here are some of our featured programs for this weekend on the c-span networks. on c-span 2's book tv saturday night at 10:00 on "after words," white house correspondent for american urban radio april ryan on her more than 25 years in journalism and her coverage of three presidential administrations. and sunday at noon on "in depth," our three-hour conversation with walter isaacson whose biographies include ben franklin, albert einstein and the international best-seller on steve jobs. and on american history tv on c-span 3 saturday at 6:00 p.m. eastern on the civil war, boston college history professor heather cox richardson on how the cowboy during reconstruction became symbolic of a newly

unified america. and sunday evening at 6:00 on american artifacts we'll tour the house that was the headquarters of the american red cross. and learn about the life of its founder, clara barton. find our complete television schedule at c-span.org and let us know what you think about the programs you're watching. call us at 202-626-3400. e-mail us at comments@c-span.org. or send us a tweet tweet @c-span #comments. join the c-span conversation. like us on facebook. follow us on twitter. next the chair of the federal energy regulatory commission on u.s. energy policy and its role in the implementation of the epa's clean power plan. setting rules to cut carbon pollution from power plants. the epa announced it will finalize the plan by midsummer.

good afternoon and welcome. my name is john hughes. i'm an editor for bloomberg first word. that's the breaking news desk here in washington for bloomberg. i'm also president of the national press club. the club is the world's leading professional organization for journalists. we're committed to our profession through programs just like this. and we work for a free press worldwide. for more information visit our website, press.org. and to donate check out our journalism institute website. that's www.press.org/institute. on behalf of members worldwide i'd like to welcome our speaker here today p & those of you attending the event. our head table includes guests the speaker as well as working journalists who are club members. members of the public attend our

lunches. so any applause you hear today is not necessarily a lack of journalistic objectivity. i'd also like to welcome our c-span and public radio audience. you can follow the action on twitter. use the hashtag npc lunch. after our guest's speech concludes we'll have a question and answer period. i will ask as many questions as time permits. now it's time to int doos our head table guests. i'd ask each of our head tablt guests to stand briefly as your name is announced. from your right chris newcomeit, editor in chief of platts. clair picard cambridge, bureau chief for argus media here in d.c. julia piper senior writer for green tech media.

kurt longo co-chief of staff to cheryl lafleur and a guest of our speaker. marilyn g. wax senior business editor for npr and help of the npc board of governors. bill kunzic, the husband of our speaker and a guest of our speaker. jerry zrimski washington bureau chief of the buffalo news. jerry's the chair of the speakers committee and a former national press club president. speaking over our speaker for the moment rod kukrow, reporter with energy wire ee publishing and the speakers committee who organized today's event. thank you very much rod. jack againhart co-chief of staff to cheryl le failure and ale fleur and a guest of our speaker and ed

bochart. esther wielden, a senior reporter with snl financial. and frank mozano, senior principal at bracewell giuliani. [ applause ] so the presence of so many people here in this room today says volumes about how the federal energy regulatory commission, or ferc as many of us call, it has emerged from the bureaucratic shadows. the commission's job -- the kigs'skigs commission's job is to regulate interstate natural gas pipelines and electric transmission lines. ferc plays a central role in the debate over how these industries should evolve in the 21st century. there are questions, for instance, about what if any role ferc should play in epa's plan to curb greenhouse gases.

should ferc ensure that the epa plan doesn't harm the reliability of the grid? questions such as that show why the commission's profile has never been higher. in the center of the spotlight of course is our guest speaker today, cheryl le fleur. she was nominated to the commission by president obama in 2010. she has been acting chairman and then chairman since november of 2013. she joined ferc after a career as a senior utility industry leader in the northeast. she retired in 2007 as acting ceo of national grid usa, which delivers electricity to 3.4 million customers. the first person in her family to go to college, she holds an undergraduate degree from princeton and a law degree from

harvard. according to our national press club archivist, she is the first chairman of ferc to speak at a national press club luncheon. please join me in giving a warm national press club welcome to cheryl le fleur chairman of the federal energy regulatory commission. [ applause ] >> well, thank you so much john, for that very generous introduction. hello. you've introduced all the folks at the head table. and i'm so happy to see so many familiar faces and new friends here in the audience. i am deeply honored by the opportunity to be the first ferc chairman or commissioner to speak at the national press club. i see at least one former commissioner in the audience who we should probably call up, book her for next month. and i really would like to thank rod kukrow for organizing this.

when i was nominated to ferc five years ago i definitely learned if i didn't already know that it wasn't exactly a household word because i spent most of my time explaining to people what was this acronym to which i had been named. and so even though john did a bit of it i thought i'd take a minute for those who may not be familiar and say a bit about what our responsibilities are. we are responsible for -- because the energy world is very complicated in terms of the number of people who have responsibilities for different elements of it. and our duties are to the transmission and natural gas pipelines. we do both rates and permitting of pipelines as well as liquefied natural gas gas facilities. and we also are responsible for wholesale rates, both gas and electric, and wholesale markets as well as the licensing of

hydro facilities across the united states. and the pricing of oil pipelines and the reliability and security standards that govern the security of the bulk electric system. so a bit of an eclectic mix but all mostly about interest rate or wholesale work in the energy space. i forgot to say although we've already had the head table introduced. we have a whole passel of folks both from my office and senior staff from ferc back in the back of the room, and i would like to acknowledge them as well. now, since i was in the industry for more than 20 years i know -- in those days i did not read very many ferc orders. maybe 888 or some of the real biggies. so where did i get my information on what ferc did? from the people in the front of the room. what energy daily or platts or even you said ferc did was what

ferc did as far as i knew. that's why press clips are the first things i read when i get in in the morning because i figure that is the record of what happened. or snl or any of our wonderful people who cover us. >> i'm not a washington lifer. i've been here a relatively short period compared to most of the people in the room. five years. but i am not energy lifer because i've been in the energy world for 30 years. mostly in the northeast. and in that role i was able to be part of the major transformations that have happened in energy over the last decades. i cut my teeth on the battles to get nuclear licensed in the 19 0 830s 1980s. i was very much in the midst of industry restructuring in the 1990s including the advent of

open transmission access, divestiture and merchant generation and competitive markets. and i've been closely involved in adapting to several generations of environmental changes at both the federal and state level. at ferc for the past five years i get to respond to today's energy issues. especially the growth of domestic natural gas and its increased use to generate electricity. the introduction of new technologies across the whole spectrum. generation transmission storage and end use technologies technologies. new threats to grid reliability and security from cyber and physical security to natural threats like geomagnetic disturbances. and the growing awareness of the impact of energy on our climate. leading to what i think is the most challenging environmental issue we've yet faced together. now, what i've learned from everything i've looked at in the

last 30 years is that all energy issues really come down to the same thing. and that's balancing three values. reliability, cost and the environment. no matter what the issue they're usually buried somewhere in the discourse. and there are trade skrofz between the values. and because different people value different elements differently it's hard to get agreement on how to strike the balance. perspectives vary based on a number of factors. ideology certainly but also economic irpt and commercial position and geography. as my homey the late great tip o'neill said, all politics is local. and that's definitely true in everything we're facing at ferc. so wearing these factors and trying to make decisions on each issue is complicated by the fact our nation has a very fragmented and somewhat dising agraited

system of decision makers which can make even finding a forum a challenge. there are lawmakers and regulators in 50 state capitals. numerous federal agencies. i know ferc is not the whole federal government. not even close. everyone is regulated by myriad other agencies as well. and divided branches of government that work on the same issues. there's a cacophony of voices and it often seems like he they're not even having the same conversation. but making progress particularly on balancing reliability and the environment requires real conversation about tradeoffs, about the real costs and consequences of our choices o'and about the effort it will take to get us where we need to be. and for better or for worse i feel like little old ferc has been thrust into the position of being a forum for these discussions and for the discussion of many of the pressing energy issues that our generation is facing. whether they're in our jurisdiction a little bit or a

lot. they're at our doorstep. one of the most polarizing energy issues we're facing today is how our electric sector will respond to the epa's clean power plan under section 111-d of the clean air act. and i'm going it devote the rest of my remarks to talking a little bit about ferc's role in that response. p and hopefully they won't be too geeky so you'll invite ferc people back. over the past several months of ferc woof had a steady stream of visitors to our door from groups across all segments and all regions who have a wide range of views on the clean power plan. from those who sate lights will go out to those who sate epa did not go nearly far enough and pretty much everyone in between. i'm honored to lead an agency that's bipartisan and independent by design and that's

built up credibility due to you all the people that came before us over decades. because of that independence and credibility people both for and against the clean power plan are looking to us to publicly validate their views. i've taken a pretty firm line that i don't think that's ferc's role. ferc is not an environmental regulator. blessedly, we're not tasked with writing the final rule this summer. epa is reviewing their millions of comments and they will put out the final rule. but make no mistake, i think ferc will have an essential role to play as the clean power plan and our response to climate is implemented. i believe that we as a nation can achieve real environmental progress including on climate change but only if we're building to build the infrastructure both gas and electric and build the energy markets to make that possible.

both infrastructure and market changes will be necessary if the val yoousz of reliability and cost are sustained as we make progress on the environment. and that's where ferc comes in. i think we will have responsibilities across three areas -- infrastructure, markets, and to be an honest broker for the discussion. starting with infrastructure. i think additions to both the gas and electric infrastructure will be needed to carry out the clean power plan. and in the case of gas pipelines and gas compressor stations ferc is the one who does the environmental review permits them and decides the rates. building block two of the clean power plan which is likely to account for the largest amount of carbon reduction calls for substantially increasing the utilization of the natural gas plans that exist all around the country. that's existing plans. now, i believe based on everyone i've talked to that meeting the

goals of the clean power plan will also lead to the construction of a lot of new gas generation because most of the people i've talked to have said that can be the most cost-effective way to meet some of the goals and epa has given people the flexibility to meet each state goal in the most cost-effective way. we're very fortunate to have abundant and relatively affordable domestic natural gas. if we didn't if we were where we thought we were 20 years ago the gas was in the ground but we didn't know it was abundant and affordable when we thought we were running out of it in the '90s. if we were there our climate goals and our climate aspirations would be much more difficult if not impossible to achieve with today's technology. but utilizing that gas to meet climate goals required the expansion and construction of gas infrastructure both pipelines and compressor stations to get it where it needs to be to keep the lights

on. but while gas is critically important to our climate goals and other environmental goals it has issues of its own. pipelines are facing unprecedented opposition from local and national groups including environmental activists these groups are active in every ferc docket as they should be as well as in my e-mail inbox seven days a week in my twitter feed, at our open meetings demanding to be heard and literally at our door closing down first street so ferc won't be able to work. we have a situation here. we take the views of all stakeholders seriously and try as hard as we can to thoroughly consider issues that are relevant to the decisions we're required to make. but ferc's responsibility under the natural gas act because we're a creature of congress is to consider an act on pipeline applications after ensuring they

can be built safely and with limited environmental impact. under ferc's regulations and policy, its market demand and specifically contractual commitments for pipeline capacity that determine what pipeline infrastructure is needed, the days when ferc went in and said here's a certificate of need we need it from here to there, ended with order 636 30 years ago. we evaluate the need for the project based on market demand. do they have people signing up for the gas? then we go in and look at environmental and safety as networks detail of the proposed project. we're blessed to have a wide range of engineers and scientists and we look at a wide range of environmental issues. water, soil, gigli, fish and wildlife and others. and we also look at air quality including greenhouse gas emissions. but our review is project specific and confined to the

information in the docket. speculating about unquantifyiable impacts is not part of that process. i think that our nation is going to have to grapple with our acceptance of gas generation and gas pipelines if we expect to achieve our climate and environmental goals. as far as ferc, i think our work on gas permitting, gas infrastructure is going to be essential to the successful implementation of the clean power plan. and i'm dedicated to ensuring the process is fair clean timely, and transparent. because the worst place we want to be is closing down the old stuff and not being able to build the new stuff because we're not willing to do the work to get it there. we're also going to have a role to play on electric transmission that's built to support compliance with the clean power plan. now, here we're not responsible for siting. that's done at the state level. but we're responsible for funding and planning of

interstate transmission. changes in generation require changes in transmission. duh. the grid was built to support what's out there now. mostly you put a coal or nuclear plant an hour or two from the city. build a line to connect them. maybe an extension cord to your neighbors. you were done. that's the old world. that's not where we are anymore. building block 3 of the clean power plan is the increased reliance on renewable generation like the wind that's on my cookie cookie. and i thought i saw solar somewhere too. and renewable generation is highly transmission dependent. you just don't put it convenient to a population center. wind and solar station solar is best sited where the resources are most plentiful often far from cities. the lines they require are usually long, require a lot of coordination between a lot of different people to get planned and built, and they're expensive. although they benefit the grid,

help reliability facilitate meeting environmental goals they don't always benefit everyone they go by or the people who live right next to where the resource is. because of all those factors, transmission is very controversial. not only does it face land oern and environmental opposition, the same as gas pipelines, but sometimes rate payer opposition as well. one of the core responsibilities of ferc, we are working hard to generate the transmission needs the nation needs to get built under order 1,000. we're requiring broad transparent competitive transmission planning processes not locally company by company but across big regions so they can derm what the regions needs and what's the most kft effective transmission to be built. and we're explicitly requiring them to take public policy requirements into account like the state plans under the clean

power plan when they decide what transmission they need. we're only a short way toward fully achieving that but we're also asking regions to sit and coordinate with each other because there are needs for transmission that aren't even within a specific region. and in addition to the planning we are responsible for the transmission rates and we're trying to ensure there's enough of an investment incentive as well as protection for the consumers to make sure they're just and reasonable and that we strike that balance right. and while we're on it, i'm on this infrastructure bully pulpit here, i just want to add that power plants are not the only thing that need infrastructure. the fourth building block of the clean power plant is energy efficiency, what we used to call conservation load management. and also distributed generation. like rooftop solar that's

becoming so per vaesive is part of building block 3. those distributed resources need infrastructure of a different sort. they need delivery. it took us a long time in new england to build up the industry to deliver the conservation programs that have won national awards. they need delivery. they needing ing aneed aggregation technology. they're not free and they're not self-executing. a lot of work to make happen is being done at the 35050 state houses, but ferc has a role and we need to work to facilitate the resources in the markets we have jurisdiction over. and speaking of the markets that's our second big challenge. 2/3 of the nation's population

is served by competitive regional electric markets. i tried to keep acronyms out of the speech but they are rtos, regional transmission operators and isos, independent system operators. and i see representatives of some of them in the room. these are bodies that work over usually a multistate region to plan and operate the transmission grid independent of the owners and dispatch the power. basically, they look out every five minutes and dispatch what's cheapest at that time. they dispatch by merit order according to cost. that's how it's been done since before there were regional organizations when each company did it. those markets that they operate are regulated by ferc. and we have worked hard and

those markets have made some adaptations to support state environment initiatives like renewable portfolio standards to try to adjust the markets tots to the -- now we're going to have 49 states coming up with individual implementation plans that by their very nature of their building blocks will say what resource the state wants to use. more of this, less of this, a little bit of that do that, because that's how a state will build up its plan. that may not just automatically be compatible with the way the power is planned and dispatched now. the existing lease cost model. we'll have to change the formula. if the markets are to survive and they've done a good job for customers we'll have to change the way they work to support the state plans to reconcile these two objectives. i think it's going to be a lot more than tinkering around the edges. so if you look at pjm which is

the largest market operator in the country they have all or some of 13 states. and if each of those 13 states have a different plan then you can imagine as they're trying to make sure they dispatch the power so each of the state's plans jut met they can require significant changes in the way we run our markets. now, of course, your mind goes to the obvious solution, why don't they all get together and agree what they want to do. then you don't have to run state by state. and the epa plan did give extra credit for regional cooperation. that was one of the comments we had made. and regional cooperation will help regional markets make adaptations to the clean power plan. but that itself will require considerable change and compromise. we've seen some success with the regional carbon markets like the regional greenhouse gas initiative in the northeast and carve, the california market. but putting those together, and

i was there when reggie was negotiated require voluntary agreement by states to come together and decide on the goals, who gets what allowances who puts what in, who gets what out. and the issue that we have is the way the markets are if you take a map now and draw your markets they put together states with substantially different portfolios and substantially different epa targets. that might not just naturally agree, that will require a little bit of negotiation to get there. as well as we have states like texas and indiana that are -- and several others that are served by multiple rtos so that if you're trying to achieve the plan you have two different dispatchers who have to make sure it's done right. we also, the markets themselves are going through a lot of transition as the generation mix in the country changes and ferc is doing a lot of work that it needs to continue to make sure that the market rules and the market designs are written to

support the investment in resources that are needed for reliability. we put out a fuel assurance order earlier this year. that's one example of that effort. also doing a lot on the capacity markets. working all this out so we can keep climate goals while working the big regional markets won't be easy and it's going to require exactly the kind of open dialogue that i spoke of earlier in the speech. fortunately, this is the kind of hard, boring unsexy, technical, dirt under the finger nails work ferc does. when i go in with summer interns they say do you work on green energy? i say we work on the unsexy underbelly of every energy issue. and this is where our work is going to be here i think. in really making those markets work. because if we don't we'll either lose the markets and take a giant step back in how we run our grid or we won't make our climate goals, which is

unacceptable in a different way. despite all our work we still have reliability problems. letting the lights go out is not going to be an option. so then reliability will have to be maintained by mechanisms like reliability must run contracts or extensions or keeping things on when they're longer than they're supposed to stay on. that can be expensive or unpopular or usually both. so that's not plan a. plan a is to get it right up top. our final job is to serve as an honest broker. as the work on the climate plan is finalized and implemented. i believe we did this effectively with respect to the mercury and air toxic rule over the last few years. now, admittedly that's a much more straightforward rule but i think ferc did a great job helping to bring together the states and the federal agencies the state regulators, to help assure that reliability was considered and protected.

with respect to the clean power plan we're getting started on that next month with four days of technical conferences in february and march two here in d.c., two in other regions of the country. we'll be hearing from our state government partners, our federal government partners like the epa, people from industry and environmental groups to help address the issues ferc is going to have to tackle as this goes forward. our objective is to hear from a wide range of entities about how compliance with the rule might impact them and really start to dig into the things ferc will have to do. based on how many people have asked to speak i think we could have a lot more than four days. we do have other things to do. but i think that's going to be just the beginning of the dialogue. we have to continue our engagement with agencies, especially the epa but also the state regulators to share information

information, lend expertise and help develop constructive suggestions. and we have to continue to be an independent and honest broker. living within the bounds of our statutory authority but keeping alert to trends and where possible get out in front of emerging issues. we can't be afraid to say unpopular things. with some people saying we need more gas pipelines is unpopular. saying we need more electric transmission is unpopular. saying the 345rk9s won't automatically change. but we have to say the hard things confront the hard issues and make the difficult policy choices that won't please everyone all the time. sometimes i'd be happy to please anyone any of the time. but i strongly believe this is why this work has been assigned to an independent appointed commission of technical experts. i'm honored to have the opportunity to be part of ferc's work. i'm only going to be chairman for three more months.

but i expect to be a commissioner for five more years working to balance and maximize reliability, cost, and the environment. i'm pretty sure that if i were here five years from now the issues i worked on some of them i probably wouldn't even know now but i'm sure they'll be five years of change challenge and progress on the nation's energy and environmental aspirations. thank you and i'll take your questions. [ applause ] if i put on my glasses i can read them as you read them. yes. >> thank you, chairman. starting with some questions related to the epa. epa appears to have held only a handful of meetings with ferc staff about the clean power plan or 111-d rule. given epa's extraordinary

outreach effort when it was developing the rule and the huge changes it will require to the grid were you disappointed to have not had more input. >> well, recently, in a letter that i sent to the hill on december 3rd i really listed all of the meetings that we had, which i think are more than a handful. i was not disappointed. i think we had quite a lot of opportunity for input. i actually which we'd seen the rule a lot earlier. but that would have required that they'd written it a lot earlier. but now we're in a whole different scene where we have a year or more before they finalize it. so we're still having input. >> do you think that aggressively implementing the clean power plan on epa's proposed timeline might cause difficulties for reliability? >> well, as i said i think that we need to build the

infrastructure and adapt the markets to be able to have both the reliability we take for granted and the progress on the climate. the timeline for the epa's goals, particularly the first set of goals in 2020, has really been one of the most controversial things we've been hearing about. what should be the period over which the ultimate 2030 goals kind of are phased in. and i think the epa has been hearing about that as well because in their notice of data availability where they asked for more comments last fall that was one of the main things that we heard about. so i think we'll have to get started early and really put our shoulder to the wheel to get the things done that we need to do. >> some of your colleagues on the commission think ferc should sign off on state plans to comply with epa's rule. is that something that you can support?

>> i'm not 100% sure that's how they would articulate their views, but putting that aside i'm looking right at the head of the state commissioner association. and i try to remember that our first name is federal. sign off is a bit strong. i think we should be engaged in the state plans because they all operate as part of -- or for the most part they operate as part of regions. but i think ultimately the states will have the control. that's why i would love to see more regional solutions, so they can work together. >> so as the utility industry moves over time to retire coal plants and substitute in renew renewables renewables, are higher consumer prices for electricity inevitable?

>> i kind of divide prices into two dimensions. the long-run price depends on the long-run costs of these things. once it's built, nuclear renewables can be very affordable once the initial investment is made. the long-run price of coal gas, and even oil on the margins depends on the long-run cost of those fuels that we don't know. that's one thing i know in my life is i can't predict gas prices since i've seen them go up and down and everywhere in between. so in the long run i think that ultimately depends on the mix of costs between those fuels but it's not at all clear to me costs will go up. we're seeing gas be very affordable and competitive with coal. certainly nuclear and hydro and renewables are very competitive

once they're built. the other dimension of cost is transition. change costs money, no matter how you do it. so i think will it cost to make this change? yes, it has to. when you're building something new, it costs money. in the long run will it cost more? that depends on the fuel costs. >> as we've seen this rapid transformation occur in the nation's energy sector, is it frustrating for you that congress has refused to consider any meaningful energy legislation or policies in this area? >> i used to have a mug that said something like -- the serenity prayer. god grant me the wisdom to fight the things i can fight and not fight what i can't fight and the wisdom to know the difference. you probably know. whatever it says. i try not to spend too much

mental anguish on what congress does or doesn't do. there's a whole blogosphere out there complaining about congress. i live by the rules they've given us. if they pass new legislation, we'll live by that. but i think we're doing a pretty good job hobbling around, hobbling through with what we've got now. that's what we're working on. and if there's new legislation, i think i'll welcome it. >> you mentioned the need for additional gas pipelines. yet we see so much public frustration and pop opposition to these sorts of projects. so how can that need for more pipelines be addressed given the level of opposition that's out there? >> i think not speaking of any specific pipeline i would kind of put the opposition into

different buckets. there's concern about the environmental impacts of the pipelines themselves, and i think that has to be addressed by making sure they're constructed including that the extraction and everything is done using the most current technologies in environmentally correct and environmentally advanced as we can. everything has a consequence. nothing is free. but i think we have to really as a society make sure we do this right. the second set of opposition is local opposition where people just don't want it going through their toubwn or county. sometimes for reason that's have to do with specific things about their town or county. people tend to not want infrastructure going right where they are. i think we need to site these things as carefully as we possibly can and try to make the best decisions. we definitely can't please everyone. but i think that's what we do

well, is to consider those issues and try to make sure that environmental risks are mitigated. very few pipelines come out in the same route that they went in when they first came into ferc. the third set of opposition are people who don't want pipelines at all. and i think there 9 policy makers, the state regulators, the state environmental people, ferc, other regulators have to have the dialogue and really decide because i've said my view, other people have other views, but that's a bigger picture than a specific siting thing. >> fracking is such a significant issue in so many ways. last year ferc approved construction of a huge liquefied natural gas facility on the chesapeake bay. and some critics have said that the decision encouraged the environmental harm that they say results from fracking. how would you respond to that

criticism? >> well, we don't regulate the extraction, and we don't -- the permitting statute the national environmental policy act that we use, we look at the reasonably foreseeable from the facility that we're implementing. so we just try to make sure if you will that what we permit is done in the right way safe and environmentally sound. fracking is regulated at the state level and by the epa. i think it's absolutely essential that if you regulate it and regulate it closely. but it's not done at ferc. >> we were mentioning the level of protests that we've seen. has the level of protests and activism at all surprised the commission or commission members? and this questioner wonders how that plays out as far as going through the filing process, the

level of protesting and activism and the effect of that then on the filing process. >> the fact that people have things to say does not surprise us. these are important issues. our secretary's office does a great job handling thousands, millions of documents that come in and getting them in the files. some of the things that have surprised me recently are a little more of the techniques. when i first got a twitter account, i really thought i was cool. tweeting out. and then i come on, it's like oh, you have eight new entries. people are writing to me. awesome. a lot of them were people tweeting about pipelines and dockets and so forth. and that's just new. that's just new to the way i think about things. the fact they're in the dockets or at the public meetings does

not surprise me. >> here in d.c. a coalition of environmental, political, and consumer groups called power d.c. has emerged to oppose the pep co. excelon merger. they say it will result in poorer reliability and higher prices for consumers. are these concerns justified? why or why not? >> well ferc approved the excelon-pepco merger, although i knew and i was just reminded that it's still pending re hearing. but just looking at what we did, what we do in mergers is we look at under the federal power act the effect on rates. are there protections for the wholesale rates we regulate? the effect on regulations. can the state regulators still have their power? and the effect on competition using formulas to see how

concentrated the market is. that's what we do in our dockets. a lot of the other things. retail rate protection, rate freezes. where the headquarters are going to be. how many employers are going to have jobs. what kind of promises they have to make. are done by the state regulators, and i think those are still pending. >> we've talked about wind and solar power. but what about the oldest renewable resource? hydropower. is there potential to significantly expand hydropower as a source of electricity and if not why? >> well there's definitely the potential to expand the hydropower as a source of electricity. there are thousands of dams in the country that are constructed. so the rivers are already damed but don't have an electric energy sit attached to them. i try not to make up numbers if

i don't get it right but there's many thousands of opportunities. we have a couple potential applications in places like alaska for big new hydro. i will just say based on some of the early commentary they're not in the filing stage yet and some of what we hear putting up things like grand cooley dam or the hoover dam would be very difficult to do in 2015. but small hydro we have tremendous potential. also kinetic in rivers and title hydro, quite a lot of potential to harness that. >> huge topic of discussion nowadays also is the risk of cyberattacks. how concerned are you that a successful cyberattack on a portion of the nation's power grid is inevitable?

>> well, i'm vigilant. there are people who attempt to hack in to the bulk electric system every day. in fact, nkick whatever that stands for, national cyber communications control center. part of the department of homeland security. more than half of the hacking attempts in the whole united states are on the electric grid. so i know that it's an important issue. part of what we try to do with first of all the way all the owners construct the grid but the way ferc regulates the reliability standards is to make sure that the grid is constructed to be resilient so that there's redundancy and so that there's cyber protections built in perimeter security password security and so 230rg9.230rg9forth. so if something happens in one place it doesn't cascade to another place. the electric grid as well as the nuclear fleet are the only two

sectors in the country that have mandatory cyber rules and i think they deserve them. i think if there's anything want to protect it's definitely your electric grid. so those rules are designed so that if something happens it doesn't lead to a cascading outage. but should we be vigilant? absolutely. >> would you say that cyber threats are far and away the foremost challenge or are physical acts of vandalism, terrorism enough of a threat that they reach the -- sort of the equal level of the cyber concern? and how does the utility industry protect itself from these sorts of threats? >> oh, my gosh. this is like when you were kids. it's like would you rather be boiled in oil or would you rather be drowned? which would be the better thing to happen? [ laughter ] both sets of threats are important. i tend to worry more about cyber threats because i know i don't

understand them. i don't think anyone over 50 does. really understand what goes on in a computer. that's probably unfair. i'm sure there are middle-aged techies who are wonderful. but i don't really understand -- i don't understand how someone can be in north korea or someplace on the other side of the globe and do something on a laptop that affects the grid. and something that you can't see and you can't like readily sense and you don't actually understand the mechanism is always more frightening whereas physical security, at least i understand it. it's frightening by understand you have to be in the physical proximity of the grid to do something. so i think it's a little better understood threat. but it's a threat as well. and what we did in the last year is for the first time mandate protections for the most important parts of the bulk electric system when viewed by their ability to lead to a cascading outage, more physical protection so that we want to make sure that while we're

worried about the 21st century threats we don't forget about the old-fashioned threats as well. >> this questioner just passed up a question that says should fighting climate change fighting climate change be part of the central mission? >> well i think i said in response to a couple of questions ago if congress changes our responsibilities they're the boss. but i think that we're well served by having the epa and all the state environmental regulators whose job is environment which we now understand to include climate and ferc whose job is reliability and pricing because i think that is sort of a healthy division of responsibility. >> industry people say that one

of the biggest threats to the electric grid is a wave of baby boomer retirements. are there enough new workers coming into the industry? if not why don't young people want to work with electricity? >> i was already a baby boomer in retirement age when i left the utility. they seemed to have managed without me. so this is a big issue across many sectors. you read this -- i used to be on a hospital board about nursing, teaching, other sectors. there is the big population spike of the baby boom and then a valley and then the millennials, our children and their peers. it is of concern in the electric sector because it takes a while to train somebody to be a line person or control room operator. that definitely makes a lot of retirements all at once a

concern. i think a lot of important work is going on with the community colleges and others to really try to develop -- there is always plenty of lawyers and all. it is the people who actually work on the electricity that are hard to find to develop those trades and really get people interested. i think a lot of the companies are working on that. i also think i'll put in a plug, military hiring is just a natural for the utility industry. and with so many veterans coming back now i know a lot of them are a wonderful source of tomorrow's energy people. >> have you heard from any grid operators or state regulators that there will be difficulties in implementing the clean power plan? >> yes.

[ laughter ] we met with almost all the grid operators. they have different levels of concern, but because they are the ones who are trying to keep the lights on they are the ones who are working through some of these issues of as the generation fleet evolves, what transmission has to be built, how the markets have to work. i think they're focused on -- i can't speak for them but some of the things i talked about in my speech. state regulators their views vary very much by what is the resource mix now in their state. some states have a much more challenging goal for various reasons under the clean power plan so we certainly haven't heard from all 50 state regulators but some are quite engaged. >> do you envision a broader role for initiatives in the implementation or will rule making be the methodology for

addressing it? >> well, that's an interesting question. to the extent that the clean power plan changes market rules, enforcement is one part of making sure markets are fair. so it's also a part of the biggest reliability issues most done by north american electric reliability corporation under our oversight. it is a part of making sure reliability is protected. i tend to think of the rule making either writing the standards or approving the standards in our case or approve approving market rules as first and then enforcing it.

>> this questioner says traditionally politics has not played much of a role at the commission even though there are appointees from both political parties. this person says but that seems to be changing with this debate over the ferc role vis-a-vis the epa. does this concern you? is ferc like other parts of washington becoming more political? >> well the vast majority of work that ferc does does not divide along partisan lines even when we have splits between commissioners they are not frequently along party lines and that i think is good because we are looking at the law and the record. we might have different views but they are not knee jerk party views in any sense. that is how ferc has been for a long time. i think basically it still is. i do think when it comes to environmental rules they tend to

be very controversial so this area of our work has kind of become more ideological than some. that is just what we see in washington. >> to what extent do you see distributed generation transforming and perhaps disrupting the electricity system? >> i think that distributed generation is a huge trend particularly the roof top solar which seems to have kind of gone over the barrier of affordability andafford ability and is a big piece of the grid. in the '80s everybody said combined heat and power in the basement and most trends didn't manifest. roof top solar is here.

it has crossed the divide to being economic and is a big part of our grid. i don't see it as disruptive. maybe some of the other technologies will become that economic but that's the first to get there. >> i know that you put your ferc regulated electricity transmission to good use at ferc headquarters because i'm sure you have many wonderful coffee pots that keep the ferc staff alert and awake. so therefore it is my pleasure to present you with the honorary national press club coffee mug. and i hope it is of good use back at headquarters to keep everybody alert and watchful over our power grid. [ applause ]

one more question before you sit down. you have been wonderful answering so many questions. we want to wrap up with this one. everything in the energy sector, this questioner says seems to be so male dominated. what do you say to girls to get them to be interested in careers in energy? what can we do to sort of turn that around to make it more of a career for more women? >> well, that's a great question. i think we are seeing more and more women in energy. and i think that maybe as far as getting more women in some of the blue collar jobs and the engineering jobs are just where it has lagged the most a lot of

it comes down to stem education, getting little girls interested early, math and science programs for young girls. i try to get girls interested in that. but i think those are important efforts to really build up that piece of the workforce. these are good jobs, good paying jobs. you can support families and we want more young girls to be interested in them. at the same time i'm living proof you don't have to -- we are the parents of a physics teacher, but i am not a stem nerd at all. i was a politics major who went to law school and i'm in electricity. i think there are jobs for people across the spectrum of interest. it's not all about stem. it's we need people of all the different disciplines. >> how about a round of applause for our speaker?

[ applause ] thank you so much for being first and at the national press club. we hope that many future ferc chairman follow your lead and come and see us. i would also like to thank the national staff for organizing today's event. finally here is a reminder that you can find more information not only about today's event but all of our activities at the national press club at the national press club website that's press.org. also, if you would like to get a copy of today's program you can go to that website, press.org. thank you very much. we are adjourned.

coming up tonight on c-span 3 a hearing on the effects of sequestration budget cuts. followed by supreme court oral argument and a case questioning the amount of time police can use to conduct traffic stops. a discussion about the financial influence that outside groups have on today's elections.

>> obviously we have the individuals here who choose to disrupt the hearing and so i will ask our -- all spectators who are here to observe the hearing today to observe the courtesy of allowing us to hear from the witnesses and for the hearing to proceed and, of course, if you decide to disrupt the hearing as you usually do we will have to pause until you are removed. i don't see what the point is, but i would ask your courtesy to the witnesses and to the committee and to your fellow citizens who are very interested in hearing what our distinguished panelists have to say who have served our country with honor and distinction. i hope you would respect that. so we will move forward the

senate armed services committee meets to receive testimony on impacts of budget control act and sequestration on u.s. national security. i am grateful to our witnesses not only for appearing before us today but for their many decades of distinguished service to our country in uniform. i appreciate their attempts to warn the congress and the american people of what is happening for their services. the brave young and women they represent and our national security if we do not roll back sequestration and return to a strategy-based budget. we look forward to their candid testimony on this subject today. such warnings from our senior leaders have become familiar to many of us despite an accumulating array of complex threats to our national interests, a number of which arose after our current 2012

strategy was developed and then adjusted in the 2014 qdr. we are on track now to cut $1 trillion from america's defense budget by the year 2021. while the budget agreement of 2013 provided some welcome relief from the mindlessness of sequestration that relief was partial temporary and did little for certainty that our military needs to plan for the future and make longer term investments for our national defense. and yet here we go again. if we in congress don't act sequestration will return in full in fiscal year 2016 setting our military on a far more dangerous course. why should we do this to ourselves now? just consider what has happened in the world in just this past year. russia launched the first cross border invasion of another

country on the european continent. a terrorist army with tens of thousands of fighters took over a swath of territory the size of indiana in the middle east. we are on track to having 3,000 u.s. troops back in iraq and flying hundreds of air strikes a month against isis. yemen is on the verge of collapsed as an iranian backed insurgency swept in and al qaeda continues to use ungoverned spaces to plan attacks against the west. china has increased aggressive challenge to america and allies in the asia pacific region where geo political tensions and potential for miscalculations are high. and, of course, just last month north korea carried off the most brazen cyber attack ever on u.s. territory. let's be clear. if we continue with these arbitrary defense cuts we will

harm our military's ability to keep us safe. our army and marine corps will be too small. our air force will have too few aircraft and many will be too old. our navy will have too few ships. our soldiers sailors air men and marines will not get training or equipment they need and it will become increasingly difficult for them to respond to a number of contingencies that can threaten our national interests around 24the world. we have heard all of this from our top commanders before yet there are still those who say never fear the sky didn't fall under sequestration. what a low standard for evaluating the wisdom of government policy. the impacts of sequestration will not always be immediate or obvious. the sky doesn't need to fall for military readiness to be eroded, for military capabilities to atrophy or for critical investments to be delayed, cut

or cancelled. these will be the results of sequestration's quiet cumulative disruptions that are every bit as dangerous for our national security. i will say candidly that it is deeply frustrating that a hearing of this kind is still necessary. it is frustrating because of what dr. ash carter president obama's nominee for secretary of defense said before this committee two years ago. i quote dr. carter. what is particularly tragic is that sequestration is not a result of an economic emergency or recession. it is not because discretionary spending cuts are the answer to our nation's final challenge. do the math. it's not in reaction to a change to a more peaceful world. it's not due to a break through in military technology or a new strategic insight. it's not because passive revenue growth and entitlement spending has been explored and kpautsed.

it is clearly collateral damage of political grid lock. i would like to echo what was told this committee yesterday no fall in the field can wreak such havoc on our security that mindless sequestration is achieving. america's national defense can no longer be held hostage to political disputes separated from the reality of the threats we face. more than three years after the passage of the budget control act it is time to put an end to the senseless policy and return to a strategy driven budget. our troops in the nation they defend deserve no less. thank you for calling this very important hearing and for your very timely and insightful remarks. i would like to welcome our witnesses and thank them for their extraordinary -- thank

you. this hearing takes place as the administration and congress continue to wrestle with two intersecting policy problems in our debate on how to solve them. because of sequester we have a strategic problem which senator mccain has illustrated well. every senior civilian and military leader has told us if defense budgets continue to be capped at sequestration levels we are likely not able to meet the national defense strategy. as senator mccain indicated we faced a variety of new and continuing threats from around the world from ukraine to syria and yemen and beyond. if we don't address the problem of sequestration we will limit the range of options to address the threats and protect our national interests. for the last three years and numerous rounds of congressional hearings and testimony our witnesses have described increased strategic risks and damaging impact of budget

control act top line caps and sequestration restrictions on military readiness, modernization and welfare of our service members and their families. and i am sure that we will hear a similar message today. compromise and difficult choices are required to provide sequestration relief in the department of defense and for other critical national priorities including public safety, infrastructure health and education. mr. chairman i know you are committed to working with our budget committee to find a way to work through these challenges and i am eager to help in this effort. i look forward to the testimony of our witnesses. thank you. >> thank you senator reid. for a moment i ask committee to consider a list of 41 pending military nominations all of these nominations have been before the committee the required length of time. is there a motion to report? >> so moved. >> second. all in favor say aye. the ayes have it. welcome to all of our witnesses and we will begin with you.

>> thank you ranking member reid, other distinguished members of the senate armed services committee, thank you for allowing us the opportunity to talk about this important topic today. as i sit here before you today a sequestration looms in 2016 i'm truly concerned about our future and how we are investing in our nation's defense. i believe this is the most uncertain i have seen the national security environment in my nearly 40 years of service. the amount and velocity of instability continues to increase around the world. islamic state in iraq rapid disintegration of order in iraq and syria have dramatically escalated conflict in the region. order within yemen is splintering. the expansion continues there and the country is quickly approaching a civil war.

in north and west africa anarchy extremism and terrorism continues to threaten the interest of the united states as well as allies and partners. in europe russians intervention in the ukraine challenges resolve of europe yn union and effectiveness of the north atlantic treaty organization. while the cycle of north korean provocation continues to increase. the rate of humanitarian and disaster relief missions heightens level of uncertainty we face around the world along with constant evolving threats to the homeland. despite all of this we continue to reduce our military capabilities. i would like to remind everyone that over the last three years we have already reduced the capabilities of the united states army. this is before sequestration will begin again in 2016.

in the last three years the army's active component strength reduced by 80,000. reserve component by 18,000. we have 13 less active component brigade combat teams, eliminated three active aviation brigades, removing over 800 rotary wing aircraft from inventory. we slashed investments in modernization by 25%. we have eliminated our vehicle modernization program and eliminated our scout helicopter development program. we have significantly delayed other upgrades from systems and aging platforms. readiness degraded to lowest level in 20 years. only 10% of the teams were ready. our combat training center rotations were cancelled and almost over half a billion dollars of maintenance has been deferred. both effecting training and

readiness of our units. even after additional support from the bba today we only have 33% of our brigades ready to the extent we would expect them to be if asked to fight. our soldiers have under gone separation boards forcing us to separate quality soldiers some while serving in combat zones. this is just a sample of what we have already done before sequestration kicks in again in 2016. when it returns we will be forced to reduce another 70,000 out of act of component and 10,000 out of the army reserves. we will cut an additional 10 to 12. we will be forced to further reduce over the next five years because we simply can't draw down quicker to generate required savings. the impacts would be much more severe across our acquisition

programs requiring us to end, restructure or delay every program with decrease of 40%. home training will be defunded. we will be forced to drop over 5,000 seats of additional military training 85,000 seats from specialized training and over 1,000 seats in our pilot training programs. soldier fam readiness programs will be weakened and facility upgrades will be affected impacting our long term readiness strategies. sustainable readiness will be out of reach deteriorating between 2016 and 2020. additionally overall the mechanism of sequestration has and will continue to reduce our ability to efficiently manage the dollars we do have. the system itself has proved to be very inefficient and

increases cost across the board whether it be acquisition or training. so how does all of this translate strategically? it will challenge us to meet our current level of commitments to our allies and partners around the world. it will eliminate our capability to conduct simultaneous operations specifically deterring in one region while defeating in another. essentially for ground forces sequestration puts into question our abilities to put into one prolonged multi phased combined arms campaign against a determined enemy. we would significantly degrade our capability to shape the security environment in multiple regions simultaneously. ultimately sequestration limits strategic flexibility and requires us to hope we are able to predict a future with great accuracy, something we have never been able to do.

our soldiers have done everything that we have asked of them and more over the past 14 years and they continue to do it today. today our soldiers supporting five operations on six continents with nearly 140,000 soldiers committed in over 140 countries. they remain dedicated to the mission, to the army and to the nation. with the very foundation of our soldiers in our profession being built on trust but at what point do we the institution and our nation lose our soldier's trust? the trust that will provide the right resources, training and equipment to prepare them and lead them into harm's way, trust that we will take care of our soldiers and their families and our civilians who so selflessly sacrifice so much. in the end it is up to us not to lose that trust. today they have faith in us,

trust in us to give them the tools necessary to do their job. but we must never forget our soldiers will bear the burden of our decisions with their lives. i love this army and i have been a part of it for over 38 years. i want to ensure it remains the greatest land force the world has ever known. to do that it is our shared responsibility to provide our soldiers and our army with the necessary resources for success. it is our decisions, those that we make today and in the near future that will impact our soldiers, army and the joint force and our nation's security posture for the next ten years. we do not want to return to the days of hollow army. thank you so much for allowing me to testify today and i look forward to your questions. >> thank you general. admiral greener. >> ranking member reid and distinguished members of the committee thank you for the opportunity to testify about the

impact of sequestration on our navy thus far and the impact of a potential return to that in 2016. mr. chairman, presence remains the mandate of our navy. we must operate forward where it matters and we need to be ready when it matters. i have provided a chartlet to show you where it matters around the world to us and where it matters to our combattant commanders. recent events testify to the value of forward presence. for example, when tasked in august the george h.w. bush strike group reloced from the arabian sea to the north arabian golf and was on station within 30 hours ready for combat operations in iraq and syria. navy and marine strike fighters generated 20 to 30 per day and for 54 days represented the only coalition option to project power against islam.

the united states arrived to establish a u.s. presence and reassure our allies within a week after russia invaded the crimea. over a dozen u.s. ships provided disaster relief to the philippines in the wake of a supertyphoon about a year ago. and the uss fort worth and sampson were among first to support search effort for the air asia aircraft recovery. we have been where it matters when it matters with deployed forces. however, due to sequestration in 2013 our contingency response force what is on call from the united states is one-third of what it should be and what it needs to be. sequestration resulted in a short fall in 2013 below our budget submission. this short fall degraded fleet readiness and created consequences from which we are

still recovering. the first round forced reductions and generated ship and aircraft maintenance back logs and compelled us to extend unit deployments. since 2013 our carrier strike groups, ambibbious ready groups and most destroyers have been on deployments lasting eight to ten months or longer. this comes at a cost of sailors and families' resiliency. navy's fleet readiness will likely not recover from back logs until about 2018 five years after the first round of sequestration. this is just a small glimpse of the price caused by sequestration. although the funding levels provided to us under the bipartisan budget act of 2013 were $13 billion above sequestration.

those were below resources we described in our submission as necessary to sustain the navy. we pushed out nodernization to be scheduled. we reduced procurement of advanced weapons and aircraft. the epd result has been higher risk particularly in two of the missions that are articulated in our defense strategic guides. that is our defense strategy. i provided a copy of that. the missions at the highest risk are those deterring us to defeat aggression. now a return to sequestration in 2016 would necessitate a revisit and a revision of our defense

strategy. we have been saying this for years. that would be a budget-based strategy for sure. we would furger delay critical war fighting capabilities and contingency response forces and perhaps forego procurement of ships and submarines and down size. in terms of war fighting the sequestered navy of 2020 would be left in a position where it could not execute the missions that are referred to. we go to high risk to we could not execute those and we would face higher risk. that's seven out of ten. more detail on the impact as i described is on a handout in front of you and outlined in a written statement. although we can model and we can analyze and we can quantify war fighting impacts as was said what is less easy to quantify is sequestration's impact on

people. people under write our security. we call them ouray symmetric advantage. they are the difference between us and the most tech nologically advanced navy close to us. we have enjoyed meeting our recruiting gelz and until recently our retention has been remarkable. however, the chaotic and indiscriminate discursion of sequestration really left a bitter taste with sailors civilians and with our families. and the threat of looming sequestration along with a recovering economy is a troubling combination to me. we are already seeing disconcerting trends in our retention particularly our strike fighter pilots, nuclear trained officers our s.e.a.l.s., cyber warriors and some highly skilled sailors in information technology and nuclear fields. these retention symptoms that i described remind me of the challenges that i had as a

junior officer after the vietnam war period on a down size. it reminds me of when i was in command of a submarine in the mid '90s a down size. the world was more stable then, mr. chairman than it is today. i would say we can't create that same circumstance. sequestration will set us right on that same course that i just described. frankly, i have been before and as was said i don't think we need to go there again. ship building and related industrial base stand to suffer from a sequestered environment. companies not necessarily the big primes but the companies that make key valves key circuit cards and things that put us together might be forced to close businesses. it takes a long time to build a ship and longer to recover from the losses of skilled workers or materials that some of the companies provide. the critical infrastructure in

this vital section of our nation's economy is key to sea power. i understand the pressing need for our nation to get the fiscal house in order, i do. it is imperative we do so, i say, in a thoughtful and deliberate manner to ensure we retain the trust of our people and sustain appropriate war fighting capability. unless naval forces are properly sized, modernized at the right pace with regard to the adversaries, ready to deploy with adequate training and equipment and capable to respond in numbers and at speed required by commanders. i look forward to working with this committee and with congress to find solutions that will ensure that our navy retains ability to organize train and equip great sailors and marines and soldiers and coast guard in defense of this nation.

thank you. >> thank you. it's always an honor to be here, a special honor to sit before you today with three people i consider to be friends, mentors and literally heroes. my pride in our air force hasn't changed since the last time i appeared before you. what has changed is we are the smallest air force we have ever been. we deployed operation -- >> repeat that again -- >> we are now the smallest air force we have ever been. when we deployed the operation desert storm in 1990 the air force had 188 fighter. today we have 54 and heading to 49. in 1990 there were 511,000 active duty air men alone. today we have 200,000 fewer than that. as the numbers came down the operational tempo went up. your air force is fully engaged. all the excess capacity is gone and now more than ever we need a capable fully ready force. we simply don't have a bench to

go to. we can't continue to cut force structure as we have been doing to pay the cost of readiness and modernization or we will risk being too small to succeed in the task we have been given. bca level funding will force us to do exactly that. we will have to consider vestiture of things like the u 2 fleet, global hawk black 40 fleet. we would have to consider reducing mq 1 and 9 fleet by up to ten orbits. the real world impact of those choices would be significant. in the isr missionary alone 50% of high altitude missions being flown today would no longer be available. commanders would lose 30% of their ability to collect intelligence and targeting data against moving vehicles on the battlefield. and we would lose a medium altitude isr force the size of one doing great work in iraq and syria today. the air force would be even smaller and less able to do the

things routinely expected to do. i would like to say that smaller air force would be more ready than it has ever been, but that's not the case. 24 years of combat operations have taken a toll. in fy 14 and 15, we used the short-term funding relief for the balanced budget act to target individual and unit readiness. and the readiness of our combat squadrons improved over the past year. today, just under 50% of those units are fully combat ready. under 50%. sequestration would reverse that trend instantly. just like an fy 13, squadrons would be grounded, readiness rates would plummet, red and green flag training exercises would have to be canceled, weapons schools classes limited and air crew members frustration in their family's frustration will rise again, just as the major airlines begin a hiring push, expected to target 20,000 pilots over the next ten years. we have a broader readiness issue and the infrastructure that produces combat capability

over time, things like training rages, test ranges, simulation infrastructure, nuclear infrastructure, have all been intentionally underfunded over the last few years to focus spending on individual and unit readiness. that bill is now due. bca caps will make it impossible to pay. the casualty will be air force readiness and capability well into the future. i would also like to tell you your smaller air force is younger and fresher than it has ever been, but that wouldn't be true either. our smaller aircraft fleet is also older than it has ever been. if world war ii's venerable b 17 bomber had flown in first gulf war, it would have been younger than the b 52, the kc 135 and u 2 are today. we currently have 12 fleets of airplanes that qualify for antique license plates in the state of virginia. we must modernize our air force. we want to work with you to do it within our top line. it certainly won't be easy and it will require accepting prudent operational risk and some missionaries for a time.

but the option of not modernizing isn't an option at all. air forces that fall behind technology fail. and joint forces that don't have the breadth of the air space and cybercapabilities that compromise modern air power will lose. speaking of winning and losing, at the bca funding levels, the air force will not longer be able to meet the operational requirements of the defense strategic guidance. we cannot defeat an adversary, deny a second adversary and defend the homeland. i don't think that's good for america. no matter what angle you look at it from. we do need your help to be ready for today's fight, and still able to win in 2025 and beyond. i believe our airmen deserve it. i think our joint team needs it. and i certainly believe that our nation still expects that of us. i would like to offer my personal thanks to the members of this committee for your dedicated support of airmen and their families and i look forward to your questions. >> thank you, general dunford. >> chairman mccain, ranking member reed and distinguished members of the committee, thank

you for the opportunity to appear before you today. i'm here to represent the marines and testify on the impact of sequestration. i would like to begin by thanking the committee for your steadfast support over the past 13 years, duty or leadership we fielded best trained and equipped marine corps we have ever sent to war. i know we have high expectations for marines as our nation's naval expeditionary force and readiness. you expect the marines to operate forward, engage with partners, deter potential adversaries and respond to crises. when we fight, you expect us to win. you expect a lot of your marines and you should. this morning as you hold this hearing, the marines are doing what you expect them to be doing. over 31,000 forward deployed and engaged. i've captured what the 31,000 are doing in my statement. i ask that be accepted in the record for the interest of time. our role as a nation's expeditionary force and readiness helps us equip the marine corps. it prioritizes the allocation of

resource that we receive from congress. before i address what would happen at a budget control act level of funding with sequestration, let me quickly outline where we are today. we have experienced budget cuts and fiscal uncertainty over past few years, we prioritize the readiness of our forward deployed forces. but in order to maintain a readiness of our forward deployed forces we have assumed risk in modernization, infrastructure sustainment and quality of life programs. as a result, approximately half of our nondeployed units, those who provide the bench to respond to the unexpected, are suffering personnel, equipment and training short falls. in a major conflict, those short falls will result in a delayed response, and/or additional casualties. we're investing in modernization at a low level. we know that we must maintain at least 10 to 12% of our resources on modernization to field a ready force for tomorrow.

to pay today's bills we're investing 7% to 8%. over time, that will result in maintaining older or obsolete equipment at higher cost and more operational risk. and we are funding our infrastructure sustainment below the dod standard across the future years defense program at the projected levels we won't be properly maintaining or enlisted barracks, training ranges and other key facilities. when we can meet the requirements of the defense strategic guidance today, there is no margin. even without sequestration, we will need several years to recover from over a decade of war in the last three years of flat budgets and fiscal uncertainty. in that context, bca funding levels with sequester rules will preclude the marine corps from meeting the requirements of the defense strategic guidance. sequester will exacerbate the challenges we have today. it will also result in a marine corps with fewer active duty battalions and squadrons than would be required for a single major contingency. perhaps as concerning, it will result in fewer marines and sailors being forward deployed

in an position to immediately respond to crises involving our diplomatic posts, american citizens or interests overseas. while many of the challenges associated with the sequestration could be quantified, there is also a human dimension. our soldiers, sailors, airmen and marines and their family should not have to face doubts about whether they would be deployed without proper training and equipment. the foundation of our all volunteer force is trust. sequestration will erode the trust that our young men and women in uniform, civil servants and families have in their leadership. and the cost of losing that trust is incalculable. given the numerous and complex security challenges we face today, i believe the dod funding at the budget control act level with sequestration will result in the need to develop a new strategy. we simply will not be able to execute the strategy with the implications of that cut.

thank you, once again, for the opportunity to appear before you this morning. i look forward to your questions. >> thank you. i thank you all for a very compelling statements and i hope that all of our colleagues and in fact all of the american people could hear the statement and see the statements that you made today. our most respected members of our society. i would also have an additional request, that is that if you could provide for the record all of you a list of some of the decisions you would have to make if sequestration continues to be enacted and there is no amelioration of the situation that you're in. i guess the only other comment i would like for you to answer, because i'd like all my colleagues to be able to have time to answer questions is the old line about those of us that ignore the lessons of history.

general odierno, you made reference to it. when general shymire came before this community and said we had a hollow army, i know my friend senator reed remembers that also, and we were able to recover hardwarewise and ships and airplanes and guns and -- but it took a lot longer than that to restore the readiness and the morale of members of our military and all four of you made reference to it. i would like you to elaborate a little bit on the personnel side of this because it seems there is always the best and the brightest that leave first when you're a pilot that can't fly

and on a ship that doesn't leave port and on so maybe each of you can give a brief comment about the intangible that makes us the greatest military on earth. i'll begin with you, general odierno. >> thank you, senator. the center of everything we do is our soldiers. the army is our soldiers. and without them, and their capabilities, our ability to do our job becomes very, very difficult and it is something that happens over time. my concern is when you're funding readiness, you're funding the development of our young soldiers and you can't do that episodically. you have to do in a sustained manner. it allows them to execute the most difficult and complex

missions we face. in today's world, those missions are becoming more complex and more difficult. my concern is as they see maybe we're not going to invest in that, they start to lose faith and trust that we will give them the resources necessary for them to be successful in this incredibly complex world that we face. i think sometimes we take for granted the level of capability our soldiers bring and the investment we have made into the education and training, which is central to everything that we do. and we can't lose sight of that. and unfortunately with sequestration, we are going to have to reduce that over the next four to five years for sure because we cannot take in and strength out fast enough to get the right balance because of our commitments we have. therefore you have to look at readiness, training and modernization. we're losing cycles of this training that develops these young men and women to be the best at what they are, the best of what they do.

so for us, we can't forget that. >> as chairman, i bring something to everybody's attention. when we had sequestration, we say, we exempted personnel as if, hey, that's good. that means they got paid. but that doesn't mean that they got -- that's their quality of life and we gave them their housing allotment, that's good. but the quality of their work, which is what you're alluding to, when they go to work and what general was -- the general was alluding to, they're not proficient at what they do. and they're not -- therefore they're not confident. as a sailor, you're out to sea, you're on your own, you need to be confident and know you can be proficient. you alluded to pilots. you have a have and have not. if you're deployed, you're flying 60 hours a week sometimes. if you're not deployed, you may be flying ten hours a week and some may be in a simulator. you're sitting around the classroom looking out the window

at your strike fire hornet, it looks great but it is on the tarmac. that's not why you joined. the same at sea. if you're a destroyman and in a submarine, you're not operating. that becomes behavioral problems eventually because the idle mind is the devil's workshop. we're out and about, our alcohol problems go up. i alluded to it, i saw it in command, saw it as a jo. this is what happens. then this gets to family problems, it starts cascading. you bring all that together. we have an all volunteer force that wants to contribute and they want to do things, they want to be professionally supported in that regard. thank you. >> general welsh? >> chairman, our civilian airmen felt we committed a breach of faith with them. they still have not recovered completely from that. if it happened again, it would be absolutely horrible. and i believe we would see the effect immediately in retention. i can't emphasize enough my agreement with what john just said about people not joining

this business to sit around. pilots looking out at their airplanes parked on the ramp feel like a hollow force whether we define it that way or no same thing with the people who want to fix the airplanes, load weapons on them, support them from the storage area, all they want is to be the best in the world at whatever it is they do. all of our people are that way. if they don't think we will educate them, and train them and equip them to do that, and to fill that role, then they will walk. they're proud of who they are, proud of who they stand beside and proud of what they represent. and when they lose that pride, we lose them. when we lose them, we lose everything. >> also, we're going to have, as you made reference to, a significant draw from the airlines as the vietnam era pilots retire from the airlines. i think that's an additional issue that we are going to have

to face up to anyway without sequestration. >> we see it today, sir. >> chairman, thank you. you alluded to the hollow force of the 1970s. i was on active duty during that time. i was a lieutenant commander -- platoon commander where we had organization of about 190,000 marines, we didn't have proper landing, didn't have proper training, didn't have proper equipment. where we saw the impact was in poor enlistments, discipline rates. we were unable to maintain the quality people that we wanted to have and quite frankly i know myself and many of my counterparts at the time had a difficult decision to stay in the marine corps. and many of us only made the decision to stay once the marine corps started to turn around in the 1980s. as you alluded to, it took five to seven years after we started to make an investment for the morale to catch up. the thing i would add to what

the other chiefs said is that i think most of us would be -- would not have been able to predict the quality of the all volunteer force and its ability to sustain now over 13 years at war. there is nothing that has allowed that force to sustain except for intangible factors. it has not been how much we paid them. it is the sense of job satisfaction, sense of purpose, sense of mission. as i alluded to, their sense of trust. none of us want to be a part of our last tour and active duty want to be part of returning back when we had a hollow force. i think we're fortunate we're not tested at that time. >> thank you very much, mr. chairman. thank you, general, again, for your testimony, for your great service to the nation. you have already reduced training. you already reduced maintenance. you already stretched out acquisition programs, et cetera. whatever we do, i think you will manage and which presents the interesting problem is that we could be in a period of a steady

accelerating, but invisible decline until a crisis. and then the reckoning will be near. -- will be severe. i think we have to take appropriate action now and the chairman's leadership is critical in that. let me just go and ask you individually, with all the cuts you already made, with all the losses, looking forward what are the one or two capabilities that you will see leaving or lost if sequestration goes into effect. i'll ask each of you. general odierno? >> i often get asked the question what keep me up at night. and the number one thing that keeps me up at night is that if we're asked to respond to an unknown contingency, i'll send soldiers there not properly trained and ready. we simply are not used to do that. the american people and we expect our soldiers to be prepared. and that they had the ability to train, they understand their

equipment, they have been able to integrate and synchronize their activities so they're very successful on the ground. that's the one thing that i really worry about as we move to the future. the second thing is our ability to do simultaneous things. what we're coming to the point now, we'll be able to do one thing. we'll be able to do it pretty well. but that's it. this world we have today is requiring us to do many, many things, maybe smaller, but many, many things simultaneous. i worry about our ability to do that. >> admiral greenert, please. >> we're at a time of modernization. our benchmark is the year 2020 and our ability to do the missions i refer to. and for the navy, a lot of those missions require joint access to areas around the world and, against an advanced adversary. i look at the futures, perhaps the inability, we'll fall further behind in what i call electromagnetic maneuver warfare. it is an emerging issue. electronic attack.

the ability to jam, the ability to detect seekers, radars of satellites and that business. and we're slipping behind. our advantage is shrinking very fast, senator. also, anti-air warfare. our potential adversaries are advancing. we're losing that. and if we don't have that advantage, we don't get the job done in the 2020 time frame. the undersea domain we dominate in it today, but we have to hold that advantage and that includes the ohio replacement, the sea based strategic return in addition to anti-submarine warfare. it is about access and the ability to get that access where we need. cyber is also another one. one we talk about a lot. lastly, i can't underestimate the fact that we're good and we will continue as joe dunford said, our forces we put forward, we'll put forward and they'll be the most ready. we're required to have a response force, a contingency

force. we owe that to the combatant commanders. if we're not there today and we'll just never get there, if we go to sequestration. we'll remain at about one third of what we need to be. thank you. >> thank you, general. if you could be succinct. >> infrastructure that gives you long-term capability, training ranges, test facilities, we haven't been investing, it will cost us the ability to operate in the future. multiple simultaneous operations. we simply don't have the capacity anymore to conduct that, particularly in areas like isr, refueling, et cetera. the capability gap is closing as john mentioned between the people trying to catch up with the technologically and they have momentum. if we let the gap get too close, we won't be able to recover before they pass us. space and nuclear business and space business, we cannot forget that that is one of the fastest

growing and closing technological gaps in the cyberarena if we don't try to get ahead in that particular race, we'll be behind for the next 50 years as everybody else has been behind us in other areas. those are my biggest concerns. >> thank you. commandant. >> the two capability areas first would be our ability to come from ship to shore, we're in a vehicle now that is over 40 years old and replacing that is both an issue of operational capability and safety. also our air frames, f-18 are both over 20 years old, an issue of operational capability and safety. but i would say, senator, you alluded to it, my greatest concern in addition to those two capability areas is the cumulative effect of the cuts we made to date and the cuts we make in the future. every day i'm still finding out second and third effects of the cuts made to date in the sequestration that was put in effect in 2013. >> thank you very much. further complicating your lives and our lives is that this is a focus today on the problem of defense, but the ramifications go to government. and the impacts will roll back on you. one more obvious example is if the state department is subject

to sequestration, they won't be able to assist you in the field >> which has 22 000 children including 18 dependents in ft. hood would lose an estimated $2.6 million. we have to take our view not only towards the defense but the cost of the whole government. you all talked about taning

troops. that's not your responsibility, that's our responsibility. it will affect you in so many different ways rngs you will, as the general will be waking up getting complaints about how the schools have been and leaving and that's not title ten. so, thaurng for your service and your testimony. >> senator wicker. >> thank you, gentlemen. this is very profound testimony today. and very helpful to us. we have a debt problem in this country. no nation in history has maintained its military power if it failed to keep its fiscal house in order.

we're blanksing a spending problem with really, a lack of funds in the defense department that you talked about today. in your 40 yearings or so of service, this is the fewest number of ships. and general dunford,in talking about sequestration, you say it's the funding levels and, also it's the rules of sequestration.

so i thought i would start with you and then we'd go back up the panel there. if we were able to give you flexibility fwr the funding levels, to what extent would that help you in the long run? >> thanks, senator, for that question. just the fupding caps alone would reduce our overall budget by about 4 to $5 billion a year. what i ask guarantee you whatever amount of money will build the very best marine keerp that he can. we will reduce the capacity to the point where we'll be challenged to meet the kumpbt strategy.

general welsh to what extent would flexibility be somewhat of a help. >> i think all of us have to understand that it has to be a solution for the nation. we don't live in a mushroom farm and not believe that that has to be true. if you look back to the 12 budget which is where we came out of, the 12 budget projecting for fy 16 was $21 billion more per year than we will have at bca levels. $21 billion a year requires some tough decisions to be made, some very hard and unpopular decisions to be made. without the ability to make those decisions we'll continue to be stuck and not sure where we're going in the future.

the clock is ticking away on that predictability, isn't it, general? gl yes, sir, it is. >> my colleagues have spoken to the flum beryl the value, that is the dollar value. as i would say, the verb, sequestered, that's an algorithm. we spend months reprogramming with your help up here on the hill. and we lose months. four, five six months on a program, like, for us the ohio replacement program, where we don't have time.

it was still only 33% ready. and so, yes, flexibility will give us the ability to manage insufficient funds in our department. but that's all it does. it allows us to better manage. today, we had to extend our -- all our aviation programs so the cost for every apache has gone up. the cost for every ch 47 has gone up because we had to extend the programs longer and longer and longer. we're paying more money per system. we're inefficient, even with the

less dollars we have. even exacerbates the readiness problems even more. so flexibility would help, but it is not going to solve the problem we have, which is a problem of insufficient funds to sustain the right level of readiness. >> thank you. let me just ask briefly, there was a decision we would pivot to asia pacific. to what extent do the joint chiefs of staff consulted on that. we have got -- we have got eastern europe, russia, still have the middle east and everything going on there. doesn't seem to have calmed down as some people thought. to what extent was this a pentagon decision that we could even have a repivot to asia pacific? and afford it? we had a good discussion on the re -- what we call the rebalanced asia pacific. >> i would comment, i agree with that. we had thorough discussions and we thought the rise of china in -- this is 2012, was very important. we had to be able to have the capability to respond potentially to that.

and also the problems with north korea and other problems in the asia pacific. and we made some assumptions about where we would be in the rest of the world, those have not quite played out the way we thought with iraq, isis, and specifically russia. and their increased aggression. the strategy is still good, we just have to recognize that there are some additional threats out there that we didn't expect. and that we have to deal with those. that increases the risk as we look at sequestration and other budget cuts. >> thank you, gentlemen. >> thank you, mr. chairman. thank you, all, for your service. general welsh, i wanted to ask you, in regards to our nuclear mission, it is a very, very critical mission, obviously. what impact is sequestration going to have in your area? >> two specific areas at the top of the list. nuclear infrastructure i mentioned before, we're at a

point in time where we have got to start modernizing and capitalizing some of the infrastructure in terms of facilities built 15 years ago now. we have an investment plan designed. it is prepared to be put into place. we actually have it in the president's budget this year. if we go to sequestration, all of the facility maintenance and new buildings that we have put into that proposal will fall off

the table, except for a single weapons storage area at one of the bases. so that's the first point. the second one is that we do have a requirement, as a nation to make decisions on what do we want to recapitalize and modernize in terms of nuclear weapons and nuclear command and control capability over the next 15 to 20 years. it affects the air force and the navy. the decisions on that need to be made in the near future. sequestration and bca caps will limit the amount of things you can do in that arena and make those decisions more important to make earlier so we don't waste money leading into the time when those things have to be done. >> admiral, how will this affect the plans you have for the ohio class? >> if i get back to the verb, if we are sequestered, we lose months as i was saying before hiring engineers and we're on a very tight timetable to start building the first ohio in 2021. that's kind of one piece we have to continue to do that. the sea based strategic deterrent is my number one program. in fiscal year 17 through 20, we have $5 billion invested as advance procurement for the first ohio, which in 2021 is $9 billion on top of the ship building plan we have now. very difficult to do. we have to do it, though, senator, so we'll have to continue to work in that regard. >> thank you, and i obviously