u probably have a pretty good sense that -- that there is some dispute about -- there are so few things that we disagree on but this happens to be one. but the program that the agency who has the responsibility for administering the program i think, has first and foremost, has to ask the question what is the intent of congress and what do we know about the intent of congress and i think there has been a serious discussion not just in -- among colleagues here but certainly within the industry and a serious concern that the intent of congress has not been followed here and so i look forward to seeing the schedule. i imagine that we're going to have ongoing discussions whether the agriculture committee or whenever we are the discussions. this is an -- this isn't an issue going away any time

season. as senator long ford said we are on re-set and the worst thing we can do is not get this done timely. and i don't mean by sending out a draft rule, i mean by finalizing a rule so the market place has a certainty. we'll live to fight about whether the number is right but we cannot see this delay. it is incredibly disruptive. thank you mr. chairman. >> this is the second round. we'll go through more open conversation. we've been through this before in other settings but this is a more open dialogue and we can talk here on the dice as with you on it. i would mention one thing to my colleagues on this, as far as the congressional intent of the law, would you remind everybody when discussing corn based ethanol, it is clear that corn based ethanol is a decreasing percentage of what is used if the days ahead. by 2022 if i remember the number correctly, 44% of the ethanol is to be cellular so

corn continues to decrease and cellular continues to increase and it is a clear area and you have a big challenge. we're not producing near the amount. i do want to ask you about the cellular osity and they did a shift in definition and 2013, if i recall correctly, adding in cng and lng based fuels into the cellularity as well that bumps up the numbers and because of the cellular number has not come through completely with the quick loss that the gas has been completed in that category and was there a discussion in that shift and was that a continuation and was that cng that bleeds over into more and where does that go from here as far as deaf nifally. >> i may need to get back to you on some of the definitions but additional fuels are coming into the -- to qualify as cellular

fuels -- >> talk us through those the new fuels into the cellular -- >> the biggest one is bio gas, which was recently approved and being produced in -- in encouraging amounts. that is one. we also have various ones that are in process, penny cress is one. and there is several others. i would be glad to provide you with details about what we've go in the pipeline and recently proposes and recently approved. >> the proposaled volume that i see around 206 million gallons for 2017, i believe the mandate is around 4 billion gallons for that year so again i come back to -- i don't see any way possible that we'll be in the significant re-set time period as we approach, especially that number on the cell you'll ossic side of things.

and the method olt for 2017 i'm sure will bleed through to 2022 when this isn't open and the statute stops giving clarity and the epa has the ability to help determine amounts as you do with biodiesel right now. where does that go is the example of dio diesel a good example to look at the path that the epa considers for 2022 but as we look on the horizon 2022 is not that far away and what is the model to look toward 2022. >> you are right. it is both near and far. and we have much to do in between there and -- here and there. in particular assuming that the triggers are met for re-set, a relook at -- at those volumes. so i think that that will be an important place to think about that. i will say that it is our hope that the approach that we've laid out in this proposal is one

that we can rely on and that people can look tos away of thinking about how to predict the volumes in the future years no matter how the resell rule comes out in terms of changing the volumes in future years. >> that is what i'm trying to get at. as everyone looks at. and there is capital investment whether it is in iowa at plants or whatever it may be, everybody is looking at a ten year plan, what is going to happen in 2022 is important right now because a facility doesn't come up to speed in a year and a half, two years so that portfolio window is important. when can we expect any kind of clarity on the epa on how this path will lead to 2022 and what will happen at that point. and so give us a picture of that time frame knowing there is billions of dollars of investment effects that have to have advanced planning. >> so the standard level that

set out to 2022. >> right. >> and those very standards are not ones that -- at least in the near term here we think are achievable. our job, as given by congress, is in the case that those volumes turn out to be problematic to achieve to re-set those volumes, that's the rule making in which we have the public discussion we would go through the information and re-set those volumes into the future which then would provide that certainty into the future. the idea would be those would be the volumes that would be responsible, reasonable with the intent of growing the volumes so we don't need to talk about waivers in the future. >> so let me provide clarity and i want others in the dice to join in on the conversation. when you talk about re-set re-setting a number or a method

of how you'll get to a number each time. >> my understanding is the job is to re-set the numbers. >> all right. but that is the annual. but i'm talking about the process of the re-set. so you're talking about two different processes. the process of re-setting the annual number but how with do re-set. will that process how with you do re-set, a process of how rere-set the number numbers or re-set of what the number numbers will be. >> the statute gives us a number of factors to consider. >> right. >> so my understanding is that that is what we'll do we'll undertake a rule making looking at all of those factors to determine then what the numbers should be in that re-set rule making for years out into the future. and then the annual -- i'm sorry to interrupt you. >> i was going to say help us how far into the future you hope to go when you talk about the re-set side of things. >> well the statute goes through 2022. >> correct. >> so i -- i'm not prepared to

discuss today, because we really haven't thought about that issue, about what would be our authority or the responsibility to go beyond that. but we would certainly look at the statutory numbers. >> so the hope is to get a re-set number that goes out multiple years with the annual rule coming out on time in november. >> uh-huh. >> okay. and then i would just say to you again, it would be extremely important for all players involved that we work toward certainty on 2022 on this because there is a tremendous amount of capitol planning going on right now in either direction. >> thank you, senator. yes. the cellular has been an important move in iowa, we have the biodiesel and that is up and running and innovation and technology is advancing so rapidly and we have the investor that really do want to join in but i think senator heitkamp

alluded to earlier that when there is not a set volume out there they are hesitant to -- to engage. we have the two cellular plants up and moving and the third set to come online but for any investors in any state moving forward think want to know that there is going to be set volume and a demand for those products. so first we have to note what those volumes are in order to invest in this area. but we also need the infrastructure that is available. and again you've used thats in ab argument why we need to lower some of the volumes. but i think one of the original intents of this was to incentivize getting some of that infrastructure into place. and you'll see the high volumes of biodiesel, ethanol are used throughout the midwest, we have the plants and we also have the infrastructure in place to support it.

so many of the flex vehicles are being purchased on our coasts. and they don't have the type of infrastructure that we do in the midwest. so i would argue that we need to continue investing in this area and make sure it is available. it is all about consumer choice as well. so senator peterson asked something and i would like you to follow up a little bit about the greenhouse gases because i find it really ironic that this administration's public focus has been very much on clean environment and reducing greenhouse emissions and yet what you're proposing is actually a direction that will increase those ksh -- carbon emissions by less utilization of these biofuels. so maybe if you could comment a little bit about that.

why you're not looking at greenhouse gas emissions? >> well, we do -- under under pinning of this program is a reduction in greenhouse gas emissions. as more and more biofuels get into the admission, and the cellular biofuels that is where the reductions can be. as you know, in order to qualify as an advanced biofuels, the greenhouse gas emissions need to be 50% less and 60% less. and that is where we want the growth to be and that is happening. of course volumes have been increasing steadily over time. not to the level that the statute called for but they have been steadily increasing over time. it would take the cellular biofuel from 33 gallons to 206 gallons in 2016.

that is substantial. not as much as congress anticipated or hoped for but from where we are now, that represents substantial growth. and my point to senator peters was in each annual volume rule we don't reanalyze emissions but we know the greenhouse gas reductions associated with the category and by growing the volumes by setting the targets to drive that growth in a responsible way, we will be seeing reductions in greenhouse gases because every gallon of gasoline replaced by cell you'll ossic biofuel is reducing greenhouse emissions. >> you talk about the pro posed 2016 standard for cell you'll ossic greenhouse gas emissions is more than 170 million gallons

which is higher than the 2014 volumes and i think it is worth noting that it is likely because three commercial scale refineries came online in 2014 sand one more slated for the end of this year. those bio refineries was made possible by the investments made before the disruption with the rule. and since then guess how many proposals have been online? zero. because we've disrupted through this rule and the lack of timely rule making we've disrupted the investment. we need to get back and i think no matter what our view of the wisdom of the rfs is if it is a law, we expect to to be administered in the way the law expected to be. and tell us what the law is because we can debate the wisdom

of this law here in congress, that is our job but it is your job to administer the way congress intended and do it timely because i think we can meet these standars if the investors know they will have access to the market. so it is just critically important that we node automatically assume we're going to have a crisis on cell you'll otic biofuels or ethanol before we let the market produce. >> i awould agree. and we have other advances coming with algae and investors are no looking at that in a way that we had hoped they would if we had the set volumes. so again technology is advancing and it is a great renewable energy source and it is taking waste products and producing a fuel that is low in greenhouse gas emissions. so i would agree. i think we have a law in place.

we need to understand what those volumes are and we do need to move forward and follow the intent of congress and i am at a point that i don't believe the epa is doing that. but i hope that we can work through these issues. >> so let me do something that everyone at home is going to be shocked at. let me take the side of the epa. and say that the cell you'll ossic was great theory and there are a lot of people experimenting with it but nobody can make it in a quantity that is affordable yet and that is the challenge of it. the largest manufacturer of cell lossic products just went bankrupt this past year and it was a major hit in the market because they were the leading industry but after a decade of trying to make this technology work and they couldn't make it work as a price that people could afford. and there is a lot of

experimental with this and the challenge the epa has is they have a mandate by 2022 to be cell you'll ossic and nobody can crack the code to make this to make it affordable and everybody is practicing with switch grass and wood and so far there is not a technology that exists and in some ways i think we're in the 1970s where carter said they were starting the research on solar power and by 200020% of the energy is going to be using solar power and it is 2015 and we are not close to that power and just because congress sets a number doesn't mean the technology is going to be there and the challenge that you have is you're working on a rule on ground based ozone and ethanol increases ozone. and the epa study came out and

said if we hit the totals the ozone numbers go up across the area and in some areas maybe significantly. so the challenge that we have right now is we deal with the balance of how do we get rfs totals and use cafe standards and decrease gas and hit new ow zone standards an one or two of the three of thoses aren't going to work because they don't work together at this point. how far off am i? >> there is a lot in there but i think i would agree there are a number of factors that would effect the development of cell lossic fuels. and we work close with the producers and the cellars and spend time with them to understand the challenges they are fatsing and we certainly here as you have described a desire for clear certainty in the market and ambitious targets which we think we are proposing in this rule but we hear about other challenges that the fuels have had in getting up and

running and i think everybody -- everybody wants those types of fuels to be successfully produced and marketed and the more that happens and the prices will come down and people will use them. but i would agree with you senator lank ford there are many factors there. >> and i need to ask about the e 85 as well. you have some assumption that it will increase in usage even six months from now. i'm trying to figure out the assumptions that went into that because my imagination is there are enough e 85 vehicles on the road right now to made the requirements but many of the those choose to purchase e-10. and i'm trying to figure out how epa assumed that e 85 would jumps when the e 85 owners choose not to use that project. >> you are correct there are a lot of flex vehicles that could use e 85 and our information is

there are 3000 stations in the country that provide e 85. i live in indiana, i see that at my gas station. but not everybody does. there are issues with the prices of it because the energy value of e 85 is different than the value of gasoline. i think people don't fully understand that and this is a long process, to change people's understanding of those choices on transportation fuel and prices need to move in directions that will encourage people to understand that can be an economical choice for them and i think that is a multi-year process and we've seen progress there. our proposal here is intended to be forward-looking and optimistic because we understand that congress wanted these fuels to be driven into the market. >> right.

but i'm trying to get at the methodology. is the assumption we're going to try to push the issue but not a menl odd to say we anticipate based on car purchases or anything else, or availability that people will use this product more. >> we've looked at a variety of things, there are flex vehicles out there that are using e 85 that are not now. there is not a precise mathematical formula that can be used. >> more of an aspirational goal rather than we see this and anticipate this use? >> i would say it is an optimist cal goal but our judgment and the way we understand the market has developed so far, what in our judgment it can do epa has regulated the fuel market for many, many years and this is all laid out for people to agree or disagree with in the proposal and we welcome that but it was

all of the things that went that with however respecting congress's clear intent that vouls of the fuels increase and it would take a push in order for that to happen. our understanding is that congress meant more renewable fuel to be used than used without the rfs. >> i would say too going further, i have a diagram you can pull this up on the internet where all of the e 85 pumps are located and most of them are in the upper midwest and again a lot of flex fuel vehicles bought out there they simply don't have access to e 85 because the pumps and the infrastructure is not yet available. so i think if we had that infrastructure in place we would see e-85 use go up. so again -- and i do want to go back, there are challenges to cell lossic and algae as we move

forward, but again so many other types of fuels have seen this problem in the past and fracking is a great example of that and i support fracking. but it took many many years for that become a cost effective way of exacting fuel. so we have those challenges. but again we're moving forward in iowa. many states are moving federal with cell lossic. the greenhouse gas emissions go down tremendously with that product and i think that is a goal everybody would like to see. thank you. >> i want to -- as long as we're talking about cars, as you look at analysis and i think senator langford alluded to engines and we've had a great deal of discussion in the ag committee, including nascar drivers and come in and swear by this as a fuel source so i think the jury certainly isn't back on that --

>> or a $3 million nascar vehicle. >> but if you look at analysis model year 2015 warranty statements and owner's manuels it shows that auto manuals approve the use of e 15 which we haven't talked about yet in two-thirds of new vehicles and e 151 approved by epa for all 2001 and newer vehicles which accounts for about 80% of the fleet of automobiles out there. was this taken into consideration or how did you take this into consideration when you developed the rule. >> and i want to interrupt. i have an appropriations hearing that i have to run back and forth to do a quick vote on. if senator erns could take the lead on. and if i have a quick vote so if senator erns could take the chair and senator heitkamp is

tough to work with so if you could hold your own. >> so e 15 is very promising to get ethanol into the system and there is discussion about vehicles using it and not using it. there is relatively little getting into the system now. i think there are fewer than 100 stations across the country that are offering e 15. again, i think that this is an issue that we all need to be focused on, how we can increase people's use of this fuel. and as more and more new cars come into the system and people understand and are comfortable this is a fuel they can use in their vehicle, that those attitudes will change and prices will change and the infrastructure will come. it is a challenge senator. i grant you. >> i think if you looked at the chart that senator erns showed

you, behind that you would see a partnership with state governments providing incentives to build out the infrastructure and things we need to do on a state-based level. i'm curious about how much you have heard from actual jobbers or people who have filling stations, as we used to call them in the old days, not the major distribution centers, but those guys who are now concerned about the quality of their tanks, concerned about the regulation of e-15, what is the conversation back and forth between epa and the actual convenience stores and filling stations. >> they convey to us challenges and of course wanting to meet the needs of the customers looking at the cost to install new infrastructure and ern certainties they might have about new technology and covering the cost of putting the

new infrastructure in and selling that product. >> do you think you have clear rules on what epa's requirements are from -- for that sfrur. >> i think so. >> i don't think a lot of them think so. they tend to be concerned and think about overbuilding infrastructure, over-building their tanks so there is no concern at all later on. >> that is something that i'd be happy to take back and look into senator. >> so we aren't just talking about blender pumps and all of those issues the infrastructure issues and what that means, we're talking about long-term concerns about moving to e-15 and so it could be good to figure out what role epa plays in providing the certainty to our philliing -- filling

stations and converting into e 15, which most stations are approved for. >> i would be glad to look into that. >> and with the e 15 too, the impact to the u.s. consumers, if they do have that choice and are using e-15 it is typically a nickel to a dime lower than the e 10. so across the united states then the impact to our consumers is there is a savings of about $5 billion to $7 billion each year in their own pockets so it is something i think we need to take a look at and continue to refine. but did you have any further questions, senator. >> as long as we have some time here and the chairman went -- when the cat's away. when we look at, i think the

ren prices, and it is so complicated for people to understand, and your latest proposal talks about the fact of correlation between ren prices and having higher ren prices to drive investment and infrastructure however your proposal had the opposite effect and ren market said we won't hit 10% blends by 2016. when you guys were plotting this out and fretting, did you consider the disruption that that would have to the ren market and would that would mean long-term and does that inform how you want to deal with this in the future? >> so i think that one statement you said seernt that everybody can hardly agree with this, this this is incredibly complicated, incredibly complex and i've been working on this for two years and i'm beginning to understand

this and i'm not an economist and so there is much discussion about this issue that goes on with people with that kind of training and understanding. what we tried to do was to provide more information for the public record about what we have seen in the market but we would certainly not purport to say that wren prices are -- the relationship between the wren prices and we set in the volumes is very complex and effected about many many things not just the volumes that we set. >> don't you think you were a major driver? volumes were a major driver? >> i wouldn't say it is not a factor. but the prices of feedstocks and the many things that go into producing fuel have a lot to do with this as well. so it is not simple. it is complex. we pay attention to ren prices

but we -- we don't formally factor them into our decision-making because it is so complex complex. and it is clear that congress established the credit system as a way for this program to work and for obligated parties to show compliance. so it is a fact of how the program works. and as long as biofuels are more expensive to produce than gasoline, you need the system that congress set up in order to driver those volumes up make the fuels more affordable for people so that it gets into the system and it builds and then people use it. >> i guess we'll have to agree to disagree. i think it was a major factor of

what happened in the ren market and we want to avoid or at least avoid people coming back to you and saying this disruption has created an additional ris rupgs in -- disruption in the market place. i want to ask the chairwoman to move senator baldwin's record. >> yes. without objection. and i could go on all day. the volume and having renuables, it has been exciting to see the development over the course of time. and we do have to remember this is an energy area that is fairly young compared to other types of energy sources that we've had here in the united states. and we have seen support of those industries for over 100 years. so again, relatively young, developing source of energy. and again clean-burning. i would say. and very supportive of our

economy here in iowa. which is why even though it wasn't expressly written in the law that we use domestic sources of fuel, i would encourage that in the future as something we take into consideration rather than utilizing biofuels from other countries as well so that might be something that we need to look at in the future. think that would help increase the production obviously here in the united states but promote the infrastructure, promote the development and further the technology advancements. senator heitkamp. >> i just have a final comment and it is probably not exactly on target here but we've been talking a lot about advanced agricultural manufacturing, meaning let's use products that renewable, let's use green products. if you look at the fuels industry. the fuels industry has been a building block it has been a foundational piece the technology developed in fuels leads to manufacturing using

renewables so this has an environmental effect beyonds just the fuels market. this has an environmental effect on building supply issues, all kinds of issues as we build out renewables for building supplies and as debbie stabenow is wanting to say you can eat your car seat because it is made out of soy beans. so this is an industry that has been very beneficial to the united states of america and i think beneficial to consumers. and we want to make sure that when congress has a policy and it pretty clearly states these are the reason for waivers that the agency is responsible follows that policy. now, like i said, i'm not unsympathetic, but in part this was to drive the infrastructure. and when you retreat from the number, it has the opposite effect. and it just creates a spiral to

a place where we don't want to bement -- be because that is not congressional intent. and i look forward to working with you miss mccabe and talk about what the future holds and i look forward to hearing the outcome of the hearing you're going to have in kansas city. i know it will be very robust. i know you're probably getting tons of comments already. and hopefully a relook at some of the issues that we think are possible that will, in fact be more consistent adjusting the rule. and i would particularly ask you to look at that in the biodiesel area. >> okay. special. >> and yes just on the final -- is the senator on his way back? >> if we could just recess for a minute until he comes back. >> and just in my conclusions, i think we need to get the volumes set but i think we need to take

a close look at how we're doing and how we want to encourage the market to develop. and again that vicious cycle in place. right now commodity prices are extremely low and so when you see $3 corn now is a time to be developing that area and working with ethanol or cell lossic. so i would encourage a good, hard look at that and again look forward to looking for you. and again if you would please emphasize to the epa administrator jenna mccarthy, we would love to have her in iowa and show her the process from the time the seed goes into the ground until the time we're producing it and sending it out to consumers. so we will, at this point, just recess for just a few minutes and wait for senator lank ford to conclude the meeting. thank you. >> thank you, senator.

you would be glad to know we're working through the interior appropriations, which the epa has connection to. so when i stepped out, the ongoing conversation was on e-15. and i would have anticipated on that dialogue as well. and you and i have had this conversation on e 15. the epa believes vehicles 2015 and forward can handle e-15 and manufacturers on the whole do not. if you go to the manufacturers in the last year year and a half, more manufacturers are

allowing e 15 to be within the warranty. would you agree that the vast majority of the manufacturers do not believe e-15 fulfills their warranty from 2001-2013? >> i wouldn't want to characterize the number. i know that is an issue for some manufacturers. >> i will tell you i have a chart that walks through that, that actually details each and every manufacturer and if they had any models at all, that allow e-15 to be within their warranty and within the past year, year and a half, that above 50%, have any vehicle model at all that would say e 15 would be tolerable in their engines and it is a fairly limited amount, and most vehicles are older, my truck is

15 years old that i drive and it is common for most americans to have an older vehicle and the assumption there that we'll have the large increase on e-85 and a jump on e 15 use and when there is a limited number of locations to get and i'm still going back to the assumptions and the patterns and it is a pattern of how do we discern what is coming and the epa and method of making the decision and how they are making the decision. >> we did not assume hardly any e 15 in these proposals for the reasons that you cite and the relatively few stations that offer it currently. >> okay. when we talk about the biodiesel, the same thing with the biodiesel, which that product has exceeded the expectations of the amount that is manufacturers and i'm trying to get the percentage or the method of your counting on the small percentage of biodiesel that cannot handle lower temperatures. we have a certain percentage

that is out there, i believe it is 56 degrees and down, it starts turning into a solid. so that doesn't work for part of the biodiesel. so the question is, how did you do that estimate and the method of that and the expectations? because biodiesel is now an open amount. epa can set the amount from year to year, based on what they feel like is the best information, how are you trying to split the two there to say this part can be used in el paso texas and southern arizona you're round but everywhere else it is not used year round versus what is used year round. >> so as you know, we look at these things from a national perspective and we look at the -- the increases in the amount of biodiesel that is being used. i think i would say, senator and be glad to follow up and confirm with more details, with the volumes, we are not in danger of exceeding the amount the system can absorb without

getting into sort of performance problems. >> so the assumption -- i want to try to get at that the assumption that the growth for the line of product is not the line of biodiesel that has a problem with lower temperatures you're aum soog the growth and the information is leading you to say the growth is in the area that not the part with the difficult time with lower teams. >> i'm not sure it is different fuel is it? we'll follow up with more specifics. >> there is one that uses animal products and that type of biodiesel, if you get below 56 degrees, it doesn't work well and you have to use it in warmer climates where you are never going to get below that and there are parts of the country that do. but if you head north very far you'll run into problems on that. let me ask a little bit about the cbo reporting. when you talk about prices. according to the krch bo. the rfs, if it was repealed or

kept at previously proposed 2014 numbers, corn based production would remain at 14 billion gallons was their assumptions, that basically corn based ethanol is in the corn system and it is a viable fuel and the prices where consumers want to purchase it and if the -- cbo estimated if the mandate went away we would still stay at 13 billion gallons of corn based ethanol even without the mandate. so when you are looking for the push there, you are pushing the products into other places that the market is not requesting, i guess at that point, but since the congressional mandate is to push this out into other areas the challenge is of that 13 billion that the cbo that the market requests and wants, do you use that as a baseline, is that a number you use in your estimations and do you consider that if the mandate went away that 13 billion would still be there, is that a baseline number

or how is that number used in your own reasoning? >> that number i believe is reflective of the 10% amount that methanol now fills in kbas lien. >> correct. the blend wall location. >> the blend wall location. you know i think, senator, we don't sent a standard for ethanol in the rule. it fills in, because it is considered conventional biofuel. so we know where the blend wall is likely to be. of course depending on how much fuel is actually used. and so we take that into account. and then as you reflected, we understand that the intent of congress was to push more into the system than what e-10 accommodates on its own and so we build from that. >> okay. so the issue is interesting, and again this is not your study, but in 2014, cbo, when they studied it said the mandate went away on corn based ethanol

and their study said 13 billion gallons would be used and it is in the study and people continue to use it and it is in the study and the price that consumers pay for gasoline would go down and i thought it was an interesting study. and there is a lot of push and pull and that is not what this hearing is about and it is about the long-term of rfs and the people that do the score keeping around here have reminded us that corn based ethanol works in the market regardless without the mandate and the prices would decrease for consumers if we would remove this mandate and pull it away from us. i want to go something we talked about earlier and that is the ozone issue. and so i know you have to balance both of these. as well as many other things. how are we doing balancing this in the internal conversations on what happens to ozone levels an how ethanol does increase ozone levels and then the coming

standard that is coming? >> so the setting of the ozone standard is a health evidence-based decision that administrator needs to make. what the ozone standard is about is the administrator's determination about what represents an -- a safe and healthy level of ozone in the air for people all across the country to breathe. we are not permitted by statute and this has been confirmed by the supreme court, that decision, that health-based decision is not to be influenced by implementation issues. that is dell with in other parts of the filter act and that is the work of states and industry and the epa for many, many years. and so we do our job under the part of the filter act that says we set the standards so the american know what is the right level of ozone to have in the air. we then work with the states and

others on assessing where across the country those levels -- monitored ambien ozone levels exceed those standards and that is not where every in the country and not by a long shot. and so once you identify those areas you look so see what are the emissions contributing to the high ozone levels. the way ethanol can impact ozone is not uniform across the country. it relates not just to the use of ethanol but the production of ethanol so that can be a localized situation and those may be areas where ozone lev standard. so it's -- it will be a situation that we will look at place by place to determine what needs to be done in order to make sure that americans have healthy air to breathe. >> we're still on the same

challenge with that miss mccabe, and that is we have a mandate to use more ethanol and a mandate to decrease the ozone and those two will be in competition and we'll literally have cities an communities with an increase of methanol and use more public transportation and use -- decrease the lawnmower usage or major industrial complexes will have to relocate or retrofit based on one mandate competing with another one. and know this has to be an on going conversation where communities will say you're telling us we have to do this and change our stuff and telling us this rule is part of the issue. >> but it is a question about in any given area what is contributing to the high ozone levels. and i don't think it is fair to conclude, senator, right now, that there are areas that will be significantly effected by

increased knocks associated exclusively with ethanol use as we look at areas that might not meet an' zone standard if there is one. >> but we will have ozone locations that are .2 outside of the range and that .2 could be ethanol based and the numbers are so close in this. if it was a big gap, but then i would understand. but it is a big gap. and ethanol is one of the contributing factors. and this is big cost to clients and i'm trying to figure out how the epa will solve that. and a different committee will do that and i'm trying to figure out how the process for how that will be made and that point deferential will be different in different communities. >> i very much appreciate your point. the history of states and an epa

working together to reduction ozone levels is to find the most cost effective ways to reduce the precursors to ozones in levels where it is high and that is the process that would ensue if a standard has changed. so there are lots of things that contribute to ozone attainment in areas that have that problem. >> but is the possibility in that portfolio of options the community can say if they are .2 one of the levels is they don't have use as much ethanol in that region. >> i think that would be a complicated situation given the competing mandates that we have. >> and that is why i bring it up. you have competing mandates and that is why i'm trying to figure out the process of making the decision. if they have ten things on the table but a decrease of ethanol is not an option when we know that is an a contributing factor, why couldn't at least

that be on the table as well? because now you have two competing mandates? >> i think that is a good question, senator. okay. we'll resolve that in the days ahead and i would like that to be in the set of options a community could have to make a decision rather than have a hit on several different industrial areas when we know the ethanol hit is one of the factors at least to have the flexibility to make that decision. >> fuel use has always been an issue in considering how to meet ozone standards. and the agency and the stays have balanced the various requirements that congress has laid out on fuel use against other options that they have. so it will be an ongoing conversation and i take your point. >> i would appreciate that. the other issue deals with a foreign importation of the fuels coming in. soerntd height -- senator

heitkamp and other senators brought it up and to ask the question, if this was about protecting the environment and american energy options, was the intent, that was clear in the statute as importation of some of the fuels, how that affects the actual amounts and the targets. if a target is going to be set but a third of it is going to be fulfilled by foreign, should that be included? again, there's a different conversation whether we allow foreign to come n but is the target number for domestically produced or all that's used? >> we understand that target is for all that is used. so could that be filled entirely? we have a competitive group that is able to produce it much cheaper overseas and being able to bring it in. could the entire requirement be produced overseas? >> i think it's highly unlikely. >> but you're still targeted doesn't matter if it's foreign or domestic on that either one, it is just setting the number of

what we're going to use. >> what we're going to use? this country. >> that will be an on going issue. it's something we have to deal with in the days ahead. again, the clear mandate of this is really it it's focused on american energy efficiency, i guess, and the way we're able to provide our own energy independence. if we're not doing that, what is the difference between importing oil or sugar cane? importing is importing. we're still not energy independent working in that direction. who other comments would you have for me? >> well, senator, i really appreciate the opportunity to come and speak with you today and you were true to your word. you provided an opportunity for all of us to have conversation. i know that there will be a lot of discussion in the months ahead as people are getting their comments in to us. i just want to assure you again

how focused we are on this program and how much we understand and appreciate it and agree with so many of the things that have been urged by the senators today in terms of administering this program the way congress intended. i will we flekt again thatreflect again about what the statute requires and what congress intended. i assure you we're doing our very best job as we should as the executive agency charged with administering this to do our best interpret the statute in the way that we think is appropriate, as best for the american people. and to make sure that we have both ambitious and responsible efforts to implement the renewable fuel standard and that is my commitment to you. >> thank you for that. in the days ahead, we'll have an on going conversation about the time period and predictability there even to know when kit

start and when people can give comments, what the assumptions are going to be in that conversation. the reset is coming. it's coming extremely quickly. 2022 is near and far 2017 is not far at all. the parameters will be set by november 2016. we'll be in the middle of the on going conversation for that. so that's the one piece of this that i know we have to maintain a very public conversation on but a very clear conversation on when rules will be set and how we actually get back on schedule. all of the rules change in 2016 and i'm concerned about that. i would like to announce on july 16, we'll hold a hearing and hope have to the administrator here. this does conclude today's hearing. i would like to thank miss mccabe for her testimony oral

and written and the brief recess. the hearing record will remain open for 15 days until july 6th at 5 p.m. for the submission of statements and other questions for the record. this hearing is adjourned. >> thank you.

new jersey governor chris christie announced he is running for the republican presidential nomination. you can see his comments at 8:00 eastern today. and here on c-span3 we're taking the opportunity while congress is on break to show you some of the american history tv programs that are normally seen only on the weekends. at 8:00 eastern we'll show you a symposium on william f. buckley's could be servetive. and james baldwin's significance in american political thought at 9:25. 10:45 p.m. eastern princeton university professor on race in america. >> the spaven span cities tour is partnering with our cable providers as we travel across the united states. we learn the life of omaha, nebraska where the de porres club was fighting for equality.

>> they had a reputation in omaha and in the united states as a city that when you came in if you were black you needed to keep your head down and you needed to be aware that you weren't going to be served in restaurants and you weren't going to be able to stay in hotels. when the de porres club began their operation, the idea of -- in fact the term civil rights, they used the term social justice. the idea of civil rights was so far removed from the idea of the greater community of omaha or the united states that they were kind of operating in a vacuum. i always like to say that they were operating without a net. there were not the support groups. there were not the prior experienced of other groups to challenge racial discrimination and segregation. >> we look back to the union pacific and how the construction of union station helped omaha's economy. >> union pacific is the premier railroad companies of america.

it was founded in 1862 with the pacific railway act signed into law by abraham lincoln. it combined several railroad companies to make union pacific. and then they were charged with building the transcontinental railroad. so they started here and moving west and central pacific started on the west coast and moving east. and they met up in utah. and that's really what pro tells us even farther. we have become that point of moving west. the gateway -- one of the gateways to the west. >> see all of our programs from omaha saturday at noon eastern on c-span2's book tv. and sunday afternoon at 2:00 on american history tv on c-span3. >> david shah peera appeared recently before the senate homeland committee on his

nomination to the u.s. foestal board of governors. he previously served as ceo and chair of the supermarket chain from 1980 until 2012. this hearing is about an hour. >> mr. david shah peera is nominated to be the director of the postal service. under his leadership, giant eagle saw huge growth from pittsburgh, ohio, west virginia and maryland. by comparison the united states postal service continues to see huge losses and decreasing volume and ending 2014 about a lot of $5.5 billion. the united states postal service needs smart, creative solutions to counter the loss in revenue by changing consumer behavior. at built to expand and adapt to customer preference that jinl eagle has shown is something the postal service needs. welcome. we look forward to your testimony. we have senator bob casey from

pennsylvania here that would like to say a few words prior to mr. shapira's testimony. >> let me say, we don't trust senator casey. >> that's right. i was hoping that senator toomey will be here. >> maybe if we wait. maybe pat will show up. great to see you. thank you for coming. this is great. >> i want to thank the chairman and ranking member this opportunity to introduce david shapira. mr. chairman you read -- or you highlighted some of his business background and that's i think one of the most significant parts of his record and resume. i won't dwell on the details of his background, but i do want to say something about his character. i think that's what i'll start with. we all know the challenges of being in elected public service. it comes with a lot of challenges as well. the process itself is a

substantial challenge. and i'm always amazed and gratified that we have people willing to put themselves forward for public service even though the process to get there to be confirmed or even to be considered is challenging. the fact that david is willing to do this is an indication of his character and also his commitment to our country. he was chairman of giant eagle. he received his ma in economics from stanford. we don't have a lot of that around here. we could use more of that. with degrees in economics. he's on the board of directors

of the allegheny conference on committee development equitable resources incorporated, extra mile education foundation academy of pittsburgh, the pittsburgh cultural trust, the pittsburgh symphony united way of allegheny county and i could go on and on but i won't. he's also member of the carnegie melon university board of trustees. i believe his experience and his success will be of great benefit to the postal service. this is a person of integrity aun someone who believes if what he's doing if he were to be confirmed would be public service. all public service is given in trust and accepted in faith and

given in honor. i think he understand that's. if he's given this opportunity, he accepts it with honor in the best way to demonstrate you accepted it in that fashion is to do quaumentt public service with integrity integrity. he'll do that, i have no doubt about that. so david, we're grateful you're willing to serve and i'm honored to be part of this nomination process for you. >> i unanimous consent that his statement be entered into the record. >> i will not object if he'll repeat one time those words inscribed in the building, all public service is a trust given in faith and accepted in honor. >> i do not object, thank you. >> i wish they were my words. they're instribd on a building in harrisburg. >> those are great words. >> again thank you senator casey. mr. shapira, it is the tradition

to swear witnesses. if you'll please rise and raise your right hand. >> do you swear that the testimony you're about to give will be the truth the whole truth and nothing but the truth? >> i swear to god. >> we'll listen to your testimony. >> thank you very much. chairman johnson if i can just say i'm blown away by senator casey coming and saying what he did. i really thank you for that. >> thank you for consideration to the united states postal services board of governors. i want to thank president obama for this honor and for the vote of confidence that it represents.

it is truly humbling. i will work hard to show that your consent is well deserved. i also want to thank my wife cindy and family for this undertaking. if i'm confirmed, they will be my partners. my family is truly my greatest gift and nothing i've accomplished would have been possible or even desirable without them. >> is she the young woman over your left shoelder? >> she's this very young but follow woman thank you. >> we thank your willingness to share your husband with our country. >> though my written testimony provides details for 30 years i was president and ceo of the giant eagle market.

>> i was doing a little under $10 billion in volume and employees about 37,000 americans. large organizations like giant eagle only succeed if they tap into the workforce and i'm immensely proud of the team i helped to lead. when i stepped away from day-to-day operations in 2013, i left the company in very capable hands. actually, the hands of my daughter.

ceo and her executive and extended team. i always had an interesting in giving back to my community and have served on boards and lay leadership positions and number of civic organizations over the years. but i hope will be a second career and community service and philanthropy. such service is foundation of our country and major component of our democratic society. every citizen to the extent that he or she is able should look for opportunities to serve. now president obama has offered me a new opportunity, one with a truly national and international scope. the united states postal service epitomizes a key tenant that underlines -- underlies our unique government of the people. the right of everyone, rich or poor, rural or urban, of every creed, faith, and race to

efficient, affordable and reliable communications. so critically important to the founding fathers was this concept that they established the u.s. post office at the second continental congress of 1775. this is a political thought and messaging. perhaps most important it is a bedrock to people everywhere to remain connected to family, friends, community, and the greater world around them. other communications have come, disrupting the paradigm and creating new challenges and opportunity the mail still remains and has the significant place as an essential government service. looking deeper, the most profitable product first class mail is in decline but it is achieving growth in the delivery of packages.

the post office is undertaking an ambitious effort to cut costs but it faces the real risk of degrading service which could lead it worse off in the long run. >> to address the challenges, my business experience tells me that given the postal service's size, the answer is multifaceted. it must preserve and enhance the current products while seeking out new opportunities to expand. must look for ways to be more efficient but also must preserve those assets which will enable it to have long term growth. if confirmed, i look forward to exploring these issues and much greater depth and i believe that my business background

experience and commitment to public service can help push this work forward. thank you, members of the committee, for your attention and i look forward to answering your questions. >> thank you, mr. shapira. we welcome pat toomey. he has a few words of support as well. >> i do. thank you very much, chairman johnson and ranking member carper. i appreciate you giving me this chance.

apologize that i was not here at the beginning but, you know, there is a rule in the senate that requires conflicting simultaneous scheduled meetings. but it's a pleasure for me to be here and to just say a few words on behalf of mr. shapira with respect to his nominee to be a governor of the u.s. postal service. i'll be brief. let me just say the postal service and the united states are very, very fortunate that a man of his accomplishments and capabilities is willing to serve in this capacity. i am delighted that he's willing to do this. we will benefit enormously from his wisdom, his experience and

the very hard work that i know he'll do here. i think mr. shapira was way too modest in describing his accomplishments in building giant eagle. it has become a very, very large business, employing tens of thousands of people and really doing great work. he developed a terrific range of experiences and really acquired great knowledge about so many different business activities and models. his philanthropic work with his wife cindy has been absolutely terrific and very, very important, especially in western pennsylvania and beyond. so i just think that david shapira represents the best that pennsylvania and pittsburgh has to offer this country. he's an extremely talented and accomplished business and philanthropic leader and we're just very fortunate to have his services. i fully support his confirmation. >> thank you senator toomey and senator casey for taking time to offer the words of support to the nominee. mr. shapira, it is tradition to ask you a series questions prior to my questions. allow the senators to retreat. let me start with is there anything you're aware inform your background that might present a conflict of interest with the duties of the office with which you've been nominated? >> no.

and if anything should arise, i would recuse myself from any possible decisions about that. >> okay. thank you. >> do you know if anything personal or otherwise that would in any way -- that would in any way prevent you from honorably discharging the office to which you've been nominated? >> no. >> do you agree with our reservation to comply with any request for summons to appear and testify before any duelly constituted committee of congress if confirmed? >> yes. >> okay. thank you. >> i'm obviously intrigued by your business background. i started my business in 1979. you started a year later. you just did a whole lot better than i did. obviously, you have some real talents. you talk about opportunities for the post office. can you tell me that your concern or whether you're concerned or not concerned about the postal system competing with the private sector and, you know, how you try and set up

guidelines if you have concerns? >> as i was getting prepared for this hearing, i realized that during my career at giant eagle, we faced a situation which is very -- we faced then and continue to face actually a situation which is very similar to what the post office does. and that is the rise of new competitors and new technologies. ch threaten various parts of our business. there's an enormous lifestyle shift from eating at home to eating out. and in the supermarket business, we serve food to eat at home. so every meal that that switches from the home to a restaurant takes business away from us. and so the way we adopted -- or adapted to that was to continue to do what we did but also to be in to diversify what we sold. and as i was saying at the staff hearing yesterday or monday, we started going in the new business. but within our stores.

so that not only did the new business bring in revenue but the fact that we had the new business reinforce the old business. and some examples of that are getting into the business like pharmacy. when i started in the supermarket business, there really was no such thing as pharmacies in supermarkets. and today -- well giant eeg eeg until particular, but all good supermarkets have successful pharmacies. the second to that is gasoline. where, you know, whoever would imagine that you get your gas at the same place you get your groceries? i think the post office has the same kind of problem. it's got a severe technological

threat and competitive threat to its best product which is first class mail. i think the way to defend that is to continuously try to improve first class mail but also to develop other projects -- products which can bring in revenue and hopefully reinforce the use of first class mail at the same time. and actually as i look at what the post office has been doing, it has been doing those things. so i don't think it needs a radical change. it needs an emphasis on continuing to change its format over time. you know, in terms of competing with private -- with private businesses, or at least governmental businesses is the right word which i think is the essence of your question, it's a very interesting question. the post office has a mission. needs to carry out the mission. its competitors have a different mission. that gives them certain advantages and certain disadvantages. but -- and clearly the post office competes against them as

they compete against the post office and, frankly, i think competition is a good thing. so i am in favor of seeing new products and being aggressive about building the business model. >> having been in the business, i imagine you did a lot of strategic planning. i found and have great value in

business called a swat analysis. people are not really familiar with that in washington. i'm sure you are. strengths, weaknesses, opportunities and threats. can you go through a quick analysis of the postal system? let's start with strengths. what are the primary strengths of the postal service? >> well, the primary strengths are the system and the employees. and the history. the post office has a system which calls on every single address every day. that's an enormous strength. the second strength is brand equity. everyone understands the post office. everyone understands how to mail

a letter, how you go about getting a stamp, putting it on. so there's -- in this case, a brand equity is sort of an institutional memory, not only of the post office but the whole population of the country. i think the weakness is it is strained as it might by law. an example of that is the necessity to prefund the retiree health benefit which is something that i'm not aware of any other company or institution does. and a second weakness is it's in some ways constrained from introducing new products. i mean any understanding is the law says the post office can't introduce a new product that doesn't use the post box, the

mail box. in a day like today where technology is changing so quickly, the inability to adapt to changing technology is a big weakness. in terms of first class -- even second class, bulk mail is enormous. and i know as a company like giant eagle, we're trying to move as fast as we can. it's nice to dream about it, you

can't just carry it off. i'm sure i'm leaving some out. but those are the strengths and weaknesses. the threat is i think a number of things. clearly technology is an enormous threat. that's sort of one reason i'm happy i'm retired these days is technology is changing so fast and very hard to keep up with.

the need to get mail to one place to another is only going to grow. we're increasingly interconnected world. and the question is how can the post office my experience says that whenever there is disruption like will is today, that it's an enormous threat and is also an enormous opportunity and the question is can the post office figure out how to take advantage of that. >> okay. thank you, senator carper. >> thank you, mr. chairman. again, very nice to have a chance to meet you and to meet cindy as well. i understand i used a basketball term talking with mr. shapira about the role his wife played in encouraging him to be named

about it president. i described her role as getting an assist on the play. so we thank you for your encouragement. i was born in beckly, west virginia, a coal mining town in southern west virginia. and back there a couple months ago for a funeral of my 98-year-old aunt hazel. and she was married to my mother's oldest brother. and back in the -- about 1950 he started a little supermarket in beckly, west virginia, on harper road right off the turnpike. it is called panda's market. he they sold groceries and gasoline. >> everything that goes around comes around. >> there you go. as i grew up, i would go back --

i grew up in virginia in roanoke. i would go back in the summers with my sister just to be with my grandparents, our cousins. and i would work a little bit, not a lot, but summers and at the mom and pop supermarket. my uncle died early. but his brother michael jim and his wife took it over. and they had it down the road from them harper road, a culver opened up. they said our market was doomed. they weren't. and then an a & p opened up and they said that pat's market is doomed. but they weren't. and they continued to do reasonably well right up into my aunt and uncle reached retirement age. they didn't have a chain of mom and pops but they had theirs. over time they changed the way they did business. and to adjust to the competition that they had just down the road. they offered people a chance to buy food on credit. folks that wanted to have groceries delivered, they

delivered. if my grandfather was a butcher. he had parkinson's disease. he drove the mountain roads until he was 81. and he would go to that butcher shop and cut meat. when he was in those shop, his hands would be like a rock. it was amazing what he would go through. people wanted a special cut of meat, they got it. they wanted produce, they got it. folks walked in the store, the staff knew the name of the people that were coming in, even their children. and they continued to be a supermarket. a little supermarket. but over time they became a catering service as well. you mentioned people change the way they eat and they decide well, you want to have somebody prepare your food.

we'll help with that. i learned so much from my aunlt and uncle and from their business in terms of customer service and being a servant. our job is to serve. talk about the lessons that you -- life lessons that you learned from starting and growing your business that might be appropriate or applicable to the post that you've been nominated for. >> thank you for the question. that's a great question. at giant eagle we feel we serve four constituencies. and the four constituencies are our customers, our team members or employees, the communities we live in and our shareholders. and when i talk about this, i like to say that those four are not in any particular order except for the last one. that doesn't mean that we don't think our shareholders are

important. obviously, they're important and we know we have to make money and we have to grow the business and we have to pay dividends, otherwise the shareholders will say we don't need you. so why do i say the other three are more important? the reason is we take a long run view of our business. and we think if we serve those other three constituencies well and that we're good financially responsible business people that in the long run the shareholders will be better off and, of course, so will everybody else of all those constituencies. i think in an organization like the post office, which is a little different because in this case the customers actually are the shareholders, we're all the shareholders. but i think if we concentrate on serving our customers, taking care of the workforce and making

sure that workforce is well trained, well motivated, understands why they're here. it was interesting listening to the admiral who i thought spoke beautifully on the subject. if we remember that part of our mission is to serve communities, big or small, near or far, and if we are freed from some of the constraints that we operate under, that post office can be very successful and adapt over time and change. >> i should know the answer to this question but i don't. in the postal service, there are four labor unions that are organized and represent different employees and employee groups within the postal service. and we have the opportunity to work with them, the board of governors and folks who are leaders at the post officeal service have the opportunity to work with them as well.

i find them to be more often than not constructive and trying to be helpful to enable postal service to survive and thrive and go on to service for hundreds of more years in this country. i don't though to what extent in your business you had a chance to wshg with collective bargaining units. but if you have, you could share with us some of what you learned from that? >> giant is a union company. we have some small nonunion companies. we deal with -- we have dozens of different union contracts. i think dealing with -- assuming that the unions have reasonably good leadership, and in many ways it's better to be a union company. it gives you an ability to communicate with people that you don't necessarily have if you're nonunion. my view on dealing with employees is you have to respect him. you have to listen to them. you have to get feedback from them. you have to include them in the

process. you have to train them. some of the admirals you have to have a clear mission. you have to explain it to people. when there's a problem, you have to be open and honest about what the problem is. you have to make people understand what the problem is. my experience is in most cases, not all, but in most cases you can -- unions are cooperative and can help solve the problem. you have to respect their point of view, too. it takes me back to when i talked about our constituencies. one of the most important constituencies is the employees. and union represents the employees. so you should respect i. just like you would if they weren't in the union, actually. >> thanks. >> thank you, senator carper.

have you really studied the financial situation of the post office? are you pretty well versed in that? >> when you use the word really studied, i would say no. but i -- >> casually studied? >> well, more than casually. i did prepare for this. and so i would say i'm reasonably familiar with it. >> i find it rather confusing. did you see the preparation is relatively confusing or straight forward? >> both. when you look at the prefunding

requirement of the retirement health benefits, that seems to me to be very straight forward. in fact, it's what essentially goes on as we put a dep it against our earnings for the amount we put a dep it. we put it in our debit balance and then we don't pay. >> right.

>> it's like a joke. >> this is just one of the liabilities? >> right. there is pension liabilities. there are all kinds of liabilities. the prefunding and the connection to whether the employees have to use medicare seems to me that that should be an obvious and very easy fix. and in looking at the financial statement the prefunding is just very slightly smaller than the loss. the total loss of the system. so if the prefunding were eliminated, we wouldn't be losing -- well, we would still be losing money but not very much. >> but we still have this

overhang of unfunded liability. i looked at the balance sheet as best i can reconstruct it and something close to gap versus other large bankruptcies and looks like a bankrupt to me. do you have a similar type of conclusion? >> it's -- if you're just looking at a straight up and down look, it seems like we're bankrupt. but the liabilities are paid out over many, many years. this is a discounted value of the future liability. so bankruptcy, can you look at a balance sheet and say you're

bankrupt or look at a cash flow statement and say you're bankrupt. cash flow statement, i don't believe we're bankrupt. and so the question is, by the way, this is not just a post office question. had is a question for private industry. this is a question for the government. we have enormous pension liabilities and the question is what are we going to do about it? i don't think we're bankrupt in the sense that i think we still have time to deal with it. but we are bankrupt in the sense that if we don't deal with it, it's clear what the end is going to be. so i think it's a better dif in addition of the terms. but it's clearly a serious problem and one that i won't say all -- i know giant eagle faces it. we are members of collective bargaining agreements that have employer joint pension funds where the funds are horribly underwater. they're on, i think it's called a red list.

the question is what are you going to do about it? >> the problem is, and senator carper led the way with this, trying to come to some political resolution of this which was not successful. you spoke about all the constraints on the post office. constraints because congress is trying to in some way or shape or form manage and direct what should be a, you know, what i think the goal was to make the post office a more autonomous type of organization. but they don't have that autonomy. both operationally or financially. so american taxpayer in the end is still on the hook for this. raet the constitution. i realize the post office is a basic power. article one, section eight, to establish post offices and post roads. do you think it's really a governmental imperative or

constitutional imparity that that no matter what the post office is, you know, we have to maintain a post office as opposed to we have to perform the constitutional duty of delivering mail? when delivery of mail is less and less obsolete, do we have to come up with different things for the post office to do just to have a post office? even if it's way outside the mission of delivering mail? >> i'm not sure i know the answer. i would say this. there's a big question within your question which is what is the definition of delivering the mail? and it doesn't say you have to deliver the mail two times a day, seven times a week. it says you have to deliver the mail. now does that mean every day? does it mean every other day? does it mean two times a day? the function is important. the question of how we define the function is also very

important. so it seems to me that the answer to your question it would really have to define what it is we want to maintain. and generally terms are'very helpful in doing that which i think is what causes the controversy. >> i agree with you. we need to find what the post office should do, what is the constitutional power of it and we really need to ask ourselves a serious question with a bankrupt organization, do we need to maintain this organization at all cost and have it expand into different areas that just might compete with private sector companies with an implicit taxpayer guarantee with taxpayers on the hook for growing liabilities? i mean, i think these are very

serious questions the board of governors is asking themselves and we have to ask ourselves the same questions. but i appreciate your answers. >> senator, can i just add that to that? i was -- this is the first time i've ever been in a hearing like. this i've seen them on television. but i was fascinated by the questions of the admiral who was sitting here before me. and it was obvious to me you were all impressed and i was equally impressed with the answers he gave. one of the things i really liked about the questions and answers was the willingness of the committee to have his back. and at least what appeared to be the desire on both sides, his side and the committee's side to cooperate on helping to solve the problem. the post office can't solve these problems itself. it needs you. it needs the congress. there needs to be a cooperative solution to the problem. i like to take the attitude there are no problems that are knoll insolvable if you have

good people with common objectives that are trying to solve. i think that cooperation of this committee is crucial. >> i completely agree. coming from a manufacturer background, i solved a lot of problems. this is a process. it starts with the definition of the problem. defining what it is you're trying to accomplish. laying out the reality of the situation which is why i was asking you, you know, your understanding of the financial

situation of the post office which, you know, trust me, the political environment gets all jumbled up. people don't really completely understand it. i'm having a hard time. again, i'm trained accountant. i've looked at a lot of balance sheets and it's still confusing to me. i'm getting a little bit better handle. it starts with reality situation, then base ond that, defining the problem, defining exactly what the achievable goal is. then start setting strategies. we oftentimes bypass that process. i think that's what you're hearing in the earlier part of our committee hearing is we were really trying to get to what was definition of the problem? are we admitting we are having one? are we looking at this honestly? i think you'll have the right type of mind.

you're answering the questions from my stand point correctly wlachlt is the definition? but we have to as the right questions. >> so again, i appreciate the input and we absolutely want to cooperate with the board of governors and the post master general. it is not fixed. i have real questions whether we can resolve this through a political process. we haven't been able to do that in the past. i know harper is dedicated to this. senator carper? >> thank you, chair. thank you for your support and for what you just said. in term of what is a role of the postal service, what should our role be? i look back to abraham lincoln. i asked what is the role of government in our lives? he said the role of government is to do for the people what they cannot do for themselves. and there is actually a constitutional system p stipulation that we have a

postal service. one reason we have is our forefathers said we have this experiment. this experiment called the united states of america. might be helpful if becould communicate. it may be important to facilitate commerce and maybe the postal service and other countries are helpful. maybe we can find the help for them in this country. and as you said in your own business, over time, the demand of your customers is changing the needs of your customers changed. and i think the same is true with the postal service. some of the folks that we work with in order to try to enable -- we're an enabler. i think the congress is an enabler. it's like the chairman talks about one my last trips down to honduras. i place that i soon hope to visit with him.

we're trying to figure out why all these people coming up here in the u.s. and trying to get into our country from honduras and salvador p it's because they live very difficult lives which we contribute to making even more difficult. but i -- my last time down there was press conference at the end of it asked a bunch of questions by the press there. one guy said, you guys have home depots? and they said we have them. and i said we them in america, too. and their advertising, the way they advertise in america has been for years is home depot's advertisement. you can do it. we can help. and i said to the folks in honduras. i said can you do it. we can help. just like colombia. colombia helped pull poland back. can you do this, we can help. they adopted the alliance with prosperity with three countries. the same is true with the postal service. the postal service can do it. there is a need for the services to be offered.

postal service is going to the mailboxes. it is a nice bit of service for the postal service. this he can help fly and move some of the postal service's products around the country. one hand sort of washes the other. on the issue of everybody -- a lot of people keep coming back to and it's the issue of this unflooded liability for retiree health care. and the question is, is it real liability? i think it is. and my last year as governor, we just -- we grew up with on -- not fedex, but a meeting with the folks from moodies, standard and poor and fitch trying to get a aaa credit rating. and we had done eight years balanced budgets, paid down some of our debt. strong employment numbers. and we went really made the case my last year as governor for

triple-a credit rating. and lo and behold, we got aaas. we still have it. they said to us at the time, they said you have a liability that you're not addressing. and i said what is that? and they said we used to have -- when i became state treasurer, we had no money in our pension fund for employees, for our retirees, none. we used to sell revenue anticipation of the taxes and revenue anticipation to raise money to be able to pay -- make pension checks every month. and we fixed that. fully funded in ten years. but they said you have all this big liability for health care and you not set aside any money. you said you need to do something about that. they still gave us a aaa rating. and we tried to address that. it's a real liability. but in order to get president bush to sign into law postal legislation, we had to not only recognize that liability but they had to pay it off over ten years. which is, i don't know of any company in america that has been asked to do something that aggressively. when you look at the liability,

the money that the -- the money that postal service pays into medicare trust fund is greater, i believe, than any other employer in america. they pay more money into medicare trust fund than any other employer. they don't get full value for what they pay. and most postal retirees, 65 and over sign up for part a. majority sign up for part b. i think almost none sign up for medicare part d. so the postal service is by overpaying into medicare, they're subsidizing competitors so they can underpay. and my wife required from dupont when she was 65. folks at med quar reached out to her and said, martha, we love you. by the way, you're going to have to sign up for medicare part a and b and d. we'll provide wraparound coverage for you. all kinds of employers in the country do that when they retire

at 65. the postal service can't do that. that is the most important thing we can do. captioning performed by vitac the think the preapplication standardization has come into play and we do need to in fact keep up the space and if anything strengthen it, yes. >> thank you, mr. chairman, i yield back. >> recognizing the gentlemen from texas for five minutes. >> i thank the chair. welcome, secretary moniz. my first question is about the federal power act. under section 202-c, doe, you, can order a power plant to stay running during a great crisis. in following your order, the plant might squeak past the clean air permits, unfairly that plant can be fined and sued by others for doing so. one regular says go, another says stop. that plant has to decide whether they want to acquiesce in a

power shortage, may be a blackout or break the permit for just a few days, maybe a few hours. i have a bipartisan bill with representative doyle in green to fix this in the energy package we're working on. this is not about a company running roughshod over environmental laws. we're talking about days or hours in a crisis. the other week ferc and nerc endorsed our bill, secretary chu told me he's very supportive of the idea. the bill has passed this committee three times now and whole house twice. and 112th, 113th congress. can i count on your support in the 114th congress? will you be supportive of the

bill like your predecessor? >> mr. olson, you've asked this question before and let me say the answer is basically yes. i know our d.o.e. staff worked with both sides on this and we're quite comfortable with it. thank you. >> thank you for the clarification. my home state of texas has half of our southern border, over 1200 miles with our neighbor to the south of mexico. we know how important that relationship is for our trade. your qer points out that we trade tens of billions of dollars in energy each year with mexico. >> 65. >> 65, i like that even better. >> in fact, some of texas only power line outside come from our

i think it was reduce by half number of employees they reduce bid half the number of mail processing centers they have in this last years they have reduced by half and reduced by a third the number of post offices around the country and done a lot of right-sizing and part of what is before them now is ways to help them like with the retirement pension liability to make it fair but there is good opportunities here and we're going to have fun fixing this and i look forward to doing that. and some of the best things i learned from life were from my failures. and i've had plenty of failures. but when you look back at some of the lessons you may have learned, the dissolution and bankruptcy of your companies

subsidiaries pharm more and what you learned from that and if there is anything that asp lickable here. >> i learned so much, it would take me an hour. >> well we don't have that long. >> first place, i would agree with you. i have come that the conclusion that if one is looking at success, however one might define it, that the biggest successes come from having failures and then recovering from them. so one of the things i learned from the farm more debacle is that you can recover you have to keep your eye on the ball and fight out of whatever ball you are in and take the lessans that -- lessons that you learn from that and apply them into the future. and just as an example, far

more's failure, which bankrupt far more and came close to bankrupting giantle eagle caused giant eagle to become much more focused on cutting debt and being a much more secure and safe company and so i don't have any doubt that having gone through far more that that changed the way we managed giant eagle. the second thing i learned which has an accountant, senator, you will know this one of the things you're always looking for is fraud. and every accountant i've ever talked to, when you talk about fraud, they say if you get a conspiracy of just a few key people that is very hard to detect. and that is actually what happened at far more.

the whole experience was four people. and so one of the things that i have become much more vigilant about since then is looking at the financial statements is how they pulled off the fraud at far more and asking is there anything going off in the current company that is anything like that. and i've taken and applied that in a larger sense wherever i am, either as a director or as a chief executive. whenever something goes wrong in a company that is like ours, the first thing i do is i call in the top executives and i say, first thing is thank god it

wasn't us and second place let's find out what happened and why it happened and are we vulnerable to that. the last thing i've learned is -- well i've learned lots of things, but i've often wondered to myself, how did i survive that crisis. i mean i was the chief executive, it was a very natural question to ask, did he know, should he have known et cetera. and i know myself that when you read about one of these frauds the first thing everyone assumes is the chief executive must have known. i didn't know. i was the one that discovered the fraud actually. but when i -- what i learned is the most important thing is to really be totally honest and open all the time and to make sure that when there is bad news that you don't make my

effort to hide it and that it comes from you. and i think taking that and applying it to the situation at the post office, there is a lot of bad news at the post office. and i think we ought to recognize the bad news and we ought to try and figure out -- i mean you're never going to deal with it unless you recognize it. and then we ought to try and come up with plans that say, okay, this situation is bad, that situation is bad. how are we going to deal with it. and to me, if you identify what the problems are, no matter what people's going in assumptions are, if you get them to understand the problems, you can generally get them to agree on solutions, assuming there are solutions, but the solutions are often very tough.

and require changes that a lot of people don't want to make. so if you want to accomplish those kinds of changes people have to have a shared understanding of the problem. >> thank you very, very much. what would president -- mr. chairman, we've been blessed this morning by two nominees that i think are exemptional and i close where i start off that we are lucky that you are willing to do this and the city is willing to give you up to the people of our country. and the last quick thing i would say, innovation, go back to the legislation that dr. coburn and i worked on to foster innovation and encourage innovation and the other four people that have been nominated by the president to serve and they are good on the innovation

and we hope that the legislation that we pass deal with fostering innovation and we hope to have a chance to work with you on that. i'm way over my time. thank you for your patience, mr. chairman. >> thank you. mr. shapiro i'll tell you right off the bat, the solution for the post office and the fiscal solutions for this country will not be easy. so i want to thank you for again coming here, for your testimony your willingness to serve. i want to thank you for being an example of a great american. someone serving your community and your state and your nation by doing what mirn americans do, aspiring building something successfully, with adversity. unfortunately, in today's society, we bee moniz and demo going people trying hard, we need to celebrate that success and i celebrate it with you and i appreciate your willingness to

serve and i thank your wife for being by your side here in this service. so again, look forward to moving this nomination through as quickly as possible so we can get the board of governors operating under regular order. you are answered prehearing questions submitted by the hearing and without objection this information together with my written opening statement will be made part of the hearing record with the financial hearing be made available for public inspection. this hearing record will be remain open until tomorrow noon at 12:00 p.m. for the submission of statements for the record. >> senator, thank you very much. >> you're welcome.

new jersey governor chris christie announced he's run forgt republican presidential nomination becoming the 14th gop candidatech you can see his comment here today. and we're taking the opportunity while congress is on break to

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