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[Senate Hearing 112-273]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 112-273

                   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

                                _____

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington           MIKE LEE, Utah
BERNARD SANDERS, Vermont             RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan            DANIEL COATS, Indiana
MARK UDALL, Colorado                 ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire        JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota                DEAN HELLER, Nevada
JOE MANCHIN, III, West Virginia      BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

                            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

 
            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.
    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 
Owens-Illinois 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.
    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 consumption 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;
   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.
---------------------------------------------------------------------------
    \1\ http://www.whitehouse.gov/sites/default/files/blueprint_secure_energy_future.pdf
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \2\ http://www1.eere.energy.gov/vehiclesandfuels/pdfs/vehicles_fs.pdf
    \3\ http://www.bls.gov/news.release/cesan.nr0.htm
---------------------------------------------------------------------------
    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.
    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\
---------------------------------------------------------------------------
    \4\ http://www.whitehouse.gov/issues/energy-and-environment
    \5\ http://www.energy.gov/news/9582.htm
    \6\ See, 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.
---------------------------------------------------------------------------
    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 Product\7\. 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.
---------------------------------------------------------------------------
    \7\ http://www1.eere.energy.gov/industry/about/pdfs/itp_program_fact_sheet.pdf
---------------------------------------------------------------------------
    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 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 long-term 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.
    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, 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.
    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.
---------------------------------------------------------------------------
    * Figure has been retained in committee files.
---------------------------------------------------------------------------
    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.
                         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-net-energy 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.

    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 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 energy-
        intensive 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 up-front 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 energy 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 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 consumers 
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.
----------------------------------------------------------------------------------------------------------------
                                                          Weighted Average    Median Energy     Mortgage Payback
                         State                            Incremental Cost       Savings            (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
----------------------------------------------------------------------------------------------------------------
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 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.
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    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,*
---------------------------------------------------------------------------
    * Full list of signatures has been retained in committee files.
---------------------------------------------------------------------------
                          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 lowest-ever 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 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 retrofitting 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, less-
efficient 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.*
---------------------------------------------------------------------------
    * Figures 1-3 have been retained in committee files.
---------------------------------------------------------------------------
    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 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\
---------------------------------------------------------------------------
    \1\ EIA, Residential Energy Consumption Survey (RECS), 2009. http://www.eia.gov/consumption/residential/reports/electronics.cfm (accessed 
6/2/11)
---------------------------------------------------------------------------
    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 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.
---------------------------------------------------------------------------
    \2\ Ibid.
---------------------------------------------------------------------------
    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.

                                                Figure 4.--Energy Features and Cost/Savings Calculations
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Pre-1940 Home  w/
                                                                  Pre-1940  Home            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/   Energy Star,  500 Kw/  Energy Star,  500 Kw/  Energy Star,  500 Kw/
                                                                                Yr                     Yr                     Yr                     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.

    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 pre-1940 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.
---------------------------------------------------------------------------
    \3\ Housing Economics.com, http://www.nahb.org/
generic.aspx?sectionID=734&generic
ContentID=103543&channelID=311, accessed June 7, 2011
---------------------------------------------------------------------------
         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 State-specific 
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 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.
---------------------------------------------------------------------------
    * Attachment has been retained in committee files.
---------------------------------------------------------------------------
    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 expose 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, less-efficient 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 large-scale 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).
---------------------------------------------------------------------------
    \4\ See 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. Sec.  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'')
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \5\ 22 U.S.C. Sec. Sec.  16512(d)(3), (g)(2)(B).
---------------------------------------------------------------------------
    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 Sec. 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.'' (Sec. 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 potential 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. Depending 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
   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.
   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

     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 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 energy-efficient.
    Third, subsection 303(b)(6), which provides a part of the 
broader study referred to as the assessment of energy savings 
available 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.
    O-I has experience with this process. We are currently working on 
an ITP 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 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 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 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.
    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.
    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.
    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 low-cost 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?
    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.
---------------------------------------------------------------------------
    \1\ http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=110_cong_bills&docid=f:h6enr.txt.pdf
------------------------------------------------------------------------
        Office of Energy Efficiency and Renewable Energy Overview
-------------------------------------------------------------------------
                   Program                             Authority
------------------------------------------------------------------------
Hydrogen & Fuel Cell Technologies                          EISA 2007\1\
------------------------------------------------------------------------
Biomass Technologies                                       EISA 2007\1\
------------------------------------------------------------------------
Solar Energy                                               EISA 2007\1\
------------------------------------------------------------------------
Wind Energy                                                EISA 2007\1\
------------------------------------------------------------------------
Geothermal Technology                                      EISA 2007\1\
------------------------------------------------------------------------
Water Power                                                EISA 2007\1\
------------------------------------------------------------------------
Vehicle Technologies                                       EISA 2007\1\
------------------------------------------------------------------------
Building Technologies                                      EISA 2007\1\
------------------------------------------------------------------------
Industrial Technologies                                    EISA 2007\1\
------------------------------------------------------------------------
Federal Energy Management Program                          EISA 2007\1\
------------------------------------------------------------------------
Facilities and Infrastructure                              EISA 2007\1\
------------------------------------------------------------------------
Weatherization and Intergovernmental                       EISA 2007\1\
 Activities
------------------------------------------------------------------------
Program Direction                                          EISA 2007\1\
------------------------------------------------------------------------
Strategic Programs                                         EISA 2007\1\
------------------------------------------------------------------------
\1\ http://frwebgate.access.gpo.gov/cgi-bin/
  getdoc.cgi?dbname=110_cong_bills&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.
---------------------------------------------------------------------------
    * Spreadsheet has been retained in committee files.

    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.
    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, 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 long-haul 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 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.
    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 
net-zero 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 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.
    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 
products, 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 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.
    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 collaboration 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 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.
    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.
    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 fuel-efficient 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.
    [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 infrastructure. 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.
    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.
    [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 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\
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    \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.
---------------------------------------------------------------------------
    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 
funds\2\ and be in force for no more than 25 years.
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    \2\ The 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.
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    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 Continuing 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 
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.
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    \3\ The 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 of money 
paid immediately. In calculating present value, prevailing interest 
rates provide the basis for converting future amounts into their 
``money now'' equivalents.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \5\ GAO, 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).
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   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 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.
---------------------------------------------------------------------------
    \6\ Loan amounts awarded to each company do not add up to the total 
loan amount the ATVM program has awarded to date because of rounding.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \7\ The 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.
---------------------------------------------------------------------------
    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 all-electric 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\
---------------------------------------------------------------------------
    \8\ This 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.
---------------------------------------------------------------------------
    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.
the atvm program has begun overseeing loans to ensure borrowers comply 
     with financial and technical requirements but has not engaged 
    engineering 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.
---------------------------------------------------------------------------
    \9\ GAO, 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).
---------------------------------------------------------------------------
    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 extent 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 technologies, 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 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.
                 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 view\1\ 
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''.
---------------------------------------------------------------------------
    \1\ Testimony 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-Kevin_Book-
ENR_Testimony.pdf.
---------------------------------------------------------------------------
    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 can\2\. 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 savings\3\. 
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.
---------------------------------------------------------------------------
    \2\ The 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/
29623348_1_solar-advocates-solar-industry-solar-markets.
    \3\ Schipper, 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.
---------------------------------------------------------------------------
    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. end-user demand headroom.
---------------------------------------------------------------------------
    * Figure has been retained in committee files.
---------------------------------------------------------------------------
    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 prices. Leaving aside short-run demand 
volatility, much of which can be linked to data resolution\4\, 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.
---------------------------------------------------------------------------
    \4\ Four 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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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. 

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 front-month 
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. Near-term 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 (long-dated 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 
vulnerability 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.
    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 SPR\6\.
---------------------------------------------------------------------------
    \6\ This 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.
---------------------------------------------------------------------------
    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 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 detente.
    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 detente, the 1985 test sale and 13 other catalyst-driven sales 
and exchanges since 1985 may have helped to reinforce petroleum 
detente. 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 preferences\7\. 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 long-term substitute.
---------------------------------------------------------------------------
    \7\ Testimony of Kevin Book before the U.S. Senate Committee on 
Energy and Natural Resources, April 3, 2008. http://energy.senate.gov/
public/_files/BookTestimony04308.pdf.
---------------------------------------------------------------------------
    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 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 recommendations: 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 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 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 
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 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 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 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 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 long-term 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 fuel-cell 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.
    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 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 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 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 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?
    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?
    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.]
                               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.

    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
---------------------------------------------------------------------------
    \1\ http://wwwl.eere.energy.gov/femp/technologies/
eep_resources.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.
---------------------------------------------------------------------------
    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 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 non-grantee 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.
---------------------------------------------------------------------------
    \3\ http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=110_cong_bills&docid=f:h6enr.
txt.pdf
------------------------------------------------------------------------
        Office of Energy Efficiency and Renewable Energy Overview
-------------------------------------------------------------------------
                   Program                             Authority
------------------------------------------------------------------------
Hydrogen & Fuel Cell Technologies                          EISA 2007\1\
------------------------------------------------------------------------
Biomass Technologies                                       EISA 2007\1\
------------------------------------------------------------------------
Solar Energy                                               EISA 2007\1\
------------------------------------------------------------------------
Wind Energy                                                EISA 2007\1\
------------------------------------------------------------------------
Geothermal Technology                                      EISA 2007\1\
------------------------------------------------------------------------
Water Power                                                EISA 2007\1\
------------------------------------------------------------------------
Vehicle Technologies                                       EISA 2007\1\
------------------------------------------------------------------------
Building Technologies                                      EISA 2007\1\
------------------------------------------------------------------------
Industrial Technologies                                    EISA 2007\1\
------------------------------------------------------------------------
Federal Energy Management Program                          EISA 2007\1\
------------------------------------------------------------------------
Facilities and Infrastructure                              EISA 2007\1\
------------------------------------------------------------------------
Weatherization and Intergovernmental                       EISA 2007\1\
 Activities
------------------------------------------------------------------------
Program Direction                                          EISA 2007\1\
------------------------------------------------------------------------
Strategic Programs                                         EISA 2007\1\
------------------------------------------------------------------------
\1\ http://frwebgate.access.gpo.gov/cgi-bin/
  getdoc.cgi?dbname=110_cong_bills&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.
---------------------------------------------------------------------------
    * Tables have been retained in committee files.
---------------------------------------------------------------------------
     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.
---------------------------------------------------------------------------
    \4\ http://www.whitehouse.gov/sites/default/files/
blueprint_secure_energy_future.pdf
---------------------------------------------------------------------------
    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 energy 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.
      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/
graphic_shwe5_ratenoincen.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?
    Answer. From the guide ``Commissioning for Federal Facilities''\5\:
---------------------------------------------------------------------------
    \5\ Commissioning for Federal Facilities, http://
wwwl.eere.energy.gov/femp/pdfs/commissioning_fed_facilities.pdf

          ``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\
---------------------------------------------------------------------------
    \6\ Commissioning for Federal Facilities, http://
wwwl.eere.energy.gov/femp/pdfs/commissioning_fed_facilities.pdf
---------------------------------------------------------------------------
          ``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\
---------------------------------------------------------------------------
    \7\ Commissioning for Federal Facilities, http://
wwwl.eere.energy.gov/femp/pdfs/commissioning_fed_facilities.pdf

          ``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\
---------------------------------------------------------------------------
    \8\ Commissioning for Federal Facilities, http://
wwwl.eere.energy.gov/femp/pdfs/commissioning_fed_facilities.pdf

    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 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?
    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.
---------------------------------------------------------------------------
    * Tables have been retained in committee files.
---------------------------------------------------------------------------
                      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.
    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.
---------------------------------------------------------------------------
    * Tables have been retained in committee files.
---------------------------------------------------------------------------
      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 these the types of 
measures that you could envision benefiting from such loan guarantees?
    Answer. 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.
 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 introduced 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 production 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. 

                      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.
                                 ______
                                 
      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.)
    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 
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 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.
---------------------------------------------------------------------------
    \1\ Memo 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.).
---------------------------------------------------------------------------
    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 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 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 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 
adoption 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.
    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.
    Again, thank you very much for the opportunity to testify, and 
please just let me know if I could be of any further assistance.
                              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 
        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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 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\
---------------------------------------------------------------------------
    \2\ See http://news.agc.org/2011/06/03/construction-employment-
remains-stagnant/.
    \3\ See http://www.bls.gov/iag/tgs/iag236.htm.
---------------------------------------------------------------------------
    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 (Sec.  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 (Sec.  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 (Sec. 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 
        (Sec. 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 (Sec. 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 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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. (Sec. 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 Sec. 304(a)(2)(E), p. 8 starting at line 5.)
   Subject DOE model codes to a small business impact review 
        analysis. (Sec. 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. (Sec. 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 
        (Sec. 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: 

  Explanation: Subtitle A purports to replace all of ECPA section 304 
        (42 U.S.C. Sec.  6833). It appears, however, that Subtitle A 
        should also replace all of current ECPA section 307 (42 U.S.C. 
        Sec.  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. Sec.  
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. Sec.  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 Sec.  304(a)(3), starting at p. 8 
line 13.) Thus, current section ECPA 307(a) is apparently mooted by 
proposed new Sec.  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. Sec.  6836(b). Likewise, Subtitle A's proposed 
new Sec.  304(a)(3)(C) provides that DOE may ``submit timely code and 
standard amendment proposals'' (p. 9, starting at line 12.) And, 
proposed new Sec.  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 net-zero-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\
---------------------------------------------------------------------------
    \5\ See ``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
_energy_ getting_to_zero&csid=Eoeea

    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 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\
---------------------------------------------------------------------------
    \6\ ``Zero and Net-Zero Energy Buildings + Homes'' (March 2011) at 
p. 10-11, available at http://twgi.com/downloads/
NetZeroWhitePaper_BDC.pdf pp. 10-11.

    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 Sec.  304(a)(2)(b)(i) are based on this 
ambitious, yet somewhat more realistic, objective.
---------------------------------------------------------------------------
    \7\ Id. at p. 5.
---------------------------------------------------------------------------
    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 Sec.  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 Sec.  304(a)(2)(B).
   Amendment 3: Target Years Should be Consistent With Net-Zero 
        Energy Revision from Amendment 2. 
        
        
        
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 large-scale 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 
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 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.
---------------------------------------------------------------------------
    \8\ See 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. Sec.  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'').
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \9\ 22 U.S.C. Sec. Sec.  16512(d)(3), (g)(2)(B).
---------------------------------------------------------------------------
    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 Sec. 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.'' (Sec. 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 first-in-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: 

    In sum, a critical element to the success of proposed Sec. 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: 

            Minimum Energy Savings
    The Roundtable recommends that proposed Sec. 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.
---------------------------------------------------------------------------
    \10\ See http://www.energystar.gov/
index.cfm?c=evaluate_performance.bus_portfoliomanager. 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
---------------------------------------------------------------------------
    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 Sec.  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.
    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.
---------------------------------------------------------------------------
    \11\ http://apps1.eere.energy.gov/news/news_detail.cfm/
news_id=12387; ;http://www.esbnyc.com/
sustainability_project_finances.asp.

---------------------------------------------------------------------------
   Whole-Building Data Capture in Multi-Tenant Buildings

    The Real Estate Roundtable also encourages Congress to enact energy 
data ``right-to-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 utilities\12\ 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\
---------------------------------------------------------------------------
    \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).
    \13\ See https://www.comed.com/sites/businesssavings/Pages/
wholebuilding.aspx; http://www.cee1.org/cee/mtg/06-09mtg/files/
BB6Bricknell.pdf.
    \14\ http://www.energystar.gov/
index.cfm?fuseaction=pt_awards.showAwardDetails&esa_id=3666.
---------------------------------------------------------------------------
    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 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 ([email protected]).
                                 ______
                                 
              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. 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.
                                 ______
                                 
                                          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. 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.
    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.
                                 ______
                                 
           Statement of the National Propane Gas Association
    The National Propane Gas Association (NPGA) applauds Senators Ron 
Wyden (D-OR) 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 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 Sec.  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, 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\
---------------------------------------------------------------------------
    \1\ The 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.''
---------------------------------------------------------------------------
                            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?
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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. 
Additionally, 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 
vehicles 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 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 encourage 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 
refinery-type 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 build-out 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 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 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, environmental 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\
---------------------------------------------------------------------------
    \1\ http://apps1.eere.energy.gov/news/news_detail.cfm/
news_id=12387; http://www.esbnyc.com/
sustainability_project_finances.asp.

    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\
---------------------------------------------------------------------------
    \2\ http://www.energystar.gov/
index.cfm?c=evaluate_performance.bus_portfoliomanager.
---------------------------------------------------------------------------
   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 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.
---------------------------------------------------------------------------
    \3\ For example, see: S. 3935, ``Advanced Energy Tax Incentives 
Act'' (introduced Sept. 29, 2010).
---------------------------------------------------------------------------
   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,*
---------------------------------------------------------------------------
    * Complete list of signatures have been retained in committee 
files.
---------------------------------------------------------------------------
                                                        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 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.
---------------------------------------------------------------------------
    \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
---------------------------------------------------------------------------
    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,*
---------------------------------------------------------------------------
    * Complete list of signatures have been retained in committee 
files.
---------------------------------------------------------------------------
                                             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.
    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 net-zero-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,*
---------------------------------------------------------------------------
    * Complete list of signatures have been retained in committee 
files.
---------------------------------------------------------------------------
                   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 (D-NH) and Rob Portman (R-OH). 
NAIOP is the leading organization for developers, 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 zero-net 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.
                                 ______
                                 
                                          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 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.
                                 ______
                                 
           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 energy 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 consensus-
driven 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.

                                 

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