measure of our welfare, gdp per capita is more important to the average person than just growth and gdp? >> absolutely that's what's behind household income. >> good. is it your understanding in terms of federal scoring immigration federal programs come into play, but if an average person with a 9th grade education i am grates into the country, makes $20,000, pays little in federal income tax, but if they have two kids in school, the cost of that is roughly $24,000 to the local and state, roughly speaking. and any other additional expenses. is that scored by cbo, the state and local cost? >> no. we don't do state and local. >> right. when he says immigration causes growth, i accept that premise it does increase gdp growth, but the average person would not be happy to find additional tax

burden for paying for school and other programs that go with it. finally if we could redirect to the slide this is problem the most important problem the country faces and provides the ultimate context and background for everything we have been speaking about the $18 trillion in debt and debt clock, and it is spinning out of control. this chart is from cbo shows by 2032, the four major programs plus interest take up all federal revenues by 2032. so i say this over and over to folks, our governor came up with the delegation from virginia the other day, sequester is having painful effects on the military in virginia, need transportation, education, health spending et cetera, but i just want your confirmation that what this graph is telling us is that under current law and at present, the budget committee can only deal roughly speaking with one-third of the budget. two third is auto pilot we can't

touch without changing law. by 2032 under current law with interest payments included 100% of the budget is auto pilot. there will be little if any money left for military and regular expenses of running the government, all else equal. >> certainly gets to be an unsustainable. at some point unsustainable level. it is hard to know where it is. but it is. >> in your view i know this is incredibly hard to answer, you've got debt at 18 trillion, these are the bottom of the debt clock, $127 trillion what breaks first? where is the -- this time is different, that book out of harvard had the red lights going off, you said debt to gdp ratio is already at historical highs. if you throw in this story with that, where do you see the first breaking point?

>> i don't know. that's like any other kind of debt, when it just accumulates, if it is a company or household at some point you know it is going to break them, you don't know where. >> i would like to go to the next slide. i think you're familiar at the bottom too small to read. seems like we could do more to provide numbers through cbo and through committee work to illustrate how dire the situation is that this chart presents. economics professor estimates the total fiscal gap, roughly the difference between all projected spending and revenue in current dollars is more than $200 trillion. i just gave the 127 trillion he does it out in infinite horizon calculations and for political purposes, he runs a purple institute. not blue or red. >> gentleman's time expired. >> thank you very much. >> the gentleman from indiana

mr. stutzman recognized. >> thank you mr. chairman and thank you, dr. hall. i enjoyed listening to your testimony and answers to different questions that have been asked. i want to talk about interest on our debt interest rates a little bit and also appreciate your comments earlier about $18 trillion of debt and what that does to our economy what it does to the future of our country. before talking about the interest, could you talk a little about the sequester and maybe how it relates to military readiness and spending. is that the greater problem or are entitlements the greater problem we need to fix because as he was saying earlier about the fact we had a balanced

budget in the late '90s and when president bush came into office 9/11 did occur. we had some extreme situations we had to deal with. i don't think that's the only place you blame for the debt. it points to and the sequester has shown we have seen military and defense spending go down, haven't done anything about the other two-thirds as congressman brat was talking about. could you talk a little about that. >> sure. the most obvious thing that clearly is coming is effect of the aging population, that's just going to happen. it has significant budget impacts and rising health care costs which is also related somewhat to the aging population. so no matter what else happens, those things are going to push the debt higher and there are a lot of ways you can focus to try

to work on that. we try to give you some options. those issues didn't exist until now. >> cbo's report on health care costs, cbo recently reduced health insurance premiums for 2016, 25 period. is that something, can you talk about that? i talk to folks back home they're seeing rising cost of premiums, out of pocket expenses. could you touch on that a bit? >> let me put it in context. one of the challenges for cbo was because we didn't have experience for that. when we are trying to estimate the likely impact, to be honest, we are relying on theory putting together things relying on theory. now we are starting to get experience and real data. going forward, that's got to inform our estimates of the

costs going forward. what we saw early on we saw drop in premiums we didn't forecast. but what we are going to continue to do is monitor the premiums and looks like premiums are not following forecast in fact they wind up going more than forecast, we will adjust. >> my concern is that folks at home aren't seeing wage increases. some large companies are starting to increase minimum page for their companies, but as you mentioned earlier, needs to be a tightness in the labor market which in indiana we are seeing that, companies are having a hard time finding that. to go back to the debt and interest how do we -- the interest will surpass defense spending. is that still the projections from cbo? >> i don't remember. if that was a projection, i suspect it hasn't changed.

>> what can we expect when interest rates do at some point go back up. how are we as congress supposed to handle the debt service to $18 trillion of debt and debt that's only going to continue to rise? what happens? >> well if you want to avoid the debt getting out of hand getting to unsustainable level, you have to make cuts. you have to manage spending manage revenue, you have to do something. >> thank you for your candidness. really appreciate it appreciate the chance to ask you a couple of questions. look forward to working with you on this committee and welcome you to your new position as well. >> thank you. >> miss blackburn is recognized for five minutes. >> thank you, mr. chairman. dr. hall, we so appreciate your time and your willingness to work with us. i think we all realize that we

have some spending issues and budget issues and it is -- constituents want us to get these addressed. i think they're tired the bureaucracy feeling is if they're immune and exempted from having to work within a budget. i just think they're encouraging us to be bold in the work we are doing. i want to ask you specifically about the inspector general reports. we have been doing some work on the council of inspector general integrity and efficiency reports. had looked at fiscal 2013. they quantified $56 billion of savings. we had a project going on in our office where our staff and interns were working and just the window from 2011 to 2014

they found $97 billion that could be utilized that with the inspector general reports, they quantify waste, fraud, and abuse. as you all look at the budget, does cbo take these reports on waste, fraud and abuse into consideration and how does that play into cost estimating and budget process. >> we do take the ig reports into account when we can, and it is a matter of estimating the cost properly, so if it is clear there are issues like that that that's part of the cost estimate going forward. one of the tricky things is scoring efforts to bring waste and fraud under control. there are scoring rules with

respect to that that make that tricky for us. >> there was a report cbo issued in 2014 regarding the budget efforts and effects of reducing waste, fraud and abuse with the health care programs. so is cbo looking at or studying waste, fraud and abuse on a broader level and are there plans to release any future reports in this vain? >> at the moment we are not looking at that. we are happy to discuss the possibility of that work. >> could you capture savings by utilizing -- capture savings and use them for budgetary off sets by heightening efforts or changing the way you utilize these reports or integrate these into the budget process?

>> that's actually a scoring rule that makes it a little tricky. if it is a new proposal, and it is something that use of a new tool, then we can take that into account. if it is just simply increasing spending on finding fraud waste and abuse, then the rules don't let us count that. >> that's helpful. i appreciate that. i have a couple of other questions i am going to submit to you dealing with interest rates and deficit reduction because those are items that come up when we're talking with constituents and doing our town halls and the good thing is people are watching closely what is happening with the budget. they're very concerned about the

fiscal health of the nation and they want us to begin to operate in a more forthright way, and also a healthier way as we determine our budget process. i yield back. >> the gentleman from alabama mr. palmer, recognized for five minutes. >> thank you, mr. chairman, thank you for being here dr. hall. it was earlier discussed about the impact of regulations. i think regulatory environment cost the economy about $2 trillion last year, i think it will go over that, well over 50,000 per household. in your view should that be taken into account when the cbo looks at economic projections? i know that the president's office of information and regulatory affairs takes a look at that. i think it only captures the discretionary costs. is there any consideration at

cbo taking into account regulatory costs? >> no, i don't think we've ever really even done research or done work on the possible impact of regulation. and obviously a lot of what makes it tricky is you need regulation, and the issue is what becomes too much regulation, what becomes regulation that has a trade off with economic growth. that's a very difficult thing. >> you raise a good point there, you do need regulation, but what you need is certainty of regulation. and i think there's a number of studies out there that indicate when businesses know they're going to be regulated and know what the regulations are it doesn't have a negative impact. it is the uncertainty in regulation that has an impact. i think we are seeing that play out in the economy now. how would you respond to that? >> well i think i mentioned

earlier there is some economic research about the effect of policy uncertainty on economic growth and the fact that that can have an impact. i don't -- that's still kind of new research, i don't know how well accepted it is yet and to be honest, i don't know how much they focused on the regulations contribution to that. >> i think there's new work university of chicago or london school of economics about that aspect of it but i think it is something cbo ought to take into account. it was also discussed mentioned earlier by one of our distinguished colleagues about the states, couple of states louisiana being one of them, that use dynamic scoring. justification for tax cuts at the state level. i want to run this proposition by you. state taxes are considerably lower. is it possible benefits of a

state tax cut would have less impact on discretionary spending and investment spending or would be nullified, that impact would be nullified or muted because of higher energy costs, higher health care costs, higher federal taxes. >> well yeah that's right. that's actually one of the difficulties of doing any projection, but certainly one of the difficulties of dynamic projection is understanding fully what's the dynamic effect of things. it is not that easy to estimate. >> for instance, in alabama our state income tax rate highest level is 5%. that's little compared to the highest rate for federal income taxes when you consider that blue cross/blue shield just announced their premium rates will rise by 26%, that's

significant. you take into account the increase in energy costs particularly for people on fixed income and lower income where it is concerning for people earn less than $32,000, it is a quarter of their income. you take into account that state taxes are usually fairly insignificant, particular on the income tax side relative to the cost imposed by the federal government would it not be true that whatever tax cuts you have at state level would be pretty much wiped out by federal policy? >> sure that's possible. >> one last thing you were asked earlier if you own a home said you did, you were asked if you had a mortgage on that home. i would like to know if in ten years the interest on your mortgage will be the highest single household budget item. >> i have a fixed interest mortgage, so no. >> so the answer is no. well, that's good. that makes me feel better about

you being director of the congressional budget office. mr. chairman, i yield the balance of my time. >> mr. west continue recognized for five minutes. >> thank you, mr. chairman and thank you dr. hall. saw your bio you taught at the university of arkansas. i just wanted to point that out here for the committee. >> i did. >> appreciate you being here today. you made interesting comment about how delaying solutions to our problems compound the problems. and we know those solutions haven't been implemented in quite some time and our problems are getting worse with too much debt, too much continued deficit spending and we have seen the graphs that show what this is going to do to our interest on the debt. we have seen a graph shows the amount of mandatory spending and discretionary spending, when we look for solutions to the problems, start drilling down on some of these mandatory spending

components, specifically if you look at the affordable care act, i think of it in two components. the exchanges provide premium support in the poverty level bracket, then you have medicaid expansion which 29 states and d.c. participated in medicaid expansion. it pays insurance or health care costs up to 138% of those 138% of poverty level. unlike traditional medicaid for disabled beneficiaries for nursing home patients and children the aca medicaid expansion is for able bodied working adults. do you know the split on aca par par 'tis pants in the exchange and budget impact for each population?

>> i don't offhand but i can follow up with you. >> i happen to have looked at some of that data, i believe there are more people in the medicaid expansion population than those effected by the exchanges and we are anticipation a court ruling in king versus birdwell case that would effect those under the exchanges, but would do very little to effect the larger population of those in the medicaid expansion population. and since the don't know the number, don't know the answer to this question i will ask it anyhow, would you say it would be fair to say medicaid expansion under aca is costing more than the exchanges, if there are more people in the medicaid expansion and more money is being spent? >> i don't know offhand. >> all right. when we look at the medicaid expansion, there's also an

incentive premium that was put in, the budget director stated in this committee that premium was put there to entice states to expand medicaid. again, the medicaid expansion has only been done in 29 states and d.c. whereas the exchanges are in all 50 states. and under traditional medicaid the federal government only pays an average of 57% of the cost whereas under expansion, the federal government pays 100% of the cost for those in the expansion population that will be backing off around 90%, which is still a large premium, again for able bodied working age adults. our numbers show the premium alone is $300 billion over ten years. have you seen any other areas like this under the mandatory

spending where there seems to be premiums or enhancements or things that would make our mandatory spending continue to grow, which also makes deficit spending continue to grow which makes our debt problem even worse? >> yeah, i don't know, i'm sorry. >> the time allotted to answer questions has been short today. i appreciate your testimony. i appreciate it if you could go back and find some answers to those questions and get those to me, mr. chairman i yield back. >> have a from south carolina mr. sanford recognized for five minutes. >> thank you for your time as well. couple quick thoughts. one, i want to follow-up on my colleague from virginia's thoughts with regard to what our colleague from maryland suggested about the republican budget, in at the said the republican budget will slow economic growth. what my colleague attempted to get at from virginia is the why. i think used the analogy of you

can hire people with tea spoons to fill in a ditch and dig it out again, it would add economic growth, but ultimately not make us more prosperous. would another way to characterize this suggestion from my colleague from maryland be that of if you continue down this road, if you go on spending money that you don't have if you don't impose the financial con stranlt that the republican budget was ultimately about, yeah, there might be slow down short term, there will be much greater consequences down the road by not addressing the entitlement and spending issue that the country is confronting. would that be a fair characterization? >> that's right. that's part of our basic message with the long term budget outlook. >> i also want to go back to your words earlier. you said the deficit issue will

have significant effect in growth at some point. >> not sure where. >> i want to go where my colleague from virginia, mentioned a book written by the professor from hartsfield-jackson, university of maryland, questions about some of their about their data. there's been a lot of work done on generational accounting and debt load in this country and the impact on future generations and young person born in america today. simpson-bowles, bipartisan commission it was interesting their observation was that we're facing the most predictably economic crisis in the history of man if we continue to do nothing to address the debt deficit and spending issue that we have in this country. so, i think, again, i'm not trying to lay blame. it doubled under the bush administration and doubled again in the obama administration opinion it's not a partisan issue.

it's a flat out economic and numerical issue that will have consequences for the american people if nothing is done. could you explore more deeply when you think we might get to that tipping point from which there, again, would be these severe consequences? >> this is one of the things difficult in communicating about this because nobody has a tipping point. you know it's got to be there somewhere. but there's no real consensus as to what is a tipping point when it will happen. i would liken it to looking at any business that's losing money at some point, okay. >> but let me just because time is so limited might we say this. the effects of a tipping point if we go to that tipping point would be one in all probability substantial effect in the value of the dollar. when countries had a debt spiral

severe consequences. there's been severe consequences with regard to borrowing ain't rates, impacts a mortgage, a person's ability to buy a home and real impacts to way of life because generally there's been economic drag which is what we were trying to get at in our book. you would say there will be severe consequences if we go past that tipping point wherever it might be. >> that's right, yes. >> and coming back just for one second, if we're somewhere around 20, 25 30, 32 which is not way off, talking 10, maybe 15 years off at that point which we only have enough money for interest and entitlements and nothing else could that be a likely spot at which you indeed financial markets say wait a minute this is clearly unsustainable, we're not going

to loan you more money if you're at this spot. i mean, could that in narrowing probability could we be getting close to as little as maybe ten years out? >> you know, i don't know. >> conjecture. i understand that. would it be reason to say financial -- if you believe the financial markets, we get to a point in ten years where there's only enough money for interest and entitlements you believe the financial markets anticipate it could well be, you know, inside of ten years that we're looking at such a tipping point? would that be reasonable conjecture. >> part of it is they have to believe you're going to address it. it's one of the reasons why the ratio alone doesn't tell you anything. you have to have some sort of credibility that it's not going to continue. and it's worthwhile to continue to loan you money. >> gentleman's time has expired. gentleman from arkansas is recognized for five minutes. >> thank you, mr. chairman, and as my colleague from arkansas

has already stated your bio includes a stint at the university of arkansas. go hogs. welcome to the hearing room. mr. mcdermott from the acting ranking chair's position a moment ago opened his line of questioning about your house. if it's okay, i'm a fellow arkansasian, once upon a time you can trust me i'm not going to try to trick you if i get too personal let me know. nice home? >> sure. >> you already established you took out a mortgage. >> yes. >> was it the nicest home you looked at? >> no. >> so there were better homes? >> i dreamed when i looked at the other ones but realistically that's what i could afford. >> there were nicer homes, bigger homes >> yes. >> probably some in gated communities, a lot of amenities you would like have. you dreamed. why did you buy the house you

got? >> it's what i could afford and it was a loan i could payback. >> so when you went to the lender, they were interested in your ability to repay. >> that's right. >> how novel. were any of the considerations in what you were doing say maintenance and upkeep utility costs, taxes, those kinds of things? >> absolutely. that factored in our decision. >> you might have kids going college that might take a bite out of your disposable income all of those things. and your lender he was interested in that too, probably wasn't he? >> yes. >> but as mr. mcdermott said, the house is a great investment. so if it's a great investment, if it's something we ought to do as homeowners is buy a home and invest in thunderstorms, it stands to reason we probably

ought to go for the best thing that we can without record to our ability to repay. but what you basically stated and i know it's kind of a crudely simple comparison that i'm making here, is that the people that are lending you money for an investment like that are vitally inned in your capacity to repay that loan. and if you could not demonstrate a capacity to repay that loan you probably are not going benefit from that loan correct? >> that's right. >> so as mr. sandford stated a minute ago and others here on the diaz stated our creditors must be interested in our ability to repay? >> yes. >> do you think there's a point in time where they may ask of us to start doing some things like looking at our budgets as every day americans look at their budgets and start doing away with cable and expensive vacations and unnecessary costs

that might be as mr. woodal would articulate on the consumption side and not necessarily to the investment side don't you think our correctedors would be expecting us to do that? >> yes. >> don't you think they are kind of looking at that today? as a matter of fact, it's under this president's watch that we have taken the only downgrade in a rating agency at least in my lifetime, i don't know maybe ever, i suppose, and that downgrade was basically a reflection of congress' inability and leadership of the country's inability to come to terms on a long term program to keep us from getting to a point where we have to suffer extreme measures. is that correct? >> i don't want to speak to their decision. i don't know what their decision was based on. that certainly should be a consideration. nine remaining time i have, it's already been said a number of times, but one of the things

that frustrates me as a member of congress is our inability to completely wrap our arms around the solutions that are going to take the long term implications of all of these programs, whether they are investment grade or otherwise off the backs of the next generation. when i look at that slide a minute ago and i projected out to 2032, i have a 2-year-old grandson that will turn 2 this month. before that young man can vote the debt load and the amount of pressure that the mandatory programs are having on the discretionary budget will be more than we have to be able to even afford discretionary programs and that young man even before he has a chance to vote has not had one thing to do with creating that problem. and so, i'm like the rest of my colleagues up here, i'm in search of solutions and i think the time to do it is now and i yield back.

>> gentleman from kentucky is recognized for five minutes. >> thank you, very much. mr. hall welcome. congratulations on your position and i wish ewell. look forward to working with you. one of the things that i will say keeps me up at night because i have various times of going to sleep, what i think about a lot is how this body which moves at its optimum efficiency of about 10 miles per hour can make policy in a world that's moving at 100 miles per hour and this manifests itself in so many areas we deal with in the energy field and education field and medical field where things are changing so rapidly and those obviously all have repercussions for government and the taxpayers and our federal budget. i remember several years ago when secretary, treasury secretary geithner was here and we were discussing these long term projections about deficits and costs of medicare and

medicaid and so forth, and i asked him at that time how reliable would you say projections going out 30, 40, 50 years would be. he said i don't think projections past five years are reliable. of course, that doesn't make your job any easier and nor does it make our job any easier. but in your statement talking about the transapparency of your modelling, that's the segue to that issue, and i am concerned about how somebody in like cbo would model forecasting in some of these areas when things are changing so rapidly. just look at the changes in the forecast of health care costs and the medicare viability have changed in just the last few years, and obviously you've had to go back cbo has had to go back and revise forecasts and projections and so forth. so, i guess my question s-we've

talked about modelling and asked questions over the years about how cbo reached these various conclusions and i don't think that any of us really understand how that process has come about and now that we're going to use dynamic scoring apparently both on the tax side and on the spending side, it seems to me that there needs to be a great deal of consultation with the congress about the modelling that is used. i know that that risks putting that question into a partisan dialogue, but i guess my question would be how do you plan to continually modernize your modelling system and what, if anything, should congress be able to -- what input should congress have in your modelling decisions? >> sure.

to me one of the fundamental things that we need to do especially with something like dynamic scoring is transparency. the thing we don't want to do, we don't want to produce an estimate, don't want to produce a dynamic estimate and give nothing else except a number so all you can do is criticize it's too big or too small. we want to be transparent about what model we're using, how we're characterizing the economy, and we want to interact really with experts. we've tried very hard to do that. we've been doing dynamic modelling for a few years. we talked about with it our panel of economic advisors. >> that would rule out talking with us. >> we're happy to talk to you. we've given presentations to staff many times. and we're happy to do that. you know, the whole goal -- we all have the same goal. the goal is from duce the best estimate possible. and i think the dynamic part of this helps us produce the best estimate.

>> the only thing i would say before i yield is that the problem is your estimates while done with the best of intentions and done as accurately as you can make them are still highly -- inherently flawed. most of them are going to turn out to be revisions. meantime we have to make investment decisions or taxing decisions and in the case of mr. mcdermott talked about earlier medical research we may miss some real opportunities to do something that will not only benefit millions of americans but also have an incredibly positive impact on the budget and looking at things like alzheimer's disease research all accounts indicate very close to yielding some real significant progress, curing that disease and reversion of the mental deficiencies, and we should be,

in my opinion, roughly $250 million is spent on alzheimer. good luck. >> gentleman's time expired. >> i thank the chair. >> i just came here from another hearing, financial services on xm bank, and that hearing made me think of something. let me ask. are you familiar with the writings of frederick -- at all? >> i know the name but i don't. >> wrote an essay, i was thinking about this in the other hearing and it applies here as well. seeing and the unseen. seeing is the immediate and it unfolds with causation, the unseen occurs over time and unfolds over a period of time. in thinking about that looking back over here, i don't know whether he got his writing from

earlier writings but if you go back to earlier writings in second corinthians we're focused on the here and now it's only transient we should be focused on the eternal. all of that comes into play when we talk about spending and our debt, what is transient and what is eternal. you have or rather the cbo's office has in january put out a budget in their economic outlook projection. looking into that what is seen and what is not seen public debt held will reach 79% of the economy by 2025 and this is a question i've asked before and answers are always no, so i assume you'll say the same thing when the cbo takes into account potential for other things do they take into account other things when they come off of those projections the answer is they work off of a baseline. do they take into account things

for potential for a future war. potential for emergency military spending that we just can't foresee. the answer is -- >> no. >> no. do you take into account or did they take into account with those projections future recessions that may come in the future and the answer is -- >> no. >> because you can't see them now. do you take into account future large expenditures for new government programs that we just haven't even thought up of yet. and the answer is -- >> no. >> the seen we get the report is only what we hear now and know but those other things are not considered in the actual report, is that correct? >> that's right. >> if any or all of those things occur the actual projections would be a lot different. >> different. >> if did you those expenditures on future war, future recessions not only different we would be worse off. >> right. >> worse than they are right now. one of the other ones do we take

into account that tint rates are not as projected but they are because of these factors or other factors cube lot higher than what we're projecting right now? >> actually on that one i'll tell you yes because long term budget outlook one of the things we do to worry about just exactly what you're talking about as we go through some scenarios what if interest rates are higher, what if interest rates are lower to give you and idea how our forecast changes. >> i thought your answer was going to be yes on that. if the cbo's forecast is correct in ten years wild be spending $827 billion on interest payments alone. >> yes. >> how much could we be spending or what could we be doing with that $827 billion if we were not spending it on interest payments to investors and banks? >> not my decision, but -- >> in other words, the answer i guess we could be spending a lot more on all the other things that we talk about spending on

whether it's infrastructure, or health care costs or if you believe in educational costs, all those other things could be funded by it but we can't because we'll be spending it on -- >> on the debt. >> on the debt and on interest. payment. >> right. >> also in this report cbo projects federal tax revenue will grow. that's the upside by 3.2 trillion dollars. that's an average of 4.5%. >> one caveat we assume there's no change in marginal tax rates from inflation. so we have the bracket creep in there. whether or not you think that bracket creep would be allowed. >> things could be a lot worse. >> that's right. >> but even if they stayed the same our projection on the spending side are what? worse than that. we'll be spending more than that increase on revenue and get into

a worse situation than where we are now? >> yes. >> the scene on these things as far as what we know what we spend. the unseen is what the eternal? the eternal is on our children and grandchildren and what we can foresee a future increasing debt and eternal debt for them of a less prosperous and growth of economy for children, our grand children is that correct? >> that's correct. >> the gentleman's time has expired. dr. hall i want to thank you for appearing before us today. please be advised members may submit written questions later to be submitted in writing. it will be made a part of the formal record. any members that wish to submit questions for the record you may do so within seven days. we look forward to working with you. this committee stands adjourned.

>> as with natural gas, america now has enough oil production and increased exports feasible, especially the lighter grades of crude that the qer notes the most rapid what increase.

economic and foreign policy experts across the political spectrum believe expanding the markets for american oil would be and that's -- net jobs created at home. at the same time report from the gao, cbo and energy information administration all point to reduction in the price of the gas as the result of increased oil exports. in other words oil exports can be a win for the american people and a win for our allies. the energy sector has been the nation's most significant job creator in recent years. but with the drop in oil prices as many as 100,000 energy industry positions have been lost. the case for great more jobs by expanding the market for american oil is the key reason why exports should be on this committee's agenda. while we are not currently considering any such provisions in this ending legislation, i do look forward to working with my good friend mr. barton and others on both sides of the

aisle to ensure we get the policy right. i yield back the balance of my time. >> at this time recognize that judgment from new jersey mr. pallone, for five minutes. >> thank you, chairman whitfield, it and ranking member rush. when the begin by welcoming secretary moniz back to the committee and congratulating on completing the first installment of the quadrennial energy review. it's a truly competent to look at her nation's energy infrastructure and its recommendations will help us chart a path forward. this installment relates to the transportation, storage and distribution of energy. these ts and the connections between suppliers and and users can impactor energy brotherly insecurity and effect are building to meet environmental and economic goals. infrastructure is vulnerable to threats from natural disasters physical and cyber attacks

those important we thoroughly understand these vulnerabilities and how to mitigate their impact. at the same time its modernization can help achieve meaningful greenhouse gas reductions and other environmental goals while enhancing safety, security and reliability. ultimately the only are our represents a forward thinking we need to ensure a smarter more resilient cost effective and environmentally sound energy system for the future and i look forward to working with you, mr. secretary, to translate these important ideas into legislation and law. i wish i could be as upbeat in discussing the majority's energy diplomacy discussion draft. rather than building on the strong relationships with our north american neighbors, the majority has chosen to resurrect controversial legislative proposals that have drawn democratic concerns and presidential veto threats. for example, the bill would eliminate the current presidential permitting process for liquid and gas pipelines, and electric transmission lines

that cross the u.s. border with mexico and canada, and replaces the process with one that rubberstamps permit applications and eliminates any meaningful environmental review. while not legally take effect after president obama leaves office and specifically excludes the keystone pipeline it still appears to allow transcanada to avail itself to the process by reapplying with a revised route. the provision also limits federal approval environmental review to the small segment of the project that physically crosses a national mortgage rates a rebuttal presumption that these projects are in the public interest shifting the burden of proof. this all but guarantees permit approval and virtually eliminates the opportunity for protective permit conditions. a draft bill also recycles lng export language designed to address nonexistent delays at the department of energy. department of energy.

effect d.o.e. recently testified that right now there is zero applicants sitting in front of us for a decision to the last application that came out of ferc, we turned that around in one day. nonetheless, the bill would make changes to an otherwise successful process. and, finally, in a position would create a task force. in fact, the very agencies tasked with natural resource and of our mental matters like epa and doi are excluded from the task force. i hope this committee can start to work toward his consensus legislation instead of resurrecting problematic issues of the past. but thank you, mr. chairman. i yield back. >> the gentleman gives back. it concludes the opening statements for today. and, mr. secretary once again thank you for joining us. we do look forward to your insights on these important issues. i'd like to recognize you for five minutes for your opening

statement. >> well, thank you chairman upton ed whitfield and ranking members pallone and rush -- >> i'm not sure the microphone is on. >> the light is -- yes. okay. okay. again, chairman upton and whitfield and ranking members pallone and rush, distinguished members of the subcommittee, thank you for the opportunity to be with you again today. i really appreciate the leadership that this committee has shown in working towards comprehensive and bipartisan energy legislation. that includes many of the topics in the qer first installment. i look forward to working with you to move these ideas forward and really appreciate in the opening remarks the statements about common ground and the opportunities we have to work together. as was already stated the u.s. has reaped enormous benefits for energy revolution the last several years which i point out includes of course hydrocarbon

production but also dramatically increased renewables two energy productivity gains. this revolution has produced a changes that are challenging our energy infrastructure. and to be direct, we need to modernize and transform our energy infrastructures and our shared commodity infrastructures. this will require major new investments and we have to get it right. we should acknowledge that while the choices we make and the decisions we take today and in the near future are critical, we also have to acknowledge that the choices and decisions that we failed to take in a timely way are very important for generating our infrastructure for the 21st century to help guide his investment choices the qer provides recommendations based on a 15 month multi-agency process. that include 14 public meetings across the country and consultations with canada and mexico. he we are focus on ts&d

including pipelines, wired, storage, waterways, railroads and other facilities to form the backbone of our energy system. i asked the chairman's permission to cement put the summary version of the qer into the record. the full qer is available online, and you have my written testimony so let me take the opportunity to highlight five crucial tasks that we need to take. first, our infrastructure investment can and must serve energy security in a broader sense than the oil centric focus of the last several decades. an example is found in the definition of energy security that the u.s. and our g7 allies developed after the russian federation and ukraine, that includes seven critical elements in a modern view of energy infrastructure. supply diversification for sure but also transparent markets greenhouse gas emissions reductions come enhance efficiency, clean energy infrastructure modernization and

emergency response. this doesn't mean global oil disruptions are not concerned. indeed, in the context of the qer and its recommendations modernizing both my physical distribution simply vessels its use is a major area of focus. through its analysis of resilience and infrastructure modernization the qer goes beyond global oil supply disruptions as a single focus of energy security policy leading for example, to recommendations related to regional fuel disruptions as we have seen across the country. more coordinated state planning is also essential and most notably we feel that state planning grants to help states upgrade and expand their emergency preparedness and security strategies and exercises to enhance electricity reliability, to accommodate this or would change are all critical. other ways to improve energy security conclude programs to make our energy infrastructures more resilient to a range of hazards and own abilities.

these are addressed in part in the qer's recommendation for a predisaster hardening grant program options for transforming reserves and assessment program to replace aging unsafe natural gas distribution pipes. second, qer underscored the indispensable role of states. these really are testbeds. we need to advanced studies such as a new framework for evaluating energy services to help things like rate structure development. third the qer analysis showcases the importance and complexity of how our energy revolution challenges our shared transport infrastructure. frankly, when we started the qer we did not anticipate we would end up with this as a major area of focus. however, the dramatic oil production increases in unconventional locations -- [inaudible] and painting exports of natural

gas have placed strains on the transport infrastructures rail large locks, port facilities and the like. the qer includes recommendations focus on innovative funding mechanisms for these infrastructures and for example, recommends a program for port connectors in stressed by nutritious supplies. fourth the qer recommends coordinate efforts for skills training and recruitment of workers to build and staff are modernize energy infrastructure system and support jobs for working families. a national job driven skills training system with a rigorous curriculum and standards that include a special emphasis on training for veterans, on minorities and energy, is critical to our energy future. i might note that yesterday 85 minority in terms started working at d.o.e. for the summer. i also created the job strategy counsel to look at how we can capture the energy sector opportunities that we have for

new jobs. and, finallyjobs. and, finally, fifth, we need to acknowledge the critical federal incentivizing our energy infrastructure investments. while the bulk of the qer recommendations fall onto this committee's jurisdiction, congress has other committees with equities and energy infrastructure especially and shared infrastructure a north american energy integration. i would note in closing the administrations most recent budget request includes a down payment for funding some of the qer's key recommendations at about half a billion dollars. however, in the current budget environment where sequestration is place artificial caps on spending, deal these programs into shared infrastructure programs, corps of engineers and others frankly placed these critical programs in competition with very restricted budget allocations. and so, for example, thousand appropriations mark does not meet our needs for energy infrastructure. in closing, the department of energy and all the agencies that developed this report and its

recommendations see great potential for benefit and we look forward to working with this committee again to find her bipartisan ways of advancing our ts&d infrastructure. thank you and i would be pleased to answer questions. >> thank you secretary moniz, after this timeout recognize myself for five minutes for statements and questions. we all recognize that the clean energy plan has been at the very center of president obama's initiatives. and i think everyone recognizes that the tension between the obama administration and republicans in the house and senate as well as elsewhere has been, many of us feel the president is moving so quickly through regulation without adequate communication with the legislative body. and while we all recognize the need for and all of the above

policy emphasizing clean energy we look at europe and we see how some policies over there in which countries like germany have made decisions to eliminate nuclear energy has gritted low -- extremely high retail prices, and as a result europe has some really, really economic problem. so what we want to be sure but in america is we made this mad rush for change that we do so in a way that we can protect the reliability the affordability and so that america continues to be competitive in the global marketplace. mr. mckinley the left was just telling me that in west virginia they have lost 45% of their old jobs. so the economic impact -- cold jobs. -- affects all of us.

that's why we're trying to move this energy bill. that's why the quadrennial energy review is so important to look at all aspects of everything because it said windows, we are fortunate that we have an abundant energy supply, natural gas particularly, and oil as well, but we have infrastructure needs and it's very difficult to get permits. they take years. and so as we are shutting down coal plants the regulatory orders we don't always have the capability to get the energy product to where it needs to go. so that's what this is all about. so one of the things i just wanted to ask you, you were talking to the development of this first installment was a colossal undertaking with at least 22 agencies involved in more than a year of work. and if this is the first

installment of the qer, will there be a new installment each year for the next three years? it in the process will begin all over again? is that what you're understanding is? [inaudible] no. yes, there you go. >> i apologize. so this first installment, frankly, to take us a few more months than we had hoped it would are not in the process of working across the government to settle on the next installment. we would like to get something into your hands early next year i can come and again at the end of 2016. >> now -- >> and clarity this will be outstanding in the supply and demand of the energy sector. >> and my time has already running out here. i want to focus on one issue

because maybe because i was in the railroad industry, but railroads provide a vital transportation network for all sorts of commodities in america. and historically railroads have generated lots of income from moving coal. and the coal shipments have dropped dramatically even though our goal exports are up despite problems of trying to open up coal export facilities in washington state. many people are genuinely concerned about the financial viability of the railroad industry with this extreme reduction in coal transportation. was that discussed in the quadrennial review process from your personal knowledge? was there any discussion about that at all? >> yes, mr. chairman. of course, the department of transportation would have prime responsibility of the area but

there were discussions because we did see in some cases especially in the upper midwest some coal shortages for a while. but it was not because the trains went operating. in which is caring other commodities which my understanding me that a higher margin for them. so one of the initiatives we have taken and the d.o.e. eia is working with the surface transportation board at the wiki is to first of all to try to get more data and understanding of commodities including energy commodities are moving on the railroads because it is coal oil and ethanol competing in a certain sense with a whole variety of other commodities. i think more data and data transparency will be very important for federal and state planning. >> because we do not have a strong financial railroad sector just because of the impact on our entire economy.

my time has expired. at this time i would like to recognize mr. rush for five minutes. >> thank you, mr. chairman. mr. secretary, as i asserted in my opening statement i believe that you will go down as one of the most consequential energy secretaries of our time. and again i want to commend you on your fine work and the initiatives you have established during your tenure. and as you know secretary moniz, when one attempts to change the culture and the practices of institutions that have been doing things a certain way for a long time then inevitably there will be resistance and apprehension when those entities are asked to change. and with this in mind, secretary moniz, i ask you to follow up with me to gauge where we are with some of the initiatives that you and i have discussed

before in the past. specifically, i would like to discuss with you the issue of inclusiveness and outreach at the publicly funded national labs, including but not limited to oregon -- at my office of in touch with you to schedule a meeting for sometime in the very near future between you and i -- argon. it is my opinion, mr. secretary that argon and others are thinking on the issues of inclusiveness and outreach. it seems to me that they're trying to run out the clock on you and i and not seriously taking our requests and our

initiatives and our discussions too hard. mr. secretary, on another issue i would like to get your thoughts and feedback on the qer legislation that was introduced in the senate your as i said before i will be offering a companion bill in the house soon. as you know mr. secretary, this bill would simply amend the d.o.e. organizational act to replace the current requirement for a biannual energy plan with the quadrennial energy renewal. and can you give the subcommittee some feedback on this bill, from your understanding we d.o.e. take the lead in addressing of qer and is there a need for legislation such as we have

previously discussed? >> thank you mr. rush. by the way on the consequential issue, i hope there positive consequences and i might also at this point say that i think our energy policy did heroic job in marshaling these huge qer forward. on your first question and culture, et cetera, i might add that there's a wonderful expression by peter drucker the famous management consultant, that culture eats strategy for breakfast. we can change rules but it's hard to change culture. but i think we are certainly making it is concerned on the issue of minorities against you know otherwise i do see enthusiasm going forward your argonne, for example, one of the initiatives is in terms of making sure that minority businesses are quite aware of the opportunities for

procurement of also have and bob harris has been a leader in a faith-based initiative comes a good example is working in this case in southwest louisiana with enormous construction going on driven by natural gas for training minorities to get some of those jobs. in terms of research collaborations, another example of the our jefferson lab working closely with hampton university. i mentioned the entrance already there so we will keep pushing on all these fronts and want to work with you on that and if you find problems letting go because i will be sure -- >> i certainly will. >> thank you. secondly, on the qer and the possibility of legislation let me say that i certainly share the driver of this, which is that i think him and by the way the initial reaction to the qer including industry i think is, suggest that institutionalizing

this could really be very important for continuing the bipartisan administration congress discussion. some happy to work with both chambers in terms of how that might go forward. i would say that the department of energy in this first installment clearly did provide kind of the analytical horsepower for it but i do want to note that the executive office of the president also played a crucial role in being able to convene 22 agencies to come together to work on it. so we knew it would to discuss it further. >> the gentleman's time has expired. at this time recognize the gentleman from michigan, mr. upton, for five minutes spent thanks again, mr. chairman. mr. secretary, in my opening i reaffirm the desire ask me to work with you and administration to find areas of mutual agreement on some qer legislative recommendations and we look forward to that. are seeking technical assistance to some of the other sections of

the bill as well. one of the areas i want to zero in is spro this morning. as i noted in your response to the committee yesterday, the spro was established in 1975 and it is the largest government petroleum reserve in the world. it has been used successfully on multiple occasions to respond to different types of energy supply disruptions. but it is now 2015 and global and domestic oil markets have changed significantly. we would all recognize that and spro needs to be modernized. so as you know the committee recently voted to draw down a limited amount of spro oil to pay for our 21st century tears package beginning in 2018. as you conduct the ongoing study to recommend the new size and role of the spro going forward would you support an additional change that would allow the president to draw down south

surplus transit crude oil in order to use the funds to pay for operations and maintenance in line with the d.o.e. budget request and potential modernization plan? in other words, using what we call mandatory savings to provide for the modernization and needed improvements that really have to take place in the next number of years? and i would imagine that would be a pretty small drawdown. >> mr. chairman, well, first of all as you know i have some considerable concern about using the spro for anything other than energy security and resilience issues for which it was which it is intended. issue covers lives at issue of what is or might be called surplus i think is really part of the study going on because we understand there are certain ida

requirements, but that may or may not be the metric for us to use your that's the first thing. secondly we did identify of course in the spro come into qer, excuse me needs right now for modernizing the spro. welcome there's issues of maintenance, issues of modernization and in particular issues of addressing distribution systems for getting spro oil on the water come in particular in an emergency. we estimated that as one and a half to $2 billion. that's part of a discussion with congress how to dress dress that. clued in which he proposed would be a case in which if one were to do that it would be being used, i would argue for the energy security intent of the petroleum reserve. >> so if you know the qer recommends more flexibility and anticipatory authority to initiate a spro draw down.

do you envision a greater role for spro to moderate global price is? >> a motivation for recommending somewhat greater participatory authority is not motivated by a desire to use the spro to manipulate oil prices. the issue is about the current anticipatory authorities are highly restrictive. up to 30 million barrels, and don't get that teach you about 500 million barrels. so they are issues of their, and we feel that that should a larger drawdown be required or if the spro were at 500 million barrels, one shouldn't have to wait to see the consequences on consumers of a spike in global oil prices before one can act. so i think that's the spirit as

opposed to manipulate oil prices. >> so i would note as the qer discusses the last on spro had a major release was in reaction to libya was back in 2011. seems like yesterday but it was 2011. sense of in the supply situation is greatly change for stress demonstrated in a test sale this last year. if there is an interruption summer in the world, that doesn't impact the supply to u.s. refiners, would it make any sense at all to export spro crude? >> once again i would say that that should be part of the study that studies really that we are going on. but it might say that it's hard to see how a major global disruption would avoid impacting our imports because again we support 7 million barrels a day

and only because within major disruption even if it lets a country is not directly importing to us right now there would probably be a redistribution to the market that would impact our imports. but nevertheless hypothetically, if that were the case i think there would still be an issue of putting spro out would have the effect of backing out imports that within the quake in the global market. we can discuss that further. >> thank you very much for your parents again today spent at this time recognize the gentleman from new jersey, mr. pallone, for five minutes. >> thank you, mr. chairman. secretary, climate change vision of israel and we are already feeling its effects across the country, the damage impacts range of heat waves, increased wildfires. at the region and the country every part of the globe is affected or i'm concerned about impacts of extreme weather events and sea level rise and

already, you know, problems we have with her energy infrastructure. my question is the qer outlines a number of findings in this area. how was your energy transmission, storage and distribution or ts&d infrastructure vulnerable to the impacts of climate change? >> thank you mr. pallone. chairman pallone. first of all the data into qer show we have been seeing increasing impacts probably impacting the economy in order of $25 billion a year on average over the last decade. and with rising sea level the effects of storms, major tropical storms for example, are amplified. so we feel it is very important now to address the hardening of these infrastructure, not only coastal the but coastal is one major issue. that's why we recommend a joint

set of initiatives. one is to provide energy assurance grants for states to do planning and to provide a basis for the states to then compete for what we recommend as a several billion dollars opportunity for the hardening kinds of activities to i'll give one example but it happens to be in new jersey. it was not out of the recommendations here, but in new jersey there was the case when we cost shared with the state a study on implementation of the very significant microcredit to protect the electrified transportation corridors. the state and used that study to compete for sandy recovery money at the fact several hundred $9 to implement that it that's the kind of thing. duty studies get technical

assistance, and then have the opportunity to move forward with cost-sharing, major resilient to projects. >> i appreciate your mentioning new jersey grant, because obviously we didn't have a lot of vulnerabilities during superstorm sandy. we still have breakdown of infrastructure and services, both electricity and water supply. in terms of this competitive grant program that is going to promote innovative solutions for infrastructure resilience, reliability, security, just give me a little more information about how the program would work. i know you mentioned the new jersey program but what is kinds of projects would be eligible for those grants? >> welcome it could be, can come any kind of project that hardens infrastructure. the electric grid as kurdish own vulnerability to storms. so could be things like i mentioned with micro-grids. it could be the use of advanced

technologies. i can mention some things like synchro phasers that would allow operators to respond much more quickly to something that's happening to protect spreading blackout, for example. it could be in terms of fuels requirements. one of the recommendations that we have in there is to expand analysis of what different kind of regional product of reserves might do. this isn't a case where again in the northeast and in new jersey we've already moved there but they are issues in california issues in the southeast. the to be issues in the upper midwest. and so we recommend that and there could be opportunities in their for new resilience he projects spent thanks a lot. i do want to applaud you for your efforts to strengthen these vulnerable and critical energy infrastructures, especially in

the face of global climate change so thanks again. thank you, mr. chairman. >> at this time speech i might just add this is an example of the importance of a broader view of energy security, including resilience of our infrastructure. >> exactly. thank you. >> at this time of recognize the gentleman from texas mr. barton, for five minutes. >> thank you, mr. chairman. mr. secretary, welcome back. mr. rush and using kevin mitchell admiration society going. superstar energy secretary. >> don't you jealous. >> do not get jealous. i wouldn't quite go so far as superstar but my daughter has been saying she learned in college when something is really cool, it's a money. and i would come its money. when you say it's money come it means that, man it's hot and it's cool and it's right on. i would say secretary moniz is

money. not superstar but money. now, you know what i'm going to -- i'm going to give you a chance to to show how much money you are. what you think i'm going to ask you right now speak what i don't know, but i'm covering my wallet. [laughter] >> door number one. >> you heard the chairman's opening statement. he talked about oil exports and, you, as you well know mr. secretary, back in the '70s we had the air of the opec embargo and this committee and the congress passed a lot of legislation to do with it most of which has been repealed. we have price controls on wellhead natural gas prices your we have price controls on crude oil. we had even retail price controls on gasoline. we limited what natural gas could be used for.

that's all been repealed. the only thing that hasn't been repealed is a ban on crude oil exports. now the u.s. is number one in the world in oil production, over 10 million barrels a day. world uses somewhere around 94 95 million barrels a day. would you agree that if we were to let our domestic oil potentially be exported, that it would at a minimum keep prices from going up on world markets? and it's a possibility that world oil price might go down? would you agree with that? >> i think the key issue, mr. barton, is whether or not any country like ours that still imports 7 million barrels a day the question would be whether that did or did not stimulate any appreciable additional

production. it would be the issue. in terms of global price. internally, it would be an issue as to how grants are shared between, say refiners and producers. but in terms of the economy wide, the real issue was whether there's more production. and certainly in today's market it's hard to imagine that happen. a future market -- >> i'm not a harvard economics professor -- >> nor am i. >> but i did go to graduate school. they want to talk about sharing of rents our refiners are taking those rents and putting them in their pockets today. they are not sharing those with the retail consumers. if we let the producers have the option of putting out oil on the world market, the consumer into united states could potentially benefit from the world price going down. and i think you'll agree with me

that retail gasoline prices are basically set based on the world price for crude. you agree with that. >> absolutely, yes. the eia has confirmed that. >> so i have a list here of studies with a look at what a price, what would happen to the price into united states at retail for gasoline. and the brookings institute resource for the future council formulations, bipartisan policy center, baker institute center for global energy policy at columbia university can energy policy research institute progressive policy institute heritage foundation come in american council for catholic formation from congressional budget office can energy information administration general accounting office, federal reserve bank have all concluded that if we allowed our oil to be exported, they would be no increase in the domestic prices for gasoline, and in most cases it might go down.

now, those are not oil company hacks. those are bipartisan, usually i'd say objected institute. are you unaware of you've got to be aware of some of those studies. >> yes. and again i think they're all in agreement with the fundamentals that, again the issue is whether or not such a move would lead to an increase in production of any appreciable magnitude. if it doesn't then there's essentially no impact on price. >> my time has expired but if you will send one of your crack aids to the republican study committee task force on energy seminar this afternoon, you here for five experts all say that if we allow our oil to be exported u.s. production will stabilize and probably go up.

>> and again, that's the key issue. we all agree on the facts. >> thank you, mr. secretary. thank you, mr. chairman. >> at this time the chair recognizes the gentleman from california. >> ki-moon. mr. secretary, i do appreciate the big effort that went into producing this qer document, nice work. the document does recommend legislative action. would you elaborate on one or two of those urgent actions that would be required? >> i think one of them one of the very important ones i already mentioned is this issue of providing funding particularly for states to compete for good projects that will provide resiliency of infrastructure. i think that's a very important one. another one is we recommend a fund that again would allow for competition for accelerating the modernization of natural gas distribution infrastructure for

both environmental and safety reasons. clearly, federal government should not and cannot pay for what may be a quarter trillion dollar bill, but what we recommend is acceleration which the federal government could help absorb any rate increase for low-income families. those are two examples of a number of. >> very good one of the things discussed is energy storage and greater modernization, grid resilience. you think there's a short-term potential for that energy storage to be useful in grid resilience, you know, lowering the cost improving access for renewables and sold speak with yes. in fact, we all know california is in the lead as is often the case in terms of storage. and clearly, except for the places geographically where

pumped storage is available, we still need to bring down the cost of storage but they are coming down. they could be a game changer in terms of, in terms of large-scale variable renewables, but also eschewed rigid storage at the household or commercial enterprise level to be another game changer, particularly in terms of distributed generation enablement. >> i were pretty close to the technology available? >> technology is available. it's the cost and would probably need another factor of two to three reduction in the cost to make it widespread available. >> thank you. they feel that the regional grid reliability would be put at risk by the clean power plan? >> we don't see any evidence in our analyses yet that this could not be managed in a pretty

normal way. for example, with a specific analysis in terms of natural gas transmission infrastructure because of the issues raised in terms of dramatically expanded gaseous in the private sector. and i found that while one would probably have some regional issues to develop that it was not likely metered a massive program because we actually have been building out the infrastructure pretty substantially for the last 15 years and frankly, there's overcapacity. >> will be the best way to do with original question then that you just referred to with reliability? >> just the normal process as the supply distribution is understood in that region the companies would go through the usual ferc process for let's say interstate gas transmission pipes. >> it seems to be -- across the

federal agencies, the qer highlights the need to improve coordination between all the stakeholders for transmission of any processes. do you believe that the rapid response transmission team has been effective and should its role be expanded? >> i believe that, i would say is i think it has really gained traction. it's been in my view i'll be honest, although the slow getting going but i think now the whole pre-application standardization is kind of come into play. and i think that we do need to come in fact, keep up the pace and if anything strengthen it yes. >> thank you, mr. chairman. i yield back. >> at this time to recognize the judgment of texas mr. olson, for five minutes. >> i think the chair and welcome, secretary moniz. my first question is about the federal power act. under section 202 c. d. a we you can order a power plant to stay running during a great

crisis. involving your order the plant might squeak past the clean air permits. unfairly that plant can define and sued others for doing so. one regulator says ago, another says stop. that plant has to decide whether they want to acquiesce the power shortage, maybe a brownout or blackout are protect breaking the grid printer just a few days maybe a few hours. i have a bipartisan bill with representative doyle and green to fix this energy package we are working on. this is not about a company running roughshod over environmental laws. we are talking about days or hours in a crisis. the other week ferc and nerc

indoors our bill. their predecessor, secretary chu, told me in this committee is quote-unquote very supportive of the idea. the bill has passed this committee three times now and the whole house twice the 112 the 113th congress. and so my question for you is can i count on your support in the 114th congress will you be very supportive of the bill like your predecessor? >> mr. olson, thank you. you've asked me this question before i let me say that the answer is basically yes. i know our view is that has worked with both sides on this editing were quite comfortable with it. >> great. thank you for the clarification. as you know my home state of texas has had our southern border, over 1200 miles of our neighbor that south into mexico. her relationship with mexico

your qer points out that we trade tens of billions of dollars in energy each year with mexico. >> sixty-five. >> sixty-five, i liked it even better. in fact, some of texas only powerline connections outside of -- [inaudible] come from our neighbor to the south, mexico. you might recall those willing blackouts and brownouts with crises in the fall or in the springs, the early winter of 2007 and august of that same year that my question is we know this oil plays we know that oil and gas, shale plays don't stop at the southern border. the new administration of mexico is reporting its energy economy. i think those opportunities will expand in the future. your qer energy package will address the topic north american

energy. better coordination trade will be critical in the years ahead. my question is can you please tell me what you see as the next major opportunities for north american energy and where that relationship is headed? >> in particular i would say actually last week i spent, for workdays in mexico with western hemisphere and other energy ministers. the energy reform in mexico i think offers tremendous opportunities for us. clearly in the hydrocarbon sector we know that. our companies are going to mexico in the coming auctions and are prepared to offer lots of technical assistance to get engaged in the shale plays as well. however, in discussions with minister walking the energy minister of mexico companies emphasize something that i agree with and that is the reform of

the electricity sector may actually offer qualitatively new opportunities. because the reform i think will bring our systems of regulation et cetera and standards much more into alignment as we have with candidate for we have a completely integrated electricity system. so we are looking forward to that. it's going to be a major focus. we have both a bilateral working group that i share on the american side -- chair -- multiagency group with the minister of environment in mexico and then i also am one of the three chairs of canada, u.s., mexico trilateral energy ministers, and we are already well along into a trilateral data, cooperation. and just last week we have not

released it but i undoubtedly can get it to you were the three of us announced that we are not going to expand the cooperation full agenda laid out which will include things like hydrocarbon production and energy infrastructure issues. so it's a very, very active -- >> thank you. the only viable carbon capture project whole world to come down and see. you love. i yield back. >> at this time recognized the gentlemen of texas, mr. pinkham for five minutes. >> turn one. trent seven -- thank you mr. chairman. mr. secretary, i don't know i see joe barton, i don't know if members have heard but his mom as well as we. mr. secretary, welcome back. according to the d.o.e. website

for projects across the u.s. international border, d. we must comply with requirements to consider primitive consequences of project. are you for me with the requirement speak with yes spent when making cross-border decisions the d. we adhere nepa regulations? >> yes spend does this include punitive indirect impacts? >> i'm sorry mr. green. could you clarify the question? >> when making these decisions the d.o.e. here, nepa regulations and guidelines set forth by the ceq coming to suggest. but does that analysis included cumulative and indirect impacts? >> i guess i'm not quite sure that's actually part of the nepa process or not. >> cpq requires -- >> clearly there are, in

general, women make public interest determinations, cuba to impacts are part of it. >> okay. cpq requires environmental impact for major federal actions significantly affecting the quality of human environment. is it reasonable to conclude that d.o.e. would require an environmental impact for cross-border project in the eye as the? >> absolutely. would always require an eis yes. >> would you we consider approval of a cross-border project a major federal action speak with yes. >> ceq is determined that nepa applies to significant the actions that can't be avoided by segmenting a project. so that means that project coming across from texas to mexico not just across border crossings of the project itself. would be we decision-making on cross-border segments of a cross-border project require compliance with nepa?

>> certainly. we always require nepa compliance. >> the discussion draft in the bill would eliminate the presidential permit process and grant cross-border decision-making to be we for electric transmission facilities. if the draft were to become law for the we would be charged with accommodating able to implement the granted decision-making is it reasonable to conclude that any d.o.e. issues new regulations, each regulation would include nepa requirements about cross-border project? >> i might take a step back. i think there's two principles that we would always insist upon. one is proper environmental review, and secondly would be a judgment that this is in the public interest. i think those are two basic principles. >> okay. there's language in section 3104 that would limit the departments but to fully comply with nepa requirements. do you believe that that

language is needed? >> well again clearly i think we need to make sure that the environmental requirements are met. so if the bill come if you proposal would curtail that, then i would not support it. >> are you for my with was called the federal nepa small handle issues? >> no, i'm not. >> okay. if federal small handle issues like how much federal control should be exercised over a private project, specifically with a full nepa review is required with the federal agencies control only a small segment and otherwise private project the court to determine if an otherwise private project cannot proceed without federal permits, and federal agencies are required to satisfy nepa requirements. mr. secretary, is impossible for cross-border project proceed without a presidential permit under current law now?

>> i really had better check that with my general counsel. i would have thought not but -- >> my concern is that we've been trying to set a standard in this bill in previous legislation on cross-border electric transmission, natural gas pipelines. and, of course, crude oil pipelines. in this case department of energy would have the authority over electric transmission -- >> wires. >> and whether the department of energy would use the nepa process to approve those cross-border spent again the two principles are there. the environmental impact just the nepa process certainly for the part in the united states and the determination of public interest. those are the key requirements and the two principles that i

would uphold. >> i'm out of time but i appreciate yeah i don't know you be if we pass this bill with this particular section would have that authority and i just want to see what the regulatory process would be with the d.o.e. >> the gentleman's time has expired. but are you saying that under 3104 our legislation would not require a nepa review? >> it does require nepa review spent okay. that's what i was wondering because there's been some confusion on our legislation that we done separately that nepa review is not require. i want to make sure folks understand it is in this bill. it was in the previous bill we passed out of the house on cross-border issues. not just for d.o.e. thank you mr. chairman. >> at this time i recognize the gentleman from illinois for five minutes from mr. shimkus. >> trembling. your department really was developed and instituted based upon our nuclear heritage, as you know.

and also it focuses on nuclear future and your to do with of the legacy issues. it's not really part of the hearing but the introduction is just election the i appreciate the support i received from the professionals and the contractors, and they took good care of me. i just want to put that on the record. now to the qer. the qer devotes an entire chapter to improving north american energy integration but makes no mention of issues be lying cross-border presidential permitting in general, or the keystone xl pipeline in particular. it's kind of some the questions i think mr. green was alluding to. do you agree that the adecco, ad hoc or slightly permitting process, close quotation, as the

qer puts it creates significant uncertainties because yes, it certainly can in many cases. >> has the inability to render a decision on keystone pipeline impacted other energy projects in canada? do you know of -- >> i'm not aware of it. >> and can you check back with us? obviously there might be, otherwise i wouldn't be asking this question. >> only in the sense that obviously i've seen discussions about other pipelines to take out things east or west for example,. >> right. i think the public and as a whole, i don't think they realize. sometimes i put up the transmission system on the map just to identify how many cross-border pipelines and transmission lines we already have both north and south. >> i think it's like 70 for pipelines or something. >> right. obviously, curious can we have

problems with one and the debate is will we have problems with the future or is this uncertainty kind of slowed down the process. and so part of the legislation which the chairman is pointing to talks about this cross-border energy infrastructure language. in the committees energy diplomacy discussion draft attempt to address the nasa delays and the permitting of cross-border pipelines and transmission lines, have you looked at this and is there room for improvement when we are talking about pipelines or wires? >> well, obviously as was already stated that pipelines as you are not in our jurisdiction. the wires are, and i think it's going pretty straightforwardly. i might add, just the projects discussed over the last five years for new transmission lines

would total about five gigawatts of additional capacity coming into the northeast. >> we had a hearing just a week ago i think on really the natural gas desert of the new england states. we have the governor of maine here which would address pipeline infrastructure and probably cross-border also with them. ..