him and why. we think these are all codewords about saintly or effective. ..

participants discuss the politics around current federal energy poll circumstance including international negotiations regard global climate change. this is just over an hour. >> is the sound on? >> barely. >> the panel now is going to presume that the age of oil independence does materialize, and look not at the energy implications but the geo political implications of shoving all of those millions of barrels of oil of surplus on to the global market. the moderator is susan glasser, who is the editor in chief of foreign policy magazine. >> thanks, steve. thanks, everybody. can you hear me now?

>> no. >> how about this? all right. here we go. we have a cast of thousands so luckily the good news is, no opening statement. i mean, this is a terrific opportunity, i think to have a conversation that all of us are looking forward to having, which is what are we supposed to make of this? let's not throw numbers at everybody. the focus of the discussion, steve has given us strict marching orders but take as a given the new aim of relative north american oil and gas abundance is upon us, and it's start to unpack the geo political implications of that. and obviously it's speculation but that's great. that's a washington sport we all excel at, so it makes for a pretty good conversation. it's such an all-star cast i'm not going to fill it up with long introduction but we have

michael levi. adam sieminski issue the administrator of the energy information administration. ed morris, the globe head of commodities research at citigroup. ed chow, a senior -- >> it's an honor. >> robin west, the chairman and ceo of pfc energy. ed chow, who is a senior fellow at the center for strategic and international studies, and john hoffmeister, the founder and ceo of citizens for affordable energy and was the president of shell oil company. i can't think of a better and more distinguished group to washing us through the consequences and where we agree and probably disagree about some of those consequences.

so, i'm actually going to jump right in here and asked morse, who said this new age of energy abundance beckons to make north america look like the new middle east. so maybe you can start us off with your tour of the geo political horizon when all this oil and gas comes online. >> i know you don't want any numbers but i have to give some. starts with the fact that the u.s. has a deficit of 3% of gdp, oil import bill is 5% of gdp. one picture you can't avoid is if this happens, the deficit will no longer be a significant issue, and as michael has argued in verious places, as have others, the current deficit and protection of the dollar has

been one of the big achilles heel of american foreign policy, and we would be freed of the shackles of that, if nothing else, looking to a world where the dollar would likely be maintained as a reserve currency for a long period of time. the other thing that comes as a consequence of not having the current account deficit impact judgments about foreign policy is we can have a better value-based foreign policy. we're no longer going to be kowtowing to despotic rule ares or monarchs who's oil supply lines are can critically important to other aspects of foreign policy and those tradeoffs will be eliminated. i know others will get into other areas but these strike me as two obvious places where energy independence makes a big difference. >> i definitely want to survey the group on whether they agree fully we're no longer going to

be kowtowing to dictators anymore. robin, you made some very interesting sweeping sense of what this new age of energy independence could mean for us. you called it the energy equivalent of the berlin wall coming down to talk about america becoming perhaps the world's top producer again. what tide you mean by that? >> i meant, as the berlin wall coming down, changedded our perception of the world and our role in it. from an energy standpoint, it's very important for two things. one to include canada and the united states, you then have the u.s. as self-sufficient. energy independence is a dangerous term. if we're self-sufficient, several things happen. one, i agree entirely with ed's opinion and there's tremendous change of crude flows, african

flow is going to move to asia, and asian countries are going to be much more focused and influential on those parts of the world. by the same token i was asked bay senior diprime minister for the u.s. last we're, do you american people will support 100,000 troops be sent to kuwait ten years from now to protect oil? i said, don't think so. i think this is a tremendous challenge for the military. there's one other thing that -- ed alluded to it, but i think it's terribly important. this was a tremendous private sector free market success in a period of stupendous market failures in other sectors. and the federal government had no role in this. 94-95% of the resources are on state and privateland. the feds have nothing to do with it. it was a complete surprise to

everybody but it was driven by independent companies being very innovative, responding to high prices, and people forget there were brownouts in 2005 and -- a million people on the brooklyn bridge from gas brownouts. in the summer of -- i think was 2005. it was a big crisis. prices were high and the market worked. and if you look look at so much energy policy -- a lot of politicians feel that energy -- war is too important to be left to the general recalls, and politicians believe energy policy is too important to be left to the market, and i think markets work pretty well and i can demonstrate that. there's one last point that people overlooked and the that's part of the narrative of the united states going back to the '7s, was we were an energy gluton, and we were wasteful and

spoiled, and the fact of the matter is -- the president likes to say we're 4% of the population and consume 20% of the energy. the fact of the matter is the u.s. economy is rough 20% of the global economy and we consumer roughly 20% of the energy. that's about right. population is a demographic, not an economic input. and the fact of the matter is the whole narrative of the u.s. in the world and its role in the world and our -- this sort of selfish energy gluton -- that's going to change as well. this is -- i do think this is on the scale of the berlin wall coming down, and i would point out there was a book that came out called "the end of history" which was completely wrong, and i think that -- >> maybe it was just ahead of its time? >> way ahead. but the fact of the matter is that a lot of thought -- in a

lot of places around the world, tremendous decline rates. the notion that there won't be tightness global markets, think there will be tightness. certain renewable technologies may not work because gas prices are so low but work in a lot 0 other places. i think we get -- it isn't over. this is part of a continuing saga. >> , they just so much to impact here. i want to bring in john because you talked about the role of private companies, and i think 2005 to 2008 is when your were sitting from a very interesting vantage point. how would it look of you were sitting there today in terms of in your role as not only head of the company but as a geo political czar? how is the landscape changed from when you were leading an oil company? >> my last advice to the board of directors when i retired in 2008, was to steer capital away

from the united states because the united states was so confused on energy policy going forward that government had taken on not just in the current administration, but prior administrations as well, the role of disabler, rather than enabler, and as we move through the 50s, 60s, and 70s of the last century, government was the primary enabler of the great expansion of the economy that occurred in the post world war ii period with major will gotive moment to make things happen for the american economy, and until the federal government in particular, comes to grip with whether it will be the enabler of prosperity or the disabler of markets, which it seems to have a much higher priority in disabling -- i think if i'm heading an american oil company, looking at use of capital in america, i would be very

careful. i would be very selective. and i think that's what we're seeing. there are so many american companies out there, however, that have huge capacity and the entrepreneurial spirit is alive and well, that we are seeing what we're seeing, but trees don't grow to the sky. we learn that a long time ago. and so all the prospective growth in domestic energy supply could be achievable but it also could not be achievable, depending upon the kind of macro policies we will set at a governmental level. market only has so much strength and yet, private landholders and state permits have enabled what we achieved today. but we could do so much more, not only in spoil gas production but in substituting natural gas as a transportation fuel in the internal con bumming engine by making ethanol from natural gas

and we could more rapidly displace oil imports if we chose to change the fuels we are using. at the same time we open up more of the assets of the -- the domestic assets we have. but here's a limitation we shouldn't forget. the oil and gas industry today has 100,000 job openings it can't fill. we don't have an immigration policy that works. 100,000 jobs going begging, which would otherwise accelerate even more activity in the oil and gas fields, and educational system that is not bringing forward the educated students necessary to equip the companies with the numbers of graduates they're going to need going forward. so it's not just natural resources. it's human row sources that -- resources that matter as well. and i spent monday in west texas; tuesday in louisiana, and everyone i talked to, can't find

machinists, truck drivers-can't find people that will pat the drug test. can't find skilled offshore workers. can't find engineers. can't, can't-can't. this is a limitation we ought to be worried about as a nation and it's not just the spoil gas industry that can do something about it. there are other systems and institutions in the country that have to help this process. >> so i want to quickly take u.s. actually outside the u.s. for a second and i want to ask ed chow, what about the rising countries and the demand from china and india, new players, brazil obviously is a producer, russia is a producer -- how does the rise that we're presuming for the purposes of this conversation -- how does this scramble what our assumptions are about the relative political weight of those countries, if they're looking at the u.s. in a different way? does it change things or are we

being overly optimistic it changes our hand. >> it won't always change things the way we hope or expect them to chiang but in terms of energy investment around the world, i think in a time of plenty, which is what we're assuming, it would take a zero sum gain nature of the conversation out of the equation. we have this mix feelings about chinese energy investments around the world, and if there was not a concern over the lack of reply here -- look of supply here in the united states, maybe that concern would dissipate. in fact we have already seen this. we have noticed it, which is the interesting part. the amount of chinese investment in north america is -- has not raised the kind of concern that the uno cal purchase by chevron did when chinese oil company was

interested in uno cal. so we have seen a more relaxed attitude, and india will be following suit. they're the incremental demands. not america in this time of plenty. the area economy will grow at two or three times our natural growth rate. so, it takes away that element which from a geo political standpoint i think is healthy. it wasser in a very healthy phobia that we had to begin with. and i know you told me in the hallway i should try to disagree -- i will do my best to probe the idea of whether we're really going to be less concerned about middle eastern

oil and whether it is true or not, american people, at least american government, will no longer be tending to liberate kuwait or anywhere else because we have been or will become more energy self-sufficient. middle eastern oil and gas is still important to the rest of the world, and our economies are intimately linked to the rest of the world. there is only one global power that can secure that supply today, rightly or wrongly. are we, therefore, going to relinquish that role? are we going to cooperate with others? i'm thinking out china and india -- as far as the global responsibility of making sure the global economy is also healthy and not just our own domestic economy. i'm not so sure itch would --

not so sure. i would like to probe that notion. clearly not happen overnight. would that change the thinks on washington's thought about a blue water indian navally, a chinese navy. this is a panel on geopolitics, and this is the sort of thing we haven't thought about much and needs to be discussed more. >> michael i want to bring you in here. i have to admit many of my facts for this conversation have come from his terrific piece in the new issue of of "foreign policy magazine" in which he asks us to think again about the americaning in boom, and have brought a little bit of a note of questioning to the conversation about how much does a new moment of energy of plenty translate into a moment of more political independence from the middle east? that certainly is what everybody would like in the sense of sort of breathing a sigh of relief, but is that really just around

the corner? >> it's striking in listening to the conversation how o. the word like feeling and attitude and variouses of the theme come up. it's important to distinguish between how this will affect our perception and how it will affect the underlying economic and physical dynamics of the whole market and its relationship with the global economy. i actually agree with robin and ed this will affect our perception. if you look at the history of oil and international politics, you fine that oil influences international politics because people think that oil influences international politics. spend the ask, based on those beliefs and those actions have consequences. so if you think it matter that saudi arabia is a big supplier of oil, you will do things because of that no matter about what any advisor tells you about the fungibility of the oil

market. reality is also affected by reality. and as ed has pointed out correctly, we live in a globally integrated oil market. it's not perfect. it's not the theoretical economic ideal that some people sometimes claim or more often assume exists but we do. and even if we are producing, as much as we cop assume -- this is the assumption for this panel -- when something goes terribly wrong in the middle east, the only way to insulate the united states from the price bite, which would be economically damaging, would be to bar exports, whether because we have not allowed construction of export capacity or because we have said by law, you're not allowed to export oil. otherwise it will be drawn to other parts of the world in order to equalize prices. that would be a big decision. perhaps that's something that would happen but i wouldn't want to assume we're going to decide to break down this open system for global trade and oil. there are whole lot of a geo

political implications. if prices go down that changes the power of various countries in the world. ed pointed to this important piece on fd i i. we talk about the geo political implications as a consumer because we're used to thinking as a consumer. that's how we have thought for 40 years or so. but if you think as the producer, you get into fights about export policy, trade policy, foreign direct investment policy, all of which have geo political implications as well. >> adam, i'm interested in your thoughts on this part of the conversation, and i wanted to step back and put aside the u.s. for a moment, these have been times of high oil prices internationally. what is your sense of -- what is the number at which it really begins to scramble the internal politics in a country like russia, for example, which is built a lot of assumptions into its budgets of continued high oil prices? where does the price of oil

start to affect potentially political stability in certain parts of the world? what's your feeling? >> a number of analysts, both in government agencies and private sector companies, have analyzed budget break-even prices for a number of countries on oil. if there were a large oil exporter. i think ed already pointed out that a number of countries -- russia, nigeria -- have very high budget break-even prices. a number of others have fairly low break-evens. if you -- just kind of consider that range, most of the numbers a year ago were falling in the average was falling somewhere in the low 0s, let's say 92, up to $95 a barrel.

actually because of higher prices and somewhat higher production in a number of these countries, that budget break-even has come down somewhat. might be in the mid-80s now rather than the mid-90s. kind of skipping over that for a second and going back to one of the major themes that has been brought up by virtually everyone here on the panel, one of the things that needs to be considered is, what does this really mean for the u.s.? and ed hinted at, this is a huge potential positive productivity shock to the u.s. economy. to grow gdp, grow employment, strengthen the dollar, shrink the tread deficit, all of these things tremendously positive. one thing to keep in mind about this and to extend it out

globally, is that the u.s. has managed to make more progress in this area, both in natural gas and oil, than virtually any other country around the world. it will be interesting to see the extent to which developments in the u.s. proceed into other countries. so far, other than canada, maybe australia, it hasn't really moved as rapidly as you might expect it to. >> ed, what about china, for example? do we see pros expects for them to experience a similar change in their internal energy picture? >> i think it's just beginning. there are a lot of other things going on in the domestic-chinese

market, particularly with gas. there needs to be preconditions of the shell -- shale gas revolution, such as price reform, which they're attempting in provinces. it would also potentially change their relationship with russia in a time of plenty for gas around the world, russia's needs to diversify its markets becomes a little more urgent than at a time when western europe did not have available lower price ong. a substitute for russian gas. so maybe make it easier for the russians and chinese to come together on the deal, something they've been working on for a long, long time but never get there. so, i think there are a number of implications for china, both in terms of domestic gas

production potential, both in conventional gas, methane type gas in addition to shale gas, which will probably come last. we'll fine out in the next five or ten years but in the next couple of years. and china's role in the international gas markets will change when supply is plentiful. >> so ed, how do you respond to the question of whether we're being -- letting our hearts lead us when it comes to the prospect of being more independent from the entanglements of the middle east as a result of this? >> i'm not moved in a lot of ways. by that -- i think there's much more consensus on this issue than otherwise might be the case. clearly the u.s. has broad international interests, clearly

mike is right in talking about the role of oil. i'm just thinking about the role of oil in the middle east since i've been looking at the knowledge and others in the room have been. when the u.s. was first interested in oil in the middle east, other than commercially developing it by companies, in the -- at least modern history. it was make sure that russia didn't get control of the middle east oil, and when the cold war was over, interregional relationships became the driver rather than the cold war, and there's bound to be other issues that will arise. as long as i'm speaking, i really do want to make a point that others have made, and we have let go, robin made it publicly many times in talking about the u.s. having the lowest cost electricity in the world, the lowest cost natural gas in the world, and it's not an issue

of oil self-sufficiency that is driving what is happening there is really an industrial investment boom that is unfolding. unfolding slower than it might but is likely to accelerate. the lag has been some of the things john talk about. the lag has been smart companies, like the one he used to be at, saying, hey, we've got an opportunity to negotiate good tax terms with states that want the investment and the employment. we're seeing a massive change the petrochemical industry. not based on natural gas or oil. it's based on the other thing being produced, the ngo. the largestth than i producer in the order. the steel industry has been transformed and a sim -- needs for different kinds of steel and

the u.s. is seeing incredible flows in investment into the steel industry. the manufacturing jobs that we think we can look at in a very conservative way, order of magnitude between three and four million between now and 2020. so, the implications geo politically include what is happening in the u.s. economy, and it's profound. >> i have two two-finger interventions and then i want to go back to these bigger pick tour u.s. pictures. >> when the picture that ed painted of what we worried about, is really important. because it takes us to a time in our history where we did not have as free and open of a global trading system, so preferential arrangements for oil trade and previous rein shat

tariffs made geography matter more than it does today. where we had a world super power rival, soviet union, which we worried would be able to control production and reduce supplies, and we're not in that world right now, but we could be in that world in a couple decades. it's difficult to predict how the future will unfold. and one important thing to keep in mind when we talk about the reply picture, is that its impact on the world, on a linear course without many changes from where we are today, is very different from what the impact might be if we end up in a world that is different win it comes to global trade and global security. if we end up in the world in 20 years, the fact we have more abundant replies, depending on what we distracted between now extracted between now and then will have different implications >> i learned many years ago not

to disagree with ed and only do it when it's necessary. i certainly don't disagree with him at all on the positive aspects. they're profound positive aspects on the domestic economy of the natural gas and oil production boom in north america. i was trying to make a different point, and that point is that the self-sufficiency does not insulate us from the global economy. as we are finding out today based on what is happening in europe right now. and so perhaps supply from the middle east is not so critical for us anymore. but where does that leave the global economy and who is going secure the supply lines from the middle east? we have this kind of mixed feelings about when the chinese,

in particular, start doing too much to protect their own interests. we feel threatened when they do that. when they don't do enough, we call them free-rider, right? should where between the two we have to figure out the mix of cooperation, collaboration, as we are doing, say, with the somali pirate problem between the chinese and others right now, how to share that global responsibility even if that middle east supply is no longer so critical to our own economy. >> i would note this has been a record year for somali piracy so cooperation might not be the key to solving problems. i i want to ask robin and john to start us off in a conversation now about what are the u.s. political implications of this, both in the short term -- this is an election year and we're seeing both campaigns in some way talking a lot more about energy than you might have

expected a couple years ago. but i just -- i'm really curious of both our your takes, does energy and this income boom play into the 2012 presidential campaign in and then in a more long-term sense do you see it being associated with one party or the other? >> i find it fascinating that one word has not been mentioned once on this panel today, carbon. and the president has said that climate/carbon is one of his priorities the next administration. and i think that frankly, if waxman markey was the basis, that was their philosophical legislative statement, this was a euro green approach. a big transfer of wealth. it was to use government regulation to drive in new technologies, and i don't think there's much support for that in

the country. it's very interesting, last week ago friday was the hottest june day ever recorded, and increasingly on the weather -- on the news, weather talking about, isn't it awfully hot? seems to be hot all the time. that's something going on. so i think that the issue of climate is an interesting issue. i think that governor romney is going to come out for a much more promarket shifting power to the states, opening up public lands. one of the key issues is e.p.a. that's where the power lies in the whole issue. and the other thing is that you have states like pennsylvania and ohio and there are whole bunch of new oil and gas producing states, and so the political calculus is going to change domestically. but i think that in the end, one

of the president's regular taglines is, he really doesn't like the oil industry. i think that's fair to say and wants to tax it more, and it's a target. i think there's a real danger what some congressmen and others have said dnr one of the real dangers is what could screw the whole thing up is infrastructure and the lack of infrastructure, and if there's -- whether it's using regulation or not changing legislation, i think that there's a chance this thing could be stymied and it could come from washington, although it was initiated by the market. >> john, do you agree that this potentially cuts against obama even though on many ways this happened on his watch? whether he had anything to do with it or not is a different question. >> i think the politics of energy are hugely important in the national dialogue in the corporate dialogue, and it will be a major discussion factor, i think, as the campaign carries

on. i know on many, many points of view in respect energy policy in which everyone can be right and everyone can also be wrong. what do i mean? energy and the development of energy -- and i'm talking all kinds of energy, not just oil and gas -- could be the basis, as was suggested, of a whole new era of president spirit, changing the whole economy. changing the revenue flow to the government. changing the deficit position of communities and states and the federal deficit itself. if we could unleash all of that prosperity. at the same time, we'd choke on our waste. and i think we could actually turn waste management into part of the prosperity as well. i think the president is wearing thin when the whole discussion is around carbon, when it really should be around waste because

it's land, water, and away. carbon only implies air but there's a whole waste management industry that could grow with the increased prosperity in the production of natural resources at the same time. i think that both/and story -- whoever gets that story right to the voters will be successful. this either/or business doesn't work. we have had miserable experiences with gasoline prices, in the first and second quarter. leading to near recession in the third quarter. the last three years? stock market volatility? people are tired of the uncertainties of low growth, slow growth, no growth. and what people are looking for is a way for the economy to rebound and sustain that rebound and to experience real growth. i think the opportunity is there. i think either party could grab

and it run with it, and i maintain a nonpartisan position to whoever i talk, to but the reality is, this country can be poised for such incredible growth for not just for a few years but for decades if we unleash and it let it happen, and i include waste management as an industry that part and parcel of how we grow going forward. >> adam, do you see other ways in which this can rescramble the u.s. economy? in this positive way or perhaps in not so positive of a way? we're going to become an energy state? become trapped in the resources? >> in many ways, this question of energy independence, wherever it takes you once you get there we're already a net exporter of coal. we don't import a lot of electricity. eii forecasts a net exporter of

natural gas by 2020. and we have had a very thorough discussion on the potential of the oil side. as the only federal employee on this panel -- >> i didn't ask you whether you thought president obama would benefit. >> i would say the role of the federal government has not been, i don't think has been as negative as some have characterized it. natural gas and oil hydraulic fracturing, a lot of the seismic technology used in this got its start in the federal labs. independents who are responsible for the breakthroughs and natural gas fracturing, were helped tremendously by federal subsidy on natural gas production. it was a dollar a million bt u at a time when gas prices were low and that is one of the

better federal policies. it was a subsidy that was put on when it was needed and taken off when it wanted needed anymore. there are a number of things going on in terms of the federal government now. the president was out in oklahoma just a few months ago. encouraging the federal agencies across the board to speed up their permitting processes for infrastructure development, and a lot of things are happening, i think, that are much more positive than what you often see in the press. so, my feeling is that the economics ultimately are going to drive this, and the economics are positive that many of the things that we are seeing in the energy area will have very strong implications for economic

growth, and that the environmental issues that john has brought up and others, can be managed, and managing those will often require state and federal regulations, but getting those regulations right, i think, will actually encourage development, not discourage it. >> so, robin challenged us to bring up the subject we haven't talked about much which is global warming and how this might scramble both the u.s. politics and also the international politics of it. michael, i know that's even a part of your job description. so, walk us through your scenario here. >> let me, though, briefly, i think, elaborate on what adam said. it's important to be clear what the president has done and what his strategy is. yes, there has been an effort to go after some relatively small tax breaks, tax treatments,

whatever you want to call them. we're talking about something that eds up to $4 billion a year in an industry that is far larger than that. on the carbon front, it's also important to be clear that good carbon policy is perfectly consistent with this sort of oil and gas development we're talking about. if i were talked directly in the late -- a couple of special cases. one was a $15 a ton carbon price, almost $20. that brackets the possibilities of what we might have got under waxman-markey. my question is oil production increases in those modeling prices bass the co2 price creates an insend different to capture carbon dioxide. so that's actually the one big growth potential in u.s. production that we haven't talked about. because they're in the carbon

place to create the incentive to make that supply of co2 available. if you look at the basic economics of the issue, increased u.s. oil production and increase is unlikely to have a large impact on global emissions and increased natural gas production, particularly in the next decade or two is like 0ly to displace coal and therefore reduce impacts. to some good extent the discussion about climate policy to date has conflated several different challenges, one of which was global warming and the other one is resource scarcity, that we're running out. if that piece of the coalition that want climate policy in place, vanishes because of their sense of abundance, then i think it becomes more difficult to put good climate policy in play.

you can argue the other play. everytime you run the cost estimates of a model for a cap on greenhouse gas emission, the estimates come in lower if you have more abundant gas because it makes it cheaper to meet your target. so you can imagine this helping, but it certainly scrambles things. no question. one more -- i'll just make one more observation about the international politics. for the most people people in the united states who care about climate change thing natural gas is good news. some thing it's bad news because of the leakage of methane and a basic belief of struck we have to pick one or the other. that's not true in europe. in europe, natural gas is seen as a bad thing for climate change and a bad direct when it comps to climate change. at the international level that will take us in problems.

when we go to an intermeeting and say we're displacing coal with natural gas, they'll say that's not a positive story, that's a negative story. that's going to cause friction. >> i think that's an important point. anyone else want to weigh in on the sort of where the climate discussion goes? >> well, one thing i think is that waxman-markey, which is over 1,000 pages long -- mentioned natural gas twice. but the impact on the economy and the energy system doesn't depend on how many words are devoted to a resource in the bill. it's what it does the economics. >> my only point is what happened really, it was a big program. and a lot of political capital was invested and something entirely different happened. >> ed chow? any response in. >> well, we're certainly internationally in a world aplenty, particularly on gas, than for india and china in particular. you have the tradeoff of

domestic coal, which is very dirty, and which harms the environment, the air people breathe, and as income grow, the population will become more and more concerned about these matters, and if there's availability of gas, whether that's domestic gas because of the shale gas revolution in india or china -- or imported gas, you now have a substitute that may be readily available that was not part of the equation at one time but will become increasingly important, and once again, that's where the energy growth and carbon emissions growth is coming from in the world, and that will definitely bend the curve for them. >> tom, i know you wanted -- >> i think europe's voice in the world, i think, can be loud and demanding, but europe's overall impact on the world i think is

not all that great when you see the world's largest economy and the world's second largest economy pretty much choosing the path they'll choose. let me say this about the oil and gas industry. there is a very strong -- and i would almost call it a passion -- to do things right because when the industry gets its wrong, we see the disasters that occur, and so when it comes to regulations, the only gas industry is looking for clarity, and continuity, because clarity and continuity you can manage. you can engineer toward it. you can make things happen with cement or casing or other innovations and technology to actually control leaks or to stop them altogether, and so i think clarity is important. when that clarity becomes

platallized and it's this program this year, another program next year, new regulation, that becomes frustrating and that's when the industry kind of pushes back. but i think if there is a tendency toward best practice and a tendency toward regulation using best practice, i think you get a lot of industry cooperation, which has positive impacts on the environment. >> robin? >> one point i'd like to come back to, which ed chow talked about -- there's a lot of shale elsewhere in the world in china,marks argentina. people thought o'land and everything like this. but we estimate it takes 1500 wells to prove up a play. and with the exception of canada, there's no place in the world where they drill more than 100 drills and what happened in the united states was that a good perfect storm in the sense that we had a huge service sector, a transparent gas markets, the ability of independents to get financing,

high prices were driving it, there was a gas market, there was gas gathering, everything was in place for this to happy these guys could figure it out. if you good to places like china and -- we've done work with the ndrc and other groups -- their fiscal system is all wrong. they don't -- it's going to take these other places a long, long time, and the point i would make also, i think that, frankly marx renewables may have much more application in those places than they do in the united states, and i think it should be encouraged. >> okay. so we have had a very patient audience here. i want to give you a chance to jump in with questions. a lot of folks so keep your questions to be really a question and not -- give yours name and where you're from, that would be traffic. ma'am? we'll start with you. >> stephanie kinney, maxwell

school. what you're positing today is important but it is not very well known or understood. what kinds of actions do you see as important in the next year or so to get the public more broadly educated and in particular university students? i have students coming out with tremendous debt who think they want to be ngos which will pay them nothing they won't get their debts paid. energy is not something they think of. they take my sustainable and public policy course, and the one area where you could both combine earning a living, real job, and doing something worthwhile if you had the sustainability frame, would seem to be energy. what suggestions do you have to

attract the students coming out now into the areas that you need? >> john, this seems to go to your point. >> this is a critical factor as a public matter of national well-being. the lack of information that prearm yates our society on all matters relating to energy and the environment is a very serious problem, and as i used to say, in meetings, american petroleum institute meetings, if you don't have the public on your side, then the public is against you. and the way to get the public on your side is information. and i founded citizen is for affordable energy for specifically that reason and spend seven days a week trying to engage people at all social and economic levels across the country just to get information out. now, my web sites, citizens for affordable energy.org, and it is basic simple information about

what it is, what is possible, what is not, what is important. we can't count on media because media have a different job to do, which is about exposing, not educating. there is an outcome of some form of education i welcome media all the time and embrace media as an outlet, but it's not media's job to educate the public on energy. our school systems badly look any approach to energy that is not taught. oklahoma is the only state in the nation that is part of the state curriculum mandate, energy education al all levels of the school system. so we had this huge undertake that has to happen for any of the success we potentially 1/2 front of to us actually occur. so i think it is not helpful when politician vilify the

source of value creation that comes from all sources of energy, and whether it's right wing politics or left wing politicians, it's not helpful. everyone knows why they do it but it doesn't do any good other than for their own electoral votes perhaps. i think we have to undertake this as parents, as leaders in society, as teachers of those who are coming after us, and we owe it to our citizens to do that on a sustained basis. >> adam, i know you wanted to jump the. >> i do come from the energy information administration. [laughter] >> and i just had to say that, yeah, ed's been trying very hard to help in this area. if you do an internet search, use a search engine and type insuring energy -- type in, energy information, we come up

first. interesting to me -- i did this the other day -- the third hit you get in google or binge typing in, energy information, is the iia kids page. a lot of really good basic information on where energy comes from house it's transformed and used, and i think extremely popular. i hope that kind of thing filters down. the eia web site has been redesigned. it gets hundreds of thousands of hits daily, and it's a very, very, i think, useful tool, not just for kids but for everybody in the analytical community and in the policy community looking for answers to some of these basic questions. >> i want to get to some more questions here. yes?

>> kuwait for -- >> i'm from the department of energy. a two-part question. mr. west, your firm put0s -- i don't know the exact title but the top 50 energy companies. i wondered how this might shake up the list in the sense that much of the revolution, the developments we're talking about. is in the western hemisphere. what does that it mean for bp and other places are under state control in saudi arabia and others, and secondly, going back to the geo political indications for this, we talk about mr. ciao -- mr. chow mentioned a share global responsibility, and what about our traditional consuming country allies, south

korea, japan, newspaper what does it mean for them if the u.s. is more secure? >> good question. >> okay. in terms of the industry, what's happening in north america isn't going to change the list very much of the top 50 companies. one of the thing things is that the -- it's important to understand that the north american unconventional plays tend to be -- it's a different process. you drill thousands of wells. what big company, the exxons and chevron of the world do they develop enormous capital intensive, engineering intensive projects, big offshore projects off the coast of mexico and africa. that's their business. the north american busy is done largely by the independents. majors are looking at this, wondering if they can come into this, but basically independents

run their business for production growth, and the majors run their business for returns. so it's a different model and it's a different challenge. but the majors are trying to figure out how to come into this. ed do you want to touch on the second part of the question? >> i guess my feeling is that it doesn't change things as much as people would like to -- or maybe as quickly. the somali piracy problem has not been solved but just think what it would be like if we didn't share responsibility. this is the beginning of the experiment. we haven't done very much of this thing before and it would be interesting to see how that thing goes. it's a shared responsibility with our traditional allies as well, but at a time of plenty, allows you to think more about the shared protection of the global commons with people we were once concerned about as

their power inevitably, i smith increases in places like india and china. but the traditional ally relationships will be in place, and i assume they will continue to want us to play a fair share of that. how do you define that fair share i think is the interesting question. >> pick up on this one quickly. i think there's a bigger impact on the gas side than the oil side for the traditional allies. on the ol' side the biggest immediate benefit would be somewhat lower oil prices, which would accrue to everyone. not just the united states. the biggest potential downside is the u.s. misreads the situation and scales back its instant svelte and security around the world which will affect e. but on natural gas everybody is seeing consequences. the fact that u.s. is not buying supplies, and that is shaking up

the geo pot ticks of gas in asia. we could see changes in asia as well. we're obviously having a conversation in this country about potential natural gas exports. i don't see them by themselves being revolutionary but they're an important piece of the puzzle that gives consumers, particularly korea and japan, and take the politics out of the natural gas trade. that's a good thing for the allies and the united states. ...

and that spread seems to be continuing. we believe, at least from our analysis and talking to a lot of experts that this is something big is happening here in terms of an independent. and it is going to put us in a position where suddenly -- let me bring us to a question for you. suddenly we're going to see a world in which not only is the united states capable of operating on its own, it will be different for the rest of the world. we will be less concerned with what happens in terms of crises overseas. the real question he comes with the pressure on the federal deficit, do people start turning and say, we should praise, or at

least tax the barrels that go into or to messed up economy differently than those that are exported abroad. we've seen other nations do this. norway, russian federation. they actually bring in a lot of tax revenue by putting heavy, larger taxes on the energy consumed outside their country. do you see the possibilities of this? >> that's a word we haven't not heard until now. >> it would violate the constitution of the united states before attacks anyhow. that is just as a basic rule being reaffirmed by the united states supreme court and that makes it less likely. >> we believe that fundamentally. it is true that the french and

the uci has reversed itself and that is for a lot of technical reasons we probably shouldn't get into on this panel, but in fact it is not like consistently for enterprises into bti pulls. it is true the differentials have left, but that doesn't mean that the world relationships in terms of a global market has changed at all. norwegians are not insulated from the effects of katrina. the oil affects another the same time, even though it is nothing to do with them and their net exporter prices still win a. so i don't agree with the premise. >> okay. sir. it's okay. you go ahead of him at the other

gentlemen. >> we basically have a longer stretch enough to supply shock have burned our resources. how about demand shock? were forecasted to grow, but a lot is people are discussion the industry peer bsm driving patterns in the united states know that service. so i think it's just around that issue. >> if there's a little bit of controversy over what we start to apply, we know about demand. i think there's a couple of issues that you raise that are really important. one is what is the share of world gdp because of what caused when prices are moving towards 100 dirty dollars a barrel not so long ago, three months ago,

the percent of global gdp a record level was the same level with that in the latter part of the 1970s. you have to do a lot of arithmetic to get there, but i'm pretty sure that was the case. which may be one reason why there's really a cap on prices and the impact of the global economy at a certain level is really very high. the other observation i would make, and this ghost of of what we think about china in particular, let alone indiana is that demand does in slowdown. it comes to a tipping point. in the history of european union of six in 1973, 74 in the late 1890s is that they had incredible growth basically in all of these cases and then i

want to say all of a sudden and that level of impact command has never been achieved. record your product and in his 1974. the six countries originally you see the record year was 1974. double-digit acceleration. china has not had double-digit acceleration. it has power acceleration requirements. if you look at the controversy about data and about what might be going on, two years ago in june or july, the annualized growth in china was 20%. a year ago was 10%. today it's 3%. product demand in china this year has grown less than 1% year on year. there is something going on and maybe at the structure of the economy is changing. it may be that in turn be at the

infrastructure, commodity comes to an end or that the economy is really in islam. time will tell. but to the degree we know about demand is that it can come to a tipping point. >> i promise to end right on time, so i'm going to disclose this with a quick lightning round two of our panels. i know there's so much more we could get out. i would like to ask everybody for a winner and a loser from the premise of our question, which is this american energy would have been. in particular one we haven't talked about yet so far. michael, could see just what to me, your first. >> we haven't talked about it yet? was talked about every country in the world. as far as i can tell. winner, the united states. loser, thank you for the

suggestion. russia. >> the audience will get to vote on this afterwards. add on. >> i think the winner is the average american wage earner. i think wages go up when we develop more than we can manage environmental issues, which i think we can, everybody wins here. as far as losers, i don't see it that way. i think positive development here doesn't mean anybody has to lose whether here or overseas. >> what about teeters in the middle east? >> i would like to believe in one globalized world in which everyone shares in a growing kind, but the fact is there are winners and losers in the audience and michael had found the obvious winners and losers in the u.s. and russia, not simply what's happening related to oil and gas exports, dependent country and what's

happening to oil and gas is happening to price commodities and. but i think single flops in the commodity business really are in a zero-sum world when it comes to the assistant. that makes for a significant amount of political turmoil. it's not a geopolitically positive world and i notice anything through the market consequences of what is unfolding, just on the oil market with ripple effects in the gas market, this is a significantly more volatile pricing model, rather than a less volatile pricing market in the winners and losers of that are the same. your commodity producer and a fairly volatile price environment in which you are struggling to keep market share and revenue is not a pretty picture. >> rodman. >> i would take it differently. i think the potential big loser on this frankly is the environmental movement and i

think that could be a big mistake and i come back from my point earlier that this is not the end of history. this is not a static situation. technology and politics will continue to drive a lot of changes and it ain't over. and i would urge people to keep pushing it. >> wonder is the world, not the united states at a time before you could have lower energy prices and a different set of energy choices, depending on how you value the climate change and so on. you have a different menu of options that you may be previously thought. euchre shop as remains someone who hasn't been called upon yet as a loser out of that.

and i agree obviously whenever i can. but it's absolutely the prudent thing to do. but for those same single commodity economies, it could also become a winning situation for them in the long run in the sense that a high -- very high energy prices have been able an awful lot of bad economic policies and a lower price of oil in particular may be a lot of different economic thinking in reform necessary for those countries. maybe in the long run. >> john. >> the winner will be north americans if we get this straight, the government policy standpoint. north america probably will win the most and i think we will

start a multi-decade new generation of prosperity in this part of the world. the big loser will be opec with the exception of saudi arabia, which is actually more enlightened liberal thinking than any of the other opec nations. they will find a way, that opec will descend into the chaos as an organization. they don't know now how much they are hated by the entire world, but they will find out as things unfold. >> thank you so much. i'm not sure it's an upbeat note to annan, but certainly a provocative one. what a terrific discussion in thank you to the new america foundation and steve for hosting us and all of you for coming today. thank you. [applause] [inaudible conversations]

from mark

>> i think i would've realized that the army for not coming to say, but they stay up really to the west, that is when it collapsed, when he realized finally it had to come to an end and it was only a question of suicide. >> his main objective is simply not to be captured alive by the russians. he was afraid of being paraded a critical, so he was determined to die. aber brown was determined to die with them. >> the campaign collection is

about 100,000 objects. it goes from the very beginning of the nation and goes right up to the president. the next important, because what try to keep this large tradition called and documented and reflect the larger story of american aid. >> to more solar and churchy companies have joined so under an fine for bankruptcy after receiving loan guarantees and

energy department. the house energy and commerce subcommittee questioned energy department officials about the loans. members also heard from interest groups representing energy consumers and electrical manufacturers. in the house, republicans have proposed a bill titled the no morsel under solyndras act. >> good morning, everybody and welcome to the joint convening of the energy and power subcommittee and the oversight investigation committee. i join my distinguished said committee chairman, mr. whitfield from kentucky and this joint hearing. we have two bills before the subcommittee. i will be addressing my opening statements to the no more solyndras act and then relinquishing the chair to my colleague mr. whitfield. and then i give myself four minutes for my opening

statement. chairman upton, proud sponsor of the no more solyndras act. product of an 18 month oversight investigation. today marks a turning point in the investigation. we gather to consider it a little fix problems during our investigation. the cylinder at investigation and introduction of the no more solyndras not is a great example of how more oversight should work. ask us questions, collect facts and identify problems and offer legislative solutions. solyndras was the first recipient under title 17 of the energy policy act and the poster child for president obama's green energy program. it is also the first stimulus pact recipients of the d.o.e. loan guarantee in the first to file for bankruptcy just two years after the long closed in six months after d.o. we've restructured the loud and supported they did private

investors. all but ensuring taxpayers will see it done. through the first five companies that received the department of energy has now filed for bankruptcy and hundreds of millions of taxpayer dollars will never be recovered. the reason the committee initiated the solyndra investigation. 2009 and 2000 connected zero loan guarantee programs come even after he received a massive injection of funding from the stimulus. just one year after receiving the first guarantee trumps pride dob, closed its facilities are made of hundreds of workers. on behalf of american taxpayers, we have a duty to figure out what went wrong with the loan guarantee and whether the program is properly managed. the subcommittees investigation has been thorough and methodical. the committee requested,

received and reviewed documents for every executive agency connected to solyndra and interviewed more than a dozen officials who played key role in the loan guarantee. some members of minority have contended the investigation of solyndra only show that it was risky. this investigation has shown far more than that. for example, it has shown that several red flags raised in 2009 by d.o.e. and omb staff about the company's financial condition in the market for solyndra's products, but the administration ignored these warnings. gop failed to consult with the department required by the energy policy are prior to issuing a conditional commitment to cylinder. the desire to highlight the stimulus impact quality of the review resulted in d.o. regression alone guarantee out the door. d.o.e. failed to adequately

monitor the loan guarantee, blandly writing checks to solyndra acid hemorrhaged cash row 2010. d.o. we've restructured the loan guarantee in early 2011 and then in violation of the energy policy act of 2005 offer to subordinate its repayment position to solyndra's private investors in the event of a liquidation. omb staff raise serious questions about legality of restructuring and weather would improve recoveries after the liquidation. they played no role in reviewing the restructuring, but advise d.o.e. to consult with the department of justice about the subordination, which dod research to do right after the bankruptcy filing, the administration was willing to take extraordinary measures to keep afloat for political reasons and insured loan guarantee was not a failure. with chairman upton and other members of the alumni committee,

we are sponsoring the no more solyndras act to make sure these mistakes and misguided decisions never happen again. six minutes for mr. without. >> thank you, mr. stearns. i am delighted the oversight investigation and energy and power subcommittee's are joining together today in this important hearing. everyone in america and they chose to give half a billion dollars loan guarantees so it meant that has gone bankrupt and left the american taxpayer holding the bag so much that

george kaiser, nature investor in the linda was also a major fundraiser for president obama cast a questioning motivation of those loan ends tran -- you've got the compiler, ballot solar and there are others. all things considered come and there is more than enough evidence to declare this program a failure. in fact he was a slush fund for the president. it's been a failure for a lot of reasons. one, lack of transparency. two, costly for taxpayers at a time when we had a horrendous federal debt and annual deficit. and then the fact that indicate the bankruptcy, the lawyers of

solyndra and the department of energy and administration agree to subordinate the taxpayers so that the private investigators would get their money back first and the taxpayers last is really almost unbelievable. and then, what role did political connections pay in the receiving of these loan guarantees? the solyndra case certainly raises that issue. and the loan guarantee program as far as we know has not developed many tech logical breakthroughs at all that would benefit the american people. at the administration talks a lot about we have created 4 million new green jobs and get chairman issa and others have had hearings and when he found out what is declared -- what is defined as the green energy job, someone merely filling a big

guys with fuel, that is considered a great job now. so they didn't create new jobs. they simply change the definition of a green job to mislead the american people and that is precisely what has been done on this dance. and so, this legislation, no more solyndras act introduced by chairman stearns and chairman upton is vitally important to protect the american taxpayers with the task of adopting this legislation. another bill we consider today is the smart energy act, which is introduced by mr. bass of new hampshire. we all know that in order to conserve energy, there's a lot of different ways to do it. one is through efficiency. and mr. bass' bill focuses on the government becoming more efficient in its use of energy.

and so i want to applaud him for that legislation. and i would also just plain out that we have major innovations throughout the history of our great country. you think about alexander graham bell, henry ford, bill gates, steve jobs and others. and yet, they were able to develop these new technological breakthroughs with private dollars and not government money. i'm delighted we are moving in on this program. at this time of i.t. all time to the chairman, mr. fred upton. >> thank you both, chairman. we all watched the innovation and breakthroughs in the energy sector and i believe the federal government can play a constructive role in encouraging them. but when the department of energy program is not delivering on the polar costing hundreds of millions of dollars, we owe it to the american people to pull the plug. unfortunately, we've reached that stage, which is one of the

reasons why i co-authored the no more solyndras act. i want to thank mr. stearns, the subcommittee for is very hard work, determination. let's not forget what we started the investigation, and right up until its bankruptcy last summer. it's a stimulus success story the next addition they pile up by a message to the american people has to be clear there's no more. the full statement can be put in the record and i yield the balance of my time. >> thank you, mr. chairman. the fact that where the draft bill on no more solyndras act. it's a good bill.

the mr. bass' bill is also a good though. i slightly diverged to say i don't think we have to throw the baby out with the bathwater. i think we can reform these green energy loan programs about terminating them. i think in the process of this legislative hearing that we could disguise. keep the program, but make it more open and transparent. the penalties than for nonperformance and is the chairman and mr. stearns draft bill does come and make it absolutely clear that they have to work with the treasury department and if they don't, they're a big penalties. in any event, i want to commend mr. upton and mr. stearns for their draft bill and also mr. bass for his bill look forward to a productive. today. >> ester texas i recognize.

>> thank you, mr. chairman. ideal cell three minutes. >> recognized. >> since i joined this committee has learned a very simple lesson. good oversight results in good legislation and in contrast, biased and partisan oversight results are biased and partisan legislation. and the no more solyndras act, proves that lesson. let me be clear, the loss of taxpayer dollars in bankruptcy is a serious problem. we should have conducted a full and fair investigation so they could find out what happened to make sure it doesn't happen again. instead, the d.o.e. make cheap political point that electioneering set up a following for thieves. unfortunately, mr. chairman i have to respectfully disagree with your characterization that this committee has conducted a thorough investigation. despite our requests, there were

no hearings to understand that u.s. policies are necessary to ensure that u.s. manufacturers can compete in the global clean energy market. no testimony from the largest private equity investors to understand why the company attracted over a billion dollars in private capital. we refuse to designate the loan program, loves to nuclear projects and invite d.o.e. witnesses to discuss the legal rationale behind the subordination of the solyndra loan guarantee. the minority act for this request was provided the proper background for legislative action to actually improve the d.o.e. loan program. instead it has conducted a political investigation, ignoring benefits of the d.o.e. program, making a series of inflammatory and misleading statements, trapping exculpatory

evidence in reducing witnesses to revoke privileges. give inadequacies of the committee oversight, it is no surprise to me that this legislation is also problematic. it's a political statement rather than a serious policy proposal. it begins with six pages of findings, including the unsupported statement that the review of the solyndra loan application was close striven by politics and ideology. mr. chairman, the statement is not supported by your committee's oversight work. in fact investigation reveals the opposite to be true. key decisions on the loan guarantees for a purely on the merits. discussion draft ignores findings and recommendations of independent consultant herbert allison who conducted a thorough detailed analysis of the program. he thought it was largely successful and stable, but did make a series of recommendations to improve performance and program management. d.o.e. is working to iplement

recommendations of the legislation ignores this fact. mr. chairman, i would love to work on bipartisan legislation to improve this program, just like i would love to work on bipartisan oversight of the program. but that is that, we had a series of bipartisan hearings, which allegedly is very partisan hearing in which led to the partisan legislation and i hope we can shift courses after that and change the legislation a bipartisan way. with that i yield two minutes to mr. dingell, chairman emeritus. >> mr. chairman, i have an opening statement, which are going to last to be put in the record. we have been suffering through this on many occasions, having a wonderful set of hearings, totally unrelated to the facts and having the same reality of alice in wonderland on a bill supported by the leadership in numbers of the republican party

and now we hear how we're going to correct this whole legislation by a new piece of legislation. the committee under the leadership by republican colleagues has been blundering around, crash into walls, finding nothing and issuing press releases and again apparently that constitute repetition of this nonsense is going to make somebody believe it. the harsh fact of the matter is than expected at a loss because the chinese cut the price says of thin-film electrical generating stubs from the power from the sun. and so my republican friends are crashing around him issuing press releases that sounds like their imagination, but demonstrating the wisdom in addition of an earth worm. so now this morning we have to repeal legislation, which afforded the united states some

opportunity to see to it that we can compete with chinese, koreans, japanese and others whose governments wisely and prudently signed the national effort is to develop new systems of energy use. i would just note that this superb piece of american engineering the striven recently out of an american fact jury using american technology on batteries which were manufactured. guess where? n. korea because the koreans are stealing the technology that americans have taken because they have government support. so let me simply observe that this is a waste of time, waste of opportunity for the united states to become competitive and it's my hope they will realize this is a political exercise and not sent in conferring any good on the united states

sightseeing. >> the balance of our time to mr. waxman. >> mr. chairman, colleagues, members of the audience, mr. dingell is absolutely right. this is a hearing for politics. that's how it is. i guess an election year we can excuse them. this nation faces an energy challenge. the wild fires, droughts, heat waves call weather events to address climate change. these are the types of events predicting and congress has been ignoring according to the national oceanic and atmospheric administration more than 40,000 high-temperature records have been set this year and at the end of june this year, more than 100 million people in the u.s. carriers under extreme heat

advisory. two thirds of the country is experiencing drought. more than 200 acres have burned in wildfires. we need to react to carbon pollution and there's a range of options for doing that, from a price on carbon into incentives for clean energy. house republicans oppose every potential solution. they say no to market-based note a cost effective regulations or financial incentives. even if they improve global competitiveness. they even say no to simply understanding the problem. we have written to chairman upton and chairman whitfield 15 times this year to request hearings on various climate change reports on topics that we

have yet to even get the courtesy of the response. denying the science and refusing to recognize the laws of nature is completely irresponsible. regrettably today are just more examples of the same. no one should mistake the loan guarantee build for serious effort at reform in the program. in fact, most of the bill is composed of inaccurate and misleading congressional findings. i'm sorry solyndra hatpin. the last $500 million. that's a shame, but that's when loan guarantees are provided. not all of them are going to succeed. there is then no showing of wrongdoing by anyone in this administration do to the cylinder loan-loss. no showing of wrongdoing despite

the claims being made that the republicans. there is no evidence for it. so what are they proposing? legislation that they say ends the loan guarantee program, but instead provides billions of dollars still to be use in a way that would ignore the best possible technology. they create winners last of 50 products eligible and anime innovative idea comes up this year or next, it wouldn't be eligible to seek a loan guarantee. even technologies republicans claim to support our abandoned if an application for a small modular nuclear reactor or generation nuclear plant is submitted, d.o.e. is required to reject it. i don't think this is a way forward or to address the problem, even energy efficiency, which is essentially for any

plan to address climate change. it's a low-hanging fruit there reduces pollution while saving american's money and creating jobs or whether it's building codes for appliance standards or industrial efficiency improvements. we should be doing more in this area and yet we are not moving forward in energy efficiency opportunity. both of the bills have serious flaws. we need to step outside the bubble has been in washington and being consumed by the quest for political power and recognize that the extreme weather around the nation and develop together solutions to climate change in the real energy challenges facing are nation. thank you. >> i think the distinguished ranking member of the full committee and i would just point out that it took us almost eight months since my subpoena back in november to get the information

and finally the white house was compliant. but this was an arduous task and we were very methodical. >> we have more time go by. >> we are moving forward, mr. waxman and we appreciate your concern. at this point, the opening of the first panel will be handled by the chairman of the subcommittee on power -- energy and power. and what do i turn the gavel over to mr. whitfield. >> thank you, mr. stearns. i want to welcome the members of the first panel. we appreciate your taking time to be witnesses on the morning

of what we consider very start issues because our responsibility as taxpayers are very important, particularly at a time and we have a gigantic federal debt. our two witnesses on the first panel are first minister david frantz at the loan program office at the u.s. department of energy. and the second is the honorable dr. kathleen hogan, deputy assistant secretary for energy efficient the, office of energy efficiency and renewable energy at the department of energy. so once again, thank you for being with us. we appreciate it. i'm going to call in each one of you to give a five-minute opening statement and at the end of that time, will give members an opportunity to ask questions. so mr. frantz, we will begin that deal with five minutes for an opening statement.

>> chairman whitfield and strings come in member is rush into gatt and members of the set committee, thank you very much for the opportunity to testify before you today. i am david frantz, department of energy's loan program office and in the way of the senior executive service i was the first employee at the opl in 2007. prior to joining the department to stand at the opioid previously served over 10 years with the investment corporation and the finance position but major energy infrastructure project around the world. prior to the government service my four year career has been entirely devoted to project finance in the earth and previous to that he served as the u.s. naval officer in a mid-vietnam combat veteran. at the outset they want to particularly express my thanks to all of you and your respect of staff for your continued interest and attention to the

program over the past five years. it is important to reiterate the point that this is a program with strong bipartisan support in 2005 and were continually welcome suggestions during the course of the popeo. before highlighting progress we've made over the past five years i would like to acknowledge and commend the lpo staff for their diligent work associated with the competence of the program. the staff is one of the finest project finance teams assembled in the world today that its record over the past years is unprecedented by world standards. i would hasten to add to the gao in its recent audit of the d.o.e. loan programs guaranties acknowledge commercial lenders interviewed a gao stated that lpo's underwriting into diligent standards are as rigorous or more rigorous than those in the air. it is noteworthy in 2011 the

department of loan programs office is recognized as the largest single source of debt finance teams for clean energy projects in the united states, public or private. this is during a time in which private lending market did not have the ability or willingness to finance the innovative and large-scale clean energy projects of the lpo support. in addition to transaction for recently recognized by exceptional journals as deals of the year. at this time the lpo is committed to close loan or loan guarantees which financed nearly three dozen projects. support for the 56 billion in total project investments. when it ended on september 30, 2011 to 17 if i program included a portfolio of 16 billion for 20 renewable projects. collectively the lpo project support over 60,000 jobs. while we have faced challenges and activities we've always made financial decision based solely on what we believed at the time

of resolving the best outcome for the united states taxpayer. we also react on a continuing basis to play fundamental lessons learned. as emphasized in a written testimony testimony before you overcome substantial impacts beyond contributions of the projects themselves. a whole new subindustry husband also to the supply chains. with respect to specific legislation the administration is currently reviewing and has not reached an official position. but we certainly share the goal of protecting taxpayer dollars, that is always our primary objective in the program, department of concerns the legislation will not accomplish that goal. in fact we are concerned the legislation could have unintended consequences that would limit our ability to fulfill the mandate that congress gave us and could potentially put taxpayer dollars at risk. additionally the legislation could lead to duplication of endor agency efforts and costs.

let me express our concerns and a little more detail. first the legislation prohibits any loan guarantees and applications received after 2011. this provision would make it difficult if not impossible to make use of loan authority provided by congress, particularly in areas of fossil g. moreover it away for the department would increase guarantee loans with the newest and most innovative technologies in the area of nuclear and renewable projects. second, legislation would extend the role of the treasury department when originating restructuring loans. each agency in the loan guarantee process plays a particular world based on existing interest and expertise. the legislation's additional requirements may increase the transaction cost to the government by requiring duplication of responsibilities and i know we have worked

closely on a continuing basis with the office of management and budget and treasury any transaction throughout the approval and closing processes to best utilize specific areas of expertise. finally, legislation would prevent the department from supporting any loan string of restructuring. this provision would weaken the taxpayer's investments by eliminating a tool that may be the best option for saving projects at risk and protecting the taxpayer. herb allen's connected an outside review of the loan portfolio and has decades of experience in the financial world stated in his testimony before the senate energy and natural resources committee that if the paramount issue is taxpayer recovery, he believes the department should have some flexibility may emphasize flexibility to subordinate when necessary. in conclusion with your support, we look forward to continuing to promote opportunities for the

united states to stay at the forefront of innovation in clean energy generation manufacturing for supporting projects that create jobs and administering the title 17 programs we are continuously striving to improve our systems and processes in order to manage loan, transactions and portfolios in the most effective and efficient manner possible all the while with the interest of the u.s. taxpayer is our foremost concern. thank you very much for inviting me here today and i look forward to responding to your questions. >> thank you very much, her frantz. dr. hogan, you are not recognized. the red box gives you the chance to stop. >> chairman whitfield, stearns, ranking member roche and dig at, i thank you for the opportunity to discuss the department efforts to improve energy efficiency of the federal government and industrial site

error and comment briefly on legislation considered by the committee today. president obama is all of the above energy strategy is designed to reduce dependence on oil, business and consumers money to make us more energy secure, protect the environment and position the united states is the global leader in clean energy and the pursuit of these goals, dob supports iraq ranger that hurts for an advanced energy technologies and accelerate the adoption of efficient products and services can also assist the federal government and leading by example in these areas. we do want to thank you for your effort and do support many provisions of the smart energy act as though we would also like the opportunity to provide technical assistance in several places to offer greater clarity or adjustments based on but we know is already underway. i will now go on a talk on

d.o.e. related efforts. first i want to highlight that the federal government is making great strides leading by example on energy and sustainable goals set by congress and the executive branch and indeed performance contracting is very important to these. with executive orders and legislation such as 2007, establish a number of goals for energy intent today, water intensity, greenhouse gas reduction, renewable energy, sustainable procurement, dob federal energy management program provides assistance across the government to help achieve goals cost effectively as well as reporting on progress. the result to date are significant and we are seeing reductions in energy use per square foot by about 15%. reduction commodities intensity by mirth and 10% and renewable

energy sources by more than 5% of electricity and indeed performance-based contracting has been important to many of -- too much of the progress. since 2006, sampath assisted industries over the average life of the efficiency measures and contracts and is now working with federal agencies to help achieve directive under the better building initiative of engaging an additional 2 billion or more and performance-based contracting. here we look forward to working with the committee to continue to use this mechanism as effectively as possible. i also would like to highlight what we are doing what the lecture vehicles. they can certainly make a tremendous contribution to energy security, environmental and economic object is in the federal government is doing a lot here while dob supports a broad portfolio of vehicle

technology work, we do also have a strong emphasis on electric vehicles. their bodies cannot a big big impact on reducing our dependence on foreign oil with fuel prices for american families will they also have the convenience of plugging in at home and they can reduce the overall environmental impact at transportation. across the administration, he bees and charging infrastructure is adopted into the federal fleet. clearly there's more opportunity as the cost continues to come down and we are available to work with the committee to figure out the best approach is for continuing to advance eb's in the federal fleet. we also do important work to bring down the cost of bbs. we have the new eb everywhere grand challenge, where d.o.e. is working with the public and private check her factor for

charging technologies to assure cost competitive plug-in electric vehicles. this initiative also aims to put the u.s. in the lead to manufacture and export the next generation of advanced plug-ins and components to create high-paying american manufacturing jobs. continuing on the theme of the importance of american manufacturing jobs, we are also working to strengthen the nation's manufacturing dirt in ways that can create more jobs and enhance u.s. competitiveness. the d.o.e. advanced manufacturing office supports manufacturing and materials research and development good record and well across a national institution standards and technology in the defense department and other government agencies and we are particularly prioritizing those crosscutting technologies that are common to many clean energy technologies in many industries that we can

engage in high impact areas. we also are working with today's industry to help them save energy and increase profitability. one example is better building, better plants program, were energy leaders agreed to set goals to improve operation by 25% or more over 10 years. this program now includes 110 companies representing 14,000 plants across more than 20 industries and they are making great progress. finally want to comment on continued support for combined heat and power development. chp is an efficient approach to energy instead of purchasing electricity and burning fuel separately. you can do together with much higher conversion efficiencies, recognizing chp in its current underutilization, we are focused

on accelerating deployment of cost-effective chp through the clean energy centers. where we assist in transforming the market for chp and district energy technology throughout the country come in the center's focus on assessments education, outreach and technical assistance. in summary we are making a lot of progress improving efficiency of building the federal side turkana vehicles industry, but also continues to be opportunities in each of these areas where we can have important impacts for security and protecting environment. we appreciate the opportunity to be here and happy to answer your questions. >> thank you, dr. hogan and both of you for your testimony. i now recognize myself for five minutes for the purpose of asking questions. >> mr. france, back in my

district kentucky and elsewhere and when they find out that i'm involved in the energy policy for the united states government, inevitably the question comes up about fallen to. it's almost becoming an example of many feelings of incompetence and there is anger in the public anyway about taxpayer dollars. in your testimony you indicated protecting taxpayer dollars was one of the responsibilities you feel is the acting her of the lpo program. i want to ask you questions regarding the subordination issue. now, director of the omb at that time, jacob lewis on out the guidance document to executive

department, which basically prescribes policies and procedures for designing credit programs including the loan guarantee program. and it specifically said the government claims should not be subordinated to the claims of other creditors because subordination increases the risk of loss to the government and to taxpayers. now circular 129 would apply to dob and the loan guarantee program, with net? >> yes, sir. and since it does apply it specifically says that it does, how do you feel like you could subordinate taxpayers to the interest of private investors? >> mr. chairman, first i would answer your question in two

parts very quickly. the first part is the career civil service attorneys, both on our staff and the general counsel's office of the u.s. department of energy made a determination and advising us that in fact it was legal for us to subordinate under the circumstances we were confronted with for the solyndra project. the other thing, that part 2 of my answer would be quickly as i indicated in this congress has heard from another senior expert, herb allison, this tool would only be used in extreme situations where we have a very distressed project and the important point i try to emphasize in my oral testimony was in fact they doing it, it is the one last chance we have two rather than liquidate -- >> this was a distressed project in you all support native in the hope that you can save the

project. >> yes, sir. in the language of the act of 2005, it also strictly prohibited that prohibit nation that. >> what are the lawyers say about that. >> i just indicated that we acted perfectly legally within the requirements you weren't in the law. >> do you feel like that is placing a priority of protecting the taxpayers to the u.s.? >> we certainly do. this is a last resort, not a tool taken lightly. >> how much money has been lost quite >> pattern of the figure in front of me. >> remember the exact number --

>> was like $538 million quiet >> in that range, sir. >> how much do we expect to recover? >> 527 is the number. >> , should expect to recover. >> we don't have a determination yet. there's still a possibility. as he notes in bankruptcy. >> we know that taxpayers will be paid back last. >> not necessarily last, but they won't be first. >> private investors will be before the taxpayers, correct quite >> private investors will be before the taxpayers quite >> i don't have the order of precedence, but that is the purpose of subordination. >> on d.o.e.'s website they talk about jobs being created and they say about solar would save 1200 jobs. so money would be created or

saved by sondra and also by beacon. since all of them have not turned out his plan, it looks like a total in 1705 project has been like 1174 permanent jobs created in loans made with $16 billion, which comes to 13,000,700 dirty dozen $75 for every created job. you feel like that is a good return for the american taxpayer quite >> mr. chairman, i think you got to think about that issue in context. i come from the major energy infrastructure industries. you have to remember these industries by definition are attempts of not labor-intensive. we have few manufacturing plant that are more than our portfolio. the predominance of our poor

folio is to be creating large infrastructure utility and by definition they are not a multiplier for job creation. >> they are pretty risky, which you say quite >> we feel just the opposite, mr. chairman. they have long-term -- >> it shows quite clearly they have lost a lot of money. you walk have deliberately subordinated them to private investors and the jobs created are unbelievably expensive and that is why we feel like this program is a total failure. ..

>> the doe lawyer looked at this, and they decided that it would be legal to subordinate the taxpayers interests and the restructuring of the solynda issue. is that right? >> correct enactment of us like the idea of the taxpayer position being second, to be honest, because in a situation like the solynda situation where the company goes bankrupt, then the private lenders have a

superior position to the taxpayers, and we don't like that. i would like you to explain to the committee very briefly why it was determined in the structuring of the solynda loan that would be a good idea to subordinate the taxpayers interest? >> thank you. as i said and i indicated in my previous comment, this is a tool of last resort and restructuring. but it is used specifically to attract new and refreshed that and/or equity into the transaction with the hope of saving the project. that is concisely what it is for. those investors, new money coming into an already distressed property. almost demanding to mitigate the risks that they have in a senior position. >> in other words, because the solynda project was in trouble, it was doe's hope that they can save this project by restructuring it?

>> emphatically. >> and it was the determination of the doe that the only way they could do that, they can attract that new capital, the only way people would invest -- private investors, as if they had this, was that the decision? >> yes. >> in the findings, and so didn't really work out, but we still might recover something, is that right? >> hopefully we met one of the reasons why we have these doe loans is because these are, by nature, risky business, is that right? >> correct. >> one thing we heard for solynda in the subcommittee investigation was that because of changing market conditions, mainly caused by china, solynda's business model really had trouble. is that what the doe found this while? >> that is absolutely correct. >> that is what caused it all fall apart? >> correct.

>> in the finding -- the six pages of findings in this bill that we are talking about today, one of the findings claims that the doe loan review process was driven by politics and ideology, as divorced from economic reality. now, sir, you have been the director of the loan administration program under the bush demonstration. that is a career position, correct? >> correct. >> you believe the statement is made from the findings is an accurate statement, that it was driven by politics and ideology? >> to the very best of my knowledge, to the whole history of the program, from its inception until today, it has not been driven by any political consideration whatsoever. all of our work and projects are represented by career and due diligence and they have been awarded on the merits of the transactions themselves. >> is it fair to say at the time

you approve the loan coming due conducted a thorough analysis and believe that the company would be a worthwhile investment for the doe loan program? >> in the time that we do the due diligence that is absolutely correct. in that time frame. >> can you assure us that the decision was made on merit and there was no favoritism shown towards a recipient. >> i can actually make that assurance. >> hindsight is always 2020, do you think that there are improvements that could be made to this loan program? >> there certainly are, and we are, as i indicated in my testimony, we are employing lessons learned all the time. >> we would appreciate it if you wouldn't mind supplementing your testimony today to give the committee's recommendations as to what we can do instead of just be hounding on it for political or business. >> we certainly will. >> thank you very much, mr. chairman.

>> at this time, i would like to recognize the gentleman from florida for five minutes. >> thank you, mr. chairman. mr. david frantz, i heard you say in your opening statement that the doe needs to have the ability to continue forever, almost, to subordinate taxpayer interest on these loan guarantees. is that your position this morning? >> yes. >> and it's doe's interpretation that subordination is perfectly legal in your opinion? >> yes, it is. >> let me read from the department department of energy act of 2052 you. the obligations shall be subject to the condition that the obligation is not subordinated to other financing. the recognize that language? >> i do, sir demand is the doe intent is warning other loans? >> yes, sir. >> mr. chairman, the question can only be answered in context.

>> for other loans in the future [talking over each other] topamax. >> argue in our position is that that language pertains to the origination of the transactions -- what you're basically saying is that you are interpreting the word is, the meaning of the word. it is not subordinated to other financing come you are saying it is applied only at the beginning and does not later on -- so your interpretation of it is, it is the focus of your interpretation. >> my oldest son reminds me that i do not have a license to practice law. >> i understand. i can only rely on the service professional legal staff of advising. >> your legal staff is making the decision on the word is in the chancing it is okay, later on, but not in the beginning.

>> do you intend to subordinate other loans? >> again, i can only -- it has to be done in context of a tool of last resort. >> you need the continued ability? is that what your argument is? >> yes, very definitely review, because of the project is in distress, we want the opportunity to save the project. >> have there been subordination many other loans. >> had he done so than the other loans? >> not to my knowledge. >> we hope not to do it. it is the emphasis of my comments. are there any that you are considering. >> not my knowledge. >> how does that work out? >> again come in time, did not work out. >> i think hindsight is always better than foresight. >> how much money will taxpayers get because of slender?

i don't. >> your answer was no. they won't get anything more until $75 million of the two hedge funds that you subordinate get theirs first. is that true? >> is expressed come i don't don't have the details economy in terms of the presidents. >> i don't understand. they have publicly announced from the administration, but they don't think taxpayers will get one dime back. haven't you heard the argument? >> the final settlement hasn't been done. it is still in investigation and discussion, sir. >> don't you agree that the loan guarantee program has had a tough record? >> quite to the contrary, sir. >> we have solyndra and we have beacon and the third recipient went bankrupt in 2000 women. that is true, isn't it? >> it is. >> but the doe loan went bankrupt a few weeks ago. isn't that true? >> please answer the question. is that not true?

>> well -- >> the fourth recipient, nevada, geothermal was also the recipient of a going concern letter from its auditor, three of the first five are bankrupt, and the other two seem to have significant problems. what do these loan guarantees say about the loan guarantee programs purport oil based upon what i just told you? >> i can give you the numbers, sir. the losses represent 2.59% am and, and that includes a recovery that we have obtained 70 cents on the dollar. >> you feel that future loan guarantees are going to be strong and there will be no more bankruptcies? >> i cannot guarantee that, sir. i think the point is that in this space, there is a high risk in new and innovative technology and that, in fact, was accommodated by the 10 billion that congress authorized for us for loan loss reserves.

>> mr. chairman, our time is expired. >> thank you. at this time, i recognize the gentleman from michigan for five minutes enact thank you, mr. chairman. i would note that when we had our earlier hearings, we didn't have the department of energy here. we don't have the department of treasury today. it is curious. we do need the treasury to discuss the questions we are discussing today. i know this by way of history, with leadership on the majority side of the aisle supporting the legislation. seventeen of my republican colleagues voted for it, and i did, too. i still think it's a good idea. having said this, i would like to address this question. now it is not proper to subordinate u.s. interests to those of other lenders under the legislation in the initial loan

or loan guarantees. is that right? >> correct, sir. >> but you do need the authority to subordinate in the event that the company gets into trouble. >> yes, sir. >> at that point you have to refinance and it's pretty hard to refinance and bring in a new investor unless he knows the money is quick to be as safe as can be. >> yes, sir. >> this is an essential tool in avoiding bankruptcy and is in that right? >> that is always are hope, sir. >> it is a standard tool going right back to the beginning of the financial order. >> bright. >> correct. >> it is not unusual to have new financing take precedence over financing in place. that is the standard practice in the financial industry. is that right? >> yes, sir.

will this legislation jeopardize future or current doe loans and will make it possible for improper restructuring alone? >> we are of that opinion. >> now, in your opinion, does the department of treasury have the current expertise to review the technology that would be developed under the section 17 alone? >> commerce meant it is not -- they don't have that skill. [talking over each other] topamax. >> the folks at the doe do. >> we have particular expertise in nato. >> so we need the doe to tell us about the technical questions, and we need a treasury to tell us about finance. >> yes, sir. >> in your time as acting director, have you received any political pressure from the white house or prove a loan your office deemed not qualify for loan?

>> no, emphatically no. >> you stand on your answer? >> i do, sir. >> how many pages of documents have you turned over to the committee? >> thousands i am sure. >> have you rejected to turn over any documents women. >> to the best of my knowledge, we have tried to fully cooperate with your committee here, sir. >> were the documents turned over on a voluntary basis or subpoenaed? >> i can't answer that question. they were voluntary, i'm told. >> i know, mr. chairman, that we have no the expertise of a witness downer that you called, which he points out this is about presidents and has a potential for further jeopardizing taxpayer funds. let me just ask you if one of these companies to which you have a loan guarantee becomes difficult, you wouldn't have the capacity to negotiate a restructuring of the entity in such a way as might make it

possible to save it. is that right? >> that is my assertion, sir. >> you not able to draw additional investors and to help save the public investment and to keep the jobs and other things that are necessary. >> yes, sir, that is our answer. now, there were some bad decisions, i think, made. this information in the case of solyndra, but not every application for the doe loan is like this. can i ask you this question? sends this big fuss started about solyndra, heavy folks at the doe reviewed and corrected the problems that you found with solyndra? >> yes, sir. >> we have no witnesses representing the treasury department here. before we go forward in us, we ought to hear from the people who have the financial expertise

in addressing this. i have a strong proponent of oversight come and i think we do need oversight. as chairman of the energy and power subcommittee and the full committee, and as the chairman of the oversight subcommittee, i did an awful lot of investigation and we have a lot of folks, republicans and democrats, and we pulled the skin operate we did it carefully, seeing to it that we got the facts and we got the witnesses that we needed to tell us what was going on. i see none of that happening today, and i think that if the committee really wants to do a good job. we ought to proceed in that direction so that we can be proud of what we are doing rather than walk out of here shamefacedly. >> i might say that we did advise witnesses from the treasury department and they respectfully declined. >> i have been a member of the committee for a long time. and you invite someone, they

come. if they don't, we have ways of getting them up here. if the gentleman doesn't know how to do it, i will be glad to assist you. [laughter] >> maybe we can meet with you as soon as this meeting is open. >> just for the record, we did invite members of the treasury department. they could not come on the day -- >> the fact is we did invite them. >> we could could not have scheduled a become a different day. >> we now recognize the gentleman from texas for five minutes. >> i just know that i'm glad to be here. [laughter] and i was invited, and i did accept. [laughter] >> this should be a solutions hearing, i don't think anybody on either side of the aisle thinks that the cylinder loan program, regardless, i don't think anybody thinks that the

solyndra process has run as smoothly as possible. the draft process is an attempt to address legitimate concerns about preventing future cylinders from happening. it's not a perfect bill. they want to go through the regular order. we can debate the political issues item by item. but at some point we should focus on solutions to protect the american taxpayer in the future. my first question is doctor hogan, my understanding is you are not here to talk about the solyndra bill, you're here to comment on the other bill? >> that is correct. have you been authorized at all to comment on the solyndra bill? or are you just here for his bill? >> i believe we have mr. david

frantz here to discuss the loan guarantee program, and that is his expertise. >> i know that mr. david frantz has been discussing it. but you are a career civil servant, onto? >> yes. >> theoretically were not to be political. is that not correct? >> that is correct. >> you really do not speak for the obama administration? to i speak as a civil servant. i understand that. >> my first comment on policy is going to be on subordination. mr. dingell and i were on the conference committee when we passed the energy policy act. i was the chairman and he was the ranking member of this committee. and we did not put a lot of debate into this particular part of the bill. but it was clear that we put the

subordination language into mean exactly what it says. but you don't subordinate. there has never been, until this month, a taxpayer backed loan that was subordinated. if i and others have anything to do with it, there never will be again. when you, mr. david frantz, say, and extremism you may do it, that is taxpayer money. in the private sector when you subordinate, you subordinate private sector dollars that are risk. but investors put forward. in the public sector companies are taxpayer dollars. you put subordinate -- subordination language and because there are no exceptions. there are no outside legal opinions that have ever been rendered on this month that this is appropriate. you have an e-mail from an attorney at the law firm that the department of energy

attorney in an e-mail says, well, maybe it is okay. you don't have a written legal opinion from an outside counsel that is signed on the letterhead by the senior partner. you do have a doe general counsel memorandum that is about -- as is possible to be. i would hope on a bipartisan basis, one thing we can agree on is that we're not going to allow subordination. when the lazy that way got away with it is because there is no penalty. i guarantee you. as you as a loan program officer had been subject to a 50,000-dollar fine, you know, you might've thought twice about agreeing with subordination. don't insult to common sense of the american people. we knew what we were doing on subordination.

and you violated it. and it is wrong. on the general loan program, i happen to agree with my colleagues, colleagues, i don't agree with your whole program. i think we can clean it up and make it transparent. i think it we put some penalties and come up with some caps and, so, i guess -- even though you are a career civil servant, you are here from the department of energy, does the department of energy continue to support that there be a loan program for alternative energy projects? do you supported or not supported? >> we absolutely support it -- he did support it. >> do you also support reforms to make sure that solyndra does not happen again? >> to answer that question, we are constantly working on improving the program. >> so you do support reforms to the program? >> yes, and i offer that in my

oral testimony. he met i am sorry, might you time is expired. to we now recognize the chairman from california. >> mr. frantz, i want to ask you about the republican loan guarantee bill. still doesn't handle loan guarantee program -- under this proposal, billions of dollars in new loan guarantees can be issued in the coming years. but this bill prohibits the doe from considering any new applications for loan guarantees. it freezes those that can be considered by those who came in by the end of 2011. well, that is an arbitrary decision of picking winners and losers. it creates a winners list, potentially, of a few dozen projects that were submitted before the end of 2011. those are the only applications the doe can look at. everyone else, no matter how groundbreaking or promising

their technology is, this program was created to support innovative energy technologies, up to the purpose. under the republican bill, new breakthrough technologies need not apply. is this the right way to structure the program if we want to support innovative energy technologies? >> it certainly is not. as i indicated in my oral testimony, congressman, we feel that it will preclude us from new and innovative technologies, particularly in the fossil and nuclear renewable applications, other than those that we have already received. >> i would like to understand the practical implications of this bill. if someone develops a new technology this year that dramatically reduces the cost of solar or wind or geothermal power, and they submit a new application, can the doe award them a loan under this bill? >> we could not. >> even the technologies that

the republicans went to support, we keep hearing about the importance of innovative cool and nuclear technology. -- and an individual at the west virginia university emphasized the importance of cool technology. let's say they cemented a new application for a power plant that utilizes the better, cheaper carbon technology under this bill, could the doe consider that technology for a loan guarantee? >> we could not. >> and what about an application for a small, nuclear reactor or nuclear plant is submitted, does the doe require it to be rejected? >> that is correct, sir. >> the doe would have to dig through the pile of nuclear reactive applications that were submitted by the end of last year? is that right? >> correct, sir. >> the republican proposal is to prohibit the doe from

considering any new applications for new technologies. the doe currently has the authority to issue tens of billions of dollars in loan guarantees. for innovative fossil fuel projects, uranium enrichment projects, other nuclear projects in renewable energies. is there any public policy reason to think that the applications already cemented her the perfect projects and that there are no new ideas out there that will be worth considering in the years to come >> no, we agree, sir. >> this republican bill seems to be a terrible idea. the latest republican assault on clean energy. it would stifle innovation instead of boosting it. mr. barton made a big to do, very passionate, that we should not allow subordination of these ones. what is he talking about when he talks about subordination? >> the subordination question is

raised in the context, in our opinion -- only and exclusively project -- projects we're trying to attract and save the products of u.s. taxpayers. >> so you're looking at a proposal for a loan guarantee, it looks like it has a lot of promise in the business is sound enough to succeed. and you give them a loan guarantee. which means that if they can't pay their loans, the government will pay for their loans. then they run into financial problems, such as their competitors suddenly raising their prices, so even if they come up with is a new way of providing this technology, they are not going to be economically viable. is that the kind of situation we are talking about? >> yes. >> it looks that there is some way that we can still succeed, but they need more money. and they go out and find

lenders. is the government standing behind those additional loans? >> well, again, to the general benefit of the entire committee, congressman, i think it is an excellent question. the point is this is a tool that we would employ in the last resort. even in the negotiations in restructuring. this is not something that we would take lightly. it is a tool that is used in extremis, and it is only used after we have failed in negotiations to check other investments to save the project without using it. it is the last thing we would do. >> the last thing you might do to save a project, if you can't do that and save the project, and the taxpayers have to come up with the money for the loan guarantee. >> yes, sir. >> you either try something out to succeed or just let it roll. >> in my oral testimony, that was the assertion that i made. you would be hamstringing us and

this tool could save taxpayer money back the gentleman's time is expired. we now recognize the gentleman from illinois. >> thank you for your service as a veteran, i appreciate that. it is very frustrating for me when sometimes i have to agree with mr. waxman on some of his points. i start worrying about my district. and what is going on here in the water in washington. a couple concerns is that i did vote for the 2005 energy poli3 a couple concerns is that i did vote for the 2005 energy policy act which had this provision. we just have to be careful, throwing out the baby with the bathwater. congress has changed significantly. the whole loan guarantee issue with the new federalism and deficits and debt, there is really a debate -- is it the government's role, and if there

is, as mr. waxman said, a new technology, i am a big cool power guy, there is no sequestration -- i don't believe there ever will be one that is economically feasible. that is the whole climate change debate. ..

should we -- we don't want to support anything else again, should they then adjust the language of legislation to say yes, the lower provision, you really can't subordinate? i mean, that's what you're saying because you have used -- i'm not a lawyer and i know you shop around and try to find a lawyer that made them give you some emphasis to do this, but i think the subordination issue does have traction with the american public here they the wonder how it was done with declared concise aspect. i'm going to yield my time, but i want to go to ms. hogan once i can. part of your statement -- you talk about this is the vehicle. you talk about electric vehicles. i want to make sure people understand it's cheap for, but people have to understand to use

electric vehicles you have to use energy and their service prices for purchasing for nuclear power being cheap now, cool being cheaper, wind, solar, expenses. so high-cost electric vehicle based on church incapacities on green power is more expensive than traditional future generation and you should have that as part of the analysis. now i yield the remaining time. >> thank you, mr. shimkus. >> the common language of the land is english. shall be subject to the commission the obligations not subordinate to other financing. council dances around the word is only applied for five or 10 minutes during the closing and immediately after that, not one in the lotus in distress.

footnote two makes it clear that you don't have to be in distress. the secretary can do at any time. that is inconsistent with other laws as well. the ag was not notified as i believe in the english language they should have picture council dances around that too and says they were in the fall. it wasn't a payment default. and last but not least when you look at the secretary's powers are under 1702 and you look at to be, he says the rights of the secretary with respect to any property purse and to guarantee related agreements shall be superior to the rights of any other person with respect to property. that make suspense if you can subordinate anytime you want to. further assume that when someone providing default and december 10, secretary chu testified under oath that he no in december, he knew when the

phone is subordinated that the chinese could sell their product cheaper than slander could make it. where were we looking? i submit to you we were not, when she agreed? >> as you want to respond, mr. frantz? >> when we connected our due diligence as i've indicated without being offenses as all, hindsight is much more valuable than foresight. my level in the staff level we were taken completely by surprise. clearly and hindsight, the solyndra transaction given what we now know we would obviously not a precedent. >> even subordination? >> subordination again in context, respectfully as a tool we would use only under

extremities. it's not something that glibly or cavalierly use in an instant. it's only to save u.s. taxpayer dollars in the last resort. >> the gentleman has expired. generally different ms. katz for five minutes. i'm sorry, i've been told it should be ms. czajkowski. for five minutes. >> thank you, mr. chairman. mr. friends, i wanted to ask you a few questions about the d.o.e.'s response to and recommendations of herb allison, independent of walton brought by the white house to review the loan guarantee program. as you know, mr. allison's credentials and impartiality are well known. he previously served as assistant secretary of treasury for financial stability in the national finance campaign chair for senator mccain's

presidential campaign. he produced a report with constructive recommendations. his report found that the d.o.e. loan portfolio as a whole was strong in the program was largely working as planned. mr. allison also suggested the d.o.e. placed more of this on protecting taxpayer interests and establish comprehensive early warning system for a long that may be in trouble. i want to ask you, what types of improvements? we've talked a lot and you said you done them. what types of improvements have the progress made in these areas? >> thank you very much, congresswoman. that's a very good question. i was first at the top of the ledger indicate to you in the full committee at the department of education is implementing all of mr. allison's recommendations as they might appropriately be done as quickly as we can so

that's in place. with respect to your questions, we replace quite frankly with a program that attacked dean francis now which ukiah from the xm bank for managing portfolio. she is the portfolio management for the program. with her she brought important system party decades tried and true and proven from the experience as well as those which obviously operated at opec is well given my background. there's a total watch system that is in place, what we call an oversight that would involve weekly interface with all of our projects and sponsors. it is now in the process of being fully systematized and will be completed by the end of this fiscal year. her monthly reports, independent engineers on these projects on a monthly basis.

all of the best track aces in the industry are being employed in our program in terms of portfolio management and all are very consistent with mr. allison steele an oversight. >> this includes specific benchmarks as well as these applications? >> yes, ma'am, we do. >> what about the internal management and reporting structures on the loan programs office have these changes been made yet? >> we are in the process of make enon. it'll be completed by september 30. below the state-of-the-art system comparable to all u.s. government agencies by the dave. the system is up and running and we are now migrating all of the information into the single system of retrieval. >> you say if you came back on september 30 you would be able to report all of these systems are now in place?

>> i hope i will be able to. >> mr. chairman, we both agree the mission of the long program office is an important one i think the discussions asked before us today does not eliminate the program i'm happy to say. it is clear to me however it is poorly crafted and has been to the benefit of the taxpayers as well. and i don't think the legislation before us is a serious attempt or inadequate attempt to improve the d.o.e. loan guarantee program, which is my understanding from your testimony is in fact implementing the improvements that have been recommended. so we need to do better. everyone agrees that that and i hope we can work on a bipartisan solution to help taxpayers and advance the goals that we all share. i yield that.

>> thank you. at this time, mr. cherry for five minutes. >> thank you, mr. chairman. and mr. frantz. as mr. gentleman from california, mr. waxman and ranking member mentioned discussing the issues with you that the proposed bill would allow all those in the pipeline to go forward but the long program at 05 would cease after that. that's how you read the bill as well? >> yes, sir, we would not receive new application. >> mr. waxman suggested that picking winners and losers. do you agree with that? >> i am not sure. there might enon secret tory. my view, which everybody a tank here acknowledges we are not clairvoyance enough to know the new technologies right around

the corner. >> you agree that's a fair statement that the bill is taking winners and losers? >> it was certainly preclude us from having an open forum for the projects. that's for sure. >> would be fair then if we talk about fairness to just eliminate all of the current ones that are in the pipeline, just to dive going further on those? kazan you're not picking winners and losers. >> know, the ones in the pipeline are in the process of interviewing those that do not meet the deadline of december 30. >> if there's unfairness, you can say to mr. waxman. he unfairness going forward. you accused us of being unfair. >> no, the point is in your oral testimony and mentioned i think we have serious concerns if there is a sunset date of

december 31, 2011. implementation of all-new technology. >> deities authority to issue home guarantees under 1705 expired after september 30, 2011. there were several that are in the pipeline that were filed before them and going forward. >> yes, sir. >> you're about to follow follow through on those if they had commenced construction. >> not necessarily. these are projects that were 1703 eligible and no sunset date. >> so basically switched from 1705 to 1703. >> yes, sir. >> in 1705 in the last three weeks before us 2011, there were $10 billion issued to projects.

is that correct? >> i don't remember the exact number. >> maybe her staff guy that helps you up behind you can help you. >> i submitted to your staff when i gave my private testimony, private interviews that all of the projects concluded under this 1705 experienced due diligence. coming comedian was 320 working days. every single one of those projects. we were able to do it. >> true or false, dod approved almost 10 billion projects in the last three weeks of the program. >> cannot remember the exact number, but the due diligence is the analysis provided. >> you're not saying yes or no, so it's hard for me to go

forward. did all of the projects that were commenced construction by september 30th, all of those funded within the last three weeks. >> they did according to our guidelines. >> how to dod combined defense destruction. >> we can get that for the record for you, sir. >> i would appreciate that. >> of the approximately 10 billion authorized in the final weeks before the stimulus deadline, how much has been drawn down? do you have those numbers? >> the actual loans outstanding right now they're active are 23,000,000,003 feet d. 369276. -- i. beg your pardon -- yeah, that's it. >> that has been drawn down?

>> well, let me get that number for you for the record. we can get it pretty quickly. >> i think that would be appropriate. but i'm also curious about is any of the loan guarantee recipients who are not currently drying times are any of those that received in the last three weeks, have they missed any deadlines or milestones? >> no, not to my knowledge. >> mai tai mustached >> at this time i recognize generally from california, mrs. katz for five minutes. >> thank you, mr. chairman. i'm glad the committee is seeking to energy efficiency are one of the topics considering today, mr. energy bill. one of the important advantages of energy efficiency is that it spans all the regions of the

country. regardless of what energy source to support, efficiency is the cheapest, fastest way to address our energy needs and we know that energy efficiency efforts relieved to jobs created, which we know also is very important, especially as i'm an when the economy still struggling. the other aspect is that these technologies are all readily available. we don't have to wait on some new magic technology. we can take advantage of the existing window about right away. so there's tremendous potential to take action on energy efficiency in health constituencies money and that's what i am pleased the legislation proposed and that is really what that's all about. i think the witnesses for your testimony today in.or hogan, i want to talk with you that improving efficiency in our home. i'm up for a project on the own home, santa barbara county a decade ago and now i've started the process to complete another

upgrade and this time i have the advantage of an energy audit of my home which is part of a county are locally based incentive structure and it uses a local veteran owned small business, which comes through and then recommends energy-saving projects. i believe there is a tremendous amount of potentially programs designed to encourage homeowners -- and a building owner to make upgrades and we actually need to have this done on every daily basis is new technologies become available. this is countless jobs you can think of. it will also help jumpstart a whole industry for home energy venture fits. so dr. hogan, and can you describe what the department is doing at home energy efficiency? maybe you can get a status update on the home energy scoring systems now available.

>> yes, thank you. so truly there is a tremendous amount of savings that can be delivered to homeowners in their homes to energy efficiency. there's opportunities of 10% to 20% savings on that of an energy bill, being for the average home $2200 or so, so that sort of $400 a year that is really out there for each and every family in an older home. for the department of energy department of energy, administration has been very focused on opportunities for many years. one of the areas we are working closely with a number of organizations across the country is something called the better building neighborhood program where we are working to pilot programs that can really take home retrofits to scale. some of the programs of the past have been slow to get traction

in the marketplace because you need to homeowners who want when and unique delivery system to be able to come in and provide high quality audits and then follow through on the projects. so it is because of that we are doing things like the program you just mentioned, the home energy scorer. we see that is a great way to bring homeowners information on the efficiency of their home, whether it's highly efficient or very inefficient and to give them object to credible information on the low-cost things they can do to improve their homes such as added installation that can give them a good portion of energy savings they are to be gotten. we're also working to pilot that program across the country with 20 or so part airs, looking to refine that over the next year and then offer that much more broadly around the country after

that. >> thank you. i just want to get into -underscore which you've been describing. i want to share a story about a country in manchester called joe's onion. any onion to keep with your hamburger next time probably came from this company. they grow, cut and process a lot of onion, but the company sold for technology to produce technology or onion ways. they run their operations there. totally self-sufficient. the company used grants to design and build the process and partnered with another company, prudent country to develop a battery system to store the electricity that is extra and use the power at peak hours of electricity cost that much. they use a lot of power for equipment site project mix a lot of sense to them and could lessen costs by hundreds of thousands dollars a year. i think it's a good example of local economic development. you can talk about the home use, company used them using

innovation and technology to help at the bottom line, but also create jobs and help businesses this way. ever be over used my time. i'll take your nods as you agree. >> at this time i recognize the gentleman from pennsylvania, mr. mercy for five minutes. >> thank you. mr. frantz comment also close to november 2011 have not missed any milestone? >> i beg your pardon? >> is your testimony the loans are closed in september last year have not missed any milestones? >> we have milestones. some of them have in the manufacturing space similar working. >> have they missed them? >> specifically amp, has amp missed milestones? >> we have not found it and get. we haven't even sunday. >> a nuclear list of ones

pending? >> cert way we can do that commissary. >> you have any closing for this year? >> nonwhite now, no commissary. >> i get concerned. because the loan program is one right here folks all over the place talking about subsidies as picking winners and losers. there's a difference between doing it right and wrong. do the countries like france subsidizing nuclear china and what concerns me a great deal is families in this country have been founding opec to the tune of $170 billion trade deficit. we're trying to get by here. there's so many indications that something is wrong and what really puzzles me is i don't get a sense yet the department of energy gets it. when i look at all these programs failing, solyndra, the first recipient, third recipient went bankrupt, abound, bankrupt

a few weeks ago. the ipo had significant data. and when you look at the things we have learned over time from these hearings, there were so many signs this solyndra was having problems. federal agencies at the departments were saying this is a bad investment. omb, treasury, justice committee only employees. price waterhouse cooper from a morning sunrise from economic abayas they're all saying this is a problem. and yet, all this indications, i think what could've been a long program turning to a white house and department of energy program saying we're going to do this anyway despite the science gnome of a payback and then ignoring the law about the tax was paid last. what concerns me here in the reason we need to even look at

this law is the department of energy is still not admitting problems and failures in how they handled this, how they ignored the warnings of failure, continued on and when the secretary of energy is here, having an attitude for which concerns taxpayers with regard to throwing money down a whole, even though he did the whole had no bottom. if we could make a movie of how the department of energy is handling this, of how the department of energy would have a typical staff meeting to discuss the sailors and how they handled it, it would look something like this. can you play the clip, please. [inaudible]

>> yield back. >> at this time i'd like to recognize the gentleman from texas, mr. graham for five minutes. >> thank you, mr. chairman. i enjoyed that movie, too, but i don't bother with this to the department of energy. thank you to my colleague from pennsylvania. one of the issues i think i have my colleague mentioned it. we have competitions for going to war energy efficiency, whether it be solar or wind power and i'm frankly successful in my part of country in texas is the greatest crime in power in the country. but unlike some of our competitive countries, if you do it with the lender and some of our countries to be taken out and shot. we don't do that in our country. recall my legislative hearings. so i want to welcome you.

i join my colleagues on both sides of the i/o on the failure of cylinder and i participate in oversight hearings before and was on the committee when we broke the law that created this loan guarantee program. i remember under republican house and the republican president. we originally authorize the program. some of my friends and colleagues champion this provision in the 2005 worked on a bipartisan manner and had her political sites and two, to work together and actually legislate. make sure to invite democrats and republicans to fix the loan program. we can learn from the mistakes he made in a program that once had broad bipartisan support. i cannot support legislation currently drafted. the attempt is a serious effort to solve the problems that allowed taxpayers to be on the hook for slander. the bill stands no chance of being taken up by the senate

order signed by the president. instead, let's not waste the opportunity. we can write a bill that fixes the program. on something like this, it's our obligation to combine the census and not create irreconcilable differences. our differences can't be solved by witnesses; shins today revolve around solar panel. my goal is to do for solar what we've done and planned in our country. like i said in the state of texas we've done quickly with wind and were going to do so if we can find state money to do it. but mr. frantz, thank you for appearing today. one of the issues that concern me greatly is the subordination of the loan. then we passed the 2005 energy bill or member of the language saying taxpayers interests could not be subordinate to that of any investor. dear we did some legal gymnastics to justify under the law but to restructure the subordination was permitted.

mr. frantz what was the reason to draft the subordination memo instead of going to department of justice? >> i can answer that question, sir. those handled by the chief counsel's office and the general counsel's office at the department of energy, sir. >> we want to avoid another situation like that we have a cylinder and i understand the year we did the best price for supporting the loan, but turned them in and retrospective judgment of the agency was flawed in this regard. it is a current policy of d.o.e. that loan guarantees can be subordinated after restructuring >> that's the position we've taken. we hope never to have to do it as i've indicated in testimony questions from the committee, is a tool of last resort and attempt to save taxpayers money for me. liquidation scenario. >> learning what we've learned from cylinder, this

restructuring seem like a risky bet now? >> i guess i don't understand your question. >> we are talking about $500 million we've done good money after bad and it seems like somebody ought to say that was a bad decision we made. >> the decision made to, congressman was there not time in that plays hindsight is always more valuable than foresight for sure and is a very appropriate transaction at the time. obviously we would not do it again when the circumstances particularly the marketplace. >> i concern is the 05 energy bill that she couldn't subordinate and there were efforts to do that by getting some great drafted letters. but you get three lawyers and i can get you for opinions depending how much you want to pay. but i think this committee ought to work in making sure the