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96–166 2015

STRATEGIC PETROLEUM RESERVE DISCUSSION 

DRAFT AND TITLE IV ENERGY EFFICIENCY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 30, 2015 

Serial No. 114–36 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

PETE OLSON, Texas 

Vice Chairman 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

ROBERT E. LATTA, Ohio 

GREGG HARPER, Vice Chairman 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

BILL FLORES, Texas 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

DAVID LOEBSACK, Iowa 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(V) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 10 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 13 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 135 

WITNESSES

Christopher A. Smith, Assistant Secretary for Fossil Energy, Department 

of Energy ............................................................................................................... 3 

Prepared statement .......................................................................................... 6 

Christopher Peel, Corporate Senior Vice President and Chief Operating Officer, Rheem Manufacturing Company (on behalf of the Air-Conditioning, 

Heating, and Refrigeration Institute) ................................................................. 34 

Prepared statement .......................................................................................... 37 

Kateri Callahan, President, Alliance to Save Energy ........................................... 45 

Prepared statement .......................................................................................... 47 

John W. Somerhalder II, Chairman, President, and CEO, AGL Resources 

(on behalf of the American Gas Association) ..................................................... 57 

Prepared statement .......................................................................................... 59 

Frank Thompson, President, Sweetwater Builders, Inc. (on behalf of the National Association of Home Builders) ................................................................. 65 

Prepared statement .......................................................................................... 67 

Elizabeth Noll, Energy Efficiency Advocate, Natural Resources Defense Council ........................................................................................................................... 80 

Prepared statement .......................................................................................... 82 

Answers to submitted questions ...................................................................... 186 

Rona Newmark, Vice President, Intelligent Efficiency Strategy, EMC Corp. 

(on behalf of the Information Technology Industry Council) ............................ 100 

Prepared statement .......................................................................................... 102 

Mark Wagner, Vice President, U.S. Government Relations, Johnson Controls, 

Inc. (on behalf of the Federal Performance Contracting Coalition) ................. 107 

Prepared statement .......................................................................................... 109 

SUBMITTED MATERIAL

Discussion draft of the Strategic Petroleum Mission Readiness Plan 1 .............. 3 

Discussion draft of Title IV—Energy Efficiency and Accountability 2 ................. 3 

Statement of the American Public Gas Association .............................................. 136 

Statement of the Business Council for Sustainable Energy ................................ 143 

Statement of the Geothermal Exchange Organization ......................................... 148 

Statement of the National Consumer Law Center ............................................... 149 

Statement of NiSource, Inc. .................................................................................... 151 

Statement of ASHRAE ............................................................................................ 154 

Statement of the Alliance to Save Energy and the American Council for 

an Energy-efficient Economy ............................................................................... 162 

Statement of the United States Chamber of Commerce ...................................... 164 

Statement of the Leading Builders of America ..................................................... 165 

Statement of the Retail Industry Leaders Association ......................................... 169 

Statements of the American Council for an Energy Efficient Economy, et 

al. ........................................................................................................................... 170 

Page

VI 

Statement of the Center for American Progress ................................................... 171 

Statement of 500 architectural firms ..................................................................... 177 

Statement of Window & Door Manufacturers Association ................................... 184 

1 Available at: http://docs.house.gov/meetings/IF/IF03/20150430/103401/ 

BILLS-114pih-Strategicpetroleumreservediscussiondraft.pdf. 2 Available at: http://docs.house.gov/meetings/IF/IF03/20150430/103401/ 

BILLS-114pih-TitleIVenergyefficiencyandaccountabilitydiscussiondraft.pdf. 

(1) 

STRATEGIC PETROLEUM RESERVE DISCUSSION DRAFT AND TITLE IV ENERGY EFFICIENCY 

THURSDAY, APRIL 30, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND POWER, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:16 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Ed Whitfield 

(chairman of the subcommittee) presiding. 

Members present: Representatives Whitfield, Olson, Barton, 

Shimkus, Latta, Harper, McKinley, Kinzinger, Johnson, Long, 

Ellmers, Flores, Mullin, Hudson, Rush, McNerney, Tonko, Engel, 

Green, Doyle, Sarbanes, Loebsack, and Pallone (ex officio). 

Staff present: Nick Abraham, Legislative Associate, Energy and 

Power; Charlotte Baker, Deputy Communications Director; Will 

Batson, Legislative Clerk; Allison Busbee, Policy Coordinator, Energy and Power; Patrick Currier, Counsel, Energy and Power; Tom 

Hassenboehler, Chief Counsel, Energy and Power; Brandon Mooney, Professional Staff Member, Energy and Power; Caitlin 

Haberman, Democratic Professional Staff Member; Rick Kessler, 

Democratic Senior Advisor and Staff Director, Energy and Environment; and John Marshall, Democratic Policy Coordinator. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. Today the committee is going to continue its 

work on the discussion draft of our energy bill that we have been 

working on with the Democrats. We began the dialogue last week 

with a hearing on the energy work force title to the bill, and today 

we are going to be focusing on the Strategic Petroleum Reserve and 

the energy efficiency part of the legislation. 

The current debate over the SPR is a familiar one to those who 

have witnessed how America’s dramatically changing energy landscape has rendered many existing policies out of date. The Strategic Petroleum Reserve was created under the Energy Policy and 

Conservation Act of 1975, and has since served as an insurance 

policy in the form of an emergency stockpile of oil. However, much 

has changed over the last 40 years, and there is bipartisan agreement that we are overdue to update the SPR to reflect the needs 

of 2015 and beyond. 

2 

One of the problems that we are having, of course, relates to infrastructure issues associated with the SPR. Specifically, the oil 

boom is underway near the SPR’s location in Louisiana and Texas, 

and is already stretching the local infrastructure to its limits. This 

raises questions whether there is sufficient infrastructure available 

to successfully draw down the SPR in the case of an emergency. 

DOE and others have found that the 40 year old stockpile is in a 

poor state of repair, raising doubts about whether it is ready to be 

utilized in a timely and efficient manner. There are also questions 

about the legal trigger tapping the SPR, and whether it constrains 

the President from anticipating problems justifying a release. So 

we are going to be looking at lot at the SPR, and we appreciate our 

witness here today, who will address that issue. 

The bill also will contain a number of energy efficiency provisions. Many of them certainly deal with the way the Federal Government, by far the nation’s largest energy user, can do more for 

less. This includes provisions that would certainly emphasize the 

importance of energy savings performance contract for Federal facilities. There are also requirements for DOE to look into potential 

energy savings from Federal data centers, and through the use of 

thermal insulation, as well as other ideas that may help reduce 

Federal energy expenditures. 

So we have two panels of witnesses this morning. On the second 

panel I think we have five or six witnesses. The first we have our 

guest from the Federal Government, who I will introduce in just a 

minute, but with that, I will yield back the balance of my time. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

Today, this subcommittee continues its work on the discussion draft of our bipartisan energy bill. We began the dialogue last week with a hearing on the energy 

workforce title to the bill. And now, we move on to the provisions dealing with the 

Strategic Petroleum Reserve (SPR) and energy efficiency. 

The current debate over the SPR is a familiar one to those who have witnessed 

how America’s dramatically-changed energy landscape has rendered many existing 

policies out of date. The SPR was created under the Energy Policy and Conservation 

Act of 1975, and has since served as an insurance policy in the form of an emergency stockpile of oil. However, much has changed over the last 40 years, and there 

is bipartisan agreement that we are overdue to update the SPR to reflect the needs 

of 2015 and beyond. 

For one thing, fears of increased dependence on oil from unfriendly producers and 

unstable regions has been replaced by the reality of growing American production 

as well as rising imports from Canada. The risk remains of a supply disruption necessitating an SPR release, but the nature and extent of the risk has changed. 

In addition, as noted in the Department of Energy’s recent Quadrennial Energy 

Review, there are many infrastructure issues associated with the SPR. Specifically, 

the oil boom is underway near the SPR’s locations in Louisiana and Texas and is 

already stretching the local infrastructure to its limits. This raises questions whether there is sufficient infrastructure available to successfully draw down the SPR in 

an emergency. Further, DOE and others have found that the 40-year old stockpile 

is in a poor state of repair, raising doubts about whether it is ready to be utilized 

in a timely and efficient manner. There are also questions about the legal trigger 

for tapping the SPR and whether it constrains the President from anticipating problems justifying a release. 

The SPR provisions in the discussion draft require DOE to conduct a strategic review of the SPR with an eye towards reforming the program for the near and longterm. This review will address issues about the proper size, configuration, and location of the SPR, as well as any necessary repairs and infrastructure additions to 

the system. It will also explore potential legal changes regarding what triggers an 

3 

SPR release. This review will help Congress as we consider the next steps in updating the nation’s emergency oil stockpile. 

The bill also contains a number of energy efficiency provisions. Many of them deal 

with ways for the federal government, by far the nation’s largest energy user, to do 

more with less. This includes provisions that would help expand the use of energy 

savings performance contracts for federal facilities. There are also requirements for 

DOE to look into potential energy savings from federal data centers and through 

the use of thermal insulation, as well as other ideas that may help reduce federal 

energy expenditures. It also eliminates the potentially costly and unrealistic requirement that federal buildings use no fossil fuel generated energy by 2030. 

The draft bill also contains measures affecting the private sector, which has been 

the source of most energy efficiency breakthroughs over the years. This includes 

greater legal certainty for the Energy Star program, the inclusion of Smart Grid capability on Energy Guide labels, and voluntary verification programs for several appliances. It also clarifies DOE’s role in setting model building codes, and prevents 

a proposed residential gas furnace efficiency standard from being finalized until the 

agency gathers more evidence on whether it is technologically feasible and economically justified. 

Both SPR and energy efficiency are two topics on which we should be able to 

agree on the path forward. I look forward to a discussion on these critical components of our energy bill. 

[The discussion draft of the Strategic Petroleum Mission Readiness Plan is available at: http://docs.house.gov/meetings/IF/ 

IF03/20150430/103401/BILLS-114pihStrategicpetroleumreservediscussiondraft.pdf.] 

[The discussion draft of Title IV—Energy Efficiency and Accountability is available at: http://docs.house.gov/meetings/IF/IF03/ 

20150430/103401/BILLS-114pihTitleIVenergyefficiencyandaccountabilitydiscussiondraft.pdf.] 

Mr. WHITFIELD. Mr. McNerney, are you going to be making a 

statement for your side, or is Mr. Rush going to—— 

Mr. MCNERNEY. Thank you, Mr. Chairman. No, I don’t have a 

prepared statement at this point. 

Mr. WHITFIELD. Sorry? 

Mr. MCNERNEY. I don’t have a prepared statement—— 

Mr. WHITFIELD. OK. All right. Is there anyone else on our side 

that would like to make a statement this morning? OK. I will tell 

you what we will do, when Mr. Rush gets here, we will give him 

an opportunity to make an opening statement. But, at this time, 

I would like to introduce our only witness on the first panel, and 

that is Christopher Smith, who is the Assistant Secretary for Fossil 

Energy at the Department of Energy. 

Mr. Smith, thank you very much for being with us again, and I 

would like to recognize you for 5 minutes for your opening statement. So be sure the microphone is on, and, as you know, the red 

light will come on when your 5 minutes is up, so thank you very 

much. 

STATEMENT OF CHRISTOPHER A. SMITH, ASSISTANT 

SECRETARY FOR FOSSIL ENERGY, DEPARTMENT OF ENERGY 

Mr. SMITH. Well, thank you very much, Mr. Chairman, for giving 

me the opportunity to appear before this Committee. Chairman 

Whitfield, Ranking Member Rush, and members of the Committee, 

it is my pleasure to appear before you today to discuss the Strategic Petroleum Reserve. The Strategic Petroleum Reserve provides 

strategic and economic security against foreign and domestic disVerDate Nov 24 2008 13:42 Oct 15, 2015 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-36 CHRIS
4 

ruptions in the oil supply by an emergency stockpile of crude oil. 

It also fulfills United States obligations under the International 

Energy Program, which avails the United States of International 

Energy Agency assistance through its Coordinated Energy Emergency Response Plan. 

As you know, earlier this month the Department announced the 

award of contracts for the purchase of crude oil sold during last 

year’s sale. Under terms of these contracts, which were funded by 

the $239 million in receipts from the test sale, BP Products North 

America and Noble Americas will deliver more than two million 

barrels to the reserve’s Bryan Mound site in Freeport, Texas. Deliveries are expected to be completed by July 31. 

I would like to elaborate on the 2014 test sale, because it did a 

couple of important things. First, it resulted in the delivery of nearly five million barrels of crude oil over a 47 day period, and brought 

in more than $460 million in receipts. A portion of those receipts 

was used to fund the Northeast Gasoline Supply Reserve, which 

was established as a result of Superstorm Sandy in 2012. This reserve consists of one million barrels of government owned gasoline 

stored in three locations in the Northeast. At the same time, the 

test sale evaluated drawdown and sales procedures, and validated 

the operational capability to draw down the Strategic Petroleum 

Reserve. 

I would like to talk about that drawdown capability for a moment. The Strategic Petroleum Reserve is a network of 60 operational caverns at four sites in Louisiana and Texas, with a total 

design capacity of 713 million barrels of crude oil, and currently 

holding 691 million barrels available for release in the event of a 

supply disruption. The infrastructure and equipment to support 

drawdown, including storage caverns and well bores, is both large 

and complex. This aging infrastructure, which has performed capably to meet every emergency release throughout the SPR’s history, 

requires progressive—requires progressively more maintenance 

every year, and is in need of modernization. 

With regard to modernization, the Department has initiated 

work on a comprehensive long term strategic review of the Strategic Petroleum Reserve in response to changing market and energy security dynamics. This review will be guided by the recommendations contained in reports conducted by the GAO and the 

Department’s Inspector General. It will also be informed by the recommendations from the Administration’s recently released quadrennial energy review. 

The QER underscores the Administration’s support for an effective Strategic Petroleum Reserve modernization program that 

would address infrastructure issues, and reflect current market 

and energy security concerns. Specific recommendations include investing as much as $2 million to increase the incremental distribution capacity of the Strategic Petroleum Reserve, and implementing 

a life extension program for key Strategic Petroleum Reserve components, including surface infrastructure and additional brine drive 

caverns. The QER also recommends that Congress update the Strategic Petroleum Reserve’s release authorities in the Energy Policy 

and Conservation Act to expressly include disruptions in the global 

oil market as release triggers to revise release requirements. FiVerDate Nov 24 2008 13:42 Oct 15, 2015 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-36 CHRIS
5 

nally, the QER recommends the integration of the President’s authorities to release products from the refined petroleum product reserve into a single unified authority. These release authorities 

should be tailored to the purpose of a product reserve, which may 

differ in some respects from the purposes of a crude oil reserve. 

With that, Mr. Chairman, I would be happy to answer any questions that the subcommittee may have. 

[The prepared statement of Mr. Smith follows:] 

6 


96166.001
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96166.002
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96166.003
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96166.004
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Mr. WHITFIELD. Mr. Smith, thank you very much, and at this 

time I would like to recognize Mr. Rush for his opening statement. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. I want to thank you, Mr. Chairman, and, Mr. Chairman, I want to welcome our esteemed witness. Thank you for holding this hearing today on two very important, but yet completely 

unrelated issues, the SPR and the energy efficiency standards. 

Mr. Chairman, I agree with the underlying assumption that it is 

time to engage in a comprehensive review of the SPR, which was 

originally authorized under the Energy Policy and Conservation 

Act of 1975 in order to reduce the domestic impact of a disruption 

in supplies of petroleum products due to unforeseen or unavoidable 

circumstances. And I commend Secretary—for initiating the process to conduct a comprehensive review of the SPR, following both 

in July 2014 DOE Office of Inspector General report, and the GAO 

office study issued in September of last year, recommending that 

the Department do so. 

Mr. Chairman, circumstances have changed significantly since 

the SPR was established back in the 1970s, so it makes sense to 

examine future SPR requirements regarding size, composition, and 

geographic location to make sure that the country is better suited 

to deal with any potential and future disruptions. Additionally, 

what little funding comes from—I think it also behooves us to consider the resources necessary to operate the SPR, and to ensure its 

long term sustainability in order to preserve the infrastructure and 

the maintenance of these sites. 

Mr. Chairman, as for the other panel, regarding a completely different topic, I must say that I hope that we will hold an additional 

hearing on DOE energy efficiency standards, where members will 

have an opportunity to hear from the agency in a direct manner. 

While engaging industry and other stakeholders as we will do 

today should be a part of the process, that should not preclude having agency officials come before this Committee to inform members 

on the reasoning, and the justification, behind promulgating the 

very standards that are under discussion. 

Mr. Chairman, many of the energy efficiency measures contained 

in the draft bill are non-controversial, and are bipartisan in nature, 

such as Section 4114, which modifies the definition of renewables 

to include thermal energy under the Federal renewable energy purchase requirements established in Section 203 of EPAC 2005. This 

language represents an example of DOE, industry, and energy efficiency advocates all working together to come up with a legislative 

fix that all sides have agreed to. 

However, there are other provisions, similar provisions, as a matter of fact, of this bill that are not bipartisan, and do not reflect 

agreement on the part of the various stakeholders. For instance, 

Section 4115, which would repeal a key portion of Section 433 of 

the Energy Independence and Security Act, the provision that requires Federal buildings to be designed to result in decreased consumption of fossil fuels by 2013, is one section, among others, that 

we will definitely have to examine further and continue to work on 

before we reach bipartisan consensus. 

11 

Mr. Chairman, as this is only a discussion draft, and will undergo significant changes, I am satisfied with engaging today’s expert 

witnesses so that we may be better informed on how to improve 

this draft as we move forward through the legislative process. But, 

Mr. Chairman, we need to have additional hearings and additional 

work. I know that you will agree with me, Mr. Chairman. With 

that, I yield back the balance of my time. 

Mr. WHITFIELD. Gentleman yields back the balance of his time, 

and at this point, Mr. Smith, we once again thank you for your 

statement, and I will recognize myself for 5 minutes for questions. 

Back in 2014, GAO issued a report entitled ‘‘The Changing Crude 

Oil Markets’’, allowing exports has price and other implications, 

and the size of the strategic reserve should be re-examined. In the 

letter that you had sent to us, you indicated that DOE has initiated 

the process for conducting a comprehensive re-examination of the 

appropriate size of the SPR in light of current and future market 

conditions. I was just curious, what is the status of that review, 

and do you have a timetable of when you all might complete that? 

Mr. SMITH. Well, thank you very much, Mr. Chairman, for the 

question. So indeed, we think it is very important to undertake a 

comprehensive strategic review, which I believe is the position of 

the Committee, and we have already started that process. As we 

know, and as was noted in your statement, there are many factors 

that have changed since the Strategic Petroleum Reserve was initially created in the ’70s. So our comprehensive review is looking 

at a very wide range of issues. Looking at modernization, looking 

at distribution capability, looking at issues that are driven by the 

appropriate size of the reserve. 

So we are already started on that process, we are working on 

that, and we believe that the total review will take several months 

to complete, towards a year for the culmination of that report. 

Mr. WHITFIELD. Are you personally concerned—I talked a little 

bit about the infrastructure issue, and because of the shale boom, 

and the capacity limitations that we have, are you concerned at all 

about the infrastructure aspect of this? 

Mr. SMITH. Well, I am, Mr. Chairman. One note, I imagine that 

our team who is managing this process would bristle at the characterization of the SPR being in a poor state of repair. I think we 

have got a tremendous team that is doing all the things that they 

need to do to make sure that the SPR is ready. And, indeed, every 

time we have had a test sale, or we have had to use the SPR, that 

team has performed admirably. 

That said, it is an aging asset. We have well bores that have 

been in place for decades. And as you drill into these salt structures, they move over time, and it causes issues. So not only are 

we concerned about ensuring that we are funding this in a way 

that allows it to keep up with deferred maintenance, but also many 

infrastructure issues, such as the direction of the pipelines, the inflow of crude, the types of crude that are coming into the refineries 

in the Gulf of Mexico has changed, and we think it is important 

for us to consider all these things. So we think these, you know, 

we agree with the Committee’s conclusion that these are critical 

things to study and analyze. 

12 

Mr. WHITFIELD. I think you had indicated there is something like 

691 million barrels of crude oil, in storage. 

Mr. SMITH. Right. 

Mr. WHITFIELD. Is most of that heavy sour crude, or is there 

light sweet as well? 

Mr. SMITH. So we have got a total of 691 million barrels of crude 

in storage right now. That is split between sweet and sour, so we 

have got approximately 260 million barrels of sweet. We have 

about 430 million barrels of sour, so we have a split between—— 

Mr. WHITFIELD. Yes. 

Mr. SMITH [continuing]. Sweet and sour. 

Mr. WHITFIELD. And do you happen to know the number of gallons of crude that are in public storage in our country today? 

Mr. SMITH. I don’t have that number off the top of my head, Mr. 

Chairman. 

Mr. WHITFIELD. I was told that it was in the neighborhood of 500 

million barrels. Does that sound right to you, or have you heard 

about—— 

Mr. SMITH. That might be a reasonable number, Mr. Chairman. 

I don’t know what the figure is off the top of my head. 

Mr. WHITFIELD. OK. Well, thank you very much. And, Mr. Rush, 

you are recognized for 5 minutes. 

Mr. RUSH. I want to thank you, Mr. Chairman. Secretary Smith, 

in your testimony you stated that the SPR is a network of 60 operational—at four storage sites in Louisiana and Texas, with a designed capacity of 713.5 million barrels, and 115 operational well 

bores. I would imagine that these facilities see a lot of wear and 

tear over the years, and require quite a bit of upkeep and maintenance. What is the state of these facilities, and how are they maintained? Is there a funding stream dedicated to the upkeep and 

maintenance of these facilities? And what can we, as members of 

Congress, do to assist you in maintaining these facilities? 

Mr. SMITH. Well, thank you very much, Ranking Member Rush, 

for that question. We request appropriation every year that we use 

to maintain the SPR, and ensure that the Strategic Petroleum Reserve is ready for a drawdown. In our budget request that the 

President recently released, we did ask for a total of $257 million 

for the Strategic Petroleum Reserve, which was an increase over 

budget requests in previous years. I guess the marks we are seeing 

right now would result in a $45 million decrease in the amount 

that we requested, which does impact our ability to tackle some of 

the deferred maintenance that we think is important. 

As I briefly noted, some of these well bores are 20, 30 years old. 

As you are drilling through the cap rock, and into these caverns, 

you do have movement over time that compromises the well bores. 

There are lots of above ground issues that you have to deal with 

to ensure that all of your pumps, your compressors, your valves, 

corrosion issues are taken care of. So it is our intent to ensure that 

we are chipping into some of this deferred maintenance backlog, 

and, indeed, that was reflected in the request that we made in this 

budget submission and the Congressional justification that we submitted. 

So we do have a plan to ensure that we are ready to execute. 

Historically we have always been able to accomplish the mission, 

13 

and I think that is a testament to the folks that we have working 

down in Louisiana and Texas, on these sites. But there is work 

that has to be done on an ongoing basis, and we think that funding 

that at appropriate levels is very important. 

Mr. RUSH. What were some of the most important lessons that 

we learned from the operational test sale, in terms of evaluating 

the drawdown and sales procedures, as well as analyzing potential 

commercial infrastructure investments? 

Mr. SMITH. So we learned a number of things. First of all, it was 

a $5 million test sale. We were successful in getting all five million 

barrels pushed to market. We did learn some things about some 

shortcomings. We noticed some issues with the—distribution 

group—or pipeline system that probably needs to be addressed. We 

also specifically identified a metering skid at one of the sites that, 

if—anything sold has to go through a single metering skid, so if 

you have two opportunities to move crude out of that site, you 

would have to do it sequentially, one after the other. 

That is a significant bottleneck, and something that we could address, and—just by putting in a new metering skid, would be able 

to significantly increase the capacity of that site. And these were 

things that we noted in our Congressional justification for the 2016 

budget that we recently submitted. 

Mr. RUSH. Now, the reduction in the 2016 budget, can you 

project the ramifications of that? Is that going to significantly affect, or drastically affect, your ability to achieve your mission? 

Mr. SMITH. Well, we think that these things are important. One 

of the reasons why we did the test sale was to identify areas of improvement, bottlenecks, things that we had to do to improve the 

distribution capabilities of the Strategic Petroleum Reserve. It is a 

valuable asset, but you do have to maintain it, you do have to manage it, so we think that it is critically important to not only take 

care of the deferred maintenance that we are concerned about, but 

also to make specific upgrades, such as the additional metering 

skid, that would increase our ability to serve more than one offtake 

at a time. And that would, as a result, increase the Strategic Petroleum Reserve’s ability to push crude into the market in the case 

of an emergency. 

Mr. RUSH. Thank you, Mr. Chairman. 

Mr. WHITFIELD. Gentleman’s time has expired. Mr. Pallone, did 

you want to make an opening statement? 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Sure. Sorry that I was late, I was at the other 

hearing, on 21st century cures. I will try to cut back on it, but I 

did want to yield a minute to Mr. Welch, so, Mr. Chairman, I just 

want to say that I think I have made it clear that I am interested 

in working with you and Chairman Upton on energy legislation, 

but I am concerned about the format of today’s hearing. I can’t recall a time when this subcommittee has crammed two completely 

unrelated topics into one hearing, and I think it does a disservice 

to members, and to the subject matter, because both of these subVerDate Nov 24 2008 13:42 Oct 15, 2015 Jkt 037690 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-36 CHRIS
14 

jects are important, and really warrant not only separate legislative hearings, but also they should be preceded by more oversight. 

With regard to the specific proposals before us, I recognize they 

do not represent anything more than discussion drafts of potential 

legislative language that could go into an energy bill. However, as 

this efficiency title is currently constituted, I would not be in a position to support it, or to recommend that others support it. In particular, I am opposed to language in the discussion draft that repeals Section 433 of the Energy Independence and Security Act 

signed into law by President George Bush. Section 433 established 

groundbreaking energy efficiency performance standards for the design of new Federal buildings, and those Federal buildings undergoing major renovation, rightly ensuring that new Federal buildings be designed to result in decreased consumption of fossil fuels. 

The draft would prohibit from promulgating a final rule updating 

efficiency standards for gas furnaces until an advisory group completes an analysis and determination. 

And I certainly understand that there are concerns out there, but 

stakeholders have been working toward a resolution mutually 

agreeable to all parties. Now, however, some stakeholders apparently decided to try to do an end run by proposing this language, 

halting DOE’s efficiency efforts from moving forward, and the draft 

sets up an opponent dominated advisory panel, and gives more 

weight to the anti-efficiency factors being examined in the analysis. 

In my opinion, this greatly sets back any progress made toward 

good faith efforts to sincerely resolve concerns with the DOE’s proposal. 

The building code efficiency provisions in the draft is another 

area of great concern to me. As currently outlined, changes to DOE 

standards authority in this area would do great harm to what has 

been a very successful and impactful program. That said, I do want 

to make clear I do believe there is a sincere effort on both sides 

to try to find common ground, and I remain optimistic that we can 

develop a bipartisan energy package. We are early in our process, 

and there are many ideas from both sides of the aisle that have not 

yet been considered. In raising these issues up front, I hope that 

we can have a more concerted bipartisan collaboration moving forward. 

Mr. Chairman, last week the Obama Administration released its 

first installment of the quadrennial energy review. I know it was 

mentioned at a previous hearing by Mr. Doyle, and this is a great 

government-wide effort to look at key aspects of the Nation’s energy infrastructure that contains many useful insights, including 

some recommendations that would require legislation. We need to 

review that report carefully, because I think it provides us with an 

opportunity for our committee to work closely with the administration to put together meaningful energy legislation that addresses 

the four areas of your architect of abundance framework, and that 

the President, I think, ultimately would sign. 

So let me thank you again for holding this hearing, for your hard 

work in bringing these provisions forward, and for your willingness 

to work with us to make this into a product that we might all be 

able to support. And I would like to yield the remainder of my time 

to Mr. Welch. 

15 

Mr. WELCH. Thank you very much, Mr. Pallone. Thank you, Mr. 

Pallone and Mr. Rush, for your leadership on energy efficiency, and 

I really am grateful to our chairman, Mr. Whitfield, and Chairman 

Upton, for their focus on this. 

Energy efficiency is such an area where we can work together 

and make real progress. It saves money, creates jobs, it is better 

for the environment. We have made progress, Mr. McKinley and I, 

in other sponsored legislation that President Obama is going to 

sign into law this afternoon, and it is only a beginning. 

What we know is that energy efficiency is literally the lowest 

cost electricity resource for utilities, and from 2008 to 2012 new efficiency improvements from utility programs and appliance standards have avoided the need for more than 275 power plants. So we 

have got an opportunity to focus on the common ground where, 

whatever the fuel source, less is more. It can be nuclear, it can be 

coal, it can be solar, if we find efficiency, we are going to put people 

to work retrofitting our homes and our commercial buildings. We 

are going to save on fuel bills, and we are going to do a significant 

improvement of the economy. So I am grateful to the bipartisan approach we have got, and there is work to be done, and I am glad 

this committee is going to do it. Thank you, Mr. Pallone, and I 

yield back. 

Mr. WHITFIELD. Gentleman yields back. At this time, recognize 

the gentleman from Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Am I asking questions or giving a statement? 

Mr. WHITFIELD. Questions. 

Mr. BARTON. Questions. OK, I didn’t know. I just got here. I have 

got two hearings going on, and I am still asleep because Mr. 

Doyle’s baseball team is so good that we are getting up now before 

dark to start practicing to try to be competitive with them. 

Mr. DOYLE. Got to get up earlier than that. 

Mr. BARTON. Yes. Well, that is probably true. But arrogance 

sometimes leads to its own downfall, so Honorable Mr. Smith, we 

are glad to have you here today. 

I think you know that I have introduced a bill that would repeal 

the current ban on crude oil exports. It also has a section that requires the Department of Energy to conduct a study, and to send 

the results of that study to this Committee, and the Senate Energy 

Committee, within 120 days about the status of the SPR, what we 

should do with it. Do you know if the Department of Energy supports that part of the repeal bill? 

Mr. SMITH. So, just to understand the question, Congressman, do 

we support the issues on export, or just support doing the study on 

the—— 

Mr. BARTON. The study. The study on the—I can make it a two 

part question. 

Mr. SMITH. OK. 

Mr. BARTON. Unless you just want to say yes, yes, which I will 

yield back to the Chairman. 

Mr. SMITH. I want to make sure I understand the question. 

Mr. BARTON. Yes. No, I have had some discussions off camera 

with the Secretary of Energy about repealing the crude oil export 

ban. My question to you, since this hearing is on energy efficiency, 

and what to do with the Strategic Petroleum Reserve, is whether 

16 

the Department supports that part of the bill repealing the ban on 

crude oil exports that requires a study of the Strategic Petroleum 

Reserve, and that that study be reported to the Congress within 

120 days? 

Mr. SMITH. Yes. Well, thank you for the question, Congressman, 

and the clarification. So we certainly do support the idea of doing 

a comprehensive review of the Strategic Petroleum Reserve. In fact, 

that is a process that we already have underway. We, of course, 

will comply with the law as written. I would say that a comprehensive study that looks at infrastructure issues, that looks at subsurface issues, that looks at geologic issues, that looks at market 

issues, all the things that would help us come to some conclusions 

over the appropriate size and the scope of work that it needs to do 

to modernize the Strategic Petroleum Reserve. It would be difficult 

to do that in 120 days. That is—— 

Mr. BARTON. Do you have a timeframe that you would prefer? 

We wanted to get it back fairly quickly, but since our bill hasn’t 

had a legislative hearing yet, we are very flexible. 

Mr. SMITH. Right. 

Mr. BARTON. Would 180 days be better? Would you like a year? 

What is the magic number? 

Mr. SMITH. Well, 180 days would be better than 120 days. I think 

the estimate that we would make for doing a piece of work of that 

magnitude was several months, so it would be considerably longer 

than the current 120 days that you have proposed. But that said, 

we have got a great team, and we will accomplish what we can in 

the time that we are given. But in order to address what we think 

are fundamentally, and comprehensively a different set of conditions than we had when the Strategic Petroleum Reserve was initially put in place, back in the ’70s, but that is actually a big piece 

of work—— 

Mr. BARTON. Right. 

Mr. SMITH [continuing]. And we would like to make sure that we 

have time to get that right. 

Mr. BARTON. When we put the SPR in place, we were importing 

lots and lots of oil, and oil production in the United States was 

going down. Today we are increasing our production, oil imports 

are going down, refined product exports are going up. Current law 

precludes the President from using the Strategic Petroleum Reserve, except in times of national emergency. He has some discretion in declaring that emergency, and Congress has had issues with 

past Presidents when they have declared it. 

What is your opinion of giving the President, or the Secretary of 

Energy, the discretion to perhaps actually make—I won’t say routine sales of crude oil, but make it easier to sell crude oil in the 

world market when there is not a national emergency, given the 

fact our oil production is increasing like it is, and we have the potential—I am not saying we will ever do it, but we have the potential to be totally energy independent, and not import any crude oil 

at all? 

Mr. SMITH. Right. Well, thank you for that question, Congressman. So the authorities to export crude to other countries would 

fall under the purview of the Department of Commerce, and of the 

Office of the President, so I dont demur answering on their behalf. 

17 

What I can say is that we think it is extremely positive that we 

are, for the first time in decades, producing more oil domestically 

than we have to import from other countries. That has been I think 

a tremendous improvement, in terms of our energy security and 

economic development. 

I would note that we are still importing—— 

Mr. BARTON. Right. 

Mr. SMITH [continuing]. 7.6 million barrels per day, so we still 

are importing significant quantities of oil here in the present time. 

But in terms of the authorities to export, I mean, that would be 

a question for Congress. We follow the statute, in that there are 

exceptions and waivers that have to be handled by Department of 

Commerce, and by the Office of the President. 

Mr. BARTON. My time has expired, but it is refreshing to know 

that at least the Department of Energy wants to do what the Congress tells it to do. 

Mr. WHITFIELD. Yes, we are excited to hear about that. 

Mr. BARTON. I am honored to hear that. With that, I yield back. 

Mr. WHITFIELD. Where would Mr. Pallone—Chair at this time, 

will recognize the gentleman from New York, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. Assistant Secretary Smith, in 

your testimony you indicated that DOE has started a review of the 

SPR, and you mentioned a few of the issues that DOE will examine, including the size, the composition, and the geographic location 

of the reserve. It sounds as if the reserve assumes it would largely 

keep the present overall structure in place, with perhaps some 

modifications. And maybe that is what we should do, but is the Department also going to re-evaluate whether maintaining a Strategic 

Petroleum Reserve is the best way to promote energy security? 

And might I just say, I don’t doubt the need for emergency planning, and specific authorities for action in case of an emergency, 

given the importance of this resource to our economy, but with the 

changes in our oil markets, and private investment in infrastructure for oil and gas, and the changes in demand for different refined products, I am wondering whether the SPR, which we conceived in the midst of a very different environment, is still the 

proper overall structure. So can you address whether or not we are 

going to re-evaluate, whether we maintain that SPR? 

Mr. SMITH. Well, thank you, Congressman, for that question. So, 

if you look at global oil prices right now, you see markets are currently very well supplied, and—as was noted by Congressman Barton from Texas, we are producing more oil domestically than we 

have in the past. We are producing more barrels domestically than 

we import from other countries, so some of those situations have 

changed. 

However, we do believe that the Strategic Petroleum Reserve 

does still provide a critical element of energy security for our nation. It is the largest energy stockpile in the world. It is, I think, 

an important tool that we have to handle not only disruption of 

physical barrels, but also the impacts that price increases might 

have on the U.S. economy. 

So in our study we will look at the size of the SPR. I think that 

is important to consider, what the appropriate size of the Strategic 

18 

Petroleum Reserve would be. And we will look at infrastructure 

issues, we will look at fundamentally how the Strategic Petroleum 

Reserve operates. But I would say that it is certainly our conclusion, and my personal conclusion, as the official who oversees the 

site, that this is an important resource for national security, and 

we think that its core mission remains vital. 

Mr. TONKO. And in terms of its structure, you believe it will best 

serve us in the event of an emergency? 

Mr. SMITH. Well, Congressman, that is something that we will 

evaluate in the study. I mean, there are structural issues that we 

can tackle, in terms of what infrastructure needs to be in place. We 

have made changes, in terms of, for example, setting up the Northeast Gasoline Reserve last year as a response to weaknesses that 

we saw in the aftermath of Superstorm Sandy in 2012. So there 

are steps that we are taking to say, well, we understand what the 

statute says, and we understand the design of the Strategic Petroleum Reserve. 

We are making steps as we go forward to ensure that we are 

using authorities that we have to ensure that the reserve remains 

relevant, and we will try to think broadly, in terms of doing a strategic review, so that we consider what other changes might be appropriate. 

Mr. TONKO. Thank you for that. And you also recommend that 

Congress update the definition of a severe energy supply interruption, to include criteria focused on disruptions in the global oil market, whether those disruptions result in a problem with U.S. oil imports or not. Would you elaborate on that thinking, please? 

Mr. SMITH. Well, it is tied to a—I guess an observation has already been made. The Strategic Petroleum Reserve was created 

back in the ’70s in a very different environment than the environment we have now. We operate under EPCA, and over the years, 

over the decades since the early ’70s, the statute that we have now 

is a patchwork of changes, and addendums, and amendments that 

have been put in place over the years. So there are some ambiguities about authorities. There are some issues of regional resources 

perhaps being deployed in a way that is more appropriate for a national resource. 

And so it is our view that, as we look at the language that authorizes us to use the reserve, given that that has been changed 

piecemeal, bit by bit, over decades, starting from a point which is 

very structurally different than the global markets right now, we 

do think it would be judicious and appropriate to take a look at— 

all of the language that gives authorization, and streamline that, 

and make it suitable for today’s markets. 

Mr. TONKO. Thank you very much, and with that, I will yield 

back, Mr. Chair. 

Mr. RUSH. Mr. Chair? 

Mr. WHITFIELD. Sorry, Mr. Rush? 

Mr. RUSH. Mr. Chairman, I just wanted to—the Committee, and 

all the—there is a gentleman in the room, on the left side there, 

white hair, very handsome gentleman, that is former member Dave 

McCurdy from Oklahoma. He is the president of the American Gas 

Association, and I just didn’t want him to sit in this room without 

us giving him his due. He was a fine gentleman, and true friend, 

19 

and just an outstanding member of Congress. So he is there. The 

handsome guy with the white hair. 

Mr. WHITFIELD. And we know he was an outstanding baseball 

player as well for the—— 

Mr. RUSH. I don’t know why—is there a provision that he can 

join your side and be on your team? 

Mr. WHITFIELD. Yes, absolutely. 

Mr. RUSH. Because you are going to need him. And—— 

Mr. WHITFIELD. He looks like he is getting younger, to me, every 

single day. No, we are glad you are here. Thank you so much, and 

thank you for reminding us of that. 

At this time I would like to recognize the gentleman from Texas, 

Mr. Olson, for 5 minutes. 

Mr. OLSON. I thank the Chair. And good morning, and welcome, 

Mr. Smith. I know you are a fellow Texan, grew up in Fort Worth. 

You served our country, a West Point graduate, in the Army. 

Thank you for your service. I promise I won’t talk about the state 

of affairs between your Army and my Navy, and that big football 

game that happens every year, but I do want to talk about the 

state of affairs of the SPR. 

It is a big part of my home life. The Bryan Mound is about 20 

miles down the road from my home, and the Big Hill is about an 

hour east in Winnie. In your QER, DOE talks about some big 

changes for the SPR. You want billions of dollars more spending to 

fix the system. And, as has been mentioned, our world has been 

turned upside down these past years with this energy production. 

We have plenty of crude here in parts of the country where we usually have to import or anticipate a shortage. I would like to delve 

into some of those issues, but I first have a question on the specific 

type of crude in the SPR. 

These days we are barely exporting light crude. Much of the 

crude we do import—I am sorry, importing light crude. Much of the 

crude we do import is heavier. It seems that this crude is most at 

threat of a supply disruption. And with the huge amount of oil we 

have here at home, are you happy with the current balance of light 

versus heavier crudes in the SPR, as you mentioned, I think, the 

balance is between 260 billion barrels of light crude, sweet crude, 

and then 430 barrels of sour, heavier crude. Are you happy with 

that balance, and how would you adjust it if you are not happy 

with it? 

Mr. SMITH. Well, thank you for the question, Congressman. So, 

indeed, our balance between sweet and sour is 260 for sweet barrels, and then 430 for sour. As we go through our process of looking 

at our long term strategic review, I think that is something that 

we will be considering, along with infrastructure. There are issues 

of cavern storage, and how we blend different types of crudes, and 

what caverns we would place them into. So, as you note, the mix 

of crude that refiners are using in the Gulf of Mexico has changed 

over the years. 

You know, late ’90s, early 2000s, refiners put lots of money into 

upgrading refineries to run heavier crudes. Now we are seeing that 

there are more light crudes that are becoming available here as the 

Bachman in South Texas comes online. These are all things, I 

think, that we have to consider. I wouldn’t categorically state that 

20 

right now we think we have the right balance. In fact, the very reason why this Committee is encouraging us to do the study, and— 

that we have already embarked on that path is that we think that 

we need to address these issues. We think they are very important. 

Mr. OLSON. Thank you. This is not news, but our crude supplies, 

and even the direction of some pipelines, have changed in recent 

years. For refined products, we are a major global supplier now, 

and at the same time some allies remain very reliant on imports. 

In some scenarios, an SPR release might not be as effective as it 

was in the past. My question is this, with this new market reality, 

should we be focused on the SPR here at home, and making sure 

our allies upgrade their reserves overseas? Allies like South Korea, 

where you served during the Army. Anything we should do with 

our allies to make sure they have their own SPRs? 

Mr. SMITH. Well, thank you, Mr. Congressman. 

Mr. OLSON. I will take the promotion. 

Mr. SMITH. OK. Apologies to the Chairman. So I—just 2 weeks 

ago—so we work very closely with the IEA, the International Energy Agency, that helps us align petroleum reserves throughout the 

world. I will make a couple of notes on that. Just 2 weeks ago I 

was in Szechuan Province, Chengdu, China at an IEA event, and 

then a few days later I was in New Delhi, India at a separate IEA 

event. We have also spent time in China looking at, you know, creating a stronger communication between ourselves and the officials 

in China who manage their reserves. So we have a very strong understanding that, you know, we can’t do this by ourselves. We 

wouldn’t endeavor to do it by ourselves. I think it is a more powerful tool when we are part of the potential to use the Strategic Petroleum Reserve as part of a collective action. 

So indeed we are taking steps along those lines. We think these 

are important steps to take. And, in fact, we have, just last year, 

signed a historic agreement with China to create a greater sense 

of transparency between ourselves and China so that we understand issues there, with regard to their energy stockpile. We think 

these are important steps, and they are ones that we continue to 

push on. 

Mr. OLSON. Thank you. Out of time. 

Mr. WHITFIELD. Chair recognizes at this time, Mr. Doyle of Pennsylvania for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman. Mr. Smith, thank you for 

testifying before our Committee today. We all know how much the 

landscape has changed since 1975, when we first passed the legislation to create the SPR. And I was glad that you mentioned the 

recently released QER in your testimony. It suggests that energy 

security should be more broadly defined than just oil security. 

What other sources do you think should be included, and how 

should we protect them? 

Mr. SMITH. So, to make sure I understand the question, Congressman, I have spoken to recommendations in the QER that had 

to deal with the Strategic Petroleum Reserve, and you are thinking 

how do we think about energy security more broadly? 

Mr. DOYLE. Yes. The report suggested that we shouldn’t think of 

it as just oil security, but we should think of it more broadly. So 

21 

is it suggesting security measures, or how we view other sources, 

natural gas, or whatever? 

Mr. SMITH. Well, with regard to the petroleum reserve, the scope 

of the study that we have discussed here would be specific to the 

petroleum reserve, including crude and refined products. So the 

scope of that discussion wouldn’t change. What I will say is that 

we do work very closely across offices within Department of Energy. So there are four applied offices within DOE. I run the Office 

of Fossil Energy, which includes oil, natural gas, clean coal, carbon 

capture and sequestration, the Strategic Petroleum Reserve. There 

is a separate office that looks at energy efficiency and renewable 

energy. 

Mr. DOYLE. All right. 

Mr. SMITH. A separate office that looks at—Office of Electricity, 

and a separate office that looks at nuclear energy. So we do work 

very closely. In fact, one of the things that Secretary Moniz has integrated since he has come to the Department are cross cutting 

teams to ensure that, in our budgeting process, we are very explicitly creating teams that break down those silos. So when we are 

thinking about energy security, and we are thinking about job creations, when we are thinking about all the important things about 

energy reliability, and reducing greenhouse gas emissions, that we 

are breaking down those silos, and we are thinking across borders. 

So that is something that is already in place, and we think is being 

expressed in the way that we are putting together our budgets and 

executing our programs. 

Mr. DOYLE. Thank you. In your testimony you also highlighted 

the QERs recommendation to consolidate the authority for the 

Northeast Home Heating Fuel Reserve and the Northeast Gasoline 

Supply Reserve into a single unified authority. And, additionally, 

you suggested that these release authorities should be aligned and 

tailored to the purposes of a product reserve, rather than that of 

a crude oil reserve. Can you expand upon why you think this consolidation is beneficial, and how the release authority would be different for a product reserve, rather than a crude oil reserve? 

Mr. SMITH. Well, thank you, Congressman, for that question. So 

Part B, Title 1 of EPCA dictates the steps we would have to take 

in order for the Northeast Gasoline Reserve, which is part of the 

Strategic Petroleum Reserve. That language is very much geared 

towards a national shortage, and very much geared towards crude 

oil. It is not geared towards a regional event, the type of event that 

we saw in the aftermath of Superstorm Sandy, and it is not geared 

toward the needs of communities who are suffering shortfalls or 

shortages in a supply of products. So we think it would be appropriate to amend that so that the triggers for releasing the gasoline 

reserve would be appropriate for the types of emergencies you 

might see there, so that, we bought this insurance policy against 

shortages. We want to make sure that we are able to deploy that 

insurance policy in ways that are appropriate for the types of emergencies that it is meant to cover. 

With the NEHHOR, the Northeast Home Heating Oil Reserve, 

there are a couple triggers that might trigger these with NEHHOR. 

One is that a differential in the current price, that it had to exceed 

a moving average by 60 percent. We think that is a tremendously 

22 

difficult bar to make. And, in fact, once you have gotten to that 

point, you have probably gone beyond the point which the reserve 

would be useful. There is also language that says a regional supply 

shortage of significant scope and duration would trigger the ability 

to use NEHHOR, which we think is probably a bit more appropriate. 

But between the NEHHOR, the Northeast Home Heating Oil Reserve, the crude reserve national resource in the Gulf of Mexico, 

the SPR, and the Northeast Gasoline Reserve, and any, you know, 

future thing that we might have for products, we do think that we 

need to go back and, you know, again, as we mentioned, this patchwork of legislation that has been created over the years, we think 

it would be appropriate to look at all of that, and make sure that 

it is streamlined for the markets of today, as opposed to the markets of yesterday. 

Mr. DOYLE. Great. Thank you very much. I yield back. 

Mr. WHITFIELD. At this time the Chair recognizes the gentleman 

from Ohio, Mr. Latta, for 5 minutes. 

Mr. LATTA. Well, I thank the Chairman, and I thank you for having this hearing today, and I appreciate our witness and his testimony this morning. If I could just kind of go back to a question 

that the Chairman asked initially, and then I think part of the answer was dealing with the infrastructure side. Did I understand 

you said something about the direction of the pipeline? Did I understand you to say that? 

Mr. SMITH. Yes, Congressman. So, as we have created a lot more 

crude—so we mentioned that we are producing more crude domestically than we import, and that is for the first time in many years. 

We have a lot more crude that is coming from North Dakota, so 

it is going from north down south. We have a lot more crude that 

is being produced in South Texas, out of the Eagle Ford Shale. And 

so previously you had pipeline networks that—you had the Strategic Petroleum Reserve in the Gulf of Mexico, and you could push 

oil from the SPR in the Gulf of Mexico up to the rest of the country. Now you are seeing some of those pipelines have reversed because they are bringing crude from new sources of production, in 

North Dakota and in Texas, and it has come into the Gulf of Mexico. 

And so that complicates the original construct of the SPR, which 

was to have this centrally located large stockpile of hundreds of 

millions of barrels that you could simply, through pipelines, push 

out to the rest of the country. Given that some of those pipelines 

were reversed, it makes us re-think some of those things, and also 

makes the waterborne transport of crude a lot more important than 

it probably was back in the ’70s. 

Mr. LATTA. Now, when you look at your strategic overall plan 

that you are looking at into the future, is that something that you 

are really going to emphasize, then, on the direction? 

Mr. SMITH. Indeed, Congressman. When we think about what infrastructure you need, what marine transport you need, what pipeline systems you might be employing, what should be the balance 

of crude, what should be the size of the Strategic Petroleum Reserve, what types of crude the refiners are using, those are all factors that we will be considering when we undergo this comprehenVerDate Nov 24 2008 13:42 Oct 15, 2015 Jkt 037690 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-36 CHRIS
23 

sive review. And it will help us crystallize these issues, and make 

very specific recommendations about investments that we need to 

make to make sure that we have got the reserve that is suitable 

for the markets of today, as opposed to the markets of the early 

’70s. 

Mr. LATTA. Thank you, because—and also you had mentioned 

earlier, in your response, that we have about 7.6 million barrels of 

oil that we are importing every day today, and also we all know 

it has been alluded to this morning what has happened with our 

shale development in this country, and really what we have been 

able to do in this country to help ourselves. But in light of all that, 

if something would happen on an—if there would be an international supply disruption at this time, are we prepared to meet 

that with the current setup of what we are with the SPR? 

Mr. SMITH. Well, thanks for the question, Congressman. So, we 

have noted many of the shortcomings, the market has changed, 

some of the pipelines go in different directions, but, one thing I can 

say is that, not only through the test sale, but, through the release 

that we had for the disruption that came from the unrest in Libya, 

that the team of professionals we have running the Strategic Petroleum Reserve down in the Gulf of Mexico, and Texas, and Louisiana, have always been successful at pushing oil into markets, 

and in doing the things that the SPR was meant to do. 

Now, that is not to say that, going forward, we don’t have some 

concerns. We do think that there is some modernization that needs 

to occur. We do have some deferred maintenance that we are concerned about, and we want to make sure that that mission readiness continues. But we are focused on remaining ready. We utilize 

the resources that we have in our disposal. But going forward, we 

do have some serious concerns, which is the reason why we have 

asked for some increase in budgets in this Congressional justification for the 2016 budget, and that the study that we are going to 

be undertaking will be looking at issues of modernization. We think 

those are important points. 

Mr. LATTA. Thank you. Mr. Chairman, I yield back the balance 

of my time. 

Mr. WHITFIELD. At this time the Chair recognizes the gentleman 

from California, Mr. McNerney, for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman, and thank you, Assistant Secretary, for testifying this morning, and for your work in 

this area, and for all the constant field work that you do. Now, one 

thing you mentioned in your opening remark was the aging drawdown infrastructure by saying that it needs more maintenance— 

what specifically would be the best actions to take, how much 

would they cost, and could that be paid for by drawdown profits? 

Mr. SMITH. So I will talk a bit about the first part of the question, which is what we think needs to be done, and then I will try 

to address the second part of your question. So in terms of deferred 

maintenance, I think every year we get an appropriate, we take 

that appropriate, we do what we need to do to in order to remain 

mission ready. And mission readiness is—this is an energy security 

asset, and so the team in the Gulf of Mexico is focused on mission 

readiness. 

24 

So what we need to do in the immediate term, for the budget 

that we are requesting for 2016, there are issues with valves, there 

are issues with compressors, there are issues with pumps. There 

are some well bore work-overs that need to be accomplished. We 

have included funding in our request for the transfer metering skid 

at Big Hill, which would allow them to push oil in two different directions to two different buyers at the same time, as opposed to the 

one bottleneck that they have currently, where they can only move 

oil to one buyer. We think in the immediate term that these are 

important things to undertake, in terms of ensuring that we are 

taking care of that deferred maintenance, and that we continue to 

be ready. 

Going forward, we have a modernization effort that is referred to 

in the Quadrennial Energy Review. That would have to do deal 

with further surface infrastructure for life extension. So again, this 

was an asset that was put in place decades ago. If you are going 

to move decades into the future, there are lots of things you have 

to do to make sure that equipment that is getting to its sell by date 

is getting renovated, it is getting fixed, it is getting replaced, in 

some cases. 

So that would be surface infrastructure, everything we need to 

move oil around the surface, and that is the pumps, and valves, 

and all that equipment to move oil around. It would include brine 

disposal caverns, so we use brine to push oil and out of the caverns, and so there would probably be some new brine drive caverns 

that we would have to work on. And then disposal wells as well. 

So, brine has to be disposed of when it is utilized, and so those are 

things that would be included in the life extension. 

Beyond that, there are some other issues to deal with, marine capacity, marine distribution. That is also envisioned in the Quadrennial Energy Review, and will be considered in the strategic study 

that will be undertaken. 

Mr. MCNERNEY. OK. Well, last year it said you grossed $468 million by your test sale. What was the average price per barrel in 

that sale? 

Mr. SMITH. Congressman, I don’t know that number off the top 

of my head. I would be happy to respond for the record. But it was 

consistent with whatever the market price was at the time. It was 

higher than it is today. 

Mr. MCNERNEY. Higher than today, but is it higher than it was 

when the oil was purchased and put into the reserve? 

Mr. SMITH. Well, the oil is purchased over time, right, so the—— 

Mr. MCNERNEY. Right. 

Mr. SMITH [continuing]. Comparison that I can make is that 

when we did the test sale we sold 5 million barrels. Receipts from 

that sale were somewhere in the order of magnitude of $500 million. We took part of those funds and used them to create the 

Northeast Gasoline Reserve, which is a million barrels of gasoline 

that we have in three sites in the northeast. That was the reserve 

that we created to respond to Superstorm Sandy. We had enough 

left over after that to replace almost all of the oil that we had sold 

in the first place. 

So we sold at a much higher level than we bought back, which 

means we sold the oil, and created a new reserve, including all the 

25 

storage, and paying for the maintenance and operation on a go forward basis, and still had enough left to buy back all the oil that 

we sold in the first place. So it was good timing, and good execution 

on—— 

Mr. MCNERNEY. OK. Well, that sort of answers the second part 

of my first question that you didn’t answer the first time through. 

OK. So, with that, I will yield back, Mr. Chairman. 

Mr. WHITFIELD. Gentleman yields back. At this time recognize 

the gentleman from West Virginia, Mr. McKinley, for 5 minutes. 

Mr. MCKINLEY. Thank you. Let me get the first question out of 

the way as quickly—I want to hear from you whether or not you 

support what Secretary Moniz came and testified to us back in 

January, I believe it was, that the operation of the Nettle facilities 

at Morgantown and Pittsburgh will remain as is into the future. In 

fact, we talked about a 10 year time period. Do you agree with 

that? 

Mr. SMITH. Yes. 

Mr. MCKINLEY. OK. So I don’t need to go to part two question 

on that. So the other issue is, building back off the question having 

to do with the gasoline storage in the northeast, I am just curious 

about that, because I know the crude can be stored for some period 

of time, but there is a shelf life for gasoline. Can you share with 

us a little bit about how often you are turning that over? Because 

that gasoline can’t stay there forever. 

Mr. SMITH. Right. Thank you, Congressman, for that question. So 

we didn’t go and construct new tankage. We rented tankage that 

is in place, and so these are in existing commercial facilities, so 

part of our maintenance that we are paying for all the time includes ongoing turnover over that product, so—— 

Mr. MCKINLEY. So it is being refreshed, is what you are saying? 

Mr. SMITH. Yes, Congressman. 

Mr. MCKINLEY. OK, that is fine, so we don’t have that issue. Because I know there are serious problems with gasoline over a period of time if it is not turned over. So let me go to the next question, that has to do with this storage of the crude in the salt minutes, primarily down, I guess, in the Gulf region, having faced a 

lot of the pushback, and understandable, the pushback of the brine 

discharge from the operation, and the Marcellus and the Utica operation that the environmentalists—and understandably. I would 

share the concern, what are we doing with this brine reserve that 

is coming back up again? 

So I am curious, since you have produced somewhere in the 

neighborhood of close to 700 million barrels of brine, what would 

you do with it? 

Mr. SMITH. Thank you for that question. So we have got a very 

experienced team of environmental professionals that are part of 

the Strategic Petroleum Reserve that ensure that we are complying 

with all state, local, and Federal regulations in terms of disposal 

of brine. We do have brine drive caverns in place that we use to 

manage the brine. We need the brine to push the oil out of the caverns. 

Mr. MCKINLEY. So when it comes back up, you are putting it 

someplace—mechanically, I want to be able to be clear, not talk in 

30,000 feet. When it comes back out, where does it go? 

26 

Mr. SMITH. It probably would be good to answer that question for 

the record, Congressman, because I want to make sure that we get 

all the details correct. But what I can say is that that is an operation that we have got decades of experience managing, that we 

are managing consistent with all the state and local regulations. 

Mr. MCKINLEY. How do you deal with—apparently there are 

some issues in the salt mines with structural integrity that is 

breaking down, in some cases, and obviously, as you know, crude 

is not typically found in a salt environment, so you are going to 

have some interaction between the chemical composition of a crude 

oil and the salt in the walls of the container. How does this work 

in the breakdown? What are we doing to assure us that we have 

long term stability in our storage with our reserves? 

Mr. SMITH. Well, we do have an extensive testing program that 

is looking at sampling from a statistical sample of the caverns on 

an ongoing basis, so we have a very granular and fine understanding of the quality and the state of the crude that we have in 

all of the caverns. Generally the reason why you store crude in the 

salt caverns is the sale is not soluble in crude, whereas it is soluble 

in water, right? So you use the water to actually create the space 

in the cavern, and then you fill that with crude, so you have got 

essentially these enormously large pressure vessels that are full of 

crude, but the salt itself is not soluble in crude, which is what 

makes it very appropriate for storage. 

Mr. MCKINLEY. So you are indicating there is no chemical interaction between the two? 

Mr. SMITH. What I am saying is—— 

Mr. MCKINLEY. Careful with that. 

Mr. SMITH. I am saying that salt is generally not soluble in 

crude, and that we have an extensive testing program so that we 

have a very fine understanding of the state of the crude, sweet and 

sour, all the various caverns, 60 caverns throughout four different 

sites, so that, on an ongoing basis, we always understand exactly 

what crude we have in the caverns, we know what refineries they 

are suitable for, and that we are consistent with all the standards 

for delivering those refineries, both—— 

Mr. MCKINLEY. OK. In the timeframe that I have left on—is that 

apparently, as I said earlier, we are finding some developing structural integrity problems—can you give us a sense of how many of 

those—if we are storing close to 700 million barrels in crude, how 

much of that is in areas that are questionable? 

Mr. SMITH. Well, what I can say is that every cavern that we 

have crude in right now is certified. It is understood it is safe, all 

right? We have had to decommission a couple caverns over the last 

few years. Our biggest challenge is that you are drilling through 

cap rock into these salt structures, and that over time they do 

move, so they pinch the well bores, they compress the well bores, 

they deform the well bores. And so, on an ongoing basis, we have 

got a program of remediation where we are having to inspect the 

well bores on an ongoing basis. And part of the funds that we had 

requested for this budget period, increasing funding from last year 

to this year, was to ensure that we are able to do the appropriate 

number of work-overs. 

27 

One final thing I will say is that if there is an issue of safety 

in any cavern, it means we don’t operate that cavern. So we don’t 

operate any cavern that is going to create an environmental issue. 

We don’t operate any cavern that is going to be a—create a safety 

issue. We decommission those caverns if they create a—— 

Mr. MCKINLEY. OK. If you can get back to me on—I am over on 

time. If you could get back to me on those two answers that left— 

one was percent, and the other question. 

Mr. SMITH. All right. I would be happy to. 

Mr. MCKINLEY. Thank you very much. 

Mr. WHITFIELD. At this time the Chair recognizes the gentleman 

from Vermont, Mr. Welch, for 5 minutes. 

Mr. WELCH. Thank you very much, Mr. Chairman. Mr. Smith, 

thank you. The Strategic Petroleum Reserve has been with us for 

a while, and can perform a number of very useful functions, including taking some of the pressure off the spike in gas prices when 

consumers are getting hammered. In fact, we passed a law, that I 

was one of the co-sponsors of, to suspend shipments, this is back 

in ’08, suspend shipments to the SPR because gas was 3.73 a gallon. And, in fact, the evidence indicated that it was about—adding 

about a quarter at—of a cost—a quarter a gallon at the price of the 

pump. Obviously, we are in a different situation now, and as we 

have re-filled it, we are paying less than we were paying then. 

What has been the experience of SPR with respect to how it can 

have an impact on the price that consumers pay at the pump? I 

know that is not its primary objective, but it is an incidental effect. 

Mr. SMITH. Well, thank you, Congressman, for that question. So 

I guess—two separate issues. So one of the things that the Strategic Petroleum Reserve, just its existence, but also its utilization 

in a crisis, can do is have an impact not only on ensuring that we 

have appropriate supply in a disruption, but also on global oil markets. I will note that global oil markets and global crude markets 

are different. You do have an internationally fungible global crude 

market, and an internationally fundable global product market. We 

import and export product. In fact, we are a net exporter of refined 

products. 

So if the question is, when we are filling the caverns, do we have 

an impact on prices, we just bought five million barrels to replace 

the barrels from the test sale. We kept an eye on that as we made 

that announcement, and we didn’t see an appreciable impact on 

prices. We are concerned about impacts on consumers, so that is 

something that we keep an eye on. 

Mr. WELCH. One other question. The quadrennial energy review 

mentions that Congress should update the SPR release authorities 

to allow it to be used more effectively to prevent economic harm in 

emergencies. Do you recommend any specific legislative steps that 

are needed in order to accomplish that? 

Mr. SMITH. Thank you for that question, Congressman. So, indeed, one of the disconnects well, first of all, to reiterate a point 

that I had an opportunity to make earlier, we operate primarily 

under EPCA, which is, right now, after decades, is a patchwork of 

amendments, and addendums, and changes. So we do see a disconnect between the market of today and the market that was perhaps foreseen back in the early ’70s. So changes in the legislation 

28 

and authorities, that would allow us to be more proactive with the 

petroleum reserve would be welcome. Changes that would centralize some of the authorities so that, right now we have different 

authorities for regional product reserves, and the Strategic Petroleum Reserve. 

And, importantly, they are in some cases, for example, the 

Northeast Gasoline Reserve is managed under Title B, Section 1, 

and that is a national standard, so you have a regional reserve for 

products that would be released based on a standard that is set for 

a national reserve that has crude in it. And so we think that addressing all those issues would be positive to make sure that that 

is its effect. 

Mr. WELCH. Well, we would welcome your specific recommendations on how best to do that. 

Mr. SMITH. I really look forward to the opportunity to work with 

the Committee on that. 

Mr. WELCH. All right. Thank you. I yield back. 

Mr. WHITFIELD. Chair recognizes the gentleman from Ohio, Mr. 

Johnson, for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman, and Assistant Secretary Smith. Thank you so much for being here with us today. A 

couple of quick questions on a little bit of a different subject, then 

I will get back to some questions about the QER. Are you confident 

that your department is treating applications by Canadian LNG 

companies consistently with NAFTA obligations? 

Mr. SMITH. Thank you very much for that question, Congressman. So we currently have two applicants for—two Canadian applicants before the Department for authorization to export liquefied 

natural gas. To be clear, what we authorize is—we give the applicant the authorization—or we rule on their application to export 

the molecule. Other entities look at environmental issues, including 

the FERC. So we have got two applications that are before us right 

now. So the commitment that we have made is that we are going 

to treat applicants in Canada, applicants in Mexico, and applicants 

in the United States in a way that is open, it is transparent, it is 

fair, it is consistent. 

So under Section 3 of the Natural Gas Act, we are compelled to 

make a public interest determination for any natural gas that is 

exported from the United States. It is our reading of that statute 

that that applies to natural gas that might be exported via Canada, 

via Mexico, or via the United States. So whether you are a mile 

north or a mile south of that border, we have to do that public interest determination. 

Mr. JOHNSON. I understand that, but it—I guess I am a little 

confused, because it is my understanding that that is not being applied in the case of Mexico, but it is being applied in Canada. And 

are you concerned that Canada could, in fact, exercise jurisdiction 

over the export of LNG derived from Canadian natural gas for U.S. 

projects, such as Jordan Cove and Oregon LNG? And the reason 

that I ask this question is because they are experiencing the same 

slow rolling, slow moving process for liquid natural gas export permits that American companies are. 

Mr. SMITH. Right. 

Mr. JOHNSON. And it is going to come to a head at some point. 

29 

Mr. SMITH. Well, I won’t speculate on what the Canadian government is going to do. I think Canadian government is going to do 

what is appropriate for the citizens of Canada, just as we are doing 

what is appropriate for the—— 

Mr. JOHNSON. Yes, but it could have dire implications for here 

at home, because a lot of the gas that we have here at home, in 

the Marcellus and other places, are destined to go to places like 

Canada. And so it does have economic implications here at home. 

Mr. SMITH. Well, indeed, Congressman, and as we make these— 

well, first, I wouldn’t concur with the characterization of this process, slow rolling. I mean, we have already—— 

Mr. JOHNSON. We can debate that, because they have been sitting there for years, and there are 38, only five of them had been 

addressed. We were assured by Secretary Moniz that these were 

going to be looked at more quickly, and we are not seeing LNG export permits being granted. 

Mr. SMITH. Well, indeed, Congressman, we are. We have authorized 5.7 billion cubic feet of natural gas—— 

Mr. JOHNSON. How many permits have you authorized? 

Mr. SMITH. For four different—— 

Mr. JOHNSON. Four out of 38. Mr. Smith, in my view, that is slow 

rolling, when America’s economy is dependent upon the jobs, and 

the energy independence that this brings. 

Mr. SMITH. Well, Congressman, right now there are zero applicants sitting in front of us for a decision right now. There is an important process that these companies have to go through that—— 

Mr. JOHNSON. Well, you know why that is, right? You know why 

that is? They are not going to put the hundreds of millions of dollars into doing the environmental assessments and the FERC process when they know these permits are going to sit in the Department of Energy for extenuating periods of time. They have got to 

have some idea that they are going to get a return on their investment. But—— 

Mr. SMITH. In fact, they are spending millions of dollars to go 

through those process, because they are going through that FERC 

process. So we work very closely with FERC. As those applicants 

have finished that process, then they come to Department of Energy. The last application that we got that came out of FERC, we 

turned that around in 1 day. 

So the companies will make the decision whether to either spend 

the money on the environmental work or not, and that is up to the 

companies. The market will decide that. As the companies make 

those investments, as they get financing, as they sell the gas, they 

will then come to the Department. Once that work is done, it puts 

us in a situation where we can make that—— 

Mr. JOHNSON. My time is expired almost. Point of clarification, 

then. Are you telling me that the roughly 33 permitting applications that are sitting in the Department of Energy, that none of 

that has gone through the FERC process, and that none of that is 

waiting on the Department of Energy for action? 

Mr. SMITH. Those applicants that have gone through FERC, that 

have completed the re-hearing process, have come to us, and we 

have made decisions on those applicants. 

30 

Mr. JOHNSON. So you are saying that none of those other 33 are 

waiting on the Department of Energy? 

Mr. SMITH. The rest of those 33 are doing all the other work that 

they have to do to complete these decadal multi-billion dollar 

projects. They are big projects, and they do take some time, but we 

are moving expeditiously on this. We are getting these applications 

out as we are ready to make the decisions because they have done 

the work. They come to us, and we write the orders. 

Mr. JOHNSON. Sorry for exceeding my time, Mr. Chairman. I 

yield back. 

Mr. WHITFIELD. At this time the Chair recognizes the gentleman 

from New York, Mr. Engel, for 5 minutes. 

Mr. ENGEL. Thank you very much, Mr. Chairman. Welcome, Mr. 

Secretary. New York and the northeast region of the U.S. are particularly vulnerable to gasoline disruptions as a result of hurricanes and other natural events, and Hurricane Sandy, or 

Superstorm Sandy, in 2012 was a good example of that. It caused 

widespread issues related to the availability of gasoline. 

In response, to help build a more secure and resilient energy infrastructure, the Energy Department did establish the first Federal 

regional refined petroleum product reserve, containing gasoline. 

The reserve, I am told, currently holds one million barrels of gasoline to help strengthen regional fuel resiliency in the northeast. So 

let me ask you if you could please talk about efforts related to the 

setup and operation of the northeast reserve. Did you have to overcome any unforeseen challenges, and are there any issues that 

have yet to be resolved? 

Mr. SMITH. Thank you, Congressman, very much for that question. So, as you pointed out, the establishment of the Northeast 

Gasoline Reserve was an important step that we took after some 

of the disruptions that we noted in Superstorm Sandy. So, as a result of that, we created a reserve in the northeast that would have 

gasoline in place. That includes 700,000 barrels that are stored in 

the New York Harbor area, and that is in two separate facilities. 

We have 200,000 barrels that are in a terminal in Massachusetts, 

and then 100,000 barrels that are stored at terminals south of 

Portland, Maine. 

So those three different geographic locations make up the Northeast Petroleum Reserve. The funding that we used for purchasing 

the gasoline, we also used to procure storage capacity, and maintenance, and ongoing expenses for the reserve. So that the resources 

are in place. We have put in place all of the IT, and the procedural 

systems that we would need to have in place in order to actually 

move those barrels out into the market in the case of a disruption. 

We worked very closely with potential buyers of gasoline out of 

those reserves to ensure that we are, on an ongoing basis, exercising the capabilities to make sure that not only have we purchased this insurance policy, but we are ready to use it, and to deploy it in case of a future emergency. So that is the steps that we 

have taken to date. 

Mr. ENGEL. It is also my understanding that the DOE operates 

a network of pipelines as part of the Strategic Petroleum Reserve, 

including the Northeast Reserve, so I would like to know a bit more 

31 

about that. Do you have available information on how many miles 

of pipelines does DOE operate as part of the SPR? 

Mr. SMITH. I don’t have that number off the top of my head, Congressman, but I would be happy to take that question for—— 

Mr. ENGEL. And get back to me? How is that system managed? 

Can you help me understand a little more about—— 

Mr. SMITH. Al right. 

Mr. ENGEL [continuing]. Management of that system? 

Mr. SMITH. So the Strategic Petroleum Reserves—our Deputy Assistant Secretary, Mr. Bob Corbin, is based here in Washington, 

D.C. He works very closely with me. We have the management office down in the Gulf of Mexico that has a center in New Orleans 

that oversees those operations. And so, between that operational 

center in New Orleans, and our center here in Washington, D.C., 

we oversee all the activities of the Strategic Petroleum Reserve, including the Northeast Home Heating Oil Reserve, and the newly 

created Northeast Gasoline Reserve, is all managed by the SPR. 

Mr. ENGEL. Is the safety of the pipeline network subject to oversight by DOT’s Office of Pipeline Safety? 

Mr. SMITH. So one clarification I will make, because there is not 

an extensive pipeline network that is actually owned and maintained by the SPR. Again, I will be happy to give some details of 

that question for the record, to ensure that we are being clear on 

that. But we certainly are complying with all state and Federal 

regulations for all assets that we manage. 

Mr. ENGEL. But help me to understand who is responsible for 

regulating those pipes. 

Mr. SMITH. So if the strategic petroleum has a release that goes 

into an existing commercial pipeline network, then that pipeline 

would be operated and regulated by whatever the appropriate Federal and State statutes oversee that infrastructure. Just like if we 

put crude into a barge, and we sell it to someone who is going to 

take that water-borne to another location, then there would be a 

federal, state, and local regulations for those transportation assets, 

even if we don’t own them. 

Mr. ENGEL. OK. Thank you. Thank you, Mr. Chairman. 

Mr. WHITFIELD. At this time we will recognize the gentleman 

from Texas, Mr. Flores, for 5 minutes. 

Mr. FLORES. Thank you, Mr. Chairman. Mr. Smith, thank you for 

your testimony today. Going to the QER for a minute, the QER recommends that Congress authorize an additional $1 1⁄2 to $2 billion 

to increase the incremental distribution capacity of the SPR. That 

request hasn’t appeared in front of Congress. Can you tell me why? 

Mr. SMITH. Well, thanks for the question, Congressman. So in 

our 2016 budget request, you know, we did have some funds for 

maintenance issues within the Strategic Petroleum Reserve. It did 

not include these recommendations from the QER. And, indeed, as 

you note, the QER was just released, right? So, we look forward to 

working with Congress to refine further details on that, but the 

QER literally is hot off the presses as of last Tuesday. 

Mr. FLORES. OK. Thank you. And the QER also says that the 

DOE will analyze the need for additional or expanded regional 

product reserves, in particularly like the one you talked about in 

the northeast. These will be in the southeast and on the west coast. 

32 

Will the DOE formally request funding from Congress in advance 

in an annual budget submission? 

Mr. SMITH. Thank you, Congressman. So we are undergoing 

these studies now, in real time, so I will demur from making any 

specific predictions about when we would make a recommendation, 

or even what the review will state. So the whole purpose of going 

through this comprehensive review, looking at everything from subsurface issues, to market issues, to infrastructure, to need for regional reserves will help us flesh out what needs to happen. And, 

indeed, future efforts certainly would have funds appropriated, and 

we will be working with Congress, based on the results of the 

study. 

Mr. FLORES. OK. So we can assume that if the DOE study indicates that you should have these regional product reserves, then 

you will formally ask Congress for the appropriation? 

Mr. SMITH. So, Congressman, certainly, if we do determine that 

there is new work that needs to be done that requires appropriation that would require us to work with Congress, yes. 

Mr. FLORES. OK. Good. Will you provide to the Committee for the 

record the September 2011 DOE study that is entitled ‘‘Refined Petroleum Product Reserve, Assessment of Energy Security Needs, 

Cost and Benefits’’ that is referenced on Page 2–34 of the QER? 

Mr. SMITH. We can provide that. 

Mr. FLORES. OK. Thank you. Mr. Chairman, that is all I have. 

I yield back. 

Mr. WHITFIELD. Gentleman yields back. At this time I would recognize the gentleman from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and, again, good to see 

you again, Assistant Secretary Smith. First of all, I would like to 

talk to you about LNG permitting exporting, and thank you for 

coming last Congress to our natural gas caucus to talk with us. Of 

course, expansion of exporting of natural gas is important to our 

producers in our area, but also to our friends and allies around the 

world. But today we are talking about the Strategic Petroleum Reserve, which is also important. 

In March 2014 Department of Energy conducted a test sale from 

the SPR to demonstrate drawdown and distribution capacity. In 

November the DOE reported that pipeline capacity is limited, and 

drawdown of significant scope may post a challenge. The same 

issues were addressed in the quadrennial energy review, and the 

budget that was submitted was for $51 million for operations and 

flexibility, and the QER recommends 1.5 to two billion increase in 

distribution capacity. Obviously 51 million is relatively low, compared to the 2 billion, and I am going to see how we can get you 

some of those funds. Does the DOE anticipate using funds from additional test sales to fund requirements laid out in the QER? Do 

you have that ability? 

Mr. SMITH. Yes. Well, thank you for the question, Congressman. 

First of all, we don’t have plans for a future test sale. The last test 

sale we felt was very important in order to exercise the operational 

and procedural capabilities of the SPR, and so that is why we undertook that sale. We don’t have plans for a future sale. 

Mr. GREEN. OK. But does the Department have the ability, if you 

have a sale, to utilize that funding for your budgetary needs? 

33 

Mr. SMITH. There is—— 

Mr. GREEN. It may not be appropriated by the appropriations. 

Mr. SMITH. So under statute we have got a fairly limited number 

of things that we could use those funds for. We could use them to 

buy other petroleum products. We could use it for storage or transit 

of petroleum. But under statute, there are some limits to—— 

Mr. GREEN. OK. 

Mr. SMITH [continuing]. What we could use those funds for. But, 

again, to reiterate, the test sale was driven by the need to exercise 

the operational capabilities of the—— 

Mr. GREEN. Well, and I am glad you do it, because what you 

found out, that there were some issues that needed to be dealt 

with. During an emergency, what actions or authorities are available to alleviate those issues you found out? 

Mr. SMITH. So some of the issues that we found out were drivers 

for the 2016 Congressional justification for the budget that the 

President issued for the 2016 budget, including the additional metering skid at that Big Hill. So in terms of major kind of infrastructure issues, I mean, that was probably one of the main things that 

we were already kind of moving to address, but, obviously, we need 

funding to do that. 

Mr. GREEN. OK. Does the DOE support additional pipeline construction and tank storage to deal with the constraints that you 

found? 

Mr. SMITH. Congressman, I think that the specific answer to 

what we would recommend to do next, with regards to infrastructure, will be driven by the strategic review. We do know that, as 

we noted, we have got aging infrastructure, and so the life extension program that we have thought through would include some 

surface infrastructure thing, including tankage, including pipelines 

to move things around the SPR, including pumps and compressors, 

brine drive caverns, brine disposal wells. So those would all be 

things that we would have to put in place as part of the life extension. 

So we have got a rough outline of what we think that would look 

like, and you have seen some rough numbers in the QER. I think 

there was an estimate of between 700 and $900 million for that 

piece of work. The details of what that would look like are—that 

is what we are going to be driving towards in this review that we 

are undertaking. 

Mr. GREEN. OK. I know a significant part of the SPR is actually 

just east of Houston, between Houston and Beaumont. 

Mr. SMITH. Indeed. 

Mr. GREEN. Was that where the test was done, or was it other 

locations that we have the reserve? 

Mr. SMITH. The test sale was out of Big Hill, and brine Mound 

was where the crude came from, for that sale. 

Mr. GREEN. OK. Because I always joke that if we have infrastructure problems in Texas with oil and gas, then the rest of the 

country really must be in bad shape, because we have a lot, and 

we still need to build more. Mr. Chairman, I am out of time, and 

I appreciate the time. Thank you. 

Mr. WHITFIELD. Thank you. I am sorry to say, Mr. Smith, there 

are no more questions for you today. But we do appreciate your 

34 

being with us, and talking about this important issue. And I just 

wanted to also bring to your attention that Mr. Rush and I, and 

Mr. Pallone, and Mr. Upton had sent a letter to Secretary Moniz 

sometime in March, just asking about four or five questions about 

the SPR review process that you are undertaking now. And if you 

see him in the hall, or at the coffee table, would you ask him if he 

could give us a reply? We would appreciate it. 

Mr. SMITH. I will do that, Mr. Chairman. 

Mr. WHITFIELD. Thank you very much, and thanks again for 

being with us. We look forward to working with you on this issue. 

And at this time I would like to call up the second panel of witnesses. And we will have you all come up, and then what I am 

going to do is just introduce each one of you before your 5 minute 

opening statement. So you all just have a seat, and then we will 

get started. 

In the second part of this hearing, we are going to be focused on 

the energy efficiency aspect, and I want to thank each and every 

one of you for joining us this morning, and thank you also for your 

patience. And, as I said, I am going to introduce you individually, 

and then you will make your opening statement. 

So our first witness this morning is Mr. Christopher Peel, who 

is the corporate Senior Vice President and Chief Operating Officer 

for Rheem Manufacturing Company, on behalf of the Air-Conditioning, Heating, and Refrigeration Institute. So, Mr. Peel, thank 

you. You are recognized for 5 minutes. Just be sure to turn your 

microphone on, and get it up close enough, because somehow it is 

difficult to hear in this room. So, thank you. 

STATEMENTS OF CHRISTOPHER PEEL, CORPORATE SENIOR 

VICE PRESIDENT AND CHIEF OPERATING OFFICER, RHEEM 

MANUFACTURING COMPANY (ON BEHALF OF THE AIR-CONDITIONING, HEATING, AND REFRIGERATION INSTITUTE); 

KATERI CALLAHAN, PRESIDENT, ALLIANCE TO SAVE ENERGY; JOHN W. SOMERHALDER II, CHAIRMAN, PRESIDENT, 

AND CEO, AGL RESOURCES (ON BEHALF OF THE AMERICAN 

GAS ASSOCIATION; FRANK THOMPSON, PRESIDENT, SWEETWATER BUILDERS, INC. (ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS); ELIZABETH NOLL, ENERGY EFFICIENCY ADVOCATE, NATURAL RESOURCES DEFENSE COUNCIL; RONA NEWMARK, VICE PRESIDENT, INTELLIGENT EFFICIENCY STRATEGY, EMC CORP. (ON BEHALF OF 

THE INFORMATION TECHNOLOGY INDUSTRY COUNCIL); AND 

MARK WAGNER, VICE PRESIDENT, U.S. GOVERNMENT RELATIONS, JOHNSON CONTROLS, INC. (ON BEHALF OF THE FEDERAL PERFORMANCE CONTRACTING COALITION) 

STATEMENT OF CHRISTOPHER PEEL 

Mr. PEEL. Thank you, Chairman. Chairman Whitfield, Ranking 

Member Rush, and members of this subcommittee, I appreciate the 

opportunity to be here with you to talk about some energy policy 

issues that are important to manufacturers and our customers. I 

would like to begin by thanking you for your work on the recent 

passage of S–535, which included language providing regulatory relief for grid enabled water heaters that are positive for the environVerDate Nov 24 2008 13:42 Oct 15, 2015 Jkt 037690 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-36 CHRIS
35 

ment and our customers in rural America. I would also like to 

thank you for inviting me to testify this morning. 

My name is Chris Peel. I am the Chief Operating Officer for 

Rheem Manufacturing Company. Rheem was founded in the 1920s, 

is headquartered in Atlanta, and is a global industry leader, with 

seven U.S. based factories and distribution centers. Rheem designs 

and manufactures furnaces, air conditioners, water heaters, and refrigeration equipment. We have a proud history of developing innovative high efficiency products which reduce energy consumption, 

and help customers save on their utility costs. I am here on behalf 

of AHRI, a trade association that represents 315 manufacturers of 

HVAC, refrigeration, and water heating equipment. AHRI’s members employ over 100,000 people in the U.S. 

I am here today because we care about serving our customers, 

enhancing safety and reliability, supporting our employees, and improving the environment. With these priorities in mind, I ask the 

subcommittee to address three issues that are vitally important, 

transparency in stakeholder engagement in the rulemaking process, the expected impact of the DOE’s proposed efficiency standards 

for residential furnaces, and the value provided by voluntary independent verification programs. 

The DOE is planning to issue 23 new regulations affecting our 

industry between now and 2018. This ambitious schedule has 

caused a reduction in the constructive interaction between stakeholders and DOE, resulting in oversights involving economic assumptions and technical issues. Rather than working together to 

achieve what are very common objectives, we find ourselves in a 

situation where we need to ask for congressional intervention. 

In my view, new efficiency standards achieve the greatest public 

benefit when industry, interested NGOs, and government officials 

work together to create consensus drive standards. We also believe 

this is the goal envisioned by DOE’s own process rule, which involves early input from stakeholders as a means to achieve successful regulations through the appropriate analysis and utilization of 

real world inputs. The outcomes will be better balanced, and 

achieve the intended benefits for the economy and the environment. 

A recently proposed residential gas furnace standard is an example of a rule created with insufficient input from industry. DOE is 

poised to finalize a new energy efficiency standard for residential 

furnaces that would raise the national minimum efficiency from 80 

to 92 percent. To achieve the higher efficiencies of a 92 percent furnace, both the product and the installation become significantly 

more complex and costly for the consumer. 

DOE estimates that replacing an existing 80 percent furnace 

with a 92 percent furnace will cost the majority of consumers an 

average of $660 more. This could rise to $2,200, depending on the 

installation. Out of the more than 20 million 80 percent furnaces 

currently installed, the majority are in the South, where the customer payback will seldom be realized. Therefore, we recommend 

consideration of legislative efforts that would give time and space 

to finalize this rule until all stakeholders are able to work together 

to ensure the proposed regulations will achieve our efficiency objectives without needlessly penalizing families and small businesses. 

36 

I also wish to thank Representatives Latta, Cooper, and 

Blackburn, who have introduced H.R. 1785, the Volunteer 

Verification Program Act, which will assure consumers that the 

HVAC and water heating products they installed in their homes 

truly meet the applicable Federal efficiency levels, while conserving 

taxpayer resources, and providing certainty for manufacturers. 

This is the proverbial win-win-win scenario, and I thank you and 

the staff for including this measure in the draft bill. 

Under H.R. 1785, DOE and stakeholders would work collaboratively on negotiated rulemaking to establish criteria under which 

the Federal Government would certify independent programs and 

rely on such VIVPs to verify efficiency ratings. DOE would, of 

course, retain its enforcement authority to periodically inspect and 

test products to ensure compliance. As DOE budgets and priorities 

can fluctuate year to year, we believe that industry and our customers are best served by VIVPs. Our industry spends millions of 

dollars, and thousands of employee hours, every year to certify and 

verify that our efficiency ratings are accurate. VIVPs, such as 

AHRI’s program, has, for 50 years, successfully held manufacturers 

accountable to the high standards that our customers deserve and 

expect. 

Finally, Chairman Whitfield, Ranking Member Rush, and members of the Subcommittee, I appreciate the chance to appear this 

morning, and I look forward to answering any questions you might 

have, and to working together with you and your staff on these priorities. 

[The prepared statement of Mr. Peel follows:] 

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Mr. WHITFIELD. Thank you, Mr. Peel. And our next witness is 

Ms. Kateri Callahan, who is the President of the Alliance to Save 

Energy, and you are recognized for 5 minutes. 

STATEMENT OF KATERI CALLAHAN 

Ms. CALLAHAN. Thank you, Mr. Chairman, and Ranking Member, and members of the subcommittee. I really appreciate the opportunity to testify today. The Alliance to Save Energy is a bipartisan, non-profit coalition of about 140 businesses and organizations that span the entire economy. Our sole mission is to advance 

energy efficiency, and we do this to drive economic growth, to preserve the environment, and to enhance our national security. We 

have a proud 38 year history of bipartisan leadership from House 

and Senate lawmakers who serve as honorary members of our 

board, and I am delighted that, of the 16 congressional leaders, we 

have five who are members of this committee, Congressman 

McKinley, Congressman Welch, Congressman Tonko, Congressman 

Burgess, and Congressman Kinzinger. These forward-thinking 

leaders demonstrate clearly that energy efficiency is truly the 

sweet spot in our our national debate over energy policy. 

Since the founding of the alliance, our country has made huge 

strides in driving energy efficiency into our economy, and a lot of 

this progress can be traced directly to the work of Congress over 

the past 4 decades. Since Congress began lawmaking on efficiency, 

we have actually doubled our country’s energy productivity. That 

means that we are getting twice as much gross domestic product 

from each unit of energy that we consume, as we did in the 1970s. 

And this translates into huge savings. ACEEE is announcing today 

that Americans, just last year, will save $800 billion on their collective energy bill. The policies now on the books are going to continue 

to deliver gains. The EEIA estimates and forecasts that our energy 

productivity will increase 50 percent or more just on a business as 

usual case. But we believe that we can, and must, do better if we 

are going to remain globally competitive. And since we still waste 

about half of the energy that we consume, there is ample room for 

improvement. 

The Alliance has a goal to again double our energy productivity 

in this nation by 2030, and if we do this, we see that American 

families could see their utility bills fall by over $1,000 a year, and 

we could create 1.3 million new jobs. But we can only deliver these 

benefits to Americans if Congress provides a policy infrastructure 

to support aggressive energy efficiency implementation. 

We are very encouraged by action in the 114th Congress today. 

We were thrilled that the first energy bill that went to the President, and will be signed today, is S–535, and we thank the Chairman and the members of the Committee who worked so hard to 

move this bipartisan bill through the full House. We view S–535 

as a strong indicator that the comprehensive energy legislation you 

are creating will include meaningful efficiency policies. And the 

draft title already does contain some of these policies, but, like the 

Ranking Member, we are deeply concerned that some of the provisions will actually impede or roll back progress that we are making. 

46 

So first let me run through quickly those provisions that we support. We support all the provisions in Chapter 1 which deal with 

improving Federal energy efficiency, with the exception of the repeal of the fossil fuel consumption requirements. We could support 

this repeal if it were coupled with strong efficiency goals, as it is 

in other legislation pending before the Congress. We also support 

the provisions in Chapter 2 that safeguard the integrity of the Energy Star program, and require energy guide labels to include information on the smart grid capability of products. We support all 

the provisions included in Chapter 4, as these enable energy and 

water efficiency measures in Federal buildings. And finally, we 

support Chapter 5, which enable schools to make efficiency upgrades. 

As much as we support these provisions, we have very, very 

strong objections to the provisions included in Chapter 3. Building 

energy codes are a critical policy tool for advancing energy efficiency in the largest consuming sector of our economy, and they 

have been very effective. As a result of a 38 percent improvement 

in the codes that we have seen in recent years, we have seen a reduction of $44 billion annually in the energy bills of American families. 

The Department of Energy has played a key and critical role in 

delivering improvements in the building energy codes, and we believe that it is imperative that the Department continue to engage 

in every step of the code making process, from development, to 

adoption, to implementation. The Alliance, therefore, urges the 

committee to strike the current provisions in Chapter 3 and to replace them with the building energy code provisions that are contained in the newly reintroduced McKinley-Welch Energy Savings 

and Competitiveness Act. These provisions actually strengthen 

model building codes to make new homes and commercial buildings 

more energy efficient, and they also work with the states and the 

private sector to improve the transparency of the code writing process. 

The McKinley-Welch bill was carefully developed to address concerns of both advocates, builders, and code making bodies. In addition, their bill deals with the up-front cost of efficiency by ensuring 

that the upgrades are valued in the appraisal and the mortgage 

underwriting process. The provision, known as the Save Act, enjoys 

the support not only of advocates like me, but also of the National 

Association of Realtors, the Chamber of Commerce, and many, 

many others. So as the Committee continues its work, we urge 

members to review the many bipartisan energy efficiency bills that 

are emerging, or being reintroduced, and in particular we ask the 

Committee to consider not just the building energy provisions in 

the McKinley-Welch bill, but all of the provisions in that bill which 

have broad-based bipartisan support. 

So I commend the Chair and the committee for seeking to include energy efficiency as a pillar of national energy policy, and we 

are hopeful that, as the committee continues its work, the energy 

efficiency title will be made much more robust so we can achieve 

that goal, and we can offer, as the Alliance to Save Energy, our full 

throated support. Thank you. 

[The prepared statement of Ms. Callahan follows:] 

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Mr. WHITFIELD. Well, thank you, Ms. Callahan. I was wondering 

why Congressman McKinley was asking us to pay particular attention to your testimony, but when you refer to him as a forwardthinking leader, I mean, I understand. 

Our next witness is Mr. John Somerhalder, who is the Chairman 

and President and CEO of AGL Resources, and he is testifying on 

behalf of the American Gas Association. So you are recognized for 

5 minutes. 

STATEMENT OF JOHN W. SOMERHALDER II 

Mr. SOMERHALDER. Thank you. Good morning, Chairman 

Whitfield, Ranking Member Rush, and members of the committee. 

Again, I am John Somerhalder, both the past Chairman of AGA, 

and Chairman, President, and CEO of AGL Resources. I am proud 

that my company serves many of the states represented on this 

Committee, including New Jersey, Illinois, Virginia, Texas, Florida, 

California, and Maryland. We support the Committee’s discussion 

draft because it will remove inappropriate barriers to the use of 

clean, energy efficient, cost-effective natural gas. 

Gas utilities have shared your focus around greater energy efficiency for a long time. Sixty-eight million residential gas consumers 

today use the same amount of gas that 38 million customers used 

in 1970. Every year gas utilities spend about $1.5 billion on energy 

efficiency, and help customers save 136 trillion BTUs of energy, 

and reduce about 7.1 million metric tons of carbon dioxide. We are 

proud of what we do as a company as well. Since 2011, our AGL 

utilities have invested $188 million in energy efficiency programs. 

We have helped 45,000 customers purchase high efficiency furnaces. We have helped save enough energy to—and natural gas to 

heat 80,000 homes for a year, and we have delivered the highest 

1 year energy savings by a gas only utility in the U.S. history just 

last year. 

We support your efforts to find a common sense standard for residential furnaces. Under DOE’s own analysis, only a third of homeowners will be better off under its proposed rule, and about a third 

of low income customers will be worse off. We think DOE’s assumptions are also too rosy. They don’t fully reflect the cost to consumers. Our data shows that an average customer would be forced 

to pay an additional $350 in the unit cost for the furnace, and an 

additional $1,500 up to $2,200 for the installation of that unit. The 

Gas Technology Institute predicts that the proposed rule would impose an additional $44.9 million in energy costs, and produce an 

additional 348,000 tons of CO2 per year. We cannot support an efficiency standard that imposes higher costs, requires more energy, 

and provides more emissions. 

Section 4124 of the discussion draft would require DOE to stop 

its rulemaking and start a negotiated rulemaking involving a 

broader group of stakeholders. As discussed—have discussions between AGA and other stakeholders have shown over the past several months, there are alternatives that would meet our shared 

goals for energy savings and consumer benefits. The negotiated 

rulemaking process included in the discussion draft will help us 

reach that consensus. 

58 

As you know, Section 4115 would repeal Section 430 of the Energy Independence and Security Act of 2007, a provision that bans 

all fossil fuel generated energy use in new and renovated Federal 

buildings by the year 2030. The fossil fuel ban was passed when 

the government thought U.S. supplies were dwindling. It had good 

intentions, but DOE’s own analysis shows the cost to taxpayers 

would jump from $30 million today to over $500 million in 2019, 

and over $1.1 billion in 2030, almost a 4,000 percent increase from 

today’s cost. It simply is not practical. 

We also support a provision sponsored by Representatives 

Blackburn and Schrader, H.R. 1273. Model building energy codes 

are developed by private organizations. States and local governments choose to either adopt the new standards, or to maintain 

their current standards. DOE has too often taken on an inappropriate advocacy role in co-development. The provisions would introduce greater transparency in the Department of Energy’s technical 

support of co-development, specifically prohibiting DOE funding or 

personnel from involvement in any advocacy related to code adoption. 

Finally, Section 4142 clarifies that the term of a utility energy 

service contract can extend beyond 10 years, but not exceed 25 

years, correcting a Department of Defense interpretation. A 10 year 

term severely limits a utility’s ability to help the DOD reach its energy security, energy efficiency, and renewable energy goals. At 

AGL Resources, we understand the importance of these types of 

projects. Since 2003 we have worked on 10 projects, totaling roughly $31 million, in Georgia, Virginia, and Florida to provide these 

vital energy efficiency programs. 

Mr. Chairman, thank you for the opportunity to testify today. I 

look forward to questions from the Committee. 

[The prepared statement of Mr. Somerhalder follows:] 

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Mr. WHITFIELD. Thank you very much. And our next witness is 

Mr. Frank Thompson, who is President of Sweetwater Builders and 

he is testifying on behalf of the National Association of Home 

Builders. And you are recognized for 5 minutes. 

STATEMENT OF FRANK THOMPSON 

Mr. THOMPSON. Chairman Whitfield, Ranking Member Rush, 

members of the committee, I am pleased to appear before you today 

on behalf of the 140,000 members of the National Association of 

Home builders, and to testify in support of the Strategic Petroleum 

Reserve discussion draft, and Title 4 on energy efficiency. My name 

is Frank Thompson. I am a home builder from Western Pennsylvania. 

As a longtime leader in the drive to make new and existing 

homes more energy efficient, while prioritizing housing affordability, NAHB, is uniquely positioned to analyze the impact of this 

legislation on home building, remodeling, and rental housing industries. NAHB supports this discussion draft. Of importance to 

NAHB, this draft includes provisions from H.R. 1273, introduced by 

Representatives Blackburn and Schrader, that use model building 

energy codes to encourage meaningful energy savings for residential construction that are achievable and cost-effective. 

As a single family home builder in Western Pennsylvania, I deal 

with energy codes, the baseline energy efficiency requirements for 

buildings every day, and I understand how different energy efficient features impact the performance of a home. I also participate 

in the development of these codes because they so intimately affect 

the way I build. The earlier versions of these codes focused on consumers, helping them reduce their utility bills with affordable improvements to their home. Over the last few years, however, I have 

seen negative trends. 

First, while it does not write or publish the codes, the Department of Energy participates in the development of the codes by providing technical assistance, needed building science research, energy modeling, and analysis that only DOE can provide. But NAHB 

has concerns that technical assistance has been broadly interpreted 

to allow representatives from DOE to advocate for or against certain technologies, picking winners and losers, and seeking aggressive and costly requirements. 

Another unfortunate trend in energy codes is the failure to consider the true economic costs when seeking further energy reductions. We know how valuable the energy savings are to the consumer, but even with these savings there is a significant upfront 

investment. The 2012 version of the residential code had such significant cost increases that it would take the average family 13.3 

years to recoup those costs through utility savings. Some parts of 

the country, including the entire State of Kentucky, and parts of 

Illinois, saw payback periods in excess of 16 or 17 years. Meeting 

an energy code is a requirement for every single home, including 

low cost housing—or, excuse me, low income housing. Increasing 

housing costs for all homebuyers will have the unintended consequence of reducing housing affordability. For every $1,000 increase in the price of a home, 246,000 households will be priced out 

of a mortgage. 

66 

This proposed legislation will drastically improve the manner by 

which model building energy codes are developed by establishing 

guidelines for DOE that increase transparency, and ensure an open 

and fair process. This legislation will also require any code supported by DOE to be cost effective, allowing homeowners to recoup 

any investment in 10 years or less. NAHB strongly supports the 

discussion draft, and urges the Committee to swiftly pass this as 

legislation. 

NAHB would also like to weigh in on Section 4124 of this draft, 

which addresses a flawed DOE rule on non-weatherized gas furnaces included in any final legislation. This provision would require DOE to convene a representative advisory group of interested 

stakeholders to help analyze the impacts of the proposed rule, and 

determine whether it is technically feasible, and economically justified, and if not, participate in a negotiated rulemaking. 

I thank you for this opportunity, and welcome your comments. 

[The prepared statement of Mr. Thompson follows:] 

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Mr. WHITFIELD. Thank you, Mr. Thompson. And at this time our 

next witness is Elizabeth Noll, who is an energy efficiency advocate 

for the Natural Resources Defense Council, and you are recognized 

for 5 minutes. 

STATEMENT OF ELIZABETH NOLL 

Ms. NOLL. Thank you, Mr. Chairman. Mr. Chairman, members 

of the subcommittee, thank you for the opportunity to participate 

in today’s hearing. My name is Elizabeth Noll. I am an energy efficiency advocate at the Natural Resources Defense Council, here to 

share our views on national policies and programs that lead to increased investments in energy efficiency. 

What would you say if I told you today we can save Americans 

money, promote job growth, cut pollution, with a solution that is 

affordable, easy to implement, proven effective, and what your constituents want? That solution is energy efficiency. And states 

across the country are seeing job growth, broad public support for 

energy efficiency. Take Illinois, 2⁄3 of clean energy jobs—clean energy workers are employed in energy efficiency, and a recent poll 

showed 70 percent of likely voters strongly support increased energy efficiency to meet the state’s energy needs. 

In state after state, support for using efficiency to meet future 

energy needs is the same or higher. Pennsylvania, 97 percent, Virginia, 95 percent, Ohio, 94 percent, and Michigan, 92 percent. 

Meanwhile, Federal programs, like the Department of Energy’s Appliance Efficiency Standards Program, first authorized by Congress 

in 1987, will save American 1.8 trillion on their utility bills 

through 2030, and just last year those standards avoided more pollution as comes from nearly 500 million cars. 

Let me take a moment now to thank the Committee for their 

leadership in helping pass the Energy Efficiency Improvement Act 

of 2015 just last week. It shows once again that efficiency has bipartisan support. And let us not forget that Ronal Reagan signed 

the first efficiency standard legislation almost 30 years ago. The 

bill now on the President’s desk was a good start, but we must go 

further. Every American home, building, and appliance that we 

make more efficient saves money, cuts pollution, and moves our nation closer to a more sustainable and prosperous future. 

Some of the provisions before you today will bring energy savings 

to your constituents, and others will increase the Federal Government’s leadership, leading to innovation in the private sector as 

well. However, I would like to highlight three troubling provisions 

that we would strongly oppose, which are further detailed in my 

written testimony. 

First, Section 4124 would block the Department of Energy from 

finalizing a much needed update to the efficiency standards for 

non-weatherized gas furnaces. If Congress blocks the standard, it 

will only hurt your constituents, especially moderate and low income families struggling to pay their energy bills. As proposed in 

March, these standards would save the average consumer $600 

over the life of the furnace. Renters, who are often low income customers, especially benefit from minimum standards. Without an 

improved standard, property owners are likely to continue to buy 

cheaper, less efficient models, which means higher bills for those 

81 

tenants. Congress needs to strengthen existing programs and policies, not delay or weaken them. 

Next, Section 4115 is counterproductive to cutting pollution in 

Federal buildings. Phasing out fossil fuels has enormous potential 

to reduce pollution, and that is a place where the Federal Government can show leadership, and leverage the enormous benefit of efficiency to reduce the $6 billion it spends on its own buildings. And 

finally, Section 4131 would hamstring the process for adopting 

model building energy codes that deliver valuable savings for 

homeowners and renters in your districts, and across the nation. 

Smart Federal policies are essential to achieving the energy efficiency progress that consumers want, and America needs. And we 

know manufacturers will continue to innovate and rise to meet 

these efficiency standards, while delivering the same or better performance and options, as they have done. 

In closing, Congress should reject any proposal to delay, weaken, 

or repeal the clean energy programs that have proven effective, and 

instead continue passing meaningful energy policies that Americans want. Thank you. 

[The prepared statement of Ms. Noll follows:] 

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Mr. WHITFIELD. Thank you. And our next witness is Ms. Rona 

Newmark, who is Vice President, Intelligent Efficiency Strategy at 

EMC Corporation, and she is testifying on behalf of the Information Technology Industry Council. And you are recognized for 5 

minutes, Ms. Newmark. 

STATEMENT OF RONA NEWMARK 

Ms. NEWMARK. Chairman Whitfield, Ranking Member Rush, and 

members of the committee, thank you for inviting the Information 

Technology Industry Council, also known as ITI, to testify today on 

the important issue of energy efficiency legislation, and specifically 

the Energy Efficient Government Technology Act. I am EMC Corporation’s Vice President of Intelligent Energy Efficiency Strategy. 

EMC is a leading IT company providing products and services to 

enable customers to move to cloud computing, and to gain value 

through analysis of big data, all within trusted computing environments. The company is headquartered in Massachusetts, and supports a broad range of customers. 

At EMC I am charged with reviewing EMC’s products and strategies in the areas of energy efficiency and energy efficiency standards. I also help lead efforts within the company, and the industry, 

to view efficiency at a system level to provide the best net energy 

savings to accomplish particular results. 

As you know, ITI is the global voice of the technology sector. The 

60 companies in ITI are leaders and innovators in information and 

communications technology, including hardware, software, and 

services. These companies, including my own, are committed to innovation, to developing the energy efficient solutions demanded by 

our customers, and to helping drive sustainable economic growth, 

and energy independence across our nation’s economy. ITI has had 

a fruitful history of working with the Committee on energy efficiency and productivity. Enactment of the bipartisan Energy Efficient Government Technology Act, Sections 4111 and 4112 of the 

discussion draft would be another important milestone in this regard. EGTA is not a regulatory approach. Rather, ITI believes the 

Federal Government can be a useful partner and leader in 

leveraging information and communications technology for increased energy efficiency and productivity, giving taxpayers improved ROI. 

Data centers and the Internet of things will be essential to future 

U.S. sustainable growth. We are only beginning to learn what opportunities lie ahead for smarter buildings, smarter manufacturing, 

and smarter transportation systems, not to mention the smarter fill 

in the blank we have yet to invent. EGTA recognizes this, and emphasizes the right role for the Federal Government in encouraging 

further progress and innovation. ITI thanks Representatives Eshoo, 

Kinzinger, Welch, McKinley, and Tonko for introducing EGTA 

again this year. We also thank the Committee for EGTA’s inclusion 

within the discussion draft as Sections 4111 and 4112, and we 

strongly urge EGTA’s adoption this year. 

Thank you. I look forward to answering your questions. 

[The prepared statement of Ms. Newmark follows:] 

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Mr. WHITFIELD. Ms. Newmark, thank you. And our next witness 

is Mr. Mark Wagner, who is Vice President and U.S. Government 

Relations for Johnson Controls, and he is going to be testifying on 

behalf of the Federal Performance Contracting Coalition. And you 

are recognized for 5 minutes. 

STATEMENT OF MARK WAGNER 

Mr. WAGNER. Thank you, Mr. Chairman, Mr. Rush, and members of the Committee. I am Mark Wagner of Johnson Controls, 

and representing 10 energy service companies that form the Federal Performance Contracting Coalition. We work to help the Federal Government reduce energy consumption through energy saving performance contracts, or ESPCs. I would like to briefly discuss 

the benefits of ESPC, and outline our coalition’s support for pending legislation that would improve the program. 

ESPCs are a tremendous tool for the Federal Government because agencies can get energy efficient equipment, such as new 

lighting, building controls, HVAC equipment, chillers, boilers, renewable energy assets, at no upfront cost to the government. The 

energy service companies leverage private sector capital to make 

the investment. We design and install the equipment, and put in 

place a plan to measure and verify the savings. 

Three important parts of this deal. As you can see from the slide, 

first the agency gets a facility upgrade, with new building equipment, and they lower their energy consumption. Second, the agency 

pays off the investment with the savings on its utility bill, but 

never pays more than it was already paying for its utilities. Thirdly, then it realizes all the savings after the investment is paid off. 

Most importantly, these savings are guaranteed by the energy service company. 

Let me give you an example of an ESPC project that Johnson 

Controls is doing at Fort Bliss in Texas. We have installed building 

controls at 120 buildings, put in energy efficient lighting, electric 

motors, chillers, building insulation, and a 4.7 megawatt photovoltaic array with 5,500 solar panels. It is a $100 million investment of private sector capital which will save the installation $150 

million. We are also working with the base on technology for a 

micro-grid to improve energy security in the event of an adverse occurrence on the grid. This is just one example of the many ESPCs 

that provide multiple benefits to the Federal Government, and to 

taxpayers. ESPCs are a well-established program. According to the 

Department of Energy, approximately 600 performance contracts, 

worth $5.3 billion of investment, have been awarded to 25 agencies 

in 49 states, with a net savings of $3 billion to the Federal Government. 

Let me now talk about several legislative provisions designed to 

improve the ESPC program. We have been very supportive of the 

energy savings through Public-Private Partnership Act of 2015 that 

was introduced by Representatives Kinzinger and Welch, thank 

you very much. This legislation will ensure that the Federal agencies are utilizing, to the fullest extent possible, all cost effective 

measures for energy conservation measures. It streamlines the 

ESPC statute, providing consistency and clarification, and it proVerDate Nov 24 2008 13:42 Oct 15, 2015 Jkt 037690 PO 00000 Frm 00113 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-36 CHRIS
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motes transparency and accountability across the government. This 

is now Section 4141 of your bill. 

Specifically, it would require reporting on the progress of ESPCs. 

It would encourage agencies to act on their required audits. It 

would clarify that agencies cannot arbitrarily limit the terms and 

use of energy related operation and maintenance savings. It would 

make the definition of Federal buildings consistent with provisions 

in the law, and it would clarify other important provisions for 

ESPC, such as the sale, transfer of energy incentives, rebates, or 

credits, as well as the type of projects for which ESPC can be used. 

These are all important details to update and clarify the existing 

statute, which will make ESPCs an even more powerful tool for the 

Federal Government. 

In addition, we support clarifying the use of ESPC for efficiency 

gains in data centers, which are extremely energy intensive. We 

are supportive of the repeal of the Federal building fossil fuel reduction, as long as it is packaged together with extended energy efficiency goals for the government, which currently expire at the end 

of this year. We are supportive of long term utility energy service 

contracts, as long as they include measurement and verification of 

energy savings, as well as guarantee or assurance of savings. 

Other important provisions that we hope the Committee will consider, in—Section 432, changing may to shall showing—would ensure that the government would act on cost-effective savings, extending energy efficiency goals for the Federal Government, which 

expire at the end of this year, as I mentioned, ensure that agencies 

set ESPC goals on an annual basis, and report on their progress, 

and add alternatively fueled vehicles in their infrastructures measures allowed under ESPCs. 

Finally, many of you are aware that the Congressional Budget 

Office scores any attempt to update the ESPC statute. Members of 

this—members of the Energy and Commerce Committee have tried 

to resolve the situation, and we are appreciative of that. The Senate budget contains a fix to the scoring problem for the Senate— 

in Senate legislation. We encourage the House to continue to pursue annualized scoring for ESPC to fix the CBO scoring problem. 

Thank you for your support of ESPC, and the opportunity to testify today. 

[The prepared statement of Mr. Wagner follows:] 

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Mr. WHITFIELD. Thank you, Mr. Wagner. Thank all of you for 

your testimony, we appreciate it very much. And I will recognize 

myself for 5 minutes of questions. 

As you know, we have this draft legislation, and we hear a lot 

in Congress today around the country about lack of bipartisanship. 

In this bill, there are 14 titles in the energy title of this bill—or 

14 sections, and on 12 of those sections we do have Democratic support. So the three areas that there is not agreement on relates to 

the furnaces, relates to the fossil fuel, and relates to the building 

codes. Now, if you have bipartisanship for 12 out of 14 titles, that 

is pretty good, I would say. So I want to address those three areas 

that there is some disagreement on, and I want to tell you why we 

put those in there. 

I think Mr. Thompson, Mr. Somerhalder, and Mr. Peel all 

touched on it, but first we will focus a little bit on Mr. Thompson’s 

remarks. DOE, obviously, has been a leader in recommending and 

promoting efficiency, and originally they were really good ad providing technical assistance. But many people around the country, 

I don’t care where you live, or what part of the country you live 

in, are saying they were becoming more of an advocate. They are 

getting closer to dictating and saying what will and will not be 

done. 

And one example of that was the—recently they came out with 

the standards on the hot water heaters that were being used in demand response programs by rural electric cooperatives around the 

country. And the cost would double under those standards, so Congress came together and delayed the implementation until some 

further refinements could take place. That passed the House, 

passed the Senate, sent to the President. Now we are hearing the 

same thing about furnaces. And we all know that efficiency—we all 

know this, that, you can promote good jobs because you promote industries to manufacture new products that are better, you save energy costs, you help improve the environment. 

But if you also are significantly increasing the upfront cost, the 

furnaces—I hear you are talking about $600, but then installing it 

is even more. So, we are just trying to buy a little balance here. 

I don’t think DOE, as much as they have expertise, they don’t have 

all of the answers, and so that is why we are having these hearings. And manufacturers—it really creates—and you, Mr. Peel, in 

your testimony you were asking—you were saying we need congressional intervention here. And I think you specifically talked about 

23 new regulations coming by EPA in appliance sector. Would you 

elaborate on that a little bit, about what it does mean to you and 

your employees? 

Mr. PEEL. Well, first of all, we have had some positive experiences along the way with DOE when we go through a process that 

involves stakeholder input along the way, and we have got recent 

examples of that as well. We also appreciate that the DOE is under 

pretty intense pressure to complete a bunch of regulations in a 

compressed timeframe. The unfortunate consequence for manufacturers is we have to react to those. One makes the rules, the other 

has to implement the rules. 

So the important thing for us is to be at the table, and make sure 

that that information, if there are challenges, for example, on gas 

119 

furnaces, that those get brought to bear in the discussions, and 

that we end up with what is the best overall solution—— 

Mr. WHITFIELD. Right. 

Mr. PEEL [continuing]. For the industry, for consumers, and they 

make sense economically. 

Mr. WHITFIELD. And you think that this draft, with the advisory 

council, basically does provide that additional protection—— 

Mr. PEEL. I do. 

Mr. SMITH [continuing]. And input? Which should benefit everyone in America that certainly has to buy an appliance. 

Mr. Thompson, the building codes, would you elaborate just a little bit on why this building code issue is so important? 

Mr. THOMPSON. I think there are several important factors, and 

it starts with creating model building codes that are affordable and 

adoptable by states. And we are seeing continued growing resistance by states to adopt building codes. If we look at a map, and 

I think that was included in my written testimony there, we see 

about 1⁄3 of the states that have adopted the 2012 or 2015 IECC, 

about 1⁄3 on 2006 and earlier, or they don’t have a state energy 

code. 

Much of the discussion is about the cost increases that come 

along with adopting those codes, and so we do need to strike a balance that represents the significant impact that these codes have 

on housing affordability, the 10 year requirement that would be included in the bill, with also the 3, 5, and 7 year analysis would go 

a long way to providing transparency in the process as to what the 

real simple payback cost is going to be to people. Get states to have 

codes presented before them that they can adopt, and then we can 

also talk about the compliance component, which DOE is in the 

midst of a pilot program currently that will start to help us better 

understand just what true rates of compliance we have, and that 

perhaps there is a significant amount of energy to be saved by increasing those compliance rates, and focus on that. 

Mr. WHITFIELD. And you all do support the building code section 

that is in this draft? 

Mr. THOMPSON. Absolutely. 

Mr. WHITFIELD. OK. And I know my time is expired, but one 

other thing I just want to mention. We have many members of 

Congress that are really focused on energy efficiency. Peter Welch 

has been one of those. David McKinley has been one of those. And 

we do want to come up with a good product here, but we want 

some balance as well. 

At this time I recognize the gentleman from Illinois for 5 minutes. 

Mr. RUSH. I want to thank you, Mr. Chairman. Mr. Chairman, 

one of the more contentious issues before us today that has been 

included in this discussion draft, as you well know, is Section 4124, 

which would prohibit the Department of Energy from promulgating 

a final rule amending efficiency standards for non-weatherized gas 

furnaces and mobile home furnaces. Mr. Chairman, my office has 

held several meetings with stakeholders on both sides of this issue, 

and I think it would be most beneficial for members to hear directly from DOE on these issues, and other issues, before we settle 

on language in any final draft. 

120 

Today, however, we have some of the interested stakeholders 

that have been taking part in discussions with DOE to try and 

build consensus and come up with language that all sides could 

agree with, as was done in previous cases, including most recently 

the water heaters provision that Congress passed just last week 

with bipartisan support. As I understand it, Mr. Chairman, the 

language in today’s discussion draft has not been agreed to by the 

very stakeholders, and the conversation is continuing. 

My view is that there would be a much better chance of getting 

bipartisan support for Section 4121 if the interested parties would 

follow the example set by the Water Heaters Coalition and come 

up with language that DOE, industry, energy efficiency advocates, 

and consumer groups could all support. 

With that, Mr. Chairman, I have a couple of questions that I 

want to ask both Mr. Somerhalder and Ms. Noll. To the both of 

you, we have received conflicting testimony from the two of you regarding the impact that this rule would have on low income consumers. Mr. Somerhalder, can you give us your perspective on this 

issue, and then I would like to hear from Ms. Noll for your perspective as well. 

Mr. SOMERHALDER. Yes. Ranking Member Rush, what we see 

from our low income customers is the decision to repair, replace 

their furnaces, when they make those decisions, if they have limitations in their ability to use an 80 percent versus a 92 percent furnace, because of venting requirements, and other requirements 

that are unique to the higher efficiency furnaces, they have to 

make a tough decision about what to do. That can be everything 

from not replace, to use electric resistance heaters, or some other 

form of heating. 

So what we see is that, because of the limitations, there can be 

a decision to go with a product that is more costly, if they do replace this. I mean, you heard the numbers of $350 more for the 

unit itself, up to around $2,000 to install that won’t pay off because 

of the use of energy, and how quickly that would pay off. And the 

end result is they either would need to make a decision to replace 

a unit, and then incur higher costs, or they may make a decision 

to switch to another form of energy that is less cost effective, and 

could produce more emissions. So we do see that impacting the low 

income—— 

Mr. RUSH. Ms. Noll, would you respond, please? 

Ms. NOLL. Yes. Thank you, Mr. Rush. First I would like to begin 

by saying that all Americans benefit from standards, particularly 

the low income, who oftentimes are renters, and pay the higher 

portion of their energy bill, and the property owner is the one that 

is choosing the furnace, or the water heater, whatever appliance is 

going into that home. 

I would also like to say that this is a proposal right now. It has 

tremendous benefit in energy savings, in consumer savings, and environmental benefit, and that we recognize a small percentage of 

installations that would face challenges, and incur a higher cost. 

But we have also seen that, just in this last year, new technologies 

and solutions have entered into the market, and helped overcome 

these challenges. And as we see those increasingly deployed, we 

121 

think that that has a great opportunity to help provide solutions 

to these customers that are going to be facing these challenges. 

So we think the Department needs to move forward with their 

open and transparent process, and get input from stakeholders on 

this rule, and find ways of making it even better. And I think that, 

from our perspective, this is not an either/or situation, this is an 

and/also. We also support the great utility programs, and the state 

programs, and bolstering those programs to help these vulnerable 

populations get into the high efficiency furnaces, have improved 

weatherization that is going to have benefits to them, and improved comfort, and improved indoor air quality. 

And we commend the gas utilities, like AGL Resources and others, that serve their customers well through these utility programs. 

And those are the kind of things that complement the minimum 

standards, and ensure that all Americans have at least a minimum 

level of cost-effective efficiency that will serve them, and they can 

count on. Thank you. 

Mr. RUSH. Mr. Chairman, I yield back. 

Mr. OLSON. As fate would have it, I have the gavel at the time 

I am speaking, so I give myself 5 minutes for a couple of questions. 

My first one is for you, Mr. Somerholder. One provision of the 

discussion draft would scrap Section 433 of the Energy Independence and Security Act. It would allow Federal buildings to use fuels 

like natural gas past 2030, something currently being phased out. 

In essence, current law bans one of our most efficient and affordable resources of energy right now. Can you talk about some benefits that we would lose if natural gas is phased out from Federal 

buildings, and do you believe that tackling Section 433 is important? 

Mr. SOMERHALDER. We believe the provision to reduce 433 is 

very important, because natural gas is American, it is affordable, 

as you pointed out, and it is very efficient. Heating a building, as 

an example, with a high efficiency furnace, or an 80 percent efficiency furnace, is a very efficient way to heat that building, with 

very affordable natural gas, American natural gas. So the ability 

to use natural gas, not limit that option, does provide customer 

benefit, savings in those buildings, savings for taxpayers. So we 

very much support a way to continue to use clean American natural gas in Federal buildings. 

Mr. OLSON. Thank you. Next question is for you, Mr. Thompson. 

As you know, the draft bill touches on the issue of DOE’s involvement in model building codes. The draft talks about transparency 

and about public comment. I am interested in your thoughts on 

how we reach consensus there. What caught my attention, though, 

was the issue of payback periods and cost effectiveness. Before the 

private sector even thinks about making an investment, they have 

to know when, and if, they would get into the black. I have heard 

some complain that this isn’t always true with energy savings. I 

would like to talk to you about the cost and benefits. 

Again, Mr. Thompson, today’s draft bill says that when DOE 

supports a change to the model building code, that change must 

pay itself back in under 10 years. Do you think that is important, 

and is that realistic? 

122 

Mr. THOMPSON. Thank you for that very thoughtful question. I 

think it is absolutely important, and if we intend to move families 

from less energy efficient homes to more energy efficient homes, we 

need to do it in a way that is affordable to them. And in a number 

of polls that have been conducted, and one in particular by the National Association of Home Builders, it really tried to identify, by 

demographic groups, how long they were willing to wait for a payback of that investment. All of them fell short of the 10 year requirement. So it is a bit of a stretch, from a home buyer perspective, to be willing to wait that long to get a simple payback on their 

investment there. 

If we are going to continue to drive people to more energy efficient homes, let us remember we need affordability. And this is in 

a marketplace that is currently very limited by financial limitations on qualifications to buyers, and limitations on appraisals, and 

how they recognize the values of energy efficient improvements to 

that home. 

Mr. OLSON. Thank you. Mr. Peel, to follow up on that, do you 

think the government has done a good job of considering whether 

energy efficiency standards are cost effective? If not, what can improve that process? 

Mr. PEEL. I think the results are mixed. I think we have seen 

some good analysis, and those have made it through the process 

through a collaborative effort, and many of them signed into law. 

We also see, with the furnace rule that is on the table today, some 

differences in views around what the actual costs would be, and 

what the payback periods would be. Again, all we are asking for 

here is a seat at the table so we can openly discuss those issues, 

make sure everyone is aware, and build the consensus that we 

think we can get on this. 

Mr. OLSON. So the key is a seat at the table, not some law parts 

of the bill, but just to actually have some voice in this process? 

That is what you would be happy with? 

Mr. PEEL. Yes. Yes, Congressman. 

Mr. OLSON. And my final question again is for you, Mr. 

Somerhalder. There seems to be a great deal of concern about 

DOE’s gas furnace rule. A number of groups say it is too expensive 

and hard to meet, and this is an issue we touched in today’s discussion draft. Are there some ways we can avoid conflicts like this in 

the future? 

Mr. SOMERHALDER. We agree that there are benefits to reach 

consensus on this, because we all do want higher energy efficiency 

as we move forward. We need to do that in a way that is not only 

affordable, but we need to do that in a way certain customers really can’t even convert because they don’t have access to side walls 

for the venting requirements. And products are becoming available, 

but there are still limitations to how those products can be used. 

So we absolutely need to work together to come to consensus so 

that all the customers can find a way to continue to lower their 

costs, and to help improve the environment. So we very much support a consensus process. As Mr. Peel has pointed out, we have had 

good success with that in the past. There are certain pieces of information that need to be considered now, and we will be able to 

find a way, we believe, to reach consensus. 

123 

Mr. OLSON. Well, thank you. My time has expired. We now recognize Mr. Tonko from New York for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. I am often stating that energy efficiency should be recognized as our fuel of choice, so I was 

very pleased when I heard that the Committee would be legislating 

in this area. But this draft, I have to state, is a real disappointment. There are a few worthy provisions, but there are many others that undermine advances that we should be taking in efficiency. 

The provision on DOE’s pending gas furnace rule in the discussion draft is of great concern to me. About 40 percent of the energy 

delivered to the residences is used for space heating, and natural 

gas and propane furnaces account for nearly 1⁄2 of that. It may be 

higher now, since prices may have enticed some to switch heating 

fuels. Either way, that is a lot of energy, and gas prices may be 

low now, but experience tells us that is likely to change. 

So DOE’s new rule on gas furnaces would save consumers a 

great deal of money on their annual outlays for fuel costs, and the 

furnaces that deliver these savings are already on the market, and 

make up a significant part of the current furnace market. The comment period is still open, and this rule appears to be well justified, 

very well justified. I am not persuaded there is any reason to delay 

these standards. 

So, Mr. Peel, you state that DOE’s rule is based on, ‘‘errors involving economic assumptions and technical issues’’. But later in 

your testimony you cite DOE’s analysis in support of your position 

that this rule should be delayed. Do you have information other 

than DOE’s analysis that supports your position that ‘‘the additional cost of installation cannot be economically justified’’? 

Mr. PEEL. I do have access to information. I don’t have it here 

today. I used DOE’s numbers as a conservative estimate. They are 

consensus numbers from—DOE would agree to those numbers. 

There are concerns beyond just the payback. The installation complexity is a big issue as well. These are all issues that we would 

bring to the table in a consensus building session. 

So, once again, to reiterate, we are not opposed to energy efficiency increases for weatherized gas furnaces. We want to make 

sure that the realities of the market are understood when we set 

these standards. So, for example, most appliances have a range of 

efficiencies that you can progress through, a continuum. Gas furnaces actually change technology between 80 and 90 percent, and 

so it is actually a different installation. It is not like installing a 

more efficient air conditioner, which is very similar to installing a 

less efficient air conditioner. 

So those are the kind of things that we want to be communicating with the DOE and other stakeholders to make sure that 

it is understood so we can really understand what the payback 

numbers are. And my feeling is that, with the data we have, with 

the data DOE has, and other data that we have heard today, somewhere in there lies the answer. And—— 

Mr. TONKO. OK. 

Mr. PEEL [continuing]. Getting together to communicate it is the 

key. 

124 

Mr. TONKO. Well, I would appreciate you sharing any of that information with the committee. These are durable goods. They last 

a long time, and I think we should implement standards that save 

energy at this level as early as possible. And given these furnaces, 

as I stated, are already in the market, there are clearly possible 

savings there. 

To Ms. Noll and Ms. Callahan, there seems to be some disagreement about the provision of this bill on building standards. Again, 

residences and commercial buildings stand for a long time. Is the 

provision on building codes consistent with having DOE do all it 

can to support the adoption of progressive building codes for energy 

efficiency? 

Ms. CALLAHAN. You want me to go first? 

Mr. TONKO. Sure—— 

Ms. CALLAHAN. Thank you—— 

Mr. TONKO [continuing]. Please. 

Ms. CALLAHAN [continuing]. Congressman, I appreciate that 

question. Let me say, as I said in my testimony, that we believe 

that the building code provisions that are in the bill currently 

should be struck. And I have an easy answer for the Ranking Member of where you find bipartisan agreement on building energy 

codes that will provide more transparency, and will ensure that 

DOE plays an appropriate, and a strong role in delivering its model 

energy codes, and that is the bill by Mr. McKinley and Mr. Welch. 

We have negotiated those provisions over a number of years to address the concerns of the stakeholders, and the concerns of builders, and the concerns of all the folks that are involved in this process. So we think that is where you can get broad bipartisan support. 

I want to address a couple of points, I think, where there is perhaps some obfuscation in the testimony that you have heard. Model 

energy codes are not set by DOE. They are set by independent code 

making bodies. These are people from all across the United States, 

city officials, builders like Mr. Thompson, code officials, elected officials. They come together, and they establish the code. Once that 

code is established, DOE certifies it, if it saves energy, and then 

the states adopt it, and the localities implement and enforce the 

codes. So I think that that process, DOE has played an important 

role, but they cannot control the process. It is handled in other 

places. 

I also want to state that 39 states right now already either the 

2009, the 2012, or the 2015 code in place. This is working. And 

with respect to the the simple payback, I think one thing that is 

very important to note, NAHB’s own surveys show that 9 out of 10 

Americans will pay two to three percent more for energy efficient 

homes. That translates on a $100,000 home to $2,000. 

Most people mortgage their homes, and so when they add in the 

efficiency upgrade to that mortgage, it is 30 years to pay it off. And 

the savings that they get on their energy bill day one, when they 

move in, are greater than that additional cost. So I think that the 

codes are there, the codes need to keep going. Thank you. 

Mr. WHITFIELD. Gentleman’s time has expired. 

Mr. TONKO. We wanted to hear from Ms. Noll, though. It was addressed to both. 

125 

Mr. WHITFIELD. All right, go ahead. 

Mr. TONKO. If we could, please? 

Ms. NOLL. I will be very brief. I would just say that we achieve 

better model codes when the Department of Energy is able to contribute their expertise, and these model codes do increase the efficiency that can save Americans an enormous amount of money in 

our nation. 

Mr. TONKO. I thank you for that, and Mr. Chair, as I yield back, 

I suggest that we have got a ways to go before we live up to the 

title of our bill. And with that I yield back. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Ohio, Mr. Latta, for 5—— 

Mr. LATTA. Well, thank you very much, Mr. Chairman, and, 

again, I appreciate the panel for being here today, and I also appreciate the Chairman for including two of my bills in this efficiency 

discussion draft: the Energy Star Program Integrity Act and the 

Voluntary Verification Program Act. Both of these pieces of legislation will help manufacturers and consumers, while strengthening 

the Energy Star program. I would also like to ask the Chairman 

for unanimous consent to enter into the record two letters in support of the Energy Star Program Integrity Act: one from the U.S. 

Chamber of Commerce, and the other from the Retail Industry 

Leaders Association. 

Mr. WHITFIELD. Without objection. 

[The information appears at the conclusion of the hearing.] 

Mr. LATTA. Thank you, Mr. Chairman. I appreciate that. 

Mr. Peel, if I could ask, why does the IVP give you more predictability than a DOE run program? 

Mr. PEEL. There are really three reasons why the IVP helps us. 

The first is that the predictability you mentioned is all about consistent funding. We know, as an industry, we are going to fund the 

program year over year. It is not subject to budget cuts, or other 

DOE priorities, so we can count on resources being available to test 

our equipment to make sure that it complies with energy efficiency 

regulations. 

It is also cost effective. There is no taxpayer burden for this, and 

it has been proven effective. We have been doing it for 50 years, 

and we get better and better and better at it. It would be very difficult to duplicate. And what makes it work so well is that competition is the driver, is what keeps the integrity of the program. Each 

manufacturer competes with each other, but it is a common system 

that allows us to verify that everyone plays on a level playing field, 

and abides by the rules. 

Mr. LATTA. Thank you. And, Ms. Callahan, if I could ask—why 

do you believe the Energy Start Integrity Act, which the gentleman 

from Vermont and I introduced, is important? 

Ms. CALLAHAN. Well, the Energy Start program itself is very, 

very important. It has proven very effective in saving consumers 

money, and in drawing in investment from manufacturers, bringing 

new technologies forward. We are concerned that if there is a continuation of class action suits that are not necessary, in our opinion, that that will cool the sort of fervor of manufacturers for participating in this very important program. And the savings that 

have been coming through it since inception in the ’90s are very, 

126 

very significant, and we have got great consumer products now 

with the Energy Star label, and we don’t want to see that program 

diminish in any way. 

Mr. LATTA. I just want to follow up, I want to make sure I heard 

that correctly, that without the Energy Start Integrity Act, that— 

you believe that the manufacturers would stop participating? 

Ms. CALLAHAN. I don’t know that—whether they would stop or 

not, but I think certainly it would be an impediment to them to 

continue because of the extra cost, and the risk involved. So I 

wouldn’t say that it would stop all manufacturers, but I certainly 

think that it would cool their attraction to the program, and cause 

some concern. 

Mr. LATTA. And let me just follow up briefly, then, also, do you 

think that the Act would prohibit all lawsuits against non-compliant Energy Star products? 

Ms. CALLAHAN. Absolutely not. I mean, it is very narrowly crafted so that if a product has been certified, and then found not to 

be in compliance, and there are corrective measures put forward by 

EPA, and those corrective measures are taken, that is where the 

protection comes. But if somebody is not in compliance, if somebody 

is not following the EPA guidelines, and refusing to cooperate, and 

come under the framework of EPA, they could still be sued. 

Mr. LATTA. Thank you very much, Mr. Chairman. I will yield 

back. 

Mr. WHITFIELD. Gentleman yields back. The reason we were having a discussion up here, we have a vote on the House floor. It is 

just one, so we are going to keep this process going, but some people have gone to vote, and they will come back. 

At this time I will recognize the gentleman from Pennsylvania, 

Mr. Doyle, for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman, and welcome to all the 

panelists. I think it is very helpful to hear from a range of industries and stakeholders on these issues. This is a draft document, 

and I do think we have some work to do on it, but the goal here 

is to see how we can use technology to save energy, but it has to 

be affordable too, and I think that is a key ingredient. I want to 

especially say hello to Frank Thompson, a gentleman that I have 

known I think my entire 21 years in Congress, and have worked 

with in the Pittsburgh area for a long time, so, Frank, it is good 

to see you. 

Let me just first ask quickly, Mr. Somerhalder, in your testimony 

you talked about how Section 433 of the Energy Independence and 

Security Act of 2007, the fossil fuel ban, is deeply flawed, and this 

current discussion draft eliminates the ban. But as Mr. Wagner 

mentioned, Senator Hogan and Manchin have a bill that would repeal this requirement, but also strengthen several existing Federal 

energy efficiency provisions to ensure large energy savings in the 

coming years. I am just curious, is the Hogan-Manchin bill something that you could support, or is there a way to make sure we 

use this as an opportunity to focus on more efficiency? 

Mr. SOMERHALDER. Yes. Our major priority is clearly to make 

natural gas available to these buildings because of the attributes 

I talked about. But we have been involved in the energy standards, 

and, in a consensus process, looking at what you talked about, 

127 

those standards that could be put in place. So replacing it with a 

set of standards that we have been involved in, we can support 

that as a way to move forward, and make sure natural gas is used 

in those buildings as well. 

Mr. DOYLE. Good. 

Mr. SOMERHALDER. And that is a good example of where consensus can reach compromise. 

Mr. DOYLE. Right. That is great. And that is—— 

Mr. WHITFIELD. So is he saying that they do support the Senate 

bill? 

Mr. SOMERHALDER. Yes. We have already officially made comments that we can support that, because we were involved in a 

part of that process, and involved in those standards. 

Mr. DOYLE. Good. That is something that is good to know as we 

work on the discussion. 

Frank, let me ask you—you know the district I represent. I don’t 

have a lot of new homes being built. We know the new homes are 

pretty energy efficient, but a lot of the older homes that are built 

before the ’90s aren’t so energy efficient, and the homes in my neck 

of the woods, in the Mon Valley, and parts of the city of Pittsburgh, 

were built in the 1920s and 1930s, and I have a lot of row houses 

in my district. And I have a lot of senior citizens in my district that 

aren’t going to be re-mortgaging their houses, or doing anything 

like that. When their furnace goes, they have got to pay. 

And so we want to have a system—and I just want to express 

this, I am all for energy efficiency. I have been a big proponent of 

it my entire time in Congress, but I also worry about a little bit 

about some of the older residents that I represent in the Allegheny 

counties that—probably second only to Dade County, Florida in the 

number of senior citizens that live in these older homes that, if 

they were told that they had to replace the furnace, and then do 

some structural changes to these older homes, I just worry what 

that does to them, cost-wise. 

And I just want to know what are, we have had a lot of successes 

with new housing, and making them more energy efficient. What 

do you think are some of the major successes that we have in making older homes more efficient, aside from, we have tax credits in 

the Tenant Star Program, but what other ways do you think we 

can encourage energy efficiency in these older homes? And maybe 

you could just speak a little bit to these urban areas like mine, that 

have houses that are stacked together in rows, and how that works 

if you have to change venting systems and that? 

Mr. THOMPSON. Well, I think there were three questions there, 

so let me start with the furnace provisions there. And I think some 

of the flaws in what DOE has presented, and why we need to get 

this advisory group together, and get the stakeholders at the table, 

and improve on what they have proposed are the exact circumstances you described there, and the consequences there of trying to bring that new technology, that condensing furnace, into a 

structure that wasn’t built that way. And it could be thousands of 

dollars that they aren’t going to go out and take a mortgage. They 

are going to have to come out of pocket for it, so we need to find 

some alternatives that are going to address those situations there. 

128 

In terms of how we best address continuing to improve energy 

efficiency in older homes, I think we need to continue a lot of the 

programs, the tax incentives, that have been in place. They work. 

We need to make sure that they are going to continue to be there, 

because the reality is that the greatest energy users, the gas guzzlers, so to speak, amongst houses are those older homes. 

Mr. DOYLE. Right. 

Mr. THOMPSON. And it is very costly to come in and retrofit 

them. So let us keep some programs out there that are going to 

help temper those costs. 

Mr. DOYLE. Great. Thanks, Frank. I see my time is up, Mr. 

Chairman. Thank you very much. 

Mr. THOMPSON. Thank you. 

Mr. OLSON. The Chair recognizes Mr. McKinley from West Virginia for 5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman, and given the timeframe, I am not going to be able to get to all my questions that 

I had, but let us just see if we could focus on—when I came to Congress 4 years ago, that was—the thing I left was an engineering 

practice that dealt deeply into energy efficiency. So we have some 

working knowledge that we are bringing to the table, and what we 

have done the first few years was nibble around the edges of energy efficiency as we try to educate the public, and the other members, about what we have to do. 

And one of the most important things that I think we are 

about—Tonko and I are embarking on is now we are going to try 

to dive deeply into the issue of turbines, and look at that. When 

we are talking about single turbines at 35 percent, and combined 

capacities of maybe 60 at best, more likely at 45 or 50 percent. So 

we are looking at what we can do with that. 

We know that this bill that we have, that we are putting forth, 

is going to provide some form of demonstration project that we can 

look at the steam injection, raising lit temperatures. We can increase pressure ratios. We know all these things are going to improve so it is probably the most efficient bill that we could pass on 

efficiency, is looking at how we create electricity. 

So is it too early? I am going to ask that to you, Mr. 

Somerhalder. Coming from the Gas Association, do you think this 

Congress is ready to take on such a huge subject as to reduce and 

improve the efficiency of our turbines and our electric generation? 

Because we know that China and Japan are very actively out 

there, participating in a robust fashion, and we are going to wind 

up playing second fiddle. 

Mr. SOMERHALDER. Exactly, and, as an association, and as a 

company—we supply today combined cycle turbines at central stations that have efficiencies of around 60 percent. They have been 

engineered that well, so we know the industry is capable of finding 

a way to continue to improve efficiencies. And we have seen the 

benefit of distributed generation, from micro-turbines, to combined 

heat and power, to fuel cells. And so we do believe that we need 

to put in place research and incentives to continue to make 

progress on that, because those are additional ways to make sure 

that we are the most efficient and the most cost effective for the 

consumers in the long run. 

129 

So that, in addition to using very efficient furnaces, whether they 

are 80 percent or 92, for heating, all that together can produce a 

very good result. So we support additional effort in those areas. 

Mr. MCKINLEY. Well, we are going to make an all-out effort to 

see if we can’t get—if nothing else, just to get the dialogue going 

to educate the American public as well as—what the problems are, 

because just imagine, what other entity would be acceptable at 60 

percent efficiency? If we let the Post Office off at 40 percent of their 

deliveries weren’t appropriate—so, having said that, let me go back 

to Mr. Thompson on homes. 

A component of my practice had been designing and building 

homes, and I knew that one of the issues we were facing there was 

indoor air quality. And, again, it is a process of education. I don’t 

think Congress and the American public understand a lot of these 

issues that we are dealing with on Clean Air Act really have a genesis back in their home. Because we know that we spend 90 percent of our time indoors, and 60 percent of our time in our homes. 

But yet we are not addressing some of those problems. So I am curious, you, as a home builder, and the Home Builders’—what are 

you doing, from an association, to address these issues of indoor air 

quality? 

Mr. THOMPSON. As the building codes have continued to tighten 

up, the air changes per hour in a house, and we saw that in the 

2012, and reinforced in the 2015 codes of reducing those air 

changes per hour. That potential is increased. It has got to be resolved through mechanical ventilation, which is a requirement in 

the building code, if you are less than five air changes an hour. 

Interestingly enough, a number of the states that adopted the 

2012 IECC chose to move that number that was in the IECC from 

three air changes an hour back up to five or over. I believe only 

one of those states kept it at that because it is a danger level there, 

and we are getting into a lot of uncharted territory that we need 

more building science to best understand how we can maintain air 

quality, minimize mold, and continue—— 

Mr. MCKINLEY. Right. 

Mr. THOMPSON [continuing]. To have energy efficiency. 

Mr. MCKINLEY. And in the time I have, my concern is that what 

we are seeing is SOx and NOx gases have been decreasing, and CO2

emissions have—but yet we are seeing more asthma attacks, and 

as a result—it is not because of the coal fired power plants. We believe there is science—justify, from the American Lung Association 

and others, that a lot of this is having to do with our indoor air 

quality. 

Mr. THOMPSON. Yes, sir. 

Mr. MCKINLEY. So the asthma increase is not because of coal and 

gas fired power plants. 

Mr. THOMPSON. Yes, sir. 

Mr. MCKINLEY. Thank you very much for you time, and I apologize for—— 

Mr. OLSON. Thank you. And I apologize, the vote has popped 

up—so we will have a brief recess. Members who come back might 

have some questions, so please stand by for maybe 5 minutes or 

so. I apologize so much for this, but we stand in recess. 

130 

[Whereupon, at 1:07 p.m., the subcommittee recessed, to reconvene at 1:11 p.m. the same day.] 

Mr. OLSON. Order. So please bear with us, patience. 

Mr. MCNERNEY. Mr. Olson, I move the bill. There have been a 

few changes around here. 

Mr. OLSON. Well, I was called Chairman the previous panel, so 

good changes. Don’t tell Mr. Rush. And the Chair recognizes the 

gentleman from Vermont for 5 minutes, Mr. Welch. 

Mr. WELCH. Thank you very much. It is really tremendous to be 

here, and to be with people that a lot of us but me very much have 

been working with on this question of energy efficiency. It is also 

very reassuring to me to see how, in my view, Congress has really 

come a long way. You know, we have been locked down in this important debate about climate change, and tough challenges about 

our energy policy that have a lot of very valid issues to them, but 

they shouldn’t get in the way of us making process in this space 

of energy efficiency that is so vital. 

Because even if we are going to achieve climate change goals, 40 

percent of those, and this was under the Waxman-Markey bill, 

were going to be achieved through energy efficiency. And that common ground that we have, Mr. Olson, of saving money, I am kind 

of cheap in Vermont, motivates me, but it also creates jobs. Lot of 

folks out there doing work to put good people to work building 

homes, doing retrofits. That all matters. So I am delighted about 

that. 

I am also delighted about all the energy efficiency bills that are 

going to be part of this, that I and our colleagues have had a part 

in. Mr. Cartwright, who is not on our committee, but his Streamlining Efficiency for Schools Act has been great. Mr. Kinzinger just 

came in, and—working with him on energy savings through public/ 

private partnership, and the Utility Energy Service Contract Improvement Act. Mr. Latta, who was speaking a little bit earlier, 

and I have been working on a number of bills. So there is a lot of 

momentum. 

And I was just talking to one of the people here, who was telling 

me that he just came from the Senate, and there is a lot of discussion over there. It is hard to believe, but they are actually acknowledging the work that we are doing over here in the House. So they 

are pretty slow over there, but they are kind of catching up, so we 

are happy about that. And we have got a lot to do. 

And this afternoon, as I mentioned, Mr. McKinley and I, we are 

going to be at the White House for a bill signing. Now, from my 

perspective, we probably should do more, but I think we are really 

making real progress, and it is bipartisan. And, by the way, it feels 

a lot better to be getting something done instead of just fighting 

all the time, you know what I mean? OK. So let us keep it up. 

But on that topic, there are a couple of issues that are tough. Mr. 

Whitfield had mentioned this before. You know, there were a number of areas, 12 areas, where there is bipartisan agreement, a few 

where there aren’t. My hope is we can work those out. Building 

codes is one. You know, building codes, I think, can be very helpful. 

They have got to be reasonable. So how you address that should 

be with a focus on what is practical. But I don’t think we just say 

no building codes. I think there have got to be some standards that 

131 

make sense, but they have to fit what is realistic in the real world. 

And that is a judgment call. It is not a right or wrong kind of situation, so let us see that as a tool, but pledge to work in a practical 

way, dealing with people who are in the field, dealing with some 

of our regulators who have the interest of energy efficiency. 

And also there is a question here about repealing Section 433 of 

the Energy Independence and Security Act. That was designed to 

move our government buildings away from fossil fuel usage. It does 

have some implementation challenges. Let us work to figure out 

how we can square that circle, not have that be something we just 

don’t resolve, and I think we can do it. But I do have a couple of 

questions for Mr. Somerhalder, who is out in the field. And I want 

to know about this rule with the DOE, and I assume you have expressed your concerns to the DOE, and I am wondering what their 

response has been. 

Mr. SOMERHALDER. Yes. We have a part of expressing concerns 

and comments. To this point, even though we have expressed those 

concerns, we still need more understanding of some of the data, 

and some of the technical information, and some of the models that 

had been used to come up with these cost estimates. 

Mr. WELCH. OK. I only have a little more time, so let me just 

follow up on that. If we pass the time out on the FERS rule, are 

the gas utilities committed to increasing the efficiency of the units, 

and will they work quickly to get that rule finalized within a year? 

Mr. SOMERHALDER. Yes. We have spent the last several months 

as well in very detailed discussions on how to do this. The units 

are very efficient, either the 80 percent or the 92 plus percent. It 

is really some of the retrofit venting issues that have to be resolved 

to see where they can cost-effectively be applied. And so—— 

Mr. WELCH. OK. 

Mr. SOMERHALDER [continuing]. A lot of those issues, we are 

committed to work with DOE and the other stakeholders to reach 

consensus. 

Mr. WELCH. OK. I appreciate that. Thank you very much. I yield 

back. 

Mr. OLSON. Gentleman’s time has expired. The Chair recognizes 

the gentleman from Illinois, Mr. Kinzinger, for 5 minutes. 

Mr. KINZINGER. Well, thank you, Mr. Chairman, and, to Congressman Welch, it is great working with you on all this, and you 

have been a leader not just in this Congress, but Congresses prior, 

and it is an honor to join you in a lot of this, and so I just want 

to personally congratulate you on all this hard work, and I want 

to thank the Chairman for holding the hearing today. I want to 

thank all of you for being here. I know it is a time commitment, 

a travel commitment. And, again, as Peter said, this is a real opportunity to show that Washington, D.C. works sometimes. And we 

get all the news for when we fight, and when we go back and forth, 

but there are a lot of things where people get to work together. 

And this is such an open process, and I want to thank the Chairman for bringing forward the draft. And I understand that some 

members have taken issue with certain provisions in the draft, but, 

given the bipartisan nature of the vast majority of the text, it is 

my hope that we are going to be able to work with each other to 

132 

produce a final product that most, if not all, of this committee can 

support. 

I would also like to thank a number of members from across the 

aisle for working with me on getting some really good efficiency related provisions into this draft. I mentioned Peter Welch. I also 

want to specifically mention Congresswoman Eshoo’s work on the 

Energy Efficient Government Technology Act to update Federal 

data center efficiencies, and Congressman McNerney for his help in 

drafting and introducing the Thermal Insulation Efficiency Improvement Act. I would also like to add quickly that insulation is, 

in many cases, the unsung hero in improving the energy efficiency 

of our homes and buildings. 

Just a few questions, and then I will yield back my time. Mr. 

Wagner, you mentioned in your testimony the scoring of ESPCs 

and UESCs has caused consternation in the industry for quite 

some time. Lately there has been some work by the House and 

Senate budget conferees to fix the issues, although we haven’t quite 

made it to that point yet. Given the inclusion of ESPC and UESC 

language in the discussion draft, would you mind explaining in a 

little further detail what savings guarantees ESPCs and UESCs 

offer the Federal Government, and also the potential impact a scoring change will have, saving the Federal Government the badly 

needed funding? 

Mr. WAGNER. Well, thanks for that question, Congressman, and, 

first of all, let me thank you, and Congressman Welch, for your 

leadership, particularly on the performance contracting coalition. 

Your bipartisan leadership is really appreciated. 

You know, the scoring problem has really been vexing us for over 

a decade, and it seems to have only gotten worse. In a nutshell, we 

basically have the problem where CBO cannot reconcile the savings 

on the discretionary side of the ledger with the ESPC contract, 

which is mandatory spending in their mind. They don’t give the offset, if you will, for the savings, even though the savings are guaranteed by the contractor. And that has just been problematic under 

the scoring rules. 

So the Senate legislation will fix that, and I know the House has 

been looking at that, and we appreciate everyone on this Committee who has been diving into try to solve this problem. So what 

happens is, when you have a number of the provisions that we 

have in the discussion draft here, they actually hold—CBO will 

score them, because they assume that ESPC will be used to implement those provisions, and therefore a score. And it is sometimes 

not just the ESPC legislation per se, it might be other things, like 

trying to extend a Federal goal for energy reduction overall. So this 

has really hampered your ability in the past to try to pass legislation in this Committee. 

So if we can crack that nut on the scoring problem, and fix it, 

then you will have a pathway to clearly be able to amend the statute—as I said in my testimony earlier, to update it, to make those 

clarifications, and maybe even expand the scope of what we can do 

under ESPC. 

Mr. KINZINGER. Yes, hopefully we can get there. And do you believe that the FPC member companies have the ability to meet the 

133 

$4 billion directive issued by the President, and also, on top of that, 

what else can we be doing to get the Federal Government to be—— 

Mr. WAGNER. Absolutely we can meet that goal, and even do 

more, and I think agencies are trying hard to do that, and I know 

the Administration is committed. And, with your help and leadership, to continue to prod agencies to do that. But I will say that 

some of these legislative provisions will help because it will unlock 

some of the things that agencies are trying to do, and clarify some 

of the things that have been causing them confusion. So that is 

why the legislation here that you are working on is very important. 

Mr. KINZINGER. Ms. Newmark, I am not going to ask you a question because I am running out of time, but I do want to point out 

that you touch on the use of intelligent efficiency, and I gather you 

believe that the Federal Government could play a larger role in the 

use of intelligent efficiency, and more specifically in data centers. 

I guess maybe in 10 seconds do you want to elaborate on that? 

Ms. NEWMARK. Sure. I think the point I was trying to make is 

that the whole is often greater than the sum of the parts. A one 

percent, or half a percent improvement in efficiency in every piece 

of equipment still only gives you a half a percent improvement. If 

we can look at how those systems work together and get a 10 percent improvement, we all win. And in this case we use less energy, 

and spend less money. 

Mr. KINZINGER. Great. And I wish I could have given you more 

time, but thank you all for being here, and I will yield back, Mr. 

Chairman. 

Mr. OLSON. Gentleman’s time has expired. The Chair recognizes 

the lady from California, Ms. Eshoo, for 5 minutes. 

Ms. ESHOO. Thank you very much, Mr. Chairman. I appreciate 

the subcommittee holding this important hearing, and I want to 

thank you, and Mr. Whitfield, and the minority for extending the 

legislative courtesy to me to come here and join you today, since 

I am not a member of the subcommittee, but a member of the full 

committee. So thank you to all the witnesses. We always depend 

on really highly informed witnesses to enhance our work, so I appreciate the inclusion of my bill, the Energy Efficient Government 

Technology Act, in the discussion draft of the subcommittee. I appreciate it very much. I have been at this for a while, as some of 

you know. 

Sections 4111 and 4112 of the discussion draft are nearly identical to the provisions of the legislation that I just mentioned, and 

it is wonderful to introduce—and he is leaving, Mr. Kinzinger. 

Maybe he can hear me. Introduced with him, and I am grateful to 

him for his leadership, and there are three other members of this 

subcommittee that are also co-sponsors of the legislation. It is really a non-controversial bill. I know everyone would like to say that 

about their legislation, but I think the test was on the floor in the 

last Congress, when 375 members in the House of Representatives 

voted for the legislation last year, so I think the proof is in the pudding. 

I think it is important to appreciate, as Ms. Newmark just said 

so succinctly, some of the facts that surround this issue. Today the 

world generates more data in 12 hours than was generated in all 

of human history prior to 2003. That is really something to digest, 

134 

isn’t it? And we should all have enormous pride in that, because 

we really are the mothers and fathers of the generation of that 

data, in terms of the technology. And, of course, I always have to 

brag and crow about my Silicon Valley congressional district. So 

these billions of gigabits of data have to be stored and processed 

at data centers, which are really the backbone of the 21st century 

economy, and they can, and should be, highly efficient. 

The Federal Government is our nation’s largest land owner, employer, and energy user, and the Federal Government, I think, 

should lead by example by improving energy efficiency of its IT infrastructure and data centers, and we have them across the entire 

enterprise. We have lots of it. We have lots of it. So the legislation 

would require the agencies to develop plans to implement best 

practices, purchase more energy efficient information and communications technologies, and submit to periodic evaluation, which I 

think is really important—we don’t always do that in the government—of their data centers for energy efficiency. So Congress can 

track, and the American people can track the progress that we are 

making. 

And the bill also requires the agencies to formulate specific performance goals, which I think is really important as well, and a 

means to calculate the overall cost savings from the improvements. 

So I think that if we get this in place, we have the opportunity, 

by reducing the government’s data center energy bill anywhere 

from 20 to 40 percent. I really don’t know who could ever be 

against this, honestly. It is like walking past a $1,000 bill on the 

sidewalk and not picking it up. So I think that—and it has been 

estimated that we could save $5 billion, that is with a B, in energy 

costs through 2020, which is not too far away from us right now. 

So I appreciate the support that has all of the support, not only 

groups and organizations, advocates, industry groups, the American Council for an Energy Efficient Economy, the Alliance to Save 

Energy, the Information Technology Industry Council, people that 

I work with all the time, U.S. Green Building Council, which is 

really very important as well, all of them, as well as the sponsors. 

And I think that we have a real opportunity to do something that 

I think everyone across our country would say, you know what, 

Congress, bravo. It makes sense, and it is going to save taxpayer 

money, and, for a change, the Federal Government, as an entity, 

will be instructive to the rest of the country, and—because we 

adopted a very smart policy. So I thank all of you. 

Ms. Newark, thank you for what you said in your written testimony, and—pointing out that we began this effort in 2006, but 

sometimes the gestation period is longer. So I am willing to wait 

for that. I thank all of you. And, again, Mr. Chairman, thank you 

for your legislative courtesy, I appreciate it very much, and kudos 

to Mr. Kinzinger. I will make sure I find him on the floor and 

thank him. And Mr. Whitfield, thank you, my friend. I appreciate 

it. I yield back. 

Mr. OLSON [presiding]. Thank you. No more speakers—I ask 

unanimous consent that the following statements and letters be 

submitted for the record: number one, American Public Gas Association letter; number two, the Business Council for Sustainable 

Energy letter; number three, Geothermal Exchange Organization 

135 

letter; number four, Consumer Federation of America, and the National Consumer Law Center; number five, NiSource; number six, 

ASHRAE; number seven, Alliance to Save Energy, and American 

Council for an Energy Efficient Economy; number eight, U.S. 

Chamber of Commerce; number nine, Leading Builders of America; 

number 10, Retail Industry Leaders Association; number 11, Alliance for Individual Efficiencies; number 12, a Center for Progress 

report entitled, ‘‘Buildings of Tomorrow are Here Today’’; and finally, number 13, a letter from nearly 500 architectural firms in 

support of Section 433. I would like to put that in the record without objection. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. OLSON. And thank you so much to all the witnesses. On behalf of Chairman Whitfield, who is from Kentucky, watch the Kentucky Derby this weekend, the biggest event there in Kentucky, 

and without objection, we are adjourned. 

[Whereupon, at 1:29 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

We have made significant progress in recent weeks as our bipartisan energy bill 

is beginning to take shape, and today we address two key components—updating 

the Strategic Petroleum Reserve (SPR) and improving the federal government’s energy efficiency initiatives. 

It has been a full 40 years since the SPR was created in the aftermath of the Arab 

Oil Embargo as an emergency stockpile of oil. Fortunately, we never had the occasion to use the nearly 700 million barrel reserve except for relatively small withdrawals. Nonetheless, it continues to serve a useful role just in case we ever do have 

a major disruption in oil supplies. 

The Department of Energy’s Quadrennial Energy Review has highlighted the fact 

that the SPR is showing its age. In fact, DOE and others are concerned that it is 

currently in no shape to respond to an emergency and that many upgrades are 

needed. We agree, and need to consider how to modernize the SPR. 

But before we draw conclusions about what to do, our draft bill requires DOE to 

build on the work in the Quadrennial Energy Review and conduct a long-range strategic review of the SPR and recommend a plan of action. 

On energy efficiency, we believe the federal government should first take all sensible steps to minimize its own energy use. Energy Savings Performance Contracts 

are one vehicle that allows the private sector to apply its energy efficiency expertise 

to federal facilities at no cost to the taxpayer. Provisions in the draft bill facilitate 

wider use of Energy Savings Performance Contracts throughout the federal government. There are other steps the federal government can take to reduce energy use, 

and the draft bill contains measures directed toward that end. 

The bill also has provisions dealing with energy efficiency in appliances and buildings, including improved information for consumers about energy use and more rigorous analysis of efficiency standards. 

Though we may not agree on all the provisions discussed today, this hearing continues a very useful discussion that I hope will lead to bipartisan energy legislation. 

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