[Senate Hearing 114-470]
[From the U.S. Government Publishing Office]
S. Hrg. 114-470
OIL AND GAS PIPELINE INFRASTRUCTURE AND THE ECONOMIC, SAFETY,
ENVIRONMENTAL, PERMITTING, CONSTRUCTION, AND MAINTENANCE CONSIDERATIONS
ASSOCIATED WITH THAT INFRASTRUCTURE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
JUNE 14, 2016
__________
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona DEBBIE STABENOW, Michigan
STEVE DAINES, Montana AL FRANKEN, Minnesota
BILL CASSIDY, Louisiana JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
ROB PORTMAN, Ohio MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee ELIZABETH WARREN, Massachusetts
SHELLEY MOORE CAPITO, West Virginia
Colin Hayes, Staff Director
Patrick J. McCormick III, Chief Counsel
Tristan Abbey, Senior Professional Staff Member
Angela Becker-Dippmann, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Rich Glick, Democratic General Counsel
C O N T E N T S
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OPENING STATEMENTS
Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska.... 1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
Washington..................................................... 2
WITNESSES
Black, Andrew, President and CEO, Association of Oil Pipe Lines
(AOPL)......................................................... 4
Eisenberg, Ross, Vice President, Energy and Resources Policy,
National Association of Manufacturers (NAM).................... 11
McGarvey, Sean, President, North America's Building Trades Unions 21
Parfomak, Dr. Paul, Specialist in Energy and Infrastructure
Policy, Congressional Research Service (CRS)................... 28
Peress, N. Jonathan, Director of Air Policy, Environmental
Defense Fund (EDF)............................................. 33
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
American Gas Association:
Letter for the Record........................................ 106
American Petroleum Institute:
Statement for the Record..................................... 113
Supplemental Statement for the Record........................ 115
Black, Andrew:
Opening Statement............................................ 4
Written Testimony............................................ 7
Responses to Questions for the Record........................ 75
Cantwell, Hon. Maria:
Opening Statement............................................ 2
Eisenberg, Ross:
Opening Statement............................................ 11
Written Testimony............................................ 14
Response to Question from Senator Franken.................... 63
Interstate Natural Gas Association of America:
Letter for the Record........................................ 120
McGarvey, Sean:
Opening Statement............................................ 21
Written Testimony............................................ 24
Murkowski, Hon. Lisa
Opening Statement............................................ 1
Parfomak, Dr. Paul:
Opening Statement............................................ 28
Written Testimony............................................ 30
Peress, N. Jonathan:
Opening Statement............................................ 33
Written Testimony............................................ 35
Responses to Questions for the Record........................ 77
Supplemental Letter for the Record........................... 125
Stupp Corporation:
Statement for the Record..................................... 129
(The) Williams Companies, Inc.:
Statement for the Record..................................... 132
OIL AND GAS PIPELINE INFRASTRUCTURE AND THE ECONOMIC, SAFETY,
ENVIRONMENTAL, PERMITTING, CONSTRUCTION, AND MAINTENANCE CONSIDERATIONS
ASSOCIATED WITH THAT INFRASTRUCTURE
----------
TUESDAY, JUNE 14, 2016
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:09 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM
ALASKA
The Chairman. Good morning, everyone.
The Committee will come to order so we can begin our
oversight hearing this morning on our nation's oil and gas
pipeline infrastructure and the economic, safety,
environmental, permitting, construction and maintenance
considerations that are associated with it.
Infrastructure is one of those things that everybody claims
to be in favor of. We all support infrastructure. Who could be
against it?
It is only when you get down to the details of where that
infrastructure is located, what the infrastructure will be
transporting and how that infrastructure will be built--that is
where you run into the controversy.
In the world of oil and gas pipelines, known in the
industry as the midstream, this is actually not a complicated
question. At point A, you have the immense resources, whether
it is places like the NPRA, the non-wilderness portion of ANWR,
in the Bakken, in the Marcellus or in the Eagle Ford. At point
B, you have the refineries. You have the chemical facilities,
the power plants and other consumers. The infrastructure that
we will be hearing about today is necessary to move the
resources from point A to point B.
It is pretty simple. Without infrastructure we cannot move
these vital resources from one place to another. While some
would contend otherwise, we know for a fact that pipelines are
the safest and the most efficient way to move these resources.
In the world of economics, experts debate about direct
impacts, indirect impacts and induced impacts. We know that
pipelines directly create jobs in their construction,
maintenance and operation, and we know that these are good
jobs. We also know that pipelines indirectly create jobs
because it is a materials intensive industries. These are also
good jobs. We also know that all of this induces economic
growth and additional job creation.
So I am big into bumper stickers and trying to distill down
all that we do here in Washington into some simplistic notions.
If we have got to place a bumper sticker here this morning, it
is that ``Jobs are good, energy is good and energy jobs are
great!''
In Alaska we are very proud of an infrastructure network
known as the Trans-Alaska Pipeline System, or TAPS. The system
stretches 800 miles, runs across all sorts of terrains, two
mountain ranges, huge mountain ranges, from Prudhoe Bay down to
Valdez. An estimated 70,000 people helped build this pipeline
from 1969 to 1977 with the actual construction phase taking
just over three years. I cannot overstate the positive impact
this project has had on the State of Alaska. Without it, I can
tell you for a fact we would not be able to fund our state's
government.
Energy is the lifeblood of our state. We have to continue
to fight to boost the throughput of that pipeline which is
vital to the energy security of this country, particularly the
West Coast where the refineries are optimized to process North
Slope crude.
TAPS, in many ways, I refer to as the gold standard. And I
question, honestly, whether or not we could build it today.
Certainly not in three years as we were able to do four decades
ago.
We know new infrastructure is still the best way to deliver
affordable energy to places that need it. We know the pipeline
permitting process should be streamlined, yet those who opposed
to building oil and gas infrastructure, often the same people,
likely to be up in arms when prices get too high or service
quality suffers.
I think we have got some cognizant dissonance here. How we
can expect affordable energy if we cannot move the energy? You
have to be able to move it.
Since I released my Energy 20/20 Blueprint in 2013 and
follow on white papers on energy insecurity, the power grid,
exports and the energy/water nexus, I have emphasized five
principals that our nation's energy policy should embody. They
are pretty simple. Energy needs to be affordable, abundant,
clean, diverse and secure. Infrastructure is really at the
heart of all five of those principals. Without proper
infrastructure, energy will be unnecessarily unaffordable. It
will be scarce. It could be dirty, limited and insecure.
So as we welcome today's witnesses and begin this hearing,
I will tell you all to look for more from this Committee on
these issues in the upcoming future.
With that, I turn to Ranking Member Cantwell, for your
comments and I appreciate your work in getting us here as well.
Thank you.
STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you.
Thank you, Madam Chair and thank you for holding this
hearing and to our witnesses today for talking about issues
associated with natural gas and oil pipelines.
Domestic production of natural gas and oil has reached
record levels, and this increased production requires a network
of pipelines and other modes of transportation to ensure that
natural gas and oil can be moved from the point of extraction
to the point of consumption. In many instances, new pipelines
will be required.
But it is also important to note that we are talking about
transporting toxic, highly flammable materials hundreds, if not
thousands of miles across the United States. So new pipelines
must meet Federal and state standards so that the public health
and safety can be addressed.
We can always look to improve the efficiency of the
pipeline siting process, but we have to remember not to take
short cuts.
The Senate Energy bill attempts to enhance the coordination
between FERC and other Federal agencies with responsibility for
issuing permits before a new pipeline is built.
In contrast, the House bill passed proposed to give FERC
just 90 days to make a final decision on permit applications no
matter the complexity of the proposed pipeline or the potential
impact on people and the environment. This is something that we
cannot do.
In addition to the potential impacts to public health and
safety, leaks of methane from natural gas and oil pipelines can
also have a dramatic impact on our climate. In the first two
decades after methane is released into the environment, it is
84 times more potent as a greenhouse gas than carbon dioxide.
The recent leak at the Aliso Canyon Natural Gas Storage Project
in California is estimated to have caused more damage to the
environment than any other leak in gas history. The project
emitted more greenhouse gases than even the Deep Water Horizon
explosion in the Gulf of Mexico.
Most new interstate natural gas pipelines require multi-
billion dollar investments. These investments are recovered
through rates charged to consumers signing on to long-term
contracts. Obviously I am concerned that these multi-year
contracts may delay the transition to non-fossil fuel
alternatives.
Natural gas is a very important bridge fuel helping to
reduce our reliance on coal while bringing online greater
amounts of intermittent renewable energy such as wind and solar
power. We are in the middle of a revolution and advances are
made every day in technologies, the way that we can create and
use energy, that will further reduce the demand for fossil
fuels.
We undoubtedly will need some traditional natural gas
capacity. I have often mentioned to the Chair my interest in
support of a natural gas pipeline in Alaska. But as the
Department of Energy Quadrennial Review suggests, we should
focus on using existing pipelines more efficiently and making
sure that the certificate process for new pipelines explores
better ways to utilize existing capacity and mitigate issues
and make sure that we are making the right decisions.
I want to mention, because of the health and safety issues,
we were unfortunate enough on June 10th, 1999 to have a gas
line explosion in Bellingham, Washington killing three children
who were playing in Whatcom Creek. We have made some
improvements in pipeline safety, but we can never forget the
importance of these issues as we continue to move forward on
this.
I look forward to hearing what the witnesses have to say
today, Madam Chair, and look forward to our discussion.
The Chairman. Thank you, Senator Cantwell.
Again, welcome to the witnesses. We appreciate you making
the effort to be with us today and for what you will contribute
to the conversation.
We will lead off this morning with Mr. Andrew Black, who is
the President of the Association of Oil Pipe Lines. He will be
followed by Mr. Ross Eisenberg, the Vice President of the
National Association of Manufacturers. Mr. Sean McGarvey is
with us as President of the North American Building Trades
Union, welcome. Dr. Paul Parfomak is the Specialist at the
Congressional Research Service, CRS. Mr. Jonathan Peress will
wind up the panel. He is the Air Policy Director for Natural
Gas at the Environmental Defense Fund. We welcome all of you
this morning and thank you.
I will let colleagues know that we are scheduled to have a
vote at 11 o'clock, so hopefully our witnesses will be able to
get through all of their testimony prior to that time. It may
be that we jump up, go take a vote and then come back to ask
questions.
With that, Mr. Black, if you would like to lead off and
welcome.
STATEMENT OF ANDREW BLACK, PRESIDENT AND CEO, ASSOCIATION OF
OIL PIPE LINES (AOPL)
Mr. Black. Thank you, Madam Chair, Senators.
The Association of Oil Pipe Lines represents transmission
pipeline operators who deliver crude oil, refined products like
gasoline, diesel fuel and jet fuel and natural gas liquids such
as propane and ethane.
The U.S. pipeline network plays a critical role in
delivering energy needed by American workers and families.
Pipelines help American drivers get the gasoline and diesel
fuel they need to drive their cars and trucks. Propane
delivered by pipeline allows farmers to dry crops and warm
livestock barns and is essential to heating millions of homes.
American workers rely upon pipelines to deliver the raw
material feedstocks needed for good paying, manufacturing jobs.
Just last week Shell Chemical announced it will build a multi-
billion dollar petrochemical plant in Pennsylvania. That new
plant turning raw ethane into polyethylene will employ 6,000
workers in construction, 600 permanent plant workers and
provide economic benefits for the entire region. This is made
possible by a liquids pipeline delivering 100,000 barrels per
day of ethane to the plant.
Pipeline operation also supports other good paying jobs.
The TransAlaska Pipeline System, for example, employs 2,500 men
and women delivering crude oil to world markets. Alaska's oil
and gas production, much of it delivered at some point by
pipeline, provides 110,000 Alaska jobs and supports one third
of Alaska's work force.
Pipelines are an exceedingly safe way to deliver the energy
America needs. A barrel of crude oil petroleum products reaches
its destination safely greater than 99.999 percent of the time.
Liquid energy pipelines are also getting safer. Since the
year 2000, pipeline incidents impacting the public or
environment are down 55 percent. Since 2000, corrosion-caused
incidents are down over 70 percent.
Pipeline safety is spurred by a combination of government
regulation and industry-wide safety improvement efforts. The
U.S. Pipeline and Hazardous Materials Safety Administration, or
PHMSA, contributes to pipeline safety by providing minimum
pipeline safety standards, accountability for pipeline safety
shortfalls and an independent source of pipeline safety.
PHMSA is proposing and finalizing several new pipeline
safety regulations. Last summer PHMSA proposed a new Federal
rule raising training requirements for pipeline personnel
performing pipeline safety related tasks and details on a new
requirement for prompt notification to authorities of pipeline
incidents.
Last fall, PHMSA proposed a large set of new regulations on
liquid pipeline systems to expand inspections of pipelines
after extreme weather events, expand the number of pipeline
segments requiring intensive inspection, shorten timelines for
performing pipeline maintenance and expand requirements for
pipeline leak detection.
Congress has taken action to improve pipeline safety by
increasing funding for over 100 new PHMSA personnel, many of
them for inspections and enforcement.
Congress also, just within the last few days or hours,
passed new pipeline, bipartisan safety regulations. The Pipes
Act, passed by the House last week and the Senate last night,
will ensure pipeline operators receive timely, post inspection
information from the government. Thank you to Senator Daines
for inspiring that, to allow them to maintain and improve their
safety efforts. It will ensure that product composition
information is quickly provided to first responders after an
incident and improved protection of coastal areas, marine
waters and the Great Lakes. The bill was passed in large part
on legislation passed by the Senate in March and negotiated in
advance with Senate Republican and Democratic staff, along with
their House counterparts. AOPL thanks the Senate for adopting
this bipartisan bill last night.
Even though pipelines are one of the safest modes of energy
transportation, the pipeline industry believes it is important
we are proactively improving pipeline safety further and have
set a goal of zero incidents. Through the AOPL and American
Petroleum Institutes' pipeline safety excellence initiative,
pipeline operators have engaged nearly a dozen industry-wide
groups to improve pipeline operations and safety. Together
we're funding research and development on pipeline inspection
technologies, enhancing our threat detection and response
capabilities, expanding safety culture and management systems
and boosting our response capabilities.
Last year liquid pipeline operators developed industry-wide
programs to improve our ability to detect cracking, integrate
safety data, manage safety efforts holistically, manage leak
detection programs and better plan for and respond to pipeline
emergencies.
This year we will complete a new program for comprehensive
management systems, complete expansion of industry-wide
guidance on river crossings, develop a new recommended practice
for construction quality management and update our recommended
practice for pipeline inspection and preventative maintenance.
As you can see, there's a lot going on to improve pipeline
safety, and pipelines continue to provide benefits to American
workers and consumers.
Thank you.
[The prepared statement of Mr. Black follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Black.
Mr. Eisenberg.
STATEMENT OF ROSS EISENBERG, VICE PRESIDENT, ENERGY AND
RESOURCES POLICY, NATIONAL ASSOCIATION OF MANUFACTURERS (NAM)
Mr. Eisenberg. Thank you, Madam Chair, Ranking Member
Cantwell, members of the Committee for having the NAM here
today to talk about pipelines and what they mean to
manufacturing.
Our message today is simple and direct. Manufacturers'
already high demand for oil and gas is going to increase
dramatically over the next ten years, and we're going to need
adequate pipeline infrastructure to ensure that the nation's
ample supply of these resources are delivered efficiently,
safely and securely to the manufacturers who need it.
We have, essentially, a math problem. Over the next decade
natural gas demand is going to grow about 40 percent, and
that's generally from the power sector and manufacturing, so 40
percent increase in demand for natural gas. On the flip side,
we're predicting about a 48 percent supply increase. So we've
got more than enough to meet the demand which is fantastic.
What is uncertain is the amount of pipes and really the
geographic distribution of the pipes to get the gas from point
A to point B to the end users who need it. We're going to need
a lot more of those.
Manufacturers use a third of the energy consumed in the
United States. We've got--we've historically had an outsized
reliance on oil and gas. Manufacturers use oil for fuel and as
a feed stock and we use natural gas for a great many things,
drying, melting, process cooling, machine drive and
refrigeration, heating, ventilation, A/C, in boilers to produce
steam and electricity and finally as a feed stock for refining
chemicals in primary metal sectors.
Because of this reliance our members have asked us and we
recently retained IHS Economists to examine our oil and gas
pipeline needs and the challenges and opportunities that exist
for manufacturers.
The challenges are what IHS calls a mismatch geographically
in the growth in natural gas demand and supply in the U.S.
lower 48. The rapid growth of low cost production out of the
Marcellus and Utica plays has created a bottleneck as producers
are unable to find pipeline capacity to move gas from the well
to consumer markets.
IHS believes that some of the pipeline capacity can be
achieved by re-engineering the existing pipelines and changing
the ones that are coming in and turn them and make them go out
so that that low cost gas can go to some of these regions.
However, the potential for reversal of these pipelines is going
to be exhausted at some point and we're still going to need to
build more. The only way to do that is by committing to
building new pipeline capacity.
And when pipelines aren't available manufacturers do
suffer. The EPA's recent boiler MACT regulations, generally
speaking, have forced most manufacturers to switch their
boilers to natural gas. But several struggle to meet the boiler
MACT imposed deadlines because they have trouble getting
authorization and approval to get the gas to their plants.
In the Northeastern United States, where this is happening,
some manufacturers are basically having to turn to truck CNG to
their facilities because they can't get a pipeline which places
them at a disadvantage relative to other places like the Gulf,
who could just have the gas.
The opportunities, on the other hand, are significant. When
pipelines are built it means jobs across the manufacturing
supply chain. IHS estimates the construction of new natural gas
transmission lines meant more than 347,000 jobs in 2015 with
almost 60,000 of them manufacturing products like steel pipe,
coatings, construction equipment, compressor motors, gauges and
instruments and sand and gravel.
On the oil pipeline side, at least 66 different
manufacturing subsectors benefited from the construction of
crude oil pipelines in 2015 and these include iron and steel,
fabricated metal, cement, machinery and paints and coatings.
As with most studies of the energy renaissance the numbers,
the big numbers, are very, very big. Real GDP increased by $190
billion and 1.4 million more jobs in 2015 because of shale gas.
The average family had about $1,300 in their pockets that they
would not otherwise have had because of the shale renaissance.
But I'd like to spend a few minutes talking about the
stories behind this which are really pretty remarkable in the
manufacturing sector.
Stories like ACME Brick Company, the largest brick
manufacturer in the U.S., with facilities in Minnesota,
Arkansas, Oklahoma, Texas and Colorado. ACME produces a product
that is heavy bricks, so moving natural gas via pipelines to
where the bricks are made is far more efficient than moving the
heavy bricks long distances.
CF Industries uses natural gas to make enough fertilizer to
nourish ten percent of the corn planted nationally.
Covestro uses natural gas as a raw material to manufacture
energy efficient products like polyurethane insulation.
UPS has more than 6,500 alternative fuel and advanced
technology vehicles in operation, more than half of which
operate on natural gas.
Caterpillar and CNH Industrial, they make the equipment to
support the construction of the pipelines and the operation of
them, but they also use natural gas as a fuel for their own
operations.
And small manufacturers like Marble King in West Virginia,
a 28-person manufacturer, and Biad Chili Company, a New Mexico
manufacturer who grows and processes chili peppers. They credit
local pipelines as their key to staying competitive in the face
of growing international competition.
As our pipeline network grows so does manufacturing
opportunity. It's imperative that the oil and gas pipeline
system keep pace with supply and demand growth. So much new
capacity is going to be needed over the next decade that
prolonged delays could cause major problems for manufacturers.
The NAM appreciates the attention this Committee is giving
this issue and stands ready to support any efforts to ensure
that pipelines are built in a timely fashion to meet our
sector's growing energy demand.
Thank you.
[The prepared statement of Mr. Eisenberg follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Eisenberg.
Mr. McGarvey, welcome.
STATEMENT OF SEAN McGARVEY, PRESIDENT, NORTH AMERICA'S BUILDING
TRADES UNIONS
Mr. McGarvey. Thank you, Madam Chair. It is an honor to
join you today to discuss our nation's energy infrastructure.
As many of you know North America's Building Trades Unions
is comprised of 14 national and international unions
representing three million skilled craft professionals in the
United States and Canada. On behalf of our members I welcome
the opportunity to explain how our value-based business model
and our world class training capacity play an integral role in
the construction and maintenance of oil and gas infrastructure.
But our expertise and exposure to the energy industry does
not end there. Building Trades members can be found working in
extraction sites, power plants, carbon capture and
sequestration facilities and export facilities. Currently we
estimate that 50 percent of our membership is employed by
energy-related industries.
I also wanted to take a moment to thank the members of this
Committee on both sides of the aisle who have voted to retain
prevailing wage protections in the construction industry. By
helping safeguard these community standards and promoting
training, we are protecting and preserving some of the few
remaining occupations that cannot be outsourced to foreign
countries or decimated by low road business models that are
centered upon low wage, low skilled and easily exploitable work
force.
In any successful organization, labor or otherwise, being
the best means setting high standards and maintaining and
exceeding those standards.
We harbor no illusions that our success is predicated on
anything other than delivering the safest, most highly trained
and productive skilled craft work force found anywhere in the
world. That's why our rank and file members and our signatory
contractors collectively fund, to the tune of roughly $1
billion a year, a nationwide network of 1,600 local joint labor
management apprenticeship training programs, or JATCs. They are
regulated by Department of Labor or State Apprenticeship
Councils and they are governed by a Board of Trustees made up
of equal numbers of contractors and labor representatives.
If the building trades system which includes both
apprenticeship level and journeyman level training was a degree
granting college or university, it would be the largest degree
granting college or university in the United States, over five
times larger than Arizona State University. If it was a K
through 12 school district, it would be the fourth largest
school district in the U.S., only behind New York, Los Angeles
and Chicago. And there's no taxpayer money involved in this
system. Our members contribute a portion of their hourly wage,
and our contractors contribute out of their own pockets.
We are successfully working with community leaders to
leverage both public and private investments in capital
construction projects to create structured career training
opportunities for historically underserved communities such as
women, minorities and veterans. Through these efforts and
others, we now boast over 100 pre-apprenticeship programs to
ready students for the academic and real world challenges of
being in a union apprenticeship program.
Specific to the topic of today's hearing I want to
highlight the International Union of Operating Engineers
Pipeline Training Fund. Many of the work opportunities in the
natural gas industry require specialization within the pipeline
crafts. For example, most operating engineers run traditional
heavy equipment such as bulldozers, backhoes and cranes and
excavators. However, the pipeline industry has a unique set of
skill requirements and the operating engineers maintain a
robust training program in partnership with the Pipeline
Contractors Association to meet the industry's needs.
For example, during the natural gas renaissance, the OEs
developed a new curriculum and course work in directional
drilling to add to their existing pipe bending and pipe lifting
classes, maintenance and rehabilitation in rock drilling
classes. The OE currently offers more than 130 classes in
different areas of the pipeline sector alone.
In real terms it means in right to work states like South
Dakota specialized operating engineers average $35 an hour, and
that means workers are able to provide for their families while
receiving union provided health care and pension benefits. But
it is not easy to make it--it's not as easy as we make it
sound.
Every single large energy project is subjected to years of
regulatory environmental study. And to be sure, pipeline
infrastructure has failed to keep pace with the increased
production which has caused several regions of the country to
experience shortages and severe price spikes.
New England is a perfect example of how the lack of
sufficient pipeline infrastructure can have an adverse effect
on both businesses and consumers. In 2000 only 15 percent of
New England's electric generation was from natural gas fuel-
power plants. By 2015 that number was nearly 50 percent but the
pipelines need to feed these plants with natural gas,
presumably from the Marcellus shale region, had not kept pace.
It isn't for lack of trying.
Less than two months ago New York State denied the
Constitution pipeline after it had already received FERC
approval and the company had been working with the state for
three years to mitigate environmental concerns. The permit
denial will delay about 2,400 direct and indirect jobs that
will be created during pipeline construction generating $130
million in labor income for the region. That decision could
also cost local governments approximately $13 million in annual
property tax revenue.
Other recent delays which have essentially put the pipeline
industry into a tail spin include the Jordan Cove LNG export
terminal and associated gas pipeline was rejected by FERC in
March and then granted a rehearing; in April Kinder Morgan's
withdrawal of the Northeast Energy Direct Pipeline application
with FERC due to opposition; the New Jersey Department of
Environmental Protection's review of the final section of the
Transco Leidy Pipeline is significantly delayed due to pending
litigation; the Dakota Pipeline received revocation of its
permit from the U.S. Fish and Wildlife Services; the Rover
Pipeline from the Marcellus shale region to the Midwest
continues its lethargic approval process; and Dominion's
Atlantic Coast Pipeline route has been rerouted a number of
times to address concerns.
The bottom line is that pipelines are the safest mode of
transporting natural gas and the U.S. Department of
Transportation's statistics show that underground pipelines
transport natural gas far more safely than ships, rail cars or
trucks. All the major pipelines I listed above will employ the
most advanced technology and monitoring systems to make it even
safer with 24/7 safety measures and regular pipeline safety
plans.
To look at it from a different angle there are three
components to every pipeline project: industry, labor and
government. Industry wants to grow, labor wants to create jobs
and the government wants safety and environmental concerns
adequately addressed.
But the third leg of this stool is proving to be
adversarial. Instead of an advocate for the first two, comments
out of the Administration such as eliminating the ``dash for
gas'' are only superseded by the lack of support for gas to
back up intermittent renewables and a less than ambitious
support system for carbon capture and sequestration at power
plants and industrial facilities and a virtual vendetta against
hydraulic fracturing and enhanced oil recovery and of course,
the denial of Keystone XL. Our country cannot afford an energy
policy that is all hat and no paddle.
North America's Building Trades Unions stand ready to work
with this Committee and Congress to find innovative funding
mechanisms, sensible regulations and collaborative tripartite
relationships between government, labor and industry to bolster
America's leadership in the energy industry and put a floor
under the middle class while creating millions of jobs.
Madam Chairwoman, while we talk about the various
components of an energy project we cannot neglect to mention
the impacts of the local community. Many of our small
communities across the country welcome infrastructure
investment. In just the pipeline industry alone, we're talking
about 800,000 jobs. The income from these jobs goes directly to
our members and local training programs and, in turn, supports
the tax base of Main Street and those seeking employment in the
construction industry.
This is truly how we can invest in America without spending
a single Federal dollar.
The Chairman. Mr. McGarvey, I am going to ask you to wrap
up here.
Mr. McGarvey. I apologize, Madam Secretary.
Thank you for your invitation and opportunity to address
the Committee.
[The prepared statement of Mr. McGarvey follows:]
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The Chairman. Thank you. I am sorry to cut you off. Your
full statement will be included as part of the record.
Mr. McGarvey. Thank you.
The Chairman. We are just trying to stick to our five
minutes here.
Mr. McGarvey. Gotcha.
The Chairman. Dr. Parfomak, welcome.
STATEMENT OF DR. PAUL PARFOMAK, SPECIALIST IN ENERGY AND
INFRASTRUCTURE POLICY, CONGRESSIONAL RESEARCH SERVICE (CRS)
Dr. Parfomak. Good morning, Chair Murkowski, Ranking Member
Cantwell and members of the Committee. My name is Paul
Parfomak, Specialist in Energy Policy at the Congressional
Research Service. CRS appreciates the opportunity to testify
about oil and gas pipeline infrastructure today.
In accordance with our enabling statute CRS takes no
position on policy or legislation.
The United States pipeline network is integral to the
nation's energy supply and provides vital links to other
critical infrastructure such as power plants, airports and
military bases. Recent growth of domestic natural gas and crude
oil production has resulted in an unprecedented expansion and
reconfiguration of this network.
From an energy market perspective continued expansion of
U.S. pipelines has the potential to improve the efficiency of
gas, oil and refined products transportation linking new
producing regions with traditional consuming markets more
directly with greater capacity and reliability. Such linkages
may lower average transportation costs and may reduce regional
price differences for energy commodities, especially in the
case of crude oil that may also reduce the volume shipped by
rail, truck and barge.
Pipeline expansion may also support jobs in energy
production and pipeline construction and may create economic
benefits among industries that rely on oil and gas as key
inputs.
However, the future operation and expansion of the pipeline
network also face significant challenges related to safety and
security, emissions regulation, price volatility and public
perception which I will now discuss.
Pipelines are a comparatively safe means of transportation
compared to other modes. Nonetheless, a single, uncontrolled
pipeline release can be catastrophic in terms of human life,
property damage and the environment. Uncontrolled releases in
Michigan, Arkansas, California and other states have raised
congressional concern about pipeline risks and increased local
intervention in pipeline development.
Over the last 15 years Congress has acted repeatedly to
strengthen Federal oversight of pipeline safety and security.
Additional safety regulations are being finalized and new
safety legislation is pending. Congress is likewise examining
the Federal oversight of pipeline security addressing both
physical threats and the growing threat of cyber-attacks.
New safety regulations and evolving security guidance are
intended to reduce overall pipeline network risk but their
associated costs and practical impacts have yet to be
determined.
In 2015 the Environmental Protection Agency finalized its
Clean Power Plan to regulate greenhouse gas emissions from
existing power plants. Last month, the EPA also issued new
regulations to reduce emissions of methane and volatile organic
compounds from the oil and gas industries including pipelines.
The Clean Power Plan is currently under litigation. If
implemented, it may encourage natural gas-fired generation to
replace coal-fired generation and to firm up renewable power.
Such an outcome could increase demand for pipeline capacity and
could potentially increase gas and power interdependency.
Regulations to reduce pipeline system direct emissions will
likely effect how pipelines are operated and maintained with
implications both for the environment and public safety.
Energy markets are in a period of significant price
volatility. In January, for example, the price of Brent crude
fell below $29 per barrel, dropping over 45 percent in about
three months. Last week, Brent crude traded back above $50.
Likewise, since 2012, Henry Hub natural gas prices have
fluctuated from under $2 to over $6 per million BTU.
Such price volatility adds significant risk premiums to
capital investment decisions for pipeline developers. One
result of these uncertainties may be greater caution among
developers before committing additional capital to new pipeline
projects or the cancellation of existing projects such as the
Northeast Energy Direct Pipeline which failed to attract enough
customers.
The oil and gas sectors tend to have a long-term
perspective on infrastructure investment, often 20 years or
more. So a short-term price volatility may not change their
long-term plans, but the timing and location of their pipeline
investments may have important implications for regional
markets.
Public perception of pipeline infrastructure has long been
a consideration in pipeline development, but its importance
seems to have intensified over the last several years. Public
concern about pipeline safety has prevented new pipeline siting
in certain localities and increased development time and cost
in others. Controversy surrounding the Keystone XL pipeline and
the Constitution pipeline are just two recent examples of
projects heavily influenced by public opinion, even where there
is Federal siting authority state and community stakeholders
retain many statutory and regulatory avenues to affect siting
decisions. Consequently, public perception is likely to be an
ongoing priority in planning and policy related to pipeline
development.
Thank you for the opportunity to appear before the
Committee. I will be happy to elaborate on my opening remarks
and address any questions you may have.
[The prepared statement of Dr. Parfomak follows:]
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The Chairman. Thank you, Dr. Parfomak.
Mr. Peress, welcome.
STATEMENT OF N. JONATHAN PERESS, DIRECTOR OF AIR POLICY,
ENVIRONMENTAL DEFENSE FUND (EDF)
Mr. Peress. Chairman Murkowski, Ranking Member Cantwell and
members of the Committee, thank you for providing this
opportunity for the Environmental Defense Fund to discuss
challenges and opportunities associated with natural gas
pipeline infrastructure.
Pipelines play a critical role in our economy and in the
ongoing transformation of the energy system to reduce air
pollution and deploy renewable energy resources. In this regard
natural gas is particularly well suited to provide flexible
reliability services like fast ramping in response to variable
wind and solar output.
The challenge we face is that the natural gas market design
is no longer in sync with contemporary supply and demand
dynamics. Market price signals for the kinds and amounts of new
midstream gas infrastructure are not focused and as discussed
in my written testimony, are likely to result in more pipeline
capacity than we need. And because pipelines are so expensive
to build and operate excess capacity will impose billions of
dollars in unnecessary costs to energy customers.
At a time when energy customers have new data-driven tools
and smarter control over energy consumption decisions, the
natural gas market design is comparatively dumb, especially in
comparison to the wholesale electricity markets.
Electricity markets balance supply and demand continuously
and they financially settle. In other words, they price and set
the value of electricity and reliability services every five
minutes, every 15 minutes at the most. Natural gas pipelines,
on the other hand, are compensated based almost entirely on
fixed charges to reserve capacity through long-term contracts,
20 years or more for new pipelines, not fees based on how much
gas is delivered and not the value of gas delivery services at
times during the day when pipeline customers most need gas.
As a consequence, pipeline operators are somewhat
financially indifferent to whether their pipelines are fully
utilized. Nationally, 46 percent of available pipeline capacity
goes unused according to a recent Department of Energy study.
In other words, almost half of the money being paid by the
pipeline customers, often retail and energy consumers, is for
annual capacity that they are not using. Likewise, pipelines
have muted incentives to provide flexible delivery services in
response to customer needs.
Gas-fired electric power generators, now the largest
pipeline growth customer, simply do not operate in a steady
state. What generators and most pipeline customers desire is
the flexibility to get gas deliveries when they need gas and
this flexibility need is increasing in a more flexible dynamic
and controllable system. Flexibility then, in general, is not
offered and is not priced by the pipelines.
In some regions it may be that what is needed is more
natural gas storage, more LNG storage, electric storage or
price responsive demand response or it may be more pipelines.
Without the market creating targeted price signals, gas
consumers and regulators can't determine the least cost
solutions.
We empathize with the challenges being brought to the
Committee's attention by the National Association of
Manufacturers. NAM needs better gas deliverability but because
pipelines are paid for capacity, not services, the price for
that deliverability has not been clarified. And paying for more
annual capacity is not necessarily a cost investment, cost
effective investment, for NAM's members to make, otherwise they
would be making it. Those are the economic underpinnings to the
math problem that Mr. Epstein mentioned earlier.
FERC understands this problem. They asked the pipeline
industry to voluntarily develop faster, more responsive
services, but the pace of change is too slow.
EDF, at its core, believes that well-structured markets
efficiently allocate capital and resources and will benefit--
and will foster beneficial environmental outcomes.
In the context of efficient outcomes, I want to touch on
methane emissions which when leaked into the atmosphere
constitute waste. Waste which not only adversely effects energy
customers but also which goes to the heart of natural gas as an
environmental solution.
Earlier this year we had a glaring example of that waste.
The leak at Aliso Canyon was the largest ever measured in U.S.
history forcing thousands to flee from their homes, releasing
enough methane to supply 60,000 homes for a year. Methane is a
potent climate forcing agent, and this disaster was preventable
through basic, well construction, operation and inspection
practices. Aliso Canyon amounts to a failure of voluntary
measures and of regulatory oversight. The extent of preventable
leaks raises legitimate questions about the propriety of
substantial further gas infrastructure expansion.
Thank you for the opportunity to present our perspectives
which my written testimony discusses in greater detail.
[The prepared statement of Mr. Peress follows:]
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The Chairman. Thank you, Mr. Peress.
I thank each of you for your testimony here this morning.
Again, I mention that we will likely see a vote around 11
o'clock, so we will be moving in and out here but do not let
that reflect a lack of interest. I think the fact that we have
seven members from each side of the aisle here today indicates
a clear interest in understanding more of our infrastructure
issues, the capacity issues and I think really, the math
problem that you have mentioned, Mr. Eisenberg.
Mr. Peress, I think you are the only one here on the panel
who thinks that we might possibly be suffering from over
capacity. More of what I hear is a concern that we lack
capacity, not only for the immediate term but moving forward
and understanding what those needs will be, recognizing that
building a pipeline today is extraordinarily expensive and
extraordinarily costly from a time perspective.
I mentioned the fact that the construction of the
TransAlaska pipeline was a three-year construction process. But
getting us to that point, I think we will recall the history,
was much longer than that.
Mr. Black, nobody has really talked about the permitting
issues and some of the siting challenges.
Maybe it was you, Dr. Parfomak, that spoke to the
disincentive, if you will, for investment in pipeline siting
things like the regulatory issues, the siting concerns, the
permitting.
Mr. Black, can you give us some discussion here on how long
permitting is taking for an oil pipeline in the United States?
I know we are talking a lot about natural gas here, but can you
please talk to me a little bit about the time involved with
permitting a pipeline?
Mr. Black. Thank you, Senator.
It's taking longer to site many liquids pipelines.
The Chairman. Define longer.
Mr. Black. I don't have that. By a period of years,
sometimes, pipelines are taking longer. Of course, Keystone XL
is a great example of a pipeline review process that took
longer.
Liquid pipelines are sited under state laws so state
processes like in Minnesota for the Sand Piper pipeline have
been lengthened years beyond what they should be.
And then for Federal issues we need to go through Federal
lands agencies if we pass Federal lands or if we need
construction-related environmental permits. And in many cases
we're able to get through those processes, and we've built more
than 20,000 new miles of pipe in the last ten years but it's
taking longer and that process adds to the cost of the projects
and those costs can ultimately be passed on to the consuming
public.
The Chairman. I want to switch over to jobs for just a
moment.
I will probably have an opportunity for a second round
here, but there has been some push back, if you will, when we
talk about the jobs numbers. Several of you have laid some
significant and some impressive numbers out there that come
with the construction of a pipeline. But we hear repeatedly the
challenge that you are only creating jobs for that specific
period of construction; and therefore, these are considered
just temporary jobs. We heard that replayed a lot with the
Keystone XL.
Mr. McGarvey, can you speak to the jobs issue?
Mr. Eisenberg, you talked about, kind of, the broader
impact when you create a pipeline it is not just the pipe that
is bisecting an area but the implications for broader job
creation.
Mr. McGarvey, if you can start, please.
Mr. McGarvey. Thank you.
You know, that's the language that's been used around that
has been a little aggravating. I don't--people don't really
understand the construction industry. The Hoover Dam was a
temporary job, the Golden Gate Bridge was a temporary job, and
the new Freedom Tower in New York that rose in place of the
Twin Towers was a temporary job. That's the nature of
construction. People, through the course of 30 or 40 years,
maintain their position in the middle class going from
construction project to construction project. I'm not aware of
a project where somebody starts on their first day and ends
their career 40 years later on a construction project.
So that temporary job thing is a real itch for us. It
bothers us greatly. It bothers our members when they talk about
these career construction craft professionals just being
temporary jobs.
The Chairman. Because they are professional jobs, most
clearly.
Mr. Eisenberg, can you speak very quickly to that in terms
of the jobs impact and what it means beyond the actual
construction of laying the pipe?
Mr. Eisenberg. Absolutely and thank you for raising this.
Obviously, through the Keystone process, I mean, where
there was a lot of inflamed rhetoric from every side, it was
frustrating to hear that there just wouldn't be many, many
jobs. I mean, obviously, there's the jobs for the men and women
who are going to be making the pipe and building this facility
and operating and maintaining it and then the manufacturing
jobs that from rolling the aluminum and the steel and the
things like that, that actually go into the inputs here, the
compressor stations, things like that.
Our studies actually looked at this and added up both the--
and analyzed both the construction and the operations and
maintenance. And so, just, I mean, I pulled up the oil study.
In 2016 when you add those together oil pipelines, both
construction and maintenance, will contribute 243,167 jobs.
Twenty-eight thousand of them, 28,438, will be in
manufacturing.
So the operations and maintenance piece is obviously
smaller than construction. These are gigantic construction
infrastructure projects, but they're there and you have to
maintain these things. You have to keep them safe, you have to
keep them secure and you have to keep supporting them.
Between 32 and 37 percent of that is going to be from the
manufacturing side of it, so these are real jobs. They matter
to our members, and obviously, we care about them continuing.
The Chairman. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you, Madam Chair.
Mr. Black, oil being transmitted by pipeline, typically, is
it treated to reduce volatility and vapor pressure?
Mr. Black. The pipelines are designed for crude oils of all
volatility. Many of the products that we deliver have a higher
volatility than even light crudes, so the volatility is not
really an issue for pipeline transportation which operates
mostly underground and does not have the risk of the product
coming to an abrupt stop like it does on another transportation
mode.
Senator Cantwell. So there is no regulation, you are
saying?
Mr. Black. Well there's certainly regulation about worker
safety.
Senator Cantwell. What is it?
Mr. Black. And about pipeline safety, but there are not
additional regulations dealing with product volatility----
Senator Cantwell. What do you----
Mr. Black. Because anything that covers gasoline would
certainly cover a light crude from the Bakken.
Senator Cantwell. What do you think the volatility is for
most pipelines shipping oil? Do you know? We will follow up
with you on a question for the record.
Mr. Black. Sure.
Senator Cantwell. I don't want to put you on the spot about
vapor pressure and pipeline volatility, but it is certainly a
subject I have gotten up to speed on in the last year.
Mr. Peress, I want to go back to your comments about
natural gas market changes. I don't want this Committee to get
into a debate that we often have now about nuclear power, which
is about we have got to change the way it is regulated because
nothing can get built. I don't want to have the same discussion
about natural gas, because I would actually like to see natural
gas.
But you are basically saying that the market has changed
and that we need to have different signals if we want to
improve the utilization of the pipelines that we have today. So
what do you think those signals are? Shorter contracts? What it
is that will allow gas to continue and flourish as a bridge
fuel source?
Mr. Peress. Right now the market is completely based on
bilateral contracts between pipelines and their customers for
capacity. Capacity does not necessarily equal deliverability.
What customers need is they need to get fuel delivered to
them. And because that deliverability is not priced because
what--pipelines are totally compensated based on capacity. We
see inefficiencies within the way that the pipelines are
operated.
We are suggesting that pipelines should be able to earn
premium revenues for providing enhanced deliverability and
flexibility services so that they're not just getting paid for
capacity so that the market calls forth the right types and
amounts of resources for customers to get gas when they need
it.
Customers don't need capacity. Customers need gas. There's
a difference.
Senator Cantwell. How do you think we make this transition,
because I am assuming the companies that invested in these
pipelines need to recoup their investments. Obviously, there
has been a structural change in gas pipeline contracts. I do
not know if this came about because we used to use natural gas
primarily for heating and now it is for electricity? And the
electricity markets are what they are today. I mean, there has
been a big change in the market. Is that what we are dealing
with here?
Mr. Peress. Yes, Senator.
It came about in the early to mid-90's when FERC, I think,
prudently decided that they were going to turn both the
interstate transmission companies on the electric side and the
interstate pipelines into common carriers and take them out of
the supply business.
And part of the deal that they struck in order to take the
pipelines out of the supply business, in other words, pipelines
are not selling gas molecules, they're selling transportation
services, was to come up with a compensation scheme that would
keep them interested, engaged and investing capital. And that
compensation scheme was based on the value of capacity. And by
and large, that compensation scheme and that market design has
been highly successful.
Fast forward 20 years. At this point in time it's--there's
a need for that compensation scheme to evolve. Virtually every
customer or company that Mr. Epstein mentioned currently has
arrangements to buy firm capacity off of a pipeline. If they
wanted to buy more firm capacity, they can invest their money
and get more firm capacity. But they don't want to do that.
What they want to do is enhance deliverability. Paying for
capacity is not a cost effective investment.
Why? Because you're paying for that capacity every day of
the year, 24/7 over the term of that contract whether or not
you use it.
What we think needs to happen is there needs to be a shift
in the rate design so that as pipelines are incented to provide
more flexible delivery services they can earn and garner
revenues from those services which are actually the services
that customers need. Capacity does not equal deliverability and
FERC understands this.
Senator Cantwell. Well, I know my time is about expired,
but I will say I definitely support the Senate version that we
worked out on siting. I am not against siting of new pipelines,
but we have to meet safety standards in the law.
But I think this issue that you touched on today is a
really big issue. I want safety. I also do not want to get
caught short in the long-term because the market has changed
and we are not building capacity.
I think it is a very interesting conversation here about
how we move forward, so I hope we will continue this
conversation.
The Chairman. Thank you, Senator Cantwell.
Senator Daines.
Senator Daines. Thank you, Chair Murkowski and Ranking
Member Cantwell for holding this important hearing.
I come from the State of Montana. It is a place where we
have some of the country's most pristine wild spaces along with
an abundance of natural resources, including robust oil and
natural gas industries which support the employment of 43,000
people.
At the same time our scenic mountains, our rivers, our elk,
our trout and so forth are the main motivator one might want to
stay in our state. In fact, tourism is an industry that is
nearly $6 billion and employs over 53,000 Montanans.
That is why, I think, we strike the right balance with the
Safe Pipes Act. I was pleased to help author it, and it passed
the Senate unanimously last night. Among other provisions this
bill reauthorizes PHMSA through 2019. That takes some of the
uncertainty out of the equation. It also helps safeguard the
environment by improving inspection report turnaround times. I
look forward to seeing the President sign this into law soon.
Mr. Black, I would like to start with the Safe Pipes Act
which passed unanimously last night. In your experience in the
industry how do you see the Safe Pipes Act making our pipelines
even safer?
Mr. Black. Well thank you, Senator, for your role in that
bill and in pipeline safety. I remember the field hearing you
convened in Montana through your role on the Senate Commerce
Committee.
I'd like to single out the provision that you helped author
on quicker inspection results. Pipeline operators want to hear
for the purpose of improving safety if a PHMSA inspector finds
something on his or her visit. Sometimes, unfortunately, we
were having a period of even more than a year or two years for
that safety inspector to tell the pipeline operator about those
concerns.
We're in the business of learning from each other and
continually improving our pipeline safety programs, and we want
that input quickly. I want to thank you for that provision that
encourages/directs PHMSA to give a post inspection briefing to
a pipeline operator much more quickly so that we can get about
the business of addressing whatever that PHMSA inspector finds.
That's one way it's going to improve pipeline safety, and it
was a great bill that we were happy to support.
Senator Daines. Thanks, Mr. Black.
I want to shift over to Mr. McGarvey. I was struck by your
comments about temporary jobs. I grew up in the construction
industry. My dad is still building houses. If you keep food on
the table in construction, it is by stringing together a series
of temporary jobs to stay employed.
I was struck by the inconsistency on the battle on the
Keystone pipeline. Why is it those were temporary jobs but when
we are building bridges and highways and infrastructure, those
are jobs? I think it is hypocrisy, frankly. That is how you
stay employed through a lot of temporary jobs in construction.
Thank you, Mr. McGarvey, for that point.
It is clear we need to invest in our energy future and
expand our energy infrastructure in order to keep up with
demand. Projections in the next 25 years, we are going to add
two billion people to the planet. Energy demand is going to
increase 85 percent from where we stand today, almost doubling
in the next 25 years. The question is how are we going to meet
that demand and what role will America play in that?
However, it appears that the Obama Administration is not
listening to the unions. I am glad to have a union leader here
today, Mr. McGarvey. They are not listening to associations and
the families that are most affected by these anti-energy
policies.
The denial of the Keystone pipeline was a big loss for
Montana workers and families and teachers and unions. Seventy
million dollars of tax revenues every year in the State of
Montana because that pipeline comes into Montana first.
By the way, it is not just about Canadian oil. One hundred
thousand barrels a day of Montana/North Dakota oil was part of
the Keystone pipeline. It was just one of many denials and
delays by this Administration.
I appreciate your comment too. You are speaking my language
when you said, all hat, no cattle. As a Montanan, I know
exactly what you meant by that.
Mr. McGarvey, in your testimony you state that the denial
of the Constitution pipeline in New York will delay thousands
of jobs that would generate millions in income for families in
the region. Can you elaborate on how this denial, like the
Keystone XL pipeline and others around the country, is hurting
our economy, our unions, our energy security and the families
that most need it in this very lethargic economy that we have
today?
Mr. McGarvey. Yes, Senator, I'll do my best. These denials
of these pipelines which are the most advanced, technologically
advanced, safest pipelines, you know, in the history of the
world.
In the case of the New York pipeline, which was already
approved by FERC, it really got bogged down which, I believe,
was in local politics. There were very strong, anti-pipeline,
activist groups in the State of New York. There's a--just last
week, I think it was the State of New York just passed a pretty
big bill on green energy which proving that pipeline would have
been moved in the opposite direction in the view of some of
those folks.
But the bottom line is when it comes to our natural
resources, oil and gas, the manufacturing that comes about once
we get the pipeline system in place, speaking of the Shell
cracker, you know, $6 billion project in Southwest Pennsylvania
and New York State hasn't been able to take advantage of any of
that. It doesn't have the infrastructure in place when it comes
to transporting gas and oil through the state.
On top of that, my skilled professionals that I represent,
men and women who've gone through, you know, three to five
years worth of training, 6,000 to 10,000 hours, to be that
safest, most productive craft work force in the world, aren't
getting the opportunity to apply their skills. And they're
being told that the green energy future is where we're going to
need your skills. And I would note that the DOE's Quadrennial
Report pointed out that the average medium wage for a solar
installer in the United States is $16.01 an hour.
And my membership that I represent currently is making
substantially more than that and their families are depending
on those higher income levels that are paid, particularly in
the oil and natural gas and petrochem industries, to maintain
their place in the middle class. So it has a devastating impact
when they don't have the opportunity to go to work and apply
their skills. In some cases, they have to travel from their
homes to places where work is available, be away from their
families, their children. And that puts a separate hardship on
a family.
But you do what you have to do in the construction
industry, and that's why it's called journeyman's card because
you go where the work is. But a reasonable, rational policy in
New York State and through the United States on energy,
settling most of these differences and continuing the arguments
where we need to have them.
Listen, I'm insulted sometimes when people talk about the
safety issue because I represent men and women, three million
of them, and their families. And if you've ever had a member
get killed in a construction accident and you're responsible to
go and meet with that family and explain what happened and
explain what their future looks like and how you're going to be
able to help take care of them. We put a preeminent focus on
safety. That's why we're so safe.
And that's why the industry, also, mostly publicly traded
companies, put that emphasis, you know, on making sure that
they're building those safe pipelines, that they're maintained
safely and that they continuously get good ratings and good
returns for their investors and the people that live in the
communities in which those infrastructure projects go through.
So--
Senator Daines. Yes, and to that point we are out of time,
but I know the energy jobs in Montana pay twice, twice, what
our state averages are.
Thank you.
Senator Barrasso. [presiding]: Thank you, Senator Daines.
We will start with Senator Manchin and the roll call vote
has begun.
Senator Manchin. Thank you very much. Thank all of you for
your testimony today.
I wanted to say, Mr. McGarvey, basically, I think you know
the State of West Virginia pretty well. We have been a heavy,
heavy lifter for many years and produced an awful lot of energy
for this country. We are an exporter of energy, and we have
been heavy in fossil with coal and now we have a natural gas
with Marcellus shale coming on and the wet gas with ethane
which has been very instrumental in our state.
We have very high unemployment right now because of the
demise of the coal industry, if you will. With that being said,
we are looking for more opportunities in jobs. I know through
your apprentice programs you have been trying to get more of
our labor force in there. Can you give me a little update
quickly on what you have done so far for some of our laid off
miners and some of these people with the skill sets because of
the shift in our energy in West Virginia or have you been able
to identify that?
Mr. McGarvey. Yes, Senator, we are in one instance across
the United States in my testimony talked about apprenticeship
readiness programs.
They're usually a 6- to 12-week program that's an
introduction to the construction industry. So you would take
women, communities of color, veterans and bring them into
apprenticeship readiness programs, also displaced workers, for
instance coal miners in West Virginia. We have a program just
starting in----
Senator Manchin. They have a high priority, I am saying.
Mr. McGarvey. Right in Southwest Pennsylvania on the border
with West Virginia.
Senator Manchin. Right.
Mr. McGarvey. Which will give opportunities for lots of
West Virginia.
Senator Manchin. Well, the cracker plant is going to be
tremendous for all of us.
Mr. McGarvey. That's right.
Working in conjunction with Shell we put that program
together. Just kicking it off.
So they move from apprenticeship readiness into
apprenticeship. They'll get credit for skill sets from other
occupations they already had, move them further up the economic
ladder in the apprenticeship and quickly into journeyman status
in a new career that's self-sustaining in the middle class.
Senator Manchin. I have been advocating for a three state
solution which would basically be the Mid Atlantic energy hub,
the same as the Southwest hub. The three states of West
Virginia, Ohio and Pennsylvania should be building the loop to
keep the ethane, to keep basically the gas, natural gas, supply
to attract more businesses to that area. I think this would be
a tremendous opportunity for all of us, and hopefully you all
can support that.
Mr. Peress, I think that your group is basically opposed to
the XL pipeline. I would just like to hear your explanation.
We have had a train blow up in West Virginia. We had trains
blow up everywhere. Why are you all opposed to the line?
Mr. Peress. Senator Manchin, I'm not aware that----
Senator Manchin. EDF?
Mr. Peress. EDF opposed the XL.
Senator Manchin. Let me read it to you. Do you want me to
read it to you? You're--you didn't know that your president?
Mr. Peress. Well, I work on natural gas issues, Senator
Manchin. If you----
Senator Manchin. Well, here is what it says.
It says, ``The Keystone pipeline was not the right path for
America. President Obama deserves credit for rejecting the
project. As a nation we have turned the corner and now
recognize that we need to consider the impact of energy
projects on climate pollution.''
Mr. Peress. Senator, maybe I can address it in the policy
context in which you are asserting it?
Senator Manchin. And that was by Mr. Fred Krupp.
Mr. Peress. Would that be okay if I----
Senator Manchin. Sure, anyway you want to do it.
Mr. Peress. So anytime there is a large investment in
infrastructure that's a bet. That's a bet because
infrastructure is so costly and so expensive, in the billions
of dollars.
Senator Manchin. Can I interrupt?
I am going to have to move on because we are running out of
time. I want to hear this, but I have never known of a company
that would make this type of investment unless they had a
market. You are saying they are building these projects on spec
whether it be a pipeline or a transmission line, they are
building on spec, hoping it will come. Build it and they will
use it?
Mr. Peress. No, I'm saying that companies that invest in
infrastructure are making a bet that there's a market for that
infrastructure over the long period of time it takes to pay
down that infrastructure.
And from our perspective and what we know, and I can only
speak to this on the gas side, not the oil side because my area
of expertise is on gas. The gas industry itself, in recent
filings, is suggesting that renewable energy, like wind and
solar, will be taking market share away from them, that those
will be an increasingly lower cost energy sources.
Senator Manchin. But the EIA basically predicts that
fossil, as far as gas and coal, is going to be a major player
with almost 70 percent of the play, up until 2040. Seventy
percent of the energy produced for this nation is going to come
from, those resources.
Mr. Peress. The EIA also predicts increasing amounts of
wind and solar----
Senator Manchin. That is great, I am saying but it is not
going to be baseload. You agree to that, right? It will not be
baseload.
Mr. Peress. I do agree with that.
Senator Manchin. So you are going to have to have baseload.
Mr. Peress. I don't agree with that.
Senator Manchin. You do not agree about the need for
baseload generation?
Mr. Peress. No.
Senator Manchin. So you like intermittent power? You are
okay with----
Mr. Peress. I think an optimized system uses the lowest
cost resources in consideration of public policy elements.
Senator Manchin. And you think those could make it without
the subsidies that we have given?
Mr. Peress. Are you referring to pipelines or?
Senator Manchin. I am referring basically to renewables and
everything else that we have done.
Mr. Peress. I think once we start opening the door on who
is subsidized, how much that becomes a much more assurance.
Senator Manchin. Sure, I agree.
I think, Mr. Black, I have one question for you here, real
quickly.
Do you agree that the type of hub, shale basically, with
what Shell is doing up there in the play? Do you believe that
type of a hub would attract greater manufacturing
infrastructure investment to our region? How do you see
something like that developing? It took quite a while for Shell
to make a decision on that hub up there, the cracker hub. Do
they have the supply in place to do that?
Mr. Black. Well, we're going to need enough pipelines to
move ethane to those plants. That's a tremendous decision that
Shell made that's going to help the region, as you said.
That's a lot of ethane coming out of the Marcellus, very
rich, wet gas. We need enough pipelines. If the hub is the way
to do it, that's great, because without it there are workers
and consumers that are just not getting those benefits.
Senator Manchin. Okay. I am sorry, we are off to go vote.
Everyone has left. I think it is time to vote.
Thank you all.
Senator Barrasso. Thank you, Senator Manchin.
Senator Cassidy.
Senator Cassidy. Well, thank you all. I am really enjoying
the testimony.
I love the all hat, no cattle. People say that for jobs but
they do not support something which clearly will create jobs.
Mr. Eisenberg, I think it was you. You pointed out that not
only, I think Mr. Black and Mr. Eisenberg, that part of the
power of this is that it leverages the creation or the
preservation of other jobs.
Senator Franken, who is not here, has once asked what has
the shale revolution done for Minnesota? I was able to quickly
find something that it had done but I think you, Mr. Eisenberg,
pointed out that ACME Brick still produces because they can get
gas shipped there and that energy intensive, low cost input
allows them to preserve those jobs.
Mr. Eisenberg. That's correct.
Senator Cassidy. Now I am sure that is one example, but
there will be many more too, I am sure.
Mr. Eisenberg. There are many, many more in the State of
Minnesota and everywhere else that when you invest in
manufacturing, a dollar invested in manufacturing, creates
$1.40 in economic benefits across the economy.
Senator Cassidy. Then you pointed out, going back to Mr.
McGarvey, that the nature of these jobs are not low paid,
service jobs. Rather, they are well paid jobs and although they
may be temporary, that is the kind of temporary jobs that
preserve somebody's position in the middle class with good
benefits.
Mr. Eisenberg. That is absolutely correct.
Senator Cassidy. Yes, I thought that was all very well
done.
By the way, for the record we should point out that the
State Department said that if the Keystone XL pipeline were
built, it would result in greater safety to current modes of
transportation, a lower carbon footprint and more lives saved.
So just for the record, that is the State Department that has
pointed that out.
Now, I really enjoyed your testimony. It was very technical
in economics, and it is something that although I suspect one
to pass on in disagreement, I thank you for that analysis.
But I could not help but thinking as you mentioned that we
have an increased capacity, and we are specifically speaking of
the Northeast that I gather during the cold, the polar vortex,
they are actually shipping in LNG from the Caribbean and
burning heating oil--very carbon intensive and a lot of
emissions.
So isn't part of our capacity, kind of, like an interstate
highway system which usually it is easy to travel at three in
the morning, but it is rush hour that we need the capacity? It
seems as if that capacity is not just for the incremental or
the base load, it is also for that spike when you have a polar
vortex or when you do an economic development and you need to
have another energy intensive enterprise move and create jobs
to a region therefore you could say oh, yes, we have the
capacity to provide your energy needs. How would you respond to
that?
Mr. Peress. Thank you very much for that question. And
incidentally, I spent seven of the last ten years on the
Participant's Committee of the New England Power Pool and have
been deeply engaged in discussions around gas capacity into New
England.
The issue that they've--that's been addressed in New
England is focused on getting gas during those peak days, as
you put it. And----
Senator Cassidy. May I also interrupt?
We have also looked at that. It also seems that there has
been a tremendous substitution with both petroleum oil as well
as coal with natural gas. The amount of natural gas growth in
the Northeast has been remarkable. I am sure that was allowed
because there was already existing capacity.
Mr. Peress. And indeed I think it's pretty clear that that
shift in natural gas has provided benefits.
But the real question and the issue that I raised in my
testimony is when you're in a region like New England where
you're facing a peak challenge. That is there are 15, 30, 40
days a year when you need to get gas deliverability that
arguably, and there's some data that suggests that the
pipelines are being used to capacity during those days, is
building new capacity and paying for that capacity every day of
the year for the other 340 days, the most cost effective way to
overcome that problem.
Rational, commercial actors, power plants, industry have
decided that pipeline capacity is not the most effective way to
address that problem. And indeed, it has been relieved over the
past several years. And it's been relieved by those actors
making a decision that there are, just in time fuel
availability to lower customers----
Senator Cassidy. But that may be a more carbon intensive
method of production, right? It would be cheaper to use
petroleum oil to heat, but frankly if we are concerned about
greenhouse gases that would be a worse way to do it.
Mr. Peress. There's no doubt that natural gas, at least at
the burner tip, emits less greenhouse gases than oil does. The
question is when you considered the limited amount of time
where they face these peak issues is that a material
difference?
And thus far, the numbers suggest that it is not a material
difference. And in fact, LNG which is, which provides for just
in time delivery, people are not paying for capacity. They're
paying for the fuel that they use because the ability to get
LNG to these power plants is not costly, unlike new power
plants, has also been a large part of the solution.
And what my testimony suggests is that when we call forth
the competition for solutions to address those deliverability
challenges, markets will provide the most cost effective
outcomes.
Senator Cassidy. I am over time. I yield back, and I thank
you all for really intriguing testimony.
The Chairman. [presiding]: Thank you, Senator Cassidy.
Senator Barrasso.
Senator Barrasso. Thank you very much, Madam Chairman.
Mr. Peress, you are the Air Policy Director for Natural Gas
at the Environmental Defense Fund. In that role you focus on
midstream, downstream areas of the natural gas supply chain
such as the interstate pipeline system.
I understand you also represent the Environmental Defense
Fund in proceedings before the FERC, the Federal Energy
Regulatory Commission.
Recently a different environmental group which calls itself
Beyond Extreme Energy has engaged FERC albeit using, I believe,
highly questionable tactics.
For example, in February of this year this group sent mail
protesting FERC's decisions to the homes of the FERC's
commissioners, not to their office, but to their homes. The
group even went so far as to hand deliver its protest mail to
the homes of FERC's commissioners and then post the
commissioner's home addresses online. Last month this group
announced that it would again target FERC's four commissioners
at their homes, directly at their homes. The group issued a
press release saying it would, ``visit the four FERC
commissioners at their homes to hold them accountable for their
decisions.''
Now, I find these tactics in today's world to be extremely
troubling, very dangerous. Other environmental activists
recently drove the Chairman of FERC, Norman Bay, from the stage
at an event in Albany, New York. They reportedly stormed the
stage and accused FERC of genocide.
Do you believe that physically intimidating public
officials at a time like this or any time and their families is
an appropriate protest tactic?
Mr. Peress. Senator Barrasso, the way that we, as a
society----
Senator Barrasso. Yes or no?
Mr. Peress. Well, I'm not going to speak for the
Environmental Defense Fund. I will speak for myself. I think
it's highly unfortunate.
Senator Barrasso. Then why hasn't the environmental
community stood up to denounce these tactics? Is it waiting
until a public official of FERC confirmed individual or his
family or her family, if they get hurt? Is that the plan?
Mr. Peress. What I can tell you, Senator Barrasso, is that
any tactics that constrain civil discourse to come up with
solutions to complex problems are not valid tactics in my
personal opinion.
Senator Barrasso. Because your organization, the
Environmental Defense Fund, has worked with the group Beyond
Extreme Energy on legal initiatives.
Last fall, your group and Beyond Extreme Energy and other
organizations co-signed a letter to Attorney General Loretta
Lynch. I imagine you did not deliver that to her house. Did
you?
Mr. Peress. I would hope not.
Senator Barrasso. So tell me, why is your organization now
linking arms with a group who believes that physically
intimidating public officials and their families is acceptable
behavior?
Mr. Peress. I'm not really sure what precipitated that sign
on letter. Sign on letters go around our community all the
time.
Senator Barrasso. Mr. McGarvey, do you believe that
blocking the construction of an oil and gas, natural gas,
pipeline is a smart and effective way to regulate hydraulic
fracturing?
Mr. McGarvey. No.
Senator Barrasso. Do you believe that blocking the
construction of oil and gas pipelines is a smart and effective
way to reduce greenhouse gas emissions?
Mr. McGarvey. No.
Senator Barrasso. So what happens to American workers and
their families when environmental activists succeed in blocking
the construction of oil and gas pipelines?
Mr. McGarvey. Well I think our greatest example was when
the rest of the country and most of the world was going through
the great recession in the construction industry, we were going
through a great depression where in many states we were north
to 25 percent unemployment. Our unemployment is still double
the national average, and where there was an opportunity to put
thousands upon thousands of people to work on one pipeline, it
was blocked. And unfortunately, many people lost their homes,
health care, unemployment insurance ran out. In some cases,
suicides amongst our membership spiked because of people's
inability to take care of their most important asset, their
family, to financially provide for them. So the effects of
those kinds of actions in energy infrastructure have a serious,
serious economic impact on the members that I represent.
Senator Barrasso. Thank you.
Thank you, Madam Chairman.
The Chairman. Thank you, Senator Barrasso.
Several of you made a reference to energy renaissance,
natural gas renaissance, shale renaissance. Would we have had a
renaissance, would we have had this uptake in the economy, to
use your terms, Mr. McGarvey, and we were in a depression
effectively? Would we have had that if we had not had
infrastructure in place to avail ourselves of the technology
that allows us to go after this resource?
This resource just did not appear there overnight. It has
been sitting there. It has been our ability to access it
through the technologies that have come about. It is a pretty
generic question to you all, but it again speaks to the
critical issue that we are talking about here which is making
sure that we have adequate capacity within our infrastructure.
Mr. Black, can you speak to that? And Dr. Parfomak, given
the research that you have done at CRS, can you also speak to
that? So, Mr. Black first.
Mr. Black. Thank you, Senator, for hitting the key point
that you need pipeline infrastructure to make this happen.
You discussed the importance of getting product from point
A to point B, whether it's crude oil to refineries where it's
lower costing or natural gas liquids that get to a
petrochemical plant. It wouldn't be possible without the
pipeline infrastructure. It's absolutely necessary and it
wouldn't happen without it.
The Chairman. Dr. Parfomak.
Dr. Parfomak. There's no question that the unprecedented
developments in shale gas were reducing the price of natural
gas, you know, from $15, if you remember just a few years
earlier, to $2 to $3 to $4 range created a host of economic
benefits.
It lowered home heating costs so folks had more money to
spend on discretionary expenditures. It lowered manufacturing
costs, as others have stated in the past. It made electricity
cheaper. And so there are a host of benefits now.
You know, economics tells you supply and demand. Cheap
commodity, you're going to increase demand for it and we have
this, sort of, you know, cyclical nature in the energy industry
as we always have had.
What is interesting to me as an analyst is that we are
just, in my view, in the beginning of a huge transition
infrastructure wise from an economy where natural gas is
produced in certain regions, consumed in certain regions to a
physical reshuffling of that, as I stated in my testimony, and
continued transition in the way that natural gas is being
utilized.
From my point of view, it sort of requires constant
vigilance as to how are things going regulatorily, construction
wise, the price of fuels which are influenced not only by
developments here but internationally. So it requires a lot of
attention to all of these factors, and unfortunately, it's a
lot more complicated that it used to be.
The Chairman. Let me ask about that, the fact that it is
more complicated because we speak about the benefits to
consumers whether it be lower energy cost. We certainly
recognize that the jobs benefit, just the overall benefit, that
comes to the broader economy as a whole.
Yet we have this nimby attitude where okay, I want to make
sure that I have access to that natural gas. I want to make
sure that I have access to this resource, but just don't put it
within my eyesight, don't put it in my state, put it in
somebody else's backyard.
If the benefits are so apparent and again, I look at you,
Mr. McGarvey, because I think from a jobs perspective it is
just bold and in your face, why is there this disconnect? I
think I called it a cognitive dissonance here. What are we not
doing right in conveying to the American public, the consumer,
that there is clear benefit here? By the way, if you want to
have more affordable, accessible, clean, diverse, secure
supplies, you are going to need the infrastructure. What are we
doing wrong? Are we not conveying to the work force the
importance of this?
Mr. McGarvey. My work force understands the importance of
it for sure. It's just ironic that, again, it goes back to our
discourse. We can't have an honest conversation where, in a
region or in a local area, we have to have outside groups come
in and gin up the scare tactics and other things why people
should be frightened and opposed.
I mean, it's gotten so bad that ironically even in the
State of Vermont, I think, in its last legislative session, I
think the Vermont Senate passed a bill out. I don't know that
it's made it all the way through to ban but put a moratorium on
more windmills in the State of Vermont. We've already closed
our nuclear plant up there. I don't know how they're going to
do the power generation.
But again, if we could have a rational conversation about
the benefits, about not ceding our position as the economic
super power to China, about real middle class jobs, families
sustaining middle class jobs and what they mean. And for the
most part, there's always exceptions to the rule, but for the
most part, you know, private investment wants to work with
local communities to make it work for them so that it works for
all the parties that are involved with it.
And then in my testimony I talked about the three-legged
stool government, labor and industry all working together to
make sure that we're building safe infrastructure. It's
aesthetically pleasing as it can be, as far away from inhabited
home sites as it can be and keeps the country moving forward.
It goes back to everything else that's going on in our country
right now. There's just not, we can't have an honest
conversation about what's important.
The Chairman. I would like to think that here at the
Committee we can help move forward on honest conversations. So
thank you for bringing that up.
Senator King.
Senator King. Thank you, Madam Chair.
Sorry about the herkey jerky nature of this. When they call
a vote we have to go.
I have a long-term question and a short-term question and
perhaps some of this might be for the record.
The short-term question touches on the question that Mr.
Peress talked about which is the capacity versus deliverability
issue and peaking needs. It has often occurred to me that we
build energy infrastructure, and this goes for the electric
distribution lines as well, for the hottest day of the year or
in the case of natural gas, the coldest day of the year. It is
like building a church only for Christmas and Easter and on an
off day in April there are not many people there.
Right now in New England, 57 percent of our electricity is
being generated by natural gas. My question is where is that
going in New England? I know we are going to lose at least one
nuclear power plant and probably one or two coal plants.
Mr. Peress, you have talked about this. Isn't there going
to be a need over the next 10 to 20 years for additional base
load capacity? We will talk about peaking after this.
Mr. Peress. First of all let me say that what we have seen
in the markets is that the markets, in particular, New England,
but throughout the country, they're getting peakier. That means
the average load to peak load, that ratio, is growing which
suggests that base load resources are not what is going to be
needed in the future. And in fact, there are many trends that
suggest that base load resources are not what's needed in the
future.
If you look at my testimony I speak in depth about the fact
that few, if any, natural gas-fired power plants run as base
load resources, less than six percent nationwide. And that's
based on recent EIA data.
So the question is less about whether we need to install
capacity to meet base load needs and what are the most cost
effective means to provide for that flexibility and that
deliverability in a more peakier dynamic.
Senator King. Well let's transition then into my second
question which is about peaks.
Mr. Parfomak, I would like you to comment. What are the
practical alternatives to building excess capacity to deal with
peaks? Are we talking LNG storage tanks? How can we deal with
this issue of a peak demand in two or three weeks in the year
and pretty adequate capacity the rest of the year? Dr.
Parfomak, what are your comments?
Dr. Parfomak. There are alternatives on the supply side and
the demand side. And so, as examples in the electric utility
world, there are programs that have been around for a long time
to try to reduce peak----
Senator King. Demand response.
Dr. Parfomak. Interruptible power supplies, now the smart
grid is putting meters on people's dishwashers and clothes
washers to turn them off on August afternoons automatically
without the consumer having to make a decision and compensate
them for that.
So there are probably a number of ways and maybe more ways
to be thought of to try to moderate certain types of demand,
interruptible rates for natural gas users. But some of them
can't do that, so there's a limit to the flexibility in demand.
On the supply side, there is that----
Senator King. Well the demand response works for the
electric side, but it does not necessarily work for a factory
that needs the gas----
Dr. Parfomak. Right, some of them can't do that, right.
Some of them can stop a shift without penalty and make it up,
you know, the following week. Some of them can't. They can't
power down that way.
But in terms of supply there are, of course, use something
other than natural gas. We talk about it in the vehicle world
using electricity to run cars instead of gasoline. We can use
other fuels rather than natural gas and we can use electricity
for a process, that sort of thing.
Of course, it's hard to build transmission lines to get
electricity into some of these regions too.
Senator King. But if you charge your car at night there is
a lot of excess capacity on the electrical transmission and
distribution at night.
Dr. Parfomak. That's right.
Senator King. A huge amount of excess capacity.
Dr. Parfomak. And that's again, that's a practice of
capacity utilization and trying to reduce peak loads.
LNG, as you mentioned is another option, but that presents
its own challenges.
Senator King. Mr. Eisenberg, your clients, your members,
will pay for this new capacity. Are you concerned about paying
for excess capacity?
Mr. Eisenberg. So I'm not hearing that from my members at
all. There's a chart on page two of my testimony that shows our
natural gas usage. It's trending up. It's about three times
higher than about any other fuel we've got. Manufacturers need
always on energy and natural gas can give us that, always has
given us that.
So when our members are looking to invest in these
contracts, my sense is they're looking long-term and they're
looking for a secure fuel for a very, very long-term.
Again, we don't really hear a lot about rates from them.
It's not something that is a top tier issue for our
organization because they're handling it at the state level.
But what we do hear is that they need the pipelines to fix some
of the geographic issues, the distribution that's going on
there.
Senator King. Thank you, Madam Chair.
I will mention I have a friend in the construction business
whose family-owned company has been providing temporary
permanent jobs since 1928, so I understand that discussion.
Thank you.
The Chairman. Thank you, Senator King.
Senator Hirono.
Senator Hirono. Thank you, Madam Chair.
I thank all of the witnesses.
Mr. Peress, I found your testimony very interesting and
talking about excess capacity and the fact that pipeline
owners, I suppose, operators are paid for capacity rather than
distribution or deliverability.
You noted that there is a potential for gas and electric
rate payers to be stuck paying the bill for pipeline
infrastructure that may not be needed. What is the typical time
for payback for pipeline, new pipeline, infrastructure to
justify the cost of building the pipelines? What is the length
of time that they generally look to?
Mr. Peress. I don't know the answer to that question off
hand because it all depends on what the application and use of
that natural gas is and the circumstances in the individual
market. But what I can say is that customers that make a
rational decision to sign up to buy capacity for and long-term
contracts, make that calculation and that's what drives their
decisions.
Senator Hirono. It could be 20, 30, 40 years and so that
commitment will also commit the rate payers to paying for
basically the cost of building the pipeline would go to the
rate payers.
Can you expand on your suggestions for what Federal and
state agencies should do to support a more accurate forecast of
the need for new pipelines?
Mr. Peress. Yes. What we are suggesting and what the FERC
is moving forward in doing is to by enhancing coordination
between the gas and electric industries and by adding flexible
services and pricing flexible services on the gas side. What
they're doing is they're fostering competition amongst all
different sorts of resources to address the individual needs of
customers. And to the point that the gentleman to my right just
made, there are multitude different options and alternatives
that customers have to meet those needs unless and until there
is a mechanism for comparing those and pricing those, then it's
difficult to make those decisions as detailed in my testimony.
So what the Commission is trying to do is to harmonize and
to some extent foster competition amongst all those different
resources so that we get a better sense of how to make least
cost procurement decisions for long lived expensive
infrastructure.
Senator Hirono. This is something that FERC is undertaking?
Mr. Peress. FERC has been moving in this direction through
several dockets. What they most recently did was asked the
industry to try to do this voluntarily. EDF has been deeply
involved in that, as has the entire industry.
I can tell you that the progress is going very slow and I
will characterize the fact that the pipelines, in general, are
not seeking to change the current market design.
Senator Hirono. Thank you.
This question is for the full panel. In Hawaii the gas
utility, which is not the largest utility entity in Hawaii,
it's the electric company, has proposed a project to import
natural gas using a floating offshore terminal and an undersea
pipeline to connect to its existing onshore pipeline network.
None of you may be particularly familiar with the details
of the specific proposal, but can any one of you speak to the
performance, safety and cost of other natural gas projects
using floating terminals or undersea pipelines? Can anybody
comment on either kind?
Dr. Parfomak. Actually I can deal a little bit with LNG
issues.
The advantages of using a facility of that type which is
not onshore is that two fold.
One is of safety. It removes the--a large quantity of
volume from populated areas. LNG at sea presents much, much
lower risk to surrounding communities than a land-based LNG
facility would, and LNG doesn't represent a hazard to the water
necessarily because it wouldn't work to escape it. It would
just evaporate or burn off, unlike an oil tanker might.
There are also cost and siting advantages. Obviously it's a
lot simpler and faster to develop a turn type system offshore
than to develop a facility on land where you have to secure the
property rights and go through a FERC siting process and take a
lot of those considerations into account.
The primary cost then is a vessel that's capable of doing
that, and that's considerably more expensive rather than just
have a thermos which is moving LNG around and re-gasifying it
onshore. You have to have all of that on a vessel that's
capable of moving around. And that, I haven't done an analysis
on the relative costs of that.
But there's certainly, there have been a few LNG import
terminals in Boston Harbor that were terminals that were not
used for economic reasons but, you know, were sited and
approved by the Federal Government.
Senator Hirono. This is also not an inexpensive proposition
because our gas company is looking to spend some $200 million
in order to set up this system.
Thank you very much, Madam Chair.
The Chairman. Thank you, Senator Hirono.
Senator Franken.
Senator Franken. Well, thank you, Madam Chair.
I am very concerned about the safety and integrity of our
pipelines in the face of climate change. In coastal regions
enhanced storm surges from sea level rise threaten the
stability of existing infrastructure and elevates the risk of
pipeline corrosion from sea water intrusion. In the Northern
Great Plains extreme precipitation can lead to land subsidence
that damages pipelines and causes devastating leaks and spills.
And as I am sure the Chair of our Committee could tell you, in
Alaska thawing permafrost can severely impair pipeline
foundations.
But what concerns me the most is that many pipelines in the
U.S. were designed, of course, without considering the impacts
of climate change. In fact, according to several Federal
studies many of the pipelines in Alaska that sit on permafrost
were designed using climate conditions from the 50's, 60's and
70's during which time we did not have as clear an
understanding of climate change as we do today.
Mr. Black, you say in your written testimony, and I quote,
``The pipeline industry believes it is important we're
proactively improving pipeline safety.'' How does your industry
consider climate change as you build new pipeline, or for that
matter, repair existing pipeline?
Mr. Black. Thank you, Senator.
Any new and existing pipeline today needs to consider its
operating environment. They need to understand the possibility
of local flooding, of erosion and to take those issues into
account whether it's in the design of the pipeline or the
protection of an existing pipeline. So they're required right
now to assess those risks, and if there's any hardening that
needs to be done, to do it.
We had the flooding in Hurricane Sandy in that area the
pipelines continued to operate in that environment. The only
issue there was the power was cut to terminals and to
pipelines, but the pipelines continued to operate safely. And
then afterwards, learned lessons to be ready for the next time
to make sure they're ready.
Senator Franken. Thank you.
Mr. Peress, how can we make sure that our pipeline
infrastructure is prepared for the impacts of climate change?
Mr. Peress. The PHMSA, the Pipeline Hazardous Materials
Safety Administration, actually has initiated a fairly
significant proposed rulemaking to address safety for the
interstate pipeline system. And in fact, one of the focal
points of that is enhanced threat identification and enhanced
data acquisition. It's a positive step forward that PHMSA is
taking but far more needs to be done.
One of my fellow panelists spoke about safety management
systems that are evolving and advancing in the context of
threat identification, and it is important for the agency to
continue to focus on this aspect. And really this is the first
time in certainly recent memory, if not ever, that they have
brought these sorts of programmatic elements to the interstate
pipeline system, outside of just the most populated, densely
populated areas. So it is happening but more needs to be done.
Senator Franken. Thank you.
Mr. Eisenberg, I appreciate the discussion in your written
testimony regarding the important role of steel in pipeline
construction. In a recent study the National Association of
Manufacturers found that natural gas pipeline construction
contributed to 1,085 jobs at iron and steel mills.
By the way, Mr. McGarvey, I was a member of a multi-
employer plan as a writer in the writer's guild and as an actor
on TV, so I know those are jobs. Jobs are jobs. I, kind of, I
got a little PO'd during the whole Keystone discussion about,
``They're just temporary jobs.'' Well yes, of course, every job
in construction is a temporary job.
Anyway, I am back to you, Mr. Eisenberg. As you may know
much of the iron ore or taconite that is used in domestic steel
production comes from the iron range of Minnesota.
Unfortunately for many years now our home grown steel has had
to compete with illegally dumped steel from China. While I am
happy the government has recently been successful in combating
illegal dumping by imposing new tariffs on Chinese steel, we
need to do more. Mr. Eisenberg, do you agree that we should be
using domestic steel in new pipeline construction and not
illegally dumped steel from China?
Mr. Eisenberg. Well, we obviously are concerned about
dumping as well. Our trade team, led by Linda Dempsey in my
office, we actively engage with groups like the Iron and Steel
Institute, the Aluminum Association, who are doing their best
to try to level the playing field here to make sure that U.S.
manufacturers have robust trade remedies available to them.
We're hopeful that it will work itself out. There were some
positive--there were some impacts there.
The good news is that you mentioned that our study had a
thousand jobs. Well, those are real numbers based on real
pipelines and real jobs, so we're still creating the jobs here.
There's a lot of upside in building more pipelines for the iron
and steel industry.
We'd obviously like to see as much of that in the United
States as we can.
Senator Franken. I obviously would like to see as much of
that. So your answer is yes. You prefer American steel.
Mr. Eisenberg. We officially do not have a preference on
that. I apologize. Our trade folks can follow up with you on
that.
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Mr. Eisenberg. But obviously we are concerned about
dumping, and we'd like to see trade remedies taken.
Senator Franken. Well, I am sorry you do not have a
position on that, and I think we should be using American steel
in our pipelines.
Thank you.
The Chairman. Thank you, Senator Franken.
Senator Lee.
Senator Lee. Thank you, Madam Chair, and thanks to all of
you for being here today.
I am increasingly worried about the politicization of
infrastructure projects. What we are seeing has allowed
increasingly vocal anti-development environmental movement that
has set its sights on run of the mill pipeline infrastructure
projects.
This does not represent everyone in the United States. It
does not represent even most who are concerned about the
environment. It is a fringe movement, but it is a fringe
movement not to be ignored. It recently killed the Northeast
Energy Direct Pipeline and the Constitution pipeline which
would have supplied natural gas to a number of states on the
East Coast.
Now Utah is one of the fastest growing states in the
country. Our population is expected to double by 2050. There
are not a lot of states that can claim that particular
distinction.
I am generally worried that the endless litigation that we
are seeing and the political pressure campaigns that we are
seeing waged by anti-development, fringe activists will inhibit
Utah's growth by preventing the construction of necessary
pipeline infrastructure.
Without that and other types of infrastructure, you cannot
have growth, growth that Utah would otherwise be experiencing.
So, Mr. Eisenberg, I would like to know. How can Utah grow
if we cannot provide heat and reliable electricity for
residents, particularly for our new residents moving into the
state?
Mr. Eisenberg. Well, and I would add the manufacturing
sector as well, right? I mean, we are the foundation of
communities and we need the energy as well.
I mean, we all, kind of, get what's going on here. But
there's a group of people right now meeting in Atlanta to try
to figure out how to make this process more difficult, the
pipeline siting process, the permitting process more difficult.
That's not going to change.
There are--it's just the world we live in.
It's unfortunate because the FERC process that generally
through laws, through the Energy Policy Act of '05 and '07, has
gotten some remedies that will allow it to move a little bit
quicker than some of the big infrastructure projects. But it's
two steps forward and one step back and now we're dealing with
some of these challenges that some of the folks in the industry
are saying are adding years to the project. We just want to see
them get done, right?
We have a real--we have a math problem. We need, we're
going to need, a lot more energy for the power sector and for
industry in Utah and elsewhere over the next decade. We just
need the pipes in place. You can regulate them. Do whatever you
need to do, but let's get them built so that we don't have a
real log jam for us. Because otherwise, you don't have
manufacturing.
Senator Lee. No, I think that is right.
Well, in addition to that, we have government regulations
like the Clean Power Plan and MATS that are forcing a
transition away from coal-fired electric power generation to
natural gas.
The same groups that forced the transition to natural gas
are now successfully scuttling the chief way to transport
natural gas which is by pipeline. In other words, without
pipeline infrastructure you cannot rely on natural gas as a way
to generate electricity.
Mr. Eisenberg, I am at a loss over this one.
Mr. Eisenberg. We are as well. I mean, manufacturers need
base load generation. We need power, right? And that generally
comes from fossil fuels or nuclear power. And obviously there
are other things taking up an increasing portion of the grid,
but that's it. That's where you get base load power from.
We're losing our nuclear power plants, we're losing our
coal-fired power plants and now we're having this existential
discussion about whether we need natural gas. We need natural
gas in the manufacturing sector. We don't have much left after
that to keep us going, and if we don't have it, we've got a
real problem.
Senator Lee. Yet this problem is particularly acute in
states like mine where the majority of the land is owned by the
Federal Government. Other people in other parts of the country
are dealing with a lot of regulatory hurdles, but those hurdles
are magnified. They are compounded to a very significant degree
in a public land state like mine.
In Utah, business looking to build a pipeline should expect
to deal with some combination of the Advisory Council on
Historic Preservation, the Bureau of Indian Affairs, the Bureau
of Land Management and the Army Corps of Engineers in addition
to the EPA, the Fish and Wildlife Service, the Forest Service
and the Federal Energy Regulatory Commission.
Mr. Black, could you walk me through what a permitting
process in the West looks like and how this process could be
improved, particularly within public land states like mine?
Mr. Black. Well thank you, Senator.
You're right. There's a lot of agencies that we need to
work with, and we're ready to do that but we hope we can do
that in a timely manner.
Pipelines are subject to many of the same requirements as
other Federal agency actions in the West such as a NEPA review
or permitting across Federal lands, like you said. In practice,
a pipeline has a minimal impact on the environment. A recent
NEPA review of a large pipeline project found that the
alternative would have less impact, the pipeline alternative
would have less impact than all alternatives including no
action. That's because the energy demanded by the public will
reach market by some other mode, by truck, by train, pipeline,
barge. They don't have barges in Utah, and pipelines have the
least environmental impact.
The Federal workers at local offices in the West are, as we
understand, generally working hard to complete that review
work. We see permit reviews slow down when maybe Washington
outside forces get involved and/or when local field offices
don't have the resources to process those applications.
One recommendation is just to make sure those local field
offices have enough resources, enough leeway to make the
decisions that we need to be made to get those pipelines sited
in Utah and elsewhere in the West.
Senator Lee. Thank you.
Thank you, Madam Chair.
The Chairman. Thank you, Senator Lee.
Senator Warren.
Senator Warren. Thank you, Madam Chair.
Last month the Massachusetts Supreme Judicial Court ruled
that the state is not on track to meet its legal obligation to
reduce carbon emissions from fossil fuels. And while
Massachusetts has been a leader in deploying renewable energy,
the Commonwealth continues to rely on fossil fuels for the
majority of our power.
We think the path forward is clear. Massachusetts will need
to aggressively expand renewable energy generation and increase
conservation to meet our carbon emission goals. And yet, in New
England big new pipelines have been proposed to bring natural
gas into the region.
Now, state leaders like Attorney General Moira Healy, have
questioned the need for these new pipelines and she has said
and I quote here that, ``the region is unlikely to face
electric reliability issues in the next 15 years and additional
energy needs can be met more cheaply and cleanly through energy
efficiency and demand response.''
In fact, even the gas pipeline companies have testified to
FERC that a long-term shift toward renewable energy calls the
economic viability of new pipeline infrastructure into
question.
So Mr. Peress, the trend toward cleaner forms of energy is
just a fact. Given this trend away from fossil fuels, is
investing in new, high capacity natural gas infrastructure a
smart, long-term investment for New England?
Mr. Peress. The evidence suggests that in New England it is
not. And just to clarify the record, when Kinder Morgan
canceled the Northeast Energy Direct project, they canceled it
because they did not get enough customers to sign up to commit
for that capacity over 20 years. It had absolutely nothing to
do with opposition.
And of course, the reason they couldn't get those customers
to sign up for that capacity is because both the grid and state
energy policy in New England and in Massachusetts are moving
more toward more dynamic renewables, more energy efficiency and
the resources that Attorney General Healey, through a detailed
analytical analysis found to be the most cost competitive
reason.
Senator Warren. Let me pick up on that point about how it
is that these pipelines are financed.
Traditionally they are financed by the companies that are
actually going to burn the gas, industrial manufacturers, gas
distribution companies, gas-fired plants, who enter into long-
term contracts with the pipeline company. The companies finance
the pipelines because they analyze the projected gas use over
time and decide that the costs of the pipeline are more than
offset by the subsequent savings in gas prices that they are
going to get from adding this new capacity. It is just
basically how markets work.
Mr. Peress, have these companies been willing to pony up to
cover the costs of big new pipelines in New England?
Mr. Peress. They have not been willing to do so in New
England because they found that it's not in their economic
interest to be paying for pipeline capacity every day when
their needs are limited and only during certain specific
periods of the year.
Senator Warren. Right.
So these companies are saying they do not want to pay
because they are not sure that these pipelines make any
economic sense, but they would sure be happy to see the
pipelines if the state would make the electricity customers pay
the cost of these new contracts.
Now in Massachusetts, the Department of Public Utilities
authorized the electric utility companies to finance these new
pipelines on the rate payers' dime even if they otherwise made
no economic sense. The Department said the electric utilities
could pass the cost off to Massachusetts families, who do not
have the option to say no.
Mr. Peress, does it make sense to force families to pay for
these pipelines when we might not need them and no one else is
willing to pay for them?
Mr. Peress. A 1.2 billion cubic foot pipeline would cost
customers $14 billion over 20 years. And that's money that's
paid for by people, by businesses and otherwise, under a scheme
that tries to impose those obligations on someone other than
the beneficiaries of that pipeline capacity. That, in our view,
is the definition of a bubble, imposing costs on captive
entities that are not the beneficiaries of that, those costs.
So we would suggest that it does not make sense.
Senator Warren. Alright.
And it is also very anti-market, I should add here. I
appreciate your testimony.
Energy costs are a big deal in New England and throughout
the country but giant pipeline companies that cannot make an
economic case for these projects should not be allowed to force
someone else to pay for them. As places like Massachusetts work
to modernize our energy system and try to keep the prices
affordable for families and businesses, it is urgent that we
upgrade aging infrastructure and invest in clean technologies
of the future. But we should keep the focus on that, not on a
big giveaway to the oil companies and gas companies.
Thank you, Madam Chair.
The Chairman. Thank you.
I am so tempted to engage in debate. I do not know how we
focus on the aging infrastructure if we cannot make sure those
companies that build the pipelines have the certainty that they
need to do exactly that.
I have already done second round. I want to give my
colleagues an opportunity.
Senator King, you were next up if you would like to ask a
second round of questions.
Senator King. I think to clarify this discussion there is a
project or, I do not know quite how to characterize it, a
proposal in New England that the taxpayer or the rate payers of
the utilities take up the burden of the capital cost. The
argument is that the pipeline has become, essentially, part of
the electrical system because so much of our electricity is
generated with natural gas.
I think that is what Senator Warren is talking about. The
real question is who bears the risk?
The Chairman. Right.
Senator King. I think Senator Warren's point is if the
private sector is not willing to, does that tell you something
about it?
In fact, our Maine Public Utilities Commission staff
studied this question and just last week recommended against
the state committing funds to the underwriting of the pipeline
because they found it uneconomic.
I do not know the details of that study, but our commission
will be looking at it. The issue is whether these costs should
be borne by the customers or by the electric rate payers and
how the risk is allocated.
The Chairman. Right.
Senator King. It is not an easy question.
The Chairman. Yes.
Senator King. And clearly we need the infrastructure, but
are there other ways to skin the cat other than building an
entirely new pipe, such as LNG storage, demand response, again
because of the problem of, in some cases, in New England
anyway, we have enough capacity today. But we will not have
enough capacity in January and how do we deal with that?
The second question is what will we need in 20 years? I do
not want to close the door to new infrastructure if, in fact,
the demand in New England for natural gas continues to decline.
That gets us to the question is what is our energy mix going to
look like in 20 years? So it is not an easy question.
If you guys can find a question buried in there somewhere,
you are welcome to it. [Laughter.]
Dr. Parfomak. Senator, the point you raised and the comment
you made is a really insightful one. The notion that, to what
extent is the natural gas system becoming part of the
electricity system? And that's the interdependency issue that I
raised in my testimony.
Something FERC has been very, very interested in and has
spent a lot of time thinking about in the context, in
particular of New England, where it's particularly evident, but
in other places. And most of the, I shouldn't say most of them,
the major driver of future demand for natural gas growth is
expected to be the electric power sector. And so, clearly,
anything that happens in the electric power sector to reduce
its requirements for natural gas in the future will mitigate
the needs, especially peaking needs, for natural gas
infrastructure as well.
So I just say that to point out that things like
electricity storage, the efficiency of renewables, the
requirement for natural gas to firm up renewables, all of that
has a direct relationship to the issues that we're discussing
today.
Going forward I mentioned earlier that this is, it's
getting more complicated. The interdependency between
electricity and natural gas, especially in certain parts of the
country like the Northeast, are yet another level of
complication that I personally have to pay a lot of attention
to.
If somebody comes up with an incredibly efficient
electricity storage mechanism it could change this discussion
radically, really affect how natural gas develops going forward
and where it needs to go.
Senator King. But one of the problems is we are all trying
to predict the future and the only thing we can say with
certainty, that we will be wrong. [Laughter.]
But if we bet that there will be new alternatives and
changes and then there are not, then we end up with an
infrastructure shortage and particularly given the length of
time it takes to permit new infrastructure. So there are no
easy answers here.
But I think what I want to do is have more data and more
understanding about long-term electricity demand. You
mentioned, I think, Mr. Eisenberg, a 40 percent increase in
demand nationally over the next 20 years.
Mr. Eisenberg. Next decade, actually.
Senator King. Next ten years. But then you have to get
underneath that and say, okay, when is that happening and what
is the necessity for additional infrastructure?
I keep coming back to this Christmas and Easter and the
church. Could you build a tent on Christmas instead of building
a church that is empty two-thirds of the time?
Mr. Eisenberg. I mean, the only thing that I think is worth
adding to that is that the manufacturing end user is
fundamentally different than the residential end user. And I
think we, sort of, get caught up in, you know, families and
homes and we absolutely should be but manufacturers use of
energy is very, very, very different. And so our gas needs are
going to be pretty consistent. So if you want us there, we need
the pipes. I mean, it's really that simple.
All the new, you know, there's so much new manufacturing
coming to the United States because of natural gas and because,
particularly, of the feed stock elements of natural gas. But
where is it happening? It's happening in the Gulf. It's
happening in Texas----
Senator King. But the test of that is whether your members
are willing to step up and sign 20 year take or pay contracts.
Mr. Eisenberg. Completely agree.
Senator King. To support the building of the
infrastructure.
Mr. Eisenberg. Agree.
Senator King. That is the issue. Thank you.
Thank you very much, Madam Chairman.
Fascinating hearing, thank you for calling it.
The Chairman. Yes it is very good, thank you.
Senator Hoeven.
Senator Hoeven. Thank you, Madam Chairman, and thank you to
our witnesses.
Today's hearing focuses on the importance of oil and gas
infrastructure and the ways in which energy is transported from
the places where it is produced to where it is consumed. While
energy moves via truck, rail and barge, pipelines are the most
efficient and the safest way to transport oil and gas.
One highlighted example. In North Dakota in September 2011
we were supplying almost a third of the natural gas we produce,
36 percent. The State Industrial Commission set a goal to get
that down to nine percent by 2020. We are currently now down to
ten percent. So we have gone from 36 percent down to ten
percent and we produce 1.0 million cubic feet of natural gas
per day. The biggest barrier that we had was building gas
gathering systems and also then building the intrastate
pipeline and then building the interstate pipeline because we
not only wanted to capture that gas and get revenue for it, it
also is better environmentally than flaring. So the key for us
is getting through these barriers to building the pipelines
whether it's gas or oil or other products.
I will start with Mr. Black. To what extent does current
Federal regulatory policy discourage this private investment? I
mean, to what extent does it discourage it and what are the
one, two or three things we can do to encourage that private
investment, get it going?
Mr. Black. Well, you're right, Senator, that it was a
success building those additional pipelines to capture that gas
that had been flared in North Dakota. There's economic value
that helps the people of North Dakota and then those who would
be consuming that product. And of course, it's further downward
pressure on prices which helps consumers.
On the liquid pipelines we face issues as well of serving
new areas, and we know there are benefits locally including
North Dakota, your state, when we get additional pipelines
built.
We need Federal Energy Regulatory Commission, FERC,
policies that continue to encourage pipeline construction. We
watch that closely; we need the federal agencies that need to
give lands permits and construction permits to do that on a
timely basis; and then we need states where liquid pipelines
are sited under to make decisions timely.
A key issue in your state and you know well, Sand Piper
Pipeline going east to the--through Minnesota, that would be a
tremendous outlet for Bakken to get to market and would help
consumers and workers in many places. But that process has
really been lengthened beyond how it should be. And that has
been, frankly, distorted.
We need states to make those decisions in order to help the
Americans benefit like they can from pipelines.
Senator Hoeven. Talk for a minute about some of the new
safety features because isn't it the case if we can empower
this investment and build the new gathering systems and
pipelines, we are going to have new technology that is going to
increase environmental safety?
Mr. Black. Well, as you said the pipeline is the safest
mode. The product isn't going to get to market if the pipeline
isn't built.
And like you said, rail, pipe--rail, truck, barge, some
other mode. There are increased fatalities, increased releases
associated with other modes, and we need to get them sited.
Senator Hoeven. So you would say building a pipeline is a
win in terms of more energy, a win in terms of jobs and a win
for the environment because it is the safest way to transport
energy?
Mr. Black. Yes, Senator.
Senator Hoeven. Alright.
Mr. McGarvey, would you give me your thoughts in turn, and
I appreciate your efforts to help us build the necessary energy
infrastructure. Your thoughts both on what has to happen with
Federal policy in this area, not just pipelines but
transmission lines, road and rail. We need it all to have the
energy infrastructure to move this energy safely from where it
is produced and cost effectively to where it is consumed. What
has to change, in your opinion, in Federal policy? And what are
the ramifications for the work force?
Mr. McGarvey. Well, I would say, Senator, and it's crossed
the line, Senator Warren just left, but we've been trying to
get windmills permitted off Cape Cod and Martha's Vineyard for
20 years. We're ready, willing and able to build those. Can't
seem to get those built or permitted either.
Again, I think it's going to take people on this Committee,
that the Chairwoman has talked about this Committee working
together to come up with sensible, long-term energy policy.
There's been some legislation that's been passed on the
permitting infrastructure from the United States Senate, the
House, and I believe the President signed it.
There needs to be predictability on, you know, investments
that the private sector is going to make, on work force
development that we can participate in that drives the middle
class, growing middle class economy in the United States.
And my great fear, as this energy revolution happens for us
in the United States, if we're not able to take advantage of
it, you know, again, we're going to cede our economic super
power status to China because I don't see them getting bogged
down in the discussion, in the environmental concerns, in
looking out for the planet that we do. And rightfully so in the
United States and looking at the long-term interest of the
American people and in my case, the construction industry work
force, both union and non-union. They all need jobs in the
United States.
So policymakers, I think, have good ideas. I think it's
coming to the middle, sitting down and putting together good,
strong, long-term energy policy for the United States.
I'm hopeful with the leadership of this Committee and the
people on this Committee that they can be a catalyst to work
with the next Congress and the next Administration to really
get it done because I think we're missing a golden opportunity
if you look through from the industrial revolution forward.
Here's this opportunity for this generation in the United
States. Really take advantage of our natural resources and get
that lift that our economy so desperately needs.
Senator Hoeven. And you see it as a significant job creator
for the people you represent?
Mr. McGarvey. I will just tell you, Senator, you know, the
job opportunities in the oil and gas sector and petrochem
manufacturing it comes.
I mean, we never, sitting at a bargaining table arguing
with people over the cost of wages and fringes in those
industries because they're profitable industries when they get
their infrastructure built. They're willing to pay. There's no
lowest common denominator where we're scrounging for a fifty
cent raise here or taking a ten cent cut back there.
These industries pay. And if you look across the United
States, I just looked at some statistics yesterday about
different age brackets and what the medium income is for people
in those age brackets, it's unbelievable when you compare them
to oil, gas and petrochem in construction.
When we're talking about where the middle class jobs in the
United States are, they're in these industries. These people
are willing to pay those prices and there's more than tens of
thousands, hundreds of thousands of Americans who want to take
advantage of the opportunities to get into the middle class
through those industries and through those occupations.
Senator Hoeven. And that energy production makes us
competitive in other key sectors, right, like manufacturing,
construction, all those other industry sectors that create good
jobs as well, wouldn't you say?
Mr. McGarvey. Without question we're going, we're building
a, right now, 50 miles from here we're building a gas and LNG
export terminal for Dominion. I've got 2,500 people on that
site.
Senator Hoeven. I see.
Mr. McGarvey. Right now we're going to build the Shell
Franklin Cracker. There's another cracker we're looking at in
West Virginia. There's another one in that loop that Senator
Manchin was talking about.
Three crackers, potentially $20 billion of investment
within 50 miles of each other that will create somewhere in the
neighborhood of 2,500 high-paid, permanent jobs and about
20,000 construction jobs over a three or four-year construction
period. The opportunities are endless.
Senator Hoeven. Good to hear. Thank you, Mr. McGarvey.
Thank you, Madam Chairman.
The Chairman. Thank you, Senator Hoeven.
I would like to thank each of you for your comments. What
you have provided the Committee here today, I think, it has
been very informative as Senator King has said. Very
instructive.
I think we heard very clearly that when it comes to the
jobs side of it, these energy jobs are good for families, good
for our communities and good for the country.
I think we recognize that trying to divine the future is
not easy around here, but Mr. McGarvey, you speak about putting
together a longer-term vision, a view of our energy policy for
this country.
We have been working as a Committee, I think, very
constructively to try to move the ball on that and have
advanced an updated energy reform piece of legislation that has
moved not only through the Committee strongly but through the
Senate strongly. We would like to go to conference on that so
we can actually do more than just talk about how we move it
through a process, but actually see some of these changes
enacted into law.
It does not solve all of our problems, not by a long
stretch of the imagination, but when you recognize that we have
not done anything to update our energy policies for close to
nine years now, you have to get started somewhere, sometime,
and we think that that time is now.
I think reminding folks that we are not done with this yet,
that we need to go to conference and we need to work things out
with the other body so that the President has something that he
can embrace that will be good for the whole country.
A little bit of a self-serving comment here toward the end,
but I think it does speak to the need to make sure that we are
updating our energy policies on a more frequent basis,
something that we just simply have not done. And when you don't
do it, you get behind.
Thank you for giving us a little bit of a forward look and
what you are doing to help us in this decision-making process.
With that, the Committee stands adjourned.
[Whereupon, at 12:13 p.m. the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
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