COMMERCE, JUSTICE, SCIENCE, AND RELATED 

AGENCIES APPROPRIATIONS FOR 2011 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED 

AGENCIES 

ALAN B. MOLLOHAN, West Virginia, Chairman 

PATRICK J. KENNEDY, Rhode Island 

CHAKA FATTAH, Pennsylvania 

ADAM SCHIFF, California 

MICHAEL HONDA, California 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

JOSE ́ E. SERRANO, New York 

PATRICK J. MURPHY, Pennsylvania 

FRANK R. WOLF, Virginia 

JOHN ABNEY CULBERSON, Texas 

ROBERT B. ADERHOLT, Alabama 

JO BONNER, Alabama 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

JOHN BLAZEY, DIXON BUTLER, ADRIENNE SIMONSON, 

DIANA SIMPSON, DAREK NEWBY, and BRAD DANIELS, 

Subcommittee Staff 

PART 5 

Page 

Department of Commerce Fiscal Year 2011 Budget 

Overview ................................................................................ 1 

National Oceanic and Atmospheric Administration 

Fiscal Year 2011 Budget Overview .................................. 123 

National Institute of Standards and Technology Fiscal 

Year 2011 Budget Overview .............................................. 233 

Economic Development Administration Fiscal Year 

2011 Budget Overview ........................................................ 313 

Economic Development Administration Grantees .......... 393 

United States Patent and Trademark Office Fiscal 

Year 2011 Budget Overview .............................................. 461 

( 

Printed for the use of the Committee on Appropriations 


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PART 5—COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 2011 


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U.S. GOVERNMENT PRINTING OFFICE 

56–756 WASHINGTON : 2010 

COMMERCE, JUSTICE, SCIENCE, AND RELATED 

AGENCIES APPROPRIATIONS FOR 2011 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED 

AGENCIES 

ALAN B. MOLLOHAN, West Virginia, Chairman 

PATRICK J. KENNEDY, Rhode Island 

CHAKA FATTAH, Pennsylvania 

ADAM SCHIFF, California 

MICHAEL HONDA, California 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

JOSE ́ E. SERRANO, New York 

PATRICK J. MURPHY, Pennsylvania 

FRANK R. WOLF, Virginia 

JOHN ABNEY CULBERSON, Texas 

ROBERT B. ADERHOLT, Alabama 

JO BONNER, Alabama 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

JOHN BLAZEY, DIXON BUTLER, ADRIENNE SIMONSON, 

DIANA SIMPSON, DAREK NEWBY, and BRAD DANIELS, 

Subcommittee Staff 

PART 5 

Page 

Department of Commerce Fiscal Year 2011 Budget Overview 1 

National Oceanic and Atmospheric Administration Fiscal 

Year 2011 Budget Overview .......................................................... 123 

National Institute of Standards and Technology Fiscal Year 

2011 Budget Overview ................................................................... 233 

Economic Development Administration Fiscal Year 2011 

Budget Overview ............................................................................. 313 

Economic Development Administration Grantees ..................... 393 

United States Patent and Trademark Office Fiscal Year 2011 

Budget Overview ............................................................................. 461 

( 

Printed for the use of the Committee on Appropriations 


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COMMITTEE ON APPROPRIATIONS 

DAVID R. OBEY, Wisconsin, Chairman 

NORMAN D. DICKS, Washington 

ALAN B. MOLLOHAN, West Virginia 

MARCY KAPTUR, Ohio 

PETER J. VISCLOSKY, Indiana 

NITA M. LOWEY, New York 

JOSE ́ E. SERRANO, New York 

ROSA L. DELAURO, Connecticut 

JAMES P. MORAN, Virginia 

JOHN W. OLVER, Massachusetts 

ED PASTOR, Arizona 

DAVID E. PRICE, North Carolina 

CHET EDWARDS, Texas 

PATRICK J. KENNEDY, Rhode Island 

MAURICE D. HINCHEY, New York 

LUCILLE ROYBAL-ALLARD, California 

SAM FARR, California 

JESSE L. JACKSON, JR., Illinois 

CAROLYN C. KILPATRICK, Michigan 

ALLEN BOYD, Florida 

CHAKA FATTAH, Pennsylvania 

STEVEN R. ROTHMAN, New Jersey 

SANFORD D. BISHOP, JR., Georgia 

MARION BERRY, Arkansas 

BARBARA LEE, California 

ADAM SCHIFF, California 

MICHAEL HONDA, California 

BETTY MCCOLLUM, Minnesota 

STEVE ISRAEL, New York 

TIM RYAN, Ohio 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

BEN CHANDLER, Kentucky 

DEBBIE WASSERMAN SCHULTZ, Florida 

CIRO RODRIGUEZ, Texas 

LINCOLN DAVIS, Tennessee 

JOHN T. SALAZAR, Colorado 

PATRICK J. MURPHY, Pennsylvania 

JERRY LEWIS, California 

C. W. BILL YOUNG, Florida 

HAROLD ROGERS, Kentucky 

FRANK R. WOLF, Virginia 

JACK KINGSTON, Georgia 

RODNEY P. FRELINGHUYSEN, New 

Jersey 

TODD TIAHRT, Kansas 

ZACH WAMP, Tennessee 

TOM LATHAM, Iowa 

ROBERT B. ADERHOLT, Alabama 

JO ANN EMERSON, Missouri 

KAY GRANGER, Texas 

MICHAEL K. SIMPSON, Idaho 

JOHN ABNEY CULBERSON, Texas 

MARK STEVEN KIRK, Illinois 

ANDER CRENSHAW, Florida 

DENNIS R. REHBERG, Montana 

JOHN R. CARTER, Texas 

RODNEY ALEXANDER, Louisiana 

KEN CALVERT, California 

JO BONNER, Alabama 

STEVEN C. LATOURETTE, Ohio 

TOM COLE, Oklahoma 

BEVERLY PHETO, Clerk and Staff Director 

(II)


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COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 

2011 

THURSDAY, MARCH 4, 2010. 

DEPARTMENT OF COMMERCE 

WITNESS 

HON. GARY LOCKE, SECRETARY OF COMMERCE 

Mr. MOLLOHAN. Well, good afternoon. 

Welcome, Secretary Locke, to our hearing today. 

Today we will hear from Secretary Locke of the Department of 

Commerce. The fiscal year 2011 budget request includes $8.9 billion in discretionary funds for Commerce, a decrease of $5.1 billion, 

or 36 percent below the fiscal year 2010 enacted level. The significant decrease is attributable to the anticipated completion of the 

2010 Decennial Census. 

But there are some significant increases in the proposed budget 

as well, including $809 million in the National Oceanic and Atmospheric Administration, or NOAA, for satellites, catch shares and 

conservation and climate change related programs, and $87 million 

in the International Trade Administration, or ITA, for the National 

Export Initiative. 

Last week this subcommittee heard testimony from the director 

of the National Institute of Standards and Technology, or NIST, 

Dr. Pat Gallagher. Later this month, we will hold separate hearings on the Economic Development Administration (EDA), NOAA 

and the U.S. Patent & Trademark Office (USPTO), which will provide us with the opportunity to look more closely at programs within those agencies. 

Today’s hearing will allow us to touch on issues of Departmental 

oversight and overarching policy issues affecting these agencies, 

while also delving into issues and funding related to other Departmental agencies, including the Census Bureau, the International 

Trade Administration, and the National Telecommunications and 

Information Administration (NTIA). 

The 2010 Decennial Census has officially begun, with enumeration in remote Alaskan villages completed. We look forward to a 

status report and timeline for the rest of the country, as well as 

discussions on current concerns, including the effectiveness and 

cost of Decennial advertising. 

Apparently, Census has gotten one thing right, Mr. Secretary, 

because everyone appears to have seen the Super Bowl ad, whatever one might think of it. 


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NTIA has significant American Recovery and Reinvestment Act responsibilities in overseeing $4.7 billion in broadband grant 

awards. While there are concerns about the delay in first-round 

awards, it is exciting to contemplate a future where high-speed 

Internet connections are as common as telephones. 

We also will discuss how ITA’s proposed National Export Initiative will help promote U.S. exports and protect U.S. jobs from unfair export subsidies. 

And finally, the Department has held a number of events and 

made quite a few announcements in fiscal year 2010. At times, the 

announcements are made well in advance of any actual implementation, and so details are scarce. The focus appears to be more on 

getting good press coverage for the Department’s efforts and less 

on the actual benefits to the public, so we intend to get to some 

of those details today. 

There is much to discuss, and Secretary Locke, thank you for 

coming. 

Following the opening statement of Ranking Member Wolf, we 

will ask you to provide a brief summary of your written testimony, 

and your written testimony will be made a part of the record. 

And now, I will call on Mr. Wolf. 

Mr. WOLF. Thank you, Mr. Chairman. 

I apologize for being late. I had some veterans in my office I just 

could not leave. 

With that, I will just submit the statement for the record. 

[The information follows:] 


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Mr. WOLF. Secretary Locke, I want to welcome you. Thank you 

very much. 

Mr. MOLLOHAN. Secretary Locke, as I mentioned, your statement 

will be made a part of the record, and we invite you to summarize. 

OPENING STATEMENT BY SECRETARY LOCKE

Secretary LOCKE. Well, thank you very much, Chairman Mollohan and Ranking Member Congressman Wolf. I am pleased to 

join you to talk about the President’s budget for the Department 

of Commerce for fiscal year 2011. 

With the 2010 census field operations ending this year, the President’s $8.9 billion request decreases overall spending from fiscal 

year 2010, but funds targeted increases for vital economic activities. Because in these challenging times, the central mission of the 

Commerce Department is very clear and straightforward, helping 

American businesses become more competitive so they put more 

people back to work. 

I want to highlight four areas where the Commerce Department’s 

efforts described in the 2011 budget are integral to that goal of putting more people back to work. First, businesses use our unparalleled statistical and technical research to develop new products, 

identify new markets and make long-term investments. For instance, the National Institute of Standards and Technology, or 

NIST, provides metrics that enable development of everything from 

a National Smart Grid, advance manufacturing processes, to airport screening devices and new cyber security measures. NIST also 

provides consulting services to American manufacturers to become 

more efficient and profitable so that they become more viable and 

competitive in a global economy. 

Increasingly, businesses are turning to NOAA for its unmatched 

weather and climate observations, and much of NOAA’s 2011 budget increase will finance its added responsibilities to implement the 

long called for restructuring of the National Polar-orbiting Operational Environmental Satellite System, commonly known as 

NPOESS. This effort will help us better meet civil and military 

weather forecasts, storm tracking and climate monitoring requirements. 

And at a time when both businesses and the President have 

called for more accurate and readily available climate information, 

the fiscal year 2011 budget assigns additional responsibilities 

NOAA’s proposed new Climate Service Office which is the result of 

a proposed budget-neutral reorganization to bring together its observational and analytical resources, now scattered throughout 

NOAA, all under one roof. 

A second key function of the Commerce Department is overseeing 

the patent protection that has incentivized American inventors and 

entrepreneurs for over 200 years. When I came to the Department 

of Commerce, the Patent and Trademark Office had a backlog of 

almost 800,000 patent applications and a waiting period of over 3 

years just to receive a yes or no on a proposed patent. We have already taken important steps to fix these problems, knowing that 

every patent application waiting in line could be a new product not 

going to market and a new job not being created. 


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And through short-term surcharges and other fee provisions, as 

well as upgrades to our outmoded IT systems, the 2011 budget will, 

along with management innovations and employee process improvements, enable the Patent and Trademark Office to grant or 

deny a patent within 12 months, and our goal is to do this by the 

year 2014, except for those innovations that are also seeking FDA 

approval, which takes several years. 

Area number three, Commerce provides direct consultation and 

funding to help communities develop crucial economic infrastructure through the Recovery Act’s Broadband Technology Opportunities Program, BTOP. By tomorrow, we expect to announce or will 

have announced close to a billion dollars to lay or activate over 

20,000 miles of high-speed Internet cable lines in underserved communities. And the fiscal year 2011 budget provides critical funding 

to ensure that all of these projects have rigorous oversight. 

Our BTOP program, our broadband technology program is a true 

public/private partnership because, just as the Federal Government 

might fund construction of an interstate across the State and then 

have local communities and governments build the streets and the 

roads that branch off of it, our infrastructure grants fund super 

high-speed Internet lines or highways that local providers, the private sector, will then connect to or tap into to bring high-speed 

Internet service directly to homes and businesses. 

The 2011 budget also provides $75 million to our Economic Development Administration for planning and infrastructure grants 

to help communities identify their unique economic strengths and 

then to develop Regional Innovation Clusters similar to what we 

have seen in Silicon Valley or the Route 128 corridor in Boston. 

And area Number four, in foreign countries, the Commerce Department serves as a lead advocate for U.S. companies looking to 

break into new markets or grow their shares in existing ones. The 

2011 budget provides a 20 percent increase to the International 

Trade Administration, which, among other things, will allow us to 

hire some 328 new trade specialists, mostly stationed in foreign 

countries, to help find buyers and customers for U.S.-made goods. 

And our target is for medium- and small-sized businesses, because 

when American companies export more, they manufacture more; 

and when they manufacture more, they hire more people. The 

International Trade Administration will play a key role in implementing the President’s National Export Initiative, which aims to 

double American exports over the next 5 years and support 2 million new jobs. 

And as we implement all these programs, results, cost effectiveness, performance and accountability are paramount objectives. 

And so we take to heart the Department’s managerial challenges 

and operational issues, as identified by our Inspector General, Todd 

Zinser, and his staff. His findings are acted upon and used to reevaluate other operations and serve as benchmarks or metrics of 

performance improvement. 

We are pleased to support and pleased that the President has 

granted our request in the 2011 budget to have increased funding 

for the Inspector General for increased oversight of departmental 

acquisitions and contracts. 


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So I thank you for the opportunity to come before you today and 

for your continuing support of the Department of Commerce and its 

programs, and I look forward to your questions. 

Thank you. 

[The written statement of Gary Locke, Secretary of Commerce, 

follows:] 


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CENSUS—2010 DECENNIAL

Mr. MOLLOHAN. Thank you, Mr. Secretary. 

Mr. Secretary, the 2010 Decennial is upon us. Could you give us 

a brief timeline of the upcoming Decennial? When will surveys be 

mailed? What is the actual Census Day? What happens if people 

don’t return their surveys? Just give us an overview. 

Secretary LOCKE. Actually, starting around March 8th, residents 

will be receiving advance letters notifying them that they are going 

to be soon receiving the Census form, and around March 15th, they 

will actually receive those Census forms. Around 11.7 million of 

those Census forms will be bilingual English and Spanish. 

By around March 22, we are going to actually make available to 

mayors and governors and local government officials, elected officials as well as Members of Congress, an interactive map which 

will enable people to actually go Census tract by Census tract and 

see within their communities how people are starting to return 

those Census forms compared to what happened in the year 2000, 

so that policymakers, mayors, public officials can do more publicity 

campaigns, public service announcements, or even target specific 

areas within their community or their State or their region to ensure that there is a full count. 

We are asking that people send back their Census forms around 

March—excuse me—April 1. And by around April 20th, all those 

forms not processed, not returned, will then become our targets for 

what we call the nonresponse follow up, which means people going 

door-to-door and trying to have the forms filled out then. That activity will actually start May 1st and go all the way through the 

middle of July. 

Mr. MOLLOHAN. How much does that nonresponse follow up cost 

per visit? 

Secretary LOCKE. I can’t tell you the exact, because sometimes 

we may have to go several times, and it depends on location. But 

for every 1 percent mail-back response, we save the Federal Government approximately $80 million to $90 million, which is why we 

have that unprecedented media campaign. 

In the year 2000, when we had the first media campaign, we actually saw an increase in participation rate, reversing a decline of 

several decades of households not returning the Census form. And 

of course, this year we are trying to make it even more simple and 

more convenient to people to fill out. Only 10 questions, should 

only take about 10 minutes. 

[The information follows:] 

The average cost per household during non response follow up (NFRU) is $57. 

Mr. MOLLOHAN. How much did the Super Bowl ad cost? 

Secretary LOCKE. I think we spent about $2.5 million, and I 

think we reached about over 50 percent or 45 percent of all households in America. You compare that with a 30-second ad, and we 

had three 30-second ads during that Super Bowl, compared to, I 

think, a cost of almost a half million for one 30-second ad during 

American Idol, and that reaches only about 10 percent of American 

households. 

[The information follows:] 


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2010 DECENNIAL CENSUS

The 2010 Census advertising campaign spent $2.5 million for one 30-second and 

two 15-second pregame spots, two on air mentions during the pregame show, and 

a one 30-second ad during the third quarter of the game. 

Mr. MOLLOHAN. And how much was that per person that saw it? 

Secretary LOCKE. Two cents per person. 

Mr. MOLLOHAN. 2.15. 

Secretary LOCKE. 2.15. And I know there has been a lot of comment about that Super Bowl ad, along with all the other Super 

Bowl ads. And it seems like maybe that is the point of it, to foster 

this discussion. Because I was puzzled by many of the other ads 

that I saw during the Super Bowl, wondering what their point was. 

But what we do know is that there was a lot of discussion, both 

pro and con, about that Super Bowl ad involving the Census, and 

there was unprecedented chatter among YouTube and other social 

media. So we got people talking about the Census. 

Mr. MOLLOHAN. Well, for 2 cents a person, you got a lot of play 

on it, didn’t you? 

Secretary LOCKE. Yes. 

Mr. MOLLOHAN. Good. Congratulations. 

The cost of the nonresponse follow up, that has been recently revised, and I am just curious. What made it necessary to revise it, 

if you’re able to answer that? 

Secretary LOCKE. Well, we are trying to constantly revise that, 

and we also have a cushion, but we took some of the lessons that 

we learned from the address canvassing, which was conducted in 

the spring, when we sent several hundred thousand people to make 

sure we had the right addresses, documenting that new buildings 

were there, or buildings may have been demolished, updating really the list of addresses from local governments as well as the Postal 

Office. 

And we had some cost overruns in that particular operation, primarily because we hire people and train them and expect a certain 

rate of attrition, people who, after 1 day canvassing addresses, saying, this is not for me. I don’t want it. I am quitting. Or people who 

then get another job and say, I am quitting, and I don’t need this 

temporary job from the Census Bureau. It turns out that because 

of the tough economy, we had a much smaller attrition rate, and 

so we ended up training more people than we actually needed. And 

so we are taking that into account in terms of the number of people 

we will actually hire, building in a revised attrition rate for the non 

response follow up. 

Mr. MOLLOHAN. So you feel this is going well? Do you anticipate 

any problems? And to the extent you have anticipated any problems, do you have adequate funding to address them? 

Secretary LOCKE. We do have a reserve built in. We have had 

other operations that have come in under budget and ahead of 

schedule. But we still have almost a half a billion dollars set aside 

for the nonrespone follow up. 

Starting around March 22nd, when we start seeing the initial 

mail-back of the Census forms, community by community, ethnic 

group by ethnic group, we will have a better sense of how things 

are going and how we can redeploy, using local government offiVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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cials, nonprofit agencies, churches to get the message out and to be 

as proactive and as nimble as we can. 

Mr. MOLLOHAN. If your mass advertising was a success, how 

about your targeting specific hard-to-reach groups? What are your 

strategies with regard to that, and how successful do you think you 

are being or are going to be? 

Secretary LOCKE. We have an unprecedented level of community 

partnerships, churches, community organizations, nonprofits, corporations, most of the mayors and governors, elected officials. Local 

elected officials have put together what they call complete count 

committees, because we rely on community organizations, faithbased organizations, respected organizations within the community 

to basically buttress and reinforce our message. A lot of concern 

among immigrant groups about participating, people who are new 

to this country, who don’t understand the history and the constitutional basis for the Census may not want to participate. So it is a 

challenge to get that message out. 

For the first time ever we are sending out the bilingual Census 

forms in Spanish and English. We have language guides in some 

59 different languages, also Census forms printed up in other languages, Vietnamese, Korean, Russian, Chinese, and one other. But 

it is an unprecedented effort to really try to reach out to people. 

Mr. MOLLOHAN. Do you think you are being successful, and do 

you have any measurement of that to date? 

Secretary LOCKE. We do have Gallup polling which shows the 

awareness of the Census is pretty high. 

Mr. MOLLOHAN. What about willingness to participate by these 

hard-to-reach groups? 

Secretary LOCKE. It is fairly high. I think we always would want 

as close to 100 percent, but right now, I think the indicators are 

about 80 percent of households plan to participate. 

Mr. MOLLOHAN. And is that a general number, or is that—— 

Secretary LOCKE. That is on average, but we are tracking it ethnic group by ethnic group. 

Mr. MOLLOHAN. I am really looking at these hard-to-reach 

groups, these groups where language challenges, maybe community, cultural issues make it more difficult. Do you have unique 

strategies to identify those people and to make sure you get as 

exact an account as possible in those communities? 

Secretary LOCKE. We are tracking both awareness by ethnic 

group, traditionally hard-to-count groups, as well as intent to participate. Then we have unprecedented direct media in different languages, Telemundo, Univision, local newspapers, and radio stations 

among the different ethnic groups. 

Mr. MOLLOHAN. Trying to take the fear out of it where it might 

exist. 

Secretary LOCKE. A lot of it. And that is why the trusted leaders 

of the community are so critical. It is one thing for a government 

official to say it, but when church leaders say it, when key members of their local community say it, that has much more power. 

Mr. MOLLOHAN. Mr. Wolf. 

U.S. PATENT AND TRADEMARK OFFICE

Mr. WOLF. I thank you, Mr. Chairman. 


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Mr. Secretary, a few months ago, an inventor came to my office 

to raise concerns that the USPTO put his complete patent application for cryptology software on the Internet. He is prohibited from 

exporting this product because of its potential military and intelligence capabilities. And he did not want to, I want to make that 

clear. 

Our system of export controls is meaningless if the plans for developing dual-use technologies are posted by the U.S. Government 

on the Internet. We all know that our country’s adversaries and rivals are aggressively working to steal as much of our intellectual 

property as possible. It is a national security issue. It is a job issue, 

too, but it should be addressed immediately. 

If you need legislation, would you please submit a proposal and 

maybe some language that the committee could carry. 

Are you concerned that patent information on dual-use technologies is on the Internet? And what is your plan for addressing 

this national security issue? 

Secretary LOCKE. Well, I am not aware of that particular situation, and I do know that information, applications, to some extent, 

are posted on the Internet to make sure that those who might contest the novelty or the uniqueness of that innovation can be heard 

as we make the determinations about patentability and whether it 

should be patented. 

But obviously, I don’t know the extent to which we do reveal or 

publicize on the Internet or any other method the complete contents of a new technology. And especially, as you say, if it involves 

military application we need to be very, very careful about that because, on the one hand, the United States Government wants to 

protect our national security, and we are trying to restrict exports, 

making sure that items that have strictly military applicability on 

the list conducted and administered by the Department of State, or 

even things that are dual-use civilian products that may have military application do not fall into the wrong hands. And as Brent 

Scowcroft, the former National Security Adviser to President Bush 

indicated in the study conducted by the National Academy of 

Sciences a year ago, we need to do a much better job of protecting 

various technologies that could really do us harm. 

Mr. WOLF. Well, could you look into this? Because we have heard 

from others that the Chinese surf your information and see what 

ideas are out there and, many times, take it. And we know the 

cyber attacks—we have some questions on that—come in to find information. So if you could do that, maybe get back to the committee, right away because it may be something that you are not 

aware of, your people are not aware of that could be corrected without any legislative of language. But if you could let us know, we 

would appreciate it. 

Secretary LOCKE. Thank you. 

BUREAU OF INDUSTRY AND SECURITY—EXPORT CONTROL REFORM

Mr. WOLF. We understand the administration has undertaken a 

multi-agency effort to reform our Nation’s export control laws. This 

could be beneficial exercise because our export control laws are 

very complicated with Commerce, Energy, State and Defense all 

playing different roles, depending on the product. 


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However, I am concerned that business interests may prevail 

over national security interests. How would these reforms strengthen our ability to prevent our enemies and rivals from stealing dualuse technology that could be used against the United States and 

our allies, or used against their own people to restrict basic human 

rights? 

Secretary LOCKE. Thank you very much, Congressman Wolf. 

And as I indicated, Brent Scowcroft and others authored the report by the National Academy of Sciences and called for major reforms of our export control system that, in many cases, we need to 

build higher fences around very sensitive technologies that are 

unique to the United States, manufactured, produced in the United 

States, that if they fall into the wrong hands could do us harm. 

At the same time, the report indicated that there are many other 

things, civilian items that may have military application, that are 

readily available by other countries from other companies around 

the world and that our restrictions oftentimes put our U.S. companies at a disadvantage, especially when those products are readily 

available almost at Radio Shack or Home Depot, or other companies around the world advertise that they will ship it to a purchaser within the next 24 hours. 

And even the head of the European Aerospace Industries Association openly advised members within Europe not to seek any 

technology that might come from the United States because of the 

difficult export control regime. That deprives U.S. companies of opportunities to engage in research, to advance their products, and to 

get revenues so that they can continue to perfect their products, 

which can then also benefit our military and our national security. 

In this export control reform that the President has called for, 

first and foremost must always be national security. Are we protecting, enhancing our national security? And whatever commercial 

benefits may come from modernization or reform of the export control system, the number one objective has to be national security. 

And that has to be paramount. 

I can tell you that, for instance, within the Bureau of Industry 

and Security, when we issue licenses for dual-use exports, we may 

allow a U.S. Company to export something to, let’s say, France. We 

never really follow up to see if that company in France is improperly re-exporting to a country that is unfriendly to the United 

States. So what we would like to do within the Department of Commerce is reform that effort, free up people, so that we are actually 

doing that additional monitoring to make sure that those items 

that are properly licensed are not falling into the wrong hands. 

BIS—CRIME CONTROL TECHNOLOGIES

Mr. WOLF. Well, I would encourage you to do that quickly; 60 

Minutes had a piece on that about 3 weeks ago, that precise thing. 

And if there is anything, again, that the committee can do to give 

you that authority and that ability, I hope you will let us know. 

Crime control and law enforcement technologies can be exported 

to foreign governments and used to abuse human rights. The Bureau of Industry and Security is currently working to update crime 

control and law enforcement items contained on the Commerce 

Control List. In addition, they are working on a more complex 


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crime control review to address developing technologies, such as biometric identification systems, training simulators and surveillance 

systems. 

What is the status of these efforts? It is not uncommon to hear 

stories of a dissident in a particular country being tortured with 

equipment that has been made in the United States and that sometimes an American company, either knowingly or maybe unknowingly, has sold to that company, cattle prods, things like that. Can 

you update us on where that is? 

Secretary LOCKE. Well, our Department of Commerce and Bureau of Industry and Security is very much committed to effectively 

controlling these dual-use items that also, not just could be used 

for military application against us and our allies but also could 

hinder or abuse human rights. And so we are looking at prohibitions on the export of crime-control items to countries such as 

China and even instruments that could be used for torture. So that 

is part of our control list, and we take that seriously. 

Mr. WOLF. It should not only be China, though. I think that is 

very good. But Egypt has done some torturing, and you can just go 

down the line. So I would hope it would be with all the countries 

that may very well be. 

NTIA—CELLULAR DETECTION AND JAMMING TECHNOLOGIES

Secretary LOCKE. Yes, sir. 

Mr. WOLF. We understand that contraband cell phones—and the 

prison system will tell you this—are increasingly being smuggled 

into State and Federal prisons and used by inmates to orchestrate 

prison breaks, conduct illegal activity, and harass or intimidate 

judges, lawyers or former victims. The fiscal year 2010 conference 

report directs the Department of Commerce to work with the FCC 

and the Department of Justice to develop a plan to investigate and 

evaluate how wireless jamming detection and other technologies 

might be utilized for law enforcement and correction applications 

in Federal and local prisons. What is the status of this plan, and 

what is the Department doing? 

Secretary LOCKE. We just recently conducted such a test involving the Federal Bureau of Prisons, along with manufacturers, and 

we did this at the Federal correctional facility here in Maryland. 

Mr. WOLF. And what did you find? 

Secretary LOCKE. The results are not yet in. But our goal is to 

make sure that we can jam those cell phones that are somehow 

being smuggled in to prisons, State or local prisons, and make sure 

that whatever technology that we use is not hampering cell phone 

use by, let’s say, prison guards or administrators within the prison, 

or even first responders who might have to come into a prison in 

a time of a riot or a disturbance. 

So we have got to make sure that, whatever we do, it is not hurting the necessary communication of law enforcement individuals 

who are operating within a prison or who are coming into the prison on an emergency basis. So we don’t have a report yet, but we 

are very interested in getting that. 

Mr. WOLF. How close are you to having a report? 


srobinson on DSKHWCL6B1PROD with HEARING
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Secretary LOCKE. I would have to get back to you, sir. The test 

was just conducted on over a 3-day period from February 16th to 

the 19th, so that was only about 2 weeks ago. 

[The information follows:] 

It is the Administration’s view that the use of cell phones by prisoners to carry 

out criminal enterprises is intolerable and demands an effective solution. The solution may include jamming technology, but we must ensure no harm is done to public 

safety, Federal and law enforcement activities or to use of cell phones by law-abiding citizens. In December and early January, NTIA’s Institute of Telecommunications Sciences in Boulder, Colorado performed radio measurements of a jamming 

device in a closed environment. These tests were followed by on-site measurements 

at the Cumberland, Maryland federal correctional facility. Those tests were coordinated with the equipment manufacturer and the Bureau of Prisons and NTIA 

worked with the Bureau of Prisons to issue final reports on test findings. NTIA released its findings on the Cumberland test in May 2010. In May, NTIA also produced a technical memorandum analyzing the data in these reports. NTIA then 

issued a Notice of Inquiry seeking public input concerning technologies that could 

help eliminate contraband cell phones in prisons. Comments on this NOI are due 

in mid-June. NTIA expects to complete a report by the end of 2010. 

Mr. WOLF. Who did the test? 

Secretary LOCKE. It was conducted by our NTIA, National Telecommunications Information Administration, along with the Federal Bureau of Prisons. 

Mr. WOLF. When do you think you are going to have the final 

report? And how do you plan on letting the different prison systems 

know? Is there any particular approach you have in mind or what? 

Secretary LOCKE. Well, we will definitely inform the members of 

the committee and all others who are interested. 

I know that, for instance, Senator Mikulski and Senator 

Hutchison have a strong interest in this, and we will certainly report back to the appropriate committees. 

And I think that ultimately we need to share this with law enforcement and prison officials because this is a growing problem, 

not just in the Federal prisons but the State prisons. Our jurisdiction, of course, can only be over the Federal prisons, but I think 

we would want to share this with local law enforcement. 

Mr. WOLF. Maybe you ought to ask Director Lappin once it is 

available to get it out to all of the State and local prison systems 

and to the Governors. But if you could kind of keep us informed. 

I have some other questions, but I will pass. And thank you. 

Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Wolf. 

Mr. Schiff. 

ACCESS TO CREDIT

Mr. SCHIFF. Thank you, Mr. Chairman. 

There were a couple of areas that I wanted to raise with you, Mr. 

Secretary, and if one or either are in a different jurisdiction, that 

is fine. Let me know that. The first is probably the most recurrent 

concern that I hear from my constituents in terms of the business 

climate and the economy—the inability of small business owners to 

access credit. And I have so many business owners that will tell me 

that they have had a perfect relationship with their bank for 25 

years. They have a perfect credit history. They want to make an 

investment in equipment or maybe want to make additional hires, 

and their bank of all that time is telling them they can’t do it or 


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are requiring such onerous conditions that they can’t get access to 

credit, can’t meet payroll, certainly can’t expand their businesses. 

So I would like to get your sense of what you think, within the 

jurisdiction of Commerce, can be done about this. 

The other area that I wanted to raise, which is very important 

to my constituents as well, many of whom are in the business of 

producing content that is sold all over the world, and I just met 

with a group of publishers who are very concerned about the dramatic proliferation of intellectual property theft of published works. 

But this has been true for a long time in the music industry and 

film and TV industry. So I would like to ask you about how we can 

beef up our efforts to go after intellectual property theft. 

Secretary LOCKE. Two very important issues. 

On the issue of access to credit, we are hearing that in talking 

to small- and medium-size companies and large companies all 

around the country. It is a major, major problem because while the 

big banks have been rescued and are profitable, nonetheless, the 

regulators appear to be putting enormous pressure on them to be 

much more conservative with respect to their lending practices, 

even to companies that have long been very good, who have always 

repaid their loans and are very, very profitable. 

Mr. SCHIFF. Can I just ask you about that? I am sorry to interrupt. I won’t interrupt you again. But I do hear that comment 

made secondhand via the small business owners. They say, well, 

the bank is telling me the regulators are breathing down their 

neck, and I have really been curious about that. Is it really the regulators telling them not to lend or to be really, really conservative 

in their lending? Or is this an excuse being used by some of the 

banks to hold on to their capital and increase their liquidity on the 

books? Is it really a problem with the regulators, or are the regulators being the fall guy for the banks? 

Secretary LOCKE. Well, it could be a combination of the two. And 

it would have to depend on a bank by bank situation. Perhaps 

Treasury officials could, and banking officials are the ones really 

more appropriate people to really ask or to dive down into to get 

that information. 

But I can tell you that the President, of course, has called for a redirection of some $30 billion in not used TARP money to be targeted toward community banks with incentives for those community banks, which oftentimes are closest to those small- and medium-size companies who have that relationship with them, familiar with their operations, to make these loans available. 

Also, the Small Business Administration has increased its Loan 

Guarantee Program up to 90 percent, and there is consideration to 

modifying even that. 

And of course, under the National Export Initiative that the 

President announced, he has called on the Ex-Im Bank to increase 

the amount of financing available for medium- and small-size business from the current $4 billion of activity to $6 billion of activity. 

But it is going to require, I think, a very comprehensive holistic 

approach to address this issue of access to capital. 

Mr. SCHIFF. On the President’s program, and I support that completely, to use some of these TARP funds to incentivize the small 

and community banks to lend, will there be conditions placed on 


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the access of those small and community banks to these funds, in 

the sense that if they are going to get the funds, they really need 

to increase their lending portfolio? Because, you know, I have 

heard secondhand some of the small banks saying, we will take the 

money, but we are not going to use it to lend. They are just going 

to hang on to it. 

And I think we saw this with some of the big banks that got 

TARP funds, that they used it to improve their bottom line but not 

necessarily to get the economy moving. How can, through this program, we ensure that if banks make access to this, that they in fact 

use it to lend? 

USPTO—INTELLECTUAL PROPERTY RIGHTS

Secretary LOCKE. I would have to really defer to Secretary 

Geithner and others in the Treasury Department for all those details in terms of the checks and balances or the incentives and the 

requirements. 

With respect to the issue of content and publishers, violation of 

intellectual property rights is a big concern. American companies 

are losing billions and billions of dollars in lost sales, and actually 

hurting job creation, whether it is in the music industry or the film 

industry, and we are focusing on that. 

The Vice President has convened a multi-agency task force involving Homeland Security, Justice Department, Commerce, Patent 

and Trademark Office. And we know that there is a lot of tension 

even among the new information technology providers in terms of 

their responsibilities. Are they simply the postmen and should not 

be liable for what is contained or transmitted over their lines? 

So the Department of Commerce, while we help enforce intellectual property rights and in all of our meetings with government officials really press the issue of enforcement of intellectual property 

rights, nonetheless, we, for instance, the Department of Commerce 

are hosting a forum of industries, both those who provide, create 

the content as well as those who transmit that content through to 

look at this very issue. 

Mr. SCHIFF. Thank you Mr. Secretary. 

And thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Schiff. 

ITA—NATIONAL EXPORT INITIATIVE

Mr. Secretary, the fiscal year 2011 budget proposes a net appropriation of $534.3 million for the International Trade Administration. Of that amount, the budget requests $83.5 million for a National Export Initiative. You have referenced that. Does this initiative include an increase in funding for the agency responsibilities 

associated with challenging unfair trade? 

Secretary LOCKE. Yes, it does. Part of that funding for the International Trade Administration under the National Export Initiative 

includes folks dealing with trade compliance and enforcement. 

Mr. MOLLOHAN. How much of this initiative is directed to the responsibility associated with challenging unfair trade? 

Secretary LOCKE. About 15 percent of the funds. 


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Mr. MOLLOHAN. Is this increased funding on imports coming into 

the U.S. from abroad, or does it just increase funding for challenging unfair trade when the U.S. exports? 

Secretary LOCKE. It would be both. 

Mr. MOLLOHAN. Can you talk about it separately, and how much 

is for challenging unfair imports versus—— 

Secretary LOCKE. Well, excuse me, the 11 percent is more for enforcement and compliance of U.S. trade laws. Then we have another sector of trying to break down market barriers in other countries to U.S. products and services. 

Mr. MOLLOHAN. Well, that is what I am trying to tease out of 

here. How much of the increase will be used for challenging unfair 

trade on imports, unfair imports? 

Secretary LOCKE. That is approximately $11.8 million or 15 percent of the funds requested for the Department of Commerce. 

Mr. MOLLOHAN. Do you agree that the production of a billion dollars, for example, worth of goods in the United States that substitutes for a billion dollars worth of unfairly traded imports creates or preserves just as many jobs as a billion dollars worth of exports? 

Secretary LOCKE. That was a pretty complicated question there. 

Mr. MOLLOHAN. Do you agree that if you save the number of jobs 

that it takes to create a billion dollars worth of exports, that that 

is worth just as much as preventing a billion dollars worth of unfair imports; that for the domestic market it is worth just as many 

jobs as going out and creating export opportunities worth a billion 

dollars? 

Secretary LOCKE. Oh, very much so. A billion jobs is a billion 

jobs. 

Mr. MOLLOHAN. Well, it is a billion dollars worth of jobs. My 

point is that we hope that the Commerce Department will focus 

just as aggressively on unfair imports as we are in trying to break 

the barriers, unfair barriers that exist to our exports. And there 

are a lot of industries that are very sensitive to that and felt that 

not as much attention has been given at Commerce. And so we applaud you for this initiative and hope that it is focusing on unfair 

imports as well as trying to break log jams that unfairly exist for 

exports. 

Secretary LOCKE. As the President has noted on many occasions, 

America is perhaps one of the most hospitable countries for investment. We have almost the fewest barriers of any country around 

the world, and that is why, if we open our markets to products 

from other countries, it is incumbent upon other countries to reciprocate. And it also means that other countries have to abide by the 

rules of trade. Otherwise, American companies don’t get the advantage or the full measure of whatever bargains and treaties and 

agreements we make with our countries. 

If we are able to create jobs and create new jobs, that is terrific. 

But if we already have jobs that are here in America, we need to 

save every single one of those. And if that means making sure that 

countries are not improperly selling their products at below normal 

cost, or not taking advantage or having extra advantage because 

their governments subsidize those products or services, then we 

need to go after those because we are talking about existing jobs. 


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And unfair trade practices by other countries that disrupt existing 

jobs has tremendous impact to the people involved, their families 

they support, as well as their entire communities. 

Mr. MOLLOHAN. Thank you for that affirmation, Mr. Secretary, 

and we look forward to working with you in ensuring that the administration is really up on full alert with regard to that. 

ITA—TRADE COMPLIANCE—ENFORCEMENT

The positions included in the overall trade compliance enforcement increase, will any of those positions work on reducing foreign 

subsidy programs? In other words, are you increasing your staff to 

look at foreign subsidy, where foreign subsidy programs exist, and 

identifying that as unfair competition? 

Secretary LOCKE. Well, we do have specialists who look at those 

various parts. 

Mr. MOLLOHAN. Do you have sole jurisdiction over subsidy investigations? 

Secretary LOCKE. We don’t have people focused on subsidy investigations unless they are part of a complaint that has been filed 

that we then investigate. 

[The information follows:] 

TRADE COMPLIANCE—ENFORCEMENT

The Department of Commerce has sole authority for investigating subsidy allegations in countervailing duty proceedings. In addition to the responsibilities for subsidy investigations, the Department also has a team of subsidy experts which research, monitor, analyze, and assess the WTO-consistency of foreign government 

subsidy practices. These practices are addressed, as appropriate, including through 

WTO-dispute settlement action, working with USTR. I envision that these enforcement efforts will increase under the NEI. 

Mr. MOLLOHAN. Do you agree that, in order to have free trade, 

currencies must float? 

Secretary LOCKE. That is the position of the United States. 

ITA—CHINA’S CURRENCY MANIPULATION

Mr. MOLLOHAN. On February 26, 2010, the Wall Street Journal 

reported that 15 Senators, including six Republicans, sent a letter 

to you, Secretary Locke, noting serious concerns about the Commerce Department’s failure to conclude that China’s currency manipulation is, in fact, a countervailing subsidy to its domestic exporters. 

The article goes on to state that you made a pledge in December 

to thoroughly investigate such allegations. The article quotes the 

President as saying that the U.S. needs ‘‘to make sure our goods 

are not artificially inflated in price, and their goods are not artificially deflated in price; that puts us at a huge competitive disadvantage.’’ 

And the article notes that the Federal Reserve Board chairman, 

Ben Bernanke, ‘‘echoed these concerns, calling on China to be more 

flexible towards its currency.’’ Is the Department investigating the 

allegations that China’s currency manipulation is a countervailing 

subsidy for its domestic exporters? 

Secretary LOCKE. The petitioners in that particular case have 

filed an amended complaint alleging that the undervaluation of the 

currency constitutes an unfair subsidy, along with several other alVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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legations, and we are investigating that. And I cannot comment because it is under investigation right now. 

Mr. MOLLOHAN. My question was only, is that under investigation by the Department? 

Secretary LOCKE. Yes. 

Mr. MOLLOHAN. When will we hear results of that investigation? 

Secretary LOCKE. I believe that it depends on whether or not the 

petitioners will grant us an extension to add these additional elements into our investigation. If they don’t grant us an extension, 

we have a statutory deadline by which me must respond to the initial set of allegations, and with these additional allegations, that 

is are very complex in nature, we need to be sure that we have sufficient time. 

Mr. MOLLOHAN. Thank you Mr. Secretary. 

Mr. Fattah. 

CENSUS 2010 DECENNIAL PARTICIPATION

Mr. FATTAH. Thank you, Mr. Chairman. 

Mr. Secretary, it is good to see you again. 

And let me just, I want to focus in on the Census which is one 

of the instant matters before your Department. 

The Census, plan was essentially developed under the previous 

administration? 

Secretary LOCKE. Much of the work of the Census was planned 

several years ago, under the previous administration, almost 4 

years ago. 

Mr. FATTAH. Because there is some noise out in the atmosphere 

from conservatives with respect to the Obama Census plan—yet 

this is a plan that was put in place years ago, before the President 

was sworn in and before you took office, too, in terms of this year’s 

Census, right? There should be no reason for anyone in our country, no matter what their political stripes, to not encourage people 

to comply with the Census. It is important data that the government needs to go forward, right? 

Secretary LOCKE. It is a constitutional responsibility of the government, and it goes all the way back to 1790 under President 

George Washington. It is the sacred duty of every resident of the 

United States. 

Mr. FATTAH. I just raised it because I heard someone on Fox 

News, saying that if they had gotten this form, they weren’t going 

to fill it out; that they couldn’t encourage anyone else not to fill it 

out. This person is a judge or a former judge purported to be giving, you know, some overview about this. 

But I think that we should be encouraging everyone, wherever 

they may be to participate in the Census. It is important to the 

work of the long-term planning for a whole range of issues, transportation, education, and the like. 

And I just wanted to see if we could just put on the record that 

the program of the Census, that is, the short form, the planning 

for the implementation of this, that you really are the conductor on 

this train, but, as the conductor on the train, the tracks and the 

direction of this program was put in place by the former administration, which was a Republican administration. Is that correct? 


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Secretary LOCKE. That is correct. And, in fact, the questions were 

all submitted to the Members of Congress, I believe 2 years ago, 

and approved by the Members of Congress 2 years ago. 

Mr. FATTAH. So this nonsense is nonconstructive in terms of 

doing the important constitutional work that your Department has. 

And I just wanted to put that on the record. I appreciate you being 

here. 

I thank the Chairman for yielding me time. 

Secretary LOCKE. Thank you. 

Let me just add that the Census program is really run by career 

people, nonpolitical people. 

Mr. FATTAH. I know, but the political atmosphere sometimes in 

our city doesn’t allow common sense to rise to high places, or when 

people have responsibility to act responsibly. So thank you. 

Secretary LOCKE. Thank you. 

Mr. MOLLOHAN. Occasionally. 

Mr. Wolf. 

Mr. WOLF. I thank you, Mr. Chairman. 

I didn’t know Mr. Fattah watched Fox News. I think that was 

interesting. 

Mr. FATTAH. I do. I am a big fan. 

Mr. WOLF. Oh, good. There you go. 

Mr. FATTAH. It is hard to find the news portion thereof; it is colored with so much opinion. 

JOB PROTECTION, COMMERCE’S ROLE

Mr. WOLF. I have a couple of questions, and I think we are going 

to come back. And I don’t want to miss the vote. 

One thing I would like, and it is not really a question, but have 

you ever considered, because your job is a very important job, I 

think the Secretary of Commerce can make a tremendous difference with regard to jobs. And following up with what Mr. Mollohan, the chairman said, have you ever thought of having a tiger 

team or an advocate team in the Department of Commerce to help 

small businesses who are looking to protect jobs? For example, a 

Chinese firm will hire a Case & White up in New York and come 

in and just pound and pound onto a small business who really can’t 

afford a Wall Street firm or a K Street firm. Have you ever thought 

of putting together an advocate team that will help people who are 

going through exactly what the Chairman was saying, where there 

is a foreign entity coming over, pounding, taking the jobs away? 

Have you ever given that any thought? 

Secretary LOCKE. Well, we do have various groups like that. For 

instance, we recently created an Office of Innovation and Entrepreneurship reporting directly to me, focusing on the issues of entrepreneurs because, for instance, in the last 30 years, virtually all 

the net new jobs in America came from entrepreneur start-up companies. 

Mr. WOLF. But I mean to protect them in a way that when they, 

when these high-powered people are coming in? If you are an entrepreneur, you are small; all of a sudden, this foreign interest 

comes in. They have one of the best law firms in Wall Street coming in. How do you advocate or protect them? Or maybe you 


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should— would you think about it? Maybe there are some ideas 

that maybe you and I can chat about. 

Secretary LOCKE. Sure. 

JOBS REPATRIATION

Mr. WOLF. The second thing was, and I don’t know how much 

time we have left, have you ever given any thought to putting together a repatriation team, a team whereby you would go around 

the country talking to American companies that are doing business 

in China and Bangladesh and Mexico and Guatemala, wherever 

the case may be, and say, we want to repatriate you. Not a Governor from Washington State taking a job from California or vice 

versa, but getting a job back from China, back from India, back 

from wherever. You would put together a high-level, bipartisan, 

nonpartisan team that would go out and meet with the head of 

Intel and say, hey, we have a great opportunity. Come home. Bring 

your jobs back home. Have you ever put together a major effort to 

do that? 

Secretary LOCKE. Not in the way that you have described, but we 

have been having discussions with major industries about what we 

can do to help them create more jobs here at home. 

Mr. WOLF. Well, the best job, though, is a job that is abroad that 

should have never left a little town in West Virginia or a little 

town in Virginia, that was taken over by it, and it is gone. And I 

think to find these American companies who, I believe, if given the 

right incentive and the right encouragement by the administration 

and by somebody like you, I would encourage you, if we can talk 

about it, maybe offline here, putting together a team and picking 

25 of the largest American companies, good companies. Generally, 

the way to bring them back and in the past has been punish, but 

instead to see if there can be an incentive where there can be an 

incentive to scatter. Because you may want to come to Martinsville 

in southern Virginia, whereby you can pay a little less of a salary 

than you may pay if you are going to move it to the suburbs of New 

York City. But they want to come home. They want to come back. 

But if we could talk about maybe developing an incentive and if 

you could also have someone call me to see what literature is out 

there about any major action that has been done by this administration or other administrations in repatriation. Again, I am not 

talking about Governor of this State stealing from this State, but 

a Governor or a President or administration looking to go abroad, 

American companies solely, beginning, who were doing a good job 

in the United States, who, for whatever reason, moved abroad, to 

see if we could repatriate them back. 

Secretary LOCKE. I will be happy to have that conversation with 

you. 

Mr. WOLF. If you could. Thank you. 

With that, Mr. Chairman, I will yield back. And we are going to 

come back I assume. 

Mr. MOLLOHAN. We are coming back from the vote. 

ITA—NATIONAL EXPORT INITIATIVE

Mr. Secretary, in the National Export Initiative, you propose $4.4 

million for increased outreach and guidance to small and medium 


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enterprises. And that includes a new Nationwide Export Education 

and Awareness Campaign and a National Series of Export Conferences and a Program of Assistance Outreach and Education tailored to the small and medium enterprises. This is a worthy goal. 

This is a worthy initiative. This, I am sure, works well in some 

places, this whole notion of really trying to mine companies who 

are not sophisticated exporters and are small- to medium-sized and 

to try to pull—it is a mine-pull program. It is not easy. I wish you 

all the success in the world. 

My first question has to do with the statement that accompanied 

our fiscal 2010 omnibus where we directed ITA to provide a report 

to the Committee on Appropriations, not later than 60 days after 

enactment, on the status of the current program, the pre-National 

Export Initiative program. And you can reference the language, the 

omnibus language in the conference report. But we haven’t yet received the report. The question is, why not? And when can we expect it? 

What I am really interested in is telling you how strongly this 

committee will actually support this initiative. And we will be looking to see what reality is with regard to it after a short period of 

time. We recognize, those of us who are from economies that are 

extraction and manufacturing, how important it is to get this 

small- and medium-size business entrepreneurial engine going in, 

hopefully, a lot of diversified kind of economies. But getting access 

to that international market, and I can tell you I have personally 

been involved with, in a serious real way, with trying to help other 

entities facilitate those relationships, is not easy to do. 

So I will be really interested to see what this National Export 

Initiative ends up looking like. I will be very interested to see your 

report, and to work with you on it, and to support it in this bill, 

and look to your request, which will make judgments, obviously, to 

the extent which we support it on performance. I think I would like 

to, before we recess here for the vote—and we will be coming back 

right after these three votes to finish up. And it won’t take very 

long to finish up after we come back. 

EMERGENCY STEEL GUARANTEE LOAN PROGRAM

The Emergency Steel Guarantee Loan program, Mr. Secretary. 

The fiscal year 2011 request, proposes to reduce the Emergency 

Steel Guarantee Loan program by $43.1 million. And Congress just 

extended the authorization for this program in the 2010 omnibus. 

What is the administration’s rationale for reducing the Emergency 

Steel Guarantee Loan Program nearly 90 percent? 

Secretary LOCKE. We have not had any loan activity on that for 

several years. The loans have all been paid back. There has been 

no activity, no loans. Only three loans have been made through the 

program, none since the year 2000. 

Mr. MOLLOHAN. Well, if we approved your request and then 

there were a need, particularly in this current economic climate, 

then you wouldn’t have any money to effect the program? 

Secretary LOCKE. Well, there are no outstanding loans. There 

have not been any requests, even in the last year. 

Mr. MOLLOHAN. I know, but we are looking perspectively. We are 

looking into 2011. 


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Secretary LOCKE. That is why we have proposed leaving at least 

some money in the account. 

Mr. MOLLOHAN. But the money you have in the account is less 

than a placeholder. I mean, I can’t imagine a situation that could 

exist that would actually be benefitted by $5.2 million. 

Secretary LOCKE. That is the administration’s position, and we 

have just looked at the course of the history of the program since 

its inception. 

Mr. MOLLOHAN. Well, let me ask you this, do you think it is possible that some steel companies in the next year might have a need 

and be able to participate in the Emergency Steel Guarantee Loan 

Program? Do you think that is possible? 

Secretary LOCKE. That is possible. That is why we have left some 

funds in the account. 

Mr. MOLLOHAN. What will that, if you were, if we were to ap- prove your request, what would the $43.1 million, how would you 

redirect that? Is any of it going to be used for import trade enforcement programs? 

Secretary LOCKE. Well, that is all part of the funds that go into 

the Department, and that includes funding for all the enhancements including the National Export Initiative. So I can’t say that 

it was this dollar that went into this program because once it goes 

into the kitty, how do you know which dollar is funding which? 

Mr. MOLLOHAN. Well, it is not here, and it is there, so—well, we 

will be looking at this very closely and working with you. 

And we will return after the third vote, Mr. Secretary, and 

should finish up within a half hour of that. 

Secretary LOCKE. Okay. Thank you. 

Mr. MOLLOHAN. The hearing will resume. 

Mr. Wolf. 

Mr. WOLF. Thank you, Mr. Chairman. 

JOBS REPATRIATION

Following up, could you have someone—and I know how busy 

you are—call me next week who you think is the most knowledgeable person in the Department on this issue? I would love to see 

us put together a repatriation program. And because I think there 

has been a tendency to just criticize and condemn, and maybe to 

flip it the other way around and see what incentives could be 

granted. I think most of these companies would really, like to have 

an opportunity to kind of come home. 

And I know, as a Governor, you have probably been in competition with different Governors to get someone to come to your State 

versus another—this would be different. This would be to get an 

American company to come to the United States and maybe to your 

State, maybe to another State, but on an incentive basis. So if you 

could have somebody call me, I would appreciate it. And if there 

is something that we could maybe put some language in here that 

would do something that would kind of help you. 

USPTO—TELEWORK

One other thing. When you came by, you mentioned about PTO 

and telework. And, for the record, the Department is interested in 

creating a long-distance telework pilot program. We understand 


srobinson on DSKHWCL6B1PROD with HEARING
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that such a program could increase employee recruitment, and retention. Is there a legislative fix or language that the committee 

could carry that would give you that ability to have more people 

to telework than USPTO currently does? If you recall the conversation that we had. 

Secretary LOCKE. Right. We are really proud that the Patent and 

Trademark Office, of all the Federal agencies and bureaus, perhaps 

has the most number of people, the largest percentage of people 

who telecommute or telework. But there is a Federal requirement 

that they come back to the home office a couple of times a month, 

I believe. And so when we have a lot of people on the West Coast 

and around the country doing patent work, it is burdensome and 

actually cuts into their productivity to have them come back into 

Washington, D.C. 

So I believe that that is being addressed under the patent law 

that is being contemplated both in the House and the Senate. 

Mr. WOLF. Contemplated. Is that passing or is that just contemplated? 

Secretary LOCKE. Well, they have a manager’s amendment in the 

Senate, and the House Members are conferring with the Senate. 

[The information follows:] 

PATENT LAW AND TELEWORK

The Administration supports developing a travel expenses test program proposal 

to provide agencies with the flexibility to enhance telework opportunities for employees. 

Mr. WOLF. Will there be a bill this year? 

Secretary LOCKE. You are a better predictor of that than I am. 

HUMAN RIGHTS AND ECONOMIC TRADE WITH CHINA

Mr. WOLF. Well, maybe you could give the Chairman some back 

up language that, if that were not the case, that could help you do 

this. 

The last issue, your assessment as to the current economic trade 

relationship with China. About a decade ago, when Congress was 

considering most-favored-nation trading status, which I voted 

against. Many urged its passage and said it would strengthen the 

rule of law and accelerate domestic reforms. Ten years have passed 

and conditions are worse today in China than they have been in 

the last 20 years. 

Economically, they are booming. The Uighur population is having 

a very, very tough, tough time. Tibet, and I was disappointed that 

the President didn’t meet with the Dalai Lama the first visit; I am 

glad he did the second time. But what they are doing to Tibet— 

have you ever been to Tibet? 

Secretary LOCKE. I have never had a chance. I have always 

wanted to go to Tibet. 

Mr. WOLF. I have been to Tibet. I went in with a young Buddhist 

monk. I went in with a trekking group, not as a Congressman. 

They didn’t know what I did. I got a clean passport. We went back 

into the bowels of the monasteries. And what they are doing, they 

are literally bulldozing large portions of Lhasa. Lhasa is almost 

turning into a Chinese city and not a Tibetan city. They are destroying the culture. 


srobinson on DSKHWCL6B1PROD with HEARING
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A large number of Catholic bishops now, it is 34, I think the latest figure is 35, are under house arrest. Protestant pastors. 

We had a hearing in the Tom Lantos Human Rights Caucus 

about 2 and a half months ago. One of the lawyers that we had 

as a witness was arrested when he got back. His family was arrested. And we just have to do a better job of advocating and connecting with regard to human rights and religious freedom. And I 

am not going to get into too much of the detail. 

It does trouble me, though, that the insensitivity of the previous 

administration and of this administration and of this Congress, of 

the Republicans in this Congress, and of the Democrats in this 

Congress, the issue of human rights and religious freedom means 

less today than it ever has. The number of people, we used to have 

Congressman Lantos and Henry Hyde and the giants that used to 

speak out. Now it is almost like no one even cares. 

And so I am not asking you a question. I would hope that the 

administration could be very aggressive in advocating for human 

rights, religious freedom, and for people that are being persecuted 

because of their faith or because of their belief. And that is not a 

question. It is a statement for the record. With that, I will just 

maybe, Mr. Chairman, I will just end and yield back. 

Secretary LOCKE. Congressman Wolf, let me just say that I accompanied the President on his most recent trip to China and was 

there when he was meeting with President Hu Jintao and Premier 

Wen Jiabao, and I can say that he did raise those issues of human 

rights. I have always raised it in all my meetings with top government officials, indicating that the strength of America is our diversity of thought, of opinion, religion and ethnic groups, and that 

they should embrace that as well. I can tell you the President did 

address those issues and raised those issues of human rights of the 

different ethnic minorities within China. 

Mr. WOLF. I would think, though, and I would urge you, the next 

time you go to China, and I will give you the telephone number and 

I will put you in touch with the people, if you would go to a house 

church and worship, not with a recognized church, with a house 

church, whether it be the Catholic underground church or the 

Protestant, it doesn’t matter. They would love to have you there. 

Secondly, when we advocate for them it isn’t enough to do it privately. It needs to be done publicly. It is like when you are in Congress and you are running for office, somebody says to you, I am 

really for you. Now, I am just not for you so much that I want to 

be identified to have my name down, and but I am really for you. 

Well, if you can’t be with me publicly, then—so I think when the 

President goes and you go, it is important to speak out. It is important we have good relations. It is important we trade, but to advocate publicly, to stand, and so I would ask you, I am not going to 

put you on the spot, but I would ask to consider and if you are interested, call us, and we will put you in touch with the people, that 

the next time you go, that you go and worship with a house church. 

And I think to have, particularly, you would send such a message, 

it would resonate, and you wouldn’t have to come out and make a 

press statement or say anything. Just by showing up physically 

there would really give hope to some of the people. So if you want 

to do that, just give us a call. We will put you in touch with them. 


srobinson on DSKHWCL6B1PROD with HEARING
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Anyway, thank you for your testimony. 

Thank you, Mr. Chairman. 

Secretary LOCKE. Thank you, Congressman. 

Mr. MOLLOHAN. Thank you, Mr. Wolf. 

Mr. Ruppersberger. 

Mr. RUPPERSBERGER. Mr. Secretary, first, there are three areas 

if I have time I would like to get into, and it is STEM education, 

the issue of ITAR, and also the weather satellite, NPOESS. 

INTERNATIONAL TRAFFIC IN ARMS REGULATIONS AND EXPORT

CONTROL SYSTEMS

First thing, let me start with ITAR. The ITAR was what happens 

a lot in Congress, unintended consequences as a result of the Chinese getting some of our equipment. When we passed a law, the 

existing ITAR law right now, that is in existence, the United States 

controlled about 73 percent of the space industry. As a result of 

ITAR, we control about 27 percent and slipping as we speak. I believe not only does this hurt commerce, but it hurts national security. 

We were able to get a bill passed in the House, one of my other 

committees is Intelligence, and we worked with the Foreign Relations Committee, Congressman Berman, to get a bill passed, which 

basically takes the jurisdiction away from the State Department 

into Commerce. And then the list would be really more controlled 

by Commerce and the President on what could be and what could 

not be on the list. I mean, there are some ridiculous provisions in 

the list; a wooden table that doesn’t impact anybody. But it is really something that the entire space industry in the United States, 

whether the larger groups or the smaller or whatever, is really 

being put at a disadvantage to the point that our allies and non 

allies are now selling our equipment, ITAR free they call it. 

So the bill is now in the Senate, in the Foreign Relations Committee, Senator Kerry’s committee. I would like to know what your 

position or the administration’s position is, and whether or not you 

can help us move this forward. The President has given different 

speeches that he wants to deal with ITAR. But from where we sit, 

it is almost a no-brainer. And then that list that is controlled by 

the President and Commerce would then come back to Congress for 

a final say. 

Do you have any comments on the ITAR issue? 

Secretary LOCKE. I cannot give you a comment now. I am not familiar with the legislation that you just referenced. 

But I can tell you that the President is very supportive of reforming our export control regime. And there was a Presidential Study 

Directive that was completed. We are beginning to meet with Members on the Hill to talk about the administration strategy and 

ideas. 

And it really comes from the report authored by Brent Scowcroft, 

the former National Security Advisor to President Bush, who said 

that our export control systems are irretrievably broken and that 

we don’t protect enough those technologies that really warrant 

more protection, and then we have undue and unnecessary restrictions on other items that actually hurt our national security and 

our economic competitiveness. 


srobinson on DSKHWCL6B1PROD with HEARING
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And you talk about satellites. Mr. Edelstenne, who is president 

of the European Aerospace Industries Association, has openly written and opined to all the members of the association that none of 

them should use any technology from U.S. companies because of 

our export control regime and the uncertainty it would provide, 

that would come with trying to incorporate U.S. technology. 

Well, that actually hurts our national competitiveness, our national security, because if our defense industries and those involved 

in high technology don’t have opportunities in which to build products and provide services, then they are not able to receive the revenues for further R&D or even opportunities to perfect their products which ultimately can be used for our national security. 

Mr. RUPPERSBERGER. I appreciate your answer. I would like 

someone from your staff to get with my staff. This is a consensus 

within the industry. We know we have to keep certain things secret. But when you take an industry in the United States from 73 

percent to 27 percent and slipping, it is something that we have 

been working on for 10 years, and I think it is time we move forward, so I really would like someone from your staff to get with my 

staff and work maybe a strategy with the Senate. 

The Senate doesn’t object to it. It is just a lot of things happen 

in the Senate that we don’t understand, and they are not moving 

a lot. So let’s see where that goes. 

WEATHER SATELLITES

The second issue, and I am not going to get into it. This isn’t 

your realm. It is more in other areas, about what happened in 

other areas with NASA and the President’s new program, which we 

all have an issue with, about whether or not we don’t move forward 

with manned space. And you know, we control the world because 

we control the skies. And Russia and China are that close to us, 

so we really have to work close with the administration. 

But the weather satellites, they were really controlled by both 

the, I think, Commerce and by Defense. 

Secretary LOCKE. Defense Department. 

Mr. RUPPERSBERGER. And now Defense gave it over to you, and 

then you all came in and you cancelled the program. It is called 

NPOESS. And you know, it is a concern at this point on why this 

was done. And when I had—who is the science advisor? 

Secretary LOCKE. John Holdren. 

Mr. RUPPERSBERGER. Holdren. I was questioning him and I think 

I believe it was this committee about, what are we going to do? You 

know, we have two older satellites in the barn, so to speak, but, 

you know, when you are talking about moving forward in the research and development and staying, again, ahead of Russia and 

China, but just generally, I think the answer was, well, we are 

going to rely a lot more on the Europeans. Well, that just doesn’t 

get it for me. I mean, we are a strong country. We have been dominant in space, and we can’t afford to take any slip at all in where 

we are moving ahead. 

Do you have any opinion on the NPOESS program? Supposedly 

it has been cancelled, and I think there is going to be a lot more 

work that we need to do working together, Congress and the administration on this issue. 


srobinson on DSKHWCL6B1PROD with HEARING
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Secretary LOCKE. Thank you, Congressman. 

We are not cancelling the program. This is a very troubled program that started originally with six satellites, and it has been cut 

down to four satellites. The original cost for the six satellites was 

about $8 billion. It is now, for even the four satellites, gone up to 

I think $14 billion. And it keeps climbing. 

A whole host of different studies, Inspector General, GAO audit 

reports on this program, and in fact, expert review panels involving 

experts and leaders from the space industry have looked at this. 

And they basically said it had to be completely restructured or 

completely abandoned. And I read those reports upon becoming 

Secretary of Commerce and immediately brought this to Mr. 

Holdren and others within the White House, and we have finally 

been able to prevail and follow those recommendations of the expert panels, and we are restructuring it. 

So NOAA will be working with NASA at the Goddard Space 

Flight Center to focus on our two satellites, and Defense Department will focus on its two satellites. And NOAA will still 

operationalize or focus on the operations, the information gathering 

from all the satellites. But instead of a 50/50 cost share, where we 

were paying half of the development of the Defense Department’s 

satellites and they are paying half of the development and cost of 

our NOAA satellites, especially the afternoon satellites, we will 

separate our ways. We will now have NASA in charge of the acquisition of the afternoon satellites on behalf of NOAA and the management of the development of the satellites and the instruments. 

So we are going our separate ways. 

[The information follows:] 

The JPSS decision severs NOAA from an open-ended liability of having to fund 

50 percent of a contract that it had limited control over. By placing NOAA in charge 

of the afternoon orbit and providing funds to develop JPSS, NOAA can exercise 

greater control over the management of the contracts. The JPSS budget of $11.9 billion gives NOAA high confidence that the program will be implemented and protects 

NOAA’s non-space portfolio from the risks to uncontrolled cost growth that was evident under the NPOESS program. 

Each year, NOAA works with the Administration and Congress to create a balanced portfolio of programs to address the Nation’s most critical needs. NOAA undergoes an extensive planning process to ensure the highest priorities are addressed 

in its annual request within the constraints of the current fiscal environment. 

NOAA’s FY 2011 Budget request of $5.6 billion includes investments to strengthen 

NOAA’s science, promote economic development, strengthen energy and security, 

sustain oceans and coasts, and protect lives and livelihoods. 

Satellites are our most critical observing platforms that provide data to support 

all of NOAA’s mission priority areas ensuring continuity of space-based climate, 

weather, and ocean observations. The FY 2011 Budget Request of $2.2 billion for 

satellite systems supports national priorities for: improving weather forecasts and 

disaster warnings; ending overfishing and transforming fisheries management, protecting and recovering species and habitat; strengthening climate science and services; enhancing the vitality of coastal communities and ecosystems; and strengthening Arctic science and stewardship. 

Mr. RUPPERSBERGER. I can understand that. 

But, on the other hand, when you take Defense satellites and intelligence satellites and you have the NASA satellites, which includes NOAA and the weather satellites, there is not enough 

money for all. And, if anything, I would think that the three areas, 

and that Defense will push back more than anyone, DOD, is we 

have got to start collaborating and maybe using certain Defense or 


srobinson on DSKHWCL6B1PROD with HEARING
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intelligence satellites for weather or whatever. It just has to be 

done. 

The other issue we need to focus on, too, is commercial. The 

other countries, European countries who don’t put the money into 

the satellites that we have throughout the years, are using commercial, and it is about half the price. And they are getting the 

same pictures we are getting throughout the world, including 

issues involving terrorism. 

So I would hope that when you meet, that we would really focus 

on the issue of collaboration between DOD, between intel and 

NASA, and then we are going to have to really decide where we 

are going to go; what is going to be commercial, what is not. But 

I just don’t want to rely on other countries for what we get out of 

these satellites. That, I think, puts the United States at a disadvantage. 

STEM EDUCATION

On STEM, as we know, we are having issues in our country with 

younger generation going to, being out of math and science and engineering, whatever. China just last year, I think, graduated over 

660,000 rocket scientists, mathematicians and engineers. I think 

we were about 66,000. Now the good news is that we are still are 

ahead curriculum wise, but they are gaining on us. China’s gaining 

on us in a lot of different areas. 

A program that I have been working on in my area, and I represent NSA, they are in my district and Fort Meade, all of those 

different areas, is trying to start focusing on middle school, on high 

school and getting some testing and developing and regional, because I am from the Baltimore region, and to get these students 

who have aptitude and test them in the area of math and science 

and whatever and start working them in a kind of a STEM school 

possibly maybe on the campus of NSA or NASA, which is up the 

street, so to speak, and to get them involved early so that they can 

learn the culture and the intern programs. 

Now, I know you all work on these type of programs I think in 

your Regional Innovation Clusters and areas like that. But most of 

it is either college or postgraduate. I would hope you would consider really starting to focus and working on the middle school and 

high school and identifying these students in an early way. 

I met with a group today that I have been working with for years 

at Fort Meade, NSA, the Anne Arundel County Education System. 

They have put together a program that we are going to start involving UMBC, which is one of the top technology schools in the 

country, University of Maryland, Baltimore Campus, and they are 

going to come together and bring students in from different regional areas, as long as we find them money, but the education 

component and the business component coming together. And this 

is so important to our future and in the area of science and technology and engineering, which also deals with the issue of space. 

In the old days, when Russia came out with Sputnik, we responded by putting a man on the moon in 8 years, and there was 

enthusiasm. It was when astronauts were as popular as NFL football players. Americans were behind the program. I think Americans just aren’t getting into the fact that we just go back and forth 


srobinson on DSKHWCL6B1PROD with HEARING
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to the Space Station, especially if we are going to have to hitch a 

ride with Russia now. 

But we need to start generating more activity in the area of 

space, because Russia and China are communist countries, and 

they will take their best and say, you are working in space, whether you like it or not. 

So I really think and I would hope that Commerce can start focusing and working, and we are going to look at it from a DOD 

point of view and whatever, start focusing and helping us on the 

middle schools and the high schools involving STEM. Could you 

consider doing that? What is your opinion on it? 

Secretary LOCKE. I would love to be part of those discussions. In 

a lot of my meetings and speeches in front of business groups, I 

keep emphasizing to them, maybe it is my former hat as Governor, 

that the business agenda must always include the education agenda, especially in math and science and engineering. 

[The information follows:] 

STEM ACTIVITIES

The Department of Commerce has a number of existing Science, Technology, Engineering and Mathematics (STEM) Education programs within the National Institute of Standards (NIST) and Technology and the National Oceanic and Atmospheric Administration (NOAA). 

NIST’s primary STEM education program is the prestigious NIST National Research Council Postdoctoral Research Associateships program. NIST also supports 

the 12-week Summer Undergraduate Research Fellowship (SURF) program, which 

brings in about 130–150 students each summer to work with NIST researchers. In 

addition, NIST offers teacher training through the NIST Summer Institute for Middle School Science Teachers, a collaboration between NIST and local school districts. 

Teachers use their experiences at NIST to enhance their curriculum, with end goals 

of helping students acquire the necessary STEM skills to successfully compete in a 

global economy and explore opportunities in STEM fields. 

Also at NIST, education organizations have been eligible to participate in the Malcolm Baldrige National Quality Award process since 2001. In that period there have 

been eight education Baldrige Award Recipients—five were K–12 school systems 

and three were high education institutions. Additionally, the Baldrige Education 

Criteria for Performance Excellence are used by educational institutions for self-assessments and guidance. 

NOAA STEM education activities focus on connecting educators, students (K–12 

through postgraduate). The programs include competitive national and regional education grants, the Ernest F. Hollings Scholarship Program, the Dr. Nancy Foster 

Scholarship Program and the Educational Partnership Program with Minority Serving Institutions. 

Through competitive educational grants, NOAA partners with organizations such 

as the American Meteorological Society and National Science Teachers Association 

to provide professional development for K–12 teachers in atmospheric, climate and 

ocean sciences. These grants also support partnerships with organizations such as 

the National Aquarium in Baltimore and the Maryland Science Center to reach diverse audiences and promote STEM literacy. 

The Ernest F. Hollings Scholarship Program supports undergraduate training in 

oceanic and atmospheric science, research, technology, and education and fosters 

multidisciplinary training opportunities. In addition, the Educational Partnership 

Program partners with minority serving institutions to increase the number of undergraduate students, particularly from under-represented communities, who are 

trained and graduate in sciences directly related to NOAA’s mission. 

The Dr. Nancy Foster Scholarship Program recognize outstanding graduate students in marine biology, oceanography, or maritime archaeology, particularly by 

women and minorities, and encourages independent graduate-level research by providing financial support, through a competitive grant process, of graduate studies 

in those fields. 

Mr. RUPPERSBERGER. Again, whoever is going to contact my staff 

on the first issue. We have some programs we have been talking 


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with the Gates Foundation for the other—I mean, the business 

community wants a workforce. And they will be willing to work 

with us when we put together the appropriate programs that are 

solid and have the curriculum that is necessary and proved by education components. 

And I have to leave. I am sorry, we have another hearing. Thank 

you for your testimony. 

Mr. MOLLOHAN. Thank you, Mr. Ruppersberger. 

Mr. Ruppersberger gets to more hearings than any Member of 

the United States Congress. We appreciate his service on this committee. 

Mr. Secretary, let me reinforce Mr. Ruppersberger’s comments 

about STEM education. We are all over that in this committee, and 

we are really going to do some things in some of the science accounts that will try to create some prototype programs for STEM 

and really get down to it. We are anxious for agencies, NSF, to 

come up here and say they have made some progress and actually 

tell us how to make the improvements that they say have not been 

made for 20 years. 

COMMERCE REPORTS NOT TIMELY

Mr. Secretary, I have in my hand a list of reports that the committee has directed the Department of Commerce to submit. Most 

of them are pretty small reports. Here is one, ‘‘Census: Inspector 

General’s Recommendations Regarding Implementation.’’ I can only 

imagine, by the time we get that report, events will have overtaken 

the purpose of the report. 

We are going to take this really seriously if Commerce isn’t, and 

we will reflect our seriousness about them in the 2011 bill. If Commerce is responsive, as I am sure you want them to be, just not 

being there very long, that would be a really good thing, and that 

might be something you want to pay attention to. 

Secretary LOCKE. We are aware of it, and we are trying to get 

on top of it and trying to get these to you as soon as we can, sir. 

Mr. MOLLOHAN. Well, your office has the responsibility to do this. 

If they can’t do it, perhaps that should be looked at closely. 

NTIA—PUBLIC TELECOMMUNICATIONS FACILITIES, PLANNING AND

CONSTRUCTION

The National Telecommunications and Information Administration’s PTFPC, Public Telecommunications Facilities and Planning 

and Construction, account, this administration has zeroed that account out. 

Secretary LOCKE. Yes. 

Mr. MOLLOHAN. The last administration zeroed that account out. 

And I would hope that this administration would be sympathetic 

to the needs that the Public Telecommunications Facilities Planning Construction account address, and I am really surprised to see 

it zeroed out. 

Now, that is one of the places where we requested a report. We 

haven’t received it. And let me start out with that. Why haven’t we 

received that report? 

Secretary LOCKE. We are in the process of finalizing that report 

to your committee, sir. 


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Mr. MOLLOHAN. And who is working on it? What different levels 

of government and different entities are looking at that finalization 

of it? 

Secretary LOCKE. I can just tell you that it is simply within the 

administration. 

Mr. MOLLOHAN. You can’t tell me anything more than that? Or 

do you want me to tell you where it is? 

Secretary LOCKE. Well, it involves NTIA and other agencies within the administration that also have to review and comment on our 

drafts. And so it is a back-and-forth process. 

Mr. MOLLOHAN. Is this at OMB right now? 

Secretary LOCKE. I cannot tell you if it is exactly at OMB, but 

I know that it is making the rounds. 

Mr. MOLLOHAN. I would just encourage you to be more sympathetic to the professional comment than to the budgetary commenters on this, because our request went to the question of, what 

is the difference between the two accounts? There is some assertion 

that, gee, they are the same; they are overlapping. That is not our 

experience, and we are fairly experienced with this. And it probably would be disappointing to come back and have it initiated, defining the differences, the distinctions between the two programs, 

and having come back and say, there is no distinction between the 

two programs. It is really something that you might want to look 

at. 

Do you believe, are you familiar enough with these programs to 

make judgments about whether they duplicate each other or not? 

Secretary LOCKE. I am not personally familiar with these programs. 

Mr. MOLLOHAN. For the record, would you submit a comment on 

that question, in addition to the letter we have asked, in response 

to my question are they duplicating? 

Secretary LOCKE. Sure. 

[The information follows:] 


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EDA—REGIONAL INNOVATION CLUSTER

Mr. MOLLOHAN. The administration has apparently announced a 

multi-agency funding opportunity to sport an Energy Regional Innovation Cluster. And our understanding is that there are three 

Commerce, Justice, Science agencies that are included in this initiative, and two of those agencies are within your Department. We 

don’t know very much about this initiative, just what we have really read on the Department of Energy Web site. Could you describe 

the goals and the vision for this initiative? 

Secretary LOCKE. Let me see. I have some paperwork on those. 

I can try to find that. 

One of the projects that I am aware of dealing with the energyefficient building technologies is a consortium or partnering of six 

agencies, including Commerce’s Economic Development Administration. And it is our intent, within EDA, to provide $5 million toward what would be about a $129 million grant to accelerate the 

development or to help put together a regional innovation cluster 

focusing on these energy-building technologies. But it would involve Energy, I believe Department of Education, Small Business 

Administration. I can’t remember. 

[The information follows:] 


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Mr. MOLLOHAN. What is the request in your agency, and how 

does it break down? 

Secretary LOCKE. $5 million. 

Mr. MOLLOHAN. Total, from Department of Commerce? 

Secretary LOCKE. Right. That is, we would make that much 

money available for this if there is an entity which applies for it 

and is accepted. 

Mr. MOLLOHAN. How does that break down? What agencies in 

the Commerce Department are going to be involved in this? 

Secretary LOCKE. Economic Development Administration. 

Mr. MOLLOHAN. It is my information there were two agencies involved. 

Secretary LOCKE. I am not aware of that. We can get back to you. 

Mr. MOLLOHAN. Okay. 

Secretary LOCKE. Also NIST. I am sorry. 

Mr. MOLLOHAN. I wish we could follow up a little bit with this 

program. Just give me, what are the goals of this program? 

Secretary LOCKE. Well, the point of Regional Innovation Clusters 

is to really try to develop the strengths of communities, creating almost like research parks, the way that—Silicon Valleys or Route 

128 corridor. And we are interested in—— 

Mr. MOLLOHAN. But how does $5 million—an Energy Regional 

Innovation Cluster? What is that? 

Secretary LOCKE. Focusing on new technologies and involving energy that might go for manufacturing new materials, building materials. 

Mr. MOLLOHAN. What is the ‘‘it’? Is this a grant program to a 

nonprofit, to an academic institution? 

Secretary LOCKE. It depends on the proposal that each regional 

applicant might put together. It could be a consortium of colleges, 

universities, economic development associations, research entities, 

nonprofit or for-profit. It really depends on the existing strengths 

of a particular region, what their assets are, what they would use 

this funding for to build out and complement. So it is really—just 

as the whole notion of Regional Innovation Clusters is to determine 

the strengths and look at the gaps of an area as they pursue whatever what their economic vision might be, whether it is in biomedical research; do they need more training? Do they need some 

infrastructure? Do they need some facilities? Do they need telecommunications assets, et cetera, et cetera? Or, for instance, it 

could be a Regional Innovation Cluster focusing on tourism and the 

different sets and skills and organizations and training that would 

be required for that. 

Mr. MOLLOHAN. Well, we look forward to it. 

Secretary LOCKE. But this one is focusing on energy-efficient 

building technologies, whether it is insulation, new materials, components, et cetera, et cetera. 

NIST—NATIONAL INNOVATION MARKETPLACE

Mr. MOLLOHAN. We will look forward to additional information 

forthcoming on the program. 

The National Innovation Marketplace, in last week’s NIST hearing, we discussed the National Innovation Marketplace. And we 

understand that is a new initiative in the Manufacturing Extension 


srobinson on DSKHWCL6B1PROD with HEARING
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Partnership Program, and we have learned that EDA has a role in 

this initiative as well. Can you describe the goals and vision of the 

National Innovation Marketplace, and what is that? 

Secretary LOCKE. I would have to get back to you on that. I am 

sorry. 

[The information follows:] 

NATIONAL INNOVATION MARKETPLACE

The National Innovation Marketplace (NIM) involves the translation of emerging 

technologies into business applications, market opportunities, and the adoption of 

new products. It does so by allowing sellers, buyers, investors and distributors of 

new products and technologies in all industries to connect with each other through 

a web-based tool. The tool also connects manufacturers with sources of new technologies to improve their manufacturing processes or for adoption into new and improved products. EDA does not have a formal role in the NIM. 

Mr. MOLLOHAN. Sure. 

USPTO—DEPARTMENTAL OVERSIGHT

Mr. Secretary, the United States Patent and Trademark Office, 

let’s explore the funding difficulties associated with that, the budgeting difficulties associated with that. 

You know, we had a fiscal crisis with regard to USPTO in 2009, 

and they had to come back to Congress as a result of the economic 

downturn and some other issues. Since Director Kappos will be testifying before this subcommittee at the end of March, it is not my 

intent to dwell too deeply into this subject matter. We have a high 

regard for him. We consider him to be really a straight shooter, 

and we look forward to his testimony before our committee. 

However, I would like to ask you a bit about the Department’s 

role in oversighting USPTO. You know, there is an agreement out 

there someplace in space that USPTO will through some process 

have access to the funds that it—the fees that it generates to operate. I don’t think, I hope that was never intended to preclude their 

submitting a requirements-based budget, but they haven’t. We 

have required that this year. We look forward to that. 

I think that is a first step in understanding, what are their 

needs? Certainly, their needs aren’t necessarily related in any 

budgetary sense to what their fees collections are. So it seems like 

a really bad budgeting process, and it has proved to be a very bad 

budgeting process; because they guess what their fees are going to 

be, we appropriate it, and then they are in excess of that or they 

are below that. 

When they are below that, it costs us. We get scored for that. It 

costs us a lot of money, which means that EDA doesn’t get funded. 

They are shortchanged or somebody else is shortchanged. And it 

also means the USPTO probably doesn’t have the money to run its 

operations. 

So we are looking for a process where, like every other agency, 

USPTO submits a budget request which reflects what their needs 

are. Hopefully the authorizers, which are considering this issue, 

will come up with a fee funding scheme that really works and we 

will be interested in seeing and inputting into that process. 

But it became evident during the crisis that the Commerce Department considered itself to have essentially no oversight responVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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sibilities. It was a pass-through. The USPTO just passed through 

its budget. Has that changed? 

Secretary LOCKE. That is changing. 

And that is one of the unusual situations that the new management team at the Department of Commerce has come across, that 

USPTO for a long time has traditionally considered itself semi-autonomous from Commerce Department central management or 

even our budgeting processes. 

So we are reviewing a new requirements-based budgeting process 

for the USPTO. And David Kappos has been terrific in and is welcoming involvement of the top managers and the management of 

the Commerce Department, because, as you recalled, in the late 

summer, when the funding crisis arose, it was the people from the 

Department of Commerce that had to help intervene in that situation and help provide leadership to get them through that. And we 

very much appreciate the support that you and your committee 

provided in giving them temporary funding flexibility and relief, 

borrowing authority. In the end, it wasn’t necessary, but it really 

demonstrated the shortcomings in terms of reporting and budgeting within the Department or the U.S. Patent and Trademark Office. 

So we are trying to get a handle on it, and Dave Kappos is doing 

a terrific job. We have a huge backlog. We also have some excess 

fees that are now being generated because of some of the management efficiencies and the reworking, the whole labor-management 

cooperative processes that have been undertaken, as well as just 

applying paralegals to take care of things that are sitting out there 

that could be easily remedied, which we can then issue the patent, 

collect more fees and use that to replace people who are retiring. 

Because of the dire budget situation, with a lot of the retirements of the workforce, we don’t have—we are really not able to 

fill those spaces. And so our goal of trying to get the approval or 

determination down to one year by year 2014 is in jeopardy unless 

we have access to all those fees. And we appreciate the willingness 

of you and your staff and the committee staff to work on that. 

That is why the President’s 2011 budget assumes some additional fee-setting authority and other temporary fee provisions, 

along with updating our IT systems. I mean, here it is the agency 

that patents and protects innovation perhaps it is under-utilizing 

the very things that they approve that are out there that can help 

them do a more efficient job. 

So it is a very—we have a very comprehensive program that we 

have embarked upon to reduce that backlog and get the processing 

down to within a year. 

NOAA CLIMATE SERVICE

Mr. MOLLOHAN. Okay. Well, we look forward to that. And perhaps this will be the year that we will, first of all, know what their 

budget requirements really are, and put in place a fee funding 

scheme that really works. And we look forward to working with 

you on that and the authorizers as well. 

NOAA Climate Service, Mr. Secretary. On February 8th, the first 

day the Federal Government closed as a result of the blizzard’s 

aftermath, the Department of Commerce and the National Oceanic 


srobinson on DSKHWCL6B1PROD with HEARING
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and Atmospheric Administration announced the intent to reprogram and create a NOAA Climate Service. The subcommittee will 

go into the details of the NOAA Climate Service with Dr. 

Lubchenco on the 17th of this month. But since the announcement 

was made jointly, I would like to ask you a few questions about the 

process. 

Why was the announcement made on the day that the Federal 

Government was closed? 

Secretary LOCKE. Well, that was already the date that had been 

planned. In fact, the employees were going to be convened in a big 

meeting at NOAA headquarters to receive that information. When 

the government closed down, we weren’t sure how many people 

were coming to work and how many weren’t. And it was primarily 

an announcement to the press and various stakeholders, so it was 

conducted by conference call. So we felt people would still be available whether they were at work or at home to participate in that. 

Mr. MOLLOHAN. You know, I don’t know who you briefed, but the 

Appropriations Committee wasn’t briefed. 

Secretary LOCKE. I don’t know who all was briefed. We were told 

that we had been informing people even weeks before of our intent 

to try to do this, and I don’t know exactly how finalized a version 

of the reorganization people were informed of. But I do know that, 

in our meetings with NOAA, that they were indicating that they 

very much needed to, and wanted to, inform key Members of Congress, including the various appropriating committees. I do know 

that there was a lot of outreach to a lot of the staff to inform them 

of what was coming and what was being contemplated. 

Again, we do know that it is a work in progress, and we want 

to consult with the Members of Congress on the final design. There 

is no final design for this but really a concept, some tentative ideas 

on which people and which units would be moved from the various 

scattered offices within NOAA into a one-stop shop or one-roof climate service. 

Recognizing that, that is why, for instance, nothing would move 

until the beginning of the next fiscal year so that, depending on 

what the Members of Congress say, then we can line up with the 

next fiscal year. 

Mr. MOLLOHAN. Is that the goal, one roof, one shop? 

Secretary LOCKE. Yes. We have so many functions data that is 

collected with respect to climate from, probably about over a dozen 

different line agencies or offices within NOAA. 

Mr. MOLLOHAN. When you make that reference, are you talking 

about just within NOAA? Or are you talking about—— 

Secretary LOCKE. We are just talking about the NOAA functions, 

making it easier and more convenient for stakeholders or members 

of the public or government officials to access whatever information 

we now collect with respect to climate. 

Mr. MOLLOHAN. So you will have a discreet service, and folks will 

know that NOAA has stood up a climate service? 

Secretary LOCKE. Yes. 

Mr. MOLLOHAN. What about other agencies or departments in 

the government? Are you coordinating this effort with them and to 

the extent—— 


srobinson on DSKHWCL6B1PROD with HEARING
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Secretary LOCKE. Yes. We coordinated this with the office of Mr. 

Holdren, of Science and Technology, the White House, and even the 

Department of Interior, because they also have a lot of collection 

and data regarding climate. 

Mr. MOLLOHAN. You describe it as a concept, but you announce 

it as a program. What is next? Are you seeking an authorization? 

Secretary LOCKE. Yes. We need approval from the Congress for 

this reorganization. 

Mr. MOLLOHAN. Do you have an authorization before an authorizing committee in the House of Representatives? 

Secretary LOCKE. We believe that we have the authority under 

the National Climate Act. But we certainly would welcome the 

input and the approval of the appropriating committees. 

Mr. MOLLOHAN. Well, this is just an inquiry of what the status 

of it is and what you think you have to do to move forward. Are 

you going to seek a reprogramming, or are you going to submit and 

have an amended budget request up here for this purpose? 

Secretary LOCKE. It would be reprogramming, but not to take effect until the beginning of the next fiscal year to make it easier so 

that we are not having to amend existing budgets. 

Mr. MOLLOHAN. Okay. Well, that is all right. We will follow up 

with it. Do you have a current package? Is it with the Department, 

or is it with OMB, to flesh out this concept? 

Secretary LOCKE. We have proposals. It has not been fully 

fleshed out. Still with consultation, even with the employees and 

the various labor groups. So we have a proposal, but it has not 

been finalized. 

ITA—TRADE COMPLIANCE—SUBSIDY INVESTIGATION

Mr. MOLLOHAN. Okay. Well, we are very interested in this, and 

so we look forward to working with you on it. 

Mr. Secretary, we are coming down to the—— 

Secretary LOCKE. Mr. Chairman, because I know you have a 

great interest in this, and I want to make sure there is enough 

time if you want to follow up on it. I want to clarify my earlier 

statement regarding the International Trade Administration and 

the allegations about currency manipulation and how that ties in. 

The International Trade Administration is reviewing that allegation and will be making a determination whether or not to initiate 

an investigation of that particular allegation. 

Mr. MOLLOHAN. You don’t have an investigation ongoing at the 

time? 

Secretary LOCKE. That is not yet ongoing. They are still making 

determination as to whether or not to initiate such investigation. 

I want to make sure we are clear on that. 

[The information follows:] 

TRADE COMPLIANCE—SUBSIDY INVESTIGATIONS

Our determination on whether to investigate this allegation is not dependent 

upon whether an extension is requested in the case. 

EDA—PUBLIC WORKS FUNDING LEVEL

Mr. MOLLOHAN. Thank you for that. 


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Recently we had a hearing of the EDA grant program, Economic 

Development Administration’s grant programs, Mr. Secretary, and 

we had five grantees from around the Nation sitting down there 

testifying, most of them very favorably, testifying about their experiences with EDA. And they provided ideas for improving the programs. It was very valuable testimony. 

We find that we have these interested stakeholders in these programs, and they come. And we have hearings, and it really is enlightening. We will go into these issues in depth with your fine Assistant Secretary Fernandez. And he is scheduled to testify next 

week, so we look forward to that. However, I would like to focus 

on a couple overarching issues with you today. 

The grantees were very appreciative of the Economic Adjustment 

Assistance program and its flexibility, but they also agreed to the 

person that the Public Works Funding should not be reduced to increase the Economic Adjustment Assistance, the EAA, funding levels. 

Now, every year, again, in the past administration—and I encourage you folks to sit down to distinguish yourself in some policy 

way from the past administration—the past administration tried to 

rob Peter to pay Paul in the same way you have; robbing Public 

Works in this manner to fund the Economic Adjustment Assistance. I had no problem with the Economic Adjustment Assistance. 

As a matter of fact, I am increasingly convinced that it provides the 

flexibility that you advertise when you come here and testify before 

the committee. 

On the other hand, I think you are going to find a lot of resistance to reducing, changing much the Public Works projects. And 

the interest in that remains very high out there in the stakeholder 

community, also in the congressional community here. 

So I guess what we ask is, why do you repeatedly propose to 

eliminate Public Works to fund this program? Because at some 

point, you are going to jeopardize—and people are going to—— 

Secretary LOCKE. I understand that concern. 

Mr. MOLLOHAN [continuing]. Not be very responsive to your EAA 

funding. 

Secretary LOCKE. I understand that concern. 

And as you noted, it is reduction of the Public Works Fund and 

transferring virtually all of that over to the Economic Assistance 

Program. Yes, the EAA program does have greater flexibility, and 

the EAA also funds infrastructure projects very similar to what the 

Public Works account also funds. 

Mr. MOLLOHAN. Yes. But if you funded it that way, you would 

be funding less Public Works, right? 

Secretary LOCKE. There is that possibility that there could be actually less Public Works projects funded by merging it into the Economic Adjustment Assistance. 

Mr. MOLLOHAN. It would be more than a possibility. I mean, it 

would actually have to happen because you are going to be siphoning off funds to the other activities. So almost by definition you 

would be funding less Public Works projects. And that is not something that is very attractive up here. 

Secretary LOCKE. Well, we are adding to the current funding 

within the Economic Adjustment Assistance account. And that does 


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not necessarily—because the pie is now bigger—does not necessarily mean that we will fund less Public Works projects within 

this larger account. 

Mr. MOLLOHAN. Well, then, let’s just all fund it out of the Public 

Works account then. 

Secretary LOCKE. I understand that. 

Mr. MOLLOHAN. And if flexibility is the issue, really, then why 

don’t you give that flexibility to the Public Works accounts? 

Secretary LOCKE. That is a possibility, too. 

Mr. MOLLOHAN. Okay. Well, we look forward to working with 

you. And I think that expresses our concern about this. It does not 

express an opposition, however, to the Economic Adjustment Assistance account. We are going to be looking at that and working 

with Assistant Secretary Fernandez. I look forward to working with 

him on it. 

Secretary LOCKE. He is a very, very—— 

Mr. MOLLOHAN. Impressive young man. 

Secretary LOCKE. Very, very impressive person. 

Mr. MOLLOHAN. We have a couple other questions we are going 

to submit for the record for you. And thank you very much for your 

testimony here today. We appreciate your appearing, and we look 

forward to working with you, Mr. Secretary. 

The hearing is adjourned. 


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(123) 

WEDNESDAY, MARCH 17, 2010. 

NOAA (NATIONAL OCEANIC AND ATMOSPHERIC 

ADMINISTRATION) FY2011 BUDGET OVERVIEW 

WITNESS 

DR. JANE LUBCHENCO, UNDER SECRETARY OF COMMERCE FOR 

OCEANS AND ATMOSPHERE AND NOAA ADMINISTRATOR 

OPENING REMARKS

Mr. MOLLOHAN. The hearing will come to order. Good morning, 

welcome. 

Today we will hear testimony from Dr. Lubchenco, NOAA Administrator and Under Secretary of Commerce for Oceans and Atmosphere. This is Dr. Lubchenco’s first opportunity to testify before 

this Subcommittee. 

Welcome. 

Ms. LUBCHENCO. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. NOAA’s fiscal year 2011 budget request includes 

$5.5 billion for NOAA, an increase of $808.6 million over the fiscal 

year 2010 enacted level, or a 17 percent increase. 

The majority of this increase or $678.6 million is attributable to 

the proposed restructure of the National Polar Orbiting Environmental Satellite System. NPOESS, a NOAA/DoD partnership with 

NASA playing a supporting role, has experienced technical and 

management challenges, cost overruns, and schedule slips, and the 

fiscal year 2010 Omnibus statement urged the Administrator to resolve these problems. 

In response, the Administration has proposed a new approach 

under which DoD and NOAA would each acquire satellites for their 

respective orbits that would continue to share data. 

The new approach will be referred to as the Joint Polar Satellite 

System. This a significant change designed to ensure continuity of 

critical climate data and we want to explore the reasons for the 

new approach as well as the proposed plan in some depth. There is also $155 million in increases for NOAA’s other satellite 

programs, including $63.5 million for the Geostationary Orbiting 

Environmental Satellite, GOES–R, which had been delayed by a 

contract protest. 

We want to get a status update on these critical programs and 

explore the need for increases. 

NOAA is an agency with multiple missions and the proposed 

budget provides a variety of topics. Unfortunately, we simply do 

not have time to discuss them all. 

However, one of the more significant requests in the fiscal year 

2011 budget is $54 million, an increase of $36.6 million to accelerate and enhance the implementation of a National Catch Share 


srobinson on DSKHWCL6B1PROD with HEARING
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Program. Will this program ensure jobs for commercial and recreational fisherman and the profitability of coastal communities? 

We want to understand the elements of this program and why 

such a significant increase is needed now and we need to know why 

taxpayers should fund the cost of ensuring a sustainable resource 

for the benefit of private industry. 

And last but far from least, on February the 8th, 2010, the Department of Commerce and NOAA announced the intent to reorganize and create the National Climate Service. The programming request will not reach the Committee for some time, but we understand that the Agency hopes that the reorganization can begin in 

fiscal year 2011. 

We will ask you to share the details which you can convey and 

the reason for the timing of the announcement. 

The mission of the NOAA Climate Service is critically important. 

It is unfortunate that the process of announcing it has overshadowed the efforts to create it. 

Dr. Lubchenco, thank you for coming. I am going to ask Congressman Wolf, invite him to make opening statement, following 

which your written testimony will be made part of the record and 

we will invite you to present your oral testimony. 

Mr. Wolf. 

Mr. WOLF. Thank you, Mr. Chairman. 

Welcome to the Committee. I look forward to your testimony. 

Mr. MOLLOHAN. Dr. Lubchenco. 

OPENING STATEMENT BY DR. LUBCHENCO

Ms. LUBCHENCO. Thank you. 

Members of the Committee, thank you very much for the leadership and the generous support that you have shown NOAA. It is 

greatly appreciated as we work to improve our products and services for the American people. 

As you know, on February 27th, the Pacific Ocean was impacted 

by a tsunami originating from an 8.8 magnitude earthquake off the 

coast of Chile. Fortunately, this tsunami was not as destructive as 

it could have been, but it provided a graphic illustration of how 

very far we have come in the past decade in making timely and accurate tsunami warnings and providing the public with information 

needed to make decisions. 

This event demonstrates that that continued investment in observations, modeling, research, and outreach is vital to saving lives 

and property. 

And our spring outlook announced just yesterday is intended to 

alert city and state emergency managers and citizens that over 

one-third of the contiguous United States has an above average 

flood risk in the coming weeks and months. 

The President’s fiscal year 2011 budget request provides a solid 

foundation to continue to advance NOAA’s mission and for meeting 

our most pressing needs. The request of $5.6 billion represents an $806 million increase 

over fiscal year 2011, as you noted, and addresses a set of priorities 

that will guide our actions in the coming year. 

I would like to highlight a couple of significant areas of progress 

over the last fiscal year. 


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In the area of climate, we have continued to provide climate observations and analysis while engaging with our partners on how 

to strengthen our climate services. 

We have made important progress in rebuilding our fisheries, recovering protected species, and sustaining the livelihoods and communities they make. 

We introduced a draft Catch Share policy and are committed to 

improving fisheries enforcement and our relationship with the fishing communities and industries. And we made good progress in 

meeting the mandates of the Magnuson-Stevens Act and commissioning the NOAA ship Pisces which will support fishery research 

in the Gulf of Mexico and the southeast United States. 

NOAA was also fully engaged in the President’s Interagency 

Ocean Policy Task Force. The release of a draft national ocean policy and a framework for coastal and marine special planning reflects the growing recognition that healthy oceans matter and that 

protecting and restoring critical habitat is essential. 

The fiscal year 2011 budget includes new investments to 

strengthen our science, foster innovation, rebuild and improve fisheries, and sustain and enhance satellite observations. 

NOAA has become a global leader in reporting on the state of the 

central climate variables and proposes to establish a new line office 

called the NOAA Climate Service. 

I want to thank the Committee for all the support that you have 

given us for improving NOAA climate services. The office will enable NOAA to better address the growing needs for climate services. 

NOAA’s fiscal year 2011 request includes $435 million in support of the U.S. Global Change Research Program with $77 million in 

increases for core climate services and observations. 

NOAA’s satellites provide the data and information that are vital 

to every citizen in our nation. A funding increase of $678.6 million for a total of $1.1 billion is 

requested to support the Administration decision to restructure the 

NPOESS Program and create within NOAA the Joint Polar Satellite System. 

NOAA is requesting an increase of $62.5 million for a total of 

$730 million to continue the development of the GOES–R Program 

to be prepared for launch near the end of 2015. 

The fiscal year 2011 budget also supports NOAA’s responsibilities in transforming fisheries and protecting species. The budget 

includes an increase of $36.6 million to establish a National Catch 

Share Program. The program will provide a national framework to 

develop, manage, and improve Catch Share Programs in fisheries 

across the nation. 

This increase will also continue the transition of the Northeast 

Groundfish Multi-Species Fishery to sector management as well as 

support new voluntary Catch Share Programs in the Mid-Atlantic, 

Gulf of Mexico, and Pacific Coast regions. 

The fiscal year 2011 budget request also includes an increase of 

$10.4 million in the Community-Based Restoration Program. 

NOAA plans to increase fish passage and spawning and rearing 

habitats by implementing larger scale ecological restoration in target areas. 


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We will continue supporting the Species Recovery Grant Program with a requested increase of $9.6 million. This will allow NOAA to 

provide grants to conduct priority recovery actions for threatened 

and endangered species, including restoring habitat, monitoring 

population trends, developing conservation plans, and educating 

the public. With a total request of $65 million, the Pacific Coast Salmon Recovery Grants Program will continue to leverage federal, state, and 

tribal resources in the Pacific Coast region to implement projects 

that restore and protect salmonid populations and their habitats. 

In fiscal year 2011, NOAA will continue to support its education 

programs and work to implement our new education strategic plan. 

A total of $20.8 million is requested for the NOAA Education Program. 

A recently released report from the National Academy of 

Sciences commends NOAA’s commitment to education and provides 

recommendations for optimizing NOAA’s investment in education. 

We plan to carefully review those recommendations and incorporate them as needed to maximize the effectiveness of our education programs. 

Overall, NOAA’s fiscal year 2011 budget request reflects the commitment of the President and the Secretary to public safety, a 

healthy environment, sound science, underpinning decision making, and job creation. 

These resources are critical to the future success of meeting our 

needs in climate, fisheries, coasts, and oceans. 

And I look forward to working with you and I am happy to respond to any questions that the Committee may have. 

Thank you, Mr. Chairman. 

[The written statement of Dr. Jane Lubchenco, NOAA Administrator and Under Secretary of Commerce for Oceans and Atmosphere, follows:] 


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NATIONAL POLAR-ORBITING OPERATIONAL ENVIRONMENTAL SATELLITE

SYSTEM

Mr. MOLLOHAN. Thank you, Doctor. 

Doctor, there have been some significant changes in the plans for 

Polar-orbiting Operational Environmental Satellites recently. I 

would like to begin with you by walking us through the problems 

with the management and implementation of the Polar-Orbiting 

Operational Environmental Satellite System and then we will discuss the proposed approach, budget request, and future plans. 

So, first of all, please describe the purpose for NPOESS. 

Ms. LUBCHENCO. The NPOESS or National Polar-orbiting Operational Environmental Satellite System was created in 1994. It was 

intended to provide information that is related to both weather and 

climate information, both critically important to the nation. It was 

set up as a collaboration between NOAA and the Department of 

Defense with NASA providing additional support. 

The original formulation had the program with a joint decisionmaking management structure, the EXCOM, the Executive Committee, that had representatives from each of the three agencies, 

NOAA, NASA, and DoD, and specifically Air Force, and that management structure was intended to—the program was set up with 

the intent of combining and putting together both civilian and military needs into a single program and taking advantage of the 

synergies to be derived from that. 

As you know, the program experienced very considerable cost 

overruns, 87 percent increase in costs through 2009, and 30 percent 

of that growth in cost was after the restructuring incurred after the 

Nunn-McCurdy process. 

Mr. MOLLOHAN. Before you get to that, just explain to the Committee how initially the program was funded, appropriations, and 

you mentioned the agencies, but what were the relative contributions of the agencies. 

Ms. LUBCHENCO. The budget was split 50/50, half to NOAA and 

half to Department of Defense. 

Mr. MOLLOHAN. What was the original budget for the program? 

Ms. LUBCHENCO. The original budget, let me look at my notes 

here so that I am sure that I get it correct. What I have are 

NOAA’s numbers. May I ask my staff behind me? 

Mr. MOLLOHAN. You can submit that for the record. That is okay. 

[The information follows:] 

In 2005, Pre-Nunn-McCurdy, the NPOESS program Life Cycle Cost (LCC) was 

$8.4 billion. Of that amount, DoD would provide $4.354 billion, and NOAA would 

provide $4.048 billion. 

In June 2006, Post-Nunn-McCurdy, the NPOESS program LCC was increased to 

$12.516 billion. Of that amount, DoD would provide $6.265 billion, and NOAA 

would provide $6.251 billion. 

In 2009, the NPOESS program LCC was updated to reflect the July 2008 Office 

of the Secretary of Defense Cost Analysis Improvement Group (CAIG) cost estimate 

(including updated the operations and sustainment costs that had been omitted at 

2006 Nunn-McCurdy certification. The NPOESS program LCC increased to $13.951 

billion. Of that amount, DoD would provide $6.983 billion, and NOAA would provide 

$6,967 billion. 

On February 1, 2010, the NPOESS Program was restructured. DoD is still assessing its costs for implementing the early morning orbit and those costs are unknown 

at this time. The cost to implement JPSS, the NOAA portion for the afternoon orbit 

is $111.9 billion, of which $2.9 billion has already been spent. 


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Mr. MOLLOHAN. Describe the management structure in a little 

more detail, the process by which decisions were supposed to be 

made and just conceptually when you bring the Department of Defense in with a civilian activity, what was the interface? What were 

the rules of engagement, if you were, and who were to make final 

decisions in that process? 

Ms. LUBCHENCO. Mr. Chairman, the concept was that the 

EXCOM would make final decisions and the individuals who sat on 

the EXCOM from NOAA and from NASA had that authority. The 

individual who sat on the Committee from the Department of Defense did not have that authority. 

And so the Executive Committee would make decisions and the 

individual from Department of Defense would go back to DoD and 

in many cases, a decision that had been made jointly would be 

overruled. 

Mr. MOLLOHAN. Was there one person? I guess your testimony is 

that there is one person who made a final decision with the Defense Department; is that correct? 

Ms. LUBCHENCO. In effect, there was often a dysfunctional relationship because there were different priorities and different requirements of the different agencies. 

And the contract was structured in a way that there was no direct immediate oversight which was an additional problem that has 

been identified by multiple GAO reports as well as the Independent 

Review Team report. 

Mr. MOLLOHAN. Was there one decider, to use that word, who 

could make a decision for the overall program and, if so, who was 

that person? 

Ms. LUBCHENCO. There was no one tasked with that responsibility. In principle, the Executive Committee as supposed to be 

doing that. But in reality, it was unable to do so. 

Mr. MOLLOHAN. Why? 

Ms. LUBCHENCO. Because the individual who sat on the EXCOM 

for the Department of Defense did not have decision-making authority. 

Mr. MOLLOHAN. Okay. But it sounds like there is a big dog on 

the porch some place that maybe, I do not know, because of the 

amount of money they brought to the table or could in effect direct 

the path forward for the program and make decisions with regard 

to funding and process and contracting. 

Is that true and was that with the Department of Defense, the 

person you are alluding to? 

Ms. LUBCHENCO. Because this was well before my time, I have 

not seen this play out firsthand. 

Mr. MOLLOHAN. No, I know you have not, but you are bound to 

have reviewed this. 

Ms. LUBCHENCO. We have. 

Mr. MOLLOHAN. And the Committee is asking you to tell us who 

was the decision maker and because they had such a dominant role 

in the program and you are suggesting it is in the Defense Department, I am asking who it is. Who was it? What position was it? 

Ms. LUBCHENCO. Mr. Chairman, I do not know that. 

Mr. MOLLOHAN. Was the program independently evaluated? 


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Ms. LUBCHENCO. Yes, Mr. Chairman. There were nine GAO reports in—eight reports in nine years. 

And the NPOESS Program also constituted an Independent Review Team Chaired by Mr. Tom Young who was the former President and COO of Martin Marietta and a former Director of NASA 

Goddard Space Flight Center. 

That Independent Review Team echoed many of the findings of 

the GAO reports and it highlighted or, I think, concluded that 

there was an extraordinarily low probability of success of the program and that this should be of great concern to the nation because 

the continuity of both climate and weather information was at risk. 

Mr. MOLLOHAN. Well, you have made some evaluations about 

moving forward with the current NPOESS Program. What would 

be the risk that the nation faces if we were to move forward with 

the current program? 

Ms. LUBCHENCO. It was explicitly because of that risk that we 

have paid special attention to how to put this program back on 

track because it is vital to the nation’s interests. 

And I believe that the proposed restructuring announced by the 

Administration would, in fact, put that program on a path to success with a much higher probability of success than the former 

NPOESS Program. 

Mr. MOLLOHAN. When did the Administration start reviewing the 

program and trying to resolve the problems in the civil and military weather climate systems and what was the result of that effort? When did it start and what was the result? 

Ms. LUBCHENCO. When I first assumed the position of Administrator, which was March 20th of last year, I almost immediately 

began conferring with the Secretary of Commerce, with the Office 

of Science and Technology Policy, with the Office of Management 

and Budget, with NASA, and with DoD to figure out what the 

problems were and what solutions might be. 

Shortly thereafter, I believe early in the summer, the Administration announced that it was going to take a comprehensive look 

at this program following on the review of the Independent Review 

Team and later in the summer set up a formal process for doing 

that review involving various offices of the White House, OMB, 

OSTP, and National Security Council. And so there were two parallel processes underway, the White House process and the joint 

interagency process of the three agencies, all wrestling with how 

can we fix this problem. 

It is not that others had not tried before, but we were determined to actually figure out—you know, the status quo was simply 

unacceptable. 

Mr. MOLLOHAN. And what did you come up with? 

Ms. LUBCHENCO. In the President’s budget that was announced 

in early February, part of that announcement was the Administration’s decision to restructure the NPOESS Program by separating 

out the responsibility for acquisition for the satellites, giving DoD 

responsibility for acquisition for satellites and instruments that are 

relevant to the early morning orbit which is most critical for military needs. 

Mr. MOLLOHAN. So Defense needs and—— 

Ms. LUBCHENCO. Defense needs. 


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Mr. MOLLOHAN. Uh-huh. 

Ms. LUBCHENCO. And giving to NOAA responsibility for acquisition for the instruments and the satellites for the afternoon orbit 

which is most important for weather and climate information. 

NOAA would work closely with NASA to oversee and execute the 

acquisitions and all three agencies would continue to operate the 

ground system which that part of the former NPOESS Program 

was working well. 

So this proposal retains the elements that were working well—— 

Mr. MOLLOHAN. The ground system? 

Ms. LUBCHENCO. The ground system, and separates out the acquisition and the oversight for the satellites and the instruments 

for the two different orbits. 

Mr. MOLLOHAN. So you are the Administrator. How do you feel 

about this new arrangement? 

Ms. LUBCHENCO. Mr. Chairman, I am really pleased that we 

have a solution that I believe is viable. This program is too important to not be on a path to success. And I think the situation was 

becoming intolerable and really inexcusable. 

That said, there was a pretty high hurdle to figuring out a solution. I am really pleased with the solution that we came up with 

and hope that you and the Committee and others in Congress 

agree that it is a good viable solution. I believe that it is. 

Mr. MOLLOHAN. So Defense Department decisions are out of your 

critical path judgments and you are out of the Defense Department’s critical path judgments? 

Ms. LUBCHENCO. That is correct. 

Mr. MOLLOHAN. So you are going to be developing satellites and 

making decisions that serve you. Are there going to be any operational problems as a result of this new arrangement? 

Ms. LUBCHENCO. Let me first point out that much of the data 

that we acquire, that NOAA and NASA will acquire will be shared 

with DoD and conversely. So there is still sharing of information. 

It is the acquisition that is separated. 

And I believe there is always risk associated with any complex 

satellite programs. That comes with the territory. But I think the 

risk is much less substantial and much more manageable than 

with the current management structure, specifically because the 

program acquisition will be overseen by NASA. We have a good 

working relationship and track record with them for joint oversight 

of programs. There is much more immediate access to technical capability. We have a lot of assets to bring to the table. 

And the risk that exists, I believe, can be mitigated both by staying on top of the programs immediately and anticipating and dealing with problems, but also having adequate budget reserves to be 

able to deal in real time with any problems as they arise. And that 

is the way that we have typically dealt with our other satellite programs that we run jointly with NASA. So that is a good model for 

this newly-structured program. 

Mr. MOLLOHAN. So there are no decisions that Defense can make 

that would impede your progress or time line? You know, they have 

got a couple of satellites on the ground, we understand, but that 

will not impede you? It will not affect you; is that correct? 


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Ms. LUBCHENCO. The period of transition, fiscal year 2010, is a 

critical year. And the path to success assumes that the funds that 

the Department of Defense has in its budget for fiscal year 2010 

will be spent for the needs for which they were intended. 

Mr. MOLLOHAN. Is there a threat to that possibility? 

Ms. LUBCHENCO. I assume that there is a possible threat. 

Mr. MOLLOHAN. I said that wrong, but is there a possibility that 

there is a threat to that? 

Ms. LUBCHENCO. Yes, sir, I think there is. 

Mr. MOLLOHAN. Are you picking up any concerns or do you have 

concerns based on any information you are picking up? 

Ms. LUBCHENCO. We know that the program, that the success of 

the program depends on an effective transition. And if that transition does not go as anticipated, there may be very serious consequences with delay in the program or derailing of the program. 

And what is at risk is the continuity of the weather and climate 

information. And any further delays or insufficient budgeting could 

easily be quite problematic. 

Mr. MOLLOHAN. What are you doing to head that off? 

Ms. LUBCHENCO. We are emphasizing how important this solution is, how likely it is to, or how it is a very significant improvement over the status quo. We have been working closely with the 

leadership at DoD, with the point person for acquisitions who has 

been working on this solution with us and who has indicated his 

commitment to seeing this through. So I believe that within DoD, 

there is interest in having this program succeed. 

Mr. MOLLOHAN. Mr. Wolf. 

Mr. WOLF. How much money was wasted over the years, the fact 

that it was not successful? 

Ms. LUBCHENCO. The cost overruns, as I mentioned, were on the 

order of 85 percent. 

Mr. WOLF. Can you put that in dollars? 

Ms. LUBCHENCO. Yes, sir. The NPOESS Program was originally 

budgeted at $8.4 billion in 2004. 

Mr. WOLF. So how much of that do you think was wasted? 

Ms. LUBCHENCO. So I do not have that number, but I would be 

happy to get it to you. It is a very large number. 

Mr. WOLF. In the billions? 

Ms. LUBCHENCO. Yes, sir. 

Mr. WOLF. Do you think the failure was because of personality 

or do you think the failure was because of technology? 

Ms. LUBCHENCO. The Independent Review Team that was 

chaired by Tom Young said that there were a number of causes for 

the failure, that the Executive Committee, as I indicated, was inefficient and ineffective, that the different agencies have very different requirements and their priorities are not aligned, that there 

is no backup capability in this system, that the budget was insufficient to deal with a very complex program that this one is, and 

that there was insufficient government oversight of the contract. 

So the IRT and the GAO reviews highlighted multiple problems 

with the way the program was originally structured. 

Mr. WOLF. So it was less technology and more human factors 

that resulted in it? 


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Ms. LUBCHENCO. Congressman, there is a lot of new technology 

that was being developed for the program and that is part of what 

creates the risk. And because it is new technology, because we are 

sort of pushing the envelope for new instruments, it is important 

to have adequate budgeting to account for the inevitable problems 

that might develop in those new instrument systems. 

Mr. WOLF. Are any of the people who were involved with the failure still there in the operation of it now? And you are not justifying 

this because you are new in town, so it is not that you have to be 

defensive. Are the people who were there involved in either agency 

or all three continuing to be, but just now there has been a divorce 

and a separation? But have you thought there should be some 

other people come in? 

Ms. LUBCHENCO. Congressman, I believe that the personnel that 

are still on board at NOAA are immensely capable and very, very 

good. I believe that our track record of other successful programs 

with NASA in partnership with NASA attest to our skills and our 

abilities to manage complex programs. I cannot evaluate the expertise of the individuals that were involved on the Department of Defense side because that is not something that I know. 

Mr. WOLF. Well, I will move on. I used to be on the Subcommittee years ago and this was a big issue. And then I left and 

now it is continuing to be. 

And it would seem to me that if the divorce, unless it was a nofault divorce, but if the divorce was partially because of both sides, 

it would seem that you ought to have a clean approach and new 

people to come in to have the opportunity to sort of begin and not 

having started out with the failure. 

So if you have the same people that were there before, even 

though they may be wonderful people, maybe their expertise ought 

to be put in some other important program at NOAA. But maybe 

you ought to have just a new person or a new team to begin afresh 

so you are not kind of tied down with that. 

Maybe you can just let the staff know. I mean, give us a list of 

the personnel who are going to work on the program now and let 

us look and overlap and see how many were there for the last three 

years before this. And then the Committee can take a look at that 

judgment and see if the same people ought to stay. 

But when you look at the food banks are empty and there are 

a lot of problems in the country, the loss of billions of dollars, you 

know, that is a lot of money. 

Ms. LUBCHENCO. I agree, Congressman, which is why I made it 

one of my highest priorities to fix this program, because I think it 

was inexcusable and an embarrassment. And this is not the way 

we should be operating. 

CLIMATE SERVICE

Mr. WOLF. You have announced your intent to create a NOAA 

Climate Service. This was done absent any proposal in the fiscal 

year 2011 budget and absent any of the required notification to the 

Committee. 

We included funding in the fiscal year 2010 bill for the National 

Academy of Public Administration, NAPA, which generally does a 


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pretty good job, to conduct an analysis of options for establishing 

a Climate Service. 

Is the review underway? What is the status of that? 

Ms. LUBCHENCO. Congressman, the announcement that we made 

on February 8th was an intention to create a new line office within 

NOAA called the NOAA Climate Service. That proposal is reorganizing existing assets. 

NOAA currently has a wealth of climate science and climate 

services that we provide already. They are distributed currently 

across many line offices within NOAA. They are in lots of different 

places. And this proposal is simply to pull all of those together and 

put them into a single line office. 

So it is reorganizing existing assets to be better positioned to be 

effective partners with other agencies, to provide services that we 

are being increasingly asked for more effectively, more efficiently, 

essentially to do our jobs more responsibly. 

Mr. WOLF. Just as a result of the NAPA review? 

Ms. LUBCHENCO. No. We announced the intent to reorganize. We 

intend to use the NAPA review to help us inform how that organization should be best accomplished. 

Mr. WOLF. So you will not do anything until the NAPA review 

is finished? 

Ms. LUBCHENCO. We anticipate that the NAPA review is going 

to be providing information to us on an ongoing basis. And as that 

information comes forward and interim reports or other things, we 

will fold that into our planning. So the NAPA review will be very, 

very helpful in guiding our understanding of the tradeoffs with a 

specific organizational design. 

Mr. WOLF. Now, you need the authorization of the authorizers to 

do this? Do you plan on asking for legislation? 

Ms. LUBCHENCO. My understanding is that what we have proposed, taking existing people from existing places and putting them 

in a different place is a reprogramming and—— 

Mr. WOLF. Wouldn’t that need the legislative—— 

Ms. LUBCHENCO. The programming would require approval by 

the Department, by OMB, and by our Appropriations Committees. 

Mr. WOLF. How do the Authorizing Committees feel about that? 

Ms. LUBCHENCO. Obviously many of our Authorizing Committees 

are keenly interested in this and we intend to work closely with 

them as the NAPA report is being prepared to inform the way that 

we are thinking about designing this. So we fully anticipate working closely with all of the relevant Committees, both Appropriations and Authorization Committees. 

Mr. WOLF. So, therefore, you will continue to go ahead waiting 

on the reprogramming of approval by this Committee or by the authorizers or by both? 

Ms. LUBCHENCO. The formal approval that is required is by your 

Committee, but we would hope to work closely with the Authorizing Committees and have their blessing. Different Authorizing 

Committees have had different views of how this might be best 

structured and so this is a great opportunity for us to be in dialogue with all of them and to think about what type of organization 

would best meet the needs of the nation. 


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OFFICE OF ATMOSPHERIC RESEARCH

Mr. WOLF. Your initial announcement, it appears that you have 

already developed a plan to establish the Climate Service mainly 

by breaking off pieces of the Office of Oceanic and Atmospheric Research. 

That office was established in its current form in 2005 with the 

purpose to unify and to strengthen the role of science and research 

in NOAA’s programs. And that organization resulted from the recommendations of a Research Review Team of prominent scientists. 

So why would the undoing of the last science reorganization at 

NOAA be a good idea at this time? 

Ms. LUBCHENCO. When that reorganization was done, the need 

for climate services was not as obvious as it is today. And what we 

have proposed is to take some offices, some labs, some offices from 

the Office of Oceanic and Atmospheric Research, some from other 

parts of NOAA. We have not made any decisions about how to organize those pieces together and that is what the NAPA report will 

inform, number one. 

Your question was asking more specifically about our existing 

Oceanic and Atmospheric Research line which the two goals that 

we had in mind with this restructuring were, one, to make climate 

services and science more effective and efficient, but, two, to 

strengthen science across NOAA. And OAR, the line Office for Oceanic and Atmospheric Research plays a vita role in strengthening 

the science. 

And it is my hope and plan to use this opportunity to reposition 

OAR to advance transformational science that is right at the forefront of innovation on key issues for NOAA. There is a lot more 

science that is done at NOAA, not just climate science, and there 

are a lot of places in NOAA where science exists. 

Mr. WOLF. Are there pieces of other federal agencies that ought 

to be in this if you were to do this? 

Ms. LUBCHENCO. There are other federal agencies that have responsibilities for delivering some kind of climate services and we 

are in dialogue with them. Many of them rely on what NOAA provides in terms of basic data, basic models, basic predictions. And 

so this organization is designed to better position us as partners to 

the other agencies so that they can do their climate job better and 

we can be more useful to them. 

EDUCATION PROGRAM

Mr. WOLF. Okay, Well, maybe we will talk to NAPA, too, at the 

time and see where they are. 

One other area is on the educational programs. According to the 

staff, they said you are only requesting $20.8 million for NOAA’s 

education programs which is a reduction of over 60 percent from 

the amount appropriated in fiscal year 2010. 

Every time you have a hearing, you always hear about the importance of the critical nature of the challenge that our country has 

with regard to science, the competition with regard to China, the 

competition with regard to India. 

Education is probably a key, so why would you have such a significant cut? When I think of the first question of the $4 billion 


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that has been lost going down the drain and then you think of we 

are falling behind as a nation in math and science and physics and 

chemistry and biology, why would you be looking for such a significant cut or is it not significant? Is it just different accounts or how 

is that? 

Ms. LUBCHENCO. Education is one of my highest priorities at 

NOAA. It is very critical to the national interests for all the reasons that you have just articulated. The request this year reflects 

readjustments from congressionally directed funding in earlier 

years. And—— 

Mr. WOLF. Earmark, is that what you are calling that, congressionally what? How do you put that in congressional—— 

Ms. LUBCHENCO. This is one of the Washington euphemisms, 

congressionally directed funds. 

Mr. WOLF. Is that diplomatic? You are really congressionally directed. 

Ms. LUBCHENCO. I had to learn a whole new language coming 

here. 

Mr. WOLF. So this is to correct the mistakes the Committee has 

made? 

Ms. LUBCHENCO. Not mistakes at all. 

Mr. WOLF. How about the Jason Project? I am just curious. 

Ms. LUBCHENCO. Could I just add one note to that? NOAA had 

requested that the National Academy of Sciences review our Education Program with the idea of providing us information with how 

to make it most strategic, most effective, most complementary to a 

lot of the other educational programs and science education programs that are out there. 

Just earlier this month, we received the report from the Academy 

study. It is highly complimentary of our efforts and it provides a 

large number of recommendations for improvement. 

It is my intention to utilize that report to rethink our Education 

Program and figure out what it should look like, how it should best 

serve the nation’s needs. 

Mr. WOLF. Before you get into Jason, what are some of the 

things? What did the Science Foundation recommend? What did 

they say you should be doing you are not doing now? 

Ms. LUBCHENCO. They highlighted many of our current programs 

as being highly successful but not at scale, so to scale up some of 

the specific programs. 

I have not had a chance to read the report in depth because it 

just came out. And I am very much looking forward to doing that. 

I know that it highlighted the GLOBE Program, the Jason Program many of our competitive grants programs, our B–WET Program. There are our educational partnership programs. There are 

a whole slew of programs that we have. 

Mr. WOLF. Could I get a copy of their—— 

Ms. LUBCHENCO. Absolutely. 

Mr. WOLF. What did they say about the Jason Program? 

Ms. LUBCHENCO. I do not recall specifically. 

Mr. WOLF. I had a discussion with Dr. Ballard. 

Ms. LUBCHENCO. I have, too. 

Mr. WOLF. And I was asked to introduce Dr. Ballard at a program in my district about four or five years ago. It was the night 


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of the seventh game of the World Series. And they asked me to 

come and I said I would come. I had an anti-gambling group I was 

speaking to that night and I said I did not think anyone was going 

to show. But because of my respect, I will come. 

I went in. It was at Rachel Carson Intermediate School—— 

Ms. LUBCHENCO. Uh-huh. 

Mr. WOLF [continuing]. In Fairfax County. And I will tell you, 

the auditorium, it was a gymnasium, was packed. And these kids 

really got into the program. 

And Ballard has a way of getting people interested who are not 

that interested and people who are interested, getting them very 

interested. So I would be anxious to see what the National Science 

Foundation feels. 

Do you know Dr. Ballard? 

Ms. LUBCHENCO. I know him quite well, Congressman, and I 

think he is a very gifted educator, explorer, scientist. And you are 

right. He really does generate a huge amount of interest and enthusiasm. 

Mr. WOLF. And we are neglecting the oceans, I think. 

Ms. LUBCHENCO. We are absolutely neglecting the oceans and the 

knowledge that school children and others have about oceans. Why 

they are important to us, what the opportunities are for keeping 

them healthy are not known to the extent that they need to be. So 

that is why our education programs are so important. 

I just recognize that the scale of the problem is so much larger 

than our ability to do everything, that we need to be strategic in 

what we are doing, which—— 

Mr. WOLF. I agree. The last question I would ask you is one in 

that area. Is there a coordinating group in the government, because 

we are falling behind? 

The reality of it is America, if you look at the scores and you look 

at we used to be number one, now the competition is not only with 

China and India, but it is in Poland and Hungary and Romania 

and Bulgaria. 

I mean, during the 1980s, you would go to Romania and there 

was one little string and a lightbulb and now you go there and they 

are pulsating there. They are hungry, the competition. 

And I am not criticizing what you are doing. I think you want 

to readjust, but is there a coordinating group in—different than an 

NPOESS coordinating group—but is there one in town that looks 

at every single program and is working with the Department of 

Education and working with you and working with NASA to make 

sure that everything—we have almost a man to the moon type approach to kind of change the dynamics of this? 

Ms. LUBCHENCO. Congressman, the Office of Science and Technology Policy in the White House has identified STEM, S-T-E-M, 

science, technology, engineering, and math, so that is one of the 

other Washington-isms, has identified STEM education as one of 

their priorities and they are coordinating a dialogue across the different agencies, each of which has some responsibility for STEM 

education. 

So there is acknowledgement of the need for better coordination 

and more strategic movement in addressing the challenge. 


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Mr. WOLF. Well, okay. Well, why don’t you let us know about 

that and then if we could see a copy of the report. 

We put language in last year directing the National Science 

Foundation to do either a 90- or 120-day study of what works—— 

Ms. LUBCHENCO. Uh-huh. 

Mr. WOLF [continuing]. Because I think once you have lost somebody by fifth or sixth grade, it is over. You almost never find somebody getting excited about science in twelfth grade or when they 

go to college majoring in English Literature transferring into physics. It does not happen. 

And so you might take a look at where the National Science 

Foundation is. They ought to be close to being finished. And so you 

ought to see. We just asked them what actually works, best practices, first through fifth, and I think there may be some helpful information there. 

Ms. LUBCHENCO. Congressman, NSF has really been the lead on 

STEM education and I am delighted to know of this study. I served 

on the National Science Board for ten years and so I am very familiar with the range of their programs and the quality. And I will 

definitely find this report. And each of the mission agencies has 

some responsibility. NASA has some. Department of Energy has 

some education. We have some. Other agencies do as well. And you 

have highlighted the importance of coordinating across those but 

drawing on the best practices, for example, from this NSF report. 

So I think that is exactly what is needed. 

Mr. WOLF. Well, thank you. 

Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Mr. Bonner 

FISHERIES STOCK ASSESSMENTS

Mr. BONNER. Thank you, Mr. Chairman. 

It is good to see you again. 

Ms. LUBCHENCO. Congressman. 

Mr. BONNER. I want to first of all thank you publicly for coming 

to Mobile back in January—— 

Ms. LUBCHENCO. It was my pleasure. 

Mr. BONNER [continuing]. To help with the groundbreaking of 

the Disaster Response Center. 

Ms. LUBCHENCO. Uh-huh. 

Mr. BONNER. And we are looking forward to that continued partnership with NOAA. 

In full disclosure, I have a statement that my wonderful staff has 

prepared that has the questions that I am going to pose to you. 

Ms. LUBCHENCO. Okay. 

Mr. BONNER. But before I get there, I want to follow up on a conversation we had at that dedication because I told you I wanted to 

bring you back down. I hope, to help a community that is not only 

in my district in Alabama but many communities like it all along 

the Gulf Coast that is struggling today. 

And I want to take you, and I do not think you were there, but 

I would give anything if you could have been at our full Committee 

hearing yesterday where we had Secretary Geithner, we had Dr. 

Orszag with OMB, and we had Dr. Romer who were representing 


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the Administration on the budget, on healthcare, on the challenging times that we are facing. 

One of our colleagues, Ms. Kaptur from Ohio, a member of the 

Majority, said probably as well as any colleagues I have heard say 

that there is a real disconnect between Washington, D.C. and 

America. There is disconnect between the Administration. Again, 

she is a Democrat and so she was speaking of the Obama Administration. 

But as a Republican, I would say there has been a disconnect 

that precedes this Administration and goes probably for decades, 

not just years. Presidents, Administrations, Congress, the American people are very frustrated and believe that their government 

is not on their side. 

Orange Beach, Alabama, which is a little beach community about 

60 miles from where we were in Mobile in January, had at one 

time one of the largest charter fleets in the Gulf of Mexico. They 

have gone just in recent years from 140 boats down to 90 boats. 

And when I mention boats, I am talking about a business, family 

business, three or four or five generations, a million to maybe 

sometimes two and a half million dollar business that employs five 

or six people. And so with those that have gone out of business, 

those families have now been forced to find work elsewhere. 

Baldwin County, the unemployment rate in January of 2007 was 

two percent. It is now over ten and a half percent. And this is one 

of the most prosperous counties economically in the State of Alabama. National Marine Fisheries has been involved as part of this 

problem, unfortunately. 

While I understand the final decision has not been made with regard to the length of the 2010 season, we have reason to believe 

that it will be shortened from the 65-day season for red snapper 

in 2009 to somewhere between 51 and 60 days. 

Last year, we heard that there was a contemplation of taking the 

fishing for red snapper from two fish down to one. I understand 

that is not going to happen and I am grateful for that. 

But now, Doctor, I want to speak to all of the people that work 

with you who are behind you and ask you this question. And you 

are not sworn in, so you cannot answer, but think about this. 

Would you pay $1,200 to take your family on a fishing trip to 

catch two fish? Most people would not. 

So we are talking about family businesses that are struggling in 

the worst economy since the Great Depression. And, again, I use 

this only as an aside to Marcy Kaptur’s comments yesterday. 

The best I can tell in your written statement, and I do not hold 

you for that any more than you should hold me for the written 

statement I will give you in just a second from my staff, but there 

is some mention of commercial and recreational fishery products. 

Red snapper are not products to the men and women and their 

families whose lives have been turned upside down any more than 

we are talking about the flounder in Massachusetts or the salmon 

off the coast of Washington State and Alaska. These are not products. These are real issues that affect people at the very heart of 

their survivability. 

So here is my question. Red snapper has supported one of the 

most important fisheries in the entire country. Management reVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00149 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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strictions started around 1990, thus the population has been restricted for some 20 years. Despite these restrictions, fishery dependent derived population estimates still consider the population 

severely overfished. The same condition was suggested in 1990. 

The overstock designation and the devastating reaction to it are 

based on an antiquated, at least in my view, antiquated data collection and analysis method dependent on actual fish takes that 

brings its validity into question. 

Recently this overfished stock condition has led to even greater 

cutbacks in the total allowable catch that has led to even greater 

hardship to both commercial and sports fishers. 

This year, the charter boat season, as I mentioned, upon which 

several communities in my district depend economically will again 

be shortened. We just do not know how long. And, again, as we believe, it will still be only two fish, thankfully not down to one. 

This despite the fact that my home state has done, I think, as 

much as any state in being actively progressive, aggressively 

proactive in establishing some 20,000 artificial reefs and there are 

more than 4,500 oil rigs in Texas and Louisiana that provide additional safety for the habitat. 

From a different base of knowledge and research using fishery 

independent surveys, the stock is clearly in better condition than 

predicted from most fishery dependent stock assessments and may 

be more in tune with what the fishers have adamantly been saying 

to me and to my colleagues. There is no shortage of red snapper. 

Many scientists locally are saying red snapper is at its highest 

stock ever. 

There is also a unique opportunity to compare past fishing independent surveys from over ten years ago with a present stock conditions based on a new fishery independent study. These studies 

would take advantage of a variety of technology to measure a fishery without taking from fishermen only. 

Such a new survey would not need any start-up time and would 

be directly comparable to a similar past survey. This approach of 

fishery independent research in my view would be more reliable, 

faster, and scientifically would bring some validity to evaluate the 

present stock condition and possible increases in population that 

have resulted from the restrictions over the past ten years. 

So the question. Why is there such a delay in funding this type 

of work and why have repeated attempts to fund this type of work 

been rejected? And then I have got two quick follow-up questions, 

but I will give you a chance to answer those first. 

Ms. LUBCHENCO. So, Congressman, let me simply start by saying 

that I am very concerned about the current status of many of our 

fisheries. And if you look nationwide, we are not in a good position. 

I think the number is over 60 stocks are currently overfished or undergoing overfishing. And I think the reality is that current fishery 

management has really not adequately controlled overfishing. 

Thousands of jobs have been lost as fisheries decline under the 

current system and many valuable fisheries face huge closures, including the ones that you were describing in your state. And that 

has very serious impacts on jobs, on communities, on lives and livelihoods, on recreational opportunities as well as the availability of 

seafood. 


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So I agree that we are not in a good place right now. This is one 

of the reasons why I have been championing consideration of and 

transition to Catch Share programs for commercial fisheries, because I believe that they have a significantly better track record in 

improving fish and they work for fishermen as well as fish. And I 

think the changes in the commercial fishery in the Gulf of Mexico 

for red snapper are a strong testament to that. 

I also agree with you that we do not have adequate information 

on the number of fish that are out there, if you will, or on the activities of recreational fishermen. The data are not as current as 

we would like. They are not as robust as we would like. 

That said, we are required by law to use the best available information to make our decisions and it would be nice if we were in 

a better position and we had better data. I agree with the importance of acquiring those better data and funding those kinds of programs. 

The decisions that we make about what to fund and what not to 

fund have to take into account all of the different fisheries all 

around the nation. And we simply have inadequate resources to do 

justice to all of them. 

So it is not a good situation. I understand it has very serious consequences. Acquiring better fishery independent data is certainly 

appropriate. So, too, is having better information on what the activities are of recreational fishermen so that we can have more 

real-time information on what is being caught. And so there are 

sort of two data needs. One is the fish. One is the activities of the 

recreational fishing community. 

One of the things that I committed to doing, which I shared with 

you when we were together in Mobile, was establishing a much better relationship with recreational fishermen. And I have been systematically beginning to do that. 

We are convening a summit with recreational fishermen in April 

here in Washington, D.C. and we have been designing that summit 

in close collaboration with leadership from the recreational fishing 

community. 

And we intend to work with them to identify the highest priority 

areas and to have a much better understanding of the data we do 

have, what is the basis of making our decisions, but also how can 

we improve that and how can we work collaboratively together 

with them to do that. 

Mr. BONNER. Well, I appreciate the summit in April. And I appreciate your desire, stated desire to establish a better relationship 

with the recreational fishermen. 

The only thing I will ask you in closing is, I am going to extend 

to you the same invitation that I extended to Mr. Schwabb who 

was nice enough to come meet with me, the Assistant Administrator for Fisheries. We had a very good conversation. But I would 

welcome the chance to bring you back to my district and we will 

go out on a boat and we will do independent data research. And 

I am very sincere. I am not trying to make light of this. 

If the very people whose lives we are impacting the most, and 

it is not just the boat captains, it is the entire community, it is the 

restaurant and hotel people, it is the Chamber of Commerce, it is 

the thousands of people that come to these communities and fishVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00151 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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ing is a big part of their vacation, but if they could have a chance 

to visit with you and with your team and let you see what we have 

been talking about when we say we believe red snapper has returned and is now more abundant than ever, not that that is alone 

going to convince you or anyone else at NOAA or National Marine 

Fisheries that more should not be done in terms of balance, 

science, but I will be perfectly honest, I think it would make them 

feel that people in their government that are going to—you know, 

we have no control over hurricanes. I wish we did. We cannot keep 

them from coming. We have no control over tornadoes. 

We do not even have any control with the price of gas. So when fuel was $4.00 a gallon a couple summers ago and that was another economic factor that put some of these folks out of business, 

there are some things we have no control over, but we do have control over writing regulations and passing laws that put hard-working, God-fearing Americans out of business and make them bitter 

toward their government. And so I would love to get you back down 

and anyone you would like to bring for an independent day of 

science and research. 

And, again, I appreciate your coming down earlier. 

Ms. LUBCHENCO. I appreciate that offer, Congressman. And I 

really do believe that we have much work to do to be out on the 

shore, on the water, and interacting more with people whose lives 

and livelihoods are affected. 

Part of our challenge is keeping the eye on the long term as well 

as trying to figure out the solutions for the short term. And decisions that would preclude recovery of depleted fisheries are not 

going to be good for communities, for fishermen in the long term. 

We are trying to think creatively about how we can address the 

very real short-term economic challenges while not precluding recovery down the road and it is that tension. And I think that these 

are extraordinary times and we are looking for creative solutions 

to try to do that balancing. 

Mr. BONNER. Thank you. 

Thank you, Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Bonner. 

We have a vote. I plan to continue the hearing down to a point 

that we can all make our votes and then adjourn for—— 

Mr. RUPPERSBERGER. Mr. Chairman, I just made my vote. 

Mr. MOLLOHAN. And adjourn for the remainder of three votes 

and then we will reassemble—— 

Ms. LUBCHENCO. Okay. 

JOINT POLAR SATELLITE SYSTEM

Mr. MOLLOHAN [continuing]. After the three votes are cast. 

Please describe the new approach. What are NOAA’s responsibilities and what are DoD’s in the Joint Polar Satellite System? 

Ms. LUBCHENCO. With the proposed restructuring of the Joint 

Polar Satellite System, NOAA would have responsibility essentially 

for the afternoon orbit. So NASA on behalf of NOAA would provide 

the acquisition management for the afternoon mission requirements. The Department of Defense would continue acquisition for 

the morning orbit assets and would need to transition the afternoon orbit instrument assets from DoD to NASA. So that is what 


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would be done in fiscal year 2010 with those funds that were allocated for that. 

NOAA with assistance of NASA would continue procurement of 

an NPOESS Preparatory Project, or NPP-like spacecraft for the 

afternoon orbit. We do not yet have that spacecraft. We are examining options for acquiring that. It is a smaller bus than would 

have been the case under the old NPOESS Program. 

Mr. MOLLOHAN. It could be a smaller bus or it is a smaller bus? 

Ms. LUBCHENCO. We believe that we do not need the huge bus 

that was part of the NPOESS Program, that a smaller bus is more 

appropriate and certainly a lot cheaper. 

And so we would continue procurement of those two spacecraft 

for the afternoon orbit and then support the launch readiness of 

the NPP, which is the NPOESS Preparatory Program, that is underway. 

So that is what the funds for fiscal year 2011 would go to, would 

be to those particular responsibilities. And then, of course, the 

ground system, as I mentioned before, we would continue to operate jointly. That is working well and we anticipate no changes with 

that. 

Mr. MOLLOHAN. So DoD’s responsibilities would continue to be 

the morning or would be the morning round? 

Ms. LUBCHENCO. That is correct. It would continue to have responsibility for the morning orbit and would share the data that 

would be appropriate from that that is not needed or that is appropriate to share for civilian purposes with us and then the converse. 

Mr. MOLLOHAN. And what is DoD doing? Well, let me ask you 

this. What data from the different satellites will be shared or will 

data be shared from the different satellites, DoD, NOAA? 

Ms. LUBCHENCO. We would share all of our data. DoD would 

share data that is not of a classified nature essentially. So each of 

those satellites has multiple different instruments on it and some 

of the instruments are more relevant for weather than climate, for 

example. And so that is one of the purposes of having a joint 

ground system is that you can share those data and it is set up to 

do that. 

Mr. MOLLOHAN. And I think you said earlier in your testimony 

that the ground system will be jointly managed? 

Ms. LUBCHENCO. NOAA manages it and NOAA is responsible for 

it, but it is a partnership that we all contribute to. 

Mr. MOLLOHAN. Financially contribute to? 

Ms. LUBCHENCO. No. I can check on this, but I believe that 

NOAA has the financial responsibility for that. 

Mr. MOLLOHAN. But DoD is benefitting from that? 

Ms. LUBCHENCO. I stand corrected. It is jointly funded. 

Mr. MOLLOHAN. And would you submit for the record the share, 

how the joint funding is going to be shared? 

Ms. LUBCHENCO. I would be happy to do that, Chairman. 

[The information follows:] 

In the February 1, 2010 decision to restructure the NPOESS program, in addition 

to assigning NOAA the responsibility of providing the observation for the afternoon 

orbit, it also assigned NOAA the responsibility of fielding the ground system network. 

NOAA currently operates DoD’s Defense Meteorological Satellite Program (DMSP) 

spacecraft on a reimbursable basis from the NOAA Satellite Operations Facility 


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(NSOF). NOAA will continue this arrangement for the rest of the DMSP satellites 

and NOAA anticipates that DoD would provide funds to NOAA to continue operation of satellites implemented under the DoD portion of the restructured NPOESS 

program. NOAA’s Office of Satellite Operations has provided the command, control, 

and communication for DMSP spacecraft from Suitland, Maryland since 1998 with 

Schriever Air Force Base in Colorado providing back-up support. NOAA will continue to operate the DMSP platforms in the morning orbit under the restructured 

NPOESS program. The new ground system offers the agencies the opportunity to 

make operations more efficient by transitioning to a single enterprise solution for 

multiple satellites. 

The JPSS budget will allow NOAA to continue development and fielding of the 

ground system in preparation for operations of the satellite on launch. 

SATELLITE INTERNATIONAL PARTNERSHIPS

Mr. MOLLOHAN. International partners, how do they play in this? 

Ms. LUBCHENCO. We currently have a partnership with 

EUMETSAT which is the European Meteorological Satellite System for support of the mid-morning orbit. There is an early-morning orbit, mid-morning orbit, and an afternoon orbit. They currently have satellites that operate in that mid-morning orbit. And 

NOAA provides instruments for that orbit that are flown on this 

European satellite and then we share the data. 

So they provide the satellite, we provide the instruments, and everybody shares the data. That is currently what we do now. It is 

working very, very well. It is a great partnership. It saves us a lot 

of resources, a lot of money. And—— 

Mr. MOLLOHAN. Is that the extent of your international partnerships? 

Ms. LUBCHENCO. No. We have considerable joint satellite systems, some with Europe’s Meteorological Satellite Organization or 

EUMETSAT, some with the Japanese. Another one, for example, 

that we share with EUMETSAT is the Jason Program. Jason is a 

satellite system that measures sea surface height. It has altimeters 

that are critically important to have continuity of climate information but also for a lot of forecasting and information about sea level 

rise. That program is, I believe, a 50/50 split between NOAA and 

EUMETSAT. 

And the funds that are requested in fiscal year 2011 are for 

Jason-3 and that satellite system builds on the earlier successes of 

Jason-1 and Jason-2 which again have been jointly operated with 

the Europeans. 

Mr. MOLLOHAN. Are there international partnerships that you do 

not have that you are pursuing? 

Ms. LUBCHENCO. There are a number of partnerships that we are 

having exploratory conversations about. I am not as familiar with 

those, but I would be happy to get that information to you. 

Mr. MOLLOHAN. The information that comes down from these 

partnership satellites, does that information all come down the 

same ground system and it is managed in the same way as the 

data that would be managed between you and DoD? 

Ms. LUBCHENCO. We have ground stations that have big satellite 

dishes. For example, in Fairbanks, Alaska, there is a ground system that captures data from the Polar-orbiting Satellites that are 

going around. It captures those data and then redistributes it to 

the relevant countries, the relevant agencies within the United 


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States. And there are a number of ground systems like that for the 

different types of satellite systems. 

JOINT POLAR SATELLITE SYSTEM

Mr. MOLLOHAN. Okay. I am not sure I totally understand that. 

But all the data that is coming down from the Joint Polar Satellite 

System, all the data that will be coming down from the Defense 

satellite once they get that worked out, that is coming down in a 

ground system that you are managing? 

Ms. LUBCHENCO. That is correct. 

Mr. MOLLOHAN. And you are going to share that data in sort of 

arrangement with DoD. The information that is coming down from 

your partnerships like in the mid morning, is that coming down 

into the same system? 

Ms. LUBCHENCO. Yes, it is. 

Mr. MOLLOHAN. What role does NASA play in the Joint Polar 

Satellite System? 

Ms. LUBCHENCO. The funds that are in NOAA’s budget are contracted to NASA. 

Mr. MOLLOHAN. NASA contributes no resources, no money? 

Ms. LUBCHENCO. That is correct. NASA does not have any for the 

JPSS System, NASA does not have any budget. They are our partner. They—— 

Mr. MOLLOHAN. Is that a reimbursable agreement? Is it a memorandum of understanding? 

Ms. LUBCHENCO. It is a reimbursable agreement. And it is the 

similar arrangement that we have for the GOES systems, for example. So they have the technical expertise, the experience in managing contracts, and they have primary responsibility for overseeing the acquisition, the testing of the instruments, the oversight 

of the contracts, et cetera. And they are very, very good at doing 

that and we have a great partnership with them. 

Mr. MOLLOHAN. Well, because Defense is still reviewing this, correct? They are not at a point that they have made decisions of how 

they are going to go here. But will the Joint Polar Satellite System, 

will it include the same observations that were originally planned 

for the NPOESS afternoon orbit? 

Ms. LUBCHENCO. For the afternoon orbit, yes, it will, because 

those are our responsibilities. DoD has committed to providing the 

same information that it does for the morning orbit, but they have 

not yet decided exactly how they will be doing that because those 

decisions for them are a little bit down the road. 

Mr. MOLLOHAN. With regard to the afternoon orbit and the—— 

Ms. LUBCHENCO. Uh-huh. 

JPSS SENSORS

Mr. MOLLOHAN. You are saying that you are going to have the 

same observations that were planned for NPOESS on the afternoon 

orbit under the JPSS System? 

Ms. LUBCHENCO. That is correct. 

Mr. MOLLOHAN. What are those sensors? 

Ms. LUBCHENCO. There are a whole range of sensors. Let me look 

here. The JPSS would have the Visible/Infrared Imager/Radiometer 

Suite, which is called VIIRS; the Cross Track Infrared Sounder, 


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which is CrIS; the Advanced Technology Microwave Sounder, 

ATMS; the Ozone Mapping and Profiler Suite, OMPS; Clouds and 

Earth Radiant Energy System, CERES; the Earth Radiation Budget Satellite, ERBS; and the Total Solar and Spectral Irradiance 

Sensor, TSIS. So those are all instruments that were on NPOESS 

that now will be on JPSS. 

Mr. MOLLOHAN. Okay. So whatever bus you are using, you decide 

to use, you will have the same instrumentation for the afternoon 

orbit as was planned for NPOESS? 

Ms. LUBCHENCO. That is correct. 

JPSS BUS

Mr. MOLLOHAN. What are your plans with regard to the bus to 

be used? Has a decision been made with regard to that? 

Ms. LUBCHENCO. The decision has not yet been made. We are exploring options. We currently plan to acquire two buses that are 

roughly the size of NPP. That seems to be a good model. It has 

worked well for us. It is adequate. And so exactly from whom we 

would get them has not yet been decided. We are exploring what 

options are out there. 

Mr. MOLLOHAN. So what are you calling these launches, the C– 

1, C–2, C–3 launches under NPOESS, and these launches are 

JPSS–1, 2, 3? 

Ms. LUBCHENCO. That is correct. So C–1 would become JPSS–1. 

JPSS LAUNCH DATES

Mr. MOLLOHAN. And when is the estimated launch date for 

JPSS–1? 

Ms. LUBCHENCO. It would be fiscal year 2015. 

Mr. MOLLOHAN. And how does that schedule compare and what 

about 2, launch of the second satellite? 

Ms. LUBCHENCO. The second is end of calendar year 2017. 

Mr. MOLLOHAN. How do those dates compare with the NPOESS 

scheduled launches, C–1, C–? 

Ms. LUBCHENCO. The JPSS–1 is about six months later than the 

original NPOESS schedule, but that schedule was questionable. No 

one thought that was actually very realistic. And it is 18 months 

sooner than the NPOESS schedule we have adjusted. So we are 

better off. 

Mr. MOLLOHAN. Okay. We are going to recess for these votes and 

we will be back after the third vote. 

Ms. LUBCHENCO. Okay. 

Mr. MOLLOHAN. The hearing will stand in recess. Thank you. 

I think we ended on my trying to—the hearing will reconvene— 

on getting estimates of schedules. So will you review that again? 

When do you anticipate JPSS–1 ready for launch? 

Ms. LUBCHENCO. We anticipate JPSS–1 ready in fiscal year 2015. 

Mr. MOLLOHAN. And JPSS–2? 

Ms. LUBCHENCO. A couple years later, 2017. 

Mr. MOLLOHAN. Okay. Will there be any data gaps with that 

schedule? 

Ms. LUBCHENCO. There should not be any loss in data. We should 

not have any data gaps if the transition goes as scheduled. 


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And I just received during the break a memorandum from Department of Defense, from the Under Secretary of Defense for Acquisitions, Logistics and Technology who is the point person at 

DoD. And he issued this morning his decision memorandum which 

is his formal direction to the folks at DoD to do what they had committed to for the transition. 

So we had their word that they were going to be responsible for 

transitioning the afternoon assets to us and to be responsible for 

the morning orbit. Now his decision memorandum has been issued 

which is the order to actually do that. So that is very good news. 

JPSS TRANSITION

Mr. MOLLOHAN. How will the transition from NPOESS to JPSS 

be handled? You alluded to a transition plan and team. If you 

would elaborate on that, please. 

Ms. LUBCHENCO. Yes, I would be happy to. We have laid out a 

transition plan that would ensure efficient and smooth handover of 

assets. There is a Government Transition Team that has been established. Those individuals have been named and they will immediately develop and execute this transition plan that we all agreed 

to. 

Part of that entails, for example, DoD transitioning its assets to 

NOAA, but it also means working with DoD and Northrop Grumman Aerospace Systems Procurement to transfer the work on the 

instruments and the ground systems to the NASA-led acquisition 

vehicles. 

DOD APPROPRIATIONS FOR NPOESS

Mr. MOLLOHAN. The information you just got from DoD, did it 

speak to its intent with regard to its appropriations for NPOESS 

for fiscal year 2010? 

Ms. LUBCHENCO. Mr. Chairman, I have not read the entire 

memo. It is one of the PDFs that is on a screen that is too hard 

to read. So I have not read the entire thing. 

I believe it simply orders DoD to do the things that were in the 

transition plan. So DoD has committed to the funding that they 

have for fiscal year 2010. 

Mr. MOLLOHAN. They committed to buying into the program? 

Ms. LUBCHENCO. That is correct. 

Mr. MOLLOHAN. So that is their intention previously expressed? 

Ms. LUBCHENCO. That is correct. 

Mr. MOLLOHAN. Whether it is in that memo or not, I think that 

is my information. 

Please describe the effect of the JPSS Program if the Defense Appropriations Committee here were to rescind some of those funds. 

And there is some expression and concern around that that might 

be a possibility. 

Ms. LUBCHENCO. There is expression of concern. Should that 

happen, I think there would be significant risk of a data gap. It is 

our hope that that will not happen because that would be quite serious. So we are hopeful. 

Mr. MOLLOHAN. Would there be a delay? What would be the—— 

Ms. LUBCHENCO. Yes. If the funds are rescinded, then the launch 

of JPSS–1 would be delayed probably by about six months and 


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there would be very considerable risk of a data gap. In fact, that 

risk would be almost a certainty. 

JPSS BUDGET IMPACTS

Mr. MOLLOHAN. Let me finish this line up. Please explain the effects of the JPSS decision on NOAA’s budget for fiscal year 2011. 

Ms. LUBCHENCO. The fiscal year budget includes contingency 

funding, termination costs for the Northrop Grumman contract, 

and a cost estimate that is at or close to the 80 percent level. So 

this would ensure that lack of funding will not drive day-to-day decisions which has been a chronic problem with this program 

throughout. 

Mr. MOLLOHAN. How has it impacted your request here? Your request has been increased by X number of dollars in order to support the JPSS approach. 

Ms. LUBCHENCO. Yes, Mr. Chairman. The request has been increased by almost $680 million. So the total request is a little over 

$6 billion. And that request essentially has the—that is the total 

request, correct, yes—and that request includes this contingency 

funding, the termination cost, and—— 

Mr. MOLLOHAN. And would you please submit for the record an 

explanation of the effects of the JPSS decision on NOAA’s budget 

for 2011? 

Ms. LUBCHENCO. I would be happy to. 

[The information follows:] 

NORTHROP GRUMMAN AEROSPACE SYSTEMS CONTRACT

On February 1, 2010, the Administration announced NOAA and the Department 

of Defense (DoD) would no longer jointly procure the polar-orbiting satellite system 

called NPOESS. NOAA and DoD are in a critical transition phase as each agency 

determines how the programs in each agency’s respective orbit will be structured. 

NOAA is working closely with NASA to develop the Joint Polar Satellite System 

(JPSS) for the afternoon orbit, while DoD is analyzing its options for fulfilling its 

need for environmental data in the morning orbit. 

At this time, however, no final decision has been reached on the disposition of the 

NPOESS prime contract as a result of the Administration decision and ongoing 

transition. While it is possible the NPOESS prime contract, held by Northrop Grumman Aerospace Systems, could be terminated by DOD, it is also possible the contract could be transferred or modified. The FY 2011 budget includes funds to cover 

our termination liability should termination occur. 

Most importantly, NOAA is working closely with NASA and DoD to ensure there 

will be no gap in polar satellite coverage, particularly in the afternoon orbit, which 

is crucial for monitoring climate change and its many impacts. 

Mr. MOLLOHAN. Given the mutual use of data by NOAA and DoD 

and their shared responsibilities for termination liabilities, don’t 

DoD decisions still have the potential to increase your cost? 

Ms. LUBCHENCO. Yes, Mr. Chairman, they do. You know, what 

DoD decides to do in the out years still has the potential for affecting our costs. 

Mr. MOLLOHAN. How? 

Ms. LUBCHENCO. It is in the process of conducting a requirements review and analysis of its alternatives. The termination liabilities are a particular concern for us. We are working with DoD 

to minimize those liabilities and we are still in the process of negotiations. 


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Mr. MOLLOHAN. When will the JPSS Program baseline be determined and what steps will be taken before then and how will that 

impact your 2012 budget request? 

Ms. LUBCHENCO. The program is going to be subject to independent review of the mission concepts, the organizational structure, the acquisition strategies, and the budget prior to program 

baselining. 

The goal is to include these findings and resultant strategies in 

the fiscal year 2012 budget. So the Transition Team will provide 

the date for this review, but the DoD architecture is needed before 

that can be finalized. 

Mr. MOLLOHAN. Has the NOAA/NASA Transition Team membership been finalized and how is it going if it has? 

Ms. LUBCHENCO. The team has been formed. It is working together. I think we are off to a good start. And I think there is a 

solid basis from which to move forward. The recent decision memorandum from Dr. Carter, I think, is very good news and puts us 

in a good position. 

SCATTEROMETER

Mr. MOLLOHAN. Okay. Mr. Schiff. 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Last year, the Committee asked for a plan to develop a satellitebased scatterometer to monitor surface specter winds. That proposal was supposed to be included in the budget, but unfortunately 

it was not. This data is vital for forecasting the progression of hurricanes and other large storms. And our current source of such 

data, the QuikSCAT Satellite, lost an antenna in November ending 

its operational capability. 

Given the predictable demise of QuikSCAT and ongoing discussions with NASA and the Japanese Space Agency, I am a collaborating on a new mission. 

Why was this project not included in the fiscal year 2011 proposal and what are your plans for obtaining high-quality surface 

specter wind data? 

Ms. LUBCHENCO. Congressman, the QuikSCAT Program was 

very, very useful and helpful. We currently have other satellite programs that can provide some comparable information for the coastlines of the U.S. So even though we have lost that satellite system, 

we can make up for those data in forecasting hurricanes along the 

coastline. 

What we have lost completely is the ability to do forecasts for 

ocean weather way out in the middle of the ocean away from the 

coastlines. And so replacing that satellite is an important thing for 

us to do. It was deemed less urgent than other needs and so it was 

a decision of tradeoffs because we currently have some capability 

to forecast hurricanes. QuikSCAT was not essential to that capacity. We still have that. And so we are anticipating studying what 

our options are for the future to replace what was lost with that 

system. 

Mr. SCHIFF. Is it your expectation at this point that this will be 

included in next year’s budget? This is a yearly reprieve but not 

a cancellation of the effort? 


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Ms. LUBCHENCO. It is probably too early to say at this point. We 

are looking at what the options are. And I would be happy to let 

you know as soon as we have made any decisions on that. 

CONSTELLATION OBSERVING SYSTEM FOR METEOROLOGY, IONOSPHERE

AND CLIMATE

Mr. SCHIFF. Thank you. 

And very quickly, I wanted to ask you, the budget submission in 

the case that NOAA is following up on, the successful COSMIC 

Radio Occultation Satellite Program with a new program COSMIC–2 to launch 12 small satellites to gather key weather and climate data, the new program is again a collaboration with Taiwan, 

meaning half the funding comes from Taiwan and about half the 

work will be done there. 

For several years now, American companies have expressed interest in providing this data on a commercial basis and claim they 

can do so at considerable savings. 

What would be the relative expense of procuring this data commercially as compared to under the current plan? When would the 

COSMIC–2 System be operational in providing data and how does 

that compare to when a commercial provider would become operational? And more generally, is NOAA pursuing opportunities to 

procure data from domestic commercial sources and help support 

the American commercial space industry? 

Ms. LUBCHENCO. Congressman, NOAA currently uses commercial 

satellite data to obtain crucial information on a number of different—for different types of information, ocean color, for example. 

Sea ice tracking and monitoring are examples. 

And so we fully recognize the value of the public/private partnerships that those kinds of arrangements entail. 

We have ongoing dialogue with companies that might be able to 

provide additional crucial environmental data sets beyond our existing Geostationary and Polar Orbiting Satellite Systems. 

In the last couple of years, NOAA has awarded a series of study 

contracts to get additional information from the private sector to 

examine possible ways to obtain additional high-priority weather, 

climate, and space weather observations. And we are folding that 

into our planning for the future. So we are taking stock of what 

is out there. 

And COSMIC is one of those programs. COSMIC will provide important information for weather forecasting in an area where private sector cooperation will likely be very beneficial in the future. 

While it has been determined that a 50/50 funding partnership 

with Taiwan is currently the most economical on the short term to 

obtain those instruments, on the longer term, private sector cooperation will likely be a good option as we are interested in obtaining more of that type of information. 

Mr. SCHIFF. Can you just get back to the Committee with a comparison of what the commercial providers can do now in terms of 

the data you are looking for and what the relative cost would be? 

Ms. LUBCHENCO. Certainly. I would be happy to. 

Mr. SCHIFF. And whether they lack the capacity to give or if they 

have the capacity, whether the costs are greater or less than the 

partnership with Taiwan. 


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Ms. LUBCHENCO. One of the issues, Congressman, is who has access to the data. And so I am just flagging that as a consideration 

that we have to fold into our thinking. Any contractual arrangements we would have, we would want to have the data be freely 

accessible and available. And that does not always fit in with the 

business plan of some companies. 

So that is one of the issues that we have to work through with 

them when we are talking about these kind of contractual arrangements. It is not just the money. It is how the data can be used is 

also important. 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Mr. Wolf. 

Mr. WOLF. I will pass. 

Mr. MOLLOHAN. Mr. Schiff, do you have any other questions? 

Mr. SCHIFF. No thank you. 

Mr. MOLLOHAN. Okay. 

Mr. WOLF. Mr. Chairman, I have some questions I will just submit for the record. 

RECREATIONAL FISHING

Mr. MOLLOHAN. Okay. You scared me there. I thought I gave you 

too much time. 

Recreational fishing contributes over 125 billion to the economy 

on an annual basis and supports over a million jobs. The recreational fishing community has expressed concerns with respect to 

NOAA programs, including Catch Shares and research. We heard 

that spoken to by Mr. Bonner here earlier this morning. 

This community also has concerns about the effect of the coastal 

and marine spatial planning framework. We will submit several 

questions for the record on these topics. 

CLOSING REMARKS

We are at the twelve o’clock hour and members have other engagements. And you have kindly given up your time to be here this 

morning and I know you have a busy schedule likewise. 

So we will submit a number of other questions for the record 

other than this. 

Thank you for your excellent testimony here today and your excellent service. The kind of management you brought to NOAA is 

very impressive dealing with this NPOESS issue and getting this 

on the right track will earn you, I do not know, a legacy forever. 

And we look forward to working with you and your fine staff. 

Thank you very much, Dr. Lubchenco, for appearing here today. 

Ms. LUBCHENCO. Thank you, Mr. Chairman. I appreciate it. 

Mr. MOLLOHAN. The hearing is adjourned. 


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(233) 

TUESDAY, FEBRUARY 23, 2010. 

NATIONAL INSTITUTE OF STANDARDS AND 

TECHNOLOGY 

WITNESS 

DR. PATRICK GALLAGHER, DIRECTOR 

OPENING REMARKS

Mr. MOLLOHAN. The hearing will come to order. Good afternoon. 

Today we will explore the fiscal 2011 budget request for the National Institute of Standards and Technology. 

NIST’s critical role in measurement science and standards fosters innovation and encourages economic growth. The agency is a 

world leader in the physical sciences and technology. 

The total NIST request is $918.9 million, an increase of $62.3 

million over the fiscal year 2010 enacted level of $856.6 million, or 

just over seven percent. 

We will explore NIST’s progress in awarding American Recovery 

and Reinvestment Act funds, including specific details on how the 

funds are being utilized and their importance in supporting NIST’s 

mission while addressing National priorities. 

NIST received $580 million in ARRA funding, including $220 

million for research, competitive grants, additional research fellowships, and advanced research and measurement equipment and 

supplies: $180 million to address NIST’s backlog of maintenance 

and renovation needs, and for the construction of new facilities and 

laboratories; and $180 million for the relatively new and well-received competitive construction grant program for research science 

buildings. 

I would like to acknowledge that this is Dr. Gallagher’s first time 

testifying before this Subcommittee. 

I understand, Dr. Gallagher, that you have some practice with 

authorizing committees, however, so it is not exactly new territory 

for you. 

Welcome, and we look forward to your testimony. Your written 

statement will be made a part of the record. Following Mr. Wolf’s 

opening statement, we will ask you to briefly summarize your written statement. 

Mr. Wolf. 

OPENING REMARKS

Mr. WOLF. Thank you, Mr. Chairman. 

Dr. Gallagher, we welcome you and look forward to hearing your 

testimony. 

And I yield back. Thanks, Mr. Chairman. 

Mr. MOLLOHAN. Dr. Gallagher. 


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OPENING STATEMENT BY DR. GALLAGHER

Mr. GALLAGHER. Well, thank you very much. It is a real pleasure 

to be here for my first hearing before this Subcommittee. 

And I want to thank you, Chairman Mollohan and Ranking 

Member Wolf and the other members of the Subcommittee, for allowing me to appear before you today to summarize the President’s 

request for the National Institute of Standards and Technology for 

fiscal year 2011. 

I also want to take this opportunity to thank you for your continued support of NIST. This budget reflects, I hope you will agree, 

the important role that NIST plays into the President’s Plan for 

Science and Innovation. 

The President’s fiscal year 2011 budget request for NIST is 

$918.9 million. This is a 7.3 percent increase over the fiscal year 

2010 appropriation for the agency. 

This budget maintains the President’s commitment to double the 

NIST laboratory budget by 2017 and to increase funding for the 

Hollings Manufacturing Extension Partnership or MEP Program. 

The request for our Scientific and Technological Research Services account which funds NIST laboratory programs is $584.5 million, an increase of $69.5 million above last year. This increase is 

focused on critical areas such as manufacturing, cyber security, 

standards for interoperable health records, Smart Grid, advanced 

photovoltaic research, and disaster resilient buildings. 

The request for our Industrial Technology Services or ITS account, which is comprised of the MEP Program and the Technology 

Innovation Program or TIP, is $209.6 million and includes increases of $4.6 million for MEP and $10 million for TIP. The request also includes $124.8 million for our Construction of Research 

Facilities account. 

So let me briefly summarize some of the initiatives in the request. 

In the laboratory initiatives, the standard for conformity assessment for interoperability and emerging technologies initiative covers the development of framework of documentary standards and 

conformity assessment requirements to enable interoperability and 

new technologies. This initiative specifically includes our efforts in 

Smart Grid and health IT. 

The scalable cyber security for emerging threats and technologies 

initiative will support the development of tools and standards necessary to enable a robust, usable, and accessible cyber security 

framework and will include a specific program of competitive 

grants to strengthen U.S. capabilities in cryptography. 

Our green manufacturing and construction initiative will provide 

for the development of tools to improve energy efficiency in manufacturing and construction and to benchmark and stimulate the 

utilization of sustainable materials in manufacturing. 

The innovations for 21st century U.S. manufacturing will accelerate the development and adoption of advanced manufacturing 

technologies, including nano manufacturing capability. This initiative is also in line with the President’s framework for revitalizing 

American manufacturing. 


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NIST’s advanced solar technology initiative, consistent with the 

Administration’s support for the development of alternative energy 

sources, will focus on bridging the current gap in measurement 

technology needed to develop both advanced technology of 

photovoltaics and to promote their commercial use. 

The disaster resilient buildings and infrastructure initiative will 

fund improved techniques, tools, and guidelines for evaluating and 

rehabilitating existing buildings based on analytical and experimental studies. It also supports efforts to work with national code 

organizations so that we can incorporate those tools and products 

into improved model codes. 

The nano material environment health and safety initiative 

builds on our current efforts to characterize nano materials and to 

begin developing the standards and reference materials framework, 

including measurement methods and instruments needed to support research and standards on nano material safety. 

For our biologic drugs initiative, we’re working with industry 

stakeholders to develop a program to provide reference materials 

and tools to control the manufacturing of biologic drugs and to support their eventual regulation. This initiative will include funds for 

grants to stimulate advances in these new measurement technologies. 

The Strategic and Emerging Research Initiatives fund, or SERI, 

is a Director’s discretionary research account, enabling the NIST 

Director to respond quickly to critical research needs. The NIST 

NRC Postdoctoral Research Associateships program initiative will 

enable NIST to support up to 23 additional new postdoctoral associateships per year through this highly competitive program. 

Our request for MEP this year is the second year of proposed increases to the program. This is consistent with the trajectory for 

the program that was outlined in the America COMPETES Act. 

This initiative will enable the program to expand its suite of business growth services, which we call Next Generation MEP services, 

to promote the acceleration of new technology, to promote green 

and sustainable manufacturing, and to open up new markets for 

U.S. small- and mid-size manufacturers. 

The requested increase for the TIP Program will support new 

competitions and cover any remaining commitments from previous 

competitions in areas of critical national need like civil infrastructure, advanced manufacturing, energy, healthcare, or green chemistry. 

Our Construction of Research Facilities request reflects three 

major goals for the agency. First, to fund the repairs and maintenance of our existing building systems, second, to renovate a dangerously obsolete Building 1 at our Boulder campus, and, finally, 

to begin detailed planning for the most cost-effective way for a future renovation at our aging general purpose laboratories in Gaithersburg. 


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Mr. Chairman, this request reflects the Administration’s recognition of the important role that NIST plays in innovation and our 

impact on the future of manufacturing and hopefully of moving this 

Nation from recession to recovery. 

I am looking forward to working with this Committee and look 

forward to answering any questions you have. 

[The written statement of Dr. Patrick D. Gallagher, Director of 

the National Institute of Standards and Technology, follows:] 


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AMERICAN RECOVERY AND REINVESTMENT ACT

Mr. MOLLOHAN. Thank you, Dr. Gallagher. 

In the American Recovery and Reinvestment Act NIST received 

a total of $580 million. We are interested in knowing what you did 

with it, how many jobs it preserved or created. So let us just start 

with how much funding has been obligated to date. 

Mr. GALLAGHER. The total amount of funding for Recovery Act 

varies according to the different programs. Where we have the 

most progress in obligations is through our grants programs. 

Mr. MOLLOHAN. Uh-huh. 

Mr. GALLAGHER. We have announced awards for all of our construction grants. 

Mr. MOLLOHAN. Well, may I? Excuse me for interrupting you. 

Mr. GALLAGHER. Yes. 

Mr. MOLLOHAN. Let me start at the top. You had $580 million 

in the Recovery, right? This is a total, a top line number, how 

much—— 

Mr. GALLAGHER. You want me to break that out? Yes, let me 

break it down because there were a number of pieces to it. 

Of the $580 million that NIST received, $360 million was in our 

Construction of Research Facility accounts. Of that $360 million, 

half of it, $180 million, was for internal NIST construction. The 

other half was for the competitive construction grants program. 

In the construction grants program, a third of that funding was 

awarded rather quickly based on proposals that had been received 

but were unfunded from the prior year. 

Mr. MOLLOHAN. Uh-huh. 

Mr. GALLAGHER. The remaining two-thirds was funded under a 

new competition and those awards have all been announced. 

In the internal NIST construction, this is done through design 

and then build contracts. The design contracts have all been 

awarded and we are now moving into the construction contracts. 

Those contracts will be moving out between now and the middle of 

the summer which just reflects the two-phase process that occurs 

under construction. 

Mr. MOLLOHAN. So $360 million for construction, it is out, and 

construction will begin when the construction season starts, I assume? 

Mr. GALLAGHER. That is correct. 

Mr. MOLLOHAN. Okay. 

Mr. GALLAGHER. The remaining $220 million was in our laboratory base account, the so-called STRS line for NIST, and that was 

broken into a number of distinct programs. A little over half of 

that, approximately $110 million, was for the purchase of high-end 

equipment needed for NIST research. We focused that specifically 

on large items of equipment. So that was good from a management 

perspective because it gave us a finite number of items to move, 

but it also complicates it because large contracts move a little slower than lots of small contracts. 

We have awarded approximately 16 of those and the balance of 

those are pending with a very heavy season of awards anticipated 

through this spring and summer. In terms of equipment received, 


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there is not a lot yet. Three or four items have been installed and 

are underway. 

Mr. MOLLOHAN. How much of that equipment is purchased in the 

United States from United States manufacturers, if you know? 

Mr. GALLAGHER. My understanding is that almost all of it is. I 

only know of one exception that, because of a Trade Act issue, a 

foreign registered company was allowed to compete and I think obtained the contract. But everything else to date has been Americanmanufactured equipment. 

Mr. MOLLOHAN. Uh-huh. 

Mr. GALLAGHER. There are some details that go with whether we 

can restrict competition to U.S. companies or not, but we have done 

everything we know to promote U.S. manufacturers in this by identifying the nature of the equipment, make sure that it is the kind 

of equipment that we could buy from U.S. manufacturers. 

Mr. MOLLOHAN. Uh-huh. 

Mr. GALLAGHER. After the $110 million, there are a number of 

programs that are various grants and contract programs. There is 

a $35 million research grants program that was to support areas 

of research and that support NIST work and those are all announced. 

We announced last week a fellowship program which will support 

positions not just postdoctoral or graduate student but all the way 

up to senior scientists at both our Gaithersburg and Boulder facilities. 

There is also a $22 million expansion of the NIST NRC Postdoctoral Research Associateships postdoc program in the Recovery 

Act that, in fact, we are also expanding in our 2011 request. Those 

positions are underway and are brought in as term appointments 

to NIST. 

Mr. MOLLOHAN. So those are postdocs that would be working in 

with NIST as an agency? 

Mr. GALLAGHER. That is correct. 

In the research grants program, we were trying to have programs that would both bring people to work at NIST and provide 

grants to universities so they could fund students and postdocs at 

their institutions. So we tried to have both aspects of the program. 

We also had a series of research contracts to support particularly 

our efforts in cyber security, health IT, and Smart Grid and about 

half of those have been obligated and are underway. The other half 

are in progress. 

Mr. MOLLOHAN. Just because the efficacy of the stimulus program has been so questioned, can you translate your expenditure 

into jobs? Have you done that computation? You may not have. 

And if you have not, that is fine. If you have, we would like to have 

the benefit of your knowledge on that. 

Mr. GALLAGHER. Well, you know, the Recovery Act, the part of 

the Recovery Act that NIST saw was very much in the investment 

side. So as you see, a lot of our spending is according to our anticipated profile, but it really peaks this year, not in the prior year. 

We are required, as are all Recovery Act recipients, to report job 

creation through the recovery.gov web site. 

Mr. MOLLOHAN. Can you do that here today or would you like to 

submit that for the record? 


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Mr. GALLAGHER. Well, yes. The numbers that come up, though, 

I can share those numbers. What we have so far is 115 jobs created, funded by the Recovery Act recipient-based reports. 

But I want to point out that, one, there is this generic undercounting problem that everybody talks about which is just the limitation of doing the recipient-based reporting which is that, for example, when you buy equipment, we do not look at the jobs that 

are created in the supply chain of that manufacturer and so forth. 

And specifically at NIST, there is an under-reporting because 

these are postdocs that are hiring under term appointments, and 

they are excluded from the count. So there is already another 53 

positions where we have hired people, provided jobs, but they are 

not part of the job tally. 

Mr. MOLLOHAN. Uh-huh. What about the construction jobs? 

Mr. GALLAGHER. Well, in the—— 

Mr. MOLLOHAN. They are prospective as you are looking at them? 

That would happen when the construction starts? 

Mr. GALLAGHER. Both the construction grant recipients and the 

internal construction have recipient reporting requirements for 

them to report. But most of the jobs will come with the construction phase, so we are not reporting many of those yet. 

Mr. MOLLOHAN. So that is 360 million out of your expenditure? 

Mr. GALLAGHER. That is correct. 

Mr. MOLLOHAN. So they will hit, I assume, when that starts and 

that is in the summer? 

Mr. GALLAGHER. Yes. They are fairly labor intensive as all construction projects. So as soon as we let those construction projects, 

we typically are breaking ground pretty quickly. So I anticipate the 

recipient reporting to follow that pretty quickly. 

Mr. MOLLOHAN. Thank you, Dr. Gallagher. 

Mr. Wolf. 

MANUFACTURING FOCUS AT NIST

Mr. WOLF. Thank you. 

Mr. Chairman, I have a number of questions and maybe we will 

get to them in the second round. 

The manufacturing base of our country is eroding pretty rapidly. 

If you get on a train in Washington and take it up to New York, 

close your book and do not buy a newspaper and just look off to 

the right and the left, you will see factories are in decay. The windows are broken. There is graffiti on the walls. The weeds are 

growing out of the buildings. 

And you are coming right up to the industrial heartland of the 

nation. You actually go through my old neighborhood and we had 

the largest General Electric switch gear plant, I think, in the world 

and it is gone. There is nothing there. When the wind blows, the 

weeds just tumble and kind of go through the buildings now. 

There is the sign over the Delaware River from Trenton, New 

Jersey to Pennsylvania that says ‘‘Trenton Makes and the World 

Takes’’. Trenton does not make anything anymore that I know of. 

I think American Standard has since pulled out of Trenton. 

And much of the funding are you doing that really deals with 

manufacturing and bringing about a renaissance in this nation 

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structing a building out at NIST that lasts for one year—but a job 

that lasts for a long period of time? 

So I guess the question is, do you agree that manufacturing is 

in the tank and we are really in a very difficult situation? Secondly, what of the funding that you have has been used to really 

create jobs in the private sector? 

Mr. GALLAGHER. Well, thank you very much for that question. 

I share your passion and your observation on the state of manufacturing in the United States. I happen to believe that this country needs a very strong production and manufacturing capability to 

be viable. And there are a number of reasons why I think it is so 

essential for us to build that. 

The NIST programs themselves focus on manufacturing in a couple of different ways. And, in fact, the types of programs that NIST 

has authorized within the agency make it somewhat unique among 

federal agencies. 

In the NIST laboratory program, our request for fiscal year 2011 

has an unprecedented focus on manufacturing. And the motivation 

here is to use a research and development agency like NIST to both 

address barriers that manufacturers are facing and to give them a 

competitive advantage when they are looking at foreign competition. 

And so the examples of that would be, for example, in terms of 

giving them advantages would be looking at Smart Grid or Health 

IT where you are looking at a new set of technologies and if you 

are going to manufacture devices and products in that space, rapidly having consensus on what interfaces those components have to 

have and doing it very quickly advantages U.S. manufacturers. 

So in the case of Smart Grid, as we quickly deploy these interoperability standards, we can have U.S. manufacturers developing 

Smart Grid appliances and components and Smart meters. And because we are the first mover, we give our manufacturers a competitive advantage. 

The other area is that we want to take advantage of the fact that 

U.S. manufacturers are in proximity to one of the strongest R&D 

activities in the world. And so giving them access, accelerated access to how to incorporate technology into their manufacturing 

process to improve productivity or efficiency or to create new products and services is something that those programs are focused at. 

And then if you look at the MEP Program, we are working with 

small and mid-size manufacturers very directly on sort of a needs 

basis to give them the business services and growth services they 

need to support on a case-by-case basis what they do. 

All that being said, I think that these are necessary things to 

have to happen, that we have to put U.S. manufacturers in the 

strongest position possible to compete. I think there are more 

pieces to the puzzle than the technology pieces that NIST is looking 

at. 

And I know within the Commerce Department, we are very focused on looking at this issue to see rather holistically all of the 

issues in terms of both trade and export controls and looking at the 

technology issues that NIST does and rapid access to intellectual 

property and so forth so that we can try to do everything we can 

to support American manufacturing. 


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SMART GRID

Mr. WOLF. But can you attribute any of the current funding, and 

I know it is too soon, that will lead to actually creating manufacturing jobs? 

Mr. GALLAGHER. Well, in the case of Smart Grid, I am aware of 

an economic analysis that was sponsored last year, it was published in the Wall Street Journal, that projected over 200,000 new 

jobs in Smart Grid-related fields by the end of 2011, which I found 

to be a very impressive, somewhat astonishing number. 

But when they broke it out and you saw that it was both in appliances and new appliance capabilities, it was in Smart Grids, it 

was in installers that would have to be installing these, it was in 

terms of network support to make these things happen, and then 

on the bulk power side looking at the upgrades to our switch gear 

and power distribution systems, and then including the renewable 

energy, so it is one of these infrastructures that enables a very 

broad spectrum of new technologies. And the job creation potential 

is quite large. 

JOB EXPANSION IN CHINA INSTEAD OF U.S. 

Mr. WOLF. And I guess you are right. I just was reading the old 

book out by John Meacham, Franklin and Winston, whereby they 

from almost zero got up and running and built a fleet of ships and 

airplanes and manufactured and did things in order to win World 

War II, almost coming from nothing. 

And it seems that today there is something missing. Why do you 

think jobs are expanding in China, and not in the United States? 

And I was very disturbed. There was an ABC report last week 

that in the area of wind, there were a large number of turbines and 

equipment that were being made in China that were being funded 

through a Texas company. There were 55 jobs in Texas and thousands in China. But why do you think they are able to compete or 

do so well in China or India and not here? 

Mr. GALLAGHER. Well, I think, you know, we have all heard sort 

of what I call the simple argument, that it was labor cost driven 

and it is cheaper to manufacture things where the labor is cheaper. 

What I find interesting is that if you look at some of the manufacturers that are moving overseas now, they are not in areas that 

are strictly advantaged by labor costs. So advanced photovoltaics 

are being manufactured in China even though that was an American invention of photovoltaic technology. And the U.S. has lost 

market share rapidly in photovoltaic manufacturing. 

Photovoltaics are an energy intensive and capital intensive manufacturing. And so companies are making these siting decisions not 

strictly on labor, but on a set of other issues. 

Mr. WOLF. What are those other issues? 

Mr. GALLAGHER. I am not sure we know them all, but the ones 

that I am worried about are, you know, there is going to be a total 

sort of cost environment that they are in. Maybe these sites are 

more aggressive at making regulatory and cost decisions that simply put product manufacturers that have very rapid product cycles 

in an environment where it is just more predictable from a business sense. We sometimes hear that from business leaders. 


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The other one that I am quite interested in is that many of the 

Asian markets have been much more systematic at building integrated supply chains so that when you start moving into a semiconductor type technology like photovoltaics, they have the assemblers, they have the device manufacturers, and they have simply 

paid more attention to the supply chain. 

And I think that is what is driving a lot of the current discussion 

here in terms of regional and innovation type clusters so that we 

try to have the symbiotic relationship that occurs between manufacturers and their supply chain. 

JOB REPATRIATION PROGRAM

Mr. WOLF. But are we looking at that, and not to just be critical 

of this Administration, but the previous Administration allowed 

jobs to go offshore? And I just wonder if there is not more that we 

can do from a practical point of view. 

I would love to see any Administration put together what I will 

call a repatriation program whereby we repatriate jobs, not New 

Jersey competing with Pennsylvania or Pennsylvania competing 

with West Virginia, but to compete for jobs with China and India 

and Bangladesh and Mexico. 

And I do not know that you are the right person, that you are 

the right agency, but somehow it seems that there ought to be a 

model put together, and the Department of Commerce has been 

asleep at the switch, both in this Administration and—let me just 

stress again in the interest of bipartisanship—in the previous Administration, but to almost put together a model. 

How do you repatriate jobs back? I would sense that if you are 

an American company, you would certainly rather have your location, your plant manufacturing in a rural area in the United 

States, perhaps to look to see how you can bring some companies 

back from China that are American companies, giving them a significant tax break, perhaps relocate in an area, for instance, in 

south side Virginia, in Martinsville, where there is an unemployment rate at 20 percent. 

So clearly you would not have to pay the people as high of a 

wage as you pay them if they were going to be relocated to Gaithersburg, where you have high property taxes in Montgomery 

County, for example. You would not have the commute, the transportation. 

But would it not make sense to put together kind of a model? I 

think the research and the development is very important. And 

when I was on this Committee before, we always funded NIST at 

a very high rate. So I am not questioning what NIST does. 

I know NIST standards, building standards perhaps have been 

involved in Haiti with regard to the earthquake and if you read today’s paper of the number of earthquake zones. So I think everything you do is good, but to really put together kind of a comprehensive way and, therefore, make an effort. 

Now, my sense is I do not see this Administration doing it. I did 

not see the previous Administration doing it. And there are probably more lawyers on K Street working for the Chinese than there 

are working for other people. 


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Would that not make sense to kind of do, to look at a model and 

see—— 

Mr. GALLAGHER. I—— 

Mr. WOLF [continuing]. Some of those companies, to bring them 

back home? 

Mr. GALLAGHER. I would love to work with you on this. I think 

that the only way we are going to tackle the manufacturing problem is to look at it very holistically and look at the systematics and 

make sure that it is not going to be one technology or just a tax 

issue or just—it is going to have to be a whole package because we 

are seeing companies making these decisions for reasons other 

than the simple ones that we thought we understood. 

Mr. WOLF. Well, maybe, at an appropriate time, working with 

the Chairman, we could put together a model, particularly with regard to this Committee having Commerce and NIST and NSF, together and do it on a kind of a ‘‘forced march’’ whereby you could 

promote this to come back in 180 days as to what is the model to 

repatriate. 

If every American company were to return to the United States, 

what would that mean in terms of jobs? How many jobs would 

there be and what would we have to do? So if you could come on 

by and we could sit down and pick your brains and see—— 

Mr. GALLAGHER. I would love to. 

Mr. WOLF [continuing]. If we could offer something. 

Mr. GALLAGHER. I would love to. 

CYBER SECURITY

Mr. WOLF. On the cyber security issue, what country is the most 

aggressive with regard to cyber attacks? 

Mr. GALLAGHER. Well, I do not have access to the detailed data, 

but it is—— 

Mr. MOLLOHAN. Access to the details. 

Mr. GALLAGHER. I was going to say what I read would put China 

and former Soviet Union, those countries sort of near the top of the 

list, but that is from my reading of the papers. 

Mr. WOLF. Well, I would think you would know, though. Do you 

work with the FBI and talk to their people? I mean, but is it not 

China from what you know as well as what you read—— 

Mr. GALLAGHER. That is correct. 

Mr. WOLF [continuing]. In the paper? Okay. I just wanted to get 

that out. Can you describe for the Committee the economic impact 

that results from cyber crime and the potential for economic loss 

and the disruption that could come from future attacks? How vulnerable are we and are we becoming more or less vulnerable? I 

think I know the answers, but I want to hear from an expert. 

Mr. GALLAGHER. Well, you know, the risk we face in cyber security is based on the utility of cyber. So as we become more dependent on it for e-commerce, which has had great benefits, as we become more dependent on it for delivering public goods and services, 

as we become more sensitive to failures of the same infrastructure, 

so the increased risk we face is also a byproduct of the increased 

benefits we incur from information technology. 

The magnitude of the risk is enormous. The estimates I have 

seen are billions of dollars lost in cyber crime. 


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Mr. WOLF. Three billion or seven—— 

Mr. GALLAGHER. Billions. I do not—— 

Mr. WOLF. But I am asking three billion or seventy-five billion? 

Mr. GALLAGHER. I do not know. 

Mr. WOLF. Could you see what you could—— 

Mr. GALLAGHER. Yes, we could look into it. 

[The information follows:] 

CYBERSECURITY

There have been many estimates of the economic impact of cyber attacks to U.S. 

businesses and citizens. However, estimates are largely based on anecdotal evidence, so there is no consensus in estimates of impact. A 2007 GAO report, GAO– 

07–705, ‘‘Cybercrime: Public and Private Entities Face Challenges in Addressing 

Cyber Threats,’’ confirmed the lack of consensus and explained the difficulties in 

precisely determining impact. The GAO report did cite a 2005 FBI survey that estimated U.S. organizations’ loss from computer crime at over $67 billion. Other, more 

recent surveys have estimated the U.S. impact in the hundreds of billions of dollars 

a year. 

Mr. WOLF. Go ahead and finish there. 

Mr. GALLAGHER. Well, what I was going to say is I think that 

what makes this a real challenge is that this is a new and rapidly 

evolving technology and you cannot think about the solutions as 

static patch the holes. 

These systems are evolving and they are sitting in a threat environment that is extremely dynamic. And so I think the solution to 

this is not can we just worry about the border security, if you will, 

in computer systems, but how do you have real robust defense in 

depth? 

The problem we really face right now is that the bad guys can 

have lots of failures and just have one success and they are done 

and they win. We can have lots of successes and one failure and 

we lose. And so it is very asymmetric. 

I think what you really want to do is have a lot of defense in 

depth. You also want to make security usable. If we turn computer 

systems into Fort Knox, we lose all of the benefit that these technologies have for us. We want to try to automate as much as possible how these systems respond to environments so that the security is sort of built in. 

One of the things at NIST that we are really focused on is how 

do you measure the security performance of a system. And the reality is today what we do is we propose controls and you really assess by an audit how many controls you have in place. It is a very 

primitive form of measurement. 

The question is, can we actually look at IT system behavior and 

actually do what we are supposed to do at NIST which is to get 

some very meaningful measurement tools so that system operators 

can say this is how well my system is performing? And if the threat 

environment changes, this is what I have to do to adjust. 

Mr. WOLF. Well, thank you very much. 

Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Wolf. 

Mr. Bonner. 

JOB CREATION AT NIST

Mr. BONNER. Thank you, Mr. Chairman. 


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Dr. Gallagher, listening to you, to your opening testimony and 

listening to you respond to the Chairman and Ranking Member, I 

told you when you introduced yourself that I do not think you are 

going to get grilled today and there was a lot of hard questions, but 

just listening to your response to Chairman Mollohan that the 115 

new jobs that have been created, are those in your estimation all 

federal government jobs or are any of those in the private sector? 

Mr. GALLAGHER. No. At NIST, the 115 jobs that we count are all 

private sector jobs that are being created. At NIST, the only jobs 

that are the federal sector in our tally are these two-year term appointments for the postdocs. That is really the only—— 

Mr. BONNER. That would be the 53 positions? 

Mr. GALLAGHER. That is correct. 

MANUFACTURING BASE AND NIST’S ROLE IN RE-ENERGIZING

Mr. BONNER. And then you also mentioned in answering Mr. 

Wolf’s questions about the importance of re-energizing the manufacturing base in this country. 

Could you tell us a little bit more specifically about what NIST’s 

role could be in that? 

And the reason, I am not trying to lay a trap for you, I have got 

a county that has got 20 percent unemployment. I would venture 

a guess with no disrespect to the people in that county that if I 

went home this weekend and said NIST has received $500 million 

last year in the stimulus and got the President asking for a 7.3 

percent increase, most of the Social Security recipients this year 

will not get any increase in their gold and most state legislators 

are struggling just to keep level funding or will see significant cuts. 

So my question is really based on how can I convey to one of my 

constituents or any of our constituents that are here that an investment in NIST is an investment in a better life for them individually or for the life of our country? 

Mr. GALLAGHER. Well, I think the short answer to that is that, 

and it goes to the heart of the whole innovation discussion, that if 

we are making these justifications for these public investments in 

R&D, we have to translate this into economic activity for the country. So the proof is really do we generate meaningful jobs and economic activity. 

In terms of what NIST can do to support that, as I said, there 

are a couple of aspects to that. One thing we know is that our research intensive manufacturers do much better than low intensity 

R&D. So if you look at just how well certain manufacturing sectors 

have done, those that are R&D intensive have really done fairly 

well in the United States. It is the ones that are not. 

And so it is a plan forward in terms of how we identify sectors. 

And that is why this R&D investment is very important. 

The other aspect in terms of an approach and maybe one with 

Ranking Member Wolf we can talk about is the federal government 

does not alone work with manufacturers. The states and local governments play an enormous role and we see that in every siting decision that is made. 

One of the approaches I would like to explore is whether we can 

use the federal involvement as a mechanism for tying together 

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try. If we can quickly disseminate best practices and identify those 

areas that really do it well and can shed those things that are not 

effective, we might be able to help everybody by sort of leveraging 

these precious resources and making sure they are maximally beneficial. 

And that is a little bit what the MEP Program tried to do 20 

years ago which was to take the various extension partnership programs, identify those practices that worked really well, and use the 

federal part to basically act as a network. 

MANUFACTURERS AND STATES’ ROLES

Mr. BONNER. Do you have a breakdown or could you get us a 

breakdown of what the individual 50 states do in terms of their 

own contribution because I think that is an interesting point here 

today? You have got New York, Maryland, Pennsylvania, West Virginia, Virginia, and Alabama, and my colleague from Alabama 

might know what we invest. It is probably not near as much as it 

should be, but I would like to know what other states are doing as 

well so that when our state legislators and governors come up to 

us asking for help at the federal level, we can turn around and ask 

for help from investment from the state? 

Mr. GALLAGHER. Okay. I would be happy to share what we do 

know. What I am afraid of is that we will be impartial as well. And 

I think that really does point to a problem that we should be looking at this broad spectrum of programs, what happens in universities, what is happening in the technical colleges and community 

colleges, what is happening in technology parks, what is happening 

with the manufacturing extension centers, and what mixes appear 

to be proper. What sort of conditions have to be in place so that 

you do start to bring jobs back in and create an attractive environment for manufacturers. 

[The information follows:] 


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OVERSEAS COUNTERPARTS OF NIST

Mr. BONNER. And then the last question that I have got is, I always like to look at the map of the world behind the Chairman because if you think about the investment of $918 million in our 

country this year, assuming this goes through, what would China— 

what is the Chinese counterpart to NIST? What is the European 

counterpart to NIST or the Japanese? And what are their countries 

investing in this? 

Mr. GALLAGHER. I do not have those numbers off the top of my 

head. We tend to have to aggregate those because there tends to 

be no exact counterpart to each agency in the other countries. 

But we do know that in some of the technology areas, it is not 

uncommon in other countries for the federal government, if you 

will, in those countries to play a very direct role in industrial policy 

and conditions. And so you are going to see very large and significant investments in China and Europe in setting the conditions for 

their manufacturers. 

And I do not think our diversity is a disadvantage. I just think 

we have to harness it better. So, you know, the trick is let us not 

disadvantage ourselves by the fact that we do not have a central 

planning, but we can certainly pull what we know about those 

numbers and be happy to share that with you. 

NATIONAL MEASUREMENT INSTITUTE (NMI) INTERNATIONAL COUNTERPARTS

Arguably, NIST is the predominant National Metrology Institute (NMI) in the 

world. Most U.S. trading partners have a National Metrology Institute (NMI) of 

their own, which provide services to their economies analogous to those that NIST 

provides to the U.S. economy. These foreign NMIs range in size/scope from the 

Physikalisch-Technische Bundesanstalt (PTB, Germany), which is the second largest 

NMI in the world, to very small NMIs, with a handful of employees, who just provide limited traceability to the internatinal unit of measurements (the SI) via a few 

calibration services. Among the principal counterparts of NIST are: NRC–CNRC 

(Canada), NIM (China), CENAM (Mexico), NMIJ (Japan), PTB (Germany), NPL 

(UK), KRISS (South Korea), LNE (France), VSL (The Netherlands), CMS/ITRI (Taiwan) and INMETRO (Brazil). 

Mr. BONNER. Thank you, Dr. Gallagher. 

Thank you, Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Bonner. 

Mr. Aderholt. 

MANUFACTURING OF TEXTILES

Mr. ADERHOLT. Thank you, Dr. Gallagher, for being here today. 

One thing that NIST has been helpful in the past as with, of 

course, a lot regarding the manufacturing we have already talked 

here today, one of the areas that has been hit hard by not only the 

recession but also through overseas competition has been the textile aspect of manufacturing. 

And just if you could tell us a little bit about what NIST is doing 

to ensure that the textile industry that remains in America does 

stay strong and tries to make sure that what we have now does not 

leave. So if you could share some of those thoughts with us. 

Mr. GALLAGHER. Yes. I hate to tell you that the NIST intramural 

efforts in textile manufacturing were largely terminated years ago. 

So there is actually very little that NIST is doing to support textile 

manufacturing right now, unless it is of a general manufacturing 


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technology like sensors and various materials, calibration processes 

that textile manufacturers would have to have access to. 

So we support their basic measurement needs, but we do not 

have a focused sector-based program anymore in textile. We used 

to, but not anymore in textile manufacturing. 

One interesting note, one area where that seems poised to 

change is in nano manufacturing. It appears that some of the high 

through-put manufacturing technologies that are being looked at 

have a lot of similarities with textile manufacturing. And it may 

very well be that we will be looking at nano materials in textiles 

as an approach in a very advanced manufacturing sector. 

Mr. ADERHOLT. What about as far as the National Textile Center? What relation do you have with that? 

Mr. GALLAGHER. I do not know. I am not aware of a specific relationship with that program. 

Mr. ADERHOLT. If you could check on that and—— 

Mr. GALLAGHER. I would be happy to. 

[The information follows:] 

NATIONAL TEXTILE CENTER

At this time, NIST does not have a direct relationship with the National Textile 

Center (NTC). However, NIST does have scientific collaborations with researchers 

at Cornell who are affiliated with NTC as well as others at the University of Delaware and Purdue, who are studying body armor and conducting research on highstrength fibers. 

Mr. ADERHOLT [continuing]. Get back with us. That is all I have. 

Mr. MOLLOHAN. Thank you, Mr. Aderholt. 

Mr. Ruppersberger. 

CYBER SECURITY INCREASE

Mr. RUPPERSBERGER. Yeah. Dr. Gallagher, thank you for being 

here. 

I know we had some conversations about cyber security in your 

role. This is an appropriations hearing, so the first thing I want to 

ask you about is the issue of cyber security in the role that you 

play. And I know you work very closely with NSA, but we also 

have challenges with the Homeland Security also. And I think in your budget that you have asked for a $10 million 

increase considering the cyber security threat. Because of the role 

I have on Intelligence, you know, we see that it is a very serious 

issue. It is one of the most serious issues involving our national security and not only national security but in the commercial area 

and the threats that are happening. 

Where do you see this ten million going and do you feel that that 

is significant based on what your role is going to be coordinating 

with NSA and also the Department of Homeland Security? 

Mr. GALLAGHER. Great. Thank you very much. 

Yes. The $10 million increase has two very distinct components 

for NIST. One of them is to strengthen certain research activities 

needed to develop stronger cyber security standards for federal systems and that does include advanced automation of configuration 

management of computer systems. It includes multi-factor authentications so we know that the authorized user is the person doing 

the work. And there is a set of very specific test beds that are needVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00261 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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ed to look at how to test security performance in financial systems, 

for example. There are a number of very specific research programs. The one new component to this program is that approximately $4 

million of this we envision as a grants program to U.S. universities 

to develop core competency in cryptography. And that is very important because cryptography, of course, is the mathematical 

science that tells us how to encrypt and protect information. 

A lot of cryptography work in the United States is not supported 

by the open science agencies. And, therefore, when we have an 

international competition in developing new encryption standards, 

we find that the participation is predominantly foreign. 

Mr. RUPPERSBERGER. And what open agencies do not really participate? 

Mr. GALLAGHER. Well, it is just that branch of mathematics is 

just not covered to any large extent by National Science Foundation or DOE or NSF. So because NIST has a core competency and 

we have strong ties with the academic community, we feel we have 

a stewardship role to make sure that there is a strong core competency in open cryptography work in U.S. universities. 

Mr. RUPPERSBERGER. You also have a role in working with small 

business; is that correct? 

Mr. GALLAGHER. Yes, we do. 

CYBER SECURITY AND NIST’S ROLE IN PRIVATE SECTOR

Mr. RUPPERSBERGER. And, unfortunately, from what we know, 

you could have a senior citizen in North Dakota who has a computer and communicates with her community bank. And that community bank then communicates with, say, Bank of America. And 

the bad guys could really get in through that one weak link and 

go through the community bank and probably be in a position if 

they knew what they were doing to maybe shut down some ATM 

systems for Bank of America. 

This is a threat that I do not think the public even understands 

where we are. 

And, again, in dealing, why cyber security is so difficult and, yet, 

it is so important because we are constantly getting attacked on a 

regular basis, what would you see your role? What would you recommend we do to involve so many—I mean, small businesses are 

about 80 percent of what we really do in this country, working with 

small business. What would your role be and what would you recommend? 

Mr. GALLAGHER. Well, I think it is an outstanding question because, you know, we tend to focus on the federal systems because 

it is the information we are charged to protect and, yet, 80 percent 

of the infrastructure is in the private sector. And vulnerability in 

the private sector can affect all of us. 

I know that I can barely configure my computer. They are highly 

flexible. And I know my mom and dad certainly cannot. So one of 

the questions is that how do you provide support to individuals and 

the small businesses to provide these sort of security enhancements? 

One of them is that we have to extend the standards framework. 

In other words, the description of how to provide meaningful cyber 


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security in depth that we have done for the federal sector and promulgate that effectively to the private sector internationally, how 

we configure machines and how they are set up and how they operate. 

But the other one was a particular focus of this initiative which 

is to increase the automation of these systems. What we want to 

be able to do is have software and operating systems that can be 

dynamically configured so that we can adjust the way they are set 

up to minimize risk and, frankly, not have a single point of failure 

in the system where once you are inside, you are inside and you 

can do anything, that there is really a defense. 

Mr. RUPPERSBERGER. Well, you know that is really a massive undertaking because the weakest link of any individual and whether 

the bad guys are other countries, whether they are al-Qaeda, 

whether they are hackers just who want to do a lot of mischief, 

whatever, and you cannot start over, though, the internet. I mean, 

we have it and we are going to be moving forward. 

CYBER SECURITY AND OTHER AGENCIES

Let me ask you this. You might not want to answer this question 

because it might be too advanced at this point or it might be better 

to talk about this from a—they are classified or whatever. But we 

know that NSA does an outstanding job. Some of what they do, 

they are the best in the world in what they do. And thank goodness 

for the United States’ national security they do that, whether it is 

helping in cyber security, whether it is helping with war fighter, 

whether it is identifying, you know, terrorists throughout the 

world. 

But they have developed a lot of software in dealing with the 

issue of cyber security. And, you know, their responsibility is in the 

military and intelligence area where Homeland Security has the 

rest of the internet basically and including the .gov. 

And it seems to me that we really need to focus on one system 

because so much research and development has been done. And I 

would hope that we would be in a position to recommend to Homeland Security that they need to learn and to work with, you know, 

NSA as far as developing their system to protect our homeland, basically, from the cyber security issue. They are way far behind 

NSA, there have not been investments. And I think it is important 

that maybe, and this is very well respected, and you will have 

input in this issue about making sure that we have some type of 

compatibility where NSA is, and we can grow from NSA. Unfortunately in this country in law enforcement and a lot of places we 

have turf battles and we cannot afford turf battles here. Do you 

have any opinion or any comments you might like to make on what 

I just said? 

Mr. GALLAGHER. Yes, I think there are a couple of quick comments. One is, you know, in the cyber security space there are 

going to be multiple agencies participating. And it is important 

that they are all playing effectively, and we are not needlessly duplicating effort. And as I shared with you before we are working 

very hard on doing that. 

There is one area in particular where NIST and NSA have a particularly close relationship because they actually were charged with 


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the same thing. NIST is responsible for developing the security 

standards to protect federal information technology systems with 

the exception of Title 50 agencies, or the intelligence community. 

And NSA was given that responsibility over the intelligence community. So NIST and NSA together are responsible for developing 

basically the standards and protocols that are needed to protect IT 

systems. What we have done very effectively is work closely so that 

those two approaches are completely harmonized. And so there 

really is no daylight between the way we are approaching this. And 

at the technical level there is a very strong collaborative relationship between the two. 

NIST will be able to interact in a way with industry and with 

private sector in a way that NSA probably will not, and so it is 

very important to have both of those capabilities there. 

HOMELAND SECURITY AND NSA

Mr. RUPPERSBERGER. But my question goes further about Homeland Security, because that concerns me where they are at this 

point. And that they work closely with NSA, work closely with 

NIST to make sure that we have a standard approach and that we 

do not not use the research and development monies, millions of 

dollars that have been used to develop our cybersecurity system. 

Mr. GALLAGHER. Yes. We believe that it is imperative to have an 

effective DHS to partner with because they carry out roles that nobody else can. And there is very intense discussion internally about 

hammering out a very specific understanding between NIST, NSA, 

and DHS so we have a very clear roadmap of how to work effectively together. 

Mr. RUPPERSBERGER. You know, an example of where this has 

not occurred, and because this Committee does the funding for FBI, 

is their communications system. To this day it is still not working, 

when in fact you have communications systems like CINSA that 

have a communications system that works well. And why we had 

to go out and develop other contractors and systems when it is 

right there in front of us? We need to learn from those mistakes 

when it comes to the issue of cybersecurity. Cybersecurity is going 

to cost this country and other countries throughout the world billions of dollars. And there is a lot out there that we have to deal 

with. 

So I think you all are doing a good job. I think you keep working 

with NSA, and I think we can do a lot more in the collaboration 

and working with Homeland Security. 

Mr. GALLAGHER. Thank you, and I look forward to working with 

you on this. 

Mr. RUPPERSBERGER. Sure. 

Mr. MOLLOHAN. Thank you, Mr. Ruppersberger. Mr. Serrano. 

9/11 REPORT UPDATES

Mr. SERRANO. Thank you, Mr. Chairman. Is there anything that 

you can update us on in terms of your report, the agency’s report 

after 9/11? I know that there were recommendations made, and 

findings about the structural setup in those buildings. Now we are 

rebuilding. And so how much of what you said has been included 

in any new plans? And lastly, that tragedy, and sight of that plane 


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coming into that building, those planes, almost makes you feel that 

there was nothing that could have been done to prevent that tragedy. Am I correct in saying that? Not prevent the tragedy, you 

know, the attack, but what happened afterwards? Or was this now 

in the study suggesting that in fact the damage could have been 

less? 

Mr. GALLAGHER. I want to thank you for the question. Our job 

was to take this enormous national tragedy and try to learn from 

it. Specifically, to try to prevent a similar reoccurrence from ever 

occurring. And so the technical study that was underdone, which 

was the most advanced study of a building failure ever attempted, 

ever done, has actually led to some very important conclusions 

about how we can strengthen our codes and our approach to building structures to improve them in a number of ways. One is to 

make them resilient to the type of fire that actually caused the failure and the collapse. And so the adhesion of the fire protectant to 

the steel was something that was a weakness in that building and 

led to the ultimate structural failure of the buildings. And so some 

of the new codes that have now been adopted address improved 

fireproofing technologies and bonding to the steel. The other lessons we have learned—— 

Mr. SERRANO. Adopting locally or nationally, now? 

Mr. GALLAGHER. These are international. 

Mr. SERRANO. International? 

Mr. GALLAGHER. International. So the International Building 

Code has adopted twenty-three specific recommendations already 

from that study. And these now become the basis, these are model 

regulations that all local and state communities adopt as the basis 

for construction. So it includes improvements in sort of fire performance, that we talked about. It also includes performance in the 

ability to evacuate. We learned a lot about how important it was 

to be able to rapidly evacuate large skyscrapers. That includes new 

standards for the width of firewalls. It includes something that we 

were all taught as kids. You never get into an elevator when there 

is a fire. But in fact, one of the lessons we learned is that we can 

build fireproof elevators. And in fact, now they will be part of new 

construction and you will be told to evacuate using the elevator because it decreases the time to evacuate. And also improvements on 

how the buildings perform for the first responders. So making sure 

that the infrastructure in that building is resistant, and functions, 

and is in places that are hardened so that first responders can assume command and control over a damaged building and get people out safely. 

I hope we never see a tragedy like that again. But we will have 

learned some lessons that will make new buildings constructed 

under these codes much more resilient against tragedies. 

9/11 AND BUILDING DESIGN FAILURE

Mr. SERRANO. Thank you. Now, my understanding, if I recall 

that day, the buildings sort of crumbled. And it was the tragedy 

that it was. My understanding also was that even though that was 

so tragic, had they fallen this way the surrounding area and many 

more people involved than what indeed happened. First of all, is 

that true? And second of all, were those buildings built for unfortuVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00265 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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nately a situation like that to kind of collapse rather than tilt over? 

Or is that uncontrollable? 

Mr. GALLAGHER. Yes, I do not want to hesitate to guess whether 

that was a design failure mode for that building. I do not think 

that the designers were designing in the progressive failure mode. 

What happened was a progressive failure when the structural steel 

weakened to a point. 

Mr. SERRANO. Right. 

Mr. GALLAGHER. And the weight simply caused a progressive 

failure that in this case led to a very vertical pancaking motion. 

Mr. SERRANO. Right. 

Mr. GALLAGHER. My impression has always been that if it had 

occurred differently it would have been more catastrophic because 

it would have affected nearby buildings more. 

Mr. SERRANO. Right. My understanding was that at any given 

time in those days in that area there was, like, 50,000 people, I 

heard was the figure. Which seems large, but not if you know New 

York. It seems there are that many people in a subway car at 

times, you know. So, it was from your study, from this study, that 

these international regulations were adapted? 

Mr. GALLAGHER. Correct. Yes, by both the International Building 

Codes and also by the National Fire Protection Agency. So the code 

organizations are adopting key findings that were a result of this 

study. 

Mr. SERRANO. Did any countries, anybody resist that? Or is that 

just accepted? 

Mr. GALLAGHER. I am not aware of any—— 

Mr. SERRANO. Yes. 

Mr. GALLAGHER [continuing]. Resistance. 

9/11 AND NIST’S ROLE IN REBUILDING

Mr. SERRANO. Now, what further role does your agency play in 

supervising, overseeing, consulting once we start to rebuild, or once 

the rebuilding has started in Lower Manhattan? 

Mr. GALLAGHER. Well I think in fact we have worked very closely 

with the Port Authority, and with other organizations in New York. 

The predominant mode that NIST comes into is as a technical 

agency offering assistance. So when we are looking at improving 

codes, eventually localities have to take these model codes and 

adopt them to their own circumstances. And if we can provide assistance we do so. I know there has been ongoing discussion with 

those authorities in New York. We do similar work in other areas. 

I want to point out as well, the fiscal year 2011 request, it does 

include this initiative in resilient buildings and structures. It is a 

generic version of this, which is that we want to make sure that 

we collect failure information about buildings, no matter what 

caused the failure. If it was an attack, if it was fire, if it was an 

earthquake, if it was wind. Because it is in studying those failures, 

in some ways the world is your laboratory. We want to understand 

what went wrong so we can learn from that and figure out how to 

make sure it does not happen again. And so part of that FY 2011 

initiative is to create a national failures database system where we 

will start to collect systematically this information from across the 

country. So we can look at that, decide which ones we need to go 


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investigate further because we think there are important lessons to 

learn. 

COMMAND CENTERS IN BUILDINGS

Mr. SERRANO. All right, one further part. You said something 

about a command center, setting up a command center. What did 

you mean? What is it that you are after? To accomplish what? 

Mr. GALLAGHER. As I understand it, fire in large structures, the 

World Trade Center would be an example, that part of the building 

design is to create command centers, or basically hardened centers 

where first responders can assess the condition to a building. It basically is access to the fire alarm, fire suppression systems. Can 

communicate with different floors, can access emergency operation 

of elevators, things of that type. And you want to make sure that 

those capabilities are not lost easily when the building is harmed. 

So this had to do with looking at redundancy, improving redundancy of these systems against what happens if the power fails, or 

what happens if a particular part of the building is affected. Do we 

lose all of these capabilities or not? Can we still talk to other parts 

of the building? Can we still control key systems in the building? 

9/11 RECOMMENDATIONS AND IMPLEMENTATION IN NEW YORK

Mr. SERRANO. Okay. And my last point is, and so now what you 

recommended and what has been accepted is true for any new construction, for instance, in New York City? Not just the replacement 

of what is happening in Lower Manhattan. Any new building going 

up in New York, and there are a lot going up all of a sudden, have 

to meet these new standards? 

Mr. GALLAGHER. Well what happens is these ideas have been 

adopted by the international code organizations. Those are in essence, they have no regulatory authority. Those are what are called 

model codes. 

Mr. SERRANO. Right. 

Mr. GALLAGHER. What happens is, the City of New York and various others would basically, through their permitting process, adopt 

certain codes as being the ones in force for that area. So as these 

codes are basically adopted locally they tend to point to these 

model codes. 

Mr. SERRANO. So it is a guide, it is a guide, and I imagine New 

York has been pretty good at following that guide? 

Mr. GALLAGHER. They have been leaders in this. 

Mr. SERRANO. Okay. Thank you so much. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Serrano. Mr. Fattah. 

AMERICAN RECOVERY AND REINVESTMENT ACT

Mr. FATTAH. Thank you, Mr. Chairman. Let me dispose of the obvious, but it needs to be said. One is that our Chairman has really 

led the effort to secure a great deal of additional funding for NIST 

in the Stimulus and Recovery Act, that is some $500-plus million 

in a whole range of activity areas. In disaster preparedness, as you 

were just discussing, and a number of other areas that you have 

made significant progress. So I want to publicly thank the ChairVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00267 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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man for his leadership in that regard. And I want to say that it 

is obvious that in terms of your leadership, now you were formerly 

the Deputy Director? 

Mr. GALLAGHER. That is correct. 

Mr. FATTAH. And now you are in charge? 

Mr. GALLAGHER. That is correct. 

Mr. FATTAH. So, and that is obvious because you got educated in 

the greatest State in the Union, Pennsylvania, and got your doctorate at University of Pittsburgh. Thank you, Mr. Chairman. 

Mr. GALLAGHER. It is worse than that. Both of my parents are 

from Pennsylvania. 

Mr. SERRANO. That makes you a Phillies fan? 

Mr. FATTAH. No. 

Mr. GALLAGHER. My father is from Philadelphia and my mother 

is from Pittsburgh. 

Mr. FATTAH. Yeah, he has got the whole state in balance, right? 

But so I want to thank you for your leadership of the agency, and 

congratulate you on your appointment. We have in the Philadelphia area some 1,300 manufacturers who against significant odds 

are doing well, working hard, and involving all manner of activity. 

Penn Fish and Tackle, Mr. Chairman, is making salt water fishing 

reels in the heart of my district. They make a world class fishing 

reel, sells for over $1,000 a pop. And they have only one competitor 

in the world, and they are over in the Pacific Rim. 

SCIENCE EDUCATION

But we have a lot of challenges in manufacturing, I know that. 

And at the heart of it is, I think, the dearth of educational attainment in the hard sciences by unfortunately Americans of every 

stripe are doing less and less and less. If you talk about, you know, 

our doctoral programs, you know, at Carnegie Mellon, I mean, anywhere you want to go in the hard sciences, I mean, you would be 

hard pressed to find, particularly to find American citizens who are 

pursuing terminal degrees in the disciplines that we, you know, 

whether nanotechnology, computer information science, so on, and 

so on. 

So I am very interested in the world of the agency. And I know 

you are doing a lot of work in the STEM area. You have got some 

postdoctoral students involved. I would like to learn more about 

that. 

PHARMACEUTICAL INDUSTRY AND NIST

On a different point, in the Philadelphia area we have a significant attachment to pharmaceutical related, because we have about 

42 percent of the pharmaceutical manufacturers in the country 

headquartered right there in the Philadelphia area. So I know you 

are doing work on biologic drugs. And these are very promising 

drugs. And the work that you are doing is going to both increase 

the effectiveness but also the efficiency of moving these drugs to 

the market. And so I am also interested in my staff learning more 

about your request in that area, and to make sure that we can 

align our priorities in ways to be beneficial. 

So I want to thank you for your presentation. And I look forward 

to finding ways in which we can partner to make sure that notVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00268 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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withstanding the other forty-nine states, that Pennsylvania gets 

more than its fair share whatever resources in technology and assistance that you can provide. And since you have this home state 

connection I know you will not have a problem being biased in your 

application of the resources of the agency. Thank you. 

Mr. WOLF. They are the number one manufacturer of cheese 

steaks and hoagies. 

Mr. MOLLOHAN. Yes, they are also to be envied the way they finance technology development. Their Ben Franklin Program is outstanding, so really. Much like Virginia is to be commended for their 

investment. 

Mr. FATTAH. Mr. Chairman, as a state legislator I created the 

Ben Franklin Technology Program. 

Mr. MOLLOHAN. Did you? 

Mr. FATTAH. Yes, thank you. 

Mr. MOLLOHAN. Well, I would like to talk with you about how 

you did that. 

Mr. SERRANO. I had nothing to do with any of this. Just for the 

record. 

COMPETITIVE CONSTRUCTION GRANT PROGRAM

Mr. MOLLOHAN. Thank you. Dr. Gallagher, in the stimulus pack- age there was $180 million to address backlog of maintenance and 

renovation projects, and for the construction of new facilities and 

laboratories. And $180 million for the Competitive Construction 

Grant Program for science research. Would you first explain the 

purposes behind the, how NIST has implemented the Competitive 

Construction Grant Program, and how it relates to how to value 

science and how you might advocate for it based on that? 

Mr. GALLAGHER. Yes, I would be happy to. I think one of the 

striking things about the Competitive Grants Program is this is 

meeting an unmet need in the research community. The proposal 

pressure has been very high. The interest has been extraordinary 

and the caliber of proposals has been very, very high. I think that 

reflects both the fact that facilities play a key enabling role for research, and the fact that there has not been a dedicated federal 

program looking at this type of funding since the late nineties. I 

believe the NSF had a program that was terminated at that time. 

We are very pleased with what we are seeing evaluating proposals. The way we established the program beginning in 2008 

with the much smaller program that we had at first, was that this 

was to look at research facilities in areas of interest to the Commerce agencies. So it really gave wide latitude to the proposers to 

propose research facilities as long as they could address an alignment with the mission focus of one of the Commerce agencies. That 

is why you, when you look at the programs you will see NIST-type 

measurement programs, nanotechnology, materials. You also see 

oceanography, ocean sensors, and NOAA-type programs, and that 

reflects that change. 

I believe you and I had a brief discussion about this a while ago, 

one of the things that I would like to explore, and we have initiated 

some internal discussions, is whether, if it is not a specifically authorized program at NIST, but if we could tie it more closely to the 

NIST mission, the NIST focus, then I think we could explore 


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whether this makes sense to make part of the request. I think 

there are a lot of different ways we could do that. The need, the 

unmet need is so high that looking at the construction related activities, for example, we talked about as a bridge to what is happening, let us say, in technology or research in a given region or 

university or cluster, I think there is a chance to bring this program into stronger synergy with what we are trying to accomplish, 

either in a technology promotion agenda, or developing certain research capabilities where we have a key interest. We have talked 

about cyber security in the case of manufacturing. 

So I think it is not much of a limitation, but I think it can be 

brought in as part of a portfolio where not only does it build a 

building, but it builds a building that addresses and fits into a 

broader context. I would actually enjoy working with you to discuss 

that further. 

Mr. MOLLOHAN. Well, let us do that. We want to make it as relevant as possible, and as competitive as possible as far as that is 

concerned. How many applications were received in the 2009 competition? 

Mr. GALLAGHER. Which 2009? 

Mr. MOLLOHAN. Fiscal year 2009. 

Mr. GALLAGHER. So in—— 

Mr. MOLLOHAN. Is there more than one? 

Mr. GALLAGHER. Well, what happened in 2009 is we had the—— 

Mr. MOLLOHAN. Oh, you had the ARRA. 

Mr. GALLAGHER. ARRA, and then we had the $180 million. 

Mr. MOLLOHAN. Yes. 

Mr. GALLAGHER. So if I recall we had something like 170 proposals that came in and—167—and we were able to fund four. 

Mr. MOLLOHAN. And so this year you are really folding a lot of 

the 2009 money into the 2010 competition? 

Mr. GALLAGHER. Well, what happened, that is, so what happened 

when the Recovery Act came is we had had all of these proposals 

received, and only funding—— 

Mr. MOLLOHAN. From 2008. 

Mr. GALLAGHER. From 2008. 

Mr. MOLLOHAN. So you put a lot of money—— 

Mr. GALLAGHER. So there was a decision made about what would 

be a responsible amount to make available to look at unfunded but 

highly meritorious proposals and then compete the balance. 

Mr. MOLLOHAN. Good. 

Mr. GALLAGHER. We have another competition with the 2010 

that will be announced imminently. So—— 

Mr. MOLLOHAN. And then that will include some 2009 funding as 

I understand? 

Mr. GALLAGHER. That is correct. 

[The information follows:] 

• NIST has received 384 applications for the competitive construction grant program since the inception of the program and has awared 19 grants. The breakdown 

of applications and grants per competition are: 

Competition Number of 

Applications 

Number of 

Grants 

FY 2008 (FY 2008 funds) ........................................................................................................ 93 3 

FY 2009 (ARRA funds) ............................................................................................................ 167 16* 


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Competition Number of 

Applications 

Number of 

Grants 

FY 2010 (FY 2009 & FY 2010 funds) ..................................................................................... 124 None yet** 

* 4 grants (@$55.537 M) awarded July 2009 using unfunded meritorious FY 2009 applications and 12 grants ($123.517 M) awarded January 2010 using new FY 2009 ARRA applications. 

** Application deadline was April 26, 2010; applications currently under review and grants are expected to be awarded in September 2010. 

• The American Recovery and Reinvestment Act of 2009 (ARRA) (Public Law 111–5) appropriated $180 million to NIST ‘‘for a competitive construction grant program for research science buildings. Additional information on the program was provided on page 418 of the Conference Report to accopany House Report 111–16 (Feb. 

12, 2009): ‘‘. . . $180,000,000 shall be for the competitive construction grant program for research science buildings, including fiscal year 2008 and 2009 competitions. Consistent with the Conference Report language NIST announced an ARRA 

competition in FY 2009 with available funding of $180 million with up to $60 million available for unfunded FY 2008 meritorious applications and approximately 

$120 million available for new applications under a new FY 2009 ARRA competition. • The FY 2009 ARRA Construction Grant Program Competition was a top priority. Therefore, the decision was made to defer holding a separate competition for 

the Omnibus Appropriations Act, 2009 (Public Law 111–8) appropriated funds of 

$30 million until FY 2010. When NIST received an additional $20 million in appropriated funds under the Consolidated Appropriations Act, 2010 (Public Law 111– 

117), the decision was made to combine the funding and hold a single competition 

with available funding of $50 million. 

Mr. MOLLOHAN. Give us an example of an award winner in that 

contest. 

Mr. GALLAGHER. Well, the University of Pittsburgh, actually, was 

one award winner where they are looking at developing—— 

Mr. MOLLOHAN. Wait a minute, Dr. Gallagher. 

Mr. GALLAGHER. Yes? 

Mr. MOLLOHAN. Pitt won one of these? 

Mr. GALLAGHER. They did. 

Mr. MOLLOHAN. Pitt, that is—— 

Mr. GALLAGHER. Pitt won one, yes they did. 

Mr. MOLLOHAN. Oh my God. 

Mr. GALLAGHER. That is why I stay out of the decisions. I have 

nothing to do with them until—— 

Mr. MOLLOHAN. Well, that is because it is a great university. 

What else about that one? 

Mr. GALLAGHER. Well it is interesting, it is a proposal to develop 

state of the art nanoscience centers. 

Mr. MOLLOHAN. By the way, Pitt beat West Virginia University 

in double overtime in basketball. This is about two weeks ago, I 

would say. We are not forgetting that, yet. So go ahead. 

Mr. GALLAGHER. Yes, it has been fun to watch that because they 

were not that good when I was there. The University of Pittsburgh 

grant is a $15 million grant. Interestingly, there was an article in 

Science middle of last month that highlighted some of the projects 

that have been funded through the NIST Construction Grant Program. As I said, since there was no other federal program like this 

that provided, construction funding like this, what you often had 

were situations where very thoughtful designs and approaches 

have been put together, cost sharing had been started to be assembled, and yet they simply could not get it over to the point where 

it became a viable project. A number of these really have that characteristic and the Pitt program is certainly one of those. 

A counterexample is in Maine, I believe, there is a facility to look 

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vanced windmills, and looking at advanced materials laboratory 

and advanced composites to basically generate new composites, 

looking at ocean sensor technology. So it is really quite diverse in 

both energy, environment, oceanography, and advanced materials. 

Mr. MOLLOHAN. So it turns out the program you think works? It 

has a—— 

Mr. GALLAGHER. Yes. 

Mr. MOLLOHAN. So you basically support it. Did you make that 

a part of your request to OMB? 

Mr. GALLAGHER. It was not part of our request to OMB. 

Mr. MOLLOHAN. You did not push it up to OMB? 

Mr. GALLAGHER. That is correct partly because we were still in 

the middle of the Recovery Act. We had so much that we were 

managing. What I have done is raise to OMB the prospect of 

whether this becomes part of our request in the next cycle. So it 

just, it was just a phasing. 

Mr. MOLLOHAN. So your—— 

Mr. GALLAGHER. But we have raised the question. 

Mr. MOLLOHAN. So you are asking for permission to make it a 

part of your request in the next cycle? 

Mr. GALLAGHER. Yes, that is correct. So, and one of the questions 

is, does it mean that we look at the attributes of that program and, 

as I said, tighten it to bring it into alignment? There was not really 

time to have those discussions as we were starting the new administration. 

STEM EDUCATION

Mr. MOLLOHAN. We had several I consider really good hearings 

with regard to education, science and math education, STEM education, here earlier in the year before we had the big snow. I would 

just like to hear you talk a little bit about STEM education. The 

budget requests an additional $3.4 million for strengthening STEM 

education through the NIST NRC postdoctoral research associates 

program. Talk about that, and how you think that contributes to 

STEM education, if you will, for the Committee, and justify the request? 

Mr. GALLAGHER. Okay. So the efforts at NIST in STEM are interesting to me because it is not generally thought of as a primary 

mission focus of NIST in terms of education. But in fact it does 

play an important role. I tend to think of the NIST role in STEM 

as having two distinct characteristics. One is, we are a national 

laboratory and I believe have an obligation, as do all national laboratories, to provide this unique experience and make it available 

to the country as part of developing meaningful STEM programs. 

And so that includes postdoctoral programs, of which the FY 2011 

request includes an increase to bring the numbers back up, actually, to numbers we had a number of years ago. This is almost a 

correction for inflation type of request. 

Mr. MOLLOHAN. How close does that get you to where they were? 

Mr. GALLAGHER. Well, we are authorized to carry 120 positions. 

We are currently only, if you exclude Recovery Act, we really only 

have about forty that we can hire each year. So this increase that 

we requested adds another twenty-three, I believe. So it is still only 

between sixty and sixty-five total new positions each year. 


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Mr. MOLLOHAN. What was the high water? That was your authorization. What was the most you had on board? 

Mr. GALLAGHER. Well the highest will be under the Recovery Act, 

where we actually took advantage of that cap. So we funded everything under the Recovery Act, so. 

Mr. MOLLOHAN. Okay. 

Mr. GALLAGHER. But we also have undergraduate programs that 

bring undergraduates, particularly in the summer, for an in depth 

research experience. We bring high school students at NIST. We 

have a weekend program that my own son participates in, which 

works with middle and elementary school kids to give them an experience in science. Those are programs that are designed basically 

to bring students to NIST. By the way, we also have a program for 

teachers, where we bring middle school teachers in the summer to 

work with NIST scientists to develop materials they can use in the 

classroom. 

But those programs are bound to have a more local effect. In 

other words, they are going to preferentially leverage what is nearby. There are also programs where you have to look what can we 

do at a national level to support STEM. And there are two distinct 

areas. One is in the Baldrige Program. The Baldrige is really no 

longer just a manufacturing program. It really is an organizational 

excellence program. It disseminates criteria that represent achieving organizational excellence. The two most rapidly growing areas, 

or sectors, that are using Baldrige criteria, and we see this in the 

awards program, are healthcare systems and school systems. And 

in fact, you know, some of the outcomes that some of these school 

systems have been able to achieve by focusing on their organizational performance are remarkable. And I think that is something 

we should continue to look at to see whether that program can be 

made more effective, or whether in fact, and this is under discussion, we can add a specific STEM component that really focuses 

on—— 

Mr. MOLLOHAN. Let me ask you, just hearing your testimony, not 

knowing a lot about this program, which I will follow up, and want 

to know a lot about this program, that you are, that NIST is involved in with regard to STEM. It sounds like it is a program that 

is local, it is limited in terms of scope. And it has no scaling potential or even intent. And so I ask if what I am saying is true, how 

does that help the nation better advance, systemically, STEM education across the country? 

Mr. GALLAGHER. Well I think, as I said, I think our STEM program has these two distinct components. One which is experiential, 

where it is about having a research experience at one of our labs. 

And those are very local. And I—— 

Mr. MOLLOHAN. Right, and that, in and of itself that is great. 

And the second? 

Mr. GALLAGHER. And the second one is really one where you can 

have a national impact, and that would be things like Baldrige 

which really is a national program. 

Mr. MOLLOHAN. How would that have an impact on promoting 

STEM education in the country? 

Mr. GALLAGHER. Well what it does is, the idea that is being 

looked at in coordination with OSTP, with the Education DepartVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00273 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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ment, with NSF, is to develop the equivalent excellence criteria in 

STEM that we disseminate as best practices that are used by 

school systems as they develop their—— 

Mr. MOLLOHAN. So that you would actually look at all of the aspects of education? 

Mr. GALLAGHER. That is correct. 

Mr. MOLLOHAN. Teacher preparation, materials, local boards of 

education, local superintendents, state education authorizations. 

Do you have such a plan developed and on paper? Or—— 

Mr. GALLAGHER. Well, no. what we have right now developed is 

the current Baldrige program which does look holistically at school 

systems, but not specifically in STEM. 

Mr. MOLLOHAN. Uh-huh. 

Mr. GALLAGHER. So the Baldrige criteria have brought in educational experts in terms of how we—— 

Mr. MOLLOHAN. There are so many people coming at this from 

so many different directions. 

Mr. GALLAGHER. Right. 

Mr. MOLLOHAN. I mean, we are going to be looking at NSF and 

our funding in NSF. And now based on your testimony here we are 

going to look and see how NIST fits into all of that. And try to be 

helpful. So any direction you might have for us, or any of the collaboration you are conducting with NSF, or Education, or anybody 

else in regard to this, please make us the beneficiary of that before 

we mark up our bill. 

Mr. GALLAGHER. Will do. 

[The information follows:] 


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Mr. MOLLOHAN. Because we want to help you actually do this, 

maybe get some prototypes out there in the country this year. 

Mr. GALLAGHER. Well let me, to that end let me mention one 

other area that we are exploring as well, which is technology in 

education. Where we have been asked to work with the Education 

Department in, how do you develop this as standards? How do you 

develop standards so that educational technology is meaningful 

when it is deployed, and covered by federal funding? So we are 

working with OSTP and the Department of Education to address 

the question of how does the Department of Education incorporate 

effective technology standards in their EdTech Program? 

NATIONAL INNOVATION MARKETPLACE

Mr. MOLLOHAN. Yes. Thank you for that testimony. The National 

Innovation Marketplace, talk to us about that initiative. What is it? 

What role do you play in it? And what role are the other components of Commerce going to play in it, or other agencies? 

Mr. GALLAGHER. The National Innovation Marketplace is actually a specific service that is offered under this class of services 

that I call Next Generation MEP. This is basically, at the current 

level, a pilot program. It is being developed and offered through 

MEP. And basically what it does is it provides to small- and midsize manufacturers a capability that large manufacturers already 

have, which is to allow them to look effectively at the range of technologies that are in the marketplace that might either be adopted 

by them to manufacture, in other words opening up new products 

and services, or that they can adopt in their manufacturing process. So you have heard about large companies that have gone into 

this market base model where they really go out and put ideas and 

needs that they have and look very broadly at where they can find 

these types of technology solutions. This is an approach that a 

small- and mid-size manufacturer simply cannot replicate. The idea 

is to give them access through this service to this marketplace of 

technology that they can explore. 

It is predominantly an effort through the MEP program as a 

service. It does not, as far as I know, have any distinct impact on 

other Commerce programs except through ITA and if there are 

some trade related aspects to the Innovation Marketplace. 

Mr. MOLLOHAN. Was this an initiative stood up by MEP? 

Mr. GALLAGHER. Yes, it was. It is something that MEP had been 

exploring. You will see that it had some Vice Presidential involvement where they were looking and promoting this program as well. 

Mr. MOLLOHAN. Yes, he was suggesting $45 million needed to expand it to the fifty states, and I think the request is for $5 million. 

Mr. GALLAGHER. Well, the question really becomes one of how 

rapidly you deploy this across the full network. Our approach 

through the increased profile we had for MEP was to start with 

this as a pilot program and to ramp it more gradually. I think what 

was being talked about at that time, which is not reflected in the 

request, was a more dramatic—— 

Mr. MOLLOHAN. But my question is, and I am not clear yet, was 

this a program stood up by MEP or adopted out there, stood up by 

somebody else? Or—— 

Mr. GALLAGHER. Oh, this was by MEP. 


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Mr. MOLLOHAN. In what year did you do that? 

Mr. GALLAGHER. I do not recall. It is a fairly young program, but 

I do not recall exactly when it was started. We can certainly give 

you the information on that. 

[The information follows:] 

NATIONAL INNOVATION MARKETPLACE

The National Innovation Marketplace (NIM) was launched as a pilot effort in 

April 2009. The NIM connects innovation sellers, buyers, investors and distributors 

in all industries through an on-line web-based tool that enables open innovation and 

connects manufacturers with sources of new technologies. The NIM involves the 

translation of emerging technologies into business applications, market opportunities, and the adoption of new products. 

Mr. MOLLOHAN. We will be interested in learning more about 

that. Mr. Wolf. 

Mr. WOLF. Thank you, Mr. Chairman. I had seen figures before 

that I, were triggered when you said STEM, that the funding for 

STEM higher education grants is roughly about $700 million and 

only $350 million was used in 2007. 

Mr. GALLAGHER. At NIST? No, I am sorry, I am not—— 

Mr. WOLF. Government wide. 

Mr. GALLAGHER. Oh, government wide? Thank you. 

Mr. WOLF. And therefore, the execution takes place at 4:00 tomorrow, I mean, what does that mean? 

Mr. GALLAGHER. I am not familiar with the numbers. I cannot 

even hazard a guess what that might mean. 

Mr. WOLF. Okay. Would you check and let the Committee know? 

Mr. GALLAGHER. Sure. 

Mr. WOLF. And by the time things, could you also just give my 

office a call and let me know? 

Mr. GALLAGHER. Sure. 

Mr. WOLF. Is anybody looking at that? One, do you agree with 

that number, or you just do not know if that number is accurate? 

Mr. GALLAGHER. I just do not know that number, I am sorry. 

Mr. WOLF. The staff person who gave it to me was wrong? 

Mr. GALLAGHER. I do not want to suggest that, it is probably 

right. But we will look into it. 

[The information follows:] 

STEM EDUCATION

NIST cannot speak to the experience of other Federal agencies. However, of the 

$11 million allocated to NIST specifically for STEM activities in FY 2009 (for the 

NRC postdoctoral programs and Middle School Science Teachers program), $11 million was spent on these programs. For the long run, the participation of science mission agencies, including NIST, in the NSTC Education Subcommittee, which meets 

monthly to exchange information and ideas, can do much to coordinate and complement Federal STEM education programs. The Subcommittee is currently addressing education and workforce policy issues and research and development efforts that focus on STEM education issues at the pre-K–12, undergraduate, graduate, postdoctoral and lifelong learning levels, as well as current and projected 

STEM workforce needs, trends and issues. The Subcommittee supports the President’s STEM education goals, with active involvement in the meetings and topics 

by the Office of Science and Technology Policy. 

Mr. WOLF. If you could. And then if you could make an evaluation of why you think that that would be the case? 

Mr. GALLAGHER. Okay. 


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Mr. WOLF. And how you could rectify that? Or if not you, but how we could rectify that? If $700 million is appropriated in these 

very difficult times we would hope that $700 million would be 

accessed. 

Mr. GALLAGHER. Was this in the Recovery Act, or—— 

Mr. WOLF. No. 

Mr. GALLAGHER. No? Okay. 

Mr. WOLF. Everything did not begin and end with the Recovery 

Act. 

Mr. GALLAGHER. Right, I was just—— 

Mr. WOLF. There used to be a Congress, people did things before 

the Recovery Act. 

Mr. GALLAGHER. Okay. 

CYBER SECURITY AND INTERAGENCY EFFORTS

Mr. WOLF. Back to cybersecurity, NIST is just one of the players 

in the interagency efforts. Who are the other players? What is 

NIST’s unique role? And is your budget sufficient for you to play 

that role effectively? So, what are the other players? Two, what is 

your unique role? And is your budget sufficient? 

Mr. GALLAGHER. So quickly, it will not be an inclusive list, but 

the main players include NIST, the National Security Agency, Department of Defense, Homeland Security, White House. 

Mr. WOLF. Is there a Czar yet? 

Mr. GALLAGHER. There is. Howard Schmidt, in fact I am meeting 

with him right after we are done here. 

Mr. WOLF. Is he actually called a Czar? I hope they are not calling him that. 

Mr. GALLAGHER. No, they are not calling him a Czar. 

Mr. WOLF. And where is he based? In the National Security 

Council? 

Mr. GALLAGHER. It is in the National Security, and I believe it 

is co-chaired with the National Economic Council so that he is supposed to look at not just the security, but the context. 

Mr. WOLF. What is his background? He was with the FBI, was 

he not? 

Mr. GALLAGHER. I believe so. I do not recall his biography off the 

top of my head. So there is a number of players. The unique NIST 

role is the one defined by FISMA, which is that NIST develops the 

standards. And not just writing the standards but the testing infrastructure to make sure that we know how to protect federal information systems. And so in that context we work closely, that is 

why NSA and DHS figure very prominently in our relationships, 

because NSA has a similar responsibility for the information, the 

same information for the intelligence community agencies as we 

have for the rest of the federal government. 

Mr. WOLF. Do you work closely with them? 

Mr. GALLAGHER. Yes, we do. And also with the DHS, because 

DHS really has the operational responsibility. Once you have these 

standards in place, the US–CERT system, which was started at 

NIST and it is not at DHS, in terms of how do you monitor cybersecurity and look at attacks. That whole role is at DHS, and of course 

that has to inform the standards process. So those are, and the 

White House because these requirements are actually disseminated 


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through OMB, through the Chief Information Officer at OMB, to 

the federal agencies. And so we work very closely, very actively, 

through the National Security Council and committees, through the 

CIO Council, through Vivek Kundra’s office at OMB, and then 

strong bilateral ties as well with these key agencies. 

CYBER SECURITY INCREASE

Mr. WOLF. Is the $10 million increase enough to keep pace 

with—— 

Mr. GALLAGHER. Well it is always, you know, one of the problems 

we face when you look at these multiple agencies, the NIST role 

is actually one of the smallest in terms of funding and effort. And 

you might argue when you look at this that it should be proportionately bigger so that it can cover that space. The way we do this, 

though, is we make sure that we define the role that can be done 

very well with our current funding level. The $10 million increase, 

as I said, is a balance between needing to grow this program pretty 

significantly and not basically doing an irresponsible increase 

where it is too much at once. And that is why we identified about 

$4 million of about $10 million to be through a grant program to 

universities. And I think that represents a good balance between 

expanding to universities some of these research activities that are 

critically important and expanding NIST efforts because our current funding level is about $28.9 million for this activity. 

Mr. WOLF. What top two universities are doing research in this 

area? 

Mr. GALLAGHER. I would not be able to hazard a guess for you 

right now. 

Mr. WOLF. But you are giving grants? 

Mr. GALLAGHER. No, we have not done the grants yet. We would 

issue a competitive call for grants with this to one or more universities. 

CYBER SECURITY OF U.S. SYSTEMS OVERSEAS

Mr. WOLF. Do you think there is a sensitivity to cybersecurity? 

My computer was stripped by the Chinese a couple of years ago. 

Seventeen other members of the House, and Foreign Affairs Committee. Members are still taking their blackberries to China and 

making telephone calls. And do you think there is a sensitivity now 

to this issue in government that has permeated everywhere? 

Mr. GALLAGHER. I think it is hard not to be sensitized to this 

now, between what we see happening these large scale attacks we 

read about in the newspapers almost every week. 

Mr. WOLF. Do you take your blackberry to China and use it in 

China? 

Mr. GALLAGHER. Well, it is interesting. I have. But what they basically do is they lobotomize it ahead of time so that it does not 

have anything on it. I take it. And if I come back then they basically lobotomize it again so that there is nothing on it. So I 

have—— 

Mr. WOLF. I am told that may not be totally effective. 

Mr. GALLAGHER. Well it may not—— 

Mr. WOLF. Remember Secretary Gutierrez? His laptop computer 

was compromised in China, Are there guidelines in NIST and in 


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the Department of Commerce that tell you that if you are going to 

go to China or certain places—— 

Mr. GALLAGHER. Yes, there are. Yes, there are. And we work 

with the NSA in terms of how we look at those systems and test 

them. 

Mr. WOLF. And so if somebody at the Food and Drug Administration is coming over to China they are certainly alerted that they 

have to be careful? There is a system in the government that lets 

everyone know that is going to go to these places that—— 

Mr. GALLAGHER. That is my understanding. 

Mr. WOLF. Could you check and tell me what it is? 

Mr. GALLAGHER. Sure. 

[The information follows:] 

INTERNATIONAL TRAVEL SECURITY PROTOCOLS

All Federal employees who travel internationally are required to complete a Department of Commerce-sponsored Foreign Travel Briefing once per year. There is 

specific information on travel to China within this briefing, including specific sensitivities to information technology security, as well as attention to measures to ensure personal security. 

Mr. WOLF. And how it works? I mean, if somebody in the meat 

inspection, or somebody in the Department of Commerce, how do 

they tell them? How do they alert them? What do they do? 

Mr. GALLAGHER. I can tell you at NIST that it is basically tied 

into the travel authorization process. So that if you are going to 

travel, and you submit your request, they can see where you are 

going and then there is basically a set of procedures that are put 

in place that you have to meet before you are allowed to go and 

when you complete your travel, immediately after, before you can 

use that technology. 

CYBER ATTACKS AGAINST NIST

Mr. WOLF. Has there ever been a cyberattack against NIST? 

Mr. GALLAGHER. I am sure there has. 

Mr. WOLF. Are you guessing, or are you certain? 

Mr. GALLAGHER. I would have to check, but I mean there are attacks against systems all the time. So I am certain there. 

Mr. WOLF. And most of the attacks come from? 

Mr. GALLAGHER. I do not know. I do not have that data? 

Mr. WOLF. Would you guess it would be China? 

Mr. GALLAGHER. It would not be a bad guess. 

Mr. WOLF. It is China and Russia. We all know. Why would you 

be reluctant just to say that? Could you tell us? 

Mr. GALLAGHER. Well I think when we are looking at the firewall 

data at the agency we are not seeing the country of origin, we are 

basically seeing the anomalous behavior that is attempting to gain 

access. So we see the evidence of an attack but at that level we are 

not seeing origin. Whereas other operational agencies are looking 

more systematically, US–CERT would be looking at—— 

Mr. WOLF. But would the FBI not tell you that as you are doing 

this, ‘‘This is what the process is. This is how they do it in China. 

This is what the Russia organized crime is doing.’’ So you should 

be looking. I mean, do you not have to know all of that to be involved in—— 


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Mr. GALLAGHER. I do not know if system administrators need to 

have that type of information as they are responding to the actual 

attacks themselves. 

Mr. WOLF. But would it not give you a level of sophistication 

coming from X or Y or Z? 

Mr. GALLAGHER. It might, but I think—— 

Mr. WOLF. Every cyberattack is not the same. 

Mr. GALLAGHER. I think the information comes in that way 

through what the vulnerabilities are. So we understand what different parts of the world do in terms of compromising systems and 

then the idea is through these vulnerability databases designing 

appropriate controls and fixes to—— 

Mr. WOLF. Do you get a list of all the cyberattacks, since you 

have been giving this job of coming up with the technology and 

standards? 

Mr. GALLAGHER. We maintain a vulnerability database, that is 

correct. 

Mr. WOLF. Of every federal agency that is hit? 

Mr. GALLAGHER. I do not know, I do not want to misrepresent 

what is on that list. But it is the comprehensive vulnerability database that is used. 

Mr. WOLF. And who collects that? 

Mr. GALLAGHER. It is collected by NIST. But I think we, let me 

check and give you the details on how that program works. 

[The information follows:] 

NATIONAL VULNERABILITY DATABASE

The National Vulnerability Database (NVD) is the U.S. government repository of 

standards-based vulnerability management data for publicly known cyber 

vulnerabilities. This data, which is freely available to the public, enables automation 

of vulnerability management, security measurement, and security compliance 

verification. NVD includes databases of security checklists, security related software 

flaws, security misconfigurations, product names, and vulnerability impact metrics. 

NVD is a product of the NIST Computer Security Division and is sponsored by 

DHS’s National Cyber Security Division. All of the software flaw vulnerabilities included in NVD are first identified in the Common Vulnerabilities and Exposures 

(CVE) dictionary. The CVE dictionary is compiled by cybersecurity analysts at The 

MITRE Corporation. As soon as the CVE analysts identify a new vulnerability, they 

document its basic characteristics and publish the information. The public and 

NIST’s NVD get this information at the same time. NIST cybersecurity analysts 

perform additional analysis that provides a severity rating for each vulnerability, 

and these ratings are added to NVD to help federal agencies and other organizations understand the relative importance of each vulnerability so they can respond 

appropriately to prevent attacks. 

TIP PROGRAM

Mr. WOLF. The last question, you are requesting a $10 million 

increase for the TIP program, that took over from the ATP program 

which phased out in 2008. How would you assess its performance? 

And is this one of your top priorities? 

Mr. GALLAGHER. The TIP program is young. It was created in 

2007. It is different from the ATP program in a couple of key ways, 

including who can participate. Universities are allowed to take lead 

roles. It also changed some of the evaluation criteria. Some of the 

business criteria that were looked at in the ATP program are no 

longer in the TIP program. My view on the TIP program has been 

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ing at not only R & D performance but how effective we are at 

turning this into commercial activity, there are a lot of good things 

to be said about TIP because it does bring together these cross-disciplinary teams of participants from industry, university, national 

labs, to work on focused problems. 

That being said, I do not believe that at this level of funding this 

is going to have an enormous national impact. And I think, the way 

I have been viewing this is that you have to consider this as a, as 

really a pilot and to see whether it is meaningful that we continue. 

So we are looking very carefully, what is the right way to measure 

whether this program is going to make the kind of impacts that we 

think are needed? And then take a hard look at it and decide 

whether it is worth continuing. 

Mr. WOLF. Thank you very much. 

Mr. GALLAGHER. Thank you very much. 

Mr. WOLF. Thank you, Mr. Chair. 

Mr. MOLLOHAN. Thank you, Mr. Wolf. Let me follow up on the 

TIP program, because that is where I was going to end actually. 

It has been around a couple of years. If it is a pilot program, can 

you not assess it at this point? 

Mr. GALLAGHER. I do not believe so, The problem with commercialization is that you would like to assess it when you see whether 

the technology finally reached the market. And this is pre-competitive. These grants are focused on the pre-competitive activity. So 

we are going to have to look at leading indicators. The first awards 

really went in early 2008. They are three to five year grants. So 

we are sort of entering the period now where we are beginning to 

see from the first award recipients what types of technologies and 

what types of outcomes they have been able to have in those programs. So I do not, I think we are at, now or the very near future 

is the time to take a look. I am not trying to push this down the 

road. I do not want to say that we already have all the information 

and we know because I do not think that is true. 

Mr. MOLLOHAN. At its best, what could the program do as a prototype at this point? What would be the measurement that would 

say, ‘‘Wow, this program is really worthwhile.’’ 

Dr. GALLAGHER. Well, I think it is a high risk, high pay off program. So the question is, did you take some big risks but have you 

got some big wins? Because that is what a program like that is designed to do. So I think we have to look at the technologies that 

are coming out of these proposals. 

Mr. MOLLOHAN. Could you give us an example? 

Mr. GALLAGHER. Well in the first call for—— 

Mr. MOLLOHAN. Of the high risk, high reward? 

Mr. GALLAGHER. Well I think in the first call the focus was on 

developing advanced sensor technology to look at physical infrastructure, our roads and bridges. Clearly a national need. We have 

an aging infrastructure. And the question was, could you create a 

game changing technology that would allow you to detect incipient 

failure or maintenance problems in things like bridge or road surfaces before they failed? And can you do it in a very cost effective 

way? And some of the proposals were very clever, where you would 

seed a bridge with sensors and basically the vehicles driving over 

the bridge would be able to talk to the sensors and pick up the 


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data or other type of remote sensing technologies that would detect 

this. 

This is not the kind of program where you are going to see a 

commercial home run in every proposal. But if we were to see 

something that was clearly identifying the types of technologies 

that, if it were commercialized, would make a big difference, that 

is really what this program was designed to do. Big, disruptive, 

high pay off, technology wins. And as I said, we are not going to 

be looking at this when it has gotten to the commercialization 

point. We are going to have to do it from a technology side where 

we take a look at these technologies that are being developed and 

then make a decision whether we think it is having that type of 

impact. And that is what the TIP program folks are looking at now, 

is how will we take a look at this? 

We have also been working with the authorization committees on 

the same question and I think we will be working with you on the 

same question, too, as we look at this program. 

Mr. MOLLOHAN. Well, we want to follow up on that. Frank, do 

you have any more questions? 

Mr. WOLF. No. 

Mr. MOLLOHAN. Thank you. Doctor, thank you very much for 

your testimony here today. 

Mr. GALLAGHER. Thank you. 

Mr. MOLLOHAN. I learned a lot and appreciate your service. 

Thank you. 

Mr. GALLAGHER. I appreciate it. Thank you. 

Mr. MOLLOHAN. Thank you. 


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WEDNESDAY, MARCH 10, 2010. 

ECONOMIC DEVELOPMENT ADMINISTRATION 

WITNESS 

JOHN FERNANDEZ, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT 

OPENING REMARKS

Mr. MOLLOHAN. Good morning. Welcome, Mr. Fernandez. The 

hearing is called to order. We will hear testimony from Assistant 

Secretary of Commerce for Economic Development, John 

Fernandez, for the first time since his appointment in September, 

2009. We look forward to working with you, John. 

The fiscal year 2011 request for the Economic Development Administration is $286.2 million, a 2.3 percent decrease from fiscal 

year 2010. This includes a $2.1 million increase in salaries and expenses, and a $9 million decrease in economic development assistance programs. The budget proposes significant changes within 

EDA programs, including an increase of $86 million in the Economic Adjustment Assistance Program, a corresponding decrease of 

$90.5 million in Public Works, and a decrease of $8.5 million in the 

global climate change mitigation initiative fund. 

EDA’s mission is to create sustainable jobs. There is no other 

agency in the federal government with quite the same focus. From 

fiscal year 2004 to fiscal year 2008, EDA helped American communities create 350,000 higher skill, higher wage jobs at an average 

cost of $2,500 per job. EDA is very good at its mission, even with 

a reduced staffing level. 

In fiscal year 2008 Congress appropriated $500 million in disaster funding for EDA. In fiscal year 2009 Congress appropriated 

$150 million in American Recovery and Reinvestment Act funding 

for EDA, 98 percent of which is obligated. While there are some 

concerns with respect to the disaster funding, which we will discuss 

today, clearly EDA is filling a significant need in very short time 

frames with funding provided above the annual appropriation of 

close to $300 million. That makes it all the more puzzling that the 

administration has proposed a reduction for EDA in fiscal year 

2011. 

In fact, instead of adding critical funding the administration 

wants to move funding from the Public Works program to the Economic Adjustment Assistance program. The rationale appears to be 

one of flexibility, but the net effect is a reduction in Public Works 

infrastructure project grants. Given the critical role these projects 

play in communities, and the fact that the demand for these 

projects remains constant, EDA should be at least maintaining, if 

not increasing, the Public Works funding level. 


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This is not to value Public Works projects over EAA projects. According to EDA grantees that testified before this Subcommittee in 

February the two programs should not be in competition with each 

other for funding; both are vital to the success of regional economies. Indeed, rather than debating the relative merits of each program the administration and Congress can agree that helping communities overcome the recent economic downturn is exactly what 

EDA is designed to do and together should provide the funding 

level needed to do it. 

Mr. MOLLOHAN. Thank you for coming, Mr. Fernandez. And following Mr. Wolf’s opening statement we will ask you to submit 

your written statement for the record and proceed with your oral 

testimony. Mr. Wolf. 

OPENING REMARKS

Mr. WOLF. Thank you, Mr. Chairman. I want to welcome you to 

the Committee and look forward to hearing your testimony. I yield 

back, thanks. 

Mr. MOLLOHAN. Thank you, Mr. Wolf. Mr. Fernandez. 

OPENING STATEMENT BY ASSISTANT SECRETARY FERNANDEZ

Mr. FERNANDEZ. All right, thank you very much Mr. Chairman, 

and Ranking Member Wolf, members of the Committee. I have a 

very brief opening statement, and then I will really look forward 

to the exchange this morning. 

As you know, I have been involved in economic development for 

probably twenty years now at the street level. As a mayor, as a private investor, really working at that grass roots level to try and 

translate economic strategies into meaningful investments to grow, 

in my case, Bloomington’s economy. Having that street level experience I can tell you that I have seen the good and the bad of the 

impacts of a changing, very competitive global economy. And there 

is a lot of things I do not know. But one thing I think I can say 

with absolutely certainty is that the world has changed. And as the 

only federal agency with economic development as our sole mission, 

EDA is poised to provide leadership with forward looking job creation strategies built around collaboration and innovation. 

EDA is a central part of the Obama administration’s national 

strategy to build a stronger foundation for long term job creation 

and prosperity for American families. Our budget proposal for fiscal 

year 2011 reflects the importance of creating competitive, high performing, regional economies as the building blocks for that sustainable growth. As you noted, the President’s budget proposal includes 

$246 million for our economic development investment programs. A 

key component of that long term strategy is to build these regional 

innovation clusters. This is part of the administration’s place-based 

initiatives. In our budget we target $75 million towards planning 

and matching grants within our EDA system to help create these 

regional innovation clusters that can leverage the competitive 

strengths of various communities. 

And while it is not a specific budgetary program, the regional innovation clusters represents a really important framework, strategic framework, for how we target our overall programmatic inVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00314 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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vestments. Consistent with our fiscal year 2010 budget, EDA plans 

to continue to fully fund its network of economic development districts, university centers, and our research agenda. As you noted, 

we are proposing $16.5 million for our global climate change mitigation fund that will help EDA enhance our contribution to the expanding green economy. 

As I stated earlier, the world really has changed. And it is critically important, in my view, that EDA’s limited resources are allocated within our programs in a way that align our investments 

with the emerging needs of the communities we serve. This is why 

in fiscal year 2011 our proposal shifts the majority of our program 

resources to the economic adjustment assistance program. We 

know that Public Works investments play a very important role in 

leveraging private investment and job creation. Yet we also know 

that in today’s economic development challenges we need more 

flexibility, and the requirements of our communities go beyond just 

Public Works. Communities need more flexibility to develop strategic responses to the changing economy. These strategies include 

a broad mix of investments that address access to capital issues, 

work force training, retraining, systems for accelerating the commercialization of research and development, and establishing a 

strong entrepreneurial network. Together all of these elements, 

along with Public Works, help build the kind of ecosystem that is 

necessary today to support an innovation oriented, sustainable economic development strategy. 

So Mr. Chairman, and Ranking Member Wolf, members of the 

Committee, I certainly appreciate the opportunity to have a discussion today about our budget proposal. I firmly believe that EDA 

can continue to be a driver for growth in distressed areas across 

the country. And we certainly look forward to continuing our work 

with the Subcommittee and the Congress to ensure that these important programs and initiatives are resourced appropriately and 

implemented properly. So I thank you for your time today and I 

look forward to answering your questions. 

[The written statement of Assistant Secretary for Economic Development, John Fernandez, follows:] 


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REORGANIZATION

Mr. MOLLOHAN. Thank you, Mr. Fernandez. Mr. Fernandez, last 

week the Committee was notified of a reorganization of EDA, and 

you spoke to it in your testimony. Elaborate on the purpose of this 

reorganization for the Committee? 

Mr. FERNANDEZ. Yes. The reorg is designed, essentially, to 

streamline our programs, make it clear in terms of some of the responsibilities within EDA. And most importantly, to put a focus on 

particularly the Office of Innovation and Entrepreneurship as a 

way to focus EDA’s investments around this critically important 

agency item for the Obama administration and the Department of 

Commerce. It is a budget neutral proposal, and we think it really 

helps align our organization properly for the challenges we face 

today. 

Mr. MOLLOHAN. Elaborate on it. Streamline your programs? How 

does it do that? 

Mr. FERNANDEZ. Well, as part of my work, Mr. Chairman, when 

I first came on board, I reached out to the EDA staff. Not just in 

Washington, but across the regional agency offices. And I asked 

them, what are some of the things we need to do to better serve 

their needs as well as headquarters’ needs? And one of the top responses we got was the need to rebuild capacity within our Office 

of Regional Affairs, particularly around the subject matter expertise for our programs. So we have proposed within our reorg adding 

positions that are programs experts that can help serve in policy 

development but also guidance and implementation through, the 

programs we administer out in our regional offices. 

We have also cleaned up some of the minor organizational structure in regard to our external affairs. The way the organization is 

currently structured that office was referred to as the External Affairs and Executive Secretariat. And for most of our stakeholders 

they have no idea what that means. But when you refer to that division, which includes our legislative affairs, public affairs, congressional relations, External Affairs just is a cleaner structure for 

that. 

We also modified some of the structure within our Finance and 

Administration Office that I think makes it much clearer in terms 

of their programmatic focus. 

Mr. MOLLOHAN. What does this reorganization mean to regional 

offices versus the home office? 

Mr. FERNANDEZ. Most importantly, as I noted, it means that we 

are going to have better capacity to help them do their jobs. 

Mr. MOLLOHAN. Well, by that I mean what is the flow of personnel? Is there any dramatic flow of personnel from headquarters 

out to the field, from the field to headquarters, an expansion of the 

field versus the headquarters? 

Mr. FERNANDEZ. A good clarification is that, if you looked at the 

staffing levels of EDA since, really, the year 2000 we went, in total, 

from 255 employees to 175. And those reductions were felt within 

the headquarters offices as well as our regional offices. With the 

support that we received with the 2010 budget, for which we are 

very grateful, we have additional resources now to try and rebuild 

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sources, we are doing a mix of investments in staffing in the Washington office to build that programmatic expertise that our regional 

offices have asked for. But also adding staff in the field offices as 

well. So I think the split is essentially twenty/eighteen, twenty 

here and eighteen in our regional offices. 

ECONOMIC DEVELOPMENT REPRESENTATIVES

Mr. MOLLOHAN. The trend toward cutting the regional staff had 

dramatic impact in my state. As a matter of fact, we lost a state 

EDA representative. In the bill last year we spoke to that. Where 

are you in addressing additional personnel at the state level across 

the country? 

Mr. FERNANDEZ. What we have done is we went to the regional 

directors and said, ‘‘Here is the additional resources we believe are 

available. Here is what we think it means in terms of total full 

time equivalents. You tell us how you think you can best deploy 

them, and what you need the most.’’ So most of those positions will 

be in what we call economic development representatives, or econ 

development specialists. It is really focused on the outreach that 

we provide within the regions and the states that each office 

serves. 

I might note that an important body of work that is going on 

right now within the agency is centered around how we do our 

business in terms of the process improvements. And that is being 

led by the leadership in our regional offices. And as part of that 

process we hope we can streamline, add efficiency, and hopefully be 

able to deploy even more resources towards that outreach function, 

which is critically important. 

In the budget there was language about exploring adding EDRs, 

if you will, to each state. We have analyzed what that would mean 

budgetarily. It would add approximately $4.4 million, maybe $4.1 

million, annually to our staff requirements. The up front costs 

would include a couple more millions dollars in terms of office set 

up, etcetera. But the way we are structured now is, we think, appropriate in terms of rather than trying to create an office in all 

fifty states, having these regional teams that can provide a broader 

range of services than one individual might be able to do in a particular state. And it is that team approach that we think provides 

a broader, better service. 

Mr. MOLLOHAN. What kind of feedback are you getting, if any 

yet, on your team approach versus having a representative in, at 

least one in every state? 

Mr. FERNANDEZ. Well, most of what I hear from stakeholders has 

to do with resources. I think we have received good feedback in 

terms of level of service. One of the challenges I think would occur, 

if you deployed a system where you would have representatives in 

every single state, or an office in every single state, that structure 

would not really align well with the resources we have. You would, 

I think, create a lot of expectation management issues. It is hard 

to justify having one person in one state that might get a grant one 

year, they may not the next year. So by having these teams we can 

really deploy a broader system, I think, to elevate the services that 

we are able to provide. 


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Mr. MOLLOHAN. I really did not understand what you just said. 

It would create an expectation, one person in one state getting a 

grant, and with the team—— 

Mr. FERNANDEZ. Well—— 

Mr. MOLLOHAN. What were you saying? 

Mr. FERNANDEZ. Let me say it a different way. The costs associated with having a stand alone office with a person serving an entire state, the programmatic resources behind that just are not 

there. I mean, if we were in 1975 and EDA’s budget was $6 billion, 

then that kind of system might make more sense. So I think aligning the organization structure to fit with the programmatic resources we have requires us to think about how we serve regions 

not individual states. 

Mr. MOLLOHAN. Well, you are operating within the realities of a 

budget and I appreciate that. On the other hand, not having access 

to an EDR can be really difficult in getting advice and counsel to 

a state. States are very large entities. Mr. Wolf. 

JOB REPATRIATION

Mr. WOLF. Thank you, Mr. Chairman. Let me try to see if we can 

get you to agree to do something here. Maybe we could do it in Virginia and in West Virginia, and Pennsylvania, and Texas, if that 

were the case. Although Mr. Schiff, his district is very affluent and 

I do not think you really operate too much there, nor do you in my 

district, actually, too much. So I am thinking more in terms of the 

country than I am about my district. And I think, the other day 

I asked the Secretary about a repatriation program whereby we 

would repatriate jobs from other countries. Right now there is competition, and you are from Indiana; Elkhart, Indiana has an unemployment rate of what? 

Mr. FERNANDEZ. Too high. 

Mr. WOLF. Too high. I even saw an article the other day that 

that program Feed the Children, which I have been, I have seen 

in African villages, was in Elkhart, Indiana giving out food. And 

so if we could repatriate jobs from other countries of American 

companies, and I asked the Secretary about it the other day. He 

had someone call, and I am not going to say who, and basically the 

answer was that the Department is not doing anything with regard 

to this. And I would like to see if we could get the administration 

to put together a team and contact and look at the top twenty-five 

companies, U.S. companies, not foreign companies but American 

companies, that are doing business in China, in India, in, such as 

call centers, in Bangladesh and Mexico, and put together a team, 

or maybe work with my Governor, and none of the jobs would come 

to my district, I understand that. But work with two Democratic 

governors and two Republican governors, because if you do it the 

whole country wide it gets dissipated. And see if we can try to repatriate. Ask some of these CEOs to bring back jobs that have left 

this country. American companies, because of whatever reason, 

have relocated. 

For instance, there was a company in Virginia, I spoke to them. 

They have repatriated a call center back from India. They wanted 

to be, the people were willing to work at a lower salary living down 

in the Blacksburg area. Perhaps their family is from Blacksburg, 


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perhaps they went to Virginia Tech, perhaps they like hunting and 

fishing and do not want to live in a metropolitan area. But they 

were very pleased to be able to take what they had in India, move 

it back to the United States, pay a good salary. Maybe not as high 

as it would be if they were in downtown New York City, or downtown Washington. 

And so what I would like to ask you to do, if you could maybe 

take the Chairman’s state of West Virginia. What is the unemployment rate in West Virginia? 

Mr. MOLLOHAN. In northern West Virginia we are doing better 

than the nation. 

Mr. WOLF. Well, wherever it be. 

Mr. FATTAH. We still need jobs, though. 

Mr. WOLF. It is jobs. Well I go back, I went back to my old neighborhood, and Mr. Fattah will know it. It is in southwest Philadelphia. When you take the train from Washington to New York you 

go right by my high school. We had the largest General Electric 

factory in the country, I believe it was, called the switch gear division. It is gone. It is at 70th and Elmwood, went to 67th. It is gone. 

It is over. It is an empty field now, and the tumbleweeds just blow. 

Nothing is there. And the old neighborhood is boarded up. 

And if you have ever been to Trenton, New Jersey, it is the capital of New Jersey. There is a bridge that goes from Trenton over 

to Pennsylvania that has a sign that says, ‘‘Trenton makes, the 

world takes.’’ Trenton is not making anything anymore. So what I 

would like to see us, rather than us just having a general question 

about, you know, you are going to go and look, I would like to ask 

you, John R. Fernandez, on behalf of this administration, to work 

with this Committee and perhaps, Mr. Rendell is a Democrat, the 

Democratic Governor, and find two Republican governors, Bob 

McDonnell from Virginia one of them, to see about repatriating 

jobs, bringing them back from other countries. I mean, that is low 

hanging fruit. 

In Martinsville, Virginia, which is not in my congressional district, the unemployment rate is 20 percent, 20 percent. There are 

many people there who would love to be in a call center, who would 

love to do these things. And so could I ask you officially if you could 

head up, and I know I am pushing a little bit, but to head up a 

program whereby working with some members up here you will 

contact the top twenty-five companies, so it will take a little bit of 

research. You are going to have to find companies. Intel is in India, 

Intel is in China. So Intel would be one, and twenty-four other 

companies that are American companies, that want to do business, 

love America, but for some reason have put their business outside 

as they have expanded. To give them an opportunity to do something to repatriate, to do a patriotic thing. And I think now American companies would like to return home. And to do it on an incentive basis rather than to say, ‘‘If you do not do this we are going 

to attack you, condemn, and we are going to rip you apart.’’ But 

put some incentives out and see if we could pick maybe four states 

that are in deep need and see if we could encourage, put together 

a team. And I think you would have to literally go around and 

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cations were. But to bring those jobs back to the United States, 

what do you think? 

And when I spoke to one of the people, and I am not going to 

say who, the other day, the Secretary had the person call me. 

Frankly, the administration is not doing anything in this area. And 

the previous administration did not do anything in this area. It is 

kind of a new concept, a new idea. Now, there may be ways that 

the Congress could give, later on give tax credits, or benefits, or 

something, or maybe the state could pass a law whereby there 

would be no taxation for five years, or something, to give an incentive. Or maybe a locality would, say Bloomington would say, ‘‘We 

are going to give you free space.’’ Or, ‘‘We are going to give you 

some land that the EDA has that you can develop a call center.’’ 

But could we actually do this to see if we could create some fundamental jobs so that Americans could have jobs, but yet not do it 

in a retaliatory method but in a positive, and incentive method? 

Does that make sense to you? Or—— 

Mr. FERNANDEZ. I can say a couple of things about that. First of 

all, we are working with some of the staff on the Senate side as 

well as within our Oversight Committee for reauthorization. And 

specifically there is a lot of discussion going on around the notion 

of onshoring, and looking at how we may incorporate an initiative 

within EDA’s reauthorization to address the very issues you are 

raising. The proposal that was made by Senator Warner, and I believe it is—— 

Mr. WOLF. Mark? Mark Warner from my state? 

Mr. FERNANDEZ. Yes. Some of the language from his onshoring 

bill has been included in the reauthorization legislation that is 

working its way through the Senate. And in that legislation it creates an opportunity for the EDA to be a real partner with states 

and localities as they try and repatriate or recreate those technology jobs, manufacturing jobs in the very areas that you are discussing. 

Mr. WOLF. Well I think Senator Warner was responsible—— 

Mr. FERNANDEZ. He was. 

Mr. WOLF [continuing]. For bringing this company back to the 

State of Virginia from I believe it was India, if my memory is correct. 

Mr. FERNANDEZ. And I can also make the point—— 

Mr. WOLF. But could we do it, could you do a pilot now? Before 

we wait, I mean when is the reauthorization, and God bless it, and 

I think it is good, and I will talk to the Senator’s office about this. 

But could we not, since Mark Warner has taken the leadership, 

could we not do something that you all go back to the Secretary 

and say, ‘‘Here is an opportunity to create some jobs.’’ You know, 

‘‘The Committee asked, I would like this responsibility.’’ You were 

a mayor, you were a political official. You put together a team and 

maybe pick not the top twenty-five, the top five companies to do 

an inventory, American companies that are abroad, that are doing 

jobs that could be repatriated. So while we are waiting for the authorization, do you expect that to pass by the end of this year? 

Mr. FERNANDEZ. I can only express my hope that it will. 

Mr. WOLF. Yeah but see, I notice that, that is good, but we cannot wait. 


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Mr. FERNANDEZ. And just to be clear—— 

Mr. WOLF. I mean if you are out of a job, I mean, the country 

needs to create jobs. We need to create real jobs, where people get 

up in the morning, and go to work, and do things that make a difference for the country. And you all should be excited about it because the unemployment rate is increasing, it is not decreasing. 

And we are in record debt. Anne Applebaum did a piece the other 

day for the Washington Post saying we are going to be Greece. We 

are, if you want to see the future, it is Greece. And so if we could 

get you to commit today, this is a friendly question, that you are 

going to do this, or you will go back and talk to Secretary Locke 

to see, and maybe we could pick the states here, West Virginia, and 

Pennsylvania, and Virginia, and Texas. But poor areas of, I mean, 

we are not going to bring this to Houston because Houston is big, 

and glittery, and vibrant. 

But areas where, there are some communities, when I drive up 

to go to a football game at Penn State I go through little towns that 

are empty, they are boarded up. The steel mills have gone. The factories have closed down. Have you ever taken the train from Washington to New York? 

Mr. FERNANDEZ. No. 

Mr. WOLF. If you ever do, get on the train and do not read your 

book. Just look to the right and the left. The factories are closed. 

The windows are broken. The graffiti is all over the walls. The 

trash is all, weeds are growing out of the buildings. This is the infrastructure. This would go through, I think, Mr. Fattah’s district. 

And I think we have an opportunity in something that is not a partisan thing to see if we could refurbish, because those people that 

live in those areas, they want jobs. They want to get up in the 

morning. They want to go out and do something. 

So if we could get you to commit that you will see if you can get 

the Secretary to designate you as the person that will do this, to 

see if we could begin to repatriate now, and then in anticipation 

of the reauthorization. Could we get you? Or could you look at that 

and tell us if you—— 

Mr. FERNANDEZ. We are always interested in working on good 

ideas. 

Mr. WOLF. It is a good idea. 

Mr. FERNANDEZ. And we are certainly willing to continue the dialogue and look for opportunities—— 

Mr. WOLF. I do not want a dialogue. I—— 

Mr. FERNANDEZ. No, I understand. But I—— 

Mr. WOLF [continuing]. Bad word. I just want to create jobs. 

Mr. FERNANDEZ. We all do. 

Mr. WOLF. This country is sinking. We are sinking. We are sinking. We have $37 trillion of debt. We owe money to the Chinese. 

The Chinese are, are you Catholic? The Chinese have thirty-four 

Catholic bishops in jail. Are you Protestant? The Chinese have 

hundreds of Protestant pastors in jail. Are you Buddhist? The Chinese have plundered Tibet. Are you Muslim? They are persecuting 

the Uighurs. They are compromising this nation. So I do not want 

a dialogue. If it is a dialogue I withdraw the question. I just want 

to know, yes or no, will you take this back to the Secretary to ask 


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to do this? Or if it is a discussion, forget it. I just want to know, 

will you go back and talk to him? 

Mr. FERNANDEZ. I can put it on the table. I think there are many 

ways to address these issues, and we are working very hard on a 

daily basis to create jobs. 

Mr. WOLF. The jobs—— 

Mr. FERNANDEZ. I was in Martinsville two weeks ago. I understand. I may not have taken a train to New York, but I have been 

in many parts of the country, my own backyard and elsewhere, 

where I see the devastation, and I share that. 

Mr. WOLF. And therefore, and therefore what will we do? I mean, 

I, this is, I wanted to, will you then to go back to the Secretary and 

work with the governors? 

Mr. FERNANDEZ. I can certainly talk to him about this proposal, 

absolutely. 

Mr. WOLF. Okay. And if you could let us know. And maybe fit 

the Governor of West Virginia, and the Governor of Pennsylvania, 

and the Governor of Virginia, I do not know, the Governor of 

Texas. But I know my State would like to participate and frankly 

these jobs are not going to go to my area. But I am tired of just 

seeing us lose all these jobs, and where Americans could do the 

jobs. And we could have a renaissance in this nation. And quite 

frankly, with all due respect, the previous administration did not 

do it, but you guys are not creating new jobs. A lot of that stuff 

went out, and it is just spend, spend. I am talking about low hanging fruit that we could get these jobs, bring them back. They could 

go to a Martinsville, they could go to West Virginia, they could go 

to parts of Pennsylvania, or they could go, and we could do something. Or at least we would know that these companies are not 

going to come back, or they will, and then see if there is an incentive package that you all would be able to give, or maybe we could 

do something in the tax code, to kind of give these companies an 

opportunity. So if you could do that and let the Committee know 

I would appreciate it. 

Mr. FERNANDEZ. Sure. 

Mr. WOLF. Thank you. 

Mr. MOLLOHAN. Thank you. Mr. Fattah. 

Mr. FATTAH. Thank you, Mr. Chairman. And Mr. Mayor, it is 

good to see you. 

Mr. FERNANDEZ. Thank you, I am glad to be here. 

Mr. FATTAH. And in a new role, and I want to welcome you. I 

think you are doing an extraordinary job. And I share the passion 

of my colleague from Virginia in that, and, obviously the administration does. Because when you all took office, we were losing 

700,000, 800,000 jobs a month. We have seen a major turnaround 

in the economy. Yesterday a year ago the stock market was at its 

lowest, 6,000. We have seen a major increase. But there is more 

work to be done, and I was happy to see the Senate act yesterday 

on a jobs initiative, but we have a lot of work to do. I think that 

the passion you hear from my colleague is shared. That as long as 

we have a significant number of Americans unemployed, as the 

President said, we have to keep working. It is good to see that the 

unemployment rate is stabilized, and starting this month we are 

going to be in the plus side of jobs, close to 100,000 each month 


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for the rest of the year. But it is going to take us a while to turn 

this economy around from where we were. And the almost doubling 

of the national debt, when the President took office, when he was 

sworn in, the national debt was at around $11 trillion and growing, 

with a $1.2 trillion deficit. 

The country was headed off a cliff. So your team and this administration has done a good job. And I do not think this is a partisan 

issue that has been raised by my colleague. I think that there is 

room for us to work to try to bring jobs that have left the country 

back to America. Americans do create jobs. Every time we buy a 

car, you know, that is putting people to work. The question is, if 

we are going to buy cars that are made somewhere else, if we are 

going to buy a TV, or a washer and dryer, and it is made somewhere else then it creates a dynamic in which we are shifting our 

wealth other places. And in Indiana you built a great reputation 

for building these RVs that I love. And in my home city we have 

some 1,300 manufacturers today who are doing an extraordinary 

job. We have Penn Fish and Tackle, they make saltwater fishing 

reels. They have no competitor in the U.S. They have one competitor overseas. We have CARDONE Industries with 3,000 employees 

making auto parts. And they have only one other competitor and 

they are in Mexico. But there are a lot of pressures on manufacturing jobs. 

So first of all I want to join with my colleague. I would be glad 

and interested, no matter what states are selected, to see whether 

somewhere in the Commerce Department, whether it is in EDA or 

somewhere else, if there is some effort to encourage American companies to have these jobs, all other things being equal, here. I think 

that American businesses have a lot of challenges. I mean, if they 

have a market in some other place, they have a responsibility to 

be a good corporate citizen there. But if they are selling 99 percent 

of their products in America, but yet making them somewhere else 

to improve their profit line, then I think that there is something 

off base about their calculation about where their long term interests are. So, I mean, I think we have to kind of walk through this 

and work on it. 

PLANNING GRANTS

But I want to ask you about EDA. Now so you had about a 1.7 

in applications. You did almost, close to $600 million in awards if 

you look at the whole package. But it seems as though the best 

place where you have almost funded everything that came in the 

door were the planning grants, well over some 400 planning grants. 

And I would be interested if you could make some comment about 

the range of diversity, and give us some examples, of the kinds of 

planning awards that the Department made to help communities 

kind of figure out what their niches are and how they can exploit 

them to retain and create new jobs. 

Mr. FERNANDEZ. Yes, absolutely. It is a good question because it 

blends into a broader discussion we are going to have today. The 

planning program within EDA’s budget, the vast majority of those 

resources fund our network of economic development districts. Currently we have 383 districts that we fund throughout the country. 

We have pending, I think, three more applications for additional 


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districts. These serve as regional, on the ground, economic development partners for our agency. That is one of the reasons why EDA 

works so well, we work through and with, as partners, a broad national network of economic development organizations. 

When you look at the requests for planning beyond the ongoing 

operational support for the economic development districts, it is not 

a large amount of money. 

Mr. FATTAH. Mm-hmm. 

Mr. FERNANDEZ. Many of our strategic economic development 

strategies are developed through our economic adjustment program. So for example, a very good example, is in Lorain County, 

Ohio where it has been in the news, a documentary about the last 

truck, that was related to that community. 

Mr. WOLF. The last what? 

Mr. FERNANDEZ. Last truck. They had the plant closing. There 

were the changes at the Wright-Patterson Air Force Base. 

Mr. FATTAH. Mm-hmm. 

Mr. FERNANDEZ. And consequently, there was a very broad regional impact of the changes in the economy. EDA funded a strategic planning effort that is very regional. They just rolled out the 

results of that planning. And what they did is they took that step 

backwards, looked at the assets they have in the region in terms 

of workforce, in terms of kinds of businesses, and thought carefully 

about the commonalities there that we can position the region to 

go after in terms of new industries. And they identified aviation 

and a couple of other sectors that I do not recall off the top of my 

head. But that is a very good example of, I think, the unique role 

that EDA plays in working with communities; thinking through 

these strategic changes that they need to make to be competitive 

in a global economy. 

Mr. FATTAH. Now you funded, outside of the planning area, you 

funded a $900,000 project in Danville, Virginia to look at—— 

Mr. FERNANDEZ. Yes. 

Mr. FATTAH [continuing]. Is it technology-based enterprises? 

Mr. FERNANDEZ. Yes, there is a commercialization center that we 

helped initiate, invest in, in that region that helps commercialize 

technology and ideas, and spin those out into new businesses to 

create jobs. And truly, the source of almost all of the net new 

growth in employment in our country are in these small and medium sized companies. And I think Kauffman did a study not too 

long ago, the Kauffman Foundation, and they found that almost all 

net new jobs were being created by companies that were five years 

old or less. 

Mr. FATTAH. Right. 

Mr. FERNANDEZ. And the point of that is that we work with communities to think about how they can strategically position themselves for sustainable economic growth—— 

Mr. FATTAH. Right. 

Mr. FERNANDEZ [continuing]. Having a holistic approach here 

that looks at how are you supporting entrepreneurism and small 

business creation. Accelerating commercialization of research and 

technology. Those are all critically important to helping communities get on a glide path that is sustainable. 


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Mr. FATTAH. Well, you know, there was this debate that I recall 

about the fundamentals of our economy. It is great that we are 

making that investment and—— 

Mr. FERNANDEZ. Yes. 

HUMAN CAPITAL DEVELOPMENT

Mr. FATTAH [continuing]. We have been working in Philadelphia 

focused on the same issue about the commercialization of nanotechnology and the like. And up in the other end of our State with Carnegie Mellon on robotics and biotech. But the fundamentals which 

you, it is not in your portfolio, but it concerns me and I just want 

to put it on the record. I mean, for the first time now we have 

crossed a rubicon in which the majority of the patents requested 

are now not by Americans or American companies. The underlying 

point of the new growth is on these cutting edge technologies and 

new products. And when we see, much smaller countries like South 

Korea out-producing us in terms of the numbers of engineers graduated, and we see much larger countries like China out-producing 

us in the number of engineers, if you look down the road here, one 

of the real deficits in the country is in our human capital development. One of the things that the Chairman has been interested in 

is, we have a number of agencies under the jurisdiction of the Committee that are involved in science and technology and education, 

is to try to see where we can have an impact. Because, whether it 

is the manufacturers in Philadelphia or the advanced technology 

issues in Virginia, if we do not grow the intellectual infrastructure 

that would be the basis for, the new products, then the ability to 

grow new companies and put new products in the market, which 

even in manufacturing when we lost jobs overseas we usually lose 

them after we have exploited the product for a fairly long time and 

then move on; we will not even have that opportunity. 

So, you know, I just want to put that on the record. I thank you 

for your testimony and for your work, and I thank the Chairman. 

Thank you. 

Mr. MOLLOHAN. Mr. Culberson. 

DEFICIT SPENDING

Mr. CULBERSON. Thank you, Mr. Chairman. Thank you for being 

with us today, Mr. Fernandez. A day that I am going to do my best 

to remind everybody of every chance I get is June 1st, because that 

is the day that the United States starts living on credit and charging everything that we do to our kids, sending them the bill. Because that is the day that, if you take the amount of money, fiscal 

year 2009 revenues, and just divide it by the amount of money we 

spend, and multiply that by 365, to obtain the number of days out 

of 365, you know, that that fraction represents, you can quickly see 

that we on June 1st have spent all the revenue that has come into 

the federal government. And from that day forward we as a nation 

are living on debt. And I, this is, I know, a concern to the members 

of this Committee. I particularly share Mr. Wolf’s passion for making sure that we do not leave this inheritance to our kids. So as 

a fiscal conservative I am always looking for ways to try to consolidate and save money. And I note that the GAO has identified 

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missions that provide economic development funding. And one of 

these, of course, is the Economic Development Administration, created of course for a noble purpose. But in looking at your statute 

I see that you can make grants to economic development districts, 

Indian tribes, states, cities, or other political subdivisions, universities, public or private nonprofit organizations. And really the 

principal purpose of your agency is, you primarily issue grants for 

planning, in essence, largely, looking at your statute. 

Mr. FERNANDEZ. The primary purpose of our agency—— 

Mr. CULBERSON. Assistance, planning—— 

Mr. FERNANDEZ [continuing]. Is to create jobs and leverage private investment. 

Mr. CULBERSON. But as I read, when you read the statute your 

guidance is to provide technical assistance, cooperation, planning, 

promote investment. You may make grants to local governments 

for public infrastructure, for public works, public service. But the 

principal job it looks like you do is planning, coordinating, facilitating economic development. Is that right? 

Mr. FERNANDEZ. The statute sets out a range of activities for 

EDA. 

Mr. CULBERSON. Right. That are focused and built around planning—— 

Mr. FERNANDEZ. You are correct, there are numerous divisions 

within other agencies that have an economic development element 

to them. But EDA is the sole agency whose sole mission is to help 

build and lead an economic development strategy for the entire 

country, across sectorial areas—— 

Mr. CULBERSON. Sure, I understand. But you are focused on 

planning and technical assistance. And you do grants to local and 

state governments to build that infrastructure—— 

Mr. FERNANDEZ. If you look at our budget the vast majority of 

what we do is invest in our economic development programs, which 

tend to be direct investments whether it is in infrastructure, incubators, other kinds of strategic initiatives—— 

Mr. CULBERSON. Okay. 

Mr. FERNANDEZ [continuing]. That leverage private investment 

and create jobs. 

JOB CREATION

Mr. CULBERSON. So what percentage of your total amount of 

money you are appropriated each year do you estimate are spent 

on grants like that, that go directly into, that create jobs? 

Mr. FERNANDEZ. I cannot tell you the percentage off the top of 

my head. But essentially it is around $190 million out of a total 

of $246 million. 

Mr. CULBERSON. So $190 million out of $246 million? 

Mr. FERNANDEZ. Mm-hmm. 

Mr. CULBERSON. Okay. And those go to grant programs that 

build infrastructure, public works projects, etcetera, that are going 

to—— 

Mr. FERNANDEZ. Incubators, accelerators—— 

Mr. CULBERSON. Okay. 

Mr. FERNANDEZ [continuing]. Organizations that support economic development. 


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Mr. CULBERSON. I cannot find where, you know the GAO has 

been unable to verify the numbers that you use for the numbers 

of jobs you allegedly create. What number of, how many jobs do 

you, does your agency claim to have created and what do you base 

that on? 

Mr. FERNANDEZ. Well this—— 

Mr. CULBERSON. I am trying to get a handle on what, if you all 

can give me an estimate and where the estimate comes from of how 

many—— 

Mr. FERNANDEZ. Well there are two different sets of estimates. 

One is based on what the grantees estimate. And I think that 

might have been the number that the Chairman alluded to earlier. 

Mr. CULBERSON. Which was what? If I could, if you would remind me what the Chairman, I am sorry, over what, 350,000 jobs? 

Mr. MOLLOHAN. 350,000 by the grantee estimates. 

Mr. CULBERSON. By the grantee estimates over—— 

Mr. FERNANDEZ. And he is trying to explain that to you. 

Mr. CULBERSON. Yes, sir? 

Mr. FERNANDEZ. We have had a couple of different in depth looks 

at this very issue. One was a study that was conducted by Rutgers 

University. And then there was a follow up a couple of years ago 

by the private consulting firm Grant Thornton. They essentially 

verified that the estimates that we are using were pretty good. 

Mr. CULBERSON. And 350,000 jobs created over what period of 

time? period of time? 

Mr. FERNANDEZ. I am not sure which period of time the Chairman is referring to. 

Mr. CULBERSON. And those are the estimates of the grantees? 

Mr. FERNANDEZ. Our average, is approximately $5,000 per job, 

sometimes it bumps up. With the stimulus act if you look at the 

total of jobs that were saved or created, the cost per job was right 

around $4,600. We can talk about other agencies. I do not know 

them as well as I know EDA. But what I can say about EDA is 

that the strength of this agency has been built on three points. One 

is that it is built on partnerships with organizations, a national 

network of economic development organizations that develop bottom up strategies for building capacity in communities to support 

economic expansion. The second point is that there is no one size 

fits all solution here. So unlike a lot of agencies EDA has a substantial amount of flexibility within our programmatic investments 

to respond to creative solutions, unique solutions, that communities 

identify. And then the third point about EDA’s strength is our return on investment. When you look at the cost per jobs that we invest, the leverage we get, when you look at the private investment 

that is leveraged per federal dollar. The return on investment for 

communities and for the country is very substantial and I think 

that is one of the reasons why over the years there has been strong 

bipartisan support for EDA. 

Mr. CULBERSON. I think flexibility is a very good point, and that 

is certainly true. I am surprised to see in your statute Title 42, Section 3151A that says that if a local project, Mr. Chairman, has actually saved money, if it is less expensive than originally planned, 

the money saved does not go back to the taxpayer. I am sorry to 


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see that we do not save the money. It is actually respent somewhere else. 

I do see, though, the flexibility is a good point. I see a number 

of projects here in the State of Texas. Port of Beaumont navigation 

district, Seabrook, Texas Medical Center branch at Galveston 

building improvements, etcetera. But, you know, this, and no question I am confident you do good work. But at a time when we are 

literally approaching a financial cliff, the scale of the debt and the 

deficit are so tremendous and so terrifying that we need to look at 

places to save money, Mr. Chairman. I do think this is an agency 

where, as in any private business gets in trouble with debt they retrench and get back to their core mission. I bet we could probably 

save some money here, and maybe look at this, and we appreciate 

the work that you do, sir, but I am confident this is an agency 

where we could probably save some money and see it better, a little 

better targeted perhaps—— 

Mr. FERNANDEZ. We can agree to disagree. 

Mr. CULBERSON [continuing]. Elsewhere, and maybe in the form 

of tax cuts. Texans always prefer tax cuts to create jobs rather 

than federal grants, as a general rule. But we appreciate what you 

do, sir. Thank you very much. 

Mr. FERNANDEZ. I appreciate that. 

PUBLIC WORKS & EAA FUNDING LEVELS

Mr. MOLLOHAN. Thank you. Secretary Fernandez, I want to explore your request and our attitudes as expressed in previous appropriations. I am looking at your 2011 request and I am looking 

at our 2010 omnibus. You have flipped, virtually flipped the funding for Public Works and economic development assistance. I want 

to give you an opportunity here today to justify this request, particularly in light of our expressed attitudes about it in the past. 

Make your case. 

Mr. FERNANDEZ. I will, and I appreciate that, Mr. Chairman. 

And I sincerely respect the views of the Committee. I mean, clearly 

this has been a discussion that precedes me and it is one that will 

probably continue. When we look at the President’s proposal for 

EDA it is in the context of the entire budget. So we are very cognizant of the constraints, the fiscal constraints, concerns about the 

deficit. So you look at what EDA does in the context of the entire 

federal budget proposal that has been put forth by President 

Obama, for economic development, there are multiple agencies that 

have an impact on how we rebuild the economy. And what the 

President has made clear and we wholeheartedly support is the notion that while we have taken bold action with the support of the 

Congress and the administration to keep the country from falling 

off a cliff, as we move forward we really need to look at how we 

build a stronger foundation that positions America to be very competitive moving forward in this new economy, or changing economy. 

It is not really new. 

And the real pillars of that include unprecedented commitments 

to education. The workforce issues are paramount to having the capacity to compete in the global economy. Infrastructure is clearly 

a huge part of that system that we need to be able to build a strong 

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dent, there is substantial investment in infrastructure. And then 

the third area is the area of research and development. And the 

President’s budget includes significant increases in the federal government, investments in the research that is going to be a real 

driver of new ideas, new products, and commercialization. 

So it is in that context that we look at EDA’s budget. So what 

does EDA do that—— 

Mr. MOLLOHAN. Other agencies having primary responsibilities 

for the R and D and primary responsibilities for the workforce development? 

Mr. FERNANDEZ. Exactly. 

Mr. MOLLOHAN. You are not suggesting EDA’s, that that—— 

Mr. FERNANDEZ. No, I am just saying that—— 

Mr. MOLLOHAN [continuing]. Where their mission—— 

Mr. FERNANDEZ. Absolutely. 

Mr. MOLLOHAN. So you are just putting it in the context—— 

Mr. FERNANDEZ. So if we put our request in the context of the 

overall budget, the unique thing that EDA provides that the other 

agencies do not is this flexibility to go in and address strategically, 

different needs in the community. If you look at demand for EDA 

in, year to date, fiscal year 2010 year to date for economic adjustment, we have received applications worth $222 million. Last year 

we had substantially more requests in EAA as a percentage of requests than any other program we have. And what we are hearing 

is that while infrastructure is very important, and that is a key implementation strategy in many communities, is the flexibility of 

economic adjustment to deal with issues like access to capital, developing the strategic plans that link workforce, innovation, existing employment to the clusters that we are trying to build. And it 

is that kind of flexibility that is available within the economic adjustment assistance, even though the majority of economic adjustment funds end up being construction projects. That is the area 

where we see just a significant amount of demand and that is the 

one area that EDA plays a very unique role that other agencies 

cannot fulfill. 

Mr. MOLLOHAN. Well I mean, obviously that is a compelling case. 

If you can think about economic development in strategic terms 

that is very important, particularly if you can bring assets to bear 

that assist local areas in strategic thinking and strategic development, which equates in my experience to promoting economic diversification, that is a very powerful thing. And I am going to invite 

myself to have you come and explain where that is happening. I 

would like to see some real examples of that. 

You know, we have gotten EDA on task up in Weirton, West Virginia; when I was elected to Congress, there were 14,000 steel 

workers working at Weirton Steel. They are definitely in transition. 

And the industry is definitely transitioned and it is a catastrophic 

economic event over time. It has been a process of attrition. But it 

has not taken forever. It has not been sudden, it has not been precipitous, but it has been real. And so they are in a period of rethinking strategically about how they reconstitute their economy. 

So I hear you talk about the EAA account in those terms, and 

the flexibility that it represents in those terms. I invite you to show 

me where that is happening, where you are really going in and 


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partnering and engaging a community on those terms and having 

a result. 

You are here to testify and I am not here to preach. But one of 

the strengths of the Public Works program is that it is understood. 

It has demonstrably impacted, in a favorable way, all kinds of 

projects that have, in my district, promoted economic diversification. It has leveraged a tremendous amount of money, including 

conventional financing, to make deals work. So, the Public Works 

program has a constituency and it is out there, throughout our 

communities, but it is also here in Congress. People have experience with it. 

So when you talk about an EAA program you have a burden to 

prove. And I am certainly susceptible to the argument. But when 

it is put in the context of pitting EAA against Public Works, it is 

tough sledding for you. It is a heavy lift, I can tell you. Not that 

you are not convincing about the potential for EAA funding, but 

that has not been as adequately demonstrated, not to me. Conceptually it really sounds great, but the Public Works program has 

been demonstrated. So we need to visit on this and continue to talk 

about it. But just to come forward with a budget request that flips 

these two accounts year after year, I am not sure you are really 

going to get there in that way. We want to help you get there, but 

I am not sure we are going to get there in that way. 

GLOBAL CLIMATE CHANGE MITIGATION INCENTIVE FUND

As we evolve the Economic Development Administration and its 

programs to help promote economic development, leverage economic development, and think about new priorities, I think about 

incentivizing public works projects, to become more environmentally sound. We initiated a program which we called the Global 

Climate Change Mitigation Incentive Fund. As originally conceived 

by the Congress that is exactly what that was, an incentivation 

fund. The original thinking was to think of it in the context of the 

Public Works account. And so as grantee applicants came forward 

they would see this incentive to incorporate environmental elements, maybe LEED certification in their project. And in addition 

to getting a regular EDA Public Works grant they would get an 

amount, supplementary amount, on top of that for this purpose. A 

reward, if you will, for trying to become environmentally friendly. 

I think in the first year the agency limited that to LEED criteria. 

I am actually interested in hearing how successful that was? Or 

was it, it was a little bit before your administration. But are you 

familiar with how successful or unsuccessful, and how did you 

measure that, if you did? 

Mr. FERNANDEZ. I can attempt to do that, and I know enough to 

be dangerous. It is my understanding that as originally conceived 

the funds that were targeted for that fund were used as leverage 

to get some of our construction projects to adopt the sustainable development techniques. 

Mr. MOLLOHAN. Just as I described. 

Mr. FERNANDEZ. Exactly. 

Mr. MOLLOHAN. So do you agree with my description of that? 

Mr. FERNANDEZ. Yes. 

Mr. MOLLOHAN. Okay. 


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Mr. FERNANDEZ. So often the investment made in 2008 for global 

climate change money in conjunction with a Public Works investment. I think it was very successful in terms of getting that leverage and adding that incentive. 

Mr. MOLLOHAN. Can you cite cases for the record where that is 

true? I would like to have cases for the record where Public Works 

applications incorporated environmentally progressive building systems, techniques—— 

Mr. FERNANDEZ. We would be happy to provide you a complete 

list of the projects that were funded. 

Mr. MOLLOHAN. Well no, no, no. I am not asking that, exactly. 

I am asking, a list of projects that were incentivized to be increasingly environmentally sensitive because of this account. In other 

words, an applicant came forward and had an application for a 

public works project. And said, ‘‘Well gee,’’ you know, ‘‘if we get another $1 million we will,’’ I do not know, ‘‘put a green roof on.’’ Or, 

you know, ‘‘It will cost a little more, but we will do something with 

windows, or the positioning of the building.’’ I do not know what. 

But you provide us with examples where this grant program did 

from the start incentivize environmentally sensitive projects. That 

is what I would like to focus on. 

Mr. FERNANDEZ. We will work on putting that together for you. 

[The information follows:] 


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Mr. MOLLOHAN. Because that is the purpose, you know? And as 

your grantees look at that, that was, ‘‘Okay, we will give you this 

money if you do something more to your building to be efficient.’’ 

You know, energy efficiency, for example. 

Mr. FERNANDEZ. Yes, and if I could just elaborate? 

Mr. MOLLOHAN. I am sure there are examples out there. 

Mr. FERNANDEZ. Yes. And if I could talk about it more broadly, 

too, is that, the goals behind that initiative in terms of encouraging 

that kind of building practice? 

Mr. MOLLOHAN. Mm-hmm. 

Mr. FERNANDEZ. Are goals that we have embedded in our new investment priorities across our programs. I have looked at the language from last year’s budget that encouraged us to look beyond 

just LEED buildings at how we support other elements of expanding the green economy. And so we can target these resources, I 

think, appropriately to help grow the green economy in many communities. But also we can embed in the evaluation criteria that we 

apply to other Economic Development Administration investments 

the principles that were squarely behind the creation of the program. And we have done that in criteria that we have articulated 

for existing programs as well. 

Mr. MOLLOHAN. Beyond just incentivizing construction techniques? Or building—— 

Mr. FERNANDEZ. The notion of ‘‘sustainable development’’ has 

evolved in the industry over the last few years as well. And as 

someone who used to develop projects, there was a time where 

LEED development was viewed as, ‘‘Something that is going to be 

incredibly more expensive.’’ 

Mr. MOLLOHAN. It was incredibly more, or it is incredibly more 

expensive. 

Mr. FERNANDEZ. It was. But cost differential between sustainable 

practices and more traditional practices is shrinking. And the operational savings are shortening the timeline on return on investment. So you see a lot more buildings in the private sector and the 

public sector are coming forward and saying, ‘‘Look, we are going 

to do this.’’ 

Mr. MOLLOHAN. Without an incentive? 

Mr. FERNANDEZ. Because the incentive is there in terms of reduced operating costs—— 

Mr. MOLLOHAN. Mm-hmm. 

Mr. FERNANDEZ [continuing]. And broader benefits for the community, for their employees. There is a wealth of evidence that 

those kind of buildings have direct impacts on productivity and just 

the quality of the work coming out of these facilities. 

Mr. MOLLOHAN. Mm-hmm. 

Mr. FERNANDEZ. So that is shrinking. So if I understood the 

guidance in last year’s budget, we were asked to look at how we 

can leverage these dollars to broaden the impact of the program beyond just LEED buildings, but look at renewable energy initiatives 

and other projects. And that is what we would like to do moving 

forward. While we can still continue to incentivize LEED buildings, 

I think there is a broader application that could have a big impact. 

Mr. MOLLOHAN. Well if you are wanting to broaden the purposes, 

which again we are not unsympathetic to but we look forward to 


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being convinced, then why are you at the same time reducing the 

funding request below the 2010 funding level? You came in with 

your request for 2010, for 2011, even though we increased the funding for $8 million. 

Mr. FERNANDEZ. Well, as we noted earlier, the President has articulated a budget based on the fiscal constraints. 

Mr. MOLLOHAN. So it is purely fiscal, a fiscal consideration? 

Mr. FERNANDEZ. Yes, so, in light of the freeze on discretionary 

spending, the request we are making is at the same level for our 

programs that we made in 2010. 

Mr. MOLLOHAN. Okay. 

Mr. FERNANDEZ. And of course Congress appropriated additional 

resources to us in 2010. We are certainly appreciative of that. But 

our request is the same request we made in 2010. 

Mr. MOLLOHAN. Okay, thank you. Mr. Ruppersberger. 

PENN STATION IN BALTIMORE

Mr. RUPPERSBERGER. I come from local government for about 

eighteen years, a lot of economic development issues. Always you 

are looking for the federal government for ways to help, and whatever. And there are different grant issues that are out there. When 

you come to Congress you prioritize on certain major projects. And 

I am getting personal now, but there is Penn Station in Baltimore. 

And it is pretty bad, and yet there are people coming there all the 

time. And I am working with Congressman Cummings to try to revitalize that area, and using the station in Washington, D.C. as an 

example. We took a station, revitalized it, retrofitted it, put in 

stores, food banks, restaurants, whatever. And it is my understanding now that that project is making profit for Washington, 

D.C. because it is a place where people come. 

Now there is, when you, in this market a lot of the governments 

are distressed and they just cannot put money in that needs to be. 

What I am going to probably ask is someone from your Department 

contact my office. There is a major issue that has to be done, and 

maybe some federal grants. But what this does, it not only helps 

the area but it revitalizes a neighborhood. This is a very poor 

neighborhood, a lot of crime issues around the area. So I am making a request, basically, if you could get with my staff, Walter 

Gonzales here, when this hearing is over and talk about that issue. 

PROCESS FOR WORKING WITH LOCAL GOVERNMENT

There are a lot of local governments in distress. Do you see that 

the ones that are successful working with you in getting funding 

are more aggressive themselves? You know, what is the process? 

Are you reaching out to different states? Because the key is jobs 

now, as we know. And the more that we deal and focus on the jobs 

issue the better. Are you coordinating with the stimulus package? 

Where are you in that regard? 

Mr. FERNANDEZ. That is a good question. EDA operates, through 

this national network of local economic development organizations. 

We fund, 383 economic development districts that by the very 

structure of those organizations, include local representation from 

local government. They partner with them to develop the strategic 

and economic development plans for their area. And so, there is 


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that direct connection between the local government, the districts, 

and the Economic Development Administration. 

In addition, through our economic development representatives, 

we engage in outreach efforts directly in communities. We would 

like to be perceived as being accessible. It may not always feel that 

way, and I certainly can appreciate that having been on the other 

side of the table not so long ago. There is a need for improvement, 

I am sure. But I think we do a pretty aggressive job in terms of 

our outreach and we try to be accessible. 

COORDINATION WITH OTHER AGENCIES

Mr. RUPPERSBERGER. Do you coordinate with Small Business Administration, the Community Development Block Grants, those different—— 

Mr. FERNANDEZ. To some extent, yes. And I can tell you with this 

administration there is an absolute commitment to blowing up a lot 

of the silos. We are engaged in collaborative efforts with SBA. I am 

leaving this hearing to go meet with HUD. There are a number of 

agencies that are working together to look at how we can address 

community needs so that we can integrate the various kinds of federal resources we can bring to the table and make it easier, frankly, from the customer side of the table than them having to figure 

out how to get from agency A to B and C, and try to put all those 

things together. I think there is an opportunity to do things in a 

different way that can be very helpful. 

AWARD FUNDING FORMULA

Mr. RUPPERSBERGER. My last question, because it is really about 

end game results. What formula do you think works? And what is 

your policy or philosophy as an agency to give money? You know, 

you have a lot of people that want money, they do not know how 

to get it. What are you looking for? And give me an example of a 

project where you got involved, where you made a difference? 

Mr. FERNANDEZ. It is a good question. First of all the communities we work in by definition have to be distressed. I mean, that 

is—— 

Mr. RUPPERSBERGER. But is that point not, I mean it is so broad 

now, you are dealing with about 80 percent of the whole country? 

Mr. FERNANDEZ. It is, that is true. So—— 

Mr. RUPPERSBERGER. You are probably going to have to relook at 

that formula, in today’s world. 

Mr. FERNANDEZ. It is a big part of the country. And hopefully it 

will shrink. But we look at the investments based on the level of 

collaboration, the amount of private sector jobs that are created, 

the leverage of investment from the private sector, how it is tied 

to the community’s strategic thinking about where their growth is 

going to come from. We look at that entire package. One of the 

things we are working on, is developing a more quantitative system 

for evaluating projects to get a more even playing field and making 

it a lot more transparent. 

Mr. RUPPERSBERGER. But what I need is an example now. Give 

me an example of what you are looking for, what is the quickest, 

the best way? When I am talking to our mayors, our county executives, or even our governors, from your perspective what works 


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quickly? Because that is what people want to do, they want to 

move forward. And we need to work quickly in this market. 

Mr. FERNANDEZ. Well, you know, if you are talking about a specific—— 

Mr. RUPPERSBERGER. A project, a specific project. 

Mr. FERNANDEZ. I mean the—— 

PENN STATION IN BALTIMORE

Mr. RUPPERSBERGER. I will give you an example, the Penn Station thing. 

Mr. FERNANDEZ. Yes. Well, that is a very important project and 

I believe in those kinds of projects. That is probably not a quick 

project. As we go out and—— 

Mr. RUPPERSBERGER. Well I know, I do not like to get personal 

in these hearings but I will. It has to do with removal of a certain 

pipe underground, to connect the parking lot over the train tracks, 

and whatever. And nothing is going to happen until that occurs. 

That would be a focus where I would look from a federal level to 

get involved. If that opens up the whole project might go. 

Mr. FERNANDEZ. I understand. And we will get more information 

about that specific project. But, you know, what we have seen is 

that by working through this network—— 

Mr. RUPPERSBERGER. Give me an example. Answer my question 

with that. Is that not the type of project that you are looking at? 

That is not where your money is going to come from? You have to 

be more involved in certain formulas and rules? I mean, when you 

are talking jobs and business you have got to move more quickly 

now. 

Mr. FERNANDEZ. Absolutely. And—— 

Mr. RUPPERSBERGER. So give me an example. 

Mr. FERNANDEZ. And there is no shortage of examples. 

Mr. RUPPERSBERGER. Okay. 

Mr. FERNANDEZ. I was in a very small town in Minnesota where 

the main issue was expansion of a water plant in Nashwauk. It is 

a city with a population of nine hundred and some people. Clearly 

they do not have the resources in a town that size to make the kind 

of infrastructure investment that was needed, which enabled a $16 

billion private sector investment creating 500 direct jobs in the 

steel industry. That was part of the strategic planning for that region—— 

Mr. RUPPERSBERGER. Okay. 

Mr. FERNANDEZ [continuing]. In Minnesota they call it the Iron 

Ridge. And they were leveraging natural resources, leveraging 

workforce, and we were able to make an investment to meet that 

local need that they could not make but for us. 

Mr. RUPPERSBERGER. Okay. 

Mr. FERNANDEZ. And that is leveraging—— 

Mr. RUPPERSBERGER. And that is what I am looking for. 

Mr. FERNANDEZ. And that is going to create immediately 2,000 

jobs just to build the facilities. So it is those kinds of projects. And 

what I was trying to say, not very articulately, is that by working 

through these local networks of economic development professionals, they have got great projects queued up. 

Mr. RUPPERSBERGER. Mm-hmm. 


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Mr. FERNANDEZ. That is why last year when the Congress approved the Recovery Act, EDA was appropriated $150 million for 

Recovery Act projects. We were able to obligate 100 percent of our 

money within a year, a year ahead of schedule, because this network that we work with has many projects queued up, more than 

there are resources to fund. So it is that built-in pipeline of investments that are out there that we can fund and accelerate job creation in the near term, but do it in a way that is built on longer 

term strategies for—— 

Mr. RUPPERSBERGER. So it is fair to say that when it is the right 

project, that you can be extremely aggressive to make the project 

move forward? 

Mr. FERNANDEZ. We can. We can. And I do not want to dismiss 

them, because there were some questions earlier. Sometimes it 

takes longer than it ought to. And I can tell you that we are very 

committed to evaluating how we do our review process to make 

sure that we are doing it as quickly as possible. 

Mr. RUPPERSBERGER. We just voted on this budget while you 

were gone. Thank you for leaving the room. 

Mr. MOLLOHAN. What did you do? 

Mr. RUPPERSBERGER. Nothing, I am teasing. 

Mr. MOLLOHAN. Mr. Wolf. 

GAMBLING

Mr. WOLF. Thank you, Mr. Chairman. I have a question, but before I do I want to make a comment. I am very disturbed to see 

the number of communities and states that are expanding gambling, that are seeking gambling, which brings crime, corruption, 

break down of the family, etcetera. Does any of EDA money ever, 

ever, ever, ever, ever go to any community to help them bring 

about economic development for expansion? Because if it is I am 

going to offer an amendment to prohibit that. But has it ever—— 

Mr. FERNANDEZ. I am not aware of any. 

Mr. WOLF. And you would never do that, would you? 

Mr. FERNANDEZ. Well I personally would not put that on my priorities of economic development strategies, but that is just my personal opinion. I can check it. I do not know if there is a specific 

exclusion for that kind of investment or not. But I am not aware 

of any such investments. 

Mr. WOLF. I mean, I do not think we should do it. I mean, that 

does not create a job. That, I mean, the break down of the American values. I just had a letter the other day. I was the author of 

the National Commission on Gambling, and what it does to communities. I, frankly it has not been the greatest thing for the State 

of Indiana either, from a lot of people that I hear. Where it comes 

you get crime, you get corruption. Where we have kept it out of our 

state. Anyway, if you could let us know if it has been used or can 

be used I would appreciate it. 

[The information follows:] 

GAMBLING INSTITUTION INVESTMENTS

EDA’s authorizing statute, the Public Works and Economic Development Act of 

1965, as amended, does not expressly exclude grant investments to gambling institutions. 


srobinson on DSKHWCL6B1PROD with HEARING
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The American Recovery and Reinvestment Act (ARRA) included an express prohibition as follows: 

LIMIT ON FUNDS

SEC. 1604. None of the funds appropriated or otherwise made available in this 

Act may be used by any State or local government, or any private entity, for any 

casino or other gambling establishment, aquarium, zoo, golf course, or swimming 

pool. 

In the past 20 years, EDA funded 4,734 construction projects totaling $5.5 billion. 

None of these projects funded casinos or gambling facilities. We would note that 

about a decade ago, EDA funded a community-wide well and water treatment system for a City located on an Indian reservation that included as part of its justification that the water treatment system for the City would also benefit a hotel associated with a casino in addition to other employers. One reason that EDA does not 

fund such projects is that they do not represent the kind of innovation-led economic 

development needed to transform the regional economy. EDA intends to establish 

an explicit prohibition against funding such projects in the Bureau’s forthcoming FY 

2010 Operational Guidance and in future revisions to its regulations. 

BEST PRACTICES FOR COMMUNITIES IN NEED

The other question is, do you have a best practices for all the 

communities that are in need? Because some communities are so 

small they do not have the resources. Do you have a best practice 

to ensure a community that is going through this has a place to 

go to find out what has the best approach that has been used by 

others? Do you offer a best practices for communities? 

Mr. FERNANDEZ. Not as well as we should. And part of our effort—— 

Mr. WOLF. That is an honest answer, is it not? 

Mr. FERNANDEZ. Well, our regional staff certainly have a wealth 

of experience that they can share, and they do with community 

representatives. What I would like to do as part of rebuilding the 

capacity of the agency is to build that kind of resource center. And 

it is really more of a virtual best practices system, but, I look at 

the history of EDA over forty-five years as having a whole host of 

not just best practices but solutions. So that if I am in Bloomington, Indiana and I have got a particular issue, we have funded 

solutions for those kinds of issues before. We need to make that 

more accessible, and not just, ‘‘Here is a best practices page of what 

they did.’’ But, ‘‘Here is a contact of the people that were involved,’’ 

and to try and do some of that direct connection to help people accelerate their thinking about how to address particular issues. So 

that is something we do need to do better. 

Mr. WOLF. What is the unemployment rate in the Bloomington 

area? I remember, I saw that movie years ago, ‘‘Breaking Away?’’ 

Is that—— 

Mr. FERNANDEZ. ‘‘Breaking Away’’ I am embarrassed to say I do 

not know off the top of my head what it is in Bloomington. I can 

tell you that as a university community there was a time where 

people there perceived it to be recession proof. But because of the 

broader context of the shifting of manufacturing jobs in the region, 

the tight budget constraints, they are actually seeing layoffs in the 

universities and the public schools like every other community. So 

they have very similar challenges. 

Mr. WOLF. Yes, okay. I think that is pretty much it. If you could, 

after you check on that other thing, give us a call—— 

Mr. FERNANDEZ. Absolutely. 


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Mr. WOLF [continuing]. A call on whether or not EDA would be 

willing to, and then what I will do is, I will talk to Senator Warner 

and see. I think he would join to see if maybe before, the authorization is a great idea and the language, and I think it is good that 

Mark is doing that. But to see if we can maybe deputize you, or 

the Secretary could deputize you to sort of have a little bit of a 

pilot to move ahead and see what we can do. But anyway, thank 

you for your testimony. I appreciate it. 

Mr. FERNANDEZ. Thank you. 

Mr. MOLLOHAN. Mr. Culberson. 

GAMBLING

Mr. CULBERSON. Thank you. Thank you, Mr. Chairman. The, in 

answer to Mr. Wolf’s question, would you all be sure to check to 

make sure, so find out if any of the money that you all have sent 

to local or state government, or to business development, economic 

development, because the statute is very broad. I am looking at the 

language of the statute, Mr. Wolf, and there is no real restriction 

of any kind. The Secretary has got complete discretion to grant 

money to, for economic development, business development. And 

that would, what we are looking for is money that has been sent 

to, for example, infrastructure, to help build out infrastructure, 

roads into and out of a gambling area. So we are looking for direct 

or indirect would be very helpful. 

AMERICAN RECOVERY AND REINVESTMENT ACT & JOBS

I also wanted to confirm, Mr. Fernandez, did you say your agency had received $150 million from the stimulus bill? 

Mr. FERNANDEZ. That is correct. 

Mr. CULBERSON. And what, if I could, also the 350,000 jobs that 

the grantees tell you they have created with the funding that they 

have received, what independent outside verification or audits have 

there been of the 350,000 job claim that the grantees say they have 

created with the money? 

Mr. FERNANDEZ. As I noted earlier, there is not technically an 

outside audit. We do our own follow up to evaluate whether or not 

the numbers are being met. We did commission a couple of outside 

studies to look at the methodology for calculating return on investment. 

Mr. CULBERSON. So you really cannot verify that number? 

Mr. FERNANDEZ. I cannot verify it from the standpoint that we 

do not have an outside audit. 

NASH, TEXAS ECONOMIC DEVELOPMENT FUNDING

Mr. CULBERSON. Okay. I note, Mr. Chairman, the wonders of 

Google, I spot one of the grants in Texas, Mr. Chairman, is a $2 

million grant to, $1.875 million economic development assistance to 

the city of Nash, Texas to spur economic recovery by making infrastructure improvements to serve the Nash Business Park. And 

under the wonders of Google Earth, Mr. Chairman, I looked up, because I do not know where Nash, Texas is. This is downtown Nash, 

Texas. I want you to see this. It is literally a, it is two farm market 

roads and there is nothing there. So it is a, I just think it is imporVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00347 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

srobinson on DSKHWCL6B1PROD with HEARING
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tant that we do all we can to really be sure that taxpayers are getting the value for their dollars. The Agency undoubtedly performs 

a lot of worthwhile work. But I am not, looking at this one I for 

the life of me cannot, $1.8 million is probably more money than 

Nash, Texas ever had in its entire existence. And I think this agency just bears some careful scrutiny. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Well I hope that Nash, Texas has some maybe 

attention paid to it in the economic development, and hopefully the 

agency’s efforts to help facilitate it will be appreciated at the local 

level. 

REVOLVING LOAN FUNDS

Capitalizing RLF funds, revolving loan funds, why are you not 

doing that? 

Mr. FERNANDEZ. Recapitalizing, or making additional investments? 

Mr. MOLLOHAN. Mm-hmm. 

Mr. FERNANDEZ. I know that, it is my understanding, and I could 

be wrong with this, it would not be the first time, that the previous 

administration did not look favorably at that initiative. We certainly look at the role of RLFs as a very valuable tool to help address the critical access to capital issues that many small businesses face today. I think it is a program that can work well and 

we are not discouraging applications for that very purpose. 

Mr. MOLLOHAN. You know, we have some concern expressed that 

RLFs are not being capitalized because of pulling back funding that 

might be available for that to fund the Energy Efficiency Building 

Systems Regional Innovation Cluster Initiative. Can you comment 

on that? 

Mr. FERNANDEZ. Yes, I would be happy to because that is not accurate. The economic adjustment program is the—that is the pool 

of resources that we have to make investments in revolving loan 

funds, which, not to beat a dead horse, but that is one of the reasons why we like the idea of increasing support for it because that 

is a huge need. 

Mr. MOLLOHAN. It is a huge need to recap a lot of these funds. 

Mr. FERNANDEZ. And to address access to capital. 

Mr. MOLLOHAN. Okay. 

Mr. FERNANDEZ [continuing]. There was a question about what 

role does EDA have. I can tell you we did a $200,000 revolving loan 

fund investment in St. Louis. It is a little company called World 

Wide Technologies, which now today is a $3 billion company that— 

employs—1,200 employees. 

So I think these small investments can have tremendous impact, 

very direct return on investment, and do the kinds of work that 

people want. 

The Energy-RIC is a very exciting project. It grew out of President Obama’s commitment to get interagency cooperation. And so 

there is a White House interagency team that headed up the effort 

to build this RIC proposal. 

The total package is probably going to be, north of $120 million 

over a five-year period. 

The EDA’s role in this, which goes back to the unique role that 

EDA plays in our federal system, is to help build, support around 


srobinson on DSKHWCL6B1PROD with HEARING
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the cluster element of the energy investment. Our commitment was 

$5 million over a five-year period. Part of the funding is public 

works and part of it would be through economic adjustment. 

We have been able to identify resources to—through some of the 

deobligations that have occurred to fund that project without taking away the capacity to fund any of the current budget—— 

Mr. MOLLOHAN. Okay. Let me go back to the revolving loan 

funds. Are you recapitalizing them with funding? 

Mr. FERNANDEZ. Across the board, no. Are we evaluating applications for those, I would have to look and see if we have had any 

specific requests. But we are certainly not saying no to the concept. 

I mean, they are evaluated in the context of other competitive 

grants. 

Mr. MOLLOHAN. But you don’t know. Have you recapitalized one 

or started one new? 

Mr. FERNANDEZ. Last time I had I don’t know. I mean—— 

Mr. MOLLOHAN. Well for the record, will you? 

Mr. FERNANDEZ. Yes. I would be happy to. I know we did 

through our Recovery Act funds. But I am not sure about a regular 

EDA program. 

[The information follows:] 

REVOLVING LOAN FUNDS

EDA is currently evaluating 6 applications for the Revolving Loan Program totaling $7.25M. 5 applications have been approved for recapitalization totaling 

$11.125M, and 2 applications are new RLFs totaling $1.8M. 

REGIONAL INNOVATION CLUSTERS

Mr. MOLLOHAN. Okay. Well tell us what the Energy Regional Innovation Cluster is. What is that? 

Mr. FERNANDEZ. It is a multi-agency investment program. EDA 

has been involved in the work of clusters for almost 20 years. 

Mr. MOLLOHAN. Well let us really start. What is a cluster in the 

context of this initiative? 

Mr. FERNANDEZ. It is a geographically-bound area. There is a regional component to it that integrates businesses, universities, education, all the elements of economic development around a particular industry so that there is complimentary activities, there is 

synergy, and it leverages—— 

Mr. MOLLOHAN. And this doesn’t exist now? This is a concept. 

This is a new initiative, correct? 

Mr. FERNANDEZ. The Energy-RIC itself is a new initiative. But 

Regional Innovation Clusters are not new. And we found that they 

are a—— 

Mr. MOLLOHAN. We being EDA? 

Mr. FERNANDEZ. EDA. 

Mr. MOLLOHAN. Where have you found that? I don’t mean to interrupt you and if you need to elaborate. 

Mr. FERNANDEZ. No, that is okay. There are a number of clusters 

that have evolved over time. 

Mr. MOLLOHAN. Give us an example. 

Mr. FERNANDEZ. In Bloomington, Indiana there is a strong life 

sciences partnership that is a cluster. In Seattle there is a bio-medical cluster. 


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Mr. MOLLOHAN. But what is it—okay, but what does ‘‘cluster’’ 

mean? You know, we have a lot of coal mining in West Virginia, 

so would that be a cluster? 

Mr. FERNANDEZ. It could be. 

Mr. MOLLOHAN. Okay. Well what is—— 

Mr. FERNANDEZ. I mean, I am not trying to be facetious. 

Mr. MOLLOHAN. What is a cluster? No, no, I know you are not 

being. What is a cluster? 

Mr. FERNANDEZ. It is the combination of similarly focused businesses and institutions that are all linked into a particular industry. 

Mr. MOLLOHAN. Okay. 

Mr. FERNANDEZ. So you could have a cluster that is life sciences. 

You could have a cluster that is mineral resources. 

Mr. MOLLOHAN. Okay. Well the word link suggests that there is 

a central facilitating activity. Is there? 

Mr. FERNANDEZ. Yes. 

Mr. MOLLOHAN. There is. And who supplies that function? 

Mr. FERNANDEZ. Typically it is a public/private partnership; economic development organization that is able to align the strategies 

of the different participants in the cluster. Look for common areas 

of interest, whether it is workforce development, infrastructure development, broader policies that can help support that particular 

industry—— 

Mr. MOLLOHAN. Okay. So it is an identification of a core competency around some activity that is being promoted by a central 

facilitating group and being strategically managed in that way. 

Mr. FERNANDEZ. Absolutely. 

Mr. MOLLOHAN. The relationships between those entities that 

make up the partnership are strategically managed to further the 

prosperity and growth of the members of the cluster to have economic benefit throughout the defined region. 

Mr. FERNANDEZ. Exactly. And it is having that deliberate strategy and coordination that helps accelerate the success of these clusters. 

Mr. MOLLOHAN. Okay. So in one of your examples, give us an example. What is the facilitating group? 

Mr. FERNANDEZ. In Bloomington it is the Life Sciences Partnership. It is a public/private entity with representations from the city, 

the university. 

Mr. MOLLOHAN. So is that a non-profit? 

Mr. FERNANDEZ. It is. 

Mr. MOLLOHAN. Created in—— 

Mr. FERNANDEZ. Public non-profit. 

Mr. MOLLOHAN. A public non-profit with the board of directors 

composed of people who are in the cluster—— 

Mr. FERNANDEZ. Who are in the industry, who are in the education. 

Mr. MOLLOHAN. With an executive director who has been hired 

to facilitate that. 

Mr. FERNANDEZ. Coordinate that, yes. 


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ENERGY REGIONAL INNOVATION CLUSTER

Mr. MOLLOHAN. So if we are talking about a energy regional innovation cluster, is that proposing one additional focusing on energy, one additional cluster? And it is going to be concentrated on 

energy. Energy is going to be the core competencies you are going 

to try to work on out of that cluster and probably innovation. 

Mr. FERNANDEZ. In this one, Mr. Chairman, specifically it is to 

build a cluster around building technologies, efficiencies, and materials and design of actual buildings. So it is narrowly focused on 

that area of the economy. 

And the reason that this is being proposed is that, as I noted earlier, we believe there is a lot of empirical evidence outside of EDA 

that suggests that where you have this kind of deliberate formation 

of a cluster, it accelerates the business success of the individual 

companies and organizations that are aligned within that cluster. 

It has an impact on wages. It has an impact on the overall economy. 

So the goal here is to say, and this is part of what the President 

is very aggressively speaking about in terms of blowing up silos, we 

are going to make an investment through the Energy Department 

to leverage research and development around energy building systems. 

If we can bring with that commitment of the Energy Department’s funds, additional resources from EDA, from SBA, from 

Labor, from others to actually form a cluster as part of that energy 

investment, we have an opportunity to really amplify those dollars 

in a way that is going to have a broader, regional impact on the 

economy where that energy investment will be made. 

So it is an opportunity to truly leverage multiple federal dollars 

in a way that amplify each other. And we think we will have even 

greater success than they might have if it was done individually. 

Mr. MOLLOHAN. What economic funding levels? What funding 

levels is EDA expected to contribute to this initiative? 

Mr. FERNANDEZ. We have a commitment of $5 million or five 

years. 

Mr. MOLLOHAN. Not for each of five years, a total of $5 million. 

Mr. FERNANDEZ. And, again, and this is one of the challenges in 

talking about something like this is that it is a competitive grant 

process. We don’t know exactly what proposals will look like. 

Mr. MOLLOHAN. That is a pretty specific request. I mean, and 

you are talking about environmental efficiency and building. I 

mean—— 

Mr. FERNANDEZ. Yes. But it—— 

Mr. MOLLOHAN [continuing]. I am sure it narrows it down to several grantees. It almost sounds like a subtle administrative earmark. 

Mr. FERNANDEZ. Well it is a competitive grant. 

Mr. MOLLOHAN. Well I understand. But how many people can— 

how many entities are out there that can compete for this? 

Mr. FERNANDEZ. I think there has been tremendous interest. I 

don’t know exactly how many. I know we hosted, along with the 

other partners, sort of a pre-application conference here in Washington and had a webcast of it. And there was a strong interest. 


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But how the EDA’s investments may—we have made a commitment of up to. But we don’t know what those individual applications are going to look like. 

One applicant may have already a strong public/private partnership entity that can serve that coordinating role. They may not 

want or need resources to build that kind of organizations, others 

might. Infrastructure may not be an important part of a particular 

applicant’s investment. 

So, the way our commitment has been articulated, it is up to, but 

we don’t know exactly whether we will get a request for the full 

amount, or half that amount, or what. But we will soon. 

Mr. MOLLOHAN. So if your—I’m sorry, your 2011 funding request 

you would expect a million, million and a half, two million dollars 

of that request to go to this initiative. You know, it is five million 

over five years. 

Mr. FERNANDEZ. We are looking at using funds that were 

deobligated to fund this initiative. So it won’t come out of the 2010 

budget nor the 2011 budget. 

Mr. MOLLOHAN. Okay. Will that require reprogramming? 

Mr. FERNANDEZ. Probably not. I don’t think so. 

Mr. MOLLOHAN. Mr. Wolf. 

Mr. WOLF. No, I’m fine. 

DISASTER FUNDING

Mr. MOLLOHAN. In June of 2008, Congress appropriated $100 

million in disaster supplemental funding for EDA. In September of 

fiscal year 2009, provided another $400 million, a total of $500 million. 

Of the $100 million disaster funding provided in 2008, $22 million is still unobligated or 22 percent and are only in the Denver 

and Chicago regions. What is the reason for the delay in obligating 

disaster funding in Denver and Chicago? 

Mr. FERNANDEZ. I don’t know if it is technically a reason for 

delay. I can tell you that doing disaster response work often is very 

complex. The communities are often devastated, the amount of initial work just in terms of first responder cleanups and relief. 

Mr. MOLLOHAN. Are there projects in these regions which are appropriate for disaster funding? 

Mr. FERNANDEZ. There certainly are. 

Mr. MOLLOHAN. Still at this time? 

Mr. FERNANDEZ. Yes. There are projects in the pipeline. I looked 

at this question ahead of time. In my conversations with our regional directors, in total out of both of those supplemental appropriations, essentially 90 percent, 96 percent of all those funds, are 

either approved, in final review, or in some stage where they are 

going to be moving forward. 

There is four percent left. And our commitment is to get those 

funds obligated by the end of the second quarter. 

Mr. MOLLOHAN. Of the $400 million—I am sorry. 

Mr. FERNANDEZ. We will meet that commitment. 

Mr. MOLLOHAN. Of the $400 million provided in September of 

2008, 100—we were advised, $143 million or more than 35 percent 

is still unobligated for projects in Atlanta, Denver, Chicago, and 

the Austin regions—— 


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Mr. FERNANDEZ. Yes. And again—— 

Mr. MOLLOHAN [continuing]. And Texas regions. 

Mr. FERNANDEZ. Yes. Again, I think we can brief you in more detail. But those are in the pipeline. The funding is in the pipeline. 

Mr. MOLLOHAN. Okay. But—— 

Mr. FERNANDEZ. Let me give you an example if I could, Mr. 

Chairman. There is a huge project in Cedar Rapids that is probably 

a $35 million project. There are a lot of technical things they are 

working out at a local issue, at a local level to move that project 

forward. 

So it has been identified as a very valuable investment for the 

community as part of that rebuilding strategy. It is one that we 

certainly would be receptive to. But it is in those final kind of due 

diligence and review stage to move it forward to announcement. 

Mr. MOLLOHAN. Okay. So you wouldn’t even describe the fact 

that these funds have not been obligated as a delay? 

Mr. FERNANDEZ. I wouldn’t, because it would be one thing if I 

were telling you that we have got hundreds of millions of dollars 

that there is no pipeline for. That is not where we are at. 

Mr. MOLLOHAN. Okay. 

Mr. FERNANDEZ. We want to move as quickly as we can. 

Mr. MOLLOHAN. So there are projects that in these regions— 

Mr. FERNANDEZ. Yes, sir. 

Mr. MOLLOHAN [continuing] That are appropriate for funding 

and are moving through the pipeline. 

Mr. FERNANDEZ. Yes. 

Mr. MOLLOHAN. Are there still appropriate applications for this 

funding? Would it be appropriate for an applicant to still file for 

this funding? 

Mr. FERNANDEZ. Yes, because there is still the four percent that 

hasn’t been really pushed into the larger pipeline. 

Mr. MOLLOHAN. Okay. 

Mr. FERNANDEZ. I would have to get back to you on specifically 

what that amount is though. 

[The information follows:] 

DISASTER FUNDING ALLOCATION AVAILABILITY

As of today, of the $500M total disaster supplemental, EDA has approved 

$271,629,200 with an additional $66,907,993 in final review in DC. That leaves 

$161,462,807 still being processed at some stage in the regional offices. 

AMERICAN RECOVERY AND REINVESTMENT ACT FUNDING

Mr. MOLLOHAN. Okay. You had some questions directed to you 

about the American Recovery and Reinvestment Act. And we mentioned in our statement that Congress appropriated $150 million to 

EDA and directed EDA to give priority to areas of the Nation that 

had experienced sudden and severe economic dislocation and job 

loss due to corporate restructuring. 

I just would like to make the record as clear as possible on this. 

How much of the funding has been obligated to date? 

Mr. FERNANDEZ. Hundred percent. 

Mr. MOLLOHAN. What areas of the country have experienced sudden and severe economic dislocation and job loss due to corporate 

restructuring? 


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Mr. FERNANDEZ. It is hard to say which parts of the country have 

not been affected by restructuring and changes in the economy. It 

is a broad area. 

Mr. MOLLOHAN. Can you give a—— 

Mr. FERNANDEZ. You know, my staff could give you an actual—— 


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Mr. MOLLOHAN. Okay. 

Mr. FERNANDEZ [continuing]. Breakdown of the counties. 

Mr. MOLLOHAN. But why don’t—why don’t you give us a more detailed answer for the record. How did EDA determine the allocation 

per region? Would you prefer to do that for the record? 

Mr. FERNANDEZ. We can give you the formula. What we used 

though was our—standard allocation formula that has been developed over the years between the staff and members, I believe of 

this Committee and others. And so we use essentially, that same 

formula. 

But one of the changes we made is rather than using a 24 month 

period for calculating unemployment, it was reduced to three 

months to give more contemporary data of that sudden impact for 

which the Recovery Act was intended to address. 

[The information follows:] 


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Mr. MOLLOHAN. I understand that there were 68 projects funded. 

Mr. FERNANDEZ. Correct. 

Mr. MOLLOHAN. That 64 were for construction coming out of public work investments, two were revolving loan fund recapitalizing 

or creation, and two were for technical assistance. 

Mr. FERNANDEZ. Correct. 

Mr. MOLLOHAN. And all the funding is out. 

Mr. FERNANDEZ. Yes. 

Mr. MOLLOHAN. Well let me congratulate you for getting that 

funding out. And it looks like they really went to bricks-and-mortar 

projects, which—— 

Mr. FERNANDEZ. As you know, I mean there is a wealth of 

projects in the pipeline. 

Mr. MOLLOHAN. I am sorry? 

Mr. FERNANDEZ. There is a wealth of projects in the pipeline. 

ECONOMIC DEVELOPMENT DISTRICTS

Mr. MOLLOHAN. Okay. In fiscal year 2009, Congress provided $4 

million above the request for a planning program to increase—for 

the planning program to increase the amount provided to each economic development district and to reduce the backlog of designated 

but unfunded EDDs. This direction was continued in the fiscal year 

2010 bill. 

Does the fiscal year 2011 request incorporate the increased levels 

for the EDDs? 

Mr. FERNANDEZ. It does. 

Mr. MOLLOHAN. How much does that provide to each EDD? 

Mr. FERNANDEZ. Currently it is approximately $60,000 annually. 

Mr. MOLLOHAN. Do you know how many funded EDDs there 

were in fiscal year 2010? 

Mr. FERNANDEZ. Three hundred eighty three. 

Mr. MOLLOHAN. How many designated but unfunded EDDs are 

there? 

Mr. FERNANDEZ. As far as I know zero. 

Mr. MOLLOHAN. What is the process for designating an economic 

development district? 

Mr. FERNANDEZ. The communities build an application based on 

the criteria in our statute. And they submit it to the regional offices. They look at an application, evaluate it, and then forward it 

on. Currently we have three pending applications. 

TIMELINESS OF REVIEW PROCESS

Mr. MOLLOHAN. There are always concerns about the lengthy review of these grant applications. It really appears to be an issue 

affecting particular regions maybe rather than all of them. 

Are you aware that EDA applicants have concerns about the 

length of time for review of their applications—in their particular 

regions? 

Mr. FERNANDEZ. Yes. I am aware. I come to this job with kind 

of a double-edged sword of having been on the other side of the 

table. 

I understand how effective EDA can be. I also have experience. 

I share some of the frustrations that our constituents face from 

time to time. And we have put together an internal interagency 


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working group being led by our regional offices in partnership with 

DC to look at how we can refine our process to make it more accessible but also more efficient. 

Mr. MOLLOHAN. Are there some regions that have a particular 

problem with the timeliness of review of grant applications? And 

I would ask you to identify them. 

Mr. FERNANDEZ. In a more specific way than the perceptions of 

pace, I can’t single out a particular region. 

Mr. MOLLOHAN. Would you for the record provide the Committee 

with a review of the—a comparative review of the response times 

for review of grant applications region by region? So that we can 

identify regions that are taking longer and kind of do a bell curve. 

Mr. FERNANDEZ. I can do that. And I would be happy to do that. 

But let me just, if I could though, maybe step back and talk about 

the process. 

[The information follows:] 


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Because, again, from my perspective I think there are areas of 

opportunities for improvement. When communities come to EDA or 

they meet with an EDR, one of our economic development representatives, and start talking about their needs and some of the 

kinds of projects that they think might be helpful for their community—well let me step back. 

There is even a beginning point. There are some communities 

that know exactly what they want today. They can fill out an application, hit the send button on grants.gov, and that is in the system. 

There are many other communities where an important role of 

what EDA does is to try and do the consultation at the front end 

and help move along an application. So it is really hard sometimes 

to get apples-to-apples comparison. 

Mr. MOLLOHAN. Sure. And I understand that. I don’t think too 

much can be drawn initially from such a depiction. On the other 

hand, it can identify areas where it may not have anything to do 

with the personnel or the leadership in the region. It may have 

something to do with the fact that we don’t have a representative 

in a particular geographic area where we should have a representative in that geographical area helping people. So that may be the 

need, the requirement. 

There may be a lot of reasons for the disparity. But, you know, 

it would be interesting to look at that. 

Mr. FERNANDEZ. It would be. 

Mr. MOLLOHAN. Where, you know, government interfaces with 

constituents. We ought to look and see how the constituents are 

judging the performance. And if there are concerns expressed, then, 

you know, we need to address them, not in a judgmental way. But 

look at it—— 

Mr. FERNANDEZ. I absolutely agree. 

Mr. MOLLOHAN [continuing]. From an administrative standpoint 

and see where we might. And actually that might bring for the 

Committee an understanding, but also a process that I am sure 

your folks have gone through, bringing a greater efficiency. We 

don’t want to beef up an area with personnel where they already 

have the resources to do a really good job and other areas they may 

need additional resources to do a good job. And I think evening 

that out across the board would be very helpful. 

I know in West Virginia this consultive ability is very, very important. And maybe it is just because we have been used to having 

it for years and years. But it is something that people have missed 

for a number of years since the agency has been hobbled by a lack 

of personnel and expertise, both at the regional and at the national 

levels. So I think that is a good starting point to begin analyzing 

them. 

Mr. FERNANDEZ. And if I can, Mr. Chairman, my focus on this 

is not totally unique or new to the agency. A few years ago based 

on a lot of input, the EDA did modify their process to streamline 

it. There used to be a pre-application then a formal application. 

They have condensed that to try and expedite the process. There 

has been a commitment in trying to improve processes that predate 

my position here. 

We are continuing to work on that. It is something we are very 

committed to doing in terms of making the system more effective. 


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I think you have to get to the point where you can tell people 

yes or no. And you have to do that in a timely manner. In my old 

world I would do deals where I could get a yes or no in a relatively 

short amount of time. 

And the yes or no might be, okay, here is my commitment letter 

on financing. Of course there is going to be tons of due diligence, 

lots of other stuff that I am going to have to check the box on to 

actually close, right? 

But in the context of EDA, I don’t understand why we can’t have 

that kind of early process to review the merits of a proposal and 

get you an answer based on the competitive grants system. And 

then, of course, there will be some things we may have to do in 

terms of due diligence, things that are internal, and solely issues 

of the federal government process. 

But at least you will know on whether or not you can move forward with that project or not, at least with the EDA component. 

I think there is room for improvement. And I know that staff 

across the board does not want to be in a system that is perceived 

or in reality is, you know, too bureaucratic and slow. 

NATIONAL INNOVATION MARKETPLACE

Mr. MOLLOHAN. Well we don’t want to, you know, hang that label 

on you or any particular region. This is in the spirit of addressing 

it positively. 

Final inquiry, in our NIST hearing we discussed the National Innovation Marketplace. And I know you have discussed that in a 

number of different places. 

A new initiative in the MEP, the Manufacturing Extension Program out of NIST, we have learned that EDA has a role in this initiative. If you would discuss that role in terms of goals and vision 

and in the process, you know, we inquired about this at a previous 

hearing. 

And I think we need some elaboration on what is the National 

Innovation Marketplace. And in the process of telling us that, what 

is EDA’s role in it? 

Mr. FERNANDEZ. To be perfectly honest, that was news to us. The 

marketplace, as I understand it, is—— 

Mr. MOLLOHAN. You mean it was news to you that you were involved with it? 

Mr. FERNANDEZ. Well I don’t think—— 

Mr. MOLLOHAN. Or maybe we are misinformed. 

Mr. FERNANDEZ. Well I am trying not to say that. 

Mr. MOLLOHAN. No, no, no, please say it. We are misinformed all 

the time. 

Mr. FERNANDEZ. I don’t think that is the case. There are certainly opportunities—— 

Mr. MOLLOHAN. We don’t have a corner on knowledge here. Believe me. And that is why you are here testifying. 

Mr. FERNANDEZ. Now the marketplace concept is a virtual program that NIST has developed to match technology to business 

spinoffs, et cetera. We are not engaged in that. 

We are broadly engaged though in a discussion with NIST and 

a whole host of other Department of Commerce bureaus about 

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mercialization, and we certainly have a role in that in terms of 

some thought leadership as well as looking at—— 

Mr. MOLLOHAN. Commercialization of university research for example? 

Mr. FERNANDEZ. Federal labs. 

Mr. MOLLOHAN. You have a role in that. Elaborate on that for 

us. 

Mr. FERNANDEZ. We can have a role. I mean, we find the university centers, some of which are specifically focused on commercialization, like the University of Kentucky. They are specifically 

focused on how they accelerate commercialization. 

We have accelerators that we invest in, incubators that are regional-serving that are located on campuses. So we do play a role 

in that commercialization and innovation economy. 

We believe there will be opportunities. And that is part of the Office of Innovation and Entrepreneurship’s directive is to look at 

how we can broadly collaborate within DOC as well as other federal agencies. 

Mr. MOLLOHAN. You know, I think—— 

Mr. FERNANDEZ. But the manufacturing—the program you are 

talking about, that is not something that we have been involved in. 

CLOSING REMARKS

Mr. MOLLOHAN. Okay. Well thank you for that clarification. 

We will have some questions for the record and other members 

may as well. We have asked you to submit for the record as we proceed in this hearing. And, you know, we would really like for you 

to actually respond to all those requests respectfully. 

Mr. FERNANDEZ. We certainly will. 

Mr. MOLLOHAN. I am sure you will. And thank you for the good 

job that you have already done and the attitude you are bringing 

to the Economic Development Administration. 

I know your attitude it is not only sympathetic to the core mission, but also brings a rigor to the efficiency of the agency and to 

the service that it provides to our communities. And also I think 

brings some imagination to the job, which we look forward to supporting through the funding process. 

Thank you for your testimony here today, Assistant Secretary 

Fernandez. 

Mr. FERNANDEZ. Thank you. 

Mr. MOLLOHAN. The hearing is adjourned. 


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(393) 

WEDNESDAY, FEBRUARY 3, 2010. 

ECONOMIC DEVELOPMENT ADMINISTRATION 

WITNESSES 

MAYOR DAVID BRADFORD, MUSCLE SHOALS, ALABAMA 

CHUCK WEMPLE, HOUSTON-GALVESTON AREA COUNCIL, TEXAS 

JOHN BROWN, BROOKE-HANCOCK-JEFFERSON PLANNING 

COMMISSION 

MICHAEL KING, NORTH COUNTRY COUNCIL 

DR. LES WYATT, ARKANSAS STATE UNIVERSITY 

OPENING REMARKS

Mr. MOLLOHAN. Welcome. The hearing will come to order. In fiscal year 2010 Congress provided $255 million for the Economic Development Administration’s Economic Development Assistance Programs, but in fiscal year 2011 the budget proposes $246 million. 

Beyond the proposed $9 million reduction the budget also proposes 

to shift almost $90 million from Public Works grants to the Economic Adjustment Assistance grants. 

EDA provides critical funding for communities across the nation 

working with state and local governments, private industry, academia, and nonprofits, and leveraging investments to create and 

sustain jobs and improve local economies. Through the testimony 

of today’s witnesses we will hear about the value of such appropriations to local communities as well as suggestions from grantees on 

how EDA can improve its processes and provide better services as 

it plays a critical role in our national economy. 

Today we will hear from grantees from various regions with a 

wide variety of EDA grant experiences. Each grantee will touch on 

his or her depth of EDA experience. Most, if not all, of our witnesses, have received Public Works grants, possibly the most important and clearly the most traditional of EDA’s grant options. Today’s witnesses will also talk about the importance of Planning 

grants, Economic Development Districts, disaster assistance, revolving loan funds, University centers, and technical assistance. 

Through their collective testimony the Subcommittee hopes to obtain an alternative view of EDA’s programs and their effectiveness. 

A view from the ground, a view from implementors, a perspective 

we often do not get from the Beltway. 

In the first panel we will hear from John Brown, Executive Director of the Brooke and Hancock Regional Planning and Development Council in Weirton, West Virginia; and Michael King, Executive Director of the North Country Council in Bethlehem, New 

Hampshire and board member of the National Association of Development Organizations. 

In the second panel we will hear from Mayor David Bradford of 

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man of the Northwest Alabama Council of Local Governments; 

Chuck Wemple, Economic Development Program Manager of the 

Houston-Galveston Area Council; and Dr. Les Wyatt, President of 

the Arkansas State University System. 

Well, thank you all for coming. Following the statement of the 

ranking member, Mr. Bonner, we will move to welcome your oral 

testimony and your written statements will be made a part of the 

record. 

Mr. BONNER. Mr. Chairman, distinguished panel, my name is Jo 

Bonner and I am pleased to sit here today on behalf of our Ranking 

Minority Member Frank Wolf of Virginia, who has another conflict 

but who hopes to be with us to join in welcoming you to the Committee. We certainly appreciate your coming today and we are interested in hearing from you about how you have utilized EDA 

grant funding. 

With unemployment nationally at 10 percent, and in parts of our 

country at much higher, I have a county in my district that is at 

20 percent unemployment today, we all know, Democrats and Republicans, and certainly this Subcommittee under the leadership of 

our Chairman, that it is critically important for us to hear from the 

people outside of Washington, D.C. on how the federal government 

can do a better job than what we have done to create sustainable 

economic growth. We encourage each of you to be very candid in 

talking about the things that have worked, the good things that the 

government and EDA specifically are doing and are doing well, as 

well as to be constructively critical of those things that we are 

doing poorly. 

Thank you again for the opportunity to hear from you today, and 

we look forward to not only your testimony but also the answers 

to some of the questions we might have. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Bonner. Today, I would especially like to welcome to the hearing Dr. John Brown, who is the 

Executive Director of the Brooke-Hancock Regional Planning and 

Development Council. He is doing really outstanding work up in 

the northern part of our district, which has been particularly challenged. And we look forward to not only his testimony here today 

but continuing to work with him in the final organization in order 

to be successful, and get our economy in the northern part of the 

state turned around, which is challenging, as I am sure we are 

going to hear. And I also welcome Mr. King to the hearing and look 

forward to your testimony. I am going to start with Dr. Brown. 

OPENING STATEMENT BY DR. JOHN BROWN

Mr. BROWN. Chairman Mollohan, Ranking Member Bonner, and 

members of the Subcommittee, thank you for the opportunity to 

testify on behalf of the Brooke-Hancock Regional Planning and Development Council. We are located on top of West Virginia, in the 

northern panhandle. Our region is a rust belt with a population of 

50,000. Through the devastation of international steel competition 

since 1995 our two-county region has lost 12,000 steel worker jobs. 

Our two domestic steel companies are now international conglomerates. In 1995, Weirton Steel, the regional lynchpin in our region, 

was the top private sector employer in West Virginia. Today West 

Virginia’s top employer is Walmart. As recently as Thursday, that 


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is last Thursday, January 28th, we lost another 180 steel related 

jobs. 

So from the perspective of the U.S. Economic Development Administration and its mission we are ground zero. For our region the 

need to have an active and engaged EDA could be no greater than 

today. Mr. Chairman, I would like to focus on three major issues 

related to EDA. First, as a region in transition we are literally reinventing our economy. While we understand our leadership role, 

we need partners to invest capital and to provide technical skills 

through the core EDA Public Works and the Economic Adjustment 

Assistance programs. In 2007 we received $891,000 for an EDA 

Public Works grant to construct related downtown infrastructure to 

a state office building. That was matched with $600,000 in local 

funds. The project was completed one and a half years later in ’06 

and resulted in over 300 new or saved jobs. Located in our key 

downtown, the project has sustained the integrity of our downtown 

and leveraged private sector downtown investment. I wish I had a 

picture. We were not allowed to put pictures in here, but if you 

could see our downtown, what we are about, I think that picture 

is worth a thousand words. 

In late ’09 we received 215,000 economic dollars in an Economic 

Adjustment Assistance grant to create and carry out a detailed 

project, specific action strategy, for job growth and diversification. 

And that project will use market information to develop site investments while benchmark measurements will be defined. Our approach focused on advantageous employment clusters as a way to 

identify job training needs, launch programs to attract investments, retain and expand emerging industries, and increase employment opportunities for workers. Over a five-year period the 

project will result in the creation or retention of over 500 jobs in 

the region. 

My second point is we support and advocate stronger incentives 

to reward regional collaboration, partnerships, and initiatives, not 

only among the public and private sector but between EDA regional offices, and you all probably know there are six regional offices. Our region is one labor force, crossed by two states, and divided by the Ohio River. In the case of employment these barriers 

are literally transparent. EDA’s Chicago region, which serves our 

West bank communities, and the Philadelphia Regional Office, 

which serves our East bank communities, has initiated the steps to 

recognize this one labor force issue that we have. 

So in 2009 through the encouragement of local development 

agencies, and we have two of them, and the regional Chamber of 

Commerce, our joint program we call the 3-2-1 Program was created. And the 3-2-1 should be no secret. It stands for three counties, two states, one goal. And this approach challenges the Chicago 

and Philadelphia regions to coordinate plans and provide, boundary 

flexibility. We have 50,000 on the West Virginia side, we have 

70,000 on the Ohio side. And so in the Chicago office, they incorporated our three-county labor force in a recent targeted industry 

study. The strategy is to find a clear building block for a forthcoming U.S. EDA management project outside the Chicago EDA 

map boundary, but inside our labor force boundary. 


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So the lesson here is boundary flexibility can and will define 

truer markets and assure wiser investments. And we do have this 

issue up and down the Ohio River, whether you are in Wheeling, 

Parkersburg, or Huntington. They are all, the labor forces go in 

two states. 

My third comment is that the Economic Development District 

Partnership Planning Program has been invaluable to us. Due to 

the downturn in the economy the demand for the Partnership Planning Program has increased significantly. In our region, Congressman Bonner, for example, our unemployment is running at 12.5 

percent in one county, it is 13.5 percent in the other. We have a 

lot of discouraged workers that have left the area, so I do not even 

know how to count those. 

Established in 2005, we are a relatively new EDD. And since 

that time, through the mandated Comprehensive Economic Development Strategy, that is called CEDS, we have prioritized future 

investments and set a path for the future. Through the Planning 

Program we created companion programs such as brownfield initiatives, because we have got a lot of brownfields. We have a lot of 

properties that need to be returned and act as job generating 

sources. And we have a small business start up program called Valley Ventures. And in the case of brownfields, we have initiated hazardous waste and petroleum site clean up to attract jobs. We have 

created a dialogue for a river barge to rail/truck and intermodal 

site. And we have communicated a very viable economic future for 

our region. 

In January ’08 ArcelorMittal Weirton, which used to be called 

Weirton Steel, the key remaining steel company in the region, announced its intent to divest its nonessential properties. These nonessential properties, characterized as mothball commercial industrial properties, constitute, and this is the key, they really constitute 30 percent of the city’s land area in Weirton. This divestment issue has created an unusual opportunity. Without EDA’s 

planning partnership resources we could not complete the necessary due diligence to organize, prioritize, and redevelop these 

sites. 

In the case of Valley Ventures, we recognized small business is 

the key driver for new jobs. Over 70 percent of all new jobs are created through small businesses. And for the past twenty-plus years 

our community has held, and I have heard Congressman Mollohan 

say this, has held adamantly to the myth that the steel companies 

will reopen, and jobs will return. In recent years reality has set in 

and this myth has deteriorated. Valley Ventures is a private, nonprofit organization formed and managed by a board with business 

and professional men and women. This innovative organization assists entrepreneurs and small business owners. Valley Ventures 

provides businesses with hands on technical assistance, financial 

resources, business education, and important business networking. 

In ’09 Valley Ventures is credited with starting ten new businesses. 

So in summary, EDA is the only federal program focused exclusively on private job creation. At ground zero it has been an invaluable and flexible resource. And given the ongoing challenges facing 

the communities in my region, and across the nation, the need for 

EDA has never been more pressing. With its forty-year track record 


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of job creation and retention and ability to leverage private sector 

funds, we know EDA has the tools necessary to help communities. 

Now is the time to assure it has the resources to fully develop its 

potential. I thank the Committee for this opportunity to testify in 

front of you, and I welcome the chance for any questions. 

[The written statement of Dr. John Brown, Executive Director, 

Brooke-Hancock Regional Planning and Development Council, follows:] 


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OPENING STATEMENT BY MR. MICHAEL KING

Mr. MOLLOHAN. Thank you, Dr. Brown. Mr. King. 

Mr. KING. Good afternoon, Chairman Mollohan and members of 

the Committee. My name is Michael King and I am the Executive 

Director of North Country Council, which is the Regional Planning 

Commission and Economic Development District for the northern 

region of New Hampshire. I am also a board member of the National Association of Development Organizations. Thank you for affording me the opportunity to testify today. I have submitted my 

written statement for the record and would like to submit this oral 

testimony in regards to the Economic Development Administration. 

I would like to provide you some examples, and I have tried to 

meet your goal of looking at some of the things that EDA does well 

and looking at some of the things that maybe we can make some 

improvements in. So there are three examples that we have seen 

EDA invest in over the last several years in my region. EDA and 

the State of New Hampshire invested $3.9 million in the Littleton 

Industrial Park, this was several years ago, which was a Public 

Works project driven by local leaders to attract and nurture new 

manufacturing and service businesses to the region at the time of 

an economic downturn. After two companies left the area taking 

with them 700 jobs, community leaders formed a local government 

corporation, and with the help of the Economic Development District, EDA, and the State, created the Littleton Industrial Park. 

Today the industrial park supports eleven companies with over 

1,200 jobs and a combined payroll of $48 million. 

Another example, more recently, is the Sustainable Economic Initiative (SEI) Program. It is a perfect example of how economic development funds can be successfully used to promote regionalism 

and regional innovation. This four-state project brought over sixty 

community and state leaders together to build on a common economic demographic, environmental interest. You have got to understand the northern part of New Hampshire is a heavily forested 

area and a very rural area. We developed a strategy for the region 

in the sustainable forest industry, in telecommunications, and 

transportation networks, and for the development of renewable energy. These central themes, along with additional priorities outlined in the SEI action plan, aim to balance the unique environmental characteristics of the region with our core economic, cultural, and geographic assets. 

Another example is the Dartmouth Regional Technology Center, 

DRTC. This initiative is focused on nurturing the growth of our 

biomedical and engineering technology cluster. In partnership with 

Dartmouth College, and with funds from the State of New Hampshire and EDA, we have built a 32,000 square foot incubator and 

are in the process of adding on to it with a 28,000 square foot addition. We are very proud of the accomplishments with this project. 

To date, eighteen companies have taken tenancy in the DRTC with 

eleven still located in the building. Over $60 million in venture 

capital investment has been made by DRTC’s tenants in the last 

three years. In addition, the most recent graduate, Mascoma Corporation, consolidated its Boston and Lebanon operations building 


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a 32,000 square foot facility of their own two miles from our incubator. That is a big success for us. 

Mr. Chairman, one of the common threads of all three of these 

success stories is the involvement of our Economic Development 

District, the EDD. My EDD uses EDA’s matching funds from the 

Planning program to bring public and private sector investments 

and public and private sector leaders together on a regional basis 

to identify, prioritize, and pursue common economic development 

opportunities and strategies. This leverages the assets of our region 

to create and retain high quality jobs. And the aim of our region 

is to try to create the jobs where we can. This results in projects 

such as the Littleton Industrial Park, the Dartmouth Regional 

Technology Center, and the Sustainable Economic Initiative, which 

happened over quite a span of years. We have been an Economic 

Development District since 1975 and those are three examples over 

those years that I brought to you. 

Mr. Chairman, I would also like to offer a couple of observations 

and recommendations for making further improvements to the programs and operations of EDA from a local practitioner’s perspective. First, we have seen a major decrease in the number of EDA’s 

professional program staff positions both in headquarters and in 

the regional field offices. These EDA staff reductions have caused 

delays in project approvals and funding which can be fatal to closing and implementing economic development projects. Especially in 

a region such as mine in the northern part of New Hampshire, 

where our construction season might be very short, it is important 

that we get things through EDA as quick as possible. 

Second, we remain steadfast in our support for maintaining the 

agency’s core Public Works program, which provides vital matching 

funds for distressed communities like mine to address the necessary building blocks for economic development. 

Third, we urge the Committee to provide new and additional resources for the administration’s proposed regional innovation initiative. It is essential that our nation’s distressed regions pursue more 

in-depth and sophisticated economic competitive strategies that leverage local assets and foster the development of emerging clusters. 

Most importantly, we encourage the agency to tap into the existing regional planning process, spearheaded by EDDs, as the primary building blocks for regional innovation strategies. 

In closing, Mr. Chairman, I would like to thank the Committee 

for your recent efforts. Increasing the minimum funding levels for 

EDA planning grants, these modest yet invaluable matching funds 

are used by organizations such as North Country Council to provide much needed professional economic development planning and 

project implementation assistance to our local governments and 

communities, especially in the distressed small rural areas like 

mine. Thank you again for allowing me to testify today, and I welcome any questions. 

[The written statement of Mr. Michael King, Executive Director 

of the North Country Council and Board Member of the National 

Association of Development Organizations, follows:] 


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LENGTH OF REVIEW CONCERNS

Mr. MOLLOHAN. Thank you. Thank you, gentlemen, both. Dr. 

Brown, I know that you have recently been going through a pretty 

intensive assessment of the condition that we are facing up in the 

northern part of the State. And you have been interfacing with 

EDA in that process. Just describe to what extent you think the 

EDA involvement has been helpful, and areas where perhaps it 

could be more helpful? And what do you think the outcome might 

be? 

Mr. BROWN. Well, we have been an Economic Development District for four years. I have been at the regional council for twelve. 

I want to tell you, first of all, that it is apparent to me that there 

has been more hiring in our Philadelphia regional office, so we 

have gotten a little more assistance. That is good. In terms of doing 

applications for EDA, it is, as it should be, a long, extensive process 

of review. We made an application in February, heard in—— 

Mr. MOLLOHAN. February of 2009? 

Mr. BROWN. Yeah. At least, we heard in July. The program has 

been up and running, and at last getting a consultant, we are in 

that process right now. So we are sitting here, what, six or seven 

months after that point in time. We have a nine or ten month window to complete the program. So we will be rolling very fast. And 

probably, if I could, later on tell you how it is going because I am 

sure you are very curious about it, too. We have ten months to get 

it done. I do know, if you come into any region like I am in, and 

I know, we all had lunch, and I was interested about how this all 

works. It is the fact that clearly in our region people are tired of 

getting plans and putting it on the shelf. They want to see action. 

If you have a high unemployment rate of 12.5 or 13.5 percent, 

councils, commissions are very cautious of where you are going and 

how you are doing it. In our time with EDA, timewise, we clearly 

told them that. We have beefed up staff a little bit. 

Mr. MOLLOHAN. I hear you saying that actually they beefed up 

staff a little bit, and that is your way of saying they needed to beef 

it up a long time ago—— 

Mr. BROWN. Absolutely. 

Mr. MOLLOHAN [continuing]. And this process needed to be expedited—— 

Mr. BROWN. Absolutely. 

Mr. MOLLOHAN [continuing]. Considerably. Yeah, I mean, if you 

are going to give help with regard to economic development, I 

mean, it has got to, the approvals have got to come much more 

quickly and the aid has got to come much more quickly—— 

Mr. BROWN. Yes. 

Mr. MOLLOHAN [continuing]. Than a year, which is what I am 

hearing you say. 

Mr. BROWN. Absolutely. 

Mr. MOLLOHAN. Have you broached this subject with them? And 

if so, what do they say? 

Mr. BROWN. I have not personally broached the issue with them. 

Clearly, we have told them we need it in a certain time, but I never 

said there is an issue here and we need you to move forward with 

that. I do not, I guess Michael, I defer to you. 


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Mr. MOLLOHAN. You are talking about some of the process 

issues. And Mr. King, will you speak to that? 

Mr. KING. Yeah, I have broached with the regional director some 

of those concerns in getting projects through. And I think the answer that I got, received, was that indeed the agency was hurt in 

reductions, but has since recovered from that. But the problem that 

we are having now is the staff is somewhat inexperienced. And 

there is a learning curve that regional staff and even, if you look 

in the Philadelphia region all of the EDRs, with the exception of 

one, are fairly new to the region. So there is that learning curve. 

There is that, you know, administratively it is a federal bureaucracy, and we have to go through those federal bureaucracies. So 

there is something to be said for that. Getting things through the 

agency is critical. We are building this new addition to the incubator, and we are right on the timeline to be able to meet construction in time right now. And you know, in the Northeast, our construction season, as I said, is shorter. So you just have to, you have 

to be able to move those along quickly. 

PLANNING

Mr. MOLLOHAN. Where do you find the Economic Development 

Administration most helpful? In the planning process? In funds for 

infrastructure? 

Mr. KING. I will defer a little bit. I think they are pretty helpful 

in most of the areas. I think the planning process is very good. You 

know, planning sometimes gets a bad name. And I want to be careful to say what EDA does in their planning process is, it is an implementation process and not just a planning process. And at least 

in my region, that is what we use it for. We are not sitting there 

developing plans. We are meeting, our planning process is to meet 

with practitioners and decide which projects are the best projects 

and can get the most bang for the buck in our region. And that is 

our planning process, so we can follow right into implementation 

when we are doing that. And EDA is very supportive of that. And 

their particular planning process is very supportive of us doing 

that. 

Mr. MOLLOHAN. What do they bring to the table in that process? 

Mr. KING. Well—— 

Mr. MOLLOHAN. Besides money? 

Mr. KING. They bring money, which is important. I think—— 

Mr. MOLLOHAN. How about advice? 

Mr. KING. I do not think we get a lot of advice from the agency 

itself. 

Mr. MOLLOHAN. Should you? 

Mr. KING. And I do not think we ask for a lot of advice, to tell 

you the truth. 

Mr. MOLLOHAN. So you are not really interested in their actually 

coming forward with lessons learned in other areas, or—— 

Mr. KING. Well, I guess I have not thought too much about that, 

Mr. Chairman. 

Mr. MOLLOHAN. I mean, you may have those resources at your 

disposal. How about you, Dr. Brown? 

Mr. BROWN. I think that is a good point. And I am thinking why 

I did not ask our EDR, who is both in West Virginia and Maryland 


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spread so thin, but that is a very good question, about how we 

could better use that. I would say, I hate to say we are working 

and we know better, but quite honestly when we get our CEDs we 

have got $550 million of projects that are being prioritized. And one 

of the great advantages, I know Mike and I have talked about this, 

the fact is if this is the one time I can get the nine incorporated 

areas, two counties, in one room and talk about, ‘‘Folks, these are 

what the available dollars are.’’ Even if it is not EDA or ARD, we 

are talking about energy efficient programs. If we did not have 

planning partnership forums, that would not be happening. 

Mr. MOLLOHAN. And that came from? 

Mr. BROWN. Those comments of priorities and where we were 

going to go came from the locals, council people, commission people, 

private sector, all sitting in a room. 

Mr. MOLLOHAN. Mm-hmm. 

Mr. BROWN. And we have about fifty-five people on our regional 

council. 

Mr. MOLLOHAN. But the dollars came from? 

Mr. BROWN. From EDA. 

Mr. MOLLOHAN. Yeah. 

Mr. BROWN. Which is, we get $62,000 a year for a planning 

grant, which must be matched on a 50–50 basis through our regional council. 

Mr. MOLLOHAN. Yeah. Okay. Mr. Bonner. 

COORDINATION OF FEDERAL AGENCIES

Mr. BONNER. Mr. Chairman, as I was listening to the witnesses 

give their testimony, and answered some of your questions, I was 

reflecting on a conversation that I had with a small businessman 

in my district, a gentleman by the name of Albert Winfield, on 

Monday of this week. Mr. Winfield is like a lot of other small businessmen in America, not just in Alabama. He has been very successful after some time developing a barbecue restaurant that has 

become one of the most popular barbecue restaurants in my district. So popular, in fact, that he wanted to expand and sell franchises. So he went to the Small Business Administration to get 

their help. They agreed he had good barbecue but they said that 

he needed to go to the banks. So he goes to the banks. And they 

said, ‘‘Well, you have really good barbecue but you need to go to 

the Small Business Administration.’’ And at the end of the day he 

is like so many other small businesses throughout the country, just 

chasing himself in a spiral, trying to grow, trying to add new jobs. 

Trying to help sell his franchise to other places around our region, 

certainly around our State. And he seems to keep running into one 

roadblock after another. So listening to you, Dr. Brown, say, I believe this was your quote, that EDA is the only federal program 

that you know of that really focuses on job creation, something to 

that effect. 

Washington has so many alphabet agencies that are acronyms, 

and yet to small towns and to planning commissions and others 

that really are your lifeline to the federal government. And I guess 

my question to you would be, not only within the Department of 

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rural development programs, Department of Agriculture, HUD 

grants, and other things, how well do you think the federal agencies coordinate their activities and their support with each other in 

an effort to help Mr. Winfield and other small businessmen and 

women around the country know that there is some real help out 

there? If that makes sense? 

Mr. KING. In my opinion, not well, Congressman. I think one of 

the values of EDA are the districts, like mine, who get practitioners together, and like Dr. Brown’s. That is more coordination 

than you will get from the federal government. We access not only 

EDA in my organization. We access Rural Development. We have 

people sitting on there that have CDFI corporations, or are getting 

federal funds for that, SBA, and those kinds of funds. And really 

the task that we have is to try to bring those agencies together. Because going directly to your question, if we did not I do not think 

the federal government is going to do it very well at all. I just, they 

are not set up to do that, to bring small, and particularly the smaller type businesses. I think they probably do a better job in larger 

developments, but not to the small businessman. It just does not 

work. 

Mr. BONNER. Dr. Brown. 

Mr. BROWN. We have small business development centers in our 

area, SBA run programs. Much like many federal programs that 

are avenues of assistance, they are clearly understaffed and are not 

there everyday. If you were to come ten years ago into the area, 

the SBA office would have been open everyday. They are not. They 

are there two days a week now, leaving a void. And you would 

think maybe community colleges will pick up some of that. Well, 

community colleges do a little bit of small business things. They do 

training more than anything else. 

The group I mentioned, Valley Ventures, probably is our biggest 

advantage, and that was created through our regional council, 

through planning partnership funds. It now has a private foundation providing some support for that. One staff member, a secretary, but run by businesswomen; people who have a barbecue 

place and are able to, if they know Valley Ventures is out there, 

can get assistance for that. But it is local, it depends on originality, 

locally what emphasis is on it, and what kind of funds you can get 

for it. But I recognize the conflict and the discussion, the dialogue 

sometimes does not quite work. And I understand the frustration. 

I have people walk in my office asking about small business assistance. I am not a small business person. We will try to point them 

in the right direction. 

APPROVAL TIMELINE

Mr. BONNER. Mr. King, you indicated that because of the decreases in the EDA staff, that that extends the time, the process, 

to get the EDA support approved. What on average is the timeline 

in terms of going after EDA funding and finding out whether or not 

you have gotten it? 

Mr. KING. I think it varies quite a bit, and it varies quite a bit 

depending on what is coming down through EDA and what their 

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ly. And so I know that is not a great answer but it does vary widely. If we push hard on it, and particularly, and get projects to be 

a priority, they can do it very quickly. And if we are not pushing 

as hard it takes a long time. For instance I can give you an example. There was a particular public works project, bank erosion 

along a particular industrial park that was going to wash away a 

building. And that problem is still there. But we have lost this season to be able to do it because they could not get the money out 

quick enough. And, you know, you have to get this when the water 

is low, and so forth and so on. So this will not be done until next 

fall when we can do it. Now, the money is out, the grant is approved, and we are going to go ahead with it. But that was put 

back in, sometime back in April, that funding. And we just lost the 

season. 

Mr. BONNER. April of last year? 

Mr. KING. April of last year. And, you know, on the other hand, 

for the Dartmouth Regional Technical Center they did a very good 

job. We were able to get that funding through. That is ARRA 

money, so it was a little bit, it had a little bit more behind it to 

say, you know, this is the kind of thing where the nation wants to 

create jobs so let us get that money out. And I think in some cases 

it is, you know, the priorities are set by you yourself that tell you 

how fast, you know, you want funds, how the bucket of funds go 

out. And we just have got to be a little careful of that in my opinion. We want them to move ahead. 

Mr. BONNER. Well, my last question, I know there are other 

members, other colleagues that would like to have a chance to ask 

some questions of you, is this Committee has been very active. I 

have only been on it for a year, but I thought Chairman Serrano 

worked me hard when I was on his subcommittee, and he did. But 

Chairman Mollohan, last year, my first year on the Committee, 

really brought a lot of people in to give us some good feedback 

about what programs worked, what programs did not work, and 

what we could do to make better use of the limited resources that 

were available. 

I read in the paper yesterday, in the Washington Post, I believe 

I am right, that thirty-three cents of every dollar that we will 

spend this year is borrowed money. So that makes your testimony 

on behalf of a program, either things that work well or things that 

need to work better, especially in light of the pressure that the administration is under and that we are under, all the more valuable. 

Of what we can do to make programs like EDA stretch those dollars even further. And certainly it seems to me that one constructive comment that you have just offered is it is just unacceptable 

that it takes so long to get approval. Think of what could have been 

done if that could have, that timeframe could have been met last 

year? So I would just encourage not only you, and the next panel 

that will come after you, to think and to continue this dialogue as 

we go forward. Things that we could do a better job at our, in our 

role in government of trying to make the process work a little bit 

better. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Bonner. Mr. Serrano. 


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GREEN PROJECTS

Mr. SERRANO. Thank you, Mr. Chairman. Gentlemen, thank you 

for being here. And as you know, there is an emphasis greater than 

ever on green industries, green businesses, and just hopefully the 

greening of America, as we would like to call it. Do you sense from 

EDA’s actions a desire to promote green projects? To invite people 

to submit green project requests? Do you see anything that indicates that that could be happening? Either one of you, or both? 

Mr. KING. I do not necessarily see a sense of that coming directly 

from EDA. I think, however, the agency itself is very supportive of 

those projects that will come forward, in my opinion. And I think, 

in my particular region, again, you did not, you were not here for 

my oral testimony, but it is a very forested land, and very concerned with creating green energy projects. We are very concerned 

with our forests, and maintaining sustainable forestry, and so 

forth. So it is very receptive, they are very receptive to those kinds 

of projects. Though I do not feel that they are promoting that, per 

se, if you will. 

Mr. SERRANO. And I am not sure, Mr. Chairman, if that is correct on my part, to assume that EDA would promote any kind of 

business. But rather, I am not sure I know what their role should 

be other than to accept good projects and then promote them. But 

there seems to be a national desire on all sides to get more of this 

going. So I was just wondering—— 

Mr. KING. If I can just make one, you know, my personal feeling 

is I see EDA’s role is, and I think, is to create jobs. And jobs are 

extremely important, be it a green job or a non-green job. I mean, 

it just, we need to be out there creating jobs and EDA is helpful 

doing that. I guess that is how else to say it. 

Mr. BROWN. I would certainly say, if it is not EDA, I hear from 

other agencies, whether it is Appalachia Regional Commission, or 

a lot of different agencies, clearly energy means jobs. We are doing 

a strategic cluster now, trying to look at our employment sources, 

and it is tough to figure out how energy mixes into all of that. But 

the economy is changing, there is no doubt about it. And we have 

seen energy, at least in the northern panhandle, the environmental 

aspect may be second to the aspect that it means jobs. And there 

is the maximizing dollars, and where the opportunity is, appears 

to be in the energy field. 

Mr. SERRANO. Right. 

Mr. BROWN. And whether it is EDA, or ARC, or some other agency, and we hear a lot about different agencies, we are looking at 

it. People that would not have looked at it five years ago or sort 

of deflecting on the energy issue, or clean, are much more accepting 

of that. 

PARTNERSHIPS WITH HIGHER INSTITUTIONS

Mr. SERRANO. And I think that that is the key. You have hit on 

the most important part of this whole argument, that the same 

folks who years ago found themselves as enemies, the environmental movement and the business community, now realize that it 

is not only sound for the environment but it is good business practices. And it does create jobs. And so I think we have now gotten 


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to a point totally different from where, when I started out in public 

service, where these folks were at each other’s throats all the time. 

With that in mind, higher education, also institutions of higher 

education always play major roles in our communities. And they 

serve as a place for training of people, and promoting business 

practices, and other issues. Do you know of any partnerships with 

higher institutions in different regions that we could be discussing? 

Mr. KING. Well, I am right in the middle of a partnership with 

Dartmouth College. And we built a 32,000 square foot incubator at 

Dartmouth College. We are adding on a 28,000 square foot addition, 28,000 square feet. And we are doing that because that 32,000 

square feet was fully subscribed. Not only Dartmouth College but 

the State of New Hampshire, commercialization of the knowledge 

coming out of that college is a very big priority for the region within the State. So, yeah, we have got super priorities with them. It 

is a major project in our region. 

Mr. SERRANO. It is an incubator you said? 

Mr. KING. It is a technology incubator. In the Dartmouth area, 

for Dartmouth College, they have the Thayer School of Engineering, and the Dartmouth Medical School, and a major, major hospital, the Tuck School of Business. But when they did all the biomedical engineering some of the businesses coming out of that, 

there simply was no lab space for businesses, for people who wanted to come out of the school doing research at the hospital and had 

ideas to commercialize things, there was no lab space. And that is 

what our incubator did. And we started to have 50–50 lab space. 

When we finished the building it was about 75–25. So it just fit a 

need to really help with getting businesses in it. And we have been 

very, very successful with that. 

Mr. SERRANO. All right, good. Any thoughts on that? 

Mr. BROWN. Well, our area is a little different. We have only one 

four-year college. And really where the technical skills and training 

occur in our region are through the two-year community colleges. 

And that may be due to the fact that we have three major steel 

mills, and most people up till about fifteen years ago were promised a job in the mill. And they saw community college as a potential training, or revisiting but with that with workforce investment, 

councils in the community colleges, it is moving along. 

I would say to give you an example, we are, through Ohio University, which is by the way located 180 miles from us, one of their 

schools, is doing a targeted industry study. And we will have people from our training group in the community colleges, workforce 

investment. We are going to really try to establish where our employment advantages are in the future. And I have certainly 

thought about the energy field, I am going to tell you, and it certainly it is coming up as one of those areas. I am not sure how viable it is, we will know in a couple of more months where that is, 

but our point is in the industrial heartland of Weirton. And Brooke 

and Hancock are the community colleges that are sort of taking 

that on. That is a good bang for the buck, too, for the population. 

Mr. SERRANO. Thank you. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Serrano. Mr. Aderholt? 

Mr. ADERHOLT. I do not have any, thank you. 

Mr. MOLLOHAN. Mr. Culberson. 


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EFFECTIVENESS OF EDA AS A LOAN PROGRAM

Mr. CULBERSON. Thank you, Mr. Chairman. I want to ask you 

each if I could, and Mr. King in particular, you have got, each of 

you have got a lot of success stories to talk about locally that you 

have been able to use the money from, the grant money from the 

EDA. And Mr. Bonner’s questions, in order to sort of follow up on 

his point, we are entering a whole different era in the United 

States of really unprecedented levels of debt and deficit. And the 

good work that EDA has done, could you both speak to, certainly 

because these programs you are talking about have been successful, what if Congress were to restructure this as a loan program? 

And to expand, for example, the responsibility of the SBA? Could 

a lot of these grants not be repaid to the taxpayers to the job creation, success you have had with these incubators, the local tax I 

am sure incentives that the State of New Hampshire and Littleton, 

New Hampshire, I suspect, probably granted some property tax exemption, or some tax break of some kind? Could you not put together packages, rather than grants, recognizing the scale of the 

debt and the deficit that we could structure this program as a loan 

program, and still be as successful and repay our kids? 

Mr. KING. I suppose we could. I do not know if it would be as 

successful. You know, you get involved with the Dartmouth Incubator, for instance, we pay full taxes, property taxes on it. And we 

try to do the best we can in that. We think what you are doing is 

you are generating, there is a number of small businesses going 

into that incubator, and some of them are going to be successful 

and some of them are not. And they do not in particular own the 

property. The property is owned by nonprofits that are trying to 

help these companies. I think one of the biggest problems we have 

with midrange companies is that the lack of funding, as Mr. 

Bonner stated, you know, there is this guy, he just cannot get any 

money to keep his business going. And I think we are faced with 

the same problem in some of the companies we bring into the incubator. 

You know, on the other side of the tax benefit, they are creating 

jobs. And those jobs create tax dollars. For instance the tax dollars, 

just going back to the Littleton Industrial Park, I forget what the 

number was. 

Mr. CULBERSON. Oh sure, no question it is worthwhile. But—— 

Mr. KING. It is millions of dollars worth of tax dollars being generated from making that investment. And I—— 

Mr. CULBERSON. But based on your experience, and what you 

have seen, this program could be restructure as a loan program, 

and the money could be paid back? 

Mr. KING. I do not think it would be as effective. Just personal 

opinion, I just do not think it could be. I think you would have 

trouble making it as effective, for instance, we could not pay the 

money back from the Dartmouth Incubator. That would not be 

something that we could do. We just, it would, the program would 

not go forward. The building would not have been built. 

Mr. CULBERSON. Mr. Brown, what about in your experience? Recognizing the level of debt and deficit, we are really about to hit a 

brick wall as a nation, turning this into a loan program? 


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Mr. BROWN. I would say Governor Joe Manchin of West Virginia 

probably understands the debt issue like most governors do. And 

if you ever walk into the Governor’s office, he visits with you, he 

always wants to know what you have in the game. You are not 

going to get a grant. Things have changed. You have to have significant investment in the project, whether it is a loan, or whatever, a bond. You are going to have to, you cannot walk away from 

this. 

Mr. CULBERSON. And that is always a good thing. 

Mr. BROWN. Yeah. And the word is out. No one is showing up 

at the Governor’s Office saying you want a grant. That is not, that 

is not happening. In terms of loans, it all depends how it is configured. I just do not know how, I do not know if I have a real good 

feel for that in terms of how it is configured, what is being loaned, 

what is being granted, what the max is, what jobs it brings, could 

bring. I mean, if it is a wise investment, and—— 

Mr. CULBERSON. What would you recommend? Just, I throw that 

out as food for thought, because we are entering a whole new era, 

unlike anything the country has ever faced before. 

Mr. BROWN. You are going to have to give me some time to think 

about that one. 

Mr. CULBERSON. Okay. Thank you very much. 

Mr. BROWN. I am sorry. 

Mr. CULBERSON. Thank you. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Thank you, Mr. Culberson. Mr. Fattah. 

Mr. FATTAH. Thank you, Mr. Chairman. I think the first place 

we should start in these loan agreements is the $20 billion we 

spent in Iraq on reconstruction. Now, if we want to get a loan, 

maybe they should pay us back. But when we tried to structure 

that in the Appropriations Committee I know that there was not 

a lot of enthusiasm. In fact, we have wasted over $1 trillion of our 

money in this ill-conceived war in Iraq. 

PLANNING NETWORK

But I am very happy that you are testifying here today, and that 

you are trying to put Americans back to work, and that you are 

doing it. I saw the President was in your home state, Mr. King, 

yesterday, in New Hampshire, and talking about the recovery. And 

the shift in, you know, last January we lost 780,000 jobs in this 

country. This week’s job’s report will probably show us dead even, 

not gaining jobs, not losing jobs, but definitely putting a break on 

this hemorrhage of jobs in our economy. And we saw the gross domestic product go from negative 6 percent to a positive 5.7 percent 

a year later, both in purchasing orders, and a whole range of other 

economic indicators. We seem to be moving in the right direction. 

Now, I know that people in New Hampshire pay federal taxes. 

And I assume they have every right to expect to be, when they 

have a worthy project, like the incubator. Now this first grant was 

3.9 and it was overbooked, almost, and you had to move forward 

again. And I am glad EDA is giving you another grant. These are 

the kinds of efforts we should be involved in as a government because it is critically important that if we are actually concerned 

about the debt and the deficit that we put Americans to work, and 

that we create the economy that will carry our nation forward. And 


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this partnership you have with Dartmouth is an excellent example 

of how higher education, and the private sector, now I understand 

in this network you have dozens and dozens of players, private sector, nonprofits, for profits. And if you could talk about that level 

of cooperation and collaboration it might inform us. Because one of 

the things that I think EDA may want to do is to use as a model 

this kind of effort of Americans working together. Everyone understanding how important it is that we develop economic basis on a 

regional level. 

So I want to welcome you to the Committee. I thank the Chairman for having you, and I would like you to expand on the work 

of this network. 

Mr. KING. Well, thank you. I have somewhat of a bone to pick 

with the President because I happened to be—— 

Mr. FATTAH. You got caught in a traffic jam? 

Mr. KING. No I happened to be flying out exactly at the same 

time he was flying in, so they shut down the airport and I was 

stuck on a plane waiting for him to come out. But that was okay. 

It was not a long period of time. But when you are the President 

you get to do those kinds of things, I guess. 

I think, as I said earlier, one of the things that we do have is 

the CEDS document and the CEDS process. It is not so much a 

document as much as it is a process, allows us to bring these practitioners together. And though Chairman Mollohan asked about 

what advice EDA gives. You know, I think one of the best things 

they do is they have this planning process. And as I stated earlier, 

I really do not think it is a planning process but it is an implementation process because it brings different kinds of economic development together. You know, local development corporations, directors 

from regional development corporations, private businesses, people 

like SBA people, and people who can provide short term financing 

to companies together. And we meet once a month, and we spend 

our time looking at the various projects that are in the region, looking where they are in their cycle of development. And it really is 

a marvelous tool. And I hope it is used the way we use it throughout the country. I do not know if I am answering your question or 

not, but that is the kind of thing we are doing. 

Mr. FATTAH. No, I think that is very helpful. I want to know, and 

also Mr. Brown in West Virginia, since the President has laid out 

a goal of doubling our export over the next five years, in the work 

that you are doing do you see, I know in the Philadelphia region, 

I am from Philadelphia, and we are very parochial. I looked at 

these stats the other day. We are behind the eight ball in terms 

of our export, you know, versus other economic regions in the country. There is obviously a great deal of growth. I have got the peanut chew factory in my district. I love peanut chews. They have 

been around for 125 years. We got them connected up with the export/import bank and now they are, they are selling peanut chews 

in forty-five other countries. Now, these are still the same candy 

bars that I have been eating since I was a kid. But they have got 

the language of the nation of origin on the cover, and other than 

that they are produced right there in my district. People are working. 


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I have got another company that is making, they have no domestic competitor at all, and they make saltwater fishing reels, the 

very best in the world. They sell for almost $1,000 a reel. They are 

employing people, and they are selling this product all over the 

world. But there are plenty of these opportunities for us to take 

American products and to make sure that doors are opened. And 

I just wonder in your instance whether you think that the goal, I 

know all of the economists who have commented say that the 

President’s goal is absolutely achievable, I think is the words that 

were used by one of the most noted ones. So the question is, you 

know, to get all of our business, and small and medium-sized businesses really focused on these markets overseas. 

Mr. BROWN. Well, that is a very good message. I am not sure if, 

at least in our region, it has reached ground zero, or the local level. 

It is getting there. I think if you ask that question two or three 

years from now, it would be well enhanced. I am saying this. We 

are on the Ohio River. And we seen the Ohio River as a major 

freight mover from the Gulf up through the Mississippi, all the way 

up through the Ohio. And it is going to expand our opportunities. 

As you probably all know, even what is going on on the interstates 

now, traffic is, freight traffic is going to double here in the next 

twenty years, or three times that, in the next twenty years. And 

we do not have the infrastructure to handle that. We feel that we 

have an infrastructure advantage in where we are located, and particularly for exporting through the Gulf. That message is coming a 

little louder, I think, for us. I think in terms of looking at export 

opportunities, clearly we know it is, although the steel market is 

down, and if there is a new steel market it will be less labor intensive and it will be a different type of specialty steel. 

So I think, at least at our local level, it is probably evolving in 

terms of our interpretation of what you are saying. But ask in two 

or three years. It is much like the energy argument. I think we will 

be much more knowledgeable about that. 

Mr. KING. We have industries, you know, in my testimony with 

the Littleton Industrial Park, there is a number of companies that 

are selling internationally right now. You yourself, if you go hiking 

in the woods, might use DEET, is one product that is made in this 

little town of Littleton, New Hampshire. And one of the companies 

is a foreign company that makes large connectors for electrical connectors. So yeah, I think from a product standpoint, we surely are 

promoting those kind of companies if they want. And we are, interesting enough we are right on the Canadian border. And we have 

some French speaking companies that come into the region, and 

they are building there. And just on the other side of that coin, in 

the service industries in, and technology, there are companies developing, I am not the scientist enough to be able to know what I 

am talking about here, but developing the different kinds of 

immunologies for cancer and infectious diseases. And if those kind 

of start up kind of companies, if they really hit it, that is better 

for all of us. 

Mr. FATTAH. Absolutely. Well, thank you for your testimony, and 

we need to look forward to continuing the progress that you are 

making. And I know that the Chairman is committed to making 

sure that as we consider the appropriations request of the adminisVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00423 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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tration that we look at the work of EDA and some of the other organizations and agencies in the Commerce Department to make 

sure that we are doing what we need to do to promote job growth 

in this country. Thank you. 

Mr. MOLLOHAN. Thank you, Mr. Fattah. Certainly, Mr. Serrano. 

Mr. SERRANO. Mr. Chairman, just a reminder that it is okay 

under the House rules to bring products from your State to share 

with the other members. 

Mr. MOLLOHAN. Member to member? 

Mr. SERRANO. Peanut chew? 

Mr. MOLLOHAN. Yeah, I do not think the Committee has received 

any peanut chews. 

Mr. FATTAH. I am going to make sure that the Chairman has the 

first opportunity to experience this product. 

ECONOMIC DEVELOPMENT DISTRICT DESIGNATION

Mr. MOLLOHAN. This is the serious business of legislating. Both 

of you are EDA designated economic development districts. Mr. 

King, you have been one for some time. Dr. Brown, you have been 

one for less time. If each in turn would describe the value of the 

EDD designation for your organization. Maybe you have had one 

longer, Mr. King, you could talk first? What is the benefit of that? 

Mr. KING. Well first of all, being recognized by EDA, the obvious 

one is you are eligible for funding. And that is, you know, a huge 

benefit. And I think in the wisdom of when the law was written, 

making, developing economic development districts and developing 

a planning and implementation process that they did was the reason that you become eligible, because some of the things that I 

talked of with Mr. Fattah. It is just, I think that is a huge benefit. 

I think some of the things that I was disappointed in in the last 

go round was that they took away some of our ability to create 

more of, which made the communities provide more of a match. I 

hope that the Committee will consider restoring what it used to be. 

And, you know, it used to be easier for communities and the local 

project developers to be able to, for EDA to contribute more to the 

project, and the local people commit less. 

Mr. MOLLOHAN. How did, just tell us how that changed, and how 

that—— 

Mr. KING. Well I think, you know, for instance in my district, 

and I am not sure what happened, we were a 60 percent funded 

and a 40 percent match. That went down to 50–50. And, you know, 

that does not seem like a lot, but it is a lot to a project and a 

project developer, in some cases. And there was always the ability 

before from the Assistant Secretary to be able to get more than the 

60 percent, and maybe up to 75 percent. That went away, and we 

were not able to do that. And that hurt some projects. You know, 

some projects were not able to go forward because of that. And you 

know, just to say it again, you know some of the things that we 

do as a district, and when we are doing the project development, 

we have got to get the project funded. And, you know, EDA is only 

one piece. And so we are out looking for the rest of the funding. 

We are looking for private investment. We are looking for state to 

put some skin into the game. I hope I am answering your question 

there. 


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Mr. MOLLOHAN. No, you certainly are. Are you opposed to the 

match in and of itself, or just opposed to the percentage of the 

match? 

Mr. KING. I think it is critical that we have a match. 

Mr. MOLLOHAN. And what do you think would be a better ratio? 

Mr. KING. Well, at least we would like to go back to where it was 

in prior years. 

Mr. MOLLOHAN. What do you think would be the optimum 

match? 

Mr. KING. I do not know if I know. I think the 60–40 was good 

at the time we were doing it. I would like to at least see it restored 

to that. 

Mr. MOLLOHAN. It was workable? 

Mr. KING. And have the ability that depending on the project to 

allow the regional directors and the Assistant Secretary to look at 

it and see if—— 

Mr. MOLLOHAN. Have some sort of waiver authority? 

Mr. KING. Some kind of waiver authority, yes. 

Mr. MOLLOHAN. Dr. Brown. 

Mr. BROWN. Well—— 

Mr. MOLLOHAN. Describe the value of the EDD designation to 

you. 

Mr. BROWN. Right. It allows locals to be focused, committed, and 

prioritized. And without that to go to congressional representatives, 

state representatives, otherwise, if we did not have that we would 

not be looking at priorities. You would be looking at a variety of 

people that you may have seen sometime come into your office on 

an hourly basis, and they are all talking about something different, 

and you did not realize was a problem in your district. 

Mr. MOLLOHAN. So it is important to you as establishing a real 

process and funding that process? 

Mr. BROWN. Absolutely. And then we are in tune with the other 

federal partners, or state partners, how that all works. Clearly, the 

more committed we are locally the much easier job we can do for 

our other partners. The other thing is EDDs, and the funding for 

the economic development districts, is increasingly more important. 

Let me give you an example. The City of Weirton had to cut its 

budget 20 percent last year. That is our major business center, 

major city in our area. What is important about that, what they 

cut out was their economic development person. Now they are depending on us to be their economic development people. We do 

mapping, technical assistance, but otherwise if we weren’t there, 

an economic development district and the planning district funding, 

there would not be, I do not know, I am sure it would be filled 

some way. But I am not sure it would be adequately filled to give 

those priorities and commitments for you. 

And in terms of the match, we are all different. There are a lot 

of original EDDs in the area. I would like to have your money, 

match money. Because I have 50 percent match, and have had 50 

percent, and it has always been that. I would say that if they 

looked in the last five years at the eligibility criteria we have probably changed. So I would ask that maybe the eligibility criteria 

should be updated on an annual basis. 

Mr. KING. Yeah, that is a good point. 


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Mr. MOLLOHAN. And the eligibility criteria be a sliding scale 

based on some needs based formula? 

Mr. BROWN. Right, whether it is unemployment rate, per capita 

income, measures, other measures of distress would be very helpful. And if that were updated on an annual basis it would be very 

helpful. 

Mr. MOLLOHAN. Yeah, too high a match obviously biases less economically distressed areas against more economically distressed 

areas, if you follow that. I think I said it the way I meant it. That 

the less economically distressed areas would be more likely to get 

the assistance than the more economically distressed areas, because you would be out of the game because you could not make 

the match. 

Mr. KING. That is right. 

Mr. MOLLOHAN. Yeah, we have seen that in some other programs, too. 

The funding associated with the designation, Mr. Brown, would 

you speak to its importance? It may be some specific examples, or 

you already have a little bit, but just for the record? 

Mr. BROWN. The funding? 

Mr. MOLLOHAN. The funding associated with the EDD designation? And you have already said it does matter. 

Mr. BROWN. Right. The—— 

Mr. MOLLOHAN. I mean, that is just crucially, let me just answer 

this, is that crucially important to the whole designation? 

Mr. BROWN. It is very crucial to our region because we would 

not— 

Mr. MOLLOHAN. As you testified. 

Mr. BROWN. I mean we have these projects, a lot of our water 

and sewer projects are essentially the planning, the application, 

the monitoring, the close out of projects is done through that type 

of program. If we did not have those funds, just the moving of technically the project forward and closing it out would be, we would 

not be staffed to do that. And I would say, where we are the locals 

do not have, when we are talking communities of a relatively small 

size that just do not have the ability to carry staff to make that 

happen. 

PUBLIC WORKS FUNDING LEVEL

Mr. MOLLOHAN. Okay. Shifting gears here, the administration 

has proposed to shift significant funding away from the public 

works account into the economic adjustment assistance program 

based on the rationale that EAA is a more flexible program. From 

your perspective, is this shift desirable, appropriate? Why and why 

not? 

Mr. KING. Well my opinion is, you know, where they are shifting 

it to be more flexible, and to provide more innovative types of 

projects, I mean, we need some more innovative types of projects. 

I do not think necessarily the way to do that is to take money out 

of public works and shift it into economic adjustment. I think, you 

know, you want to do that, give more money to economic adjustment. Public works in a rural area is critical. We still need the 

basic building blocks to be able to do economic development. You 

know, most of my communities are under 5,000 people, and many 


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of them are under 1,000 people. And that infrastructure, you know, 

there has to be some kind of continued infrastructure. And I am 

not saying we need to continue to build industrial parks. But there 

are serious places where infrastructure needs to be continually 

built. And do not take too much away, you know, public works was 

the core of EDA. And it, has not changed that much that we should 

take all the money out of public works and start shifting it to these 

innovative planning things. We need more, we need bricks and 

mortar, and we need to have people doing that. 

Mr. BROWN. Yeah, I agree, bricks and mortar are key. But economic adjustment does create the creativity and ideas to get the 

bricks and mortar. So it is sort of a catch-22 type of approach. But 

I, once again, it is just bricks and mortar which are fundamental 

projects. And you are looking back ten years from now, that is 

what you are looking at. The infrastructure that is there. 

Mr. MOLLOHAN. Mr. Bonner. 

Mr. BONNER. I have no further questions, Mr. Chairman. 

Mr. MOLLOHAN. Mr. Serrano. Mr. Aderholt. Mr. Culberson. Mr. 

Fattah. 

Mr. FATTAH. No further questions, Mr. Chairman. 

Mr. MOLLOHAN. Gentlemen, we want to thank you very much for 

your appearance here today. We understand that you had to travel 

a long distance, prepare. You have been very helpful to the Committee. There may be some questions submitted which if you would 

be kind enough to take some extra time to answer it would be really helpful to the Committee. I know I do have some follow up questions, actually, which I may be in touch with both of your individually about. But thank you for your appearance here today, and 

your good testimony. 

Mr. KING. Well, thank you for affording us the opportunity to 

come down and talk to you. 

Mr. BROWN. Thank you. 

Mr. MOLLOHAN. You are welcome, and for your good work back 

in your regions. 

Mr. KING. Thank you. 

SECOND PANEL REMARKS

Mr. MOLLOHAN. If the next panel would take come forward? 

Okay. We welcome our second panel. Mayor David Bradford, the 

City of Muscle Shoals, Alabama, was the immediate past Chairman 

of the Northwest Alabama Council of Local Governments; Chuck 

Wemple, Economic Development Program Manager of the HoustonGalveston Area Council; and Dr. Les Wyatt, President of the Arkansas State University System. Gentlemen, we welcome you all to 

the hearing today. Your written statements will be made a part of 

the record, and after Mr. Bonner makes any comments he might 

want to make, or if Mr. Aderholt would like to make a comment 

before the witnesses proceed please, Mr. Bonner? 

Mr. BONNER. I would be happy to yield to Congressman Aderholt. 

Mr. ADERHOLT. Well I just want to say thank you. It is good to 

see Mayor Bradford here. Thank you for your testimony today. And 

thank you for your work, you and other regional leaders in Northwest Alabama, and the direction you have taken Northwest Alabama. And so we thank you for your testimony here today, look forVerDate Mar 15 2010 23:45 Jul 07, 2010 Jkt 056756 PO 00000 Frm 00427 Fmt 6601 Sfmt 6602 E:\HR\OC\A756P2.XXX A756P2

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ward to hearing it, as well as your colleagues here today to testify 

before the Committee. So thank you. 

Mr. MOLLOHAN. Okay. Thank you, gentlemen. Why do we not 

just lead off with Mayor Bradford? 

OPENING STATEMENT BY MAYOR BRADFORD

Mr. BRADFORD. Thank you, Mr. Chairman. Good afternoon, my 

name is David Bradford. I am the current Mayor of the City of 

Muscle Shoals, Alabama, and the immediate past Chairman of the 

Board of Northwest Alabama Local Governments, an EDA designated economic development district. We thank you for the opportunity to be here today and speak on the role of the Economic Development Administration. And we have submitted a lengthy statement for the record so I will limit my remarks to a few key points. 

First, I would like to stress the importance of EDA to local economic development efforts. EDA provides support for strategic 

planning, ongoing collaboration, and project implementation. And 

each type of support is tremendously important to successful strategies to create jobs. Through its strategic planning investments 

EDA lays the groundwork for successful strategies to prepare and 

promote communities. With its planning partnerships, EDA gives 

regional organizations, such as the Northwest Alabama Council of 

Local Governments, and other economic development districts, the 

capacity and the support to maintain planning, project development, technical assistance, and grant resource opportunities. And 

finally, EDA supports job creation efforts by investing in infrastructure, revolving loan funds, business incubators, and other economic 

development projects. With these investments EDA has helped to 

create or retain over 4 million jobs and over $130 billion in private 

investment. 

In our region alone EDA’s support was important to the location 

decisions of two international companies that have had great positive effects on our local economy. Without EDA assistance, SCA 

Tissue of Sweden in 2003, and North American Lighting Koito of 

Japan in 2007, would have been more difficult, if not impossible to 

recruit. For both of these companies EDA’s strategic planning and 

infrastructure investments proved to be critical. These investments 

were coordinated through the economic development district which 

proved to be a vital partner along with local governments and the 

Shoals Economic Development Authority. In both cases modest investments and strategic plans laid the groundwork for success by 

pointing out opportunities and focusing on regional efforts in collaboration with governments. In each case EDA made investments 

in infrastructure to prepare sites for industries. Combined, EDA’s 

$2.83 million for water production storage at two locations in 

Colbert County helped create over 600 new jobs and leverage over 

$300 million in private investment. These new industries located in 

our region in 2003 and 2007 and immediately helped to improve 

unemployment rates and incomes in an area that has long suffered 

from economic troubles. These industries continue to be strong employers despite these economic times that we are in. 

EDA’s investments in our region are coordinated by the Northwest Alabama Council of Local Governments, which was recognized 

by the EDA as an economic development district in 2001. EDA’s 


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support allows the council to provide vital resources to regional collaboration through a five-county region in Northwest Alabama. 

And EDA’s planning partnership investment is used to provide ongoing planning and project development, technical assistance, and 

grant resources to area governments and partners throughout a 

five-county region. 

Despite working with EDA through the years there are probably 

two areas that EDA activities could be strengthened. First, EDA 

sometimes takes too long to review the application and these 

delays can sometimes strain relationships with industries and 

other local partners. And second, EDA is charged with creating 

higher skill, higher wage jobs, and oftentimes, for more rural areas, 

the quality of job opportunities is relative to the existing conditions. Certain industries in our region, such as tourism, may not 

have nationally competitive wages but are strong local industries, 

and they are part of a regional strategic context. Improving EDA’s 

ability to speed up the application process and understand the context of its investments will make EDA an even stronger partner. 

Finally, I would like to point out the EDA’s significance going 

forward. We are currently in the middle of one of the deepest economic crises in memory. But for over two decades our region steadily improved its lagging economic performance. And we had double 

digit unemployment because of the loss of manufacturing, and textile jobs in the late nineties, or mid-nineties. And through much of 

2005, 2006, and 2007 our region had unemployment rates as low 

as 3.5 to 4 percent. For a region with historically bad performance 

compared to much of the nation, this was an amazing task to accomplish. It was done as a result of strategic planning and investment in economic development, with help from EDA. 

Today, however, in each of the five counties our EDD serves, unemployment rates have more than doubled in just over the past 

two years, in some cases 12 percent, as much as 17 percent. Rates 

are as high as they have been in decades. Because of our positive 

experiences with EDA we think that the administration can be a 

model for economic recovery. EDA’s investments and strategic 

plans create a solid base of support for working toward regional solutions. Its support for regional councils and economic development 

districts enhances local capacity to pursue development in a way 

that no other agency can replace. 

EDA’s commitment of investing in a variety of solutions has tremendous value. We need solutions to be regionally developed and 

supported so they can take a variety of forms, and EDA has a commitment to regions for strategic planning, ongoing collaborative action, and a variety of implementation opportunities. In addition, 

EDA has a proven track record for promoting economic development success and taken together these qualities make the EDA a 

vital partner for the nation’s economic recovery. 

And I thank you again, Mr. Chairman, and members of the Subcommittee for this opportunity to be here today. And I welcome any 

questions. 

[The written statement of Mayor David Bradford, of the City of 

Muscle Shoals, Alabama, follows:] 


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Mr. MOLLOHAN. Thank you, Mayor Bradford. Mr. Wemple. 

OPENING STATEMENT BY MR. WEMPLE

Mr. WEMPLE. Good afternoon. Thank you, Mr. Chairman, Subcommittee members. Thank you for allowing me to testify before 

you today. My name is Chuck Wemple. I am the Economic Development Program Manager for the Houston-Galveston Area Council. 

We are a thirteen-county region, including the nation’s fourth largest city. So we have about 5.75 million people in the region. We 

also have some very small, very rural, sparsely populated counties 

as well. So it is kind of a challenge for us sometimes to line up 

those different needs. 

I want to get across three key points today with regards to our 

involvement with EDA. The first being that EDA’s response to our 

region following Hurricane Ike was exceptional, and continues to 

play a key role in our region’s recovery from that natural disaster. 

Secondly, I want to talk about the effectiveness of the district funding and why we think that is a solid, good investment of federal 

funding. And then third I want to talk about the importance of not 

reducing the types of funding that are currently available to our 

local governments, and also offer up some areas for possible improvement as well. 

For those of you who may not be familiar, Hurricane Ike hit our 

region in September of 2008. And we took a direct hit from Hurricane Ike. The storm came out over Galveston Island, bringing with 

it 100-mile per hour winds, extensive rain and flooding, and a 

twenty foot tall storm surge which laid waste to many of our coastal communities. We had widespread devastation. We had neighborhoods turned into debris fields. We have 200,000 homes either 

damaged or totally destroyed in our region. Thousands of households displaced, thousands of workers displaced, and thousands of 

businesses impacted either physically or at least through extensive 

long term power interruptions. 

EDA quickly responded to our region following the disaster. 

While many of our communities were digging out from under debris and trying to get their communities back to a functioning form 

of government, the local office came down and met with us, and 

through our development district we identified twenty-eight 

projects worth nearly half a billion dollars that could be implemented with EDA disaster recovery funds. We narrowed that list 

down, and ended up funding, through the EDA office, nine projects 

totaling about $42 million. And these projects were prioritized 

based upon the ability to get them implemented quickly, and the 

relief that they would bring to our communities. 

There are a wide variety of projects. All of them are infrastructure based projects. One of our small coastal cities is looking to restore their waterfront area, running sewer and water lines and elevating a roadway. The Port of Galveston on Galveston Island is improving bulkheads and expanding their lay down areas. And some 

of our rural counties are running utilities along their interstate 

frontage roads with the attempt to move more of their economic development a little further inland so they will be more resilient if 

and when the next storm hits. 


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One of the most exciting projects that we have through the EDA 

supplemental funds after Hurricane Ike is our revolving loan fund 

that was granted to our economic development district, which I 

manage. It is a $10 million revolving loan fund. The first cycle of 

funds, that first $10 million, is going to focus exclusively on businesses that were impacted by Hurricane Ike. We have that program launched. We are currently reviewing about eighteen applications totaling about $2.5 million. And we expect that that first 

cycle of funding will create about 500 jobs for our region. It is a 

large variety of businesses that we are looking at, restaurants, auto 

repair shops, and medical facilities. 

All of these projects are going to bring hope to our devastated 

communities. It may not sound like much to some folks, but if you 

are a rural coastal community and you hear that Pat’s Tire is coming back in business, and if you got a flat you can call Pat again, 

that is their slogan, people start to shine a little more. And it kind 

of helps with that recovery effort. A lot of the businesses that were 

hit by Hurricane Ike were doing well before the storm. But once 

they were hit by the disaster, and right on the heels of the Hurricane Ike disaster we had a lot of economic downturn issues nationwide. All of a sudden those folks do not have access to traditional 

forms of credit. So it becomes very imperative that a revolving loan 

fund like this be developed and put into play. 

I want to emphasize a couple of things about the RLF. It is not 

designed to compete with private banks. If anything we want to 

complement what private banks can offer to our applicants. Much 

like the SBA program, if there is a loan that the bank may not do 

because they may not be comfortable with the type of business, or 

the condition of that business after Ike, we are able to come in and 

provide a loan for part of that funding and the bank can move forward. Or in some cases, traditional funding is not available at all 

and we are able to come in and help those businesses get back on 

their feet and recover. 

I want to talk a moment about district funding. Personally, I 

think it is a great investment. Relatively modest amounts, we get 

about $50,000 a year to run our economic development district. It 

provides us to do the regional planning that the previous folks testified about. We develop our comprehensive economic development 

strategy, able to get those rural folks from the sparsely populated 

counties, and our urban developers together, and talk about priorities and linkages across the region. It also allows our local governments to go after the EDA grants. And it also allows us to respond 

to major events, like Hurricane Ike. If our EDD would not have 

been in place it would have been much more difficult for EDA to 

move quickly, identify those projects, and get those funds allocated, 

and help our communities. We view it as an extension of the EDA 

staff for the region as well. 

We are encouraged to see an increase in the level of funding for 

the districts. It has also allowed us to get people in the room and 

start to explore new opportunities for our region, so some of our 

communities can transform or diversify their economies. We have 

folks that are now looking at renewable energy manufacturing component facilities. We are looking at embracing and capitalizing on 

the local food movement, raising more food locally and finding ways 


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to get some of those products to market. So we are very, very excited about that and think those are a good investment that return 

a lot of dividends. 

I want to talk real briefly about the importance of the diversity 

and flexibility in EDA funding. In my opinion, the current mix 

works very well. When you have a suite of products that communities can draw from, whether it is public works, or adjustment, or 

the other products that are offered by EDA, honestly I think that 

reducing the diversity of their funding portfolio, of moving a lot of 

money out of public works, is a step in the wrong direction, just 

to be very frank. So I want to really emphasize the importance of 

diversity and flexibility. If anything, you might want to consider 

expanding some of the projects that might be eligible. We heard 

about tourism a while ago. Infrastructure for ecotourism could be 

considered. Not every community has a smokestack. Sometimes 

that is your best bet, to protect your natural resources and have 

a good quality of life for your citizens and good jobs. 

A few recommendations. One thing that I think is important, and 

it kind of ties into the flexibility I just mentioned, is the final disposition of revolving loan funds. For those of you that may not be 

familiar with the EDA revolving loan fund, that money stays federal forever as long as you are able to keep revolving those funds, 

and letting those monies out. And I think there are going to be 

times, even with our Ike Recovery Fund, when those funds may not 

be as easy to move as they are going to be after a natural disaster, 

and when the credit market is tightened. And I think that when 

you get to a point where maybe you cannot be moving those funds, 

it would be nice if those funds could be turned into another EDA 

eligible project. Perhaps the RLF money could then go towards a 

public works grant, or a planning grant, or some other project. I 

think that that would probably be a good investment of those funds 

in the long term rather than having a revolving loan fund that 

might carry on for many years without being very productive. 

I also want to talk about something that was mentioned earlier. 

Folks talked about hiring in the regional offices. I think it’s very 

important that EDA look at strategic hiring. I think that as with 

many corporations and HTs that are out there, there’s a degrading 

of the workforce, and I think that it’s important that hiring be done 

to start to fill those slots that are going to be retired and vacated, 

and I think moving forward with that is a very important thing. 

Our regional office has actually done that recently and we applaud 

those efforts. 

In closing, I just thank you for your efforts to maintain and hopefully increase funding for EDA, and Mr. Chairman, that completes 

my testimony, and I would welcome any questions. 

[The written statement of Mr. Chuck Wemple, the Economic Development Program Manager for the Houston-Galveston Area 

Council, follows:] 


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Mr. MOLLOHAN. Thank you, Mr. Wemple. Dr. Wyatt. 

OPENING STATEMENT BY DR. WYATT

Mr. WYATT. Mr. Chairman, and Committee Members, I’m Les 

Wyatt. I’m President of the Arkansas State University System, in 

Jonesboro, Arkansas. I wanted to tell you how EDA grants to University Centers have help build capacity at our university—— 

Mr. MOLLOHAN. Dr. Wyatt? I apologize for interrupting you. I 

just want to note that we have been joined by your distinguished 

Member of Congress from Arkansas, Marion Berry. Marion, welcome to the hearing. We appreciate your coming by today. If you 

want to take a seat at the table, you’re welcome to do that. Maybe 

you can see better. 

Mr. BERRY. Thank you. 

Mr. MOLLOHAN. Yes, sir. You’re welcome. 

Mr. BERRY. I’m hear to show my support for Arkansas State University and Dr. Wyatt, and the EDA which has been a great agency 

for our part of the world. 

Mr. MOLLOHAN. Well, great. Thank you for coming by. We appreciate your attendance here today. 

Mr. WYATT. That is essentially my speech. 

Mr. MOLLOHAN. Well, that’s why we value him so much up here 

is because when he says something, it’s short, sweet, but has a lot 

of meaning associated with it. Dr. Wyatt, please continue. I apologize for interrupting you. 

Dr. WYATT. That’s all right. I want to tell you how our capacity 

has been increased with these grants; what has been an outgrowth 

of economic development in our region; and finally I want to describe a tangible outcome of that activity that will affect you and 

your children. 

I live in the 1st Congressional District which is represented by 

Congressman Marion Berry. He wrote to all of us in our District. 

This District is the Mississippi river delta of Arkansas, and has 

some of the richest land and the poorest people in America. Our 

regional economies have traditionally been based upon agriculture 

and manufacturing, two sectors that have declined in profitability. 

Over the last century many jobs have been lost in these areas. Our 

region’s products have had value added and profits taken outside 

our region, and most recently by offshore interest. As a result, our 

communities are dwindling. Our schools are inadequate, and our 

economic future is challenging. 

Our university was created 100 years ago to serve the students 

of this region. We do so with a wide variety of academic programs 

which have produced over 60,000 alumni. A large majority of these 

graduates live in the 1st District where they form the basis of hope 

for economic growth and sustainability for our future. We’re at the 

eastern edge of an EDA region overseen by Mr. Pedro Garza and 

his staff in Austin, Texas. Mr. Garza has long been concerned for 

the economic conditions of eastern Arkansas, and he’s provided 

support and expertise, assistance and encouragement to many 

agencies in our state, including our university. Mr. Garza and his 

staff are problem solvers, and they are entrepreneurial, in terms of 

their outlook for our future. They’ve been patrons when we’ve badly 

needed patronage, and their investments are paying off, and in a 


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moment I will describe a perfect example of that return on investment. 

EDA has provided support for economic development centers 

which are located on several university campuses in our state, and 

throughout our EDA region. The Delta Center for Economic Development on our campus provides assistance and information to 

small and large businesses, government agencies, communities and 

individuals. The Delta Center has also received support from EDA 

to construct a facility where assistance is given, where data can be 

generated and kept, and where staff is based for outreach across 

our region. There is no comparable economic engine in our region, 

and the Delta Center would not exist if it were not for EDA support. We and thousands of citizens in east Arkansas are grateful 

for the EDA financial support for the Delta Center for Economic 

Development at Arkansas State University. 

The Delta Center also works closely with the state’s economic development agency, local Chambers of Commerce, and city officials 

across the region to recruit new businesses and industries to our 

area. This process is frequently supported by a productive relationship between Mr. Berry, Mr. Garza, and our state’s governor, Mike 

Beebe, and a host of other collaborators. Our campus resource, the 

Delta Center for Economic Development, has been a player in most 

of these projects across the region, thanks to EDA support for staff, 

programs, and facilities on our campus. This campus-based university economic development center is a model you can be proud of. 

On a parallel track, our campus also receives support from the 

state to create a research initiative called the Arkansas Biosciences 

Institute. The purpose of this initiative is to study plant materials 

which may be produced or modified to improve the lives of Arkansans, often at the intersection of medicine and agriculture. We’re 

particularly interested in health benefits from plants which may be 

consumed by domestic livestock or by humans, for both chronic and 

acute diseases. The Biosciences Institute is five years old. It has a 

staff of research scientists from around the world, and it has successful competitive grant awards from a number of federal, health 

related agencies. 

The Biosciences Institute has also received significant support 

from EDA to create an incubator facility to move research from 

benches in the laboratory toward commercialization of products 

and processes. Several small companies have been created, based 

on patents received through these research and development activities, thanks again to EDA. 

So I’ve described support from EDA which sustains the Delta 

Center for Economic Development, which is a business organization, and EDA support which created an incubator, a research organization. The two came together in an important economic development project which will affect you and your constituents and 

your families. 

Our state recruited a New York company, called Nice-Pak. NicePak has produced billions of these little packets. They’re disposable 

wipe products and they’re used for sanitary, cosmetic, medical, and 

hygienic applications. You’ve used these products. Every citizen has 

used these products at restaurants, medical facilities, beauty shops, 

retail stores, daycare centers, and nurseries, all across the country. 


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Nice-Pak is an organization that was recruited through EDA support and sponsorship. We worked with their company officials to 

relocate their operation and manufacturing activity to our city. 

Using the facility and staff supported by Mr. Garza’s grants, the 

project in Jonesboro is up and running. The CPA of Nice-Pak, Mr. 

Robert Julius, was rightly concerned about the environmental affect of these products, because a billion of these little foil packets, 

and the wipes that are inside these things, will go into our landfills. 

Mr. Julius and one of their customers in Arkansas, the Walmart 

Corporation, decided to seek more environmentally-friendly packaging and application materials. So they turned to our campus for 

assistance, and the value of EDA support became very quickly evident. The researchers in our Biosciences Institute got together with 

the production staff of the company that makes these little things 

and they’re putting together a concept to use cellulose-based materials for the wrapper, and to integrate plant materials into the 

wipes themselves. These products, when introduced back into the 

landfill, will be biodegradable, and will leave this planet better for 

our children because of that activity. The wipes themselves will be 

based on plant materials which are found in abundance all around 

us, and this will add an additional layer to our economic capability. 

The outcome of this effort, which integrates a number of EDAsponsored projects will touch the lives of millions of users around 

the country and across the world, one wipe a time, billions of times. 

So this has become a win-win, win-win-win outcome. The prime 

sponsor of all of this activity has been the EDA office, Mr. Garza, 

and his staff, and because of your appropriations. We want to 

thank you for directing the people’s money for this important activity, for making our university center possible, and for the great 

success that you’ve engendered. Thank you, Mr. Chairman. 

[The written statement of Dr. Les Wyatt, President of the Arkansas State University System, Jonesboro, Arkansas, follows:] 


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ECONOMIC RECOVERY IN NW ALABAMA

Mr. MOLLOHAN. Thank you for your testimony, Mr. Wyatt. Mr. 

Bradford, in your oral presentation, you referenced a model for economic recovery. 

Mr. BRADFORD. Yes, sir. 

Mr. MOLLOHAN. Would you elaborate on that a bit, please? 

Mr. BRADFORD. I came into office in 2000. We had double digit 

unemployment at that time. We’d been suffering a great deal of unemployment since the mid-1990s, and local leaders and I, by local 

leaders I mean mayors, county commission, chairmen, chamber of 

commerce counsel, open government such as EDAs, focused on job 

creation economic development through infrastructure improvements, and we knew we had to diversify as far as our workforce, 

our labor workforce, and actually go after jobs and so that’s what 

we started working on. We had jobs, economic development infrastructure, education, and transportation issues, and that’s primarily what we’ve been working on to date. But in 2005, 2006, and 

2007, we turned that double digit unemployment around into 3.5 

to 4 percent, and we were looking for, we were able to pick and 

choose some of the companies. 

Mr. MOLLOHAN. I see. That effort turns out to be a model effort 

for economic recovery. 

Mr. BRADFORD. Well, as far as planning, in 2001 we went to EDA 

and looked for an economic development model, and for planning 

on infrastructure, and what type of jobs that we could go after, 

what type of jobs our area would support our workforce development and so forth, and with that plan in place in 2003, we got our 

first company, which was a Swedish company, SCA Tissue, and 

they now employ over 480 people. 

Mr. MOLLOHAN. Did you receive from EDA only money and then 

you went out and hired a consultant to develop your plan, or did 

EDA themselves participate in fashioning the plan? 

Mr. BRADFORD. They didn’t participate in fashioning the plan. I 

think they gave direction as to accountability and how we would 

be able to go out and actually take bids from consultants and chose 

the consultant that was the best fit for our area, but they did not 

participate other than the accountability aspect. 

Mr. MOLLOHAN. In your testimony you emphasize the importance 

of EDA’s strategic planning investments through its comprehensive 

economic development strategy process and planning grants. Is 

that the process that you just described right there? 

Mr. BRADFORD. Yes, sir. It was known as the Wilson Dam Corridor Comprehensive Plan, and actually, in northwest Alabama, we 

actually lay on the Tennessee River, Wilson Dam is part of the 

TVA reservoir, and it’s one of the largest lift lock dams in the 

world, but we also have ready access available to rail, in one of 

computerized railcar assemblies. These companies actually lay in 

between those areas and also a regional airport, so we were able 

to coordinate our resources and from there go forward. 

DISASTER RECOVERY IN TEXAS

Mr. MOLLOHAN. Mr. Wemple, your testimony discusses how 

quickly your District was able to provide EDA with suggested 


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projects following the devastation of Ike. What was the dollar value 

of that assistance? The total dollar value of that assistance? 

Mr. WEMPLE. Dollar value as in number of projects, or how much 

it cost us to do the work? 

Mr. MOLLOHAN. How much money you got from EDA in their assistance in your recovery from Hurricane Ike? 

Mr. WEMPLE. We conducted the analysis by leveraging our planning dollars that we get from our District with other projects that 

we have within our economic development program, and then the 

amount of funding that actually came to the region from the grants 

was right about $42 million dollars. 

Mr. MOLLOHAN. And does that count the $10 million from 

the—— 

Mr. WEMPLE. That includes the $10 million revolving loan fund, 

yes. 

REVOLVING LOAN FUND

Mr. MOLLOHAN. And who administers the revolving loan fund? 

Mr. WEMPLE. My program administers that at our economic development district. 

Mr. MOLLOHAN. And do you have assistance from a banking institution? 

Mr. WEMPLE. Actually one reason why we were able to work with 

EDA and get the revolving loan fund is my department also administers a very robust small business administration 504 loan program which we’ve had in existence for a number of years. We are 

one of the top producers in the state of Texas, and definitely in the 

Houston region. About a 300 loan portfolio totaling over $220 million dollars. 

Mr. MOLLOHAN. And that revolving loan program is part of 

EDA’s regular authorization? Or was it a special authorization 

under that emergency funding? 

Mr. WEMPLE. It was special under the supplemental emergency 

funding. 

Mr. MOLLOHAN. So it, not only the money but also the authorization, would not have been available except for the emergency authorization? 

Mr. WEMPLE. Yes, and we would not have pursued it without the 

emergency money, the main need. 

Mr. MOLLOHAN. In other words, another organization could not 

go after a revolving loan fund because it was only authorized in 

that emergency funding bill? 

Mr. WEMPLE. We were identified as the only entity within our region that could successfully administer it and come up to speed 

quickly. 

DELTA CENTER FOR ECONOMIC DEVELOPMENT

Mr. MOLLOHAN. Okay I’ll follow up on that. Mr. Wyatt, your EDA 

University Center, that is exciting, there’s no question about it, 

and I guess it’s an example of how powerful an association with an 

academic institution can be. Just explain to us what role that plays 

in the community and how it facilitates economic diversification, I 

expect, in most instances. 


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Mr. WYATT. The fact that it’s based on a university campus is 

misleading. It’s really an organization for the community. It covers 

a large geographic territory and in fact, the entire 1st District. People go out from that base of operations on our campus to other locations and so its real value is perceived by the communities around 

us in the business and the industries there. But its placement on 

the university campus is very important because we have assembled a large group of experts in many areas that constitutes the 

university faculty, and the Delta Center for Economic Development 

can tap those resources as needed to provide assistance in the communities where they do their work. 

Mr. MOLLOHAN. Mr. Bonner. 

EXPORTS

Mr. BONNER. Jobs, jobs, jobs. That was the message the President delivered last week in his State of the Union address. It’s certainly the message that all of us have been saying for some time 

now because the economy has suffered so much loss of jobs, and in 

your testimonies today each of you have given testimonials about 

the importance of EDA. One question that I’d like you to address 

is the President also talked about the need to pass some trade 

agreements that whether it’s Columbia, or Panama, or wherever, 

help export American products and create jobs here in this country. 

Any of you all have an example of how EDA specifically has helped 

your community or businesses in your communities take advantage 

of that opportunity to export American products to other countries 

overseas? 

Mr. WYATT. This is an example of many of the activities where 

our University Center has been productive. In our area where agriculture product is so prominent, our University Center has given 

counsel to a number of our agricultural producers to move their 

products around the world, and in fact, products from Arkansas 

serve world markets. We could ship a boatload of rice, down that 

river to any place in the world, and we’re doing it, and we’re giving 

assistance through the University Center to the people who would 

provide for shipping, harvesting, processing, finishing and producing those products. It’s happening every day. 

Mr. WEMPLE. Our region, given that we have major ports within 

our region, and also an intra-coastal canal, we have a lot of import 

and export activity within our region. There’s a good likelihood that 

businesses that will be helped through the revolving loan fund, 

particularly on Galveston Island, will be eventually looking at exports. You know we do have success stories from our Small Business Administration program and others where that happens, so I 

can’t point to a specific example. But these EDA funds definitely 

help by diversifying our economies, allowing folks to take advantage of that opportunity. 

Mr. WYATT. SCA Tissue, which is a global company, actually the 

SCA plant located in the Schoals area, serves the entire north 

American continent, and is a non-pulp paper product company, so 

you don’t get some of the environmental concerns. In fact, we use 

recycled paper, cardboard, and other products. They make tissue 

paper, they make restaurant supply type of paper products as well 

as hygiene materials and cardboard shipping containers. So that’s 


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going all over north America. The North American Lighting, which 

makes taillight assemblies for Toyota, Nissan, GM, and Ford primarily stay here in the United States. 

CREDIT ACCESS

Mr. BONNER. And Mr. Wemple, you had mentioned specifically 

about some of the problems that businesses, especially small businesses, were having with regard to credit. I asked the previous 

panel a question using an example, I think you all might have been 

in the room, of a local businessman’s story that he had shared with 

me. Specifically do you think EDA is positioned to help programs 

like yours filter out, since there is so much concern about credit 

today being available, whether it’s through commercial lending or 

through SBA or other federal agencies, is EDA doing as much as 

they could do to help fill the gap? 

Mr. WEMPLE. Well, I think maybe I have two different parts of 

an answer for you. I think that our revolving loan fund in particular is going to fill a very severe need in our region and so in 

that regard they are definitely stepping up to help fill that void. 

One of the best things I think EDA has really done for us is 

through the funding of our economic development district, and 

through the development of our comprehensive economic development strategy, we actually get people together, people come to us 

to ask what types of grants they might be able to get, what type 

of loans they might be able to get, whether it’s a local government 

or sometimes a business venture, and then because of the ability 

of our district to exist through EDA, we’re able to link them up. 

Maybe they have a better opportunity going through the USDA 

Business and Enterprise Fund as opposed to EDA, or maybe SBA 

is a better option. So it allows us to operate as a bit of a clearinghouse in that regard, so I think that’s probably one of the most 

critical things that they allow us to do. 

Mr. BONNER. Mayor, Congressman Aderholt had another meeting 

for which he had to be excused, and asked that you would forgive 

him for leaving early. 

Mr. MOLLOHAN. Thank you, Mr. Bonner. Mr. Fattah. 

REVOLVING LOAN FUND

Mr. FATTAH. Thank you, Mr. Chairman. I realize we have a vote 

coming, so just some quick questions. Do you charge interest on 

this revolving loan fund for businesses? 

Mr. WEMPLE. Yes. We’re required to charge a minimum of four 

percent. 

Mr. FATTAH. Do you charge the minimum, or do you charge 

above the minimum? 

Mr. WEMPLE. Right now, our program is charging four percent as 

our interest rate. 

LENGTH OF REVIEW CONCERNS

Mr. FATTAH. We’ve got to go vote. Mr. Mayor? I’ll try to get my 

geography right. You’ve got a golf course there? Shaw Creek? 

Mr. WEMPLE. Actually, we do. It’s Robert Trent Jones Golf 

Course. 


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Mr. FATTAH. Condoleezza Rice just joined, right? 

Mr. WEMPLE. Yes, sir. 

Mr. FATTAH. I try to keep track of your local economic activity, 

at least in relation to golf. My colleague from Alabama was telling 

me about the golf trail. I hope to visit. Mr. Chairman, let me get 

to the point. In your comments submitted to the Committee, you 

said one of your concerns, among all of the glory that was bestowed 

by your comments on EDA, was their decisions are slow. And that 

sometimes dealing with private enterprise, they’re looking for a 

quicker paced decision package, and so I was trying to see how we 

might reconcile that with our responsibilities. You know, the government only works at one speed, which is slow. But it’s for a reason, that is to say, you have to be caretakers of the public’s treasury. So I was just interested if you could share with the Chairman 

any real life anecdotal story about the slowness of the process. 

Mr. BRADFORD. Well, I believe that in both of these projects it 

was prior to this group or EDA being able to hire additional personnel, and that was the biggest thing. It would take six to nine 

months to get some of these projects approved, and you’re on a 

time line to get infrastructure to them when they’re investing, you 

know, $40, $50 million, sometimes $100 million on their projects on 

their site, and they’re wanting their infrastructure there and of 

course you’re going through the bid process, design engineering, 

and so forth, and we understand that there has to be accountability 

and so forth and making sure that you know where this money is 

going. 

Mr. MOLLOHAN. It sounds like that timeliness is a problem all 

over the country. We want to get Mr. Schiff and I’m sorry we didn’t 

see him right then, and he hasn’t had the chance. Mr. Schiff, welcome to the hearing. 

CREDIT ACCESS

Mr. SCHIFF. Thank you. I just wanted to ask and I don’t know 

how much a part of this is in your bailiwick, what efforts EDA has 

undertaken to help small businesses access credit, because that’s 

the number one complaint that I hear among my constituents, that 

banks they have longstanding relationships with where they just 

can’t get credit. A lot of the job retention issues in my district are 

a little different than some of my colleagues. It’s more about trying 

to retain motion picture production and not have that run away to 

Canada and other countries. But, I’d love to hear your thoughts 

about EDA’s work on access to credit. 

Mr. WEMPLE. Again, through our revolving loan fund that we 

have, that’s going to be a major access for our businesses to credit 

they can’t get otherwise. Also we work closely with the small business development centers at our colleges and universities to make 

sure that the businesses get in good shape where they can maybe 

have a better chance of having that credit at the bank. If you don’t 

have a business plan or projections and various things in place, it’s 

difficult to get a bank to seriously consider you. So we make that 

requirement through our EDD revolving loan fund, and then again 

the district funding is critical to my group to allow us to have the 

capacity to be able to steer businesses to other non-EDA programs, 

as well. 


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Mr. MOLLOHAN. Well, thank you, gentlemen, very much for your 

testimony. We are looking at five votes which will take us 40 minutes or so. We’re not going to make you stay here during that period. Your testimony has been excellent. I think everyone has had 

two rounds. There may be a question or two submitted for the 

record. You’re not an agency, you’re not required to respond to 

that, but it would be nice if you did because you’re really helping 

the Committee with your expertise. I have one question. Mr. 

Wemple, you indicated that EDA funding, you’re looking for diversity and flexibility, so to broaden the opportunities for funding by 

expanding the current funding portfolio to include special projects 

and unique economic settings. If that resonates with you, I’d like 

a comment on your ability to be flexible with EDA programs. It’s 

a changing environment. We’re going from traditional economies to 

the future, and diversification is very important and just for that 

reason alone this flexibility is important and I’d like to hear you 

all comment on that. Only for the record, and I’m sorry to do that 

because right now I’ve got zero minutes to go, zero seconds to go 

vote. But thank you so much, all of you, for testifying, both panels 

for being here today to testify. It’s excellent testimony and will certainly help us to establish a support base for EDA as we move forward, certainly on the Subcommittee and beyond. So thank you for 

your testimony here today. This hearing is adjourned. 


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THURSDAY, MARCH 25, 2010. 

USPTO (UNITED STATES PATENT AND TRADEMARK 

OFFICE) FY 2011 BUDGET OVERVIEW 

WITNESS 

DAVID KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF USPTO 

OPENING REMARKS

Mr. MOLLOHAN. The hearing will come to order. 

Good afternoon, welcome. Today we have with us the Director of 

the United States Patent and Trademark Office, Mr. David 

Kappos, Kappos. 

Mr. KAPPOS. Kappos. 

Mr. MOLLOHAN. Kappos? Thank you. 

To examine the fiscal year 2011 budget request and operations 

of the USPTO. 

Director Kappos, you well know that the USPTO plays an important role in fostering innovation which in turn drives job creation, 

economic recovery, and prosperity. 

You also know well that the USPTO found itself in fiscal year 

2009 in a precarious fiscal position. Fiscal years 2010 and 2011 will 

likely present new and equally daunting financial challenges for 

the Agency and key performance measures like patent pendency 

and backlogs will likely continue to decline if left unaddressed. 

USPTO’s fiscal posture of last year highlighted major unacceptable deficiencies in its budget formulation and execution processes 

and underscored the need for a sustainable funding model that 

would allow your Agency to weather periods of economic downturn 

and reductions in fee collections without disruption to patent and 

trademark operations. 

You are aware of these deficiencies and that your budget includes several proposals to address them which we will explore this 

afternoon. 

Your fiscal year 2011 budget request for USPTO is $2.3 billion, an increase of $435 million over the fiscal year 2010 enacted level. 

Of this total USPTO projects fee collections under the current fee 

structure of nearly $2.1 billion. The difference, some $224 million, 

would be generated under the request by a temporary 15 percent 

surcharge on patent fees which the Agency would require new statutory authority to impose. 

In addition, the budget request proposes new fee setting authority that would permit the Agency to work with its external partners to align fees in future years with the actual cost of Agency 

services. 

These two legislative proposals seek to establish a more sustainable funding model for the USPTO, but are authorizing in nature 


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and outside the jurisdiction of this Committee. For this reason it 

is imperative for the Committee to understand the impact of your 

Agency operations if such new fees are not established for fiscal 

year 2011. 

Lastly, it is important to note that the budget request proposes 

to establish an operating reserve to ensure the availability of adequate funding to address multi-year budget plans and unexpected 

fluctuation in revenues, but again the creation of such a reserve is 

predicated on the collection of new fees. 

I would like to thank you for your cooperation and close working 

with the Committee staff, it is certainly appreciated and your efforts to develop a requirements-based budget, which I think will go 

a long way in the long term to solving your problem. 

We have some structural issues that hopefully your authorizing 

effort will address or that maybe we can address otherwise. 

I am going to invite you to summarize your written statement 

which is made part of the report, but first I am going to call upon 

our Ranking Member, Mr. Wolf. 

Mr. Wolf. 

Mr. WOLF. Thank you, Mr. Chairman. 

Mr. Secretary, welcome. You’re leading the Patent Trademark 

Office in a very troubling and difficult and challenging time. Your 

revenues are down, your patent backlog is over 700,000, unemployment reaching ten percent in the country, inventors now waiting 

three years, so we are anxious to hear how you plan on dealing 

with that. 

I also know that, I think, through the effort of this Committee 

over the years on the telework, that you are probably one of the 

leaders in telework. 

How many are teleworking at your—— 

Mr. KAPPOS. Well on the trademark side of our Agency nearly 

every trademark examiner can telework. On the patent side, large 

numbers in the thousands of examiners. 

Mr. WOLF. Well we have been told that you want to expand it, 

so we will be anxious to hear how you want to expand it. 

And again, we look forward to hearing your testimony. 

Mr. MOLLOHAN. Mr. Kappos. 

OPENING STATEMENT BY MR. KAPPOS

Mr. KAPPOS. Okay, well thank you, Chairman Mollohan and 

Ranking Member Wolf, members of the Subcommittee. 

I am really pleased to be able to join you here this afternoon and 

have an opportunity to discuss the USPTO’s operations and our 

programs and initiatives, and the President’s 2011 budget request 

in order to fund our efforts at the Agency. 

Mr. Chairman, we all recognize that innovation is a principal 

driver of our economy, perhaps the principal driver of this century. 

Stimulating economic growth, promoting innovation, and creating 

high paying jobs are key priorities of course for the Administration. 

The President’s 2011 budget clearly recognizes and supports the 

role that the USPTO plays in enabling U.S. innovators to flourish 

and to bring new products and services into the marketplace. Yet 

the Office currently faces significant challenges, as has been pointed out already, a backlog approaching 750,000 patent applications, 


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unacceptably long patent pendency rates by any measure, 35 

months and counting to final action, and outdated information 

technology infrastructure. 

Our 2011 budget request provides the USPTO with the resources 

and the flexibility that we need to start addressing these problems. 

The President’s budget, as you noted, requests $2.322 billion for 

the USPTO based on projected fee collections of about $2.098 billion under the current fee schedule, and an estimated additional 

$224 million that would be brought in by an interim fee increase. 

Just like the business community, if we collect less fees than expected, we have to manage the Agency based on the revenues that 

we receive. And to safeguard against economic downturns, the 

budget request emphasizes business tools such as creating a reserve so that we can insure that we can execute multi-year plans 

and serve the public without disruption even in cases where patent 

filings dropped as they did in 2009. 

However, to help the USPTO and put us on a solid path toward 

a more sustainable funding model, the budget further proposes fee 

setting authority to permit the USPTO to work with its stakeholders and better align our fees with the actual cost of our services. 

So specifically, the President’s request was formulated as a requirements-based budget at the request of the Subcommittee and 

supports a five-year plan that would reduce the time to first office 

action in patent applications to 10 months, reduce total average 

pendency to 20 months, and invest in a 21st Century IT architecture infrastructure and tools that are badly needed at the Agency. 

For those applicants in fast moving industries who need even 

shorter patent pendency, we are also formulating options to provide 

12-month pendency from filing until grant or final action. 

To achieve these performance commitments we will initiate targeted hiring to recruit and hire 1,000 patent examiners for a net 

increase of 400 to 500 after retirements and other attritions annually during fiscal year 2011 and fiscal year 2012. 

We are refocusing our hiring strategy to attract experienced IP 

professionals who will require far less training and will be able to 

quickly begin working on reducing the patent backlog. 

In fiscal year 2011 we will continue to promote a nationwide 

workforce, as has already been mentioned, and to invest in our 

telework programs which have been a model for other federal agencies. 

We are also studying ways to strengthen our organizational 

structure to support our extra strategic initiatives, and we look forward to working with the Committee as those efforts progress. 

So while fiscal year 2011 looks promising, our current financial 

situation is less than optimal. 

Our revenues from user fee collections declined substantially 

during fiscal year 2009, and the Office was forced to cut spending 

sharply in many important operational areas, cuts that cannot be 

sustained in the long term. 

Some of these financial constraints carried over into fiscal year 

2010 even as we started to improve the efficiency and production 

of the Agency while operating on a bare bones budget. 


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Thus far in fiscal year 2010 we have lost 115 patent examiners 

through the end of March, and have replaced only six so far. In 

total for fiscal year 2010, we project nearly 300 patent examiners 

will leave the USPTO and we will be able to hire about 250. 

So our Agency will deteriorate slightly in size even while the 

backlog grows at current course and speed. 

Mr. Chairman, I would be remiss if I didn’t provide an update 

on our current fee income projections. 

Based on the first five months of fiscal year 2010, we are seeing 

a very substantial rebound in user fee collections. 

Our current projection is that the USPTO will collect between $146 million and $232 million more than its appropriated spending 

limit for fiscal year 2010. 

So our new leadership team has undertaken a broad array of efficiency initiatives to provide the speed and quality of patent processing that our country needs. These initiatives are described in 

more detail in my written statement. 

Progress toward our strategic goals, however, is dependent on a 

number of important elements. These include establishment of a 

sustainable funding model, authority to set appropriate fees, an interim fee adjustment on patent fees, and an operating reserve to 

insure adequate reserves to address multi-year budget plans. 

Our fiscal year 2011 budget provides a framework for continuing 

the work we have already started to make critical changes that 

support innovation, enable investment, and contribute to the U.S. 

economic recovery. 

Mr. Chairman, the challenges we face at the USPTO are significant, but we can address them with improved management, working closely with our external partners to identify the best solutions 

for improving the Agency, and with adequate resources. 

We appreciate your continued support of the USPTO and we look 

forward to working closely with you and with your staff on our fiscal year 2011 request in the weeks and months ahead. 

Of course I am happy to answer questions. 

[The written statement of USPTO Director David Kappos, Under 

Secretary of Commerce for Intellectual Property, follows:] 


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BUDGET REQUIREMENTS

Mr. MOLLOHAN. Thank you, Mr. Kappos. 

You are asking for quite an increase here, and your request is 

not keyed to your fee collection estimates are they, as they have 

been in the past? 

Mr. KAPPOS. Correct, our request is greater than our fee collection estimates. 

Mr. MOLLOHAN. Yeah. And why is that? 

Mr. KAPPOS. Well we started this year for the first time with a 

true requirements-based budget. So we started by asking within 

our business units what do you need to do in order to make substantial progress against the huge backlog that we have got? How 

many people do you need? What resources do you need? We simply 

added all of that up and it came out to more than our estimated 

fee collections. 

Mr. MOLLOHAN. So the budget you are requesting here today is 

based on what you need to achieve some goals, not based upon 

what your estimate of the fees that you might collect during a fiscal year that you are projecting. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. All right. I think that is a whole lot better, and 

again, in opening remarks I complimented you for that and I want 

to compliment you again for doing that. I think that is the start 

of getting some rationality in this whole fashion of fiscal policy for 

the USPTO and getting away from a lot of misunderstandings, 

which maybe we just leave behind us as we march forward, unless 

there is any interest in churning all those issues. Because the 

issues are structural and not necessarily anybody’s fault, it is just 

people working within a system that I consider to be dysfunctional, 

which is my term. 

So you have requested this pretty large increase, and what are 

your goals with regard to it? 

Mr. KAPPOS. What we plan to do with that money is first in my 

mind and foremost, is to implement some really significant efficiency improvements. 

My belief is that you don’t hire a lot of people under broken systems, you have got to fix the systems. I wish we had forever to fix 

the systems first, but we don’t, so we are going to have to fix the 

systems, which we are already working on, and hire a substantial 

number of people, as I mentioned. 1,000 people in fiscal year 2011 

and 2012 while we are fixing the systems. 

We have got to turn on overtime 100 percent, which is an extraordinarily efficient way for us to get work done. 

We have got to get the information technology working and start 

making some investments in our information technology. 

We have got to fully fund our Patent Cooperation Treaty, which 

is an international treaty. We have got to fund the contracts so we 

can keep that work with our contractors so we can use our internal 

resources to work on U.S. patent applications. 

PENDENCY GOALS VS. PENDENCY STATUS

Mr. MOLLOHAN. Let us go to your goals with regard to your pendency and your first response times. What are they right now? 


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Mr. KAPPOS. So right now—— 

Mr. MOLLOHAN. Average pendency. 

Mr. KAPPOS. Average total pendency—I am doing this from memory—is about 35 plus months. 

Mr. MOLLOHAN. And so that is 35 months starting when? 

Mr. KAPPOS. Starting from when the patent application is filed 

to when we give a final decision on issuance or rejection. 

Mr. MOLLOHAN. Okay. So just so emphasize it, from the time a 

patent application is filed to the average time it is disposed of one 

way or another is 35 months? 

Mr. KAPPOS. Correct. Actually a little more than 35 months. 

Mr. MOLLOHAN. Okay. And since that is average there are some 

shorter and there are some probably much longer. 

Mr. KAPPOS. Sure. 

Mr. MOLLOHAN. What is the first response time frame that you 

are working at? What do you call that? 

Mr. KAPPOS. First action pendency. 

Mr. MOLLOHAN. First action. 

Mr. KAPPOS. Right. So the pendency until the first time we give 

a substantive answer to the applicant is somewhere around 27 

months or so. 

Mr. MOLLOHAN. So on an average a person filing an application 

would just say well a couple years from now I will hear from them 

for the first time. 

Mr. KAPPOS. Correct, and that is not good at all. 

Mr. MOLLOHAN. Well we agree with you. 

So what are your goals now with this new budget? To what extent and how in terms of objective criteria, these numbers—— 

Mr. KAPPOS. Right. 

Mr. MOLLOHAN [continuing]. What do you hope to achieve in 

terms of reducing those pendency periods? 

Mr. KAPPOS. We are going to do three things. And of course it 

will take multiple years. With a backlog as big as we have we can’t 

get it all done in one year. But we are going to do three things. 

Mr. MOLLOHAN. Well we will talk about that in a second, but go 

ahead. 

Mr. KAPPOS. Right, okay. 

So we are going to take average total pendency down from the 

35 plus to 20 months. 

Mr. MOLLOHAN. So your ultimate goal a couple years out is to get 

to 20 months final disposition. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. Okay. 

Mr. KAPPOS. We are going to take average first office action 

pendency down to ten months. So 27 or so down to 10, a very substantial decrease. 

Mr. MOLLOHAN. Okay. So we file it, we expect to hear from you 

in 10 months instead of 27 months. 

Mr. KAPPOS. Yes. 

PENDENCIES, OPTIMAL

Mr. MOLLOHAN. That is improvement. 

Mr. KAPPOS. Those are the optimal pendencies. 

Mr. MOLLOHAN. Well that is my next question. 


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What is the right time, I mean the optimal time to use your 

word, that a applicant should expect to hear back from you with 

first response and then final disposition? 

Mr. KAPPOS. The answer is it depends on the applicant in the situation. Some applicants want to hear back immediately. There is 

no such thing as too soon for them. We will talk about them in a 

minute. 

But on average, applicants actually want to have some time before they hear from us so that some prior art can get out there, so 

that they can do market research on their product, for a number 

of reasons. And it turns out that 10 months is optimal because it 

is as long as we can wait, but it is less than 12 months. Twelve 

months is when applicants have to make foreign filing decisions. 

So optimally they want to have all of the information they can 

have from us shortly before they are required to make their foreign 

filing decisions, which is why you want to push close to 12, and 10 

is about the closest you can get and give them time to respond. 

Mr. MOLLOHAN. So these times, these target turn around periods 

are optimal turn around periods. I mean that is what your community, your customers so to speak, that is what they would like to— 

that is the goal they would like to see achieved. 

Mr. KAPPOS. Right. 

Mr. MOLLOHAN. They wouldn’t like to see you turn these applications around any more quickly. 

Mr. KAPPOS. Not in general. There are some who will, we can 

talk about those. 

Mr. MOLLOHAN. Okay. 

Mr. KAPPOS. So to talk about the ones who want a very quick response. So frequently—— 

Mr. MOLLOHAN. But let me just be clear on this and then please 

on that. 

Twenty months for a final disposition and ten months for a first 

response. Those are the goals the communities advocate for. 

Mr. KAPPOS. Right. 

Mr. MOLLOHAN. And this budget that you are projecting here 

achieves those time frames in what time period? 

Mr. KAPPOS. Well we will achieve the time frames, and if I am 

recalling right now, 2014 for the—I might have to refer to my notes 

here—but 2014 I believe for the 20-month total pendency and 2015 

for the 10-month first action pendency. But it is 2014, 2015. 

FEE SETTING AUTHORITY AND RESERVE FUND REQUESTED

Mr. MOLLOHAN. Okay. Let us quickly, and I am going to come 

back to the FTE numbers here later, but let me just finish up my 

line here by asking you about the funding scheme that you are proposing. 

Elaborate on that beyond your introductory remarks, if you will. 

Mr. KAPPOS. Okay. So let me make sure I have the question 

right. Our funding—— 

Mr. MOLLOHAN. Your proposal for funding and for your new fee 

proposal—— 

Mr. KAPPOS. Okay. 


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Mr. MOLLOHAN [continuing]. And your reserve fund that you 

want to create, and talk to us about this proposal and how this 

works for you. 

Mr. KAPPOS. Okay. 

So it starts with getting the bridge funding provided by the 15 

percent surcharge next year. 

Mr. MOLLOHAN. Right, because you want to build up the surplus 

and the reserve fund. 

Mr. KAPPOS. Correct. And that helps us to build up starting with 

a $50 million reserve fund so that we don’t get ourselves in financial trouble in the future. 

Mr. MOLLOHAN. Okay. 

Mr. KAPPOS. It also enables us to start on the path toward recovery, hiring the 1,000 examiners, turning over time all the way on. 

Mr. MOLLOHAN. Well the reserve fund doesn’t do that. Your increased fees do that I think don’t they? 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. They support your base budget, the reserve fund 

is sort of your float, if you will. 

Mr. KAPPOS. Right. 

Mr. MOLLOHAN. It is the ‘‘go to’’ you are proposing in case you 

don’t meet your budget request—— 

Mr. KAPPOS. Right. 

Mr. MOLLOHAN [continuing]. With your fee collections. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. Okay. 

Mr. KAPPOS. Right. So the next major piece to the financial product is having the ability for the Agency to set its own fees with significant oversight and user community input so that we insure that 

we are staying very balanced and reasonable, but that will provide 

us with the ability to get fees much more aligned with the cost of 

actually delivering services, which I believe will help significantly 

to prevent another major shortfall in the future. 

Mr. MOLLOHAN. And a significant difference here in your proposal as compared to what the situation you face now is your fees 

are set. You can’t adjust your fee rates, correct? 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. You can’t adjust your fees. 

Mr. KAPPOS. Right. 

Mr. MOLLOHAN. What you are seeking is authorizing legislation 

at the best where you would be able to adjust fees through some 

process that you didn’t have to come back to the legislature and 

ask for that, either through a rule making—is it through a rule 

making you are proposing that? 

Mr. KAPPOS. Yes. 

Mr. MOLLOHAN. Well that is not very efficient either. I mean if 

you actually have to go through a rule making before you change 

every fee you are talking about a year or two year process. 

Mr. KAPPOS. Indeed it is a significant process, and so we 

wouldn’t be changing our fees on any very short-term basis, we 

would be going through getting significant user input—— 

Mr. MOLLOHAN. And you are comfortable with having to do that? 

Mr. KAPPOS. Yes, I am. 


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Mr. MOLLOHAN. I guess you are, because somebody told you you 

had to go that way or because it is okay with you? 

Mr. KAPPOS. No, because I think it is actually critically important that we have input from the patent user community. 

Mr. MOLLOHAN. I see. 

Mr. KAPPOS. And that we keep our fees reasonably balanced. 

Mr. MOLLOHAN. So you have an interactive process with your 

customers, if you will. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. Okay. Are you requesting an authorization for 

this? 

Mr. KAPPOS. Yes, it is in the President’s 2011 budget, director 

fee-setting authority. 

Mr. MOLLOHAN. But my question is a little different than that. 

That is a request to the appropriators. My question is are you seeking an authorization, going to the authorizing committee and asking for this fee structure change and the reserve fund approval? 

Mr. KAPPOS. Well yes, we are. The director’s fee-setting authority 

is a provision that is included in the Senate 515 patent reform legislation. 

Mr. MOLLOHAN. Which you are working with the authorizers on 

both sides of the Capitol, the Senate and the House? 

Mr. KAPPOS. Correct. Right. We are trying to support the House 

right now—— 

Mr. MOLLOHAN. Do you have an opinion from them as whether 

you are going to get an authorization in time to give us direction 

with regard to this fee proposal? 

Mr. KAPPOS. No, I don’t. 

Mr. MOLLOHAN. You don’t have an estimate? 

Mr. KAPPOS. No. 

Mr. MOLLOHAN. Well you might ask them. We will as well, but 

you might tell them how important it is. Okay. Well that is good. 

Mr. Wolf. 

EXPORT CONTROL AND SECRECY ORDERS

Mr. WOLF. I thank the Chairman. 

I have a couple questions here in a different area. A few months 

ago I had a visitor to my office who raised a concern that the PTO 

put its complete patent application for software on the Internet. He 

was prohibited from exporting his product because of its potential 

military intelligence capabilities. He would never want to export it 

and I would be opposed strongly if he ever tried. 

But our system of export control is meaningless if the plans for 

developing technologies are posted by the U.S. government on the 

Internet. We all know that our country’s adversaries, China and 

others, our rivals are aggressively working to steal as much of our 

intellectual property as possible. 

Two questions. Are you concerned that patent information on 

dueling technologies is on the Internet, and have you participated 

in any NSC led multi-agency to reform our Nation’s export control 

laws? 

Mr. KAPPOS. Okay, thank you for those questions, Ranking Member Wolf. 


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I am going to have to offer to get back to you on the second question, because I am not sure about that. 

As to the first question, I certainly would be concerned about the 

export of U.S. controlled technologies. 

The role that we play in the USPTO as the patent applications 

involves in our Agency a very course filter and then relying on 

other agencies, I believe DoD and DoE, to filter the vast majority 

of our patent applications and put those that involve controlled 

technology under secrecy orders. And so, to my knowledge, that 

process works pretty effectively. 

I would be concerned though, if something slipped through, and 

I certainly would like to investigate that. 

Mr. WOLF. Well if you would just give me a call and come back 

and take kind of a different approach on these secrecy orders. 

In fiscal year 2008 there were imposed 69 secrecy orders and in 

fiscal year 2009, 103, more than 78 percent of these were DoD and 

NASA initiators, the remainder being foreign initiators. 

But did the Patent Trademark Office impose any secrecy orders 

for reasons of economic security in either fiscal year 2008 or 2009? 

Mr. KAPPOS. Not that I know of. 

Mr. WOLF. That is important, because we are losing jobs. 

What authority, if any, does the PTO have to impose secrecy orders for reasons of economic security? 

Mr. KAPPOS. I actually don’t believe we have that authority. 

Mr. WOLF. But China is stealing us blind. And Mr. Chairman, 

I think when I hear of this program created in China, maybe we 

could carry language here, we are giving them that authority. Because while it is great the secrecy orders which would be a national 

security, but on economic security whereby the stories that I have 

heard is that China just kind of codes these things, it kind of comes 

through. 

Let me take the third question. Should the technologies restricted for export by the Department of Defense, Commence, 

Homeland Security, State, NASA, Justice, and Energy automatically be subject to a PTO secrecy order? 

Mr. KAPPOS. So if I understand in the case where there is a dual 

use technology, right, that is covered—— 

Mr. WOLF. Put Defense, Commerce, Homeland Security, State, 

NASA, Justice, and Energy. 

Mr. KAPPOS. Yeah, I would think that those issues should be getting caught by those other agencies that do the reviews for us. 

Mr. WOLF. Well apparently they all haven’t, and it troubles me 

too that you can’t really be economic. Can you see the importance 

of the economic security? 

Mr. KAPPOS. Sure. 

Mr. WOLF. Almost ten percent unemployment in the country. The 

Chinese can come in and access patents and move that. You believe 

that the Chinese are looking at the patents that come on? 

Mr. KAPPOS. I believe that China and lots of other countries are 

looking at them. 

Mr. WOLF. And so does it make sense for you that you would 

have that ability because of economic security as well as national 

security? 

Mr. KAPPOS. Difficult question to answer. 


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Mr. WOLF. Because if we get to 11 percent unemployment and 

12 percent unemployment all you have to do is get on a train to 

Washington and take it to New York and look at the factories that 

are empty or closed. 

Probably China is where it is now with the space program because of the stealing of technology. The cyber attacks against our 

government, DoD, Homeland Security and into companies. 

So it is economic security. A great nation needs a strong economic base to support its national security. 

You are shaking your head, you agree with me. So how do we 

deal with this? 

I can see I caught you a little bit by surprise, but this is not a 

trick question. 

Maybe we ought to get together and I can bring some people to 

see how we deal with this issue. Would you not agree that this is 

important with regard to the industrial base of the Nation so that 

we don’t have this technology and information taken away? 

Mr. KAPPOS. Right. I certainly agree with that. 

If I could make a suggestion, perhaps this is an idea that we can 

put together some kind of a study to take a look at what level of 

potential expansion of secrecy orders makes sense. 

Mr. WOLF. Maybe a 30-day study. I don’t want a year study or 

two years. You will be practicing law downtown and move it onto 

somebody else. So if we can do a quick 30-day that would be fine. 

Last question on this area. What arrangements does the PTO office have with the patent offices of Europe, Asia, and other agencies cooperating in non-publication from national or economic security when innovations are involved? 

Mr. KAPPOS. I don’t believe we have any arrangements. We handle non-publication on a unilateral basis. So for the USPTO, if we 

get a secrecy order, we put the entire case under lock, if you will, 

and don’t publish anything. We don’t tell overseas offices anything 

about those cases. 

Mr. WOLF. So let me ask a last question. What does China do 

and what does England do? 

Mr. KAPPOS. In fact I believe in both of those countries, and some 

other countries, they have the same requirement as we do for local 

applicants to get export clearance for their patent applications. So 

you have to actually go into their patent offices, just like you have 

to come into the USPTO, and give the office an opportunity to 

evaluate the subject matter for secrecy purposes. 

The UK does that. I am quite confident China does and some 

other countries do so. 

And so I expect they have programs similar to ours where they 

are pushing those applications through their security apparatus 

and asking the same questions that DoE and DoD do for us, and 

pulling some of those with secrecy orders. 

Mr. WOLF. I hope you don’t have any collaborative agreements 

with China, do you? 

Mr. KAPPOS. Collaborative agreements? 

Mr. WOLF. You are not bringing China over and sitting down 

with them and talking to them. 

Mr. KAPPOS. Our major collaborative agreement, which we don’t 

have with China, is called the Patent Prosecution Highway, we 


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have that with some other countries like the UK, but not with 

China. 

Mr. WOLF. And so you are not doing this with China. What do 

you do with China? 

Mr. KAPPOS. Well we are both members for instance of the Patent Cooperation Treaty, but there are many countries I believe, 

somewhere around 160 countries, or some huge number. 

Mr. WOLF. What is your special relationship with China? 

Mr. KAPPOS. I am trying to be helpful. Special relationship? 

Mr. WOLF. Well rather than taking up the Committee’s time with 

that why don’t you think about these and then maybe arrange for 

a time to come on by. 

Mr. KAPPOS. Sure, sure. Okay, thank you. 

Mr. MOLLOHAN. Thank you, Mr. Wolf. 

We have two minutes, 50 seconds to go vote, 339 members have 

not voted, just to let the Committee know, we have a 15 minute— 

finishing a 15-minute vote and two 5-minute votes. 

Mr. Fattah. 

PATENT REQUESTS: FOREIGN VS. DOMESTIC

Mr. FATTAH. Thank you, Mr. Chairman. 

Along the lines of what the Chairman was talking about earlier, 

you know, I am very interested in how we can help you work 

through this backlog and how to get the decision packages done 

more quickly. 

So your optimum is 20 months, and along this continuum of 

budget request you think you can achieve that by when? 

Mr. KAPPOS. Again, I am doing this from memory, but I believe 

we can get to 20 months total pendency by 2014 and 10 months 

first action pendency by 2015. 

Mr. FATTAH. Okay. And I am very sympathetic to the request in 

terms of the reserve fund and the 15 percent. 

I have another question. Who is requesting patents? Who are 

the, you know, compared to domestic versus foreign requests what 

is the balancing of that these days? 

Mr. KAPPOS. Okay. Well, I am fond of saying that it seems like 

everybody is requesting patents these days. 

Mr. FATTAH. I understand that. My point is have we arrived at 

a rubicon where we now have more foreign companies requesting 

patents than domestic? 

Mr. KAPPOS. Yeah, it is about 50/50. It depends on how you 

count, but the best way to count you come out about 50/50. 

Mr. FATTAH. And is there any fee differential? 

Mr. KAPPOS. No, there is no fee differential between foreign and 

domestic. 

Mr. FATTAH. And what about your counterparts in the UK and 

other places, is there a fee differential? 

Mr. KAPPOS. No. There are treaty requirements that cause all 

countries’ patent offices to charge local applicants the same as 

overseas applicants. 


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PENDENCY BACKLOG REDUCTION

Mr. FATTAH. Okay. And the budget request for the additional 15 percent, this floating reserve fund, right, would generate about $50 

million? 

Mr. KAPPOS. Yeah, the reserve fund would start at $50 million, 

right. In my view it should become significantly more than that 

over time. 

Mr. FATTAH. And if we wanted to front load the reduction and 

the delay can you quantify for the Committee how much more it 

would take to get this backlog to the optimum quicker? 

Mr. KAPPOS. More quickly? Well so this is a very difficult point. 

I totally agree and I would love to get there quicker, but the problem I am going to have—my major tool would be to hire more people, but the problem I am going to have if I hire more people in 

2011, 2012 is that it will cause the backlog to go down so fast that 

I will wind up having potentially some art units in the office literally run out of work, and I won’t be able to get people out of the 

office fast enough by normal attrition. 

So I am very concerned about over hiring in early years, which 

would cause an overshoot. 

Mr. FATTAH. I can understand the desire for perfection here, but 

if you follow the Chairman’s thought, and it is in your testimony, 

that there is a direct link between you doing your work and other 

Americans being about to go to work, and new inventions come on 

the market and so on, we might be willing to live with some unevenness. 

And plus in your design you are going out and you are hiring 

former examiners in part, right? 

Mr. KAPPOS. Uh-huh, correct. 

Mr. FATTAH. In order to expedite this process, which I think is 

a great way to proceed. 

So if the production of the patent decision expedites the development of new products in a way that puts lots of Americans back 

to work, it may be worth us trying to expedite your work, right? 

Versus worrying about how neatly the hiring and tradeoffs are in 

the packages of your personnel. 

Mr. KAPPOS. Okay, correct. So we would be happy to go back 

and—— 

Mr. FATTAH. If you could provide that to the Chairman that 

would be helpful. 

Mr. KAPPOS. Yes, absolutely. 

[The information follows:] 

COST OF SPEEDING UP HIRING OF PATENT EXAMINERS IMMEDIATELY

If the USPTO were to speed up the hiring process by hiring 350 more patent examiners during FY 2010, it would cost approximately $12 million this fiscal year. 

There would not be any additional cost in the out-years due to already being included in the base funding in our FY 2011 budget request. 

The below chart illustrates the impact of immediate hiring on patent pendency 

and backlog: 

PATENT EXAMINER HIRES—ACCELERATE 350 IN FY 2010 

Pendency reduction Backlog reduction 

—2011 0.8 mos .................................................................... —2011 24,300 applications. 


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PATENT EXAMINER HIRES—ACCELERATE 350 IN FY 2010—Continued 

Pendency reduction Backlog reduction 

—2012 1.5 mos .................................................................... —2012 24,500 applications. 

—2013 2.1 mos .................................................................... —2013 24,200 applications. 

—2014 2.7 mos .................................................................... —2014 23,700 applications. 

—2015 3.3 mos .................................................................... —2015 22,800 applications. 

Mr. FATTAH. All right, thank you. 

Mr. MOLLOHAN. We are going to recess and we will be back after 

two additional five minute votes. It shouldn’t be too long. Ten, 15 

minutes. 

Mr. KAPPOS. Thank you. 

Mr. MOLLOHAN. Thank you, Director. 

The hearing will resume. 

Mr. Schiff. 

PATENT SYSTEM REFORM

Mr. SCHIFF. Thank you, Mr. Chairman. Director, good to have 

you with us. 

Congress has been examining proposals as you know and we 

have discussed reforming the patent system for several years, and 

I believe the key to addressing the concerns with the current patent system is to work to increase efficiency at the PTO and improve 

the quality of patents as well as get rid of the backlog. In order 

to achieve those goals we need to insure we are providing the Office with adequate resources and staff. 

What I wanted to ask you about was if you look at the fiscal year 

2011 performance chart, you have provided estimates on fee collections for fiscal year 2015. The chart indicates that if funded accordingly, average total pendency will come down to 19.9 months. 

Do those fee collection estimates contemplate the 15 percent surcharge or are you building that into your expectation? Can you tell 

us a little bit about how you arrived at 15 percent? And do the estimates also contemplate other fee increases? 

In other words if you are building at 15 percent and you are asking for fee setting authority, are you contemplating other fee increases? If so, what kind of fee structure are you contemplating? 

Would it be advisable, for example, to have a scaled fee structure 

where organizations that have multiple, multiple patent applications pay more because they are utilizing the resources and have 

the capacity to pay more? 

The other question I wanted to ask you is sort of about the long 

term and about the historic record of the Patent Office. 

I asked my staff to look at the Office’s projections five years ago 

as a way of evaluating sort of the projections five years forward, 

and I know it won’t surprise you to learn that the Patent Office, 

when they estimated this is what we will need to get rid of the 

backlog, were very close in getting what they said they needed. I 

mean they were a little bit off, but not off by that much. But when 

you look at what the result was, the result moved in the other direction. 

In fiscal year 2006 the Office projected that the average first action patent pendency in fiscal year 2010 would be down to 18 


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months, but just a year later in fiscal year 2007 the projection was 

up to 23 months, and two years later it is up to 26.5 months. 

So the resources have come in not all that differently than anticipated, but the pendency times, et cetera, have actually moved in 

the wrong direction. 

So the increase in the times cannot be fully explained by a lack 

of resources, and this is coming from someone who is a strong advocate of more resources. 

So I guess, you know, one question, and you know, I think we 

all have is, we want you to have the resources, but how much confidence should we have that if you are given the resources you say 

you need that the numbers will actually change in the right direction? So if you could address that. 

And you know, the final comment I would make on the fee issue 

is, as important or as valuable as it may be for the Office to set 

fees, unless you have the advantage of using the fees, I don’t want 

a situation where you are raising fees, not getting use of the revenues, and the Patent Office is being used to subsidize other government activities. 

So if you could comment on those three areas. 

Mr. KAPPOS. Okay. Well thank you, Congressman Schiff, those 

are great questions. I will see how many I can remember and you 

can perhaps guide me back to the other ones. 

So relative to fee setting, which I think was one of the first 

issues. 

FEE INCREASES CONTEMPLATED

Mr. SCHIFF. You know, let me summarize and make it easy for 

you. 

The three categories I am interested in are do your estimates 

contemplate fee increases? Well, do they take into consideration 15 

percent? Do you contemplate additional fee increases? And what do 

you think about scaling up those fees for sort of multiple, multiple 

users? Then how do you in evaluating the performance record of 

PTO for the last five years, what will you be doing differently to 

avoid the trap of getting the resources, but not getting the productivity? And then finally the retention of the increased fees. 

Mr. KAPPOS. Okay. So the estimates contemplate both the 15 

percent surcharge and separate fee increases, but not that they 

would be operating together at the same time. 

So what I mean by that, as Chairman Mollohan pointed out before, is that fee-setting authority under notice and comment rulemaking takes at least a year, and my understanding is between a 

year and 18 months in order to actualize. 

If we are going to get started at improving the Agency immediately, we need to have access to additional funding before we 

would be able to get through any permanent reset of fees. 

And so the 15 percent surcharge is designed as a bridge, it is sort 

of step one. It is something we can put in place immediately while 

we are working on resetting the fee structure in a more permanent 

way. 

The 15 percent surcharge was calculated, as I mentioned before, 

literally on a requirements-basis. So we started by adding up what 

we needed to get done, figuring out how much that would cost, 


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then subtracting from it the funds we expected to collect, and that 

left us with some $232 million, or around that level, that weren’t 

going to be funded. 

And so if you then do the math as we did, to ask how much if 

you were going to do a simple across the board surcharge, how 

much would you need to do, accounting for some amount of leeway 

or applicants changing behavior, and it just literally mathematically comes out to 15 percent, so that is how we got the number. 

Mr. SCHIFF. And I guess this gets to the Chairman’s point, which 

is a good one. That you know, in the ideal situation you would develop a five-year plan for reducing the backlog, swift processing of 

patent applications, tell us what you need to establish that and we 

would appropriate the money. If it is more than the fees, then we 

would appropriate more than the fees, if it is less than the fees, 

you know, theoretically we could appropriate less than the fees. 

It sounds like in the beginning it would be more than fees because it will take you time to change the fees, but is it your goal 

with the 15 percent and whatever additional increment to set the 

fees at a level that presumes that that will be the budget sufficient 

for the Agency to eliminate the backlog, et cetera? 

In other words is what you will be aiming for with a 15 percent 

increase and whatever fee increases and however they are scaled 

on top of that to arrive at a fee level that would make the Agency 

self-sustaining in this downward backlog reduction trajectory without having the necessity of the appropriation of any funds on top 

of fees, but at the same time using all the fees that are collected? 

Mr. KAPPOS. Yes, that is correct. 

FEE SCALING FOR MULTIPLE USERS

Mr. SCHIFF. Okay. And what do you think about scaling the fees 

for the numbers of applications? 

Mr. KAPPOS. Right. So for multiple users, we are actually working on something that is similar to that, and I want to use an approach when we get to fee setting, if we get Agency fee setting authority, that would be very, very similar, which is to charge differentially, based on the number of pages that are submitted in the 

application based on the number of claims that are submitted more 

so than we do now. 

We currently have some level of additional charge for additional 

claims, but it needs to be substantially higher for additional claims. 

So you get very close to the same place by charging based on the 

amount of work that we have to do in order to handle the application, which is a function of the number of claims and the number 

of pages of specification. 

Mr. SCHIFF. How will you handle a situation where we have organizations that acquire patents from others where you would need 

to pierce the veil to see who the patent owners are to know how 

many applications they are making and how do you deal with that 

situation? 

Mr. KAPPOS. Well that is a significant problem, and that is one 

of the reasons that I think the way to get at the issue that we are 

talking about here, which is to differentially charge those who are 

requiring more of the offices resources, the way to do it is on a per 

page and per claim basis, because then you don’t have to ask the 


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real party in interest or piercing the veil kind of question, you cut 

through that, just look at the individual application and say how 

much resource are we going to have to put into this as a function 

of the number of claims and the number of pages of specification 

and charge on that basis? 

Mr. SCHIFF. Are there other policy reasons though why you 

might want to know what the patent owners are in terms of the 

utilization, the system, the transparency of the system? 

Mr. KAPPOS. Well there certainly are in my view some good reasons. 

We currently get information on, of course, the inventors, and 

the true and correct inventors have to be disclosed, right? And then 

we get information on whoever the patent application is assigned 

to, if the assignee wants to have all the legal rights that you get 

from being transparently listed as an assignee. 

But to your point, applicants are able right now to form any kind 

of company they want, including shell companies, and list those as 

the assignees on applications. And in my view that indeed does create some transparency challenges. Because then, once a patent 

issues, and even when the application publishes, a member of the 

public can’t tell who is truly the owner of the patent or patent application by looking at the assignment records. 

OUTCOMES

Mr. SCHIFF. And can you comment briefly, because I am probably 

running out of time, what should give us more confidence that with 

the resources that you are contemplating we will see a different 

track record than your predecessors? 

Mr. KAPPOS. Right. So look, we are doing everything differently, 

okay? 

There were many problems that have come up in the past starting with skating to where the puck is rather than where the puck 

is going, and we are trying to skate to where the puck is going 

rather than where the puck is. 

Putting it more specifically, there were terrifically high attrition 

rate of examiners who had been hired within the last two to four 

years. Those are the examiners that we have invested a tremendous amount of money into training and they were the people who 

we had gotten the least pay back from, if you will, in terms of production and work. 

By changing our hiring demographic, just one example, to trying 

to hire experienced IP professionals, former examiners, and people 

who at least have some life experience with the IP system, we hope 

to get a much more mature workforce demographic that will require a less training aggregate and will have lower short range attrition. So that is just one example that can have a tremendous impact on the Agency. 

Mr. SCHIFF. Does the top end of the pay scale pose a real limit 

on the quality of the applicants you can hire and your ability to retain them? Is that something that needs to be looked at as well? 

Mr. KAPPOS. I believe that our pay structure is okay. It is not 

as much as people make in the private sector, and we do lose employees to the private sector, but I have plenty of examiners who 

are telling me we feel like the pay isn’t the issue at the Agency. 


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They are issues like the work mix, like the management, and the 

structure of the management, and the incentives that we have been 

giving to management, the IT tools which are terrible, I commented 

on those before. Those are the issues that our examiners rightly 

complain about. 

I truly believe that while our pay is not what the private sector 

is, that is not the issue that is holding us back. 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Mr. MOLLOHAN. Mr. Ruppersberger. 

CYBER SECURITY

Mr. RUPPERSBERGER. I know Mr. Wolf raised the issue about the 

cyber security issue, and because your mission is fostering innovation through technology and capital investment and whatever, do 

you have a security team that is working with Homeland Security 

or whatever? 

Because we know China, Russia, other—we are getting a lot of 

cyber attacks. Are you working—because the information that you 

have and gets in the hands, and we know it has, especially to 

China, millions of dollars worth of intellectual property is gone. 

Where are you as it relates to your security? Are you just starting, have you identified anything, where are you there? 

Mr. KAPPOS. Okay. So thank you for that question. 

We do have a security team at the USPTO. We also are working 

with our colleagues at the Department of Commerce which has a 

significant focus on cyber security related issues, and working to 

ensure that the USPTO is not vulnerable to those kinds of attacks. 

Mr. RUPPERSBERGER. All right. Well, I think hopefully you will 

be very aggressive in that regard, because we are just—Homeland 

Security is taking a little while to step up, but I think your area 

should be made a priority, and if you have any issues there if you 

could contact me in my office we would like to deal with you on 

that. 

And I will take this to another level. On the attache ́s embassies 

throughout the world that are there to help us to work with us to 

make sure we are protecting our American business and as far as 

their trade secrets or whatever, just discuss that program a little 

bit, and how are we also protecting them from the cyber attacks 

or any other intelligence gathering countries or people that are trying to get in fact. 

Mr. KAPPOS. Okay. So yeah, our attache ́ program is relatively 

new still, I believe we started it in 2006. We have USPTO employees in several important countries, including China and Brazil and 

several other places, southeast Asia, India. 

When they go overseas they are typically housed in the U.S. government embassy and are put on information technology systems 

that are the same ones that foreign commercial service employees 

are put on. 

And so our view is that they have good security by virtue of 

being on the same secure systems that the foreign commercial service folks are on. 

Mr. RUPPERSBERGER. Okay, good. Thank you. 

Mr. KAPPOS. Okay, thank you. 

Mr. MOLLOHAN. Mr. Wolf. I anticipate this being a last round. 


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EXAMINERS

Mr. WOLF. Thank you, Mr. Chairman. 

Given the PTO’s backlog of patent applications, how many additional examiners and how much more of an operative budget and 

how long will the PTO need to meet the one year processing goal? 

So really how many more examiners? You said 1,000, but you said 

some are retiring. So how many more, how many more operating 

budget to become any chance of the one-year processing? 

Mr. KAPPOS. Okay. So as to examiners, our plan would be to hire 

1,000 in fiscal year 2011 and then 1,000 again in fiscal year 2012. 

But of course there is attrition, so if you factor in retirements and 

other attrition you would be netting somewhere over 500 examiners each year. So we would have a net increase of workforce of 

somewhere over 1,000 examiners after the end of the second year. 

Mr. WOLF. So each year they are retiring you would have retirees, so that counts. And then the following year retiring and the 

following year? I mean as you get—each year more people are 

going to retire from there, so that is counting—that would get you 

up on a permanent basis to the level. 

Mr. KAPPOS. Correct, right. 

INCREASE IN FEES AND INDUSTRY SUPPORT

Mr. WOLF. And how high would you need to raise fees in order 

to fund the one-year processing, and how would that be reacted to 

by the industry? 

Mr. KAPPOS. So in terms of the increase on fees, we are working 

on formulating those numbers and haven’t gotten them completed 

yet. We will be getting a lot of input from the IP community to insure that the IP community is together with us in whatever we 

propose. 

Mr. WOLF. Do you have any rough idea? 

Mr. KAPPOS. It actually depends on the fee. There will be some 

fees frankly where we might either reduce them or don’t change 

them at all. There will be other fees that will go up very substantially, and there will be other fees that we’ll raise incrementally. 

Mr. WOLF. Okay. So you’re feeling that the industry would still 

support that? 

Mr. KAPPOS. Yes, I actually believe that. Because they will be 

getting something for their money, which is reduced pendency, very 

substantially. 

INTELLECTUAL PROPERTY THEFT ESTIMATE

Mr. WOLF. Do you have an estimate of the level of revenue lost 

by U.S. businesses from intellectual property theft each year? 

Mr. KAPPOS. I don’t know. I certainly don’t have an estimate of 

that. 

Mr. WOLF. Is there any way that you could look at that? 

Mr. KAPPOS. We certainly can take a look. It may be a hard thing 

to estimate, but be happy to try. We have a new chief economist 

and that would be a good project for him to look at. 

Mr. WOLF. And if you would also estimate who is responsible for 

it, what countries would that be that may be responsible for that 

loss. 


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Mr. KAPPOS. We would be happy to take a look at that. 

INTELLECTUAL PROPERTY RIGHTS

Mr. WOLF. Does the Patent Office work on promoting intellectual 

property rights internationally? 

Mr. KAPPOS. Yes, we do. And we have a number of programs that 

are very centrally directed to international IP rights, including the 

IP attache ́ program that we were talking about before, and very 

significantly including our external affairs mission just focused on 

U.S. global leadership of intellectual property rights. 

Mr. WOLF. How closely do you work with the FBI and Homeland 

Security to prevent and investigate intellectual property rights 

crimes? 

Mr. KAPPOS. Well of course we support the FBI and Homeland 

Security and other enforcement agencies, and we work closely with 

the IP enforcement coordinator at the White House in order to support them. 

Mr. WOLF. Who is the IP coordinator at the White House? 

Mr. KAPPOS. That is Victoria Espinel. 

Mr. WOLF. And who is she under? Is she on the National Security Council or who is she under? 

Mr. KAPPOS. I believe she is in the office of the Vice President 

in OMB. 

Mr. WOLF. Oh, it is OMB. Is that a new position? 

Mr. KAPPOS. Yes, it is. 

Mr. WOLF. As of when? Is she a Czar or is it a different area? 

No, I meant that, that was a serious question. Was this by authorization a statute or was it—— 

Mr. KAPPOS. By statute. 

Mr. WOLF. She was authorized by statute. And she is the first 

one? 

Mr. KAPPOS. Correct. 

Mr. WOLF. Could you ask her, we would like to have the opportunity to just talk to her some time, maybe she could—I don’t always get my calls returned from the White House, so if you could 

maybe—— 

Mr. KAPPOS. I would be happy to speak with Victoria. 

JOB CREATION AND PATENT PENDENCY

Mr. WOLF. I appreciate that. I think that is pretty much it. 

Just one additional question. What is the relationship between 

patent pendency and job creation? Have you ever looked at that? 

Is there a connectively to it? I mean there is, but I mean have you 

ever looked at how it is—— 

Mr. KAPPOS. Yes, I believe there is a relationship, and I believe 

it is a directly correlated relationship. Meaning that the longer patent pendency is, the worse we are doing at job creation, and I believe there is actually a strong relationship between getting patents 

out of the USPTO and creating jobs for Americans. 

Mr. WOLF. Well that was a next question. How harmful is it to 

the U.S. economy that it takes a patent application almost three 

years? Has anyone ever done a study with regard to the length and 

the economy? 


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Like one of the questions when you were testifying earlier I 

wrote when, when was the best year ever? 

Mr. KAPPOS. For patent pendency? 

Mr. WOLF. For patent pendency. 

Mr. KAPPOS. Well without looking back to the time of our founding fathers, recently I believe—— 

Mr. WOLF. In modern times. 

Mr. KAPPOS. In modern times I believe there was a time in the 

1980’s when pendency was very favorable. 

Mr. WOLF. What were the conditions then insofar as the numbers, insofar as the spending? Why was it favorable then and not 

now? 

I am sure there is no—I mean there must be some connection as 

to was it—— 

Mr. KAPPOS. Well there were a lot fewer patent applications. 

Mr. WOLF. Well then that is not a good reason. I mean when was 

the best year that you were doing very well? Not you, but the Patent and Trademark Office, when the number was still relatively 

high? 

Mr. KAPPOS. I don’t believe in really recent history. In the last 

ten years the backlog has just gone monotonically up. 

Mr. WOLF. If you were to reduce that the way you want to do 

you think—is there any study showing what impact that would actually have on the economy? 

Mr. KAPPOS. Well, we do have some information, in fact a new 

study that we are just in the process of completing and anxiously 

want to share with the Subcommittee, does not go, Ranking Member Wolf, all the way to showing a direct correlation between patent output and jobs, but that is one of the projects that our new 

chief economist is focusing on, because we are very concerned about 

exactly the point you are raising, and we want to know exactly 

what the relationship is between patent output and job creation. 

We are in the process of studying that now. 

Mr. WOLF. So now basically you understand and believe that, but 

you don’t have any proof, but what you are working on is a study? 

Mr. KAPPOS. Correct. 

Mr. WOLF. Okay. Well thank you very much. If we can chat with 

you some time with regards to the economic security issue, I guess 

you would have to determine what the standard was with regard 

to economic security. But when I see the loss of jobs and America 

has taken a leadership in so many areas and knowing how people 

are cherry picking and taken away I think it is something hopefully we can work out an argument to give you that opportunity to 

look at economic security as well as national security. 

Thank you for your testimony. 

Mr. KAPPOS. Okay, thank you. 

PENDENCY REDUCTION TIMELINE

Mr. MOLLOHAN. Okay, thank you. 

Mr. Kappos, we talked about reducing pendency in terms of time 

and we are at 35 months and optimum is 20 months for final determination, which is your testimony. And under this budget request 

for fiscal year 2011, if everything worked well, if you got all your 


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fee and surcharge approvals wherever you got them, you would 

reach the 20-month period in what time frame? 

Mr. KAPPOS. Okay, this is where I need to actually correct what 

I mentioned before, because I was reversing the dates. 

We would reach the 20-month period in 2015, and the 10-month 

first action period in 2014. So I apologize for reversing those dates. 

Mr. MOLLOHAN. Well that makes sense actually, which is a good 

thing. Okay. 

So this is really a multi-year effort to get to that, and that 

speaks to the question that Mr. Fattah was getting to. How do you 

modulate the employment or potential employment bubble? And I 

guess it is by not doing it three years earlier. 

Mr. KAPPOS. Right. Exactly right. 

Theoretically we could hire 1,500 or 2,000 people next year, but 

it would then cause us in somewhere around 2014 to go down a 

cliff in pendency and overshoot the ideal pendency level, which by 

the way is about 320,000 applications in the Office at any one time. 

The reason I say that is because we are operating a large work 

flow engine like a production environment similar to a factory in 

many ways, and you need to have inventory at all stages of the 

production system. 

Three hundred and twenty thousand applications ensure that at 

any one time there are about 70 dockets on the workload of each 

examiner, which ensures that each examiner has cases at all 

stages. Brand new cases, cases in the amendment process, older 

cases. They all move on their own time cycles, but it enables each 

examiner to have a very steady workflow. 

If you take the docket load down much below 70 you literally can 

risk examiners running out of work, and I don’t want that to happen. 

Mr. MOLLOHAN. Well, I want to talk about strategies of achieving 

what Mr. Fattah was speaking to in avoiding that bubble that we 

were just eluding to. 

But first I would like to get some absolute numbers with regard 

to your backlog. Right now what is your backlog? 

Mr. KAPPOS. About 750,000 unexamined applications. And if you 

include the number that some are in examination the total number 

is about 1.2 million. So that means 750,000 that we haven’t even 

picked up to look at yet, and an additional 450,000 or so that we 

are currently looking at, but we haven’t made a final decision. 

BACKLOG REDUCTION WITH AND WITHOUT SURCHARGE

Mr. MOLLOHAN. Well let me ask you this. How do you define 

backlog? 

Mr. KAPPOS. The backlog is the total number of pending, meaning filed, but unexamined applications. 

Mr. MOLLOHAN. Unexamined meaning not even looked at initially. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. So backlog is unexamined. Then what do you 

call those that are in the examination process but are processing 

through over that two-year period? 

Mr. KAPPOS. We refer to those as in process applications. 


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Mr. MOLLOHAN. Okay. So right now today you have 750,000 

backlog. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. You have not looked at 750,000 applications? 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. And in process you have how many? 

Mr. KAPPOS. In process, again doing this out of memory. 

Mr. MOLLOHAN. And that doesn’t count the 750-. I am looking for 

the number that you have first looked at and are now being processed. 

Mr. KAPPOS. Correct. Somewhere around 450,000. That is why 

you get to—1.2 million as the total number of cases that are in the 

Office that haven’t had a patent granted or denied yet. 

Mr. MOLLOHAN. Okay. You are effecting efficiencies and trying to 

do things right now within your fiscal year 2010 budget to achieve 

some reduction in the backlog. 

So first, at the end of this fiscal year by October 1st of 2010 do 

you have a projection for a reduction hopefully in your backlog, and 

what would that be? 

Mr. KAPPOS. I am going to have to refer to my notes on that. I 

do have some information. Current course and speed, at the end of 

this year, because we are not hiring enough people to counter for 

attrition—— 

Mr. MOLLOHAN. Because your 2010 budget won’t allow you to do 

that. 

Mr. KAPPOS. Correct. 

Mr. MOLLOHAN. Okay. 

Mr. KAPPOS. So this is showing slightly different numbers, but 

it is showing that the end of year—I will give you the number here, 

but I would like to actually confirm this if it is okay. It is showing 

an end of year backlog at the end of 2010 of 692,350 applications. 

Mr. MOLLOHAN. And 350 applications, what does that mean? In 

process? 

Mr. KAPPOS. No, backlog. Unexamined. So 692,350. 

Mr. MOLLOHAN. Okay. 

Just taking the backlog numbers, at the end if you were to get 

everything you are asking for in your budget request for 2011 to 

what number I am assuming you would reduce the backlog? 

Mr. KAPPOS. Right. We would be taking it down to a little over 

668,000 in 2011. 

Mr. MOLLOHAN. At the end of 2011 you would go from 92 to 68? 

I tell you what, instead of doing it this way submit this for the 

record. 

Mr. KAPPOS. Sure. 

[The information follows:] 

BACKLOG NUMBERS WITH OR WITHOUT SURCHARGE

See below chart detailing projected backlog numbers under the two requested scenarios for Fiscal Year 2009–Fiscal Year 2015. Note that the backlog numbers below 

are consistent with the President’s FY2011 budget and were premised on hiring 600 

new examiners. Given USPTO that these hires were not made, the estimates for at 

least FY2011 and 2012 may at the end of these years be slightly higher. 


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2009 2010 2011 2012 2013 2014 2015 

2011 President’s 

Budget: 

Average First 

Action 

Pendency 25.8 25.4 25.8 19.1 10.7 10.9 10.8 

Backlog ....... 718,835 705,010 614,392 496,334 378,799 343,029 335,538 

No Surcharge/Fee 

Setting Authority: 

Average First 

Action 

Pendency 25.8 25.8 26.0 26.6 28.0 30.1 33.0 

Backlog ....... 718,835 719,077 724,908 750,038 803,559 888,034 1,003,369 

Mr. MOLLOHAN. And what I would be interested in saying is this 

is what I would like to get at. Given your budget request what 

would you get to and in each of the next let us say four years? 

Mr. KAPPOS. Okay, sure. 

BACKLOG, OPTIMUM

Mr. MOLLOHAN. And we got to the pendency that you wanted, optimum pendency. What is your, if this is the right way to ask it, 

optimum backlog level at any one time? 

Mr. KAPPOS. About 325,000 total applications. 

Mr. MOLLOHAN. Why wouldn’t zero be your backlog goal or your 

optimum backlog goal? 

Mr. KAPPOS. If you had zero, that would mean you would be 

picking up applications to examine them immediately when they 

arrived at the Agency. 

Mr. MOLLOHAN. Yes. 

Mr. KAPPOS. Right. Which would mean you wouldn’t have access 

to the prior art, because there is lots of prior art that takes months 

to get access to, which would not enable us to—— 

Mr. MOLLOHAN. No, because that assumes—getting access to 

prior art assumes you have touched the paper and it is no longer 

backlog, right, it is in process? 

Mr. KAPPOS. No, the prior art are all those documents out there 

that constitute work that was done before that can affect the patentability of the invention, and much of it isn’t available to us 

when the application is filed. 

Mr. MOLLOHAN. Okay, well would you just submit an assessment—a discussion of this for the record, please? 

Mr. KAPPOS. Sure. 

[The information follows:] 

FACTORS CONSIDERED IN FORMULATING OPTIMAL BACKLOG LEVEL

[NOTE: ALSO ADDRESSED IN USPTO’S SUBMITTED QFR’S (SEE MOLLOHAN, Q6)]

Given USPTO’s current workload and budget, the agency currently expects that 

with its FY2011 request, it can to reduce average pendency for first action on patent 

applications to 10 months by FY2014 and reduce average total pendency time to 20 

months by FY2015. USPTO is targeting a patent inventory backlog level of 10 

months (approximately 379,000 applications). Factors that were considered in formulating USPTO’s aggressive pendency reduction goals included an analysis of 

international filings, patent term adjustment considerations, publication of patent 

applications, patent application docket management and international best practices—all of which were considered with the overall objective of providing optimal 


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service for our innovators. The resources provided by the FY2011 Budget are crucial 

to achieving these goals. 

REDUCTIONS NECESSARY WITHOUT AUTHORIZED SURCHARGE

Mr. MOLLOHAN. With regard to the surcharge. We have already 

talked a little bit about your authorization. We would prefer that 

you have an authorization, that you go to the Senate and the 

House and get authorization. You said you are talking to the Senate and the House and that that is being considered. 

If you don’t get an authorization for your budget request you are 

going to request this Committee to actually include this; is that 

correct? 

Mr. KAPPOS. Yes, correct. 

Mr. MOLLOHAN. In the budget. What if you weren’t approved? 

What expenditures would you expect to curtail to insure that your 

operations would not exceed the revenue collected from the current 

fee structure? 

Mr. KAPPOS. Well, we would have to limit our hiring of course. 

We would be hiring about to the attrition level. 

We would be not able to undertake our IT improvements which 

are critical to improving the Agency. 

We would be at a lower level of overtime than optimal and a 

lower level than we are at this year. And as I mentioned, overtime 

is the most efficient way for us to run the Agency. In fact, it produces more income than it costs in terms of training the examiners. 

And we wouldn’t be able to fund the PCT treaty work that keeps 

overseas work off of the plates of our examiners. 

Mr. MOLLOHAN. So you spent a lot of time developing this and 

you have thought through the fee structure you want, and if you 

don’t get it nothing gets better over there, and if they are approved 

through the authorization process or through the appropriation 

process you really have a way forward here to achieve the longstanding goals of getting these pendency periods and number of applications that are involved to an expectable business accommodating level. 

Mr. KAPPOS. I think we really do, yes. 

Mr. MOLLOHAN. Well, I had no more questions. 

Mr. WOLF. Mr. Chairman, if I could just—— 

Mr. MOLLOHAN. Sure. 

TELEWORK—LONG DISTANCE

Mr. WOLF. Okay. The staff had met with your people and years 

ago we authorized the telework program that you are using. We 

were told that you are interested in creating a long distance 

telework program which would increase the recruitment. 

Can you explain how the program would work and are you seeking legislative language in this report or this bill to give that you 

ability on a pilot, or do you have ability to have a pilot or do you 

need some language that gives you the ability to have a pilot? 

Mr. KAPPOS. Well, thank you for those questions. 

We are working, in fact, earnestly on putting together what I call 

a nationwide workforce program which will enable the USPTO to 

set up satellite offices in cities and states very distant from Washington, D.C. 


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The plan that we are working on will use existing facilities, including already available government facilities, so very well-controlled real estate costs. It will include hiring obviously employees 

from the local workforce with preference to people who have deep 

experience in the IP system, again, so that we don’t have to invest 

tremendous amounts of money. It will take advantage of good cost 

of living areas of the country in order to bring these people in. And 

it will have to manage within our IT infrastructure capabilities. 

Right now we have the ability to bring on, I believe it is something like 350 more remote workers onto our current IT infrastructures, so we have got all of that in the plan. 

Mr. WOLF. And have you shared that language with your authorizers? 

Mr. KAPPOS. So there is language that is pending that will enable us to effect that plan most efficiently in a couple of bills, including Senate 515. 

There is another bill that is pending, and I forget the number of 

it right now, but another bill that also has nationwide workforce 

or distant teleworker language in it which would get us the authorization that we need. 

Mr. WOLF. Now there was a question. Do you expect there to be 

a bill this year? Do you expect to have a bill this year and authorizing this year? 

Mr. KAPPOS. Well that is a difficult question. 

Mr. WOLF. Was there any sense that there is? Or I wondered if 

there isn’t then maybe you should share with the Chairman language that would enable you to move ahead certainly on a pilot. 

Because if you don’t get one this year then you are into the following year, and pretty soon you just push this thing farther and 

farther behind. 

And I am looking at the numbers here, I mean, you have one of 

the better percent of eligible positions at the PTO that are teleworking; 81.85 percent of the eligible patent positions that are teleworking 82.52. That is pretty impressive. And I think you have 

demonstrated that is a less expensive way, office space and every 

other way. 

But if you don’t think you are going to get it maybe you can 

share it with the Chairman and it would give you the ability to 

move ahead on that. Obviously check in with the authorizers first. 

Mr. KAPPOS. Well thank you, we will certainly do that. 

[The information follows:] 

PROPOSED TELEWORK LEGISLATION THAT WOULD SUPPORT USPTO’S PROGRAM

[NOTE: USPTO ALSO RESPONDED TO A QUESTION ON TELEWORK IN ITS SUBMITTED QFRS

(SEE RESPONSE TO REP. WOLF, Q1 & Q2)]

As requested, the following bills addressing telework have been provided to the 

committee: 

—H.R. 1722 (as reported out of Committee 5/4/2010) 

—S. 707 (as passed by the Senate on 5/24/2010) 

—S. 515, Section 13 (as reported out of Committee 4/9/2009) 

Mr. WOLF. Tell me how bad things would be, because it was actually my idea, so I want to hear, tell how bad things would be seriously if you could not have telework at PTO. 


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Mr. KAPPOS. We would have much higher attrition, we would 

have gotten nothing done during the recent snowstorms where we 

operated the Agency at nearly full capacity despite the fact that nobody could come into work for four days. 

I believe it would multiply our pendency problems and exacerbate all of the other issues we have had at the Agency, because 

telework is such a huge employee benefit. 

Mr. WOLF. Yeah, I mean there is nothing, Mr. Chairman, to locking yourself into a metal box and driving from beautiful West Virginia driving downtown when you could just stay in West Virginia, 

and I think it has been one of the most successful. We have had 

great resistance, the agencies that now use it love it. So hopefully 

if they don’t get the authorization we would give them the ability 

so they can move ahead. Thank you. 

Thank you, Mr. Chairman. 

Mr. KAPPOS. Right. We will make sure the to send the language 

to the Chairman. 

CLOSING REMARKS

Mr. MOLLOHAN. That is also probably one of the strategies to use 

to avoid this bubble—to avoid a hiring bubble as you get experienced people on telework. 

Thank you, Director Kappos for your testimony here today and 

for your good work with the Agency. We look forward to working 

with you and being as responsive as possible to your requests. 

Mr. KAPPOS. Okay, thank you very much. 

Mr. MOLLOHAN. Thank you. 


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W I T N E S S E S 

Page 

Bradford, Mayor David ............................................................................................ 393 

Brown, John ............................................................................................................. 393 

Fernandez, John ...................................................................................................... 313 

Gallagher, Dr. Patrick ............................................................................................. 233 

Kappos, David .......................................................................................................... 461 

King, Michael ........................................................................................................... 393 

Locke, Hon. Gary ..................................................................................................... 1 

Lubchenco, Dr. Jane ................................................................................................ 123 

Wemple, Chuck ........................................................................................................ 393 

Wyatt, Dr. Les .......................................................................................................... 393 


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I N D E X 

Bureau Reference 

Bureau and Topic Page 

Census 2010 Decennial.......................................................................................... 13–15 

Census 2010 Decennial Participation................................................................... 24–25 

Census 2020 Census ............................................................................................. 116 

NIST 9/11 and Building Design Failure .......................................................... 265–266 

NIST 9/11 and NIST’s Role in Rebuilding ....................................................... 266–267 

NIST 9/11 Recommendations and Implementation in New York ..................... 267 

NIST 9/11 Report Updates................................................................................ 264–265 

DOC Access to Credit ............................................................................................ 19–21 

EDA Access to Credit ............................................................................................ 390 

USPTO Accuracy of Fee Collection Estimates and ‘‘Swing’’ Language......... 511–513 

USPTO Accuracy of Fee Collections................................................................. 509–511 

DOC Administration’s View on Spectrum ......................................................... 96–105 

NIST American Recovery and Reinvestment Act ........................... 267–268, 248–250 

EDA American Recovery and Reinvestment Act And Jobs.................... 347, 353–358 

EDA Application Flexibility .............................................................................. 366–367 

DOC Appropriations, Authorizations, Obligations and FTE.............................. 81–94 

EDA Approval Timeline .................................................................................... 416–417 

NOAA Aquaculture............................................................................................ 223–224 

NIST ARRA—Construction Funding................................................................ 290–294 

NIST ARRA—Science and Technical Research Funding................................ 285–290 

EDA ARRA Funds ............................................................................................. 378–381 

EDA Award Funding Formula.......................................................................... 343–344 

USPTO Backlog Reduction With and Without Surcharge.............................. 493–495 

USPTO Backlog, Optimum ................................................................................... 495 

EDA Best Practices for Commuting in Need................................................... 346–347 

NTIA Broadband Technology Opportunities Program (BTOP).......................... 74–81 

NOAA Budget for Restoring Climate Sensors................................................. 211–212 

USPTO Budget Requirements .............................................................................. 476 

NOAA Catch Shares.................................................................................. 169–179, 200 

NTIA Cellular Detection and Jamming Technologies......................................... 18–19 

Census Census Scams ........................................................................................... 62–63 

ITA China........................................................................................................... 120–121 

ITA China’s Currency Manipulation .................................................................... 23–24 

NOAA Climate Service ...................................................................................... 143–144 

NOAA Climate Service and Business Information ......................................... 204–205 

NOAA Closing Remarks ....................................................................................... 161 

USPTO Closing Remarks ..................................................................................... 498 

NIST Command Centers in Buildings ................................................................. 267 

DOC Commerce Reports Not Timely ................................................................... 36 

NIST Competitive Construction Grant Program............................................. 269–272 

NOAA Constellation Observing System For Meteorology, Ionosphere and 

Climate .............................................................................................................. 160–161 

NIST Construction of Research Facilities........................................................ 297–300 


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EDA Coordination of Federal Agencies............................................................ 415–416 

EDA Coordination With Other Agencies ............................................................. 343 

EDA Coordination With Other Federal Agencies............................................ 385–387 

EDA Credit Access..................................................................................... 458, 459–460 

BIS Crime Control Technologies........................................................................... 17–18 

NIST Cyber Attacks Against NIST .................................................................. 281–282 

NIST Cyber Security ......................................................................................... 254–255 

USPTO Cyber Security ......................................................................................... 489 

NIST Cyber Security and Interagency Efforts ................................................ 279–280 

NIST Cyber Security and NIST’s Role in Private Sector ............................... 262–263 

NIST Cyber Security and Other Agencies ....................................................... 263–264 

NIST Cyber Security Increase.................................................................. 261–262, 280 

NIST Cyber Security Initiative......................................................................... 309–311 

NIST Cyber Security of U.S. Systems Overseas ............................................. 280–281 

Census Decennial Census.................................................................................... 115–116 

EDA Deficit Spending........................................................................................ 332–333 

EDA Delta Center for Economic Development................................................ 456–457 

USPTO Departmental Oversight.......................................................................... 46–47 

EDA Disaster Assistance................................................................................... 391–392 

EDA Disaster Funding ...................................................................... 352–353, 381–384 

EDA Disaster Recovery in Texas...................................................................... 455–456 

NOAA DOD Appropriations for NPOESS........................................................ 157–158 

NOAA Discovery Mission .................................................................................. 214–218 

EDA Economic Development District Designation ......................................... 424–426 

EDA Economic Development Districts ................................................................ 358 

EDA Economic Development Representatives................................................. 324–325 

EDA Economic Recovery in NW Alabama .......................................................... 455 

EDA EDA Reorganization—Office of Innovation and Entrepreneurship...... 367–369 

NOAA Education Program................................................................................ 145–148 

EDA Effectiveness of EDA as a Loan Program............................................... 420–421 

DOC Emergency Steel Loan Program.................................................................. 27–28 

EDA Energy Efficient Building System Regional Innovation Cluster Initiative (E–RIC) ...................................................................................................... 369–370 

EDA Energy Regional Innovation Clusters ..................................................... 351–352 

USPTO Examiners ................................................................................................ 490 

USPTO Export Control and Secrecy Orders.................................................... 480–483 

BIS Export Control Program ................................................................................ 16–17 

EDA Exports....................................................................................................... 457–458 

USPTO Fee Increases Contemplated ............................................................... 486–487 

USPTO Fee Scaling for Multiple Users ........................................................... 487–488 

USPTO Fee Setting Authority .......................................................................... 505–506 

USPTO Fee Setting Authority and Reserve Fund Requested........................ 478–480 

USPTO Fiscal Year 2011 Budget Request....................................................... 499–501 

NOAA Fisheries Stock Assessments ................................................................ 148–152 

ITA Fraud and False Statements—During Investigations and Administrative Review ............................................................................................................ 67–68 

EDA Gambling........................................................................................... 345–346, 347 

NOAA Geostationary Operational Environment Satellite Program ................. 166 

NOAA Geostationary Operational Environment Satellite–R Series Space and 

Ground Awards................................................................................................. 162–164 

EDA Global Climate Change Mitigation Incentive Fund............... 337–342, 374–375 

NOAA Goes-R Instrument Updates ................................................................. 164–165 

NOAA Goes-R Satellite Program...................................................................... 212–214 

EDA Green Projects .............................................................................................. 418 

NIST Homeland Security and NSA ..................................................................... 264 

EDA Human Capital Development ...................................................................... 332 

DOC Human Rights and Economic Trade With China ...................................... 29–31 

USPTO Increases in Fees and Industry Support ............................................... 490 

NIST Industrial Technology Services—Tip...................................................... 294–295 

USPTO Intellectual Property Rights ................................................. 21, 491, 522–523 

USPTO Intellectual Property Theft Estimate ..................................................... 490 


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DOC International Traffic in Arms Regulations (ITAR) and Export Control 

Systems.................................................................................................................. 31–32 

USPTO IT Modernization ................................................................................. 516–517 

EDA Job Creation .............................................................................................. 333–335 

USPTO Job Creation and Patent Pendency .................................................... 491–492 

NIST Job Expansion in China Instead of U.S................................................. 252–253 

DOC Job Protection, Commerce’s Role................................................................. 25–26 

DOC Job Repatriation ........................................................................................... 26, 28 

EDA Job Repatriation ....................................................................................... 325–330 

NIST Job Repatriation Program....................................................................... 253–254 

NIST Jobs at NIST ............................................................................................ 255–256 

NOAA Joint Polar Satellite System ................................................................. 152–154 

NOAA Joint Polar Satellite System ..................................................................... 155 

NOAA JPSS Budget Impacts............................................................................ 158–159 

NOAA JPSS Bus ................................................................................................... 156 

NOAA JPSS Launch Dates ............................................................................... 156–157 

NOAA JPSS Sensors.......................................................................................... 155–156 

NOAA JPSS Transition ........................................................................................ 157 

EDA Length of Review Concerns ..................................... 376–377, 413–414, 458–459 

NIST Manufacturing and State’s Roles ........................................................... 257–259 

NIST Manufacturing Base and NIST’s Role Re-Energizing........................... 256–257 

NIST Manufacturing Focus at NIST................................................................ 250–251 

NIST Manufacturing of Textiles....................................................................... 260–261 

NIST MEP .......................................................................................................... 295–297 

EDA Nash, Texas Economic Development Funding ....................................... 347–348 

NOAA National Climate Service ...................................................................... 121–122 

ITA National Export Initiative................................................. 26–27, 113–115, 21–23 

ITA National Export Initiative—Staffing Requirements.................................... 68–70 

EDA National Innovation Marketplace............................................................ 363–364 

NIST National Innovation Marketplace .............................................. 277–278, 45–46 

NOAA National Polar-Orbiting Operational Environmental Satellite System 

(NPOESS) ......................................................... 116–119, 138–143, 201–203, 228–229 

NOAA National Polar-Orbiting Operational Environmental Satellite System 

(NPOESS) Transition to JPSS......................................................................... 206–211 

NOAA National Weather Service—Aviation Weather.................................... 218–219 

NIST NIST & Competitiveness......................................................................... 305–307 

NOAA NOAA Catch Share Program ................................................................ 203–204 

NOAA NOAA Climate Service.............................................................. 187–192, 47–49 

NOAA NOAA Educational Program................................................................. 193–199 

NOAA Office of Atmospheric Research ............................................................... 145 

DOC Office of The Senior Advisor for Native American Affairs........................ 95–96 

USPTO Opening Statement By Mr. Kappos.................................................... 462–475 

USPTO Opening Remarks—USPTO FY 2011 Budget Overview................... 461–462 

Opening Remarks—Department of Commerce—Commerce, Justice, 

Science and Related Agencies Appropriations for 2011 ................................. 1–2 

Opening Remarks—Economic Development Administration .................... 313–314 

Opening Remarks—National Institute of Standards and Technology ......... 233 

Opening Remarks—NOAA FY2011 Budget Overview............................... 123–124 

Opening Remarks—United States Patent and Trademark Office (USPTO) 

FY2011 Budget Overview ......................................................................... 461–462 

Opening Statement—Ranking Member Wolf ................................................. 3 

Opening Statement by Assistant Secretary Fernandez ............................. 314–315 

Opening Statement by Dr. Gallagher.......................................................... 234–236 

Opening Statement by Dr. Lubchenco......................................................... 124–126 

Opening Statement by Mr. Kappos ............................................................. 462–464 


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USPTO Opening Remarks—USPTO FY 2011 Budget Overview—Continued 

Opening Statement by Secretary Locke .............................................................. 4–6 

USPTO Operating Reserve ............................................................................... 515–516 

USPTO Optimal Pendencies ............................................................................. 477–478 

ITA Other Agencies and Organizations Involved................................................ 70–74 

USPTO Outcomes .............................................................................................. 488–489 

EDA Overall Funding Levels—Public Works and EAA.................................. 365–366 

NIST Overseas Counterparts of NIST ................................................................. 260 

EDA Partnerships With Higher Institutions................................................... 418–419 

USPTO Patent Count System........................................................................... 517–519 

USPTO Patent Reform .......................................................................................... 522 

USPTO Patent Requests: Foreign vs. Domestic ................................................. 483 

USPTO Patent System Reform......................................................................... 485–486 

USPTO Pendency Backlog Reduction .............................................................. 484–485 

USPTO Pendency Reduction Timeline............................................................. 492–493 

EDA Penn Station in Baltimore ............................................................... 342, 344–345 

NIST Pharmaceutical Industry and NIST .......................................................... 268 

EDA Planning .................................................................................................... 414–415 

EDA Planning Funds......................................................................................... 377–378 

EDA Planning Grants........................................................................................ 330–332 

EDA Planning Network..................................................................................... 421–424 

USPTO Post Grant Review ............................................................................... 519–521 

ITA Pre-Petition Process ....................................................................................... 64–66 

EDA Process for Working With Local Governments....................................... 342–343 

NTIA Public Telecommunications Facilities, Planning and Construction........... 36–39 

EDA Public Works and EAA Funding Levels.................................................. 335–337 

EDA Public Works Funding Level ....................................................... 426–427, 49–51 

NOAA QuikSCAT............................................................................................... 167–168 

NOAA Recreational Fisherman ........................................................................ 179–186 

NOAA Recreational Fishing ................................................................................. 161 

NOAA Recreational Fishing Data .................................................................... 225–226 

NOAA Red Snapper ........................................................................................... 230–232 

USPTO Reductions Necessary Without Authorizations Surcharge .................. 496 

EDA Regional Innovation Center ......................................................................... 40–45 

EDA Regional Innovation Clusters .................................................................. 349–350 

EDA Reorganization .............................................................................................. 323 

USPTO Reserve Fund........................................................................................ 507–509 

EDA Revolving Loan Fund ............................................................................... 456, 458 

EDA Revolving Loan Funds.............................................................. 348–349, 371–373 

NOAA Satellite International Partnerships .................................................... 154–155 

NOAA Scatterometer......................................................................................... 159–160 

NIST Science Education ....................................................................................... 268 

NIST Scientific and Technical Research Services........................................... 300–304 

NOAA Seafood Safety........................................................................................ 226–228 

EDA Second Panel Remarks............................................................................. 427–428 

NIST Smart Grid ................................................................................................... 252 

NOAA Southwest Fisheries Science Center .................................................... 192–193 

Census Status, Revised Estimates and Media Purchases.................................. 52–62 

DOC STEM Education........................................................................................... 34–36 

NIST STEM Education ..................................................................... 272–277, 278–279 

DOC Stimulus—Broadband Grants ................................................................. 106–113 

NIST Stimulus Programs.................................................................................. 307–309 

USPTO Surcharge: Interim Fees...................................................................... 501–505 

USPTO Telework................................................................... 119–120, 28–29, 514–515 

USPTO Telework—Long Distance.................................................................... 496–498 


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EDA Timelines of Review Process.................................................................... 358–363 

NIST Tip Program ............................................................................................. 282–284 

EDA Trade Assistance....................................................................................... 387–389 

ITA Trade Compliance—Enforcement ................................................................. 23 

ITA Trade Compliance—Subsidy Investigation .................................................. 49 

NOAA Tsunami Detection, Warnings and Forecast ....................................... 219–222 

USPTO U.S Patent and Trademark Office.......................................................... 15–16 

NOAA Weather Satellites ..................................................................................... 32–34 

Written Statement of Assistant Secretary for Economic Development, 

John Fernandez ......................................................................................... 316–322 

Written Statement of Dr. Patrick D. Gallagher, Director of the National 

Institute of Standards and Technology.................................................... 237–247 

Written Statement of Jane Lubchenco, Ph.D. Under Secretary for Oceans 

and Atmosphere and NOAA Administrator ............................................ 127–137 

Written Statement of USPTO Director David Kappos, Under Secretary 

of Commerce for Intellectual Property..................................................... 465–475 

Written Statement on Commerce Department’s FY 2011 Budget by Commerce Secretary Locke .................................................................................... 7–12 

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