Summary of Hearings on Energy (7-23-04)
The Energy and Commerce Subcommittee on Energy and Air Quality met with Department of Transportation and the Government Accountability Office (GAO) officials, energy industry representatives, and pipeline safety advocacy groups to discuss the issue of pipeline safety. In 2002, Congress passed the Pipeline Safety Improvement Act (PSIA) (H.R.3609), which calls for a risk-based approach to pipeline safety management, called the Integrity Management Program (IMP). In this program, pipeline operators identify "high consequence" areas and prioritize these in their safety inspections. PSIA also calls for increased public education and access to information about pipeline safety and strengthens federal and state pipeline safety programs.
The GAO released a preliminary report on the Department of Transportation Office of Pipeline Safety's (OPS) actions toward implementation of the PSIA. Katherine Siggerud, Director of Physical Infrastructure Issues at GAO, testified that although the OPS has had some success implementing the IMP aspect of PSIA, the number of accidents involving death, injuries, or property damage of $50,000 or more has not fallen. Siggerud said that OPS needs to develop clear program goals and an achievement strategy for enforcing pipeline operator compliance with PSIA. She said that no conclusions could be made at this time regarding the effectiveness of OPS enforcement of regulations.
Samuel Bonasso of the Department of Transportation testified to the successes of OPS recent actions to raise standards for pipeline safety, improve technology, increase enforcement of standards, and improve state, local, and inter-agency coordination. He said that the OPS is "aggressively responding" to the mandates of PSIA in several ways, most importantly by finalizing the regulations of IMPs. He said that the OPS will finalize rules on technical assistance grants to local communities within a year.
Kenneth Mead, Inspector General of the Department of Transportation, testified that the OPS has made significant progress complying with PSIA mandates. He also said that too many interests have the ability to block progress on pipeline relocation or repair, causing the failure of OPS to comply with some mandates. He suggested that the roles of agencies such as the Department of Homeland Security, Department of Transportation, and Department of Energy, should be specifically outlined. Siggerud agreed with this idea. He expressed frustration that although natural gas transmission pipeline operators are required to have IMPs, natural gas distribution pipeline operators are not required to have IMPs although the distribution lines still pose serious risks to human life.
Earl Fischer, on behalf of the American Gas Association and the American Public Gas Association, testified that natural gas distribution lines are sufficiently regulated by federal and, more importantly, state authorities. Fischer and Paul Koonce, of the Interstate Natural Gas Association of America, outlined the actions the natural gas industry is taking to comply with PSIA. Fischer, Koonce, and Barry Pearl of the Association of Oil Pipe Lines and the American Petroleum Institute testified in support of streamlined repair permitting and increased coordination among stakeholders and federal agencies.
Breean Beggs of the Center for Justice and the Pipeline Safety Trust,
said that he would like to see mandated testing of a greater portion
of pipelines than required in the IMP rules, a stronger enforcement
of regulations by OPS, and an increased financial responsibility of
oil and gas companies that have pipeline accidents. He contends that
energy companies who contract out to seperate pipeline companies can
evade responsibility for accidents while pipeline companies go bankrupt.
Robert Kipp of the Common
Ground Alliance described the ways in which pipeline safety stakeholders
are working together to improve pipeline safety through research,
public awareness, and coordination of interested parties.
The House Energy and Air Quality Subcommittee met on July 15th to address the state of the oil refining industry in the United States, which has been a popular topic due to elevated gas prices and speculation that those prices will continue to rise. Fifteen representatives were present for the hearing and were eager to gain a better understanding of how the oil refining industry is affecting the price of gasoline. In their opening statements, members shared their mixed opinions over whether or not new refineries should be built. Gene Green (D-TX) argued in favor of building new refineries, pointing to the fact that it would be easier to drill and produce oil in the U.S. than bring peace to Middle East. John Shimkus (R-IL) was also in favor of building new refineries, citing statistics that showed most refineries are running at 98% capacity and no new refineries have been built in 28 years. On the other hand, Henry Waxman (D-CA) and Lois Capps (D-CA) expressed their disapproval of H.R. 4517, the United States Refinery Revitalization Act of 2004, saying it would compromise the health of the environment and provide an inadequate solution to increasing gas prices and dependence on fossil fuels. Billy Tauzin (R-LA), former chair of the Committee, was invited to speak by current Committee Chair Joe Barton (R-TX). Rep. Tauzin informed the Committee that it doesn't make sense to refine oil overseas, which is the inevitable consequence of rising demand and diminishing refinery capacity in the U.S. He also stressed the importance of getting past the Republican/Democrat divide on this issue and thinking as Americans instead.
Witnesses cited several causes of elevated gas prices. Guy Caruso, Administrator of the Energy Information Administration (EIA), explained the EIA's analysis of the refinery situation reveals petroleum prices would still be high even if more refining capacity was available, but increasing capacity would most likely reduce price volatility. He also shared that expanding existing refineries has been more economically advantageous than investing in the construction of new facilities, which the EIA projects will continue to be the case as the demand for petroleum prices continues to rise. Jim Wells testified to the Committee on a recent Government Accountability Office (GAO) report that analyzed the effect of mergers on the refining industry. The report shows high gas prices are the result of many factors, including mergers, which have lead to increased market concentration, specialized gasoline blends that are more difficult to produce, and refineries running near maximum capacity, which diminishes their flexibility to respond to increased demand. Dr. Cooper, testifying on behalf of the Consumer Federation of America, agreed with the findings of the GAO report, saying the concentration of supply into a few companies and consequent lack of competition is the main cause of high gas prices, not crude oil availability or refining capacity. He suggested promoting a more competitive industry as well as increasing efficiency on both the supply and demand side to increase market flexibility and ultimately lower prices. Jeffrey Holmstead from the Environmental Protection Agency (EPA) defended the environmental regulations placed on oil refineries, stating that steep increases in crude oil prices have been the cause of higher gasoline prices, not environmental regulations. He also said gasoline blends ("boutique fuels") and the permitting process for refineries were not significantly influencing gas prices or preventing an increase in refining capacity, but were necessary to meet clean air requirements. Eric Schaeffer, Director of the Environmental Integrity Project, told the Committee that, due to the steady increase in U.S. refining capacity reported by the EIA, there is no crisis in the refining industry. Therefore, he argued that H.R. 4517 was unnecessary and would give the Department of Energy (DOE) too much regulatory authority over the states. Additionally, he presented the Committee with a list of 14 petroleum refineries with outstanding notices of violation, showing enforcement of current regulations has not been adequate.
The House Subcommittee on Energy and Mineral Resources held an oversight hearing on July 15th to discuss technological advances that will help domestic energy production. Chairman Barbara Cubin (R-WY) was very optimistic that developing technologies will allow the US to have energy security as well as a clean environment. Representative Richard Pombo (R-CA) praised the US for having the most advanced technology, toughest standards, and best workforce in the world. All witnesses also testified to the encouraging role technology will play in securing our energy future and benefiting the environment. They pointed out that the process of finding and producing energy has dramatically changed in the past twenty years - what was once thought impossible is now reality in a relatively short time period. Vello Kuuskraa, President of Advanced Resources Internationl, Inc., reported that traditional oil recovery methods only extract one third of the oil in a field; recent technology has helped to increase this figure. Technology has also advanced environmentally sound energy production by minimizing impacts and enhancing mitigation and restoration techniques. William Whitsitt, President of the Domestic Petroleum Council, testified that well pad size has been significantly reduced from an average of six acres to 1.5 acres in some areas as a result of new technology. Bernard Padovani from the Compagnie Generale de Geophysique explained to the Committee that advances in deep seismic imaging has greatly reduced the number of wells drilled unnecessarily. Technology will also enable renewable energy sources to contribute to energy production in the US. Several witnesses detailed the progress wind, geothermal and gas hydrate research has made toward developing these sources into a major component of the US energy portfolio. The Committee agreed with a 1999 Clinton Administration report that emphasized energy production, environmental progress, and economic vitality all go hand-in-hand.
The House Energy Subcommittee met July 8th to discuss economic models and their accountability when applied to predicting natural gas prices. The discussion was spurred by Chairman Judy Biggert's (R-IL) concern over natural gas prices, which have nearly tripled since 2000, from $2 to $6 per million BTU. Economic models have been increasingly used as tools for making policy, but the fact that none were able to accurately predict the current spike in natural gas prices raised questions about their effectiveness. The discussion revealed that natural gas prices have been difficult to predict due to the complex nature of models and the variations in the underlying assumptions of the various models, which are often biased and unclear. Weather is the most unpredictable of these assumptions, but factors such as liquefied natural gas (LNG) production and imports, crude oil prices, and production capacity can all drastically change the output of the models. Currently, oil prices have risen $10, which is putting pressure on natural gas supplies as power plants are turning to this resource for energy, consequently raising natural gas prices. Representative Ehlers (R-MI) was especially concerned that the models were unable to account for the diminishing availability of natural resources, particularly natural gas, and instead assumed that, as long as there was demand, we could find the supply either domestically or overseas.
Dr. DeCanio, an economics professor at U.C. Santa Barbara, explained to the Committee that physical models, such as climate change models, were much more reliable than economic models, which do not follow the laws of nature. The large volume of variables makes them very complex, and he argued that care should be exercised when using them for something as important as policy. Mary Hutzler from the Energy Information Administration (EIA) commented that the models are only as good as the data used to create them, stressing that investing in the collection of quality data was necessary to help the models be more useful to policy makers when predicting gas and oil prices. As an answer to the current dilemma of high natural gas prices, Dr. Hansen from the Argonne National Laboratory suggested focusing on using hybrid technologies to relieve the pressure on natural gas resources until technology, which has an unpredictable rate of development, has a chance to improve the efficiency with which natural gas is used and extracted. The National Energy Modeling System (NEMS), developed by the EIA, found that there is no statistically significant relationship between research and development investment and technology advancement, showing that research alone is not the best answer to the problem. The models were also unable to factor in the developing LNG industry as well as safety issues accompanying this global industry. The models do, however, include calculations for greenhouse gas emissions and other pollutants. Hutzler reported that the models have been recently used to asses the economic effects of the Clear Skies Initiative and the McCain-Leiberman climate change proposal.
The Senate Energy and Natural Resources Committee met June 17th to discuss the Department of Energy's (DOE) nuclear waste accelerated cleanup program. One hundred fourteen sites are being cleaned up through the program, which costs $7.4 billion or one third of the DOE budget. There are some critics of the program, such as Senator Ron Wyden (D-OR), who said that accelerated cleanup is "just walking away faster." The committee heard testimony from Jessie Roberson, the Assistant Secretary of Environmental Management at the Department of Energy, who has been in charge of the program since 2001. Two federal investigators also testified regarding DOE compliance with worker safety at the Hanford site in Washington.
Roberson testified to the successes of the DOE program including increased speed and efficiency of contaminated site cleanups. She cited several specific examples of progress at sites including Savannah River in South Carolina, the Idaho National Laboratory, and the Hanford site in the state of Washington, noting many instances where work is being completed ahead of schedule. She said that both state and federal regulators review the sites and contended that accelerated cleanup has been an effective, proactive cleanup strategy.
Pacific Northwest Senators Ron Wyden and Maria Cantwell (D-WA) questioned Roberson regarding the cleanup of the Hanford Site. They said they had been informed that the DOE intends to clean up only 90 percent of residual waste in underground tanks, although the DOE had previously agreed to clean up 99 percent of the waste. After being pressed by the Wyden and Cantwell, Roberson affirmed that the DOE will remain committed to cleaning up 99 percent of the waste. Roberson said she would submit that commitment in writing, although she did point out that the DOE is legally required to continue to explore other cleanup options.
The committee also discussed some aspects of the Department of Defense authorization bill, which awaits final vote by the Senate and allows the DOE to reclassify Savannah River high level waste mixed with grout to be reclassified low level waste. Senators Lindsey Graham (R-SC), Mike Crapo (R-ID), Larry Craig (R-ID) recently led the passage of an amendment that will prevent any precedent from being set by the authorization bill in states with nuclear waste sites such as Idaho, Washington, and Oregon. The amendment also calls for intensified study of waste treatment techniques.
Senator Bingaman (D-NM) raised the question of whether the DOE or the Nuclear Regulatory Commission (NRC) should have jurisdiction in the classification of waste. The NRC sets waste classification standards, although currently the DOE has the authority to interpret the standards--for example, high level waste mixed with grout may be reclassified by the DOE as low level waste. Roberson said that the DOE collaborates closely with the NRC when classifying waste and would readily comply if the NRC were to be given the sole authority to classify waste.
Bingaman also enquired about the new Office of Future Liabilities proposed in the DOE FY 05 budget request. Roberson said that the office would be created to put together a comprehensive timeline of site cleanups and prevent the drainage of resources away from actual cleanup procedures.
Roberson expressed continued support of the Yucca Mountain repository, saying that it is a vital part of the DOE nuclear waste management plan. During an emotional moment she also said that she is astounded by the amount of work the DOE and its partners have accomplished in moving the waste cleanup program forward. She will resign from her position in July.
On June 15th, Senator McCain (R-AZ) presided over the full committee hearing on pipeline safety. Senator Lautenberg (D-NJ), Senator Cantwell (D-WA), and Senator Murray (D-WA) were also present. Testimony was given by eight witnesses on the implementation of the Pipeline Safety Improvement Act of 2002 (H.R. 3609). This act was originally proposed by Senator Lautenberg in 1994 in response to a deadly natural gas pipeline explosion in New Jersey. The aging pipeline infrastructure in the U.S. has lead to concern over the safety and environmental hazards they present. Pipes are a critical component of our economy; roughly 63% of U.S. energy is transported through these pipelines which are a safer, more efficient mode of transportation compared to barge or truck transportation. Additionally, the threat of terrorist attacks has heightened the need for Federal assistance in maintaining the safety of the pipes.
In the past two years, the Office of Pipeline Safety (OPS) has attempted to implement the rules and regulations defined by this act concerning oil and natural gas pipelines. The general consensus of the witnesses was that OPS has done a good job overseeing the repair and improvement of the pipelines and the act overall is working well. But, they also point out that it is still too early to truly know its effectiveness and there is still much improvement needed. Components of the act that received praise included the three-digit emergency number, standardization of operator regulations, pipeline mapping, and inspection procedures. Funding for research and development projects has also increased from $2.7 million to $9 million, increasing the number of research projects from 1 in 1999 to 22 today.
Progress has been made with the implementation of the Integrity Management Programs, which are responsible for assessing the risks associated with pipelines. The phases of this program are expected to be completed by 2009 and 2012, but several witnesses commented that the industry is ahead of schedule. The pipelines have been ranked according to whether or not they pose a "high consequence" risk, defined as pipes located in environmentally sensitive or densely populated areas. Roughly half of the 41,000 total high consequence pipes have been thoroughly inspected. The inspections process, although much more thorough, has come at a much higher cost than previously calculated. Improved technology has made it easier to monitor these pipes, but this technology has also revealed that there are more problems with the pipes than originally anticipated. Senator Cantwell expressed concern over whether or not the pipes that have already been inspected have since had any leaks or explosions. None of the witnesses had an answer to this question. Lois Epstein, of Cook Inlet Keeper, who was more doubtful of the act's success, said the occurrence of incidents has only decreased by 3.5% in the last three years.
Each of the witnesses also expressed several concerns about the act. One, brought up by Ken Mead of the Department of Transportation (DOT), dealt with the inadequate permitting process. Although the act provides for timely repairs of high consequence pipes, many projects are still required to obtain anywhere between 8 and 40 permits before they can proceed. He cited the explosion of a pipe in California last April that had been identified as a high risk, but the permitting process prevented its relocation before the accident happened. Many other witnesses concurred that the act has insufficiently improved the permitting process.
Kate Siggerud, from the U.S. General Accounting Office, explained that the civil penalties for not complying with the new regulations needed to be higher to act as a better deterrent. Some regulatory gaps were also discussed. Senator Lautenberg and Ken Mead agreed that the security roles of the DOT, Department of Energy (DOE), and Department of Homeland Security (DHS) were not clearly defined, making the act less effective, especially when it came to the threat terrorism poses on pipelines. Enhanced communication between agencies was also stressed, as well as the importance of monitoring rural pipelines.
Additionally, several witnesses were concerned about the effects implementing these regulations would have on consumer prices of natural gas. Robert Howard, speaking on behalf of the Natural Gas Association of America, explained that repairing pipes will most likely affect natural gas prices due to the increased demand and limited pipe capacity as repairs are made, making several of the deadlines hard to meet.
Although not mandated by the act, all witnesses were in opposition of the proposed move of OPS to the Federal Railroad Administration (FRA), claiming it was unnecessary and would only hinder the forward momentum of the act. Senator McCain said he would write a letter discouraging this action, following with legislation if the letter was not sufficient.
The Senate Energy and Natural Resources Committee met June 15th to discuss the causes of recent high fuel prices. Guy Caruso of the Energy Information Administration at the Department of Energy told the committee that oil prices have dropped in the last three weeks, and should continue to drop to $35 per barrel from the current $37.50 cost by the end of the year absent any major disruptions. Republican committee members urged passage of the Senate energy bill throughout the hearing, while Democrats continued to argue in favor of other solutions to current energy problems.
One solution offered by Democrats is the opening of the Strategic Petroleum Reserve (SPR). Democrats Charles Schumer (NY), Ron Wyden (OR), and Byron Dorgon (ND) pressed the issue of the reserve during the hearing, arguing that it can be used as a tool to pressure Organization of Petroleum Exporting Countries (OPEC) to lower crude oil prices. Schumer recently proposed releasing 1 million barrels of oil per day from the SPR for 30 days. Proponents of this action claim that the effects of opening up even a small portion of the oil in the reserve will be compounded in favor of the United States as OPEC adjusts to a decrease American demand. John Kilduff of the Energy Risk Management Group said that the continuing addition of oil to the SPR is contributing high oil prices, and agrees with the proposal to release some oil. American Petroleum Institute president Red Cavaney said that the oil that could potentially be released from the SPR will not provide a long-term solution to energy problems, and that other steps such as refinery deregulation would be more effective.
Some Democratic committee members questioned the witnesses regarding the possibility that recent price spikes are the result of corporate market manipulation. Committee member Maria Cantwell (D-WA) alluded to the possibility of a future federal investigation of oil company profits and exporting activities. Caveny said that the petroleum industry does not have the type of control over industry markets seen in other business sectors. Senator Wyden also released a report at the hearing called "Campaign of Inaction: The Federal Trade Commission's Refusal to Protect Consumers from Consolidation, Cutbacks and Manipulation in America's Oil and Gasoline Markets".
The hearing also featured some debate about the role of risk factors in determining oil prices. Kilduff said in his testimony that "the greatest factor determining prices is the perceived uncertainty or vulnerability of future crude oil and gasoline supplies," and that "there is a lot of air in the price [of oil] right now as a result of troubles around the world." Caruso and Caveny continued to argue that the most important factors causing price spikes are increased demand, high crude oil prices, and refining capacity, and that risk factors play only a small role in price changes. Committee Chairman Pete Domenici (R-NM) agreed that risk factors have a strong influence on oil prices. He used this point to illustrate the need for comprehensive energy legislation, arguing that the U.S. should work for solutions on issues it does have some control over such as domestic exploration.
Caruso stated in his testimony that tight refinery capacity is a contributing factor to high gas prices. Caveny said that a new refinery would cost $2 to $3 billion and four years to build. "There are other places people put their money," he said, noting the comparatively low percentage of return (6.9% vs. 7.5% for other industries) gained on refinery investments. He cited regulations that cost money and lead to uncertainty as reasons for low interest in the current refining business. To read a summary of a May 2004 hearing on the oil refineries, click here.
David Berry, representing the American Trucking Association, focused his testimony on "boutique" fuels, or fuels specific to localities and states. He said that boutique fuels are subjected to little competition, driving prices up in states such as California. He advocates the creation of a single type of fuel for the nation to avoid price spikes in certain localities. Senator Bingaman (D-NM) said that he believes the current count of 110 different fuels in the nation is excessive and should be reduced. Berry said the situation is getting worse for trucking companies and that he is unaware of any EPA action to lower the number of fuel types in the nation. He could not say whether standardization would lead to an overall price increase or decrease.
Discussion was also initiated by Alaskan Senator Lisa Murkowski (R) regarding the Arctic National Wildlife Refuge. She argued in favor of oil exploration and noted the irony of $5.00 per gallon pump prices in her state.
The House Science Subcommittee on Energy met May 20th to discuss
3890, a bill to reauthorize the Metals Program at the Department
of Energy (DOE). The bill was introduced by Melissa Hart (R-PA) in
March in an effort to ensure continued funding of the DOE program
that works with the metals industry in the research and development
of efficiency technologies. The program was established in 1988 and
may be facing cuts as its official appropriations expired in 1997.
In her opening statements, Subcommittee Chair Judy Biggert (R-IL)
said that the Metals Program has economic, environmental, and national
security benefits. The newest version of the bill includes provisions
to help industries reduce greenhouse gas emissions.
On May 19th, House Science Subcommittee on Energy met to examine
the potential contribution of energy efficiency and renewable energy
to the nation's energy needs. In her opening statement, Subcommittee
Chair Judy Biggert (R-IL) discussed rising oil prices and high foreign
dependency as reasons to invest in alternative technologies. She and
several of the witnesses, all experts in a field of efficiency or
renewable technology, emphasized that these technologies are likely
to improve quality of life at sustained or lowered energy consumption
levels. Testimony of the witnesses provided a description of the current
state of efficiency and renewable technologies and their impacts on
the economy. Witnesses unanimously recommended increased investment
by the federal government in the research and development of these
technologies. The Bush administration's FY '05 budget proposes a 10%
cut in funding for efficiency research and development programs. House
Science Committee Chairman Sherwood Boehlert (R-NY) and John Carberry
of DuPont acknowledged that research projects are likely to lose momentum
and effectiveness if their budgets are cut.
On July 22, 2003, the Resources Subcommittee on Energy and Mineral
Resources held a hearing to discuss Rep. Jim Gibbons' (R-NV) recently
introduced bill, H.R.
2772, the John Rishel Geothermal Steam Act Amendment of 2003.
The bill has been named in honor of John Rishel, a geologist and long-time
Resource Committee staffer, who played a key role in this legislative
issue. Rishel passed away suddenly on May 9, 2003.
In his opening statement, Gibbons said that we are facing an energy
crisis and "America is not making full use of its geothermal
potential because we don't have adequate incentives to attract needed
capital investments to geothermal energy projects." He said that
H.R. 2772 addresses some of these shortcomings. The bill will make
geothermal leasing market-driven through competitive bidding, promote
uniform ownership of resources, provide a uniform royalty structure,
and address the current backlog of leasing permits. Under H.R. 2772,
leases will need to be "cleared within one year and applications
could pay up-front for the work needed to complete the application."
The bill also calls for a "review of moratorium and withdrawals
from geothermal leasing on federal lands and it directs the US Geological
Survey (USGS) to complete a new national geothermal resource assessment."
Most of the witnesses were in favor of H.R. 2772. Patricia Morrison
that the Bureau of Land Management (BLM) and the Department of the
Interior (DOI) have not had enough time to make a statement on the
bill, but she agreed with Gibbons that a new geothermal assessment
needs to be done. She said the last assessment was done in the 1970's.
Morison also said that BLM is addressing the leasing backlog. She
said BLM has competed 100 applications in the last 12 months but there
are 230 leases that are still on backlog.
On July 10, 2003, the Senate Committee on Energy and Natural Resources held a hearing to discuss natural gas supply and demand and its effect on the economy. Alan Greenspan's testimony, which was similar to the statement he gave to the House Transportation and Commerce Committee a month ago, dominated the hearing. Greenspan said that the nation's economy has not yet seen a significant effect from the current natural gas price increases. He also said that it is hard to predict what the total effects will be.
Greenspan also said that the US needs a consistent energy policy. He said we cannot push industry to use natural gas but not advance our liquefied natural gas (LNG) importing capabilities. Greenspan said that LNG facilities would act as a safety valve, giving the US the option of increasing imports to offset market fluctuations. The committee was interested to hear Greenspan's thought on LNG, but many of them were concerned about the safety dangers of LNG facilities. Richard Grant replied saying that LNG is as safe, if not safer, to transport and store than most other fuels.
The witnesses also mentioned other solutions to mitigate
the current supply shortage: clean coal technology, nuclear power,
coal bed methane, tight sand gas, additional gas pipelines, and conservation
and efficiency. A push for conservation and energy efficiency came
from David Garman. Garman said that the Department of Energy is promoting
programs that raise appliance efficiency standards and encourages
more efficient methods of insulating. On the pipeline issue, Greenspan
was asked for his opinion on whether the government should provide
subsidies to promote a gas pipeline from Alaska. Greenspan said there
is no need for the government to encourage this idea. He said that
profitability will bring the pipeline to the lower 48 states.
On June 24, 2003, the House Energy and Commerce Subcommittee on Energy and Air Quality held a hearing to explore the future of coal power production. Chairman Joe Barton (R-TX) began with a frequently repeated theme: cleaner coal technologies are very important for America's energy needs because coal is the nation's most abundant energy resource, and coal will drop in price as natural gas prices rise. Barton touted the energy bill passed by the House of Representatives, H.R. 6, for its provisions on clean coal. He pointed out that the hearing would likely have a major impact on the final energy legislation. Rep. Edward Whitfield (R-KY) cited the Clean Coal Power Act of 2003 (H.R. 1213), which he is sponsoring, as an example of the needed federal investment in clean coal technology.
The practical concerns of moving the nation toward cleaner coal plants were a major focus of testimony and discussion. Coal gasification and pulverized coal were the chief present-day technologies under scrutiny. Much attention was also paid to FutureGen, which Deputy Assistant Secretary of Energy George Rudins called the "Holy Grail" of coal power. This public/private initiative announced earlier this year by the Department of Energy promises an emission-free source of electricity and hydrogen and is to be developed out of existing coal gasification technology.
Many of the questions centered on industry requests from the federal
government in order to implement cleaner technology. Panelists generally
agreed on the need for:
Panelists did not agree on whether carbon dioxide (CO2) emissions
are related to climate change. Dr. Frank Burke stated that neither
he nor his company believed that carbon had been scientifically shown
to cause warming. David Hawkins, responding to Whitfield's skepticism
on this question, contended that transferring the existing reservoir
of 5 trillion tons of carbon stored in coal to the atmosphere without
slowing the rate of consumption would have disastrous effects on climate.
Several witnesses agreed that coal gasification is superior to pulverization if CO2 sequestration were necessary. Although they noted that it is easier to remove CO2 from the more concentrated waste stream produced by coal gasification, panelists also pointed out that higher capital costs are involved.
On the issue of mecury emissions, Representative Henry Waxman (D-CA) asked Burke about the accuracy of an American Coal Council report stating that existing technology is suitable for retrofitting coal plants to meet stringent mercury regulations. Burke refused to acknowledge the credibility of either the source or the report, claiming that the findings resulted from short-term pilot tests rather than commercial-scale operations. Noting that coal burning releases about a third of all mercury emissions, Rep. Ted Strickland (D-OH) asked the panel how the industry was likely to respond to new mercury regulations anticipated in 2004. Hawkins responded by pointing out that technology-based Clean Air Act regulations are unlikely to disrupt the industry because existing technology has been shown to remove up to 90% of mercury from emissions, with limited cost. He suggested that the world would follow a U.S. move to restrict the release of the dangerous neurotoxin, as it did in the case of lead in gasoline. (Additional information about mercury policy is available in AGI's mercury policy update).
Prospects for the near-term future seemed mixed. Richard Olliver,
whose claim that his company's gasification facility is the cleanest
coal plant in the world went undisputed, announced the intention to
build two more such plants. Randall Rush, however, stated that his
company would opt to build pulverization facilities under current
conditions. A self-proclaimed proponent of coal gasification, Rush
lamented that the technology is not yet competitive with pulverization.
When asked about the time-frame for FutureGen, Rudins anticipated
that a commercial-scale example plant could be ready in 10 years,
and that the technology could be totally viable in an additional seven
On June 24, 2003, the House Resources Subcommittee on Energy & Mineral Resources held a hearing on the availability of oil and gas resources on federal land. The witnesses' testimonies are available on the committee's website. The members in attendance heard testimony on two recent studies: the Energy Policy and Conservation Act (EPCA) Inventory that was produced by the Department of the Interior (DOI) and an economic assessment that was produced by RAND. The EPCA inventory focused on determining the amount of technically recoverable oil and gas resources on federal lands. The RAND study determined the amount of economically recoverable resources in the Green River Basins. The two studies produced different conclusions on whether to pursue oil and gas "plays" in certain basins. The members in attendance asked the panel to elaborate on the differences between technological and economical recoverable resources. The witnesses testified that economic recoverability is based on profit. The profit, however, is just a "snapshot" in time because it is making assumptions using today's prices and available technology. Technically recoverable resources are based on the amount of oil and gas that can be produced using existing technology. Technically recoverable resources do not address economic ability to produce the oil and gas.
The members in attendance were also concerned about the permitting
process to lease federal land. They heard testimony today and in previous
hearings on how these permits delay and halt many projects. Rebecca
Watson testified that the process is very complex because there are
many aspects for each case that needs to be examined, such as compliances
with tribal regulations, National Environmental Policy Act, and Clean
Water Act. She continued by saying that litigation has played a major
role in delaying the process. Watson also said that administratively
DOI is addressing the problem and trying to increase their efficiency.
On June 19, 2003, the House
Resources Subcommittee on Energy & Mineral Resources held
a hearing on, "The Domestic Natural Gas Supply Shortage."
The witnesses' testimonies are available on the committee's
website. The hearing's expressed goal was to discuss a solution
to the domestic natural gas shortage; however, the committee members
deviated from this goal to debate the issue of domestic gas production
versus imported liquefied natural gas (LNG). The LNG buzz started
last week in a House Energy and Commerce Committee hearing when Alan
Greenspan testified that the US should increase its LNG imports. Subcommittee
Chair Barbara Cubin (R-WY) and other witnesses stated that natural
gas resources are available in the US, especially in the Rockies and
on federal lands. Several of the witnesses said that there is a need
to increase drilling and gas pipelines in the west. They also noted
that there was a need to lift the moratorium on federal lands and
off-shore drilling. Other supply solutions mentioned were increased
conservation and efficiency, clean coal technology, and alternative
fuels. On the LNG front, most of the witnesses agreed that importing
LNG would take time and increased investments. The witnesses, however,
did not agree on its effects on the market. Some felt LNG would not
be a good investment because of the large capital cost it is only
profitable when gas prices are high and it would increase the US's
foreign energy dependence. Other witnesses testified that LNG could
be profitable at moderate gas prices.
On June 10, 2003, the House Committee
on Energy and Commerce held a hearing entitled, Natural Gas Supply
and Demand Issues. The witnesses' testimonies are available on the
website. The members in attendance heard testimony on the natural
gas market outlook. For the short-term outlook, the panelist said
that the market is very volatile and there will be price spikes. The
market volatility is due to an economic "domino effect:"
colder winter temperatures drove gas consumption up, increased consumption
caused lower gas reserves, and finally low gas reserves are presently
causing the market volatility. For long-term market outlook, the panelists
had many views on how to steady the market: increase the amount of
pipelines to transport the gas to the needed market areas, lift the
moratorium from federal lands to increase drilling production, demand
destruction as well as to explore clean coal technology, liquefied
natural gas (LNG), methane hydrate, and tight-sand gas. The most surprising
comment was made by Alan Greenspan when he said that the US needs
to increase the amounts of imports of LNG. Greenspan's presence at
the hearing reflected the impact of natural gas prices on the economy.
The members present were interested in all the ideas, but some of
them made it clear that they would not support drilling in national
The full Senate Energy and Natural Resources Committee held a hearing to examine the supply and prices of natural gas. The complete testimonies of the witnesses can be found on the Committee web site. The witnesses agreed that the recent increase in natural gas prices is due to a harsh winter, a flattening of supply, and considerable growth of power plants using natural gas. While prices are likely to remain volatile in the short-term, high prices are expected to trigger an increase in drilling, which will eventually return prices to a more acceptable level. In order for market self-correction to occur, the witnesses said Congress needs to encourage construction of new infrastructure, provide access to natural gas supplies on federal lands, spread the word that natural gas is abundant and environmentally friendly, and fund collaborative research.
The Gulf of Mexico, which has historically been one of the highest
producers of natural gas, has recently experienced a flattening in
production rates, despite an increase in drilling because new deep-water
sites have surprisingly proven to contain mostly oil. This discussion
prompted Senator Pete Domenici (R-NM) to question whether increasing
accessibility to federal lands is reasonable given that it is unknown
if they actually contain the large quantities mentioned. The panel
agreed that the possibility for abundant sources on federal lands
is high, especially within Alaska, the Rocky Mountains (specifically
sedimentary sections below 1500ft), the Gulf of Mexico (specifically
deep drilling in shallow waters), and the Mackenzie Delta. The San
Juan Basin, coalbed methane, and liquefied natural gas (LNG) imports
were also mentioned to a lesser degree.
On February 13, 2003, the Senate Committee on Energy and Natural Resources conducted a hearing to examine oil supply and prices. The witnesses, who's complete testimonies can be found on the Committee website, testified that recent increase in oil prices are due to a combination of factors, including a cold winter, the strike in Venezuela, flattening of the global supply, and low stock prices. Short-term recovery will be difficult, but an increase in supply diversity could aid long-term energy security.
Senator Pete Dominici (R-NM) began the questioning by inquiring how much of federal lands are available for oil and natural gas exploration. Cavaney replied that 30% of federal lands (located in Alaska, mountain states, the outer continental shelf, and most significantly on coastal areas) were available for oil and 40% of these lands for gas. Also, Cavaney commented that permitting was a greater obstacle to gaining access to these lands than leasing.
Senator Jeff Bingaman (D-NM) commented that only 15% of federal lands are completely unavailable for oil exploration and 12% for gas, further these lands contain little oil and gas. He then asked the witnesses to comment on whether it would be appropriate to tap the Strategic Petroleum Reserve (SPR). Simmons replied that it would be dangerous to prematurely use the SPR as it could send market forces elsewhere. Ebel disagreed; saying the release of the SPR would create a calming effect, though it does depend on the situation. Cavaney replied that the president should exercise his authority on the SPR when there appears to be supply crisis, not a price crisis. He agreed it could have unintended consequences. May reiterated from his testimony that frequently a release from the SPR occurs too late to have a significant effect. Senator Ron Wyden (D-OR) stated he strongly supported an SPR release now.
Senator Jim Bunning (R-KY) asked the witnesses if they support exploration for resources in Alaska. Simmons replied that drilling in Alaska would pose less of an environmental risk than importing oil in leaky single-hulled tankers across the ocean. Ebel stated that it would be "a shame if that resource potential is never put to use." Cavaney believes we should explore whatever "makes sense" to increase our energy security. Senator Bunning further inquired if Russian oil could help alleviate the instability of the Middle East oil supply. Cavaney said Russia needs first to improve its infrastructure and also that the U.S. should be looking towards a diverse oil source, not only from Russia but also West Africa and around the Caspian Sea.
Senator Lisa Murkowski (R-AK) commended Simmons' previous comments about the relative environmental risks of leaky tankers and drilling in Alaska. She said that if drilling was permitted in the Alaska's Arctic National Wildlife Reservoir (ANWR), the oil could be transported from Alaska to the continental U.S. via double-halled tankers, thereby reducing environmental accidents.
Senator Craig Thomas (R-WY) requested the panel comment on where to start in developing a national energy policy. Simmons suggested beginning with convincing Americans that energy is the single most important part of society. Ebel called for an increase in political will to understand and help the public understand the complexity of how energy is produced, and not just concentrate on price and availability. Cavaney recommended working towards a comprehensive solution, while May proposed repealing the jet fuel tax.
Senator Mary Landrieu (D-LA) called for more domestic drilling and conservation. Also, she agreed with previous comments that tankers are probably more of an environmental problem than pipelines. She asked the witnesses whether more production would help lower oil prices. Simmons said there is no evidence that domestically produced energy is cheaper, but tanker capacity is almost at its maximum. Therefore, an increase in transportation cost could make domestic energy cheaper. Ebel observed that the U.S. does not stand in isolation in the oil market; therefore the U.S. cannot be protected from changes in the world market.
Senator Lamar Alexander (R-TN) requested the panel offer their thoughts
on a comprehensive energy policy. Ebel replied that he believes demand
will fall before supply runs out due to new energy sources, such as
hydrogen. Simmons said for a long-term solution the US should invest
more in research and development, such as nannotechnology and more
efficient diesel engines, similar to those in Europe. Cavaney called
for increasing the role of alternative sources of energy such as solar
and wind. May also called for more research and development.
Sources: Hearing testimony, personal communication.
Contributed by Charna Meth, 2003 Spring Semester Intern; Deric R. Learman, AGI/AIPG Summer 2003 Intern; Brett Beaulieu, AGI/AIPG Summer 2003 Intern; Bridget Martin, AGI/AIPG Summer 2004 Intern; and Ashlee Dere, AGI/AIPG Summer 2004 Intern..
Please send any comments or requests for information to AGI Government Affairs Program.
Last updated on July 23, 2004