tv Key Capitol Hill Hearings CSPAN March 13, 2015 7:00pm-9:01pm EDT
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container transfer facilities, and for trucks we need to start thinking about dedicated freightways. these types of investments will make u.s. exports more competitive. thank you. >> thank you, dr. kemmsies. next we have mr. john greuling. mr. greuling is a board member of the coalition for america's gateways and trade corridors. welcome, sir. >> thank you mohammad chairwoman, members of the subcommittee. thank you for this opportunity. today i'm representing both the will county center for economic development and the coalition for america's gateways and trade corridors, which is a diverse group of 16 public and private organizations dedicated to increasing federal investment in america's multimodal freight infrastructure. i'm also here as the ceo of the will county center for economic development. our responsibility today is marketing the largest inland international container port in
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north america. will county is crossed by six class 1 railroads, five interstate highways, several commercial water ports on our nation's largest inland waterway. last year we processed over 3 million containers containing $65 billion worth of goods that are grown, manufactured, assembled, and delivered throughout the united states and the world. our first and last mile infrastructure requirements today total $3.6 billion of new investment just in our county, and that does not include bringing our existing road infrastructure up to a state of good repair. our needs extend far beyond roads. increased utilization of freight by rail as we've heard is resulting in more at grade rail crossings and it's impacting commerce from public safety. we need at the very local level more grade separation structures and first and last mile
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interstate connectors to accommodate the freight of the future. the growth of freight has been stated we believe by 2045 that increase will be about 45% putting more pressure on both existing and future infrastructure for freight. meanwhile, 95% of the international consumers are now outside of the united states. so being at the beginning and the end of the global -- of a major global supply chain u.s. companies have to understand and the government needs to understand that we need good infrastructure to reach those markets. u.s. government infrastructure investment as a percentage of gdp is currently less than 2%. our trade partners our biggest ones canada, china, mexico are spending two to five times more than that on their infrastructure. and it can't be just one mode that we're focused on when we talk about funding infrastructure. we have to look at all modes.
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and we need to make those modes work better together. rail, truck, air, and water are today the key components of the global supply chain. the global situation is getting worse in a lot of respects but we have the opportunity to take advantage of what's going on internationally in the economy. the coalition for america's gateways and trade corridors asked congress to take the following steps in the upcoming surface transportation authorization. first, we would like you to establish a freight program containing dedicated and flexible funding. freight should not compete with other mobility needs. it's integral to other mobility needs. freight movement occupies a special place in our transportation system as the elements supporting commerce, competitiveness, and that all important word jobs. it should be -- we should have a dedicated funding such as a
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freight trust fund that is committed to stoking our economic engine by improving efficiency, safety, reliability, and speed at which goods are moved. second, fund at a minimum level of $2 billion a year, a competitive multimodal freight infrastructure grant program. projects of national and regional significance or similar freight specific competitive grant program is needed to prioritize federal funding of projects that meet certain performance criteria to advance economic goals of this country. by prioritizing projects we can identify important public benefits as well as non-federal support. a $2 billion grant program could leverage many times that amount in private investment and infrastructure. third, ensure robust public investment in all modes. where public benefit is derived public investment must be made. because often where modes come together the public assistance is needed to close the funding
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gaps. examples include highway rail grade crossings rail spurs to access cargo, logistics or transfer facilities, tunnel and bridges for port access and border crossing capacity enhancements. finally, modify the national freight transportation policy to make it multimodal. create a office of intermodalism in the u.s. d.o.t. secretary's office and give freight the significant attention that it needs in this country to keep our economy healthy. thank you. >> thank you very much. we will begin with a first round of questions. five minutes. i will start. mr. bessac you talked about competing in a global market and the effect that has. being with cargill and the emphasis you have with port, can
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you tell me what percentage of pork in this country goes for exports? >> certainly. senator, pork is much larger than beef. about 25 -- between 20% 25% depending upon the year and about 10% of pork. i'm sorry, 10% of beef is exported. >> and when you are looking at delays at our ports and you see other countries stepping forward and being able to fulfill some of those orders, do you know what share of the market your company has lost and how you see that rippling effect throughout the industry? >> well, i guess going to cargill's share gets to be a bit difficult. but if you look at the u.s. pork industry or the u.s. beef industry, we certainly have been the largest exporter around the
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globe. but as we have dealt with the congestion in the ports, also issues like currency and other forces in play on the market we've seen a substantial increase just in the past year to countries, the eu, chile, and i think certainly in the last couple months have seen a substantial decline in our volumes. >> do you think that will be a permanent decline? will we be able to get that market back once these customers are used to having new trading partners? >> i think anytime you disappoint a customer it takes time to build trust back. and as i referred to in my testimony, there's a tremendous amount of potential for both beef and pork exports on the global scale. we have a productive that the world is looking for in values.
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i certainly believe the growth potential remains. but there is no doubt that we have disappointed our customer base primarily in japan, korea and in china over the last couple months. and that will take some time to rebuild trust. >> and in disappointing our customer base what has been the loss in dollars to pork producers and the economy here in this country? >> well, i don't know that i'd be the best one -- i think north american meat institute estimated 40 to 50 million dollars per week. i could probably give you a better example. just this morning we have about 15 containers of chilled pork product en route to japan that our customers are either asking can you guarantee us that it will arrive in a useful form with shelf life or not.
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and so for me that's about a million dollars i have to decide whether i'm going to put that into a port system and either slow down or potentially close closing being a complete loss. so i hope that gives you some perspective. >> yes. thank you. and miss farmer, with bnsf i'm sure you have to look at the possibilities of a shutdown and a shutdown that would last for possibly an extended period of time. how does that affect the railroad in planning and what impact does that have on your customers and on your thousands of employees that you have? >> sure. an example of this would be this weekend we were moatified by the pma that vessel gangs would not
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be working. so the effect that has on our railroad is that in an average week during this period of the year we would be moving somewhere in the neighborhood of 60 trains off of our docks in southern california. that number has been reduced to 30 trains per week. the impact that that has is that we cannot move the freight that wants to move off the west coast. so we will move a limited amount of that freight off the west coast into the interior of the u.s. it will then limit the ability for us to accept freight at our inland hubs. so we will have to turn freight away at those inland hubs that wants to move back to the west coast. in addition to this i talked about our capital expenditures that we've made. we are now having to store locomotives and equipment that we have added to our fleet to be able to handle this country's supply chain growth. store that across our railroad because we cannot continue to send this volume out to the port. when we do that it sits on the mine and it causes ripple effects across our network,
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which impact other customers in addition to our intermodal customers. so the impact for us really senator fisher is that we cannot move the freight through it and we are not using the valuable resources that we have. >> and that impact when you see the freight migrate from the west coast, what impact does that have on a local community? >> absolutely. i think when we look back at history and we know that during 2002 freight has permanently migrated away from that to canada, to mexico, and we know that because of that the local freight is not ending up in those communities and additional expenditures need to be made somewhere else when a port is there that could be used for that freight to be moved through the country. >> thank you very much. senator blumenthal. >> thank you, madam chair. there seems to be no doubt among any of our panel members that solving this threatened impasse or crisis on the west coast is
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necessary to america's near-term and longer-term competitiveness. is that correct? but moving on to the broader issue, let me go to mr. greuling's really excellent testimony about our ongoing failure. and it is a kind of slow motion implosion of american competitiveness. the ongoing failure to spend more than 2% of our gdp on infrastructure investment which is compared to 9% by china, 8% in india, 5% in europe, even in mexico 4%. and it extends not only to roads and bridges which are crumbling and decaying and decrepit but also to areas of our
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infrastructure as simple as rail grade crossings. in valhalla, new york just days ago we saw the consequences of possibly -- we don't know causes yet, but possibly a railway crossing that could have been made safer and could have prevented the deaths and injuries that occurred there. the fact of the matter is that there are more than 2,000 crashes and collisions every year at our rail grade crossings, causing more than 230 deaths and more than 700 injuries. not to mention the economic cost of those collisions. which are very difficult or impossible to calculate. that's just one example of our failure to invest in infrastructure. so let me ask you, as to the $2
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billion that you recommend as a fund for investment would it make sense to do it through a public financing authority or infrastructure bank such as has been proposed and advocated by myself, other members of this committee, a very bipartisan proposal, that would make available not just 2 billion but possibly more? >> i think the concept of a set-aside through a public infrastructure bank, broader utilization of public and private activity bonds along with some other finance mechanisms, i think we need to bundle these together. i think anything that costs a lot of money these days is going to take more than one source or resource to make it happen. back in illinois we don't like to talk about gas tax, but we think in illinois to solve some of the state road and infrastructure problems a gas tax is something we should be looking at. but i do believe that loan
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guarantees, broader use of some of the existing bonding programs, tifia and riff, i think both would help in meet ing this demand that we have. and i do believe that multiple solutions are going to be necessary. >> my understanding is that both tifia and riff are underutilized. in fact, billions of dollars have been left on the table in effect. as a result of internal problems highlighted by the inspector general of the department of transportation very recently. would you agree? >> i would agree with that. i think the time it takes to process going through the preapplication, going through that review the uncertainty quite frankly that comes about when there's long delays in financing tools all of a sudden the hot project becomes not so hot a project and they start looking at some other infrastructure pieces to accomplish.
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expedited review of the broadening of the utilize ooigs of those funds and certainly making sure we're using our full complement every year would go a long way to helping us. creating new programs is fine but i think a better utilization of existing programs makes a lot of sense. >> and riff in fact is a multibillion-dollar opportunity that is lost literally every day to american intermodal transportation. i welcome the emphasis that owl of our panel have placed on intermodal transportation because as you've well expressed it is the transportation growth opportunity of the future. >> that's right. >> do any of you have any differences with the points that mr. greuling has made? >> i would say from bnsf's perspective, certainly as you know we are privately funded but we certainly have a vested interest in making sure that the supply chain runs efficiently.
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so therefore, we fully support a federal focus on freight. we think that is a good thing. >> through an infrastructure bank? >> again, we don't necessarily want to drive that decision, but we certainly want to be part of the conversation. >> thank you. my time has expired. thank you all. >> thank you senator blumenthal. senator daines. >> thank you madam chair. well, i get to represent the state of montana. and in montana our number one industry is agriculture. it's about a $5 billion industry just last year and as we know in ag, you have to be able to export. and like senator fisher we don't have a lot of oceanfront property in montana. i don't think nebraska does either. so the supply chain becomes critically important. in fact, 80% of montana's wheat is export. nearly a billion dollars in 2013. and primarily through the west
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coast ports. we're very proud of our ranchers and our farmers who not only feed america, they feed the world now. for miss farmer, i heard concerns certainly from our producers in montana about the backlog we had. i think backlog of nearly 3,400 cars past due in the region. could you tell us what the current status of the rail backlog is now in montana? >> as i have responsibility for intermodal, i'd be happy to follow up with specific statistics around the backlogs. but what i can tell you is that by any measurement on a year-over-year basis because of the capital that we've invested because of the milder winter that we've had by any metric that you look at we are far improved where we were last year. we are making significant progress towards delivering the service that your constituents in the staft montana have come
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to expect from us and we will continue to make progress along those lines. what i would say is concerning to us is one of the ways that agricultural products get to the west coast as we've discussed is through the use of containers. it can move in hopper cars or containers. and what i can say is as we limit the inbound flow of containers into the interior of the country it makes it more difficult for me to be able to move that product for export. so that's certainly of concern to us. >> i can tell you too last summer our montana ag producers were not so concerned about the rail backlog. it was the issues going on at west coast ports. i used to be a supply chain guy myself. i worked for procter & gamble for 12 years and was in the supply chain. and have an appreciation that the chain is only as good as its weakest link. if we can't get the harvest to market then we really cannot
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realize the great potential of our ag industry. the port of vancouver, the port and the labor dispute we had going on there that now we see going on in long beach in l.a., it is having a great impact in creating dwindling confidence on i think our global markets the ability for us to deliver. in thinking about our global opportunity, as our competitors continue to improve in their products, the differentiator for us long term to win will be an excellent customer service, the ability to assure that when we say the product's going to be there it will be there. and as has been said when we lose, as senator fisher mentioned, when we lose the ability to deliver our customers will look elsewhere to find those same products. in fact i just got a rather haunting e-mail from the president of an outdoor products company that manufactures in montana.
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they have leading global market share. in fact, they're the only producer of some of these products that still produce in the united states. the rest are overproducing in china. so this u.s. manufacturer, the president of the company e-mailed me about his concerns with what's going on as we speak today about the west coast port slowdowns, the international longshoreman warehouse unions that are putting their interests he said ahead of their customers. and he said this -- if something doesn't happen soon, we will have no choice but to reduce our current hiring plans and potentially lay off some of our current staff. in your view what if anything can be done as we look at these challenges right now with these west coast ports being virtually either slowed down or shut down? >> you know, certainly we're not party to the negotiations between the pma and the ilwu. but it is clear to us that there needs to be some speedy resolution of this. the biggest opportunity that i think is in front of us is that
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it is going to take us several weeks to work off the backlogs that exist once some type of resolution comes to bear. we have the opportunity in front of us. and that is that chinese new year is upon us. and that will give us several weeks of reduced freight inbound to the west coast that will allow us to catch up. so i couldn't agree with you more that we -- it is very concerning. we need to find a way to be able to resolve this. but again, we're not party to those negotiations. and as such we just -- the urgency is really where we're focused. >> thank you. same amount of time, madam chair. >> thank you, senator daines. senator klobuchar. >> thank you very much. i'm losing my voice but i want to thank everyone for coming and of course mr. bessac from target -- from cargill. i forget my nice company. from cargill, which is a great minnesota company, biggest private company in the country. and we have worked extensively
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with them on these transportation issues. so thank you for being here. i'm very glad that we were able to pass the user fee increase from the river act, and i appreciated all the work that people who transport on the river did to get that bill done. as you know, it was part of the able ec. can you talk about what the increased revenue will mean for improving locks and dams on our nation's inland waterway system? >> senator i'm sorry. my area of expertise is in pork exports. i know cargill is very interested in building a strong infrastructure so that we can compete on the global scale. i'd be happy to get you a written answer from our corporate affairs staff so that we can -- >> but you're glad that we passed the bill so you can get more infrastructure improvements. >> i am. >> okay. that was supposed to be an easy question, but that's okay.
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could you talk about how this works and why it's such a problem if you're able to get things out as mr. daines points out, we are states that are not on an ocean we're on lake superior and so the port matters a lot. i was once placed on the ocean subcommittee of this -- the commerce committee. and i remember frank lautenberg giving me a note when i told him i was the only senator that didn't have an ocean on the ocean subcommittee. and he came back and said well, next year just come back and ask for one. but in any case, could you talk about how inland states depend more on this river traffic? >> absolutely. as you know, the demand for safe wholesome food products around the world continues to increase as population increases. and we need very effective, reliable modes of transportation whether it be a river, railroad, truck or ocean vessel to efficiently move those products to their best value
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consumer. and our farmer and rancher suppliers depend upon us to be able to take those crops and move them efficiently and get the best value so we can in turn pay them a strong value for the hard work that they do raising those crops and those livestock. >> thank you. dr. kemmsies, could you talk about that interrelationship with the ports? and we do have the lake superior port and rail and the intermodal issue. >> over the last 15 20 years the number of hours of unscheduled outage at america's locks and dams, particularly the mississippi waterway, has increased substantially. it has made barge traffic less predictable. and agricultural shippers have been finding alternative routes. and perhaps the easiest way to see this is when you look at the port of new orleans' share of u.s. agricultural exports. it used to be close to 65%.
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about 10, 15 years ago. and today it's about 45%. it is an impediment for farmers to get product down the river reliably and loaded onto the handy max vessels. and this does create permanent damage. so rather than look at threats of job cuts or of not making investments, there are actual quantitative facts that can be assessed here. under a free trade agreement there are quotas for the trade of agricultural goods corn, soy, and other grains and oil seed. if a shipment is delayed beyond the then if the quota for the year isn't made the importer on the other side of the trade is normally allowed some small growth rate, say, 2% to 3%, but if they don't make their quota the year before the 2% to 3% growth rate is applied to a lower base rate. the excess amount is actually filled by other countries that
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do have reliable systems. >> exactly. and it's going to hurt us competitively, internationally. mr. greuling one last question on public-private partnerships. there is the exporting of the goods to neighbors to the north and south and bringing goods in from mexico and canada is really important. canada's the biggest trading partner that we have. people don't seem to always realize that. and we are having some huge problems at the borders with delays in places like international falls, minnesota. there's an issue with the bridge which i'm not going to get into which we hope is soon solved. michigan. i've been working on this as head of the interparliamentarian group with the canadians. but on the mexican border our country has started to do a lot of public-private partnerships with building up the infrastructure at the points of entry. do you think this is a smart way to go? because i want to get it rolled out on the northern border as well. >> we definitely think it's a
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smart way to go. in our own case we're looking at privately built bridges connecting modes of transportation highway with rail highway with water ports. knowing that the users will pay their way, their fair share knowing that that money is being invested into that specific infrastructure infrastructure. we can't afford to build $150 million bridges without some infusion of private equity. it's being used in north africa. >> canada. >> in canada. we have a great example down on the ohio river of a toll bridge that was built with heist equity funding. one of the construction companies actually paid part of the bill. keep their people employed. so it is a good way, a good approach to these. >> thank you. and just to be clear with it this project is more about the customs plazas. >> right. >> to try to speed up the back and forth between the countries with the new dawn in north america.
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so thank you. >> thank you. >> thank you senator klobuchar. senator cantwell. >> thank you madam chair. and thanks for having this important hearing on movement of freight. when i think of this issue i think so much of washington state and all the products that come through on their way to asia. and we have in a short period of time seen something like a doubling in the size of the ships over the last five years. so yes, we have a lot more capacity. and we obviously have a rising middle class in asia. they want more u.s. product. the question is what are we going to do to meet that demand as relates to improving our infrastructure? one of the things that has occurred is the recommendations of the freight mobility board which was chaired by mort downey. i think somebody you're familiar with, mr. greuling. and i think miss farmer, somebody from the railroad association at least participated in that. the question is how do we move forward on those recommendations? and would you support a dedicated funding source to
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freight so that we could raise the importance of why moving this product is so critical to our economy and infrastructure. and that tiger alone just isn't going to get it done. >> are you asking me? >> yes. miss farmer or mr. greuling. anybody else who wants to jump in on that. >> okay. certainly we surnt anythingpport anything to make our ports more competitive. we're excited about the -- working together at seattle and tacoma tacoma. so we will certainly stand together to work with them. we believe that the tiger grants were a good thing that we need more funding around those kinds of issues. so from our perspective anything we can do to make them more competitive we're certainly in favor of that as well. >> senator certainly our four points with the coalition number one is to establish a fully funded dedicated freight program. and we believe that that needs to be at least $2 billion a year. and this is not a program that's
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going to pick winners and losers in the transportation field. this money should be spent on what makes the most economic sense in terms of performance for the entire system. we believe setting priorities on a national scale for projects of national and regional significance is one of the mechanisms to do that. and also the establishment of a separate freight office within u.s.d.o.t. again, to strictly focus on these multimodal needs nationally. >> what do you think we need to do to get people to understand this from a -- either an economic impact or some of the things that your organization has done in studying the economic development associated with this? >> a lot of what we do at the center and through the coalition is education. you may see this brochure that we recently produced through the coalition followed that and it showed the supply chain of an
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almond from a california grower to the port of hamburg in germany. delivering almond butter. and we'll have more of those in the future. i think that helps. but i also think that local jurisdictions and state jurisdictions need to understand and look at freight more on a national level and think in terms of interconnectivity, not just what's good for elm street or what's good for my river but look at the whole national system and make sure they're aware that what we do at the national level and at the local level interconnect and we really need to make sense of that when it comes to funding. >> mr. bessac, did you have smug wanted to add to that? >> the only i guess more of a comment, senator you hear lots of numbers talked about. $2 billion for infrastructure. i go back to the numbers senator fisher mentioned in you know a port -- if the ports were closed today it would be $2.5 billion per day to the u.s. economy.
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and i would submit we're very close, although they're not officially closed. i think we're very close to that at this moment. so i guess my comment is simply it seems like a very wise investment and an expense that the u.s. taxpayers and consumers are paying today daily because we don't have the free flow of goods. >> well, i think we learned the lesson in washington because we're at the tip of the spear and so that congestion caused so many problems that we learned that if we were going to be competitive and not lose that business that we had to make the improvements. but now we need the improvements made all along the system, not just right there. but i think we just have to prioritize that we will lose the economic impact. it's not just the up side. there is huge up side. but there's a down side if we don't act as well. and that is that people will go
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to other ports or start buying product from somewhere else because they can get more predictable time frames for its delivery. we really need to make this investment. thank you, madam chair. >> thank you, senator cantwell. i believe we have some more time. and i know members have more questions. so we're going to do a second round, take a big sigh here. but i'm interested, mr. bessac and ms. farmer when we look at freight transportation systems and we look at the midwest and some of the challenges that we have with containers, how would you address those challenges where we have that lack of containers to move our product. and other members of the panel if you would like to jump in on that as well. >> certainly. i'll go ahead and start chairman fisher. i think that what you'll see is that we've proven in normal times that we have sufficient containers to be able to move
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the product that wants to move export. in fact, last year we moved 236,000 units of grain in a box back to the west coast. we work very closely with the ocean carriers and trucking companies and they are able to scale relatively quickly to be able to meet the demands. what bnsf has been very focused on is improving our velocity because as you well know, when we look at the speed with which we can turn these assets we can create more capacity for the supply chain and the market. if we invest in our infrastructure, if we have expansion in our infrastructure. so we have a very thoughtful approach to investing so that we can get the velocity that we need, which will generate the capacity for the midwest to be able to have the containers that they need. >> anyone else? >> there is a structural deficiency for the exports. and our exports tend to be agriculture, large-scale capital goods and energy products. and these come from places where not a lot of people live, and therefore not a lot of
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containers arrive full of imported goods. so there is a structural gap that has to be addressed and from where i sit and what i see in the data i don't think it will be addressed very simply by trying to match or reposition containers because every time you have these congestion issues things do get paralyzed. it may be necessary to pursue an alternative solution such as using 53-foot domestic containers and then doing cross-stock operations like we do with the imports but in reverse so we can compress these onto the container ships. >> thank you. >> senator the demand is clearly there. empty containers quite frankly are at a premium in certain locations. in our case we're receiving grain, dry distiller's grain and corn and soy meal from 16 different states that are being trucked in, transmitted to containers and shipped out on the bnsf and the u.p. to the
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west coast. so when you think about the cost of that transportation just to get to an empty container, shows clearly that we've got this very high demand. and really we can't afford to build more ports. we just need to use the existing ports as efficiently as we can. and i think that applies to both inland ports and water ports. that's going to be the solution. and tie it all together with highways and railroads and we've got a winning situation. >> that ties into what i want to ask, dr. kemmsies, with making our ports efficient. what role do you see for automation? is that going to help make our ports more efficient more competitive, and what success do you see us having in that regard? >> well, i don't think it's possible to operate the ports with the larger vessels coming without some degree of automation.
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if not eventually full automation. these ships as i mentioned in testimony earlier, they have to be on the water as much as possible, not sitting at ports. so if you were to look at an 18,000 t.e.u. vessel which is the largest size that's really currently operating, it takes 4 1/2 days if you can do 45 gross moves an hour on a 24/7 basis. if you maintain productivity like that without some form of automation i think is impossible. i've yet to see it demonstrated. so we seem to have to move in that direction. if we do that, then i do see u.s. ports being able to maintain an ability to compete with foreign ports particularly those to our north and to the south. >> thank you, doctor. senator blumenthal. >> thank you. what is the cause of the shortage of contain erer cars in
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this country? i'll ask that question to whomever or all of you if you want to answer it. >> senator, i think from our perspective i'm not sure there's a net shortage. i think the real issue is where the empty containers are versus where the demand for containers is. >> what accounts for that imbalance? >> a lot of it has to do with the system we have set up, the intermodal system today. we have handle over 3 million containers at our yard. a million and a half coming in and a million and a half going out. places in down state illinois or in minnesota or in indiana don't have that kind of inbound capacity. therefore, they don't have the available containers to ship out. it's a market balance to some degree. i'm not sure that's fixable in the short term. building more containers is not necessarily the answer and i would defer to my rail colleague here to maybe respond to that. >> miss farmer?
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>> senator blumenthal, what i would say is i don't believe there's a net shortage of containers but what we need to challenge ourselves with is how do we efficiently get them into the interior of the country? so with that what bnsf and the western roads have done is that we have found ways to find the ability to load those containers consolidate grain loading around our intermodal hubs in the interior of the country. so where there's a surplus of empty containers that is naturally made by the goods that come off the west coast for example at our logistics park kansas city facility the majority of grain that gets loaded out or a very large percentage of the grain that gets loaded out comes from the state of kansas. so as we can draw that closer to our logistics parks we then have the empty containers there that can be loaded out. and in addition to that we have to keep continuing to investment so our velocity is good so the containers are there. i don't think in total there's a net shortage. the issue is about how do we stay competitive through the ports over the railroads into the right places to be able to get those containers into the
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interior of the country. >> but the ports are just one key to a multimodal system. >> absolutely. >> where rail is obviously very important to moving a lot of those containers to the right places so they can be there at the right time. >> absolutely. >> let me ask you, you know, going back to the infrastructure investment issue and mr. bessac mentioned this figure of $2 billion, the possible loss of $2 billion if this impasse or crisis continues, which would be very, very very unfortunate, but it strikes me as an example of how possibly there are costs to lack of recognizing the importance of investment and smart policy. so what somewhat perplexes me is why the folks who run our transportation system including
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your railroad and others who are here have not been more vociferous or vehement advocates of specific solutions to these infrastructure problems in the way that maybe will move policy makers including folks who are sitting on this panel to take some action. in other words we'd welcome you to be more vigorous advocates for the system that is your responsibility and trust to run and ultimately your shareholders have very significant investments in. >> absolutely. as i mentioned earlier, senator blumenthal, we agree from the standpoint that we absolutely have to continue to manage our network, invest in capital expenditures that make sense going forward. we also want to -- we have a
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vested interest in remaining engaged in that conversation. we believe that a national transportation policy is a good thing with a focus on freight. so i think we've been very active relative to those discussions and participation in national transportation policy planning. >> thank you. thank you all for being here today. >> thank you, senator blumenthal. senator daines. >> follow-up question. madam chair, regarding infrastructure investment. senator blumenthal, i completely agree we need to continue invest heerg if we're going to maintain global competitiveness. i think miss farmer you mentioned about some of the road blocks of proposed export facilities we're experience on the west coast. i was out at one of those proposed facilities last summer. the gateway pacific terminal. i was standing there with a member of the rail union from montana. i was standing there with a
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tribal member from montana that would benefit from expanded exports. we see the jobs as well as the tax revenues that would be created by expanded exports. and yet it's delay after delay after delay in trying to get this port built. and it sits literally right in between two existing ports. it's zoned properly. it's environmentally sound. and yet there's great concern how in the world are we going to move forward with infrastructure and endless delays and uncertainty. i'm looking for help here around what we can do to try to -- i'm not suggesting there's not a thorough review process but one that provides some degree of certainty and reasonability in that process. any comments on that? >> i would say senator we certainly agree. we are working very closely as you know with the state of montana to put together our export platform. we like you are anxious to have
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the ability to continue to grow, to be able toex port export. we believe there needs to be some improvement whether it's around permitting reform. we've talked about that multiple times in the past. we believe that extending the environmental review position of matt 21 to the railroads would be helpful and further expediting the process, looking at these things concurrently. basically reducing the timeline these things take. but in general what i would say is that we completely agree that we are anxious to export product to continue to grow to improve the competitiveness of the u.s. supply chain both through exports and what we've talked about here as well as imports as well. >> i think mr. kemmsies talked about the need for the state-of-the-art productivity and automation and so forth. this proposed port would be exactly that. mr. greuling, what are your thoughts on this? i know you're somewhat of an expert on the issue. >> senator i think much like we
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suffer from multiple jurisdictionitis with three or four or five or six governmental units controlling roads and infrastructure, the federal government has the same issue for these major projects the number of agencies that these projects have to touch. the time it takes to go through the nipa process, the environmental review. in fact i would comment that we have actually seen some improvement on that under leadership from congress and the administration. and we applaud that. it shouldn't take 10, 12 years to do an eis statement on a bridge. clearly that is an issue. so multiple agencies maybe working a little closer together on collaboration, and again, we think a national freight office could help sort of quarterback that initiative especially for these major important freight projects. >> i think what's highlighted today in some of the testimony is what's happened with these choke points on our west coast
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ports, allowing more optionality and so forth here to resolve these issues if they come up. if we only have one way out it's nice to have multiple choices and so forth to make sure we protect our economic interests and continue to compete globally. thanks. that's all the questions i have. >> thank you senator daines. we've been joined by the chairman of the committee senator thune. do you have questions, please? >> thank you, madam chair. senator blumenthal, thanks for holding this hearing. it's a very important subject. and i appreciate the fact your subcommittee is focused on this. a reliable and efficient supply chain is critical to our global competitiveness and to our economy. and the ports are an absolutely vital link in that change. and what's frustrating is that some of these things are things sometimes you can't control. these things are sort of i would guess self-imposed problems. they're really kind of unforced errors. and they are if you try to quantify, this it's having a
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profound impact on the economy. i know smuf on the panel have already testified to that effect. and cargill, 40 million a week. i've talked with tysons in my state and south dakota and they've shared with me that we've got beef and pork sitting in freezers near the ports instead of heading to asian markets. while we've got all these large container ships sitting off the coast waiting toex port export our nation's products. that affects jobs. tyson's employs 41000 people. usda estimates there are 1 million jobs associated with agricultural exports in this country. it has a profound impact on the economy not just on the west coast but all across the country on workers in south dakota and other places that are dependent upon like i said a reliable supply chain. outdoor gear inc., family-owned business in south dakota. they're a wholesaler. receives 95% of its inventory from west coast ports. that's been forced to miss
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deadlines, pay for late delivery penalties and pass up important sales opportunities including in december. which is of course the holiday peak season. so this is an issue that just really needs our focus. and it's a huge drain on the economy. and i just urge all sides to come to a resolution in this dispute to find a solution as soon as possible. we just can't afford to drag this on and have this kind of -- have our economy pay this kind of a price. and if we can get this behind us, we can start focusing our energy and creativity on a lot of the other long-term infrastructure challenges that need our attention as well. in that light i wanted to ask a question. i know that i think all of you attempted to kind of quantify what some of the financial and economic impacts of this have been. but the question i'd like to pose is once this is resolve how long will it take to unwind this
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and to get those networks working in an efficient way again and where things are sort of normalized? what are we talking about once we get a -- hopefully which will be very soon a resolution to this our side as the exporter. i think it's an excellent question. our best estimate is on chilled shipments, it will take at least a month to get back into a normal flow where we can get those products moving through to the high value markets in japan and korea, at least a month. if you move over to the frozen side, the products that we would send to japan, korea, china, mid east, all around the globe, our best estimate is three to four months before we're back to a normal flow. we've moved through the back log of goods that we have, and that number continues to increase every day. >> senator, from our perspective
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at the railroad, we certainly stand ready to be able to help the back log, but what i would say is because of the challenges that we face with not being able to move freight, we have had to store locomotives and equipment across our network. so there will be some period of time that it will take for us to be able to go and get those assets, reposition them to the port, be able to be in position to handle that. but what i would tell you is we are anxiously awaiting the ability to do that. we will be ready to do that. we have a unique opportunity, as i mentioned earlier before you stepped in, in that chinese new year is coming and when chinese new year hits we will see less vessels that will be headed towards the west coast. it would give us an opportunity if there was a speedy resolution to this current pma/ilwu negotiations that we could use the time to work off the back log that exists at the ports. >> i guess i would reiterate, madam chair, again, thank you for having this hearing, that this is not something that's confined to the west coast.
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this is a -- this has a ripple effect throughout our entire economy. having a -- an efficient transportation system is really one of the keys to our advantage, our competitive advantage in the global economy. when you see this kind of thing happen and recognize the impacts that it has, i would just encourage all the parties. to create a new sense of urgency. to build some sort of intensity to build a resolution. we just can't continue to keep this going on and not expect that it's going to have some very, very detrimental and adverse impacts on a whole range of sectors of our economy. and on all the jobs that go with pit. it. madam chair, thank you. thank the panel for your great testimony today. >> thank you for holding this hearing. you and senator blumenthal are joining us on this issue.
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i know a lot of questions have already been asked. in your written testimony -- the under investment on the mississippi ports inland ports indicates that we've been more import oriented than export oriented. can you expand for a few minutes on the significance of the inland ports, particularly with the panama canal development and agriculture opportunities and trade as well as manufacturing. >> most of the growth in trade was on the import side and when we look at the various segments of the freight movement industry in the u.s., the larger projects that were done by rail, by highway and at the port level, they were focused on being able to handle the imports more efficiently. a lot of the dredging, for instance, is not really done because we were trying to export more goods. our goods are very heavy.
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they require deeper draft vessels, but the motivation when you read the economic analysis or the cost/benefit analysis was essentially focused on the import side. and maybe you can look at it from that side to say, well, this is an import bias but when we look at the projects and where we haven't had funding for infrastructure, you get the same message. that's what i meant. and the testimony about the mississippi water way. we have seen a chronic system of underfunding and a deterioration of the infrastructure there. >> i think from the locks to the ports themselves, obviously i would be focused on the mississippi river based on where i grew up and where i am, but the inland ports serve a geographic area because you
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serve a geographic area both ways and i hope we can begin to focus more on those ports. the other question i have for ms. farmer, i think you all have trying in bnsf for a long time doing a california project. the california international gateway. permitting delays have been a big problem. i'm working on legislation to try to streamline permitting for railroad projects. do you want to talk about how the kind of problems you've had trying to serve that market in a better way? >> absolutely. so southern california international gateway would be, as i've mentioned, the greenest intermodal facility in the world when built. we've been working for a decade to try to do this. we've faced local opposition and what i would say is that that is indicative of projects that we see across our network. so it's not just the south, southern california international gateway project.
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we really are in favor of permitting reform. i know and i appreciate your leadership in this area. as i spoke to earlier, we really believe that extending the environmental review position of mat 21 to the railroads would be a great first step. we believe it's important to shorten the time frames. we know that we're not trying to eliminate the review process, we're just asking that there be a reasonable time. we need to shorten the time frame that the agencies could possibly look at this concurrently as opposed to sequentially and so it's just important for us that we are able to move forward. the projects that will add capacity to this supply chain. >> may i make a comment on that? we're the program managers for the jasper ocean terminal on the savannah river, and the report that we gave the board last year we pointed out that if we were to start the application process then it would be 13 years before the port could become actually, you know, turnkey operational.
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and then we have to justify this on the basis of analysis, so i had the unfortunate position of having to forecast what volumes will go through a port that doesn't exist in 13 years. so i think this is an example of how far the process has gotten off kilter. >> either of the other two want to comment on that topic? >> i would, senator. what's interesting about this discussion about freight movement and the problems we have in this country, it's all about choke points, whether it be a problem at the ports, whether it be congestion on the highways, whether it be at grade closing for a rail crossing, whether it be an extended period of time to get permitted for a project, those are all choke points. what's unfortunate about that is america has a distinct and very unique advantage in this global marketplace and to think that our transportation system is one of the primary reasons why we're
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being held back on imports, more importantly exports, it's almost criminal. it's a shame. i think there's a lot to do better to help with that situation. >> thank you. thank you, chairman. >> thank you, senator blunt. any other questions from senators? so with that, i would say this hearing record will remain open for two weeks and during this time senators are asked to submit any questions for the record. upon receipt the witnesses are requested to submit their written answers to the committee as soon as possible. with that i conclude the hearing. i thank the witnesses for just great responses here and the information you provided us today. thank you so much. the hearing is closed.
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environmental officials from california, indiana, wyoming, wisconsin and new york testified on the hill this week on the challenges and successes with the epa's greenhouse gas emissions rule for power plants. the senate environment and public works committee convened the hearing. senator jim inhofe chairs the committee while senator barbara boxer serves as ranking member. this is just shy of two hours. good morning. before we begin let me get clarification senate armed services committee -- embraced by everyone but we'll use it
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that is when we hit the gavel whoever is here we'll go by the early bird -- we'll go by seniority. then those who come in after the gavel we'll get to them after everyone is already taken care of. so with that i'll make note of who is here. if you would do that. we'll bring this meeting to order. great to have the panel. had a chance to meet each one of you. i really do think the most important thing when we get into these rules and regulations is the state perspective because they are the ones who have to carry these things out, have to pay for all this stuff. so we're here today with state official officials and on the co-2 regulations for power plants the clean power plant is unpre unprecedented on what it will impose on state governments what you have to carry out.
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the proposal undermines the long standing concept of the cooperativeness and clean air act where the federal government is network in partnership with states to achieve the underlying rules. the rule forces states to redesign the ways they generate, manage and use electricity in a manner that satisfies president obama's extreme climate agenda. to date we have 32 states who opposed the rule. 12 states including my state of oklahoma are suing the agency over a lack of authority promulgate the proposals. nine states have passed resolutions in their legislatures that express limits to the proposals application. five states have passed laws that would limit the proposals application. had the epa engaged in meaningful dialogue with these states the agency would not be rushing ahead to impose such an
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unfair and unworkable and likely illegal regulation. while the epa is busy selling this as a plan to save the world from global warming we know that this rule will have impactminiscule impacts on the environment. last week mccarthy admitted the agencies has done any modelling that would measure the impacts on temperatures and sea level rise. there's a reason for that. the reason is that nara a very highly respected group on economic modelling and analysis used the epa's models and numbers and found after spending $479 billion over a 15 year period we would see the double digit electricity process increase in 43 states, reduce grid reliability resulting in voltage collapse and cascading
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outages. however the clean power plant would reduce co-2 concentrations by less than 0.5% global average temperatures rise would be reduced by only 0.01 degrees fahrenheit and sea level rise would be reduced by 0.3 millimeters which is the thickness of three sheets of paper. any perceived benefits would be rendered pointless by the continued emissions growth in india and china. hold that up higher so we can see it. that a good chart there. you can see the problems. this is the whole point that administrator jackson was talking about you know what we do unilaterally here in the united states isn't going to have that much effect on other countries. these results or lack thereof show that this rule is not about protecting the environment or saving lives of the local
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citizenry, this proposal is about expanding the government's control into every aspect of american lives as m.i.t. climate scientist richard lind don't and he's one of the foremost climologyists in the country. controlling climate is a bureaucrat's dream. you control carbon you control life. epa's rush timeline in practical assumptions and arbitrary mandates pay no mind to the fact this will be damaging to state economies and local residents. their proposals are nothing more than blatant and selfish power grab. we have been through these arguments multiple times before most recently when the president failed to garner enough support for cap and trade under the democratic controlled house and senate. back when nancy pelosi was a majority and the white house and house and senate. couldn't get a majority vote in order to support this. so i appreciate very much all of the people coming so we can hear the voices from the states.
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and it's nights of you to take the time to be here. senator boxer. >> thanks so much mr. chairman and i want to welcome all of our witnesses and very proud that mary nichols is here. she's really a legend in our state. and has worked on the environment for her whole adult life. and she now is executive director of the california air resources board. she's going to describe the successes that we're having. i'm also proud that my home state of california has been a leader in this field and here's the deal. we're prospering. we have to reduce carbon pollution in order to address dangerous climate change. and we can't wait any longer because we're seeing the impacts all around us. according to nasa the ten warmest years on record occurred since the year 2000. in 2014 was the warmest year on record. now people can put their head in the sand but that's the fact and facts are stubborn things.
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according to a new peer review research and the proceedings of the national academy of sciences and i trust my colleagues respect that, california's record temperatures are driving the state's extreme drought and scientists predict it will get worse over the coming decades. just two weeks ago scientists at nasa and at or kneel and columbia found if we fail to act aggressively to cut carbon pollution we have an 80% chance of a mega drought in the entire west. in the face of all this peer review science showing the impacts from uncontrolled dangerous carbon pollution, states really should be working together to find solutions to prevent climate change. let me say we know the american people want action. this isn't a guess. this is a poll. in a stafford poll 83% of americans including 61% of republicans if nothing is done to reduce emissions global
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warming will be a problem in the future. again you can sit here and say it's not an issue but the american people are in disagreement with that conclusion. ultimately climate change deniers in the senate continue to attack the landmark clean air act just last week our majority leader senator mcconnell told state governments to ignore the clean air act. imagine ignore the law of the land and one of the most popular legislative actions in our history. so we know we can reduce carbon while growing the economy and i want to talk about california here and the regional greenhouse gas initiative where new york is prospering. california is on a path to cut its carbon pollution by 80% by 2050 as required under our greenhouse gas emissions law. ab 32. the people who tried to overturn that lost at the ballot. during the first year and a half
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of the state's cap and trade program, california added 491,000 jobs, a growth of 3.3% which out paces the national growth rate of 2.5%. we are living proof that growing the economy and a safe environment go hand-in-hand. and we are a very large state. this has benefitted the middle class. i want may interest you to know that the energy information administration found last month that california's monthly residential electric bill averaged $90 compared to oklahoma's monthly bill which averaged $110. under california's climate program many consumers are even receiving twice a year climate credit of $35. that further lowers their utility bill. so california, new york and other states around the country should be proud of their leadership in putting forward real solutions to climate
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change. and showing that meeting the goals of the clean power plan will benefit our states and our people. i look forward to hearing from today's witnesses. thank you, mr. chairman. >> thank you, senator boxer. we're going to have some introductions by their request of some of our members of the panel. let's start with senator grasso. >> thank you very much. it gives me great pleasure to bring greeting from the committee to one of our, those witnesses this morning which is todd parfitt who is the director of the wyoming department of equality. he has a long history of working in wyoming and specifically working in this department. you'll remember mr. chairman our former wyoming department of environmental quality spoke here testified a number of years ago. todd has worked closely with him and has succeeded with him and is now our director. it's interesting mr. chairman,
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because today as todd was the he will have worked with the democrat governor and a republican governor in wyoming and as always has put wyoming first, has done what's best for our state and our environment and it's privilege for me to introduce one of those testifying director of the department of environmental quality for wyoming todd parfitt. thank you. >> thank you senator grasso. anyone else here for introductory purposes? we'll go ahead and start with our testimony. we would like to ask you to do your best to confine your time to the time required. we'll start with you mr. myers and work to the end to ellen nowak. you're recognized. >> thank you chairman inhofe ranking member boxer and the committee for inviting me here to testify. i'm michael myers. my perspective is slightly
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different from those of other members of the panel. as an environmental lawyer i've worked for the past 15 years at the attorney general's office counselling state regulators on legal issues related to air pollution and climate change and litigating those issues in the courts. it's particularly appropriate that the committee should seek to hear state perspectives because under the provision of the clean air act section 111-d states are in the driver's seat. but for us to succeed in this critically important area, each state has to be willing to take the wheel. from the perspective of state new york that's already taken action to cut power plant greenhouse gas emissions i have good news for other states. you can significantly reduce these emissions from the power sector and do so in a way that helps grow your economy. new york and other states in the
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regional greenhouse gas initiative have reduced by 40% from 2005 levels and reinvesting the proceeds from the oxygen of pollution allowances in renewable and energy efficiency projects has kept down electricity costs in our region. epa's clean power plan would build off the work that the states like california have done. it would cut greenhouse gases from power plants by 730 metric tons equivalent to the annual emissions of powering half the homes in america. the shift to cleaner generation would also result in substantial public health benefits. including 150,000 fewer asthma attacks by 2030. but back to the point i started with. for this plan to work, states have to be willing to step up. some are discouraging states from doing so on the grounds that the clean power plan is
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unlawful. my written testimony highlights why such arguments are meritless. first, under section action under section 111-d to address greenhouse gases from fossil fuel power plants are required. law requires epa to ensure that states achieve emission reductions from power plants necessary to protect human health and welfare from the harms of carbon pollution. second, epa's regulation of hazardous air pollutants from existing power plants under one provision of the clean air act does not preclude the use of section 111-d to require those floonts cut their greenhouse gas emissions. the implication of that claim is that epa had a choice. it could either use the act's hazardous air pollution program to cut power plant mercury emissions that ss that poison the
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fish we eat or use the provision the supreme court says speaks directly to power plant carbon emissions. not only does this interpretation defy common sense it's wrong as a matter of law. third, it is clear that epa has the authority to set substantive emission limitations for states to meet. in the absence of such a benchmark state plans could vary widely in terms of their stringency and effectiveness. states have a lot of flexibility, however on how to achieve they're emission targets in a way that best suits their respective circumstances. fourth, it's also clear that epa has the authority to interpret the best system of emission reduction to reflect the various ways in which states and utilities have reduced greenhouse gas emissions from the electricity sector. epa's building blocks approach appropriately recognizes successful strategies such as cap and invest programs,
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renewable portfolio standards and energy efficiency. that states and utilities have already shown can significantly reduce carbon emissions and do so cost effectively. in conclusion here's what i would urge state regulators to consider. the world scientists are telling us that we need to act now if we're to have a chance of avoiding catastrophic harms from climate change. our faith leaders are telling us we have a moral imperative to act. the law, the clean air act requires us to act. and epa's plan for cutting greenhouse gas from existing power plants is on sound legal grand. we're open to working with you on how best to cut emissions in your state. the time is now for state leadership so take the wheel. thank you for the opportunity to testify and i look forward to answering the committee's questions. >> thank you, mr. myers. mary nichols is the chairman of the california air resources
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board. you're recognized. >> thank you, chairman inhofe ranking member boxer members of the committee. thank you for inviting me to be here. i am mary nichols chair of the california resources board and i'm honored to be here to support epa's proposed clean power plan which we believe will unlock state innovation across the country to protect our people and grow our economies. the framework proposed by epa is a workable, practical plan that will cut carbon pollution along with other forms of pollution with a focus on increasing energy efficiency and the use of cleaner domestic energy sources. it provides an opportunity for a better future. this is a future that we are already working to create in california. our success story has been one of bipartisanship. the 2006 california warming global warming solution act was
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signed by our republican governor schwarzenegger who appointed me to this position and our democratic governor jerry brown who has reappointed me and also more importantly put clim change at the core of his agenda championing our successful carbon market ramping up green energy programs and working nationally and internationally to spread solutions that will protect our vulnerable citizens our extremely valuable agricultural industry, our coastline and our forests against the already growing reality of climate change. californians overwhelmingly support our board's efforts to move california towards cleaner and more efficient sources of energy. and to address the grave athlete that global warming poses to america and to the world. i'm here today to share some of our successes with you and to emphasize that the epa is using
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its clean air act authority in a way it was meant to to spread success across the country and to encourage each state to develop its own plan to cut carbon pollution and to grow its economy. and i'm going to skip some of what's in the prepared testimony because i really want to focus on the fact that we believe that working together not just as an environmental agency but under the direction of our governor with the public utilities commission and our energy commission as well as the independent system operator that controls the transmission wires we can deliver not only a more resilient energy system but we can also meet an even exceed the targets that epa has set. we're on track for a third of our state's energy needs to be met by renewable energy by the year 2020 and governor brown has establish ad goal of getting to
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50% of our energy from renewable resources by 2030. our carbon wide carbon intensity has already fallen by nearly 5% since 2009 and it will keep falling. now that's not only due to electrical power plants. it's also due to cleaner fuels and cleaner vehicles which are an integral part of our plan, the power plan, the epa power plan is only one piece of the overall president's climate plan but it is an important one. but the main thing i want to emphasize is that this is happening at the same time that california is prospering. we're growing jobs. we're growing our economy faster than the rest of the country. we have grown our jobs since the carbon market has gone into operation by 3.3%. personal income and wages are up. again, growing at rates well above the national average. our electric power grid delivers power reliably, resiliently and
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efficiently thanks to the continued stewardship of the transmission operators and as senator boxer indicated, power bills are actually down. californians pay the ninth lowest electricity bills in the country. states all across the country and we do talk to many of our colleagues are discovering that clean energy pace big dividends. for example oklahoma is on track to exceed its 15% renewable energy target for 2015 thanks to a very successful wind energy industry. a policy that has yielded billions of dollars in investment in that state and hoped the cut pollution. of course california and oklahoma are not alone. we know that texas often billed as our rival in many ways leads the nation in wind industry and many states in the midwest as well as the west and south are taking action to ensure their ratepayers and their citizens against risks to reliability
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that come from dirty and inefficient coal plants by replacing them with cleaner power and energy efficiency investments are being used again in states red and blue to cut power bills. we think that the clean power plan will encourage states to take broader advantage of strategies that they are already using, saving money and invigorating economies across the country and, of course, to the extent that they choose to work together around their regional grids they will do even better because we all know that a regional approach will be more cost effective for all. as a result, we believe that the net benefits of this plan amount to something like 48 to 82 billion dollars in 2030 representing lives saved, six days avoided and climate risks abated as well as greater productivity lower costs and more efficient and secure energy system.
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so bottom line is clean power plan builds 40 years of success. federalism and confronts us with an opportunity to address one of the host to severe challenges of our time in a way that can also create new jobs and increase our energy security. thank you very much. >> thank you, miss nichols. thomas easterly is commissioner of the indiana department of environmental management. you're recognized. >> thank you, chairman inhofe ranking member boxer and members of the committee. good morning. my name is thomas easterly and i'm the commissioner of the indiana department of environmental management known as item. i bring you greetings from the governor and i appreciate the opportunity to share with you indiana's current perspective on the environmental protection agency's proposed 11-d regulations for fossil fuel electric generating units. the proposed regulations will detrimentally impact indiana for a number of significant reasons.
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we are the most manufacturing intensive state in the united states. more than 80% of indiana's electricity comes from coal. we have a 300 year supply of coal in our state and 28,000 hoosiers are employed in the coal industry. we recognize that we need all forms of energy to power our economy and the administration is developing an undated energy plan for the state that will continue to foster greater use of renewables and other energy source but at the same time we know coal is a crucial hoosier energy resource that must continue to be utilized. our mission is to protect hoosiers and our environment. following release of the proposed rule my office carefully examined the proposal in light of our mission. we also engage private-sector stake holeders and state agencies in an extensive review of the proposal and its potential impacts. our analysis came to one
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conclusion. this will cause significant harm to hoosiers and most residents of the united states wouldn't providing any measurable off setting benefits. for those reasons indiana's office of energy defendant, office of consumer, department much natural resources, and my agency filed joint comments urging the usepa to withdraw this proposal. the letter from the governor has been shared with the committee. the most ironic impact of the proposed regulations is that they are likely to increase worldwide greenhouse gas emissions by decreasing the international competitiveness of u.s. business due to increased energy costs. competitive businesses have been engaged in savings for decades. the total cost of the products produced in the united states will need to increase eroding our international competitiveness and resulting in the loss of manufacturing jobs in indiana and across the nation.
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when these businesses close u.s. emissions will decrease but worldwide greenhouse gas emissions will increase as our businesses move to areas with less efficient and more intensive carbon supplies. indiana once held a competitive advantage due to our low cost of electricity. not any more. indiana's low cost of electricity advantage has slipped and epa regulations have significantly contributed to that change. state utility forecasting group in indiana has forecasted a 30% increase in indiana electrical costs in part from usepa regulations already in place and the 111-d proposal will add additional costs on top of that 30%. usepa itself predict its 111-d proposal will increase the cost of natural gas and cost per kilowatt hour by 10% in the next six years. furthermore increase in energy costs hit the poor, elderly and
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most vulnerable in our society first. at a time when indiana is doing all that it can to grow its economy and create jobs the epa's proposal create as very real possibility that the increased energy costs will slow our economic progress and raise people's utility bills. in indiana we're obviously concerned about the economic impact of the epa's proposed rules on business and consumers but we have filed 31 pages of technical comments. we want to make sure the rule does not result in unintended consequences such as reduced reliability resulting in brown outs or not yet having all the necessary infrastructure in place to convert from coal to natural gas. for purposes of due diligence indiana is investigating all proposed responses from submitting a state plan to participating in a regional approach or simply refusing to comply at all known as just say no option. however the fact that this
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misguided policy will harm hoosiers and other people in our country while actually increasing the worldwide level of the very emissions it is designed to increase compels indiana to oppose the proposed regulations. thank you for the opportunity to share our views and we welcome your questions. >> thank you, mr. easterly. todd parfitt is the director of the wyoming department of environmental quality and you're recognized. >> good morning, chairman inhofe. ranking member boxer. and members of the senate environment and public works committee. my name is todd parfitt. i am the director of the wyoming department of environmental quality. i thank the committee for inviting the state of wyoming to share its perspective on the clean power plan. state of wyoming has provided extensive comments to the environmental protection agency on its proposed rule. in wyoming we take great pride in how we manage our natural resources providing for environmental stewardship and energy production. as our governor has stated it
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is a false question to ask do we want energy production or environmental stewardship. in wyoming we must and do have both. wyoming sends electricity to both the eastern and western power grids. reaching from iowa to washington. wyoming generated 49.6 million mega watt hours of electricity in 2012 with 66% of this electricity consumed beyond our borders. this electricity generation includes 88% coal and 9% wind. epa's proposal impacts states differently. each state has unique characteristics in energy portfolios that drive the application of each of the four building blocks. for wyoming the proposed-goal is problematic and unrealistic to achieve. epa is proposing a compressed timeline in which states are to develop and submit their state plans. considering the complexity of proposal and developing a
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compliance plan along with any state need legislation the timelines are problematic if not unrealistic. wyoming he's emission reduction required by 2020 which is 70% of the proposed state goal is far greater than can be achieved. this disparity is often referred to as the cliff. wyoming's evaluation identified data errors. renewable energy, since i want has the largest impact on wyoming's proposed goal. 100% of co-2 emissions from fossil fuel power plants regardless of end user will be attributed to the energy producing state. 66% of electricity generated in wyoming is consumed outside its borders. according to epa renewable energy credits will be attributed to the consuming state not the producing state.
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85% of 4.3 million mega watt of wind energy generated in wyoming is consumed outside its borders. yet when epa cal can you littled wyoming's state goal they applied 6% escalation factor to all 4.1 mellon mega watt generated hours in wyoming. more than half of the land in wyoming is owned and managed by the federal government subjecting many renewable transmission projects to nepa. while the intent is good the process is slow. a high priority wind project took over four years for nepa decision. now the fish and wildlife service requires an additional decision. two federal fast track transmission projects in wyoming are in their eighth year of the nepa process. both are still awaiting a final decision. finally, epa's assessment of available land in wyoming for wind energy development failed
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to consider high priority environmental conflicts such as greater sage grass habitat, other designated critical habitats and protected areas of cultural and historical significance. factoring in these considerations reduce available lands for renewable as proposed by 83%. all of these factors thread an unrealistic goal for wyoming. now directing your attention to the two graphs. graph one depicts as a bar graph wyoming's glide path as proposed by epa. >> which one is one? >> graph one is to your right. >> thank you. >> graph one depict as bar graph of wyoming's path as proposed by epa. one can observe the dominant influence of the renewable component as shown in green. after review wyoming determined what is practically achievable given epa's proposed avenues. this shown in graph two.
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the line in the graph represents wyoming's carbon emission requirements according to epa's analysis. the colored bars were derived through extensive analysis by the state representing what may be possible in wyoming. as can be seen there's a wide gap between epa's and wyoming's analysis. based on the proposed goal and with limited openings the simplest is to consider how many power plants have to be closed. four plants need to be closed representing 4200 megawatts of the state's total coal fleet of over 6600 megawatts. stranded investment for these four would be nearly $1.5 billion and doesn't include the cost of replacement power. we look forward to continued die wlog the epa and other states as epa considers our comments and reconsiders their proposal.
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thank you for allow noticing provide input to your committee. >> thank you, mr. parfitt. ellen nowak is the commissioner of public service commission of wisconsin. you're recognized. >> good morning chairman inhofe ranking member boxer and members of the committee. thank you for the opportunity to speak on behalf of the state of wisconsin and provide with you a summary of our state's assessment and concerns with the epa's clean power plan. my name sell len nowak. i'm the chair person for the public service commission of wisconsin. last fall i was intimately involved with the construction of the comments that the state of wisconsin submitted to the epa and i submitted those comments together with our analysis with my written testimony for the record. wisconsin is a manufacturing heavy state of with industrial customers representing over one-third of energy sales and more than 60% of our state's power generation comes from coal. if the problems in the clean power plan are not remedied the
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work wisconsin has done to restore our manufacturing sector will be threatened. as regulator i remain concerned about the reliability of the grid considering the dramatic fast shift in energy production required by this proposal. with that background and because of the far reaching impacts of the epa's clean power plan, we brought together an interdisciplinary team. this team consisted of public service commission in utility rate modelling economics and engineering along with department of natural resource experts in environmental regulation, particularly the clean air act. using a standard accepted utility modelling program we forecasted the cost of this regulation under a number of scenarios with varying assumptions about the future. candidly, our team felt that taking into account the impacts of this regulation on every family and every business in the united states is the kind of analysis that should have been
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done by the epa before making such a proposal. the results of our analysis have been provided to the committee. here are two highlights. first, this single federal regulation will cost wisconsin ratepayers between 3.1 billion and 13.4 billion dollars. this is only a production cost increase. it does not include necessary upgrades to the gas and electric transmission infrastructure that will add significantly to the cost of compliance. these costs are also on top of the 11.6 billion in carbon dioxide reduction measures that wisconsin ratepayers have paid for since 2000. not only do we not receive credit for these investments under the clean power plan but the proposal actually penalizes wisconsin for being an early actor. second, as our assumptions about this rule became more realistic the cost rose. for instance would you assume this massive increase in reliance on natural gas would
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drive natural gas prices high center that very reasonable assumption significantly raises the cost of this regulation. at the heart of the matter, we question the very foundation of this proposal. the epa constructed four building blocks, each of which was evaluated independently then to determine the foundation for each state's target reduction the best system of emission reduction or bscr they anticipated the carbon dioxide reduction from each of those individual building blocks. unfortunate the epa ignored how the building blocks would affect each other when all four were implemented together. increasing reliance on natural gas would decrease the heat rate achieve to far below the 6% required under building block one. furthermore epa used indiscriminate and unsupportable approaches to determine the four building blocks. building block one applies a national level heat rate
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improvement to each coal fired plant regardless of the ability of an individual plant to realize these gains. in contrast building block three state renewable goals takes a regional approach sean driven by average renewable portfolio standard found in states arbitrarily ground together. as it is currently written under any previous interpretation of the clean air act the bscr system proposed by the epa is actually not a system at all. first, the building blocks are outside of the coordination and control the emission owner operator. and they cannot guarantee a certain conclusive greenhouse gas emission reduction when implemented as a whole. engineers at the public service commission modeled the epa plan and concluded the building blocks would have a reduction.
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this is a far cry from the 34% that epa claims is attainable and necessary for wisconsin to comply. finally the compliance timelines in the proposal are unrealistic and unworkable. lead time required for planning per migt and construction not to mention the epa's own requirements will require the full proposed compliance period through the end of to 30. in conclusion i sincerely appreciate the opportunity to speak to this esteemed committee today. we can all agree on the need to protect our environment. but this proposed rule does not strike the right balance in protecting public health reliability of the grid and economic security. thank you very much. >> thank you, miss nowak. in fact the end of your remarks answered the first question i was going to ask you, the problem that if you submitted in
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compliance with building block one and yet came along and said no we have to have a federal program for two, three and four would that create a problem and i think you adequately answered that. but very similarly i would like to ask you, north carolina proposed to delay the clean power plan until a final ruling by the courts on the plan's many legal uncertaincies the. during our budget hearing the administrator of the epa talked about, i think it was $3.5 million to hire a bunch of new attorneys because of all the lawsuits and problems and i would ask you in your, in the state of wisconsin you could end up taking steps to comply with the clean power plan that the state came back and found that it was ultimately out of compliance. so what kind of a problem would that be for wisconsin? >> it create as lot of
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uncertainty. as a regulator the parties would regulate ratepayers all want and deserve certainty about where rates are going to go and what we may do. you know, when we become commissioners they don't give us crystal balls. unfortunately we can't flook to the future but have to make the best decision based on the information before us. we ran into a similar problem in the cross state air pollution rule and utilities are starting to make movements to attempt to comply and we have to do the best to allow them to try to recover but we have to be judicious in spending rate payer dollars. we'll work closely and obviously northern the legal proceedings and any legal proceedings that wisconsin is involved in so we don't unnecessarily spend rapist payer dollars. >> mr. easterly in your written testimony you talked a little bit and elaborated a little bit more on how the clean power plan
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proposal could actually increase increase the cost and increase the amount of emissions and this is a position i've held ever since lisa jackson said that no doing something unilaterally in the united states is not going to be effective. is this where the problems are as you saw in this chart with china. dew point to elaborate any more on that concept, could increase instead of decrease emissions? >> most of our businesses the basic bottom of our economy, the steel industry, the auto industry rely on energy costs and they are internationally competitive. you can buy steel from baz. you can buy steel from india. you can buy steel from russia and use it. why would you gore bring the steel to the united states. you just bring the finished product here. so, the emissions will happen in those countries.
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some of those countries have decided to, like i understand that china signed an agreement to consider stopping the growth of their emissions by about to 30 but between now and 2030 those emissions, they are still much higher per unit production than we have here. so as our businesses, have to stay in business by being internationally competitive, i'm very concerned that total emissions will go up. >> thank you very much. miss nowak, have you done an analysis as to how much of a rate increase would the psc have to approve to implement this plan? >> we expect it to be in the double digits. depending on which method of compliance we use. it could be easily into the upper 20% of an increase. right now we have more of an aggregate number three to 13 billion dollars for the state to comply. how that's broken down on a per
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rate payer increase will be flushed out as we know more details and utilities come in and ask for recovery. but this is going to be a significant increase on rate payers all across the board, low-income to large manufacturers. >> thank you. and i'm going to be either asking you for the record, mr. myers, or if there's time at the end of my six minutes if you would agree with the position that many have taken that wouldn't it be better to wait until these controversial legal issues are cleared up before requiring them to comply? i hope we have time because i do want to hear your answer to that. so i would say to miss nowak, mr. easterly and mr. parfitt, what parts of the clean power plan will require enactment of new laws in your state and how long would it take to develop pass and impleamen these laws?
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let's start with you mr. parfitt. you haven't been asked yet. >> mr. chairman, as far as legislation that may need to be put into place, anything that would replate to a multi-state plan if there were to be one developed would certainly need some legislative discussion. anything dealing with renewable portfolio standard basically the building blocks three and four would likely require some sort of legislation. now, the timing of that is our legislature meets for a 40 day session and then a 20 day session. so alternating. our next session coming up is a budget session. so you know there's some timing concerns related to when something could be brought forth to the legislature in a meaningful way through an interim topic study as well. >> mr. easterly? >> so in indiana our legislature also doesn't meet year round so
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the next time when they could consider things is 2016. we don't have authority for building blocks two, three and four and then if i have to pass rules within an 18 month rulemaking process. years out. >> any further comment? >> we have at least a three year rulemaking process on a controversial rule which i would submit this would be one. we would also have to change -- we don't have authority over building blocks three and four if we were to increase our rps or change our efficiency standards that requires legislative action as well which adds to the timeline. >> senator boxer? >> thank you. what i'm stunned by is some of the states attitude of gloom and doom when we have states that are doing this, prospering far more than your states and that's what kind of stuns me. but it's okay. i respect your view. i want to ask mary nichols this question. when you listen to mr. easterly respond to my chairman and they
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said actually these rules could mean that we would be increasing carbon worldwide because some companies will leave the states because they will be so upset at these rules. have we found companies running away from california? last i checked silicon valley was booming everybody was -- we have increases in manufacturing. am i wrong on the point? >> you're not wrong senator boxer. we have experienced growth across the board but particularly in the clean energy sector in california because of our policies. we are the leading state in terms of investment and clean technology. and also in renewable energy in the country right now, solar energy in particular is booming, obviously we have some natural advantages in california in terms of renewables. and i think it is important to say that there needs to be transition time for all industries and all states. when we implemented our cap on
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carbon emissions with a trading program there were many who were concerned about rising costs of electricity to our manufacturing sector. it's a critical concern for everybody along with reliability. no state, no governor can afford to take risks with the lights going out in their state. that is job one no matter how much we care about the environment or greenhouse gases and we do profoundly we know that our job is also to make sure that the lights stay on. so, i think it's important to recognize that this proposal that epa has put out does have within it the flexibility and the time that's needed. i recognize the concerns of my fellow states. i think they are legitimate concerns. but i would assert that the proposal as epa has put it out which admittedly they will be modifying as they go forward can
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address those concerns. >> i think that's such an important point because you make it very clear that we need a transition time and we started a little earlier and i think epa does get that. jean mccarthy gets that. she's very sensitive to the states. mr. myers, i wanted to ask you. last rather former epa administrator who served under george w. bush testified before our clean air subcommittee that it was settled law that the clean air act can be used to control carbon pollution. are epa's proposed carbon standards supported by the three supreme court decisions in massachusetts v epa 2007, american electric power v connecticut 2011 and utility air regulatory group versus epa, june 23rd, 2014? >> yes, they are, senator. the massachusetts versus epa case as you may recall recognized that epa has the
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authority under the clean air act to regulate greenhouse gas emissions, and the connecticut versus american electric power case was a case that was new york was involved in where we >> the supreme court, again reaffirmed epa's authority under the clean air act to bring down greenhouse gas emissions. and they're found that one of the acts in the source permitting program if you're emitting a certain amount of pollutants, then you also have to provide the best available control technology for co2 emissions. so i think all tolled, those
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decisions provide a sound foundation. >> thank you. last month, the chief en environment al environmental regulated utilities surf of wyoming stated with the clean power plant, and i quote, and i'd like to get your reaction to that. if the state wants to push back against the plan, that's okay. but we really do have to have a back-up plan because if not, to be caught in the situation, we don't have any option. and that's the worst of all positions to be in. she also stated the clean power plants 20-30 tar gets are achievable and urged wyoming to collaborate with other states. do you agree with rocky mountain power that wyoming would be best served by completing a state compliance plant?
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>> i can't speak specifically, but what i can say is that our evaluation to look at the entirety of the plan, it doesn't prove for wyoming. as shown in the charts, the building blocks don't work for wyoming. >> yes, we have provided comments and have had discussions since the comment period. >> good, thank you.
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>> thank you, mr. chairman. . during the time that we were on the campaign trail, one of the items that we talked about a lot was one of the an tis pated costs and the increase and their cost for electric rates. the united states chamber of commerce last summer, i believe, estimated that the average cost to the average american family would be approximately $1400 more per year in their electric rates. i was curious, mr. parfit in a recent statistic that comes in the case of my state south dakota, that our electric rates would increase probably about 20% or more as a result of the clean power plant.
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this is significantly more than the 8.8 cents per kilowatt hour that south dakota is paying now. compliance costs for the 111-d proposal could well-exceed if the dollars per ton of carbon. what impacts would this have not only on rate payers in wyoming, but also on rate payers in surrounding states. i know that people in south dakota have received power from wyoming. as you indindicated earlier, you've been an exporter of power. could you share a little bit about what this would have to rates or people in the other states, as well. >> well, yeah. and we do provide power to many other states. and if our compliance paetth, as we've viewed it based on the
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proposal, results in the pre-mature chose sure of plants and the stranded assets, it would likely result in raising of rates for all the customers, not just those in wyoming. that would be shared across the network. >> how does the epa propose that you respond to those stranded costs. what's their expectation? >> this is an issue that we had raised with epa before the proposal was put out to notice. in hopes that that would be taken into consideration. we don't see, at least at this point, the off ramp. we've expressed this concern with the epa and comments and we're waiting to see how they might respond in june when they come out with the final proposal. >> so you have not had a comment
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back? or there is not a process in place within this to get a response back for the stranded state that you had and other states would also expect the electricity or the places where your organization of contracts would provide on going electrical power? >> at this point, epa has not conveyed to us how they would address that particular comment. the conversations we've had with epa have been primarily to get verification on some of the corrections that we pointed out within the proposal itself. >> the epa claims that the rules give states flexibility to create their own plans. but it appears that it overlooks the fact that electricity transmission does not stop at state borders. many states help support their
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own electricity generation and support the reliability of the grid and suggest that under the 111-d proposal 111 could cut its generation by 1.75 million megawatt hours. how will you continue to power and is that an 5:00 rat state? >> as far as how we would continue if we were looking at closing down existing power plants that would create a reliability issue, however this is getting a little bit out of my expertise within the expertise of the public service commission, in terms of how to maintain the reliability of service to all of its customers. >> thank you chlgt appreciate your time. mr. chairman, i yield back. >> thank you, senator rounds.
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senator carver? >> glad to see you. thanks for the work you do and the thoughts to us and responding to questions. i come before a lot of these issueses, not as a sitting senator, but as a recovering governor. i want to share a little bit with you from the perspective of the state of d e de ke. delaware. >> i could have shut down the economy of my state. and we would have been out of compliance. and the reason why is because the folks who were cleaning cheap electricity to the west of us, somebody put bad stuff up in the air and it came out of the way. i'm a big believer in the golden
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rule. epa needs to be mindful of them, as well. but i just want you to know that there are other folks that have been adversely affected by the able of some people able to develop cheap electricity, dirty electricity. and we suffer the consequences. we went to court to stop that and we finally have succeeded. get in the car with me and use your imagination. we're in southern delaware. we're driving on pine hook road to the east to the delaware bay. and we get to the delaware bay. it used to be a parking lot there. a big parking lot there. it's not there anymore. well, actually, it is. it's under water. you look off to the right, you'll see a bunker sticking up out of the water ab500 feet out. it used to be about 500 feet on the land. and now it's 500 feet out in the water. something is going on here.
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we don't make this stuff up. and the key is, for us, how can we have cleaner air. how can we address the issues of cleaner air. i'm not interested in seeing epa jam anything down your throats. but we need to think of how to work on this together. one of the issues to create a lot of electricity, my understanding of the rules that are being con testimony plated here, you don't get a lot of credit for that. and the credit, i guess, goes to california and those e those other states. we ought to be able to figure out how to deal with that. we ought to be anyone to use some common sense in figuring out how to deal with that. okay? i want to ask a question -- the lady from california. it sountz to me like the economy is doing pretty well. and the question is a cleaner environment and a stronger economy. i think you've answered that. we think the answer is yes, you can. but it's a false choice. i think most
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