Summary of Hearings on Energy

(12/4/12)

  • November 30, 2012: House Committee on Science, Space, and Technology Subcommittee Energy and Environment on "Tapping America's Energy Potential Through Research and Development"
  • September 20, 2012: House Committee on Energy and Commerce Subcommittee Energy and Power Hearing on "The American Energy Initiative: A Focus on H.R. 6172"
  • September 13, 2012: House Committee on Energy and Commerce Subcommittee Energy and Power Hearing on “The American Energy Initiative: A Focus on the Outlook for Achieving North American Energy Independence Within the Decade”
  • August 2, 2012: House Committee on Energy and Commerce Subcommittee on Energy and Power Hearing on the American Energy Initiative: A Focus on Growing Differences for Energy Development on Federal vs. Non-Federal Lands
  • June 19, 2012: Senate Committee on Energy and Natural Resources Hearing on Induced Seismicity Potential in Energy Technologies
  • June 14, 2012: Senate Committee on Energy and Natural Resources Hearing on China and Clean Energy
  • May 31, 2012: House Committee on Oversight and Government Reform Hearing on “Rhetoric vs. Reality, Part I: Does President Obama Really Support an ‘All-of-the-Above’ Energy Strategy?”
  • May 31, 2012: House Committee on Oversight and Government Reform Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform Hearing on “Rhetoric vs. Reality, Part II: Assessing the Impact of New Federal Red Tape on Hydraulic Fracturing and American Energy Independence”
  • May 22, 2012: Senate Committee on Energy and Natural Resources on “The AEIC Report on the Government’s Role in Energy Innovation”
  • May 17, 2012: Senate Committee on Energy and Natural Resources Hearing on the Clean Energy Standard Act of 2012
  • February 1, 2012: House Committee on Science, Space, and Technology Subcommittee on Energy and Environment Hearing on “Fractured Science – Examining EPA’s Approach to Ground Water Research: The Pavillion Analysis”
  • January 31, 2012: Senate Committee on Energy and Natural Resources Hearing to “Receive Testimony on the US and Global Energy Outlook 2012”
  • January 24, 2012: House Committee on Science, Space, and Technology Subcommittee on Investigations and Oversight Hearing on “A Review of the Advanced Research Projects Agency-Energy”
  • November 16, 2011: House Committee on Natural Resources Oversight Hearing on "The Future of U.S. Oil and Natural Gas Development on Federal Lands and Waters"
  • November 16, 2011: House Committee on Transportation and Infrastructure Subcommittee on Water Resources and Environment Hearing on “Hydraulic Fracturing of Shale Beds: Ensuring Regulatory Approaches That Will Help Protect Jobs and Domestic Energy Production”
  • October 27, 2011: House Committee on Science, Space, and Technology Joint Energy and Environment and Investigations and Oversight Subcommittees Hearing on the “Review of the Blue Ribbon Commission on America’s Nuclear Future Draft Recommendations”
  • October 20, 2011: Senate Committee on Energy and Natural Resources Subcommittee on Water and Power Hearing “To Examine Shale Gas Production and Water Resources in the Eastern United States”
  • October 13, 2011: House Committee on Science, Space, and Technology Subcommittee on Energy and Environment Hearing on Advancing Coal Research and Development for a Secure Energy Future
  • October 13, 2011: House Committee on Natural Resources Oversight Hearing on the "BOEMRE/U.S. Coast Guard Joint Investigation Team Report"
  • October 4, 2011: Senate Committee on Energy and Natural Resources Hearing to Receive Testimony on the Secretary of Energy Advisory Board’s Shale Gas Production Subcommittee’s 90-day Report
  • September 15, 2011: House Committee on Natural Resources Subcommittee on Energy and Minerals Hearing on Discussion Draft to Reorganize the Interior Department’s Offshore Energy Agencies
  • July 27, 2011: House Committee on Natural Resources Hearing on "State Perspectives on Offshore Energy Revenue Sharing"
  • July 20, 2011: Senate Committee on Environment and Public Works Subcommittee on Transportation and Infrastructure Hearing on “Yellowstone River Oil Spill Oversight”
  • July 19, 2011: Senate Committee on Energy and Natural Resources Hearing on "The Future of Natural Gas"
  • July 12, 2011: Senate Committee on Energy and Natural Resources Hearing on S. 1160, S. 1108, and S. 1142
  • July 8, 2011: House Committee on Natural Resources Subcommittee on Energy and Mineral Resources and House Committee on Agriculture Subcommittee on Conservation, Energy and Forestry Joint Subcommittee Oversight Hearing on “Challenges Facing Domestic Oil and Gas Development: Review of Bureau of Land Management/U.S. Forest Service Ban on Horizontal Drilling on Federal Lands”
  • July 7, 2011: House Committee on Science, Space, and Technology Subcommittee on Energy and Environment Hearing on "Hitting the Ethanol Blend Wall: Examining the Science on E15"
  • June 23, 2011: House Natural Resources Subcommittee on National Parks, Forests, and Public Lands on “H.R. 2170, H.R. 2171, H.R. 2172, and H.R. 2173”
  • June 13, 2011: House Committee on Energy and Commerce, Subcommittee on Energy and Power Hearing on H.R. 2054, the “Energy Enrichment Act of 2011”
  • June 7, 2011: Senate Committee on Energy and Natural Resources Hearing on Nuclear Energy Related Legislation
  • June 2, 2011: House Committee on Natural Resources Subcommittee on Energy and Mineral Resources Hearing on Alaskan Oil and Gas Resources
  • February 16, 2011: Senate Committee on Energy and Natural Resources Hearing to Receive Testimony on the U.S. Department of Energy's Budget for Fiscal Year 2012
  • February 9, 2011: House Committee on Energy and Commerce Subcommittee on Energy and Power Hearing on "H.R. ___: the Energy Tax Prevention Act of 2011"
  • February 3, 2011: Senate Committee on Energy and Natural Resources Hearing on the Energy and Oil Market Outlook for 2011
  • January 26, 2011: Senate Committee on Energy and Natural Resources Hearing on the National Oil Spill Commission Report
  • January 26, 2011: House Committee on Natural Resources Hearing on the National Oil Spill Commission Report

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BAR

House Committee on Science, Space, and Technology Subcommittee on Energy and the Environment Hearing on "Tapping America's Energy Potential Through Research and Development"
November
30, 2012

Witnesses:
Anthony Cugini
Director, National Energy Technology Laboratory, Department of Energy
David Martineau
Chairman, Texas Independent Producers and Royalty Owners Association
Daniel Hill
Interim Department Head, Professor of Petroleum Engineering, Texas A&M University
Michael Hagood
Director of Program Development, Energy and Environment Science and Technology, Idaho National Laboratory

Subcommittee Members Present:
Andy Harris, Chairman (R-MD)
Brad Miller, Ranking Member (D-NC)
Jerry McNerney (D-CA)
Dana Rohrabacher (R-CA)
David Curson (D-MI)

Full Committee Members Presents:
Chairman Ralph Hall (R-TX)

On November 30, 2012, the House Committee on Science, Space and Technology Subcommittee on Energy and Environment held a hearing to receive testimony on research needs and priorities relating to unconventional oil and natural gas resources as well as on the Tapping America’s Energy Potential Through Research and Development Act of 2012 (H.R. 6603).

Due to developments in horizontal drilling and hydraulic fracturing technologies, the U.S. is now producing oil and natural gas at a faster rate than any other region in the world. As a result, the U.S. is currently on a path to surpass Saudi Arabia as the world’s top producer of oil by 2020, according to the International Energy Agency and Citigroup. H.R. 6603 would authorize $111 million for the Department of Energy (DOE) to conduct research and development (R&D) on oil shale energy extraction as well as for reducing environmental impacts such as water use.

In his opening statement Energy and Environment Subcommittee Chairman Andy Harris (R-MD), said, “Tapping America’s unconventional oil and gas resources will... provide sorely needed stimulation of our economy, restore our manufacturing sector and create high-paying middle class jobs.” Harris continued, “Citigroup predicts the cumulative impact of new oil and gas production could create as many as 3.6 million new jobs by 2020.” Harris blamed politics for preventing the U.S. from realizing the benefits of developing unconventional fossil fuel resources.

In his opening statement, Chairman of the full House Science, Space and Technology Committee and sponsor of H.R. 6603, Ralph Hall (R-TX), said, “In 2010, unconventional natural gas development alone supported over a million jobs in this country, and this number is expected to more than double by 2035.” He described H.R. 6603 as “bipartisan legislation,” which “promotes the development of oil shale instead of restricting it, and ensures we maximize the benefits of our unconventional oil and gas resources.” An important aspect of the bill is supporting, “R&D to minimize water use and maximize efficiency in shale oil and gas operations.”. The bill “complements” the Section 999 of the Energy Policy Act, which created a “very successful” unconventional oil and gas R&D program, the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Program, within the Department of Energy. Hall entered a letter endorsing H.R. 6603 into the record from the American Geosciences Institute (AGI).

Ranking Member Brad Miller (D-NC) began his opening statement by saying, “Hydraulic fracturing is the combination of technologies developed by federally-funded research.” Miller stated that Democrats will “likely” support this bill in a vote, noting that, “the section of Chairman Hall’s legislation on ‘produced water’ is almost identical to legislation passed by the Democratic majority in the last Congress.” Miller expressed his hopes that this bill be part of an “all-of-the-above” energy approach instead of “hunting fossil fuels to extinction” without developing renewable sources to replace them.

Anthony Cugini, Director of the National Energy Technology Laboratory for DOE, began his testimony by stating that the growth in natural gas production in 2011 was  “the largest year-over-year volumetric increase in history.” Oil production has grown as well due to development in technology and “overall, oil imports have been falling since 2005, and our dependence on imported oil declined from 57 percent in 2008 to 45 percent in 2011—the lowest level since 1995.” Cugini stated that unconventional resources including carbon dioxide enhanced oil recovery, heavy oil, oil shale, and natural gas resources including methane hydrates as well as residual oil zones have the “potential” to further ‘reduce U.S. reliance on foreign oil,” and support the “president’s all-of-the-above energy strategy.”

Residual oil zones (ROZs), oil shale, heavy oil, oil sands and shale oil alone comprise of “3,000 billion barrels of liquid hydrocarbons,” said Cugini. He continued, “Even if one were to assume that only 10 percent of this oil could be recovered economically, it would mean a significant increase in the Nation’s domestic energy supply.” While “unconventional resources are much larger in volume than are our conventional resources stores,” these resources “generally exist in more geologically complex settings or in more remote or environmentally sensitive areas and require more intensive production methods.”  Therefore, “developing our unconventional oil and natural gas resources in an environmentally sustainable and safe manner will require new technologies.” Cugini concluded, “DOE has demonstrated its ability to engage industry and academia to perform research that can help catalyze the development and application of these new technologies.”

In his testimony, David Martineau, Chairman of the Texas Independent Producers and Royalty Owners Association (TIPRO) and member of the American Association of Petroleum Geologists (AAPG), described H.R. 6603 as a “step in the right direction.” He praised the areas of research outlined in the bill which “could produce significant results,” including hydraulic fracturing; development of improved proppants; water minimization, management, re-use and alternatives; improved modeling of formations; and energy efficiency in exploration and production. In his testimony, Martineau described three aspects of this research, hydraulic fracturing, water management, and understanding the subsurface.

Regarding hydraulic fracturing, areas of research which would reduce the “number of wellbores required, resulting in a reduction in well sites, water usage, emissions, traffic, noise, dust and other factors, all while increasing oil and gas recovery per well” include “focusing on the subsurface processes involved with fracturing, including modeling of the process, microseismic assessment, emissions, water usage and other research.” As to water management, “the volume of water used in hydraulic fracturing represents less than 1 percent of all water consumed in the state of Texas.” However, “research and development are needed to address mitigation of the volumes of fresh water required for hydraulic fracturing; significant volumes of water produced from oil and gas shale wells and associated concerns as to its composition; the development of technology to process water – converting the industry’s larges waste stream into a new, useful product; and assuring the ability to safely dispose of water in the subsurface by geologic characterization of potential disposal zones which vary across the country –geologic basin to geologic basin.”

For understanding the subsurface, “Flow of fluids, gas, oil, water, through very low permeability formations, particularly oil and gas shales, is not well understood.” Martineau continued, “By increasing our understanding of subsurface geologic conditions, we can make progress toward effectively answering questions regarding economic recovery and environmental safety,” as well as “increase recovery efficiency.” In addition, Martineau highlighted historic federal research in oil and natural gas development. Martineau offered recommendations on tax provisions for independent oil and natural gas producers as well as the regulatory burdens on producers.

In his testimony, Dan Hill, Interim Department Head of Petroleum Engineering at Texas A&M University, discussed how unconventional energy has “changed the U.S. energy game” how this occurred, and whether this growth is “sustainable.” Hill pointed out that due to increased production from shale formations, natural gas from these resources now comprises over 30 percent of U.S. supply. Hill states that this is “great news” as “natural gas is the cleanest burning fossil fuel, it yields the least CO2 and it is low cost, thanks to newfound abundance in conventional reservoirs.” Hill stated, “Oil production from the Bakken formation in North Dakota is now close to 500,000 barrels per day (bpd) and is projected to beak at “1 to 2 million bpd.” Hill explained that technological improvements are still needed and major challenges include developing “ways to lessen the environmental impacts of hydraulic fracturing operations” and “the development of lower cost hydraulic fracturing techniques.”

Advances in unconventional exploration and production will require, “further development in technology, and the trained engineers and geoscientists needed for continued growth.” Hill said, “Perhaps most important is the role that Department of Energy funding for unconventional oil and gas research will have on the training of engineers and geoscientists needed to sustain growth in unconventional oil and gas development.” Hill emphasized that the because of “booming” demand for petroleum engineers, Texas A&M University is “receiving unprecedented demand for places in our graduate program.” Hill explained, “To attract and retain high quality graduate students, a university has to offer financial aid, and this is usually in the form of a research assistantship funded by an external grant.” Hill concluded, “The research funding provides universities through the proposed Department of Energy research program will help support the graduate students who will become the future technology leaders of our country.”

In his testimony, Michael Hagood, Director of Program Development of Energy and Environment Science and Technology at Idaho National Laboratory, provided background information on oil shale resources, discussed how production relates to U.S. security goals, discussed advancements and research needed, and provided comments on H.R. 6603. On the size of U.S. oil shale resources compared to usage,  “U.S. usage is approximately 6.8 billion barrels (of oil) in 2011” and is “projected to be 7.3 billion barrels per year in 2035, ” said Hagood.  He stated, “Estimates from recent U.S. Geological Survey studies indicate that between Colorado, Utah and Wyoming, nearly four trillion barrels of oil are estimated to be in place.” Hagood pointed out that “most of this resource is located on federal lands.” In addition, “development of an oil and shale industry will also result in increases in tax and royalty payments to federal and state government for oil production on their lands and contribute to the U.S. gross domestic product.” Hagood pointed out that not only can the shale industry decrease dependence on imports, but would “reduce the risks associated with potential supply disruptions.”

Hagood urged for “aggressive R&D” and noted, “Advancements of novel concepts and new approaches requires significant investment in long-term, high-risk R&D to reach proof-of-concept stages of development.” Hagood continued, “Similarly, applied R&D is needed to develop and prove technology at bench or field scale prior to demonstration at a commercial scale.” As to research topics for federal R&D, Hagood suggested, “increasing the energy return on investment, fracture mechanics and heat transfer for enhancing recovery, materials performance in high-temperature subsurface environments, real-time subsurface process monitoring, water use reduction and post-retort subsurface environmental impact mitigation.” Hagood advised that “the objective on an oil shale R&D program should be to provide solutions that help achieve specific production and environmental performance goals” and these goals should be both “near-term” and “far-sighted”.

Hagood suggested investigating “application of hybrid energy systems approaches, including integrating renewable and/or nuclear energy into oil shale development schemes for achieving greater carbon efficiency and reducing environmental impact.” Hagood recommended understanding and addressing the “cumulative environmental and socioeconomic effects in the region” in “the context of competing needs” such as agricultural, municipal and industrial needs. Hagood emphasized that, “stakeholder engagement in an R&D program is very important” in order to have “greater impact.” In his conclusion, Hagood said, “DOE is a technical integrator that can bring together needed assets and expertise from both within and outside DOE including universities and industry, to provide a high-quality R&D program, and as well, act as a needed honest broker of technical information.”

Chairman Andy Harris (R-MD) asked if he understood correctly that using the reported estimates of oil shale resources, the U.S. has a 120 year supply based on current usage. Hagood confirmed that that was correct. Harris asked what nation has the most oil shale in the world, to which Hagood answered, the U.S. Harris asked Hill if the DOE budget currently supports oil shale research. Hill replied that it does not. Harris commented that subsidies for the fossil fuels industry supports domestic manufacturing. 

Ranking Member Miller asked how federal research in hydraulic fracturing related technologies in the 1970s and 1980s is not considered picking winners and losers, which is the rhetoric used against supporting renewable energy. Cugini replied that the support in the 1970s and 1980s was for basic and early stage research and thus was not picking winners and losers. Miller asked why unconventional fossil fuels were federally funded, as they were in early, more uncertain stages of development when the argument used for “dismissing” renewables is that they are more uncertain while unconventional resources are a “slam dunk.”

Cugini answered that there are still some risk factors remaining in developing unconventional extraction and production technologies. While there is potential to access more resources than is currently economically available, it is not profitable with current technology to pursue. Therefore the federal government is needed to fund this technology, to allow more resources to become available with the current technology in the current economy.

Chairman Hall said states currently regulate hydraulic fracturing and asked Martineau for his insights on how hydraulic fracturing should be regulated. Martineau responded, saying every rock and state is different. Therefore the exact hydraulic fracturing method varies and subsequently one universal regulatory rule would not be effective. Hall commented that independents require support because they will assume larger risks in developing technologies before being bought by a larger company.

Representative Jerry McNerney (D-CA) said, “Most of my colleagues ...would be in favor of providing research dollars for development of energy resources” but asked that legislators supporting fossil fuel development also be as “receptive” to providing support for clean energy.  McNerney brought up the Production Tax Credit, which provides subsidies for the wind industry, which is set to expire at the end of 2012. This would put 40,000 Americans out of work and send the wind industry overseas. McNerney stated that there is no argument that U.S. unconventional resources are “massive.” 

McNerney discussed with Hill the energy input compared to output for unconventional resources. Unconventional resources have a higher energy input to output ratio than conventional resources and emit two to three times more carbon in the atmosphere per energy unit delivered, McNerney concluded. McNerney urged that the impact on the global environment be considered. He asked what the fossil fuel industry does to hire veterans and pointed out that the wind industry has the best record for hiring and training veterans. Martineau replied that there are veteran programs, and said they cannot find enough people to work in the fossil fuel field. McNerney asked that writing provisions for training and hiring veterans be included in H.R. 6603.

Representative Dana Rohrabacher (R-CA) stated that wind is an inefficient way of producing electricity in terms of cost and investing in the industry is “evaporating wealth” that could be used to raise the standard of living or providing programs for veterans.  Rohrabacher asked what the American taxpayer is “getting out of” investing in an energy industry that makes billions. Hill replied that if the government wanted to patent the technology DOE develops, they could do that. He pointed out that this research is done for the general public benefit. Martineau added that decreasing prices for energy would benefit the public.

Representative David Curson (D-MI) said that if these technologies are now profitable to develop, it is the “responsibility” of the industry to pursue them. He suggested that the taxpayer should own the intellectual property that they are paying for. Curson stated that the three largest oil companies in America made 80 billion in 2011 while the rest of the economy was “struggling.” He asked why the government should pay for an industry that is making more than  “nickels and dimes.” Hill responded that the research funding of this type mainly goes to universities for research, which supports training scientists and engineers.

Opening statements, witness testimonies and an archived webcast of the hearing can be found on the Committee’s web site.

- KGK

House Committee on Energy and Commerce Subcommittee on Energy and Power Hearing on "The American Energy Initiative: A Focus on H.R. 6172"
September
20, 2012

Witnesses:
Mark McCullough
Executive Vice President – Generation, American Electric Power
Eugene Trisko
Attorney at Law, United Mine Workers of America
Robert Hilton
Vice President, Power Technologies for Government Affairs, Alstom
John Voyles, Jr.
Vice President, Transmission & Generation Services, PPL Corporation
John Christy
Professor and Director, Earth System Science Center, National Space Science Technology Center, University of Alabama in Huntsville
Dan Lashof
Program Director, Climate & Clean Air, Natural Resources Defense Council
John Thompson
Director, Fossil Transition Project, Clean Air Task Force

Subcommittee Members Present:
Edward Whitfield, Chairman (R-KY)
Bobby Rush, Ranking Member (D-IL)
John Shimkus (R-IL)
Lee Terry (R-NE)
Michael Burgess (R-TX)
Pete Olson (R-TX)
David McKinley (R-WV)
Cory Gardner (R-CO)
Mike Pompeo, (R-KS)
Morgan Griffith (R-VA)
Joe Barton (R-TX)
Edward Markey (D-MA)
Gene Green (D-TX)
Lois Capps (D-CA)
Mike Doyle (D-PA)

Full Committee Members Present:
Fred Upton, Chairman (R-MI)
Henry Waxman, Ranking Member (D-CA)

On September 20, 2012, the House Committee on Energy and Commerce Subcommittee on Energy and Power, held the 29th day of a series of hearings titled “The American Energy Initiative” to discuss H.R. 6172, a bill that prohibits the Environmental Protection Agency (EPA) from finalizing any standards of performance under section 111 of the Clean Air Act (42 U.S.C. 7411) for carbon dioxide emissions from existing or new fossil fuel-fired power plants unless or until carbon capture and sequestration (CCS) is found to be technologically and economically feasible. This bill rejects the proposed EPA rule to combine both coal-fired and natural gas-fired power plants into a single newly created source category, and set a single carbon dioxide standard, at a level that has been met by new natural gas combined cycle power plants, of 1,000 pounds of carbon dioxide per megawatt hour. In addition, coal-fired plants must capture and store 50 percent of their carbon emissions.  This rule also specifies that a utility will comply if their average emissions over the next 30 years are within the standards. The proposed rule was first issued in March 2012.

In his opening statement, Subcommittee Chairman Edward Whitfield (R-KY) stated, “It is now clear to everyone that the Obama Administration intends to limit or eliminate the use of coal for electricity generation.” He continued explaining that while the Obama Administration “denies” this bias against coal, this denial has “become even more far-fetched in light of EPA’s proposed New Source Performance Standard for greenhouse gases from fossil fuel-fired electric generating units.” Coal plants would almost certainly have to install CCS technology to comply with the standards. Whitfield describes this technology as “a very long way from widespread use” and the new EPA regulation as “nothing less than an outright ban on new coal-fired power plants, and one that could later be extended to existing plants as well.” Whitfield yielded to John Shimkus (R-IL). Shimkus referred to the proposed EPA regulation as an “assault” on “our cheapest form of energy.” He referred to the loss of coal production jobs as an “untold” story of the loss of taxpayers.

Ranking Member Bobby Rush (D-IL) began his opening statement by saying H.R. 6172 is an attempt to “roll back progress” in “trying to make our air, land and water cleaner for the American people.” Rush said H.R. 6172 would prevent coal plants from becoming cleaner and sends a clear message that “if we don’t succeed once, twice, ten, twenty or in this instance 29 times, we will try and try and try again to show the industry that we are with them.” Rush continued saying we are Congress is showing the industry that they are “standing shoulder to shoulder with them, not to be divided by the plight or affairs of Americans’ publics health.”  Rush concluded wondering, “Whatever happened to bipartisan legislation?”

In his opening statement, Full Committee Chairman Fred Upton (R-MI) expressed his concern about the impact of the proposed EPA regulation on “the future of affordable coal-fired power generation in America,” since he said CCS is not yet available on a commercial scale. Upton stated, “Clearly, there is a “war on coal” being waged by this administration.” Upton then yielded the remainder of his time to Representative David McKinley (R-WV). McKinley described the proposed regulation as “hurting our nation” and “close-minded.” He urged that the regulation is driven by ideology and “should not pass.” 

Representative Henry Waxman (D-CA) stated that coal workers are not “victims” of the government. He pointed out that “it is not the government’s fault if a utility decides it is cheaper to use natural gas than coal.” Waxman explained, “That’s what we call economics.” He stated that while we do not have CCS technology available on a commercial scale, “it is a technology we should all want to have” and the industry has no incentive to implement CCS because “that would just be an extra expense.” He outlined two ways to achieve the commercialization of CCS; tax electricity from coal and allocate these funds for research and development, or set standards that provide an incentive for industries to implement CCS.  Waxman concluded his opening statement by chiding the chairman for not holding a hearing on new developments in climate science even though the Democrats have sent 17 letters requesting one.

Mark McCullough, Executive Vice President of Generation for American Electric Power (AEP), opened his testimony by saying “AEP has a long history of proactive involvement in environmental stewardship, particularly with regard to reducing its net carbon emissions” and as an example he highlighted “the successful completion of a validation-scale demonstration of the world’s first fully integrated carbon capture and sequestration project.” However, McCullough stated that “based on AEP’s experience and EPA’s own admission, this technology is neither commercially demonstrated nor economically viable for coal-fired electric generation.”  H.R. 6172 “ensures a balanced energy portfolio in which coal is in the mix as a fuel for the future,” McCullough concluded.

In his testimony, Eugene Trisko, Attorney at Law on behalf of the United Mine Workers of America, stated that, “H.R. 6172 eliminates the threat to advanced new coal generation posed by EPA’s proposed Carbon Pollution Standards Rule.” The Carbon Pollution Standard for New Power Plants, currently under public comment, is biased, Trisko argues, because “natural gas combined-cycle units could comply without CCS” and the rule is “lumping together these two very different sources of electric generation.” Funding through the Department of Energy (DOE) has not been “adequate to support successful large-scale demonstration of CCS technologies.” Trisko concluded by saying. “Our recoverable coal reserves hold the energy equivalent of the world’s proven oil reserves. The U.S. should pursue policies that will accelerate – not stymie – the full range of advanced coal technologies.”

Robert Hilton, Vice President of Power Technologies for Government Affairs for Alstom, testified that CCS technology is not yet commercially available. He introduced Congress to Alstom as “a leader in the field of CCS having completed work on four pilot or validation scale plants and with 10 pilots, validation, and commercial scale demonstration plants in operation, design, or construction worldwide.” He then said, “To date, no CCS technologies have been deployed at commercial scale demonstration size.” There are no suppliers globally that “are willing to make a normal commercial contract for CCS at commercial scale,” but “the technologies being developed by Alstom and others work successfully.” Hilton explained that the regulations proposed by the EPA would be a financial burden and impede a “plant’s ability to compete in the market or even generate electricity.” Hilton concluded, “We know that carbon capture technology works. We need time and support to reach the point of commercial offerings.” 

In his testimony, John Voyles, Vice President, Transmission & Generation Services at PPL Corporation, stated PPL Corporation “supports the principles embodied in H.R. 6172.” He explained that while the company is invested in CCS, they do not “believe it is ready for deployment at a scale necessary.” Voyles made the subcommittee that the proposed EPA regulation would cost coal industries to implement as well as decrease profits and that these “penalties” to the coal industry should be considered.  Futhermore, “Carbon storage implications, both technical and legal, are yet to be fully understood and debated to ensure it will be deployable on a commercial scale.”

In his testimony, John Christy, Professor and Director at the Earth System Science Center at the University of Alabama in Huntsville, stated that “events, like the recent U.S. drought, will continue to occur, with or without human causation.” He recommended policy be based on observations instead of model results. Christy said, “Widely publicized consensus reports by thousands of scientists rarely represent the range of scientific opinion that attends our murky field of climate research.” Christy recommended that the full range of scientific views be used for policy instead of a consensus. Christy stated that, based on his own datasets, modern warming is not caused by greenhouse gases. He presented figures to support these claims which can be found in the testimony. He suggests that increased carbon dioxide could be beneficial in increasing food production since plants consume it. Christy concluded that we are not “addicted to oil” but “addicted” to the “long-life” that our carbon-based fuels provide.

Dan Lashof, Program Director of Climate and Clean Air at the Natural Resources Defense Council (NRDC), opened his testimony by saying, the “NRDC strongly opposes H.R. 6172 because it would prevent EPA from establishing life-saving standards to reduce carbon dioxide emissions from power plants, the largest source of this dangerous pollutant in the United States.” Lashof stated, “January through August, 2012 was the warmest such period ever in the U.S.” He showed a newly released National Aeronautics and Space Administration (NASA) image of the Arctic sea ice at a record low and urged that “what happens in the Arctic doesn’t stay in the Arctic.” As to the claim that the EPA is overreaching in their power to regulate carbon emissions, “two Supreme Court decisions, Massachusetts v. EPA and American Electric Power v. Connecticut¸ confirm that it is EPA’s job under the Clean Air Act as Congress enacted it to protect the American people from carbon pollution from both cars and power plants.”

He pointed out that such EPA regulations are meant to regulate pollution and not to favor certain technologies and coal plants should not be an exception. Lashof explained that, “The panel may never be able to make the finding that CCS is economically competitive because the marketplace is already providing cleaner and more competitive alternatives.” Lashof said, “Analysts from government, the power industry, and the financial world all forecast that we will meet electricity needs over the next two decades without constructing new coal-fired plants.” He pointed out that Canada has already passed more stringent carbon emission regulations. In addition, “more than 60 percent of Americans support EPA’s setting carbon pollution standards according to a recent bipartisan poll conducted for the American Lung Association.” Without incentives, Lashof stated, CCS will never be implemented. Lashof addressed the claim that the new regulation would close-down existing plants, “It is just plain false to claim that existing coal plants will be required to meet the new plant standard.” Lashof continued, “The criteria and procedures for new and existing plants are different.” Lashog concluded, “We owe it to our children to act now.”

John Thompson, Director of the Fossil Transition Project of the Clean Air Task Force, said in his testimony, “Several coal plants, either under construction or in advanced development, would meet the EPA’s proposed carbon dioxide emission limits using CCS.”  As to setting performance standards, “Carbon dioxide performance standards are needed to gain state public service commission approval for coal CCS projects that would be added to utility’s rate base.” Thompson addressed the feasibility of commercial CCS by saying the “EPA considered technical feasibility and cost of CCS in its draft rule.” He elaborated saying the EPA “addressed the cost in the proposed rule by establishing reasonable emission limits, providing flexibility in how standards could be met by new plants, and by allowing extended compliance deadlines.” Thompson said H.R. 6172 would be detrimental to the coal industry by “creating additional uncertainty about future regulations.” In addition H.R. 6172 is detrimental to domestic oil production because the carbon dioxide could be used to increase enhanced oil recovery (EOR) production since carbon dioxide can be used for EOR. 

Representative Whitfield began the question and answer session by asking Voyles if modifying an existing plant will reclassify the plant as new and if so, would the plant be required to comply with the proposed regulations. Voyles answered that they would be reclassified as new. Representative Rush asked the same question to Trisko, who answered that the EPA was “explicit” in stating that the proposed regulations would not apply to modified plants.

Rush commented that “coal does not have to harm human health” and asked Thompson to comment on advances in CCS. Thompson replied that much has been accomplished simply by new CCS plants “breaking ground,” but Congress could do more to provide incentives for EOR using carbon dioxide from coal plants. Rush then asked Hilton what the most important things Congress could do to promote CCS are.  He replied, “We need financial support” and “grants do not go far enough” because the price of electricity from CCS coal plants is more expensive. He continued, “Carbon sequestration is not going to happen until we resolve the issue of financial liability.” Lashof commented that the NRDC has supported CCS and reiterated that there are applications and a market “around the world” for CCS and there is “a real need for the U.S. to be a leader in this technology.”

Whitfield asked Christy if he participated in the Intergovernmental Panel on Climate Change (IPCC) and if he agrees with the IPCC findings. Christy replied that he has been an author but does not agree with the IPCC findings. Whitfield asked if it is true that “thousands of scientists” all agree “the world is going to hell because of carbon dioxide,” and “how many scientists are there like you?” Christy replied, “It depends on how you define ‘climate scientist.’” Christy continued, “There aren’t very many of us.” Christy said, “Other people like to use the term, you know, have some bleak relationship to how climate might impact something.” Whitfield asked if it is not conclusive that “man-made carbon dioxide is the primary contributor to global warming.” Christy did not answer this question, but referred Whitfield to his figures from his written testimony.  Christy mentioned that a recent Nature article concludes that climate models are insufficient to accurately model the future but did not provide the author.

Whitfield asked Voyles what the expense is for most economic CCS technology currently available today for commercialization. Voyles answered that the recent unit they installed in 2011, which received a tax credit, and has been operating for two years is in the $30 to $40 per megawatt range. Representative Gene Green (D-TX) asked Thompson how coal plants plan to comply with the proposed standards. Thompson answered that some states are actually trying to regulate carbon emissions from coal plants and promote CCS, but in states like Illinois it is unlikely they will succeed because of the low price of natural gas. Green then asked how to provide incentives for EOR. Thompson replied, “To use a portion of the tax revenue from new oil development and put that back into subsidizing some of the cost for CCS.” Thompson pointed out that the EPA regulations allow 30 years to comply.

Representative Lee Terry (R-NE) asked the panel to comment on the discrepancy between Hilton’s testimony that CCS is “still in progress” and Thompson’s testimony that “they are already building them,” referring to CCS equipped plants. Hilton reiterated that it is currently technologically available and could be commercially available with funding. Hilton said that a coal plant in Kemper County, Mississippi, will utilize CCS but only because they received sufficient funding. Thompson pointed out that the Kemper plant and the Texas Clean Energy Project, which is a facility that is a commercial clean coal power plant, both use pre-combustion capture technology, which has “been around for 30 years—commercially available.” Thompson continued that what Hilton “is talking about is post-combustion capture” and agrees that this type of CCS technology is not available yet. Terry asked Hilton to elaborate on the liability issues which are associated with CCS. Hilton replied there is “liability associated with storing carbon in a reservoir and issues with land ownership where the carbon is stored in the ground. 

Representative Mike Doyle (D-PA) asked Hilton how CCS projects are being funded around the world. Hilton answered that the UK government is funding CCS projects. Doyle asked the panel what they thought “would be the best driver for the commercialization of affordable CCS technology.” Doyle continued, “Would it be EPA regulation, a carbon tax, cap-and-trade or something else?” Trisko answered “a wire’s charge approach,” which involves charging power suppliers to fund subsidies, as this would generate $10 billion as a “non-budget” approach. McCullough and Hilton supported Trisko’s suggestion. Voyles agreed and pointed out that the industry is already investing in CCS without regulations and should continue. Thompson recommended implementing standards, subsidizing and incentivizing EOR. Lashof recommended implementing standards as well as supporting CCS development.

Doyle brought up the fact that in 2009, Democrats passed a stimulus bill which provided $3.4 billion to CCS and was “49 percent of all the energy funding in the stimulus bill” which republicans “smeared, denigrated and misaligned.” Doyle continued, “Also in 2009 we took up a cap-and-trade bill which had $60 billion for CCS funding as well as the $10 billion in wire charges that Mr. Trisko referred to in his testimony.” Doyle went on, “That bill was smeared, denigrated and misaligned on this House floor.” Doyle expressed his frustration that the same people who are arguing that the technology is not commercially available are the same people who voted against funding CCS technologies.

Representative David McKinley (R-WV) pointed out that Democrats have voted to cut EOR funding. In addition, he suggested that oil companies pay for CCS technology since “they will be the ones that benefit” from EOR. McKinley asked Lashof if he was aware that carbon dioxide emissions have reached a 20-year low. Lashof responded that he was and pointed out that carbon dioxide levels in the atmosphere are still climbing. Lashof continued, “The U.S needs to provide leadership” in stabilizing the atmospheric carbon dioxide. McKinley responded, “I think you said that was the main culprit of global warming.” Lashof agreed, “Carbon dioxide traps heat in the atmosphere. It would be remarkable if it wasn’t causing warming.” McKinley asked if he disagreed with the statement that “this is the greatest pseudo-science fraud perpetrated on America.” Lashof said he did. McKinley pointed out that other scientists think global warming is being used for “other purposes.”

McKinley asked if Lashof is aware that Milutin Milankovitch predicted the current recent trend of warming would be occurring right now. Lashof replied that he was aware of Milankovitch cycles, but that carbon dioxide has become “a much bigger factor influencing climate than Milankovitch cycles.” Lashof said, “If we predicated policy on unanimity among scientists on any issue we would never do anything.” McKinley pointed out that this statement admits that the climate science is “still up in the air.” Lashof replied that it does not and explained, “There is not unanimity among scientists and there won’t be.” Lashof continued, “The National Academy of Sciences has said that ‘the idea that carbon dioxide is contributing to climate change is as well proven as gravity.’” Lashof concluded that that is “a strong basis for making policy.”

Representative Ed Markey (D-MA) quoted the American Geophysical Union’s 2003 statement on climate change, “Scientific evidence strongly indicates that natural influences cannot explain the rapid increase in global near-surface temperatures observed during the second half of the 21st century." Representative Morgan Griffith (R-VA) pointed out that even if the U.S. decreased emissions, this decrease would be negligible given the increases in emissions as other countries such as India or China develop. He argued that while decreasing emissions in the U.S. would be negligible, increasing utilities bills for the people of America would not, and the EPA regulations would be effectively “taking our economy and throwing it in the trash can.”

Opening statements, witness testimonies and an archived webcast of the hearing can be found on the committee’s web site

-KGK

House Committee on Energy and Commerce Subcommittee on Energy and Power Hearing on "The American Energy Initiative: A Focus on the Outlook for Acheiving North American Energy Independence Within the Decade"
September
13, 2012

Witnesses:
Harold Hamm
CEO, Continental Resources
Daniel Ahn
Chief Commodity Economist, Citigroup
John Freeman
Managing Director, Raymond James & Associates
John Purcell
Vice President for Wind Energy, Leeco Steel,
Daniel Weiss
Senior Fellow, Center for American Progress Action Fund
Mark Mills
Senior Fellow, Manhattan Institute
Peter Howard
President and CEO, Canadian Energy Research Institute

Subcommittee Members Present:
Edward Whitfield (R-KY), Subcommittee Chairman
Bobby Rush (D-IL), Subcommittee Ranking Member
John Sullivan (R-OK)
Steve Scalise (R-LA)
Pete Olson (R-TX)
David McKinley (R-WV)
Mike Pompeo (R-KS)
Morgan Griffith (R-VA)
Joe Barton (R-TX)
Kathy Castor (D-FL)
Edward Markey (D-MA)
Gene Green (D-TX)
Lois Capps (D-CA)

Full Committee Members Present:
Fred Upton (R-MI), Full Committee Chairman
Henry Waxman (D-CA), Full Committee Ranking Member

On September 13, 2012, the House Committee on Energy and Commerce Subcommittee on Energy and Power held the 28th day of a series of hearings titled “The American Energy Initiative” to discuss the outlook for achieving North American energy independence within the decade. Due to technological advances within the industry, mainly hydraulic fracturing and horizontal drilling, North America has been the fastest growing oil and natural gas producing region of the world for the last 5 years.

Chairman Edward Whitfield (R-KY) opened the hearing celebrating the possibility of North American energy independence within the decade remarking, “It was not long ago that we were repeatedly told that we would have to live with declining U.S. and North American oil production.” Hesaid the geopolitical implications alone as justification for achieving energy independence through increased North American oil and gas production and stated that energy independence alone would “succeed where the economic stimulus package has failed,” and would lower the price of gas at the pump. The chairman referred to the creation of clean jobs as “wishful thinking” compared to the jobs the oil industry offers.  Whitfield lamented the President’s rejection of the Keystone XL Pipeline and called for an end to the government “crackdown” on hydraulic fracturing.
 
In his opening statement, Ranking Member Bobby Rush (D-IL) praised the Obama Administration for their 2011 Blueprint for a Secure Energy Future which would put the nation on-track for energy independence and promote job creation through renewable energy sources, clean coal and natural gas. Rush emphasized that unlike Republican Presidential Candidate Mitt Romney’s energy plan based on the “simplistic Sarah Palin drill baby drill” mantra, the President’s proposal “endorses safe and responsible production of domestic energy sources” and considers climate change. Rush referenced  the nine percent decrease in oil production required by 2025 under the Obama Administration’s greenhouse gas and fuel economy standards and expressed his hope for “ a valid and honest” discussion of the North American energy independence. 

Fred Upton (R-MI), chair of the full committee, remarked that the energy revolution in the oil and gas fields “will accomplish more for the American people than Solyndra and all other federal stimulus giveaways combined” referring to the former U.S. solar panel manufacturing company that received $535 million in loan guarantees from the Department of Energy before filing for bankruptcy in 2011. He emphasized that North American energy independence will not cost the American people “a single dime”, and accused the Obama Administration of refusing to “get out of the way.” He pointed out that while President Obama was “trying to convince the Americans that Solyndra’s new solar panels would take the world by storm and create green jobs,” hydrocarbon “game changing energy breakthroughs have quietly continued to unfold in places like the Bakken Formation and other state and private lands where the federal government has little or no role.” Upton said the opportunity is at hand for “liberation” from the Organization of Petroleum Exporting Countries’ (OPEC) control, to create new jobs, and decrease the price of gas at the pump and that “this subcommittee has initiated legislation to remove the Obama Administration’s obstacles to North American energy independence” in the past. Upton declared that “we will continue to fight for increased leasing on federal lands, streamline the permitting process and we’re not going to give up on the Keystone XL pipeline.”

Daniel Ahn, Chief Commodities Economist for Citigroup, testified that “North America has recently become the fastest growing hydrocarbon producer and exporter in the world and this trend should accelerate to the end of the decade.” He referred to this as an “energy renaissance” caused by the decline in domestic consumption and success of new technology to unlock previously inaccessible resources. He stated that new U.S. oil and gas production could decrease the current U.S. deficit could by two thirds, strengthening the credibility of the U.S. dollar. He stated that global oil prices could fall by 15 to 20 percent. He concluded by remarking “a minor industrial revolution is in the making in the American heartland” which is testament to “the bounty of our natural resources.”

John Freeman, managing director for Raymond James & Associates, opened his testimony by stating that “for the first time in over 50 years, there is clear visibility on how oil independence can be achieved within a foreseeable period of time.” He described oil independence as a sustained trend, driven by the private sector, and mentioned that Congress has the potential to “play a constructive role” by supporting industry efforts. He noted that the U.S. contributed more barrels to the global oil supply than any other country between 2008 and 2011 despite the deepwater drilling moratorium in 2010 and 2011 as a result of the BP Deepwater Horizon blowout. Freemen emphasized that his team forecasts the U.S. to become the largest producer of oil in the world before the end of the decade. He expressed his concern for the “graying of the oil patch,” referring to the aging workforce in the field. The average age of a U.S. petroleum engineer is around 50 years old and the supply of young professionals is insufficient to replace them upon retirement. He asked Congress to consider ways to encourage the interest of young people in the field. He asked that Congress remove regulations which slow the process of obtaining permits, especially those pertaining to federal lands using the Keystone XL pipeline as an example of a project that was stalled by permitting. He concluded by saying “We are the largest producer of natural gas in the world, the second largest producer of coal and in the next several years we will become the largest oil producer in the world. The future has never been brighter for achieving energy independence.”  

In CEO of Continental Resources Harold Hamm’s testimony, based on his 45 years of experience in oil and gas exploration, he recommended Congress develop more reasonable and consistent environmental regulations, encourage the development of federal lands and provide tax relief to oil industries in order to achieve energy independence in North America. Hamm made the subcommittee aware that his company, Continental Resources, is one of the top 10 petroleum liquids producers in the U.S. and that he is an energy policy advisor to  Romney. He impressed upon the subcommittee the wealth of the resources in America by stating that there are 139.6 billion barrels of economically recoverable oil, which is sufficient to replace imports from the Persian Gulf, and 1445.3 trillion cubic feet of technically recoverable natural gas in the U.S. He noted that over the last 15 years the U.S. has transitioned from importing 60 percent of our oil to 45 percent through technological advancements which provide access to previously unattainable immobile oil and marveled that this “new technology allows us to drill two miles down, turn right, drill another two miles and hit a target the size of a lapel pin.” Hamm highlighted the creation of high paying jobs, increased tax revenues in addition to independence from foreign oil as the benefits of these technological advancements. He asked that Congress invest in the oil and gas industry and open federal lands and offshore areas for development, both of which would require a paradigm shift in the regulatory regime.

John Purcell, the Vice President for Wind Energy of Leeco Steel asked for the immediate extension of the Production Tax Credit (PTC) which is set to expire at the end of this year. Purcell said if the PTC is not extended, 37,000 jobs will be lost industry-wide while extension of the PTC would create tens of thousands of jobs. Purcell reiterated extension of the PTC is “crucial for regaining our nation’s leadership in new technology and innovation” and would “help secure our nation’s energy future” by diversifying our energy portfolio. He concluded his testimony by stating, “The wind industry is on the verge of becoming competitive without the PTC, but failing to extend it immediately would prevent us from finishing the job.”

Daniel Weiss, a senior fellow at the Center for American Progress Action Fund (CAP Action) opened his testimony by urging Congress to consider climate science when developing energy policies and that not doing so “is like setting your house on fire to stay warm.” Weiss continued by saying, “This year the polluted climate struck back with the worst U.S. drought in over 50 years and the third  hottest summer ever measured and the drought has cost us at least $5 billion in crop damages so far.” He brought up the CAP Action finding that the Flight 93 Memorial in Stoystown, Pennsylvania would be vulnerable if federal regulations were relaxed. He dismissed the notion that increased production of oil in the U.S. would lower the cost of gas at the pump because oil prices are set by the world market and the Environmental Protection Agency (EPA) has found no correlation between prices at the pump and U.S. oil production. Weiss dismissed the idea that the Keystone XL pipeline would increase energy security since a significant proportion of the tar sands transported from Canada will be exported to Europe or South America. In his concluding remarks, Weiss suggested that clean energy could be paid for by ending the $2.4 billion annual special tax brakes for the “Big Five” oil companies which made $60 billion dollars in the first half of 2012 alone.

In his testimony, Mark Mills, a senior fellow at the Manhattan Institute proposed that the U.S. could fuel the world just as it currently “feeds the world” as the largest supplier of grains. He informed the subcommittee that “policies that accelerate hydrocarbon production could create at least 3 million jobs and $3 to $7 trillion in economic benefits and would completely reset energy geopolitics.” He remarked that the U.S. can “literally drill, dig, build and ship its way out of the current economic and job malaise.” He remarked that this can only be accomplished if energy policies adopt a pro-export policy, “establish a single federal portal for approval of all major energy projects” and suspend all rules except those with “near-term safety relevance.” Mills warned that “the energy future isn’t inevitable” and the U.S. could either “become a major player in the world energy markets” or else “other nations will step up to fill the void.”

Peter Howard, the President and CEO of the Canadian Energy Research Institute testified on the state of Canada’s hydrocarbon industry and informed the subcommittee that Canada would require five pipelines to reach their production capacity. There are three pipelines currently “on the books” to be constructed, the Keystone XL, Trans Mountain Expansion, and Northern Gateway pipeline, all of which have faced significant resistance from various entities resulting in an unclear outcome. He offered a multitude of statistics in regards to Canada’s oil production.

Chairman Whitfield began the discussion period and asked Hamm to comment on the size of U.S. hydrocarbon reserves by elaborating on the discrepancy between what is classified as known or proven reserves and what the actual recoverable reserves might be. Hamm answered that President Obama says we have 2 percent of the world’s oil reserves, yet the U.S. produces 12 percent of the world’s production oil each day.  Hamm highlighted that there are known resources they cannot claim.

Ranking Member Rush commented that the Obama Administration has been viewed as hostile towards the oil and natural gas industry. Rush asked Weiss and Purcell if they thought this was a valid viewpoint. Weiss answered that some people may agree because the Obama Administration has set new standards for worker and environmental safety and that the predictions made by Raymond James & Associates of increased oil production in the U.S. include these new regulations. Weiss noted that the Obama Administration is focusing on eliminating tax breaks for the oil industry, some of which go back to 1916 and were intended for a young industry. Weiss reiterated that the $2.4 billion given in tax cuts to the “Big Five” oil companies would be more appropriate supporting the wind industry, which is in a similar state to the oil industry 100 years ago, through extension of the PTC.

 Rush then asked Purcell to explain why Congress should invest in renewable energy and wind energy. Purcell answered saying that his industry created 75,000 jobs and that $15 billion in private investments have come in over the last four years. Purcell said that Congress should extend the PTC to protect these jobs and investments. Representative Joe Barton (R-TX) responded by saying that he supported the PTC in 2005 but feels that wind power is now a conventional and mature source and therefore it is not acceptable to spend $1 to $1.5 billion in tax credits on it. Purcell responded that he and his colleagues feel that wind energy is experiencing a “renaissance” just as the oil and gas field is and urged that it is at risk without the renewal of the PTC.

Representative Gene Green (D-TX) noted that Canada is a net exporter of oil and is energy independent but their prices are controlled by world events and asked Ahn and Freeman how they came to their conclusions that gas prices would go down. Ahn responded saying that decreases in gas prices are projected because of the addition of new supplies and decrease in world consumption. He said that this is a global trend for which the U.S. is “at the heart and forefront of.” He also explained that the decrease in global consumption is due to other countries such as China making energy efficiency a key goal. Freeman agreed and added that the price of oil is down $17 per barrel in Texas where local production has increased.

Representative Mike Pompeo (R-KS) asked if there is any chance that the U.S. will be experiencing a decline in resources as was the thought over the last 25 to 30 years. Mills responded by saying that the resources were always there, but that new technology has “unleashed” resources that were previously unrecoverable. Mills mentioned that 100,000 new patents in the hydrocarbon industry have been published in the last 5 years while there have been only 60,000 for non-hydrocarbon technology. Pompeo questioned Purcell’s business management by asking if he regretted building a business model knowing the PTC was set to expire, therefore resulting in layoffs. Purcell responded that he did not, and remarked that the oil industry has received support for a long time.  

Representative Kathy Castor (D-FL) praised the success of the Obama Administration for the increases in domestic hydrocarbon production. She asked Weiss to comment on the perception that the U.S. energy sector is stagnant. Weiss answered that the Raymond James & Associates report is encouraging because it indicates the oil and natural gas industry can grow without expanding into public lands. Weiss reiterated that the Flight 93 Memorial is a location where oil leases are already held and would be at risk in the Romney Energy Plan which would put states in charge of deciding if federally owned lands would be opened for drilling.

Representative David McKinley (R-WV) commented that when scientists study the Dust Bowl of the 1930’s, they do not discuss atmospheric carbon dioxide as the cause and referred to climate change as “based on ideology and not the facts.” McKinley asked Weiss if “he thought Americans could afford higher energy bills.” Weiss replied that the cost to health should be considered in the price of energy. These costs include an increase in mercury contamination as well as in the frequency of asthma attacks. Weiss mentioned a Harvard study that demonstrates asthma attacks increase with air pollution. McKinley insisted that you cannot tell that an increased in frequency in asthma attacks is from increased outdoor air pollution and continued “there is more mercury in a can of tuna fish than in fly ash and we eat the tuna fish not the fly ash.”

Representative Morgan Griffith (R-VA) Weiss’s comments about drilling in federal parks and explained that the Romney Plan is meant to  increases the use of federal lands for oil and gas production to over 3 percent, but excludes national parks and sacred sites. He called for permitting the Keystone XL pipeline and relaxing federal regulations. Griffith called on Mill to comment on how in all previous energy revolutions we “didn’t cut the legs out from the older industry.” Mill remarked that we have made oil and gas production cleaner with new technology and that it would be “marvelous if 20 percent to 30 percent of the world’s energy came from renewables, but that still leaves the 60 percent to 70 percent.”

Representative Edward Markey (D-MA) described the Romney Energy Plan as “oil above all” instead of “all of the above” and urged for improved energy efficiency instead of increased oil and gas production. Markey asked Hamm if he agreed that Mitt Romney energy plan is subsidy based. Hamm disagreed saying the nation’s energy selection should be market based. Markey pointed out that subsidies for oil and not for wind is not market based.

Representative Rush asked Mills what he thinks about the “climate change speed bump on this expressway” of oil and natural gas. Mills replied that industry leaders support environmental and safety measures, but are looking for regulations that are simple, coherent and sensitive to time. He commented that if the “U.S. ceased to exist by tomorrow or got all of its energy from renewable resources, the consumption of hydrocarbons will still go up.” Mills pointed out that “someone else would supply those hydrocarbons” and the U.S. might as well be the one to provide since the U.S. would benefit from the creation of jobs and geopolitical ramifications as well as produce the oil and gas in a cleaner manner. Representative Griffith concluded that he believes in all of the above, and that we should “get out of the way of people like Mr. Hamm” to ensure that our children and grandchildren do not inherit “a lesser America.”

Opening statements, witness testimonies and an archived webcast of the hearing can be found on the committee’s web site.

-KGK

House Committee on Energy and Commerce Subcommittee on Energy and Power Hearing on the American Energy Initiative: A Focus on Growing Differences for Energy Development on Federal vs. Non-Federal Lands
August 2, 2012

Witnesses:
Panel 1
Michael Nedd
Assistant. Director, Minerals and Realty Management, Bureau of Land Management
Mary Wagner
Associate Chief, U.S. Forest Service
Adam Sieminski
Administrator, U.S. Energy Information Administration

Panel 2
Lynn Helms
Director, North Dakota Department of Mineral Resources
Dan Sullivan
Commissioner, Alaska Department of Natural Resources
Thomas Clements
Owner, Oilfield CNC Machining, LLC
Kathleen Sgamma
Vice President, Government and Public Affairs, Western Energy Alliance
Reed Williams
President, WillSource Enterprise, LLC
Christy Goldfuss
Director, Public Lands Project, Center for American Progress
Corey Fisher
Assistant Energy Director, Trout Unlimited and Sportsmen’s Conservation Project

Subcommittee Members Present:
Edward Whitfield (R-KY), Chair
Bobby Rush (D-IL), Ranking Member
John Shimkus (R-IL)
Lee Terry (R-NE)
Brian Bilbray (R-CA)
Steve Scalise (R-LA)
Cory Gardner (R-CO)
Morgan Griffith (R-VA)

Full Committee Members Present:
Fred Upton (R-MI), Chair
Henry Waxman (D-CA), Ranking Member

On August 2, the House Committee on Energy and Commerce Subcommittee on Energy and Power held its 27th hearing on the American Energy Initiative, the Republican’s energy plan which would reduce government regulation on energy production.

Subcommittee Chairman Edward Whitfield (R-KY) opened the hearing by saying the American Energy Initiative seeks to solve two “primary problems” facing the government - dependence on foreign energy sources and high unemployment rate. Whitfield explained that this hearing would focus on the difference between oil and gas production on private and public lands. He said North Dakota is “doing it right” with a three percent increase in oil and gas production and the majority of production in the state is on private or state land. Since 2008, North Dakota has grown from the eighth largest producer in the country to the second largest. Whitfield complimented the situation in North Dakota with the decrease in oil production in Alaska. He attributed this difference to the fact that most of the oil in Alaska is found on federal lands. The chairman claimed that regulations from the federal government, including an overcomplicated permitting process, impede oil development.

Subcommittee Ranking Member Bobby Rush (D-IL) stressed the need to address climate change in his opening statement. He repeated a request for a hearing on the science behind climate change. The ranking member said it would clarify the relationship between increased carbon dioxide in the atmosphere and rising temperatures and even the drought experienced by much of the U.S. during the summer of 2012. He criticized his Republican colleagues for “taking a cue” from former governor of Alaska and 2008 Vice-Presidential candidate Sarah Palin’s “drill, baby drill” mantra. Rush recommended the committee focus on investing federal dollars to renewable energy research. American demand for oil has decreased according to the ranking member, and he said the committee’s focus should reflect this.

Full Committee Chairman Fred Upton (R-MI) discussed the dichotomist energy states in the U.S. in his opening statement. He said across the U.S. oil and gas production is either growing or stagnant and 96 percent of the increased oil supply since 2007 comes from private land. The production in Alaska has been “blocked by bureaucrats” according to Upton.

Full Committee Ranking Member Henry Waxman (D-CA) supported the regulations in place on public lands in his opening statement. He addressed the Republican rhetoric that the Obama administration is hostile to the oil and gas industry saying production has increased even in the Gulf Coast, despite the effects of Hurricane Katrina and the 2010 BP Deepwater Horizon oil spill. The permitting process has been extradited under President Barack Obama according to Waxman. The ranking member explained there are many uses for public lands other than oil and gas exploitation saying that federal lands are “held for people, not oil companies.” He doubted whether the oil production model in North Dakota could be applied to other states. Waxman said his state has more oil than the North Dakota but its model could not work in the more densely populated California. Because of this, Waxman asserted that the other uses of public lands, recreation, hunting and even renewable energy production, must be protected.

Michael Nedd, Assistant Director of Mineral and Realty Management for the U.S. Bureau of Land Management (BLM) testified based on his experience coordinating federal land use for mineral acquisition. He supported BLM’s policies for the use of public land, claiming that one-third of lease land is used for oil and natural gas production. Nedd said $2.9 million were made in royalties in 2011 and in accordance to agreements with oil and gas companies, the money went back to state governments in exchange for state-owned land. He defended BLM saying the Mineral and Realty Management Directorate was working to expedite lease application review and drafting rules on hydraulic fracturing on public land. He acknowledged the importance of hydraulic fracturing, saying improvement of the technique had a role in increased production of oil and natural gas. BLM’s policies for land leasing caused that improvement by requiring a level of environmental sustainability according to Nedd.

Mary Wagner, Associate Chief of the U.S. Forest Service, discussed the Department of Agriculture’s role in managing land desired for oil and natural gas production in her testimony. She said the Forest Service provides information on environmental monitoring on oil and gas production sites to inform the public and uses science to inform policy. This information usually involves mapping of local aquifers, as one of the Forest Service’s primary duties is to protect the watershed. Since 2008, Wagner said tourism and resource acquisition other than oil and gas have made $6.5 million per year and provide 110,000 jobs. Given this contribution to the economy, Wagner does not support easing regulations for oil and gas production on National Forests.

Adam Sieminski, Administrator of the U.S. Energy Information Administration (EIA), reported research on the oil and gas industry in his testimony. The EIA collects data on oil and gas production from over 240 independent surveyors every month. He said the increase in production is because of shale gas mining on private or state lands. Production on federal lands like the outer continental shelf (OCS) decreased after 2010, but has now begun increasing according to the Sieminski. He stressed that EIA estimates are based on “technically recoverable resources” and will likely change as technology advances.

During the question and answer period, Representative John Shimkus (R-IL) discussed working with the Forest Service or BLM to ease production restrictions for oil and natural gas. He mentioned working with Indian tribes as an alternative for companies hoping to avoid leasing regulations from the federal government. Nedd and Wagner acknowledged that this option is utilized in North Dakota.

Representative Morgan Griffith (R-VA) asked if natural gas prices will rise which Sieminski confirmed because of delayed production on the Utica Shale Formation in Ohio and Pennsylvania. Prompted by Rush, Sieminski estimated the lull will not last, and production will experience a “tremendous rate of activity” until 2035.

Representative Cory Gardner (R-CO) asked if hydraulic fracturing had the potential to pollute groundwater. Nedd and Wagner said it did, which is why environmental awareness is stressed in BLM and Forest Service regulations. Nedd said BLM’s rules could add between $10,000 and $13,000 per permit to the cost of hydraulic fracturing.

Representative Brian Bilbray (R-CA) said BLM should consider creating a federal “green zone” to produce renewable fuel. He said it takes years for companies to receive permits, and he asked the panel if their agencies would oppose Congress setting up a zone with “free permitting” to streamline construction of solar power plants. Nedd said he could not speak for BLM on that issue.

Representative Lee Terry (R-NE) asked if the proposed 5-year OCS permitting plan will reimpose the moratorium on off-shore drilling. Nedd said the plan is under the Bureau of Ocean Energy Management (BOEM) authority and could not comment on it. Representative Steve Scalise (R-LA) spoke about the potential for domestic oil and gas production to reduce dependence on foreign fuel. He discussed the possibility of oil reserves off the coast of Virginia and Sieminski confirmed there was likely oil on the OCS in the mid-Atlantic.

Lynn Helms, Director of the North Dakota Department of Mineral Resources, testified to the “renaissance” in North Dakota due to increased oil and natural gas production. He said there is an estimated 300 billion barrels of oil in the Bakken Formation, a shale formation which crosses North and South Dakota, Montana and into Canada. Because “geology varies from state to state” oil production from the formation, found mostly in North Dakota, falls under state jurisdiction in North Dakota. He attributed “rapidly growing employment” in the state to oil companies producing the Bakken. To address concerns that oil and gas production prevents land use for recreation and other uses, Helms said the private owners in his state allow multiple uses on land being drilled for oil and gas.

Dan Sullivan, Commissioner of the Department of Natural Resources in Alaska, discussed the lack of oil and gas production in his state in his testimony. Even though the U.S. owns land with the most oil in the Arctic of the Arctic nations, there has been very little production because it lies on federal lands, according to Sullivan. He said the state has as many critical mineral deposits as the top ten critical mineral-containing countries. Sullivan lamented the fact that Alaska was not participating in an “energy renaissance” and reminded the committee that many technological innovations for mining and drilling came from mines in the state. With Alaska’s deposits on and off-shore, Sullivan said the U.S. could be the largest hydrocarbon producer in the world by 2020.

Thomas Clements, owner of Oilfield CNC Machining Inc, testified as one of the many small business owners in the oil and natural gas industry. He said he was “shocked” by the possibility of another moratorium and the 2012-2017 OCS permit plan “does nothing.” Clements said relaxing oil and gas production regulations on federal lands would help his business. He said he hoped the federal government would do more to support the oil and natural gas industry saying, “all natural energy is good.”

Kathleen Sgamma, Vice President for Government and Public Affairs at Western Energy Alliance, discussed the impedance to oil and natural gas production due to federal regulations in her testimony. She said the increase in production since 2008 is “in spite of, not because of, the federal government.” She said federal regulations have slowed production and even stopped it for small companies looking to drill for oil in western states. Sgamma cited seven or eight year long environmental analyses under the National Environmental Policy Act (NEPA P.L. 91-190) as a “burdensome” regulation.

Reed Williams, President of WillSource Enterprise, testified to how federal regulations interfere with oil and natural gas production. WillSource Enterprise is a small prospecting and drilling company working on the Western Colorado Slope. He said the Forest Service and BLM have required multiple rounds of environmental analysis, delaying production in some cases for 16 years.

Christy Goldfuss, Director of the Public Lands Project for the Center for American Progress Action Fund, defended BLM and Forest Service regulations in her testimony. Goldfuss said regulations seem strict because there are many more interests invested in public land than just oil and gas companies. The outdoor industry, hunting and fishing and timber industries must be considered, she said. She said public lands are open for oil and gas development and the choice by companies to produce on private land is because of a lack of demand. Goldfuss said most shale gas development occurs on private lands because of geology - most shale formations just do not happen to fall on public land.

Corey Fisher, Assistant Energy Director for Trout Unlimited and representing the Sportsmen’s Conservation Project, discuss the need to keep public land open for hunting and fishing in his testimony. He argued there are many uses for public land saying, “No one use is allowed to trump another” and BLM manages those needs well.

During the question and answer section, Whitfield brought up the Washington Post article describing the “gritty side” of the oil boom in North Dakota. The article asserts people who move to North Dakota cannot find affordable housing, and residents are being displaced by oil companies looking to drill on private land. The article includes the claim by the Sierra Club that pollution is “out of control” in the state because of the oil production boom. Helms responded to the question saying, “The article is filled with inaccuracies.” He said regulations in North Dakota comply with the Environmental Protection Agency’s rules regarding production of Class II injection wells.

Rush asked about the opportunities for production of other, “more sustainable” resources on public lands. Goldfuss responded that the Department of the Interior (DOI) is streamlining the approach to solar wind and geothermal energy development and passed new rules for permitting in April and May of 2012.

Gardner asked how many jobs have been delayed by “burdensome” regulations for production on public lands. Sgamma responded that the “backlog” of environmental analyses is preventing 65,000 jobs from being created by the oil and gas industry. She said the Obama Administration is “making it easier for solar and wind energy” but not for oil and gas. She went further to say only 48 percent of leases are being utilized because of government regulations.

Opening statements, witness testimonies, and an archived web cast of the hearing can be found at the committee’s web site.

-SJG

Senate Committee on Energy and Natural Resources on Induced Seismicity Potential in Energy Technologies
June 19, 2012

Witnesses:
Murray Hitzman
Chairman, Committee on Induced Seismicity Potential in Energy Technologies, National Research Council
Professor of Economic Geology, Colorado School of Mines
Bill Leith
Senior Science Advisor for Earthquake & Geologic Hazards, U.S. Geological Survey
Susan Petty
President and Chief Technology Officer, Altarock Energy, Inc.
Mark Zoback
Professor of Geophysics, Stanford University

Committee Members Present:
Jeff Bingaman (D-NM), Chairman
Lisa Murkowski (R-AK), Ranking Member
Mary Landrieu (D-LA)
Joe Manchin (D-WV)

On June 19, the Senate Committee on Energy and Natural Resources held a hearing to discuss the findings of a recently released National Research Council (NRC) report on induced seismicity. The report, titled Induced Seismicity Potential in Energy Technologies, was released on June 15. In 2010, Chairman Jeff Bingaman (D-NM) requested that Steven Chu, Secretary of the Department of Energy (DOE), conduct a study to assess energy technologies’ potentials to cause earthquakes. DOE then requested NRC’s Board on Earth Sciences and Resources (BESR) to complete the report. Bingaman’s original request came shortly after a group of seismic events near a waste water disposal site in Guy and Greenbrier, Arkansas. Earthquakes occurred in Basel, Switzerland in 2006 and 2007 that have been linked to a nearby geothermal plant. Several other moderately sized seismic events have recently occurred in Youngstown, Ohio and Texas that may be linked to waste water injection wells.

Geoscientists have suspected since the 1920s that injecting fluid into the Earth can cause faults to slip. Earthquakes as high as magnitude 3.7 near geothermal plants like The Geysers in California during the 1970s and 1980s made more Americans aware of this potential hazard. The NRC report confirmed that certain energy development technologies do have the potential to cause earthquakes, though they can rarely be felt by humans. Fluid injection and extraction is cited as the main cause of induced seismicity from energy technologies.

Bingaman began his opening statement by outlining the different energy production methods which were assessed for their seismic potential. The report covered geothermal energy, carbon sequestration and storage, waste water disposal from hydraulic fracturing and enhanced oil recovery. All of these methods involve pumping liquid or gas deep into rock formations. He reported the findings of the report saying the potential for seismicity is there but, “only a small percentage [of energy-related injection and extraction activities] have created earthquakes at levels noticeable to humans.”

The chairman said that methods such as hydraulic fracturing, which inject a relatively small volume of fluid over a short period are very unlikely to cause earthquakes. Much higher volumes of waste water from drilling or hydraulic fracturing are injected into the ground over a longer period for storage and this is much more likely to induce seismic activity. Carbon capture and sequestration (CCS) is the process of capturing carbon dioxide emissions from fossil fuel-fired power plants and injecting it as a supercritical fluid into permeable formations or depleted oil and gas reservoirs. This method is thought to have seismic potential, but there are few sites actively sequestering large amounts of carbon dioxide to acquire data from.

Bingaman emphasized that the “risk for earthquakes … is minimal” and that no technology-induced seismic event has “caused significant damage to life or property.” He echoed the report’s claim that with “appropriate proactive measures” the risk from induced seismic events can be managed.

Ranking Member Lisa Murkowski (R-AK) agreed with Bingaman and the report on the relatively low levels of risk posed by induced seismic events. She reproached members of the media for “sensational” headlines on induced seismicity and thanked the witnesses and those who wrote the report for the “reality check.” Though the risk is “remote,” Murkowski was quick to point out that no one “should be dismissive of this discussion.”

The ranking member emphasized that “drilling is perhaps not the issue,” instead risk comes from “injection of water or carbon … where pressures have become destabilized.” She said she is thankful that with so many methods of energy production involving the deep earth the hazards are “barely noticeable to humans.” Murkowski stressed the importance of deciding “whether that sort of seismicity is avoidable and manageable.”

Murray Hitzman, a professor at Colorado School of Mines and chairman of BESR’s Committee on Induced Seismicity Potential in Energy Technologies, testified that energy development, like underground nuclear testing, mining and dam reservoirs, can be a source of induced seismicity. The report found that induced seismicity from injection and extraction of fluid “is caused in most cases by change in pore fluid pressure and/or change in stress in the subsurface in the presence of faults.” This knowledge is important but he added it does not aid in predicting the magnitude or occurrence of induced seismic events.

Hitzman explained that the risk of inducing seismicity is governed by fluid balance. The volume of fluid injected should be as close as possible to the volume of fluid removed. The report found that induced earthquakes with the largest magnitude did not maintain this fluid balance, though Hitzman clarified this as a statistical observation. He suggested the relationship could serve as an important meter to measure the risk of induced seismicity from a project.

Hitzman then outlined the findings for the major energy technologies assessed in the report. He said geothermal energy production usually maintains a constant fluid balance within the Earth. “Vapor-dominated” and “fluid-dominated” geothermal production usually results in quick cooling of subsurface rocks, which Hitzman said could cause induced seismicity. Enhanced Geothermal Systems (EGS) have caused low magnitude induced seismicity in all EGS projects in development.

Hitzman testified to the low risk of induced seismicity for conventional oil and gas sources and shale gas recovery. He stressed that the possibility of induced seismicity for these methods comes from the disposal of waste water. Though the majority of waste water wells do not result in induced seismicity, Hitzman said there is a “causal [link] between the injection zones and previously unrecognized faults in the subsurface.” He explained many of the well-documented seismic events near waste water wells occurred over a long period of time and involved a large volume of fluid.

The potential for CCS sites to induce seismicity was “difficult to accurately assess” with a limited amount of large scale sites in production. Hitzman testified that because large amounts of fluid are injected but nothing is extracted, the fluid balance relationship would suggest large-scale CCS sites could carry a high risk of induced seismicity.

Bill Leith, an advisor of geological hazards for the U.S. Geological Survey (USGS), explained in his testimony that the greater number of earthquakes in the Eastern and Central U.S. could be a result of induced seismicity. Leith said the August 2011 5.8 magnitude Mineral, Virginia earthquake was naturally caused, but other events do not have a known cause and induced seismicity should be considered.

To understand induced seismicity, Leith recommended research focus on the differences between injection procedures which cause earthquakes and those that do not and how those procedures can be altered; if injection or an induced seismic event can increase the likelihood of a larger, natural earthquake; the distribution and maximum magnitude of an induced earthquake; and the possible damage from an induced earthquake. Leith stressed industry cooperation in research.

He expanded on the “data gap” and echoed the report’s recommendation that “data related to fluid injection... should be collected by state and federal regulatory authorities in a common format and made publicly available (through a coordinating body such as the USGS).” Leith explained “To meet these increasing demands, we have increased research efforts within our current budget” and said the Obama Administration asked the USGS “to address potential environmental, health, and safety issues associated with hydraulic fracturing.”

Susan Petty, President and Chief Technology Officer of Altarock Energy, testified that induced seismicity has become a major concern for scientists in the geothermal, mining and oil and gas industry. She cited a Massachusetts Institute of Technology (MIT) study which found 2 million megawatts of energy can be recovered from 2 percent of domestic geothermal resources. She explained that industry knows more about operation and selection of sites from past problems with induced seismicity related to geothermal energy production. EGS “relies on controlled induced seismicity,” according to Petty, to create fractures where heat can be extracted.

She explained that the magnitude of an earthquake determined by the Richter scale only partly influences whether the event can be felt on the surface. Depth of the slip, types of rock above the event and structural integrity of buildings on the surface contribute to the “ground shaking” people will feel on the surface. She said, “It would be better to talk about the risk of ground shaking” than the energy released by the actual event.

She noted that the mining industry has “long had regulations to address induced seismicity.” Petty emphasized the importance of the industry educating the public on the dangers of induced seismicity. She said it has been “difficult … communicating the information it [the NAS report and others on induced seismicity] contains to the public.” Petty said that public outreach has shown that groundwater contamination is a much larger concern for most people.

She stressed the need for scientists with effective communication skills to properly brief the public and regulators on the complex tectonic nature of any site. Petty said much of the misunderstanding regarding this issue comes from miscommunication between scientists from industry and the press.

Mark Zoback, a professor at Stanford University, focused on induced seismicity hazards from waste water injection and carbon capture and storage in his testimony. He began by agreeing with Leith’s assessments that recent earthquakes in the Eastern and Central U.S. could be linked to induced seismicity from energy technologies and that these practices could contribute to the advancement of faults at critical stress.

When discussing waste water injection, Zoback explained that fault identification is not required by the Environmental Protection Agency (EPA) in site characterization. He outlined steps to reducing the risk of induced seismicity. He cautioned that fluids should not be injected into areas with brittle rock and the injection site and injection rate should be selected to minimize the change in pore pressure of the target formation. Seismic monitoring arrays should be in place at a site, and procedure should be in place to reduce injection or shut down a site if induced seismicity could become problematic. Another method is to simply reuse waste water for other hydraulic fracturing projects, rather than disposing of it. He said this method was a “welcome development.”

Zoback referenced one of his recent papers published on June 18 in Proceedings of the National Academies of Science titled “Earthquake Triggering and Large-Scale Geologic Storage of Carbon Dioxide” and discussed the difficulty in implementing enough CCS sites around the world large enough to properly combat greenhouse gas emissions. A large site injection site greatly upsets the fluid balance because large volumes of fluid are injected while essentially none is extracted. He clarified that the concern is not a large destructive earthquake, rather a breach of the reservoir’s seals in a CCS site leading to a release of the stored carbon dioxide. Zoback said a CCS site would have to leak less than 1 percent of its carbon per thousand years “to achieve the same climate benefits as switching to renewable energy sources.” Natural earthquakes could cause this leak just as easily as induced earthquakes.

Zoback raised concerns that the large amounts of sequestered carbon necessary to “have a beneficial affect on climate change” would likely result in induced seismicity which could cause a leak in the site. He questions if a large enough site could even be found for the 3.5 billion tons of carbon dioxide per year needed to be stored to reduce atmospheric greenhouse gases.

Bingaman asked the panel who would define the practices necessary to avoid sites where induced seismicity could occur. Hitzman responded that the committee did not make a recommendation but it would be most beneficial to bring together members of industry, academia and the government to define safe procedure. Murkowski asked Leith about the specific changes needed to ensure greater seismic monitoring at the USGS. Leith explained that in addition to the hundreds of additional portable monitoring systems needed, many more geoscientists and analysts would be required to make sense of the data. The ranking member further qualified that because waste water injection is a low cost operation, not much mapping is done. Zoback agreed, clarifying that most injection wells do not cause earthquakes, but agreed that more monitoring was necessary.

The Department of Energy Carbon Capture and Sequestration Program Amendments Act of 2011 (S.699) was a main focus of questioning. This bill would provide liability insurance for groups attempting CCS projects if the site was approved by the DOE and there is no carbon leakage. Murkowski and Bingaman both asked if it was “premature” to provide this kind of support if the method would not sufficiently reduce carbon dioxide. Hitzman explained that more would have to be known about the size of the site, and Zoback argued that a large site could be affected by induced or natural earthquakes of any size. According to Zoback, CCS should not be relied upon to completely reduce greenhouse gases, but could be a minor source of reduction.

Witness testimonies, opening statements, and a webcast of the hearing can be found on the committee’s web site.

-SJG


Senate Committee on Energy and Natural Resources Hearing on China and Clean Energy
June 14, 2012

Witnesses:
Justin Wu
Head of Wind Industry Research, Bloomberg New Energy Finance, Hong Kong
Alan Wolff
Senior Counsel, McKenna Long & Aldridge LLP
Clyde Prestowitz, Jr.
President, Economic Strategy Institute
Dan Holladay
Director, Advanced Technologies & PV Programs, SEMATECH
Derek Scissors
Senior Research Fellow, the Heritage Foundation

Committee Members Present:
Jeff Bingaman (D-NM), Chair
Lisa Murkowski (R-AK), Ranking Member
Al Franken (D-MN)
Ron Wyden (D-OR)

On June 14, 2012, the Senate Committee on Energy and Natural Resources hosted a hearing to discuss the level of success of China’s clean energy sector. Discussion focused on policy options that could promote international collaboration and ensure the competitiveness of U.S. clean energy innovations. In 2005, China created a Renewable Energy Law to mandate a portion of electricity generation be sourced from clean energy supplies. Following this and other supportive legislation, China became the world leader in attracting new capital for clean energy in 2009 and 2010. During 2012, U.S. clean energy investments are projected to fall relative to China. China invested $47 billion into wind, solar, and other clean energy development in 2011. It is uncertain the level to which the United States should prioritize alternative energy investments to ensure a sustainable supply of energy, improve environmental quality, and remain internationally competitive.   

Chairman Jeff Bingaman (D-NM) opened the hearing by describing the Chinese clean energy pursuits he witnessed during recent visits to Hong Kong. Because of China’s rapid economic growth and high reliance on coal and oil, the government has instituted incentives and other financial policies to promote clean energy development. Bingaman noted that clean energy investments in China are influencing markets in the U.S. and Europe. He called for a strong foundation of domestic policies, stating that the U.S. cannot compete under current “inconsistent and erratic” clean energy investments. Bingaman outlined the need to evaluate the investment landscape in China, the appropriate extent of U.S.-Chinese collaboration, and determine how the U.S. can remain competitive with China. 

In her opening remarks, Ranking Member Lisa Murkowski (R-AK) stressed the need to understand the key contextual differences between China and the United States. Murkowski said the U.S. is not falling behind in areas such as environmental and labor standards, therefore “imitating China is not the best way to compete.” Murkowski contrasted the alternative energy challenges China has faced with air and water quality issues and the displacement of millions of people by the Three Gorges Dam project, with U.S. energy problems, such as a rise in food prices associated with biofuels and the lack of a nuclear waste disposal site. Murkowski stated that the different challenges denote the importance to “look at the whole picture” in order to constructively advise congressional leaders. Murkowski concluded that the nation “should not be overwhelmed” by Chinese clean energy development. 

Justin Wu, of Bloomberg New Energy Finance, testified on the extensive work he has done in Hong Kong over the past several years. Because the nation manufactures half of all wind turbines and hosts eight of the top solar manufacturers, China is “a clean energy giant,” Wu said. He commented that the Chinese government has been influenced by factors such as annual economic growth of 8 percent and the reliance of coal to supply 70 percent of electricity needs. China has realized current energy trends may be expensive, bad for the environment, and weaken national security. Local governments have provided land and tax incentives for wind and solar energy, state-owned corporations are buying technology licenses, forming joint ventures, and hiring foreign engineers to design wind turbines, and private entrepreneurs have invested in solar manufacturing facilities. Wu concluded that trade relations between the U.S. and China can only increase in the future as China continues to rapidly develop clean energy.

In his testimony, Alan Wolff emphasized that solar and wind power must play a more significant role in the future to meet energy needs. Wolff noted that current U.S. measures are “temporary, erratic, and expired” and it should not be acceptable to have Chinese clean energy policy shape U.S. economic progress. He continued that it is essential to have efficient delivery of energy from production to an energy grid in order to be cost-effective. Wolf used the U.S. experience with semiconductor technologies as an example of a competitive framework similar to current Chinese-U.S. energy relations. In the 1980s, Japan began to introduce less-expensive semiconductors to the market because Japanese producers were vertically integrated and able to sustain below-average costs of production. To help Silicon Valley companies compete, the U.S. implemented a complete strategy of research and development (R&D) investments, foreign market access, and tax policy to eventually double Japanese production rates and make semiconductors one of the top five U.S. exports. To ensure market stability and competiveness for clean energy technologies, Wolff recommended the government avoid large cash deposit dumping, invest in R&D, strategically integrate trade measures into policy, and collaborate with China. Wolff concluded that China and the U.S. share “mutual interests” in clean energy and should lead negotiations that will not “end up in trade disputes.”

Clyde Prestowitz, President of the Economic Strategy Institute, began his testimony by comparing China’s clean energy pursuits to U.S. priorities in leading aircraft security and technology development. He highlighted that other national governments are supporting clean energy development such as Germany, where there are large subsidies for solar technology, and Denmark, who subsidizes wind power. Prestowitz stated that the world is at a place in which industrial policy, such as China’s 863 Program, is “defining the incentives and outcomes of the marketplace.” With the lack of an industrial policy in the U.S., the clean energy market will be determined by “external energy policy.” Prestowitz argued that the U.S. should respond by instituting a broad, comprehensive policy to support economies of scale, promote “learning by doing,” and ensure long-term, public-private commitment. He recognized the importance of the emerging shale gas industry, but noted that clean energy technology will still “be important down the road.”

In his testimony, Dan Holladay focused on the key role a public-private consortium, such as Semiconductor Manufacturing Technology (SEMATECH), can play in expanding the scope of next generation technology. SEMATECH is an organization that works to accelerate the commercialization of innovative technologies into manufacturing solutions by creating opportunities for flexible collaboration, investing in strategic R&D, and establishing global networks between suppliers, universities, research institutes, start-up companies, and government partners. Holladay attributed the past success of SEMATECH with semiconductor technologies to seven components: commitment from senior executives, industrial leadership, a pre-competitive mission to build a technology base and strengthen the manufacturing base, broad industrial engagement, leveraging of government and industrial funds to accelerate technology development, shared manufacturing development facilities, and the utilization of a membership model. Holladay stated that the SEMATECH model is being applied to photovoltaics (PV) through the Photovoltaic Manufacturing Consortium (PVMC), which will demonstrate capabilities to increase the performance and speed of implementation, improve manufacturing processes, and drive down costs of PV technologies. Holladay said the U.S. should not risk being a producer of intellectual property that is commercialized elsewhere. He concluded that private-public partnerships can build an infrastructure of sustainable growth and leadership in clean energy technologies.

Derek Scissors, Senior Research Fellow at the Heritage Foundation, testified that the negative aspects of China’s clean energy development are “pretty stark.” He said China is now the world’s leading importer of coal, has improved energy efficiency at an annual rate of 1.7 percent as opposed to U.S. improvements of 2.5 percent, is at least 50 percent ahead of the U.S. in carbon emissions, and has little primary innovation. Scissors said these factors are a result of economic policies associated with “state-control of energy,” that have suppressed competition and instituted price controls. Scissors emphasized that the U.S. is “winning” the competition. Scissors recommended the government comes to a consensus on corporate tax reform, create a stable yet minimally directed regulatory environment, and resist choosing “winners and losers” by subsidizing certain clean energy technologies.

Chairman Bingaman began the question and answer period by asking how partner organizations would initiate participation in a clean energy consortium and be as successful as SEMATECH. Wolff responded that the development of SEMATECH was driven by vertically integrated and Silicon Valley companies who recognized the need to develop better quality semiconductor chips to outcompete Japanese production. Government funding, matched dollar-for-dollar by industry, was a “major effort that paid off” because it led to the development of pre-competitive R&D practices. Holladay added that private companies, particularly along the supply chain, have expressed collective interest to develop high-quality R&D facilities to improve manufacturing and efficient deployment of crystal silicon cells. Bingaman then asked the panel to elaborate on the need to develop manufacturing capacity. Prestowitz described “path dependence,” the concept that decisions on further development are limited by potentially irrelevant past decisions, to highlight the importance of the “back and forth” scientific process to successfully transition along the stages of R&D to manufacturing to commercialization. Contributing to this comment, Holladay said it is essential to integrate innovation with manufacturing and deployment.

Ranking Member Murkowski questioned whether it is constructive to regard China-U.S. clean energy trade relations as “a race for the clean energy title.” She asked what metrics, such as generation capacity, the extent of emission reductions, or the quantity of federal investment, should be used to measure “who is winning or losing” in the development of clean energy. Wolff responded that in terms of environmental and energy sourcing reasons, it is internationally beneficial to promote a “race” in clean energy deployment, but collaboration in areas such as carbon sequestration and wind turbine technology are valuable as well. Wu commented that the focus should be on “grid parity,” the ability to deploy energy in a cost-effective manner, rather than on the quantity of wind turbines or solar panels. Prestowitz said industries are not characterized by “win-win” outcomes and the U.S. should invest in solar and wind in addition to shale gas technologies. Holliday noted that although photovoltaics are in the early stages of development, they will become a “huge market globally,” suggesting the U.S. should position itself as a leader of next generation technologies. Scissors commented that federal investment “money should not be a metric” to compare U.S. to China.

After describing China’s “green mercantilism,” a system of aggressive industrial policies and exportation of clean energy technologies, Senator Ron Wyden (D-OR) asked the panel how the nation should respond to this type of trade policy. Wu responded that Congress must consider economic differences, such as the higher demand for energy in China than in the U.S. Prestowitz suggested the U.S. strategically monitor green mercantilism practices, such as excessive investment followed by dumping, progressive industrial policies, and currency manipulation, by instituting foreign investment taxes or establishing public-private consortia. He recommended interested parties avoid debates over federal selection of “winners and losers,” because in a situation of active international, industrial policy “a decision not to intervene is a decision to pick losers.” Scissors suggested the U.S. focus efforts to apply political pressure on Chinese trade policy.

Senator Bingaman expressed concern about government procurement efforts in the United States. Unlike the U.S., China is not a signatory to the Government Procurement Agreement under the World Trade Organization (WTO) and is not obligated to offer fair opportunity to foreign producers. Bingaman asked if there should be more government demand for “buy-America” policies to support national industries. Wolff underscored the importance of government demand historically in areas such as the titanium industry, the internet, semiconductors, and global positioning systems (GPS), and highlighted the need for national policies to balance costs while concurrently maintaining a domestic industrial base. Senator Murkowski commented on the tension between environmental improvement, cost, and job creation, and questioned whether the nation will choose to prioritize either affordability or ‘made-in-America’ policies. Scissors claimed there will always be this type of tension. Wu disagreed that the tension presents “a stark choice,” because energy resources must be localized and therefore allow for job creation in installation and maintenance. Wolff added that a public-private consortium could drive down costs of clean energy technologies produced in the U.S.

Senator Al Franken (D-MN) suggested the statistics on China’s carbon emissions and clean energy efficiency used by Derek Scissors “need context” and asked the panel to respond to his testimony. Prestowitz said the fact that Chinese emissions are worse than the U.S. should not detract from their commitment to develop alternative energies. Wu noted that the poor emission statistics are a result of the massive growth in China’s economy and energy-use. He agreed with Scissors that federal investment in clean energy has not resulted in as much return as hoped, but said this is simply a function of poor grid parity. Wolff said he is more concerned about Chinese trade practices depressing clean energy production and preventing the U.S. from entering the clean energy market, than by the extent of Chinese renewable energy deployment. He concluded that “we breathe the same air around the world… it would be nice if they [China] had more clean energy.”

Visit the Senate Committee on Energy and Natural Resources web site for an archived webcast of the hearing and witness testimonies.

-NEH


House Committee on Oversight and Government Reform Hearing on "Rhetoric vs. Reality, Part I: Does President Obama Really Support an 'All-of-the-Above' Energy Strategy?"
May 31, 2012

Witnesses:
Kathleen Sgamma
Vice President of Government and Public Affairs, Western Energy Alliance
Charles Drevna
President, American Fuel and Petrochemical Manufacturers
Mark Perry
Scholar, American Enterprise Institute
Michael Krancer
Secretary, Pennsylvania Department of Environmental Protection
Peter Glaser
Partner, Troutman Sanders LLP
Daniel Weiss
Senior Fellow and Director of Climate Strategy, Center for American Progress Action Fund

Committee Members Present:
Darrell Issa (R-CA), Chair
Elijah Cummings (D-MD), Ranking Member
Mike Kelly (R-PA)
Tim Walberg (R-MI)
John Tierney (D-MA)
James Lankford (R-OK)
Danny Davis (D-IL)
Blake Farenthold (R-TX)
Peter Welch (D-VT)
Tim Walberg (R-MI)
Dennis Ross (R-FL)

On May 31, 2012, the House Committee on Oversight and Government Reform held a two-part hearing entitled “Rhetoric vs. Reality.” The morning session was titled “Does President Obama Really Support an “All-of-the-Above” Energy Strategy?” The strategy is Obama’s approach to energy security. It focuses on increasing domestic oil production, natural gas production, biofuel use, the use of wind, solar, and nuclear energy, and the development of clean coal.

Chairman Darrell Issa (R-CA) began his opening statement by quoting President Obama’s 2012 State of the Union address in which Obama said “This country needs an all-out, all-of-the-above strategy that develops every available source of American energy.” Issa pointed out how oil, natural gas, and coal energy sources have been limited in production by actions from the administration. Issa mentioned that the proposed nuclear waste geologic repository at Yucca Mountain in Nevada has been “shut down (…) effectively dooming nuclear.” He said all the actions are based off of “(…) distortion of the actual facts.” Issa focused on statements made by the President about domestic oil reserves and production and he cited the Institute for Energy Research that says the U.S. has 1.4 trillion barrels of recoverable oil. Issa said this amount is enough to meet demand for the next 200 years. Issa stated that “96 percent of U.S. oil production increases in 2007 have occurred on non-federal lands.” He mentioned the proposed Keystone XL pipeline and that the President “stood in the way” and claimed an executive order that “does nothing new, advances nothing, and expedites nothing new.” Issa finished his statement by saying “we have to have an all-of-the-above and all-of-the-below mentality” to be able to provide affordable energy for the American people.

Ranking Member Elijah Cummings began his opening statement by answering the title of the hearing, saying that the President does support an “all-of-the-above” plan. Cummings said that total domestic oil production has increased by 14 percent since the last year of the Bush Administration and every year since the beginning of Obama’s presidency, total crude oil production has increased. Over 2 billion barrels of oil were produced in the U.S. in 2011. Cummings listed on-shore and off-shore statistics. Natural gas has increased in production and is at its highest level in 30 years. Cummings discussed nuclear power and how the President has requested an additional $770 million in the FY 2013 budget for nuclear programs. Cummings noted a reduction of oil consumption by 2.2 million barrels a day due to fuel economy standards. He said the “arguments that the administration has been refusing to approve drilling permits in the Gulf [are] a complete myth.” He said that the administration has issued more than 400 deepwater drilling permits after enacting safety rules after the 2010 BP Deepwater Horizon Oil Spill.

Michael Krancer began his testimony by saying that he has no intention to remove health and safety protection. Krancer said that the States are doing a great job of regulating extraction and used Pennsylvania’s natural gas extraction as an example. He clarified that natural gas production increased regardless of the federal government, once again using Pennsylvania as an example. Krancer focused on Pennsylvania’s diverse energy sources, including coal, nuclear, natural gas, oil, wind, and solar. He said he sees a federal government that seems to be picking “winners and losers” and does not have an “all-of-the-above” method. He used hydraulic fracturing in Pennsylvania as an example saying that the federal government has a “hostile attitude” towards the practice. He accused the federal government of not being interested in the subject until just recently. Krancer discussed the Environmental Protection Agency’s (EPA) involvement in Dimock, Pennsylvania and how the government is now “looking for an exit strategy” after they found no contamination of drinking water as a result of hydraulic fracturing. When it comes to air regulations, Krancer said he sees opposition from the government towards coal. He went on to mention that air regulations would kill coal burning in Pennsylvania and the proposed coal combustion residuals rule would be “devastating” and that there is no scientific or legal justification. Krancer agreed with Issa saying that the federal government is not dealing with the nuclear waste disposal issue.

Kathleen Sgamma began her testimony by saying that western producers are upset about the administration taking credit for increased production. She says that oil and gas companies have increased the production mainly on private lands. Sgamma talked about a recent Western Energy Alliance study of 20 projects on public lands, with about 3100 wells, which are in the evaluation stage of the National Environmental Policy Act (NEPA, P.L. 91-190). The wells would create $27.5 billion in economic impact. NEPA analysis must be conducted by the Bureau of Land Management (BLM) where small well projects take over four years and “large projects take over seven years” to complete the analysis. She mentioned other instances that she considered obstacles, including the Secretary of the Interior Ken Salazar, who cancelled leases in Utah and “added three new layers of analysis to the leasing process.” Sgamma said it takes 298 days to process drilling permits, and Secretary Salazar “promised to reduce the time to 60 days.” Sgamma mentioned BLM’s planned hydraulic fracturing regulations which the Western Energy Alliance estimates could potentially add another 100 days on to permitting times. She finished her testimony by stating “now we are just waiting for reality to catch up.”

Mark Perry began his testimony by saying “all-of-the-above” is really only “some-of-the-above.” He supported this statement by saying domestic production of fossil fuels on federal lands fell to a nine year low in fiscal year (FY) 2011, while crude oil fell by 14 percent, and natural gas fell by more than nine percent. He stated that the President’s proposed FY 2013 budget focuses higher taxes on oil and natural gas companies. He continued his argument by citing the administration’s rejection of a cross-state permit that would have allowed the construction of the Keystone XL Pipeline, temporary blocking of off-shore lease sales, and “closing a majority of the outer continental shelf to new energy production for the next five years.” Perry said that the proposed FY 2013 budget allots for the “politically favored, green energy sector” by “tax subsidies, tax credits (…) and grants.” The U.S. Department of Energy (DOE) estimated that fossil fuels use in energy will decline from 83 percent of total U.S. consumption in 2010 to 77 percent in 2035. DOE estimates that in 2035 the use of renewable energy in U.S. consumption will be less than 11 percent. Perry closed his testimony saying the “scientific and economic realities suggest that the fuels of the future will mostly be the same as the fuels of the past.”

Daniel Weiss began his testimony by clarifying the assumption that producing more oil would reduce gasoline prices. Weiss quoted the Associated Press which said that there is “no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.” He stated that to most Americans an “all-of-the-above” strategy means three things: developing the energy resources of today while using them efficiently, investing in new cleaner technologies of tomorrow, and reducing public health threats from pollution from burning of fossil fuels. Weiss reviewed the President’s record when it comes to the “all-of-the-above” strategies. He said that U.S. oil production is the highest it has been since 1998. The U.S. imported only 45 percent of its oil in 2011, which is the lowest since 1997. He mentioned the approval of licenses for two nuclear reactors, something that has not happened in 30 years. Weiss said that the U.S. spent more on clean energy investments in 2011 than China. The non-hydro renewable electricity generation is expected to double from 2008 to 2012. Weiss then mentioned EPA’s Cross-State Air Pollution Rule (CSAPR) and Mercury and Air Toxic Standards (MATS) and how they will reduce pollution from power plants. Weiss said it appeared the President passes the “all-of-the-above” test and moved on to reviewing the House of Representatives. He stated the House “ignored oil use reductions, slashed investments for new clean energy technologies, and would eviscerate public health protection from hazardous pollutants.”

Charles Drevna opened his testimony by agreeing with Krancer that there is no intention of removing health and safety protection. Drevna continued by saying that market reacts to a stimulus and if the U.S. could display how serious about its energy it is, it could help moderate prices throughout the world. The oil and natural gas sectors pay more than $31 billion in taxes, which makes it the largest taxpayer. Drevna called the U.S. an “energy giant” and all its domestic needs could be met by 2025 without taxpayer money. He said government actions are threatening the future. Drevna recommended “the administration should allow the oil and gas industry to fully develop domestic resources and immediately approve the Keystone XL Pipeline, consider the cumulative impact of regulations before imposing them and eliminate costly, contradictory, or ineffective regulations.”

Peter Glaser opened his testimony by stating coal is not included in the “all-of-the-above” policy. He pointed out EPA’s policies directed towards coal mines, and mentioned MATS rule. Glaser attributed EPA’s policies to the “misplaced conclusion” that these policies are needed to protect the public. He further stated that the EPA’s “anti-coal regulations will actually harm public health and welfare.” Glaser said the reliability of the electric grid is affected by EPA policies. EPA has never produced a study on the effect of their regulations on the grid and ignored recommendations from the Federal Energy Regulatory Commission to do so. Glaser said America must use its competitive advantage, and “coal is one of our competitive strengths.” He argued that coal has more heating value, lower cost, is easier to stockpile, and has been the “bedrock of the American electrical system for a very long time.”

After all witnesses finished their testimony, Issa showed a map of the Keystone XL Pipeline and asked Drevna that if by not having the pipeline, the U.S. would be burning more carbon to deliver oil. Drevna agreed said “the most inefficient way to transport oil is either by rail or by truck.” Issa asked Weiss if producing more natural gas would reduce gas prices at the pump. Weiss said he could not answer that because oil and natural gas are priced differently on the market. Issa asked Krancer if natural gas of Pennsylvania and Ohio is a highly substitutable fuel to which Krancer agreed.

Cummings addressed Weiss about $8000 in savings to drivers due to car efficiency standards and asked him to clear up the time frame for which that was applicable. Weiss said that amount is for the lifetime of the vehicle. Cummings listed statistics from the Energy Information Administration comparing oil production during the Bush Administration to the production during the Obama Administration. Weiss said U.S. is definitely producing more now than under the previous administration.

Mike Kelly (R-PA) asked what advice Krancer would give to federal regulators right now to which Krancer replied, “Back off.” He said the states “are doing a good job regulating hydraulic fracturing, in their states where it takes place.” Kelly mentioned the length of time it takes to acquire a permit and how it is keeping “this country from reaching the energy independence that we’ve been seeking since the early seventies.” Krancer blamed “federal overlay” for causing delay.

John Tierney (D-MA) re-iterated some statistics of increased crude oil and natural gas production and said “this debate or trying to make the President look bad is a little silly.” Tierney pointed out that the Congressional Research Service says in the FY 2013 budget, $39 billion in taxpayer subsidies would go to oil companies. He said subsidies are for emerging technologies, which oil is not. Renewables are only getting a “fraction” of what the “mature, extremely profitable, industry is getting.” Tierney asked Weiss for any public policy rationale behind this. Weiss listed several statistics including the top five oil companies having $60 billion in cash reserves, and said they do not need the tax break that is given to them.

James Lankford (R-OK) said it is a “pet project to try to diminish fossil fuels and traditional energy and go after them.” Lankford addressed Perry and asked what would happen if the U.S. became energy independent. Perry used North Dakota as an example and listed off several statistics that showed the positive economic stimulus. Lankford then asked Sgamma about the status of permits on private and public lands. Sgamma said two large projects have been approved and 20 projects that have been proposed. Lankford asked Sgamma what she estimates the production on federal lands to be in 10 years. Sgamma said she predicts less production in the future. Lankford then asked if anyone on the panel could point out one specific action done by the administration that increased production. Sgamma said she could only see obstacles.

Danny Davis (D-IL) wanted to know how natural gas production has done under the Obama Administration in comparison to the previous administration. In 2008 about 25.6 trillion cubic feet were produced. In 2009 about 26 trillion cubic feet were produced and production has been increasing ever since then reaching 29 trillion cubic feet in 2011. Davis asked Weiss if there are any significant differences in policies in regards to natural gas production between the two administrations. Weiss noted one, the Clean Air Act (42 U.S.C. 7401). He then asked Drevna, who replied production increase has been due to innovation by entrepreneurs on state, private and federal lands. Davis closed by agreeing with Cummings that the President does not get any credit for increases in production.

Blake Farenthold (R-TX) re-stated the time it takes a company to acquire a permit and asked Sgamma how it can be shortened. Sgamma replied, by “just having the government do its job.” Farenthold then told Glaser about a county in Texas that was trying to build a coal-fired power plant, but were told by the EPA they may be in non-compliance even though they were upwind of Houston. Glaser re-stated the rules in place make it difficult to build a coal plant.

Peter Welch (D-VT) asked Krancer if he thought the regulatory oversight is better accomplished at the state level and Krancer agreed. Welch then asked if Glaser acknowledges there is mercury release from coal plants. Glaser said there are “minute amounts.” Welch then asked if the panel agrees that there needs to be some sort of regulation “to look out for air and water quality.” Glaser said reasonable regulation is a good thing. Sgamma agreed but included that new regulation is not well thought out.

Tim Walberg (R-MI) re-visited the inability of coal-fired electric generation plants with the newest technologies to comply with Utility Maximum Achievable Controllable Technology (MACT) rule. Glaser agreed. Walberg said there is a “catch-22 that says commence construction and cease construction.” Glaser agreed and said “projects are effectively being strangled.”

Witness testimonies and a webcast of the hearing can be found on the committee web site.

-KNR

House Committee on Oversight and Government Reform Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform Hearing on “Rhetoric vs. Reality, Part II: Assessing the Impact of New Federal Red Tape on Hydraulic Fracturing and American Energy Independence”
May 31, 2012

Witnesses:
Panel I
Michael McKee
County Commissioner, Uintah County, Utah
Lori Wrotenbery
Director, Oil and Gas Conservation Division, Oklahoma Corporation Commission
Michael Krancer
Secretary, Pennsylvania Department of Environmental Protection
Robert Howarth
Director, Agriculture, Energy, and Environment Program, Cornell University

Panel II
Nancy Stoner
Acting Assistance Administrator for Water, U.S. Environmental Protection Agency
Mike Pool
Deputy Director, U.S. Bureau of Land Management

Subcommittee Members Present:
James Lankford (R-OK), Chair
Gerry Connolly (D-VA), Ranking Member
Mike Kelly (R-PA)
Blake Farenthold (R-TX)

Other Members Present:
Rob Bishop (R-UT)

On May 30, 2012, the House Committee on Oversight and Government Reform Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform hosted a hearing to assess the economic and environmental impacts of hydraulic fracturing and its implications for an energy-independent America. Industry has located significant new areas for unconventional oil and gas exploration. Disagreement over the extent to which federal government should regulate hydraulic fracturing has become a contentious congressional debate.

In his opening statement, Chairman James Lankford (R-OK) discussed the importance of energy production to revamp the U.S. economy. With 58 percent of U.S. oil resources produced in the Americas, 79 percent of which are produced in North America, Lankford claims the U.S. is “truly in an energy renaissance.” Lankford noted that 96 percent of new energy production is occurring on private rather than public land, causing royalty losses and underutilization of federal lands. He compared the regulatory role of the Environmental Protection Agency (EPA) and the Bureau of Land Management (BLM) to that of state regulators. Through programs such as the Frac Focus chemical registry web site and the State Review of Oil and Natural Gas Environmental Regulations (STRONGER), Lankford stated that regulators in gas and oil producing states work closely with all interested parties to develop an industrial regulatory regime that is environmentally sound. In defining his perspective on the role of the EPA and the BLM in hydraulic fracturing regulation, Lankford said he was “very skeptical” that thousands of wells can be “overseen from Washington better than the state regulators” who are familiar with the land. Lankford concluded, “Today is a pursuit of awareness and clarity on the direction of the EPA and the BLM.”

Ranking Member Gerald Connolly (D-VA) stated that he disagreed on “almost every front” with the chairman. Connolly highlighted the success of oil and natural gas initiatives and noted that the U.S. is on a trajectory to match Saudi fossil fuel production and eliminate dependence on foreign oil. He said the hydraulic fracturing industry could experience “serious regression” if Congress continues to pit state and federal regulators against one another. Connolly stated that he supports “reasonable regulation” for a practice as “potentially serious to environmental safety and human health” as natural gas extraction. In conclusion, he said there is scientific evidence of at least 29 toxic chemicals found in water resources near drill sites and cases of seismicity associated with the fracturing process.

Sitting in on the hearing as a nonmember of the committee, Representative Rob Bishop (R-UT) introduced witness Michael McKee. He stated that 65 percent of all natural gas in Utah comes from Uintah County. Bishop commented that when regulations are established to solve problems that are non-existent this could result in “overreach” of the federal government.

Lori Wrotenbery, director of the Oil and Gas Conservation Division in Oklahoma, began her testimony by emphasizing the influential role of self-directed state regulations on oil and gas drilling productions. As a chairman of the board for STRONGER and a member of the Groundwater Protection Council Board in Oklahoma, Wrotenbery described the procedures and findings of these two “comprehensive, strong, responsible, flexible” and well-established programs. She noted that there are remaining challenges with hydraulic fracturing technologies and described the history of hydraulic fracturing in Oklahoma to highlight that the nature of the challenges differs from state to state. Wrotenbery described the goals of STRONGER to develop guidelines for state hydraulic fracturing regulations. STRONGER has conducted reviews in Oklahoma, Pennsylvania, Arkansas, Texas, and Ohio to help states benchmark regulatory programs and identify areas for improvement. After the surveys of the participating states were conducted about 75 percent of STRONGER’s recommendations had been met. States “do take these reviews seriously,” said Wrotenbery. She described another program, a web site called Frac Focus that encourages drilling companies to disclose the chemicals in their flowback waters. After the Frac Focus web site was created in April 2011, companies have disclosed information on over 18,000 wells.

Uintah County Commissioner Michael McKee discussed the importance of the natural gas industry to the families in his county. He said fracturing has been done in Uintah county for over 60 years and that the process of hydraulic fracturing allows operators to produce 10 times the amount of energy in one tenth the number of wells. He emphasized that regulatory regulations are best made at the state level and would do “better than a far-removed federal government.” McKee said that government policies have shifted investment away from Uintah County. He discussed the relationship between the BLM and native tribal authorities and concluded by saying the BLM has failed to work with tribal leaders and their rules will “kill tribal jobs.”

Robert Howarth from Cornell University testified on the “new and rapidly changing” science associated with hydraulic fracturing. He discussed the water quantity issues of high precision directional drilling by stating that this process uses 50-100 times more water per well than conventional fracturing. Howarth then discussed other environmental issues by citing the evidence of water contaminated with bromides due to improper waste disposal, methane contamination of water, local air pollution with benzene emissions and increased ground-level ozone, stress on climate change associated with methane (a greenhouse gas 105 times more potent than carbon dioxide), and rises in radon levels in the Marcellus Shale region. Howarth concluded that this evidence, the lack of drilling expertise within states, and the fact that gas pipelines move across state lines calls for involvement of the federal government.

Michael Krancer of the Pennsylvania Department of Environmental Protection described the comprehensive regulations on well casings, water handling, drilling processes, long and short-term air quality, and wastewater treatment that are in place in Pennsylvania. He said claims of studies making a connection between contamination of drinking wells and  fracking fluids are “simply not true.” The areas in each state are complex and difficult to study but Krancer asserted, “We know the science in the states.”  He cited the Safe Drinking Water Act (P.L. 93-523) and the Energy Policy Act of 2005 (P.L. 109-58) as examples of the federal government not getting involved in hydraulic fracturing regulation and questioned why the government is now showing an interest.

Chairman Lankford began the first question and answer period by displaying a shale rock sample and declaring that the new shale gas extraction technology is “revolutionary.” He said there is a history of shale gas extraction, including the newer technologies, and questioned Howarth as to why regulatory conflicts have arisen only recently. Howarth responded that the technology is new and not well known yet. Lankford then claimed that the EPA has not found a single site for groundwater contamination, but Howarth disagreed citing multiple incidences not reported by the EPA of fracturing associated with contamination. Lankford continued by asking Krancer about the geology in his and other states. Krancer noted that the hydrology, geology, meteorology, and other Earth and atmospheric properties are different in every state. The Chairman concluded by asking Michael McKee why investments into hydraulic fracturing have shifted out of the west and east. McKee highlighted that there is not a lack of investment opportunity because there is 111 trillion cubic feet of natural gas on public land in the west, rather he claims the policies enacted by the BLM make it easier to invest on private rather than public land. “It is valuable that decisions are made at the state-level,” McKee concluded.

Representative Connolly asked Krancer if the other 49 states are as equipped as Pennsylvania to regulate hydraulic fracturing. Krancer claimed that “states are in the best position to known their own state.” Connolly disagreed by saying that the expertise of Pennsylvania cannot be extrapolated to all other states. Connolly then asked Howarth about the problems associated with methane and the possibility of seismicity around fracturing sites. Howarth replied that methane is a powerful greenhouse gas and contributor to ground level ozone, which causes 30,000 premature deaths per year. Howarth said the United States Geological Survey (USGS) has attributed wastewater reinjection to increased earthquake occurrence. Scientists with the USGS state that it remains to be determined the exact links between hydraulic fracturing and seismic activity. Lori Wrotenbery disagreed, stating that any conclusive links between seismicity and fracturing processes are premature. Connolly asked Michael McKee about the winter ground level ozone levels in Uintah County, saying they top Los Angeles, California levels of 149 parts per billion. McKee says his county has been conducting research and that the levels may not be associated with the high levels of hydraulic fracturing in his county, but instead to a number of factors including winter snow and sunlight.

Representative Mike Kelly (R-PA) asked questions specifically about EPA studies in Dimock, Pennsylvania. Krancer described the process, which involved four rounds of sampling, costing about $4 million, and resulting in no records of contamination and no cases of negative health impacts. Kelly concluded that scientific studies concerning hydraulic fracturing have been politicized through the media and movies such as Gasland.

Representative Blake Farenthold (R-TX) asked Lori Wrotenbery to compare the protective well casings of conventional and unconventional natural gas production, as well as to describe the location of the water table relative to the extraction site. Wrotenbery said the multiple layers of steel and concrete surrounding the boreholes have been required for many decades and have improved with time. She stated that variations in geology cause different depths to the water table depending on location. Farenthold questioned McKee about the costs associated with regulating hydraulic fracturing. McKee replied that besides jobs, money is being lost from royalties on public lands and delays in permitting.  

Nancy Stoner of the U.S. EPA opened up the second panel discussion by clarifying the role of the EPA within the oil and natural gas industry. She recognized that states have the primary regulatory role, whereas the role of the government is to promote research and development, ensure safety, regulate tribal lands, and guarantee safety. Stoner stated that the EPA has been asked to clarify the permits and requirements for waste disposal under the Safe Drinking Water Act. The EPA has developed permitting guidance for technical operations, that poses no new restrictions on companies, that is available to industry, states, tribes, environmental organizations, and the public. The EPA continues to conduct research to understand the effects of hydraulic fracturing on drinking water. As an example, Stoner said that by using the EPA pre-treatment program for extraction and proppant fluids companies can prevent water contamination. Stoner concluded by describing the EPA efforts to clarify the Energy Act of 2005, which excludes monitoring of natural gas extraction unless diesel fuels are used in proppant agents, by releasing the Underground Injection Control (UIC) Class II draft guidance available for public comment until July 9.

Mike Pool, Deputy Director of the Bureau of Land Management, began his testimony by describing the mission of the BLM to facilitate “safe, responsible, and efficient development” in order to protect lands and reduce dependence on foreign oil. Pool stated that the BLM complements state regulations by “providing a consistent standard.” He described the royalty process and said that government annually receives $2.6 billion in royalties, and tribal trust land royalties exceed $400 million. He highlighted the BLM efforts to work with tribal leaders by holding conferences to discuss the future of hydraulic fracturing to which 84 tribal leaders attended. In conclusion, Pool reiterated the role of the BLM to ensure disclosure of chemicals in hydraulic fracturing operations, assure well integrity, manage water requirements of flowback fluids, and strengthen regulations on federal and tribal trust lands.

The second questioning period began with Representative Kelly asking Nancy Stoner about the EPA’s decision to specifically address “the definition” of diesel fuels now and stated that the EPA has “changed its position” with regard to fracturing. Chairman Lankford expressed similar concern. Stoner replied stating that the UIC Class II document is for guidance only and is not aware that the EPA has changed positions since the Energy Policy Act of 2005. The new EPA rule was formed to address air pollution issues and mandates that by 2015 operators of fractured natural gas wells must use “green completion” equipment to capture gases known to be volatile organic compounds.  Kelly disagreed and said hydraulic fracturing should “not be part of policy.” Kelly turned to Pool and said that 96 percent of the increased production in oil and natural gas are occurring on private as opposed to public lands. Pool’s only comment was that the government has statutes for leases.

Ranking Member Connolly continued the prior discussion and asked why it took seven years for the EPA to propose this new rule. Stoner replied that originally regulation was focused on coal bed methane, but recent industrial shifts outside of the realm of coal bed methane no longer makes previous guidance applicable. Connolly asked Mike Pool to comment on McKee’s assertions about the BLM in Uintah County.  Pool said that the state hydraulic fracturing regulations were very outdated and that the Secretary of the Interior and the BLM have held regional meetings to formulate improved standards “in line with state standards.”

Chairman Lankford asked Pool why state rules do not apply to federal lands and suggested that BLM rules are out of date relative to state regulations. Pool replied that the requirements associated with the Federal Onshore Oil and Gas Leasing Reform Act (30 U.S.C.181ET SEQ), which authorizes each BLM state office to conduct oil and gas lease sales on at least a quarterly basis, are very basic.

Witness testimonies, opening statements, and a hearing of the webcast can be found on the committee’s web site.

-NEH


Senate Committee on Energy and Natural Resources on “The AEIC Report on the Government’s Role in Energy Innovation”
May 22, 2012

Witnesses:
Panel I
Norman Augustine
Former Chairman and CEO, Lockheed Martin Corporation

Panel II
Ethan Zindler
Head of Policy Analysis, Bloomberg New Energy Finance
Jesse Jenkins
Director of Energy and Climate Policy, Breakthrough Institute

Committee Members Present:
Jeff Bingaman (D-NM), Chair
Lisa Murkowski (R-AK), Ranking Member
Al Franken (D-MN)
Mark Udall (D-CO)

On May 22, 2012, the Senate Energy and Natural Resources Committee held a hearing to address the economic and policy recommendations put forth by the American Energy Innovation Council (AEIC) report, Catalyzing Ingenuity, on the role of government in energy innovation. The report outlines the importance of developing the clean energy sector to guarantee the country’s national security, environmental well-being, and economic competitiveness. AEIC recommends a three-fold increase in annual clean energy investments using innovative funding policies to account for current budgetary realities. If congressional renewal of funds is not pursued, government appropriations for clean energy research and development (R&D) are predicted to decrease 75 percent by 2014 from a 2009 level of $44.3 billion. The decrease in funding is due to the decrease in available stimulus funds associated with the American Recovery and Reinvestment Act (P.L. 111-5) and the expiration of several tax credits. Recommendations on the extent of government influence in the clean energy marketplace and public/private investment policies were discussed with the objective of preventing concession of clean energy technologies to overseas competitors.

Chairman Jeff Bingaman (D-NM) opened the hearing stating the importance of public-private partnership in helping the U.S. “continue to lead in the clean energy sector.” He noted the high costs of the fossil fuel energy system and the economic “insecurity” associated with relying on overseas energy sources. Because of the continual improvement and growing cost-competitiveness of clean energy technologies, Bingaman explained, “the only losers in the clean energy technology race are those who fail to participate.” 

Ranking Member Lisa Murkowski (R-AK) followed with remarks on the importance of government investment into basic research. Murkowski stated that the government should support a coherent, long-term approach with innovation at the core of policy. Funding for clean energy research would need to be offset elsewhere; however, budget constraints should be seen as an “opportunity to be financially creative.” She questioned how long the federal government should be involved in the clean energy sector before phasing out subsidies and tax incentives, and concluded by highlighting the significance of establishing future marketplace independence for clean energy corporations.

In his testimony, Norman Augustine, former Chairman and CEO of the Lockheed Martin Corporation, mentioned two reports put forth by the AEIC. The first report, The Business Plan released in 2010, addresses the lack of funding from the government and private sector for energy R&D. Catalyzing Ingenuity, released in 2011, is the second report of interest and addresses the need for government involvement in energy R&D. Augustine continued by describing the reluctance of private sector investment into the “valleys of death.” There are two “valleys of death” associated with energy research. One is research that leads to promising ideas, but is not yet feasible in practice. This type of research requires long-term commitment and risky investments, in which the funder may not be a direct beneficiary if the technology is successful. The second “valley of death” is capital-intensive research that requires scaling-up a proven concept and promoting economic competitiveness. Augustine expressed the “valley of death” as a “threshold that is fairly unique to the energy field.” Investment into these types of research is necessary, Augustine said, because “innovation is the key to succeeding in this arena.”

Bingaman opened up the first question and answer period by reviewing the efforts of Germany, China, and other international governments in development, commercialization, and job creation associated with clean energy technology. He asked Augustine for his thoughts on the appropriate level of involvement for the U.S. government. Augustine replied that the government should “promote an even playing field” for the private sector, contribute to research that the private sector cannot or is unwilling to invest in, and discourage international governments from becoming active participants in the marketplace. Bingaman said the government should not pick winners or losers. Augustine replied, “Government can and has to make choices.” He suggested the government promote competition and make the reasons for their investment choices highly transparent.

Senator Murkowski followed up by asking how the government would pay for clean energy technology R&D. Augustine suggested implementing small taxes on high polluting fossil fuels. He stated that the U.S. sends $1 billion per day to foreign countries to pay for oil resources, whereas only $2.1 billion per year is allocated for clean energy R&D in the budget. Augustine suggested this practice shortchanges clean energy R&D. By adding to the clean energy R&D budget at the AEIC recommended level of $6 billion per year, the U.S. could reduce investment outflow to overseas energy industries.  

Senator Mark Udall (D-CO) asked Augustine for his opinion on the Advanced Research Projects Agency-Energy (ARPA-E) program and the contributing factors to the agency’s success within the Department of Energy (DOE). Augustine explained that the success of the ARPA-E model is due to the agency’s decisiveness, willingness to take risks, ability to adapt to failures, recruitment of high quality talent, and the financial support provided to the agency by the government. Senator Udall asked for suggestions to best help American households transition to clean energy technologies. Augustine suggested subsidizing the costs of clean energy or defraying start-up costs for energy efficient buildings until reimbursed with the money saved due to efficiency.

Senator Al Franken (D-MN) cited many former government supported technologies including the Global Positioning System (GPS), nuclear power, the internet and hydraulic fracturing, all of which created jobs and spurred the economy. He said it “wouldn’t have happened without the government” and asked if there is anything that makes renewable energy different. Augustine stated that the aforementioned technologies are similar to clean energy technologies because of the associated high-risk and high-investment costs. He continued by saying that contrary to the other technologies, “the energy market has failed.” This is because the clean energy market is highly regulated, requires high initial investment costs, and must compete with low fossil fuel prices. “Without government support we won’t be successful,” he concluded.

Ethan Zindler of Bloomberg New Energy Finance opened up the second panel discussion by reiterating the challenges associated with the “valley of death.” He attributed the success of research innovation to “economies of scale,” stating that once production scales up the unit price of a commodity will decrease. Zindler mentioned that the U.S. lags behind Germany and China in development and deployment of clean energy technology. Due to the extensive network of research institutions and the hub for industry investment, Zindler asserted that “no nation is in a better position than the U.S.” for clean energy R&D.   

In his testimony Jesse Jenkins of the Breakthrough Institute recommended a “smart energy policy reform.” Smart energy policy reform treats energy as a commodity by guiding energy innovation toward subsidy independence as well as supporting R&D and commercialization of clean energy technologies. “Policy is the key to jumpstart market demand for clean energy,” Jenkins claimed. He continued stating that the U.S. needs to “advance full cost competitiveness” between clean energiesand fossil fuels. Jenkins asserted that limited and direct policy would be the best way “to develop robust industries.”

The second question and answer period began with a discussion between Senator Bingaman and Zindler on the clean energy banks established in the United Kingdom and Australia. Zindler explained that the goal of these establishments is to create a “quasi-federal seed bank” to provide initial federal investment and allow transition into a self-sustaining enterprise. As clean energy technologies improve, the seed-bank entity obtains investment returns and can begin to re-invest in more clean energy pursuits independent of government influence. By breaking from the government, clean energy banks grant clean energy technology development more leeway and allow for financial bets in the private sector that may not be possible under highly regulated federal investment ventures.

Bingaman asked Jenkins about the ability of a reverse auction incentive policy to drive industry competition and innovation. Jenkins described a reverse auction incentive policy, stating that the government is essentially the first demanding customer for a technology. This drives down the cost of a commodity to the point where it can be more widely competitive within the private sector. Investors bid on the new technologies with the winning bids subject to strong penalties for non-compliance, which ensures the company provides the promised funding. Jenkins said this type of policy could “provide both market opportunities and continual cost reductions.”

Franken asked about the government’s historic role in hydraulic fracturing technologies. Jenkins responded that the government’s collaboration with the private sector and initial funding were critical to developing the technologies which have increased the technically recoverable resources of shale gas. Jenkins mentioned the Eastern Shale Gas Project funded by the Federal Energy Regulatory Committee (FERC) and mentioned the Gas Research Institute (GRI) funded by user surtaxes from gas transmission fees. He cited the development of directional drilling technologies by the Department of Energy, the former U.S. Bureau of Mines, and the National Energy Technology Lab made possible through government support. Finally, he referred to Sandia National Laboratories in New Mexico, where research has focused on understanding the geology of shale deposits and potential fracturing locations using micro-seismic imaging technology. The projects were initially expensive, Jenkins explained, but the Internal Revenue Code Section 29 production tax credit for unconventional gases in place from 1980 to 2002 made it profitable for the private sector to develop and innovate upon shale extraction technologies. Jenkins recommends the government “encourage the private sector to do what it does best” by reducing price barriers on clean energy technology. 

Franken discussed outsourcing of clean energy technologies to countries such as China, where the government insists on ensuring “intellectual property.” Franken asked for solutions on how the U.S. government can prevent violation of basic free trade principles to protect taxpayer funded technologies. Zindler said that the U.S.-China energy trade relationship is at an “interesting juncture.” Due to the scale up in production in China, the cost of solar and other technologies have been lowered globally. Jenkins emphasized the need for government involvement to drive down costs and support policies that promote innovation to enhance the United States’ international competitiveness.

Franken concluded the hearing by saying the government is “basically fighting for the future.” He said it is inevitable that a global market will develop and the government should support price-competitiveness of solar, wind, and other clean technologies. Speaking of government support of R&D, Franken asserted “if we don’t do this now, we won’t be a part of it.” Jenkins agreed with Franken’s statements, citing the importance of the current government partnership with shale gas development. He said this led to a revolution in the global energy markets and “this is a parable for what [the U.S.] can and should do.”

Witness testimonies and a webcast of the hearing can be found on the Senate Committee on Energy and Natural Resources web site.

-NEH


Senate Committee on Energy and Natural Resources Hearing on the Clean Energy Standard Act of 2012
May 17, 2012

Witnesses:
Panel 1
David Sandalow
Assistant Secretary for Policy and International Affairs, U.S. Department of Energy
Howard Gruenspecht
Acting Administrator and Deputy Administrator, Energy Information Administration

Panel 2
Karen Palmer
Research Director and Senior Fellow, Resources for the Future
Collin O’Mara
Secretary, Delaware Department of Natural Resources and Environmental Control
Judi Greenwald
Vice President, Technology and Innovation, Center for Climate and Energy Solutions
Thomas Gibson
President and CEO, American Iron and Steel Institute
Keith Trent
Group Executive & President Commercial Businesses, Duke Energy
James Dickenson
Managing Director, Chief Executive Officer, Jacksonville Electric Authority

Committee Members Present:
Jeff Bingaman (D-NM), Chair
Lisa Murkowski (R-AK), Ranking Member
Bob Corker (R-TN)
Mark Udall (D-CO)
John Barrasso (R-WY)
Al Franken (D-MN)
Maria Cantwell (D-WA)
Jeanne Shaheen (D-NH)
Ron Wyden (D-OR)
Jim Risch (R-ID)
Chris Coons (D-DE)
Joe Manchin (D-WV)

On May 17, 2012, the Senate Energy and Natural Resources Committee held a hearing to discuss the Clean Energy Standard Act of 2012 (S. 2146). A clean energy standard (CES) on the largest utilities starting in 2015, would require each utility to derive a percentage of their electricity from clean energy sources. The percentage would start at 24 in 2015 and increase every year thereafter. Credits would be awarded based on a comparison of emission levels versus the amount of electricity produced. Meeting the standard can be accomplished by submitting credits earned, making alternative compliance payments (ACP's), or a combination of both. Penalties will be assessed for not meeting the standard. Any funds generated by ACP's or penalties will be proportionally returned to the states for investment in energy efficiency. Clean energy sources include renewable energy, qualified renewable biomass, natural gas, hydropower, qualified waste-to-energy, and facilities that capture carbon dioxide.

Chairman Jeff Bingaman (D-NM) opened the hearing by noting the benefits of the bill. The bill would help to establish a “national standard for electricity”, enhance development of cheaper and cleaner energy sources for the future and support “ home grown innovation and manufacturing.” He explained that zero-carbon emission sources like nuclear and renewables get a full credit per kilowatt hour of electricity produced, oxy-fuel combustion from advanced coal technology will get partial credit, and natural gas will receive about a half a credit. Credits will be submitted to meet a standard that will increase overtime. The Department of Energy’s (DOE) Energy Information Administration (EIA) estimates the CES would reduce power emissions 20 percent below the reference case in 2025 and 44 percent in 2035.

Ranking Member Lisa Murkowski (R-AK) stated that she questioned whether the American people want a CES.  She is not certain if this type of action is required at the federal level. She stated that there is more than one option and suggested using revenue from other resources that could help pay for newer and cleaner initiatives. She pointed out the bevy of energy policies already in public law and how policy makers need to “break the habit of piling one policy on top of another.”

The first witness, Assistant Secretary David Sandalow, talked about the global race for clean energy and the risk of the U.S. falling behind. He stressed that the CES is a “technology neutral approach.” Sandalow closed by saying that the U.S. has made progress in clean energy investments, but needs to do more. A market-based mechanism is the best way to advance innovation through ingenuity and a CES would help.

Howard Gruenspecht stated in his testimony that EIA does not take a position on any policy issue and only supplies data. Gruenspecht provided results from EIA’s report, Analysis of the Clean Energy Standard Act of 2012, which was conducted at the request of Bingaman. He stated the proposal is expected to lead to a decline in coal-fired electricity generation, while nuclear energy, natural gas and non-hydropower renewable sources are expected to increase. He mentioned that the bill has language for credit dispersal for combined heat and power and carbon capture and sequestration (CCS), though neither is expected to play a valuable role. Although the bill focuses on the electric power sector, all sectors with energy-related emissions are projected to be 18 percent lower than the reference case in 2035. Gruenspecht noted there is a variation of clean energy resources from region to region across the U.S., which could result in prices differences in different regions.

In the question and answer segment, Bingaman asked Sandalow and Gruenspecht if increased rates as a result of a CES would make consumers’ power bills increase. Sandalow said that it would not and that in 2035, bills are expected to be about five dollars lower for each household. Murkowski mentioned the Energy Policy Act of 2005 (EPAct, P.L. 109-58) where the government requires utilities to purchase 7.5 percent of electricity from renewable sources by 2013. The current CES shows 24 percent by 2015. She asked Sandalow that given the requirement and increase cost for industry, would it be passed to the consumer. Sandalow responded that the technology neutral aspect of a CES makes it different. Senator Mark Udall (D-CO) mentioned the importance of looking at the medium and long term cost as well as direct and indirect cost.

Murkowski asked about the role of nuclear energy and coal in generating demand if the CES were implemented. She said, “What we’re talking about might not be achievable. So, it might look good on paper, but how do we get there from here?” Gruenspecht replied that a CES does force some existing plants out of the market and replacing them with nuclear would be cost effective. If nuclear did not work, there were other methods that could be used to reach the standard. If those methods did not work out, then Gruenspecht said there would be a problem. Murkowski closed by stating that because only 5,000 megawatts of nuclear capacity have been added since 1997,  not enough coal-fired power plants are equipped with carbon capture technologies, and solar and wind technology and deployment are not growing rapidly, a CES would have to rely on natural gas.

Udall asked the witnesses how a national CES would help the U.S. compete in the clean energy sector. Sandalow said it would “[provide] the long-term signal that businesses say they need.” He stated that around the world, investment in this particular area was large.
 
Senator John Barrasso (R-WY) asked Sandalow if the administration would need to repeal regulations already in place for carbon emission reduction if Congress adopts the bill. Sandalow replied they have no intention of amending the Clean Air Act.

Senator Ron Wyden (D-OR) discussed promoting clean energy nationally but managing the regional differences in the U.S. Sandalow thanked Wyden for his proposal and said that he would look into it further if CES moved forward.

Senator Al Franken (D-MN) mentioned how a CES would use the nation’s innovation to advance clean energy. Franken asked Sandalow what competitors are doing and how to make the U.S. competitive. Sandalow quoted Secretary of Energy Steven Chu, “We need to ensure our technologies are invented in America, made in America and sold around the world.” He said that “this is a race we (U.S.) can win and will win with policies like the CES.” Franken thinks a CES needs to incorporate renewables better by adding a renewable energy standard in the CES and asked for the panel’s opinions on the topic. Sandalow credited state policies for success in using more renewables for energy consumption.

Senator Jim Risch (R-ID) agreed with Sandalow on the “optimism the American people can do this.” He further went on to say, “I have absolute confidence in the American people. I have zero confidence in the government […] to make these innovations work.” He blamed government for the policies that withhold innovation from occurring.

Senator Chris Coons (D-DE) brought up Corporate Average Fuel Economy standards (CAFE) and asked if the success of the standards could be looked at as an analog. Sandalow agreed but Gruenspecht pointed out CAFE does not set up a program of removing an existing model based on new models. CES would focus on removing existing methods that do not meet the standard.

Senator Joe Manchin (D-WV) talked about the struggle for balance and stated, “We will be the first nation in history not to use its resources to its own benefit.” He referred to West Virginia’s coal supply and how a CES removes “the one abundant energy we (U.S.) have.” He asked Sandalow if a balance could be found and Sandalow said the technology neutral aspect of a CES would leave the energy balance up to the states.

Senator Jeanne Shaheen (D-NH) brought up energy efficiency and how a CES could elevate this aspect and asked for opinions on how it could help with reducing carbon emissions. Sandalow said that CES includes energy efficiency in the combined heat and power portion. Shaheen said she would like to see thermo-biomass included in the bill.

Karen Palmer began the second panel of witnesses with her testimony. Palmer presented three main points from an analysis Resources for the Future conducted on implementation of a CES. First, a CES would reduce a large amount of carbon dioxide emissions. Second, the ACP mechanism will be used in all years, which returns 75 percent of funds generated for investment in energy efficiency at the state level. Third, large savings provides an opportunity for electricity consumers to make their own small utility.

Judi Greenwald in her testimony said that 31 states and DC have some sort of CES. These standards differ from CES 2012 and provide information for building of a program. Greenwald discussed the uncertainty in EIA’s report and said there are many more options available to promote innovation, such as eliminating natural gas from clean energy, designing to limit specific types of energy, or complimentary policies for various methods.

Collin O’Mara discussed Delaware’s success in modernizing the electric power generation fleet in his testimony. He recommended complementing state standards already in place in 40 states, including energy efficiency in the CES, and adding lifecycle emissions into the carbon-intensity calculation.

Thomas Gibson, from American Iron and Steel Institute (AISI), noted that the domestic steel industry reduced its energy intensity by 27 percent since 1990 in his testimony. During this time, greenhouse gas emissions were reduced by 33 percent. DOE shows U.S. steel industry has the lowest energy intensity and second-lowest carbon dioxide emission and that the U.S. “is winning the race for clean steel.” Gibson said AISI does not support the bill.

Keith Trent presented three goals that a CES should accomplish in his testimony. Trent mentioned that it should contain diverse fuel sources and technology, give clean coal technologies the ability to move forward and it should support zero-emissions nuclear power. He said that CES contains these goals and does so “without picking winners and losers.” Trent was concerned about new natural gas plants getting partial energy credit.

James Dickenson shared some concerns with the bill in his testimony, especially in the area of regional competition. He called a CES “too aggressive.” Jacksonville Electric Authority would see an increase of about 64 percent over base cost in order to comply with a CES over 20 years. He asked for reconsideration of distribution of ACP’s to return them directly to any contributing utility to invest in clean energy or energy efficiency projects.

The question and answer portion began with Bingaman asking Gibson if the Environmental Protection Agency (EPA) should handle compliance with a clean energy standard. Gibson replied that EPA is currently regulating pollution and there would be a “parallel structure” if CES passed in regards to regulations set-up by EPA. Bingaman stated that EPA’s regulations of greenhouse gases would only apply to new coal plants. Gibson said his expectations are they may eventually look at existing facilities. Trent agreed with Bingaman that a market-based solution is better for the economy than any type of mandate from EPA. There is concern of overlapping regulations in regard to a CES, primarily EPA's regulations under the Clean Air Act. Murkowski asked if adding pre-emption of regulations that deal with emissions to the bill was a good idea. Dickenson agreed and said compounding regulations from different laws are difficult to keep up with. Trent and Gibson agreed with pre-emption, while O’Mara did not. Greenwald did not take a side, but would be open to discussion. Palmer said if there is pre-emption, it should focus on electricity generation because that is what CES covers.

Murkowski questioned the cost of a CES and asked Dickenson about the additional cost for his business due to compliance with the proposed CES. He suggested spreading out the compliance over a longer period of time to reduce the cost. Trent said market-base strategy reduces prices, giving industry long-term certainty and alternative compliance payments all help with the cost issue. He stated, “If you’re going to have a clean as a goal, you’re going to have some costs associated with that.”

Franken asked about the potential energy savings that could occur with an energy efficiency goal. Palmer agreed with the importance of energy efficiency but said keeping it separate from the CES would be “preferable.” Greenwald suggested looking at states that have the two policies in place. Coons asked O’Mara what message including energy efficiency in the CES would send to the market. O’Mara says it would show that energy efficiency would be treated as any other supply resource and that energy efficiency would lower bills.

Witness testimonies and a webcast of the hearing can be found on the committee web site.

-KNR

House Committee on Science, Space, and Technology Subcommittee on Energy and Environment Hearing on “Fractured Science-Examining EPA’s Approach to Ground Water Research: The Pavillion Analysis”
February 1, 2012

Witnesses:
James Martin
Regional Administrator, Region 8, United States Environmental Protection Agency
Tom Doll
State Oil and Gas Supervisor, Wyoming Oil and Gas Conservation Commission
Kathleen Sgamma
Vice President, Government and Public Affairs, Western Energy Alliance
Bernard Goldstein
Professor and Dean Emeritus, Graduate School of Public Health, University of Pittsburgh

Subcommittee Members Present:
Andy Harris, Chairman (R-MD)
Brad Miller, Ranking Member (D-NC)
Paul Tonko (D-NY)
Jerry McNerney (D-CA)
Frank Lucas (R-OK)
Todd Akin (R-MO)
Randy Neugebauer (R-TX)
Paul Broun (R-GA)
Chuck Fleischmann (R-TN)
Lynn Woolsey (D-CA)
Zoe Lofgren (D-CA)

Full Committee Members Present:
Ralph Hall, Chairman (R-TX)
Eddie Bernice Johnson, Ranking Member (D-TX)

On February 1, 2012, the House Committee on Science, Space, and Technology Subcommittee on Energy and Environment held a hearing entitled “Fractured Science-Examining EPA’s Approach to Ground Water Research: The Pavillion Analysis.”  The reason for this hearing was to discuss the validity of the Environmental Protection Agency’s (EPA) ground water analysis in Pavillion, Wyoming, released in a December 8, 2011 draft report.  This has been a charged issue ever since land owners in Pavillion reported well contamination to the EPA back in 2008.  Pavillion is a small rural town with a history of oil and gas exploration and a history of poor water quality dating back to the 1940’s.  The outcome of this EPA study is being closely watched by those who maintain that properly managed hydraulic fracturing is not harmful to drinking water.

The hearing was initially delayed when Josh Fox, producer of the documentary “Gasland,” attempted to film the hearing.  Fox was told he would not be allowed to film the hearing without any documentation of press credentials.  After a discussion with security officials Fox was escorted out of the hearing room in handcuffs. Ranking Member Brad Miller (D-NC) called for a motion that the rules on press credentials be suspended to the end of the hearing to allow Fox to film. Chairman Andy Harris (R-MD) called for a recess due to the lack of a quorum on the committee.  Once a quorum had been reached, Miller called for a recorded vote.  Those not in favor of suspending the rules won 7-6 and the motion was tabled.  Miller put forth another motion that the hearing be suspended one week to allow for Fox to attain his credentials.  This motion was tabled in another 7-6 ruling.

In his opening statement Chairman Andy Harris (R-MD) praised the increased production of natural gas as one of the few bright spots in the nation’s energy outlook.  He proclaimed that in 2010 shale gas exploration supported 600,000 jobs and saved U.S. homeowners $16 billion in home energy costs.  He expressed his anger at President Obama for announcing his support for shale gas in the State of the Union address and then allowing his administration to “attack [hydraulic fracturing] through scientific innuendo and regulatory straight-jacketing.”  Harris attacked the EPA for not practicing sound scientific procedure in their analysis and for not consulting with individuals with supreme knowledge of the specific structural and hydrological geology of this region.  He criticized the EPA for releasing 622 documents significant to the report late last night giving the subcommittee insufficient time to evaluate these documents. 

Ranking Member Brad Miller (D-NC) opened by stating that the question at hand “is not whether we are pro-drilling or anti-drilling.  The question is whether we will drill with our eyes open.”  Miller believes the public is entitled to know if hydraulic fracturing is safe.  In his statement he went on to clarify that the EPA’s study is a risk assessment not risk management assessment.  The purpose of the risk assessment is to inform decisions makers who develop risk management strategies.  Miller said he is suspicious of industry and their willingness to dismiss the validity of contamination claims, even while they refuse to identify the chemicals they use in hydraulic fracturing.

In his testimony James Martin of the EPA gave a history of the EPA’s investigation.  In the spring of 2008, the EPA office in Wyoming was contacted by some residents of Pavillion requesting an assessment of their drinking water and potential contamination.  A sampling of ground water detected benzene, xylene, methylcyclohexane, naphthalene, and phenols in one third of sampled wells.  Another sampling in 2010 detected inorganic compounds in 16 of 17 samples, but a source could not be identified.  The EPA went back again in 2010 and drilled two deep monitoring wells where they found increases in alkalinity at the deepest points of the wells.  This lead the EPA to “tentatively” conclude that drinking water was “likely” contaminated by drilling practices.  Martin said that peer review and public comment is currently underway.  He defended the EPA and their process of addressing the public’s concerns and acting with the utmost transparency. 

Tom Doll of the Wyoming Oil and Gas Conservation Commission states in his testimony the unreliability of the EPA report.  He argues the EPA drilled monitoring wells that found contamination far deeper than the drinking water wells that the residents of Pavillion rely on.  He says the geology of the Wind River Formation is complex making the identification of migration pathways difficult.  He further states that the EPA did not investigate other potential contamination pathways.  Wyoming has historically regulated hydraulic fracturing and the chemicals that drilling companies use are required to be released.  He concluded by saying that Wyoming does not support the EPA findings or procedures and has requested further testing.

In her testimony, Kathleen Sgamma of Western Energy Alliance emphasized the importance of the public perception of hydraulic fracturing.  She has seen false information get to the public and then spread uncontrollably.  She says ground water protection groups consider hydraulic fracturing low risk and consider agriculture to pose a far greater risk.  Sgamma questioned why the EPA jumped to conclusions before holding a scientific peer review.

In his testimony Bernard Goldstein said he supports maximum production of natural gas while at the same time cautioning the nation to learn from the past, specifically ignorance to potential environmental health issues.  He said he believes the public is confused over the contradictory messages they are receiving about hydraulic fracturing.  On one hand they are being told that we have been doing hydraulic fracturing for decades: however the implementation of new techniques has completely changed the methods.  Goldstein expressed further concern over the current lack of any support for studies dealing with health concerns related to hydraulic fracturing.  He believes the U.S. should take time to study the health concerns sooner rather than later to possibly avoid any potential serious issues. 

Harris opened the question and answer portion of the hearing by asking Martin which chemicals were found in the EPA drilled wells and to what degree these chemicals were above the allowable drinking water regulations, as well as if both wells showed contamination.  Martin replied that benzene was the only chemical found and that only one well showed contamination.  Martin clarified that when the same well was sampled six months later it showed half the contamination level.  Harris urged Martin to agree that hydraulic fracturing in the Marcellus Shale is a completely different geological regime than in the Wind River Formation and that the results of this study cannot be applied to hydraulic fracturing in different areas of the country.  Martin agreed saying at the EPA they have “not proposed to extrapolate” the findings in Pavillion to the Marcellus Shale.   

Miller followed Harris by asking Martin if benzene is a known carcinogen and to what levels above the allowable drinking water standards was it at both of the sampling times.  Martin confirmed that benzene is a known carcinogen and that it was at 50 times above the acceptable level and at 25 times the acceptable level six months later.  Miller made it clear he did not think Sgamma was qualified to make conjectures on this case because she has no background in “geology” or “toxicology”.  Miller questioned Martin on whether the EPA study tested for other means of contamination besides hydraulic fracturing.  Martin confirmed that they did and at this point some of these alternative means of contamination have been ruled out and some have not.  Miller reemphasized that it would help the EPA evaluation if the drilling company, Encana, would release the complete list of chemicals that they used in drilling.

Representative Paul Tonko (D-NY) directed questioning at Doll asking him if he believed the contaminants in the water are from natural sources and if so why the state offered up five measures for the residents of Pavillion to get safe drinking water.  Doll said the measures offered by the state were in order to assure the residents of Pavillion that their drinking water is safe.

Representative Jerry McNerney (D-CA) asked Martin what the EPA’s assessments were on the quality of the cement casings used to enclose wells.  Martin said that the EPA found some missing or soft cement in some of the wells which is why they hypothesized that the incomplete cement casings could have served as migration pathways for contaminants.  However, they were not able to identify one as an absolute pathway. McNerney believes the casings in general circumstances are adequate but need to be better regulated. 

In the second round of questioning Harris asked Doll if he believes that the contaminants found by the EPA in their deep well testing relate to drinking water complaints .  Doll did not believe the deep wells are of any significance to the shallow wells where the residents are pulling their drinking water.    

In the third round of questioning Harris asked Martin why those specific depths were chosen when they drilled their monitoring wells.  Martin explained that they were trying to sandwich the lowest depth of drinking water extraction and the highest depth of hydraulic fracturing in order to see if there was evidence of contamination pathways between these two depths.  Harris attributed the detection of contaminants at that level to the known presence of natural gas in that area.  Harris drew his evidence from the presence of blowouts at around the same depth.  The fact that there were blowouts acknowledges there are small amounts of natural gas in the area that are insignificant enough to commercially pursue.

Opening statements, witness testimony, and a web cast of the hearing can be found at the House Science, Space, and Technology web site.   

-APR

Senate Committee on Energy and Natural Resources Hearing to “Receive Testimony on the U.S. and Global Energy Outlook 2012”
January 31, 2012

Witnesses:
Howard Gruenspecht
Acting Administrator, Energy Information Administration
Richard H. Jones
Deputy Executive Officer, International Energy Agency
Jim Burkhard
Managing Director, Cambridge Energy Research Associates
Roger Diwan
Head of Financial Advisory, PFC Energy

Committee Members Present:
Jeff Bingaman, Chairman (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
Joe Manchin (D-WV)
John Barrasso (R-WY)
Mary Landrieu (D-LA)
Rob Portman (R-OH)
Jeanne Shaheen (D-NH)

On January 31, 2012, the Senate Committee on Energy and Natural Resources held a hearing to receive testimony on the global energy outlook for 2012.

Chairman Jeff Bingaman (D-NM) opened the hearing by focusing on the recent unrest in the Middle East and the surging U.S. energy sector.  The conflict in Libya in 2011 halted its oil exports, which crippled energy supply in Europe and consequently hurt the global economy.  Refineries are now back on line and are expected to reach their former export levels in 2012.  One anticipated disruption in global oil prices in 2012 will be U.S. and European sanctions placed on Iran.  U.S. sanctions on Iranian oil have been in place since the 1980’s, but now Europe, a heavy importer of Iranian oil, is in the process of developing their own sanctions.  Iran has countered by threatening to close the Strait of Hormuz, a crucial oil exportation pathway for the Middle East.  Bingaman made it clear that these geopolitical issues will remain a critical factor in U.S. oil prices.  However, he went on to say that the U.S. oil market looks strong for 2012 because of decreasing reliance on foreign oil and increased domestic production.  He concluded by saying, “My view is we need to understand not only how to make the U.S. less vulnerable to oil disruptions, but understand what events and actions actually affect world oil prices.” 

In her opening statement, Ranking Member Lisa Murkowski (R-AK) reiterated the concern over Iran’s threat to close the Strait of Hormuz and the unforeseen consequences that may follow.  She encouraged Congress to set themselves up not to make the mistake they made in 2005.  In 2005, Congress was left scrambling for solutions to lower very high gas prices because the predicted outlook had not expected such a spike.  Murkowski believes the U.S. should take advantage of the “quiet time” that we have now to prepare for the unlikely occurrence of another price spike.  She feels the U.S. has a good problem developing with our superfluous amounts of natural gas.  She closed by telling the panel she looked forward to hearing what role they see Alaska playing in America’s energy scenarios.

In his testimony, Howard Gruenspecht of the Energy Information Administration (EIA) expressed a positive outlook by describing the results and findings of EIA’s report, Annual Energy Outlook 2012 Early Release.  The early release report shows that the EIA expects increases in renewable and domestic energy production in the next decade.  By 2035, renewables are expected to increase by 20 percent making them the fastest growing global energy.  During the same time period, liquid fuel consumption is expected to decline from 49 percent to 36 percent and carbon dioxide emissions are expected to remain below their 2005 maximum.  With the discovery of new reservoirs and improvements in extraction technology, the U.S. production of natural gas is projected to surpass the demand.

Richard Jones of the International Energy Agency (IEA) focused strictly on the oil market.  The IEA projects a global average increase of one million barrels of oil a day for 2012.  Shale gas production will increase globally by 250,000 barrels per day from nations that are not a part of the Organization of the Petroleum Exporting Countries (OPEC).  OPEC is expected to produce 30 million barrels of oil per day.  Jones said that the upcoming European sanctions on Iran will place pressure on Europe to find other sources of oil which may drive prices up.  IEA believes that long term closure of the Strait of Hormuz is unlikely, but the global market will be affected regardless.

Jim Burkhard of Cambridge Energy Research Associates opened his testimony by proclaiming that the U.S. is in the midst of a “great revival in U.S. oil production.”  Domestic liquid energy production has increased by 1.3 million barrels of oil per day since 2008, and North Dakota alone now produces more oil than Ecuador.  By 2020 the combined oil production of the U.S. and Canada will grow by 4 million barrels a day exceeding the oil production of Iran.  The current projections of a U.S. decrease in foreign oil reliance will save $182 billion annually.  With a more diverse oil market the price per barrel and at the pump would be expected to go down, however geopolitical issues in Iran are thwarting any attempts at price reduction. 

In his testimony Roger Diwan of PFC Energy reiterated the message of his fellow witnesses by proclaiming we are in a “new golden era in the U.S. oil patch.”  By the year 2020 the U.S. will be the largest producer of hydrocarbons in the world.  Diwan said the bipolar trends of the global crude oil market will continue until the Strait of Hormuz threat is resolved.  He does not foresee many countries willing to except Iranian oil, which will lead to a decrease in production and loss of financial resources for the country. 

Senator Joe Manchin (D-WV) asked the panel if the Canadian oil that would potentially be delivered to the U.S. through the proposed Keystone XL pipeline would be exported to China if the U.S. does not approve and allow the pipeline to be constructed.   Gruenspecht replied that Canada will develop full production capacity regardless of whether the U.S. accepts Keystone XL or not.  Diwan replied that he believes shipping oil to China would be difficult and that Canadian oil will eventually make it to the U.S.  Manchin then inquired about the state of the Marcellus Shale, a large producing shale formation in the northeastern United States.  EIA explained that their revised estimate of natural gas reserves in the Marcellus Shale decreased from previous estimates.  In 2011, the United States Geological Survey (USGS) released a report amending their 2002 report on Marcellus Shale natural gas reserve estimates.  The releasing of these new USGS estimates prompted the EIA to conduct a new study in their Annual Energy Outlook 2012 Early Release.  The new study resulted in an 80 percent decrease from their original study in estimated natural gas reserves.

Murkowski questioned the panel about an article describing the unlikelihood of a natural gas pipeline from Alaska to Alberta.  Gruenspecht replied that the possibility is low due to the costly nature of an overland pipeline, but EIA has not conducted a study regarding the transport of natural gas from Alaska to Alberta and that he will follow up with the senator.    

Bingaman asked how increases in fuel economy standards would affect projected oil imports.  Gruenspecht could not give a specific number but acknowledged that it would make the percentage of imported oil lower than their current projections.  Bingaman questioned the panel on why refineries are shutting down.  Gruenspecht and Diwan attributed this to geographic location.  Refineries on the East coast are closing but refineries in the Midwest and along the Gulf of Mexico are opening to meet the demand of oil plays in North Dakota and Alberta.

Senator John Barrasso (R-WY) inquired about the significance of coal to China and India’s energy needs.  Jones replied that one half of energy growth from 2000-2010 is attributed to coal.  This was because the rapidly expanding countries of China and India needed to get cheap electricity to portions of their population that had never had electricity before.  Concern over rampant pollution in Chinese cities is causing the Chinese government to reevaluate the use of coal, but thus far economics have ruled out controlling pollution. 

Witness testimonies and the hearing web cast can be found on the Senate Energy and Natural Resources Committee web site.

   -APR

House Committee on Science, Space, and Technology Subcommittee on Investigations and Oversight Hearing on “A Review of the Advanced Research Projects Agency-Energy”
January 24, 2012

Witnesses
Arun Majumdar
Director, Advanced Research Projects Agency-Energy, Department of Energy
Gregory Friedman
Inspector General, Department of Energy
Frank Rusco
Director, Energy and Science Issues, Government Accountability Office

Subcommittee Members Present
Paul Broun, Chair (R-GA)
Paul Tonko, Ranking Member (D-NY)
Brad Miller (D-NC)
Jerry McNerney (D-CA)

Full Committee Members Present
Ralph Hall, Chair (R-TX)
Roscoe Bartlett (R-MD)
Dana Rohrabacher (R-CA)

On January 24, 2012, the Subcommittee on Investigations and Oversight of the House Committee on Science, Space and Technology held a hearing entitled “A Review of the Advanced Research Projects Agency-Energy”.  The Advanced Research Projects Agency-Energy (ARPA-E) was formed in 2007 under the America COMPETES Act (P.L. 110-69), but did not receive funding until 2009 under the American Recovery and Reinvestment Act (P.L. 111-5).  The hearing was called to review ARPA-E’s allocation of funds to research projects not funded by the private sector, an issue that was examined in a Department of Energy Inspector General (DOEIG) report from August, 2011 and a Government Accountability Office (GAO) report dated January, 2012.  The DOEIG and GAO reports were called to ensure that ARPA-E is funding projects that are deemed “high risk, high reward” and that encompass the “white space” in research.  The term “white space” refers to an area of research between basic research and market ready products.   A project that is deemed “high risk, high reward” would not be funded by the private sector because of the risk.  Consequently, ARPA-E was formed to ensure that the United States maintains its technological edge in the global market.  A committee majority staff report was compiled before the hearing and details the maority's findings and interpretations of the DOEIG and GAO reports.

Chairman Paul Broun (R-GA) opened the hearing by summarizing what ARPA-E was mandated to do.  He stated his interpretation of the GAO and DOEIG report findings, and how he concluded from the findings that ARPA-E had funded projects that the private sector was already funding.  He explained how ARPA-E is crowding out the private sector, investing in too many late stage technology developments, and picking winners and losers instead of letting the marketplace decide.  He closed his opening statement by reiterating that taxpayers should not be paying for “high risk, high reward” research that is already being supported by the private sector. 

In his opening remarks, Ranking Member Paul Tonko (D-NY) stated the design of ARPA-E is modeled after the Defense Advanced Research Projects Agency (DARPA), which notably produced the World Wide Web.  He voiced his support of ARPA-E and similar projects while reciting the difference in federal spending for renewable energy technologies in the U.S. ($18.6 billion) and in China ($36.8 billion).  He said he believes the findings of the GAO and DOEIG reports show ARPA-E has done nothing wrong, but “the majority staff wrote the report it wished to receive.”

In his testimony Director of ARPA-E Arun Majumdar said the U.S. currently imports 50 percent of its oil from hostile regions and that alternative means of energy need to be developed if we want to improve national security.  He emphasized the importance that alternative energies will play in securing the future, “Our children's and grandchildren's security is at stake, and that secure future is like a stool with three legs: national security, economic security, and environmental security.”  Majumdar made it known that cutting edge alternative energy technologies are in the process of being developed .  Majumdar concluded by stating two of the original mandates for ARPA-E - that a panel of experts chooses the projects to be funded and that if a project is not meeting the goals set forth by ARPA-E than funding is discontinued.

In the testimony of Gregory Friedman and the testimony of Frank Rusco, both assured the committee that their reports found ARPA-E to be adequately complying with and accomplishing its goals and mandates.  The GAO report found it impossible to determine if the funding for all ARPA-E projects could have come from the private sector, but they felt comfortable that “most” could not provide full funding.  Additionally, the GAO report outlined that there was no issue with overlapping of federal and private funding.  

Broun began the question and answer portion by questioning Majumdar on why ARPA-E funded projects that the private sector was financing separately.  Once again, Majumdar described that the research DOE was funding, although in the same general sector, was “high risk, high reward”.  Majumdar cited the GAO report as evidence that ARPA-E was not overstepping their role with the projects they are funding.  Broun used evidence from a chief executive officer (CEO) of an unnamed company that received ARPA-E funding.  He claimed that the CEO acknowledged they had received funding from ARPA-E along with private funding.  Chairman of the Full Committee Ralph Hall (R-TX) directed his questioning to Majumdar on how ARPA-E fits into DOE.  Majumdar replied that DOE Secretary Steven Chu has announced on several occasions that ARPA-E is one of his top priorities, but that Congress ultimately decides where the funds go.  Hall then asked Friedman if ARPA-E was in good standing.  Friedman replied that of the sampled ARPA-E research projects that they investigated everything appeared to be in good standing.  Representative Brad Miller (D-NC) focused his questioning on the cooperation of ARPA-E with the Inspector General and GAO.  As a former chair of the Subcommittee on Investigations and Oversight, Miller said he found that top agencies looked at similar investigations as unwanted criticism.  Once the witnesses responded that ARPA-E had cooperated with the investigations, Miller praised ARPA-E for being compliant and for their willingness to adapt to suggested changes.  Representative Roscoe Bartlett (R-MD) took his allotted time to warn that our supply of oil is not going to be able to meet the demand and that there will be “geopolitical consequences” in the very near future.  He praised ARPA-E for their work and told Majumdar how he wishes that ARPA-E had been around twenty years ago.

Opening statements, witness testimonies, and a webcast of the hearing can be found on the committee web site.

-APR

House Committee on Natural Resources Oversight Hearing on "The Future of U.S. Oil and Natural Gas Development on Federal Lands and Waters”
November 16, 2011

Witnesses
The Honorable Ken Salazar
Secretary, Department of the Interior
Accompanied by
The Honorable Bob Abbey
Director, Bureau of Land Management
The Honorable Tommy Beaudreau
Director, Bureau of Ocean Energy Management

Committee Members Present
Doc Hastings, Chair (R-WA)
Ed Markey, Ranking Member (D-MA)
Dan Boren (D-NE)
Mike Coffman (R-CO)
Paul Broun (R-GA)
John Fleming (R-LA)
Jeff Landry (R-LA)
Jeff Duncan (R-SC)
Glenn Thompson (R-PA)
Kristi Noem (R-SD)
Niki Tsongas (D-MA)
Rob Wittman (R-VA)
Rob Bishop (R-UT)
Rush Holt (D-NJ)
Bill Johnson (R-OH)
John Sarbanes (D-MD)
Louie Gohmert (R-TX)
Doug Lamborn (R-CO)
Scott Tipton (R-CO)
Don Young (R-AK)
David Rivera (R-FL)
Bill Flores (R-TX)
Mark Amodei (R-NV)
Raul Labrador (R-ID)
Tom McClintock (R-CA)
Grace Napolitano (D-CA)
Steve Southerland (R-FL)

On November 16, 2011, the House Committee on Natural Resources held an oversight hearing to discuss the future of oil and natural gas production on federally owned lands and waters. Secretary of the Interior Ken Salazar was the main witness and was accompanied by Director Bob Abbey of the Bureau of Land Management (BLM) and Director Tommy Beaudreau of the Bureau of Ocean Energy Management (BOEM). On November 8, the Department of the Interior (DOI) released its proposed five-year leasing plan for the outer continental shelf (OCS). It includes 15 proposed lease sales in the Gulf of Mexico, the Chukchi Sea, the Beaufort Sea, and Cook Inlet in Alaska. The proposal does not include lease sales on the Atlantic or the Pacific OCS. In regard to onshore gas production, DOI may be releasing new regulations to require drilling companies to disclose the chemicals used in hydraulic fracturing. Though Salazar said no decisions have been made, the potential regulations may come before 2012.

Chairman Doc Hastings (R-WA) began the hearing by claiming a need not only for fewer “government hurdles” in domestic energy production but also for exploration of more domestic energy producing areas and the development of a more dynamic energy portfolio. He cited the potential to generate federal revenue by opening up more areas for oil and gas production and pointed out the reliability of hydraulic fracturing in natural gas production. Ranking Member Ed Markey (D-MA) told Secretary Salazar he was pleased the five-year leasing plan did not include the East Coast but he was concerned that the Chukchi Sea, the Beaufort Sea, and the Cook Inlet were included in the plan: he does not think the oil industry has proved that it could effectively respond to an oil spill in Alaskan waters. As a solution to reduce the federal deficit, Markey called on the oil and gas industry to pay more to the U.S. government to lease federal lands. His legislation, introduced the day of the hearing, would reduce the deficit by $19 billion over the next decade by imposing a fee on non-producing leases, increasing inspection fees, and repealing and reforming several laws related to energy and mineral production and reclamation.

Secretary Salazar explained President Obama’s plan to “secure the energy future of the United States of America” by investing in a broad energy portfolio that includes oil and gas production. He said, however, “We also believe we can’t just produce our way to energy independence” and described the administration’s efforts to increase fuel efficiency. After citing several statistics about heightened current domestic oil and gas production, Salazar called hydraulic fracturing the “Achilles heel” of the natural gas industry. He suggested that unless DOI develops a program to disclose chemicals used in hydraulic fracturing, natural gas production will not have such a “bright future” as imagined. Director Abbey called the public’s concern with hydraulic fracturing “understandable” and said DOI and BLM must remain “diligent” in monitoring the integrity of well bores to protect human health and safety. At the same time, Abbey said, responsible oil and gas development on public lands must provide a good return to the American taxpayer. Director Beaudreau highlighted the specifics of the proposed five-year leasing plan and described what steps BOEM is taking to gather feedback from stakeholders and the public who live and work in impacted areas.

Chairman Hastings began the question and answer period by describing the Republican’s American Energy Initiative as a vehicle to “jumpstart the economy.” He contrasted the “opportunities” for drilling on the OCS before the 2010 BP oil spill with DOI’s proposed five-year leasing plan and asked Salazar why large parcels on the West Coast, East Coast, and other parts of Alaska were left out of the proposed plan. Salazar said it was important for the U.S. to “not have amnesia” about the BP oil spill and that significant issues still need to be resolved. In regard to Alaskan opportunities, Salazar told the committee that the administration does not believe leases in the Bristol Bay or the Arctic National Wildlife Refuge (ANWR) should be available but lease sales in the Chukchi and Beaufort Sea should be undertaken in a thoughtful way. Chairman Hastings and Salazar agreed that the passing of an organic act for the new BOEM and Bureau of Safety and Environmental Enforcement (BSEE) is a top priority. 

Ranking Member Markey asked Salazar why leases on the East Coast OCS were left off the proposed leasing plan but parts of the Alaska OCS were included. Salazar said, “We have to take into consideration the opinion of the states.” After describing the features of a particularly strong storm last week in Alaska, Markey asked Salazar if the infrastructure was in place in Alaska to respond to a potential oil spill. Salazar responded, “We could always pull plans if the infrastructure isn’t ready.” Ranking Member Markey described his concerns with Coast Guard capabilities, the potential for heavy storms, and the lack of baseline scientific data as reasons for possibly pulling back on selling leases in the Alaskan OCS. Beaudreau told Markey about BOEM’s environmental programs which study climate change, marine mammals, ocean currents, and other issues in the Arctic Ocean.

Concerned with federal regulation of hydraulic fracturing, Representatives Louie Gohmert (R-TX) and John Fleming (R-LA) challenged Salazar to name a scientific study that found contamination in water wells as a result of shale gas development and asked him if he was aware of any deaths as a result of hydraulic fracturing. Salazar conceded he was not aware of either. Gohmert went on to declare that the administration was using “scare tactics” to enact regulations. Representatives Doug Lamborn (R-CO), John Sarbanes (D-MD), Glenn Thompson (R-PA), Paul Broun (R-GA), and Scott Tipton (R-CO) asked Salazar questions about potential federal regulation of hydraulic fracturing. Salazar repeated to many of the congressmen that proper regulation of the controversial drilling technique would protect the industry from another environmental disaster and moratoria in multiple states. Broun and Hastings asked Salazar to submit for the record the department’s interactions and collaborations with the Environmental Protection Agency (EPA). After Thompson asked how the department would decide to regulate hydraulic fracturing now after millions of wells have been safely drilled in the United States, Abbey replied, “by listening to the public.” Sarbanes, whose district borders the Chesapeake Bay, pointed out the overlap between the Marcellus shale and the Chesapeake Bay watershed. He praised natural gas as an energy resource with “great promise” and “great potential” but cautioned that the U.S. should move forward carefully and thoughtfully with hydraulic fracturing. In a discussion with Representative Grace Napolitano (D-CA), Salazar said “we support hydrofracking.”

Several members were interested in discussing the particulars of the proposed five year leasing plan. Representative Rob Wittman (R-VA) asked why Salazar and DOI ended up leaving lease 220, located off the coast of Virginia, out of the proposed plan even though it was opened up for purchase before the 2010 oil spill. Salazar answered that since then DOI has found significant conflicts between oil and gas development and the Department of Defense (DOD) activities in that area. Wittman and Salazar agreed that it would be worthwhile to work with DOD to figure out a solution. Representatives Niki Tsongas (D-MA), David Rivera (R-FL), Bill Flores (R-TX), Jeff Landry (R-LA), Rush Holt (D-NJ) and Raul Labrador (R-ID) asked Salazar questions related to offshore drilling and the proposed leasing plan. Returning to Markey’s concerns about drilling off the coast of Alaska, Tsongas told Salazar she was concerned that Royal Dutch Shell, a company that has purchased leases in the Chukchi Sea, might not have a worst-case scenario plan for an oil spill. Beaudreau and Salazar reiterated that Shell’s agreement is conditional and that they have to prove containment capabilities and demonstrate adequate spill response plans before they receive a permit. Beaudreau told Tsongas about an interagency working group tasked with reviewing Shell’s plan. Representative Landry told Salazar he hopes shallow water operators will see their leases extended as a result of the 2010 moratorium, as deepwater operators have. Flores disputed Salazar’s earlier claim that the eastern Atlantic was not included in the proposed leasing plan because it lacked the infrastructure. He argued that the infrastructure would only be built by making those areas available for drilling. Salazar told Flores that DOI had received stakeholder feedback on the proposed leasing plan from several oil and gas producers and from the American Petroleum Institute. Sporting a blue beanie with a button that said “Obama Energy Policy,” Representative Don Young (R-AK) again pressed Salazar to explain DOI’s position on drilling in ANWR. Salazar replied, “Our position is drilling in ANWR is not appropriate.” Holt asked whether it was “a good idea” for taxpayers to subsidize seismic surveys in the Atlantic. Salazar responded that good information is in the public’s interest.

Representatives Flores and Labrador discussed the length of time it takes for a producer to develop a well from the initial lease purchase date. Flores displayed a graph that showed an average time of 9.5 years. Labrador took issue with Salazar’s claim that, under the Obama Administration, oil production is at its highest since 2003 if the average lease takes 9.5 years to develop.

Representative Rivera told Salazar his concerns with the close vicinity foreign oil platforms to Florida. Rivera has introduced the “Foreign Oil Spill Liability Act” (H.R. 3393) to impose strict penalties on the owner or operator of the platform.

Representative Rob Bishop (R-UT) discussed his legislation, the Action Plan for Public Lands and Education Act of 2011 (H.R. 2852), to provide proceeds of the sale of federally owned lands to state education efforts.

Many other issues unrelated to oil and gas drilling on federal lands were brought up, including the Keystone XL pipeline and a recent BLM wilderness lands report

Opening statements, witness testimonies, and a webcast of the hearing can be found on the committee web site.

-WMB


House Committee on Transportation and Infrastructure Subcommittee on Water Resources and Environment Hearing on “Hydraulic Fracturing of Shale Beds: Ensuring Regulatory Approaches That Will Help Protect Jobs and Domestic Energy Production”
November 16, 2011

Witnesses
Cynthia Dougherty
Director, Office of Ground Water and Drinking Water, Environmental Protection Agency
James Hanlon
Director, Office of Wastewater Management, Environmental Protection Agency
Dana Murphy
Chair, Oklahoma Corporation Commission
Michael Krancer
Secretary, Pennsylvania Department of Environmental Protection
Tom Stewart
Executive Vice President, Ohio Oil and Gas Association
Martie Groome
Vice Chair, Pretreatment and Pollution Prevention Committee, National Association of Clean Water Agencies

Subcommittee Members Present
Bob Gibbs, Chairman (R-OH)
Timothy Bishop, Ranking Member (D-NY)
Andy Harris (R-MD)
Chip Cravaack (R-MN)
Larry Buchson (R-IN)
Bill Schuster (R-PA)
Jason Altmire (D-PA)
Grace Napolitano (D-CA)
John Duncan, Jr. (R-TN)
James Lankford (R-OK)
Jaime Herrera Beutler (R-WA)

On Wednesday, November 16, 2011, the House Committee on Transportation and Infrastructure Subcommittee on Water Resources and Environment held a hearing to discuss regulatory approaches to hydraulic fracturing and shale gas production. The primary topics of interest were state versus federal regulation of shale gas production and the future of a potential national Environmental Protection Agency (EPA)-regulated effluent standard for wastewater treatment. EPA is currently working on a study, which will be released in two parts in 2012 and 2014, that will investigate the effects of hydraulic fracturing on drinking water and the need for management of produced waters, or wastewater, from the drilling wells. This issue has arisen because many Privately-Owned Treatment Works (POTW) do not have the capability to test or treat many of the wastewaters, a step that is required of waters that are not directly reinjected into the ground.

Chairman Bob Gibbs (R-OH) opened the hearing saying that the shale gas industry is currently causing an economic boom, creating thousands of jobs, and benefitting the nation’s national security. He said that wastewater from shale gas wells can contain salts and radioactive materials, but POTWs are not well-equipped to treat the waters. Because EPA is currently in undergoing a study to evaluate a national wastewater standard, Gibbs argued that states will “suffer” from “needlessly restrictive” regulations. Ranking Member Timothy Bishop (D-NY) read from his opening statement that he thought the hearing should focus on “what to do with the chemicals.” He dismissed the Republicans’ alarm from the EPA study, saying that the report will not come out until 2014 and that “we should not run from science.” He stated the need for a minimum national standard of regulation for wastewaters, though he supports an overall state regulation of the industry.

James Hanlon of the EPA listed from his testimony the agency’s upcoming actions, including the development of treatment standards for wastewater discharge, guidance for permitting diesel fuel use for drilling, and water quality permitting. He stressed the EPA’s desire to create “regulations that are affordable,” and promised the EPA will consider jobs and the local economies during its studies. Cynthia Dougherty, also of the EPA, did not provide an opening statement.

Dana Murphy of the Oklahoma Corporation Commission told the committee that the two goals of the shale gas industry, protection of water and a beneficial development of the nation’s gas resources, are “not mutually exclusive goals.” She asserted that states are the appropriate bodies to regulate the industry because of their proximity to the unique characteristics and needs of the wells, and because state officials are directly responsible to the citizens. Nevertheless, Murphy believed that the federal government can beneficially encourage state collaboration.

Michael Krancer of the Pennsylvania Department of Environmental Protection asserted in his opening statement that this hearing was held because the states originally took the initiative to create their own wastewater pretreatment regulations, but the federal government “followed” the example and is now attempting to get involved. In order to clarify popular “myths” about drilling fluids, Krancer told the committee that ninety-nine percent of the fluid is water and sand, and that there have never been any instances of groundwater contamination from hydraulic fracturing. Tom Stewart of the Ohio Oil and Gas Association focused his opening statement on positive collaborative efforts between states, rather than a reliance on federal regulation. Martie Groome of the National Association of Clean Water Agencies told the committee that her program has had great success with treating industrial wastewaters. Under the current National Pretreatment Program for industries other than shale gas, the regulatory authority is in the hands of the local authorities and the POTWs, yet they enforce a National Pretreatment Standard. She argued that a “scientifically and economically sound” national pretreatment standard for the shale gas extraction industry may provide protection to both the industry and to POTWs by providing a baseline for treatment of wastewater.

During the question and answer period, Chairman Gibbs asked the panel to elaborate on any contamination problems that have happened in each of their states. Murphy told the congressman that Oklahoma has over five thousand wells, yet there have been no documented incidences of pollution to waters as a result of hydraulic fracturing. Krancer said “fracking has never caused groundwater contamination” in Pennsylvania; Stewart spoke of 80,000 wells in Ohio, but no correlation between hydraulic fracturing and groundwater contamination. Larry Buchson (R-IN) inquired about the reason of EPA’s study of hydraulic fracturing on drinking water, and if there was an incident of contamination that brought it on. Dougherty told the congressman that the House  Appropriations Conference Committee requested the study be done in 2010; there was no incident of contamination. Buchson told the committee that there needs to be a “specific reason that the federal government is trying to usurp the power of the states.”

Gibbs asked Hanlon if the states are equipped to protect the environment and if he thinks there should be a national pretreatment standard. He replied that EPA “has the expectation” the states are  equipped to do so and will do a good job; he also believed a national standard would be beneficial. Bill Shuster (R-PA) asked Stewart his opinion on state regulation of pretreatment standards. Stewart explained that individual wells differ greatly and the people “closest to the well” understand best what types of standards are needed.

Ranking Member Bishop asked Krancer if he sees Pennsylvania’s regulatory methods as a model for the rest of the county, to which Krancer said he does. Bishop asked Krancer why he would not want other states to adopt similar methods in order to protect Pennsylvania if, for example, New York did not abide by clean water standards and its wastewater disposal affected the freshwater resources of Pennsylvania. Krancer replied that he “is not in a position to answer a hypothetical.” He added that “common denominators” are not a good idea, since states know how to handle their own pretreatments. James Lankford (R-OK) asked Hanlon whether he had ever been to a “frack site.” Hanlon replied that he had not, but his staff had. Lankford recommended that he visit a site, as it is very informative.

Shuster asked Murphy about Oklahoma’s regulatory process and what she thought of national effluent standards. After describing her state’s open rule-making process that involves environmentalists, geologists, and engineers, she said EPA has a different approach that does not put “dialogue first.” She added that Oklahoma is working through the State Review of Oil and Natural Gas Environmental Regulations, STRONGER, as well as FracFocus, an online well information disclosure website. When Gibbs asked if EPA holds any public meetings for stakeholders, Hanlon said EPA is working with them as the study progresses. Lankford asked Hanlon to submit to the committee a detailed description of the EPA’s peer review process.

Grace Napolitano (D-CA) asked Groome about the relationship between wastewater and POTWs. Unless the POTW can characterize the constituents within the industrial wastewater, Groome said, the treatment plant will likely not accept the water because they do not have the facilities to treat it. Napolitano inquired about the benefit of a national pretreatment standard and if any research and development (R&D) has been done on the topic. Although produced waters can vary from well to well, Hanlon told the congresswoman that there are similarities in the waters that will allow for “consistent affordable standards.” According to him, the EPA is currently working on effluent standard R&D.

Jason Altmire (D-PA) asked Hanlon to offer an opinion of the 2010 Carnegie Mellon study that looked at high levels of bromide in hydraulic fracturing areas. Hanlon replied that some potential sources of the unusually high bromide levels include flowback water, mining operations, and power plants, but he believes that “fracking might be one of the causes.” Altmire asked Hanlon if the EPA will consider local jobs and economic impacts during its study. While it is not a focus of the appropriations committee’s request, EPA “will be looking at it” as it examines effluent guidelines. 

Witness testimonies and the hearing briefing memo and archived webcast can be found on the committee’s web site.

-ERC

House Committee on Science, Space, and Technology Joint Energy and Environment and
Investigations and Oversight Subcommittees Hearing on the “Review of the Blue Ribbon
Commission on America’s Nuclear Future Draft Recommendations”
October 27, 2011

Witnesses
Jack Spencer
Research Fellow, Nuclear Energy Policy, Heritage Foundation
Peter Swift
Distinguished Member of the Technical Staff, Sandia National Laboratory
Roger Kasperson
Professor and Distinguished Scientist, Clark University
Gary Hollis
Chairman, Nye County Board of County Commissioners
Rick McLeod
Executive Director, Savannah River Site Reuse Organization
Mark Peters
Deputy Laboratory Director for Programs, Argonne National Laboratory

Subcommittee on Investigations and Oversight Members Present
Paul Broun, Chairman (R-GA)
Paul Tonko, Ranking Member (D-NY)
Jerry McNerney (D-CA)
Dana Rohrabacher (R-CA)

Subcommittee on Energy and Environment Members Present
Andy Harris, Chairman (R-MD)
Brad Miller, Ranking Member (D-NC)
Judy Biggert (R-IL)

On October 27, 2011 the House Committee on Science, Space, and Technology held a Joint Hearing with the Energy and Environment and the Investigations and Oversight Subcommittees. This hearing was held to review the draft recommendations made by the Blue Ribbon Commission on America’s Nuclear Future (BRC) and to consider science and technology issues associated with spent nuclear fuel management. President Obama issued an Executive Order (EO) in January of 2010 that directed the Secretary of Energy to create a Blue Ribbon Commission to “conduct a comprehensive review of policies for managing the back of the nuclear fuel cycle, including all alternatives for the storage, processing, and disposal of civilian and defense used nuclear fuel and nuclear waste.” Around the same time, the Department of Energy (DOE) withdrew its licensure application to make Yucca Mountain a nuclear waste repository site. The BRC was instructed not to comment on the suitability of Yucca Mountain as a repository site or the request to withdraw the application.

Investigations and Oversight Chairman Paul Broun (R-GA) said in his opening statement that while the draft recommendations offer a chance to explore innovative policy options, “the fact that the Commission was precluded from addressing Yucca Mountain limits the usefulness of the report.” He expressed concern that the Savannah River Site in Georgia is becoming a “de facto” nuclear waste site under the BRC interim storage recommendations. Broun stated his distrust in the political manner in which the federal government decided to pull Yucca Mountain as a repository, since a previous report on the suitability of the site concluded that it met all necessary safety requirements. Investigations and Oversight Ranking Member Paul Tonko (D-NY) told the panel in his opening statement that closing Yucca Mountain was not a science-based decision. He said there has been a “lack of scientific integrity” and too much “political muscle” involved with the topic of nuclear waste disposal. Tonko added that this is partially a state’s rights issue, and that if Yucca Mountain is opened as a repository it should be with the consent of the state of Nevada.

Energy and Environment Chairman Andy Harris (R-MD) noted that America gets twenty percent of its electricity from nuclear power from a total of 104 reactors that provide “clean, affordable” energy. Harris applauded the BRC members and their recommendations, specifically long-term support for research, development, and demonstration on advanced reactor and fuel cycle technologies that could reduce high-level radioactive waste quantities and improve waste management. He noted, however, that the effectiveness of the BRC contributions “appear to be limited by politics.” Energy and Environment Ranking Member Brad Miller (D-NC) said in his opening statement that this was an “odd hearing” because none of the witnesses in the panel were members of the BRC. He pointed out that, although he cannot envision America’s future without nuclear energy in its portfolio, nuclear energy is “far more expensive” than other forms of energy like natural gas. Miller said it was not clear why the committee could not wait to hold a hearing until January when the BRC's final report comes out.

Jack Spencer of the Heritage Foundation told the committee in his testimony that there are three fundamental problems with current U.S. nuclear policy : a lack of any long-term geologic storage facilities even though the government has spent $15 billion on the initiative, waste producers bear no responsibility for the waste management, and there is “no specific price for specific waste” management services. Spencer added that the BRC recommendations are not likely to achieve any progress because they do not address any of these fundamental problems. He believes that the BRC should suggest a limited role of the federal government in geologic repository operations and waste management, and a transfer of responsibility toward the private sector. He said that the BRC should ask the Nuclear Regulatory Commission (NRC) to complete the licensure application for Yucca Mountain so that the information can be viewed publicly and a well-informed decision can be made.

Peter Swift of the Sandia National Laboratory described his role as the lead scientist for Yucca Mountain repository research and said that estimates of mean annual nuclear radiation exposure that a person might receive living in the vicinity of the repository over the next million years are well below the Environmental Protection Agency (EPA) limits. He told the committee that he agrees with the BRC’s conclusion that “deep geological disposal is the most promising and accepted method currently available,” whether that disposal is done in mined repositories or in deep boreholes.

Roger Kasperson of Clark University said in his testimony that regaining social trust is the most important step when approaching nuclear policy. He said that there are “deep uncertainty problems,” mostly because this is a new endeavor and experience is limited. Kasperson suggested that the nuclear management process needs to be revolutionary, as it will need to change over time.

Gary Hollis of the Nye County Board of County Commissioners told the committee that Nye County has been “fully engaged” with the BRC as part of their oversight responsibility. He believes that the withdrawal of the Yucca Mountain licensure application was a violation of the law. Hollis said he is “disappointed” that the draft report from the BRC implies a lack of support in Nevada for Yucca Mountain. He argued that Yucca Mountain has support of surrounding communities, especially that of Nye County.

Rick McLeod of the Savannah River Site Reuse Organization explained in his testimony that his organization believes that the Administration’s “decision to halt work on Yucca Mountain is wrong headed” and works against America’s long term interests. He told the committee that he completely agrees with full transparency of information and a science-based approach. McLeod commented on a need for separate disposal regulations for high level defense waste and commercial spent fuel. 

Mark Peters of the Argonne National Laboratory said in his testimony that he agrees with the BRC’s efforts to “move forward expeditiously.” He is in support of an advanced fuel cycle research and development (R&D) program. Peters said that America needs to increase its energy generating capacity to prepare for the next few decades.

During the question and answer period, Broun asked McLeod if Yucca Mountain was excluded in the BRC draft recommendations, and what factors were taken into consideration when evaluating it as a repository site. McLeod said that Yucca Mountain is excluded and “may be one of the missing recommendations in the report.” He added that the factors included possible sea level changes, erosion of land surfaces, seismic effects, possible volcanism, groundwater flow of nuclides, and potential pathways for human exposure. Broun asked Hollis to explain why Nye County supports the use of Yucca Mountain but the state of Nevada is firmly against it. Hollis explained that Yucca Mountain is being portrayed outside the county as a “dump” and public opinion is therefore very negative.

Tonko asked about future nuclear waste sites and the approval processes. Kasperson replied that he has spent time in Sweden where they rely more on voluntary consent rather than coercion, which he said has been the primary mode of action in the U.S. He said that the U.S. needs to achieve a higher degree of voluntary consent with states in order to “grease the wheels.” Harris noted that the NRC has not released much of the scientific data from Yucca Mountain and asked the panel if it is important that this information be released. Spencer and Swift agreed that the release of this information is critical to allow for the best possible decisions to be made and to come to an agreement on a much-needed repository. Harris inquired about the advantages and disadvantages of deep borehole technology. Swift replied that the technology is essentially drilling a five kilometer hole in the crystalline bedrock, using the lower two kilometers for disposal, and sealing the column. He said that the borehole technology exists but more research should be done to confirm the reliability of the seal technology. He added that if America relied only on borehole waste technology, the country would need “just under” 1,000 boreholes for the waste from all 104 reactors.

Miller asked whether the transportation of nuclear waste to Yucca Mountain passed through Las Vegas. Hollis told Miller that the waste does not go through downtown Las Vegas, but some of it does go through Clark County. Judy Biggert (R-IL) asked Peters what he recommends for the next nuclear fuel cycle R&D program. Peters responded that good research is being done but the demonstration of that technology needs to get started. He added that if America grows its nuclear energy sector it needs to “close the fuel cycle” by focusing on recycling the waste. Jerry McNerney (D-CA) told the panel that he agreed with Kasperson’s emphasis on public trust, but argued that transferring power to the private sector would not engender public support. He asked Swift if there are other feasible options for disposal besides Yucca Mountain. Swift said although Yucca Mountain, in his opinion, was the best option due to its ideal location above the water table, there are other options for disposal. He mentioned that France, Germany, and Sweden are all looking into new depository options. Dana Rohrabacher (R-CA) told the panel that he does not understand why the federal government has not built a prototype for water-cooled reactors, which he called a more “promising” option than “digging holes.” Peters responded that there first needs to be a market for those reactors in order to build a prototype.

The hearing charter, full witness testimonies, and the majority opening statements can be found on the committee web site.

-ERC

Senate Committee on Energy and Natural Resources Subcommittee on Water and Power Hearing “To Examine Shale Gas Production and Water Resources in the Eastern United States”
October 20, 2011

Witnesses
Panel 1
Cynthia Dougherty
Director, Office of Ground Water and Drinking Water, Office of Water, Environmental Protection Agency
David Russ
Regional Executive, Northeast Area, United States Geological Survey

Panel 2
Lori Wrotenbery
Oil and Gas Conservation Division, Oklahoma Corporation Commission
Tom Beauduy
Deputy Executive Director and Counsel, Susquehanna River Basin Commission
Cal Cooper
Worldwide Manager, Environmental Technologies, Greenhouse Gas, and Hydraulic Fracturing, Apache Corporation
Katy Dunlap
Eastern Water Program Director, Trout Unlimited

Subcommittee Members Present
Jeanne Shaheen, Chairwoman (D-NH)
Mike Lee, Ranking Member (R-UT)
Bob Corker (R-TN)

On October 20, 2011, the Senate Committee on Energy and Natural Resources Subcommittee on Water and Power held a hearing to discuss the effects of shale gas production on water resources in the Eastern United States, specifically within the Marcellus Shale play. Chairwoman Jeanne Shaheen (D-NH) mentioned in her opening statement the serious concerns of hydraulic fracturing (hydraulic fracturing), notably the freshwater requirements for drilling and potential methane and wastewater contamination of ground and surface waters. Shaheen said that the committee needs to look at not only the risks of hydraulic fracturing but also “the holistic view of its production, including any outlying issues.” Ranking Member Mike Lee (R-UT) introduced the hearing’s central topic of shale gas regulation. Lee said that states are the correct body to regulate shale gas production, “they are doing it now and doing it well,” and they should continue to do so.

Cynthia Dougherty of the Environmental Protection Agency (EPA) said in her testimony that EPA supports shale gas production when it is done in an environmentally friendly manner, and that shale gas “can be and must be extracted responsibly.” She notified the committee that EPA plans to conduct a five-pronged study on water use impacts in shale gas production. The final draft of this study will be released “soon,” and the final reports will be released in two phases in 2012 and 2014. Dougherty mentioned that EPA is in the process of developing a guidance document for states to use in managing their water resources, as well as a set of national pretreatment standards for shale gas wastewater. David Russ of the U.S. Geological Survey (USGS) told the committee that the Marcellus Shale holds 84 trillion cubic feet (Tcf) of natural gas resources. In his testimony, Russ confirmed that the USGS is collaborating with EPA on the report that will evaluate the effect of shale gas production on drinking water resources. According to Russ, the USGS is conducting studies on uranium content in produced waters and baseline water monitoring, as well as working on an extensive groundwater resource mapping project for the Marcellus area.

Chairwoman Shaheen asked Russ about the main differences between shale gas production in the East and the West. Russ explained that the East is primarily concerned with the Marcellus shale resource, which has a much higher salinity than any other shale gas resource in the U.S. Where salinity is higher, Dougherty added, there is a higher potential to mobilize radium into the wastewater. Dougherty also said that while wastewater permits have technology-based and water-based standards, there are no enforced water-based requirements in place as of yet. Direct discharge of wastewater is not allowed, so drillers send their wastewaters to sewage treatment plants. Due to the composition of wastewaters, however, they need to be pretreated before being sent to the treatment plants. According to Dougherty, there are no effective pretreatment plans currently, thus technology-based standards need improving. Shaheen then asked Dougherty to lay out the aspects of shale gas production that have federal jurisdiction and those that have state jurisdiction. Dougherty replied that the states have authority over oil and gas production and permitting. EPA is only involved if there are any leaks from fluid storage facilities, if diesel fuel is used in the hydraulic fracturing fluids, or if fluid reinjection is involved. However, in 2005 Congress deemed hydraulic fracturing exempt from regulations set in place by the Safe Water Drinking Act. Regulation of wastewater reinjection therefore falls under state jurisdiction within the Underground Injection Control Program. Regulation of non-injected wastewater, on the other hand, falls under the Clean Water Act. Dougherty noted that recycling produced waters is becoming a popular option, as well as using produced brine as a de-icing solution. Shaheen asked Dougherty if well casings and cementation are being adequately regulated on the state level. Dougherty replied that they are.

Lee asked Russ what the USGS has found during their well testing and what types of markers they look for in the water. Russ said that the USGS looks at salinity and other anomalous chemicals, but they have not detected any evidence of contamination in the wells. Lee then asked if the state departments of environmental quality are “inadequate.” Russ replied that they are not inadequate, but they did request EPA to do a study to produce a technology-based standard for them. Lee asked how often diesel is used in the injection fluids. Dougherty said that diesel is becoming less popular and is “not used a lot.”

Lori Wrotenbery of the Oklahoma Corporation Commission said that states are updating the transparency in their regulations of shale gas production. In her testimony, Wrotenbery referred the committee to the reports done by the State Review of Oil and Natural Gas Environmental Regulations (STRONGER), a stakeholder work group originally created to develop guidelines for states. She mentioned FracFocus, another state-wide effort to improve transparency of hydraulic fracturing fluid chemical compositions that posts all available information on their web site for public view. Wrotenbery said that over five thousand wells are currently posting their fluid information on FracFocus.

Tom Beauduy of the Susquehanna River Basin Commission (SRBC) noted in his testimony that SRBC is a federal interstate compact commission that has developed a “special set of rules” for the Marcellus shale play. The SRBC regulates every withdrawal in Pennsylvania’s Susquehanna Basin, within which the Marcellus shale is located, and the shale gas industry has always complied with the regulations. Beauduy added that the SRBC incentivizes water sharing between companies and has promoted the use of acid mine drainage, a common occurrence in the basin, as an alternative to freshwater for injections. He noted that the Marcellus shale play is extremely dry compared to other shale gas areas, thus the amount of flowback water is only about five to ten percent of the water injected. All of that flowback water is recycled at treatment plants, according to Beauduy. Additionally, SRBC maintains 50 water quality station monitors and their information is available online.

Cal Cooper of Apache Corporation spoke about protection from chemical contamination, water competition challenges, and comparisons of water usage with other energy sources., he noted that all chemicals used in hydraulic fracturing fluids can be replaced with bio-degradable compounds. Regarding water usage issues, he said that “location is everything” and water withdrawal must be managed on a local basis. In the Marcellus area between four and eight million gallons of water are used “per frac job,” a value that is, according to Cooper, equivalent to only 1.6 seconds of the Mississippi River’s discharge., he told the committee that natural gas production uses less water per million British thermal units (BTUs) than “any other common fuel.” Specifically, he noted that shale gas production uses half the water used for coal steam power plants, less than a third of nuclear steam turbine requirements, and “an even smaller fraction of water” required by solar condensing plants.

Katy Dunlap said in her testimony that Trout Unlimited supports the production of shale gas that “is done right.” She went on to list the negative impacts that shale gas production has had on the river ecosystems in the Marcellus area, including sedimentation and erosion control problems that affect cold-water habitats and drinking water resources. Dunlap referred to an instance when a fluid storage tank blew out and polluted surface water sources with brine and toxics. She said that Trout Unlimited “applauds” EPA on their study of water resources in shale gas production. Shaheen asked Beauduy to speak about Dunlap’s concerns. Beauduy agreed that industrial areas need extremely tight controls and that the erosion concern “is a legitimate one.” He said that there have been a few well blowout impacts, which he called “poster-child examples,” but he argued that the issue of land disturbance is the greatest concern.

Shaheen asked how many wells do not post their information on the FracFocus website. Wrotenbery did not know the answer but said she would follow up. Cooper added that half of the wells in Texas are on the web site. Shaheen asked Dunlap if Beauduy’s information about wastewater recycling was correct to her knowledge. Dunlap said that she has been told that only fifteen percent of the wastewater is actually being reused. Beauduy replied that some companies recycle all of their wastewater, but the transport and treatment are often too expensive for others to do the same. He said that SRBC is trying to incentivize wastewater recycling. Shaheen asked Cooper if states should require full disclose reporting of hydraulic fracturing information. Cooper replied that they should, and Texas has already done so. The panel agreed that more states are moving in the direction of full disclosure requirements. Shaheen asked the panel to comment on state regulation of well casing and cementation. Wrotenbery said that it is a “core part of state oil and gas regulations,” and the Oklahoma Corporation Commission is in the process of reviewing the regulations’ effectiveness on casings. Beauduy said that “stray gas is the dominant issue,” and regulators in the state of Pennsylvania has found that leak problems are only found in old drill casings. He added that “integrity testing is on the way.” Shaheen concluded her round of questions by noting the New York Times article from the morning that discussed concerns for property owners in shale play areas. Dunlap elaborated that individuals looking to purchase a home will not be able to acquire mortgages from the bank if the mineral rights have already been sold.

Lee asked Wrotenbery how FracFocus is funded and if states require the use of the web site. She replied that the Department of Energy provided the grant to start up the website, and since then state participants and industries have made contributions. She said that states do not require information to be posted on FracFocus, but Oklahoma is considering it.

Full witness testimonies and a hearing webcast can be found on the committee web site.

-ERC

House Committee on Science, Space, and Technology Subcommittee on Energy and Environment Hearing on Advancing Coal Research and Development for a Secure Energy Future
October 13, 2011

Witnesses
Scott Klara
Deputy Lab Director, National Energy Technology Laboratory, Department of Energy
Janet Gellici
Chief Executive Officer, American Coal Council
Nick Akins
President, American Electric Power
David Foerter
Executive Director, Institute of Clean Air Companies
Stu Dalton
Senior Government Representative, Generation, Electric Power Research Institute

Subcommittee Members Present
Andy Harris (R-MD), Chairman
Brad Miller (D-NC), Ranking Member
Roscoe Bartlett (R-MD)
Randy Neugebauer (R-TX)

On October 13, 2011 the House Committee on Science, Space, and Technology Subcommittee on Energy and Environment held a hearing to discuss research and development (R&D) of technologies to reduce carbon emissions from coal-fired power plants. Chairman Andy Harris (R-MD) acknowledged in his opening statement that, although coal provides the U.S. with 45% of its electricity consumption in a “plentiful, affordable, and reliable” manner, it suffers from a negative reputation. Harris chided the Environmental Protection Agency’s (EPA) coal regulations, saying that they might force coal production into retirement. Considering the unlikelihood of a cap and trade economy, Harris asked whether it was logical for the Department of Energy (DOE) to continue allocating so much of the coal R&D funding in the Office of Fossil Energy budget to carbon capture and sequestration (CCS). He told the witnesses that he hoped to learn more about the “status of, outlook for, and lessons learned from” the $3.4 billion used to fund CCS projects in the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Ranking Member Brad Miller (D-NC) followed by saying, “To have a strong economy we do not have to sacrifice cleaner air and a healthier and more productive workforce.” He chastised his Republican colleagues for frowning upon DOE funding for renewable energy R&D, when just about every other energy source has received government support, including coal. Miller pointed out that he was curious about the financial interests of the witnesses, but said he would not spend his 5 minutes of questioning on that subject.

Scott Klara said in his testimony that DOE’s Clean Coal Program is currently pursuing cost minimization of CCS technologies and improvements for fossil energy systems, and the agency has created Regional Carbon Sequestration Partnerships with 400 companies that focus on the geologic storage of greenhouse gases (GHG). He noted that DOE’s Interagency Task Force on Carbon Capture & Storage concluded that CCS has “no insurmountable technological, legal, institutional, regulatory, or other barriers from playing a role in reducing GHG emissions,” but suffers from cost-ineffectiveness compared to other technologies. He said that the advanced coal technology program, which can be traced back to three out of every four coal-burning power plants in the U.S., is tackling the challenges to achieve cost-effective deployment of CCS.

Janet Gellici of the American Coal Council said that the U.S. has more recoverable coal resources than any other country in the world, amounting to about 200 years of energy production. She also said the U.S. has the “loftiest” environmental goals in the world. She stressed, however, that we don’t have to pick one over the other; she encouraged “bridging” these two facts. She recommended that R&D funding focus on higher efficiency technologies, reducing capitol costs, and increasing commercial availability of technology solutions.

Nick Akins of American Electric Power (AEP) spoke of the J.W. Turk Plant in Arkansas, the country’s first power plant equipped with “ultra-supercritical technology,” a high efficiency design that uses less fuel per megawatt hour of electricity and emits significantly less GHG. He also announced the completion of the world’s first integrated CCS project, technology that has not yet been commercially deployed and needs DOE’s continued funding support, at an existing coal-fired power plant. AEP, according to Akins, believes that the regulations being pursued by EPA will have “damaging impacts” on the reliability of America’s electric system, such as premature plant retirements and over one million jobs lost in the country. He supports a more “reasonable” approach to energy and environmental policy, and encourages DOE to act as a “trusted advisor” to EPA by performing a thorough analysis of their rules impacts.

David Foerter of the Institute of Clean Air Companies (ICAC) acknowledged the importance of R&D support to improve energy technology developments, yet he argued that such technological improvements and commercial offerings must be “fostered” by a market with clean air regulations and policies. Foerter said that while CCS has large initial hurdles to overcome on its way to commercial deployment, the rewards will “be great.” This is especially important, according to Foerter and ICAC, because they are “aware of no energy ‘map’ that does not include fossil fuels, particularly coal, as being essential to a load following, demand responsive, reliable energy strategy.”

Stuart Dalton of the Electric Power Research Institute (EPRI) listed three main areas that are not sufficiently covered by the current DOE coal R&D funding: ultra-high-efficiency steam cycles based on American advanced alloy steels, improved water management at power plants, and “workable solutions” to proposed hazardous air pollutants emission standards. Dalton stressed that these areas have been identified by EPRI as “necessary to augment, not supplant” DOE’s current programs focusing on CCS technology.

When asked by Chairman Harris about the amount of DOE funding from the first stimulus bill, Klara replied that $3.4 billion was dedicated to the projects but only $500 million has been spent thus far. Harris also inquired about the extra costs for building new supercritical power plants and potential increases in electricity costs from these plants. Klara responded that the supercritical plants cost about $600 million more than conventional plants, but do not incur any noticeable energy price increases.

Miller asked Dalton why the coal industry is not capable of funding its own R&D for more efficient technologies. Dalton replied that moving to a commercial scale with a new technology requires “an additional order of magnitude” of funding, which intrinsically needs some sort of allocation and legislation from the government. Miller expressed a worry that such government support would crowd out private investment, but the panel felt it would enhance the partnerships with private investors.

Roscoe Bartlett (R-MD) asked Gellici if the American Coal Council’s prediction for 200 years worth of coal energy assumed current energy consumption rates. She replied that, while the 200 year value was calculated with current energy consumption in mind, the American Coal Council does expect a 25 percent increase in energy use. Bartlett asked for a slide to be displayed to the panel, at which point he told Gellici that a mere two percent increase in energy consumption would decrease our energy supplies four-fold by 200 years, and encouraged her to reevaluate her calculations considering her estimate of a 25 percent increase. Randy Neugebauer (R-TX) called EPA’s extensive air quality regulations “EPA’s war on energy, which is really the President’s war on energy.” When asked about the effect of EPA regulations on energy reliability, Dalton told Neugebauer that it takes approximately five years to install a scrubber in an existing coal-fired power plant and that EPRI is dealing with “serious reliability issues” due to EPA’s rules and regulations.

During a second round of questioning, Harris asked Klara where the unspent money would go if the DOE projects were not successful. Klara assured the Chairman that the money would be sent to the U.S. Treasury. Harris inquired about the practicality of allocating funding for CCS research given an absence of a cap and trade program in the country. Foerter said that there is “no structure for power plants to be built without considerations for carbon.” He mentioned that retrofitting existing power plants with CCS technology would require an upfront cost but would also provide an upfront and lasting carbon benefit. Miller then asked Foerter about the potential coal power plant retirement rates assuming EPA’s regulations are successful. Foerter said that the energy production would be lowered from about 68 to 40 megawatts per hour, which in his opinion “is not much of a difference,” because many of those units are planned to retire anyway. Harris concluded the hearing by asking the entire panel what aspect of coal research should receive the next-greatest attention, behind CCS. The witnesses agreed that DOE’s focus should be directed at water management and efficiency improvements.

Complete opening statements, witness testimonies, and an archived webcast can be found on the committee web site.

-ERC

House Committee on Natural Resources Oversight Hearing on the "BOEMRE/U.S. Coast Guard Joint Investigation Team Report"
October 13, 2011

Witnesses
Panel I
Captain Hung Nguyen
Co-Chair of the Joint Investigation Team, U.S. Coast Guard
David Dykes
Co-Chair of the Joint Investigation Team, Former Bureau of Oceam Energy Managment, Regulation and Enforcement Staff
Vice Admiral Brian M. Salerno
Deputy Commandant for Operations, U.S. Coast Guard
Michael Bromwich
Director, Bureau of Safety and Environmental Enforcement

Panel II
Ray Dempsey
Vice President, BP America
James Bement
Vice President, Sperry Drilling, Halliburton
Bill Ambrose
Managing Director, North America Division, Transocean

Members Present
Doc Hastings (R-WA), Chairman
Ed Markey (D-MA), Ranking Member
Jeff Landrey (R-LA)
Rush Holt (D-NJ)
John Fleming (R-LA)
Dan Boren (D-OK)
Glenn Thompson (R-PA)
Bill Flores (R-TX)
Raul Grijalva (D-AZ)
Andy Harris (R-MD)
John Sarbanes (D-MD)
Steve Southerland (R-FL)

Non-members Present
Sheila Jackson Lee (D-TX)

This oversight hearing on October 13, 2011 was held to review testimony from key witnesses regarding the final Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) and Coast Guard Joint Investigation Team (JIT) Report. The report evaluated the causes, effects, and responsibility of all involved parties in the March 2010 BP Deepwater Horizon oil spill. The disaster began with an unexpected influx of hydrocarbons into the Macondo well, which escalated to a blowout of hydrocarbons onto the rig floor. The oil was ignited by a gas vent, resulting in two separate explosions and a persistent fire that continued to burn the available fuel until the rig sank two days later. The night before this hearing, the Department of the Interior (DOI) formally issued BP, Halliburton and Transocean 15 violation notices regarding their involvement with the oil spill.

Chairman Doc Hastings (R-WA) opened the hearing saying that it is the committee’s “duty to get the full facts... before rushing to judge or legislate.” He added that it is America’s top priority to make its offshore drilling practices the safest in the world. Ranking Member Ed Markey (D-MA) followed with his opening statement that focused on lack of any legislation following the country’s worst environmental disaster, which took place a year and a half ago. Markey pointed out that the report said the disaster was preventable and that worker and safety standards are in need of improvement. He brought up the fact that the Democratic minority members of the committee were not notified of this hearing’s second panel of witnesses, whom he called "the majority’s witnesses," or their testimonies until a day and a half before the hearing took place. He expressed a worry that the lack of a consultative process to discuss the witnesses was an attempt to shield the companies’ mistakes. Finally, Markey alluded to the recent development of DOI’s violation notices to BP that will result in $21 million fines, equivalent to only seven hours of profit for the company.

Hastings took the floor again to clarify Markey’s comment about the last-minute notification of the second panel. Hastings responded that party witnesses do not exist, and that the majority was not aware of the presence of a second panel until late as well.

The first panel of witnesses was made up of five government and military officials. Captain Hung Nguyen of the U.S. Coast Guard gave his testimony to provide background on the development of the BOEMRE and Coast Guard JIT, for which he co-chairs, as well as a detailed description of the methods in which the study was conducted. Next, David Dykes spoke on the report’s recommendations. He assured the committee that his written and oral testimonies contain his “best recollection of the facts as [he] remember[s] them,” because of his limited access to the evidence after his resignation in September 2011. He summed up the report recommendations, some of which have already been incorporated since the disaster, which encompass regulatory changes, research collaboration, and agency collaboration with industry to develop best practices for well control training. Brian Salerno gave his testimony, stating that “a flawed safety management system and safety culture aboard Deepwater Horizon” contributed to the disaster. He explained that the Coast Guard examined five aspects of the disaster relating to their jurisdiction, one of which was the safety management system implemented by the owner-operator of the well, Transocean. Salerno noted that their investigation “revealed numerous system deficiencies and acts of omissions by Transocean and the Deepwater Horizon crew that adversely impacted opportunities to limit the magnitude of the disaster.” Michael Bromwich listed in his testimony a number of issues that BOEMRE concluded contributed to the disaster, including well design, well cementation, hydrocarbon flow paths during the blowout, temporary abandonment of the well, kick detection and rig response, failure of the blowout preventer, regulatory findings, and company practices. He said that the evidence from the report shows that BP and their contractor, Halliburton, violated BOEMRE’s regulations. The BOEMRE panel found that regulations could be enhanced in a number of areas, especially drilling inspections, after recognizing that “existing regulations had not kept up with the advancements in technology used in deepwater drilling."

During the question and answer period, Hastings and Jeff Landry (R-LA) brought up the topic of statutory authority, asking Bromwich which law allows the Bureau of Safety and Environmental Enforcement (BSEE), previously BOEMRE, to regulate the subcontractors. Bromwich assured both congressmen that their regulatory abilities are written in the law and said he was happy to provide the exact details after the hearing. Rush Holt (D-NJ) asked Salerno if any of the Coast Guard recommendations are currently being put in place and if any require regulatory action. Salerno replied that they are currently being incorporated into practice and that all of them do not require regulation.

Dan Boren (D-OK) questioned the authenticity of the report absolving government officials from blame, because he had email proof that a government official was provided with the questions prior to the JIT hearing. Nguyen assured Boren that none of the witnesses were coached on how to answer the questions; they were merely given the “areas of the questions” that would be asked. Steve Southerland (R-FL) was disappointed that the report laid nearly all of the blame on the companies, but Bromwich argued that though the disaster was not a governmental failure, the government needs to take a bigger role in regulating industry so there can be a successful “partnership between the two.”

John Sarbanes (D-MD) asked Bromwich to speak more on government oversight resources. Bromwich said that the number of inspectors available is “nowhere near where we need to be.” According to him, the government needs to hire more inspectors and bolster the regulatory program to replace the “prescriptive style” of regulation the agency had in the past.

Bill Flores (R-TX) asked how the government can address the human error problem. The panel suggested reducing the number of opportunities that individuals have to make decisions that can result in error. Greater awareness, knowledge, and training are essential to provide the information individuals need to digest the situation and make correct decisions.

Flores asked the panel if they were aware of any fraudulent acts by BP, Halliburton, Transocean, or anybody else during the study. All the witnesses had no knowledge of fraud or criminal acts. Landry asked Dykes if BP had a comprehensive Safety and Environmental Management Systems (SEMS) in place at the time of the disaster. Dykes replied that they did and it played no part in the cause of the accident; he informed Landry that there is no guarantee a working SEMS will prevent accidents. According to Dykes, there were gaps in the management change as the company shifted from paperwork to an electronic system.

During the second panel, Raymond Dempsey gave his testimony, saying that BP “deeply regrets” the spill and has new performance standards for deepwater drilling. James Bement said in his testimony that Halliburton is committed to its safety and to providing energy to the country, and will “continue to fully support, and cooperate with, the ongoing investigations.” Bill Ambrose stated in his testimony that “nothing is more important to Transocean than the safety of our people,” and that they have formed an investigative team to evaluate the problems associated with the disaster.

In the question and answer period of the second panel, Flores asked Dempsey what the total cost of the accident was for BP. Dempsey answered that total costs have amounted to over $20 billion. Flores then asked Bement and Ambrose if the report came to any systemic allegations against Halliburton or Transocean. Both men said no, assuring that they drill thousands of wells safely all over the world. Holt asked Dempsey if BP plans on appealing the violations that DOI released the night before. Dempsey replied that BP will take a serious look at them and participate with DOI to reach an agreement. Holt asked if BP has acknowledged that it failed to protect its workers and the environment. Dempsey said that “BP has from the very start acknowledged its role in this accident,” but the contractors also have to be held accountable and “it gets very complicated with multiple parties.” When Holt asked Bement if Halliburton plans to appeal the violations, Bement replied that the company “will go through the process and reserve the right to appeal.”

Sheila Jackson Lee (D-TX), a non-committee Representative, joined at the end of the hearing to ask the witnesses if each of them is committed to “fixing what needs to be fixed.” All three witnesses confirmed they are actively engaged and committed to making the necessary changes. Finally, Hastings wrapped up the hearing by asking about “stop-work” policies in each of the three companies. All three witnesses said that BP, Halliburton, and Transocean each have a “stop-work” policy that is in place if an emergency takes place.

Opening statements, witness testimonies, and an archived webcast of the hearing can be found on the committee web site .

-ERC

Senate Committee on Energy and Natural Resources Hearing to Receive Testimony on the Secretary of Energy Advisory Board’s Shale Gas Production Subcommittee’s 90-day Report
October 4, 2011

Witnesses
Daniel Yergin
Chairman, HIS Cambridge Energy Research Associates
Stephen Holditch
Department Head, Professor of Petroleum Engineering, Texas A&M University
Mark Zoback
Professor, Stanford University
Kathleen McGinty
Sr. Vice President and Managing Director, Strategic Growth Weston Solutions, Inc.

Members Present
Jeff Bingaman, Chairman (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
John Barrasso (R-WY)
Al Franken (D-MN)
John Hoeven (R-ND)
Jeanne Shaheen (D-NH)
Mark Udall (D-CO)
Ron Wyden (D-OR)

In response to increasing public concerns over the development of shale gas, President Obama instructed Secretary of Energy Steven Chu to organize a subcommittee that would develop a 90-day study report to address the safety and environmental performance of shale gas production. On October 4, 2011 the Senate Committee on Energy and Natural Resources held a hearing to hear testimony from four key witnesses who contributed to this report.

In his opening statement, Chairman Jeff Bingaman (D-NM) explained that since the March 2011 Fukushima nuclear disaster, the U.S. is looking more eagerly toward the potential of natural gas. However, because the public has expressed concerns of “fugitive emissions” and contaminants into the air and water table from shale gas extraction, policy makers have to take a “transparent and diligent approach” as they proceed. Ranking Member Lisa Murkowski (R-AK) praised shale gas in her opening statement as “one of our most promising resources” with “game-changing technological innovations.” Murkowski noted that America should commit to environmentally regulated practices as well as encourage ingenuity in the private sector for natural gas production.

Daniel Yergin was the first of the panel to share testimony. He noted that shale gas constitutes 30 percent of current natural gas production and “this is expected to rise dramatically in the foreseeable future.” As a result of the U.S.’s self-sufficiency in natural gas production, prices have gone down and jobs have gone up. Yergin referenced the state of Pennsylvania’s revenue increase of $1.1 billion in 2010 from shale gas production. He said that the subcommittee report includes 20 recommendations to address the safety and environmental concerns, but only elaborated on two, which he claimed would be areas of “modest funding that would pay back to the nation… enormous returns”. First, he recommended support for the State Review of Oil and Natural Gas Environmental Regulations (STRONGER) organization, since states are the backbone of regulation. Second, he and his colleagues would like to see federal support to develop technologies that will address environmental issues and promote and improve best practices.

Stephen Holditch then gave his testimony, referring to his 40 years of work with shale gas production and stating that “shale gas is for real.” He cited a Department of Energy (DOE) report from 2009 that suggests that new shale gas technology has added over 900 Trillion cubic feet (Tcf) of technically recoverable resources (TRR), not all of which are economically recoverable resources (ERR). Holditch told the committee that additional research into new drilling and completion technology can convert TRR to ERR. He assured the members of the committee that there is no evidence to prove that fractures can travel miles upward into freshwater aquifers. Holditch concluded with a list of potential research areas to improve shale gas production. These included developing technologies to purify wastewater, discovering safer fracturing fluids, improving seismic monitoring to better characterize the fractures, and making more cost-effective technologies to monitor and capture methane emissions.

Mark Zoback followed up by providing three key points derived from his five-year research on optimizing shale gas reservoirs. First, he assured the committee that horizontal drilling for shale gas can be done without any environmental impacts. He admitted that while there have been accidents, those accidents were all related to well construction rather than fracturing. He recommended stable and secure well construction to easily prevent these accidents from occurring in the future. Second, Zoback brought up water conservation and the future of pad drilling, in which one main vertical drill is used for multiple horizontal fractures in all directions. Such technology uses considerably less water, minimizes land-use, and improves drilling efficiency. Third, he addressed the concerns over flowback water, which is often contaminated with brine, metals, and chemicals from the shale. Zoback encouraged careful monitoring of the flowback water (specifically water volume, composition, and disposition) and additional research on the potential re-use of flowback water.

Kathleen McGinty testified about regulation, best practices, and information sharing. She stated that while shale gas production is an industrial activity, it can and must be managed and stakeholders need to be active participants. In order to prevent any further contamination accidents (which she added are more likely to occur with escaping methane than with fracking fluids), researchers need to better characterize the geologic subsurface, improve the quality of well cementation, and increase the amount of filters on equipment to reduce particulate matter. McGinty highlighted the economic and environmental benefits of capturing methane from shale gas production, and emphasized the need for information sharing between regulation agencies and the industry, implementation of a “baseline data” process to better monitor operations over the course of a well’s lifetime, and an investment in databases for an easier exchange of such information.

During the question and answer period, best practices and information sharing were popular topics. Bingaman asked how the industry can be sure that wells are properly cemented, to which Zoback replied that proper training and frequent well tests combined with a proper exchange of information would significantly reduce the likelihood of leakage problems. Murkowski commented on the importance of information sharing and asked the panel if they collaborated with the Bureau of Land Management (BLM) during their study. The panel said they were in communication with BLM in regards to their research. Mark Udall (D-CO) asked how the committee suggests implementing best practices and what the federal government can do to help. The panel collaboratively emphasized information sharing between states and state-level regulatory agencies. Ron Wyden (D-OR) suggested that the federal government should use its federal lands to bring together stakeholders and work on best practice implementation, so they can easily share information for improvement.

The discussion transitioned to the topic of state versus federal regulation. Murkowski was the first to point out that the report did not discuss regulation at all and asked if we needed a “gap analysis” to see if regulations have been successful before making any changes. Holditch fielded her question, assuring her that state regulators are doing a “great job.” He also suggested that some of the states with extensive drilling experience should share their knowledge with states that are newer to the gas drilling industry. John Barrasso (R-WY) followed by commenting that the report did little to praise the high quality of state regulation, and that the government should continue to let states regulate their own practices so that there are not extra bureaucratic levels involved. Yergin added that the federal government should encourage state collaboration. Jon Hoeven (R-ND) expressed a desire to keep federal “one size fits all” regulation out of the industry, since geologic conditions and community involvement varies state by state. McGinty reminded the committee that their study was not in charge of evaluating regulation, but that state regulation would be ideal since they are at the heart of ensuring public confidence. Murkowski asked if the upcoming 180-day report will examine current regulation of the two states involved with the shale gas industry. McGinty replied that the report is only going to look at baseline data procedures and best practices because the core of the study is for transparency and public understanding. Yergin said they will need to look more into the issue of regulation in the future.

Al Franken (D-MN) utilized his five-minute period to clarify government funding. He asked why the committee recommends the federal government should pay for the regulation of the shale gas production when the oil and gas Industry has much more money to “foot the bill” during the economic crisis. There was some misunderstanding among the panel; the witnesses answered his question regarding funding for R&D of shale gas production, but Franken’s concerns regarded funding for regulations. The time ran out and the question was left unanswered.

Barrasso and Udall both requested the panel to elaborate on contamination and leaky wells. Holditch first explained that fractures grow hundreds, not thousands, of feet, and once the pumping stops the fractures close up. Therefore, he concluded, fracking fluids are very unlikely to travel miles upward into freshwater aquifers. Zoback added that contamination issues are connected to leaky wells or storage cases, not from fracture leaks. Holditch also added that leaky wells are most likely to be old and in need of replacing; in his opinion, new wells and drills are not the problem.

Wyden asked the panel if policy makers should look into the practice of flaring, a process used to eliminate waste gas which is otherwise not feasible to use or transport. Holditch responded by saying that flaring “needs to be watched”. He explained that flaring happens when you drill a new oil well without a pipeline. It is not an ideal situation, since capturing the methane is ideal, but flaring is a better option compared to venting the gas. Bingaman asked for comments on methane capturing technology. Holditch said that procuring methane capturing technologies is a delicate balance between limiting the cost of the air quality filters without compromising the sensitivity of the sensors. Bingaman then asked if states currently require measurements on methane emissions. McGinty said there are no current requirements but the Environmental Protection Agency (EPA) has done modeling on the issue. Bingaman suggested that methane emissions should be federally regulated.

Testimony from the witnesses and an archived webcast is available from the committee web site.

-ERC

House Committee on Natural Resources Subcommittee on Energy and Minerals Hearing on Discussion Draft to Reorganize the Interior Department’s Offshore Energy Agencies
September 15, 2011

 

Witnesses
Panel I
The Honorable Michael Bromwich
Director, Bureau of Energy Management, Regulation and Enforcement

Panel II
Albert Modiano
President, U.S. Oil & Gas Association
Donald Boesch
President, University of Maryland Center for Environmental Science
Commissioner, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

Subcommittee Members Present
Doug Lamborn, Chairman (R-CO)
Rush Holt, Ranking Member (D-NJ)
John Fleming (R-LA)
David Rivera (R-FL)
Jeff Duncan (R-SC)
Bill Flores (R-TX)
Jeff Landry (R-LA)

Full Committee Members Present
Doc Hastings, Chairman (R-WA)
Ed Markey, Ranking Member (D-MA)
John Sarbanes (D-MD)
Niki Tsongas (D-MA)

On September 15, 2011, the House Committee on Natural Resources Subcommittee on Energy and Mineral Resources held a hearing to discuss Chairman Doc Hastings’ (R-WA) discussion draft to reorganize the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) within the Department of the Interior (DOI). Previously the Minerals Management Service (MMS), BOEMRE has been due for reorganization since the BP Oil Spill of 2010 and is currently in the process of being separated into two new agencies, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), as envisioned by the Obama Administration.      

Hastings has alternatively proposed in his discussion draft a division of BOEMRE into the Bureau of Ocean Energy (BOE) and the Ocean Energy Safety Service (OESS). Hastings has proposed slight changes to the already-existing Office of Natural Resources Revenue (ONRR) and his proposal would establish an Under Secretary of Energy, Lands, and Minerals. This hearing was called to discuss the details of Chairman Hastings’ proposal and hear testimony from key witnesses.

Subcommittee Chairman Doug Lamborn (R-CO) began his opening statement by stressing, “We don’t take this task lightly – the formation of organic legislation for an agency must be conducted with careful attention to the precedence of existing laws without bias, and paired with an understanding of the successes and failures at BOEMRE and the former MMS.” Furthermore, Lamborn expressed that the establishment of an Under Secretary is “a bold new idea” that would increase oversight and elevate the importance of safe and efficient energy development.

Hastings reiterated in his opening statement the importance of increasing accountability, efficiency, safety, and ensuring the highest ethical standards for employees. He added that these goals need to be pursued while expanding American energy production, growing the economy, and ensuring oversight. Subcommittee Ranking Member Rush Holt (D-NJ) said in his opening statement that those in favor of increased drilling and permitting should not favor Hastings’ draft proposal, rather they should support BOEMRE’s plan. Full Committee Ranking Member Ed Markey (D-MA) added in his opening statement that the committee needs to hear from the companies involved in the 2010 BP oil spill while constructing this organic act.

During the first panel, Michael Bromwich detailed the main differences of the two proposals in his testimony, emphasizing that Hastings’ three agencies would be at conflict with each other due to the manner in which their functions are divided. He also noted that the pre-lease/post-lease function in the draft proposal would be counter-productive and defeat the purpose of the reorganization. When Bromwich was asked his opinion on the addition of the Under Secretary, he argued firmly that additional bureaucracy would stifle the progress that their new agencies hope to make. Chairman Lamborn asked the panel how BOEMRE plans to ensure expeditious development of the nation’s oil resources, while Jeff Landry asked how BOEMRE plans to expedite permit processing and whether the current rate of permitting will be sufficient enough for the economy. Bromwich answered by noting that the organization is currently moving as quickly as possible with permit grants, but they are currently battling the issue of insufficient permit applications, which slows the process significantly.

Holt then asked the panel if the Administration’s reorganization of BOEMRE would result in an increase in cost to taxpayers, to which Bromwich answered in the positive.  However, Bromwich emphasized that the agency is in need of a dedicated funding stream from the government itself rather than taxpayer support. Holt turned to the issue of regulating contractors and maintaining authority with them. Bromwich stated that they have the utmost authority with contractors and they plan on holding contractors accountable whenever necessary.

Niki Tsongas (D-MA) brought up some environmental regulatory concerns during the questioning period. She mentioned seeing no “worst case scenario” guidelines for drilling under the Administration’s reorganization of BOEMRE and asked whether permits will be granted in areas where such worst case scenarios would be extremely detrimental to the environment. Bromwich assured her that the BSEE would handle oil spill plans and that they are working with the Coast Guard to make sure responses are improved. John Sarbanes (D-MD) also requested to see more accountability at the corporate level; Bromwich assured him that someone is now directly responsible at the corporate level when such scenarios occur.

Bill Flores (R-TX) noted that due to the economic climate and unemployment rates, drilling rates should be much higher. He wished to see more transparency within BOEMRE and asked the organization to encourage operators to approach them when they have any concerns. Flores asked Bromwich to reconcile the difference in agency partitioning between BOEMRE’s and Hastings’ plans. Bromwich was supportive of an increase in transparency and a welcoming environment for concerned operators. Next, he warned against putting those in charge of management and permitting in the same agency as those in charge of safety. Bromwich believes there would be a need for robust regulations in Hastings’ proposal, since there will likely be conflicting environmental regulation motivations within BOEM. He said it is much more efficient to put the management and permitting agency together with environmental regulations (BSEE, under the BOEMRE reorganization plan).

During the second panel, Albert Modiano reiterated in his testimony that clear lines of authority and adequate funding are top priorities for the reorganization of BOEMRE. He mentioned that assigning an Under Secretary, as proposed by Hastings, would be a very positive change. During Donald Boesch’s testimony, he agreed that the permitting function should be combined with the agency performing environmental safety regulations, as BOEMRE has suggested with the BSEE. Additionally, he suggested that the reorganization could be taken even further by placing environmental safety regulations in their own separate agency in DOI, which would give it much more authority.

During the question and answer period, Landry asked Boesch for his opinion regarding the necessity of establishing an Under Secretary, since Modiano had already expressed his views on the matter. Boesch felt that the organization would become more efficient by implementing a specific person to do a specific job.

Testimony from the chair, ranking member, and witnesses is available from the committee web site.

-ERC

House Committee on Natural Resources Hearing on “State Perspectives on Offshore Energy Revenue Sharing”
July 27, 2011

Witnesses
The Honorable Doug Domenech
Secretary of Natural Resources, Commonwealth of Virginia
The Honorable Garret Graves
Chairman, Coastal Protection and Restoration Authority, Office of the Governor, State of Louisiana
Ryan Alexander
President, Taxpayers for Common Sense

Committee Members Present
Doc Hastings (R-WA), Chairman
Edward Markey (D-MA), Ranking Member                                                             
Rush Holt (D-NJ)
Rob Wittman (R-VA)
Bill Johnson (R-OH)
Grace Napolitano (D-CA)
Doug Lamborn (R-CO)
Raul Grijalva (D-AZ)
Raul Labrador (R-ID)
Scott Tipton (R-CO)
John Fleming (R-LA)
Jeff Duncan (R-SC)
Ben Ray Lujan (D-NM)
Jeff Landry (R-LA)
Louie Gohmert (R-TX)

The House Committee on Natural Resources held a hearing on July 27, 2011 to examine state interests in offshore energy development revenues. In fiscal year 2008, $18 billion in revenue was generated from offshore energy production in federal waters. Under the Gulf of Mexico Energy Security Act of 2006 (GOMESA, 43 USC 1331), 50 percent of revenues obtained by certain leases in federal waters in the Gulf of Mexico go to the federal government, 12.5 percent go to the Land and Water Conservation Fund, and 37.5 percent go to Gulf coast states. However, states outside of the Gulf of Mexico only recieve shared revenues from energy development within three to six miles from their coastlines. All energy and mineral production royalties are collected by the Office of Natural Resources Revenue (ONRR) within the Department of the Interior (DOI).

Chairman Doc Hastings (R-WA) said in his opening statement that the committee will be crafting a bill on offshore revenue sharing after the August recess. He emphasized that revenue sharing will increase American energy production which will lead to an increase in jobs and revenue and to a stronger economy. He concluded that a revenue sharing proposal should be fair to all states who have a stake in the costs and risks of offshore energy production.

In Ranking Member Edward Markey’s (D-MA) opening statement, he highlighted his concerns with GOMESA which will give $150 billion in royalties over the next 60 years to the Gulf of Mexico. Markey has introduced a bill, the Gulf Coast Oil and Gas Royalty Giveaway Repeal and Deficit Reduction Act (H.R. 2673), that would recover an estimated $150 billion in the coming decades by sending revenue generated from offshore oil drilling in federal waters back to the federal government instead of to selected states. Markey stated that GOMESA was a big mistake and Hastings’ future legislation would be a “big mistake [given] the fiscal crisis we are in right now.”

Doug Domenech said in his testimony that the governor of Virginia, Bob McDonnell, hopes to make Virginia the “energy capital of the east coast” with every intention of reducing the nation’s dependency on foreign oil and expanding alternative fuel options. He stated that Virginia believes that royalties from oil and gas development should be shared with all coastal states. He added that shared revenues from offshore production will allow states to be better prepared to mitigate potential risks and impacts.  

In his testimony, Garret Graves stated Louisiana’s support for revenue sharing but pressed for a system more akin to onshore revenue sharing where states receive 50 percent of production royalties. Graves told the committee that production activities in the Gulf of Mexico region have benefited the U.S. Treasury from $5 to $14 billion annually though in 2010, Louisiana received only $222,000 while the Treasury received over $5 billion in production revenues. Graves encouraged the committee to enact "responsible revenue sharing legislation" that would allow coastal states hosting energy production to mitigate potential harmful impacts from energy production and make investments in protecting coastal resources.

Ryan Alexander stated Taxpayers for Common Sense’s opposition to any legislation that would alter the existing federal-state revenue sharing. She said that draining billions of dollars in revenue from the treasury is “downright foolish.” She emphasized the fact that federal waters are managed and protected by federal agencies through federal taxpayer’s dollars, so the sale of the resources should be returned to the federal treasury. She concluded that if the production and sale is within federal waters the states should not get the revenue. States should only receive revenue from royalties within state waters and the state-to-federal transition waters.

Hastings asked Domenech how revenue sharing would help Virginia proceed with its potential lease sale. Virginia was approved to lease offshore tracts about 50 miles from the coast to oil and gas developers in 2010 but the process was put on hold by the Obama Administration in the aftermath of the BP Deepwater Horizon oil spill until 2017. Domenech answered that shared revenues would allow Virginia to implement safety infrastructure and that if Virginia were given the flexibility, the state would use the funds for green energy research, enhance the roadway infrastructure, and protect the coast with the resources necessary to respond to a potential spill. Domenech commented that 5,000 to 15,000 jobs would be created if Virginia was allowed to develop offshore energy and a majority of the funds from revenue sharing would stay along the coast.

Markey asked questions relating to the safety recommendations outlined in the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling report. Graves answered that there are appropriate safety recommendations made in the report but as a whole, all of the safety recommendations should not be implemented. Markey countered that the safety recommendations do need to be established. Markey asked Alexander if she would be supportive of ending federal money “give-a-ways.” She said that revenue from federal waters should go back to the federal taxpayers.

Bill Johnson (R-OH) asked Alexander if Congress should repeal onshore revenue sharing. Alexander said that onshore is different than offshore energy because onshore energy on federal land is within the states boundaries. Alexander opposed wind, tidal, and solar revenue sharing when the development is in federal waters because the revenue from federal waters should be going back to the federal taxpayer. In response to Alexander’s testimony, Johnson stated that, “This is the administration of no. No to putting America back to work, no to tapping into American’s natural resources, no to establishing a national energy policy.”

Doug Lamborn (R-CO) asked if states that have shorelines adjacent to offshore drilling should be considered for revenue sharing. Alexander stated if there were an oil spill in Virginia, other states like Delaware, New Jersey, and North Carolina may have an impact but the impact would be more diffused. She added that states will have a disproportionate impact and the states would get disproportionate federal assistance.

Raul Grijalva (D-AZ) asked why it is important for revenues to remain the way they are and what would occur to our federal waters if changes were made. Alexander responded that the areas that will be significantly impacted as consequences of a disaster in federal waters are hard to predict. She said the impacted states would get significant funds in disaster assistance but there should be government accountability on disaster assistance response. She concluded that revenue sharing will not improve federal disaster assistance.

Jeff Landry (R-LA) stated that “revenue sharing protects the environment.” He proclaimed that is it unfair for other states in the country to be receiving 50 percent of oil and gas royalties for their onshore drilling when offshore drilling states do not receive any. Alexander reiterated that the states do get money when there is development within the three miles of the border and the transitional areas but once the drilling is in federal waters the money should be going to the federal taxpayer.

Written testimonies from the witnesses, a documented webcast, and other information can be found here.

-VAB

Senate Committee on Environment and Public Works Subcommittee on Transportation and Infrastructure Hearing on “Yellowstone River Oil Spill Oversight”
July 20, 2011

Witnesses
Panel I
Robert Perciasepe
Deputy Administrator, Environmental Protection Agency
Cynthia Quarterman
Administrator, Pipeline and Hazardous Materials Safety Administration

Panel II
Bill Kennedy
Commissioner, District 3, Yellowstone County, Montana
Gary Pruessing
President, ExxonMobil Pipeline Company, ExxonMobil Corporation
Scott McBurney
Montana Landowner

Subcommittee Members Present
Max Baucus, Chair (D-MT)
David Vitter, Ranking Member (R-LA)
Frank Lautenberg (D-NJ)

The Senate Committee on Environment and Public Works Subcommittee on Transportation and Infrastructure held a hearing on July 20, 2011 to evaluate what caused the Yellowstone River oil spill and what progress has been made to clean up the spill.

Chairman Max Baucus (D-MT) introduced the hearing acknowledging the juxtaposition of the love Montanans have for the rivers plus jobs, agriculture, and tourism and their reliance on oil. “Water is our most sacred resource and oil is our most basic fuel,” he said. Baucus made clear he wants a prompt and complete cleanup stating that ExxonMobil must not only help with the short-term cleanup but ensure a long-term commitment to Montana landowners. He invited Montana citizens to submit comments and stories for the record within two weeks from the hearing date. Though not present at the hearing, Ranking Member James Inhofe (R-OK) submitted an opening statement on the committee website in which he expressed concern about overreactions in the government and the effects it may have on the Keystone pipeline development. The proposed Keystone Gulf Coast Expansion Project is a oil pipeline that would deliver crude oil from Alberta, Canada to the United States. “Unfortunately, I’m afraid that this spill has occasioned some misguided calls against pipelines and oil development.  Already, some politicians have leveraged this spill in opposition to the expansion of the Keystone pipeline which would double the amount of crude we receive from Canada, reducing our imports from overseas,” he wrote.  

Robert Perciasepe testified on behalf of the Environmental Protection Agency (EPA) and gave an overview of the cleanup process. The EPA, which shares responsibility with the U.S. Coast Guard for responding to oil spills, estimates 1,000 barrels of oil were released. They are continuing to hold ExxonMobil accountable, issuing an official Administrative Order to the company under the Clean Water Act. Thus far, they have found no hydrocarbons in the region above the water table and testing shows the drinking water is safe. Perciasepe was encouraged by the effort from Montana citizens in helping with the cleanup process. EPA’s next steps include transitioning from emergency response activities to State-determined cleanup standards. They will be doing so under a process called Shoreline Cleanup Assessment Technique (SCAT).

The second witness, Cynthia Quarterman expressed the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) commitment to mitigate public and environmental safety risks. PHMSA reports that over the past 20 years, they have seen a 28 percent reduction in onshore incidents involving hazardous liquid pipelines. This has resulted in a 57 percent decrease of total barrels spilled. While they are optimistic of the progress made thus far, Quarterman reiterated her concern for the Yellowstone River spill. She assured the committee of PHMSA’s involvement in investigating the incident, but acknowledged limitations because of the continued high water volume in the river.

During questioning of the first panel, Perciasepe hoped the cleanup processes will be concluded by the fall of 2011, as estimated by EPA. Chairman Baucus attempted numerous times to get a better understanding of the standards by which the EPA was working. “We need to know what we are dealing with here, that is, the standard. What is the standard?” He expressed concern for “the average guy who has his place along the river,” and making sure that the general public understands what standards the state, EPA, and ExxonMobil are working towards. Perciasepe mentioned that the human nose is more sensitive than some of the monitors the EPA uses. Therefore, it might be possible for people living in the area to smell odors that the monitors cannot read and do not pose a threat. He stated that ExxonMobil has been providing most of the funding and will have to reimburse any funds EPA uses. Baucus questioned Quarterman about whether PHMSA takes into account the varying physical and hydraulic properties of rivers when determining the correct safety standards and depth of the pipeline below the surface, or depth of cover. The Yellowstone River oil spill may be attributed to an eroding depth of cover of the pipe because of spring flooding. Quaterman responded that companies are responsible for meeting the safety standards and creating a report on the risk of the pipeline. PHMSA’s role is to provide oversight when decisions are made, according to Quaterman. She stated that the accuracy of depth of cover tests might be roughly 6 inches, though she would need to report back with a more accurate number. Baucus replied, “To be honest ma’am, it sounds like you are not really on top of this.” He further expressed dissatisfaction with the work the agency was doing, but blamed ExxonMobil and PHMSA for the problems. Quarterman assured the chairman that PHMSA was working aggressively and diligently.

The second panel of witnesses began with a testimony from Bill Kennedy. Kennedy gave a detailed outline of the response immediately following the leak, which was discovered by the city of Laurel’s emergency personnel. Kennedy testified that ExxonMobil employees responded immediately and began working with the local disaster and emergency personnel. As the cleanup progressed and the EPA and the Montana Department of Environmental Quality became involved, Kennedy noted that “it was very evident that the local government was informed but not involved in decisions involving the next steps.” He stressed the importance of including local government in emergency response decision making. Additionally, Kennedy acknowledged the consequences of the spill, but reiterated that “pipelines are safer than trucking and rail and keep good paying jobs in our community.”        

Gary Pruessing gave his “sincere apologies to the people of Montana” on behalf of his company. ExxonMobil is “steadfastly committed to not only complete the cleanup, but also to build the learning from this incident into our future operations,” he said. ExxonMobil does not yet know the exact cause of the pipeline failure though he did mention they passed and met all regulatory inspections for the pipeline including an inspection in June 2011. As investigations continue, ExxonMobil is working under a Unified Command Center led by EPA. More than 750 people representing industry, government, and volunteer groups are working in the center. Pruessing expressed gratitude for the public servants and volunteers aiding the cleanup efforts. Under the Unified Command, ExxonMobil is closely watching the air and water quality along 200 miles of the Yellowstone River. Pruessing described his company’s commitment to understanding the impact on the local community. The company has established a community information line and they have received about 160 claims as well as 160 offers from the community to help.  

Montana landowner, Scott McBurney, testified about the events of July 1, the effects the oil spill has had on his home, and ExxonMobil’s cleanup response. McBurney’s land is about 140 yards from the Yellowstone River. On the day of the spill, his family was already nervous because of the rising river and the United States Geological Survey’s (USGS) height forecast, which would place stream water levels one vertical foot from the lower level of the house. “I have to say I think the USGS does a really good job with their river forecasts as far as snowmelt is concerned; we use their website a lot,” he said. The river was forecasted to be within one vertical foot of his home level. Once the pipeline breach occurred, oil began to fill his property. “Oily water stood in the ditches and the pasture. The tall uncut hay had acted like a big brush and stopped a lot of the heavy oil, a thick line of oil showed on the edge of the uncut hay,” he described. McBurney then spoke of his experience after the spill. His family contacted ExxonMobil the day following the spill and since then have had several meetings with ExxonMobil and Crawford Co., an insurance company acting on behalf of ExxonMobil, stating “they have always been helpful and more than fair” throughout the cleanup process. As the cleanup progress continues and the long-term effects are better understood, McBurney requested ExxonMobil provide site specific soil and water testing for homeowners to have on record.

During questioning Pruessing gave a detailed timeline of the events of July 1, 2011. This timeline is also given in the written testimony of Quaterman. Pruessing responded to how ExxonMobil was addressing wildlife in the area, which includes daily ground truthing as well as aerial surveillance. He described how portions of oil have evaporated, other portions are biodegrading, and the remaining oil requires cleanup. Pruessing explained the depth of cover surveys they conducted in December 2010 and what further risk assessment studies they conducted in May 2011. Reassuring the committee of his company’s commitment to pipeline safety, Pruessing said ExxonMobil had been closely monitoring the pipeline and had met all testing requirements. McBurney noted one of the challenges is a lack of expertise where agriculture and oil overlap - someone to understand how the oil will affect his hay and land. Pruessing assured him that ExxonMobil would work to find the necessary bridge between the two.
  
Opening statements, witness testimonies, and an archived webcast can be found here.

-EMD

Senate Committee on Energy and Natural Resources Hearing on "The Future of Natural Gas"
July 19, 2011

Witnesses
Howard Gruenspecht
Acting Administrator, Energy Information Administration
Ernest Moniz
Co-Director of MIT Coal Study, Massachusetts Institute of Technology
George J. Biltz
Vice President of Energy and Climate Change, Dow Chemical Company

Committee Members Present
Jeff Bingaman (D-NM), Chairman
Lisa Murkowski (R-AK), Ranking Member
Chris Coons (D-DE)
Joe Manchin III (D-WV)
Mary Landrieu (D-LA)
Mark Udall (D-CO)
Al Franken (D-MN)

The Senate Energy and Natural Resources committee held a hearing on July 19, 2011 regarding the Massachusetts Institute of Technology’s (MIT) Energy Initiative report titled “The Future of Natural Gas.” This study looked at the economics, uncertainty of supply, infrastructure needs, geopolitical implications, global markets, needs for natural gas research and development, and opportunities for capitalizing on natural gas supply. Major findings of the report concluded that there is an abundant supply of low cost natural gas in the world, and natural gas can play a major role in a future carbon-constrained economy.

Chairman Jeff Bingaman (D-NM) said in his opening statement that many factors have contributed to the increasing importance of using natural gas as a resource. Some of these factors are the new applications of technologies like horizontal drilling and hydraulic fracturing, an international focus of reducing greenhouse gases, the reduction of dependence on foreign oil, and the creation of jobs due to domestic manufacturing. Bingaman believes that the U.S. holds a “greatly expanding unconventional gas resource.” He emphasized that the U.S. must provide a transparent and safe approach to well site management in order to manage environmental concerns.

In Ranking Member Lisa Murkowski’s (R-AK) opening statement, she said that natural gas resources have already benefited the nation by creating jobs and growing the nation’s economy. She further commented that “natural gas would move our nation in the right direction in terms of energy security, economic growth, and environmental protection.” In order to achieve the three goals, Murkowski stated that the nation’s resources must be developed responsibly.

Howard Gruenspecht provided in his testimony recent natural gas developments and projections. He also commented on the Energy Information Administration’s (EIA) evaluation of the nation’s natural gas reserves. Much of the focus was on the uncertainties of natural gas. He elaborated on demand uncertainties of natural gas and cost uncertainties related to shale gas production and consumption.

Ernest Moniz provided results published in MIT’s study. He stated that “natural gas would be a ‘bridge’ to a low-carbon future.” Moniz elaborated on the findings of the report. He cautioned that the U.S. needs to look at the economic, security, and political significance of natural gas whereas the international gas trade fails to focus on these matters.

George Biltz stated that Dow Chemical is an energy intensive company by using naphtha, natural gas, and natural gas liquids to make products essential to the nation and believes that U.S. energy policy will be affected greatly by a shift to natural gas. He reminded the committee that natural gas will provide jobs and the production of unconventional gas needs to be done in an environmentally responsible manner. He also said that “a comprehensive and sustainable national energy policy is long overdue. Without an energy policy we are in danger of repeating an over-reliance on natural gas and a return to the price volatility that destroyed American manufacturing jobs in the last decade.”

Many expressed concern that a potential price shock could occur to consumers if natural gas is integrated into a global market. Gruenspecht answered that the EIA has not looked at the effects of the U.S. exporting natural gas but as demand increases it is understood that there will not only be an increase in price but also in domestic jobs. Moniz stated that there is no reasonable concern regarding natural gas price increases as long as natural gas has substitution possibilities like natural gas for transportation, industry, and electricity. Biltz emphasized that the nation would need to balance supply and demand in order to keep prices low.

Murkowski and Mary Landrieu (D-LA) were concerned with the recent New York Times publication of emails leaked from EIA regarding natural gas which portrayed natural gas in a negative light. Both senators stated that the committee relies on the EIA for reliable information and emphasized the importance of EIA being independent and impartial in order for the energy committee to create strong policy. Gruenspecht stated that the EIA did look at the “heavily redacted” article and the EIA found nothing of concern regarding the methodology, data, and analysis. He believes that the EIA is doing a “solid job” in tracking shale gas and reiterated that the EIA “stand[s] behind shale gas.”

Senator Joe Manchin (D-WV) asked the panel what environmental concerns the committee should consider in pursuing natural gas production. Moniz answered that there would need to be tough regulations put in place. He emphasized, in relation to injecting chemicals into wells, that a full disclosure of injected contents should be required. Moniz commented that MIT has not found any evidence of hydraulic fracturing harming the water resources. He said that though there have been problems in the past, nearly half of all of the environmental problems have been because of faulty well completions.

Bingaman mentioned that if the U.S. were to have an ample supply of natural gas for the future, the viability of carbon capture and sequestration (CCS) is brought into question. He asked if CCS would be economically feasible. Biltz answered that CCS is a great way to reduce carbon in regards to coal power plants as demonstrated with the CCS pilot project in West Virginia. Murkowski asked if the committee is doing enough to encourage CCS gas to liquid conversion. Moniz answered that while the market is moving in that direction he feels the processing infrastructure is not there yet.

Bingaman raised concerns over the potential consequences the nation may face with an abundant, cheap, and long lasting resource like the nation has seen with oil. He asked whether these are valid concerns and if a policy needs to be put into place to avoid them. Biltz answered that policies do need to be put into place to manage supply and demand as the nation transitions to a lower carbon future. Moniz commented that natural gas will only work as a bridge when there is strong demand management.

Written testimonies from the witnesses and a documented webcast can be found here.

-VAB

Senate Committee on Energy and Natural Resources Hearing on S. 1160, S. 1108, and S. 1142
July 12, 2011

Witnesses
Panel 1
Steven Chalk
Chief Operating Officer and Acting Deputy Assistant Secretary, U.S. Department of Energy

Panel 2
Douglas Dougherty
President and CEO, The Geothermal Exchange Organization
Holly Gordon
Vice President, Legislative and Regulatory Affairs, SunRun Inc.

Committee Members Present
Jeff Bingaman, Chairman (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
Al Franken (D-MN)
Bernard Sanders (I-VT)

On July 12, 2011 the Senate Committee on Energy and Natural Resources held a hearing regarding the Department of Energy Administration Improvement Act of 2011 (S. 1160), the 10 Million Solar Roofs Act of 2011 (S. 1108), and the Geothermal Exploration and Technology Act of 2011 (S. 1142).

Chairman Jeff Bingaman (D-NM) briefly introduced the hearing, welcoming the witnesses and stating his sponsorship of S. 1160 and co-sponsorship of S. 1108. Ranking member Lisa Murkowski (R-AK) submitted an opening remark for the record, though she was not available to give her statement at the beginning of the hearing. Bernard Sanders (I-VT), who introduced S. 1108, spoke of the progress that has already been made to reduce “hard costs” of solar energy (such as materials and infrastructure), yet pointed out how installation fees for solar units, “soft costs,” have not been reduced. Sanders pressed the need for simpler permitting, which would allow for an easier implementation of ten million solar roofs by the end of the decade. He stressed the importance of installing more solar and geothermal energy sources in order to keep up with production in countries such as Germany and China.

In his testimony, Steven Chalk stated the Department of Energy (DOE) had not fully reviewed the bills and did not have an official stance on them. Nevertheless, Chalk spoke of the DOE’s SunShot Initiative scheduled to be implemented in 2012. “In addition to investing in improvements in cell technologies and manufacturing, the SunShot Initiative also focuses on steps to reduce installation and permitting costs,” which Chalk told the committee, “account for 40 percent of the total installed system price of solar electricity.” Additionally, DOE is making efforts to standardize local permitting under the “Race to the Rooftop” challenge. Chalk stated the efforts of these programs “are similar to the challenge grant provision in the 10 Million Solar Roofs Act, which calls for applicants to develop best practices for solar permitting.” He continued, “The proposed legislation, S. 1108, employs a bottom-up approach so that local teams can identify approaches best-suited for them.” Regarding geothermal energy, Chalk expressed disappointment in how slow the development of geothermal power has been. “Despite geothermal’s enormous potential, in 2010, only 15 megawatts of new geothermal power generation was added to the grid in the United States.” He said the main challenges towards increasing geothermal production are the high costs and risk involved in exploration and that the hydrothermal resources that have been identified are already developed.

During questioning, Bingaman mentioned that other countries are using geothermal energy to reduce natural gas consumption for heating and cooling of buildings. He stated that replacement of natural gas is a more compelling argument than simply adding wattage to total energy use. Bingaman asked how much focus the DOE was putting in to expanding geothermal production in residences and commercial facilities. Chalk stated the DOE, under the American Recovery and Reinvestment Act (P.L. 111-5), is investing $62 million in geothermal heat pumps for large buildings, universities, and local government buildings. The DOE, he stated, is in the beginning stages of expanding geothermal use for residential buildings. Upfront costs of installing geothermal units can be up to three times the cost of traditional air source heat pumps. Additionally, retrofitting houses can be problematic for residents if problems arise with the pumps. With traditional air source heat pumps, the pump can be fixed and accessed within hours. Due to geothermal pumps being underground, the timeline for repair is much longer. Currently, the most effective and plausible option is to install geothermal units for larger buildings.

Though DOE is investing in geothermal energy, Senator Al Franken (D-MN) emphasized the importance of private sector investment. He wondered if there was a model already in place for private investing in which the geothermal units would pay for themselves. Chalk responded that geothermal units have high upfront costs, but that in five to six years (20 years for smaller scale units) the units would pay for themselves. In response to questioning from Sanders, Chalk described that the role of government reform would be to decrease those costs by increasing the scale at which geothermal energy is produced.

In the second panel of witnesses, Douglas Dougherty testified that geothermal energy results in 44 to 72 percent fewer total emissions. He described geothermal energy as a “fully scalable technology” and that despite the proven efficiency, there is a less than five percent market penetration. Other benefits from geothermal energy are the constant temperatures of the fluid running through the pump (40 to 75 degrees year round) and the longevity of the system. “A conventional air source heat pump struggles to scavenge heat from freezing winter air or dump it into the summer swelter,” he said. The benefits are known, but challenges remain. Some of the challenges he stated for greater production are lack of public awareness, lack of a “home” within DOE, and high upfront costs. Dougherty stressed he would like to see a set position within DOE for geothermal energy. Additionally, he estimated more than 100,000 jobs could be created by 2017 with the expansion of the geothermal industry to ten times its current production (to one million installations). He continued, S. 1142 will help us reach this goal by making geothermal heat pumps more affordable and further demonstrating the efficiency of the technology in large scale projects.”

In her testimony, Holly Gordon focused on the importance of reducing the cost of solar installation. She cited Germany, France, and Japan as countries that have waived permitting fees for installation. She stressed the importance of creating a national expedited installation process and reducing unnecessary red tape.

Ranking Member Murkowski spoke briefly during questioning, stating support for geothermal exploration. “Geothermal is one of our most promising sources of renewable energy,” she said. “This bill [S. 1142] will spur investment in geothermal, further expanding its market share to allow the United States to remain a world leader in development of geothermal technology.” She cited that Iceland generates 80 percent of its heating from geothermal sources and consumers pay an average cost of $35 per month on heating. She questioned what could be done to lower upfront costs in the United States. Dougherty stated that better drilling equipment and better loop designs would reduce costs and he stressed the need for more research. Murkowski asked about the potential for developing geothermal energy in colder climates such as Alaska. He noted that Sweden, which has a 90 percent market penetration of geothermal energy, and Canada are effectively using geothermal energy in colder climates.

Though the witnesses focused on improving research and increasing production of solar and geothermal energy, they stressed the importance of an expedited permitting and installation process. Franken stated that while development is important, it would seem more logical to create a standardized process before increasing production. Gordon described the current installation process for solar roofs. Typically, the installer must wait all day until the inspector comes, after which installation can begin. The process is lengthy, and involves much waiting which generates an unpleasant experience for the customer. Gordon stressed the importance of improving the customer experience in order to increase the demand for renewable sources of energy such as solar roofs.

Witness testimonies and an archived webcast can be found here.

-EMD

House Committee on Natural Resources Subcommittee on Energy and Mineral Resources and House Committee on Agriculture Subcommittee on Conservation, Energy and Forestry Joint Subcommittee Oversight Hearing on "Challenges Facing Domestic Oil and Gas Development: Review of Bureau of Land Management/U.S. Forest Service Ban on Horizontal Drilling on Federal Lands"
July 8, 2011

Witnesses
Panel 1
The Honorable Bob Abbey
Director, Bureau of Land Management
The Honorable Joel Holtrop
Deputy Chief, U.S. Forest Service
Accompanied By:
Tony Ferguson
Director, Minerals and Geology Management, U.S. Forest Service
Maureen Hyzer
Forest Supervisor, George Washington and Jefferson National Forests, U.S. Forest Service

Panel 2
Maureen Matsen
Deputy Director of Natural Resources and Senior Advisor on Energy, Commonwealth of Virginia
David Miller
Standards Director, American Petroleum Institute
Lee Fuller
Vice President of Government Relations, Independent Petroleum Association of America
Craig Mayer
General Counsel, Pennsylvania General Energy Company, L.L.C.
Kate Wofford
Executive Director, Shenandoah Valley Network
Amy Mall
Senior Policy Analyst, Natural Resources Defense Council

Subcommittee Members Present
Doug Lamborn, Energy and Mineral Resources Subcommittee Chairman (R-CO)
Glenn Thompson, Conservation, Energy, and Forestry Subcommittee Chairman (R-PA)
Rush Holt, Energy and Mineral Resources Subcommittee Ranking Member (D-NJ)
Tim Holden, Conservation, Energy, and Forestry Subcommittee Ranking Member (D-PA)
Edward Markey, Natural Resources Committee Ranking Member (D-MA)
John Fleming (R-LA)
Chuck Fleischmann (R-TN)
Bill Flores (R-TX)
John Duncan, Jr. (R-TN)
Scott Tipton (R-CO)
Randy Hultgren (R-IL)
David Rivera (R-FL)
John Sarbanes (D-MD)
Jim Costa (D-CA)

On July 8, 2011 the House Committee on Natural Resources Subcommittee on Energy and Mineral Resources and House Committee on Agriculture Subcommittee on Conservation, Energy and Forestry held a joint subcommittee oversight hearing to discuss the future of oil and gas development on federal lands.  The hearing was held in response to recent activities of the U.S. Forest Service and the Bureau of Land Management (BLM).  In early June, the U.S. Forest Service put forth a draft plan that would ban horizontal drilling in the George Washington National Forest while the BLM has recently held hearings to review policies for hydraulic fracturing on federal lands in the western United States.

Energy and Mineral Resources Subcommittee Chairman Doug Lamborn (R-CO) focused his opening statement on the impact that a ban on horizontal drilling on federal lands would have on jobs and energy security.  Representative Glenn Thompson (R-PA), chairman of the Subcommittee on Conservation, Energy, and Forestry, reiterated these concerns in his opening statement.  Representative Rush Holt (D-NJ), ranking member of the Energy and Mineral Resources Subcommittee, expressed dismay at the title of the hearing which he felt implied that the administration had banned horizontal drilling on all federal lands when the ban would actually apply only to the George Washington National Forest.  “Distortion in the title of today’s hearing makes me wonder how grounded in evidence this discussion will be,” said Holt.  Representative Ed Markey (D-MA) focused his opening statement on the detrimental environmental impacts of hydraulic fracturing, explaining that the process could eventually turn portions of the forest into “lifeless dunes.”

Bob Abbey of the BLM and Joel Holtrop of the U.S. Forest Service both emphasized in their opening statements that their organizations have no plans to ban horizontal drilling on federal lands.  Abbey explained that the BLM supports energy development, adding that 2010 was the second most productive year in history for natural gas development under the BLM.  Holtrop stressed in his testimony that the U.S. Forest Service draft plan is site specific and does not represent a broader policy of prohibiting horizontal drilling on federal lands.

Representatives John Fleming (R-LA), Bill Flores (R-TX), and Scott Tipton (R-CO) focused their questions on proving that hydraulic fracturing does not detrimentally impact human health or the environment.  Both Fleming and Tipton said that wells are far deeper than the water table and the numerous layers of casing make the process safe.  Fleming asked why there is suddenly concern about drilling in the George Washington National Forest where it has been done for 60 years and Flores asked why horizontal drilling was specifically being targeted.  Tony Ferguson, director of Minerals and Geology Management at the U.S. Forest Service, explained that vertical drilling has occurred in the forest for decades but horizontal drilling would be new to the area.  Flores responded that horizontal drilling has less of an environmental impact than vertical drilling and concluded that, “This ban is the wrong thing to do.” 

Representative John Sarbanes (D-MD) and Holt were encouraging of the BLM and U.S. Forest Service activities.  Sarbanes noted, “I don’t want the audience to go away thinking that your deliberate, careful approach isn’t supported.”  Holt cited an incident where hydraulic fracturing fluid with radioactive material was sent to a sewage facility that could not remove it and asked the witnesses to strongly pursue the issue and revise regulatory plans to ensure that radioactive waste is accounted for.

On the second panel, Maureen Matsen, David Miller, Lee Fuller, and Craig Mayer harshly criticized the activities of the U.S. Forest Service and the BLM.  Matsen said in her testimony that the ban would be detrimental to the effective collaboration between the commonwealth of Virginia and the two agencies. Miller explained that the American Petroleum Institute’s well standards are stringent and protect water resources.  Fuller called the activities unjustified and added that they “[target] long-standing, well regarded technologies.”  Mayer stated that the U.S. Forest Service does not have the authority to ban horizontal drilling in the George Washington National Forest, adding that the move is “aggressively attacking industry.”  He said that the agency is purposely evading federal law by trying to “grant itself regulatory authority.”  Kate Wofford and Amy Mall discussed the impacts of horizontal drilling on rural communities and the environment.  Wofford, whose organization works to support farmers and the local governments in the Shenandoah Valley, explained in her testimony that communities in the area have reservations about drilling and that they are grateful that the draft plan has addressed their concerns.  Mall’s testimony stressed the need for more research on the effects of the process on water resources.

Holt focused his questions on the impact that horizontal drilling would have on agriculture, the biggest source of income in Virginia.  He explained that three of the five largest agricultural communities that would be impacted have announced opposition to horizontal drilling in the George Washington National Forest.  He asked Matsen if she disagreed with their concerns.  Matsen responded that her organization agrees with their desire to proceed with caution but does not support a ban.  Fleming asked Wofford if she had survey information to support this claim that communities were opposed to horizontal drilling.  She responded that she was confident that the statements of public officials have reflected community opinions.  Fleming was not satisfied with this, responding, “I don’t want to know what you’re confident about, I want data.” Flores asked Wofford what community members in the Shenandoah Valley are most concerned about with horizontal drilling.  Wofford explained that clean water is a major issue but the main concerns are about the whole process including exploration, wastewater treatment, and heavy truck traffic.

Written witness testimonies, an archived webcast, and other information can be found here.

-LMH

House Committee on Science, Space, and Technology Subcommittee on Energy and Environment Hearing on "Hitting the Ethanol Blend Wall: Examining the Science on E15”
July 7, 2011

Witnesses
Margo Oge
Director, Office of Transportation and Air Quality, U.S. Environmental Protection Agency
Bob Greco
Group Director, Downstream and Industry Operations, American Petroleum Institute
Heather White
Chief of Staff and General Counsel, Environmental Working Group
Jeff Wasil
Emissions Certification Engineer, Evinrude Outboard Motors
Mike Brown
President, National Chicken Council
W. Steven Burke
President and CEO, Biofuels Center of North Carolina
Ron Sahu
Technical Consultant, Outdoor Power Equipment Institute

Subcommittee Members Present
Andy Harris, Chairman (R-MD)
Brad Miller, Ranking Member (D-NC)
Paul Broun (R-GA)
Paul Tonko (D-NY)
Steven Palazzo (R-MS)
Chuck Fleischmann (R-TN)

Committee Members Present
Ralph Hall, Chairman (R-TX)
Jim Sensenbrenner (R-WI)

The House Committee on Science, Space, and Technology Subcommittee on Energy and Environment held a hearing on July 7, 2011 on “Hitting the Ethanol Blend Wall: Examining the Science on E15.”In his opening statement, Subcommittee Chairman Andy Harris (R-MD) stated the purpose of the hearing was to evaluate the validity of the science behind the Environmental Protection Agency’s (EPA) decision in granting a partial waiver of the Clean Air Act for the use of fuel blends containing up to 15 percent ethanol (“E15”). He expressed concern for the potential harmful impacts on the vast amount of car, boat, motorcycle, tractor, and lawnmower engines that might use E15 if it is introduced to the market. Many engines are only capable of handling E10 fuels. Ranking Member Brad Miller (D-NC) was concerned by the fact that the Department of Energy (DOE), which conducted most of research in question, was not represented by a witness on the panel. Miller wished the committee had been more patient and allowed for more time before holding the hearing in order for DOE to be represented.

In her testimony which supported EPA’s decision, Margo Oge stated the EPA’s “waiver record is extensive and strong.” She gave detailed explanations of the tests the E15 waiver went through and the role of the EPA in setting emission standards. Oge stated that a number of additional steps must still be reached before E15 will be on the market though some of these steps are outside of the EPA’s control. In his testimony, Bob Greco reported that “E15 blends increase the oxygen content of gasoline by 50%, well outside the range for which US vehicles and engines have been designed and warranted.” The American Petroleum Institute (API) has concerns for the EPA’s new fuels tagging system. He warned the committee of the negative impacts on consumers if they are not able to understand the E15 label and the effects of the fuel on engines not suitable for E15. Greco explained the cylinder head, which costs about $3,500 to replace, may be adversely affected. Additionally, studies are being conducted on the effects of ethanol blends, such as E15, on the durability of other parts like fuel pumps that come in contact with E15.

Heather White stated in her testimony that “this nation’s biofuels policy is on the wrong path.” She disagreed with EPA’s decision to waive the Clean Air Act and allow for E15 to move forward in the markets. She added that many engines are not suitable for E15 intake, “Yet the ethanol industry, thirsting for bigger markets and more sales, has pressed hard to add E15 to the entire automobile fuel supply, arguing without basis that increased ethanol content in gasoline would somehow foster American energy independence.”

In his testimony, Jeff Wasil argued “it is a bad idea for the US Environmental Protection Agency to allow an increase in the volume of ethanol in gasoline.” He expressed concern for the millions of consumers who would be adversely affected by using the incorrect fuel type for their engines, as many engines are not made for anything greater than E10. Wassil stated that engines using ethanol blends run hotter, which creates concerns for the durability of engines as well as increased emissions of Nitrogen Oxides of hydrocarbons. Mike Brown stated in his testimony his concern for how the ethanol industry has been able to operate under government subsidies, protected from market competition. Contrasting most of the other witnesses, Steven Burke provided examples in his testimony of how the Biofuels Center of North Carolina is forging ahead with non-corn based ethanol. Ron Sahu, in his testimony, stated that “unequivocally, the answer is that millions of products including most non-road engines and equipment will sustain a range of damage if the ethanol content of gasoline is increased to 15 percent.”

The committee’s questions focused on the impact the sale of E15 would have on car repair warranties. Miller expressed additional concerns for incorporating all pertaining parties to the hearing record. He asked for a letter from the ethanol industry to be incorporated, just as the petroleum industry had its voice heard. White stated the importance of investing in fuels that do not require new pump systems at gas stations, like E15 would require. Burke emphasized the importance of merging technologic and economic thinking.

Full testimonies and an archived webcast can be found on the committee web site.

-EMD

House Natural Resources Subcommittee on National Parks, Forests, and Public Lands on “H.R. 2170, H.R. 2171, H.R. 2172, and H.R. 2173”
June 23, 2011

Witnesses
Panel 1
Mike Pool
Deputy Director, Bureau of Land Management
Accompanied By:
Walter Cruickshank
Deputy Director, Bureau of Ocean Energy Management, Regulation and Enforcement
Joel Holtrop
Deputy Chief, U.S. Forest Service

Panel 2
P.J.  Dougherty
Vice President, Helios Strategies
Chris Taylor
Chief Development Officer, Element Power
Testifying on behalf of the American Wind Energy Association
Paul Thomsen
Director of Policy and Business Development, Ormat Technologies, Inc.
Chase Huntley
Director, Renewable Energy Policy, The Wilderness Society
Jim Lyons
Senior Director, Renewable Energy, Defenders of Wildlife

Committee Members Present
Doug Lamborn, Chairman (R-CO)
Rush Holt, Ranking Member (D-NJ)
Kristi Noem (R-SD)
Chuck Fleischmann (R-TN)
Glenn Thompson (R-PA)
Paul Gosar (R-AZ)
Bill Johnson (R-OH)
Raúl Labrador (R-ID)
Jeff Landry (R-LA)

Full Committee Members Present
Doc Hastings (R-WA), Chairman of Full Committee
Edward Markey (D-MA), Ranking Member of Full Committee

On June 14, 2011, Natural Resources Committee Chairman Doc Hastings (R-WA) and Representatives Raúl Labrador (R-ID), Kristi Noem (R-SD), and Rob Wittman (R-VA) introduced four bills to expand renewable energy production and create jobs. The renewable energy bills were reviewed in the subcommittee on June 23, 2011.

Hastings’ bill, Cutting Federal Red Tape to Facilitate Renewable Energy Act (H.R. 2170), would reduce the number of years it takes to develop renewable energy projects on federal lands and waters. The Exploring for Geothermal Energy on Federal Lands Act (H.R. 2171) introduced by Labrador would establish a new policy for the development of clean geothermal energy resources. Noem introduced the bill, Utilizing America’s Federal Lands for Wind Energy Act (H.R. 2172), which will streamline the process to test and develop onshore wind power on Bureau of Land Management and U.S. Forest Service lands. Advancing Offshore Wind Production Act (H.R. 2173), sponsored by Wittman would increase the production of renewable energy by allowing the Bureau of Ocean Energy Management (BOEM) to develop offshore wind power.

Chairman Doug Lamborn’s (R-CO) opening statement said that federal rules and regulations are slowing down, stalling, or destroying critical renewable energy projects. He believes the U.S. needs to streamline projects where Congress will “keep the full review process when there are real environmental concerns, but when there are none, the federal government should be able to give a waiver to the states to speed up start times on construction projects.” Lamborn commented that the development of renewable energy on federal lands holds great promise, potentially bringing a $1 trillion boost to the economy and supporting two million new jobs.

In his opening statement, Ranking Member Rush Holt (D-NJ) expressed opposition to these bills stating that they eliminate public comment and would lead to more lawsuits if the bills became law. He would like two bills introduced by Democrats (H.R. 2176 and H.R. 2196) to be included in the package of renewable energy bills. These proposed bills would funnel money back into the states and the percentage of renewable energy the federal government is allowed to purchase would be limited. Edward Markey (D-MA) the Ranking Member of the Full Committee agreed with Holt and said the four bills in consideration are a recipe for more lawsuits.

In Hastings’ opening statement, he stated that the biggest obstacle to renewable energy production is the federal government and these four bills are taking steps to correct this. He believes that energy diversity is essential to any long term energy policy whether it is oil and natural gas or wind, solar, and hydropower.

Though the Department of the Interior considers onshore and offshore renewable energy a priority, the Bureau of Land Management (BLM) opposed all four bills. Mike Pool told the committee that H.R. 2170 reduces the analysis of challenging issues to a “yes-or-no” answer which may force agencies to make a decision that is not in the best interest for taxpayers. H.R. 2171 and H.R. 2172 are inconsistent with the National Environmental Policy Act (42 USC 4321). These bills do not contain exemptions for extraordinary circumstances. H.R. 2173 was opposed because it conflicts with the Outer Continental Shelf Lands Act (43 USC 1331) and the 30 day time frame is not sufficient for public review, engineering safety reviews, and meetings with consultants and other agencies.

In his testimony, Joel Holtrop stated that the Forest Service cannot support these bills. The exclusion of surveying areas in H.R. 2171 and H.R. 2172 will have negative impacts to the surrounding areas of the renewable energy projects.

In the questioning period, Lamborn and Chuck Fleischmann (R-TN) wanted to know how often BLM is sued. Pool answered that BLM is less prone to litigation when it works upfront with individuals. This method creates a greater amount of understanding for the public and shows the public that BLM values their input. The government would be less prone to litigation if the lines of communication are open. Lamborn then asked how many of the nine solar projects BLM is in the process of starting are under construction. Pool answered that four are under construction.
 
Holt asked the representatives of the Forest Service and BLM how many categorical exclusions (CXs) had been issued since fiscal year 2008. These CXs are a category of actions which do not have a significant effect on the human environment. Holtrop answered that all 15 of Forest Service’s wind projects are CXs and Pool said that the Forest Service has issued 149 CXs.

Markey stated that the 30 day decision period proposed in these bills is too short of a time frame to make sound decisions on potential renewable energy projects being developed on public lands. He asked Pool if any geothermal projects might be developed around Yellowstone. Pool answered that any project being developed around Yellowstone would be carefully considered. Markey then suggested that these four bills could possibly “kill Old Faithful” if they became laws.

Labrador asked Pool whether any lands adjacent to Yellowstone are or would be leased. To Pool’s knowledge no lands are leased or would be leased. Labrador reiterated his bill would not “kill Old Faithful” because the BLM will not lease lands around Yellowstone.

In the second panel of witnesses, P.J. Dougherty offered modifications to H.R. 2171 and H.R. 2172 in his testimony. He approved of H.R. 2173 but fears that H.R. 2170 will lead to lawsuits. Chris Taylor testified that he would like CXs to be included in H.R. 2172. In regard to H.R. 2170, Taylor was concerned that more projects would be denied because there is no leeway for special considerations of any projects.. Paul Thomsen offered some modifications regarding geothermal activity in H.R. 2171. Chris Huntley said in his testimony that The Wilderness Society is opposed to all four bills because the bills are “not needed to accelerate renewable energy development on public lands and development.” The society feels that shortchanging environmental concerns would actually delay projects by spurring litigation. In Jim Lyons’ testimony, he said he does not believe that the four bills “are needed or would help, nor do [the bills] address the real roadblocks to clean energy development.”

During questioning, the second panel did agree that they would like to see predictability and consistency in the process of establishing renewable resources on public lands. In doing so, companies will consistently know how long the process to get a renewable resource project approved will take. Companies will be more likely to propose projects when they know how long the process will take.

Written testimonies from the witnesses, a documented webcast, and other information can be found here.

-VAB

House Committee on Energy and Commerce, Subcommittee on Energy and Power Hearing on H.R. 2054, the “Energy Enrichment Act of 2011”
June 13, 2011

Witnesses
Panel 1
Mitch McConnell (R-KY)
Senate Minority Leader

Panel 2
Gene Aloise
Director of Natural Resources and Environment, Government Accountability Office
Daniel Poneman
Deputy Secretary of Energy, U.S. Department of Energy

Panel 3
Jim Key
Vice President, United Steelworkers Local 550
Herman Potter
President, United Steelworkers Local 689

Committee Members Present
Ed Whitfield (R-KY), Chairman
Bobby Rush (D-IL), Ranking Member
Greg Walden (R-OR)
David McKinley (R-WV)

Full Committee Members Present
Henry Waxman (D-CA), Ranking Member of Full Committee

The House Committee on Energy and Commerce Subcommittee on Energy and Power held a hearing on June 13, 2011 to discuss the Energy and Revenue Enrichment Act of 2011 (H.R. 2054). A pilot program is proposed in this act to reenrich the canisters of DUF6 (depleted uranium hexafluoride). Furthermore, the sales of the reenrichment canisters, commonly known as “tails,” will provide revenue to the Uranium Decontamination and Decommissioning (D&D) Fund for environmental cleanup.

In Chairman Ed Whitfield’s (R-KY) opening statement, he introduced his bill H.R. 2054 which initiates this two-year pilot program. He stated that there are 40,000 14-ton canisters in Paducah, Kentucky and 20,000 in Piketon, Ohio. He feels this pilot program once initiated will give the Department of Energy (DOE) the time it needs to assess the situation at these two locations. Whitfield later directed attention to an image depicting uranium tail canisters. He explained that the earliest canisters have been at Paducah for 60 years and cleaning up the material in the safest way possible has long been an issue for the state.

Ranking Member Bobby Rush (D-IL) said in his opening statement that he expects this bill to pass through the committee in a bipartisan manner. He stated that this hearing is in response to a letter written in March asking DOE to update its report from 2008 on their options for dealing with these tails.

In his opening statement, Ranking Member of the Full Committee Henry Waxman (D-CA) expressed his concerns about DOE’s potential to enter into a “sole source contract” with the United States Enrichment Corporation (USEC). DOE has the authority to do so, but Waxman was not convinced that “this action is best drafted to yield the best deal for the American taxpayer.”

Senator Mitch McConnell (R-KY) began his testimony by stating that the Paducah plant has supplied America’s defense and commercial nuclear reactors for 60 years and is the only domestic plant enriching uranium today. He further stated that DOE has “shortchanged cleanup efforts at this site” for many years. In 2007, the House inquired about DOE’s plans for depleted uranium and McConnell pointed out that DOE still does not have a plan that includes Paducah. McConnell is especially concerned because the 60,000 tails are exposed to many weather conditions that could potentially cause health, safety, and environmental risks. McConnell is troubled by the potential closure of the Paducah plant eliminating 1,200 jobs at this site and adversely impacting the economy of western Kentucky.

Gene Aloise, the Director of Natural Resources and Environment at the Government Accountability Office (GAO), started the second panel of witnesses with his testimony. Aloise stated that GAO estimates DOE’s tails to be at a value of $4.2 billion, but pointed out this estimate is very sensitive to changing uranium prices. Aloise commented that the government has the potential to obtain money from these tails, which were once considered a liability. Daniel Poneman, Deputy Secretary of Energy, explained in his opening remarks that the funding needed to reenrich the tails is currently not supported by the President’s budget. DOE is concerned that the bill will complicate its mission of maintaining sufficient uranium inventories at all times to meet the missions of the department. Poneman commented that much has been invested in this resource and stated that DOE is willing to optimize the interests set forth by both parties. Rush asked if the bill were to go forward what would be the benefits for the taxpayer. Poneman answered that the optimal taxpayer value would come from a competitive bid.

Greg Walden (R-OR) asked whether DOE has the authority to move forward on the GAO report. Poneman answered that there are different views on the GAO report and there is some conflict in authority. Aloise responded that GAO thinks DOE does not have the authority to sell the tails “as is” while DOE thinks they do. Poneman and Aloise agreed this would be an easy fix in legislation and that Whitfield’s bill does not fix this issue.

Waxman posed many questions as to whether DOE is given the discretion or is mandated to enter into a contract proposed by this bill. He feels that forcing DOE to enter into this contract without much leverage to negotiate does not hold the best interest of the American taxpayers. Poneman agrees with Waxman that there is discrepancy in the bill on this subject.

Representative David McKinley (R-WV) was very interested in DOE’s “concrete plans” in dealing with the issues at Paducah. Poneman responded that DOE has requirements and obligations to the nation’s security and to the D&D fund at Portsmouth, OH. DOE is willing to work with the committee in order to optimize the value of the tails for taxpayers, Poneman told McKinley. Poneman reiterated that DOE is not fully supportive of the bill; however, he told the committee the department is in support of assisting the taxpayers while also protecting the environment.

In the third panel, Jim Key and Herman Potter expressed support for the legislation in their testimonies. Key in his testimony  said that this bill is the best opportunity to extend jobs when employment around the country is low. Potter voiced in his testimony the many concerns the United Steelworkers Local 689 had. The major concern is the return on revenues to complete the “funding of the retirement and health benefits [for the employees] at the Paducah and Piketon sites” while also supporting the D&D fund.

When both individuals were asked about the possibility of legislation opening up the tails for competitive bid, Key suggested the possibility of an outside company doing the business when the Paducah employees could do it, and Potter expressed that the funds may not be funneled back to the company. The two men agreed that if criteria restricting USEC were agreed upon beforehand, then USEC would live up to their obligations if the legislation were to go forward.

Written testimonies from the chair and witnesses, a webcast, and other information can be found here.

-VAB

Senate Committee on Energy and Natural Resources Hearing on Nuclear Energy Related Legislation
June 7, 2011

 

Witnesses
Panel 1

John Kelly
Deputy Assistant Secretary for Nuclear Reactor Technologies, U.S. Department of Energy
Steven Chalk
Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, U.S. Department of Energy

 

Panel 2

Edwin Lyman

Senior Scientist, Union of Concerned Scientist

Joe Colvin

President, American Nuclear Society

James Bartis

Senior Policy Researcher, RAND Corporation

Brian Siu

Policy Analyst, Natural Resources Defense Council

 

Committee Members Present
Jeff Bingaman, Chairman (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
John Barrasso (R-WY)

Al Franken (D-MN)

Mary Landrieu (D-LA)

Joe Manchin (D-WV)

Jeanne Shaheen (D-NH)


On June 7, 2011 the Senate Committee on Energy and Natural Resources held a hearing regarding bills S.512, the Nuclear Power 2021 Act; S.937, the American Alternative Fuels Act of 2011; and S.1067, the Nuclear Energy Research Initiative Improvement Act of 2011. 

 

Chairman Jeff Bingaman (D-NM) began the hearing with a brief statement naming the three bills on the agenda as well indicating that topics such as the Clean Air Act and other pollution issues are beyond the jurisdiction of the committee.

Senator Lisa Murkowski (R-AK), ranking member, provided an overview of the benefits and possibilities small modular reactors (SMRs) could provide. These benefits include smaller up-front costs, safer power levels, as well as the ability to incrementally add capacity to the reactors. As the price per barrel of petroleum hovers around $100 she stressed the importance of S.937, which reduces regulations for alternative energy by repealing Section 526 of the Energy Independence and Security Act of 2007 (42 USC 17001). Section 526 states that emissions from alternative fuel sources must be less than or equal to the emissions from equivalent conventional petroleum sources.

In the first testimony, John Kelly gave insight into the possibilities SMRs could provide for the United States. He stated that SMRs are “inspiring American innovation” and could become a great way to replace the aging fossil fuel plants. Due to their smaller size, SMRs can be stored underground which lowers their seismic risks. In his testimony, Steven Chalk emphasized the transportation sector’s goals. He expressed the need for improvements within the sector and is hopeful of the President’s goal to cut U.S. fuel imports by a third by 2025. Additionally, he stressed the importance of more efficient cars and trucks. Chalk provided background on domestic biofuels and stressed the business opportunities these present, especially for rural areas. Chalk’s hope is for the U.S. to lead the “21st century green economy.”

During the question and answer period, Bingaman raised concerns about a feasible timeline for the Department of Energy (DOE) to implement SMR’s, especially as other countries are increasing their developments. Kelly stated that within a decade he foresees American light water nuclear plants to be operating fully. Kelly believed development in other countries is not likely to occur at a faster rate due to extensive licensing processes overseas. Tensions grew as Senator Landrieu pressed for a realistic timeline in which some of the technologies would be fully operational. Further frustrations arose regarding whose responsibility, industry’s or DOE’s, it is to take the lead in development of technologies and implementation of such. 

Bingaman disapproved of the triple credits algae based biofuels would receive relative to other developments in S.937. Senator Franken additionally expressed some concern for the high emphasis algae based fuels would receive.

Contrasting the first panel, the second panel presented objections to reducing regulations in order to speed up the process of developing nuclear power. During his testimony, Edwin Lyman argued against easing regulations in light of the Fukushima events. Joe Colvin stated support for S.512 and S.1067, arguing these would bring about job growth and long term development in the country. In his testimony, James Bartis argued for greater emphasis on development and extraction of oil shale, notably in Western Colorado and Eastern Utah, stating that the potential yield is triple the oil reserves of Saudi Arabia. Bartis also supported continuing our nation’s coal development. Additionally, he regretted the loss of biodiversity and water contamination with biofuels. Bartis urged Congress to focus on the final outcome rather than taking a resource specific approach, which might limit diversification. Brian Siu expressed support of Section 526 in the final testimony, stressing the importance of safety and maintaining the regulations set forth in Energy Policy of 2005 (42 USC 15801).

A short period of questioning followed the testimonies, emphasizing the importance of preparing for the worst case scenarios and any natural hazards that might affect the reactors.

Testimonies from the witnesses, as well as a video webcast are available on the committee website.

-EMD

House Committee on Natural Resources Subcommittee on Energy and Mineral Resources Hearing on Alaskan Oil and Gas Resources
June 2, 2011

Witnesses
Dan Sullivan
Commissioner, Alaska Department of Natural Resources
Richard Glenn
Executive Vice President, Arctic Slope Regional Corporation
David T. Lawrence
Executive Vice President Exploration , Shell Energy Resources Company
Cynthia Quarterman
Administrator, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation

Subcommittee Members Present
Doug Lamborn, Chairman (R-CO)
Rush Holt, Ranking Member (D-NJ)
Paul Broun (R-GA)
John Fleming (R-LA)
Jeff Landry (R-LA)
David Rivera (R-FL)
Jeff Duncan (R-SC)
Bill Johnson (R-OH)
Bill Flores (R-TX)
John Sarbanes (D-MD)

Full Committee Members Present
Doc Hastings, Chairman (R-WA)
Don Young (R-AK)

Concerns about the permitting process for offshore petroleum development in Alaska led the Subcommittee on Energy and Mineral Resources to hold a hearing on June 2, 2011 to discuss infrastructure related to oil and gas resources.

In his opening statement, subcommittee Chairman Doug Lamborn (R-CO) emphasized Alaska’s integral role in the nation’s energy production with at least 27 billion barrels of oil and 132 trillion cubic feet of natural gas available offshore. He stressed Alaska’s importance with respect to energy security and decreasing foreign energy dependence as well as its implications for the growth of the national economy. Lamborn noted that “There are few more egregious examples of bureaucratic red tape stifling development of our domestic resources than the problem facing oil and gas developers in NPRA [National Petroleum Reserve, Alaska] today.” Natural Resources Committee Chairman Doc Hastings (R-WA) reiterated these points in his opening statement. Ranking Member Rush Holt (D-NJ), in his opening remarks, agreed that petroleum is important to our national economy but emphasized the need to look at the bigger picture. He pointed out that Alaska is on the “front line” of climate change impacts and cited the BP oil spill of April 2010 as an example of the need for a sufficient permitting process. Holt noted that we have already reached peak oil and that it is time to begin exploring alternative sources of energy.
                                                                                    
In his testimony, Dan Sullivan, Commissioner of the Alaska Department of Natural Resources expressed anger that federal government policies have “shifted from helping the environment to shutting down resource development.” Richard Glenn, a native Alaskan and Vice President of the Arctic Slope Regional Corporation explained in his opening remarks that his culture depends on a clean environment but that development of coal, natural gas, and oil is critical to the survival of his community. He emphasized that the environment has fared well with this development and that industry has brought schools and infrastructure. In his testimony, David Lawrence of Shell Energy Resources Company complained that the government’s permitting and regulation process was undermining his company’s confidence in the system. Lawrence, Glenn and Sullivan emphasized that the Trans-Alaska Pipeline System (TAPS) faces an uncertain future if oil production does not commence soon—as decreased flow could cause the pipeline to shut down. In her testimony, Administrator of the Pipeline and Hazardous Materials Safety Administration Cynthia Quarterman countered that safety is her group’s number one priority and an enormous responsibility.

During the question and answer period, Lamborn inquired about the slow permitting process. Lawrence explained that before drilling a well in Alaska his company had already invested $3.7 billion to prepare multiple permits needed to approve the drilling. He explained that these permits have been denied for a wide variety of reasons from where measurements were taken to incomplete studies. Lamborn asked Glenn if, as a Native Alaskan, wildlife in his home region had been negatively impacted by petroleum development. Glenn responded that the area still teemed with wildlife offshore and on land.

In his questioning, Holt cited President Obama’s Oil Spill Commission report which concluded that scientific understanding of petroleum reserves in the Arctic is inadequate and that deaths in the petroleum industry in the United States are four times greater than in Europe. Sullivan countered that understanding is adequate and that drilling is necessary to save the culture of native Alaskans. Representative Don Young (R-AK) fumed that the report was “false” and that it was “hard to listen to someone talking about something that they don’t know anything about,” with reference to Holt. Holt addressed Sullivan’s assertion that TAPS would fall into disrepair without significant oil production by asking Quarterman if there is any other way that the pipeline could maintain function. She stated that doing so was quite possible by heating the pipeline or other measures. Representative John Sarbanes (D-MD) added in response to Young’s statements that he had not seen any evidence that government agencies are against oil and gas development but instead advocate safe development.

Several issues came up frequently in the statements and questions of the Republican representatives, including energy security, job creation, energy independence, and high gas prices. Hastings noted that delays in oil and gas exploration in the Arctic, which he blamed on the Obama administration, undermined national energy security and energy independence. Representative Jeff Landry (R-LA) expressed dissatisfaction with the extensive government regulations, stating to the Alaskan witness, “You know how to protect your home better than I do.” Representative Jeff Duncan (R-SC) countered Holt’s statement that the European petroleum drilling industry was better regulated, arguing that our country does not want European gas prices, which, he added, are around $10 per gallon. He noted that energy production is the second largest revenue producer in the United States, second only to borrowing and thus it is critical that the government does everything possible to facilitate drilling rather than hinder it. Representative John Fleming (R-LA) emphasized that the United States has more coal, oil, and natural gas than any other country in the world. He explained that the U.S. Geological Survey has found in recent years that there are significant mineral and oil resources waiting to be extracted throughout the country. He asked Lawrence if the reason that the government has stalled drilling development is due to a lack of competence or a fundamental disagreement on whether drilling should be occurring. Lawrence responded that it was due to a lack of coordination between government agencies. Fleming concluded that this signified incompetence. Representative David Rivera (R-FL) expressed dismay that TAPS would have to be dismantled due to decreased flow.

Written testimony, text of the legislation, opening remarks and an archived webcast is available from the subcommittee hearing summary page.

-LMH

Senate Committee on Energy and Natural Resources
Hearing to Receive Testimony on the U.S. Department of Energy's Budget for Fiscal Year 2012

February 16, 2011

Witnesses
The Honorable Steven Chu
Secretary of Energy, U.S. Department of Energy

Committee Members
Jeff Bingaman, Chair (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
Ron Wyden (D-OR)
Al Franken (D-MN)
Mike Lee (R-UT)
Daniel Coats (R-IN)
Jeanne Shaheen (D-NH)
Joe Manchin (D-WV)
John Hoeven (R-ND)
Mark Udall (D-CO)
Christopher Coons (D-DE)
Rob Portman (R-OH)
Bernard Sanders (I-VT)
Mary Landrieu (D-LA)
Tim Johnson (D-SD)
Debbie Stabenow (D-MI)
John Barrasso (R-WY)
James Risch (R-ID)

The Senate Committee on Energy and Natural Resources received testimony from Secretary of Energy Steven Chu on the fiscal year 2012 budget for the U.S. Department of Energy (DOE) on February 16, 2011.

Chairman Jeff Bingaman (D-NM) applauded President Obama on a DOE budget request that he called a “strong statement that energy is a priority for his administration” and explained that he thinks it was compiled with significant fiscal restraint. Despite being pleased with the increased investments in clean energy, Bingaman was concerned with the decrease in fossil fuels research, noting that advances must be made on technologies that make fossil fuels cleaner, such as carbon capture and natural gas development.

Ranking Member Lisa Murkowski (R-AK) questioned the need for an increased DOE budget in her opening statement. “I share the desire to promote clean energy technologies, but given the urgent need to make tough budget decisions we need to draw a distinction between the programs we want to fund and the programs we need to fund,” she explained.

Secretary Chu said that the country must “rev up the great American innovation machine” to meet President Obama’s challenge to out-innovate, out-compete and out-build the global competition. The President’s budget request would increase total DOE spending by 11.8 percent more than the level appropriated for FY 2010, to a total of $29.5 billion. According to Chu, the FY 2012 budget proposes to lead the global energy race by investing heavily in clean energy technologies and supporting groundbreaking science through increased funding for the Office of Science and the Advanced Research Projects Agency – Energy (ARPA-E). In addition, $11.8 billion would be directed to the National Nuclear Security Administration (NNSA) for nuclear security issues. These investments come at the expense of others, admitted Chu; funding would be reduced for the Fossil Energy program and the Hydrogen Technology program.

Chairman Bingaman asked Chu to describe the three new proposed Energy Innovation Hubs, which would double the current number of hubs. One hub would focus on battery technology research, another would look at ways to strengthen fossil fuel energy capacity and storage as a back up to alternative energies, and the third would study critical materials, such as rare earth elements (REEs), Chu explained.

A few members were concerned with the varying support the budget allocates to energy resources. Ranking Member Murkowski noted that the request proposes plenty of funding for wind, biofuels, solar and geothermal technologies, while money proposed for hydropower and nuclear would be decreased. “The Administration is clearly picking those winners and picking those losers,” she argued. Senator John Hoeven (R-ND) echoed this concern. Chu defended DOE’s decisions, saying that the department must differentiate between mature technologies and those just getting off the ground

Several senators expressed their support for ARPA-E. Al Franken (D-MN) mentioned the House proposed continuing resolution that would drastically cut funding for the program. “It would be a very significant setback,” Chu acknowledged, adding that the program helps spur private sector growth when companies invest money given to them by the government at a ratio of four dollars invested to every one dollar of government support.

Senator Rob Portman (R-OH) asked Chu what plans DOE has for securing sources of enriched uranium. “We also have the view that the U.S. should have in-country technology” to supply the mineral used for nuclear power and that such a supply is important to national security, Chu responded. Chu gave no specific plans for ensuring a uranium supply except that DOE is “focusing on the next generation of technologies” in enrichment.

Another topic mentioned a few times was technology related to clean coal and carbon capture. Senator John Barrasso (R-WY) noted that the budget has a 26 percent decrease for clean coal investments. Chu recognized this but pointed out that DOE gave $4 billion to clean coal research and development from the 2009 Recovery Act. Chu later told Senator Joe Manchin (D-WV) that the National Academy of Sciences (NAS) published a report in 2009 on making liquid fuels by combining biomass and coal and that the prospect is promising.

Others thought the budget does not address certain concerns at hand. “We’ve got immediate problems in this country,” said Senator James Risch (R-ID), referring to rising gas prices and the effect the budget could have on them. Chu claimed that investments in alternatives to fossil fuel and energy efficiency could decrease the use and demand of oil in the U.S. and bring the price down. Senator Daniel Coats (R-IN) said that he does not agree with the budget increases and told Chu “it’s likely you’ll be called on to do more with less.”

Testimonies from the chair, Ranking Member and witness, as well as an archived webcast can be found here.

-DLT

House Committee on Energy and Commerce Subcommittee on Energy and Power
Hearing on "H.R. ___: the Energy and Tax Prevention Act of 2011"

February 9, 2011

Witnesses
Panel 1
The Honorable James Inhofe
U.S. Senator, State of Oklahoma

Panel 2
Ms. Lisa Jackson
Administrator, Environmental Protection Agency

Panel 3
Mr. Greg Abbott
Attorney General, State of Texas
Mr. Harry C. Alford
President & CEO, National Black Chamber of Commerce
Mr. Steve Rowlan
General Manager, Environmental Affairs, Nucor Corporation
Mr. James Pearce
Director of Manufacturing, FMC Corporation
Mr. Steve Cousins
Vice President, Lions Oil Company
Mr. Lonnie N. Carter
President and CEO, Santee Cooper
Ms. Betsey Blaisdell
Senior Manager of Environmental Stewardship, The Timberland Company

Panel 4
Mr. Peter S. Glaser
Partner, Troutman Sanders LLP
Dr. Margo Thorning
Senior Vice President and Chief Economist, American Council for Capital Formation
Mr. Philip Nelson
President, Illinois Farm Bureau
Mr. Fred T. Harnack
General Manager, Environmental Affairs, US Steel Corporation
Mr. James N. Goldstene
Executive Officer, California Air Resources Board
Dr. Lynn R. Goldman
American Public Health Association

Subcommittee Members Present
Ed Whitfield (R-KY), Chair
Bobby Rush (D-IL), Ranking Member
Fred Upton (R-MI)
Joe Barton (R-TX)
Henry Waxman (D-CA)
Jay Inslee (D-WA)
John Sullivan (R-OK)
Edward Markey (D-MA)
Greg Walden (R-OR)
Lois Capps (D-CA)
Lee Terry (R-NE)
Gene Green (D-TX)
Eliot Engel (D-NY)
Steve Scalise (R-LA)
Michael Doyle (D-PA)
Pete Olson (R-TX)
Jim Matheson (D-UT)
David McKinley (R-WV)
Cory Gardner (R-CO)
John Shimkus (R-IL)
Michael Burgess (R-TX)
John Dingell (D-MI)

Setting the stage for a showdown between one of the most vocal climate change skeptics and the Environmental Protection Agency (EPA) administrator trying to limit its effects, the House Subcommittee on Energy and Power held a legislative hearing on “H.R. ___, the Energy Tax Prevention Act of 2011” on February 9, 2011 to discuss legislation that attempts to block the EPA from regulating greenhouse gas (GHG) emissions under the Clean Air Act (CAA).

In January 2011 EPA enacted new rules to regulate GHG emissions from the largest stationary sources, such as power plants and refineries. Subcommittee Chairman Ed Whitfield (R-KY) and Committee Chair Fred Upton (R-MI) introduced draft legislation called the “Energy Tax Prevention Act of 2011” on February 2. The bill has not been officially submitted to Congress so the draft does not have a bill number yet.  Senator James Inhofe (R-OK) is a cosponsor of the bill. The act would add new sections to the CAA that would expressly define GHG to be excluded from regulation; prohibit EPA from regulating GHG due to climate change concerns; and clarify that GHG do not qualify as air pollutants under the CAA.

Chairman Whitfield said that the proposed act will “restore the proper balance” in government in regards to regulating GHG in his opening statement. He argued that “Congress has made its will crystal clear on this issue,” and mentioned that it declined to sign the Kyoto protocol in 1997 and failed to pass a cap and trade bill on emissions in the 111th Congress. Despite these actions, he said, EPA and the courts are “pushing the United States down a path that in my opinion will cost jobs and make us less competitive in the global market place.”

“I really have a bone to pick,” announced Ranking Member Bobby Rush (D-IL) in his opening remarks. The majority party resisted inviting Lisa Jackson, Administrator of the Environmental Protection Agency (EPA), and only did so after much persuasion, he claimed. Rush expressed his disapproval of the act, saying it would take away EPA’s authority under the CAA to preserve environmental quality, protect human health and promote energy efficiency. Furthermore, it would overturn a 2007 Supreme Court decision that said carbon dioxide qualifies as an air pollutant under the CAA and that EPA has the right to regulate carbon dioxide under the CAA if it made an endangerment finding.

Chairman Upton described the EPA regulations as an attempt to achieve the goals of a cap and trade program through different methods. He expressed concern that the EPA’s new regulations will reduce jobs and burden industry, making fossil fuels expensive. He claimed that his draft legislation will “protect jobs and preserve the intent of the Clean Air Act” as states could continue to regulate without national standards.

Henry Waxman (D-CA), Ranking Member of the Committee, was extremely concerned with the legislation’s lack of regard for science. The act would overturn the endangerment finding by EPA with support from the National Science Foundation and essentially says that carbon emissions are not a threat to public health or welfare, he said. “Mr. Chairman, you and the new Republican majority have a lot of power to write our nation’s laws, but you do not have the power to rewrite the laws of nature,” he exclaimed. “History will not judge this Committee kindly if we become the last bastion of the polluter and the science-denier,” Waxman predicted.

Inhofe’s testimony focused on his claim that the science of global warming, climate change, and the human-induced causes is mixed. “This scandal could very well be the greatest scandal in science,” he said. Regardless of whether climate change is proven, the regulations would not affect overall global carbon dioxide levels, he stipulated. The regulations would cost billions of dollars a year, destroy jobs and make fossil fuels more expensive, negatively affecting America’s economy, according to Inhofe. “We have to run this machine called America, and we can’t do it without fossil fuels,” he said.

Waxman described the position of the National Academy of Sciences (NAS) that states that “climate change is occurring and is caused largely by human activities” and listed several other scientific societies, including the American Geophysical Union (AGU), that echo this stance. He said that 13 federal agencies, including the National Aeronautics and Space Administration (NASA), the National Science Foundation (NSF) and the Department of Defense (DOD) have said that climate change is largely human induced. After mentioning that Inhofe is an economist and not a scientist by trade, Waxman said that the subcommittee should hold hearings on the science behind the legislation before it is introduced.

Representative Jay Inslee (D-WA) supported Waxman’s statements. “We are not listening to the scientists,” he cautioned. The NSF, members of the Intergovernmental  Panel on Climate Change (IPCC), doctors and other medically trained scientific professionals are warning that climate change poses a real health problem, he said.

Lisa Jackson described the legislation as part of a broader effort in Congress to delay, weaken or limit actions under the CAA. The CAA saves lives, prevents medical visits, decreases cases of respiratory illnesses, and lessens the number of sick days employees take, according to Jackson. The NAS and 18 leading societies have determined climate change to be largely caused by human activity, and the bill would repeal that scientific finding, she said. A report released by the University of Massachusetts found that the regulations would create 1.5 million jobs over the next five years. Jackson cited several companies’ approval of the regulations and said they would promote oil savings through efficiency.

Each side had their different arguments concerning the possible effects of the regulations. Those that support the draft legislation say the additional burden will cause job loss. Upton cited findings that Michigan would lose jobs and GDP because of the regulations and said he is worried about net decrease in jobs and outsourcing because of increased manufacturing costs. On the other hand, Ms. Jackson cited that over the time the CAA has been in effect, pollution has decreased 60% and the economy has grown 200%. Others claimed the push for efficiency could spark innovation and then construction and utility jobs. It is possible to grow the economy in the midst of regulations, according to Inslee. He expressed his faith in Americans to “innovate our way out of this pickle.”

Proponents of the draft bill argue that it does not change the overall intent of the CAA and that EPA was never intended to regulate GHG. Joe Barton (R-TX) went over the six criteria pollutants named in the CAA and said that none of them are affected by the proposed act. A few members said that Congress has the jurisdiction to regulate GHG. Congress has an obligation to clarify what the CAA regulates, said Barton. “I share your concern with carbon” but regulation needs to be done on the legislative side, said Representative Green.

Other supporters of the bill were worried about the complications it could cause by allowing multiple entities at the state and national level to regulate GHG. “You’re going to have a holy complicated mess,” said Representative John Dingell (D-MI).

Opponents of the legislation say that the bill ignores the science and tries to interfere with what is widely accepted among scientists all over the world: that climate change is occurring and that it is largely caused by human activity.

Representative Edward Markey (D-MA) posed another argument against the legislation. The bill would bar EPA from taking further action to reduce oil usage and therefore reduce demand, he said. In essence, the bill could actually increase dependence on foreign oil in the U.S., according to Markey.

An archived webcast, testimony from the witnesses and committee members and other information can be found here.

-DLT

Senate Committee on Energy and Natural Resources
Hearing on the Energy and Oil Market Outlook for 2011

February 3, 2011

Witnesses
The Honorable Richard Newell
Administrator, Energy Information Administration
Ambassador Richard H. Jones
Deputy Executive Director, International Energy Agency
Roger Diwan
Partner and Head of Financial Advisory, PFC Energy
Mr. Jim Burkhard
Managing Director, Cambridge Energy Research Associates

Committee Members Present
Jeff Bingaman, Chair (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
Ron Wyden (D-OR)
Al Franken (D-MN)
Mike Lee (R-UT)
Daniel Coats (R-IN)
Jeanne Shaheen (D-NH)
Joe Manchin (D-WV)
John Hoeven (R-ND)
Mark Udall (D-CO)
Christopher Coons (D-DE)
Rob Portman (R-OH)

The Senate Committee on Energy and Natural Resources held a hearing on the Energy and Oil Market Outlook on February 3, 2011.

Chairman Jeff Bingaman (D-NM) opened by saying that he hopes that increased vehicle efficiency, usage of biofuels and domestic oil and gas production will lessen U.S. dependence on foreign oil, creating national and economic security benefits. Ranking Member Lisa Murkowski (R-AK) stressed the importance of developing America’s fossil fuel sources, such as largely untouched offshore resources in Alaska and shale plays in the Rocky Mountains. “Over the years our lands have been locked up,” she asserted, and called for the U.S. government to allow more development. Though she claims never to have denied the need for greater energy efficiency and investments in cleaner energy alternatives, Murkowski said she is “interested in what we can achieve today, not just tomorrow.”

Richard Newell testified for the Energy Information Administration (EIA), who released a report on global energy forecasts through 2035 based on current laws and policies. Worldwide energy consumption is expected to increase by 49 percent by 2035, with rapidly developing countries like China and India accounting for most of the increase, according to the report. Fossil fuels will continue to supply the bulk of the world’s energy, with a reliance on oil from countries in the Organization of the Petroleum Exporting Countries (OPEC). U.S. oil consumption will increase, but at a slower growth rate than previously predicted. The decreased rate is attributed to recent fuel efficiency standards and mandates, Newell remarked. Dependence on imported liquid fuels is projected to decline, as it has been since 2005. This is due to the increased domestic production of liquid natural gas and biofuels and the amount of technically recoverable shale gas resources in the U.S., said Newell.

Richard Jones, a former diplomat, discussed the views of the International Energy Agency (IEA) on the global energy outlook based on its World Energy Outlook, released in November 2010. Since September 2010, international oil prices have increased by more than 25 percent, he said. However, signs that there is a sufficient supply of oil could help stabilize prices in 2011. Natural gas production and development of ‘unconventional’ sources of gas in the U.S. has led to a sharp drop in the need to import gas and has sparked interest in the resource around the world, according to the IEA. Energy supply needs to become more diverse and varied to improve energy security, economic development and environmental protection in the U.S., Jones declared. The IEA notes three things that could change the energy outlook: a strong push for energy efficiency; ‘decarbonization’ of electricity generation; and advances in vehicle technology.

Financial advisor Roger Diwan discussed the economics behind the energy outlook. He said that today there is no tension in the oil market and that there will be “unbalanced demand” in the future as China, India and other Asian countries need more and more energy. High oil prices are showing an effect on energy supply, he said, and could potentially rise enough to encourage investment in new areas. For example, natural gas and biofuels have gained in supply as competition to crude oil.

Jim Burkhard of Cambridge Energy Research Associates spoke of the overall increasing global energy demands, largely related to China’s and India’s stunning increases in GDP per capita. The cost of developing an oil field doubled from 2005 to 2008, and he too mentioned that rising oil prices may foster innovation and energy efficiency.

Natural gas production and its potential in the U.S. has had a significant effect on projections of oil prices, demand and import levels, according to the witnesses. American levels of imported liquid fuels peaked in 2005 and are expected to continue to decrease as liquid fuel production of natural gas and biofuels increases, said Newell. Bingaman asked what effect the success of natural gas development will have on renewable energy proliferation. Because natural gas is a relatively cheaper and less polluting fuel, the market will continue to favor it over renewables, Newell responded.

New committee member John Hoeven (R-ND) noted recent technology advances in the drilling industry that have made development of unconventional natural gas sources possible. In a way then, technology helps lower gas prices, he said. “How can Congress foster such technology development, and what kind of regulatory environment are companies looking for?” he asked. First of all, the market drives technology investment, Newell answered. It was high oil prices that led companies to explore the option of natural gas as an economic alternative to crude oil, explained Diwan. In the entrepreneurial sector, the combination of experimentation and research, resources and people led to the technologic breakthrough in gas production to “break the code” in that field, he elaborated. Creating clear, consistent policies that are technology neutral and take into account the development stage of technologies is the best way for Congress to approach encouraging innovation, Jones suggested.

Senator Al Franken (D-MN) asked what factors can help the renewables energy sector to grow, and how Mr. Jones proposes accomplishing the three goals the IEA set forth. Renewable energy growth could evolve differently from projections if the cost of renewables decreases or certain tax credits and incentives on wind and solar development do not expire. Carbon capture and storage (CCS) has the potential to help ‘decarbonize’ electricity generation by using it at coal-fired power plants, said Jones. The IEA advocates a broad spectrum of energy sources, and encourages countries to choose solutions that make the most sense for their situations, whether it is nuclear energy, renewables or CCS.

Hoeven (R-ND) requested suggestions from the witnesses on what actions Congress could take to improve the energy outlook in general and stimulate energy production in the U.S. across all fields—biofuels, natural gas, wind, nuclear, solar or coal. Enacting standards for fuel efficiency is the cheapest and largely most effective way to reduce energy demand in the U.S., according to Diwan. Ensuring a diverse energy supply is key to a secure energy future, Burkhard answered, and he suggested a multidimensional policy approach that considers supply and demand factors. The regulatory framework for energy policy should look at long term energy predictions and allow diversification, Diwan agreed.

A few witnesses mentioned that the recent disruptions in the Middle East, especially in Egypt, do not look like they will have an effect on the overall supply, demand and price of oil, and the recent spike is only temporary. Still, civil unrest is common in several countries that supply oil to the U.S., said Murkowski. Senator Joe Manchin (D-WV) echoed her call that less dependence on foreign oil can increase national security, and he further advocated West Virginia’s coal production as essential to domestic energy supply.

Testimony from the witnesses, opening statements and an archived webcast of the hearing can be found here.

-DLT

Senate Committee on Energy and Natural Resources
Hearing on the National Oil Spill Commission Report

January 26, 2011

Witnesses
The Honorable Bob Graham
Co-Chair, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling
The Honorable William K. Reilly
Co-Chair, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

Committee Members Present
Jeff Bingaman, Chairman (D-NM)
Lisa Murkowski, Ranking Member (R-AK)
Ron Wyden (D-OR)
John Barrasso (R-WY)
Mark Udall (D-CO)
Mary Landrieu (D-LA)
Maria Cantwell (D-WA)
Jeanne Shaheen (D-NH)

The Senate Committee on Energy and Natural Resources held a hearing on January 26, 2011 to review the final report by the National Oil Spill Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. The Oil Spill Commission (OSC) released Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling on January 11, 2011.

In his opening statement, Chairman Jeff Bingaman (D-NM) thanked the committee for their efforts. He addressed the tragic nature of the oil spill and the need to address the aftermath, saying “this is not just a Louisiana problem. This is America’s problem.” While he stressed the importance of enhancing safety systems, Bingaman said that “no one can doubt the need to continue to produce domestic oil and gas.”

Ranking Member Lisa Murkowski (R-AK) began her statement announcing a goal for the committee to ensure three things: that no victim of a spill ever goes uncompensated; that taxpayers are never held responsible for a company’s damages; and that choices are made to preserve and promote the offshore industry. She discussed the negative impact of the administration’s moratorium on offshore drilling on industry workers and the economy, noting that the economies of Louisiana and Alaska are similarly dependent on tourism, the seafood industry and oil and gas development.

OSC Co-Chair Bob Graham went over the commission’s findings regarding response and containment efforts, emphasizing the overall lack of preparedness from the industry and the government, and discussed suggestions for long-term restoration of the Gulf of Mexico. Graham said Congress should administer eighty percent of the fees collected from Clean Water Act penalties for Gulf restoration. “These resources...belong to all of us. They belong to the American people,” said Graham.

Fellow Co-Chair William Reilly discussed the proposed restructuring of the Bureau of Ocean Energy, Management, Regulation and Enforcement (BOEMRE) and the safety suggestions from the commission, including the creation of an industry-run safety agency. He spoke of the need for international agreements and discussions on offshore safety with countries like Mexico and Cuba, who work in the Gulf, and Russia and Denmark, who plan to drill in the Arctic.

Though the commission recommends funding the additional regulatory procedures with portions of fees that drilling companies pay for federal leases and from new fees that could be imposed, Senator Mary Landrieu (D-LA) cautioned against allocating more fees. She suggested that instead funds be taken from the $7 billion a year the industry contributes to the treasury in royalties, bonuses and severance taxes.

Several senators expressed concern about the ability to have a productive oil and gas offshore drilling industry in the midst of stricter standards and new requirements. Landrieu lamented that no deepwater drilling permits have been issued since the accident and stressed the issue of “getting people back to work.” Senators John Barrasso (R-WY) and Mark Udall (D-CO) declared their disapproval of a moratorium on offshore drilling. “Shutting down oil and gas operations would be a wrong choice,” said Barrasso. Reilly assured the committee that the commission is against a blanket moratorium, supports investing in Arctic development and understands the importance of the oil and gas industry. “We vitally need the resources of offshore oil and gas,” he said.

Graham highlighted the fact that the commission wants future decisions to be “rooted in the best science.” Senator Maria Cantwell (D-WA) asked how the National Oceanic and Atmospheric Administration (NOAA) will give input on environmental considerations concerning leasing decisions. Graham explained that with past onshore and shallow water drilling projects, the areas have been largely well understood, but in deepwater, the geology and pressure can vary from place to place significantly. NOAA can help “bring to bear the best science within and outside the government to make decisions”, according to Graham. In response to Senator Jeanne Shaheen’s (D-NH) comments on oil spill research, the witnesses discussed a few areas that should be explored. Instead of undertaking ‘crisis research’, ‘anticipatory research’ focusing on what information will be needed five to ten years from now should be the goal, according to Graham. Such unknowns that need clarifying are the fate of dispersants, especially in cold Arctic waters, and the impacts of the spill on Gulf wildlife such as blue fin tuna.

The witnesses urged that it would be a shame to let years go by without acheiving progress in research, restoration and technology development. Udall agreed that the tragedy could be looked at as an opportunity to spur restoration in the Gulf and follow up on research ideas and said he plans to introduce legislation to expand research and development in the federal and private realms.

Testimony from the chair, ranking member and panelists can be found here, as well as a video archive of the entire hearing. 

-DLT

House Committee on Natural Resources
Hearing on the National Oil Spill Commission Report

January 26, 2011

Witnesses
The Honorable Bob Graham
Co-Chair, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling
The Honorable William K. Reilly
Co-Chair, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

Committee Members Present
Doc Hastings, Chairman (R-WA)
Edward Markey, Ranking Member (D-MA)
John Fleming (R-LA)
Donna Christensen (D-VI)
Steve Southerland (R-FL)
Jeff Denham (R-CA)
Henry E. Brown, Jr. (R-SC)
John Sarbanes (D-MD)
Mike Coffman (R-CO)
Ben Lujan (D-NM)
Tom McClintock (R-CA)
Chuck Fleischmann (R-TN)
Dan Boren (D-OK)
Raul Grijalva (D-AZ)
Doug Lamborn (R-CO)
Frank Pallone (D-NJ)
Don Young (R-AK)
Jeff Landry (R-LA)
David Rivera (R-FL)
Glenn Thompson (R-PA)

The House Committee on Natural Resources held a full committee oversight hearing on "The Final Report from the President's National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling" on January 26, 2011. The National Oil Spill Commission (OSC) relased their final report, Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling, on January 11, 2011.

Chairman Doc Hastings (R-WA) focused on the issue of domestic oil and gas production and its effect on job creation and national security in his opening statement. “The right response to this spill is to focus on making drilling safe, not making it impossible,” he said. Hastings warned that shutting down America’s oil and gas drilling is not the best way to react to the disaster. He said that the committee’s responses to the spill can determine whether the offshore industry can continue to produce “American-made energy” or if the country will “lock up its resources” and increase its dependence on foreign oil.

In his opening statement, Ranking Member Edward Markey (D-MA) stressed that he and the committee must “assess the lessons to be learned with open minds, and commit ourselves to fundamental reform with firm resolve.” He explained that it is a time for bold reforms and that the committee must not miss the opportunity for substantial change.

William Reilly, co-chair of OSC, reviewed the safety and regulatory reforms suggested by the commission. He described the recommended independent safety agency and restructuring of the Bureau of Ocean Energy, Management, Regulation and Enforcement and mentioned the need for international discussion on offshore drilling standards in the Gulf and Arctic with other countries. Reilly explained that the funding needed for reforms is small compared to oil and gas revenues and the cost of the disaster.

OSC co-chair Bob Graham described the overall failure by BP and the federal government to effectively respond to the spill, saying neither group was prepared nor equipped. He stated the commission’s suggestion that Congress provide adequate and sustained funding for oil spill response and research. He charged Congress with the responsibility to dedicate 80 percent of the fines collected for Clean Water Act penalties to Gulf restoration, explaining that since offshore drilling is conducted on public lands, the government acts as landlord and must protect the assets that belong to all Americans.

Several representatives complained that the commission did not wait for test results on the failed blow-out preventer from the Macondo well to publish their report. Reilly defended the commission’s decision and explained that the report describes several other errors and mistakes that led to the accident. “We know enough. We know what happened,” he said.

Democrats and Republicans from states with economies heavily reliant on the oil and gas industry expressed concern over avoiding a moratorium and returning employees to work. “I’m worried about this country,” said Don Young (R-AK) in regards to the ability to develop domestic fossil fuel sources. Reilly assured him that the commission specifically recommends against a drilling moratorium in Alaska, but that research should be done to increase understanding of the area. “In respect to oil and gas, we need the resource,” he said. John Fleming (R-LA) explained that Louisiana has lost jobs since the accident and asked if additional legislation will slow the offshore permitting process. The primary reason for current issuing delays is that drilling companies have not met standards incorporated into permit applications, said Graham. Proper funding is the only way to make progress on the permitting and regulating processes, according to Reilly.

A few representatives addressed the issue of company liability following a spill. Dan Boren (D-OK) asked if the commission had investigated if smaller drilling companies will have difficulty getting insurance plans if there is no cap on liability. The commission has suggested raising the maximum value a company would be required to pay after a spill, but they avoided setting an amount because they did not want to inhibit small business operations and did not consider themselves experts in that category, said the co-chairs.

Graham and Reilly mentioned several times that offshore drilling, compared to onshore and shallow water drilling, is in riskier and less understood areas, with greater pressure and more complex geology. Basic research must be done in preparation for disasters instead of after catastrophe stikes, said Graham. Both witnesses stressed the fact that improvements must be made on spill and containment technologies, noting that virtually no advancement has been achieved in that field since the 1989 Exxon-Valdez oil spill.

Testimony from the chair, ranking member and panelists can be found here, as well as a video archive of the entire hearing. 

-DLT

 

Sources: Hearing testimony.

Contributed by Geoscience Policy Staff; Dana Thomas, AAPG/AGI Spring 2011 Intern; Erica Dalman, Lauren Herwehe, and Victoria Bierwirth, AIPG/AGI Summer 2011 Interns; Erin Camp, AAPG/AGI Fall 2011 Intern; Aaron Rodriguez, AAPG/AGI Spring 2012 Intern, Krista Rybacki, AIPG/AGI Summer 2012 Intern; Nell Hoagland, AIPG/AGI Summer 2012 Intern; Stephen Ginley, AIPG/AGI Summer 2012 Intern; and Kathryn Kynett, AAPG/AGI Fall 2012 Intern.

Please send any comments or requests for information to AGI Geoscience Policy.

Last updated on December 4, 2012