Hearing of Committee on Energy and Natural Resources to Consider Nomination of Samuel W. Bodman to be Secretary of Energy

Hearing of Committee on Energy and Natural Resources to Consider Nomination of Samuel W. Bodman to be Secretary of Energy

Statement of Hon. Maria Cantwell, U.S. Senator From Washington

Thank you, Mr. Chairman and Senator Bingaman. And thank you, Dr. Bodman, for being here today. I want to start by saying that I very much appreciated our opportunity to meet earlier this month to discuss in an informal setting the many Department of Energy (DOE)-related issues that are critical to my Washington state constituents. I am pleased that we were able to touch on a wide array of issues, ranging from cleanup of the Hanford Nuclear Reservation and policies impacting
the Bonneville Power Administration (BPA), to the federal role in research and development at institutions such as the Pacific Northwest National Laboratory. I also appreciated the opportunity to discuss the continuing challenges Washington state consumers, utilities and businesses are facing as a result of the Western energy crisis of 2000-2001.

From our discussion, I know that you've begun to develop an appreciation for just how large DOE's ``footprint'' is in the State of Washington, and how much is at stake for our economy and environment when it comes to the many policy decisions you will make if confirmed as the next Secretary of Energy. It's a job that comes with a considerable number of challenges--but also, incredible opportunity. Putting in place a real, forward-looking energy policy for the 21st century is not only essential for this nation's economic security, it's my belief that it will fuel the next wave of innovation. It is critical for this country to take the technology lead in the energy sector. Otherwise, we will find ourselves in ten to twenty years in exactly the same position we do today as it relates to our dependence on foreign oil--we will be importing the next generation of energy technology.
Instead, we need to seize the opportunity before us and recognize that it is the key to securing our nation's long-term energy independence.

Dr. Bodman, I have a number of questions for you on a variety of issues that--by nature of their diversity--further illustrate the
tremendous responsibilities you will shoulder if confirmed. As we've discussed, the Western market meltdown of 2000-2001 has had a profound impact on my state's economy, the pocketbooks and economic well-being of my constituents--too many of whom have had to make the choice between keeping their heat and lights on and buying food, paying rent, and purchasing prescription drugs. In some parts of Washington state, utility disconnection rates have risen more than 40 percent. People just can't pay their utility bills. So you can imagine, what we've seen and heard since the height of the crisis--as we've
learned about the market manipulation and fraud that took place in the Western market, while Enron energy traders laughed about the plight of ``Grandma Millie''--has added tremendous insult to substantial economic injury. Moreover, the Western crisis has brought to the forefront a number of very important policy questions about the kind of behavior that will be tolerated in our nation's electricity markets, as the Federal Energy Regulatory Commission (FERC) has continued to pursue its
``restructuring'' agenda.

As the Secretary of Energy, you would have a very important, leading role--defined in the 1977 Department of Energy Organization Act--in guiding overall electric regulatory policy. I want to make sure today that we are on the same page on some of these policies and principles.

First, we need strong leadership that will condemn the types of schemes used by Enron traders--manipulation tactics with infamous nicknames like Get Shorty, Death Star and Ricochet. We need to send a strong and unanimous message that these practices will not be tolerated in our nation's electricity markets. Next, we need to agree--as a matter of common-sense policy--that the victims of these schemes should not have to pay the inflated power prices resulting from market manipulation.

Dr. Bodman, you know that these are more than just ``theoretical'' concerns for me and my constituents. Not only are Western ratepayers trying to recover some small fraction of the money they lost to Enron as a result of its unscrupulous trading practices, they are trying to avoid paying even more. Right now, Enron is claiming utilities in Washington state and Nevada alone owe about a half billion dollars more--for power Enron never even delivered. You can understand just how outrageous this seems to my constituents, who are already struggling to pay their power bills.

Unfortunately, justice delayed is justice denied for Enron's victims. It has literally been years now, in which the ratepayers of my state--who have already suffered enough--have been waiting for the other shoe to drop.

Dr. Bodman, my understanding is that the Secretary of Energy has, under the DOE Organization Act, substantial discretion to intervene in matters pending before the Commission. There is also substantial precedent, as both Secretaries Richardson and Abraham have involved themselves in various ways in matters before FERC. I can understand why. I imagine that any Secretary would have a considerable interest in doing so, in ensuring that regulatory matters are being handled in a
manner consistent with national energy policy. I hope that you agree that what I've outlined above--the scenario in which Enron is allowed to collect money for power never delivered, at outrageous rates resulting from market manipulation--is not in the public interest, and I hope it is not the energy policy endorsed by this Administration. I hope you will agree to work with me, to help my constituents in this matter if you are confirmed as the next Secretary of Energy.

I must also make a few remarks about the importance of Hanford cleanup to the residents of Washington state and the Pacific Northwest as a whole. Dr. Bodman, it's been my experience that achieving our mutual goal of an effective and efficient Hanford cleanup suffers when relationships between the states and DOE, the Congressional delegations and other stakeholders are damaged by the bad faith actions of one of the parties.

I know you are aware of what happened last year, when DOE-authored language related to the reclassification of high-level nuclear waste was inserted into the Fiscal Year 2005 Defense Authorization bill. This was done behind closed doors, in a Committee that is not the rightful forum for debate on the issue of high-level nuclear waste and how it should be treated and disposed of. This legislative end-run was viewed by me and Sen. Murray, as well as the State of Washington and many of
our constituents, as an ill-considered attempt to take short-cuts at Hanford. I hope you will commit to me, Dr. Bodman, that DOE--under your leadership--would not attempt a similar backdoor maneuver. It does nothing but destroy trust on an issue in which trust has been a very scarce commodity.

Dr. Bodman, as the next Secretary, you would be our nation's chief energy policymaker. As my colleagues on this Committee know, the general direction of our nation's energy policy is a topic on which I've been known to offer an opinion or two. But for purposes of my remarks this afternoon, I simply want to welcome you, and will focus my questions today on a few of the many issues on which I hope we can work together.

BREAK IN TRANSCRIPT

Questions From Senator Cantwell

Question 180. When we met, we informally discussed the challenges the Northwest faces with respect to electricity rates and our efforts to deal with the aftermath of the Western energy crisis of 2000-2001. I know you recognize the sad fact that the Northwest is far from out of the woods on the rates crisis.

Obviously, the Western market meltdown has had a profound impact on my state's economy, the pocketbooks and economic well-being of my constituents--too many of whom have had to make the choice between keeping their heat and lights on and buying food, paying rent, and purchasing prescription drugs. In some parts of Washington State, utility disconnection rates have risen more than 40 percent.

People just cannot pay their utility bills. So you can imagine, what we've seen and heard since the height of the crisis--as we've learned about the market manipulation and fraud that took place in the Western market, while Enron energy traders laughed about the plight of ``Grandma Millie''--has added tremendous insult to substantial economic injury. Moreover, the Western crisis has brought to the forefront a number of very important policy questions about the kind of behavior that will be tolerated in our nation's electricity markets, as the Federal Energy Regulatory Commission (FERC) has continued to pursue its
``restructuring'' agenda.

As the Secretary of Energy, you would have a very important, leading role--defined in the 1977 Department of Energy Organization Act--in guiding overall electric regulatory policy.

As such, before I get into some of the specifics, I want to make sure we are on the same page when it comes to these broader principles and policies:

First, do you agree that the types of schemes used by Enron traders--manipulation tactics with famous nicknames like Get Shorty, Death Star and Ricochet, many of which involved the falsification of data and have been deemed illegal by the Federal Energy Regulatory Commission (FERC)--are practices that must not be tolerated in our nation's electricity markets?

Answer. Senator Cantwell, illegal market manipulation certainly cannot be tolerated, and we should vigorously enforce the relevant laws.

Question 181. Do you also agree that, as a matter of common-sense policy, the victims of these schemes should not have to pay the inflated power prices resulting from market manipulation?

Answer. We must take appropriate action to protect consumers against the effects of illegal market manipulation.

Question 182. Do you also agree that this principle is even more important in instances in which the company perpetrating these schemes has done so while providing false information to federal regulators, making it impossible for those regulators to ensure markets are functioning properly?

Answer. Any form of market manipulation, including providing false information to regulators as you have described, is intolerable and we should vigorously enforce the relevant laws. As you know, FERC and/or the courts have the authority to review such cases and make appropriate judgments.

Question 183. I particularly want to ask you your views about instances where the company perpetrating these schemes has frustrated the efforts of regulators and parties trying to find the truth about the depth of its deceptions, failing to turn over relevant evidence in a timely fashion. Do you believe that, as a matter of national energy policy, a company like that should still be allowed to reap the profits of its market manipulation schemes?

Answer. As I am not aware of all the details of current allegations, I cannot comment at this time but I would reassert that I
agree that regulatory authorities should act appropriately to protect consumers against unscrupulous or illegal conduct.

Question 184. Sadly, the theoretical situation I outlined in my first question is not theoretical at all. It's the situation that has
been unfolding at FERC for the past few years. Not only are Western parties trying to recover some small fraction of the money they lost to Enron as a result of its unscrupulous trading practices, they are trying to avoid paying even more. Right now, Enron is claiming utilities in Washington state and Nevada alone owe about a half billion dollars more--for power Enron never even delivered. You can understand just how outrageous this seems to my constituents, who are already struggling to pay their power bills.

Unfortunately, justice delayed is justice denied for Enron's victims. It has literally been years now, in which the ratepayers of my state--who have already suffered enough--have been waiting for the other shoe to drop.

My understanding is that the Secretary of Energy has, under the DOE Organization Act, substantial discretion to intervene in matters pending before the Commission. There is also substantial precedent, as both Secretaries Richardson and Abraham have involved themselves in various ways in matters before FERC. I can understand why. I imagine that any Secretary would have a considerable interest in doing so, in ensuring that regulatory matters are being handled in a manner consistent with national energy policy. I hope that you agree that what I've outlined above--the scenario in which Enron is allowed to collect money for power never delivered, at outrageous rates resulting from market manipulation--is not in the public interest, and is not the energy policy endorsed by this Administration.

Will you commit to me that, if confirmed as Secretary, you would use your authority and intervene with FERC to prevent ENRON from collecting these so-called ``termination payments'' which harm Western consumers?

Answer. Senator Cantwell, under section 405 of the DOE Organization Act, the Secretary of Energy has the ability to intervene, as of right, in proceedings before FERC. It is my understanding that there currently are matters pending before FERC, as well as in the courts, relating to Enron, and that some of those matters have been going on for several months or years. If confirmed, I will look into the matter and evaluate whether it would be appropriate for DOE to intervene at this point in
those proceedings at FERC.

Question 185. In our previous meeting we also had the opportunity to discuss the importance of Hanford cleanup to the people of Washington State and the Pacific Northwest as a whole. It's also my belief that cleaning up the legacy of our defense efforts must be high on our list of national priorities. Cleanup suffers, however, when relationships between the states and DOE, the Congressional delegation and other stakeholders are damaged by the bad faith actions of one of the parties.

I know you are aware of what happened last year, when DOE-authored language was inserted into the Fiscal Year 2005 Defense Authorization bill, behind closed doors, in a Committee that is not the rightful forum for debate on the issue of high-level nuclear waste and how it should be treated and disposed of.

This legislative end-run was viewed by myself and Sen. Murray, as well as the State of Washington and many of our constituents, as an ill-considered attempt to take short-cuts at Hanford.

Will you ensure that the DOE will not attempt a similar legislative end-run around the State of Washington and its Congressional delegation on the issue of high-level waste reclassification, during your tenure as the Secretary of Energy?

Answer. Senator, I appreciated the opportunity to meet with you to hear your views about the Hanford cleanup. I agree with you on the importance of cleaning up the Hanford site in a manner that is protective of human health and the environment. The remediation of liquid radioactive waste stored in aging underground tanks in Washington, Idaho and South Carolina is by far the greatest environmental challenge facing the Department of Energy. It is my understanding that the legislation that was enacted in the last Congress only affects the Department's sites in South Carolina and Idaho. If confirmed, I can assure you that the Department will consult with you and the State of Washington on the cleanup of tank waste.

Question 186. Among the biggest challenges at Hanford is the cleanup of 53 million gallons of nuclear waste, contained in 177 tanks within 7 miles of the Columbia River. Already, some 67 tanks have leaked an estimated one million gallons of this waste into the ground. Retrieving and disposing of the waste in these tanks is one of the most challenging--yet crucial--components of successful Hanford cleanup. The TriParty Agreement lays out the terms of the relationship between the
State of Washington and federal government when it comes to cleanup. In the view of the State of Washington, the agreement vests DOE with the responsibility of retrieving and cleaning up ``everything that is technically feasible but no less than 99 percent'' of the waste in these tanks. As Secretary of Energy, will you commit to abide by this requirement of the TriParty Agreement?

Answer. The Department will abide by the terms of the TriParty Agreement.

Question 187. As you may know, this Administration's previous budgets have proposed withholding certain cleanup funds until DOE has secured what it views to be favorable outcomes in pending litigation or legislation. This has been widely viewed by many as blackmail, with the purpose of getting the State of Washington to back-down on its cleanup requirements at Hanford.

Will you commit to me that, as Secretary, you will not use these same tactics?

Answer. Senator, I am unaware of the situation you describe. If confirmed, I intend to review the accelerated cleanup program and I would be happy to meet with you and discuss this further.

Question 188. More generally, are you committed to working collaboratively with Washington State regulators, the affected
communities' and workers' representatives, and the members of the Washington State Congressional delegation to ensure that the cleanup is fully funded and completed as soon as possible--in a manner that ensures the equal protection of the workers, the public, and the environment?

Answer. Senator, I believe that it is important for the Department to work cooperatively with the congressional delegations that represent the DOE sites, as well as with the State regulators, the local community and the workers' representatives. If confirmed, I would expect this practice to be carried out.

Question 189. Last year, the National Institute of Occupational Safety and Health (NIOSH) and DOE conducted audits at the Hanford nuclear site on the issue of worker health and safety. Both NIOSH and DOE came up with a long list of recommendations and corrective actions. Many improvements have been made. But I also want to ensure that DOE,
as a matter of policy, is doing its job in ensuring adequate health and safety protections on an ongoing basis.

As Secretary, what procedures will you put in place to assure that the Department continues to improve its health and safety protection for workers at sites like Hanford?

Answer. The safety of the Department's workers will be a top priority for me if confirmed. I will review the safety procedures and determine whether additional measures are needed.

Question 190. Many major DOE procurement decisions are being challenged and overturned. What will you do to improve the quality, fairness, timeliness, and success of the DOE procurement process?

Answer. Offerors that are not awarded contracts have the right to protest the contract award and other decisions to the Government Accountability Office. It is my understanding that, on a relative basis, very few protests are filed against DOE award decisions. If confirmed, I will ensure that DOE has appropriate standards, systems and quality controls in place to guard against irregularities in the contracting process.

Question 191. Another major concern on the part of many of my constituents is whether DOE is implementing the President's directive to increase government procurements with small business.

What will you do to improve and expand DOE procurements that benefit small businesses, particularly those based in the local communities most affected by contamination and which will suffer severe economic impacts when cleanup is done if local, sustainable businesses are not developed?

Answer. If confirmed, I would fully support the President's policy of increasing government procurements with small businesses.

Question 192. Will you support efforts to expedite evaluations of procurement involving local small businesses--particularly since extended delays are especially harmful to small companies that do not have the resources to keep teams mobilized?

Answer. It would be my intent, if confirmed, to review all of the issues surrounding small business procurement and I would be happy at the appropriate time to meet with you to discuss the matter further.

Question 193. DOE has made a major commitment to the Hanford Vitrification Project. The Defense Board and others have raised questions about the safety of the design and prospect for cost increases and schedule slippage. Given the supreme importance of this project to the future of Hanford cleanup, what do you propose to ensure that this facility stays on track? Is there some value in an independent review?

Answer. Senator, I appreciated the opportunity to discuss this issue with you during our recent meeting. I understand the importance of the Hanford cleanup and I share your view that the cleanup must proceed in a timely, efficient manner that is protective of human health and the environment. If confirmed, I will review the Hanford Vitrification Project and would welcome an opportunity to meet with you again to discuss this project further.

Question 194. The Volpentest HAMMER Training and Education Center at Hanford was built by DOE to ensure the health and safety of Hanford cleanup workers and emergency responders. HAMMER's unique hands-on ``Training as Real as It Gets'' is essential to the safe, cost-effective, and successful completion of Hanford cleanup. Further, as the cleanup workforce decreases, more of HAMMER's capabilities will become available for other DOE missions, such as energy assurance and
hydrogen safety, and for training law enforcement, security, emergency response, and other homeland security-related personnel.

Will you ensure that DOE continues to fully utilize HAMMER to protect the safety and health of Hanford cleanup workers? Will you support the development of new DOE training missions at HAMMER? Will you help with the Department of Homeland Security and other agencies to develop, expand, and support other training missions at HAMMER?

Answer. Senator, I am not familiar with this issue. If confirmed, I would review this matter and I would be happy to report to you my thoughts on HAMMER.

Question 195. When DOE recompetes its major site contracts for complex cleanup projects, the process often takes up to two years with extensive worker and community anxiety. Then, it may take up to another two years for the new contractor management team to get up to speed fully with subsequent impacts on the projects, workers, and communities. None of this is good for DOE, the workers, or the communities.

Will you consult to the extent allowed by law with the affected workers' and communities' representatives before a recompete decision is made, to determine the best course of action?

Answer. Generally, when the government considers contract competition it uses an extensive array of mechanisms to convey public information and obtain feedback from interested parties. If confirmed, I will ensure that DOE employs these mechanisms and practices to the maximum extent practicable.

Question 196. Dr. Bodman, I also know you are beginning to understand the importance that I, and others in tie Northwest
delegation, place on the Bonneville Power Administration and the policies that affect its long-term viability. BPA has for decades been the engine of the regional economy. As such, I am sure we'll be in frequent contact on many BPA related issues.

First, I want to confirm something we've previously discussed. Namely, I want to ensure that you understand that the decision of whether BPA should join a regional transmission organization (RTO) is something that must be decided in the Northwest, after an inclusive stakeholder process that considers the real world costs and benefits of such a change. Can you commit to me that you will not, in your potential capacity as Energy Secretary, force BPA to join an RTO?

Answer. Senator, I appreciate your bringing the issue to my attention and while I do not feel I am in a position to make a
commitment at this time, I can provide assurances that I will work with you on this issue should I be confirmed.

Question 197. Second, as you know, Bonneville has the statutory responsibility to maintain the reliability of the Northwest
transmission system, of which it currently owns more than 75 percent. Interestingly, the Northwest is one of the few regions in the country where transmission lines are currently under construction. This is due to the unique way in which BPA uses borrowing authority, backed by Northwest ratepayers, to finance these investments. Unfortunately, the President's budget last year called for legislation that would tie Bonneville's hands, and make it virtually impossible for the agency to continue the transmission expansions necessary to maintain the reliability of the Northwest system. Under the proposal, BPA would
exhaust its borrowing authority in 2008--well before the region can complete the needed transmission upgrades. Can you commit to me that as Secretary of Energy you will not support legislation that would impair BPA's ability to make these crucial investments?

Answer. I am not familiar with the funding levels being requested or other proposals for the Bonneville Power Administration in the FY '06 budget. If confirmed, I will evaluate this matter and I would be happy to meet with you to discuss your concerns further.

Question 198. For the past two years, the Pacific Northwest National Laboratory has been working with the Department to solve the issue of replacement facilities and lab space in the 300 Area of Hanford. The 300 Area is home to critical on-going research in science and national and homeland security, but the area is scheduled for closure by 2009 as part of the DOE accelerated cleanup program. Consequently, PNNL must vacate the area on a tight schedule, and without interrupting critical work for the DOE, NNSA, and DHS. Planning for these facilities has begun, but the most substantial funding needs
lie ahead. PNNL is an enduring asset to the state and the entire Pacific Northwest region, and we cannot afford to come up short on this investment. I understand we are in a difficult budget environment, but I would like to seek your commitment for continued funding. Will you commit to keep this effort on track?

Answer. I agree with you that the research that takes place at the Pacific Northwest Laboratory 300 Area is important to both science and homeland security issues. It is my understanding that DOE and the Department of Homeland Security are working cooperatively to ensure that a new laboratory is constructed and that the important missions at the laboratory go uninterrupted. If confirmed, I will review this matter and support it as appropriate.

Question 199. Research and technology applications developed to secure America's electricity grid system are being funded by the Department's Office of Electricity Transmission and Distribution. Many entities in Washington State, including the Pacific Northwest National Laboratory, have formed an Alliance that is working closely with the Department to help bring these technologies forward. I strongly support the GridWise and GridWorks programs and seek your support. Do you plan
to make research and development through these programs a top priority?

Answer. I appreciate your support for the efforts of the Office of Electric Transmission and Distribution and if confirmed, look forward to working with you on programs like the GridWise and GridWorks programs.

Question 200. As you may know, I sponsored legislation in the last Congress to support the Genomes to Life program at the Department of Energy. I strongly support an expanded program and development of research centers to support this goal. Last year, the Office of Science released a Twenty-Year Facility Outlook that included four Genomes to Life centers. The FY05 Energy and Water Development appropriation includes $10M to begin preliminary design of the first facility. Are you committed to fulfilling the implementation of the 20-year strategy, including the four GTL centers?

Answer. I will need to familiarize myself with this 20 year strategy for science facilities, if I am confirmed as Secretary. But, I
can assure you that if confirmed, maintaining a robust scientific infrastructure will be an important priority for me.

Question 201. Last week, the Washington Post reported that the Bush administration's budget request would freeze most spending, including science, and slash or eliminate dozens of federal programs. In my view, this is a very short-sighted approach to ensuring the economic future of this country. In my state, for example, the DOE's Office of Science
invests more than $135 million a year in university grants and in support of the Pacific Northwest National Laboratory. Can you share with us your commitment to science and R&D investments being made at the Department of Energy?

Answer. The Department of Energy has a responsibility to maintain America's world leadership in Science. The Pacific Northwest National Laboratory certainly plays a key role in the Department's and the Nation's scientific enterprise and, if confirmed, I will pay very close attention to how we nurture that important asset in your state. While we pursue the President's commitment to deficit reduction, I can assure you that I will also work to maintain and improve upon America's scientific infrastructure that is the envy of the world.

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