>> the navy is responsible -- >> i'm not talking about an organization. that's very amorphous. i'm talking people, individuals. >> i believe we could have done much better in preparing and advocating for the right aspect of this program to be conducted at the beginning and throughout its execution. >> so who is responsible, in your view? >> the department. not a good answer, not something that -- >> no, it's a ridiculous answer, okay? so who -- in your view, who is responsible? part of the issue here is that the responsibility seems to be placed, i mean, secretary stackley, i appreciate your statement. it's up front. secretary mcfarland come i'm asking the same question a few. who is responsible? undocking individuals. that's how we fix it. we can't blame it on the navy spent i will take absolute responsibility for not having done the correct thing in terms

of helping this program along spent so who is responsible? >> then i would say myself. >> okay. admiral moore, admiral gaddis complicated your bios, very impressive in terms of your literary careers. when you get assigned to be the build of a program manager as a senior flag officer in the united states may become is that something when that happened you celebrated? is that something you were like, jeez, i mean, how is your job as uniform military officers viewed in the navy, and it is that part of the issue? >> welcome other that i got to spend my 16th consecutive year in washington, d.c. for taking the job, yeah. no -- >> i feel for your. >> it's an honor. >> is about a career in answer to successfully complete a tour that is filled with landmines,

or is that something you try to avoid? wasn't getting at is do we have our most ambitious top rated officers tried to get these jobs, or are they trying to avoid? is that part of the problem? >> i believe, cuba, this is the best job in the navy. i was honored to be asked by secretary stackley to take the job. i take most of us are anyone sitting at this table at our level will tell you that we want the challenges. we are not going to shut away from the responsibilities that go with each other i am ultimate accountable for this program as his secretary stackley. i accept that responsibility. i want the tough jobs. i was like to take a. i think we've made strides and 78. nobody is happy with cost overruns we've had on 78. i think we've done significantly better on 79 and on a good path ago for. to your basic question, good people want these jobs. they are tough jobs, but i think

you'll continue to get the right people. >> i know you see the frustration from the committee. i think senator ernst did a very good job of articulating that in terms of can we talk about dollar cost, opportunity cost with regard to the defense of our nation. so just what do these cost overruns on one of these carriers could find a brigade combat team in the army for 10 years. it's a really important issue. the army wants to cut 40,000 troops right now. so strategically this doesn't seem to make sense. ..

ischemic mr. chairman, first and went to thank you for your interest in this topic. i think it's one of the most important response abilities that we have, but i do think in terms of today's discussion that there needs to be context. i suspect the first macintosh's computer cost million dollars. in terms of the work, i have read about the work they went through to develop the computer, but then they made by the thousands and millions and the price went down to a thousand dollars and i think what are the problems here, mr. francis, you identify it and i think this is where we need to focus our attention is that we are dealing with first in class products,

new products and you have mentioned to terms, fly before you buy immature technologies. i understand that, but the problem is we are building a product here that is supposed to have a 50 year wife and if we build it with a fully mature and fly before you buy technology it will be obsolete the data enters the water and we are talking about a qualitative technological edge, so i really think-- and senator mccain pointed out we are essentially building prototypes. there is no way to do a prototype of the first macintosh , that was a prototype that would sit on the desk, but you can't build a prototype of an aircraft carrier, so i think the problem and you have identified it, mr. francis, how do we deal with the first in class issue? may be is more realistic estimates at the beginning, maybe it's more realistic estimates of the time, but to simply say there is an overrun here, senator mccain pointed out

, if the estimates at the beginning had been more realistic there would be no overrun. it would've been what was estimated, so mr. francis, how do we deal with this? it's a risk and cost balance, it seems to me, and in order to build the highest technology and most advanced weapon system we will have to take risks in terms of being sure that technology is the most advanced possible when the ship launches. talk to me about what you identified, this isn't an overall procurement problem of the military, but the fact it seems to happen in every branch on every weapon system, whether it's the f35 or this or other ships or weapon systems, tanks, you name it. how do we deal with this first in clash-- class issue? >> well, senator, i think there

is a way to take risks, so we need to take them. our position has been, let's take more risks in science and technology before we get into acquisition. that takes money and we are kind of stingy about money before we get into a program's. >> would be accurate to say some of these ships, some of these systems, this is an r&d project, this says r&d on the health. >> yes, and we talked earlier about offramp that i think sean talked about them. if you're going to take a risk, i think we should say, let's say we are taking a risk and we have an offramp, so if this does not work out we have a plan b. we tend not to do this. we tend to bet this will come out the way we say and if you are looking at the original plan , these systems were going to get wrong out in land based testing before they got on the

ship, but we were too optimistic about the schedule for that, taking that risk, so they slid onto the ship. myself personally, i'm not terribly concerned about the types of problems we are having on the systems. it's when and where we are discovering them. that the problem, so i think there is a way take risks and take it more intelligently. again, i come back to the acquisition culture. the culture here is to say there is no risk, that we can do up for a low cost. you come in and say it's going to cost 13 million, maybe you will get told no, so you camp at that on the table, so somehow our culture has to change, so we can say it's okay to take a risk and here's how we will do it. >> one of the problems here is that we are talking about a class of ships that we are building three of them, so you don't have 50 or 60 to spread those of essentially r&d over the ddg 51 i think his example of that and it's now cheaper that it was when it was-- i

believe that it was back in 1986. it had a whole lot of problems announced the mainstay of the navy, so i think-- again, i think this is a very important subject. i don't mean to us sugarcoated anything we need a focus on it and understand the context somewhat and really focus on the real problem, which is seems to be how do we deal with the quantitative risk? i spent two hours not long ago in a classified briefing on the new bomber, same kinds of issues and trying to hammer about how we do the contracts, who takes the risk whether it's a contractor the government, but this is a tough problem when you're talking about trying to build the most technologically advanced weapon system in the world. the chinese are doing pretty well by stealing our intellectual property. i alleged. [laughter] >> but, that is one way to short-circuit their r&d, but i

hope you all-- met up secretary, secretary staff, you have done a lot of thinking about this and i with it would be very helpful to present us with some thinking about how we deal with the person class problem because that is what we are talking about across the government. >> senator mccain, if i can offer a more complex technology risk and that is what technologies do you choose to put in the first-class? secretary stanley and others is that in their statement the original plan cbn x1 and cbn x2 almost in one class, we talked about, i think, ranking member read talked about the surveillance radar project we are putting in the cdn 79 to replace the dual band radar and that the management of risk because the radar is a non- developmental solution to read we have requirements as set looks at what industry has now to reduce the risk of technology and development on time and a scheduled.

brand-new summary warfare aircraft was put on a commercial system, that's the boeing 37 aircraft. we reduced the risk of integration into an air freight by using something arty proven or realized in that risk. several of our weapons programs, we use the back and mortar with a brand-new seeker on the front, very very capable and the seeker's do and we do the backend voter later on, so the type of risk that you take on, sir, in the first in class is key. if we choose to do a full develop an outburst of class like the joint strike fighter, that's a revolutionary weapon system that is that her than any aircraft in the world and there's a lot of risk of there, sir. we realize that risk it now. we have talked about-- that was revolutionary between the-- i would submit sir, that the comments are exactly on the market we have to look clearly at the risk we have. if you are first in class is a revolutionary and you don't do

the things your talked about for technology, you will have a cost delivery mismatch that you will have to deal with later on, sir, and we deal with that risk. >> if i may just add because you are asking a spot on question, an issue we rescued-- wrestle with continuously. the next big thing coming our way in the department of the navy in terms of the first of class, we are talking about a program that will provide reliable secure, certain sea -based detergent into the 2080s, so how do you design and develop the capabilities that will go on the boat on the front end, deliver on schedule, so she can be on deployment on scheduling 2031 certainly and then throughout its life remain that secure sea -based. >> still be at strategic weapon 50 years from now. >> yes, sir, so we are not going to go big bang. we have been working this and we

looked at what we need to do that we don't already do on the ohio. right now, we have a very effective, high performing strategic program in terms of a weapon system is so we won't develop a new weapon system. we will pour over the existing weapon system in its current stage of technology at the right time onto the replacement whole in virginia class, they're effective combat systems, sensors, communication platform. we will pour over that technologies onto the replacement whole. the advances we need to make are in terms of stealth and survivability of the ohio replacement whole for the next half-century and that's where our focus is in terms of development and design in the way we are going about this is challenging requirements right up front and getting it right doesn't just mean what does the operator mean-- need, but what is technically feasible, what are the risks you carry in their when you identify those, make

sure you have a developmental program that works those risks, so everyone understands you are making progress before you cut steel and then have the offramp that we discuss. in a we have that laid out. that's a 2019 boat that we are sitting here today doing those developments, managing 2021, excuse me. we are managing closely today and then today assessing the risk means visibly for the congress, the department of defense with industry to ensure each step along the way we have-- we are making the right decisions and we don't find ourselves where we are today with the late in the cost we are seeing. >> admiral, when your time has expired, when you use the joint strike fighter as a success story, sir, you have lost the connection between the military and this committee. the most expensive, longest--

largest cost overrun, first trillion dollar weapon system in history and you are using that a six effect story, sir, you have lost connection with the members of this committee and those of us who have been involved in this fiasco for a decade. francis, you have to respond to some of this. we are now painting pictures everything is fine. >> i think this is the byproduct, again, of culture in the long timeline, so when programs get through their problems we fall back on, well, it's so much better than what we have, but we have forgotten the cost of the opportunity cost that it took to get there. so, i think we could agree that the system produces tremendous weapon systems, but they cost way more and they take much longer and we are giving things

up along the way, but we don't know what those things are. that's not a pattern we want to repeat. we went to get it right the first time. >> senator. >> mr. chairman, for the record, sir, i did not intend to use that as a success story serve as much to illustrate the innovative technology such as the secretary said is a challenge cirque. >> innovative technologies in silicon valley reduce costs. innovative technology apparently in the department of defense increase costs. >> thank you. i know we have gone over a lot of the details of this program, so i won't rehash those. but, i do in the spirit of inquiry and problem solving's moving ahead in the future have a couple simple questions that i want to ask. mr. francis, i will start with you. has the navy ever delivered a ship under budget and on time? >> i don't know if i can answer that for history. but i will say, in the recent months we have looked that has

not happened, but probably, esther stokley has better data on that. >> yes, sir. >> first of all you said a ship and absolutely, yes, we do it consistently. i think you what-- what he wanted to get at is a lead ship as we have spent so much of our time discussing lead ships and the answer is yes, we have and that's when we have been there he measured in terms of the risks we carry through those lead ships. we-- when we look at the lead ship coming our way right now, the first one is going to be the tao acts, which is in the 2016 budget and we will leverage existing technology and design to minimize the risk on that and that will be a fixed price program carried the next one after that will be the next program as what we refer to as the lx are and we have made the decision to mitigate and minimizes risk to ensure we deliver the capability at a cost we can both afford and rely upon when it delivers.

we will use the whole form, which is technology and capability we understand and supports the mission and that we will just deal with those changes that are necessary for the changes to that platform. >> those are ships in the future, though. retrospectively, what is the lead ship that the navy delivered under budget? >> i don't want to oversimplify this, but the last lead ship we delivered was the mobile nt platform that was delivered on schedule under budget. >> secretary mcfarlane, do you have anything to add? >> no, sir, i would add one thing different, though. i think the underlying premise in terms of what we has that is a discussion doesn't go specific to the ship, but to the culture we discussed earlier. >> to be clear i'm asking is not just about the carrier, but all of these major capital investments that in particular our navy and air force-- if the air force was in front of me i would ask them the same thing

about airplanes, but we had to replace our submarines in the air force is on the verge of replacements long-range strike bomber. i want to know if we have done in the past even if it's been rare, overbudget and delayed programs, what are the features or best practices or the cultural conditions that allowed a program to be delivered on time and under budget? >> senator, i would like to bring forward a list of programs that have come in on schedule and performance and also, in terms of the culture i think that was article he discussed by the chairman ranking member and i think the table here there are things that can be done to improve, things like bureaucracy and things like overhead. i think the other piece you're getting at in terms of, what we've learned, one of the attributes of our new implementation and the better buying power is taking lessons that come from gal, from the dot and eat and incorporate it in very stepwise and disciplined

into the system and work to see these improvements in culture eight it into our workforce for the long-term. we have seen as part of the performance of acquisition systems report that we started three years ago, a moderate improvement, a decrease in the numbers and an increase of performance of our contracting. although, we can improve incentive. we have been trying to measure what we do and find no space off whether they traced to acquisition reform, policy, statute regulation to work as we had done with congress for these upcoming and daa's legislation. we believe we need to get to the heart of the matter which is the data that points as to what we can do to improve. >> mr. francis, you have any? >> one of the classic cases of a success story is the f-16 fighter. i know that is old, but the story, the lessons are still applicable, so that was a

low-cost alternative to the f-15, so the requirements were kept a low. we had five international partners and they all had agreed to requirements changes and had the effect of keeping the requirements down. we had a contractor at the time that was in very difficult financial straits, so they couldn't underbid and hope to get well later. so, that combination of things had the effect of changing the culture for that program. there are other examples i'm trying to think up, the shadow uav that the army developed also went quite well and again in that case we had both the-- we had requirements in the army and the head of acquisition actually drove that program and kept it in check. so, i'm-- my experience is that the success stories have been

the byproduct of exceptional circumstances and not the result of normal circumstances, so the take away here is how to replicate that, how to make the circumstances, that culture normal for most acquisitions. >> the uniformed officers, have anything to add? >> yes, sir. i was the hornet, super hornet and growler program manager and it might change command and i said i thought super hornet was the most successful program in the history of dod. two years later, i found out i was wrong. the 18g growler beat the ef super hornet and i would argue that that is normal acquisition and what you see is apparition. of that over there, is an admiration. at a $47 billion portfolio with those platforms and it includes advanced hawkeye and includes

the next generation jammer. very successful programs. that right there is the unfolding of one agonizing technical discovery after another. at its root, since senator mccain as a question, is we didn't do it inadequate td. in fact, i will give you examples. we did at risk reduction effort before signing the contract and we spent $322 billion. with fear act passed in what he nine-- 2009, the next generation jammer before we go to milestone b the department of defense will have spent 622 lane dollars for tech match the tech development for next generation jammer. what that means is you will have a solid technical baseline in a solid technical cost estimate going into milestone b and i feel confident about the execution of this programs. we spent a paltry $29 million.

we could have discovered everything that we discovered then we could have discovered a lot sooner. but, we are at a point in the program where we are beaching back all of the discovery, beating back the design changes. as the secretary said before we are now into software and tweaking the software. that is where we outwit adg. wish we had done td like we did next generation jammer, we just didn't do it. in 2004, by the way, normal acquisition, we did propose that. we did propose a five-year component advanced development program. followed by a five-year development program and it was aimed as too costly into lengthy well, here we are. we should have done that in the first place, but leadership said no.

because we were in transformation pushing technology to the left. but, that is the consequences of those decisions that were made back in 2004, which by the way is all documented in the 2004 acquisition strategy. thank you. >> thank you, prodromal-- admiral. i would, if you could, follow-up on providing examples of where systems have succeeded and been a success story that have come in under budget, under time, the headline grabbers are the ones like this one like the strike fighter that don't do that, but i do think we have a lot of lessons to learn not just on oversight of current and past products, but what's going to happen in the future for the platforms and of the weapon systems for our sailors, soldiers, airmen, marines need your good that would be helpful for me and the rest of this committee, sure. >> on the half of the chairman let me recognize german mccain. cnet thank you mr. chair. super questions by senator

cotman. in this program, going back to up point i asked earlier and i want to get your opinions on the roles we should play in oversight, in this program the cost estimate before 2010, were coming with the confidence factor of less than 50% corn one instance less than 40%. if we are asked to make a decision about a significant acquisition and we are given a cost estimate, but the navy-- navy or whatever the service says our confidence on this cost is less than 50, to me that suggests probably some questionable confidence on cost, but also operational risk because the reason you have a question about cost often k'nex to operational operational uncertainties as well. should we just say come back to us when you are at 75 or come back to us when you are 60 if is that much uncertainty about a cost estimate, should we basically push you to do more work before we give a green light?

>> 's or come i spent a lot of time with the cost estimators and the program managers and i explained the cost estimate is that the answer. its information. you hit onto things, the cost estimate and the% confidence. in fact, the estimators come up with a range of things that could influence the final cost to read what i want the program management team and the cost estimators to do is in that understand what are the risks. today the confidence is 40%, what other risks that we had to drive out of the program to get it up to the level that we are ready to put budget down on, ready to go to contract, he to cut steel. so, it's not just the cost estimate, it's the next two or three layers below that that the estimators are pointing at that identify the risk that we need to retire just like we're been discussing here with the carrier program that we need to retire before we go to contract, before we go to congress and say we need authorization of a preparation to go forward on this major program.

>> senator, i would say for you get to start you work earlier, so when you come up for the milestone and cost estimate is done in the program acquisition strategy is laid out there is very little you can do. but, i think the congress and this committee by getting invested in programs earlier, say three years before that milestone, you create the expectation that you want that to come in at a high confidence level and you want to risks identified and you are willing to either one, pay for the reduction like the admiral talked about or you are willing to offload some of the requirements to bring the system down, but the work would have to start earlier to position it for success. >> thank you. thank you for your extraordinarily interesting insightful testimony and for your service to the nation. on behalf of german mccain--

chairman mccain. [inaudible conversations] >> next line nancy stands new series landmark cases, in 1830, dred scott was enslaved to u.s. army sergeant doctor john emerson. during his enlistment in the army, emerson was assigned to duties and several free states. during which dred scott married harriet robertson and when the doctor died mr. scott try to buy his families freedom, but she refused and he sued. follow the case of scott versus sanford and see spence new

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just waiting for things to get started here. the chair of this sentiment is lisa murkowski of alaska and maria cantwell of washington state is the ranking member. [inaudible conversations] [inaudible conversations]

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[inaudible conversations] [inaudible conversations] >> just waiting for this hearing to begin. it is on modernizing the strategic petroleum reserve.

also talk about related energy security issues. one of the waiters today, secretary ernie moniz along with experts on energy and national security issues is being held by the senate energy and natural resources committee. if we have to leave the hearing because the full senate gavels in at noon eastern you can continue watching this streaming live online that c-span.org. the chair lisa murkowski just arriving. [inaudible conversations]

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>> a lot of ground to cover this way. with a couple of excellent panels of witnesses. so let us begin this morning. we are honored and pleased to once again to have before the committee the secretary of energy, doctor ernest ponies. welcome back. it's always good to see. appreciate this. we have an opportunity this morning to talk about -- ernest ponies. to talk about the strategic petroleum reserve and other energy security related issues. back in july i prepared for the committee a report on the strategic petroleum reserve, a turbulent world in defense of the strategic petroleum reserve. if i must say so myself it's pretty darn good. i would commend it to you if you'rhave not yet had an opporty

to read it. we have some pretty unparalleled opportunities here in the united states with regards to the oil and our oil production. and while it is good and strong i think it's important that we be ever vigilant in this area. opec's spare capacity has fallen, unplanned production outages persist in iraq community and elsewhere. and for the trouble always seems to lurk just over the horizon. the strategic petroleum reserve remains critical to our nation's energy security, and it is an asset. and you will hear me repeat as often as i possibly can that this is about a national security asset. and i think it's important that we focus on the energy security aspect of it.

it is in an insurance policy, absolutely. it is a source of leverage and stability for us from a geopolitical perspective, absolutely. and while i believe that it should be modernize i think the question that many of us have asked is what exactly does modernization really mean. i'm going to make for brief points this morning in that direction. the administration proposes some $2 billion in new funding for spr life extension projects and to improve marine distribution capability. i think his proposals merit careful consideration by the committee. i look forward hearing from secretary moniz as he makes the case of these. i had an opportunity act in july to tour one of our strategic petroleum reserves and i think ensuring operational effectiveness of the reserve should be efforts prayer before us. we cannot let these last into disrepair so that they cannot fulfill the purpose which is

intended. and again taking us back to energy security. second administration is also setting decoration a petroleum product reserves on the west coast. and on the east coast had one. i am not opposed in principle to build an additional product reserves but i do have some reservations about them. petroleum products have a much shorter shelf life than crude and a much more direct impact on the american consumer. guarding against the use of the spr for political purposes i think should be an enduring concern for all of us. and third, i'm also not opposed in principle to revising the emergency release the authorities and the frustration some of my colleagues have proposed but generally i am wary of proposals to expand the power and the ability of the federal government to intervene in the free market. any sort of redemptive release clause must be very carefully examined.

while the quadrennial energy review briefly discusses this proposal i don't think administration has at this point i made a convincing case of authority, so i look forward to discussion on that as well. but i think final point, and i raise this in the white paper that we released in july, strategic petroleum reserve doesn't essential exist in a vacuum. the trans-atlantic pipeline is another vital piece of energy infrastructure and it, too, these important to our national security. and yet we are seeing it through put decline at deeply troubling pace. tasks most opera for decades to come. with the resources in our state to ensure that it does. i think when we are talking about energy security, our focus should be broad in evaluating our energy security, pursuing all of our options including for the increases in domestic production. so i'm going to close my comments again by reiterating that we call it the strategic

petroleum reserve for a reason. and as the name suggests we hope never to use it. we hope to use it passed that strategic reserve. but we keep it around for good reason. because in the event that something happens, if there is anything, whether it's in the straits of hormuz, or whatever it may be coming case the world slips and we find ourselves in need, we need to know patty strategic asset, this national energy security asset is there. and i have said before that it would be a mistake to treat the reserve as anything but a reserve. it is not an atm for new spending are a vestige of our national energy policy. it would begin to treat it as the i think we risk of selling at the wrong time at the wrong price and losing its substantial

benefits. so again looking forward to youd discussion about energy security in this context, and look for do not only the commerce undersecretary but our second panel as well. with that i will turn to ranking member cantwell. >> thank you, madam chair and thank you for this hearing on modernization of the strategic petroleum reserve. i also want to thank secretary moniz any other witnesses for joining us today on this important discussion. i want to thank the secretary for his leadership on the quadrennial energy review which is an important document that helped frame the discussions of our national energy policy and particularly our infrastructure needs. in july this committee successfully report out of energy modernization act on a bipartisan basis and we had discussions about the pieces of legislation but i think it was one thing we could easily agree on and that was the critical imports of the strategic petroleum reserve. 40 years ago we created the strategic petroleum reserve to prevent economic insecurity impacts of crude oil supply disruptions and that's exactly what happened with the arab oil

embargo in 1973. in 1975 law that created the strategic petroleum reserve, specifically authorized the president to draw that if he or she determined that was soviet energy supply interruption. the core policy reason for the reserve in my opinion hasn't changed event nor should it now. the strategic petroleum reserve is important better and you should security asset. we needed just as much today as we did then. perhaps the energy markets that we've seen with volatility over the last decade point2.com for the global oil markets may have changed but so does the nature of the threat to the infrastructure which is so key to our economic and national security. we have made commitments to the international energy program, so supply interruptions could happen at anytime, whether its response to volatility somewhere else i in the world or in naturl disasters like hurricanes, we are seeing increasing frequency and devastation to our critical energy infrastructure.

you just never know when the oil every strategic petroleum reserve will be needed. even with the u.s. being an oil producer today, we need to have emergency crude oil contingency plans. there are several immediate and medium-term geopolitical risk capable of printing severe and even catastrophic oil supply by such as a possible attack on major middle east supply, whether it is for severe, ma or what would be severe disruptions originating in places like nigeria or venezuela. even if the situations, some of them could result in disruption or triggering a drawdown. our colleagues on the committee are quite familiar with the findings of the quadrennial review. the report quotes the challenges remain and maximizing the energy security benefits of our resources in ways that enhance our competitiveness and minimize the environmental impacts of the use. this network of the oil

distribution has changed significantly. the quadrennial review explains the bill to protect u.s. from soviet economic impact in the event of supply emergency or association like a spike in price has been diminished by infrastructure congestion, literally the congestion of too much product not being able to get the product to market where we want and when we want. in fact, the department of energy did a test in 2014 and it identified a series of challenges with distribution to investments are needed to modernize to make sure the infrastructure has the ability to respond. the spr is in need of $2 billion worth of repairs and upgrades. it is estimated those $2 billion of modernization can help save the us economy approximately $200 billion in the event of a sustained large oil supply disruption. so we will hear from the secretary about some of these issues, about the fact that salt caverns were built in the

1930s and some of them raised questions about their integrity. i know two of them have been taken off-line. some of the wells by more than 60 years old and we need to invest in aboveground infrastructure, issues like brine disposal, participation systems, physical security of all the things that will help us respond to any emergency. because pipelines have essential reverse direction since the flow of spr being built 40 years ago that's what this issue of congestion comes in and the strategy without regard to deal with the congestion to make sure we can get product into the market so they would have the intended impact we wanted to have. so again i think the secretary for his work on the quadrennial review, a long process but a very good roadmap for telling us what we need to do to improve our infrastructure, not just on this but on other issues as well. i thank the chair for having this important hearing. >> thank you, senator cantwell. at this time we will turn to the

secretary of energy, dr. ernest moonies. welcome to the committee and we look forward to hearing from you about this very important national energy security asset. >> thank you, chairman murkowski and ranking member cantwell come and distinguished members of the committee. i have submitted a 30 detailed testimony so i will just make a few summary comments to open up the discussion. clearly we need energy security policy based on 21st century energy market changes, challenges, vulnerabilities and needs. key components are a modernize spr configured to enable appropriate drawdown and distribution capacity. energy infrastructure, resilience, reliability including emergency response, and a broader concept of energy security to include our international engagement, our allies and our partners. i'll touch on the latter two

points briefly and make a few more comments on the petroleum reserve. so it's our nation's, as you've said, both of you, it's our nation's most central federal energy security asset and should be treated as such. some have concluded some large ball into the oil for purposes not related to energy security will have no or little impacts on its energy security benefits at a do not subscribe to those views. and, in fact, i believe sp or remains an extreme powerful and viable energy security tool. as we've i went energy security bounty we must take into account several factors. including going to stick the relevant relative to 1975 come to change major oil markets since it was established. we are linked to the global market and we are exposed to global prices. including disruption driven global price spikes. and these historically have had significant economic impact,

even if there is little direct impact on our imports today. secondly, our international commitments not only our obligation of 90 days of import protection would also another international obligation which is based upon oil use, not oil imports, and that is our obligation based upon the last dated to provide 43.5% of the amount of a total coordinated on the cd response pashtun oecd 200 disruption. i think it's important emphasized we have an import obligation and an oil use dependent obligation. and then third actual dissertation capacity of the spro, the 2014 test sailed it identified a significant gap between the spro a drawdown and distribution capacities. much of that is driven by what's happened in the last several years in terms of the changed scale and geography of our oil

production. and to address disruption scenarios, thank you need would be the ability to get spro oil onto the water to supply coastal refineries. changing markets of international commitments are not the only concerned with the spro. like much of our publicly support infrastructure, a spro needs additional investment to maximize its value to in this case funding in three distinct areas. one is deferred maintenance. depressives budget for fiscal year 2016 proposes a major down payment on a backlog of spro deferred maintenance. cutting it in half. unfortunately, the house and senate appropriation bills mark if enacted would not support that. indeed, we might be going in the wrong direction in terms of increased deferred maintenance. secondly, almost 40 years old in sum caverns much older than that. the spro needs a significant

life extension program to ensure its effectiveness for decades to come in such areas as crude oil transfer and security. and third modernization. we also need to modernize the spro to accommodate the dramatically different locations and volumes of domestic oil production and changes in global oil markets. the quadrennial review that has been alluded to released in april examine what the spro would need to protect the u.s. economy, energy supply emergency. as already stated roughly $2 billion are needed, about 800 in life extension and about 120 billion for modernization, such as dedicated marine terminals to respond quickly in emergencies. the return on these could be huge to a study out of oak ridge suggest that, for example, adding about 2 million barrels per day distribution capacity could save our economy a major disruption tens of billions of

dollars, up to $200 billion depending upon the nature of the disruption. so we need a robust spro to guard against the economic harm of such a major disruption. this is not theoretical. if we look at many events in of these including just last week the russian military intervention in syria adding another element of geopolitical uncertainty in that entire region. just to finish with a couple of words on energy infrastructure, resilience and liability. this was discussed extensively in the qer. this is challenging. our existing infrastructure is not always well matched to our supplies. we have aging facilities going to failure. we have climate change impacts that we must guard against which but many facilities at risk and, of course, we have enhanced concerned about cyber and physical attacks that could take a heavy toll. thank you your head over 60 recommendations for addressing infrastructure needs. finally, just end by saying a

collective approach to energy security in the international sphere is what we need today. the situation in ukraine and growing european dependence on the dominant supplier of energy is what stimulated a lot of discussion within the g7 plus eu in terms of this collective responsibility i have just returned from the g20 energy ministers meeting in istanbul for this dialogue continues. and the reality is that this is an important and sensitive time in this arena. it is a time when we are, in fact, encouraging other major countries to build up their petroleum reserves to work collectively with hours. and so i think we need to be very careful about signals we send to the entrance of collective energy security. i appreciate the opportunity to come and look forward to the discussion and working further with the committee. >> thank you, mr. secretary.

your concluding words are the ones that i find most intriguing. here you are over in europe, in istanbul at the g20. you are working in this collaborative, this collective approach that you've been talking about with our g7, our eu allies, and the focus is on improving energy security from a broader perspective. you come home from the meeting and the discussion here is that congress is looking to take money, to sell off, not take money but sell off parts of that strategic reserve, that we are encouraging other nations to participate in, to again build out and enhance this collective energy security. tell me how this works, when the united states is trying to

persuade china, trying to persuade india to participate in these international energy security conversations. isn't it a little bit hypocritical for us as the country to be saying, come on in, and yet we are basically treating our energy security asset as a cash machine? >> well of course we are as you know and has called for in product after committee, we are carrying out a strategic study which we expect to finish next may, basically, in terms of what we need to do in terms of the size and the authorities of the petroleum reserve. now, without those on the go to talk about a specific size, like the fact is that, as i said the markets are totally different

today than they were in the '70s. the real issue is a major disruption that leads to a substantial price excursion, which affects all of us. and that's why we are working with china. and by the way, the collaboration was actually. they have come and visited our spro. we had the visit to their developing spro in november. they are building up towards 500 million-barrel petroleum reserve in china. india is building up reserves as well. so again as i said earlier i think this is a time of considerable geopolitical uncertainty. and what we need is a more unified international collective response to the economic wrist we would all these. >> i would hope you would agree we need a consistent response and we can't just ask them to move forward in this collective approach while at the same time we are weakening our own energy

security cushion, if you will. now, i appreciate you saying you can't comment on the right sizing up his tripod at this point in time. you're going through the studies. i would walk through all of the varied layers of analysis that will be part of that review, but wouldn't it be premature for us to be selling off portions of the reserves before we have that considered analysis, before we really know what the right size is, before we really understand how aspects of this modernization need to proceed speak with well, i would serve us in that's what congress has asked us to do this study, was to be able to have a detailed and significant analysis. and his analysis is being performed with the meaning, both

analytical companies and universities to bring together, i think the first really integrated strategic look in a very, very long time. and we would certainly like to have it enter. >> a very necessary review. i think it's something that we asked for a reason come and i would certainly hope that we would take advantage of this considered review before we weaken our ability to utilize the recommendations that come with this. and right now we've got a mindset here in this congress, and i've, unfortunately, even with your guidance here, even within the administration that says we need this money now because we need to spend it on a transportation bill. if we don't spend on a transportation bill, somebody is looking for another bill on the house side.

we have already identified it, for research in the health care world. we are looking at this as nothing more than a cash machine at a time when we are looking for more money. and i think that this is wrong and i think that this is irresponsible you and i believe very, very strongly that what we need to do is make sure that as we move to modernize, as we move to make sure that we have that strong energy asset, we don't erode our ability to utilize it in the time of an emergency, when we don't know what's going on, we don't know what may come next but we know that if we drained it out and we don't have the flexibility to move when we need it, then this could about the fingers pointing. ..

>> but, as i said we also have a contractual obligation based upon use and that is the 43 and half percent of dried out capacity for the response, but cycling the the on the international obligation, i believe it's in our best interest to have a very strong petroleum reserve. that is what gives us the flexibility to respond to a very major disruption and we have had

-- we have had brainstorming sessions, workshops with external experts work-- looking at what are the risks of major disruptions and they certainly are there. major disruptions, perhaps, more than 3 million barrels a day, for example, suddenly disrupted and by the way, the risk also multiple disruptions because things could be linked. as i said, that adds the expected impact of the major price five in those cases. we are in a situation with the diminished global reserve capacity and so it's being able to use government stocks in a rapid way that could at any rate that economic harm we might say. >> and you think the president should have new authority in this area? >> we have said in the qr it

raised the issue of writing authorities and some are very specific such as with the two product reserves, they have very different authorities for you so we think that should be harmonize within the petroleum reserve, but then there are a bigger policy issue such as, how one defines what a major disruption is in the sense of having the ability to respond when there is likely to be a major price fight as opposed to after there has been a major price fight, so those are the kind of policy issues i think we need to discuss in terms of looking at authorities appropriate to what is now a genuine global market in contrast to the market in the 1970s. >> in the quadrennial review you also talked about-- and we had a couple in the community about

monody congestion, the inability for people to even get product, utilities, to get product based on the competing commodities, so i think the review does a pretty good job of outlining the fact that we need to improve their as well. i mean, i wish people here would swing-- usually that's not how the legislative process works. clearly, we had to do both; is that correct? with the improved infrastructure, commodity as my colleagues talked about, the fact that utilities in minnesota who had requirements to serve their consumers, but did not get their call supply to them because of commodity congestion on the market, so that is the same problem with the underlying issue about the product, getting the oil and it takes and infrastructure improvement and modernization. is that correct? >> yes, and in terms of the marketization there is a

congestion issue in terms of the gulf of mexico, but that issue, as you say, is broader than that in terms of energy of the structure and i believe the rest is progress with regard to the trained congestion. i have met with the ceo, one of the major railroads and understood the steps they are taking to try to not have a repeat of those kinds of issues, so i think there's a lot of work going on in the private sector, but the fact is we haven't yet caught up to the incredible increase in our gas and oil production from the geographies and we also had things like large crops etc. all of this coming together to lead to some congestion. so, in the qtr, in addition to specific energy infrastructure with also had recommendations because it was an administration wide document, so we have also had shared infrastructure that all commodities used was part of

the focus as well. >> thank you. >> thank you very much madam chair. welcome back and as you talk about the role that energy plays in our national security global security in your testimony advocate for an expanded view of energy security that probably compasses the needs of the united states, our allies and trading partners and go on to say the crisis in ukraine highlighted the vulnerability of our european allies increasing reliance on a single dominant supplier. explained it's not always true with regard to natural gas, but also crude oil. your words. you cite the european commission's finding that some european refineries are optimized were using russian crude in the eu confining capacity in the hands of a shrinking number of russian owned, so i'm encouraged that the administration continues to approve us liquefied natural gas exports, but i question why it seems to be dithering when it comes to crude oil exports.

do you agree the us crude oil exports would benefit the energy security of our allies and trading partners and if not, why not? >> sir, again, first i think it's important that we do distinguish and we have had this discussion before, i think, in terms of natural gas and oil situations of the united states quite different in natural gas we are-- i mean, some canadians -- although, those are gone down to. we are self-sufficient and our export will very shortly started exports with lng out of the lower 48. oil is different where we are 7 million barrels a day importer of crude oil, a much greater exporter now of oil products, of course. so, the specific issue raised, as you well know is in responsibility to the department of commerce to make that policy judgment, but it's also true that recent studies including the last summary study of the eia on the congressionally

requested studies on exports show that's the impacts for the next 10 years or so are likely to be pretty modest, to put it mildly, in terms of exports. >> because-- if crude oil imports have to get to zero or near zero before the administration would support crude oil-- we all know that much of our nation's refining capacity really was built to handle heavy crudes that are imported from outside the united states, not what's being produced in the united states right now as a result of technological advances and fracking and how we get to this oil, so it's different in terms of refining capacity to read but, is that your litmus test that we have to get to zero but before we can export, which is essentially different product? >> i do not say that. of course, we should emphasize again, we are exporting a think

it's now 4 million barrels, maybe a bit more of products and that goes to south america and europe. so, they are getting the benefit of our increased production. that's the first point. i forgot my second point now. okay. maybe that was it. >> last month the white house press secretary said we won't support legislation like the one that put forward by republicans, but last week the senate banking committee advanced legislations introduced by democrat to repeal the crude oil export ban, so it doesn't seem the administration supports efforts to move this bill and according to the white house spokesperson, the obama administration opposes all legislative efforts to repeal this crude oil ban. >> by the way, that of my other point. on the additional production of light oil, the fact is that when

you look at that spreads brands, louisiana like, it's hard to argue that there has been a lot of production being hemmed in by current rules. the second, commerce again is responsible and they had taken two steps, one was the ruling on lightly processed high api oil to be exported as a product and secondly, more recently, the approval of the swap with mexico of light for heavy, so i think the commerce has taken steps to address this and it's in their their -- on their desk in terms of any further steps. >> when you talk about production being hemmed in, of course, that means jobs lost in the united states in the oil industry for people that are

actually out there working trying to make a living and put food on the table, so it's a consideration for our economy. >> evidenced today is that this is not occurring. that eia analysis would say that if there were substantially greater reduction in the united states somewhere up north then there might become an impacted there, but right now the evidence does not suggest a major effect. >> final question. in the north stream pipeline running from russia to germany under the city circumvents eastern europe and i understand a number of eastern european leaders have expressed opposition. i don't know if that came about your recent meeting, but what if any steps as this administration taken to stop the advancement of north stream? >> of course, we are working with our european colleagues both at the national level and at the european commission level. the european commission has made it very clear in their energy security plan that they are looking for diversification of supply, which the north history

when i do. so, we have been advocates and frankly, to answer your question, yes, these were discussed a few days ago with the g20. so, we remain, pork sample, strong advocates of getting gas into europe, the southern carter, that needs additional interconnections to bulgaria, etc. and in addition we are very interested-- don't have a direct role, but we maintain discussions in terms of the production and monitors a of eastern mediterranean gas. israeli and of course it up now potentially with a major fine. i think those are the issues that really added to diversity of supply and would increase european energy security. >> thank you, madam chair. >> thank you madam chairman. thank you, secretary, for being here and appreciate your input. sir, you just mentioned we have about 7 million barrels a day of

imports that we depend on. that's going to stay-- i think eia even forecasted about 4 million even way up into future-- >> of crude oil. >> correct. your predecessor was here and i asked him the question, i said you know about liquids and he said since we had to enter $50 million or tons of: and what i think to barrels of oil can produce from 1 ton of: and that's about 500 million barrels of reserves and i think saudi arabia only has about 260 billion barrels of reserves and i would put us in a-- sooner or later we will have to use the resources we have not to be dependent on foreign oil. if it used he believed it would have eight neutral if any a reduction of carbon footprint. do you feel the same about that, i mean, if we would advance that

the technology cracks the only thing we are considering is asking for pilot project to show we can do it. >> first of all, i think the interesting technology prospect it would be cold with carbon capture and potentially by a feedstock together. theoretically, possibly even become completely carbon neutral in terms of biomass part, so these are kind of conversion technologies are researched. right now as with a number of technologies there is a ways to go in terms of cost. >> looking from the investment-- >> on the research side i think this is the kind of potential home run-- >> as you know they would be very interested in developing this pilot project with the doe

because we think down the road with the balkan and all that leveling out we will have to have an energy policy. it doesn't make us more dependent on foreign oil. >> i might also add that our military has also been interested in exploring this technology. >> yes, and i think they have used in b-52s and found it performed extremely well. >> yeah, i think it perfectly replaceable fuel is certainly possible. >> sir, i hope that you would consider that because the whole state of west virginia will continue to do the heavy lifting if you would work with us. with that said, on the export of crude, i know my concern was this with export of crude is that it's hard to go home and next line why be exporting when basically the prices here can be so volatile. but, the more you look into it, i thought if we did it from a strategic standpoint,

legislation that the chairman has been moving makes a lot of sense to me and i support it wholeheartedly. moves it strategically and also gives the president a chance to use the trigger and basically stop export if the oil prices bike here the price was that. would not be advantageous for us to use our strategic oil using basically to help our allies and not be dependent on the oils around the country-- around the world as revenues are used against us. strategically if you look at export strategically. >> again, to repeat again, we are significant net importers of crude oil-- importers of crude oil fury that we are major exporters of oil products. so, the issue is, for example, if i take the mexico situation

and as i said earlier congress approved a swap of light for heavy, so there is a question great and in this case because the mexican refineries are quite short of light oil, so that's a case where there was a good match between a swap. but, also as i said earlier the reality in terms of the big picture, but current oil market analysis does not suggest that there is an inability, for example, of the american refining system to handle the light oil at least in today's production levels, so again that eia analysis really requires season impact only when the production gets significantly larger and you see that in terms of the spreads of the various prices. so, as price goes by the way it's worth repeating and other eia result of a think mick-- six months ago part of the series of

five that the congress requested and that it showed pretty clearly that our domestic product prices like gasoline are linked to the global price and not to the domestic price of sake wti. >> i thank you so much and i would say that state of west virginia would be very interested in the park-- partnering with the department of energy for coal and we think we can show it can be done in a commuter medicine manage for our country to but a strategically in a position to make us independent, very much independent of foreign oil. >> happy to follow it up. >> i will point out just to point out that we could do a lot for train congestion moving problems to market by building the keystone xl pipeline as the state department reports it was a worker's life and lower the carbon footprint. i don't know why we don't, but nonetheless, that's a political decision.

you and your testimony repeatedly refer to the relative sea level rise in the central part of the gulf coast, which is louisiana. i emphasize the relative because there's a subsidence as you point out in your testimony much more so than rising sea levels. so, just to put it on record, would you agree that we should take whatever steps we can to make louisiana's coastline more resilient so that as the lng export facilities are built they will not get wiped out as you mentioned on page 13 or the refinery capacity that you talk -- spoke of that went down after katrina were preserved even with another storm cracks is that a fair statement? >> absolutely. the gulf coast as you well know is absolute critical energy hub for the whole country and of the coastline issues, storm surge issues are very very important

for the golf and therefore i think the country's energy system. >> thank you for saying that and i will point out that both senator cantwell energy statement as well as the department of interior's would take the money that louisiana is slated to receive under the program, which by our state's constitution has to be used for coastal restoration and redirected elsewhere. if you will, it removes the very resources needed to increase that resilience that you several times in your testimony point to the national importance thereof, so thank you-- didn't mean to set you up on that, but it so flows. it just so flows that it's just like i can't understand why people concerned about sea level rise are taking resources away from louisiana, which is out to culture nations in the structure. ,-- by the way, also in the eia report, it also points out that there has been spreads as much as $20 in the relatively recent past between brent and wti.

as we know louisiana typically sells at a premium relative to brent and so the report just to point out when you say significantly, it's not astronomic. it goes up to 13.5 million barrels per day by 2025, which would actually be a reasonable increase. we have a certain-- inability to do that and it does point out that if we did so and with exported oil, gasoline prices would fall for the american consumer, so we have to point out that if we lift the export ban gasoline prices fall. i'm not sure that-- that may have been a little lost. you didn't intend to, but it may have been a little lost and what you are saying. >> if i may comment, i went to emphasize the 13 and half million barrels a day production was a high resource case, not in the reference case, so the high resource case without a low

price is the one where one got a significant-- about a 400,000-dollar a barrel a day impact, as i recall. >> i will also point out and i think was the aspen institute said that if we allow oil exports that we could increase the american gdp by as much as 1% by 2020, resulting in hundreds of thousands of jobs, so those blue-collar workers who are even independent of that decrease price of gasoline and so i will point out that again, aspen institute, larry summers of both touting we could increase gdp by 1% and that would be really good for the average american family right now. so, granite it might not have a just because of market conditions, but if it does occur we increase gdp lower gasoline prices and create more american jobs and it just seems something we should do. one more thing.

this is purely out of curiosity. chris smith, think it was, testified to energy and commerce last april and made a statement, which i don't quite follow. that the fpr says the impact of overall supply disruption global oil markets would have the same effect on domestic petroleum product prices regardless of us import levels of whether or not us refineries import crude oil from disrupted countries. now, i am all for this broke, but i have to admit i read that in preparation for this and i am thinking what is the purpose if there is no lessening of the impact upon us. do you follow what i'm saying? i can show you the quote. chris smith is the assistant secretary-- i know you know. >> i would have to discuss his vote with chris smith, but let

me just say that again, the issue of a use in the current market could be very important even in some scenarios of major disruption where the disruption is not for our direct imports. >> i get that. its global. >> we would have incremental barrels from this breaux to get in there to back up somoza and ports so that the global market can be rebalanced. i'm not sure if that's what he was discussing or not. >> it seemed counter to the whole thing, but we will give you this quote and if you can get back to us. thank you all. >> thank you madam chair. thank you for holding this hearing and i couldn't agree with you more in your comments about as well as our ranking member about the factor that the sparrow should be kept for

energy security and of the structure investments and the idea of doing one for some other bill makes actually no sense, so thank you very much for holding the hearing and let me also say that i think this really is a long game. i think we would all agree with the fact that when we look at energy security is about the long game and whether it's the strategic petroleum reserve or frankly, how we expedite lng exports or any research on us exports of crude oil, these really are all the long games for us in terms of their country and where we go. just one, and i don't know if you want to respond to this, but it seems interesting to me that we are talking about selling off reserves right now when prices are so low. it seems like from a purely financial standpoint that taxpayer dollars standpoint that we would want to be selling off reserves when prices are high,

not when they are low. it seems like from a financial standpoint that this does not make any sense. i don't know if you have analyzed if net standpoint. >> well, i would it is observed with the 2014 test sail, i would say we sold high and bought low. >> mypoints. let me ask something slightly different on energy security, but important piece of this as we look at our infrastructure. that is something that has impacted michigan very directly and that's the safety of our pipeline. in particularly, the area of the oil pipelines. we have had as you know a devastating pipeline breaking 2010, the largest domestic cleanup $1.2 billion to clean up the kalamazoo river and it was just a disaster. now, we have a situation where we are very very concerned and

people all over michigan, the state is concerned about a 62-year old pipeline that runs under the mackinac straits that connects lake michigan and lake huron and if in fact there was a break it would devastate the great lakes, 20% of the world's freshwater. there been a number of different models that have been done on what this would mean, but it's devastating, so senator peeters and i have introduced legislation to address the safety concerns around the pipelines that run throughout the great lakes both under the water as well as along the water line. i understand that accelerating natural gas pipeline replacement is one of the 60 actions of the energy review recommendations as it relates to enhancing energy infrastructure. i know that there is safety

oversight as it relates to oil pipelines, but is there an opportunity for the department of energy to up modernize as well as improve the safety of oil pipelines because it's going to serve no one if we have these pipelines breaking, whether it's from a safety standpoint, environmental standpoint or from an energy security standpoint. >> i think you have obviously raise a critical question in terms of the aging of a lot of our energy infrastructure gas pipes, oil pipes in this case etc. so, i personally think we need a national commitment to really upgrade our infrastructure and while doing this also make it much more resilient to the kinds of risks that we have seen. now, as far as your we and specific area as you said there

is the responsibility and secretary fox is generally very concerned about this, we do work with fins that in providing essentially technical assistance, so our laboratories, for example work with them on that. we don't have the regulatory authority, but we do provide technical assistance. >> i would just say, madam chair, that as we look at infrastructure, i would hope that we would as we are talking about upgrading pipelines and so on that we include safety even though it has broader jurisdiction across other agencies, but the whole question of what's happening in terms of the line, obviously has very broad implications. again, something that we are deeply concerned about given what happened back in 2010, in michigan. we saw devastation and we want to make sure our pipelines are working and that they are safe.

thank you. >> thank you madam chair and thank you for holding the hearing today. we talked a lot of they-- today about spro in relation to security and i want to talk to you about another national security and that's having messed it source of enriched uranium and you have said we need to have a domestic source for nuclear navy, nuclear arsenal. also, for our commercial power plants and our efforts in nonproliferation around the world. i'm very concerned as you know about the fact that we seem to be pulling the plug on our ability to have that enrichment capability. i'm also concerned about the cleanup. i was very concerned when more notices were given to about 500 employees at the plant. we also have about 236 employees

who are with the new technology, the american centrifuge project that were affected. they could have been laid off by the end of this month. when i was at the planet a few days ago i spoke to employees and their angry, understandably. so i my, petite lili by the total surprise on the american centrifuge's announcement with regards to new technology. for three years now, we have been requesting two things from the ministration, two simple things, one, tell us how much you need to complete the funding consistent with the commitments you all have made and second, give us a plan, a long-term plan for the funding of the cleanup. unfortunately, the department of energy has done neither. in 2008, candidate obama made specific limits to support the plant and clean up the site quickly and talked about the fact that when it would go a long he would increase the costs in 2009, doe made a secretarial

commitment to the community to accelerate the cleanup and complete the work by 2024. that was a commitment made to us. the doe said the agency was accelerating the cleanup and among other things effort to jumpstart that a commie and create jobs to the community is now being told the cleanup will not be completed until 2044 at the earliest. they are same between 2044 and between 2050. the federal government has responsibly and commitment to clean up this site to read it has to be cleaned up so the psych and be. it has been cleaned up for the safety of the community as the president said in his comments and it has to do so to be sure to make the commitment to the workforce and the local economy, which is already troubled. last week that congress passed a bill that funded the government until december 11, 2015. a number of us worked on this and we got when which in a bill that includes additional funding authority for the cleanup and for the american centrifuge plant. this would keep the layoffs from happening while the cr continues

in operation. can you give me a guess or no answer on these questions and i would appreciate a. of first is doe intended use the funding authority to spend at that by 15 levels for the work done at the plant to prevent the involuntary layoffs from happening on the cleanup site? >> as we discussed we are getting close to finalizing a plan where we think we can accomplish the avoidance of involuntary layoffs on the d&d work, hopefully for the entire fiscal year, but it does depend on our receiving the house mark -- >> i am talking about the cr. are you same between now and december 11, there will be layoffs? >> the plan we are finalizing is to in void involuntary during the cr. it entails risk for the rest of the year two-- >> i'm going to get to the rest of the year. yes or no on using the authority

with giving you for using the cr? >> again, we are finalizing the planning getting very close. that is what-- >> you cannot even give us a commitment that there will not be layoffs between now and december 11? >> i feel very confident that we will get their. i need a little more time to finish the plant. but, that is what we are working towards. no involuntary layoffs during the cr, for the d&d work. >> well, that's a surprise because i thought we had a commitment from you all during the cr, at least to not have any layoffs. we have been given the authority and we worked hard to get the leg which in their. >> the issue again, is one of risk and that's why we want to be open with you as i was last night, that-- >> last night you were talking about next steps, which is after december 11. you are not talking about the cr >> they are linked. >> obviously-- i was going to

ask about the commitment after that and i appreciate your interest in suggesting last night that you would indeed-- >> all i can say senator, is that we are finalizing a plan that will not have involuntary layoffs in d&d through the cr with the idea that that will continue for the rest of the year if we get the house mark. >> that is of course what we all hope for and beyond that we had need of that commitment that in your budget for next year, which you are already preparing, which will be here in the house and senate right after the first of the year that you will have adequate funding in their last year you underfunded it by about $80 million. can you give us a commitment that you will have in the presence of budget for the next fiscal year 2017 adequate funding for cleanup? >> i cannot discuss the fy 17 funding budget at this stage can read we are trying to get adequate funding for all of our cleanup activities and right now it's tried-- hard to put everything in the budget box.

>> cleanup request in this last fiscal year was $80 million less than what was appropriated by congress and again we are talking about sending the cleanup further and more more layoffs if you don't put in your budget the funding you have committed to overtime, not just the president, but the secretarial commitment and we are talking about just keeping the funding at least level so there are some certainty unpredictability. i don't think that is too much to ask. >> i have every intention, hope to do exactly that, but i cannot discuss the fy 17 budget until we have gone through all of that trade-offs and working with-- as you know very well. >> so, with regard to the cleanup itself we cannot even get a commitment on the cr. that concerns me a lot. a commitment for you to try to work with us on both the cr and beyond the cr with regard to

having an anomaly in the not-- longer-term budget whether it's cr or some, nation. with regard to the new technology, the american centrifuge project, again i was surprised as were the workers of the site to learn that you are planning to pull the plug on the new technology. this is the only domestic source and you have testified before this committee and the path that we need to have a domestic source of enrich uranium to support a weapons program and our nuclear naval reactor program. have you changed your mind on that? >> absolutely not, and we are not pulling the plug on this technology. the program continues. the issue is that for the last two years, operating the pilot facility without spending-- the pilot machines, we have learned things in operational nature and we were able to resolve technical issue with the machines, but two things led to

that and i have to say unfortunate. i completely agree for the site. namely, number one is that scrubbing really hard on the need for enriched uranium using american origin technology we were able to extend the timeframe for that very very dramatically. something i'm happy to come and discuss with you in the days ahead. secondly, the technical judgment made is that continuing to spend the machines will not give us any technical knowledge on the technology that we will preserve. we are not pulling the plug. but, right now it's hard to justify taxpayers $50 million for something that we think will have little to no technical--

>> my time is up, but quickly let me make this point clearly. there are 120 centerpieces. this is a test site as you say in its application and it can go to commercial grade because of that and you are pulling the plug on tire that-- you are pulling the plug entirely on that. it will be enormous and costly and you said you would only do it after issuing a report that was due to congress in april. you never give us the report. i got the report last night, last night after you already major decision two weeks ago without informing us. we had to hear about this from the press. i think those 326 workers deserts to know is going on and also our country deserves to know what's going on. we will not be able to say that we can enrich uranium. gets better security and our energy security and it consists of what we talked about today. thank you, madam chair. >> let's go to senator franken and these are important questions. i will remind colleagues we do have a second panel as well. senator franken. >> thank you madam chair.

thank you, mr. secretary for all your service. as you note in your testimony the continued need for the strategic petroleum reserve partially stems from continued reliance on oil for transportation. this suggests energy security can also come from diversifying our transportation fuels portfolio and improving vehicle efficiency. i believe that the best way to protect our economy from oil supply shocks may be one of the best ways may be to reduce the need for that oil in the first place. can you talk about the advantages of alternative fuel sources as they relate to energy security within a abundance source of alternative fuels lower the likelihood that we would have to drawdown from the strategic petroleum reserve.

>> senator franken, yes. in fact the g7 plus eu energy security principles that were updated in 2014, reflected exactly the point you made that efficiency and alternatives are part of energy security. so, what we are doing to continue to focus on reducing oil dependence is threefold. one, both regulation and a substantial technology development for much more efficient vehicles, automobiles on the web to class eight trucks. secondly, the development of advanced alternative fuels the two early liquid biofuel and a third, electrification of transportation as three of thrusts that can lower our oil dependency. >> speaking of biofuels, one of the key motivations for the rfs,

fuel standards diversify our transportation fuel supply, so we are not dependent on imported oil. there is a bill that has been proposed in the senate that really targets ethanol. ethanol is something that increases the octane of gasoline in the mix that helps us replace lead. it's something that is required. do you think that maintaining the rfs target in line with the energy independence and security act of 2007, helps reduce us reliance on international oil? >> well, not going to get into the issue of those kind of standards, which, of course. the epa has responsible the,--

>> oh, come on. >> what we will continue to do is develop technologies for advanced biofuels and clearly ethanol today is 10% of our gasoline. >> let me just-- i am conscious of time, so i went to make sure i get in under the five. what i took from your testimony was basically not so fast. basically that-- i mean, oil is low now, but what you are saying is the markets change and there's a reason to have as their to prevent shocks and part of that might be about-- you know, we don't export oil now,

but we export oil products and that if there is a spike around the world we can't let it hurt the global economy. that we will be-- we fall victim to shocks when other countries, even though we are now because of the oil and gas revolution here, fracking etc., we're in pretty good shape, but that we need this in order to make sure that we are able to respond to global shocks and that we are able to help our global partners so that their economies are strong and that's why we need to keep the infrastructure and respond to the difference-- i am summarizing your testimony, but

i want to thank you for that and i want to urge my colleagues to read that very thoroughly. thank you. >> if i may just add a little. in fact, if you-- >> i'm sorry about my colorless description. >> that's because you are reading my testimony. [laughter] >> actually, there is an interesting event if you look back to 2004, august, september time, that's when britain was having the trucker's flight-- strike slowdown. they were exporting a million barrels a day next, exporters. it did not protect them from the global price hike. which led to all of this problems. then, it turned out somewhat-- not by accident, perhaps simultaneously we used the spro

not for sale, but for a swap, a time swap and let's just say it took a lot of fraud out of the markets. >> could you add that color next time to your written testimony? >> or i could send you-- >> i'm not that particular color , i'm just saying written testimony could be more interesting. [laughter] gee, i mean, it's interesting, but-- >> i'm not sure my colleagues will appreciate that. >> thank you madam chair and speaking of color, going back to a mrs. person at franken as well, in 1973, with the oil embargo in the 1975 ban on oil exports, senator franken in 1975 was a new writer for a brand-new show called saturday night live in 1975. i was looking at stats. senator murphy would have been two years old. senator gardiner was one year

old and tom caught wasn't born yet in 1975. forty years ago. to think about that, i mean, it was captain into neil, it was the eagles, i was in seventh grade, but it was a response to an acute crisis that we had certainly. i remember what happened there with the oil embargo. so, as we go back and passport here i think secretary, you are a brilliant man. you are a forward thinker. i'm still somewhat surprised that we have a policy in place that is 40 years old that served a purpose 40 years ago, but argue is a relevant today as we move from a scarce city of environment to an abundance. united states is one of the largest producers both surpassing russia and saudi arabia, so my question is: now

that it looks as if the ban on iranian oil exports will be lifted, what countries in the world have a man on oil exports? >> i don't know the full answer to that question in the united states we have partial ban. >> so, and i want to make sure i had my facts right, but i don't know another country that has a ban on oil exports now that we are going to be lifting the ban on iranian exports, so why should we had this been a place? why should the united states be the only country in the world with a band on most oil exports when we export coal, national gas, net-- gasoline, why not export oil? >> again, we are as you just inferred we are major exporters of oil products. >> buds, why have the ban on oil

>> again, as i said earlier, that's obviously a policy decision in the department congress, but i go back to the fact that that ye i a analysis certainly shows and anything like today's and projected markets, rather small impact of weather that is in place are not >> but, does it make sense to think about all the countries in the world and now the united states is the leading producer of oil and liquids, number one in the world, and we have a ban on exports because of a law passed by congress 40 years ago. why does that make sense? >> of course, again, to repeat we are also a 7 million-barrel a day importer of oil, so we are a huge importer of oil. that's just a fact. >> the force driving that is the

way refining capacity is laid out in terms of the heavy versus light, but i'm looking forward to continuing work with the chair here as well as having a good vigorous debate on lifting the span allowing the forces here, the jobs it created, the taxes created in portland the topic of this hearing is back on energy security and that and portals thereof. i hope we move forward and remove that van. >> well, if the law. >> and this is the body that makes laws and can change laws and i hope we can get the white house to work with us here to remove that ban. i think it will be tremendous for our national security, global security as well as for our economy. we have one drilling rig right now operating in montana. we have one drilling rig currently operating and i recognize the ups and downs of prices, but i think we have tremendous--

>> senator, i think the current global market is one that does not look-- it does not seem to be in reality looking for that oil. in fact-- >> but, why not allow the forces of the free market, why would we unilaterally be the only country the world to ban oil exports? now that aransas ban is lifted, why are we the only country job and oil export ban? >> i look forward to your answer i do not have a good answer. those who oppose lifting-- >> i am out of time, meta- chair thank you. wiki-- >> we keep trying to get an answer here about when the administration will support us. senator warren. >> thank you madam chair. thank you, mr. secretary for being here. i understand that under certain circumstances trying down our

emergency oil reserves could make good financial sense, good strategic sense. we should have a conversation about how large the strategic petroleum reserves needs to be on a going forward basis. but, there have been recent congressional proposals to sell off a large amount of this emergency supply of oil and i want to focus on just two features of these bills that have been proposed. they are not there because anyone has made the case that we need a smaller reserve. nor is there a proposal to sell it off because anyone thinks this is a great time to sell. the reason for the proposed sales are the emergency oil supply is to fund the government. in fact, quantities of oil to be sold years in advance with no flexibly at all if oil prices are low they could drop to a dollar a barrel and under these provisions you would still have to sell.

or, if there are good policy reasons not to sell, like we have emergency needs to hold onto the reserves. secretary, is this approach an efficient way to manage the strategic petroleum reserve. >> well, again, i think it is key and i think we are doing an unprecedented integrated strategic study of this to be ready in may. in fact, this committee encourages that. so, i think obviously, we would like to have the results of that analysis before moving forward. i might say there are even other factors that have not yet been discussed. for example, there are special authorities to be able to use 30 million barrels of the reserve only if one has a base of at least 500, so there are a

whole variety of issues and as i mentioned earlier our international obligations are not based on imports. they are also based on use and is our responsibility. in it-- i think clearly our analysis will greatly inform. i think this discussion-- >> thank you, mr. secretary and i want to be clear about what's happening with these current proposals. mandating a massive, inefficient and inflexible sellout strategic petroleum reserve years in advance is just one more bad idea for how to finance government. look around. oil prices are at strategic lows. this is a high cost gimmick to let some people avoid facing the facts that loopholes for billionaires and giant corporations are leaving us with too little money to keep our highways in working order and to fund a essential services like medical research. it's time to act like grown-ups

and figure out how we will pay for the critical investments that will help build a future for everyone and we will never get there if we don't get serious about making sure that everyone in this country, even billionaires, even big and powerful corporations, that everyone is pulling their weight. selling off our strategic petroleum reserves is just not a way to do that. thank you madam chair. >> thank you madam chair. all the way over here. mr. secretary, during that 2014 test sail a number of the structure concerns were brought to life and he said repeatedly today and threat your testimony the woeful situation in terms of their infrastructure in moving the product whether it would be pipeline capacity because of the geographic shift in our oil markets, the doc availability, talked about the real as well. well, i share your concern here and it's been estimated that 1.5 to $2 billion would be needed to increase distribution capacity.

here is my concern: i mean, all of our states-- it certainly my state of west virginia has a lot of coal and we also have a lot of natural gas. trying to cite pipelines through residential national forests, certainly throughout all of our states is getting more and more difficult. so, if the need is as big as 1.5 to $2.0 billion, what kind of leadership can we expect from the administration? it was already mentioned that the keystone pipeline was vetoed what kind of leadership can we expect from the administration to help meet this challenge of not just making sure existing pipelines are safe, but creating and building those new pipelines that we know will be-- >> if i may just clarify two things. the distribution requirements of the petroleum reserve in particularly the maritime

requirements are about a billion or 1.2 of that total because roughly speaking 800 million, we think, is what we need for the life extension. then, 1.2 would be for the maritime distribution. >> when you say it life expectancy of pipelines? >> no, for the petroleum reserve. >> okay. >> basically, it's old. >> right, i get that. >> we need to-- >> this estimate doesn't include creation and modernizing the infrastructure? >> pipeline distribution-- no, it does not. >> what was your estimate on that? for the senator talk about safety. >> i really don't have an answer to that. i can give you an answer to a slightly different question to give you an idea of scale in the qtr, we estimate that the

modernization replacement, the operating of natural gas distribution pipes, which are mainly an urban areas, that's in the hundreds of billions of dollars. so, that's the scale. >> we have the same problem-- >> we have a huge infrastructure problem. we heard about the pipe connecting that great lakes etc. , and i don't know how to pay for it, but i think we need to have an enormous infrastructure renewal program. >> i would agree with that. i think my question sort of goes to another issue. we had to have a leader here who is going to lead the way through this very difficult permitting issue that we see all across the country. whether it's kind of dragging your heels and not meeting deadlines, bringing up roadblocks when permitting is

also to the end and we have a real problem here not to mention the money. even if you had the money in the investment world, we are still not able to move a lot of these projects forward and that's very struck-- frustrating. >> i might add homages to add to what you are saying it's not only pipelines. it's also high-voltage transmission lines with challenges. including to bring distant when to market-- >> i'm just talking about fighting windmills. >> but to do that you have to be able to move-- welcome i think one thing we did and i take some comfort in that i think the energy reviewee did i think is in fact, helping. >> the senate is about to gavel in and you continue watching this herein streaming online at c-span.org. we take you live to the senate

floor. the senate continuing debate on the 2016 defense programs bill with the procedural vote on the measure scheduled for 1:00 p.m. eastern the president pro tempor: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. eternal god our hope, you fight our battles for us, for you continue to work for the good of those who love you. be a shield for our lawmakers. delivering them from cynicism, pessimism and despair. give them such respect for