generating rental and other income, 

among other factors. Additionally, the guidelines could carve-out retrofit ‘‘performance risks’’ not to be borne by DOE. A prerequisite to project qualification should 

be guaranteed energy savings arising from the retrofit, such as through energy service performance contracts and other mechanisms. Third-party contractors responsible for the retrofit like DOE-approved energy services companies should bear risks 

that installed energy efficiency measures will perform as designed, not DOE. In this 

way, the transaction can be structured so as to amortize retrofit financing through 

energy savings, and energy performance will be measured and verified so that the 

project is a safer bet and DOE’s guarantee is limited to covering the ‘‘default risk’’ 

of the borrower. 

While managing DOE’s risks, refinements are also needed to make the retrofit 

loan guarantee program meaningful for and usable by real estate owners, managers 

and financiers. Currently, there are provisions in existing law requiring debt obligations backed by federal guarantees not to be subordinate to other financing.4 When 

these provisions were adopted in 2005 with nuclear plants, wind farms and largescale solar projects in mind, Congress did not consider the effect on the proper functioning of traditional commercial and residential mortgages (such as the sale of 

mortgages on secondary markets). 
27 

5 22 U.S.C. §§ 16512(d)(3), (g)(2)(B). 

A fundamental tenet of real estate finance is that, in the event of a property owner’s default on the mortgage and/or foreclosure, the lender (or ‘‘mortgagee’’) will receive payments outstanding on the loan before sums are paid to any other secondary 

security interest in the property. In other words, the first mortgagee has a superior 

lien taking precedence over secondary security interests in the collateral. This principle of ‘‘mortgage superiority’’ is an industry standard written into deeds of trust 

and other mortgage documents, including Fannie Mae’s uniform security instruments. Borrowers would likely be in breach of contract if they allowed a secondary 

lender (such as one extending a loan to finance the retrofit of a commercial building) 

to occupy a more favorable lien position on the asset, to the detriment of the bank 

providing a mortgage loan in the first instance. 

As NAHB understands, there is some confusion over the application of requirements in the existing law if applied to a loan guarantee for building retrofits, potentially putting DOE’s interests in conflict with the rights of first lenders in mortgaged properties. Building owners considering retrofits and contemplating loan 

guarantee financing for efficiency upgrade projects will find themselves in untenable 

positions. Such borrowers could not simultaneously respect their contractual obligations to allow mortgagees to maintain a higher interest in the collateral, while also 

ensuring that a government-backed retrofit loan is ‘‘not subordinate to other financing’’ or that the DOE has superior interests compared to the ‘‘rights of any other 

person’’ in the property.5

Thus, it is critical to get this lien priority issue right, so that real estate ownership and lending communities can avail themselves to any new retrofit loan guarantee products in a market transformative manner. Accordingly, NAHB supports 

changes to refine this provision to amend the Energy Policy Act by adding a new 

§1706 which, among other things, would direct DOE to develop guidelines to implement the credit support program for building retrofits. These guidelines must include ‘‘any lien priority requirements that the Secretary determines to be necessary.’’ (§1706(c)(2)(E), p. 156 lines 17-18.) NAHB understands this to mean that 

DOE may, through its guidelines, establish new principles to address the first mortgagee lien issue discussed above and provide that the federal obligation may be subordinate to prior mortgages on an eligible building. NAHB suggests that the statutory language needs to be more direct and Congress should direct DOE to consider 

how the superior rights of first-in-time mortgagees can be maintained while minimizing the federal government’s exposure to default on the underlying obligation to 

underwrite the retrofit. 

Similarly, NAHB supports refinements offered and supported by groups like The 

Real Estate Roundtable to more clearly define eligible projects and buildings and 

defining minimum energy savings when establishing the loan guarantee program. 

The most effective way to develop a retrofit policy and approach is to allow for the 

most flexibility and the most participation. Access to the program is critical, as is 

not limiting projects by scope or benchmarking requirements. Because commercial 

retrofit programs are often extremely expensive, yet can be the most transformative 

in terms of energy savings, it is important to make the parameters of the program 

open-ended and to include as much input from the real estate community as possible during development of guidelines, criteria documents, and other administrative 

processes. 

CONCLUSION

Despite facing the worst economic downturn since the Great Depression, the housing industry is ready to work to improve the energy efficiency and performance of 

new and existing homes and buildings throughout the U.S. New homes have dramatically changed the energy performance of ‘‘buildings’’ with substantial efficiency 

gains over the last few decades. The growth of green building has also helped further the strides in improving new home performance and NAHB is pleased to have 

contributed to the initiation of the first and only ANSI-approved residential green 

construction standard. NAHB continues to be a leader in promoting energy-efficiency in all facets of the industry—single family, multifamily, light commercial, and 

remodeling. 

Even with low mortgage rates and relatively high housing affordability, the housing market has not seen the turn around that many expected. With access to credit 

a major concern, coupled with foreclosure, appraisal and inventory issues, builders 

are facing substantial challenges building new homes in today’s market, leaving 

fewer, more-efficient homes available for consumers. NAHB is concerned with the 

changing dynamics of energy requirements for new housing because it has the po-
28 

tential to make the newest, highest-performing homes unaffordable for the average 

family. Rather, NAHB encourages a national policy that directs limited federal resources at the biggest source of energy loss in the real estate sector: older homes 

and buildings. 

NAHB is pleased to have contributed to the legislative process up to this point, 

and we hope to continue to do so as the Committee moves forward and considers 

the legislation. Our industry has faced substantial changes over the last few years 

and will have to deal with an entirely new regulatory and housing finance landscape 

in the next few. NAHB supports energy efficiency and wants to encourage support 

for programs that help put our members back to work retrofitting older, less-efficient homes and buildings. With over 160,000 members, NAHB looks forward to 

being a key partner in developing an effective national energy policy. 

The CHAIRMAN. Thank you very much. 

Mr. Damiano. 

STATEMENT OF PHILIP DAMIANO, CHIEF OPERATING 

OFFICER, VELCRO USA, MANCHESTER, NH 

Mr. DAMIANO. Thank you, Chairman Bingaman, Ranking Member Murkowski, and members of the committee for the opportunity 

to testify today. 

My name is Philip Damiano. I am the Chief Operating Officer for 

Velcro Group Corporation. I’d like to thank Senator Shaheen for inviting me to testify today and putting forward a bill to help domestic manufacturers remain competitive amid high and increasing energy costs, which is a serious concern for all of us. 

As I’m sure, you know New England has some of the highest energy costs in the Nation. 

Velcro Group Corporation is a global corporation with multiple 

entities. Our products go far beyond the standard hook-and-loop 

fastener that most everyone is familiar with. In fact, we provide 

very advanced fastening systems to the government, to the military, automotive, personal care, and medical industries, as well as 

a wide range of retail products. 

I’d just like to share with you a couple of experiences of our domestic U.S. company, Velcro USA. Velcro USA is based in Manchester, New Hampshire. We employ about 750 people in New 

Hampshire, Michigan, and Arizona. The company is about 50 years 

old. We have a long history of manufacturing in the United States. 

In fact, our 2 largest facilities in the world are in the State of New 

Hampshire, and recently, over the last 10 years, we have committed to continue our commitment to manufacturing by building 

a whole new facility in Somersworth, New Hampshire, which is 

450,000 square feet. 

When we built that facility we were careful to design the building envelope—the components, the finishes, the mechanical and 

electrical systems—to be very low-cost energy consumption, and we 

also employed an energy consultant to engage and compare and 

evaluate alternative technologies. 

Velcro is proud of being a strong manufacturer. We are committed to employment in New Hampshire, and we are also committed to minimizing our commitment to environmental impacts. 

To support that, in our Manchester facility, which is a 26-acre facility, we spent over $6 million on a cogeneration system. That system completely provides all of our electricity and thermal energy. 

As a result, we are completely off the grid in Manchester. Depend-
29 

ing on certain seasonal loads, that system has an efficiency of over 

80 percent, which is typically twice that of a public utility. 

This type of initiative allows us to stay competitive with our offshore suppliers—which is a major issue for us—and also helps us 

create more jobs in New Hampshire. Now, in order to maintain our 

competitive edge, we’re now considering a similar system in our 

Somersworth facility in New Hampshire. 

Consistent with that, we’ve also implemented an environmental 

management system. The EMS system enables us to manage continuous improvement activities for all environmental aspects and 

impacts, which, energy conservation and reduction measures are a 

key element to that program. For example, we’ve implemented a 

heat recovery program for our die processes; we’ve incorporated 

high-efficiency technologies in our HVAC, lighting, compressed air 

systems; and all new and replacement motors for our production 

equipment are specified as premium efficiency. So, we actually can 

see how very directly the electric motor rebate program in Senator 

Shaheen’s bill would be very meaningful to us. 

Energy efficiency and conservation is critical to our success and 

our competitiveness. By enabling industry-led partnerships to develop specific road maps to energy consumption, we believe the Energy Savings and Industrial Competitive Act will continue to keep 

Velcro competitive and create opportunities for additional employment. 

I’d like to thank the members of the committee for allowing me 

to share the experience of our company with regards to energy efficiency, and thank Senator Shaheen for an invitation, and sponsoring this bipartisan bill. I’m sure that with congressional support, many more corporations will take the view that we have and 

modify their business practices to increase their energy efficiency. 

Thank you. 

[The prepared statement of Mr. Damiano follows:] 

PREPARED STATEMENT OF PHILIP DAMIANO, CHIEF OPERATING OFFICER, VELCRO

USA, MANCHESTER, NH 

Thank you Chairman Bingaman, Ranking Member Murkowski, and members of 

the committee for the opportunity to testify today. My name is Philip Damiano, 

Chief Operating Officer of Velcro Group Corporation. Prior to joining the Velcro 

Companies, I was CEO of Idea Paint, President of DYMO, a Newell Rubbermaid 

Company, and co-founded of several start-up companies. I would like to share with 

you what our company has experienced while striving to improve our energy efficiencies. 

I would also like to thank Senator Shaheen for inviting me to testify today and 

for putting forth a bill striving to help domestic manufacturers remain competitive 

amid high energy costs in New England. 

Velcro Group Corporation is a global corporation with numerous entities. The experience that I would like to share with you is that of our domestic company Velcro 

USA Inc. (Velcro). Velcro is over 50 years old and employs over 750 people at its 

locations in New Hampshire, Michigan, and Arizona. The company is headquartered 

in Manchester, NH with manufacturing facilities in Manchester and Somersworth, 

NH. These two locations produce vast quantities of fastening systems that are used 

in a multitude of markets. Some of our key markets include medical, government 

and military, personal care, transportation, and retail. Our identity as a domestic 

manufacturer is very important to us and our culture reflects this pride. This desire 

to maintain domestic manufacturing jobs has been a key factor in our decision to 

invest and pursue increasing environmentally sound and energy efficient practices. 

Three motivators are the driving forces in the decision to head in this direction. 

• Rising costs of manufacturing 

• Maintain competitiveness while committing to domestic manufacturing jobs 
30 

• Act as an environmental steward and do our part to keep our natural resources 

as minimally impacted as possible 

Most textile manufacturing left the area a long time ago due to higher labor and 

overhead costs. High cost of energy in New England is a big factor. However, it has 

always been important to the Velcro Companies to maintain manufacturing in New 

Hampshire. The fastening market is highly competitive and we are routinely challenged by non-domestic products that enter the market at a lower price point. 

Therefore, cost management is essential. 

Over 20 years ago, Velcro recognized the need to address the rising cost of electricity in NH and implemented a small-scale cogeneration system to power the textile manufacturing operation. With increased pressure to reduce operating costs and 

the emerging need to reduce environmental impacts, energy efficiency and conservation became a priority within the organization. In the late 1990’s and the midst of 

electric utility deregulation, the need and complexity to manage energy cost was a 

growing concern to Velcro. In 1998 Velcro hired a full time energy professional to 

focus on energy management for the US operation. In 2000, a full-scale natural gas 

fired cogeneration system was placed in service at the Manchester location. Since 

this time, Velcro has identified and implemented countless energy efficiency and 

conservation measures that have yielded substantial operational cost savings to the 

business as well as considerable reductions in environmental impacts. Consistent 

with a focus on energy efficiency, Velcro implemented an Environmental Management System (EMS) and achieved registration to the ISO 14001 standard in 2003. 

The EMS enables the business to manage continuous improvement activities for all 

environmental aspects and impacts, with energy conservation and reduction measures being key elements of this program. As you can see, the attention to energy 

and our environment is not a fleeting fad, but has been ‘‘woven’’ into our business. 

The following is a brief description of our NH facilities and an outline of some of 

the key measures that have been implemented. 

MANCHESTER FACILITY

Established in the 1960’s, our Manchester Facility includes approximately 450,000 

sq. ft of building space on a 26 acre campus. This location supports Textile and Plastic manufacturing operations and is also the hub of the Velcro Companies Innovation and Technology Center (R&D). Key measures include: 

• Co-generation Plant provides 100% electric and thermal energy to Manchester 

campus. Dependent on seasonal loads, system efficiencies have exceeded 80%, 

twice the efficiencies of public utilities. 

—Natural gas fired combustion turbine outfitted with Low NOx combustion 

technology provides electric power while minimizing NOx pollutants 

—The turbine is coupled with a Heat Recovery Steam Generator that recovers 

the waste heat from the turbine and converts this energy into useful steam. 

This steam is utilized for 

• Thermal process loads (dyeing, coating). 

• Domestic hot water 

• Snow melt system for campus sidewalks 

• Space heating 

• Space cooling for textile plant: a 500 Ton Steam Fired Absorption Chiller was installed in 2007. Prior to this system being installed, an electric 

chiller was utilized and it only produced 250 tons of chiller water. The result of this installation is a net reduction in electrical use during the summer cooling season and an increased overall cycle efficiency of the co-gen 

plant. Basically, the chiller water is produced by heat from the exhaust that 

was previously released to the atmosphere. 

• Dye process.—process water and heat recovery. Noncontact cooling water utilized to ‘‘cool down’’ dye process is captured in storage tank and re-used for next 

‘‘fill’’ cycle. Heat from dye process wastewater effluent is recovered through a 

heat exchanger to pre-heat city water supply to dye house. 

• HVAC Systems.—textile plant: retrofit central systems with new technology. All 

new and retrofit systems utilize economizer feature, variable frequency drives 

and digital controls. 

• Lighting.—All areas are outfitted with high efficiency lighting and are continuously being updated to take advantage of the latest technology including 

dimmable ballasts, daylight harvesting, etc. The majority of break rooms, conference rooms and restrooms lighting is controlled by occupancy sensors. 
31 

• Premium Efficiency Motors.—All new and replacement motors for production 

and facility equipment and systems are specified to be premium efficiency. • Variable Frequency Drives.—VFD’s are utilized for the majority of new and retrofitted equipment. Most production equipment utilizes VFD’s for process control as well as all fans and pumps for HVAC systems. • Compressed air systems.—upgraded to include new high efficiency air compressors with VFD’s and demand management controls and metering. • Roofing.—All roofing systems replace with white reflective TPO membranes to 

minimize heat gain. 

SOMERSWORTH FACILITY

Our Somersworth Facility includes approximately 430,000 sq. ft of building space 

on 242 acres. This location supports Textile, Plastic and Non-Woven manufacturing 

operations. The original facility was built in 2000 and an expansion project completed in 2009 doubled the size of the factory to accommodate business growth 

plans. The design of the building expansion considered total cost of ownership. 

Building envelope, components, finishes as well as mechanical and electrical systems were all evaluated and selected with energy and operational costs considerations. An energy consultant was engaged to compare and evaluate alternate technologies and decisions were made based on ROI. Some of the key elements include: 

• Lighting: 

—Original building: All lighting fixtures installed in original building were replaced with High Efficiency lighting (T-5) fixtures (30% reduction in electricity used for lighting) 

—Daylight harvesting: Skylights have been installed in specific locations to take 

advantage of natural light. High Efficiency Lighting is controlled based on 

available daylight. 

—Occupancy sensors are utilized where appropriate such as conference rooms, 

common areas, and restrooms 

• Dye process.—same water and heat recovery as Manchester plant. Also 

Somersworth dye operation utilizes a High Efficiency Direct Contact Hot Water 

Heater (90%+ efficiency) to heat process water to desired temperature. 

• Central Chilled Water.—HVAC: The new building addition is air conditioned to 

maintain a stable process environment. High Efficiency Centrifugal Chillers 

with VFD’s are the heart of the system. All fans and pumps are driven with 

VFD’s to minimize energy use. A ‘‘free cooling’’ heat exchanger was also incorporated into the design to eliminate the need to run the electric chillers when 

the outside air temperature is below a certain point (winter use). 

• Central Chilled Water and Glycol.—Process: Plastics molding process lines are 

serviced by a central chilled water and glycol system instead of individual units 

for each line. Lower operational cost and system redundancy are key benefits. 

• Roofing.—All roofs include high reflective white TPO membrane to minimize 

heat gain. 

Consistent with a focus on energy efficiency, Velcro implemented an Environmental Management System (EMS) and achieved registration to the ISO 14001 

standard in 2003. The EMS enables the business to manage continuous improvement activities for all environmental aspects and impacts, with energy conservation 

and reduction measures being key elements of this program. 

• Once ‘‘low hanging fruit’’ (lighting, motors, drives, etc.) has been addressed, 

more effort is required to pursue specific measures. Opportunities to reduce energy use in the manufacturing process require a higher level of engineering and 

expertise. These efforts are usually more costly with expectations of shorter 

payback periods as compared to a building solution. Incentives from public utilities and/or other sources can sometimes help to close the financial gap and 

make unattainable projects a reality. 

• Resources are focused on operation and production vs. energy opportunities. Energy is a significant part of COGS. Assistance from subject matter experts that 

can help us develop and implement solutions is equally important. 

• Most public programs / technologies are focused on commercial solutions vs. industrial/manufacturing. 

• Rising Cost of Electricity (NH) / Volatile Energy Market (NG, Oil) 

CURRENT PROJECTS

• Continued lighting projects—office space, Manchester warehouse 
32 

• Cogeneration Opportunity at Somersworth Plant—evaluating opportunity 

• Comprehensive Energy Audits completed in August 2010 for US locations. 

Audits funded by the New Hampshire Department of Resources and Economic 

Development’s Business Resource Center as an account of work sponsored by 

an agency of the United States Government (ARRA funding). 

—Opportunities identified covered a broad range, but most require additional 

investigation. Estimated payback periods ranged from 1 year to over 30 years, 

with the overall average above 12 years. 

—Opportunities worth being pursued include: 

• Alternate Plastic Resin drying technology (3-4 year payback) 

• Boiler controls / efficiency improvements at Somersworth Plant (3-4 

year payback) 

Members of the committee, as you can see Velcro has taken an active role in increasing our energy efficiencies in an effort to maintain our competitiveness through 

cost reduction to maintain manufacturing jobs in NH. Included are continuous improvements of manufacturing and facilities equipment and incorporating the latest 

technology in environmental and lighting control. When we expanded our capacity, 

we used those lessons learned and made the decision to incorporate cutting edge 

technology. We see this as not only the path forward to mitigate the rising costs 

of energy but also a way to stay connected with the interests of our workforce, continue our commitment to domestic manufacturing, and to decrease our impact on 

the environment. Legislation similar to that proposed could act as a catalyst to 

move forward with many energy savings projects. 

I would like to thank all members of the committee for allowing me to share the 

experiences that our company has had in regards to energy efficiency efforts and 

again thank Senator Shaheen for the invitation and sponsoring this bipartisan bill. 

I am sure that with congressional support many more corporations would take the 

view that we have and modify the appropriate business practices. 

The CHAIRMAN. Thank you very much. 

Mr. Scripter, go right ahead. 

STATEMENT OF JAY SCRIPTER, VICE PRESIDENT, 

SUSTAINABILITY, OWENS-ILLINOIS, PERRYSBURG, OH 

Mr. SCRIPTER. Thank you. 

Mr. Chairman, Ranking Member Murkowski, and members of 

the committee, my name is Jay Scripter, and I’m the Vice President of Sustainability at Owens-Illinois. 

O–I, with revenues of $6.6 billion, is the world’s largest glass 

container manufacturer, and is the preferred partner of many of 

the world’s leading food and beverage brands. The company is 

headquartered in Perrysburg, Ohio, and employs more than 24,000 

people in 80 plants in 21 countries. O–I delivers safe, effective, and 

sustainable glass packaging solutions to a growing global marketplace. 

I greatly appreciate the opportunity to testify today. I commend 

the committee for its consideration of each of these important bills 

and, in particular, I commend Senators Portman, as well as 

Shaheen, for their work on S. 1000, the Energy Savings and Industrial Competitiveness Act of 2011. It is bipartisan and sensible, 

and, among other things, it provides opportunities for America’s energy-intensive industries, such as glass manufacturing, to work cooperatively with government to increase energy efficiency. 

Before offering a few particular observations about the bill, however, let me briefly describe our company’s approach and commitment to energy efficiency and sustainability. In March 2009 we announced the most aggressive sustainability goals in the company’s 

100-plus-year history. Using 2007 as a baseline, the goals span 10 

years to 2017, and are the following: a 50—that’s five-zero—percent 
33 

reduction in energy consumed, a 65 percent reduction in CO2 emissions, and almost doubling our usage of post-consumer recycled material—from roughly 30 percent worldwide to 60 percent. 

O–I has realigned a significant amount of our engineering and 

technical resources to upgrade our systems today with new more 

energy-efficient technology, such as advanced furnace control systems. 

Equally important, development of out-of-the-box new manufacturing processes are also critical to our strategy. These new processes include high efficiency melting technologies, heat recovery 

and utilization, and new innovative approaches to obtaining and 

processing more post-consumer glass for recycling. 

Through many of these devices contemplated in the proposed legislation, such as well-conceived partnerships, strategically targeted 

collaboration, best practices promulgation, and revolving-fund financing assistance, the Government can accelerate and spread the 

efficiency revolution, making it an engine for American competitiveness and job creation. 

Turning more specifically to S. 1000, I want to highlight just 3 

of the most promising provisions from our point of view. First, section 302—coordination of research and development of energy-efficient technology for industry. We are particularly encouraged by 

section 302, with its objective of using the capabilities of, and 

learning from, DOE’s Industrial Technologies Program to create industry-government collaborative research and development partnerships involving IN THE PROCEEDINGS and other DOE entities. 

O–I has experience with this process. We are currently working 

on an IN THE PROCEEDINGS energy efficiency project with the 

Battelle Institute that involves using waste heat from our furnaces. 

The initial installation would be in our Zanesville, Ohio plant. If 

the concept can be successfully developed and implemented industry-wide, we could significantly reduce glass industry energy consumption, and increase the financial competitiveness of the U.S. 

glass manufacturing. 

In our view, this kind of partnership helps assure that projects 

meet both governmental needs, and they aid energy efficiency, that 

they are practical, and they are immediate. 

Second, section 303—energy efficient technologies assessment. 

This provision would create a collaborative government-industry 

process to study the special needs of energy-intensive industries, 

including glass, steel, aluminum, forest and paper products, food 

processing, metal casting, chemicals, petrochemical refinery, cement, and information and communication technologies. Among its 

goals would be recommendations on cost-competitive commercial 

energy technologies, programs and structures to promote investments in energy efficiency, and international comparisons aimed at 

borrowing the best ideas from elsewhere. If done right, this process 

could be an excellent opportunity for industry and government to 

put their heads together and come up with ways to make our energy-intensive industries more competitive, as well as more energyefficient. 

Third, subsection 303(b)(6), which provides a part of the broader 

study referred to as the assessment of energy savings available 
34 

from increased use of recycled materials. We believe this is critical. 

Recycled materials represent a huge potential energy and emission 

savings. It is wasteful to think that energy-intensive materials 

made from raw materials can be made from remelting existing recycled products as an alternative. We need to find ways, however, 

to increase the quality and availability of these recycled materials. 

This being considered, however, recycling in the United States is 

inadequate. It’s served by an inadequate government infrastructure, and lags far behind many developed countries. We in the 

glass industry cannot nearly get enough recycled bottles, and are 

engaged in multi-front efforts to improve supply. We greatly welcome the initiative represented by subsection 303(b)(6). 

To close, I want to again thank and express my gratitude for the 

opportunity to share O–I’s enthusiasm for this legislation, and our 

willingness to help it succeed in any way we can. 

Thank you. 

[The prepared statement of Mr. Scripter follows:] 

PREPARED STATEMENT OF JAY SCRIPTER, VICE PRESIDENT, SUSTAINABILITY, OWENS- ILLINOIS, PERRYSBURG, OH 

Mr. Chairman, Ranking Member Murkowski and members of the Committee, my 

name is Jay Scripter and I am Vice President, Sustainability of Owens-Illinois. O–I, with revenues of $6.6 billion, is the world’s largest glass container manufacturer and the preferred partner for many of the world’s leading food and beverage 

brands. The company is headquartered in Perrysburg, Ohio, and employs more than 

24,000 people at 80 plants in 21 countries. O–I delivers safe, effective and sustainable glass packing solutions to a growing global marketplace. 

I greatly appreciate the opportunity to testify today. I commend the Committee 

for its consideration of each of these important bills, and, in particular, I commend 

Senators Portman and Shaheen for their work on S.1000, the Energy Savings and 

Industrial Competitiveness Act of 2011. It is bipartisan and sensible—and, among 

other things, it provides opportunities for America’s energy-intensive industries, 

such as glass manufacturing, to work cooperatively with government to increase energy efficiency. Before offering a few particular observations about the bill, however, 

let me briefly describe our company’s approach—and commitment—to energy efficiency and sustainability. 

In March of 2009, we announced the most aggressive sustainability goals the company has created in its 100+ year history. Using 2007 as the baseline, the goals 

span 10 years to 2017 and are the following: 

• A 50% reduction in energy consumed 

• A 65% reduction in CO2 emissions 

• Almost double our usage of post-consumer recycled material from roughly 30% 

worldwide to 60%. 

O–I has realigned a significant amount of our engineering and technical resources 

to upgrade our systems today with new more energy efficient technology such as advanced furnace control systems. Equally important, development of out-of-the-box 

new manufacturing processes are also critical to our strategy. These new processes 

include high efficiency melting technologies, heat recovery and utilization, and new 

innovative approaches to obtaining and processing more post-consumer glass for recycling. 

Through many of the devices contemplated in the proposed legislation, such as 

well conceived partnerships, strategically targeted collaboration, best-practices promulgation, and revolving-fund financing assistance, the government can accelerate 

and spread the efficiency revolution, making it an engine for American competitiveness and job creation. 

Turning more specifically to to S.1000, I want to highlight just three of the most 

promising provisions, from our point of view. 

First, Section 302—Coordination of Research and Development of Energy Efficient 

Technology for Industry. We are particularly encouraged by Section 302, with its objective of using the capabilities of, and learning from, DOE’s Industrial Technologies 

Program to create industry-government collaborative research and development 

partnerships involving ITP and other DOE entities. 
35 

O–I has experience with this process. We are currently working on an ITP energyefficiency project with the Battelle Institute that involves using waste heat from our 

furnaces. The initial installation would be in our Zanesville, Ohio plant. If the concept can be successfully developed and implemented industry-wide, we could reduce 

significantly glass-industry energy consumption and increase the financial competitiveness of U.S. glass manufacturing. 

In our view, this kind of partnership helps assure that projects meet both governmental and industry needs—that they aid energy efficiency and that they are practical and immediate. 

Second, Section 303—Energy Efficient Technologies Assessment. This provision 

would create a collaborative government-industry process to study the special needs 

of energy-intensive industries, including, explicitly, glass, steel, aluminum, forest 

and paper products, food processing, metal casting, chemicals, petroleum refining, 

cement, and information and communication technologies. Among its goals would be 

recommendations on cost-competitive commercial energy efficiency technologies, programs and structures to promote investments in energy efficiency, and international 

comparisons aimed at borrowing the best ideas from elsewhere. If done right, this 

process could be an excellent opportunity for industry and government to put their 

heads together and come up with ways to make our energy-intensive industries 

more competitive as well as more energy efficient. 

Third, Subsection 303(b)(6), which provides, as part of the broader study referred 

to above, ‘‘an assessment of energy savings available from increased use of recycled 

material in energy-intensive manufacturing processes.’’ We believe this is critical. 

Recycled materials represent huge potential energy and emissions savings. It is 

wasteful to make energy-intensive materials from raw materials when they can be 

made from re-melting existing, recycled products. We need to find ways, however, 

to increase the quality and availability of recycled materials. 

In the glass industry, for instance, a plant’s energy usage drops 2-3% for every 

additional 10% increment in usage of recycled glass. Similarly, the plant’s greenhouse-gas emission levels are reduced 4-10% for every additional 10% of recycled 

material. According to EPA, in 2009, recycling activities saved the equivalent of 5% 

of the entire U.S. carbon inventory, and the equivalent of the electricity used by 19 

million homes. 

However, recycling in the United States is inadequate, is served by an inadequate 

governmental infrastructure and lags far behind many developed countries. We in 

the glass industry cannot get nearly enough recycled bottles and are engaged in 

multi-front efforts to improve supply. We greatly welcome the initiative represented 

by Subsection 303(b)(6). 

To close, I want to again express my gratitude for the opportunity to share O– 

I’s enthusiasm for this legislation and our willingness to help it succeed in any way 

we can. 

The CHAIRMAN. Thank you very much. 

Before we go to questions, let me just defer first to Senator Murkowski for any opening comments she has.Then Senator Shaheen 

also indicated she’d like to make a few opening comments. If Senator Portman wanted to, that would be fine, too, or any of the rest 

of the members here. Then we will have questions. 

Senator Murkowski. 

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

FROM ALASKA 

Senator MURKOWSKI. Mr. Chairman, in the interest of time, recognizing that we have another full panel after this one, and in deference to the bill sponsors, I will just submit my opening comments 

for the record. Thank you. 

Just, welcome to all the panelists here this morning. 

[The prepared statement of Senator Murkowski follows:] 

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

Good morning, Mr. Chairman, and thank you for convening this hearing. As you 

mentioned, we have a couple of different bills to discuss this morning. 

I’d first like to commend Senators Shaheen and Portman for coming together and 

beginning work on a comprehensive energy efficiency bill. I believe that efficiency 
36 

is part of an all-of-the-above energy plan, and this is an important first step that 

we are taking here today. I understand that Senator Carper’s bill contains several 

ways for the federal government to be more energy efficient and save money, and 

I look forward to hearing more about these ideas, because it’s important to lead by 

example. 

Anyone who has been following our Committee lately knows that we’ve had some 

spirited debates about new authorizations. We’re in a period of unprecedented national debt, and while it’s important to continue with our legislative business, we 

also need to be mindful of the context. I know our staff is working not only to find 

offsets for new spending, but also to identify any overlap between the programs proposed in these bills and existing authorizations. 

Moving on to the third bill we’re here to consider, I’d like to thank Senators 

Wyden and Stabenow for their efforts. I appreciate the emphasis on technology neutrality and the explicit cost-share provision within this bill. As I said a few weeks 

ago, with oil prices remaining near $100 a barrel, vehicle technologies are an area 

this committee should be focusing on. 

I’m also glad we have several witnesses on our second panel that can help us understand what’s happening with the Advanced Technology Vehicle Manufacturing 

program. Just five loans have been provided under that program over the past three 

years, so before we consider a significant expansion, it’s appropriate to make sure 

it’s working as Congress intended. 

Finally, I appreciate the effort to pay for this legislation, but I have serious concerns about selling oil from the Strategic Petroleum Reserve. That’s our insurance 

policy to protect against serious supply disruptions, and any decision to reduce its 

capacity needs to be very carefully considered. For a number of reasons, including 

the events of the past few months, I’m simply not able to support the offset envisioned by S. 1001. 

As we do seek to pay for the legislation that comes before us—whether these bills 

or others—I continue to believe that our best path forward is to produce more of 

our own abundant resources and then to put the resulting federal revenues to good 

use. Right now Alaska alone has about 40 billion barrels of oil that are effectively 

off-limits. If we harness those resources, and more of the resources in the Gulf of 

Mexico and the Rocky Mountain West, we’d dramatically increase our energy security. We’d create thousands of new jobs. And we’d generate billions and billions of 

dollars, year after year, that could be applied to both deficit reduction and advanced 

vehicle technologies. 

Again, Mr. Chairman, I’d like to thank you for scheduling this hearing, and our 

witnesses for joining us today. 

The CHAIRMAN. Very well. 

Senator Shaheen. 

STATEMENT OF HON. JEANNE SHAHEEN, U.S. SENATOR FROM 

NEW HAMPSHIRE 

Senator SHAHEEN. Thank you, Mr. Chairman and Ranking Member Murkowski, for holding this hearing this morning, and thank 

you to all of the panelists for being here. I will submit my full 

statement for the record in the interest of time, but I do want to 

make a few remarks. 

First, I want to credit both Senator Bingaman and Senator Murkowski for the work that you’ve done previously on the issue of energy efficiency, as well as the Alliance to Save Energy, and all of 

your businesses who have worked so hard on energy efficiency over 

the years. 

Many of the provisions in the legislation that Senator Portman 

and I have been working on have been introduced in previous Congresses—many by members of this committee, and so they have 

proven bipartisan support. I think that will be important as we try 

and advance this legislation. 

One of the things that I think is so important about energy efficiency, that some of our panelists have alluded to, is that this is 

something that spans regions of the country; it’s something that is 
37 

important regardless of what energy source you support; and it’s 

the cheapest, fastest way to address our energy needs. The bill is 

designed to take a number of these provisions that have been 

worked on and have been successful in the private sector, to try 

and see if we can leverage some of those private sector dollars with 

public support to encourage this kind of energy efficiency. 

I think an important corollary of the legislation is the potential 

for job creation that is part of what’s the offset of many of these 

provisions. Mr. Crasi spoke very eloquently to the potential for 

building retrofits to create jobs, and other members of the panel 

have talked about the jobs that are created as the result of their 

energy efficiency efforts. So, I think that’s very important—particularly now at a time when the economy is still struggling. 

The other important aspect of it is that these are technologies 

that are already available. We don’t have to wait on some magic 

new technology. We can take advantage of them now. 

So, I look forward to continuing to work with the committee, and 

to see if we can advance this legislation on the Floor, and just want 

to recognize, also, Phil Damiano from Velcro USA in Manchester, 

New Hampshire. It’s very nice to have you here this morning. 

[The prepared statement of Senator Shaheen follows:] 

PREPARED STATEMENT OF HON. JEANNE SHAHEEN, U.S. SENATOR

FROM NEW HAMPSHIRE

Thank you Chairman Bingaman and Ranking Member Murkowski for holding a 

hearing today on S. 1000, the Energy Savings and Industrial Competitiveness Act, 

legislation that I developed with Sen. Rob Portman. 

A national energy efficiency strategy, like the one Senator Portman and I have 

introduced, can have an immediate impact on job growth in this country. It can 

make our economy more competitive and start addressing our nation’s energy challenges. 

We have heard from business after business that there is a pent-up demand for 

energy efficiency. Companies and homeowners want to invest in more efficient 

buildings and equipment. These investments pay for themselves, but the up-front 

costs remain a barrier for many. This is a big part of what our bill does—lowering 

barriers to private investment through smart leveraging of federal dollars. By increasing private sector investment, we can grow jobs while reducing our energy consumption. 

These are off-the-shelf technologies that are available now, such as better insulation and better lighting. They aren’t radical new solutions and they are universal— 

there’s not a state in this country that can’t utilize the energy efficiency technologies 

promoted in this bill. 

Let me be clear—I do not think energy efficiency solves all of our energy problems. But efficiency remains the fastest, cheapest way to start meeting our energy 

challenges. 

Our legislation addresses some of the largest energy users in our economy—buildings, industry and the federal government. By expanding existing programs, such 

as the DOE’s loan guarantee program, and through other cost-effective tools, such 

as revolving loan funds for manufacturers, it promotes efficiencies that will save our 

economy billions of dollars a year. 

Our bill enjoys the support of a diverse coalition of over 100 businesses, electric 

utilities, and efficiency advocates who recognize the importance of energy efficiency. 

The Dow Chemical Company, Knauf Insulation, United Technologies, and Honeywell are just a few. 

I am also pleased that we are joined today by Philip Damiano of Velcro USA, 

which is headquartered in Manchester, New Hampshire. I recently visited with 

Velcro USA and came away greatly impressed with their efforts and commitment 

to energy efficiency. They recognize that investing in efficiency can reduce their 

costs and position them for growth. 

I look forward to our witness’ testimony today and working with Members of the 

Committee to take up and pass this important, bipartisan piece of legislation. 
38 

I would be remiss if I didn’t thank Sen. Coons for his cosponsorship of our bill 

and Sen. Landrieu for her contributions to our provision that expands the DOE 

Loan Guarantee program to cover building retrofits. 

The CHAIRMAN. Senator Portman, did you wish to make any comments? 

STATEMENT OF HON. ROB PORTMAN, U.S. SENATOR 

FROM OHIO 

Senator PORTMAN. I would, Mr. Chairman. 

First of all, thank you, and Senator Murkowski, for not just your 

support of efficiency legislation over the years and giving us most 

of our good ideas that are in our bill, but also for your willingness 

to have this hearing today, and help promote this legislation. I also 

appreciate my 2 other colleagues who are here, Senator Coons and 

Senator Wyden, both of whom have expressed interest in this bill. 

I think Senator Coons is a cosponsor already. So, we look forward 

to working with you and members of our side of the aisle as well. 

I think we’ve already heard, Mr. Chairman, from our panelists 

as to why this makes sense. I mean, this is a pretty common sense 

idea to both save energy and make our economy more efficient, and 

therefore more productive, and therefore more competitive. So, I 

think it speaks for itself. 

I’ll give you a couple data points that we’ve been able to derive 

from various sources. One is that by 2030, if this legislation were 

enacted, we believe that the energy savings could equal up to 5.8 

quads—which is, by the way, the equivalent of taking about 37 million homes off the grid. By 2020, so, 8 or 9 years from now, 1.6 

quads, which happens to be the total energy use of the State of 

Oklahoma. So this is part of, from my point of view, an effort that 

is sensible in terms of energy policy to both find more energy—and 

Senator Murkowski has been articulate about that in this committee as have others, and we need to do that—but also use less. 

By doing so, we’ll be able to address the energy challenge that we 

face as a country, as our energy needs will increase. 

Discussion today was about a 20 percent increase in energy projected over the next decade. If done right, energy efficiency can 

help to address some, or some would say—including Ms. Callahan—all of that increased energy need. 

So, I think it’s a common sense approach that incentivizes residential, commercial, industrial customers to use energy more wisely and more efficiently. It makes a lot of sense. It does have an impact on our economy. It will create jobs. Our analysis is that it will 

create many jobs not just through the retrofits—which are important, as Mr. Crasi has said, being a wise Ohioan that he is—but 

also, again, by making our economy more efficient, as Mr. 

Scripter—another wise Ohioan—has pointed out. So that we can, 

indeed, continue to have great companies like Owens-Illinois 

headquartered in the United States of America, and be a global 

leader in manufacturing. 

So again, thank you very much. I look forward to having a dialog 

with the witnesses today, and our next panel as well. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 
39 

Do any the rest of the Senators feel an obligation to make a 

statement here before we get going? 

STATEMENT OF HON. CHRISTOPHER A. COONS, U.S. SENATOR 

FROM DELAWARE 

Senator COONS. Senator Bingaman, if I might. 

The CHAIRMAN. Go right ahead. 

Senator COONS. I’ll just briefly say, as someone who worked for 

a highly energy-efficient manufacturing company in Delaware for 8 

years before running for office, I was thrilled to hear the details 

from Mr. Scripter, Mr. Damiano, Mr. Crasi, of the work that you’ve 

done. 

The homebuilding and commercial real estate industry has been 

a long, actively engaged in energy efficiency. I had no idea how 

much O–I is doing. Those are very ambitious targets and impressive. I am going to dig in and learn more about Velcro that, it 

sounds as if, as has often been the case, the private sector is leading the way on energy efficiency and has some of the most important insights. 

So, I just want to thank Senator Shaheen and Senator Portman 

for bringing to the panel today some really compelling exemplars 

of what energy efficiency can do. The Alliance and the Department, 

I think, have done a great job of partnering with industry in a collaborative way. That’s what produces bipartisanship; it produces 

legislation that can move through this body; and it makes progress 

for our country. So, if you’ll forgive me, there’s another committee 

hearing that several, I know, other members of this committee are 

already at. But, I simply wanted to thank the members of the 

panel and the 2 leads on this bill today for your great work in putting together a sensible bipartisan bill that I think will move. 

Thank you very much. 

The CHAIRMAN. Thank you very much. 

Let me start with a few questions. Let me mention that I’ve distributed to all members of the committee a reprint of this article 

that’s in the morning New York Times entitled, ‘‘U.S. is Falling Behind in the Business of Green.’’ I think it’s got some information 

in there that’s directly relevant to the hearing we’re having this 

morning. 

Let me ask you, Dr. Hogan, to begin with—One of the statements 

in this article is, ‘‘The Energy Department has pressed hard for a 

new home energy score program that would rate homes for energy 

efficiency just as cars are rated for gas mileage, and that rating 

would be available to potential buyers.’’ Could you describe a little 

more what you’re trying to do there and what the status of that 

is? 

Ms. HOGAN. Certainly. We are working to develop a home energy 

score program that would be a simple scale, 0 to 10, to help people 

understand if their home is not very efficient, medium efficient, or 

very highly efficient. But it’s not just a score alone. It is also providing the top number, a top set of recommendations for the homeowner to take to improve the efficiency of that home, and show the 

homeowner the cost savings they would get if they took those actions. 
40 

One of the reasons people aren’t improving their homes is they 

just don’t have sufficient information about their home, its current 

efficiency, and the things that they could undertake to get a significant savings. So, we have been working on this. As you can imagine, this is putting together a fair amount of technical information 

in a way that it really works to give credible information to the 

homeowner on what they can do. So, we’ve been working on this 

for over a year at this point to do the technical side of it. we’re now 

fielding it in ten pilots around the country. We’re collecting the 

data as assessors go, and provide these ratings for homes. We will 

collect all that data, figure out what we need to do to improve this 

model, and then we hope to roll it out with partners in the fall. 

The CHAIRMAN. Does this just apply to new homes, or does this 

apply to existing homes as well? 

Ms. HOGAN. No, this is really focused on primarily existing 

homes, because there is an existing rating system for new homes 

called the Home Energy Rating System, HERS, which works when 

you’ve got the blueprint in front of you, and a lot of the measurements about a new home, that you don’t have when you’re doing 

an existing home. They each have their own quirks. We need to figure out a low-cost way to pull all the information together and talk 

about the efficiency of the home. This will allow us to consider the 

air infiltration issues of an older home, the unevenness in the insulation of the older home, to really help people understand the lowcost improvements they could make to greatly reduce their energy 

bills. 

The CHAIRMAN. OK. 

Let me ask Kateri Callahan about the Supply Star Program that 

is talked about in here. Tell me how that would work as you envision it, and what benefits would derive from that? 

Ms. CALLAHAN. What we like about that program is that it will 

provide information, best practices, examples, and help those companies to green their supply chain, as much as Wal-Mart is doing 

currently. 

There is so much lack of information, I think, in the marketplace 

now on the benefits of driving energy efficiency into business operations and practices, and we’ve got some exemplars here today of 

folks that are doing that. But we need to get a much more widespread ability to go across the economy and across the business 

sector. I think that the Supply Star is a great start for that and 

brings the Department of Energy in to build the partnerships, to 

identify the best practices, the best companies, and to provide the 

tools that allow this to be spread again throughout the economy. 

So, we are very, very supportive of this type of activity and think 

it’s a great provision in the bill. I think you may have introduced 

it in the last Congress, Senator, so thank you for that. 

The CHAIRMAN. I’m glad it’s still alive and well. 

Mr. Damiano, you talked about your cogeneration operation 

there in your plant. Is this something in doing. in putting this in, 

was your electricity provider supportive of this effort? Or was it a 

problem getting their support? Or how did that factor in? Were 

there other barriers that you encountered in trying to shift to this 

cogeneration? 
41 

1http://frwebgate.access.gpo.gov/cgi-bin/ 

getdoc.cgi?dbname=110lconglbills&docid=f:h6enr.txt.pdf 

Mr. DAMIANO. Obviously, our public utility’s not necessarily 

thrilled that we’re off the grid there, and we are using natural gas 

as, to fire our co-gen plant. What we also did was, we had to have 

a complete backup system, and in our backup system, we are currently using a diesel-based solution. Now we’re looking and actually seeing it might be better to do that differently and work with 

the public utility. 

So, I think it can be in coordination with the public utility. But 

again, if you look at just the overall efficiency, the big difference 

is that with a public utility, you lose half of the generating power 

because you transmit it, and you can’t recapture the heat and 

reuse that as we do. So, it’s just a much more efficient way, and 

it’s very difficult to do that through a public utility. 

The CHAIRMAN. All right. My time is up. 

Senator Murkowski. 

Senator MURKOWSKI. Thank you, Mr. Chairman. 

Thank you all. 

As I was looking through the bills that we have today, you always are looking to see whether or not the provisions are duplicative, whether there’s any overlap within existing programs. Dr. 

Hogan, I would direct this to you—In your review of the legislation, 

do we have any duplication now with other programs that are already in existence? Further, do we have existing authorities that 

are in place that perhaps would be part of what we’re discussing 

here this morning? 

Ms. HOGAN. We are still doing our review of these bills, but we 

will be looking at those issues very closely, and we’ll be happy to 

get back to you with those answers. 

Senator MURKOWSKI. I would ask you to do that. As you know, 

here in the committee, there’s been a great deal of discussion about 

just how we provide for the ‘‘pay-fors’’ for legislation that comes out 

the committee—a very important aspect of it—and a review of existing authorities that are currently in place and just understanding what is really out there. So, I would ask you within the 

department to provide us with a list of those programs that are 

submitted within your budget, give us the authority that’s cited to 

fund it, and the amount, so that as we are looking at this, we’ve 

got some frame of reference, and we kind of know where we’re 

going. 

Ms. Callahan, I would ask your assistance, as well, to work with 

the committee, to work with DOE, to develop a list of the existing 

statutes that are out there that address energy efficiency, and then 

the authorization within those statutes. I think that that would be 

helpful for us. 

Ms. CALLAHAN. We’d be very happy to do that. 

[The information referred to follows:] 

EERE’s programs have long been authorized through the Energy Policy and Conservation Act, and more recently through the Energy Policy Act of 2005 and Energy 

Independence and Security Act of 2007 (EISA 2007)1. All programs within SERE, 

as submitted in the FY 12 budget request, cite EISA 2007 as their funding authority, for the entirety of their request. 
42 

* Spreadsheet has been retained in committee files. 

Office of Energy Efficiency and Renewable Energy Overview 

Program Authority 

Hydrogen & Fuel Cell Technologies EISA 20071

Biomass Technologies EISA 20071

Solar Energy EISA 20071

Wind Energy EISA 20071

Geothermal Technology EISA 20071

Water Power EISA 20071

Vehicle Technologies EISA 20071

Building Technologies EISA 20071

Industrial Technologies EISA 20071

Federal Energy Management Program EISA 20071

Facilities and Infrastructure EISA 20071

Weatherization and Intergovernmental Activities EISA 20071

Program Direction EISA 20071

Strategic Programs EISA 20071

1http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110lconglbills&docid=f:h6enr. 

txt.pdf 

Attached, please find a spreadsheet* listing all of the EERE provisions in the 

three bills considered during this hearing, S. 963, S. 1000, S. 1001. The spreadsheet 

also indicates whether there is existing pre-existing authority to carry out programs 

that could potentially be duplicative with the provisions of these bills. 

Senator MURKOWSKI. Ms. Callahan, as you have reviewed this, 

do you think that any of the provisions that are referenced in the 

bills that we’re looking at here today could be done under existing 

laws? 

Ms. CALLAHAN. I think that if, the one that would come to mind 

is, we do have authorities on the building energy code provisions. 

But what this bill, I think, very smartly does is refreshes, updates 

those authorities, and expands them to make sure that DOE has 

the guidance to be transparent in the building energy codes, to 

match those building energy codes up with our national energy 

needs. 

So, in short, what it will do is ensure that the Department of Energy, as it works its way through the codes process, as it currently 

does, that the will of the Congress is brought to the fore in terms 

of driving those energy codes, cost-effectively, to reduce energy 

waste. 

So, yes, there are authorities there. We just think that this 

makes it better, and makes sure that the voice of Congress is 

brought to the table in the codes processes that currently exist 

today. 
43 

Senator MURKOWSKI. I appreciate that. You had mentioned in 

your comments that you’ve got some potential impact within the 

provisions of the Carper bill on agencies. They’re already required 

to meet certain conditions under existing laws and executive orders 

regarding energy management. Again, we’re trying to understand 

and make sure that we’re not duplicating, overlapping. We want 

some—— 

Ms. CALLAHAN. Right. 

Senator MURKOWSKI [continuing]. Efficiencies within how we—— 

Ms. CALLAHAN. Right. 

Senator MURKOWSKI [continuing]. Administer the programs as 

well, so—— 

Ms. CALLAHAN. Senator, I appreciate that, because that is an 

area of concern that I raised in the testimony. You know, the agencies are struggling now to catch up with reporting requirements. 

The Department of Energy has a requirement under the Energy 

Independence and Security Act to put together a web, data base reporting. That’s not done yet. So, to continue to layer requirements 

on, if it’s not done carefully and if it’s not synced, we do think that 

there’s a chance that you overwhelm these agencies. You know, it’s, 

for the sake of great data, we get none, because we keep asking for 

more and more. So, I think that is really an area we need to work 

on. 

Senator MURKOWSKI. OK. I appreciate your commitment to do 

that, and then would look forward to this information from both 

the department and the alliance. 

Mr. Crasi, in your testimony you stated that the housing industry faces some pretty considerable challenges. You’ve got an increase in the number of regulatory actions and implementation of 

new requirements that could have an impact, a negative impact, as 

we’re trying to deal with the struggling housing industry. Can you 

elaborate a little bit more on this point? What are you facing in 

terms of these regulations? 

Mr. CRASI. What’s relevant to our conversation today would be 

the increased amount of insulation being required by code. I 

think—because I am the front line. I’m actually selling this every 

day. This is what I do. What we’re experiencing is a homeowner 

who is somewhat reluctant to go beyond where it becomes little less 

practical for them to be able to afford it and real pay-backs. 

When we get to the 2009 code—which is a good code. OK? I think 

that is a very stringent code. I do the energy rating as well. I’m 

a HERS rater, and so I understand how this interacts. At the same 

time, I’m a builder, and I know what the real costs are in my area. 

I think once you start to go beyond that area, there is a point of 

diminishing returns, and it starts to get to be a little too expensive 

a step at a time. I think at 2009 we have a good code. 

Senator Portman, in our, in Ohio we were asked—and part of the 

Ohio homebuilders as well—we, in a collaborative effort, actually 

worked with the environmentalist to come up with a better code 

from the 2009. We actually came up working with the folks out of 

Chicago from Meeya, we actually improved on the 2009. We came 

up with a code that was more stringent, but, yes—but yet, less expensive to implement than the 2006 version. But at that point, 
44 

going beyond, you hit a wall. At some point, you can only put so 

much insulation in the wall before it starts to get expensive. 

That’s one of the impediments we see right now, is, layering on 

additional costs that don’t see any real payback immediately for 

homeowners. That’s what I’m just seeing myself in the field. 

Senator MURKOWSKI. I appreciate that. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

Senator Wyden. 

Senator WYDEN. Thank you, Mr. Chairman. 

This panel is the energy efficiency panel, and I think what Senator Shaheen and Senator Portman have done is a very laudable 

proposal. I’m certainly planning to support it. 

I just wanted to say, Ms. Hogan, that I can’t pass up the opportunity, because at your office you also run most of the Department 

of Energy alternative vehicles programs, to just ask you for a 

minute or 2 about a piece of legislation that Senator Stabenow and 

I have introduced. 

What my question essentially involves—because there’s a lot of 

good work that’s being done. My colleague from Oregon, Senator 

Merkley, and Senator Alexander have a fine bill as it relates to 

electric vehicles—is, we’re seeing that when it comes to technology, 

what works for an 80,000-pound tractor trailer may not work for 

the family car, and a fuel that is economically competitive in one 

region of the country may not be competitive in all parts of the 

country. 

So, what we have generally said is, let’s try to find a way—if 

we’re going to get millions and millions of these alternative fuel vehicles out on our roads—is to come up with a way that is technologically neutral, geographically neutral, fuel neutral and vehicle 

neutral, so as to have the broadest and most comprehensive effort 

possible. 

Do you generally think that that philosophy makes sense? 

Ms. HOGAN. Yes. At the Department of Energy, we’re very supportive of a fuel-neutral approach to addressing our issues in the 

transportation sector. 

Actually, if you look at the work that we are doing at the Department, it’s perhaps the electric vehicle area that gets the most discussion. But we’ve got a balanced research portfolio. We’re doing a 

lot with advancing the efficiency of long-haul trucks in addition to 

cars, and we’re not really pursuing an electric agenda for the longhaul trucks as we pursue 50 percent improvements in that research area. We are supportive of a fuel-neutral approach. 

Senator WYDEN. I appreciate that. 

Let me ask it another way as well. What Senator Stabenow and 

I are seeking to do is to help the vehicle manufacturers and the 

suppliers and providers remove the barriers to deployment, and 

tool up the economy for, as I say, a variety of different alternative 

fuel vehicles and fuel infrastructure. 

Is it fair to say that we are at the point—because you all have 

done important, you know, work as it relates to research and development—that a variety of these technologies are now ready for 

market? That we’re now in a position to say that the past efforts 

have really paid off, and a variety of technologies are essentially 
45 

ready for a more aggressive focus on deployment? Would that be 

fair to say? 

Ms. HOGAN. Yes. I think we, based on the research that’s been 

done to date, are at a point where we can see the great expansion 

in these technologies in the marketplace. 

That’s not to say that all of the questions have been answered. 

For example, our goal of 1 million electric vehicles on the road by 

2015 is an important milestone. However, it’s not the end game, 

and we need to keep driving down costs. But we’re in that period 

of time when we can both look for increasing prevalence of these 

technologies in the marketplace while continuing to work on some 

of the important research questions. 

Senator WYDEN. Thank you. 

To the panel members, you all have done good work on energy 

efficiency. I’m sure you didn’t expect me to piggyback on, on Secretary Hogan’s expertise in alternative fuels. I’m supporting your 

work as well. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Portman. 

Senator PORTMAN. Thank you, Mr. Chairman. 

Again, I appreciate all the panelists’, the great input we’ve gotten 

on the various legislative proposals—particularly on our efficiency 

bill. 

If I could, Tony Crasi, let me just focus in on your issues, and 

the homebuilder’s issues. First, of course, I couldn’t agree with you 

more about retrofits. Senator Shaheen shares that concern, as do 

other members of the committee, and I think that’s because that’s 

where the obvious savings are going to be. This article that the 

Chairman just sent around only confirms that. 

So, as you know, the legislation does have a number of good retrofit provisions. The Rural Energy Savings Program, that loan program is for retrofits, because it lets electric coops help pay for efficiency retrofits. The Federal Loan Guarantee Program is amended 

to allow for commercial and industrial efficiency projects of existing 

buildings. I know you all support those, both those provisions, and 

we appreciate that. 

I was a little surprised, as you know, about some of the concerns 

that were raised about the building codes, because I thought we’d 

made a lot of progress there—not so much in your testimony today, 

but in other meetings that I’ve had, since we completed the process, working with the national and, housing folks, and others in the 

building community. So, let’s just review that quickly. 

This is what we did to change the legislation that passed out of 

this committee in 2009 on a bipartisan basis. It was done because 

there were concerns raised by builders when we worked with builders on these. One, it requires DOE to establish all these energy targets, determinations and everything, through public notice and 

comment. By the way, the last piece of legislation—and some people in this panel still support this—said there is a statutory mandate that the codes had to achieve greater efficiencies by 50 percent 

over the ASHRAE–IEC baselines. It’s not in this legislation. It was 

taken out. 
46 

We incorporate economic and cost considerations from the perspective of building owners and tenants as these model codes are 

developed, including this return on investment analysis you talked 

about earlier, which I agree on. That’s in here. It wasn’t in the 

other bill. It subjects DOE model codes to small business impact review analysis. It has an interesting provision that says when you’re 

measuring energy efficiency of buildings, you’ve got to take into account the habits of those who’ll be using the building. So, basically, 

it says that energy efficiency isn’t just achieved through better 

building practices, but also how you use the building, which I think 

is important. That’s something that you all encouraged us to put 

in, and we worked with you on that. 

Finally, to your point on transparency, it makes transparent the 

methodology and data used by DOE to determine whether and by 

how much the subsequent code iteration provides energy efficiency 

compared to its predecessor. So, that goes to the issue of getting 

the information you need. 

I would just remind the committee today and our panelists— 

these building codes are not what they’re sometimes described as. 

Again, some of the panelists are not happy about this. But it encourages, as an end result, net-zero energy buildings by the year 

2030—meaning buildings that produce as much energy as they use. 

It’s not a mandate. There is not a mandate in the bill for that. 

There’s no enforcement mechanism, no requirement for DOE to accomplish it. It’s an aspiration. That’s how it’s written. I think some 

groups are concerned DOE may push the code-making bodies into 

achieving this goal without properly considering the economic consequences on new home buyers, and that’s, you know, why we have 

some of these other provisions we’ve put in the legislation. So, you 

know, I just wanted to make that clear. 

Then, to throw it back to you, Mr. Crasi. Any suggestions of how 

we should rework this language to address any continuing concerns 

that homebuilders might have, or others? 

Mr. CRASI. Having been exposed a little bit in the last couple of 

weeks to the previous version of the bill, I understand exactly what 

you’re saying. This is a huge improvement as to what it could have 

been. I think our concern is, going forward—and I’m going to tell 

you, I absolutely agree that, I think a net-zero energy home is a 

great aspiration, and it’s a wonderful goal, and I think we should 

all get there. But I think it should be market-driven. 

Senator PORTMAN. OK. 

Mr. CRASI. To have a code that dictates that you need to be netzero energy, or, have a net-zero home, it starts to put an undue 

burden on a homeowner. Because, I think, if you look back at my, 

I included some calculations in here. Now, I’m coming from an affordable housing experience. I sit on 2 inner-city housing boards, 

and I’m a builder trustee on one, and I chair another. The one program—we build homes for $92,000. I would tell you, 8, about 80 

percent of the people who come who are customers are single moms 

who have rebuilt their credit, rebuilt their lives. We review every 

single application coming through the door. The pre-approval letters make it for about a $1,000, maybe $1,500. 

My concern is, if we get to the point where we have a code that 

prescribes that we have to have a net-zero energy home—if you 
47 

look at the analysis that I did, I took a 2009 home. It cost about 

$860 a year for energy cost in it. Senator, you’re right. It has everything to do with how people live. That’s just an academic number, 

but it’s something we need to start with, which, everybody here 

uses the same technology. 

What happens, though, to get to the net-zero, OK, to eliminate 

$860 costs about $40,000. You need photovoltaics. You need to do 

a lot more insulating. You need to get the air infiltration down, 

which now you need some type of a recovery system or mechanical 

system for ventilation. If you factor in the cost of money over the 

course of 30 years—because nobody comes to the table with 

$40,000 in our market, that particular market—you’re actually 

adding about $2,800 a year in mortgage costs to save $860. That 

just wipes out my entire market. I mean, it just, it’s gone. Nobody 

can afford that, unless we find a way to pay for it. 

While the aspirations of a net-zero were wonderful, and I—as a 

matter of fact, I used to be a homebuilder. Now I’m a remodeler, 

because we’re just not building homes anymore. What’s keeping me 

in business is exactly what we’re talking about here. I’m retrofitting old homes with energy efficiency. 

But my clients come to me, and they want to know—what is a 

reasonable pay-back? I give them the real numbers, based on current costs that I have to pay for things. So, this bill is a huge step 

in the right direction. But, our concerns are, how do we go forward 

and keep this, the American dream, attainable for everybody? 

Senator PORTMAN. Yes. First of all, my time is up so I need to 

be quick here, and maybe we can come back again. But, I’m really 

glad the committee’s considering and hearing what you’re saying, 

because I think on absolutely right. Just making the point again— 

it is aspirational. It’s not a mandate, as you say. 

Second is, it’s about an aspiration 20 years from now—— 

Mr. CRASI. Right. 

Senator PORTMAN [continuing]. We all know the technology’s 

going to change during that time period. We hope it will improve 

significantly on energy efficiency. It sure better because the rest of 

the world will be doing that. We want to be sure, as the chairman 

has talked about, to be ahead of that curve. 

So, I think what you and your group representing the national 

homebuilders here today have done is improve the legislation, in 

my view, and made it more practical for those homeowners, particularly low-income homeowners. We want to continue to work 

with you with the hope that, again, we can make progress on the 

technology, and this aspiration can be met, not by a mandate, but 

by market forces, as you say. 

Mr. CRASI. Senator, we really appreciate the opportunity for your 

open door, to work with us to help shape this, very much so. 

Senator PORTMAN. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Shaheen. 

Senator SHAHEEN. Thank you, Mr. Chairman. 

I would just reiterate what Senator Portman has said about the 

building code provision in the legislation. It is voluntary. It’s not 

a mandate. I certainly appreciate the concerns, particularly at this 

difficult time, for the construction industry. 
48 

But I also visited one of 2 Platinum LEED buildings in New 

Hampshire earlier this week. It wasn’t a residential home, it was 

a business. But I was talking to the builder who told me that it’s 

already paid for itself in 2 years, and they are now realizing the 

significant savings as the result of the efficiency that was built into 

the building. There was also a building inspector there from the 

community, and he was lamenting that the challenges is that not 

enough homeowners know what’s available, what’s out there, what 

can be done. It speaks to the concerns that have been raised already about, how do we get information to people. 

I know, Ms. Callahan, that in your written testimony you talked 

about the Building Codes Assistance Project and the Consumers 

Union recent survey about how consumers feel about energy efficiency in their new homes. I wonder if you could elaborate on that 

a little bit. 

Ms. CALLAHAN. Sure, I can, and I appreciate the opportunity because I would like to make 3 quick points to Mr. Crasi’s comments. 

The study that was done by the Building Codes Assistance 

Project and the Consumers Union show that 82 percent of the people that were surveyed support strong building energy codes. A 

couple of things that I want to make certain everyone is aware of— 

part of the reason that we have this existing building stock that 

is so huge, and so much potential, is because a lot of those homes 

were built before we started putting in place building energy codes. 

So, we are building better, and the codes are having an impact. 

The second piece of it is that building energy codes are very important to the retrofit market, because when you update your home 

or your office building, you have to meet the new codes. So, they 

are very, very important for the retrofit, as well as the, as well as 

the new market. 

The other thing that I want to say, that, costs when you get to 

net-zero energy homes can be very high. If you put the 

photovoltaics on, if you put in the renewable resources that you 

need to fuel the small bits of the home. This code and this aspiration doesn’t say that you have to do those things. It just reduces 

the energy use in the home down to a level where, if you can afford 

and want to put the renewable energy onto the home, you can do 

it. So, the cost, you know, I think there’s differences of opinion on 

the cost there. 

But the work that we have done, the work actually that the National Association of Realtors and Homebuilders have done, show 

that homeowners are willing to pay $11,000 more for a home that 

saves, that can be shown to save a $1,000 a year. So, he’s out talking to consumers, but we’re talking to them, too, and we’re hearing 

a slightly different story. 

Senator SHAHEEN. Thank you. 

Mr. Damiano, thank you again so much for being here. I was 

very impressed when I toured Velcro USA with all of the energy 

efficiency changes you made in the business. I wonder if you could 

elaborate a little bit on what you said in your testimony about 

what those energy efficiency improvements have done to save jobs 

in New Hampshire. 

Mr. DAMIANO. Certainly. I think probably the key thing is that 

it keeps us competitive in a global market. We develop our prod-
49 

ucts, well, first off, we like being able to say that it’s a U.S.-made 

product. It certainly helps us to sell to the military and the Government through the Berry Amendment, so it’s critical for us to be 

here. But if we cannot compete with—the majority of our competitors, frankly, are in the Far East. You don’t see products like ours 

generally being made as often as we make it here in the United 

States, and we are, the vast majority of what we make is made in 

New Hampshire. 

So, again, I think that the cost we save to be able to keep employed and keep the business in New Hampshire is very much driven by some of our energy policies. As I said, I think probably we 

just have to continue to do what we have, a continuous improvement program, and we see that having impact. Probably the next 

big step would be for us to take the Somersworth facility and go 

with a similar off-the-grid solution. 

Fortunately, I’m happy to report that over the last 2 years 

Velcro’s been actually growing extremely well, and we are continuing to employ in New Hampshire. So, it’s working for us. We 

don’t ever intend to be the lowest-cost supplier. It’s just not our position. Our position is actually, be the highest-quality supplier, and 

so we can afford to be a little bit more expensive. But it’s a global 

economy, and we have to be competitive. 

Senator SHAHEEN. Thank you. 

Can I just ask one follow-up question, Mr. Chairman? 

In terms of the retrofits that have been done in the building, can 

you speak to how much of that equipment and technology was done 

in the U.S., and, the people who came in and did that work? Can 

you talk to where they were from and the kind of effort that put 

people to work doing that? 

Mr. DAMIANO. A good question. In fact, I may have to ask someone to help me with that. I do know, particularly, the co-gen system, which was our largest investment, was entirely U.S.-based. 

Was it not? Yes, it was entirely U.S.-based, in terms of where the 

equipment was produced, the people who installed it. Of course, 

now the system’s been in since 2000, so our ongoing maintenance 

of the system is also generating, you know, local jobs. 

Senator SHAHEEN. Thank you. 

The CHAIRMAN. Senator Stabenow. 

Senator STABENOW. Thank you very much, Mr. Chairman, for a 

very, very important hearing. 

I think that what Senator Shaheen and Senator Portman have 

been providing to us in terms of this legislation is very important, 

so congratulations to both of you. 

Also coming from, obviously, a State where I spend a lot of time 

on industrial efficiencies and auto efficiencies and so on, I think it’s 

important to note that there is more energy use and more carbon 

emitted from buildings than from transportation. So we do a lot of 

focus on transportation, very important. I support it. But, this is 

a critical piece if we’re going to really tackle energy efficiency. So, 

I want to talk about those efficiencies, and for our second panel, 

talk more about automobiles. My good friend, Ron Wyden and I are 

focusing on that, along with Jeff Merkley and Lamar Alexander. 

But let me talk from an industrial efficiency standpoint because, 

obviously, buildings, obviously, homes, commercial building is very 
50 

important. But we also have a very important piece of this as it 

relates to the efficiencies of operations, industrial plants. 

I also, Mr. Damiano, I want to welcome you. I know you have 

a presence in Michigan, most of it’s in New Hampshire. We’d welcome more of it in Michigan, by the way, and—— 

[Laughter.] 

Senator SHAHEEN. Not a chance. 

Senator STABENOW. Not—but, I do want to note you’re in Troy, 

Michigan, and I know that, and so, we appreciate that very much. 

But there is an—this is to Dr. Hogan and Ms. Callahan. We do 

have something already called the Industrial Technologies Program, and this legislation in front of us really adds to that, I think 

works with that very well. But we’ve had other discussions in committee about whether that should be removed from that program, 

used for other purposes, and so on. I do want to note that that particular program has commercialized 220 technologies, given over 

33,000 industrial plants technical help to create efficiencies, saving 

over $270 million a year and reducing carbon emissions by 206 million tons. So, this is an important piece of it. 

So, I wonder if you might describe how the Energy Savings and 

Industrial Competitiveness Act will build upon what is being done 

through the Industrial Technologies Program. 

Ms. HOGAN. Yes. At the department, through the Industrial 

Technologies Program, we have a portfolio of efforts underway, 

which ranges from our industrial assessment centers that go and 

help small and medium-sized business better understand and take 

advantage of energy savings opportunities. We have regional application centers that are really focused on working with companies 

within their territories around combined heat and power. Additionally we have a program called Save Our Energy Now which partners with businesses that want to lead in putting energy savings 

practices into place, I believe it’s the savings from some of these 

programs to which you were referring. 

In addition to that, we have an R&D portfolio that seeks to improve the efficiencies of technologies like combined heat and power. 

The program also endeavors to improve manufacturing practices, 

fabrication practices, and look at other highly energy-intensive 

processes so that we can bring those costs down and improve competitiveness. 

As you look at the provisions of the legislation before us, it touches on many of those areas and looks to build upon what we’re doing 

and taking them further. I understand one of the included efforts 

seeks to expand and enhance some of the Industrial Assessment 

Centers, as well as bring new financing opportunities to the table 

around the revolving loan fund, as well as the funding behind motors. So, clearly, this builds upon what we are doing. 

But, before going any further, we should really go back and do 

this detailed look that Senator Murkowski asked us to do, which 

we will. 

Ms. CALLAHAN. I would just add to that. I, Dr. Hogan has really 

done a good job of outlining it. The way I kind of look at it is, it 

puts that program on steroids, if you will. It adds money into the 

system to make loans to have folks be able to make the upgrades. 
51 

I think 2 very important aspects that she did not touch upon is 

the creation of a steering committee that would include folks from 

trade associations and from the business to help DOE look at what 

they need to do within that program to be most useful. There is 

also a road mapping exercise that is required in the legislation that 

I think is very important, as well, to look at, where do we go from 

here? Finally, to look outside the United States. Because we don’t 

know it all here, unfortunately. But we don’t. So it would require 

DOE to inventory the technologies, the practices that are used outside of the United States, and to publish that and make that available to our American businesses. 

So, again, I wrap it up and say, it puts them on steroids. 

Senator STABENOW. Thank you. 

Mr. Chairman, I think this is a very important part of the legislation, because we do have energy-intensive manufacturing facilities that have really benefited, and can benefit more, from and not 

only saving energy, but helping them to be competitive internationally. So I think this is an important piece of it, and I thank my 

colleagues for including it. 

The CHAIRMAN. I agree with that very much. 

We have 4 additional witnesses on the second panel, but before 

we go to that, let me see if there are other questions that anyone— 

Senator Murkowski, did you have a question? 

Senator Portman, did you have a question? Go ahead. 

Senator PORTMAN. Mr. Chairman, I’ll be brief. Two quick questions I was not able to ask earlier, given the time constraints. 

One is to Mr. Scripter, first, thanking him for coming from the 

Toledo area—Perrysburg, Ohio. You talked a little about your support of section 302 and 303—302, specifically, about coordinating 

the industrial tech program at DOE. You also said that you have 

worked with DOE on energy efficiency. 

My question is, is, do you think that the expertise the agency offers currently is well-aligned for your industry’s need, and could 

that be improved? 

Mr. SCRIPTER. Absolutely. It’s very effective. As, I would add to 

what Senator Shaheen said, as well. There are technologies that we 

can put in place today that are highly effective. We don’t need to 

invent anything so to speak of. 

The example in the glass industry, for instance, is—a plant’s energy usage can drop 2 to 3 percent for every additional 10 percent 

increment in usage of recycled glass. This is a reality in some global regions. Similarly, the plant’s greenhouse gas emission levels are 

reduced 4 to 10 percent for every additional 10 percent of recycled 

material. 

According to the EPA, in 2009 recycling activities saved the 

equivalent of 5 percent of the entire U.S. carbon inventory and the 

equivalent of the electricity used in 19 million homes. So, I think 

it’s going to be a balance between these various initiatives that will 

drive us forward. 

Senator PORTMAN. Could DOE be better aligned to help you more 

as an energy-intensive industry? 

Mr. SCRIPTER. Absolutely. We see many industries and businesses inventing their own wheel, so to speak. If we could get col-
52 

laboration and accelerate that, it would also accelerate job creation, 

and more efficient and highly competitive solutions for the U.S. 

Senator PORTMAN. Great. 

Just a quick question, Ms. Callahan. First of all, totally agreeing 

with Senator Murkowski, working closely with her staff, committee 

staff, and make sure we’re not duplicating anything on the Federal 

agency side. But let’s remind ourselves—the biggest user of energy 

in the country, the single biggest user, is the Federal Government, 

using in 2008, 1.6 quads. 

So, a question for you again, if you’d be willing to work with us 

to help with DOE working on avoiding duplication. But, do you 

think the department, departments and agencies in the Federal 

Government can do more in terms of energy efficiency? 

Ms. CALLAHAN. Thank you, Senator Portman. Yes, we do. The alliance has been watching and working with the Federal Government since, I think, 1989 or 1992. We put out the first report, 

‘‘Leading by Example,’’ to showcase the energy use of the Federal 

Government and make recommendations. So, we have been working very closely with the agencies, with the Department of Energy’s 

FEMP, the Federal Energy Management Program and the CEQ, to 

look out ways that we can drive energy efficiency even further. 

I think it’s worth noting, though, that the Federal Government 

is doing a good job of leading by example. You know, they don’t 

often get kudos for that. But, they have significantly reduced the 

energy use in their facilities. You have leading agencies—and within the military, which is the biggest user of efficiency—that really 

are putting very creative programs and policies in place, and are 

driving efficiency. So, our hesitation with these bills and the provisions is not that we shouldn’t ask more of the Federal Government, 

but that in the asking, we don’t overburden the agencies, because 

there is such a rich body of executive orders and legislation already 

in place. 

Senator PORTMAN. It sounds like we can improve what’s already 

there and streamline it, but we’re not going to let them off the 

hook, right? 

Ms. CALLAHAN. I don’t think we should let them off the hook at 

all. I’m paying that $24.5 billion a year energy bill, and so are you. 

Senator PORTMAN. That’s the point. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Yes, any additional questions? Senator Shaheen? 

Senator Coons has not had a chance to ask any questions. So, 

should we ask, why don’t you go ahead first? Then we’re going to 

try to finish up on this panel as quickly as we can so we can move 

to the second panel. 

But, go ahead, Senator Coons. 

Senator COONS. Thank you, Mr. Chairman, and thank you for accommodating me. 

I’d just like, if I could, to ask Dr. Hogan about energy savings 

performance contracts, something with which I had experience in 

both the private sector and local government. 

I understand the Department’s been considering a directive, or 

some communication, to all Federal agencies regarding increasing 

the use of ESPCs, and I’d be interested in whether that is, in fact, 

forthcoming. Then, I’m interested in following up on how CBO 
53 

scores ESPCs and their use throughout government, because of, at 

least my understanding of how they work—if the savings don’t materialize, the Government doesn’t pay. But CBO scores them up 

front regardless of outcome, which I think then reduces our ability 

to make effective use of them in the Government sector. 

Then with the indulgence of the chair, if the private sector folks 

have any comment for me about how we might incentivize and 

make better use of energy savings procurement contracts in the 

private space, that would be of real interest to me. 

Thank you. 

Ms. HOGAN. Energy Savings Performance Contracts are a critical 

tool for the Federal Government, and we believe they’ll be even 

more critical going forward—particularly with the pressures on appropriations, which would be the other place to get money for investing in Federal facilities. There’s already been a number of improvements in the ESPC process, thankfully, because of something 

the Congress did at the end of the last session, where they altered 

the competitiveness rules that were actually stifling some of the 

ESPC activity. 

So, with that provision included in the Defense Authorization Act 

around Christmas, we’ve moved quickly to put those modifications 

into the contracts for the ESPCs, and are now working with the 

ESPC service companies so that they can be work as aggressively 

as possible to scope out projects and put them into place. Because 

we do know how important this money is to meeting the Federal 

goals. So, we are doing all of that. We really wanted to have that 

process all in place—just a good working system—before there 

would be any type of additional directive back to the Federal agencies to really give ESPCs another really strong look. So, we are 

continuing to have that conversation as well, to encourage the Federal agencies to go back. We are hoping there will be some more 

communication about that soon. 

On the scoring side, that’s a conversation that we should all just 

keep having to figure out how we can do that well. 

Senator COONS. I’m on the Budget Committee as well, and eager 

to continue that conversation, because I think some of our budget 

scoring rules are preventing us from being as fully engaged in 

using these valuable tools as we could be. 

ESPCs have been very effective in the public sector. I didn’t 

know if any of the members of the panel wanted to comment briefly 

on how we might incentivize their broader use in the private sector. 

Ms. CALLAHAN. I’ll just make one quick comment, and that is 

that the energy efficiency legislation before us today actually would 

expand the use of ESPCs to include electric vehicle infrastructure 

facilities. I think that’s a very creative and innovative expansion of 

that financing mechanism. 

Senator COONS. Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Shaheen. 

Senator SHAHEEN. I don’t have any questions, Mr. Chairman. 

But, we’ve had, as Ms. Callahan stated, a number of businesses 

who have indicated their support for this legislation, and I would 

just ask that those letters be introduced and included in the record. 
54 

The CHAIRMAN. We’ll be glad to include those letters, and the list 

of over 100 organizations, I think you indicated? 

Ms. CALLAHAN. I did. We’re so excited. 101 as of last night, and 

the team is probably going to tell me it’s growing. 

The CHAIRMAN. Terrific. We’ll include a list of all of them in the 

record. 

I thank all of you very much for your testimony. This has been 

very useful. Why don’t we dismiss you now and allow the second 

panel to come forward? 

OK. Why don’t we get started with the second panel? Let me introduce the folks on the second panel. 

Mr. Shane Karr is Vice President of Federal Government Affairs 

with the Alliance of Automobile Manufacturers. 

Mr. Frank Rusco is the Director of Natural Resources and Environment with the U.S. Government Accountability Office. 

Mr. Kevin Book is Managing Director of Research with 

ClearView Energy Partners, LLC. 

Mr. Jonathan Silver, who is a frequent testifier before our committee, is the Executive Director of the Loan Program Office with 

the Department of Energy. 

Thank you all very much for being here. 

If you could all give us about 5 minutes of the main points that 

we need to understand, we will include your full statement in the 

record, and then we’ll have some questions. 

Mr. Karr, why don’t we start with you? 

STATEMENT OF SHANE KARR, VICE PRESIDENT, FEDERAL 

GOVERNMENT AFFAIRS, ALLIANCE OF AUTOMOBILE MANUFACTURERS 

Mr. KARR. Terrific. Thank you, Mr. Chairman, Ranking Member 

Murkowski, other members of the committee. I’ll be brief, because 

I know our time is short. 

I am here today on behalf of the Alliance of Automobile Manufacturers. We are a trade association that represents 12 car and light 

truck manufacturers, roughly 75 percent of the U.S. market based 

on annual sales. On behalf of the alliance, I appreciate the opportunity to offer our views on S. 1001, and the role that automakers 

can help play in addressing our Nation’s energy security and environmental concerns. 

First, I want to start by saying that we are fully engaged in developing vehicles and advanced technologies to improve fuel efficiency and reduce emissions, including greenhouse gas emissions. 

We are committed to improving the average fuel economy of the 

new car fleet to 30 miles—35 miles per gallon by 2016, 4 years earlier than the Energy Independence and Security Act of 2007 required. This will represent a 40 percent increase in fuel economy 

and it will save 1.8 billion barrels of oil over the lifetime of those 

vehicles. 

Bringing more fuel-efficient vehicles to market is a capital-intensive process requiring substantial investments at the front end on 

research, design, development, testing and certification before any 

vehicle can go into production. Advanced technologies can carry significantly higher costs, at least initially, as they are developed and 

refined. 
55 

To give you an idea of the kinds of numbers that we’re talking 

about, the Government estimates that manufacturers will need to 

spend more than $50 billion to meet that 35-mile-per-gallon target 

by 2016. That’s why alliance members are supportive of Senators 

Wyden and Stabenow for crafting a bill that builds on existing programs, that make capital available to support a broad array of fuelefficient vehicle technologies and alternative fueling infrastructure. 

The future vehicle fleet is likely to include many advanced technology vehicles that are being developed and introduced today, but 

we must expect, and accept, that some will not succeed. Automakers believe that effective energy policy must allow the market 

to weigh variables like cost, quality, reliability, and risk—some of 

the other variables that Senator Wyden mentioned in the first 

panel. 

The real strength of S. 1001, from our perspective, is that it refrains from picking technology winners and losers, and allows consumers to be the ultimate arbiters of the transportation solutions 

that work best for them. 

So, while the capital markets are beginning to reopen, once 

again, the fact is that access to capital, especially for medium and 

smaller manufacturers and suppliers, remains a significant hurdle. 

The alliance supports section 102’s expansion of the AVTM program, which will help manufacturers of all sizes obtain loans to accelerate the production and deployment of a wide range of advanced technologies. Extending the existing authorization also provides DOE sufficient time to review and issue new loans. 

The alliance also appreciates and supports the expansion of the 

definition of alternative fuel vehicles in section 2, to include electric 

vehicles, plug-in hybrids, compressed natural gas, and hydrogen vehicles. We also believe that section 101 appropriately expands 

DOE’s existing 1703 loan guarantee program to include additional 

alternative fuel production and distribution infrastructure. 

We also support section 104’s efforts to provide State and local 

government’s technical assistance to help with the deployment of 

vehicles and infrastructure. We believe that the cost share and the 

means to provide such assistance will encourage public-private 

partnerships with State and local governments to work on these efforts. 

Two minor suggestions with regards to section 105, which provides grants for work force training: We have been working with 

the first responder community, and we would recommend that first 

responder programs for alternative, certain alternative fuel should 

be eligible for these grants. We would also recommend that hydrogen be included in section 107. Hydrogen is a viable fuel that my 

members believe offers the opportunity to achieve long-term and 

widespread oil and greenhouse gas reductions. 

So, in closing, we support enhancing energy security, promoting 

fuel diversity, and increasing fuel efficiency by accelerating the 

availability of advanced technology and alternative fuel vehicles in 

the market. We believe S. 1001 accomplishes that goal. We commend Senators Wyden and Stabenow for their leadership in promoting a technology-neutral approach to reducing oil consumption 

in the vehicle fleet. 

I’d be happy to answer any questions. 
56 

[The prepared statement of Mr. Karr follows:] 

PREPARED STATEMENT OF SHANE KARR, VICE PRESIDENT, FEDERAL GOVERNMENT

AFFAIRS, ALLIANCE OF AUTOMOBILE MANUFACTURERS

Thank you, Chairman Bingaman, Ranking Member Murkowski and members of 

the Committee. My name is Shane Karr and I am Vice President for Federal Government Affairs at the Alliance of Automobile Manufacturers (Alliance). The Alliance is a trade association of twelve car and light truck manufacturers including 

BMW Group, Chrysler Group LLC, Ford Motor Company, General Motors Company, 

Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche Cars, 

Toyota Motors, Volkswagen Group and Volvo Cars. Together, Alliance members account for nearly 75% of annual motor vehicle sales in the U.S. Auto manufacturing 

is a cornerstone of the U.S. economy, supporting 8 million private-sector jobs, $500 

billion in annual compensation, and $70 billion in personal income tax revenues. On 

behalf of the Alliance, I appreciate the opportunity to offer our views on the role 

advanced technology and alternative fuel vehicles can play in helping address our 

nation’s energy security and environmental concerns. 

This hearing comes at a pivotal time—more and more Americans are now feeling 

pain at the pump. With gasoline prices exceeding four dollars per gallon in many 

cities across the country, this hearing provides a forum to highlight critical steps 

our nation can take to break its dependence on foreign oil. And automakers stand 

ready to help. 

Automakers are fully engaged in the development of vehicles and advanced technologies to improve fuel efficiency and reduce emissions, including greenhouse gas 

emissions. We have demonstrated this commitment through our support of aggressive fuel economy and GHG emissions standards for 2012-2016 model year (MY) 

light-duty vehicles. These standards will result in a 40% increase in fuel economy, 

saving 1.8 billion barrels of oil over the lifetime of the vehicles. Today, consumers 

have more than 160 models that get over 30 miles per gallon—and we are working 

on a variety of additional technologies that will also dramatically reduce gasoline 

consumption. However, there is no silver bullet or single technology that will solve 

the challenges of achieving energy independence and reducing greenhouse gas emissions. 

We commend Senators Wyden and Stabenow for crafting legislation that promotes 

a broad universe of alternative fuel vehicles and refueling infrastructure to support 

them. While the future vehicle fleet is likely to include many advanced technology 

vehicles that are being developed and introduced today, we must expect—and accept—that some will not succeed. The Alliance appreciates the expansion of the definition of alternative fuel vehicles in Section 2 to encompass electric vehicles (EVs), 

plug-in hybrid electric vehicles (PHEVs), compressed natural gas (CNG) and hydrogen. Automakers believe that effective energy policy must be based on broad, market-oriented principles with all regions participating, not just a select few. The market should be allowed to weigh variables like cost, quality, reliability, and risk. S. 

1001 supports this sound policy directive by refraining from picking technology winners and losers. Ultimately, consumers will decide which transportation solutions 

work best for them. 

Introducing any new model vehicle is a capital intensive process. Automakers and 

suppliers must make substantial investments at the front end on research, design, 

development, testing and certification before a vehicle enters production. New technologies carry significantly higher costs, at least initially, as they are developed and 

refined for use on the various types of vehicles needed by American consumers. For 

example, the government estimates that complying with the 2012-2016 fuel economy 

standards will require an upfront investment of more than $50 billion. The Alliance 

supports Section 102’s expansion of the Advanced Vehicle Technology Manufacturing Incentive Program, which will help manufacturers and suppliers—large and 

small—obtain access to the capital needed to help accelerate the production and deployment of these advanced technologies. Extending the existing authorization from 

2012 to 2016 will provide the Department of Energy (DOE) a sufficient amount of 

time to review and issue loans for deserving projects. 

Automakers support the efforts in Section 101 to expand DOE’s existing Section 

1703 loan guarantee program to include alternative fuel production and distribution 

infrastructure. As I mentioned, Alliance members are investing in diverse vehicle 

technologies and fuels. These investments will rely on expanding the existing infrastructure or, in the case of hydrogen and CNG, creating a new refueling infrastructure. Also of critical importance are efforts to provide state and local governments 

technical assistance to help with the deployment of these vehicles and infrastruc-
57 

ture. Section 104 provides an effective means to provide such assistance and would 

encourage public-private partnerships with governments to work on these efforts. 

Additionally, the Alliance supports Section 105, which would provide grants for 

programs to train workers in various aspects of design, manufacture, maintenance 

and installation of alternative fuel vehicles and refueling infrastructure. Automakers have also begun working with first responders to develop training programs 

to respond to accidents involving advanced technology vehicles, particularly as it relates to EVs and CNGs. The Alliance recommends that first responder programs be 

eligible for Section 105 funds. 

Finally, the Alliance supports efforts in Section 107 to identify and eliminate barriers to alternative fuel deployment in existing distribution systems, and we recommend hydrogen be included as well. Hydrogen is viable fuel that automakers believe offers the opportunity to achieve long-term and widespread oil and greenhouse 

gas emission reductions. Hydrogen infrastructure has been successfully built and operated, including delivery via pipeline. Economic modeling has demonstrated that 

efficient, central hydrogen reforming with regional and local distribution by pipelines can offer economic advantages over other hydrogen delivery methods. Its inclusion in Section 107 will provide industry with the opportunity and resources to continue to make these investments in the public’s interest and in support of Federal 

and State policies. 

Automakers support enhancing energy security, promoting fuel diversity, and increasing fuel efficiency through accelerating the availability of advanced technology 

and alternative fuel vehicles in the market. These diverse technologies and fuels 

will help our nation address the concerns about U.S. gasoline consumption and oil 

imports. We commend Senators Wyden and Stabenow for their leadership in promoting a technology neutral approach in S. 1001. The Alliance looks forward to 

working with them and the Committee on further improvements that can be made 

to accelerate the deployment of these vehicles and the related infrastructure. Thank 

you for the opportunity to offer our views on S. 1001 and I will be happy to answer 

any questions. 

The CHAIRMAN. Thank you very much. 

Mr. Rusco, go right ahead. 

STATEMENT OF FRANK RUSCO, DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. RUSCO. Thank you, Chairman Bingaman, Ranking Member 

Murkowski, and members of the committee. 

I’m happy to speak today about GAO’s work on DOE’s advanced 

technology and vehicle manufacturing program in the context of 

the bills being discussed today. I can also answer questions related 

to our work on DOE’s Title XVII Loan Guarantee Program for Innovative Energy Technologies. 

Federal loan guarantees confer large benefits to loan recipients, 

because they give these recipients access to very low interest rates. 

In addition, as is the case for the ATVM program, the cost of guaranteeing these loans is sometimes paid for by the Federal Government, and therefore, ultimately, by taxpayers. This cost is commonly referred to as the credit subsidy cost of the loan guarantee, 

and is roughly equal to the probability that a loan will default, 

multiplied by the costs associated with that default. The ATVM 

program is currently authorized to make up to $25 billion of loan 

guarantees at an expected cost to taxpayers of $7.5 billion. 

Because loan guarantee programs confer benefits to loan recipients and the cost of these loans are borne by the public, it is important that Federal loan guarantee programs can demonstrate that 

they are providing public benefits commensurate with these costs. 

Benefits are more likely to exceed costs if it is clear that it is desirable to stimulate the industry being provided the loan guarantees 

and that the loans are not crowding out private investment. 
58 

In the case of the initial round of ATVM loan guarantees to Ford 

Motor Company, Nissan North America, Fisker Automotive Inc., 

and Tesla, global financial markets were in disarray and the economy was in deep recession. Further, North American automobile 

sales were in sharp decline. Under these conditions, the case was 

made by Congress and the administration for stimulating the auto 

industry. 

Using borrower information provided during the application process, the ATVM program estimated that these loans would be used 

for projects in 17 factories in 8 States. The program also estimated 

that the loans would create or preserve a total of 37,800 jobs. 

The vehicles and components produced in these factories were expected to lead to significant improvements in fuel economy of the 

U.S. passenger car fleet and lead to other benefits, including reduced petroleum consumption and lower emissions of greenhouse 

gases. It is important to note that these are estimates gleaned from 

information provided by applicants—not observations of what has 

actually occurred. 

ATVM loan guarantees made to date have used up about a third of the authorized $25 billion of loan authority, and at a credit subsidy cost of about $3.3 billion. Now that these loans have been 

made and public costs incurred, it is important that the program 

be able to realistically measure the actual benefits of the program. 

In our February 2011 report on the ATVM program, we found 

that DOE did not have adequate plans and procedures in place to 

measure these actual benefits, and we recommended that they fix 

this problem. Unfortunately, DOE does not agree with GAO’s recommendations and says that measuring performance would expand 

the scope of the program without creating any benefits. 

We strongly disagree with DOE’s position on this. Measuring the 

performance of a program is a fundamental tenet of good government, and providing verification that the public is getting good 

value for money is itself a benefit. Without such measures, DOE 

cannot provide Congress or taxpayers with a reasonable assurance 

that the program is delivering the benefits it promises, including 

significant improvements in fuel economy of the U.S. passenger 

fleet, advancements in innovative automotive technologies, and protection of the financial interest of taxpayers. 

Measuring the actual performance of the ATVM program is important for the loan guarantees already awarded, and it will become even more so if the program follows through on its plans to 

make additional loans. Further, the economy is recovering from the 

recession, and the country now faces tight budgets and fiscal constraints. In this environment it is essential that all Federal programs be able to demonstrate that public money is being spent efficiently and to good effect, and that programs that seek to stimulate 

specific sectors of the economy are not crowding out private investment. 

Therefore, we hope that DOE will reconsider its position on 

measuring and reporting on the performance of the ATVM program, so that Congress can make informed decisions about where 

to put scarce public funds. 

Thank you. This concludes my prepared statement. I will be 

happy to answer any questions you may have. 
59 

[The prepared statement of Mr. Rusco follows:] 

PREPARED STATEMENT OF FRANK RUSCO, DIRECTOR, NATURAL RESOURCES AND

ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE

ADVANCED TECHNOLOGY VEHICLE LOAN PROGRAM NEEDS ENHANCED OVERSIGHT AND

PERFORMANCE MEASURES

Why GAO Did This Study 

In the Energy Independence and Security Act of 2007, Congress mandated higher 

vehicle fuel economy by model year 2020 and established the Advanced Technology 

Vehicles Manufacturing (ATVM) loan program in the Department of Energy (DOE). 

ATVM is to provide up to $25 billion in loans for more fuel-efficient vehicles and 

components. Congress also provided $7.5 billion to pay the required credit subsidy 

costs—the government’s estimated net long-term cost, in present value terms, of the 

loans. 

This testimony is based on GAO’s February 2011 report on the ATVM loan program (GAO-11-145). It discusses (1) steps DOE has taken to implement the program, (2) progress in awarding loans, (3) how the program is overseeing the loans, 

and (4) the extent to which DOE can assess progress toward its goals. 

What GAO Recommends 

GAO is making no new recommendations at this time. In the February report, 

GAO recommended that DOE (1) accelerate efforts to engage engineering expertise 

and (2) develop sufficient, quantifiable performance measures. DOE disagreed with 

the recommendations, stating that such expertise had not yet been needed and that 

performance measures would expand the scope of the program. GAO continues to 

believe that these recommendations are needed to help ensure that DOE is achieving its goals and is accountable to Congress. 

What GAO Found 

DOE has taken several steps to implement the ATVM program. First, it set three 

program goals: increase the fuel economy of U.S. passenger vehicles as a whole, advance U.S. automotive technology, and protect taxpayers’ financial interests. DOE 

also set technical, financial, and environmental eligibility requirements for applicants. In addition, DOE established criteria for judging the technical and financial 

merits of applicants and projects deemed eligible, and policy factors to consider, 

such as a project’s potential for supporting jobs. DOE established procedures for 

ATVM staff, aided by experts from within and outside DOE, to score applicants and 

projects. Finally, the Credit Review Board, composed of senior DOE officials, uses 

the scores and other information to recommend loan decisions to the Secretary of 

Energy. 

The ATVM program, as of May 2011, had made $8.4 billion in loans that DOE 

expects to yield fuel economy improvements in the near term along with greater advances, through newer technologies, in years to come. Although the loans represent 

about a third of the $25 billion authorized by law, the program has used 44 percent 

of the $7.5 billion allocated to pay credit subsidy costs, which is more than was initially anticipated. These higher credit subsidy costs were, in part, a reflection of the 

risky financial situation of the automotive industry at the time the loans were 

made. As a result of the higher credit subsidy costs, the program may be unable 

to loan the full $25 billion allowed by statute. 

The ATVM program has set procedures for overseeing the financial and technical 

performance of borrowers and has begun oversight, but at the time of our February 

report it had not yet engaged engineering expertise needed for technical oversight 

as called for by its procedures. To oversee financial performance, staff review data 

submitted by borrowers on their financial health to identify challenges to repaying 

the loans. Staff also rely on outside auditors to confirm whether funds have been 

used for allowable expenses. To oversee technical performance, ATVM staff are to 

analyze information borrowers report on their technical progress and are to use outside engineering expertise to supplement their analysis, as needed. According to our 

review, projects needing additional technical oversight are under way, and the 

ATVM staff lack the engineering expertise called for by the program’s procedures 

for adequately overseeing technical aspects of the projects. However, the program 

had not yet engaged such expertise. As a result, DOE cannot be adequately assured 

that the projects will be delivered as agreed. 

DOE has not developed sufficient performance measures that would enable it to 

fully assess progress toward achieving its three program goals. For example, DOE 

has a measure for assessing the fuel economy gains for the vehicles produced under 
60 

1 EPA is responsible for developing and executing CAFE testing and calculation procedures. 

NHTSA uses EPA data to determine if a manufacturer’s fleet is in compliance for a given model 

year. The final rule was published in the Federal Register on May 7, 2010. 2The government’s cost of funds is the interest cost that the federal government must pay 

for the use of the money it lends to ATVM borrowers—that is, the interest rate on Treasury 

notes at the time the funds are disbursed. 3The Federal Credit Reform Act of 1990 requires that the credit subsidy costs of federal loan 

programs be paid; for the ATVM program, they are paid by congressional appropriations. 4 Credit subsidy costs exclude administrative costs and any incidental effects on governmental 

receipts or outlays. Present value is the worth of the future stream of returns or costs in terms 

the program, but the measure falls short because it does not account for, among 

other things, the fuel economy improvements that would have occurred if consumers 

purchased more fuel-efficient vehicles not covered by the program. Principles of good 

governance call for performance measures tied to goals as a means of assessing the 

extent to which goals have been achieved. View GAO-11-745T or key components. 

Chairman Bingaman, Ranking Member Murkowski, and Members of the Committee: 

In recent years, questions have arisen about fluctuations in gasoline prices and 

the environmental impact of petroleum use. In addition, gasolinefueled passenger 

vehicles are a major source of greenhouse gas emissions. 

In 2007, Congress enacted the Energy Independence and Security Act (EISA) 

which, among other things, increased corporate average fuel economy (CAFE) standards, requiring that the nation’s automobile manufacturers’ new vehicle fleets attain 

at least an average of 35 miles per gallon by 2020. In May 2009 the Administration 

announced its National Fuel Efficiency Policy, which, to implement the increase in 

fuel economy required by EISA, called for higher CAFE standards for model years 

2012 through 2016 for passenger cars and light-duty trucks—surpassing those 

standards EISA required by 2020. On April 1, 2010, the National Highway Traffic 

Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) 

made final the rule putting the more stringent CAFE standards in place.1

In addition to increasing CAFE standards, EISA also authorized, but did not provide funding for, the Advanced Technology Vehicles Manufacturing (ATVM) loan 

program to provide up to $25 billion in loans to support projects to produce more 

fuel-efficient passenger vehicles and components. Loans made under the program 

are to, among other things, have an interest rate equal to the government’s cost of 

funds2 and be in force for no more than 25 years. 

In addition to the negative effect that rising fuel prices had on domestic automobile sales, the economic recession that began in late 2007 particularly affected 

the three major domestic automakers—Chrysler Group LLC, Ford Motor Company, 

and General Motors Corporation, or the Detroit 3. Rising fuel prices had negatively 

affected the sales of domestic automakers as consumers shifted to smaller, more 

fuel-efficient vehicles and away from less fuel-efficient light trucks and sport utility 

vehicles. At the end of 2008, several economic indicators, including economic growth 

and the unemployment rate, worsened while credit markets tightened and dampened consumers’ demands for new passenger vehicles. Sales of new vehicles had 

been trending downward since 2006, but the decrease was markedly sharper in 2008 

and 2009. For example, U.S. sales for the Detroit 3 dropped by 49 percent from February 2008 through February 2009, whereas U.S. sales for American Honda Motor 

Co., Inc.; Nissan North America, Inc.; and Toyota Motor North America, Inc., 

dropped 39 percent during this period. Additionally, the Detroit 3 had been losing 

U.S. market share to foreign automakers for several years. For instance, General 

Motor’s U.S. market share for total light vehicle retail sales—including passenger 

cars and light-duty trucks—fell from 27.2 percent in 2004 to 22.1 percent in 2008, 

while the market share of Japanese auto manufacturers grew from 29.8 percent to 

38.9 percent during the same period. Furthermore, since the 1980s, the Detroit 3 

have relied heavily on sales of light-duty trucks and sport utility vehicles, which 

were more profitable than passenger cars but had relatively low fuel economy ratings. As a result of this reliance, the Detroit 3 faced more difficulty in achieving 

substantial improvements in fuel economy than most foreign-based manufacturers, 

which historically had produced and sold more fuelefficient vehicles. When proposing the new, more stringent CAFE standards, NHTSA estimated that the Detroit 

3 would face significantly higher costs to meet revised standards than the major 

Japanese automakers. 

In September of 2008, the Consolidated Security, Disaster Assistance, and Con- tinuing Appropriations Act provided $7.5 billion to DOE to pay the credit subsidy 

costs of up to $25 billion in ATVM loans.3 Credit subsidy costs are the estimated 

net long-term costs to the government, in present value terms, of loans over the entire period the loans are outstanding.4 Congress also provided $10 million to DOE 
61 

of money paid immediately. In calculating present value, prevailing interest rates provide the 

basis for converting future amounts into their ‘‘money now’’ equivalents. 5GAO, Department of Energy: Advanced Technology Vehicle Loan Program Implementation 

Is Under Way, but Enhanced Technical Oversight and Performance Measures Are Needed, 

GAO-11-145 (Washington, D.C., Feb. 28, 2011). 6Loan amounts awarded to each company do not add up to the total loan amount the ATVM 

program has awarded to date because of rounding. 

to administer the ATVM loan program and required that DOE issue an interim final 

rule to establish regulations necessary to implement the program. DOE issued an 

interim final rule for implementing the program in November of 2008. 

In February 2011 we reported on DOE’s implementation of the ATVM loan program. My testimony today is based on that report,5 updated with recent information 

from DOE on ATVM loans made, additional loan amounts requested by applicants, 

and the subsidy costs DOE expects to need in order to provide loans to those applicants. My testimony addresses (1) the steps DOE has taken to implement the ATVM 

loan program, (2) the ATVM loan program’s progress in awarding loans, (3) how the 

program is overseeing the loans, and (4) the extent to which DOE can assess its 

progress toward meeting program goals. A detailed description of our scope and 

methodology can be found in the February report. We conducted this work in accordance with generally accepted government auditing standards. 

DOE ESTABLISHED PROGRAM GOALS AND SET CRITERIA FOR APPLICANT AND PROJECT

ELIGIBILITY AND MERIT

DOE has taken several steps to implement the ATVM program. First, it set three 

goals for the program: increase the fuel economy of U.S. passenger vehicles as a 

whole, advance U.S. automotive technology, and protect taxpayers’ financial interests. In that regard, EISA calls for the program to make loans to provide funding 

to automobile manufacturers and component suppliers for projects that re-equip, expand, or establish U.S. facilities that are to build more fuel-efficient passenger cars 

and light-duty trucks. According to DOE, the program’s goals also support the agency’s goals of building a competitive, low-carbon economy by, among other things, 

funding vehicles that reduce the use of petroleum-derived fuels and accelerating 

growth in advanced automotive technology manufacturing, and protecting U.S. taxpayers’ financial interests. 

DOE, in its interim final rule, also set technical, financial, and environmental requirements that vehicle and components manufacturers must meet to qualify to receive a loan under the program. For example, an established vehicle manufacturer— 

one that was manufacturing vehicles in 2005—must demonstrate that the adjusted 

average fuel economy of the fleet of vehicles it produced in its most recent model 

year was at least equal to that of the fleet of vehicles it produced in model year 

2005. 

Similarly, a manufacturer that was not producing vehicles in 2005 must show 

that its proposed vehicles’ adjusted average fuel economy will at least equal that 

of established manufacturers for a similar classs of vehicles for model year 2005. 

For applicants deemed eligible, DOE also uses statutorily based technical criteria 

to determine which projects are eligible. For example, proposed vehicles must 

achieve at least 125 percent of the average fuel economy achieved by all manufacturers’ vehicles with substantially similar attributes in 2005. 

In addition, DOE established criteria for ATVM staff, aided by experts from within and outside DOE, to judge and score the technical and financial merits of applicants and projects deemed eligible, along with policy factors to consider, such as a 

project’s potential for supporting jobs and whether a project is likely to advance 

automotive technology. Finally, the Credit Review Board, composed of senior DOE 

officials, uses the merit scores and other information, including Office of Management and Budget’s approved subsidy cost estimates for projects, to recommend loan 

decisions to the Secretary of Energy. 

THE ATVM PROGRAM HAS AWARDED $8.4 BILLION IN LOANS THAT LARGELY ENHANCE

CONVENTIONAL VEHICLE TECHNOLOGY, BUT THE PROGRAM MAY BE UNABLE TO LEND

THE FULL AUTHORIZED AMOUNT

To date the ATVM program has made about $8.4 billion in loans: $5.9 billion to 

the Ford Motor Company; $1.4 billion to Nissan North America; $529 million to 

Fisker Automotive, Inc.; $465 million to Tesla Motors, Inc.; and $50 million to The 

Vehicle Production Group LLC.6 About 62 percent of the funds loaned—$5.2 billion—are for projects that largely enhance the technologies of conventional vehicles 

powered by gasoline-fueled internal combustion engines. These projects include such 
62 

7The CAFE standards for 2012-2016 will subject passenger cars and light trucks to target levels of fuel efficiency based on the vehicles’ ‘‘footprints.’’ A vehicle’s footprint is a measure of its 

size calculated by multiplying its wheelbase (the distance from the center of the front wheels 

to the center of the rear wheels) by its average track width (the average of the width between 

the two front wheels and the width between the two rear wheels). The vehicle-level mpg targets 

generally become more stringent with each new model year. 8This does not include DOE’s fuel economy estimates for the vehicle to be produced under 

the loan to The Vehicle Production Group, which was finalized after our February report. 

fuel-saving improvements as adding assisted direct start technology to conventional 

vehicles, which reduces fuel consumption by shutting off the engine when the vehicle is idling (e.g., while at traffic lights) and automatically restarting it with direct 

fuel injection when the driver releases the brake. According to DOE’s analysis, the 

projects will result in vehicles with improved fuel economy that will contribute in 

the near term to improving the fuel economy of the passenger vehicles in use in the 

United States as a whole because the conventional vehicles are to be produced on 

a large scale relatively quickly and offered at a price that is competitive with other 

vehicles being offered for sale. 

DOE used data from the borrowers to estimate the fuel economy in miles per gallon (mpg) of the enhanced conventional vehicles that were considered for ATVM 

loans. According to our calculations using DOE’s estimates of fuel economy, these 

projects are expected to result in vehicles with improved fuel economy that exceed 

both the program’s eligibility requirements and the CAFE targets that will be in 

place at the time the vehicles are produced 7—by, on average, 14 and 21 percent, 

respectively. 

The remaining 38 percent of the funds loaned—about $3.1 billion—support 

projects for vehicles and components with newer technologies. Fisker’s loan is for 

two plug-in hybrid sedan projects—the Karma and the Nina. Tesla’s loan is for an 

all-electric sedan, the Model S, and Nissan’s loan is for the LEAF, an all-electric 

vehicle classified by DOE as a small wagon. The Vehicle Production Group’s loan 

is for a wheelchair-accessible vehicle that will run on compressed natural gas. Finally, a portion of the Ford loan supports projects for manufacturing hybrid and allelectric vehicles. In addition, there are two advanced technology components 

projects: Nissan’s, to build a manufacturing facility to produce batteries for the 

LEAF and potentially other vehicles; and Tesla’s, to build a manufacturing facility 

to produce electric battery packs, electric motors, and electric components for the 

Tesla Roadster and vehicles from other manufacturers. In contrast to the projects 

supporting enhancements to conventional vehicles, DOE’s and the borrowers’ analyses indicate that the projects with newer technologies will result in vehicles with 

far greater fuel economy gains per vehicle but that these vehicles will be sold in 

smaller volumes, thereby having a less immediate impact on the fuel economy of 

total U.S. passenger vehicles. 

According to our calculations using DOE’s fuel economy estimates, the projects for 

vehicles with newer technologies, like the projects for enhanced conventional vehicles, are expected to result in improved fuel economy that exceeds both the program’s eligibility requirements and CAFE targets—by about 125 percent and about 

161 percent respectively.8

The loans made to date represent about a third of the $25 billion authorized by 

law, but the program has used 44 percent of the $7.5 billion allocated to pay credit 

subsidy costs, which is more than was initially anticipated. The $7.5 billion Congress appropriated was based on the Congressional Budget Office’s September 2008 

estimated average credit subsidy rate of 30 percent per loan ($7.5 billion divided by 

$25 billion equals 30 percent). However, the average credit subsidy rate for the $8.4 

billion in loans awarded to date is 39 percent—a total of roughly $3.3 billion in credit subsidy costs. At this rate, the $4.2 billion remaining to be used to pay credit subsidy costs will not be sufficient to enable DOE to loan the full $25 billion in loan 

authority. These higher credit subsidy costs were, in part, a reflection of the risky 

financial situation of the automotive industry at the time the loans were made. For 

DOE to make loans that use all of the remaining $16.6 billion in loan authority, 

the credit subsidy rate for the loans would have to average no more than 25 percent 

($4.2 billion divided by $16.6 billion). As a result, the program may be unable to 

loan the full $25 billion allowed by statute. As of May 9, 2011, DOE reported that 

16 projects seeking a total of $9.3 billion in loans—representing $3.5 billion in credit 

subsidy costs—were under consideration. 
63 

9GAO, Agencies’ Annual Performance Plans under the Results Act: An Assessment Guide to 

Facilitate Congressional Decisionmaking, GAO/GGD/AIMD-10.1.18 (Washington, D.C.: February 

1998, ver. 1.) and GAO, The Results Act: An Evaluator’s Guide to Assessing Agency Annual Performance Plans, GAO/GGD-10.1.20 (Washington, D.C.: April 1998, ver. 1). 

THE ATVM PROGRAM HAS BEGUN OVERSEEING LOANS TO ENSURE BORROWERS COMPLY

WITH FINANCIAL AND TECHNICAL REQUIREMENTS BUT HAS NOT ENGAGED ENGINEER- ING EXPERTISE THAT WOULD HELP ENSURE THAT PROJECTS ARE DELIVERED AS

AGREED

The ATVM program has set procedures for overseeing the financial and technical 

performance of borrowers and has begun oversight, but at the time of our February 

report the agency had not yet engaged engineering expertise for technical oversight 

as called for by the procedures. To oversee financial performance, staff are to review 

data submitted by borrowers on their financial health to identify challenges to repaying the loans. Staff also rely on outside auditors to confirm whether funds have 

been used for allowable expenses. As of February 2011, the auditors had reported 

instances in which three of the four borrowers did not spend funds as required. According to ATVM officials, these instances were minor—the amounts were small relative to the total value of the loans—and the inappropriate use of funds and the 

borrowers’ practices have been corrected. 

The ATVM program’s procedures also specify technical oversight duties, a primary 

purpose of which is to confirm that borrowers have made sufficient technical 

progress before the program disburses additional funds. To oversee technical performance, ATVM staff are to analyze information borrowers report on their technical 

progress and are to use outside engineering expertise to supplement their analysis 

once borrowers have begun constructing or retrofitting facilities or are performing 

engineering integration—that is, designing and building vehicle and component production lines. According to our review, several projects needing additional technical 

oversight are under way but the program, as of February of 2011, had not brought 

in additional technical oversight expertise to supplement program staffs’ oversight. 

For example, ATVM officials identified one borrower with projects at a stage requiring heightened technical monitoring; however, ATVM program staff alone had monitored the technical progress of the project. ATVM officials told us that the manufacturer has experience with bringing vehicles from concept to production so additional 

technical oversight expertise has not been needed, despite the procedures’ calling for 

it. Further, according to documents we reviewed, at the time of our report, four borrowers—rather than the single one identified by ATVM—had one or more projects 

that, according to the program’s procedures, had already reached the stage requiring 

heightened technical monitoring. Because ATVM staff, whose expertise is largely financial rather than technical, had so far provided technical oversight of the loans 

without the assistance of independent engineering expertise, we found that the program may be at risk of not identifying critical deficiencies as they occur and DOE 

cannot be adequately assured that the projects will be delivered as agreed. At the 

time of our report, according to ATVM staff, they were in the process of evaluating 

one consultant’s proposal to provide engineering expertise and were working with 

DOE’s Loan Guarantee Program to make that program’s manufacturing consultants 

available to assist the ATVM program. 

DOE LACKS THE PERFORMANCE MEASURES TO ENABLE IT TO FULLY ASSESS THE ATVM

PROGRAM’S PROGRESS TOWARD ACHIEVING ITS GOALS

DOE has not developed sufficient performance measures that would enable it to 

fully assess whether the ATVM program is achieving its three goals. Principles of 

good governance indicate that agencies should establish quantifiable performance 

measures to demonstrate how they intend to achieve their program goals and measure the extent to which they have done so.9 These performance measures should 

allow agencies to compare their programs’ actual results with desired results and 

should be linked to program goals. 

Although the ATVM program has established performance measures for assessing 

the performance of ATVM-funded vehicles relative to the performance of similar vehicles in model year 2005, the measures stop short of enabling DOE to fully determine the extent to which it has accomplished its overall goal of improving the fuel 

economy of all passenger vehicles in use in the United States. The measures stop 

short because they do not isolate the impact of the program on improving U.S. fuel 

economy from fuel economy improvements that might have occurred in the absence 

of the program—by consumers investing in more fuel efficient vehicles not covered 

by the program in response to high gasoline prices, for example. In addition, the 

ATVM program lacks performance measures that will enable DOE to assess the ex-
64 

tent to which it has achieved the other two goals of the program—advancing automotive technology and protecting taxpayers’ financial interests. 

In our February 2011 report, to help ensure the effectiveness and accountability 

of the ATVM program, we recommended that the Secretary of Energy direct the 

ATVM program to (1) accelerate efforts to engage sufficient engineering expertise 

to verify that borrowers are delivering projects as agreed and to (2) develop sufficient and quantifiable performance measures for its three goals. DOE’s Loan Programs Executive Director disagreed with the first recommendation, saying that the 

projects were in the very early stages of engineering integration and such expertise 

had not yet been needed for monitoring. However, at that time, three of the four 

loans had projects that had been in engineering integration for at least 10 months, 

and the fourth loan had at least one project that was under construction. We maintained that DOE needed technical expertise engaged in monitoring the loans so that 

it could become adequately informed about technical progress of the projects. DOE’s 

Loan Programs Executive Director also disagreed with the second recommendation. 

He said that DOE would not create new performance measures for the agency’s 

three goals, saying that performance measures would expand the program and did 

not appear to be the intent of Congress. We maintained that by not setting appropriate performance measures for its program goals, DOE was not able to assess its 

progress in achieving what it set out to do through the program; furthermore, it 

could not provide Congress with information on whether the program was achieving 

its goals and warranted continued support. 

Chairman Bingaman, this concludes my prepared statement. I would be pleased 

to answer any questions that you, Ranking Member Murkowski, or other Members 

of the Committee may have at this time. 

The CHAIRMAN. Thank you very much. 

Mr. Book, go right ahead, please. 

STATEMENT OF KEVIN BOOK, MANAGING DIRECTOR, 

RESEARCH, CLEARVIEW ENERGY PARTNERS, LLC 

Mr. BOOK. Thank you, Mr. Chairman, Ranking Member Murkowski, and distinguished members of the committee, for the opportunity to contribute to your discussion today. 

My name’s Kevin Book, and I head the Research team at 

ClearView Energy Partners, a DC-based research and consulting 

firm that serves financial and corporate investors in energy. 

It’s with some humility that I am going to begin my opening remarks with a correction to my written statement. There is a math 

error which happened as I was writing this in haste on the train. 

If I could ask you just—we’ve already corrected it with your staff, 

and it should be out soon, the formal copy—but, on page 5 in the 

first paragraph under ‘‘sales volume,’’ the correct number is $14.8 

billion to $16.2 billion, and not $148 and $162 billion, respectively. 

That is a big mistake. I recognize that, and I apologize. 

Accordingly, on page 6 there’s a statement that says something 

about the ‘‘better safe than sorry,’’ third sentence. Instead of 3 

times, it should read ‘‘one-third the cost basis of the full reserve.’’ 

Again, I apologize, and I’ll put all this in context in a second. 

But, basically, I want to begin by thanking you for pursuing this 

whole topic at a time when the Nation is in such a dire fiscal crisis. 

I think it’s extremely important to look at the idea of how we’re 

going to subsidize the innovation and efficiency agenda for energy, 

particularly now. There’s a certain counter-cyclicality to investment 

you strive for, which is that when things are cheap you should buy 

them, and when they’re expensive you should sell them. That’s part 

of what I’ll deal with in my testimony as it refers to the strategic 

reserve. 

But, as it stands right now, one of the consequences of weak demand is that it deters a lot of private investment in needed tech-
65 

nologies, and this is very important. So, one of the things that I 

also would contribute just is, generally speaking, efficiency tends to 

be a pretty good investment. The IEA did a paper in 2000 that said 

basically, you have a rebound demand, using more because things 

get cheaper, which is a relatively small on efficiency. So, if you’re 

trying to find ways that are consistent with energy security and financial prudence, efficiency investments are usually good ones, and 

debt subsidies generally tend to be better than equity subsidies 

when it comes to financing big projects, too. 

But, what I’m addressing in my testimony is the question of how 

the relevant agencies will get the money, and this is obviously very 

much an open question. Financing efficiency retrofits with new oil 

and gas production might be a fiscally prudent way to pay for it, 

provided that spending does not get ahead of the leasing and permitting activities that generate revenues. 

On the other hand, selling oil out of the strategic petroleum reserve to pay for efficiency gains and alternative fuels could seriously diminish U.S. energy security, without necessarily delivering 

financial benefits. 

The thrust of the, page 2 of the testimony is to show that we actually had a significant demand contraction in our gasoline and 

distillate fuels during the great recession and the ensuing recovery. 

There is a couple of takeaways that are not, I think, well appreciated: That 1.9 million barrels per day that fell out of demand at 

the maximum peak to trough change between the top and bottom 

of our consumption is a major impact on global markets. It matters 

to producers in a way that smaller numbers often do not. 

What’s happening around the world, I think, is now well understood. OPEC demand—I’m sorry. Sorry. Non-OECD demand is 

growing rapidly. As a result, you have about a million barrels per 

day per year of demand that shows up no matter what, because the 

developing world is emerging into an energy-thirsty adolescence. 

This is something that will eventually make our demand changes 

less relevant. When you get to the whole question of whether or not 

good customers get treated better, in most business contexts, it 

would generally behoove you, if you’re not the biggest customer, to 

have other strategies in play—diplomatic strategies, for example, 

when buying from exporters; or, better still, a very good insurance 

policy. The strategic reserve is that. I think it’s very prudent. 

On page 4 I address the issue of, insurance is something that you 

should review from time to time. The strategic reserve is such a 

policy. It’s appropriate to ask, is this the right coverage for this 

point in time? I think it’s a very good question that deserves a serious answer. 

The answer that I’ve come up with is that, probably, yes. It is 

a very good policy at this point in time. The of question whether 

you should size the reserve on the basis of non-NAFTA import 

cover, which is the proposal embedded in section 202(a) of S. 1001, 

is one that I think is, it’s, again, a reasonable way to approach the 

problem. But, if you were to look back at the last 20 years and ask, 

assuming that we needed the oil this would eliminate, would it 

have cost the Government money, or saved the Government money, 

to have pared it down at that point in time—each time you fell 

below the non-NAFTA import demand implied by the formula in 
66 

section 202(a)? The answer is, it would have lost money. On average, it’s a money-losing proposition. It’s about a $9 billion hole in 

your pocket if you were to do it as a formula. 

The second thing, though, is that the strategic reserve is pretty 

economic when you think about what it costs to put oil in and what 

it’s worth. This is where the correction on page 5 does come into 

question, and page 6. You’re going to raise between $14.8 billion 

and $16.2 billion in the proposed sale in section 202(a), which is 

obviously a nontrivial and important way to fund the green agenda 

and retrofits. But, it is also expensive relative to what that oil cost. 

On the surface, you might say you bought low and on selling 

high. After all, the entire strategic reserve, in real dollars, to fill 

it costs about $48.8 billion. If you can get $16 billion for selling 22 

percent of it, that’s going to be a pretty winning trade ordinarily. 

The problem is that we can’t displace 22 percent of our energy 

demand for transportation that easily—not anytime soon. So you 

have, effectively, a high cost relative to what it would cost to replace it in a hurry. Canadian and Mexican production is more secure, but the risk that you might have to buy the oil back from 

Canada and Mexico at market prices defined by the rest of the 

world, again, is probably fiscally disadvantageous. 

Finally, just on the fiscal front, the volumetric ethanol excise tax 

credit—leaving all other ethanol subsidies and related costs aside— 

is about twice as expensive on an annual barrel displacement basis 

as the reserve. 

So, 2 concluding points very quickly. One, there is also a negotiating value to having a strategic reserve of this size, and the bigger, the better, which is that, if the producer nations in the world 

have a choice, and that choice is between selling oil into a tight 

market to help their formerly best and hopefully still very well-favored customers, or not, and capturing the proceeds, the threat of 

opening that reserve—even if you never do it—is a very powerful 

tool. This has been conveyed by discussions I’ve had with folks who 

use to run these decisions. 

So, in conclusion, I would say that the most important thing here 

is to recognize that we’re using oil not because we love oil or because oil is an ideological choice, but because of physics and economics. There’s been 152 years of efforts to try to find something 

else, and they’re still going on. I think it’s right to diversify. Those 

efforts should continue, and I applaud the efforts to try to find new 

efficiency and fuels diversity, and I think those are noble and especially, countercyclically important goals. But I don’t think they 

should come at the expense of America’s well conceived energy security insurance policy. 

This concludes my remarks. Thank you. I look forward to questions. 

[The prepared statement of Mr. Book follows:] 

PREPARED STATEMENT OF KEVIN BOOK, MANAGING DIRECTOR, RESEARCH, 

CLEARVIEW ENERGY PARTNERS, LLC 

Chairman Bingaman, Ranking Member Murkowski and distinguished Members of 

this Committee, thank you for the privilege of contributing to your discussion today. 

My name is Kevin Book and I lead the research team at ClearView Energy Partners, LLC, an independent research and consulting firm here in Washington, D.C. 

that serves institutional and corporate energy investors. 
67 

1Testimony of Kevin Book before the U.S. Senate Committee on Energy and Natural Resources, February 12, 2009. http://www.cvenergy.com/public—testimony/2009-02-12- 

KevinlBook-ENRlTestimony.pdf. 2The repeated revisions and rescissions of European feed-in tariffs for alternative power technologies are well known, but examples abound here in the U.S., too. For example, see Maykuth, 

A., ‘‘Solar Energy Output is Outpacing Pennsylvania Mandate’’, Philadelphia Inquirer, June 5, 

2011, http://articles.philly.com/2011-06-05/business/29623348l1lsolar-advocates-solar-industrysolar-markets. 3Schipper, L. and M. Grubb. ‘‘On the Rebound? Feedback between Energy Intensities and Energy Uses in IEA Countries’’. Energy Policy: Volume 28, Issues 6-7, June 2000, Pages 367-388. 

* Figure has been retained in committee files. 

ENERGY SECURITY AND FINANCIAL PRUDENCE

Mr. Chairman, I am encouraged that this Committee continues to explore policies 

to promote efficiency gains and alternative fuels amid the dire fiscal circumstances 

that confront our nation. My clients—the investors who may capitalize some of the 

policies you are discussing today—frequently ask how tough decisions and stark reductions might shift energy policy priorities. Many of our clients share my view1

that subsidizing or assuring loans can, in many cases, promote diffusion of innovative technologies at lower taxpayer cost than paying out cash grants or ‘‘tax equity’’. 

Either way, I would suggest that energy subsidies that do not set a glide path 

towards unsubsidized profitability are unlikely to meet the explicit goal of reducing 

federal spending. In my experience, when governments give net financial rewards 

to the consumers or producers of otherwise non-economic energy resources, the payees take as much as they can2. Academic research suggests this is less true of energy efficiency subsidies: ‘‘rebound demand’’ (using more because each unit is cheaper) tends to erode only a small portion of energy savings3. In this context, ‘‘government-first’’ policies that target the considerable energy consumption by state and 

federal buildings and fleets offer two potential benefits: (1) reducing government 

spending, provided that fuels and technologies track towards unsubsidized profitability; and (2) creating a sales opportunity large enough to promote competition 

among producers so that they might achieve scale economies, potentially bringing 

down costs for industrial, business and residential customers. 

Accelerating behavior change and infrastructure turnover to promote energy security has a financial cost, but energy security and fiscal prudence are different goals. 

Some policy choices may combine energy security with fiscal prudence better than 

others. For example, government loans that enable automakers to successfully retool 

for greater fuel economy could deliver financial returns if the loans are repaid, paying energy security dividends with every new vehicle mile driven between the showroom and the scrap heap. Alternatively, diversifying and increasing energy supplies 

by subsidizing production or consumption of alternative fuels may have strategic importance that overshadows the associated financial costs. 

The open question appears to be how the relevant U.S. federal agencies should 

offset the costs of explicit subsidies and source the working capital with which to 

make or guarantee loans. Financing efficiency retrofits and alternative fuels with 

proceeds from new oil and gas production could be a fiscally prudent way to do it, 

provided that spending does not get ahead of the leasing and permitting activities 

that generate revenues. On the other hand, selling oil out of the Strategic Petroleum 

Reserve (SPR) to pay for efficiency gains and alternative fuels could seriously diminish U.S. energy security without necessarily delivering financial benefits. The remainder of my testimony today addresses this topic. 

DEMAND CHANGES COULD CHANGE PRODUCER PRIORITIES

For the moment, the U.S. remains the world’s top oil consumer and its primary 

destination market for exports. More importantly, changes in U.S. domestic consumption can still outstrip demand growth from fast-growing, non-OECD nations. 

Both of these things are likely to imminently change. 

The shaded ‘‘ranges’’ in Figure 1* present maximum and minimum weekly U.S. 

gasoline and distillate fuels consumption between 2006 and 2010, as computed by 

the U.S. Energy Information Administration (EIA). The blue and red lines trace gasoline and distillate consumption, respectively, through the first 21 weeks of 2011. 

Taken together, the shaded regions represent the 1.9 MM bbl/d of peak-to-trough 

‘‘swing’’ demand contraction that emerged as the Great Recession deepened. Averaging across all 52 weeks and five years implies about 1.05 MM bbl/d of U.S. enduser demand headroom. 

Changing demand dynamics.—Figure 1 shows that U.S. consumption has been 

trending towards the low end of the five-year range for gasoline and distillates, despite a possible early indication that demand rose in response to falling gasoline 
68 

4Four week ‘‘moving averages’’ smooth out some of this jaggedness, but the jaggedness can 

be analytically interesting as an early indication of a changing trend, so I used weekly data for 

Figure 1. Both are available on the EIA website. 5 A slow recovery from the Great Recession or a ‘‘double-dip’’ may obscure the extent of this 

change because emerging economies’ energy demand is still strongly linked to the financial circumstances of their export markets. 

prices. Leaving aside short-run demand volatility, much of which can be linked to 

data resolution4, Figure 1 depicts one side of a story that is now widely understood: 

global petroleum demand changed dramatically during the last decade. Consumption patterns flattened out within industrialized economies at the same time that 

oil products demand from non-OECD nations grew by an average of about 3.3% per 

year between 2001 and 2010, according to International Energy Agency (IEA) data. 

This represented an average annual increase of about 1.086 MM bbl/d—in other 

words, annual growth within emerging economies may be theoretically sufficient to 

offset a maximum ‘‘average’’ U.S. demand contraction. Moreover, the pace of this 

non-OECD growth has been accelerating at an average rate of about 8.3%/Y2; had 

it not been for the global economic slowdown, the slope of the trend would probably 

have been much steeper. 

Price implications.—The implications of this change for oil prices are relatively 

easy to interpret, despite disheartening recent data that suggest slowing growth 

here at home. Nominal and currency-adjusted crude oil prices have risen because 

global demand growth has largely outpaced global supply growth. Supply is catching 

up, but production from new marginal and unconventional sources is more costly 

than the oil already in production. 

Energy security implications.—The implications for energy security may be less 

obvious, however. The U.S. is losing its importance as a source of marginal petroleum demand. The moment may soon arrive—possibly as soon as 2013—when a 

U.S. demand decline could be wholly offset at the margin by growth from emerging 

economies, without any significant global price weakness.5

Why does this matter? Because the biggest customers usually get the best treatment in any business context. A large part of U.S. energy security comes from our 

strong commercial ties with our suppliers. Strategic alliances provide another tier 

of assurance. To extend the metaphor: if one cannot be the biggest customer, friendships and favors can go a long way towards securing favorable terms. And what if 

friendships break down? Getting fair treatment from a neutral or hostile supplier 

who sells to a highly competitive customer base would probably require something 

else: a big stick. 

Thanks to the foresight and diligence of this and prior Congresses, we have one: 

the SPR. 

FINANCIAL CONSIDERATIONS: THE RISKS OF GAMBLING WITH INSURANCE MONEY

First and foremost, the SPR is America’s insurance policy against a serious petroleum supply interruption. As with individual policyholders, it seems appropriate for 

national purchasers of insurance to periodically re-examine their coverage options 

in light of any changes in their physical and financial circumstances. Accordingly, 

Section 202(a) of the Alternative Fuel Vehicles Competitiveness and Energy Security Act of 2011 (S. 1001) includes the following language: 

(a)—Section 154(a) of the Energy Policy and Conservation Act (42 U.S.C. 

6234(a)) is amended by striking ‘‘1 billion barrels of petroleum products’’ 

and inserting ‘‘the quantity of crude oil and petroleum fuels imported into 

the United States each year from countries that are not signatories to 

North American Free Trade Agreement during an average 90-day period 

during the most recent calendar year for which data are available. 

Figure 2 presents my interpretation of this provision using latest-available EIA 

data. 
69 

Source: ClearView Energy Partners, LLC using data from EIA, DOE (SPR Annual 

Report) and BLS 

Sales volume.—By my estimate, fulfilling the directive within 202(a) would require a sale of approximately 161 MM bbl of crude oil from the SPR, reducing it 

from 726.6 MM bbl to 565.8 MM bbl. Using our internal CY2011 WTI price projection of $92/bbl, this sale would theoretically yield approximately $148 billion towards alternative fuels and vehicle efficiency spending! At prevailing WTI frontmonth futures prices of $100.85/bbl, the sale would theoretically generate approximately $162 billion! In practice, both projections are probably more than what an 

actual sale might bring in. 

Price impacts.—The mere act of declaring a sale this large is likely to be very disruptive to oil prices, at least the first time it happens. It’s hard to know precisely 

how events might unfold, but the crude futures curve would probably steepen. Nearterm contracts might sell at a deep discount as highly leveraged commercial buyers 

rushed to close their long positions and unravel their hedges at the same time that 

speculators established short positions in near months. Meanwhile, commercial and 

noncommercial players might also have reasons to stake out long positions in the 

out months on the expectation that OPEC would respond to the sale by cutting production. 

Market dynamics.—This calls into question the very premise for the sale in the 

first place—the notion that NAFTA production can be netted out of U.S. strategic 

assets because it faces differentially lower disruption risk. Although disruption risk 

is considerably lower in Canada and Mexico, Canadian and Mexican crude oil are 

sold at prices that reflect global supply-demand dynamics. Selling 161 MM bbl at 

today’s market price leaves the U.S. vulnerable to having to buy them back at market price premiums in the event of a disruption tomorrow. More ironically, if the 

initial Section 202(a) sale were to send the crude strip into a steep contango (longdated contract prices higher than near-term contract prices), selling today could actually cause a higher acquisition cost for U.S. refiners tomorrow. 

Replacement costs.—It is hard, if not impossible, to accurately quantify how future prices might rise or fall in response to geopolitical events, but it seems fair to 

assume that any major future disruption that impairs capacity of the global production system would probably raise prices and draw on inventories, increasing the vul-
70 

nerability of U.S. refiners to further disruptions and raising odds for an SPR draw 

or exchange. On a nominal basis, purchasing oil to replace the oil drawn out of the 

SPR in this scenario would probably cost more tomorrow than the government 

might earn by selling it today. On the other hand, the real cost could be lower if 

the sale happens far enough in the future or, as in 2008, a recession creates a buying opportunity for governments looking to fill their strategic reserves. 

Back-test.—It is very easy, however, to look backward and ask whether excluding 

NAFTA from SPR assets in this fashion would have been cost-effective. My answer 

is no. Figure 2 also includes a simplified ‘‘gaming out’’ of the twenty-year interval 

from 1991-2010 if the U.S. government had sold the actual SPR whenever it exceeded the levels dictated by Section 202(a): on a nominal basis, the U.S. would have 

lost a theoretical $9.3 billion playing that game. Using the CPI-U with 2010 as a 

base year to capture inflation implies a theoretical loss of about $11.3 billion. This 

illustrates another point: when oil prices are rising faster than producer or consumer prices in general, it pays to hold onto the oil and sell high. 

Figure 3 presents an estimate of the nominal and real costs of buying oil to fill 

the SPR. 

Better safe than sorry.—The nominal total presented in Figure 3 of about $22.5 

billion implies a gross average cost of oil to fill the SPR of about $31/bbl. Using the 

CPI-U as an inflator implies a total real cost of about $48.6 billion and a corresponding gross average cost of about $67/bbl. On the surface, selling 22% of the 

SPR for more than three times its real cost basis seems like a winning trade. So 

what’s the problem? The nation is not yet technologically capable of transitioning 

22% of its transportation energy demand to non-petroleum sources. In other words, 

although it doesn’t make economic sense to buy insurance one no longer needs, it 

makes even less economic sense to give up insurance one still requires only to buy 

it back later at a higher price. And, as I noted in the first section of my testimony, 

supply risks may be increasing as the commercial importance of U.S. import demand decreases; it seems a more appropriate time to be expanding our insurance 

coverage—including new domestic production, greater fuel economy and broader 

fuels diversification—rather than reducing it. 
71 

6This is not a perfect comparison because it does not capture the recurring nature of ethanol 

supplies (for an incremental cost, of course) relative to the finite nature of the SPR. Even so, 

the terminal value of ongoing ethanol supply would be far outweighed by a less-generous accounting of ethanol energy security per gallon, too. Most of the published efforts I have seen 

incorporate related and supporting subsidies for corn and ethanol infrastructure and the aforementioned energy-content-prorating. 

As insurance goes, the SPR is pretty cheap.—Figure 4 presents a simplified accounting of the subsidy costs associated with increasing annual U.S. ethanol consumption from 83 MM gal/Y in 1981 to 13.5 B gal/Y in 2010. Unlike many of the 

polemical efforts to ‘‘fully account’’ for ethanol subsidy costs, Figure 4 counts only 

the notional tax revenue lost due to the Volumetric Ethanol Excise Tax Credit 

(VEETC). 

This cursory assessment implies that the last thirty years of ethanol subsidies 

added up to a nominal total cost of about $40 B and a real total cost of about $47.7 

B—approximately the same on a real dollar basis as the cumulative acquisition cost 

of oil for the SPR. Counting ethanol gallon-for-gallon as a gasoline replacement 

(rather than prorating it for energy content, a frequent convention), this implies a 

nominal petroleum displacement cost of about $123/bbl and a real petroleum displacement cost of about $148/bbl—more than twice the displacement cost of the oil 

in the SPR6. 

The proposal in Section 202(a) has historical precedent. In 1996, DOE also conducted three SPR sales for fundraising purposes. It seems unlikely that those sales, 

a total of 27.1 MM bbl, seriously impaired U.S. energy security. On the other hand, 

as I noted earlier, that was then. Not only do differentially tighter global market 

conditions and increasingly volatile geopolitical circumstances inject new risks, but 

the differentially greater size of today’s SPR means that selling it without a strategic catalyst may leave a powerful implicit asset on the table: negotiating power. 

THE OTHER STRATEGIC VALUE OF THE PETROLEUM RESERVE: AN INCONVENIENT TRUCE

Signposts to the SPR.—Most histories of the petroleum industry highlight the concession granted to Standard Oil Company of California by Saudi Arabia to explore 

Hasa Province on May 29, 1933 as the beginning of U.S. reliance on foreign oil, even 

though exploration throughout the Persian Gulf and Arabian Peninsula began decades earlier. In a similar vein, most accounts of U.S. policy responses to oil shocks 

center around the October 17, 1973 Arab Oil Embargo, despite the many smaller 

policy actions taken in anticipation of, or response to, the complications U.S. producers encountered during the four prior decades of producer-led efforts to secure 
72 

7Testimony of Kevin Book before the U.S. Senate Committee on Energy and Natural Resources, April 3, 2008. http://energy.senate.gov/public/lfiles/BookTestimony04308.pdf. 

the market power OPEC enjoys today. Surprisingly, I have encountered very little 

(beyond the DOE website) written about another critical moment within the same 

narrative: November 18, 1985, the date of the SPR’s 967,000 bbl ‘‘test’’ sale, a moment which may have been equal parts proof of concept and de ́tente. 

The defensive ‘‘oil weapon’’.—Recent conversations with former senior U.S. and 

international energy security officials have reinforced my suspicion that the SPR 

may have served, on several occasions, as far more than an insurance policy against 

a supply interruption, but also as a negotiating tool to persuade producers to respond to market dislocations by ramping up production instead of banking scarcity 

premiums. Just as weapons tests during the Cold War gave credibility to nuclear 

de ́tente, the 1985 test sale and 13 other catalyst-driven sales and exchanges since 

1985 may have helped to reinforce petroleum de ́tente. Based on my conversations 

with producers, the DOE projection that a maximum SPR draw could deliver 4.4 

MM bbl/d into the market for 90 days is widely accepted as credible and realistic. 

Payload.—As defensive ‘‘weapons’’ go, 4.4 MM bbl/d is a non-trivial payload: that 

volume is approximately equal to estimated OPEC spare capacity during 1Q2009, 

when the price of oil plummeted below $40/bbl. Although OPEC producers could ultimately outlast price pressures during a full drawdown of the world’s strategic reserves (the SPR plus the other IEA nations’ combined crude and products reserves), 

doing so might prove to be a very costly choice. Not only might the ensuing price 

shock motivate unprecedented OECD investment flows into petroleum alternatives, 

but it’s not clear how well OPEC itself would cohere during an all-out ‘‘oil war’’. 

Given the choice between selling incremental barrels into a tight market and facing 

off against IEA reserves, low-cost producers might prefer to share the gains associated with a coordinated increase in production rather than either (a) reducing revenues and potentially taking losses by undercutting SPR-mitigated market prices; or 

(b) ceding market share to competing, higher-cost producers who might choose to 

opportunistically defect from the cartel. 

CONCLUSION

As I have testified in the past, petroleum fuels about 95% of global demand for 

transportation energy because of economic and physical realities, not ideological 

preferences7. Oil is energy dense, broadly available, physically stable and readily 

shipped. During the 152 years since the Drake well in Titusville, Pennsylvania inaugurated commercial petroleum production, generations of scientists, engineers 

and political leaders have rigorously assayed a wide universe of alternatives. No fuel 

or technology has emerged as an economically viable, scalable or sustainable longterm substitute. 

Although a ‘‘drop-in’’ or ‘‘plug-in’’ replacement for petroleum is unlikely to emerge 

anytime soon, we won’t find one—or even a better way to improve supply diversity— 

if we don’t look for it, and we won’t look if we don’t spend money on it. 

I strongly support this Committee’s continuing efforts to encourage greater vehicle 

efficiency and to explore fuel and vehicle technology alternatives, but not at the expense of this nation’s well-conceived and highly effective energy security insurance 

policy. 

This concludes my prepared testimony. I will look forward to any questions at the 

appropriate time. 

The CHAIRMAN. Thank you very much. 

Mr. Silver, thank you for being here. 

STATEMENT OF JONATHAN SILVER, EXECUTIVE DIRECTOR, 

LOAN PROGRAM OFFICE, DEPARTMENT OF ENERGY 

Mr. SILVER. Thank you, sir. 

Chairman Bingaman, Ranking Member Murkowski, members of 

the committee, thank you for the opportunity to testify today. 

My name, as you know, is Jonathan Silver, and I’m the Executive Director of the Loan Programs Office at the Department of Energy. 

DOE’s loan programs provide critical support for the commercial 

deployment of clean energy and the jobs and economic growth that 
73 

come with it. I welcome the opportunity to discuss the ATVM program with you and to highlight our accomplishments. 

ATVM loans finance the domestic manufacturing of advanced 

technology vehicles and components. In general, the program works 

to increase the overall fuel economy of U.S. passenger vehicles, advance U.S. automotive technology, and protects taxpayer financial 

interest. 

More specifically, we provide loans to auto and auto parts manufacturers to re-equip, expand, or establish manufacturing facilities, 

and for related engineering integration. 

Although established in 2007, the program did not begin processing applications until 2009. We’ve now issued 5 loans for more 

than $8.3 billion and have a number of other large projects in advanced stages of due diligence. The projects we have funded support advanced vehicle manufacturing in 9 States and will create or 

save almost 40,000 jobs. Between them, there will be work going 

on at 19 different factories. 

ATVM loans now support 3 of the world’s first electric car factories. In aggregate, the ATVM projects will save approximately 

282 million gallons of petroleum annually—roughly the same as removing 545,000 passenger vehicles from the road, or more than all 

the cars in Idaho. 

ATVM loans also support the redevelopment of the U.S. automotive supply chain and service network. As examples, more than 

65 percent of the parts for Fisker’s Karma vehicle are expected to 

come from U.S. manufacturers, and VPG’s compressed natural gas 

facility should support about 800 sales, service, parts, and supplier 

professionals. 

Now that the program is successfully up and running, minor 

changes could dramatically improve performance. Let me offer one 

example. 

In contrast to the title XVII programs, the ATVM program does 

not charge fees, and as a result there is a substantial cost that 

could be, but are not, borne by applicants. Since the application 

process is essentially free, some sponsors have submitted projects 

that were basically concept papers, often lacking capital, suppliers, 

assembly operations, distribution channels, and more. The requirement that we review all eligible applications equally means that 

program staff must complete time-consuming and costly reviews of 

these projects, diverting resources for more robust applications. If 

the program charged fees, it could develop a fee structure that 

would help pay for the reviews, and focus work on projects that 

were likely to succeed. 

Let me also take a moment to respond a bit to the GAO report 

on the program that was recently issued, and whose commentary 

you heard earlier. The GAO completed its audit in February of this 

year after an investigation lasting a year and a half. 

In the report, the report notes that we have taken numerous 

steps to successfully implement the program, including establishing 

rigorous technical, financial and environmental eligibility requirements. It also acknowledges that the program has developed effective policies and procedures for overseeing the financial and technical performance of borrowers. The report did make 2 basic rec-
74 

ommendations: that we need to engage more engineering expertise 

earlier, and that we needed better performance metrics. 

Time does not permit a complete response, but I do want to point 

out that on all our transactions we have worked closely with the 

technical experts in the Office of Energy Efficiency and Renewable 

Energy at DOE to review and score each application and, when 

needed, hired the country’s leading independent engineering firms 

as consultants. We disagree with the conclusion that an engineering analysis is required at every stage of development, and believe 

that standardized approaches do not work well in reviewing 

unique, complex transactions. Beginning engineering evaluations 

while designs are still being formulated is costly and of limited 

value. 

With respect to the need for better performance metrics, we 

strongly support the use of solid metrics, and we use many, including net present value calculations, debt-to-equity ratios, debt service coverage ratios, technical scoring metrics, and more, but believe 

that creating hypothetical metrics, such as what might have happened had an OEM and/or its consumers made different choices 

from among the number of changing variables, is unproductive. 

That said, we will continue to try to develop policies, procedures, 

and metrics that are best in class, and which will improve the program’s performance. 

Let me now comment briefly on the language in S. 1001 that addresses the auto loan program. While the administration has not 

yet taken a position on the bill, we generally support expanding the 

scope of the program in ways which benefit our current pool of applicants. 

The proposed definition of ‘‘qualifying components’’ in section 102 

is more expansive than the definition of the same term in the current legislation. It would cover not only components, but systems 

and groups of subsystems, making it easier to finance more complex solutions to reduce fuel consumption in vehicles. 

The proposed definition would also significantly ease the nexus 

test in the existing legislation. Currently, as you know, a component must be both designed for, and installed in, an ATV. The new 

language requires only that a component contribute measurably to 

the overall improved fuel use of an ATV. By not requiring it to be 

designed in, the legislation significantly expands the pool of potentially eligible components. The basic assessment as to whether it 

improves overall mileage is also easier for us to ascertain. 

I would suggest revisiting the definition of the term ‘‘measurably.’’ Presumably, the word is used to mean ‘‘meaningful,’’ as opposed to, ‘‘an improvement capable of being measured,’’ but it is not 

completely clear from the proposal. 

The proposal also adds a new class of qualifying components— 

those designed to improve fuel economy, or the substitution of conventional fuel with alternative fuels and advanced biofuels. This 

addition would also be relevant to our applicants and is helpful. 

While the bill does not specify other ways in which the program 

might be enhanced, it might also be worth exploring how ATVM 

might also support materials and advanced vehicle infrastructure 

manufacturing. For example, the ATVM program could support factories that produce materials for advanced vehicles, which could 
75 

help the emerging U.S. battery industry expand upstream in the 

supply chain and help establish U.S. leadership in lightweight materials. 

The ATVM program could also support factories that manufacture advanced vehicle infrastructure. This would include plug-in 

vehicle chargers and natural gas pumps, and ensure U.S. factories 

are not just producing tomorrow’s vehicles, but also the infrastructure needed to support them. 

Quickly, let me turn to the language in S. 1000 that creates a 

new section 1706 under Title XVII to finance energy efficiency upgrades to existing buildings. While the administration hereto has 

not yet taken a position on the bill, it should be noted that the 

President’s 2012 budget requested $100 million for loan guarantee 

subsidy costs to support up to $2 billion in loan guarantees for 

similar energy efficiency retrofits of universities, schools, and hospitals. We should together perhaps explore what kind of financing 

tools are best suited to support those goals. 

In less than 2 years, the Loan Programs Office has begun to 

meet the expectations Congress had in creating and funding the 

program it administers. We’ve made a meaningful contribution to 

our national clean energy goals, while creating new and permanent 

jobs, and the ATVM program has been instrumental to that effort. 

We look forward to continuing our progress and to working with 

you to ensure that these programs work effectively. 

Thank you again for inviting me here today, and I look forward 

to responding to your questions. 

[The prepared statement of Mr. Silver follows:] 

PREPARED STATEMENT OF JONATHAN SILVER, EXECUTIVE DIRECTOR, LOAN PROGRAM

OFFICE, DEPARTMENT OF ENERGY

INTRODUCTION

Chairman Bingaman, Ranking Member Murkowski, and members of the Committee, thank you for the opportunity to testify today. My name is Jonathan Silver, 

and I am the Executive Director of the Department of Energy’s (DOE) Loan Programs Office (LPO). DOE’s loan programs provide critical support for the nation’s 

commercial deployment of clean energy technologies, and the jobs and economic 

growth that come with them. I welcome the opportunity to discuss the Advanced 

Technology Vehicles Manufacturing (ATVM) Loan Program with you and to highlight our significant accomplishments. 

BACKGROUND OF THE ATVM LOAN PROGRAM

As you know, the Loan Programs Office administers three separate programs: the 

ATVM Loan Program and the Title XVII Section 1703 and Section 1705 loan guarantee programs. The ATVM Loan Program was established by Section 136 of the 

Energy Independence and Security Act of 2007, and provides direct loans to support 

the manufacturing of advanced technology vehicles and qualifying components in 

the United States. As noted by GAO in their most recent report, although the authorizing statute does not specifically identify goals for the Program, ATVM Program staff have established clear goals and performance metrics to measure the program’s success. In achieving these goals, the Program helps create next-generation 

jobs in the automotive and component manufacturing industries. 

The Program provides loans to automobile and automobile parts manufacturers 

for the cost of reequipping, expanding, or establishing manufacturing facilities in 

the United States to produce advanced technology vehicles or qualified components, 

and for associated engineering integration costs. In 2010, Section 136 was amended 

to include ultra-efficient vehicles within the definition of advanced technology vehicles. 

The FY 2009 Continuing Resolution (CR), which was enacted on September 30, 

2008, appropriated $7.5 billion in credit subsidy to support up to $25 billion in loans 
76 

under the ATVM Loan program. The FY 2009 CR also provided DOE with $10 million to administer the Program. On November 5, 2008, DOE issued the Interim 

Final Rule for the Program. DOE accomplished this effort in approximately half of 

the 60-day timeframe mandated by Congress. The program began receiving applications on December 2, 2008. 

The ATVM Program has received numerous applications from both automobile 

original equipment manufacturers (OEMs) and component manufacturers. 

VALUE OF ATVM LOAN PROGRAM

ATVM funding has played a critical role in the development of plug-in hybrid and 

electric vehicles by providing long-term capital when private financing was not 

available. It is important to remember that the ATVM Loan Program is not a grant 

program; loans must be repaid. We review projects on a competitive basis, and we 

do not fund every eligible project. We ensure that the loans we support meet our 

statutory requirement of having a reasonable prospect of repayment. Every project 

that receives financing must first go through a rigorous financial, legal and technical review process—similar to, and in some ways more comprehensive than, what 

a private sector lender would conduct—before a single dollar of taxpayer money is 

put to work. 

Moreover, the programs can efficiently and effectively leverage government resources to spur private-sector investment. The financing provided by the loan programs is ‘‘additive.’’ It is intended to finance projects that—because they would have 

difficulty accessing conventional debt markets—might otherwise not get built. A relatively small amount of appropriated credit subsidy can support large amounts of 

new private sector investment. When a loan is fully repaid, the nation will have 

benefited from the incentivized private sector investment at relatively little cost to 

taxpayers. 

The potential benefits of the Program are great. In addition to improvements in 

fuel economy, ATVM Loan Program projects promote economic growth and job creation. They create construction and permanent operating jobs in manufacturing 

communities where job growth has long been stagnant. In addition, these projects 

contribute to the build-out of the domestic supply chain and manufacturing base 

that we will need to ‘‘win’’ the clean energy future. 

To date, DOE has issued five ATVM loans totaling $8.3 billion. These funds will 

support advanced vehicle projects in nine states and the companies supported estimate these projects will preserve or create almost 38,000 manufacturing or permanent jobs. The Program also provides substantial support to the US automotive supply chain. According to information received from the companies, more than 65 percent of the parts for Fisker’s Karma vehicle are expected to come from US manufacturers, and the VPG facility alone is estimated to support approximately 800 sales, 

service, parts and supplier professionals. In an economic downturn that threatened 

the entire domestic auto industry, the Program helped re-establish US leadership 

across multiple automotive technologies including plug-in, high-efficiency gasoline, 

and natural gas vehicles. 

ATVM loans support three of the world’s first electric car factories in Delaware, 

Tennessee and California, as well as the only factory-built light-duty vehicle to date 

that meets or exceeds accessibility guidelines of the Americans with Disabilities Act. 

In total, our projects will save approximately 282 million gallons of gasoline annually—roughly the same as removing 545,000 passenger vehicles from the roads. 

S. 1000 AND S. 1001

The Administration is continuing to review these bills and does not have a position on them at this time. My comments will be limited to Section 202 of S.1000 

and Sections 101 and 102 of S.1001 as they address issues that would fall under 

the Loan Program Office at the Department of Energy. 

S.1000 would expand Title XVII to finance energy efficiency upgrades to existing 

buildings. The new program would target certain building types, including commercial, industrial, municipal, university, school, and hospital facilities. The President’s 

2012 budget requests $100 million for loan guarantee subsidy costs to support up 

to $2 billion in loan guarantees for energy efficiency retrofits of universities, schools, 

and hospitals. However, as noted above the Administration is continuing to review 

the specifics of this bill. 

S.1001 would add two new categories of vehicles to those now eligible for a loan 

under the ATVM Program. Vehicles currently eligible for ATVM loans include certain light duty and ultra-efficient vehicles. The proposed bill would add medium and 

heavy-duty trucks, bus and rail vehicles, as well as alternative fuel vehicles. These 

vehicles would need to satisfy certain loan eligibility requirements set out in the 
77 

proposed bill, including reducing the consumption of conventional motor fuel. The 

proposed bill would also expand the scope of components that are eligible for a loan 

under the ATVM program. 

The bill would also amend the Title XVII loan guarantee program to include, as 

part of the 1703 program’s mandate, the reduction of oil imports through alternative 

fuel projects. It would also make projects that produce and distribute alternative 

fuel and advanced biofuels eligible for 1703 loan guarantees. 

ADDRESSING THE GAO FINDINGS

As you are aware, the US Government Accountability Office (GAO) completed its 

audit of the ATVM Loan Program in February of this year. The stated objectives 

of the audit were to (1) identify the steps DOE has taken to implement the ATVM 

loan program, (2) examine the ATVM program’s progress in awarding loans, (3) assess how the program is overseeing the loans, and (4) evaluate the extent to which 

DOE can assess its progress toward meeting program goals. The auditors made only 

two recommendations: (i) that the Program accelerate its efforts to engage the engineering expertise needed for effective technical oversight of loan recipients, and (ii) 

that the Program develop sufficient, quantifiable performance measures for its three 

program goals. 

The GAO report noted that DOE had taken numerous steps to successfully implement the ATVM Program. In addition to setting out Program goals for increasing 

U.S. fuel economy as a whole, advancing U.S. automotive technology, and protecting 

taxpayers’ financial interests, the Program also established rigorous technical, financial, and environmental eligibility requirements for applicants. 

The GAO also acknowledged that the Program has successfully set procedures for 

overseeing the financial and technical performance of borrowers, but asserted that 

it did not engage engineering expertise in a timely matter for certain projects that 

need additional technical oversight. First, because of their technical expertise, the 

Program leverages staff in DOE’s Office of Energy Efficiency and Renewable Energy 

(EERE) to determine whether applicants and proposed projects meet the Program’s 

technical eligibility criteria. EERE performs most of the technical eligibility analysis 

for the ATVM Loan Program, and uses a model from the Argonne National Laboratory to analyze certain applicant-provided technical data. Second, as we related in 

our response to the GAO report, the ATVM Loan Program—consistent with its procedures—has regularly engaged both internal and external expertise to help oversee 

borrowers’ compliance with the loans’ technical requirements. In addition to experienced engineers on staff, we have—contracted with the country’s leading independent engineering firms to ensure that the projects are being delivered as agreed. 

These large, private sector firms have decades of experience in monitoring and overseeing complex vehicle and technology projects—and thousands of specialized experts. 

We also disagree with GAO’s recommendations on the appropriate phase to begin 

close technical scrutiny of certain large projects. GAO suggested, for example, a detailed review of the engineering integration stage, which is typically software-based 

design, scheduling, and logistics. A formal engineering assessment at this very preliminary stage would increase transaction costs but would not yield insights that 

would increase effectiveness of the ATVM program. 

For every project supported by ATVM loans, DOE utilizes engineering expertise 

on a regular basis during vehicle assembly and component manufacturing facility 

construction. Given the wide variation in ATVM projects, however, it is neither possible nor prudent to subject them all to an identical engineering review. The Program tailors the review for each project to deploy engineering expertise when and 

where it is most needed in order to achieve the highest confidence in the quality 

of the project and its ability to repay the loan. 

Additionally, the Loan Program’s Portfolio Management Division continuously 

monitors both a borrower’s adherence to the technical specifications in its approved 

business plan, and its financial performance relative to the terms and conditions of 

the loan agreement. Program engineers attend quarterly progress meetings with the 

borrowers and participate in on-site inspections of assembly plants and construction 

sites. Financial covenants are specifically crafted to provide timely warnings to DOE 

prior to a borrower developing financial issues that may impact the project. This 

level of attention gives DOE the ability to closely monitor both the technical performance and financial health of each borrower for the life of the loan. 

The Department also disagrees with GAO’s second stated concern, that the Program has not developed sufficiently robust performance metrics. To support this position, GAO expressed concern that external auditors reported instances in which 

three of the four borrowers did not spend funds as required. The Program has been 
78 

successful in verifying that loan funds are spent by the borrowers as intended by 

the ATVM Loan Program. As GAO reported, the ATVM program uses external auditors to oversee borrowers’ financial performance. Out of $3.5 billion in loan disbursements over fifteen months, DOE’s auditors have identified less than $1 million in 

total funds that were problematic. The largest of the overages, in dollars, represented less than 1/100th of one percent of the relevant loan. Each problem that 

has been identified was corrected immediately, and procedures were quickly put in 

place to ensure that the errors did not occur again. GAO also recommended that 

the ATVM Loan Program develop quantifiable performance measures for ATVM 

Program goals. DOE believes that the ATVM Loan Program has established clear 

performance measures and operated in a manner consistent with its authorizing 

statute and implementing regulations. DOE believes the analyses suggested by GAO 

go well beyond the statutory requirement set out under Section 136. 

CONCLUSION

In the past two years, the ATVM loan program has shown great success. We are 

making a meaningful contribution to our national clean energy goals while creating 

new and permanent jobs. We will continue to administer all of the DOE loan programs, including the ATVM program, in the most effective and efficient way possible—while appropriately protecting taxpayer funds. 

Thank you again for inviting me here today. I look forward to responding to your 

questions. 

The CHAIRMAN. Thank you very much. 

Thank you all for your excellent testimony. 

I think many of the points that you made, Mr. Silver, about the 

ATVM program and improvements that are possible, changes that 

could be made in the law governing that program that would be 

beneficial, I don’t see those in your comments that were submitted. 

Those would be very valuable for us to get in writing, if you could 

give us any specific changes that you think would help in the administration of that program. 

Mr. SILVER. I’d be happy to share that with you. 

[The information referred to follows:] 

There are several potential changes that could aid in administering the program 

and potentially allow it to support more transactions involving smaller companies 

or new entrants. 

DOE has supported a broad range of companies, including large mature companies and start up ventures, and a broad set of projects, including advanced technology vehicle manufacturers and suppliers. DOE is committed to administering the 

program as effectively and efficiently as possible and continuously looks for ways 

to improve the execution of the ATVM program as with all of its programs. A number of bills introduced in Congress contain proposals for amending the ATVM program. The Administration has not yet taken a position on these bills, but is currently reviewing the various proposals. 

The CHAIRMAN. Let me just ask, Mr. Book—I guess your, the 

main point you’re making is that keeping the SPRO the way it is 

is a better bet, considering all the risks and economics involved, 

than using some of it to pay the bills for some of these good purposes. Is that basically the message that you’re giving us today? 

That was—— 

Mr. BOOK. Yes. 

The CHAIRMAN [continuing]. What I understood. 

We currently have in law a requirement that SPRO increase to 

a billion barrels. You think that should be maintained as well? 

Mr. BOOK. I think that seems appropriate as well—not just from 

the genuine risk that presents itself with regard to supply, but 

also, again, from that second order effect. As we become less relevant as a customer for producer nations, it’s probably better to 
79 

have a more powerful defensive negotiating strategy, and a bigger 

SPRO would help. 

The CHAIRMAN. OK. Now, in order to get to that bigger SPRO, 

we’ve got to do a few things around here. We’ve got to spend some 

more money, as I understand it. Is that your understanding as 

well? 

Mr. BOOK. That is my understanding. 

The CHAIRMAN. But, you think it’s worthwhile for us to continue 

pursuing that and to commit those funds? 

Mr. BOOK. As long as energy security is considered a first or high 

priority, this is one of the easiest and cheapest ways to buy it. It 

should not eliminate other energy security spending, and it may 

not need to be first. Whether it needs to be expanded today—unclear. Selling it today, though, certainly seems like a bad idea. 

The CHAIRMAN. OK. 

Let me defer to Senator Murkowski for her questions. 

Senator MURKOWSKI. Thank you, Mr. Chairman. 

Mr. Book, let me continue on with discussion about the SPRO. 

I concur with your statements that, when we’re talking about energy security, a more positive approach or path to take would be 

to produce more. I agree that looking to sell off significant quantities of SPRO oil is ill-advised, and have said so on many, many 

occasions. But, I look at how we can advance good ideas, whether 

it is the legislation that Senators Stabenow and Wyden have been 

working on, whether it’s how we advance energy efficiency programs. Our reality is, we’ve got to figure out a way to pay for them. 

have suggested that one of the ways that we can pay for them is 

to increase our domestic production, take some of those royalties, 

take some of those revenues, and direct them toward these new 

technologies. 

If we want to talk about energy security, that not only allows us 

the resource that we need; it helps in not sending the billions of 

dollars overseas, and it increases our economic security through additional jobs. So, I would hope that we don’t look to a quick fix, 

which I think tapping the SPRO would be. 

But, let me ask you whether you’re aware of any other efforts, 

whether congressional or administrative, to sell off the SPRO oil to 

offset the costs of new technologies. It has been discussed. We want 

to tap into it to lower the price potentially at the pump. But has 

it ever been considered to be used for offsetting the costs of your 

technologies? 

Mr. BOOK. I’m not aware of any. I went and looked back at the 

past sales that were for non-catalyst reasons, and there were some 

deficit reduction sales, 3 of them, in 1996, none targeted toward 

new technologies. 

If I might, to your first point, the notion that you can fund new 

technologies with offshore drilling, without the math error this 

time, to put some numbers to it, there was a company that announced a $700-million-barrel find 250 miles south of New Orleans. 

Senator MURKOWSKI. That was just announced yesterday. 

Mr. BOOK. Yesterday. So, after the testimony was prepared, and 

after I could put the math error in to cover this too. But, at about 

a 40 percent recoverability and $100 of barrel, and a 16 2⁄3 percent 

royalty, that’s $4.6 billion. So, it’s not an insignificant amount of 
80 

money relative to the 14 to 16 we’re talking about from the sale. 

It actually adds to our energy security to have the new volumes of 

oil, plus, we’re getting money, as the Federal Government and as 

a taxpayer, from the producer of, and operator of, that well. That 

means that the average cost of whatever new technology you’re 

spending per barrel of imported oil replaced is actually going to be 

lowered, because there’s a negative number averaging with a positive number. So, it doesn’t just give you energy security. It makes 

the new spending, on an average basis, cheaper. 

Senator MURKOWSKI. Incredibly important. Of course, you’re just 

referring to one—— 

Mr. BOOK. Just one. 

Senator MURKOWSKI [continuing]. New sale. 

Mr. BOOK. One that is, in fact, was in processing and was held 

up, unfortunately, for a little while, that is very successful. 

Senator MURKOWSKI. Yes. 

Mr. Silver, you did not mentioned in your testimony any reference to the pay-for through the sale of SPRO oil. Does the Department of Energy have a position on this proposal? 

Mr. SILVER. Senator, I don’t want to respond for the department 

in that regard because that’s not my area of expertise, but I’ll be 

sure the Department comes back to you with an answer. 

Senator MURKOWSKI. OK. I would appreciate that. 

Let me ask about the ATVM loans. We hear a lot of frustration 

out there from companies that have applied for, but haven’t received, any loans from the program. It’s my understanding that 

just a couple of years ago ATVM had received more than 75 applications seeking more than $38 million in loans. Now, 2 years later, 

just over $8 billion has been provided through just 5 loans. 

What’s happening? Why are these loans so slow to get out the 

door? Is it a lack of viable projects? Is there some other hurdle or 

impediment? This is to both Mr. Silver and Mr. Rusco. 

Mr. SILVER. We have certainly, I think, worked diligently to 

move forward as many projects as we can in as timely a fashion 

as we can. Indeed, I am cautiously optimistic that another several 

will be coming forward shortly. But, it is true—— 

Senator MURKOWSKI. Do you think that 5 loans over a 2-year period is timely enough? Are you satisfied with that? 

Mr. SILVER. We would certainly like to be able to do as many as 

we can as quickly as we can, Senator. That goes without saying. 

I will say, as I referred to in my testimony, that using project finance as the sole financing tool available to the program, which, 

at its most basic, requires the matching of cash-flows to repayment 

streams, and therefore, by extension, clarity into the multi-year 

loan and where the receipts will come from, is, does take a considerable amount of time—particularly with early stage or startup 

projects who have yet to identify exactly where their markets will 

be, and how they will distribute to those markets. 

We have made very significant loans among those 5. I acknowledge that 5 is not a large absolute number. But there are very important energy technologies embedded in those transactions. As I 

said, I expect we’ll be able to issue a few more slowly—shortly. 

The other feature that I mentioned—and this refers specifically 

to components, rather than to OEMs—is that the language in the 
81 

current legislation requires that a component not only be designed 

for, but also be installed in, an advanced technology vehicle. That 

dramatically limits the number of components that actually can 

qualify, since the business ecosystem in which the auto parts manufacturers operate doesn’t really work like that. In other words, 

you’re putting technology into platforms or chassis which are going 

to be produced 3 and 4 years down the road. 

Senator MURKOWSKI. Let me ask—I don’t mean to cut you off. 

But I am well over my time, and I wanted Mr. Rusco to comment 

on this—whether or not we really are moving the loans through in 

a manner that we feel is sufficient. 

Mr. RUSCO. I think it’s very difficult for us to comment on that. 

We, when we looked at the program, we focused on the loans that 

had been issued primarily, and then on the processes of the program in terms of meeting its goals and measuring its performance. 

Senator MURKOWSKI. Mr. Rusco, you have asked for some level 

of measurement, and there’s a little bit of a dispute here between 

GAO and DOE on this. Wouldn’t one of those metrics be how many 

loans were getting out the door? Whether or not we’re meeting the 

need that is out there? 

Mr. RUSCO. Absolutely. The speed at which those can be gotten 

out the door, and compared to some sort of criteria that is reasonable. Maybe project finance in the private sector is not the right 

metric, but it may be one that’s worth looking at. I do think that 

any program that’s spending this kind of money should have those 

sorts of measures. It should be responsive exactly to the potential 

loan recipients and applicants, because those companies are spending a great deal of resources and time applying for the loans, and 

they should be considered, as well, in this. 

Senator MURKOWSKI. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Wyden. 

Senator WYDEN. Thank you, Mr. Chairman. 

Let me just spend a couple of minutes with you, Mr. Karr, talking about the legislation, and then I want to get into this question 

of the offset. Obviously, for colleagues, it’s hard to follow some of 

this math and we’re going to be working with all of you. 

The first point I want to make clear is, Mr. Karr, you all support 

the legislation. You support S. 1001. That’s correct? 

Mr. KARR. Correct. 

Senator WYDEN. OK. Let me read you a sentence from a very 

good article in the Congressional Quarterly about alternative fuel 

vehicles and see if you would agree. I think you would. It says, and 

I quote, ‘‘Energy and transportation experts predict that the longterm race is unlikely to have a single winner. Future drivers may 

use a variety of technologies, natural gas for trucks and fleet cars, 

all-electric vehicles for in-town passenger vehicles, hybrid or fuelcell vehicles for longer trips, and advanced biofuels to lower the oil 

content in conventional gasoline.’’ 

My sense is, by and large, that’s right, and that’s why Senator 

Stabenow and I have laid out that we want to get away from this 

picking winners and losers, because this sets the broadest base for 

the future. Would you generally agree with what I just read? 

Mr. KARR. I think that’s absolutely right, yes. 
82 

Senator WYDEN. OK. That’s the key point. So, I want it understood that as we start this, this legislation has the support of 

America’s automobile manufacturers, and that there’s a reason for 

it, and that is that this is consistent with what experts say we’re 

going to need to do to get millions of vehicles out on the roads of 

this country in the future. I think we all want to do that, and that’s 

why the legislation has been drafted. 

So, let me go now to this question of the pay-for, and obviously, 

we’re going to work with colleagues. I’m going to ask unanimous 

consent—the chair is out of the room—to put into the record a 

spreadsheet that we got from the Congressional Research Service 

that dramatically differs with your math on this, Mr. Book. I’m just 

going to kind of walk, you know, through it. 

Our cap is based on total imports, not net imports, so it actually 

requires more oil to stay in the strategic petroleum reserve than 

your calculations. Now, we’re going to obviously have to sort that 

out, and I know colleagues are going to want to look at that. But, 

I just want to kind of walk people through what the Congressional 

Research Service found for us on this. They estimated that the new 

non-NAFTA import requirement would free up about 12 million 

barrels of oil that could be sold off. At $100 a barrel, that’s $1.2 

billion that can be reinvested in reducing our need for oil each day 

through the use of alternative fuels. Twelve million barrels out of 

a total inventory of 727 million barrels is just 1.6 percent of the 

reserve, or roughly the amount of oil sold from the reserve following Hurricane Katrina to offset supply disruptions in the Gulf, 

which was 11 million barrels. 

So, I only bring this up by way of saying 2 things. First, for colleagues that are interested, we’re going to be working closely with 

you. Obviously, there are differences on math, and Mr. Book has 

not seen the analysis in the Congressional Research Service 

spreadsheet. We’re happy to make that available. I know my friend 

from Louisiana has great interest in these issues as well. 

I think what’s important here is, first, to hear Mr. Karr’s strong 

support for a fresh approach in terms of alternative fuel vehicles. 

So, when you get the legislation, first you have to see, does the policy that underlies it make sense? I think we have clearly shown 

that there’s growing support for this kind of approach. 

Then we’ve got to figure out, like everything else around here, 

how to pay for it. There is a sharp difference of opinion between 

the Congressional Research Service spreadsheet, what you’ve said, 

Mr. Book. I want colleagues to know I’m anxious to work with 

them on this issue. I’m sure Senator Stabenow is as well. People 

have different opinions on these kinds of things, and that’s what’s 

important here. But, I do think that we ought to be looking at ways 

that are a little bit more creative in tough fiscal times to find a 

way to do the important work that our country needs. 

As we thought about it, we said, look, here’s a chance to not hurt 

domestic production. A number of colleagues feel strongly about 

that. We know that our real target in energy policy is shaking free 

from our dependence on foreign oil—just like Canada and Mexico 

we’ve been concerned about it, and that’s why we’ve looked at it. 

I just want our colleagues to know, because time is short—I’ve got 

to go to a budget meeting and may not be able to stay that much 
83 

longer—that there is a very different set of numbers out there done 

for the Congressional, done for us by the Congressional Research 

Service, than you all at your firm have proposed. 

Mr. Book, you obviously would like to make a comment, and 

you’re welcome to. 

Mr. BOOK. If I may. 

I appreciate the comment, and I, again, I realize I’m standing, 

given how I started by opening remarks, on very fragile ground. 

But, with regard to the rest of the math, our interpretation is 

based on our interpretation. Having guidance from you on how to 

interpret it differently would be very helpful. All I had was a 

version of the law publicly circulated and no access, by any means, 

to the Congressional Research Service. 

The interpretation, the way we read it, is that you’re talking 

about 90 days on an annualized basis. So it’s also, I think, for a 

lot of us who are not privy to a lot of the inside discussions, when 

we’re trying to model these things, the obscurity, we’re left to fill 

them in on our own. So, it’s always helpful to have a guideline, and 

I’m very grateful for that opportunity. 

Senator WYDEN. I have no grievance at all with your having a 

chance to, you know, come on up. I just wanted to make clear for 

colleagues that the cap is based on total imports, not net imports, 

so it actually requires more oil to stay in the reserve than the kind 

of approach that you’ve been talking about. That’s important to me. 

I heard the ranking minority member, she and I have worked on 

a lot of bills together. I’m certain my friend from Louisiana may 

have some questions about this. She and I have worked together 

on many bills. We’ll share this analysis with you. 

What we’ve established today, though, is that the car companies 

of this country, who have been watching these rollercoaster approaches that the Federal Government has taken over the years to 

alternative fuel vehicles, they have said that what Senator 

Stabenow and I are advocating is a winning policy for the future, 

so we can get millions of alternative fuel vehicles out on the roads 

of this country. 

Now, we’ll be happy to share the analysis with you, get your reaction to it and. 

Of course, Mr. Chairman, work with you, Senator Murkowski, 

Senator Landrieu, and others on a pay-for. I continue to feel that 

on the basis of the past, we’ve made a lot of headway in putting 

together those kinds of approaches, and somehow we’ll figure out 

a way to do it again. 

I thank you for the time, Mr. Chairman, and also for scheduling 

the hearing. 

The CHAIRMAN. Thank you very much. 

Senator Stabenow. 

Senator STABENOW. Thank you, Mr. Chairman, very much. 

Thank you to my friend, Senator Wyden. It’s always a pleasure 

to work with him.. 

Welcome to all of you. 

Let me first say, Mr. Chairman, that as we are broadly, in our 

legislation, focused on a technology-neutral approach, I also believe 

very strongly in our efforts to promote electric vehicles. So, I don’t 

want that to be in any way viewed as in conflict, because I think 
84 

the goal of a million new electric vehicles on the road is a very, 

very important one. 

I think we’ve made a very critical investment that’s for billions 

of dollars in the private sector around advanced battery manufacturing technology that is a very important part of our future. 

Building that infrastructure is also very, very important. So I’m 

supportive of, I guess, all of the above moving forward because I 

think they’re real opportunities. 

Even though, I would also just say, even though, we talk about 

it in terms of small vehicles—and by the way, we would love everyone to buy a new Chevy Volt and a Ford Focus electric and all the 

new vehicles coming out. We have very exciting work going on for 

medium and heavy-duty trucks, as well and batteries and hybrids. 

So it’s, that’s very important as well. 

I want to talk specifically, Mr. Silver, it’s no surprise to you, 

about how we can do more in terms of moving project approval 

along. You and I have had many conversations on this. 

Let me also then back up, though, before asking you this, just 

to say that, as we put this into the 2007 energy bill, we have seen 

very important impacts that we desired in terms of helping our vehicle manufacturers retool for the future. We added new regulations in the 2007 energy bill around fuel efficiency, CAFE standards, and then part of that, something I was extremely involved in 

championing, was to make sure that the incentives were there and 

the support was there so the jobs would be here. 

I just want go on the record, Mr. Chairman, on one example I 

think I’ve shared with you before. Ford Motor Company was one 

of the early recipients of this. They have retooled a large, a truck 

plant in Michigan, the Wayne truck plant now do make the Ford 

Focus electric and a variety of small vehicles. 

As a result of what they are doing with the batteries related to 

that, we are literally bringing jobs back from Mexico. I don’t know 

very many examples right now, Mr. Chairman, of being able to 

bring jobs back from overseas, and that has happened as a result 

of section 136 and this program. So, I put in a plug for that. 

But, Mr. Silver, let me talk about how we are able to move these 

projects along more quickly. I mean, clearly, there are a number of 

issues, you raised a number, I was very interested in your ideas. 

I want to follow up with you on charging fees. I mean, we right 

now have a lot of different applications. You have to look at each 

of them equally and so on. More broadly looking at materials, infrastructures and so on, I think are very important. But, we are in 

a situation where these projects are extremely complicated and detailed. There are a number of issues around level of risk, which I 

think is something we really have to look at. 

Right now, this program is required to consider separately the 

issue of risk per project, rather than looking at a balance of risk 

more broadly across a portfolio of projects, so that keeps the program from really focusing on higher-risk projects that could have 

a major impact on clean energy savings and efficiencies down the 

road. 

So, I wonder if you might talk about what the department can 

do in terms of improving this application process. This is about 

jobs. We have a lot of, I think, really important projects in the 
85 

pipeline that could create jobs right now if we were able to move 

them forward. In terms of project review, how do we move it forward, and how do we look more broadly at the issues of risk. 

Mr. SILVER. Senator, first, thank you for your ongoing support 

and leadership in this area. It’s been essential to the work that 

we’re trying to do. As you noted, you know, I have talked a number 

of times on this. No one wants this to work more efficiently and 

effectively than we do at the Department of Energy and within the 

administration. 

I alluded to some of the challenges in my oral testimony, and 

you’ve certainly touched on several additional ones. 

One of the other things I would point out is that, perfectly appropriately and quite understandably, applicants working on new 

technologies often evolve and change their business plans as they 

go along and as one would expect them to. I certainly, in my prior 

life, as a venture capitalist, saw that repeatedly. 

We are required as a matter of good practice, if nothing else, to 

essentially re-start our analysis every time there is a significant 

change to a business plan. Volumes change, approaches change, 

distribution networks change and the like, and all of those have 

impacts on the financial structure and viability of the project, and 

by extension on the work that we need to do to analyze it and to 

de-risk these projects. So, we have certainly done the things, I 

think, you would expect us to do. We run much of our analysis concurrently instead of sequentially. We actually have brought our 

credit and origination teams together to work in partnership on 

these transactions, rather than review these projects ad seriatim 

and the like. 

But, the bottom line is that it takes a considerable amount of 

time to pull together the, all the consultant work, the background 

financial work, and the project development work that the companies are doing in order for us to complete our work. 

I expect, as I said in my, in my earlier remarks, that I’m cautiously optimistic that we’ll be announcing several transactions relatively shortly. I believe we’ve made good progress on them. Obviously, as you know, I can’t speak to any specific application. 

But, as we work our way through each of these issues, they become not only easier within the project itself, but easier across 

projects. So given the items you’ve identified just now, the things 

I think I made a reference to, those would all be helpful, indeed 

instrumental in streamlining the process further. 

Senator STABENOW. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Landrieu. 

Senator LANDRIEU. Thank you, Mr. Chairman. I appreciate you 

calling this hearing this morning on several important topics. I just 

want to make a few comments and then direct most of my questions to Mr. Silver about this program that we’re discussing. 

But, first of all, how happy I am, and I think the country is, 

about this Exxon find out in the Gulf. People have been saying, 

‘‘Can America produce more oil and gas domestically?’’ I think the 

answer is clearly yes. 

This is not an insignificant amount of oil and gas. It will be 

found, I think, equivalent to 200 million to 300 million barrels, 

which represents maybe a 20 percent increase in the volume of oil 
86 

and gas produced in the Gulf, which is significant—not a 3 percent 

increase, not a 10 percent increase. But, I think we’re producing 

over a million barrels a day—this is 200 to 300. So, it’s significant. 

No. 1, had the moratorium not been put into effect, which I 

strongly disagreed with and continue to, this find could have been 

identified potentially a year ago, adding not only to emotional security in the Nation, but jobs, et cetera. 

No. 2, with, you know, to the chairman, particularly and to the 

Ranking Member, this find is 250 miles due south of New Orleans, 

about 190 miles due south of Houma, Louisiana. I would contend 

that this country would be unable to secure one drop of oil from 

this find if it weren’t for the energy ports along the Gulf Coast; the 

thousands of miles of pipeline that support operations like this; the 

hundreds of businesses that build the widgets, gadgets, pipes; the 

ports and the workboats that leave our docks every day. 

The thought that this will generate $4 billion when it’s up and 

producing annually for the Federal Government, and not a penny 

will go to these Gulf Coast States that served as a platform now 

for this industry for the last 60 to 70 years, is beyond what this 

senator will take. 

So, I just urge this committee to lean very forward on how we’re 

going to do this, because I cannot, as happy as I am about this find, 

cannot continue to support efforts to mine oil and gas out of the 

Gulf with 4 States, Texas, Louisiana, Mississippi, and Alabama, 

bearing the full responsibility as hosts. 

Now, yes, do we want the jobs? Yes. But, if you look at the map 

of all of the workers from the Gulf, they work and reside in almost 

every State of this union. They are just not citizens of Louisiana, 

Senator Bingaman and Senator Murkowski, and Mississippi. People commute in from Maine. I’ve seen these charts. They come and 

work 2 weeks offshore, and they go back and spend their money 

in Maine. 

Meanwhile, we pick up the responsibility for the canals, for the 

wetlands restoration. So, I just wanted to get that off my chest this 

morning, and our efforts for fair revenue sharing for coastal States 

that are at least equivalent to what interior States receive now will 

go on with some renewed energy. 

Mr. Silver, I appreciate the 5 loans or 7 loans, I’m sorry, in 14 

months. Let me make sure I’m correct. Is it 7 loans? 

Mr. SILVER. It’s 5 loans. 

Senator LANDRIEU. Five loans. Five loans in 14 months, only one 

in the last 16 months. Of the 5 loans, which, were any loans given 

to nontraditional companies? Where did those loans go? One went 

to Chrysler? 

Mr. SILVER. No, ma’am. 

Senator LANDRIEU. Ford? What were the 5 loans? 

Mr. SILVER. Ford, Ford received a loan—battery work for the 

Nissan Leaf. 

Senator LANDRIEU. Nissan, that’s one. 

Mr. SILVER. Tesla. Tesla received a loan for the migration of its 

battery technology into a mid-priced Sedan. Fisker received a loan. 

Senator LANDRIEU. Were Tesla and Fisker already established 

companies, or are they new companies? 
87 

Mr. SILVER. I guess a little bit, it depends on your definition, but 

I would describe them as new companies. They are not established 

OEM providers. 

Senator LANDRIEU. OK. 

Mr. SILVER. Then the VPG is, as you know, a compressed natural 

gas provider that serves—— 

Senator LANDRIEU. So, you say 2, 2 traditional and 3 nontraditional, or 3 established and 2 non-established? Is that the breakdown, you think? 

Mr. SILVER. Our objectives are not based—— 

Senator LANDRIEU. I realize that, but my point is this. I think 

that we need to not only have this program supporting companies 

that have long been in this industry, but companies that are 

emerging and have real potential to create more competition and 

more robust competition around the country. 

If the chairman will give me just one more minute, I think it’s 

important that there be some interest, particularly in viable applications, in emerging companies. 

As you know, we’ve had a 2-year, two-and-a-half-year application 

before the agency for a company trying to emerge out of Louisiana 

so that these jobs can be spread throughout the country and not 

just focused in Michigan and Ohio, where the industry has traditionally been. The South is emerging as quite a powerhouse in the 

automobile, and we’d like to make sure that that remains. Of 

course, we’re happy for the West and the Northeast, but this is not 

just a Michigan-Ohio revitalization effort. 

So, can you give me any updates, not on the specifics, which I 

know you can’t, but we seem to be hung up on this application of 

positive net present value. Can you give just 30 seconds on that? 

Can you also say are you still working with Next Autowworks on 

a daily or weekly basis? Or is this something that we’re ready to 

pull the trigger on one way or the another? Because this has been 

a very tough, and there’s been a lot of the State money and local 

effort going into this, as you know. So, if it’s going to work, we 

want to continue to work with you, and if not, the State can use 

the $65 million that it has in other ways. 

Mr. SILVER. Senator, I appreciate your concern and your questions, and it is certainly our goal to provide financing as efficiently 

and as effectively as we can and without respect to geographic 

focus. Geography is not a screen in the review process for this or 

any of the other projects we do. 

Iin addition, some of the factories that I made mention of in my 

earlier testimony are in fact located in the south. But, it doesn’t 

distract, I think, from, or detract from your fundamental point. 

As you know and as you indicated, I obviously cannot comment 

on the particulars of any individual transaction. But, I will say that 

we meet regularly and we speak very regularly with all of the applicants that are in the due diligence process. 

Senator LANDRIEU. Including this particular applicant? 

Mr. SILVER. Including this particular applicant. 

Senator LANDRIEU. Would you describe it as moving forward or 

stalled? 
88 

Mr. SILVER. I think the, all the applications in the due diligence 

process, by definition, because they got into due diligence, are moving forward. 

As I mentioned in my earlier comments and, in a sense, in response to Senator Murkowski’s question to me as well, speaking generically, when applicant business plans change and when fundamental elements of a particular proposal change, we need to re-set 

in terms of the analysis that we do and essentially commence it 

again, and that is a time-consuming exercise. It is one of the reasons that, you know, it would be attractive to consider ways in 

which, you know, robust applications make their way into the intake process to begin with. 

But I am cautiously optimistic that the projects that we are 

working on now—and there are a number of them in due diligence, 

as you know—will come forward. 

Senator LANDRIEU. OK. 

Finally, Mr. Chairman, I need to bring it to your attention that 

the House of Representatives has taken a million—a billion dollars 

from this program under the guise that there weren’t enough applications pending, or the program couldn’t be used to pay for the disaster relief fund that’s short $3 billion. So, this is another nexus 

between my responsibilities as the Chair of the Homeland Security 

Committee, so I’ve got to get to the bottom of it. 

The House seems to think you have $1 billion that you don’t 

need. There’s a difference of opinion about that. But the bottom 

line is, this fund is about $3 billion to $4 billion short. Even taking 

$1 billion from your program isn’t going to solve the problem that 

we have responding appropriately to the victims of Missouri and 

Tennessee, Montana, including Louisiana and the Gulf Coast. 

Mr. SILVER. Speaking as a citizen, of course, I support anything 

that we can do for, you know, our fellow Americans. 

I will say that, in the group of applicants in due diligence, as I’m 

sure many of you are aware, are one or 2 very, very large OEM 

manufacturers who, should those applications reach successful resolution, would account for a substantial portion of the credit subsidy that remains. There is, certainly, sufficient subsidy to make 

sure that the other applicants in the pool—and we have about 130 

and change in total—that the most robust applications there can 

also be brought forward, and we would be interested in working 

with you all in terms of proposed legalization as to how we could 

make the remaining resources available to the, you know, the opportunities you’ve presented here. 

The CHAIRMAN. Thank you all very much. I think it’s been useful 

testimony. We appreciate it. 

That will conclude our hearing. 

[Whereupon, at 12:01 p.m., the hearing was adjourned.] 
(89) 

APPENDIXES 

APPENDIX I 

Responses to Additional Questions 

RESPONSES OF KATHLEEN HOGAN TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. Both S. 963 and S. 1000 include provisions directed at energy efficient 

Federal buildings. Could you provide for the record your analysis of the programs 

that would provide the largest amount of energy savings for Federal agencies without burdening the agencies with multiple mandates and overlapping programs? 

Answer. Federal agencies are subject to a comprehensive suite of outcome-based 

performance goals, prescriptive process requirements, and performance standards 

for new and existing buildings. Full implementation and compliance by agencies 

with existing mandates would result in significant energy savings as characterized 

below. 

The Government has reduced its energy intensity (Btu per square foot) in buildings by 15 percent in FY 2010 compared to the FY 2003 baseline, meeting the goal 

set under the Energy Independence and Security Act of 2007, and is working toward 

the FY 2015 goal of a 30 percent reduction. 

Recovery Act GSA funds and savings-financed investments for efficiency improvements in Federal facilities, totaling approximately $5.8 billion in FY 2009 and FY 

2010, should keep the Government on track to meet the reduction goals for FY 2011 

(18%) and FY 2012 (21%). Further progress is expected to include performance contracting arrangements that use the savings stream from reduced energy costs to finance the initial investments in infrastructure improvements. Undertaking these 

types of capital improvements and retrofits through direct or financed investment 

is expected to result in the majority of the mandated energy savings. 

Agencies are also implementing the approach for improving facility energy efficiency prescribed by Section 432 of the Energy Independence and Security Act of 

2007. This entails assigning energy managers at designated covered facilities, identifying opportunities by evaluating Federal buildings, investing in the deployment 

of energy efficiency and conservation projects (ECMs), continually monitoring the 

performance of these projects, and benchmarking building performance annually. So 

far, Federal agencies have evaluated approximately a third of the Government’s 3 

billion square feet of facility space and identified potential annual savings of 31 trillion Btu or 9 percent of facility energy use. Approximately $7 billion in potential 

investment was identified, including projects that could potentially save 6 billion 

gallons of water annually. The potential annual cost savings from implementing 

these projects is $600 million. Key types of potential ECMs that agencies identified 

are listed below ranked in terms of number of projects: 

• Lighting improvements 

• Water and sewer conservation systems 

• Heating, ventilation, and air-conditioning improvements 

• Building controls and automation systems/advanced metering 

• Building envelope modifications 

• Boiler plant improvements 

• Energy-related process improvements 

• Electric motors and drives 

• Chiller plant improvements 

• Chilled/hot water, steam distribution systems 

• Distributed generation opportunities, including renewable energy. 
90 

1http://wwwl.eere.energy.gov/femp/technologies/eeplresources.html. 2 ‘‘Potential Energy, Cost, and CO2 Savings from Energy Efficient Government Purchasing.’’ 

Proceedings of the 2000 ACEEE Summer Study on Energy-Efficient Buildings. Asilomar, CA. 

August 2002. 

Additionally, conservation of energy through institutional changes, such as implementation of operations and maintenance best practices, continuous building commissioning, streamlined approaches for procurement of energy-efficient equipment, 

and workforce engagement is also important. 

Another area for energy savings from these institutional approaches is the procurement of energy-efficient products and equipment as prescribed in both the Federal Acquisition Regulations (FAR) Subpart 23.2 and in Section 104 of the Energy 

Policy Act of 2005. By fully complying with the requirement to purchase equipment 

in the top 25 percent of efficiency by category, Federal agencies could potentially 

save from 3 to 12 percent of facility energy use, as estimated for example in an analysis from the American Council for an Energy-Efficient Economy.1, 2 The Federal 

Energy Management Program has increased its focus in this area to assist agencies’ 

compliance and accelerate the uptake of commercially-available, under-utilized technologies 

Question 2. Mr. Crasi made an excellent point about the potential energy efficiency savings that could be tapped in older existing homes compared to new homes. 

I believe he said that an energy retrofit program like HomeStar could work if it 

were simplified and more builders could be involved. Is this something DOE is could 

do? 

Answer. The Department of Energy has a long standing interest in improving the 

energy efficiency of existing homes. The DOE currently has a grant program for existing homes called the Better Buildings Neighborhood Program. Through this grant 

program, DOE has competitively awarded close to half a billion dollars to 41 states 

and local jurisdictions. The purpose of these grants is to test alternative approaches 

to improving the energy efficiency of existing homes. Several grants are designed 

similar to the HomeStar legislation, and all aim to reduce costs to home owners, 

broaden the pool of participating contractors, and reduce the cost of home improvements. DOE closely monitors these projects for important lessons for improving the 

energy efficiency of the nation’s housing stock. Successful grants that have adopted 

the HomeStar approach may prove to be important deployment models. If the results indicate that further simplifications could improve the program, DOE will certainly explore implementing those simplifications. However, many times the seemingly over-complex requirements of retrofit programs are necessary to protect homeowners from poor workmanship. Within these requirements, these projects as well 

as other retrofit programs have sought to include additional builders to the greatest 

extent possible, as well as new construction sub-contractors who have lost their jobs 

because of the housing recession. 

Question 3. Has DOE been briefed on the draft version of the SAVE Act (Sensible 

Accounting to Value Energy Act) ? While the bill affects mortgage underwriting and 

would not be in the Energy Committee’s jurisdiction, I’ve heard from several homebuilders that it would promote cost-effective investments in home energy efficiency. 

Does the Department with the goal of the legislation to reform mortgage underwriting and appraisal policies so that prospective homeowners can benefit from efficiency when financing their home purchase? 

Answer. The Department of Energy (DOE) supports all reasonable efforts to encourage the American public to pursue the use of energy efficiency and renewable 

energy technologies. While DOE does not specialize in mortgage underwriting or appraisal policies, tangible methods that make energy savings affordable and accessible to the American public are laudable goals. 

Question 4. Other than Low-Income Weatherization, what energy efficiency programs for existing homes does DOE manage? (Please provide for the record) 

Answer. The Department of Energy has a long standing interest in improving the 

energy efficiency of existing homes. Through the Recovery Act, the Energy Efficiency 

and Conservation Block Grant (EECBG) provided approximately $2.7 billion in formula grant awards and an additional $454 million in competitive grants for energy 

efficiency and conservation programs. EECBG recipients plan to invest approximately $8 million in residential sector energy audits and $63 million in residential 

sector retrofits. 

DOE’s State Energy Program (SEP) is investing through the states in residential 

energy efficiency, including retrofits in the residential and other sectors.. Through 

the Recovery Act, SEP invested $226 million in residential energy retrofits. States 

also use their annually awarded formula grants, which are cost-shared with the 
91 

3http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110lconglbills&docid=f:h6enr. 

txt.pdf 

states’ own funds, to develop state strategies and goals to address energy efficiency 

and renewable energy, including energy efficiency programs for existing homes. 

DOE currently has a grant program for existing homes called the BetterBuildings 

Neighborhood Program. Through this grant program, DOE has competitively awarded close to half a billion dollars to 41 states and local jurisdictions, largely through 

the use of Recovery Act funding. The purpose of these grants is to test alternative 

approaches to improving the energy efficiency of existing homes. It is the intent of 

these programs to improve the energy efficiency of homes by at least 15%. DOE will 

work with these grantees to assist them making these retrofit programs self-sustaining once the grant funds have ended, and to broaden their programs to nongrantee jurisdictions. 

At the same time, DOE is assuming responsibility for the Home Performance with 

ENERGY STAR Program, a whole house energy retrofit program that had been 

shared by DOE and EPA. Over 110,000 homes have been retrofitted to date under 

this program, with homeowners seeing a range of 15% to 30% energy savings for 

this program. These retrofits are paid either entirely by the homeowner or subsidized in part by a local program sponsor such as a utility. Federal funds are only 

used to set program specifications, provide technical assistance, or to promote the 

ENERGY STAR program. 

DOE also oversees the Building America program which is an industry-driven research program working with national laboratories and building science research 

teams to accelerate the development and adoption of advanced building energy technologies and practices in new and existing homes. The program’s overall goal is to 

reduce home energy use by 30—50% compared to 2009 energy codes for new homes 

and pre-retrofit energy use for existing homes. 

Additionally, DOE runs the Home Energy Score program which allows homeowners to compare their home’s energy consumption to that of other homes, similar 

to a vehicle’s mile-per-gallon rating. 

Finally, DOE’s Appliance Standard program assists in reducing the energy consumption within existing homes. With close to half of the average household’s energy consumption attributed to products and appliances, energy efficiency standards 

for these products help reduce household energy consumption. 

RESPONSES OF KATHLEEN HOGAN TO QUESTIONS FROM SENATOR MURKOWSKI

Question 1. Code Data I am a little concerned that it has been so much trouble 

to produce the data documents to justify DOE’s 30% code improvement. Do you 

know why the process was so difficult? 

Answer. DOE is working to streamline the process of developing and providing 

data to support code improvements. Statutorily, DOE is required to determine 

whether a new version of the energy code improves energy efficiency in residential 

and commercial buildings over the previous version within one year of publication 

of the new version. 

AUTHORIZATIONS AND BUDGETING

Question 2. As we address new authorizations regarding efficiency programs at 

the DOE, it is necessary to understand your existing authorities to fund these programs. As Senator Murkowski requested at the hearing, will you provide us a list 

of all the programs submitted within your budget, with the authority cited to fund 

it, and the amount of the total proposed budget number allocated to each authority 

within the 2012 submitted budget? 

Answer. EERE’s programs have long been authorized through the Energy Policy 

and Conservation Act, and more recently through the Energy Policy Act of 2005 and 

Energy Independence and Security Act of 2007 (EISA 2007)3. All programs within 

SERE, as submitted in the FY 12 budget request, cite EISA 2007 as their funding 

authority, for the entirety of their request. 

Office of Energy Efficiency and Renewable Energy Overview 

Program Authority 

Hydrogen & Fuel Cell Technologies EISA 20071
92 

* Tables have been retained in committee files. 

4http://www.whitehouse.gov/sites/default/files/blueprintlsecurelenergylfuture.pdf 

Office of Energy Efficiency and Renewable Energy Overview 

Program Authority 

Biomass Technologies EISA 20071

Solar Energy EISA 20071

Wind Energy EISA 20071

Geothermal Technology EISA 20071

Water Power EISA 20071

Vehicle Technologies EISA 20071

Building Technologies EISA 20071

Industrial Technologies EISA 20071

Federal Energy Management Program EISA 20071

Facilities and Infrastructure EISA 20071

Weatherization and Intergovernmental Activities EISA 20071

Program Direction EISA 20071

Strategic Programs EISA 20071

1http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110lconglbills&docid=f:h6enr. 

txt.pdf 

OVERLAP AND DUPLICATION

Question 3. Please describe whether any of the programs depicted in the bills before us today could be done within existing authority. If they can’t be done within 

existing authorities please describe why. 

Answer. The attached tables* assess whether DOE has existing authority to carry 

out the programs proposed in S.734, S.948, S.963, S.1000, and S.1001. The Administration is still reviewing these bills and does not take a position on any of them at 

this time. 

RESPONSES OF KATHLEEN HOGAN TO QUESTIONS FROM SENATOR SHAHEEN

Question 1. I understand that the DOE and the Administration need additional 

time to review the legislation before taking a position; however, can you tell me if 

the Department supports the underlying goals of our legislation? 

Answer. The Energy Savings and Industrial Competitiveness Act (S.1000) outlines 

new provisions for building codes, appliance standards, and industrial energy efficiency among other areas. Energy-conserving appliance standards, building codes 

and other efficiency efforts are extremely important steps that can save energy in 

homes and businesses nationwide, and pave the way toward a clean energy future 

for our country.4 DOE will continue to prioritize and support codes and standards 

that will provide the greatest benefits in energy savings for the least cost. 

Question 2. Can you discuss why improvements in model building codes is so important? 

Answer. Buildings consume 40 percent of the energy and 70 percent of the electricity in the U.S. Buildings, by their very nature, are meant to last for decades, 

meaning that a building built today will have an impact on our energy use for 50 

to 100 years or more. Building energy codes set a floor for energy efficiency in new 

construction by establishing minimum energy efficiency requirements for all new 

and renovated homes and buildings. These efficiency requirements affect the design, 

materials, and equipment installed in dwellings and buildings which reduce the en-
93 

ergy inputs needed to maintain healthy, comfortable and fully functioning indoor environments over the life of the building. Because the energy codes can apply to all 

construction, they have the potential to affect energy consumption across all building types and sizes. 

Energy efficiency gains are low or no cost at the time of construction. Alternately, 

going back later to make efficiency improvements can cost much more. Improving 

energy codes/standards generates energy savings in a consistent low cost and long 

lasting manner. However, improvements to state energy codes beyond the national 

model energy codes have typically been slow to occur. Therefore, improvements to 

national model energy codes/standards allow states to continue to align their building construction practices with the latest developments in building methods and 

technologies that result in continued energy savings. 

Question 3. The Recovery Act made federal funds available to states to—among 

other things—help them adopt and enforce building codes. Has DOE been able to 

capture or quantify the improvements from these advancements in code adoption? 

Answer. The Recovery Act provided the opportunity for DOE and the five existing 

regional energy efficiency partnerships (EEPs) to fund 9 statewide energy code compliance evaluation pilot studies. These studies are designed to systematically measure code compliance resulting from new procedures and tools implemented under 

the Recovery Act. The pilot studies are intended to help states in their compliance 

efforts, while at the same time provide valuable insight into the effectiveness of 

these tools and suggestions for their improvement. The pilot studies were implemented over a 10-month period, with final reports, including lessons learned and 

quantitative assessments of code compliance, to be released no later than September 

2011. 

Question 4. Our legislation includes incentives to help states adopt and enforce 

building energy codes. From your experience, can you discuss how the Recovery Act 

funds made available for the same purpose has been received by the states? 

Answer. Investing in efficiency helps stretch local energy budgets so scarce public 

dollars can be spent on other critical needs. With initiatives like the State Energy 

Program (SEP) and incentive funding provided through the SEP, the Department 

supports states’ efforts to achieve their energy efficiency goals. In doing so, the federal government develops partnerships with state energy offices, enabling them to 

leverage technical expertise at DOE. 

When states focus on local initiatives—whether they support energy code training, 

compliance assessments, or building retrofits—they help business owners and residents reduce energy costs while contributing to broader goals, such as stimulating 

economic development, reducing the impacts of climate change, and improving public health. 

The American Recovery and Reinvestment Act of 2009 (ARRA or Recovery Act) 

provided an opportunity for every state to conduct activities aimed at improving 

building energy codes from assistance through either the State Energy Program 

(SEP) or the Building Technologies Program (BTP). 

• Through the State Energy Program, 18 states are spending a small share of 

their SEP grant to support code development, enforcement and compliance 

training 

• Through the Building Technologies Program, technical assistance is provided to 

states in the areas of code adoption, compliance and training. Currently, there 

are 33 adoption, 35 compliance and 17 training activities underway on the state 

level funded through either the Technical Assistance Program or financially 

supported with ARRA funds. 

Our experience with the Recovery Act indicates a rate increase in state adoption 

or improvement of building energy codes over previous rates. For instance, some 

states previously had no statewide energy code but are now adopting the ARRA target codes. However, adoption is only the first step in full implementation, and the 

states still face challenges in adoption, implementation, and enforcement of energy 

codes, in order to realize energy savings through these codes. Lack of training, time, 

and resources have been cited as critical barriers to improved enforcement and increased adoption efforts. It is critical to use the momentum gained with the Recovery Act to support states in realizing the full benefits of energy codes. Investing in 

efficiency helps stretch local energy budgets so scarce public dollars can be spent 

on other critical needs. The incentive funding provided through the SEP and BTP 

allows the Department to develop partnerships and to support states’ efforts to 

achieve their energy efficiency goals by providing technical assistance, analysis and 

tools. 
94 

RESPONSES OF KATHLEEN HOGAN TO QUESTIONS FROM SENATOR COONS

Question 1. With respect to the department’s weatherization assistance program, 

I’d like to ask for your response on the Weatherization Innovation Pilot Program 

(WIPP), the program funded with $30 million in Fiscal Year 2010. We need to look 

at more innovative ways to invest in energy efficiency and retrofit more low-income 

homes. I know the projects funded under this program are still in the early stages 

of implementation, but I would like your thoughts on whether the WIPP program 

has been beneficial and cost effective for DOE thus far? Do you see a future role 

for WIPP to allow qualified nonprofits to maximize the implementation of weatherization? Do you believe innovation can play a role in improving the quality and consistency of weatherization as a whole? 

Answer. Yes, the WIPP program funded with $30 million in Fiscal Year 2010 will 

be a cost-effective program that is beneficial to the Department. 

First, these projects are projected to leverage over $76 million in non-federal resources, over 2.5 times the initial federal grant. This enables more homes to be 

weatherized (18,500 homes projected to be weatherized) with the same federal investment. The projects are just starting implementation, but thus far the grantees 

are executing on schedule to prove these pilot programs will be effective. 

Second, 16 qualified organizations, including non-profits, state and local governments, and for-profit organizations, are participating in WIPP. These grantees are 

bringing together resources on local, regional, and national scales to implement 

weatherization as effectively as possible. The Weatherization Assistance Program 

(WAP) is able to serve the entire nation, but where the confluence of non-federal 

resources and programs exist, WIPP grants enable organizations to expand their 

programs for new pilot projects to demonstrate innovative weatherization delivery, 

financial models and new technologies, making WAP and WIPP effective complements. Future WIPP funding as proposed in the budget for FY 2012 would allow 

an expansion of the organizations participating, including qualified nonprofits, and 

the goals would continue to be to leverage non-federal dollars to weatherize more 

homes. 

Third, the WIPP projects can play a role in improving the quality and consistency 

of weatherization. As the projects begin implementation, we will be reviewing them 

through DOE onsite visits and through independent evaluation and case studies to 

determine best practices and lessons learned. Many innovative aspects of these 

grantees, including financing approaches, healthy homes plus weatherization approaches, and applying new technologies (namely in-home energy monitors to help 

clients understand and reduce their energy use) are new to the WAP. The lessons 

learned from these pilot projects will be very important to their potential broader 

application to weatherization as a whole. 

Question 2. With respect to Senator Carper’s bill, S. 963, the Reducing Federal 

Energy Dollars Act, the bill contains a provision that would expand the government’s definition of renewable energy to include thermal energy. This will allow for 

thermal energy to be counted as renewable for the purposes of federal energy requirements. It would also bring the definition under code in line with the definition 

detailed in President Obama’s green government executive order. In your view, why 

is this change so important and necessary? 

Answer. The Administration is still reviewing the Reducing Federal Energy Dollars Act of 2011 (S. 963) and does not take a position on any of its provisions at 

this time. 

EO 13514 (Sec. 19) includes thermal renewable energy sources in its definition 

of renewable energy. The EO recognizes both renewable thermal and electric energy 

because they both can be used to reduce Federal agencies’ scopes 1 and 2 greenhouse gas emissions. Federal agencies consume thermal energy as well as electric 

energy at their facilities. They can use renewable thermal technologies such as geothermal heat pumps, biomass heating systems, and solar hot water 

systerns.Renewable thermal energy can be a particularly cost effective way to reduce greenhouse gas emissions when displacing electricity tied to heating. (See, for 

example, http://www.nrel.gov/gis/images/femp/graphiclshwe5lratenoincen.jpg) 

Question 3. The Carper bill, S. 963, the Reducing Federal Energy Dollars Act of 

2011 mandates continuous commissioning for all federal property that is over $10 

million in value or larger than 50,000 square feet or has an energy intensity greater 

than $2 a square foot. Commissioning is not the most well-known topic, but it is 

estimated by Texas A&M researchers that as much as 20 percent of the energy used 

in an average commercial building is wasted because of poorly commissioned systems. Could you explain for us what exactly commissioning is and how it could be 

of value for the federal government as it attempts to save energy and cut operating 

expenses? 
95 

5 Commissioning for Federal Facilities, http://wwwl.eere.energy.gov/femp/pdfs/commissioninglfedlfacilities.pdf 6 Commissioning for Federal Facilities, http://wwwl.eere.energy.gov/femp/pdfs/commissioninglfedlfacilities.pdf 7 Commissioning for Federal Facilities, http://wwwl.eere.energy.gov/femp/pdfs/commissioninglfedlfacilities.pdf 8 Commissioning for Federal Facilities, http://wwwl.eere.energy.gov/femp/pdfs/commissioninglfedlfacilities.pdf 

Answer. From the guide ‘‘Commissioning for Federal Facilities’’5: 

‘‘The National Conference on Building Commissioning has established an official definition of total building commissioning as follows: 

‘Systematic process of assuring by verification and documentation, from 

the design phase to a minimum of one year after construction, that all facilities perform interactively in accordance with the design documentation 

and intent, and in accordance with the owner’s operational needs, including 

preparation of operational personnel.’ 

‘‘Total or whole building commissioning differs from ‘‘building commissioning’’ 

inasmuch as the former refers to the whole process from the project planning 

to post-acceptance, as well as to all of the building systems that are integrated 

and impact on one another, such as HVAC, lighting, electrical, plumbing, building envelope and their respective controls and technologies. 

‘‘Building commissioning that is not qualified as total or whole building commissioning may be more selective in terms of the phases during which the commissioning activities actually take place (e.g., the Commissioning Agent may be 

hired to commence work late in the design or during the construction phase) 

or in terms of the systems to be commissioned (e.g., HVAC and electrical systems only). It is essentially a subset, or a slice of the whole building commissioning pie, and for the purposes of this document, the terms will be used interchangeably.’’6

‘‘The goals of commissioning are to: 

• Provide a safe and healthy facility. 

• Improve energy performance and minimize energy consumption. 

• Reduce operating costs. 

• Ensure adequate O&M staff orientation and training. 

• Improve systems documentation.’’7

‘‘Continuous commissioning is a form of remote intelligence. The primary 

focus of continuous commissioning is ensuring the persistence of building systems optimization. It is an ongoing process for existing buildings, employed to 

resolve operating problems, improve building comfort and safety, optimize energy use, and improve system reliability.’’8

Most Federal buildings are not equipped for continuous commissioning, and there 

are few Federal employees or contractors who possess the skills required to implement continuous commissioning. While there are potential savings, implementing 

continuous commissioning at Federal facilities would take significant additional resources. 

RESPONSES OF JONATHAN SILVER TO QUESTIONS FROM SENATOR BINGAMAN

Question 1. The Advanced Technology Vehicles Manufacturing program currently 

has funding for some additional lending. Do you have any estimates of how much 

of your remaining capacity could be used by the current applicant pool? With the 

modifications in this bill to clarify the situation with component suppliers and add 

medium and heavy-duty trucks, would you expect that to use your remaining capacity? 

Answer. The ATVM Loan Program has a strong pipeline of applications from a 

broad range of companies and projects. The 2012 Budget estimates that the program 

will use the remainder of the program’s appropriated credit subsidy. 

Question 2. The program also has allowed grants instead of loans, but Congress 

has never appropriated dollars for that portion. Do you have any thoughts on 

whether grants may be a good fit for some projects? 

Answer. As a general matter, grants may be a more efficient form of supporting 

early stage projects. DOE has not specifically evaluated whether grants would be 

appropriate for any of the projects that have applied to the ATVM loan program or 
96 

requested funds for these purposes, although some of the projects that have applied 

have not been sufficiently mature to qualify for debt financing. 

Question 3. Are there additional changes to the program that could aid in administering the program and allow you to do more transactions with smaller companies 

or new entrants? 

Answer. DOE has supported a broad range of companies, including large mature 

companies and start up ventures, and a broad set of projects, including advanced 

technology vehicle manufacturers and suppliers. DOE is committed to administering 

the program as effectively and efficiently as possible and continuously looks for 

ways to improve the execution of the ATVM program as with all of its programs. 

A number of bills introduced in Congress contain proposals for amending the ATVM 

program. The Administration has not yet taken a position on these bills, but is currently reviewing the various proposals. 

RESPONSES OF JONATHAN SILVER TO QUESTIONS FROM SENATOR MURKOWSKI

ATVM LOANS

Question 1a. We regularly hear from companies that have applied for, but not received a decision on, loans from the ATVM program. It’s a source of considerable 

frustration for many of those companies. 

We’ve heard for months now, in this committee and elsewhere, that ATVM is on 

the verge of providing multiple additional loans. Can you provide an update on how 

many applications have been received, how many loans are currently under consideration, and when it is likely that DOE will make a decision on them? 

Answer. The ATVM loan program has a strong pipeline of applications. DOE has 

offered loans or conditional commitments to seven projects to date, including the recent announcement of a conditional commitment to Severstal and one additional 

conditional commitment that did not proceed to closing. DOE is currently reviewing 

additional applications. 

Question 1b. How did some companies make it through the application process so 

quickly, while others’ applications are still in review? 

Answer. All applications are reviewed using the same eligibility and underwriting 

criteria. But every application and project is different, and the amount of time that 

it takes for a given application to successfully move through the due diligence process depends on the specific details of that project, and its ability to meet our underwriting standards and demonstrate that it represents a prudent investment of taxpayer resources. In addition, the timeline is often driven by the applicant who often 

needs to meet other requirements and/or negotiate with other stakeholders involved 

in the project before due diligence and be completed. 

LOAN GUARANTEE ELIGIBILITY

Question 2. To what degree are transportation projects—whether for production 

of vehicles or the development of infrastructure—currently eligible for loan guarantees? If an auto manufacturer applied for a loan guarantee today, would their application be rejected because it does not explicitly match the criteria listed in EPAct 

2005, or does DOE believe the current criteria are sufficient to provide eligibility 

for such projects? What sort of expertise can DOE currently draw on to help evaluate transportation-related projects? 

Answer. ‘‘[P]roduction facilities for fuel efficient vehicles, including hybrid and advanced diesel vehicles’’ are eligible for loan guarantees pursuant to Section 

1703(a)(8) of EPAct 2005. 

Section 1703 does not provide loan guarantees for transportation infrastructure 

projects, although there are other programs in the federal government that do. In 

evaluating transportation-related projects, the Department is able to draw on the 

expertise of the EERE Vehicles Technology Program staff and the ATVM program 

staff and expert consultants. 

RD&D PROGRAM

Question 3. Section 109 of this bill outlines a $500 million research, development, 

and demonstration program for alternative fuel vehicles and technologies. Right 

now, however, there is already a Vehicle Technologies Program at DOE. How do you 

see these programs interacting? Is it necessary to have another program focused on 

many of the same areas? 
97 

* Tables have been retained in committee files. 

Answer. The attached tables* assess whether DOE has existing authority to carry 

out the programs proposed in S.1001. The Administration is still reviewing this legislation and does not take a position on it at this time. 

ATVM BASE YEAR CALCULATIONS

Question 4. I understand the 2007 energy bill has been interpreted as requiring 

ATVM projects to achieve at least 25 percent greater fuel economy than the 2005 

base year standard. As fuel economy standards increase in the years ahead, will the 

‘‘base’’ standard move with it to ensure that projects continue to produce vehicles 

with greater and greater efficiency? For example; if a loan is awarded next year, 

in 2012, would the vehicles need to be 25 percent above the 2005 standard or the 

2012 standard? What are the advantages and potential disadvantages of establishing a steadily-increasing base year standard? 

Answer. In order to qualify as an advanced technology vehicle (ATV) under the 

Interim Final Rule (IFR), an applicant must demonstrate that the subject vehicle 

meets the definition of an advanced technology vehicle—that is, the vehicle is expected to achieve ‘‘at least 125 percent of the average base year combined fuel economy for vehicles with substantially similar attributes,’’ as well as to meet EPA emissions standards. This statutory standard required DOE to define ‘‘substantially 

similar attributes’’ and choose a base year against which DOE could measure the 

125 percent improvement. To define ‘‘substantially similar attributes,’’ DOE researched other related rules and then developed its vehicle classes largely based on 

EPA’s size-based vehicle classes existing at the time of the Interim Final Rule. Similarly, in the Interim Final Rule implementing the ATVM program, the agency chose 

2005 as the base year for measuring fuel economy improvement in part because 

model year 2005 CAFE compliance data were fully available when the Interim Final 

Rule was being drafted, and, because Congress had selected model year 2005 in the 

statutory test for manufacturer eligibility. For these reasons, DOE determined that 

using model year 2005 would promote efficient and effective administration of the 

program. In application, this rule means, for example, if a loan is awarded in 2012, 

eligible vehicles would need to meet a fuel economy performance at least 125% of 

the average fuel economy of substantially similar vehicles from MY 2005. 

ATVM ELIGIBILITY

Question 5. In November 2010, ATVM awarded a $50 million conditional loan to 

a company that plans to produce vehicles that run on compressed natural gas. Does 

this loan indicate that DOE believes that alternative fuel vehicles already qualify 

for the ATVM program? 

Answer. Alternative fuel capability, alone, does not ensure eligibility under the 

ATVM Loan Program. In order to qualify as an advanced technology vehicle (ATV) 

under the Interim Final Rule (IFR), an applicant must demonstrate that the subject 

vehicle meets the definition of an advanced technology vehicle—that is, they are expected to achieve ‘‘at least 125 percent of the average base year combined fuel economy for vehicles with substantially similar attributes,’’ as well as to meet EPA emissions standards. 

ATVM RECOMMENDATIONS

Question 6. During the hearing, you made a number of legislative recommendations for the ATVM program. Please summarize those recommendations for the 

Committee, and any other suggestions DOE believes are appropriate at this time. 

Answer. DOE has supported a broad range of companies, including large mature 

companies and start up ventures, and a broad set of projects, including advanced 

technology vehicle manufacturers and suppliers. DOE is committed to administering 

the program as effectively and efficiently as possible and continuously looks for 

ways to improve the execution of the ATVM program as with all of its programs. 

A number of bills introduced in Congress contain proposals for amending the ATVM 

program. The Administration has not yet taken a position on these bills, but is currently reviewing the various proposals. 

SPR SALES

Question 7. Please provide the Administration’s views and position on Section 202 

of S. 1001, which would require the Department of Energy to substantially reduce 

the size of the Strategic Petroleum Reserve. 
98 

* Tables have been retained in committee files. 

Answer. With regard to the proposal to reallocate prior year funds appropriated 

for the Strategic Petroleum Reserve and to use proceeds from Reserve oil sales and 

exchanges to support alternative fuel vehicles development, the Administration is 

continuing to review Title II and has not developed a position at this time. 

AUTHORIZATIONS AND BUDGETING

Question 8. As we consider new or expanded authorizations for vehicle technology 

and loan programs at the DOE, it is necessary to understand your existing authorities. Please provide the Committee with a list of all vehicle-related authorizations 

available to the Department of Energy, as well as an explanation of how those authorities are reflected in the funding proposals in DOE’s Fiscal Year 2012 budget 

request. 

Answer. The Department has two programs that include vehicle technology: LPO’s 

ATVM program and EERE’s Vehicle Technologies Program. The 2009 Continuing 

Resolution appropriated $7.5 billion in credit subsidy to provide up to $25 billion 

in loans to eligible projects under the ATVM loan program authorized by the Energy 

Independence and Security Act of 2007. The President’s FY 2012 budget requests 

funds to administer the program, including funds to monitor the loan portfolio. 

The Office of Energy Efficiency and Renewable Energy’s Vehicle Technologies Program activities are authorized in the Energy Policy Act of 1992, Energy Policy Act 

of 2005, and the Energy Independence and Security Act of 2007. The President’s 

budget request for FY 2012 would provide support for key activities including research and development of batteries and electric drive technologies, advanced combustion engines, materials technologies, and fuels technologies; vehicle systems simulation and testing; and vehicle technologies deployment, outreach, and analysis 

(EPACT 1992, EPACT 2005, EISA 2007). In addition, it would support a proposed 

competitive community grant program, administered through the Clean Cities initiative, to accelerate market adoption of electric drive vehicles (EPACT 1992). 

OVERLAP AND DUPLICATION

Question 9. Please describe whether any of the programs and activities within S. 

1001 - as well as two bills considered at our recent legislative hearings, S. 734 and 

S. 948 - could be undertaken with existing DOE authorities. To the extent that new 

authorities are necessary to carry out the provisions or programs within any of 

those bills, please explain. 

Answer. The attached tables* assess whether DOE has existing authority to carry 

out the programs proposed in S.734, S.948, and S.1001. The Administration is still 

reviewing these bills and does not take a position on any of them at this time. 

RESPONSES OF JONATHAN SILVER TO QUESTIONS FROM SENATOR COONS

UTILIZING OTHER FINANCIAL CREDIT MODELS

Question 1. In my state, the Delaware Sustainable Energy Utility has successfully 

managed a loan program for energy efficiency investments in residential and commercial buildings for over a year. Can you envision a way in which unique financing 

organizations like Delaware’s Sustainable Energy Utility would be eligible, in cooperation with the state energy offices, to put the federal program funds to use? 

Answer. While organizations like the one you discuss are not eligible for ATVM 

loans or Title XVII loan guarantees, the Administration recognizes the importance 

of financing energy efficiency retrofits for existing buildings. The President’s FY12 

budget requests $105 million, as part of the Better Buildings Initiative, to create 

a pilot program to provide loan guarantees to finance such retrofits for hospitals, 

schools, and universities. 

DOE LOAN GUARANTEE PROGRAM—ENERGY EFFICIENCY UPGRADES FOR THE EXISTING

BUILDING STOCK

Question 2. I was particularly drawn to the opportunities of a provision in S. 1001, 

the Shaheen/Portman bill that expands opportunities for municipal, university, 

schools, and hospitals (MUSH) buildings through the DOE’s loan guarantee program. The University of Delaware has been implementing a number of renewable 

and energy efficiency measures on campus. This includes the installation of a solar 

project, a green roof for a major laboratory building, energy efficient lighting in a 

parking garage, HVAC upgrades, and other projects. The needs and opportunities 

in local government, hospital, university and other buildings are tremendous. Are 
99 

these the types of measures that you could envision benefiting from such loan guarantees? 

Answer. The Administration recognizes the importance of financing energy effi- ciency retrofits for existing buildings. The President’s FY12 budget requests $105 

million, as part of the Better Buildings Initiative, to create a pilot program to provide loan guarantees to finance such retrofits for hospitals, schools, and universities. 

CLEAN ENERGY DEPLOYMENT ADMINISTRATION (CEDA) AND SECTION 136 VEHICLE

TECHNOLOGIES LOAN GUARANTEE PROGRAM

Question 3. The Advanced Vehicle Technology Manufacturing (AVTM) loan guarantee program has been very successful to date. This includes one project financed 

in my state—Fisher Automotive, and there are four other AVTM projects that have 

been finalized. At the same time, about half of the original $7.5 billion in budget 

authority remains in the program for financing additional projects. This committee 

is considering the Clean Energy Deployment Administration. That entity would supersede and incorporate the DOE’s innovative loan guarantee program. CEDA 

would also have the authority to delegate other financial programs to CEDA. It does 

not currently designate moving the AVTM program into CEDA. Given that the remaining authorities of the 1703 loan guarantee program would be moved into 

CEDA, do you see significant hurdle by moving the remaining funding and existing 

authorities of the AVTM as well should Congress pass it and the administration set 

it up? 

Answer. The Administration has not yet taken a position on CEDA or its relationship with the ATVM program. The Department of Energy is committed to administering the ATVM program in an efficient, effective, and responsible manner. 

RESPONSES OF JONATHAN SILVER TO QUESTIONS FROM SENATOR PORTMAN

Mr. Silver, as you know, a project with significant national security and energy 

security benefits for our nation is the American Centrifuge Project located in Ohio. 

This project will also create thousands of jobs at a time when we need those jobs 

in Ohio and in our nation—about 8,000 jobs with about 4,000 of those in Ohio. 

Secretary Chu in a call on April 15 advised Senator Brown and I that he was 

pushing hard to keep this project on track for the possibility of a conditional commitment by June. 

Question 1. Where does the loan application for this project stand and what is the 

current timing for issuing a conditional commitment? 

Answer. The Department cannot provide information on individual applications. 

Question 2. What can be done to expedite the DOE-OMB review and credit-subsidy process for the project and for DOE loan guarantees generally? 

Answer. DOE and OMB work closely together in reviewing the credit subsidy cost 

estimates for all DOE loan guarantees to ensure as timely a review as possible 

while also ensuring all estimates accurately reflect all appropriate costs to the government. 

Question 3. Secretary Chu has previously testified that national security value 

should be considered in the credit subsidy calculation. 

What is DOE doing to ensure that the national security value of the ACP is considered in the credit subsidy cost calculation to achieve a full and fair calculation? 

Answer. Credit subsidy costs for the Title 17 loan guarantee program are calculated consistent with the Federal Credit Reform Act of 1990, as amended. For 

each project, the credit subsidy cost reflects DOE’s analysis of the risks associated 

with the project, including its analysis of the borrower, the project and the financial 

prospects of both. We are working closely with OMB on this issue. 

RESPONSES OF JONATHAN SILVER TO QUESTIONS FROM SENATOR SHAHEEN

The President’s Better Building Initiative seeks to make improvements in the residential, commercial and municipal school university and hospital (or MUSH) building sectors. The initiative calls for a variety of tools to catalyzing private sector investment in these building sectors, including the expansion of the Department’s 

Loan Guarantee Program to cover building retrofits. 

The potential for efficiency gains in our existing building stock is enormous. More 

than 70% of the commercial buildings in this country are older than 20 years and 

these buildings are significantly less efficient than buildings built today. Improvements to these types of buildings can improve efficiency by 20 to 40% using widely 

available technologies and the payback period can be as little 5 years. 

As you know, one of the key barriers to unlocking the potential of retrofitting of 

existing building stock is access to capital. That’s why Senator Landrieu and I intro-
100 

duced legislation last Congress which would help unlock this potential by expanding 

the DOE Loan Guarantee program to retrofit commercial and industrial buildings, 

schools and universities, and hospitals so that they can be renovated to be more energy efficient. We included this provision in S. 1000. 

Question 1. Would you agree that there is enormous opportunity to create jobs 

and save money by making energy efficiency retrofits to existing buildings? 

Answer. The Administration agrees that making energy efficiency retrofits to existing buildings will create jobs, save money, reduce our energy consumption, and 

enhance our energy security. 

Question 2. Do you think an expansion of the DOE Loan Guarantee Program, 

such as our legislation or the President’s Better Buildings Initiative, to cover building retrofits could leverage private sector financing for building retrofit projects and 

achieve the goals I mentioned? 

Answer. While the Administration does not yet have a position on 5.1000, the Administration does believe that federal financing may be an appropriate tool to leverage private sector investment and stimulate energy efficient building retrofits, as 

evidenced by the President’s 2012 budget, which requests $105 million to create a 

pilot program to provide loan guarantees to finance such retrofits for hospitals, 

schools, and universities. 

LOAN SUBORDINATION

One of the concerns we’ve heard from the real estate community is over senior 

lien status of a loan guarantee. 

As you may know, one of the challenges we face is that when the loan guarantee 

program was originally created in 2005, it included provisions to ensure that debt 

obligations backed by federal loan guarantees must not be subordinate to other financing. These provisions were adopted with larger, potentially riskier investments 

in mind, such’ as new nuclear plants, CCS projects, and large-scale solar projects 

in mind. 

However, the challenge we face in expanding the loan guarantee program to cover 

building retrofits is that a fundamental tenet of real estate finance is that in the 

event of a default, the lenders will be paid first before others. They have mortgage 

superiority. Potential borrowers would be in breach of contract of their mortgage if 

they applied for a loan guarantee that contained the same senior lien provisions 

that apply to more expensive and riskier transactions, such as a nuclear power 

plant. 

Question 3. Would you agree that the risks of a building retrofit project, which 

uses commercially available technologies, is less than a new nuclear power plant or 

CCS project? 

Answer. Project risk cannot be detelinined in the abstract; determining the risk 

of any project is a highly fact-based exercise. Building retrofit projects face different 

risks than energy generation projects. 

Question 4. Would you be willing to work with us on this loan subordination issue 

to craft language that minimizes risk to the federal government while at the same 

time leveraging the Loan Guarantee program to attract more private capital to the 

building retrofit market? 

Answer. Per Federal credit policies, credit assistance should be provided in a manner that most efficiently and effectively achieves the policy goal, while minimizing 

risk and cost to the taxpayer. Generally, the Government’s claims should not be subordinated to the claims of other creditors. Subordination increases the risk of loss 

to the Government since other creditors would have first claim on the borrower’s 

assets. We look forward to working with Congress on legislation to support energy 

retrofits. 

RESPONSES OF KEVIN BOOK TO QUESTIONS FROM SENATOR MURKOWSKI

SPR SALE

Question 1. Can you provide the Committee with a sense of how the United 

States’ energy security would be impacted by increased domestic oil production, as 

compared to a decision to sell significant quantities of SPR oil? 

Answer. Producing oil in the United States has benefits above and beyond the 

physical attributes and financial value of the oil itself. 

The most obvious of these is differentially lower disruption risk. During times of 

heightened geopolitical risk, a barrel produced within our borders may be more likely to reach refineries located within our borders than a chemically-identical barrel 

produced overseas that might be intercepted or delayed. In this sense, domestic pro-
101 

duction provides supply assurance even if it does not provide price insurance, because global crude prices generally rise together. Even so, domestic energy consumers should theoretically assign higher risk-adjusted values to domestic energy 

sources to reflect their reduced costs of buying hedges and building inventories to 

mitigate supply risks. 

There are other potential benefits, too, including: creation of well-paying jobs (and 

the capture of corresponding tax revenues); government revenue streams from bid 

bonuses, rents, permits and royalties; opportunities for innovation and development 

of improved business practices; and a politically-stable environment within which 

U.S. companies might improve the performance and profitability of technologies 

with potential for sale overseas (e.g. ultra-deepwater drilling and shale gas production). 

By contrast, selling significant quantities of SPR oil in a non-emergency situation 

could diminish domestic refiners’ assurance of stable supplies in the event of a future disruption. Sales that are sufficiently large and priced sufficiently low to temporarily depress U.S. market prices could deter domestic production and erode the 

value of industrial consumers’ hedging investments, as well. Finally, SPR sales are 

unlikely to encourage U.S. producers or refiners to become productive or more innovative. 

GENERAL POLICY EMPHASIS

Question 2. In your written testimony, you noted that ‘‘subsidizing or assuring 

loans can, in many cases, promote diffusion of innovative technologies at lower taxpayer cost than paying out cash grants or ‘tax equity’.’’ We’ve had quite a range of 

policy proposals come before our committee this year, on vehicles and other topics. 

Generally speaking, can you expand on the types of energy policies that would promote innovation and, at the same time, make the best use of limited taxpayer dollars? 

Answer. Federal guarantees of private commercial loans make borrowing cheaper 

by bolstering borrowers’ creditworthiness. In some cases, loan guarantees make borrowing possible, especially for innovative firms pursuing new technologies in the absence of long performance records, but also in the case of mature companies contemplating infrastructure investments so large that they rival the enterprise values of 

would-be project sponsors, as with electric utilities building nuclear power plants. 

Selection and due diligence are important. A portfolio that balances projects with 

diverse risk profiles may serve the public interest much better than a program that 

allows companies to obtain cheaper credit than their otherwise-identical competitors 

or to secure loans for which they may be unworthy. Comparing a single technology 

in a single circumstance, however, a loan guarantee can optimize the benefit to the 

project sponsor per tax dollar spent, a ratio I sometimes refer to as ‘‘return on tax’’ 

because it measures the subsidy efficiency of the taxpayer outlay. 

For example, a wind farm operating at a 33% capacity factor over a 20-year operating life with a capital cost of $2,000/kW, financed with 20% equity at 15% and 

80% debt at a 12% interest rate over a ten-year period, would theoretically generate 

power at a ‘‘levelized’’ cost of about $0.055/kWh. (This example excludes startup 

time, rental fees and O&M costs for the purposes of illustration; real generating 

costs would be about $0.015/kWh higher). 

The project sponsor could lower his or her generation cost to $0.046/kWh with a 

ten-year production tax credit of $0.021/kWh by selling the ‘‘tax equity’’ of the credit 

stream to a financier and offsetting the cost basis of the project with the proceeds. 

Taking a 30% investment tax credit at the end of the first year would reduce the 

generation cost to $0.40/kWh. Taking that 30% as an outright grant would bring 

generation costs down a little further, to $0.39/kWh. Each of these provides a big 

‘‘pop’’ to the project sponsor relative to his or her unsubsidized generation cost. 

Guaranteeing the loan, assuming a 10% default risk and government-borne credit 

subsidy costs of 14% of the expected value of the default (10% times the value of 

the loan) would lower the generation cost less dramatically, to $0.48/kWh. On the 

other hand, the subsidy cost of doing so would also be lower than giving ‘‘equity subsidies’’ to the project sponsor. In other words: the project sponsor would get more 

benefit for every tax dollar spent. 

The table below highlights the differences in the subsidy efficiency of taxpayer 

outlays in each case. For every dollar taxpayers spend on the ten-year PTC in this 

example, the project sponsor takes home only 45%. A 30% ITC delivers 141%; an 

outright grant delivers 159%, but a loan guarantee delivers 227% return on tax. 
102 

OFFSHORE PRODUCTION REVENUES

Question 3. During the hearing, you estimated that the federal revenues associated with the production of oil and gas at just one recent discovery in the Gulf of 

Mexico could total $4.6 billion. Please summarize for the Record how you calculated 

that figure. 

Answer. Assuming that the 700 MM bbl find is 40% recoverable (a high, but reasonable number over the operating life of the well), a $100/bbl crude price and a 

16.67% federal royalty rate, the federal government would receive a nominal total 

of $4.667 billion in royalties, exclusive of any volumes suspended from royalty payments, but also excluding the value of any associated gas and natural gas liquids. 

This number excludes the other sources of revenue a deepwater well might provide, including (1) the bid bonus received at the time of the lease sale; (2) federal 

rents; and (3) any permit and user fees assessed by BOEMRE, as appropriate. The 

most significant of these may be the bid bonus because, unlike royalties, rents and 

fees, the federal government receives the bid bonus at the time of sale irrespective 

of whether the operator bidding on the lease ever produces the asset in question. 

It isn’t clear how bidders will price Central GOM real estate in the next sale in light 

of the recent find, but I would suggest that they would probably pay bigger bid bonuses for ten-year leases than they would for five-year leases, reflecting the ‘‘option 

value’’ that comes being able to optimize production choices for market conditions 

and to scale infrastructure costs across an extended development program. 

OIL IMPORTS

Question 4. What is the typical convention used when discussing oil imports from 

an energy security standpoint? 

Answer. When discussing petroleum imports from an energy security perspective, 

government and industry economists typically discuss ‘‘net imports’’—the difference 

between total inbound volumes and total outbound volumes. Doing so takes into account the extent to which many countries simultaneously import and export petroleum and, in the short term, may be unable to redirect outbound volumes due to 

commercial obligations and infrastructure limitations. Gross imports would be appropriate when discussing the security risks confronting a country that does not export any petroleum, but this does not apply to the United States. 
103 

RESPONSES OF KATERI CALLAHAN TO QUESTIONS FROM SENATOR COONS

WEATHERIZATION ASSISTANCE PROGRAM

Question 1. With respect to weatherization, do you believe that qualified nonprofits could play a role in reducing energy use and cutting utility bills for low-income homeowners by leveraging private funding? If so, do you have thoughts on the 

ways we can expand opportunities for nonprofits and other organizations to help 

with weatherization? 

Answer. In general, the Weatherization Assistance Program (WAP) network has 

evolved over the past thirty years, with a focus on best practices and standards for 

excellence that have been an example for the wider energy efficiency retrofit industry. The existing WAP network leverages a significant amount of private and other 

funding along with federal dollars. 

That said, we recognize that non-profit organizations can play a role in reducing 

energy use and cutting utility bills for low income homeowners by leveraging private 

finding with respect to weatherization. Non-profits can seek to obtain private financing through community development loan funds, or private banks willing to finance 

energy efficiency improvements, as well as seek matching grants. We believe that 

the non-profits can most effectively play a role in supplementing the WAP network 

in areas of the country where the existing networks for whatever reason need additional resources to fully realize weatherization goals, and we would point to the innovation grants awarded recently by the Department of Energy as examples of creative use of non-profit resources to supplement the existing WAP network. 

Question 2. I also wanted to ask you specifically about your thoughts on financing 

and private sector leverage for residential energy efficiency. Do you think the private sector can play a role in weatherization for low-income homeowners? In your 

work with the Alliance and its partners, are the private sector and non-profits ready 

to play a greater role in weatherization? 

Answer. Due to funding limitations, WAP has always been able to meet only a 

fraction of the need for low-income weatherization. The difficulty of today’s fiscal climate makes finding opportunities for creative involvement of the private sector in 

improving energy efficiency in low income households even more of a necessity. 

Leveraging private investment funds for residential energy efficiency will be necessary to finance energy efficiency measures for low-income homeowners at a time 

when dollars for federal programs such as the Weatherization Assistance Program 

are severely limited. Public advocates for energy efficiency in low income households 

must leverage marketing investment opportunities, and tap private and public investment capital, as well as market the potential of low-income weatherization to 

generate profits in energy savings to further entice private investors to seek investment opportunities. 

Creative private financing could also be important in the multi-family housing 

sector, which often has not been well-served by the existing WAP structures. For 

example, low-income housing developers could contract energy service companies 

(ESCOs) to carry out energy saving projects that guarantee estimated savings and 

pay the ESCO service fees and interest through energy savings. 

FEDERAL ENERGY EFFICIENCY (CARPER BILL S. 963, THE REDUCING FEDERAL ENERGY

DOLLARS ACT OF 2011)

Question 3. As the nation’s largest consumer of energy, the federal government 

has a responsibility to lead by example when it comes to energy efficiency. I am interested to hear what specific pieces of Senator Carper’s Reducing Federal Energy 

dollars Act you believe help the federal government accomplish this? 

Answer. As noted in testimony, the Alliance commends Senator Carper for his 

leadership in this area, including introduction of S. 963. We believe that several of 

the bill’s provisions have potential for enhancing federal government energy and 

cost savings, and serving as leadership examples. We are especially pleased that 

some of the provisions address ongoing operations of federal buildings, a neglected 

area in comparison to design of new buildings and capital retrofits. 

A particularly important area in the bill is building commissioning (Section 11). 

While the section refers to ‘‘ongoing’’ commission, it really addresses periodic recommissioning of federal buildings. (Ongoing commissioning is usually used to refer 

to commissioning on a continuous basis with building operators using monitoring 

and control systems to enhance and optimize performance, in contrast to discrete 

recommissioning events taken every few years. Both are important, though ongoing 

commissioning may have even more potential for enhancing and optimizing building 

performance.) 
104 

Our work with commissioning experts and researchers agrees with findings that 

buildings’ energy performance degrades over time after a commissioning event, 

meaning that periodic recommissioning (or implementation of true ongoing commissioning) is needed to regain energy and other performance benefits. Energy, water 

and other savings as well as other aspects of improved building performance, leading to enhanced occupant comfort and productivity, should yield significant dividends. 

The Alliance supports policy to require periodic recommissioning or ongoing commissioning of federal buildings that are significant energy consumers. The bill would 

require standards and regulations to this end. However, we suggest that such requirements be integrated with requirements under Sec. 432 of the Energy Independence and Security Act (EISA) of 2007. EISA requires that large federal buildings 

undergo energy and water audits every 4 years on average, with consideration of 

recommissioning. The language on commissioning could be clarified more clearly to 

require periodic recommissioning or ongoing commissioning (with provision for appropriate definitions and rules). 

In addition, Section 7, Improving Computer Energy Management at Federal Agencies, would save energy and money by encouraging automated power management 

of desktop computers and other equipment. The addition of smart submetering to 

federal metering requirements in Section 6 could further building monitoring and 

ongoing commissioning, though it is important to develop ways to use the data effectively, not just to collect it, and the proposed language could be clarified. These provisions could help develop best practices that could be used by non-federal building 

owners and managers too. 

Question 4. Today, a lot of time may pass between the funding for the design of 

a project and the funding for actual construction. In the intervening time, standards 

may have changed, but no additional design funds are available to update the original design to current standards. In many cases this means federal buildings are outdated the day they open their doors. The Reducing Federal Energy Dollars Act authorizes the General Services Administration to use funds from the Federal Building 

Fund Capital Account to update designs to current standards. This seems like a 

simple solution to a pretty serious problem. What thoughts do you have on this proposal and its potential to give us better buildings that will run cleaner and cheaper? 

Answer. All federal buildings should be built to up-to-date best practices in order 

to reduce the billions of dollars taxpayers pay for federal energy bills each year, reduce air pollution, and enhance energy security. There often is a long delay between 

design and construction of new buildings based on availability of funds, leading to 

buildings designed to standards that are outdated before construction even begins. 

Federal buildings especially should be designed for future energy needs rather than 

based on past minimum standards. It is well worth a little more up-front investment in good design in order to reduce energy bills over decades, and that includes 

redesign or updating designs when there are delays in construction. The Alliance 

supports a provision to help enable this smart investment. 

RESPONSE OF TONY CRASI TO QUESTION FROM SENATOR MURKOWSKI

RESIDENTIAL RETROFITTING

Question 1. You point out that older, existing homes consume virtually all of the 

energy in the residential sector. It seems that there would be an enormous opportunity for people like yourself to gain employment by retrofitting those old homes 

to be more efficient. Is this the case? If not, what are the barriers? 

Answer. The opportunities that exist for creating jobs by retrofitting older homes 

and buildings are exponential, particularly for unemployed or under-employed builders that are still struggling with the worst housing economy since the Great Depression. Builders with expertise in energy efficiency, like me, have found a natural 

transition to retrofitting older homes, as a way to survive the significant downturn 

in the new home construction market. With 129 million existing homes and a billion 

single-pane windows still to replace, there is plenty of work for our industry. However, there are challenges and potential barriers to really grow the retrofit market 

on a large scale. 

First, it has been more and more difficult for homeowners to obtain financing or 

utilize meaningful incentives to help offset some of the upfront costs to undertake 

efficiency work in older homes. With many homes lacking equity following the collapse, and homeowners lacking the ability to obtain home improvement financing, 

the capacity to undertake major renovation work, even for energy efficiency gains 

that may be extremely desirable, is limited. Attempts to allow consumers to finance 
105 

efficiency upgrades through a property tax assessment-type program, commonly referred to as Property Accessed Clean Energy (PACE) bonds, has not gained traction 

due to push back from government-sponsored enterprises (GSEs) and others over 

mortgage superiority status. Also, the only federal-level tax incentive for undertaking various efficiency upgrades in existing housing—Section 25C of Internal Revenue Code—was substantially decreased last year and is subject to a lifetime cap 

of $500 for consumers. Although demonstrated returns on investment can be realized, coupled with energy savings paybacks that are far more realistic than layering 

on requirements for new construction, consumers are extremely price-sensitive in today’s market and the upfront costs can still be a barrier for some, particularly families in the lower-to-moderate income range—ironically, those families that would 

likely benefit most from an energy retrofit. 

Secondly, a major environmental rule covering renovation and retrofit work in 

older housing took effect in April 2010—the EPA’s Lead: Renovation Repair & 

Painting Rule (RRP). In almost every instance, the types of retrofit work that improve energy efficiency (e.g., window replacement, insulating or re-insulating, 

HVAC-replacement, re-roofing, etc.) that are conducted in homes built before 1978 

would be subject to the requirements of this law. For contractors that have not undergone the required training or paid the appropriate certification fees to EPA, undertaking renovation work, for hire, in a pre-1978 home is illegal. That is, a homeowner can choose to undertake the upgrade project himself and the rule would not 

apply, but as soon as the homeowner hires me, or another contractor to do the work, 

the law is triggered and compliance, for all legitimate contractors, like me, is not 

optional. 

NAHB supports requirements to use lead-safe work practices (LSWP) and fully 

supports the intent of the rule to protect children and pregnant women from potential lead exposure during renovation work in older homes. In fact, NAHB members 

were some of the experts that helped developed the LSWP protocols that EPA used 

in the finalization of the rule back in 2008. However, because lead exposure for consumers is a very serious issue, I have personally chosen to require my customers 

to contact a professional lead abatement firm before I will undertake any work on 

pre-1978 homes because I want to ensure that I am working on a home that does 

not contain lead-based paint. Due to the liability and compliance costs that accompany this rule, I have decided not to work in any home that contains lead-based 

paint and I ask my customers to have their homes checked and abated, if necessary. 

In some cases, this means that I have had to turn down jobs, but I believe it has 

protected my business from potential lawsuits and/or enforcement actions that stem 

from working in pre-1978 homes under the RRP, particularly since the rule has 

been implemented so poorly by the EPA and it is especially burdensome to small 

businesses attempting to do the right thing and not create lead hazards. 

As stated, the RRP that was finalized in 2008, and NAHB supported that rule 

at that time. However, it has since been modified very substantially, far beyond 

Congress’ original intent for regulating renovation work in the underlying Toxic 

Substances Control Act (TSCA). As part of a voluntary settlement, EPA first agreed 

to amend the RRP by disallowing homeowners without children under six or pregnant women in the home to waive the costly compliance requirements—July 2010. 

Secondly, EPA is finalizing a post-renovation clearance testing requirement to require contractors to provide test results to homeowners that may show EPA-verified 

lead hazards and such results must be disclosed to future buyers—July 2011. Lastly, EPA will prescribe work practice standards and protocols for all public buildings 

built before 1978 and all commercial (including multifamily residential) buildings— 

regardless of vintage—that will be finalized within the next few years, despite 

EPA’s own Science Advisory Board admission that there are no scientific data to 

support the standards. These modifications to the RRP hold serious legal liability 

and hefty fines ($37,500 per day, per violation under TSCA) for contractors that 

might otherwise actively pursue retrofit work in older homes. For contractors like 

me that are similarly choosing not to work in pre-1978 homes, this limits the impact 

of efficiency work by slowing or halting work in the oldest stock (pre-1978), i.e., the 

most inefficient housing, which subsequently limits the overall impact of a national 

retrofit policy. 

RESPONSES OF TONY CRASI TO QUESTIONS FROM SENATOR SHAHEEN

Question 1. I was pleased to read in your testimony about the importance of retrofitting existing buildings to cut energy bills and save consumers money. You note 

that ‘‘upgrading an older, less-efficient, pre-1940 homes can save over $1,500 per 

year in energy costs with an upfront cost of ‘‘$10,405.00,’’ and with an energy-savings payback period of just under 7 years. In New Hampshire we have a lot of older 
106 

1Memo from Ken Danter, Danter Company, March 3, 2011. Assumptions based on 90% financing, 30-year term mortgage at 5.0% interest rate and average real estate taxes at $278 with 

P.I.T. not to exceed 28% of gross salary (excluding consideration of additional debt—credit card, 

auto, etc.). 

building stock, and Sen. Portman and I included provisions to help retrofit homes, 

businesses, manufacturers and municipal buildings. I was pleased to see that the 

National Homebuilders [sic] are supportive of these provisions. 

Now I understand that it is actually cheaper and easier to add wall insulation 

or install efficient windows when the house is built rather than in a retrofit. Would 

you agree that it is generally cheaper and easier to make a home efficient at the 

time it is built rather than to fix is later? 

In New Hampshire we spend a lot of money weatherizing low-income homes and 

assisting people in paying their energy bills because the homeowners cannot afford 

their energy bills, and often risk losing their homes. I know you do in Ohio too. 

Would you agree that it is cheaper to have building codes that make sure the home 

is built efficiently rather than paying more both in energy bills and to fix the homes 

later? 

Answer. Depending on how the term ‘‘cheaper’’ is being defined, it is possible that 

it is ‘‘cheaper’’ to build a new home to modern energy codes rather than to mandate 

an efficiency upgrade to current standards of an existing home at the point of sale 

or lease. However, the first family to own the new home with the higher efficiency 

features is the only one obligated to pay the costs for the efficiency. Using the same 

example from my Written Statement,—a 1,400 square foot home in Akron, Ohio— 

if a builder added $5,864 in upgraded insulation to a 2009 IECC-compliant home, 

it could save $102.00 a year in energy bills. A simple payback, without the cost of 

money, calculates an energy savings return of 57 years, i.e., the upfront cost of 

$5,864 divided by $102.00 in savings = 57 years. Adding the cost of financing the 

additional $5,864 into a mortgage, on a life-cycle basis, using 30 years and 5.75% 

interest, adds an additional $34.22 a month and makes the full cost of the upgrade 

a $12,319 expense. The payback for the total efficiency requirement is 121 years— 

i.e., $12,319 cost divided by the energy savings of $102.00 per year = 121 years [documentation of this calculation on REM design software is attached]. 

In this case, it would not be ‘‘cheaper’’ for that first owner who must finance the 

extra cost, particular for energy savings that may never accrue to them, and further, 

must bear the increased interest, property taxes, and mortgage insurance on the additional upfront cost. 

As information from the Danter Company explains, for every $1,000 increase in 

total home price for a new home at the $190,000 price range in Franklin County, 

Ohio, 1,197 households residing in Franklin County can no longer qualify for a 

mortgage on that home. In the total Columbus MSA, 1,831 households would no 

longer qualify with an additional $1,000 in total home price.1 To be sure, these numbers will vary nationally and NAHB does maintain average mortgage data on home 

price sensitivity for a variety of areas, but the point is the same in almost every 

example—even a modest increase ($1,000) in home price can disqualify a potential 

homebuyer from obtaining a mortgage on a newer, more energy-efficient home. 

Some of the data presented in the testimony of Kateri Callahan, from the Alliance 

to Save Energy, does not adequately explain how the cost calculations estimated by 

her organization—via research by the Building Codes Assistance Project (BCAP)— 

accommodate these very specific housing finance issues that are a critical component of housing affordability. 

For example, the BCAP study that Ms. Callahan references in her Statement, 

dated June 2011, shows weighted incremental costs, median energy savings, and 

mortgage payback averages for 27 States. The chart she includes shows an average 

weighted cost of $840.77, energy savings of $243.37, and an average ‘‘mortgage payback’’ of 10.25 months. The citation for the chart links to a BCAP analysis, which 

relies heavily on a study by DOE titled, ‘‘Impacts of the 2009 IECC for Residential 

Buildings at State Levels,’’ but after careful review of both the BCAP analysis and 

the underlying DOE study, it is not apparent where in either document ‘‘mortgage 

payback’’ data is derived. It is specifically unclear if the BCAP analysis even calculated any increases in property taxes, interest, and/or mortgage insurance that accompany such cost increases. Similarly, it is unclear if the study factored in recent 

changes from the implementation of the Dodd-Frank Act and other changes that are 

occurring with FHA mortgages and with the Government Sponsored Enterprises. If 

these factors are excluded in the respective analyses, then the information that they 

are providing should be qualified, as such, to reflect that the cost increases are only 

accounting for actual cost of materials, or perhaps materials and labor, but not 
107 

housing finance-related costs, in order to provide a more accurate reflection of the 

actual cost increases that accrue to the consumer. 

As expressed in my Written Statement, we have already demonstrated that energy codes, as applied in the construction of new homes over the last 20-30 years, 

have delivered substantial energy savings. Modern energy codes are indeed working 

as intended to increase efficiency in a cost-effective manner, and they are rapidly 

increasing in stringency as each new iteration is published every three years. That 

said, the most efficient new homes today still cannot compete on a cost-based comparison with older, less-efficient housing. Newer, more efficient homes are subject 

to appraisals and comps that use foreclosed or distressed properties, in addition to 

not getting adequate consideration for their energy performance superiority. It is 

unfortunate that older, less-efficient housing is ‘‘cheaper’’ to finance when we all 

agree it is much more expensive to maintain and operate, in terms of energy costs. 

Lastly, I think it is extremely important to recognize that builders of new homes 

are the only ones working to preserve affordability for a constituency of people that 

does not yet exist—i.e., future homebuyers. Not only do builders of new homes have 

to comply with the most stringent energy codes, construct the tightest housing, comply with other environmental regulations, and absorb additional costs to compete 

against ‘‘cheaper,’’ older housing, but the beneficiaries of efforts to preserve this affordability are those who do not yet own that home, do not yet pay taxes, and do 

not yet vote. Yet, this future group is being tacitly forced to pay additional costs 

for features that may never accrue any energy savings to them. Therefore, it is easy 

to argue that it is ‘‘cheaper’’ to impose costs on a group of people who do not yet 

exist to pay for energy requirements because there is no one to argue the alternative, except for the builder. 

Question 2. In your testimony you say ‘‘With. . .substantial increases in energy 

efficiency requirements and rigorous energy codes, energy performance in new 

homes has skyrocketed delivering tremendous savings.’’ Does the National Association of Home Builders support adoption of the 2012 International Energy Conservation Code? Are you supporting adoption of the 2009 edition of the code? Have you 

supported adoption of the 2006, 2004 Supplement, 2003, or 2000 editions of the 

IECC? 

Answer. NAHB policy supports the adoption of a single coordinated set of national 

model building codes, as currently developed by the International Code Council 

(ICC), by jurisdictions seeking to adopt a new or updated set of building codes. This 

includes the 2012 IECC, as well as previous editions of the IECC. However, NAHB 

leaves the decisions of which of the various editions of the code to support adoption 

of, within a State or local jurisdiction, to the various State and local members and 

home builder associations (HBAs). As a federation, the Ohio Home Builders Association is not compelled to support the adoption of any specific code at the State or 

local level, or, it is free to adopt a version of the 2012 IECC that meets specific energy savings, as specified in the code, without adopting the exact code as a whole. 

With respect to the 2012 IECC, if a jurisdiction chooses to undertake the adoption 

of the 2012 IECC, NAHB would recommend that our members and HBAs seek 

amendments needed to make this code more cost-effective and affordable for new 

home buyers while preserving and still achieving the same level of energy savings. 

In this manner, the code’s adoption can be implemented while allowing more avenues to achieve overall energy savings. 

With regards to the 2009 IECC, I participated in a collaborative effort with many 

in the efficiency and environmental advocacy community to develop an alternate 

code for adoption in the state of Ohio that actually produced energy savings that 

exceed the thresholds specified in the 2009 edition, while being less costly to implement. The DOE approved this alternate code and the collaborative effort demonstrates that builders are committed to effective energy policies that work to advance efficiency while preserving affordability for consumers. Builders are leaders 

in delivering energy efficiency to the new home market, as demonstrated by the substantial advances in energy codes over the last few decades. 

NAHB has long supported energy efficiency both through mandatory minimum 

code requirements that apply to all housing and voluntary above-code programs, 

such as the National Green Building Standard (ICC 700). On the other hand, 

NAHB’s support of mandated provisions within a national model energy code is limited to those requirements that are cost-effective and affordable. In terms of affordability, NAHB believes that the added cost of mandated energy efficiency requirements should not prevent first-time home buyers, who typically have modest incomes and limited resources for down payments, from purchasing a new home or 

relegate their options to only older, less energy-efficient housing. 

Further, NAHB believes that minimum efficiency requirements in new homes 

should provide a payback to home buyers of the initial added cost through annual 
108 

energy savings—without impacting their ability to purchase a newer, more efficient 

home. In this regard, given current mortgage underwriting practices and appraisal 

standards, a payback period that is scaled to the ‘‘life-cycle’’ of a home or building 

is financially unrealistic. For example, if an energy code provision’s payback period 

is required to be calculated over the ‘‘life cycle’’ of a home that may exist for 60 or 

70 years, it is unreasonable to assert that a consumer must wait 60 or 70 years to 

obtain an energy savings payback. Alternatively, if an energy code provision returns 

savings to the consumer in 10 years, it is entirely reasonable to assume that the 

consumer will wait a decade to get their upfront investment returned in the form 

of energy savings. NAHB would support any provisions that return energy savings 

paybacks to consumers in this reasonable fashion and, thereby, objects to energy 

code provisions—whether in whole or in part in various editions of the IECC—that 

do not meet this energy savings payback criteria, regardless of our overall support 

for the adoption of national model energy codes themselves. 

Question 3. I have been told that the National Association of Home Builders will 

have the authority to appoint one-third of the members of the new development 

committee that the International Code Council board recently decided to create for 

the residential portion of the International Energy Conservation Code, the model 

energy code specifically recognized in several places in federal law. Could you tell 

me what agreements, if any, NAHB has with the ICC regarding appointments to, 

representation on, or voting of members on committees developing energy codes? 

Could you provide me with any Memoranda of Understanding or other documents 

that contain these agreements? 

Answer. NAHB does not have a Memorandum of Understanding with the International Code Council (ICC) regarding appointments to the new Residential Energy 

Code Development Committee. However, NAHB does a pre-existing written agreement with ICC regarding its code development committees and is not willing to 

share a copies of this document without the express written consent of the ICC, the 

other partner in that agreement. It is important to note that NAHB does not have 

the authority to ‘‘appoint’’ members to any ICC committees and that such authority 

to ‘‘appoint’’ rests solely with the ICC Board of Directors. 

As with the other code development committees involved in residential construction, ICC recognizes the importance of having representatives from the industry 

that will ultimately be subject to and regulated by its model code provisions to serve 

on the code development committees. As was previously the case with the Building 

and Energy Committee of the International Residential Code (IRC), the ICC agreed 

to allocate one-third of the committee slots on the new Residential Energy Code Development Committee to representatives from the home building industry. The practice of allowing regulated stakeholders to participate in the development of industry 

standards is not uncommon. In fact, it is the preferred protocol by which the federal 

government must recognize consensus-based technical standards, per the National 

Technology Transfer Act (P.L. 104-113), that have undergone a development process 

that involves industry experts and practitioners. 

NAHB has more than 160,000 members involved in home building, remodeling, 

multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light 

commercial construction. ICC recognizes that NAHB is, in fact, ‘‘the voice of the 

housing industry’’ and has agreed to seek qualified representatives from NAHB to 

fill the slots allocated to the home building industry. 

The NAHB nominees to the ICC code development committees, like all other applicants, must submit applications detailing their credentials and qualifications in 

order to serve on the committee for which they have been nominated. In fact, I am 

one of builders that NAHB has nominated for consideration for this code development committee. The ICC Codes and Standards Council reviews applications received from all applicants and then forwards its recommendations to the ICC Board 

of Directors and it is the Board who ultimately decides who is selected to serve on 

the code development committees. 

The one-third allocation referenced in your question is within the limits set by the 

consensus process for representation by a single group of stakeholders, as prescribed 

by the American National Standards Institute (ANSI) and, as stated above, is a 

common practice for the consensus committees that oversee the development of industry technical standards. The ANSI process recognizes the importance of having 

representation from industry groups with expertise and a significant stake in the 

codes and standards being developed. As such, it is reasonable and practical to have 

industry representatives serving on panels that prescribe standards development for 

the entire industry. 

Further, it is crucial to understand that it is not the decisions of the ICC code 

development committees that ultimately determine the outcome of proposed changes 
109 

to the IECC and the other ICC codes. Only the designated representatives of ICC’s 

Governmental Members are permitted to vote at Final Action Hearings on proposed 

code changes. ICC’s voting members consist of building officials, fire officials, officials from state energy offices, and even DOE employees. Representatives from 

NAHB and other industry groups do not have a vote at the final hearings. The final 

vote of these ICC members can, and often does, reverse the action recommended by 

a specific code development committee panel. 

Nonetheless, NAHB does believe that undue influence into the model codes development process should be of concern to the Committee. Perhaps the Committee 

could examine a variety of special interest groups, some who receive funding from 

DOE, and their participation and relationship with DOE vis-&-vis the ICC code development process. With regards to DOE and other voting members being allowed 

to both offer proposals and vote on their approval, this privilege is extended only 

to representatives of DOE and other ICC Governmental Members and does not extend to any industry group, including NAHB. 

NAHB believes that Congress should take a much closer look at the actions of 

DOE, investigate its funding of special interest groups and their activities related 

to the development of national model codes, and examine how DOE is sharing, or 

not sharing, information with the regulated community about how energy efficiency 

calculations are being performed. While NAHB is pleased that the industry is allowed to participate in the consensus code development process and offer our industry expertise, NAHB is very concerned that the national model codes development 

process has the potential to become very political and veer from its intended path 

of providing a path towards consensus that is based on technical integrity and openness. Much as the question alludes, NAHB believes that there may be issues of 

undue influence affecting the codes development process, but not in a manner that 

favors industry. 

RESPONSES OF SHANE KARR TO QUESTIONS FROM SENATOR MURKOWSKI

AUTOMAKER PREFERENCES

Question 1. As you noted in your testimony, the members of the Auto Alliance are 

responsible for 75 percent of domestic auto sales. Please describe your Alliance’s top 

legislative priorities, both within the jurisdiction of this committee and beyond it. 

Answer. The Alliance of Automobile Manufacturers is committed to developing 

and implementing constructive solutions to public policy opportunities that promote 

sustainable mobility and benefit society in the areas of environment, energy and 

motor vehicle safety. 

Currently, automakers’ top priority is to ensure the continuation of a single, national program for fuel economy and greenhouse gas (GHG) emissions for 2017-2025 

model year (MY) light-duty vehicles. In 2009, the Alliance supported the federal government in finalizing a national program for MY 2012-2016 that increases fuel economy by 40%, which is projected to save 1.8 billion barrels of oil over the lifetime 

of the vehicles. This program avoids separate stringencies of programs administered 

by EPA, NHTSA and California by creating a harmonized approach. Automakers 

are now working with EPA, NHTSA and California on a single, national program 

for MY 2017-2025. This is a difficult process involving significant assumptions and 

uncertainties. It is imperative that the necessary analyses and studies be completed 

and fully evaluated prior to these standards being set. A Notice of Proposed Rulemaking is expected in September 2011 and the rule is likely to be finalized sometime next summer. It is critical that any proposal recognize and balance technological feasibility, safety, and economic practicability, including impact on U.S. jobs. 

This will help ensure that a single, national program for fuel economy and GHG 

emission standards exists and that it continues to provide clarity and certainty, 

without pricing consumers out of the market or preventing them from choosing from 

a broad range of vehicles and technologies that can meet their diverse needs. 

While the 2017-2025 standards are our top priority, the Alliance continues to support enhancing energy security and promoting fuel diversity through accelerating 

the availability of advanced technology and alternative fuel vehicles in the market. 

However, there is no silver bullet or single technology that will eliminate U.S. dependence on foreign oil and make significant cuts in GHG emission levels. The Alliance strongly believes that effective energy policy must be based on a broad, technology-neutral approach with all regions of the country participating, not just a select few. We remain concerned that mandating particular vehicle technologies or 

targeting a select handful of cities for ‘‘exclusive’’ incentives, while well intended, 

has the potential to misallocate resources in ways that could ultimately slow adop-
110 

tion of advanced vehicle technologies. We are at an exciting period of innovation in 

the automotive sector. To the extent that the government intervenes in the market 

to ‘‘encourage’’ adoption of new technologies, it should not adopt policies that dissuade manufacturers from continuing to invest in a broad suite of potential solutions or consumers from purchasing vehicles that they believe will best meet their 

needs. Ultimately, consumers will decide which transportation solutions work best 

for them. 

Finally, achieving widespread adoption of vehicles that run on alternative fuels 

requires developing a supporting infrastructure. The Alliance supports public policy 

directives that will help create new and expand existing refueling infrastructure. 

Legislative efforts to provide state and local governments technical assistance to 

help with the deployment of these vehicles and infrastructure is critical to the successful adoption of these technologies. 

NONFINANCIAL BENEFITS

Question 2. Please discuss the impact that nonfinancial benefits—whether HOV 

lanes, or preferred parking spots, or something else—can have on consumers’ willingness to purchase a vehicle. Please provide the Alliance’s position on nonfinancial 

benefits, and any additional policy options our committee could consider in this 

area. 

Answer. The Alliance strongly supports proposals to incentivize the purchase and 

use of advanced technology and alternative fuel vehicles. During these challenging 

economic times, governments can adopt a broad range of nonfinancial benefits to encourage consumer adoption of fuel efficient and alternative fuel vehicles. In addition 

to incentives that support refueling infrastructure (electric charge point, CNG, LPG 

etc.), streamlined permitting process and outreach efforts that highlight alternative 

fuel locations are critical. Particularly in congested urban areas, benefits such as 

HOV lane access, priority parking, and public access to alternative fueling locations 

help support consumers who purchase advanced technology vehicles. In an effort to 

level the playing field and allow consumers to choose what technologies are right 

for them, the Alliance supports the adoption of incentives that encompass all advanced technologies, not just a select few. Finally, any federal policy should merely 

guide state and local governments, providing them the flexibility they need to implement these incentives. 

Encouraging policies that support utilities to offer off-peak charging rates for electric vehicles and integrating electric vehicles into utility outreach efforts with current customers is also a key part of encouraging plug-in electric vehicles. The utility 

industry has much to gain from integrating vehicles into the grid in a way that 

minimizes increased capacity requirements and costs. 

RESPONSE OF FRANK RUSCO TO QUESTION FROM SENATOR MURKOWSKI

ATVM REPORT

Question 1. A significant portion of DOE’s testimony responds to your report on 

the ATVM program. DOE appears to disagree with GAO’s recommendations. Is 

GAO satisfied by DOE’s response, and the statements included in DOE’s testimony? 

Answer. GAO continues to believe that DOE needs to implement the two recommendations we made to the agency in our February 2011 report to help ensure 

that DOE is achieving its goals and is accountable to Congress and the American 

people. GAO is concerned that DOE continues to believe that such accountability 

is unnecessary, particularly as DOE has plans to spend additional taxpayer money 

on this program. 

Regarding our first recommendation—that DOE accelerate efforts to engage engineering expertise—at the time of our report, DOE had not secured independent engineering expertise, nor was DOE following its program’s procedures that called for 

engaging such expertise. DOE’s statements on engineering expertise in their June 

9 testimony were vague as to whether they have implemented this recommendation; 

we do not know what they have done in this regard. According to the ATVM program’s procedures, ATVM staff are to analyze information borrowers report on their 

technical progress and are to use outside engineering expertise to supplement their 

analysis once borrowers have begun constructing or retrofitting facilities or are performing engineering integration—that is, designing and building vehicle and component production lines. At the time of our review in February of 2011, several 

projects needing additional technical oversight were under way but the program had 

not brought in the required technical expertise to supplement program staffs’ oversight. 
111 

In their testimony, DOE states they have contracted with engineering firms for 

technical oversight of ATVM loans. However, DOE has not provided GAO with evidence that they have fully implemented this recommendation and engaged sufficient 

engineering expertise to be applied at the design and build stages of the projects. 

With regard to our second recommendation, we continue to believe that DOE 

should more fully assess progress toward achieving the three program goals of the 

ATVM program. Principles of good governance call for performance measures tied 

to goals as a means of assessing the extent to which goals have been achieved. To 

date, the ATVM program has made about $8.4 billion in loans. The loans made to 

date represent about a third of the $25 billion authorized by law, and the program 

has used 44 percent of the $7.5 billion allocated to pay credit subsidy costs. Because 

of the significant amount of taxpayer dollars being loaned through the ATVM program, and because the amount of risk involved—as measured through the credit 

subsidy costs—is not insignificant, we believe that DOE should set appropriate performance measures for its program goals. Without such measures, we maintain that 

DOE is not able to assess its progress in achieving what it set out to do through 

the program. 

RESPONSE OF JAY SCRIPTER TO QUESTION FROM SENATOR MURKOWSKI

July 23, 2011. 

DEAR MS. CAMPBELL: Thank you for the opportunity to respond to the question 

submitted by Senator Murkowski for the record of the June 29th hearing on energy 

efficiency: 

As a manufacturer, what do you think is the role of private industry in 

facilitating energy efficiency in manufacturing processes, and what is the 

role of the government? 

Below is the portion of my testimony given on the 29th that is most directly responsive: 

Through many of the devices contemplated in the proposed legislation, 

such as well conceived partnerships, strategically targeted collaboration, 

best-practices promulgation, and revolving-fund financing assistance, the 

government can accelerate and spread the efficiency revolution, making it 

an engine for American competitiveness and job creation. 

I would make a few points in elaboration. 

First, we believe that one useful way to think about the Senator’s question— 

which is of course an essential one—is to put the issue in a broader policy context, 

that of the nation’s energy policy, manufacturing policy, job-creation policy and environmental policy. Increased energy efficiency can play a very positive role in each 

of these areas. With respect to energy policy, to the extent that among our goals 

is increased energy independence and less reliance on imported and fossil fuels, our 

energy policy should vigorously embrace efficiency-enhancing programs. With respect to our manufacturing and jobs policies, many governmental policies and practices, including regulatory and tax burdens, tend to work against U.S. manufacturing; promotion of energy-efficiency, by contrast, is a potentially significant means 

of aiding American manufacturing competitiveness and job creation. With respect to 

environmental policy, particularly because of the strong correlation between energy 

efficiency and pollution reduction, promoting efficiency should become an integral 

part of our environmental policy. 

Second, governmental programs may have a particularly effective role to play in 

fostering break-through advances in efficiency. It is likely that game-changing advances in manufacturing energy-efficiency will involve innovative thinking, extensive research and considerable cost and risk of failure. A partnership with government in some aspects of this would make possible research, development and adoption that would be unlikely to occur, or occur soon enough, without such assistance. 

Third, the government can play a vital role in the dissemination of new ideas and 

best practices. The Department of Energy has already demonstrated effectiveness in 

this area. Even for companies that are leaders in their industries, such as O–I, energy-efficiency may not be a ‘‘core competency’’ and, in any event, it greatly benefits 

by collaborative work and shared expertise. Small and medium-sized businesses 

may be especially aided by a governmental role of this kind. Moreover, governmental involvement is more likely to involve the fostering and dissemination of 

ideas that broadly help a U.S. industrial sector, as opposed to proprietary or otherwise closely held advances that may benefit only one company. 
112 

Again, thank you very much for the opportunity to testify, and please just let me 

know if I could be of any further assistance. 
(113) 

APPENDIX II 

Additional Material Submitted for the Record 

[Due to the large amount of materials received, only a representative sample of 

statements follow. Additional documents and statements have been retained in committee files.] 

STATEMENT OF THE REAL ESTATE ROUNDTABLE

Chairman Bingaman, Ranking Member Murkowski, and Members of the Committee, The Real Estate Roundtable is pleased to submit this statement for the 

record of the hearing on June 9, 2011, regarding proposed legislation to promote energy efficiency. The Roundtable represents the leadership of the nation’s top 130 privately owned and publicly held real estate ownership, development, lending and 

management firms, as well as the elected leaders of the 17 major national real estate industry trade associations. Collectively, Roundtable members hold portfolios 

containing over 5 billion square feet of developed property valued at over $1 trillion; 

over 1.5 million apartment units; and in excess of 1.3 million hotel rooms. Participating Roundtable trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business. More information on The 

Roundtable can be found at www.rer.org. 

This statement will address S. 1000, the Energy Savings and Industrial Competitiveness (ESIC) Act of 2011, sponsored by Senators Shaheen, Portman, and Coons. 

The Roundtable commends the Committee, and Senators Shaheen’s and Portman’s 

offices in particular, for the open and transparent manner in which diverse stakeholder input has been sought in developing S. 1000. As discussed below, the bill’s 

current language addresses many of the suggestions we have made. However, we 

still have concerns with the bill—in particular, its provisions on model building energy codes—and we look forward to continue working with you to improve S. 1000 

as it moves through the Committee process. 

I. SUMMARY AND ECONOMIC BACKGROUND

A. Summary 

• The real estate sector is in the midst of a sluggish recovery. The real estate sector remains in a sluggish, tentative economic recovery from the Great Recession. Rather than a new law creating a federal building energy codes bureaucracy that will lead to more stringent regulations and greater costs on construction, Congress should focus on tax, loan guarantee, and other incentive programs that will leverage private investment in real estate and create new 

‘‘green jobs.’’ 

• Building energy codes at the federal level are unnecessary. Stakeholders on all 

sides agree that ASHRAE and IECC codes are becoming more stringent and 

will result in vastly improved energy efficiency in buildings. Accordingly, The 

Roundtable questions the need for S. 1000’s model federal energy code provisions, as the market is already moving in the direction of higher-performing residential and commercial structures. The Committee should instead consider the 

legislative proposal offered by The Roundtable and other real estate stakeholders in March of this year (attached to this statement). Our proposal would 

improve the current codes-establishment process, avoid creating a new federal 

codes bureaucracy in the U.S. Department of Energy—and not require the $500 

million authorization of appropriations sought to implement S. 1000’s energy 

code provisions. 

• S. 1000’s energy codes provisions are improved relative to prior bills. The 

Roundtable recognizes that the energy codes language in S. 1000 is improved 

compared to prior bills. For example, language that would incorporate economic 
114 

1 Available at www.rer.org. This survey is the commercial real estate industry’s most comprehensive measure of leading executives’ confidence in financial and real estate markets. Conducted by FPL Advisory Group, it captures the perspectives of over 100 senior real estate executives, including CEOs, presidents, board members, and other executives from a broad set of industry sectors including owners and asset managers, financial services firms and operators. 

considerations (such as a business owner’s return on investment) into codes development is a significant change for the better. Similarly, subjecting federal energy codes and targets to a small business impact review analysis, requiring the 

Energy Department’s release of data when determining code efficiencies, and 

giving the public an opportunity to comment on efficiency targets without enshrining them in a statute, are progress from The Roundtable’s perspective. • Still, S. 1000’s energy codes provisions require improvement. Nonetheless, establishing an across-the-board national goal of ‘‘net zero energy buildings,’’ as 

the ESIC Act would do, presents serious concerns to the real estate sector. We 

suggest modifications to this language at p. 7 of this statement. Also, while the 

bill factors economic considerations into certain Energy Department acts and responsibilities, it does not do so uniformly and further amendments are needed 

to ensure consistent and robust economic analyses. • Other aspects of S. 1000 could enhance energy efficiency and benefit the real 

estate sector. In particular, the ESIC Act’s sections regarding credit enhancement through loan guarantees for building retrofit financing are a step in the 

right direction. However, more work is needed to make the program usable and 

viable for real estate owners and lenders. In this regard, the statutory text 

should incorporate changes suggested starting at p. 10 of this statement, to protect the prime lien position of ‘‘first mortgagees’’ in building collateral while 

minimizing the credit risks of the federal government in backing private sector 

retrofit debt. Similarly, the Committee should support changes to electronic 

‘‘right-to-know’’ language that would overcome significant energy data obstacles 

currently faced by owners of multi-tenant buildings. 

B. The Real Estate Sector is in the Midst of a Tentative, Sluggish Economic Recovery. Rather Than a New Law Creating a Federal Codes Bureaucracy, Congress 

Should Focus on Incentive Programs that Will Leverage Private Investment in 

Real Estate 

The Real Estate Roundtable’s members recently confirmed, through our 1st and 

2nd Quarter 2011 Sentiment Indexes,1 that commercial real estate markets nationwide are experiencing a slow, tentative recovery. So-called ‘‘gateway’’ cities have 

come back strong while smaller, more mainstream markets still struggle. There is 

improved access to functioning liquidity and improving values (particularly for 

‘‘Class A’’ assets) in cities like New York, Washington, D.C., Boston, San Francisco, 

and western Los Angeles. Contrast this to still-weak capital formation and lackluster fundamentals in the rest of the country. Smaller, more mainstream real estate markets continue to face big challenges. Absent strong improvement in U.S. job 

markets and demand for business space, the nation’s commercial real estate sector 

will likely continue its sluggish, ‘‘bifurcated’’ recovery—with top urban markets outpacing recovery in secondary, non-gateway markets. 

In markets outside of our key urban areas, rent and occupancy rates are weak 

while construction remains at its lowest levels in the past 40 years. From a position 

of comparative balance in mid-2008, as the economy shed 8.6 million jobs, demand 

for commercial space fell precipitously. To make matters worse, 2 million new jobs 

were needed to absorb the new commercial space delivered through the development 

pipeline. This 10.6 million job shortfall has reflected directly in vast oversupply, lack 

of demand, and declining rents. Since the economy hit bottom at the lowest depths 

of the recession, only about 1.3 million jobs have been added to the workforce, leaving jobs about 9.3 million short of striking a balance. Thus, even with a solid recovery, it will take three to four years at least to make up this 9.3 million job shortfall. 

Until private sector job creation picks up, we are not out of the economic danger 

zone. Commercial real estate markets tend to recover from the top down, when 

higher quality markets attract new capital and eventually affect other markets. But 

legitimate headwinds remain, such as an unacceptable unemployment level, a huge 

pipeline of maturing commercial mortgages, and significant fiscal issues faced by 

state and local governments. Looming just around the corner is the roughly $1.5 

trillion of commercial mortgage debt coming due over the next four years. Most commercial real estate loans have terms of 10 years or less, and a significant percentage 

of outstanding debt matures each year which needs to be refinanced. 

Exacerbating all of this is the chronically slumping single-family housing market, 

still plagued by a near-record 14 million vacant residences. That glut could take 
115 

2See http://news.agc.org/2011/06/03/construction-employment-remains-stagnant/. 

3See http://www.bls.gov/iag/tgs/iag236.htm. 

years to eliminate and is the significant cause for falling home values which decline 

at an increasingly rapid pace. 

Against this sobering economic outlook, Congress should not enact legislation to 

further dampen the real estate sector’s lackluster performance. In particular, measures like the ‘‘Building Energy Codes’’ provisions in Subtitle A of S. 1000 would vest 

the U.S. Department of Energy (DOE) with new authorities to ‘‘support the development of’’ and ‘‘establish’’ federal model building energy codes. We believe that creation of such a bureaucracy in Washington, D.C., will result in greater complexity, 

confusion, and costs not only for the regulated community, but also for traditional 

codes development bodies like ASHRAE and ICC, and enforcement agencies within 

state and local governments. Legislation like Subtitle A would likely generate increased regulation and costs on construction activities and thereby hinder the sector’s recovery. This is especially problematic as the jobless rate among construction 

workers still hovers above 16%, employment rates are stagnant and unlikely to 

change soon,2 and new claims for jobless benefits from the construction workforce 

increased from March to April 2011.3

New construction activity, and financing streams to support it, must be encouraged. This is why The Roundtable favors a meaningful program of financial incentives, like improved tax deductions and loan guarantees, to spur energy efficiency 

retrofits of existing buildings. Such incentives for building upgrades can help get 

people back to work, lower energy consumption, save consumers and businesses 

money on utility bills, and reduce our nation’s dependence on foreign oil. From The 

Roundtable’s vantage point, retrofit incentives are better energy policy compared to 

programs that would create federal jurisdiction to develop building energy codes. 

We thus take this opportunity to re-direct your attention to a May 5, 2011 letter 

(attached to this statement). The Roundtable joined over 80 diverse stakeholders 

from the real estate, energy, environmental, manufacturing, and building products 

sectors, all supporting legislative improvements to the existing tax deduction for energy efficient commercial buildings at Section 179D of the Internal Revenue Code. 

We encourage Congress to focus on tax incentive proposals like those endorsed in 

the May 5 letter—as opposed to new bureaucracies that will expand the federal government’s regulatory footprint. 

II. LEGISLATION IS NOT NEEDED FROM CONGRESS TO AUTHORIZE AND ESTABLISH

FEDERAL BUILDING ENERGY CODES

The Roundtable joins other national real estate organizations in questioning why 

S. 1000’s Subtitle A is necessary. Even without congressional action, DOE and 

stakeholders on all sides acknowledge that recent iterations of IECC and ASHRAE 

model codes will result in more energy efficient buildings as compared to prior code 

versions. And, DOE currently plays an active role in the consensus-based processes 

administered by IECC and ASHRAE. With traditional energy codes already moving 

down the path of vastly improved building efficiency—driven in large part by DOE’s 

on-going support and advocacy—we doubt the need for Subtitle A to create a federal 

bureaucracy that would, among other things: 

• Give the federal DOE responsibility to establish energy savings ‘‘targets’’ for 

buildings (§ 304(a)(2)(c), p. 5 starting at line 5). 

• Implement burdensome procedures for DOE to issue ‘‘preliminary determinations,’’ ‘‘positive final determinations,’’ and ‘‘negative final determinations’’ on 

ASHRAE/IECC code efficacy (§ 304(a)(4), starting at p. 10 line 1). 

• Compel states to ‘‘certify,’’ ‘‘demonstrate,’’ and ‘‘measure’’ energy code compliance, while further requiring the federal Energy Secretary to ‘‘validate’’ such 

states’ certifications (§304(b), starting at p. 14 line 7). 

• Burdening states with reporting and other obligations when DOE determines 

that such states fail to meet federal targets (§304(d), starting at p. 18 line 12). 

• Authorize the federal DOE to reach down to local governments as necessary to 

demonstrate code conformity when a state fails to do so (§304(d)(3), p. 19 line 

3). 

Subtitle A appears out-of-step with sentiments on Capitol Hill, as leaders from 

both parties search for means to minimize the federal government’s regulatory 

reach, curtail unneeded government spending, and tame the nation’s deficit and 

debt. An Executive Order issued by President Obama on January 18, 2011, advised 

that our ‘‘regulatory system’’ must ‘‘identify and use the best, most innovative, and 
116 

4 ‘‘Improving Regulation and Regulatory Review—Executive Order’’ (January 18, 2011), available at http://www.whitehouse.gov/the-press-office/2011/01/18/improving-regulation-and-regulatory-review-executive-order. 

least burdensome tools for achieving regulatory ends.’’4 In this regard, The Roundtable recommends that current ASHRAE/IECC consensus-based processes are the 

best and least burdensome means to enhance building energy efficiency, and federal 

energy codes will add unnecessary administrative layers to the process. 

On March 18, 2011, The Roundtable joined other real estate and building supply 

groups in submitting to the Committee a proposal to amend the Energy Conservation and Production Act (ECPA). Our suggestions would amend the same section of 

ECPA as S. 1000’s model energy code provisions would revise. However, our approach improves the current consensus-based IECC and ASHRAE processes without 

creating new federal responsibilities and mandates vis-&-vis building energy codes. 

We attach these suggestions again for your consideration—and further note that our 

proposal would not require the $500 million authorization sought by section 304(i) 

(p. 24, line 1). Respectfully, we recommend that our March 18 approach should be 

taken in lieu of Subtitle A. 

III. RELATIVELY SPEAKING, S. 1000’S ENERGY CODE PROVISIONS ARE IMPROVED

COMPARED TO BILLS FROM PRIOR CONGRESSES

The Roundtable indeed recognizes that S. 1000 is improved over similar bills introduced by previous sessions of Congress. While there is still room to improve Subtitle A (we suggest amendments in that regard at pp. 6-10), The Roundtable commends provisions in S. 1000 that would: 

• Require DOE to establish all energy targets, determinations, and national 

model codes through public notice and comment rulemaking procedures, as opposed to enshrining efficiency targets in the legislation itself. (§304(a)(5), p. 13 

starting at line 18.) For example, the ESIC Act does not include a statutory 

mandate that model energy codes must achieve greater efficiencies by 50% over 

ASHRAE/IECC baselines by some target year, as prior bills have done. 

• Incorporate economic and cost considerations from the perspectives of building 

owners and tenants as model energy codes are developed—including return on 

investment analysis. (For example, see §304(a)(2)(E), p. 8 starting at line 5.) 

• Subject DOE model codes to a small business impact review analysis. 

(§304(a)(2)(C)(iv)(IV), p. 7 starting at line1.) 

• Recognize that tenant ‘‘plug load’’ uses and other considerations must be counted as model energy code targets are developed. (§304(a)(2)(D)(v), p. 8 lines 1- 

4.) 

• Make transparent the methodology and data used by DOE to determine whether, and by how much, a subsequent code iteration improves energy efficiency 

compared to its predecessor (§304(a)(3)(D), p. 9 starting at line 20.) 

• Strike language that appeared in earlier drafts of S. 1000, which would have 

measured federal code compliance against ill-defined ‘‘renovations,’’ and maintain the status quo on building retrofits as already covered by current ASHRAE 

and IECC codes. 

In short, to the extent federal energy codes remain in play, Subtitle A should continue to include those sections discussed above. 

IV. THE ENERGY CODES PROVISIONS IN S. 1000 REQUIRE IMPROVEMENT

In any event, Subtitle A requires further improvement. Insofar as S. 1000 continues to incorporate a federal energy codes section, The Roundtable recommends 

that the Committee consider at least the following six (6) amendments: 

• Amendment 1: S. 1000’s energy code provisions should replace current ECPA 

Section 307 (as well as Section 304). 

Amend: Section 101(a), p. 3, lines 5-7, as follows: 
117 

5See ‘‘Getting to Zero—Final Report of the Massachusetts Zero Net Energy Buildings Task 

Force’’ (March 11, 2009), available at http://www.mass.gov/ 

?pageID=eoeeamodulechunk&L=1&L0=Home&sid=Eoeea&b=terminalcontent&f=eea 

lenergyl gettingltolzero&csid=Eoeea 

Explanation: Subtitle A purports to replace all of ECPA section 304 (42 U.S.C. § 

6833). It appears, however, that Subtitle A should also replace all of current 

ECPA section 307 (42 U.S.C. § 6836) as well. 

Current ECPA section 307 is titled, ‘‘Support for voluntary building energy codes.’’ 

Among other things, section 307(a) presently gives DOE authority to consult with 

model codes bodies to ‘‘support the upgrading of voluntary building energy 

codes . . .’’ 42 U.S.C. § 6836(a). ‘‘[S]uch support shall include’’ activities like compiling data regarding building efficiency standards; assistance in improving the 

technical basis for such standards; assistance in determining the ‘‘cost-effectiveness 

and technical feasibility of energy efficiency measures’’; and assistance to identify 

measures for radon and other indoor air pollutants. Id. § 6836(a)(1)-(4). Meanwhile, 

S. 1000’s Subtitle A would duplicate these existing provisions of ECPA section 307. 

The proposed legislation would direct DOE to ‘‘provide technical assistance to model 

code-setting and standard development organizations,’’ and gives a laundry list of 

what such technical assistance shall include. (Proposed § 304(a)(3), starting at p. 8 

line 13.) Thus, current section ECPA 307(a) is apparently mooted by proposed new 

§ 304(a)(3). 

Similarly, current ECPA section 307(b) provides that DOE shall ‘‘recommend 

amendments’’ to energy codes; ‘‘seek adoption of all technologically feasible and economically justified energy efficiency measures’’; and ‘‘otherwise participate’’ in processes to review and modify energy codes. Id. § 6836(b). Likewise, Subtitle A’s proposed new § 304(a)(3)(C) provides that DOE may ‘‘submit timely code and standard 

amendment proposals’’ (p. 9, starting at line 12.) And, proposed new § 304(a)(4) prescribes an elaborate process for DOE to determine whether IECC and ASHRAE 

codes meet the federal energy targets (p. 10 starting at line 1.) These provisions in 

S. 1000 make existing ECPA section 307(b) redundant and, at worst, conflicting. 

In short, it appears that the ESIC Act’s new federal energy codes provisions 

should replace all of current ECPA sections 304 and 307. 

• Amendment 2: Language for the Zero-Net Energy Goal Should be Deleted or at 

Least Modified, and the Bill’s Overall ‘‘Goals’’ Should Reflect Economic Considerations. 

Amend: Section 304(a)(2)(B), p. 4 starting at line 17, as follows: 

Explanation: Proposed section (B)(i) above would create a national ‘‘goal’’ of netzero-energy buildings by 2030. This provision is extremely troublesome to the 

real estate community. Net-zero-energy is not a feasible goal for all buildings 

in every circumstance. A task force examining this very goal reported recently 

to the Governor of Massachusetts that ‘‘achieving zero net energy will be more 

difficult for some building types than others and . . . the concern over the costs 

of incorporating significant improvements into buildings is real.’’5

Not every building can be constructed in such a way to achieve net-zero-energy 

by going ‘‘off-the-grid’’; using passive design, siting, or location strategies; or gaining 

access to on-site energy generation sources (at least without incurring crippling 

project expenses). The very definition of ‘‘net-zero-energy’’ is vague and subject to 

many different interpretations. For example, how is energy use to be accounted? Is 

there enough renewable energy to be purchased? If yes, are there geographic limits 

as to how far away from the site renewable energy may be purchased? Are we talking about net zero ‘‘site’’ energy or ‘‘source’’ energy? Is there a sufficient cadre of 
118 

6 ‘‘Zero and Net-Zero Energy Buildings + Homes’’ (March 2011) at p. 10-11, available at http:// 

twgi.com/downloads/NetZeroWhitePaperlBDC.pdf pp. 10-11. 7 Id. at p. 5. 

knowledgeable builders, architects, and designers that have the necessary skills to 

build zero-energy structures? The Roundtable strongly cautions against establishment in the ESIC Act of an across-the-board net-zero energy ‘‘goal’’ for all buildings 

by 2030, when such fundamental questions still defy consistent responses from industry experts. 

Moreover, specialists in the field readily acknowledge that net-zero-energy as a 

goal is unrealistic unless ‘‘plug load’’ behaviors of homeowners, office tenants, and 

other building occupants are considered. In this regard, it is critically important to 

recognize that plug-load behaviors are wholly outside the purview of building codes 

and standards to regulate. A leading white paper on the subject of net-zero-energy 

buildings declares that plug loads are the ‘‘hidden energy sinkhole,’’ and finds: 

Even though energy modeling and innovative energy-efficient designs will certainly go a long way toward achieving net-zero, the shocking fact is that in 

terms of a building’s total energy profile, it’s only half the equation. ‘‘For the 

RSF project, the facade design, daylighting, natural ventilation, etc., only accounted for half of the energy use in the building,’’ states Okada. The other half 

is devoted to plug load. Computers, copiers, electronic devices, appliances, and 

the like account for an average 50% of a commercial building’s total electricity 

use.6

Of course, no federal law on energy codes could appropriately legislate the use of 

desk top computers in an office in favor of laptops, control the temperature level 

of thermostat settings, limit the number televisions allowed in a home, or restrict 

the hours that residents may use their appliances. Yet, it is precisely these plug 

load behaviors that must be addressed in the context of any lofty net-zero-energy 

aspirations for buildings. 

The white paper cited above states: ‘‘[A]cross all NZEB definitions and classifications, one design rule remains constant: reduce energy demand to the lowest possible level first, then address energy supply.’’7 This strikes The Roundtable as a better basis for Subtitle A’s goals than striving for a too-elusive net-zero-energy ideal. 

Our suggested edits to proposed § 304(a)(2)(b)(i) are based on this ambitious, yet 

somewhat more realistic, objective. 

The Roundtable also suggests a new goal in subsection (B)(iii). More stringent 

codes will come with greater up-front costs for higher efficiency equipment and materials. And, to the extent that the goal in (B)(i) continues to place buildings on a 

path to achieving net-zero-energy, demand reduction strategies and renewable technologies will certainly add to the expenses of building design and construction. We 

thus believe an equally compelling objective is to assess economic impacts on businesses and consumers. Accordingly, the ‘‘Economic Considerations’’ in proposed § 

304(b)(2)(E) (p. 8, line 5) should be re-stated as a ‘‘Goal’’ of this legislation through 

a new subsection (iii) added to § 304(a)(2)(B). 

• Amendment 3: Target Years Should be Consistent With Net-Zero Energy Revision from Amendment 2. 
119 
120 

8See 22 U.S.C. 16512(d)(3) (‘‘The obligation shall be subject to the condition that the obligation is not subordinate to other financing’’); id. § 16512(g)(2)(B) (‘‘The rights of the [Energy] Secretary, with respect to any property acquired pursuant to a guarantee or related agreements, 

shall be superior to the rights of any other person with respect to the property’’). 

V. LOAN GUARANTEE PROVISIONS SHOULD BE AMENDED, AND ENERGY DATA ‘‘RIGHT TO

KNOW’’ PROVISIONS SHOULD BE CONSIDERED

While the model energy code provisions are of most impact and concern to the real 

estate sector, other aspects of the ESIC Act can be enhanced to benefit building 

owners and achieve the overarching objective to improve energy efficiency in our 

built environment. 

• Loan Guaranties for Building Retrofits 

The Roundtable has repeatedly advocated for a program of credit enhancement 

from DOE to support and leverage private sector financing for building retrofit 

projects. In that regard, section 202 of the ESIC Act (starting at p. 154, line 12), 

which would authorize a building retrofit program within Title XVII of the Energy 

Policy Act of 2005 (EPAct), is a step in the right direction. 

As with any loan guarantee authorization, section 202 must be crafted to allow 

for fiscally austere measures that limit DOE’s exposure to financial risks in the 

event of a borrower’s default on a retrofit obligation. The Roundtable thus recommends that agency ‘‘guidelines’’ required by section 202, to implement the new 

loan guarantee program, should include assessments of a borrower’s creditworthiness, the building’s loan to value ratio, and the building’s history and expectations 

in generating rental and other income, among other factors. We also suggest that 

the agency guidelines carve-out retrofit ‘‘performance risks’’ not to be borne by DOE. 

A prerequisite to project qualification should be guaranteed energy savings arising 

from the retrofit, such as through energy service performance contracts and other 

mechanisms. Third-party contractors responsible for the retrofit like DOE-approved 

energy services companies—but not DOE itself—should bear risks that installed energy efficiency measures will perform as designed. In this way, the transaction can 

be structured so as to amortize retrofit financing through energy savings, and energy performance will be measured and verified. The project thus becomes a safer 

bet and DOE’s guarantee is limited to covering the ‘‘default risk’’ of the borrower. 

While DOE’s risks must be contained, refinements are also needed to make the 

retrofit loan guarantee program meaningful for and usable by real estate owners, 

managers and financiers. Currently, the EPAct requires that debt obligations 

backed by federal guarantees must not be subordinate to other financing.8 When 

these provisions were adopted in 2005 with nuclear plants, wind farms and largescale solar projects in mind, Congress did not consider their effect on the proper 

functioning of traditional commercial and residential mortgages (such as the sale of 

mortgages on secondary markets). A fundamental tenet of real estate finance is 

that, in the event of a property owner’s default on the mortgage and/or foreclosure, 

the lender (or ‘‘mortgagee’’) will receive payments outstanding on the loan before 

sums are paid to any other secondary security interest in the property. In other 

words, the first mortgagee has a superior lien taking precedence over secondary se-
121 

9 22 U.S.C. §§ 16512(d)(3), (g)(2)(B). 

curity interests in the collateral. This principle of ‘‘mortgage superiority’’ is an industry standard written into deeds of trust and other mortgage documents, including Fannie Mae’s uniform security instruments. Borrowers would likely be in breach 

of contract if they allowed a secondary lender (such as one extending a loan to finance a building retrofit) to occupy a more favorable lien position on the asset, to 

the detriment of the bank providing a mortgage loan in the first instance. 

It appears that the EPAct sections cited in footnote 8, if applied to a loan guarantee for building retrofits, would have DOE’s interests leapfrog over the prior 

rights of first lenders in mortgaged properties. Building owners considering retrofits 

and contemplating loan guarantee financing will find themselves in untenable positions. Such borrowers could not simultaneously respect their contractual obligations 

to allow mortgagees to maintain a higher interest in the collateral, while also ensuring that a government-backed retrofit loan is ‘‘not subordinate to other financing’’ 

or that the Energy Secretary has superior interests compared to the ‘‘rights of any 

other person’’ in the property.9

For purposes of S. 1000, it is critical to get this lien priority issue right—or else 

we risk that the real estate ownership and lending communities will not avail themselves to any new retrofit loan guarantee product in a market transformative manner. 

Accordingly, The Roundtable suggests the following refinements to ESIC Act section 202—with the objective to both minimize DOE’s exposure to borrower default 

and address the significant lien priority issue: 

Implementing Guidelines 

S. 1000 would amend the EPAct by adding a new §1706 which, among other 

things, would direct DOE to develop guidelines to implement the credit support program for building retrofits. These guidelines must include ‘‘any lien priority requirements that the Secretary determines to be necessary.’’ (§1706(c)(2)(E), p. 156 lines 

17-18.) We take this to mean that DOE may, through its guidelines, establish new 

principles to address the first mortgagee lien issue discussed above and provide that 

the federal obligation may be subordinated to prior mortgages on an eligible building. The Roundtable suggests that the statutory language needs to be clearer on this 

matter, and Congress should direct DOE to consider how the superior rights of firstin-time mortgagees can be maintained while minimizing the federal government’s 

exposure to default on the underlying retrofit obligation. We accordingly recommend 

the following edits: 
122 

In sum, a critical element to the success of proposed §1706 for retrofit financing 

support will be to preserve the prime position that pre-existing mortgagees enjoy in 

the underlying asset. At the same time, DOE’s guidelines to implement the new program must—and can—be structured in a manner to significantly minimize the federal government’s default risk while maintaining lien superiority of first-in-time 

mortgage lenders. The guidelines to implement a new Title XVII building retrofit 

guarantee should be developed in consultation with OMB to ensure that taxpayer 

interests are safeguarded. And, opportunity for comment on the new guidelines 

should be available so the real estate, lending, energy services, and efficiency advocacy communities can assist in creating a meaningful, workable, and usable loan 

guarantee product for building retrofits. 

Eligible Projects and Buildings 

The Roundtable recommends edits to the definition of ‘‘Project’’ (p. 155, starting 

at line 3). It should also include operations, maintenance, management and monitoring systems for energy efficiency measures. New equipment and materials (like 

HVAC and lighting) can be installed in a building, but unless they are properly 

managed and maintained by skilled and trained staff, anticipated energy savings 

may not accrue. Indeed, retrofit projects with continuous commissioning and monitoring protocols will present safer investments and pose less credit risks to DOE, 

and are precisely the kinds of projects that should fall within the retrofit loan guarantee’s purview. We thus suggest the following amendment: 
123 

10See http://www.energystar.gov/index.cfm?c=evaluatelperformance.buslportfoliomanager. 

The 14 varied commercial building types that are eligible to receive ratings from EPA’s ENERGY STAR office are bank/financial institution; courthouse; data center; hospital; hotel; house 

of worship; K-12 school; medical office; municipal wastewater treatment plant; office; residence 

hall/dormitory; retail store; supermarket; and warehouse. But even this list is not exhaustive, 

and does not encompass other commercial building types like retail malls, restaurants, assisted 

living facilities, distribution centers, and others such as a wide variety of factories and other 

types of industrial facilities 

Minimum Energy Savings 

The Roundtable recommends that proposed §1706(c)(5), ‘‘Minimum Energy Savings Requirements’’ (p. 157, starting at line 22), be deleted. This section states that 

DOE ‘‘shall establish an initial minimum energy savings requirement for eligible 

projects that, to the maximum extent practicable, results in the greatest amount of 

energy savings on a per project basis.’’ However, such a one-size-fits-all minimum 

requirement can unduly hamper the program’s success. 

The building types within the commercial sector are varied and diverse. Indeed, 

EPA’s ENERGY STAR program office recognizes the heterogeneous composition of 

the commercial building stock. It has identified 14 unique types of commercial buildings for purposes of energy ratings—and even these represent only about 50% of the 

commercial floor space in the United States.10 It is highly unlikely, for example, 

that a single, minimum savings target will make sense for an office building, supermarket, warehouse, school, or retail mall. Compound this diversity of building categories by regional climatic differences, and then again by variations of occupant 

‘‘plug load’’ uses across these types. Selection of a single arbitrary threshold for 

minimal energy savings will not be workable considering the broad spectrum of commercial structures. 

The Roundtable does encourage, however, that energy savings be an important 

factor when DOE decides which building retrofits warrant credit enhancement. 

When DOE receives competing proposals through project solicitations, the agency 

should certainly prioritize which of those projects are designed to achieve higher levels of energy performance. 

In short, The Roundtable believes the market should select levels of energy savings among competing project proposals. To this end, we support language stating 

that DOE shall prioritize ‘‘(A) the maximization of energy savings with the available 

credit support funding.’’ (Proposed § 1706(c)(4)(A), p. 157 lines 12-13.) Moreover, in 

our suggested amendments to the ‘‘Guidelines’’ provision discussed above (pp. 11- 

12), DOE should consider requirements that third-party contractors guarantee energy savings as a condition to receiving credit support; whether energy savings will 

cover the costs of the retrofit obligation; and that the project should incorporate energy savings measurement and verification protocols. These provisions will be undermined by a single threshold for energy savings applied across all building types 

as a prerequisite for loan guarantees. 
124 

11http://apps1.eere.energy.gov/news/newsldetail.cfm/newslid=12387; ;http:// 

www.esbnyc.com/sustainabilitylprojectlfinances.asp. 12 Utilities include Commonwealth Edison Co. (ComEd), Pacific Gas and Electric Co. (PG&E), 

Southern California Edison (SCE) and the Sacramento Municipal Utility District (SMUD). 13See https://www.comed.com/sites/businesssavings/Pages/wholebuilding.aspx; http:// 

www.cee1.org/cee/mtg/06-09mtg/files/BB6Bricknell.pdf. 14http://www.energystar.gov/ 

index.cfm?fuseaction=ptlawards.showAwardDetails&esalid=3666. 

In lieu of a minimum savings requirement, the Committee may consider adding 

a new subsection (D) in the ‘‘Priorities’’ section (following page 157, line 21), as follows: 

Deep retrofits of this sort will certainly be designed to achieve high levels of energy savings—such as the upgrade at the Empire State Building, where the performance contract guarantees reduced energy consumption by about 38 percent.11

Rather than a minimum savings standard that could impede the success of a nascent loan guarantee program, we suggest the Committee instead consider language 

emphasizing the importance of whole-building retrofits as preferred beneficiaries of 

federal credit enhancement. 

• Whole-Building Data Capture in Multi-Tenant Buildings 

The Real Estate Roundtable also encourages Congress to enact energy data ‘‘rightto-know’’ provisions with regard to multi-tenant commercial and residential buildings. 

Whether through voluntary or regulatory programs, building owners face increasing demands to benchmark whole-building energy performance and report data on 

energy consumption throughout an entire structure. However, while owners can 

manage energy consumption in common space areas within their control (like lobbies, atriums, parking lots, clubhouses, etc.), they frequently lack access to energy 

usage information in individual spaces leased by tenants. This is especially the case 

where leased spaces are covered by separate utility-grade meters to record energy 

usage, and are outside of the owner’s ability to fully manage. 

Whole-building energy benchmarking is an important tool that enables commercial building owners and managers to identify energy performance issues in buildings, undertake energy management actions and cost-effective improvements in 

buildings, track energy performance over time, and set energy performance goals. 

But these significant objectives are impeded by owners’ lack of access to consumption data throughout tenant-leased spaces. 

The Roundtable suggests that energy consumption ‘‘right to know’’ provisions can 

be a vehicle to overcome the significant data issues faced by owners and managers 

of multi-tenant buildings. Before its introduction, S. 1000 included provisions of the 

Electric Consumer Right to Know (eKNOW) Act. While these sections were removed 

from S. 1000, the eKNOW Act has since been introduced as S. 1029, sponsored by 

Senators Mark Udall and Scott Brown. Whether through S. 1000 or stand-alone legislation, we recommend that whole-building data capture be addressed in the context of the eKNOW Act and are prepared to assist with suggesting text in that regard. 

Several utilities12 are already utilizing EPA’s ENERGY STAR automated 

benchmarking services, in a manner where the modest and incremental costs of the 

service are spread among ratepayers. Additionally, tenant privacy concerns have 

been addressed through aggregated, whole-building consumption data provided by 

the utility to the owner, which neither reveals the individual identities of tenants 

nor divulges energy usage in a particular leased space. For example, the ‘‘Energy 

Usage Data System,’’ pioneered by Commonwealth Edison in Chicago, is a program 

that enables utilities to upload whole-building performance data directly into Portfolio Manager, the ENERGY STAR benchmarking tool.13 ComEd received a 2009 

ENERGY STAR award for collaborating with EPA to promote the use of the EUDS 

by real estate owners and managers in the Chicago area.14

Armed with information about whole-building energy use, owners, tenants, and 

other consumers will be able to better target energy efficiency upgrades for their 

homes and businesses. They also will be able to see how their actions affect their 
125 

energy use. The Roundtable stands ready to assist the Committee in exploring how 

eKNOW provisions can be modified to specifically address data capture in multi-tenant commercial and residential buildings. 

VI. CONCLUSION

The real estate community and its suppliers fully endorse proposals to create 

green jobs, enhance our nation’s energy security, and lower energy consumption. We 

applaud the Administration’s call in the January 18 Executive Order to assess alternatives to regulation, such as ‘‘economic incentives to encourage the desired behavior.’’ To that end, we enthusiastically support proposals to assist homeowners and 

businesses with the costs to retrofit the vast stock of existing buildings. Modest but 

meaningful retrofit incentives will accomplish more effective results, we believe, 

than federal codes which would largely govern in a still-struggling market where 

the pace of new construction is anemic at best. The Real Estate Roundtable looks 

forward to finding solutions with the Committee which enhance building efficiencies 

without unduly extending the regulatory reach of the federal government into the 

energy codes arena. 

For more information on the content of this statement, please contact Duane J. 

Desiderio, Vice-President and Counsel, at (202) 639-8400 (ddesiderio@rer.org). 

STATEMENT OF THE AMERICAN CHEMISTRY COUNCIL

INTRODUCTION

The American Chemistry Council welcomes this opportunity to state our support 

for the Energy Savings and Industrial Competitiveness Act of 2011 (S. 1000). The 

Council thanks Senators Shaheen and Portman for developing and introducing the 

bill, and we thank Senators Bingaman and Murkowski for holding today’s hearing. 

Energy efficiency must have a prominent place on the nation’s energy policy agenda. After all, it’s a proven way to help America save energy and money while creating jobs. Unfortunately, energy efficiency has been devalued in the clean energy 

policy discussion this year. The Obama Administration’s Energy Blueprint, for example, specifically excludes energy efficiency from the definition of ‘‘clean energy’’ 

in its proposed national clean energy standard. We are dismayed that champions 

of clean energy would exclude cost-effective and proven emission-reduction and energy-savings strategies from a clean energy deployment program. 

We strongly believe that energy efficiency must not be relegated to some vague 

suite of ‘‘complementary’’ programs. If policy awards tradable credits to ‘‘qualified’’ 

clean energy technologies and energy efficiency is excluded from the list, then that 

would only lead to underinvestment in cost-effective efficiency solutions and overinvestment in more expensive, less effective products and technologies. Developing 

a clean energy economy that can compete with the rest of the world demands that 

policymakers maximize energy efficiency’s contribution to the nation’s energy portfolio. 

Given the second-class status of energy efficiency in some policy circles, we are 

especially pleased to see the Committee deliberate the Energy Savings and Industrial Competitiveness Act. The bill contains a series of measures that each save energy and reduce costs. S.1000 restores energy efficiency to its rightful place high on 

the nation’s energy policy priority list. 

AMERICAN CHEMISTRY AND ENERGY EFFICIENCY

America’s chemistry companies are leaders in energy efficiency. They invent and 

make products used in building insulation, appliances, lightweight vehicle parts, 

windows, engine lubricants, compact fluorescent light bulbs, energy storage systems, 

thermal coatings, water saving systems and many others. These markets are significant, and growing. 

In today’s highly competitive global commerce, we know that being energy-efficient in our own operations helps our industry reduce costs and maintain U.S. production and jobs. This commitment has led to a 56 percent improvement in energy 

efficiency since 1974, and 33 percent since 1990. Just last month, we recognized 

member companies for implementing energy efficiency improvements in 2010 that 

saved 14.8 trillion BTUs—enough to power the homes of Akron, Ohio’s 210,000 residents for one year. 

It is important to recognize that affordable, reliable energy supplies are vital to 

making the United States a competitive producer of energy efficient products and 

services. For example, the domestic chemical industry relies on natural gas liquids 

(e.g. ethane) to make chemistry that is used to make energy efficiency products. 
126 

Policies that create reliable natural gas supplies directly affect whether America has 

a globally competitive manufacturing sector to make the products that drive energy 

efficiency throughout the U.S. economy. 

SPECIFIC COMMENTS ON S. 1000

Title I-Buildings 

Subtitle A-Building Energy Codes 

ACC is a longtime supporter of updating building energy codes. Buildings currently consume 40 percent of all energy used in the United States. Building codes 

help investors overcome the market barriers that impede energy savings in this sector, while reducing energy costs for businesses. ACC commends the authors for setting a goal of zero net energy in new buildings by 2030. 

Subtitle B-Appliance Standards 

This section of the bill would require conservation and energy efficiency standards 

for a broad range of appliances. These include, heat pump pool heaters, GU-24 base 

lamps, bottle-type water dispensers, commercial hot food holding cabinets, portable 

electric spas, refrigerators and freezers, room air conditioners, water heaters, clothes 

dryers, dishwashers, reflector lamps, outdoor lighting, commercial furnaces, and a 

specific type of commercial refrigerator. 

According to the American Council for an Energy-Efficient Economy, appliance 

standards provisions in the bill will cut consumers’ home energy costs by $43 billion 

through 2030. Existing federal appliance standards have saved taxpayers more than 

$300 billion in energy bills and reduced national energy use by 3.6 percent annually. 

This provision is identical to S. 398, which was recently reported by the Senate Energy and Natural Resources Committee with a bipartisan 18-4 vote. 

American Chemistry Council member companies supply a wide range of materials 

and products that enable appliances to be more energy efficient. 

Title III-Industry 

Manufacturing Energy Efficiency 

The bill would establish a $700 million loan program for 2012 through 2021 for 

manufacturers to adopt commercially available technologies and processes that ‘‘reduce systems energy intensity, including the use of energy intensive feedstocks.’’ 

The Secretary of Energy would be directed to provide an assessment of commercially 

available energy efficiency technologies that are not widely implemented for a number of sectors including (but not limited to): chemicals, steel, aluminum, and paper. 

The bill would establish a public-private partnership to develop industry-specific 

roadmaps to identify the technologies necessary to reduce energy intensity and 

greenhouse gas emissions. It would also establish a sustainable manufacturing initiative as part of the Industrial Technologies Program of DOE. With this fund, domestic manufacturers could fine-tune their equipment, improve use of water in their 

process, reduce utility related overheads, and strengthen their bottom-line. 

We believe Title III will help industries identify additional energy efficiency opportunities and can serve as a springboard to attempt even more ambitious industrial energy efficiency programs in the future. 

CONCLUSION

The Energy Savings Act also contains a provision based on the Rural Star legislation which was passed by the House of Representatives last year. This program 

would create a loan program through rural public utilities and electric cooperatives 

to finance energy efficiency improvements for rural utility customers. Sponsors of 

the original bill estimate that it will create 20,000 to 40,000 jobs to conduct and implement these energy improvements. ACC supported Rural Star legislation in the 

last Congress and we continue to support it today. 

In conclusion, we’d like to leave the committee with three thoughts: 

• Energy efficiency must be recognized as a cornerstone of any clean energy policy 

agenda 

• The domestic chemistry industry is a leading supplier of products and technologies that make energy efficiency possible 

• A sound domestic energy supply policy is critical to implementing a successful 

energy efficiency strategy 

Thank you for this opportunity to express ACC’s support for S. 1000 and to comment on specific provisions of the bill. 
127 

EFFICIENCY FIRST, 

May 27, 2011. 

Hon. JEANNE SHAHEEN, 

U.S. Senate, 520 Hart Senate Office Building, Washington, DC. 

Hon. ROB PORTMAN, 

U.S. Senate, B40D Dirksen Senate Office Building, Washington, DC. 

DEAR SENATORS SHAHEEN AND PORTMAN, On behalf of Efficiency First, I am writing in support of the Energy Savings and Industrial Competitiveness (ESIC) Act of 

2011. Efficiency First is a national nonprofit trade association that represents home 

performance contractors from across the country working to advance home energy 

efficiency and combat rising energy costs. 

Efficiency First applauds your bi-partisan call for increased energy efficiency technologies across the residential, commercial, and industrial sectors of our economy. 

We also appreciate the focus on increasing the energy efficiency of our nation’s current building stock. Buildings currently consume 40% of all energy used in the 

United States, and by including provisions in your bill that call for regular updates 

to the existing national model building codes, you are helping to provide certainty 

to the marketplace and ensure new homes continue to take advantage of increases 

in energy efficiency. 

While we support the legislation, Efficiency First is concerned with the bill’s lack 

of focus on existing residential buildings, which account for more than 20% of the 

nation’s energy use. Policies like the Retrofit for Energy and Environmental Performance (REEP) program, which passed both the Energy and Natural Resources 

Committee and the Environment and Public Works Committee in the 111th Congress, would promote quality jobs that would put people to work retrofitting homes 

and saving Americans energy. We request that you consider including this legislation in your bill. 

Efficiency First represents thousands of contractors who are hurting in these 

harsh economic times; they are trying to do right by their customers and provide 

quality installations but are faced with increasingly large financial burdens and 

dwindling government resources. The construction industry has almost twice the 

unemployment rate compared the entire nation—17.8% unemployment in the construction sector compared to 9% nationally. In 2010, 1,826,000 construction sector 

workers were unemployed, 1,083,000 of whom were unemployed for 15 weeks or 

more. 

Making matters worse is the fact that construction industry unemployment is not 

subsiding, as is the case in many other sectors of the economy. Approximately 

42,000 construction sector jobs—0.8% of the industry as a whole—have been lost 

since April of last year. Intervention is desperately needed. As the sole voice for 

home performance contractors across the nation, Efficiency First respectfully requests that your offices consider including provisions aimed at getting America’s 

contractors back to work. 

The REEP program would save consumers money, create jobs and help protect the 

environment through incentives for energy efficiency home retrofits. These performance-based incentives—deployed as direct consumer rebates—reward modeled energy savings, not specific products or technologies, and leverage private investment 

to minimize the burden on public funding sources. These incentives are technology 

neutral, removing government from the role of trying to pick winning technologies 

and freeing the market to innovate and reward performance. Inclusion of the REEP 

program would make your bill a truly comprehensive package and would serve to 

enhance its overall goals. 

By fully deploying the power of energy efficiency, we can help create new jobs, 

save energy, save money, and reduce carbon emissions. Energy efficiency is the 

quickest, cleanest, and cheapest way to meet America’s growing energy needs. Welldesigned programs such as those contained in the Energy Savings and Industrial 

Competitiveness Act will help those American families and businesses who are 

struggling today to lower their energy costs. 

We again commend your leadership in developing and introducing the Energy 

Savings and Industrial Competitiveness Act of 2011, and hope to work with you to 

ensure that when this legislation reaches the floor, it is a vehicle by which we can 

get our American contractors back to work. 

Again, thank you for your efforts to advance home energy efficiency and we look 

forward to working with you. 

Sincerely, 

GREG THOMAS, 

Chair. 
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STATEMENT OF THE NATIONAL PROPANE GAS ASSOCIATION

The National Propane Gas Association (NPGA) applauds Senators Ron Wyden (DOR) and Debbie Stabenow (D-MI) on the introduction of the Alternative Fuel Vehicles Competitiveness and Energy Security Act of 2011 (S. 1001), comprehensive alternative fuel vehicle legislation designed to reduce our dependence on imported petroleum by replacing it with clean domestic sources of energy to power America’s 

on and off-road vehicles, including cars, trucks and buses, as well as commercial and 

agricultural equipment. 

The only path toward achieving United States energy security is to reduce our dependence on foreign oil, particularly in the transportation sector which accounts for 

over 70% of all oil used in the United States. NPGA strongly believes that S. 1001 

addresses head-on the broad concepts that our nation must confront in order to 

wean ourselves off of foreign petroleum products, spur economic growth, and create 

good jobs here at home. 

First and foremost, the Alternative Fuel Vehicles Competitiveness and Energy Security Act of 2011 gets the details regarding fuel neutrality in public policy correct. 

In the previous Congress, numerous alternative fuel and alternative fuel transportation bills were introduced that would have incentivized the development, production and use of various alternative fuel vehicles, notably vehicles that operate on 

compressed natural gas (CNG), biofuels, ethanol, hydrogen and electricity. Unfortunately, in many cases this legislation neglected to also support propane autogas as 

a vehicle fuel and propane autogas vehicle alternatives despite the fact that propane 

autogas is defined in law as a clean alternative fuel, is widely available, domestically-produced, and increasingly deployed in vehicle fleets nationwide. 

NPGA appreciates the ‘‘technology neutral’’ approach S. 1001 takes. Passing legislation that incentivizes only one, or a select few, fuels places the Congress in the 

position of ‘‘picking winners’’ among alternative transportation fuels. Alternative 

fuel choices should be made by the marketplace, by the fleets, companies, and consumers across the country who are tasked with making individual decisions about 

which alternative fuels and vehicles suit their needs best. The government should 

not intercede in this process. 

NPGA fully supports the policy positions outlined in S. 1001. Expanding existing 

Department of Energy programs to include manufacturing support for alternative 

fuel vehicles and alternative fuel infrastructure; offering DOE technical and workforce training assistance to state and local entities toward the deployment of alternative fuel vehicles; and increasing interagency alternative fuel vehicle technology 

research and development program funding will help manufacturers, suppliers, fuel 

providers, and transportation program managers deploy alternative fuel vehicles in 

numbers large enough to reduce our dependence on imported oil. 

At the end of the day, the propane industry is confident that, given a level playing 

field, propane autogas vehicles can play a lead role in addressing many of the objectives outlined in the Alternative Fuel Vehicles Competitiveness and Energy Security 

Act of 2011. Propane autogas offers the right attributes: 

• Propane autogas is a clean American fuel. 98.7% of U.S. propane supply is produced domestically. 66% of propane supply is derived from natural gas. This 

compares very favorably to the current U.S. transportation sector which is 95% 

reliant on petroleum. Even better news is that U.S. propane production from 

natural gas will increase between 2010 and 2020. 

• Propane autogas vehicles have a positive emissions reduction profile. Propane 

autogas vehicles are 19% lower in CO2 emissions than gasoline powered vehicles. Propane autogas vehicles also produce significantly lower particulate matter, carbon monoxide, nitrogen oxide and hydrocarbon emissions than gasoline 

or diesel vehicles. 

• Propane supply is abundant. In 2010 the North American market (U.S and 

Canada) was a net exporter of propane. This trend is likely to continue as shale 

gas, and natural gas liquids production in conjunction with shale gas, increase. 

• Propane autogas vehicles are here now. Over the past several years, more and 

more commercial, state and local government fleets have been transitioning to 

propane autogas as a cost-effective, environmentally sensitive domestic fuel. 

Propane autogas is easily the most accessible alternative transportation fuel currently available in the marketplace. Moreover, this clean, domestic and abundant 

fuel is already displacing imported petroleum products in the American marketplace. Recognizing this market, Ford and General Motors are now producing propane autogas vehicle platforms and many smaller companies are now converting existing vehicles to run on propane autogas. With gasoline and diesel prices rising fast 
129 

and our country’s continued reliance on foreign oil, now is the time to support all 

opportunities to bolster alternative vehicle deployment. 

NPGA appreciates the approach Alternative Fuel Vehicles Competitiveness and 

Energy Security Act of 2011 takes in promoting alternative fuels and respecting parity in the alternative fuel marketplace. As an industry, we the look forward to working with the Senators Wyden and Stabenow, the Senate Energy and Natural Resources Committee, and our partners in the broader alternative fuel industry to 

craft smart and equitable alternative fuel transportation solutions for the American 

public. 

——————— 

NPGA is the national trade association of the propane gas industry with a membership of approximately 3,200 companies, including 39 affiliated state and regional 

associations representing members in all 50 states. Although the single largest 

groups of NPGA members are retail marketers of propane gas and propane autogas, 

the membership includes propane producers, transporters and wholesalers, as well 

as manufacturers and distributors of associated equipment, containers and appliances. More than 55 million households and businesses use propane gas for space 

heating, water heating, cooking, outdoor recreation, and other uses. Propane gas is 

also used in millions of installations nationwide for commercial heating and cooking, 

in agriculture, in industrial processing, and as a clean alternative engine fuel for 

over-the-road vehicles and industrial lift trucks. 

STATEMENT OF KENT JEFFREYS, STAFF VICE PRESIDENT, THE INTERNATIONAL

COUNCIL OF SHOPPING CENTERS

SUMMARY AND INTRODUCTION

Thank you for this opportunity to comment on the record concerning such an important national issue. In the interest of brevity, these comments are specifically addressed to the Building Energy Codes provisions of Subtitle A of S. 1000, the Energy 

Savings and Industrial Competitiveness Act of 2011. These comments convey two 

essential points: 

(1) Existing law and the current code-writing process are more than sufficient 

to achieve economically appropriate levels of energy efficiency in commercial 

and residential buildings. 

(2) Setting a goal of Zero-Net-Energy for all new buildings is simply bad public policy. 

The International Council of Shopping Centers (ICSC), founded in 1957, is the 

premier global trade association for the shopping center industry. Its approximately 

50,000 members include shopping center owners, developers, investors, lenders, retailers and other professionals as well as academics and local public officials. As 

such, ICSC members have a uniquely broad perspective on the effect of proposed 

building energy code provisions as they relate to multi-tenant retail and mixed use 

commercial real estate. ICSC and its individual members continue to support consensus-based energy codes that reflect current technological capabilities and existing 

market realities. 

BACKGROUND AND CONTEXT

Congress has frequently addressed the issue of energy efficiency in both privately 

and publically owned buildings. Major recent examples include the American Recovery and Reinvestment Act of 2009, the Energy Independence and Security Act of 

2007, and the Energy Policy Act of 2005. 

The legislation being considered at today’s hearing seeks, once again, to further 

refine federal policy and thereby increase the efficiency of energy consumption by 

the private sector. These are laudable goals. However, federal policy is made less 

effective when each succeeding Congress revises the scope and purpose of past policies without providing sufficient time to determine the success of failure of previous 

efforts. 

Consider that current federal law (42 USC § 6836) already directs the Secretary 

of Energy to ‘‘support the upgrading of voluntary building codes for new residential 

and commercial buildings.’’ Some participants would argue the Department of Energy has, if anything, been excessively involved in driving consensus-seeking building code processes toward predetermined outcomes. For example, it is safe to assume that most Members of Congress are unaware that the Department of Energy, 
130 

1The U.S. Energy Information Administration recently stated that it ‘‘regrets to report that 

the 2007 Commercial Buildings Energy Consumption Survey (CBECS) has not yielded valid statistical estimates of building counts, energy characteristics, consumption, and expenditures. Because the data do not meet EIA standards for quality, credible energy information, neither data 

tables nor a public use file will be released.’’ 

operating under current law, submitted at least 56 code change proposals during the 

International Code Council’s (ICC) 2009/2010 code development cycle (which is developing the 2012 code). 

Nevertheless S. 1000 proposes to amend the existing statute before Congress has 

fully determined the impact of its past statutory directives and determined the full 

extent of progress toward its goals.1

ZERO NET ENERGY

Cost-effective, carbon-free energy production is fairly limited in scope. This is 

largely due to limitations inherent in these technologies. In addition, solar and wind 

energy are time and place specific. That is, their energy output depends upon the 

precise conditions present over time at each unique building site. Furthermore, reliance upon them must be augmented by two-way access to the power grid. As the 

installed capacity of on-site solar increases, complications are predicted to arise in 

balancing power fluctuations on the grid and properly anticipating peaks in demand. Without first successfully addressing these issues, Congress should not move 

forward with proposed zero-net-energy code provisions. 

If zero-net-energy is adopted into state and local building codes building owners 

would be required to engage in an entirely unrelated business (that is, power generation) that effectively forces them into competition with regulated public utilities 

and large distributed power generators. It is unlikely that all building owners would 

be equally successful in any such competition but if it is written into building codes, 

what choice will they have? Bear in mind that state regulated utilities typically are 

guaranteed a minimum return on their investment—yet no similar guarantee is 

being provided to building owners. 

Hypothetically, neighborhood or community-wide zero-net-energy might be feasible if there were significant changes to the regulatory structure of the electrical 

distribution system and an expensive increase in current subsidy levels for ‘‘green’’ 

energy. However, universal building-by-building ‘‘zero net’’ simply is not possible 

with today’s technology, or even with tomorrow’s foreseeable improvements—unless 

one simultaneously restricts occupant behavior to a degree far beyond anything yet 

admitted by energy efficiency advocates. That would be a huge, unintended consequence of imposing zero-net-energy requirements on the code writing process and 

Congress would be remiss if it did not carefully consider the potential impacts in 

advance. Does Congress truly want to force landlords to reject one tenant simply 

because they might consume 5 percent more energy than another? What if the first 

tenant created more jobs and generated far more income in the process? Proponents 

also gloss over the fact that existing street patterns, building orientations and property locations may not be conducive to zero-net-energy requirements (particularly 

when utilizing wind or solar). Yet if such requirements become part of the state or 

local building code, many private citizens will be denied the full and fair use of their 

property. 

If Congress is to impose the ‘‘zero net energy’’ concept on building energy codes, 

a precise definition will be critical, yet one is not included in S. 1000. There has 

been a long debate over the proper definition of zero net energy to be applied in 

federal laws. See, for example, the 2006 publication Zero Energy Buildings: A Critical Look at the Definition. (http://www.nrel.gov/docs/fy06osti/39833.pdf) 

One definition is found in Executive Order 13514, issued by President Barack 

Obama in 2009. It provides the following definition: ‘‘Zero-Net-Energy Building 

means a building that is designed, constructed, and operated to require a greatly 

reduced quantity of energy to operate, meet the balance of energy needs from 

sources of energy that do not produce greenhouse gases, and therefore result in no 

net emissions of greenhouse gases and be economically viable.’’ This is slightly different from the definition found in the Energy Independence and Security Act of 

2007, which referred to zero-net-energy commercial buildings (at section 422(a)(3)), 

but only as part of a High-Performance Green Building initiative. 

Executive Order 13514 goes on to require that beginning in 2020, all new Federal 

buildings that enter the planning process must be designed to achieve zero-net-energy by 2030. Admittedly, this is a rather imprecise requirement. Yet shouldn’t Congress first determine whether federal buildings (which typically have ‘‘captive’’ tenants and the deep pockets of the Treasury backing them) are able to achieve such 

lofty goals before imposing the same requirement on the private sector? 
131 

2 42 USC 6831(b)(1): The purposes of this subchapter, therefore, are to—(1) redirect Federal 

policies and practices to assure that reasonable energy conservation features will be incorporated into new commercial and residential buildings receiving Federal financial assistance; 3 42 USC 6832(7)(B): (7) The term ‘‘Federal financial assistance’’ means... (B) any loan 

made or purchased by any bank, savings and loan association, or similar institution subject to 

regulation by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, the Federal Home Loan Bank Board, the 

Federal Savings and Loan Insurance Corporation, or the National Credit Union Administration. 

In addition, one should not be too quick to assume that the caveat in Executive 

Order 13514 that zero-net-energy be ‘‘economically viable’’ will have the same definition for businesses as it does for the government. Indeed, the definitions already 

adopted in existing law clearly highlight the false assumption that ‘‘everyone knows’’ 

what a specific term really means. Consider that under the existing law (that would 

be amended by S. 1000’s Building Energy Code provisions) one of the primary purposes listed is ‘‘to assure that reasonable energy conservation features will be incorporated into new commercial and residential buildings receiving Federal financial 

assistance.’’2 Few would object to a policy that appears to extract concessions only 

from those private developers who seek federal financial assistance to complete their 

projects. Yet the definition of ‘‘Federal financial assistance’’ included in the same 

law effectively declares that merely borrowing money from any regulated entity 

qualifies as ‘‘federal financial assistance.’’3 In other words, essentially every new 

building in America is covered by that definition. 

The language of the Building Energy Codes subtitle of S. 1000 includes numerous 

words and phrases that, despite any assurances by the authors, will be subject to 

bureaucratic reinterpretation and ultimate enforcement. These include ‘‘support,’’ 

‘‘life-cycle cost effective,’’ ‘‘technologically feasible,’’ ‘‘technically feasible,’’ ‘‘return on 

investment analysis,’’ and ‘‘cost benefit analysis.’’ 

CONCLUSION

ICSC’s members uniformly support sensible sustainability practices, particularly 

when it comes to energy efficiency. Energy expenses directly impact the bottom line 

for most businesses in the retail industry. Yet that does not mean that energy is 

the only priority or that there is a ‘‘one size fits all’’ solution to the important question of ‘‘how much efficiency is enough?’’ 

The goods and services supplied by the retail real estate industry are as diverse 

as the American economy itself. So it is entirely understandable that carefully tailored business models have arisen to serve different market segments. Some, perhaps many, of these business models may not be viable under a requirement to 

achieve zero net energy for each new building in America. 

Directing the Department of Energy to draft a model building energy code around 

zero-net-energy requirements is not a hypothetical exercise. The purpose is to make 

this model code the minimum standard for the entire nation. Therefore, the potential negative consequences of such a radical goal should be more fully contemplated 

before any Congress considers imposing them on the US economy. 

STATEMENT OF ANN WILSON, SENIOR VICE PRESIDENT, GOVERNMENT AFFAIRS, 

MOTOR & EQUIPMENT MANUFACTURERS ASSOCIATION

The Motor & Equipment Manufacturers Association (MEMA) represents more 

than 700 companies that manufacture motor vehicle parts for use in the light vehicle and heavy-duty original equipment and aftermarket industries. Motor vehicle 

parts manufacturers are the nation’s largest manufacturing sector. MEMA represents its members through four affiliate associations: Automotive Aftermarket 

Suppliers Association (AASA), Heavy Duty Manufacturers Association (HDMA), 

Motor & Equipment Remanufacturers Association (MERA) and Original Equipment 

Suppliers Association (OESA). 

MEMA strongly supports the Advanced Vehicle Technology Act (S. 734) and the 

Alternative Fuel Vehicles Competitiveness and Energy Security Act (S. 1001) and 

urges the Committee to report these bills to the full Senate for consideration as soon 

as possible. These important bills will help motor vehicle parts suppliers develop, 

implement, and manufacture technology for more fuel efficient components. 

Component suppliers and vehicle manufacturers have worked together to develop 

the technologies necessary for advanced technology vehicles that will improve the 

fuel economy of our nation’s fleets. Suppliers account for 30 percent of total automotive investment in research and development and continue to take on a greater 

role in the design, testing, and engineering of new vehicle parts and systems. Addi-
132 

tionally, suppliers now account for as much as 70 percent of the value-added in the 

manufacture of motor vehicles. 

S. 734 calls for the research, development, and deployment that will be necessary 

for motor vehicle suppliers to make the highly efficient components and technologies 

for future cutting edge vehicles. These investments will advance fuel efficiency, 

lower emissions, and expand and strengthen U.S. manufacturing capabilities for the 

next generation of automobiles as well as increase our nation’s energy independence. 

S. 1001 broadens and makes improvements to the Advanced Technology Vehicle 

Manufacturing Incentive program which will allow the program to work more effectively for suppliers and extend the program to medium-and heavy-duty vehicles. 

We look forward to working with you to ensure that S. 734 and S. 1001 are considered by the full Senate. 

STATEMENT OF DAVID TERRY, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF

STATE ENERGY OFFICIALS, ON S. 1000 

On behalf of the National Association of State Energy Officials (NASEO) we wish 

to express our strong support for the Energy Savings and Industrial Competitiveness Act of 2011 (S.1000). We also want to stress the importance of the building 

energy codes provision (Section 101) contained in the bill, which would spur major 

building efficiency improvements by working with states to strengthen national 

model building codes to make new homes and commercial buildings more energy efficient. 

New building energy efficiency must be a key part of any successful national energy policy because homes and commercial buildings are the largest source of energy 

use. In the United States, non-industrial buildings consume over 40 percent of all 

energy and over 70 percent of all electricity. We believe improved energy efficiency 

of buildings codes is a critical measure in achieving our goal to greatly increase energy efficiency and reduce demand of the largest energy consuming sector in our 

economy. 

NASEO and our 56 State and Territory members share the committee’s goal to 

strengthen the nation’s economy through sound energy policy advances. We are encouraged by the building energy codes policies contained in S. 1000, and urge you 

to support these provisions in committee. We welcome the opportunity to work with 

you to advance this important piece of legislation that will surely accelerate our efforts for cost effective and dramatic efficiency improvements in new homes and commercial buildings. 

STATEMENT OF NATURAL GAS VEHICLES FOR AMERICA

INTRODUCTION

NGVAmerica is pleased to offer the following written statement with regard to 

this hearing. NGVAmerica is a national organization dedicated to the development 

of a growing and sustainable market for vehicles powered by natural gas and biomethane. NGVAmerica represents more than 130 member companies, including: vehicle manufacturers; natural gas vehicle (NGV) component manufacturers; natural 

gas distribution, transmission, and production companies; natural gas development 

organizations; environmental and non-profit advocacy organizations; state and local 

government agencies; and fleet operators. 

The purpose of the Committee’s hearing on June 9, 2011 is to receive testimony 

concerning energy efficiency and alternative fuel provisions contained in S. 963, S. 

1000, and S. 1001. Our statement addresses the alternative fuel provisions in S. 

1001, Alternative Fuel Vehicles Competitiveness and Energy Security Act of 2011.’’ 

In general, we appreciate the provisions contained in S. 1001, including loan guarantees for alternative fuel vehicle manufacturers, research and development grants, 

and other incentives like the high-occupancy vehicle exemption extension. Below we 

offer some general comments on the benefits of NGVs and the types of incentives 

we believe the Congress should offer as well as specific comments on the incentives 

contained in S. 1001. 

NATURAL GAS VEHICLES SHOULD BE A PART OF FUTURE ENERGY LEGISLATION

Today, natural gas vehicles are uniquely positioned to help the United States 

achieve a number of critical policy objectives. The increased use of natural gas vehicles can reduce our dependence on foreign oil while reducing greenhouse gas emissions and urban pollution. And, equally important, increased use of natural gas ve-
133 

hicles will benefit the economy by stimulating demand for domestic natural gas and 

by lowering fuel cost to businesses, fleets and consumers that operate natural gas 

vehicles. Thus, energy legislation that is intended to reduce reliance on oil consumption should also seek to promote the use of natural gas vehicles. We are pleased 

to see that a number of the provisions contained in S. 1001, specifically includes 

natural gas vehicles, or include natural gas vehicles by reference to existing definitions that incorporate natural gas powered vehicles. 

The House of Representatives has already introduced HR 1380, a bill intended to 

promote the use of natural gas vehicles. We would urge the Committee Members 

to support the HR 1380 when a Senate companion is introduced. HR 1380 is discussed in greater detail below. 

AN ABUNDANT AND ECONOMICAL DOMESTIC RESOURCE

Reliance on foreign oil exacts a high toll on the U.S. in terms of direct economic 

costs and indirect energy security costs. In the past three years (2008—2010), the 

US spent nearly $700 billion on imported petroleum. More recently, the tab for imported oil has been much higher as oil prices have once again exceeded $100 per 

barrel. In the coming decade, the EIA forecasts total expenditures for petroleum imports to top $3.3 trillion dollars. See EIA, 2011 Annual Energy Outlook , Table 11 

(April 2011). Our reliance on oil not only affects our trade balance but makes the 

U.S. vulnerable to price spikes and supply disruptions. And high oil prices results 

in a windfall for regimes that may not be friendly to the U.S. Fortunately, the U.S. 

has an unprecedented opportunity to displace petroleum with domestic natural gas. 

In the past several years, a wealth of new data has been developed demonstrating 

that the U.S. has an abundant supply of readily available, economically priced natural gas. 

The U.S. Energy Information Administration, the Potential Gas Committee and 

other expert bodies now estimate that we have up to a 100 years supply of natural 

gas. The Potential Gas Committee’s 2011 bi-annual report indicates that the U.S. 

now has a total future supply of 2,170 trillion cubic feet of natural gas. This is 89 

Tcf more than estimated in the 2009 report. As was the case with the 2009 report, 

the 2011 report includes the highest resource estimate in the Committee’s history; 

PGC has now been estimating natural gas supplies for 46 years. 

Increased demand for natural gas helps to keep our economy growing by supporting new jobs and economic development. In 2008, U.S. production of 20 Tcf of 

natural gas supported nearly 3 million jobs (‘‘The Contributions of the Natural Gas 

Industry to the U.S. National And State Economies’’, IHS Global Insight 2009, p.1) 

Even a modest increase in demand for natural gas as a transportation fuel could 

create tens of thousands of jobs associated with producing natural gas. 

Natural gas also benefits our economy because it is a low cost energy that helps 

businesses grow while at the same time controlling costs. Natural gas is priced 

much lower than petroleum. The two fuels no longer track one another and haven’t 

for many years. The current contract price for natural gas (NYMEX July delivery) 

is $4.629 per million Btu, which equates to a per-barrel of oil price of only $26.85 

at a time when oil is trading above $100 a barrel. The difference in price relates 

to the fact that petroleum prices are set by world markets. An increase in demand 

in China or India leads to an increase in the cost of oil consumed here in the U.S. 

However, the same is not true for natural gas. The U.S. market for natural gas is 

currently insulated from most overseas events. Given the fact that large quantities 

of natural gas cannot be readily shipped from North America to other markets, the 

supply and demand for natural gas here in the U.S. sets the price that U.S. consumers pay. Because of the abundant supply of natural gas that exists here in the 

U.S., natural gas prices relative to oil prices are expected to remain much lower in 

the coming years. In fact, the EIA estimates that the differential between diesel fuel 

and natural gas for transportation could be as much as $2 per diesel gallon equivalent in the future. 

TRANSLATING OPPORTUNITY INTO ADVANTAGE

How should we use this natural gas? Market price signals tell us that transportation fuel and vehicles are the highest valued application of all natural gas uses. 

Outside the U.S., demand for natural gas vehicles is growing at a rapid pace. In 

the last seven years the market for NGVs has more than tripled with a compound 

growth rate of over 17 percent per year. In fact, NGVs are the fastest growing alternative to petroleum vehicles in the world. In 2003, there were only about 2.8 million 

NGVs globally. Today, there are over 13.2 million NGVs in operation worldwide. 

This rapid growth points to the fact that rapid scaling up of NGVs is possible. The 

International NGV Association forecasts that, by 2020, there will be 65 million 
134 

NGVs on the world’s roads. Unfortunately, the U.S. currently ranks fourteenth in 

the world in total number of NGVs. 

Most of the new natural gas vehicles sold outside the U.S. are either conversions 

of light-duty gasoline vehicles or are produced by light duty OEMs, including: Ford, 

GM, Toyota, Honda, Nissan, Hyundai, Fiat, Volkswagen and Mercedes. Fiat alone 

makes 14 separate NGV models, and more than 100,000 NGVs were sold in Italy 

in 2009, comprising some 7% of the new vehicle market. Most U.S. manufacturers 

currently offer natural gas vehicles in places like Europe, South America and Asia, 

but only Honda currently offers a light duty OEM NGV product—the Honda Civic 

GX. 

For a number of reasons, including the sheer geographic size of America, the 

strategy of the US NGV industry has been to focus on high fuel-use fleets: trash 

trucks, transit buses, short-haul 18-wheelers, school buses, urban delivery vehicles, 

shuttles of all kinds, and taxis. Today, the U.S. only has about 120,000 NGVs. Vehicle demand has been growing, but slowly. However, because of the large fuel use 

per-vehicle, the amount of natural gas used (and petroleum displaced) has been increasingly at a robust pace. NGVAmerica estimates that, last year, natural gas vehicles used about 43 billion cubic feet of natural gas. That is the equivalent of about 

320 million gallons of gasoline that was not imported. At today’s fuel prices, this 

represents about a billion dollars not spent on foreign oil. 

Fortunately, the U.S. currently leads the world in offerings of new medium-and 

heavy-duty NGVs. In the past several years, virtually all the major truck and bus 

manufacturers in the U.S. have begun offering factory-built NGVs. The impressive 

list of manufacturers includes: Kenworth, International/ESI, Peterbilt, Mack, American LaFrance/Condor, Crane Carrier, AutoCAD Truck, Capacity, Thomas Built Bus, 

Blue Bird Bus, Optima, NABI, El Dorado, New Flyer, Daimler/Orion, Freightliner, 

Gillis, Workhorse Chassis, Elgin, Allianz/Johnston, Schwarz, and Tyco. 

Manufacturers are betting that the U.S. will get serious about its desire to displace petroleum demand and increase the use of alternative fuels like natural gas. 

With proper government policies, like those proposed in S. 1001, and incentives, like 

those proposed in HR 1380, sales of these trucks and use of natural gas could grow 

substantially in the coming years. NGVAmerica estimates that current fuel consumption of natural gas for vehicles could grow to one and a quarter trillion cubic 

feet or the equivalent of about 10 billion gallons within 15 years. At the level of 

fuel prices currently projected, that would lower fuel costs to businesses by up to 

$20 billion a year and reduced payments for imported petroleum by more than $40 

billion per year. 

NGVAmerica believes that there could be a substantial market for natural gas vehicles in all applications. However, the most immediate opportunity for displacing 

petroleum and increasing the use of natural gas as transportation fuel lies with 

light-, medium-and heavy-duty fleets—especially trucks, buses and other heavier vehicles. As noted above, America currently has a large selection of medium and heavy 

duty vehicles available here in the U.S. This is significant since trucks are the economic lifeblood of America. Everything we buy moves by truck. Reducing the cost 

of trucking reduces the cost of everything, benefiting businesses and consumers 

alike. 

PROPOSED CHANGES TO S. 1001

Section 2. Definitions. The definition of alternative fuel vehicle incorporates the 

definition of qualified alternative fuel vehicle found in 26 USC 30B (e) (4) (e.g., dedicated alternative fueled vehicles) and section 30B (e) (5) (B) (e.g., mixed-fueled alternative fueled vehicles operating on 75% NG or more). Section 30B specifically includes compressed natural gas and liquefied natural gas. The definition in section 

2 controls key provisions elsewhere in S. 1001 (e.g., loan guarantee program). As 

currently written, the bill would not include incentives for bi-fuel NGVs or most 

dual-fuel NGVs. The NAT GAS Act (HR 1380) specifically amends section 30B to 

allow all bi-fuel and dual-fuel NGVs to qualify for the tax credits. For the section 

136 loan guarantee program authorized under EISA 2007, the NAT GAS Act (HR 

1380) would allow a bi-fuel NGV that is capable of achieving a minimum of 85 percent of its total range with compressed or liquefied natural gas, or a dual-fuel NGV 

that is capable of operating on a mixture of natural gas and gasoline or diesel fuel 

but is not capable of operating on a mixture of less than 75 percent natural gas. 

The provision contained in the NAT GAS Act is intended to limit the loan guarantee 

incentive to vehicles that will be predominately fueled with natural gas. S. 1001 

should include bi-fuel and dual-fuel alternative fuels vehicles that will be predominately fueled with alternative fuel. Outside the U.S. bi-fuel vehicles are the dominate technology offered by automakers. Providing incentives for them could encour-
135 

age manufacturers to offer such vehicles here and would make the use of alternative 

fuel vehicles far more practical for a larger portion of the consumer and fleet market. That is why the NAT GAS Act amends the tax code in section 30B to include 

such vehicles. 

It is true that S. 1001 already allows mix-fueled vehicles but by referencing the 

current version of section 30B of the tax code, it would only encourage heavy-duty 

mixed fueled vehicles (i.e., vehicles 14,001 lbs. GVWR or greater). S. 1001 should 

be expanded to include the change requested here by tracking the definitions found 

in section 202 of HR 1380. 

Section 101. Loan Guarantees Program. This section amends the U.S. Department 

of Energy (DOE) loan guarantee program found in 42 USC 16513(a) (EPAct 2005, 

Sec. 1703) so that activities that reduce petroleum through the use of alternative 

fuels as defined in 26 USC 30B(e)(4) (NG is included here) also qualify. S. 1001 

would amend this program to add support for activities involving the ‘‘production 

and distribution of alternative fuel.’’ The DOE program (section 16513(b)(8)) already 

includes production facilities for fuel efficient vehicles, including EVs and diesel 

fueled vehicles. However, it doesn’t specifically include alternative fueled vehicles or 

natural gas vehicles. 

We believe that the program found in section 42 USC 16513 (b) (8) should be expanded to specifically include natural gas vehicles so that there is no doubt that 

they qualify. And the language in S. 1001 should be expanded specifically to include 

fueling infrastructure equipment for natural gas vehicles; the current wording ‘‘production and distribution of alternative fuel’’ sounds like it is intended for refinerytype operations and terminal distribution networks, not fueling station equipment. 

If the word ‘‘dispensing’’ were added that probably would take care of our concern: 

‘‘production, distribution or dispensing.’’ 

Section 102. Advanced Technology Vehicle Program. S. 1001 amends the Section 

136 Program found in EISA 2007 to add medium and heavy duty vehicles and certain non-road vehicles if they reduce consumption of conventional motor fuel by 25% 

or more. This loan guarantee program for manufacturing facilities is currently 

geared to retooling for fuel-efficiency improvements. If conventional fuel means gasoline or diesel then this amendment would allow for inclusion of NGVs. The amendment adds alternative fuel vehicles as defined 30B(e) so that means NGVs qualify, 

but only dedicated and mixed-fueled vehicles that operate at 75% or more NG. 

As noted above, we think that bi-fuel and dual-fuel vehicles should qualify for this 

program. Since this section references the definition section in S. 1001, making the 

changes we have suggested for that section would take care of our concern here. 

Section 105. Workforce Training. This section provides assistance for job training 

related to alternative fuel industry, including the manufacture and maintenance of 

AFVs. Authorizes $50 million for each FY, 2012—2016. We propose that the bill specifically include ‘‘installation of conversions’’ in the list of industry jobs supported 

by this incentive. This would help small businesses and automotive dealerships who 

are involved in installing aftermarket conversion systems on existing or recently acquired vehicles. 

ENACTING MEANINGFUL POLICIES SUCH AS HR 1380 AND S. 1001

Currently, NGVs cost more to buy than comparable gasoline or diesel powered vehicles. But they cost less to operate. The more miles a vehicle is driven each year, 

the faster the payback and the more likely the owners can justify the investment 

in NGVs. For some of the most fuel intensive fleets and vehicle applications, NGVs 

already are economic. However, to expand the use of NGVs and maximize NGVs’ 

oil displacement potential, the first-cost or incremental cost of NGVs needs to be 

brought down rapidly. And this will only happen with large scale production and 

increased economies of scale. H.R. 1380, the New Alternative Transportation to Give 

Americans Solutions (NAT GAS) Act of 2011 provides the means to accelerate demand for NGVs and to help manufacturers achieve economies of scale and buildout much needed fueling infrastructure. HR 1380 would provide federal incentives 

for the production, purchase and use of natural gas vehicles and the expansion of 

the NGV fueling infrastructure. 

It is important to note that there is no free market when it comes to the leading 

transportation fuel, i.e., petroleum. It is significantly distorted by the cartel power 

of OPEC. All other transportation fuels and technologies are at an extra-market economic disadvantage. Nothing would please OPEC more than for Congress to assume 

that, left on its own, the marketplace would solve the problem of our addiction to 

foreign oil. Federal intervention to offset the policies of OPEC is essential. 

That is why NGVAmerica strongly supports H.R. 1380, and hopes similar legislation will be introduced in the Senate soon. There is broad bipartisan support for this 
136 

bill. Although only introduced on April 6th, H.R. 1380 already has 190 bipartisan 

co-sponsors. As proposed, these incentives would be available for only a five year 

period. During that time and long thereafter, it would make NGVs the economic 

choice for many more fleets. This legislation would accelerate NGV use, which, in 

turn, would bring more NGV manufacturers into the market, increase competition 

and drive down the first-cost premium of NGVs. 

NGVs are a here-and-now technology. This fact is highlighted by the investments 

and commitments by fleets already taking place in the market place in the U.S. 

Highlighted here are some of the growing examples of how natural gas is helping 

meet the needs of fleets: 

• AT&T operates more than 2,400 vehicles powered by natural gas and has a goal 

of expanding the fleet to 8,000 by 2013; 

• UPS has more than 1,100 natural gas powered vehicles, and is expanding its 

fleet of vehicles powered by liquefied natural gas. The company has said it 

would convert a much larger share of its trucking fleet to LNG if the fueling 

infrastructure was in place; 

• The Los Angeles County Metropolitan Transportation Authority earlier this 

year held a retirement ceremony for its last diesel bus, and 2,221 of its buses 

are now running on compressed natural gas; a number of the other smaller 

transit agencies around the country have successfully switched their entire fleet 

over to using natural gas. In Washington, DC, the local transit authority operates nearly 500 natural gas transit buses, and several feeder systems (outlying 

counties) also operate natural gas buses. 

• Ryder System Inc. is purchasing 202 heavy-duty natural gas vehicles that will 

be used in its Southern California network; 

• Waste Management, the largest refuse company in the country, has more than 

900 vehicles running on either compressed natural gas or liquefied natural gas; 

• The Dallas Area Rapid Transit system recently announced it will purchases 452 

natural gas powered transit buses—the largest single order of natural gas transit buses currently in place. 

As these fleet examples highlight, NGVs do not need technical breakthroughs to 

capitalize on the potential of natural gas as a transportation fuel. What is needed 

most is to grow demand for these vehicles faster. Federal leadership in leading the 

way and providing incentives will make this happen. By providing critical incentives 

like S. 1001 and HR 1380, the Congress can help jumpstart that growth. While 

NGVs do not need technological breakthroughs to be commercial, NGVs can be further improved by, for example, integrating hybridization technology with natural 

gas power. Therefore, it is important that the federal government support research, 

development and demonstration programs, like the ones proposed in S. 1001. Federal assistance and public private partnerships can ensure that natural gas vehicles 

continue to improve over time, delivering increased performance and delivering increased fuel efficiency. 

CONCLUSION

The U.S. has an unprecedented opportunity to displace petroleum with domestic 

natural gas. Now is the time to act to encourage the increased use of natural gas 

vehicles. We have an abundant supply of readily available, low-cost domestic natural gas. The fact that this fuel is domestic, low-cost, and clean means that America 

can achieve multiple national goals (energy security, clean air, economic security) 

all the while helping fleets and businesses to lower their costs, thus improving economic prosperity. Today, nearly every major truck or bus manufacturer in the U.S. 

is now offering factory-built NGV models. Federal policies and incentives, however, 

are needed to aid in the successful market penetration of these vehicles and to help 

accelerate their use so that the benefits of increased natural gas use can be realized. 

June 6, 2011. 

Hon. JEANNE SHAHEEN AND ROB PORTMAN, 

U.S. Senate, Washington, DC. 

DEAR SENATORS SHAHEEN AND PORTMAN: On behalf of the Petroleum Marketers 

Association of America (PMAA), the New England Fuel Institute (NEFI), the Ohio 

Petroleum Marketers and Convenience Store Association (OPMCA), the Oilheat 

Council of New Hampshire (OHCNH), and the National Association of Oil & Energy 

Service Professionals (OESP), we are writing in support of the ‘‘Energy Savings and 

Industrial Competitiveness Act of 2011’’ (S. 1000) which will pay dividends both in 
137 

the short and long-term for residential, commercial, and industrial sectors by promoting the use of energy efficient technologies. The bill updates provisions for building codes sections and appliance standards which will reduce America’s dependence 

of imported oil and provide for a cleaner, greener future for American households 

and commercial businesses. 

PMAA is a national trade association in the petroleum industry representing 

8,000 independent petroleum marketing companies who own 60,000 retail fuel outlets such as gas stations, convenience stores and truck stops. Additionally, these 

companies supply motor fuels to 40,000 independently owned retail outlets and 

heating oil to eight million households and businesses. Nearly all of the heating oil 

consumed in the United States is sold by PMAA member heating fuels companies. 

NEFI is a member of PMAA, and an independent trade association representing the 

home heating industry since 1950. NEFI represents over 1,000 home heating oil and 

propane retailers and related service companies in New England and throughout 

the northeastern United States, most of which are small, multi-generational family 

ownedand-operated businesses. OPMCA is the statewide trade association representing more than 500 independent, small businesses in Ohio’s petroleum and 

convenience industry. OPMCA’s members own and operate the overwhelming majority of Ohio’s 5,200 convenience stores and employ more than 55,000 Ohioans. Members on the wholesale side of the industry employ thousands more in commercial 

fueling facilities, transportation divisions, and heating oil sales. OHCNH represents 

122 heating fuels companies which market traditional heating oil and biodiesel 

blended fuels. OHCNH keeps the public informed regarding energy conservation, 

safety and environmental protection and the benefits of heating with oil. Finally, 

OESP devotes its resources for education and the advancement of oil heat service 

professionals. 

S. 1000 encourages consumers and businesses to upgrade to newer, more efficient 

energy savings technologies which will stimulate the economy and encourage private-sector job creation. S. 1000 specifically builds upon Section 325(f) of the Energy 

Policy and Conservation Act for non-weatherized oilheat furnaces by increasing the 

Annual Fuel Utilization Efficiency (AFUE) standards to 83 percent. Increasing the 

AFUE ratings for non-weatherized oilheat furnaces will save consumers money because of the higher AFUE rating offset for using less energy to heat their homes. 

Standards for commercial oilheat furnaces would have a minimum thermal efficiency rating of 81 or higher. 

We would also like to thank Senator Shaheen’s lead role to reauthorize the National Oilheat Research Alliance (NORA), S. 949. The bill promotes research and development in the oilheat sector to increase energy efficiency to conserve fuel for 

oilheat consumers. NORA educates consumers on the benefit and importance of regular service and safety practices, and the latest in oilheat technology and renewable 

alternatives. With passage of S. 1000 and S. 949, oilheat consumers will benefit tremendously with the tools and tips to reduce their heating bills. 

Again, we would like to thank Senators Shaheen and Portman for putting aside 

party politics by introducing a bipartisan bill which will lower consumers’ energy 

bills, create jobs for small businesses and will provide for a cleaner and greener future for American households and commercial businesses. 

Sincerely, 

DAN GILLIGAN, PRESIDENT, 

Petroleum Marketers Association of America. 

JIM COLLURA, VICE PRESIDENT, 

New England Fuel Institute. 

JENNIFER RHOADS, PRESIDENT AND CEO, 

Ohio Petroleum Marketers & Convenience Store Association. 

JUDY GARBER, 

Association of Oil & Energy Service Professionals. 

ROBERT SCULLEY, 

Oilheat Council of New Hampshire. 

May 5, 2011. 

Hon. JEFF BINGAMAN, DIANNE FEINSTEIN, AND OLYMPIA SNOWE, 

U.S. Senate, Washington, DC. 

DEAR SENATORS BINGAMAN, FEINSTEIN, AND SNOWE: We represent real estate 

owners, builders, contractors, building managers, energy service companies, building 

efficiency manufacturers and suppliers, energy efficiency financing sources, environ-
138 

1http://apps1.eere.energy.gov/news/newsldetail.cfm/newslid=12387; http://www.esbnyc.com/ 

sustainabilitylprojectlfinances.asp. 2http://www.energystar.gov/index.cfm?c=evaluatelperformance.buslportfoliomanager. 

mental and efficiency advocates, architects and engineers, and other stakeholders 

who believe that modifications to the Energy Efficient Commercial Buildings Deduction (Section 179D of the Internal Revenue Code) could increase its effectiveness at 

encouraging retrofits of existing buildings. 

We appreciate your leadership in recognizing that federal tax incentives to improve the energy performance of commercial buildings could deliver tremendous 

benefits in terms of job creation, energy savings and greater competitiveness. In 

particular, we commend your work to establish and improve Section 179D. We understand that the Department of Energy is currently working on prescriptive guidance to make 179D more useable, and that your offices have been encouraging them 

to do so. While we support these efforts, we have concluded that additional statutory 

options are required for Section 179D to have a meaningful impact on the market 

for retrofits of commercial buildings. The Obama Administration’s Better Buildings 

Initiative also suggests legislative modifications to increase the uptake of Section 

179D for existing building retrofits and we are supportive of the goals of this initiative. 

We recommend adding an additional tax incentive provision that is specifically 

targeted at encouraging existing building retrofits. This provision should include the 

following key elements: 

• Measure energy savings compared to the existing building baseline. Currently 

Section 179D rewards buildings that reduce the energy consumption of the 

whole building to 50 percent of the amount the building would use if it were 

built to a particular code. This is an arbitrary baseline for buildings that were 

constructed decades ago. Additionally, the current savings threshold of 50 percent better than this code is very aggressive for existing buildings. For instance, 

the project at the Empire State Building—a leading and internationally recognized example of whole-building commercial retrofits that makes a $13.2 million 

investment in efficiency upgrades—would not meet this target, despite the fact 

that the retrofit is guaranteed to reduce the building’s energy consumption by 

about 38 percent.1

Energy usage pre-and post-retrofit is a more appropriate comparison metric for 

existing buildings. For example, many building owners today commonly use the 

EPA Portfolio Manager tool to document the total energy use of a building. This 

information could be used in combination with analysis by a Professional Engineer to project and measure energy savings. The incentive should be structured 

in such a way that reductions in energy used by exterior lighting can also qualify, even though it falls outside of the building envelope. • Link the amount of the incentive to energy savings achieved. This would calibrate the tax benefit to the value created. We recommend that the minimum 

amount of the incentive should correspond to 20 percent total energy savings 

compared to the building’s baseline energy consumption, and the maximum incentive should correspond to 50 percent savings. The amount of the incentive 

would increase for every 5 percent increase in energy savings within this range. 

This will encourage ambitious projects while also rewarding projects that 

achieve meaningful yet more moderate levels of energy savings. A larger incentive for deeper energy savings is justified as achieving high percentage savings 

is often dependent on addressing the building’s core systems, such as the HVAC 

system, which can be more technologically challenging and costly. 

• Tie a portion of the tax incentive to implementation of efficiency measures and 

a portion to demonstrated energy savings. There are good reasons to reward a 

building owner for implementing energy savings measures, and good reasons to 

reward energy savings actually realized at the meter level. We recommend 

doing both by allowing the building owner to claim 60 percent of the incentive 

at the time measures designed to save a certain percentage of energy (as certified by a Professional Engineer) are put in to service. The remaining 40 percent of the incentive would be available 2 years later, based on demonstrated 

energy savings (as measured using the ENERGY STAR Portfolio Manager tool 

or other tools designated by the Secretary).2

• Allow owners or tenants to claim some incentive for improving a substantial 

space within a building. There is significant opportunity and appetite for building owners and tenants to improve energy efficiency during tenant build-out of 

office space, but current landlord-tenant arrangements seldom seize that opportunity. Similarly, there is also appetite and opportunity for building owners to 
139 

3For example, see: S. 3935, ‘‘Advanced Energy Tax Incentives Act’’ (introduced Sept. 29, 

2010). 

* Complete list of signatures have been retained in committee files. 

improve the efficiency of a large space within a building, but where they do not 

necessarily have access to all tenant space. To encourage these objectives, the 

Department of Energy should be directed to develop guidance for how the tax 

incentive can be used for efficiency improvements for large defined spaces within an existing building. • Make the tax incentive useable for a broad range of building efficiency stakeholders and building types, including REITS and multifamily buildings. Commercial buildings are owned by a variety of organizations, some of which do not 

have appetite for conventional tax incentives. To gear a tax incentive for optimal benefit by Real Estate Investment Trusts (REITS), the full amount of the 

incentive that considers such entities’ special tax requirements should be available for REITS.3 Furthermore, we believe it is important to enable a range of 

building efficiency stakeholders to realize the value of the tax incentive when 

making investments in energy savings. Hence, we suggest clarifying language 

that the building owner be permitted to allocate the incentive to other parties 

related to the transaction, such as the contractor, a tenant, engineer, architect, 

or source of financing. Additionally, multifamily buildings should remain eligible for any commercial building incentive given their similarity to commercial 

buildings with respect to ownership, structure, and application of energy codes. 

To capture a larger set of multifamily buildings within the scope of the incentive, it will also be critical to ensure that the incentive complements the rules 

of the existing low-income housing tax credit to encourage energy efficiency upgrades in the affordable housing stock. • Supplemental incentives should be considered for retrofits that multiply energy 

efficiency benefits. Some retrofit projects and technologies can achieve important policy objectives beyond energy efficiency, and are not normally implemented as part of comprehensive retrofits, and thus may not be effectively 

incentivized by the base provision. Congress should consider additional incentives for certain improvements that multiply energy efficiency benefits—such as 

renovating historic buildings, installing ?cool roofs? to mitigate urban heat island effects, and replacing chillers that use ozone-depleting refrigerants.. 

We welcome your continued leadership in paving the way for tax incentives that 

will drive efficiency upgrades in commercial buildings and appreciate the opportunity to share these suggestions with you. We are available to discuss these issues 

with you in greater detail at your convenience. 

Sincerely,* 

3M, 

CANNON DESIGN, 

EARTH DAY NEW YORK, 

JONATHAN ROSE COMPANIES. 

STATEMENT OF RHONE RESCH, PRESIDENT & CEO, SOLAR ENERGY INDUSTRIES

ASSOCIATION, ON S. 1000 

The Solar Energy Industries Association (SEIA) thanks you for introducing S. 

1000, the Energy Savings and Industrial Competitiveness Act of 2011. This bill addresses the energy challenges facing our nation today by promoting energy efficiency 

and renewable energy measures. The bipartisan bill will foster job creation, increase 

our energy security and benefit the environment. SEIA strongly supports enactment 

of S. 1000. 

SEIA is the national trade association of the U.S. solar energy industry. Through 

advocacy and education, SEIA is working to build a strong solar industry to power 

America. As the voice of the industry, SEIA works with its 1,000 member companies 

to make solar a mainstream and significant energy source by expanding markets, 

removing market barriers, strengthening the industry and educating the public on 

the benefits of solar energy. 

The Energy Savings and Industrial Competitiveness Act of 2011 promotes the increased use of solar energy in a number of ways. The bill strengthens national 

model building codes for residential and commercial buildings, with the goal of 

achieving net-zero-energy buildings by 2030. Solar photovoltaics as well as solar 

heating and cooling will be an integral part of the netzero-energy building effort. 

In addition, the bill authorizes funding for credit support for commercial buildings 

to do renewable energy and energy efficiency projects, including solar, through the 
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1 American Council for an Energy-Efficient Economy & Appliance Standards Awareness 

Project, Appliance and Equipment Efficiency Standards: A Money Maker and Job Creator. January 2011. http://www.standardsasap.org/documents/A111.pdf 

Building Retrofit Financing Program. The measure also promotes training and education by authorizing funding for grants to be provided to colleges for Building 

Training and Assessment Centers, which will promote the use of alternative energy 

sources to supply heat and power for buildings, including solar energy. Finally, the 

legislation amends the definition of renewable energy in Section 203 of the Energy 

Policy Act of 2005 to include thermal energy for the federal purchase requirement 

of renewable energy, a positive for solar heating and cooling. 

SEIA applauds your leadership on this issue and we look forward to working with 

you to help pass S. 1000. 

June 9, 2011. 

Hon. JEANNE SHAHEEN, 

520 Hart Senate Office Building, Washington, DC. 

Hon. ROB PORTMAN, 

B40D Dirksen Senate Office Building, Washington, DC. 

DEAR SENATOR SHAHEEN AND SENATOR PORTMAN, We the undersigned represent 

a broad-based coalition of energy efficiency and environmental organizations, small 

and large businesses, public interest organizations and faith organizations. 

We commend your work on the Energy Savings and Industrial Competitiveness 

Act of 2011, which was introduced on May 12, 2011. Your bill will help to deploy 

energy efficiency across all sectors of our economy; save consumers and businesses 

money, help make us more competitive globally and reduce our dependence on imported sources of energy at a critical time. We look forward to working with you 

in the coming months to see that this important legislation is enacted into law. 

We specifically commend those provisions in your bill that will help to drive job 

creation. For example, the Energy Savings and Industrial Competitiveness Act will 

include a state partnership manufacturing revolving loan fund to finance investments in manufacturing process equipment though the issuance of federal bonds. 

With this fund, domestic manufacturers can fine-tune their equipment, reduce utility related overheads, and strengthen their bottom-line. 

Your legislation would also advance targets for national model building energy 

codes. Buildings currently consume 40% of all energy used in the United States. The 

Energy Savings and Industrial Competitiveness Act would support regular updates 

to the existing national model building codes. Building codes help investors overcome the market barriers that impede energy savings in this sector, and reduce energy costs for businesses. 

Similarly, appliance standards provisions contained within the Energy Savings 

and Industrial Competitiveness Act will cut home energy costs to consumers by $43 

billion through 2030.1 Existing federal appliance standards have saved taxpayers 

more than $300 billion in energy bills and reduced national energy use by 3.6% annually. This provision is identical to S. 398, which was recently reported by the Senate Energy and Natural Resources Committee with a bipartisan 18-4 vote. 

The Energy Savings and Industrial Competitiveness Act also contains a provision 

based on the Rural Star legislation which was passed by the House of Representatives last year. This program would create a loan program through rural public utilities and electric cooperatives to finance energy efficiency improvements for rural 

utility customers. Sponsors of the original bill estimate that it will create 20,000 to 

40,000 jobs to conduct and implement these energy improvements. 

Another important bill from last session, Supply Star, is also included in the Energy Savings and Industrial Competitiveness Act. This bill was reported favorably 

by the Senate Energy and Natural Resources Committee. Supply Star would promote energy efficiency improvements throughout the supply chain, including savings 

from product sourcing, development, distribution, use and disposal. This bill would 

provide crucial support to small businesses in reducing unnecessary energy expenditures. 

As the nation’s largest energy consumer, it is critically important that the federal 

government lead by example. The Energy Savings and Industrial Competitiveness 

Act contains several provisions which will improve the energy efficiency of federal 

agencies. Rather than squandering taxpayer’s dollars on needless energy costs, the 

Energy Savings and Industrial Competitiveness Act implements practical, cost effective measures to tackle federal energy consumption. These provisions include per-
141 

* Complete list of signatures have been retained in committee files. 

sonal computer power saving techniques, advanced metering, building upgrades and 

more. 

By fully deploying the power of energy efficiency, we can help create new jobs, 

save energy, save money, and reduce carbon emissions. Energy efficiency takes effect faster than other policies designed to address our energy needs. Well designed 

programs such as those contained in the Energy Savings and Industrial Competitiveness Act will help those American families and businesses who are struggling 

today to lower their energy costs. Moreover, energy efficiency policies offer Americans protection from rising energy costs caused by political instability abroad, and 

moves us towards energy independence. We again commend your leadership in developing this comprehensive package, and offer our support in helping to advance 

this important bill toward enactment by the 112th Congress. 

Sincerely,* 

ACUITY BRANDS, 

CLEAN WATER ACTION, 

EARTHJUSTICE, 

ENERGY FUTURE COALITION. 

STATEMENT OF THE WINDOW & DOOR MANUFACTURERS ASSOCIATION, ON S. 1000 

On behalf of the Window & Door Manufacturers Association (WDMA), we would 

like to thank Chairman Bingaman, Ranking Member Murkowski and Members of 

the Committee for conducting today’s hearing to explore tools to promote energy efficiency. WDMA is a national trade association representing the leading producers of 

commercial and residential doors, windows, and skylights for domestic and export 

markets. Our members sell to distributors, dealers, builders, remodelers, homeowners, architects, contractors, and other specifiers in residential, commercial, and 

institutional markets. WDMA welcomes the Committee’s interest in energy efficiency and higher-performing residential and commercial buildings, and is pleased 

to submit this statement addressing S. 1000, the Energy Savings and Industrial 

Competitiveness (ESIC) Act of 2011, introduced by Senators Shaheen and Portman. 

WDMA appreciates the efforts by Senators Shaheen and Portman to incorporate 

stakeholder input in the development of S. 1000. We believe the bill’s current language improves considerably upon previous iterations of legislation to establish 

model federal energy codes. However, WDMA continues to have several concerns regarding the appropriateness and efficacy of creating a new federal codes bureaucracy and involving the Department of Energy (DOE) in the codes process. 

First and foremost, WDMA believes that the greatest gains to be made in reducing building energy use also lie in existing building stock. Tax incentives for homeowners, like the 25C nonbusiness energy tax credit, are proven mechanisms for 

spurring replacement of older, less efficient products to make homes more energy 

efficient. For example, there are more than 1 billion single-pane windows still in use 

in today’s housing stock, and restoring the 25C tax credit to its 2009-2010 levels 

would make an immediate and direct impact in incentivizing homeowners in their 

replacement. 

Likewise, improving the 179D commercial building deduction to make it easier for 

building owners to take advantage of the benefits would directly spur needed commercial retrofits to reduce energy use and create jobs in the hard-hit construction 

sector. To that end, we commend Senators Shaheen and Portman for including the 

Rural Energy Savings Program, originally proposed as part of S. 3102 in the 111th 

Congress, as a mechanism for rural homeowners to finance voluntary retrofits 

through their utility co-operatives. We encourage the Committee to make such voluntary incentives available to more homeowners through the 25C tax credit and 

other such methods. 

WDMA’s primary concerns are in Subtitle A of S. 1000, which would vest the Department of Energy (DOE) with new authority to ‘‘support the development of’’ and 

‘‘establish’’ federal model building codes. We do not believe there is a demonstrated 

need for increased DOE involvement in the established model codes development 

process. The existing code development bodies, ASHRAE and the ICC, are already 

producing increasingly more energy efficient codes through a well-established, open 

and consensus-based approach with the full participation of stakeholders including 

DOE. In fact, we and many other stakeholder interests believe DOE has exerted excessive influence through their participation that borders on undermining the consensus code development process. 
142 

* Complete list of signatures have been retained in committee files. 

Rather than vesting new authority in the DOE, which we believe will be unduly 

intrusive and is not necessary to DOE’s participation, we call on Congress to further 

clarify and limit the DOE’s role and to make transparent the methodology and data 

used by DOE to support their claims regarding the energy efficiency gains of subsequent code iterations and to substantiate specific code amendments they are advocating. We believe that introducing new DOE oversight of the ICC and ASHRAE 

processes, as S. 1000 does by subjecting future code iterations to their approval, will 

only slow the energy improvements the legislation is intended to achieve. In addition, compelling states to certify and measure energy code compliance will add an 

additional layer of bureaucracy and red tape without achieving the desired results. 

We also remain deeply concerned about the establishment of a ‘‘net zero energy 

buildings’’ goal by 2030 absent additional research into the cost effectiveness, practicality and attainability of such a goal. Research has already demonstrated that netzero-energy is only attainable if ‘‘plug load’’ behaviors of building occupants are considered; this is entirely outside the reach of building codes to regulate. The fragile 

real estate market can ill afford new federal mandates that arbitrarily drive up the 

cost of new construction. New construction activity, energy-efficient retrofitting, and 

financing to support it, are worthwhile public policy objectives. However, we urge 

the Committee to act with care in promoting those objectives without increasing the 

regulation and costs of construction activity that would hinder our economic recovery. 

WDMA appreciates the Committee’s work to develop proposals that will restore 

jobs and promote energy efficient retrofits and new construction. We believe modest 

retrofit incentives for homeowners and businesses will accomplish more effective results than establishing new federal energy codes. We look forward to working with 

members of the Committee to continue to improve S. 1000 as it moves through the 

committee process. 

June 8, 2011. 

Hon. TOM CARPER, 

Senator, U.S. Senate, 513 Hart Senate Office Building, Washington, DC. 

DEAR SENATOR CARPER, As leading organizations within the building community, 

the undersigned organizations thank you for your continued efforts to improve federal buildings and provide agencies with the tools to accomplish high-performance 

building goals. As you know, federal agencies have numerous Congressionally and 

Executive mandated goals regarding energy use. Achieving these goals requires a 

comprehensive approach with various tools and practices available. 

The Reducing Federal Energy Dollars Act of 2011 (S.963) provides implementable 

solutions to many of the issues currently faced by agencies including sharing of best 

practices, keeping design criteria up-to-date (in general and for specific projects), implementation of smart meters, and use of ongoing commissioning. 

Federal agencies have long been looked to as an example of what can be done 

within the built environment. As the nation’s largest holder of real estate, the federal government has the opportunity and resources to influence the development 

and implementation of building design, construction, operations and maintenance 

tools, technologies and practices. Federal buildings should serve as public showcases 

and leading examples of energy efficiency and indoor environmental quality (IEQ) 

through their design, construction, equipment, and operations and maintenance. 

We look forward to working with you on this and other opportunities to achieve 

high-performance buildings in both the public and private sectors. 

Sincerely,* 

NATIONAL INSTITUTE OF BUILDING SCIENCES, 

DRYVIT SYSTEMS. 

U.S. GREEN BUILDING COUNCIL (USGBC), 

ASSOCIATION FOR FACILITIES ENGINEERING (AFE). 

STATEMENT OF THOMAS J. BISACQUINO, PRESIDENT AND CEO, NAIOP, COMMERCIAL

REAL ESTATE DEVELOPMENT ASSOCIATION, ON S. 1000 

On behalf of NAIOP, the Commercial Real Estate Development Association, I 

want to thank you for holding a hearing on S. 1000, ‘‘The Energy Savings and Industrial Competitiveness Act of 2011’’ introduced by Senators Jeanne Shaheen (DNH) and Rob Portman (R-OH). NAIOP is the leading organization for developers, 
143 

owners, investors and related professionals in office, industrial, retail and mixed-use 

real estate, and is comprised of 15,000 members and more than 50 local chapters 

throughout North America. I write to express our concerns with the legislation, specifically regarding Section 101 of the introduced bill. 

We have been given the opportunity to work with staff during the initial drafting 

of this bill, and sincerely appreciate the open and transparent way that this legislation was created. We commend you and Senators Shaheen and Portman for facilitating the numerous discussions that took place with a variety of stakeholders during the past several months. We believe that the approach to increasing the energy 

efficiency of building codes contained in S. 1000 is superior to prior legislative proposals in the 111th Congress that relied primarily on mandating specific numerical 

targets in statute. 

While we are appreciative that some of our concerns were addressed prior to the 

introduction of this bill, we remain concerned that this legislation, if enacted without further changes, would cause significant confusion and harm to the real estate 

industry. It is our hope that our specific concerns with Section 101 in particular, 

can be addressed prior to this bill being brought to a vote in Committee. 

The overriding goal of Sec. 101, Greater Efficiency in Building Codes, is to achieve 

a zero-net energy outcome for all new commercial and residential buildings by 2030. 

Essentially, zero-net energy would require buildings to produce as much on-site energy as they would consume. However, Section 101 only deals with building energy 

codes and does not provide for a power generation strategy for buildings. The extent 

of how much on-site power generation will be available to reach the zero-net energy 

goal, either through existing technology or future technology, is almost entirely unknown. As a consequence, this leaves increasing energy efficiency as the sole measurable tool for achieving this net-zero target. If the contribution of on-site power 

generation efforts are modest, whether through technical infeasibility or because of 

prohibitive costs, then the difference would have to be made up through higher efficiency through building codes. 

The aggressiveness of the code efficiencies that would be needed to achieve zeronet energy could very well be outside the scope of most development practices, and 

not practical for all building types. In addition, while achieving a net-zero energy 

target for buildings by 2030 may seem like a far off goal, the code targets would 

need to be established far in advance of this date. Because this standard is not attainable in the foreseeable future, especially without defining the role of on-site 

power generation, we feel strongly that it should not be considered as the basis for 

setting code targets and efficiency gains in new buildings. 

This legislation also does not take into consideration the significant efficiencies already gained in new construction during the past few years. Since 2002, commercial 

building energy codes have already achieved gains approaching 50 percent. These 

substantial gains have been achieved in just the last three code cycles: 2004, 2007 

and 2010. All of this was accomplished without implementing new federal guidelines 

or creating targets for new energy codes. 

New buildings account for a very small percentage of overall building stock. This 

is especially true in today’s environment. Commercial buildings that are built by today’s standards are vastly more energy efficient than the majority of existing buildings across the country. Rather than recreate a process that is already working, this 

legislation should be more focused on creating incentives for existing buildings 

where the majority of energy is consumed and the most energy efficiency gains can 

be achieved. It is much easier to increase the efficiencies of an existing building by 

50 percent, using the previous year’s energy usage as a baseline, than to create a 

new building that is 50 percent above the most recent energy code. Setting more 

stringent code targets for new building codes is not the best way to address the vast 

amount of energy that is consumed by buildings. In order to better address the efficiencies of the entire building sector, new existing building incentives need to be created to have a more measurable impact. 

In conclusion, we appreciate your attempts to advance energy legislation that 

leads to improved energy efficiency in buildings. While we applaud the intent of S. 

1000, we feel strongly that zero-net energy should not be the basis for setting code 

targets for new construction. We look forward to working with your offices to improve this legislation as it is considered by the Energy and Natural Resources Committee. 
144 

JELD-WEN, 

EXTERNAL AFFAIRS, 

Portland, OR, June 7, 2011. 

Hon. JEANNE SHAHEEN, 

U.S. Senate, 520 Hart Senate Office Building, Washington, DC. 

Hon. ROB PORTMAN, 

U.S. Senate, 338 Russell Senate Office Building, Washington, DC. 

DEAR SENATORS SHAHEEN AND PORTMAN, On behalf of JELD-WEN, inc.’s over 

7,000 employees in 19 states, I am writing to support S. 1000, the Energy Savings 

and Industrial Competitiveness Act of 2011. JELD-WEN is the largest manufacturer 

of windows and doors in the United States, and we appreciate your leadership in 

introducing such an important piece of energy legislation. 

Your bill will encourage energy efficiency measures in residential, commercial, 

and industrial settings, incentivize states to accelerate their energy efficiency activities, and direct the Federal Government to make energy efficiency improvements as 

the nation’s largest energy consumer. Furthermore, it will foster essential job creation throughout the country. 

We commend the inclusion of alternative financing proposals in your legislation 

as a promising, cost-effective path to deploying efficiency products. We particularly 

applaud the Rural Energy Savings Program provision. The establishment of a rural 

electric loan program will assist those in rural communities to finance critical energy-efficient improvements to their homes and small businesses, resulting in significant savings in energy costs. Likewise, by expanding the DOE Loan Guarantee 

program to include building efficiency upgrades, the legislation will provide greater 

access to capital, benefitting both consumers and builders, and resulting in more investments in building efficiency upgrades and renovations. Finally, we support the 

bill’s call for strengthened, updated building codes for new homes and commercial 

buildings, and we appreciate the balanced attention paid to cost effectiveness as 

that model is developed. A national model code is a way to further advance energy 

efficiency in buildings, and your legislation encourages the production and use of the 

best technologies in energy efficiency. Likewise, your legislation urges states and 

local governments to revise outdated building codes and adopt the most recent consensus-based model codes. 

At JELD-WEN we know well the environmental and cost-saving values of energy 

efficient buildings. We believe that this legislation is a good step, especially if paired 

with direct consumer incentives, in encouraging investments in energy efficient 

buildings. We commend your work on these efforts and applaud your leadership. We 

look forward to working with you to enact this legislation into law. 

Sincerely, 

RON SAXTON, 

Executive Vice President. 

STATEMENT OF GP RUSS CHANEY, CHIEF EXECUTIVE OFFICER OF IAPMO 

DEAR CHAIRMAN BINGAMAN, RANKING MEMBER MURKOWSKI AND MEMBERS OF THE

COMMITTEE. Thank you for the opportunity to provide testimony on S. 1000, the Energy Savings and Industrial Competitiveness Act of 2011. 

We, the International Association of Plumbing and Mechanical Officials (IAPMO), 

have been protecting human health and safety since 1926. IAPMO remains the preeminent code development association for plumbing, mechanical and solar codes. 

Furthermore, with membership of approximately 5,000 members, IAPMO remains 

the only trade association through which plumbing, mechanical and solar codes are 

developed employing an open consensus process accredited by the American National Standards Institute (ANSI). As a result our codes are designated as American 

National Standards. 

The membership of IAPMO is comprised of plumbing and/or mechanical inspectors, engineers and building code officials, union representatives (installers), plumbing and mechanical contractors, water and energy efficiency experts, government 

representatives, and manufacturers of plumbing, mechanical, and building products. 

Not only do we create baseline construction codes as previously mentioned, but 

we also have created the first-ever ‘‘green’’ construction code entitled the Green 

Plumbing and Mechanical Code Supplement (GPMCS). This ‘‘stretch’’ code was developed with the assistance and support of more than one dozen major trade associations, manufacturers, unions, engineering societies, environmental organizations 

and many others. One purpose of the GPMCS is to supplement ANY construction 

code, not only IAPMO’s baseline codes but other codes that are available for use 
145 

throughout the United States. By simply adhering to the water provisions found in 

the GPMCS, one can realize, at minimum, a 30 percent decrease in water usage. 

We are all becoming increasingly aware of the incredible amount of imbedded energy in water and how being more efficient with our water usage is one of the most 

cost effective ways to save energy. 

Chairman Bingaman and Ranking Member Murkowski, you will be interested to 

know that the respective states you represent adopt and utilize IAPMO’s baseline 

construction codes. Additionally, on this committee many of the senators’ home 

states are currently being protected by IAPMO’s codes. 

Numerous countries throughout the world depend upon IAPMO’s code to protect 

their citizens as many of the United States have done over decades of use. 

As you know, construction codes are critical to maintain the structural security 

of buildings, our infrastructure and overall public health. Cities, counties and states 

across the country are always changing and updating codes to address the revolving 

concerns of local policy makers and this should continue. 

With that said, I would specifically like to provide input on Title I, Subtitle A, 

Section 101, ‘‘Greater Energy Efficiency in Building Codes.’’ As I previously mentioned, building or construction codes are key to ensuring the safety and structural 

well being of our country, but they also can be utilized to make our buildings more 

efficient, which is the purpose of this subsection. 

Under this subsection, the bill aims to achieve more efficient, better performing 

buildings, and specifically calls upon the Department of Energy to ‘‘establish goals 

of zero-net-energy for new commercial and residential buildings by 2030.’’ This is 

a widely supported and fantastic goal. It should be noted that IAPMO is heavily involved in these effort, participating on both the National Institute of Building 

Sciences Consultative Council and the Net-Zero Energy Consortium however, our 

primary concern with S. 1000 lies within the direction given by congress to the Department of Energy. In the subsection, congress singles out two organizations with 

which the Department of Energy should work in achieving the desired results. By 

doing so, congress is creating an imbalance by singling out two organizations over 

the many others that contribute as much if not more to energy conservation and 

not allowing other organizations, such as IAPMO, to provide their expertise in the 

area of increased energy conservation. 

Finally, within the same building code section, under the subsection titled ‘‘Voluntary Advance Standards,’’ once again congress is not only selecting preferred organizations but actually directs the Secretary to ‘‘give preference’’ to only two organizations. By giving the Secretary such a large goal and then limiting whom the 

department can consider will be a great hindrance and would certainly at the least 

be unfair to IAPMO and the many other organizations that can make a huge contribution in this area. 

We respectfully request the following two changes be made to Title I, ‘‘Greater 

Energy Efficiency in Building Codes’’; 

Again, Senators, many of your home states use IAPMO’s construction codes, yet 

we, our member building code officials, contractors, engineers and manufacturers 

will be neglected by the current language in the bill. 

In closing, we fully support the intentions of the bill and by addressing these two 

small areas of concern, IAPMO can wholly endorse the proposed legislation. 

Thank you for your time. 
146 

NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION, 

Arlington, VA, May 12, 2011. 

Hon. JEANNE SHAHEEN, 

U.S. Senate, 520 Hart Senate Office Building, Washington, DC. 

DEAR SENATOR SHAHEEN: I am writing on behalf of the The National Rural Electric Cooperative Association 

(NRECA) to express our appreciation for making the Rural Energy Savings Program 

Act (RESPA) a part of your comprehensive energy efficiency legislation, the Energy 

Savings Act of 2011. 

NRECA is the national service organization representing over 900 not-for-profit, 

member-owned, rural electric cooperative systems, which serve 42 million customers 

in 47 states. NRECA estimates that cooperatives own and maintain 2.5 million 

miles or 42 percent of the nation’s electric distribution lines covering three-quarters 

of the nation’s landmass. Cooperatives serve approximately 18 million businesses, 

homes, farms, schools and other establishments in 2,500 of the nation’s 3,141 counties. 

As you have recognized, energy efficiency is a critical step in lowering electricity 

costs, while helping the environment and creating jobs. RESPA would boost needed 

investments in energy efficiency in rural areas by providing rural electric cooperative consumers access to low-interest loans through USDA’s Rural Utilities Service 

(RUS). Through these loans, rural consumers will be able to make upgrades to their 

homes and small businesses that may otherwise be out of reach, and will ultimately 

save energy and money on their power bills. 

The RESPA program builds on USDA’s successful RUS electric loan platform 

which provides loans to cooperative borrowers (and other qualified entities) to build 

infrastructure for the generation and distribution of electric service to their member 

owners. Under this program, the cooperatives first use their own funds for such 

projects. After completion, the co-ops submit documentation and are reimbursed by 

RUS only after the expenses are found to be within the federal purpose. We believe 

that this new efficiency program under continued careful RUS management will 

also garner stellar results. 

NRECA would like to thank you for your leadership in energy efficiency, and your 

efforts to ensure that investments in energy efficiency extend to rural areas. 

Sincerely, 

GLENN ENGLISH, 

Chief Executive Officer. 

NATIONAL ASSOCIATION OF REALTORS®, 

Washington, DC, June 7, 2011. 

Hon. JEFF BINGAMAN, 

Chairman, Committee on Energy and Natural Resources, U.S. Senate, 703 Hart Senate Office Building, Washington, DC. 

Hon. LISA MURKOWSKI, 

Ranking Member, Committee on Energy and Natural Resources, U.S. Senate, 709 

Hart Senate Office Building, Washington, DC. 

DEAR CHAIRMAN BINGAMAN AND RANKING MEMBER MURKOWSKI: Thank you for 

holding this important hearing on S. 1000, the Energy Savings and Industrial Competitiveness Act. Included in the legislation introduced by Senators Jeanne Shaheen 

(D-NH) and Rob Portman (R-OH) is authority to implement the ‘‘Rural Star’’ energy 

savings program. While the 1.1 million members of the National Association of REALTORS® (NAR) strongly support a voluntary, incentive-based approach to building 

efficiency, NAR is concerned that this authority could be used to implement a mandatory real estate energy labeling program across rural America. We are also concerned with provisions to clarify priority lien status for purposes of federal retrofit 

financing and to provide for an increased federal role in the development of state 

building energy codes, and would support amendments to address the following 

issues. 

RURAL STAR ENERGY LABELS

Many property owners would like to make energy improvements, but simply do 

not have the financial resources to undertake the project. The Rural Star provisions 

would change this by providing direct loans and incentives to make improvements, 

which would not only benefit our environment, but also create jobs and cut energy 

bills for the rural owners. While these owners would like to take advantage of the 

incentives, many would he discouraged from doing so if the program requires an en-
147 

ergy label as a condition for the incentives. As currently drafted, the bill provides 

no apparent limit on the new authority from imposing such a condition. Labeling 

could stigmatize the older properties which would most benefit from a Rural Star 

program. A disproportionate share of these older properties are owned or occupied 

by populations living on modest or fixed incomes according to the American Housing 

Survey. 

PRIORITY LIEN STATUS

The bill would also direct the U.S. Department of Energy to develop guidelines 

for federal retrofit financing, including ‘‘any lien priority requirements that the Secretary determines to be necessary.’’ However, this provision could cause unintended 

consequences if the Department requires this financing to have superior status to 

existing mortgages. Rules governing ‘‘mortgage superiority’’ are written into deeds 

of trust and mortgage documents including Fannie Mac’s uniform security instruments. Allowing an intervening lien could violate the borrower’s contract with current lenders. For future loans, there is a serious question whether a bank will make 

a loan (or Fannie/Freddie will purchase the loan) unless the loan documents provide 

a first lien for the mortgage (ahead of subsequent loans) so the lender will receive 

payments outstanding on the underlying mortgage before sums are paid on loans 

with a subordinate interest in the event of a foreclosure. Many rural owners would 

not be able to make improvements without financing and these owners are less likely to obtain the requisite financing given these concerns. 

FEDERAL BUILDING CODES

While we appreciate the revisions and improvements over prior legislation, we 

continue to question the need, achievability and affordability of the federal energy 

code provisions—especially the ‘‘net zero energy building’’ standard—for recovering 

real estate markets. Introducing federal bureaucracy and red tape into a consensusdriven model code development process by IECC and ASHRAE will only slow the 

energy improvements the bill is intended to achieve. Rural Star, by itself however, 

would offer significantly more incentive for the rural property owners to take advantage of and speed the voluntary building energy improvements. 

Thank you again for your extensive and on-going efforts toward a voluntary, incentive-based approach to making properties more energy efficient. We would welcome the opportunity to work with you and the bill’s authors in clarifying the above 

provisions to ensure the bill’s voluntary energy efficiency incentives are available to 

more Americans. We look forward to continuing to work with the Committee and 

other members of Congress as the legislative process continues. 

Sincerely, 

RON PHIPPS, 

ABR, CRS, GRI, GREEN, e-PRO, SFR 2011 President. 

Æ