[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
BENEFITS OF AND CHALLENGES TO ENERGY ACCESS IN THE 21ST CENTURY: FUEL
SUPPLY AND ENERGY INFRASTRUCTURE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MARCH 6, 2014
__________
Serial No. 113-124
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
______
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
LEE TERRY, Nebraska GENE GREEN, Texas
MIKE ROGERS, Michigan DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee JANICE D. SCHAKOWSKY, Illinois
Vice Chairman JIM MATHESON, Utah
PHIL GINGREY, Georgia G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington DONNA M. CHRISTENSEN, Virgin
GREGG HARPER, Mississippi Islands
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BILL CASSIDY, Louisiana JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
CORY GARDNER, Colorado BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
_____
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
STEVE SCALISE, Louisiana BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
RALPH M. HALL, Texas JERRY McNERNEY, California
JOHN SHIMKUS, Illinois PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania JOHN A. YARMUTH, Kentucky
LEE TERRY, Nebraska ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas GENE GREEN, Texas
ROBERT E. LATTA, Ohio LOIS CAPPS, California
BILL CASSIDY, Louisiana MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia DORIS O. MATSUI, California
CORY GARDNER, Colorado DONNA M. CHRISTENSEN, Virgin
MIKE POMPEO, Kansas Islands
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN D. DINGELL, Michigan (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio) HENRY A. WAXMAN, California (ex
officio)
(ii)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 2
Hon. Jerry McNerney, a Representative in Congress from the State
of California, opening statement............................... 2
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 64
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 65
Witnesses
Adam Sieminski, Administrator, Energy Information Administration,
Department of Energy........................................... 4
Prepared statement........................................... 6
Answers to submitted questions............................... 210
Donald F. Santa, President and Chief Executive Officer,
Interstate Natural Gas Association of America.................. 65
Prepared statement........................................... 68
Answers to submitted questions............................... 213
Richard R. Roldan, President and Chief Executive Officer,
National Propane Gas Association............................... 75
Prepared statement........................................... 77
Response to Mr. Tonko........................................ 194
Response to Mr. Rush......................................... 202
Answers to submitted questions............................... 216
Andrew Logan, Director, Oil and Gas Industry Programs, Ceres..... 114
Prepared statement........................................... 116
Charles ``Shorty'' Whittington, President, Grammer Industries,
Inc., on Behalf of American Trucking Association, Inc., and
National Tank Truck Carriers................................... 122
Prepared statement........................................... 124
Answers to submitted questions............................... 219
Michael Obeiter, Senior Associate, Climate and Energy Program,
World Resources Institute...................................... 128
Prepared statement........................................... 130
Andrew J. Black, President, Association of Oil Pipe Lines........ 148
Prepared statement........................................... 150
Answers to submitted questions............................... 222
Edward R. Hamberger, President and Chief Executive Officer,
Association of American Railroads.............................. 159
Prepared statement........................................... 161
Answers to submitted questions............................... 229
Submitted Material
Statement, dated March 6, 2014, of Hon. David Loebsack, a
Representative in Congress from the State of Iowa, submitted by
Mr. McNerney................................................... 183
BENEFITS OF AND CHALLENGES TO ENERGY ACCESS IN THE 21ST CENTURY: FUEL
SUPPLY AND ENERGY INFRASTRUCTURE
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THURSDAY, MARCH 6, 2014
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:02 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Scalise,
Shimkus, Pitts, Terry, Latta, Olson, McKinley, Gardner, Pompeo,
Griffith, Barton, Upton (ex officio), Rush, McNerney, Tonko,
Barrow, Christensen, Castor, and Waxman (ex officio).
Staff present: Nick Abraham, Legislative Clerk; Charlotte
Baker, Press Secretary; Sean Bonyun, Communications Director;
Allison Busbee, Policy Coordinator, Energy and Power; Patrick
Currier, Counsel, Energy and Power; Tom Hassenboehler, Chief
Counsel, Energy and Power; Jason Knox, Counsel, Energy and
Power; Mary Neumayr, Senior Energy Counsel; Chris Sarley,
Policy Coordinator, Environment and Economy; Tom Wilbur,
Digital Media Advisor; Alison Cassady, Democratic Senior
Professional Staff Member; Greg Dotson, Democratic Staff
Director, Energy and Environment; and Ryan Skukowski,
Democratic Assistant Clerk.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. I would like to call the hearing to order
this morning, and we have a panel of eight witnesses this
morning, and we look forward to the testimony of all of you,
and your expertise and assistance to the committee. This
morning's hearing is the second in a series entitled ``Benefits
of and Challenges to Energy Access in the 21st Century''. Last
week we focused on access to electricity, and today we want to
turn our attention to fuel supply and infrastructure issues. We
really look forward to this hearing this morning because we
have representatives of the pipeline, railroad, and trucking
industries, as well as others, to give the perspective on what
we need to be doing to make sure that we take advantage of our
current energy opportunities in America.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
North America's oil and natural gas output has been growing
since 2007, and the Energy Information Administration expects
continued increases in the years ahead. This poses a challenge
to the nation's existing energy infrastructure--be it
pipelines, railroads, or trucking. For one thing, this
infrastructure is being called upon to carry more energy than
ever before. For another, most of it does not serve the areas
where energy production is rapidly increasing, such as the oil-
rich Bakken formation in North Dakota and the gas fields in
Pennsylvania.
There is no question that the energy boom is great news for
the U.S. But without an infrastructure boom to match it, the
benefits of our energy abundance will not be fully realized.
Recent events have shown the energy infrastructure to be
under strain. For example, very tight natural gas supplies and
high prices in New England during this very cold winter were
not caused by any actual shortages but by the limited pipeline
capacity serving that region. And the low supplies of propane
that hit my district and many rural areas throughout the
Midwest were attributable in part to the fact that we now have
booming production of crude oil that is competing for space on
trains and trucks with other commodities like propane.
And I might add that the trains in turn are overburdened
with oil in part because oil pipeline capacity has not been
able to expand to keep up with rising production. So each
element of our infrastructure system is interconnected with the
others. Indeed, just as we benefit from energy diversity--coal,
oil, natural gas, nuclear, and renewables--we also benefit from
infrastructure diversity, but only if each mode of transport is
allowed to expand to meet current and future demand.
Unfortunately, the Obama administration has been
considerably less than proactive in addressing our
infrastructure challenges. We are all familiar with the
administration's 5-year-long delay in approving the Keystone XL
pipeline expansion project. And Keystone is indicative of a
larger indifference if not hostility towards infrastructure
upgrades, especially those that carry fossil fuels. I fear that
the Keystone XL delays and other instances of infrastructure
obstructionism may be a part of the administration's climate
agenda.
Compounding Keystone XL and other project delays are
proposed regulatory actions that may make it much harder to
transport oil and other fuels by rail. We need regulations that
facilitate the safe transportation of energy rather than limit
it.
The House is already acting to address several
infrastructure bottlenecks. In addition to passing H.R. 3 to
greenlight Keystone XL, we have also passed H.R. 1900, the
``Natural Gas Permitting Reform Act,'' that would expedite and
streamline future natural gas pipeline approvals. And this
committee has introduced H.R. 3301, the ``North American Energy
Infrastructure Act,'' to reduce unnecessary red tape for
approvals of energy projects that cross the Canadian or Mexican
border and thus help create a more integrated North American
energy infrastructure.
And we continue to consider other measures that would help
give this nation a more robust 21st century energy
infrastructure. I look forward to hearing from representatives
of the pipeline, railroad, and trucking industries as well as
others to give their perspective on what else is needed. Thank
you.
Mr. Whitfield. You didn't even start my time, and I am
already through with my remarks. So at this time I would like
to introduce Mr. McNerney of California for his opening
statement.
OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. McNerney. Thank you, Mr. Chairman, and good morning.
This is our second hearing on energy access, and I think it is
an important topic. As we have seen in New England, we have had
price hikes, gas shortages, and there are other infrastructure
concerns that we need to think about. The good news, of course,
is that we are seeing a tremendous amount of natural gas and
oil production. I think we are the biggest producer in the
world as of last year. Well, the relatively bad news is we
don't quite have the infrastructure to make sure that all of
our potential domestic customers have good access to this
wonderful bounty that we are having, so it is important to hear
from the witnesses this morning.
We need to maximize what resources we have so that we can
improve our manufacturing base. I think that is one of the real
benefits of this, is that we have an opportunity now to regain
our stature as the premier manufacturing center of the world.
And with your all help out here, this is going to happen. So we
want to hear what your thoughts and ideas are on how we can
move forward. There needs to be a partnership between the
Federal government and the local governments, on the one hand,
and industry that is going to make these investments. We have
some complaints about the regulatory process, how long it takes
to get permits, and hearing how we can best move forward while
maintaining public safety is critical.
We need to worry about methane leaks into the atmosphere,
so that means finding the best technology out there to prevent
methane, which is a greenhouse gas. So we want to make sure
that the technology is not only available, but that it is being
implemented properly. And we would need to make sure that there
is continued oversight so that when gas lines, oil lines, get
put in, that they are monitored properly. No one in this panel
benefits when there is a leak, when there is a disaster. And if
we work together in a way that prevents those from happening,
and gets potential bad players out of the market, then everyone
is going to benefit.
We also need to have an environment where investment is
encouraged. And, again, overregulation won't do that, but
under-regulation won't do it either, so we need some strong
public/private partnerships.
And, with that, Mr. Chairman, I am going to yield back. I
believe we have votes called within an hour, so----
Mr. Whitfield. Thank you very much. Mr. Upton is not here,
Mr. Waxman is not here, so if they come in later and want to
make a statement, we will recognize them at that time. But in
the meantime, I am sorry, you are not going to hear any more
from us. We are going to give you all the opportunity to talk.
So, on our panel today, we have Mr. Adam Sieminski, who has
been here before, the administrator over at the U.S. Energy
Information Administration, Mr. Donald Santa, who is the CEO,
president, of the Interstate Natural Gas Association of
America. We have Mr. Richard Roldan, who is president and CEO
of the National Propane Gas Association, Mr. Andrew Logan, who
is the Director of Oil and Gas and Insurance Programs at Ceres.
And we have Mr. ``Shorty'' Whittington, who is president of
Grammer Industries, on behalf of the American Trucking
Association and the National Tank Truck Carriers. We have Mr.
Michael Obeiter, who is with the Climate and Energy Program,
Senior Associate, at the World Resources Institute. We have Mr.
Andrew Black, who is president of the Association of Oil Pipe
Lines. And then we have Mr. Ed Hamberger, who is the president
and CEO of the Association of American Railroads.
So each one of you will be recognized for 5 minutes for
your opening statement. And, as you know, we have the little
boxes, and when it turns red, that means the time is up. If it
is green, you can keep talking. So, Mr. Sieminski, we will
begin with you, and you are recognized for 5 minutes for your
opening statement. And be sure and turn your microphone on.
STATEMENTS OF ADAM SIEMINSKI, ADMINISTRATOR, ENERGY INFORMATION
ADMINISTRATION, DEPARTMENT OF ENERGY; DONALD F. SANTA,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, INTERSTATE NATURAL GAS
ASSOCIATION OF AMERICA; RICHARD R. ROLDAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NATIONAL PROPANE GAS ASSOCIATION; ANDREW
LOGAN, DIRECTOR, OIL AND GAS INDUSTRY PROGRAMS, CERES; CHARLES
``SHORTY'' WHITTINGTON, PRESIDENT, GRAMMER INDUSTRIES, INC., ON
BEHALF OF AMERICAN TRUCKING ASSOCIATION, INC., AND NATIONAL
TANK TRUCK CARRIERS; MICHAEL OBEITER, SENIOR ASSOCIATE, CLIMATE
AND ENERGY PROGRAM, WORLD RESOURCES INSTITUTE; ANDREW J. BLACK,
PRESIDENT, ASSOCIATION OF OIL PIPE LINES; AND EDWARD R.
HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION
OF AMERICAN RAILROADS
STATEMENT OF ADAM SIEMINSKI
Mr. Sieminski. All right. Chairman Whitfield, Mr. McNerney,
members of the committee, thank you for the opportunity to be
here today. As you know, EIA is a statistical and analytical
agency at the Department, and by law our data analyses are
independent of approval by any other office or employee of the
Federal government, so these views should not be construed as
representing those of the Department of Energy or any other
Federal agency.
EIA is providing data and analysis related to the winter
fuels markets. This winter we have been working very closely
with the Department of Energy's energy response organization to
provide critical market information to public officials,
industry, and consumers. This winter's cold weather increased
both consumption and prices of heating fuels nationally. This
winter season has been the coldest since 2002-3, and in the
Midwest the coldest since the winter of 1978-79.
Let me talk a little bit about propane. U.S. propane
supplies hit record highs last year due to increased oil and
natural gas production. With supply growing faster than
domestic demand, the U.S. has become a net exporter of propane
in recent years, although imports have continued to play an
important role, particularly in the upper Midwest and the
Northeast of the United States. Last fall, a record corn
harvest coincided with very wet weather to increase demand for
propane in the Midwest for crop drying. As a result, propane
stocks in the Midwest were at their lowest level for November
since 1996. Stocks were further reduced when cold weather hit
the Midwest in late December and early January.
There are two major hubs for propane in the mid-continent,
Mont Belvieu, Texas, which is really on the Gulf Coast, and
Conway, Kansas, in Central Kansas. Under market conditions that
prevailed from March 2010 to November 2013, prices at Mont
Belvieu were generally above those at Conway, and that provided
a signal for supplies to move towards the Gulf Coast. Most
pipelines between the hubs carry supplies southward. Rail is
the primary mode available to move propane northward from Mont
Belvieu up into Conway.
At the beginning of December, wholesale prices, as reported
by Reuters, were nearly equal at Conway and Mont Belvieu. The
development of extreme propane shortages in the Midwest in
January led to a significant rise in prices at Conway, and that
provided a strong incentive for increased flows back up north
to the Conway hub, and other consuming areas, by a variety of
modes, including trucks. Imports also increased, with more
propane flowing into Minnesota and Michigan via pipelines from
Canada, and additional European tanker cargoes coming into the
Northeast of the United States. Many States declared
emergencies to enable more delivery of propane throughout the
Midwest to both wholesalers and retail customers.
Now I am going to talk just a little bit about natural gas.
Cold weather affected natural gas markets, including new record
high withdrawal of natural gas from storage, and a surge in
natural gas prices. On February 21, storage levels were below
the previous 5-year minimum, and natural gas prices at Henry
hub increased from $4.32 per million BTUs up to as high as
$8.15 on February 10. In contrast to markets for propane and
heating oil, however, where wholesale prices are quickly
reflected in retail prices, electricity and natural gas rates
paid by consumers who receive service through their local
distribution utilities did not immediately reflect the spot
market prices.
New England faces some of the highest and most volatile
spot natural gas prices, reflecting both pipeline capacity
constraints and growth in demand, particularly for electricity
generation. Reductions in imports of liquefied natural gas,
LNG, and Canadian pipeline gas added to the strain on pipelines
serving New England that carried domestically sourced natural
gas.
So natural gas spot prices in New England hit record levels
this winter. Price for the first 50 days of 2014 averaged 50
percent higher than prices during a comparable period in 2013.
Winter spot prices for natural gas in New England were also
higher on average, and more volatile than elsewhere in the
United States, although prices were high all over the U.S. In
fact, EIA released a special report last January, which is
included in my testimony, that talks about this in detail. An
updated analysis for this winter, also included in my
testimony, discusses a number of potential ways to lessen the
impact of limited peak natural gas supply at peak demand
periods, including pipeline expansions, additional fuel
substitution by electric generators and other gas customers,
and ways to save on the demand side.
I am going to end there. Thank you for the opportunity to
testify, and I look forward to answering questions.
[The prepared statement of Mr. Sieminski follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. Thank you very much, Mr. Sieminski. Mr.
Waxman has come in, and we will give him an opportunity to make
his opening statement at this time.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman. I welcome
all of our witnesses today. There is a significant energy
transition underway in the United States, and we are going to
hear today about how we need to modernize our energy
infrastructure in light of this transition. Building a modern
energy infrastructure for the 21st century requires more than
just drilling more wells, laying more pipelines, filling more
rail cars with crude oil, and putting more tanker trucks on our
highway. A modern 21st energy infrastructure isn't modern at
all unless it takes climate change into account.
We have a rapidly diminishing window to act to reduce our
carbon pollution before the catastrophic impacts of climate
change are irreversible. That means that the energy
infrastructure decisions we make today will have a real and
direct impact on whether we can limit climate change in the
future. We need to understand this risk before we lock in
infrastructure that will produce carbon pollution for decades
to come. Every responsible business executive in the country
knows that there will be no certainty in energy policy until we
address climate change.
A modern 21st century infrastructure also needs to be
resilient. Earlier this week the Government Accountability
Office released a report finding that U.S. energy
infrastructure is increasingly vulnerable to a range of climate
change impacts, such as severe weather and sea level rises. We
need to prepare our infrastructure to withstand climate related
disruption. We also need to have an infrastructure that is
efficient, and minimizes waste.
A good example of inefficiency in today's system is
methane. Far too often methane, a potent greenhouse gas, leaks
into the air during the production, processing, and
distribution of oil and natural gas. In North Dakota oil
companies are flaring natural gas as a waste product, rather
than building the infrastructure to get these resources to
market. We need to find solutions to stop this dangerous
pollution and put this gas to productive use.
The future will belong to the country that builds an energy
infrastructure to support a cleaner, low carbon economy. It is
our responsibility to lead the country in that direction.
I appreciate this chance, Mr. Chairman, to make this
statement. I thank the witnesses for being here today, and look
forward to their testimony.
Mr. Whitfield. Thank you, Mr. Waxman. It is my
understanding that Mr. Upton is going to waive his opening
statement?
Mr. Upton. No, I would say just insert it in the record,
but thank you.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
North America's growing oil and natural gas abundance is
easily the best energy news we've had in decades. The benefits
for jobs, energy affordability, and national security are
nothing less than staggering. In fact, a recent study by the
Manhattan Institute finds that virtually all of America's
economic growth in recent years is attributable to the oil and
gas sector, and that without it we would have remained in
recession. And since the energy output is projected to continue
rising, the good news could get even better in the years
ahead--but only if we play our cards right.
But producing more energy is only part of the job. We also
must get it to the businesses and homeowners that need it, and
expanded energy output presents a very significant
infrastructure challenge. But with challenge comes opportunity,
and building this architecture of abundance will create many
jobs. An energy infrastructure expansion is a win-win for
America--more jobs building and running it, and more affordable
and secure energy because of it. The problems we will discuss
at this hearing are good kind of problems to have.
Nonetheless, the Obama administration has been more of a
hindrance than a help, both on energy production and energy
infrastructure. The administration has placed so many energy-
rich Federal lands off limits that a Congressional Research
Service report found that all of the oil and gas increase is
attributable to output from non-Federal lands. And the
administration has been just as unhelpful on energy
infrastructure as it has been on energy production. At this
promising juncture in the nation's energy history, we need an
administration that embraces the architecture of abundance. But
instead, we often get Keystone-style delays and red tape.
Granted, each new pipeline project and other infrastructure
upgrade raises legitimate safety and environmental concerns
that must be addressed. But these concerns should not be used
as an excuse for indefinite delays, as we have seen with
Keystone XL. After all, new infrastructure increases safety.
Our inadequate energy infrastructure is already causing
problems. This winter's regional propane shortage throughout
Michigan and much of the Midwest is a case in point. When the
temperatures dropped and demand grew, there was not enough
infrastructure to transport the propane to the customers who
needed it. In the words of Secretary of Energy Ernest Moniz,
``what we are seeing play out is also just one example of where
our energy infrastructure isn't quite ready for the task that
we have today.'' Michigan has the largest number of propane-
heated households of any State. I take this warning very
seriously and want to look at how this can be avoided in the
future.
I am convinced that we can create a new energy
infrastructure to safely deliver the affordable energy that
businesses and families need. We welcome the task of creating
this architecture of abundance, and Congress must take action
to remove any impediments to further progress.
Mr. Whitfield. Thank you. At this time, Mr. Santa, you are
recognized for 5 minutes for your opening statement.
STATEMENT OF DONALD F. SANTA
Mr. Santa. Good morning, Chairman Upton, Chairman
Whitfield, and Ranking Member Waxman, and members of the
subcommittee. My name is Donald Santa, and I am president and
CEO of the Interstate Natural Gas Association of America, or
INGAA. INGAA represents interstate natural gas transmission
pipeline operators in the U.S. and Canada. Thank you for the
opportunity to share INGAA's views. Our analysis points to the
need for the U.S. to build significant new natural gas
infrastructure. Simply put, we need to keep pace with the
changing natural gas supply and demand picture. Infrastructure
designed to meet the challenges of the past will not
necessarily meet the challenges of the future. Congress can
help in one area, that I will touch upon in a few moments.
I do not have to tell anyone that this has been a demanding
winter. With but extremely few exceptions, there have been no
service disruptions or curtailments for natural gas pipeline
customers who contracted for reliable, firm service. The rare
disruptions were caused by mechanical difficulties, and were
limited only to a day or so. Given the magnitude of the demand
across much of the country, the extreme operating conditions,
and the resulting stress placed on the overall system, the
natural gas transmission pipeline industry's performance has
been remarkable.
This contrasts with what happened in the 1970s. A
combination of government policies at that time discouraged
natural gas supply and infrastructure development. Consumers,
and many of our nation's leaders, believed that the U.S. was
running out of natural gas. This lack of interstate supply and
interconnected infrastructure, coupled with severely, unusually
cold winters in the late 1970s, caused significant natural gas
service disruptions. Schools closed for extended periods, and
some businesses ceased operations until warmer weather arrived.
We have come a long way since then. Congress decontrolled
natural gas well head prices, thus providing an incentive to
explore and produce new natural gas. The Federal Energy
Regulatory Commission restructured the interstate pipeline
sector, unbundling commodity sales from transportation, and
thereby gave pipeline customers the opportunity to realize the
benefits of competition at the well head.
So we have gone from the mistaken impression that the U.S.
was running out of gas to being the world's largest producer of
natural gas. Our robust nationwide pipeline network is the envy
of the world. Most major markets, and all major producing
basins, are connected to multiple pipelines, and as a result,
we have competition among entities that were assumed to be
natural monopolies several decades ago. This phenomenal
transformation of the U.S. energy sector has provided our
country a unique competitive advantage in the global market. No
other country has the combination of abundant natural gas
supply and robust pipeline infrastructure. Additional natural
gas transmission pipelines, however, will be needed to keep
pace with the rapid development of new natural gas resources,
and the increase in natural gas demand.
Two things are necessary to make this infrastructure
development possible. The first is proper market signals for
new capacity. In most regions, this is not a problem. Shippers
sign contracts for proposed firm pipeline capacity, and if
enough capacity is contracted, a pipeline project stands a
reasonable chance of moving forward. Regions with restructured
electricity markets, however, present real challenges. This is
especially the case when such markets are capacity constrained,
and rely heavily on natural gas fired generators. New England
is the prime example.
We have encouraged the regional stakeholders to take steps
that will create such price signals, and recent initiatives
undertaken by New England States' Governors are promising.
Still, the region has far to go in resolving the disconnect
that has caused its consumers to pay such a premium for natural
gas and electricity.
Beyond these market signals, the pipeline permitting
process also much work efficiently. The House has debated
legislation authored by Representative Mike Pompeo to bring
some discipline and accountability to the pipeline permitting
process, and to permitting agencies beyond FERC. We support
this legislation, and hope the Senate will act soon to move it
forward.
This winter has been challenging, but it would have been
far worse without our new domestic natural gas abundance.
Supply is only one side of the coin, however. The other side is
infrastructure, because pipelines make it possible. The
incentives to develop the shale gas, and the opportunities for
consumers to realize its benefits, would not be the same
without our robust, flexible, and expandable natural gas
pipeline network.
Still, we should not assume that the current natural gas
pipeline and storage infrastructure be sufficient to handle
present and future natural gas supply development. Natural gas
has given the U.S. a phenomenal advantage. To realize this
advantage fully, we need to build the infrastructure that will
permit all Americans to benefit from the shale revolution.
I thank the subcommittee for the opportunity to testify.
[The prepared statement of Mr. Santa follows:]
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Mr. Whitfield. Thanks very much. And, Mr. Roldan, you are
recognized for 5 minutes for an opening statement.
STATEMENT OF RICHARD R. ROLDAN
Mr. Roldan. Thank you, Mr. Chairman, and members of the
subcommittee. I am Richard Roldan, president of the National
Propane Gas Association. I appear before you today on behalf of
nearly 3,000 member companies that produce, transport, and sell
propane on both a wholesale and retail basis. By far the
largest segment of our association is made up of retail propane
marketers who provide the fuel to heat nearly six million
American homes. I am going to be brief in my remarks this
morning to save as much time as possible for your questions,
and I ask that my extensive statement be placed in the record.
Mr. Chairman, this is a particularly timely hearing,
considering that propane retailers in several regions of the
country face supply and distribution constraints this winter. I
want to stress that our highest priority is to safely and
reliably serve the nearly six million households that depend on
propane to heat their homes. And I would like to point out that
the vast majority of retail marketers were able to do just
that, despite the significant challenges they faced.
Given the experience of this winter, I believe it is
incumbent upon us, as an industry, to understand the causes and
contributing factors, and to propose concrete practices and
policy recommendations to prevent a recurrence. In our written
statement, we noted the role that cold weather played. The
number of heating degree days this season was 10 percent higher
than the previous year, and 15 percent higher than the year
before that. Last fall's grain harvest came in later, wetter,
and it seemed all at once. This forced farmers to use five
times the amount of propane to dry the grain that was used the
previous year. Altogether, weather driven demand, coupled with
record crop drying usage, resulted in nearly a billion gallons
of additional demand.
Now I would like to point out the role that exports have
played this year. In recent years we transitioned from being a
propane importing country to being a propane exporting country.
Today propane is 100 percent American made. That is offset by
the fact that the U.S. now exports one out of every five
gallons, and those numbers are growing. We believe we need to
review our current export policies with respect to propane, and
consider its effect on consumers and energy reliability.
Finally, Mr. Chairman, I want to alert the subcommittee to
the dramatic transition that is taking place with the fuel
distribution infrastructure in this country. Record production
of crude oil, natural gas, and propane from shale formations is
changing the historical flow of fuels. Pipelines that once
carried propane and other products from the Gulf Coast, where
they were produced, northward are now being reversed to carry
other products toward the Gulf Coast. That, in turn, is place
greater pressure on railroads and highways. I think it is
critical that we understand these changes, and the effects that
they have on consumers.
Mr. Chairman, I would be remiss if I closed without
extending our deep appreciation to the people who helped
stabilize the situation. That includes members of this
subcommittee, as well as other members of Congress. The level
of cooperation between agencies, among Governors of affected
States, and our transportation partners, some of whom are
represented at this witness table, was not less than
extraordinary, and have made a real difference.
I would like to thank in particular the Department of
Energy, the Federal Energy Regulatory Commission, the
Department of Transportation. And I personally would like to
commend Secretary Moniz and Secretary Foxx for their personal
attention.
Mr. Chairman, that concludes my remarks.
[The prepared statement of Mr. Roldan follows:]
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Mr. Whitfield. Thank you very much. At this time, Mr.
Logan, you are recognized for 5 minutes.
STATEMENT OF ANDREW LOGAN
Mr. Logan. Great. Thank you, Mr. Chairman, and members of
the subcommittee for the opportunity to be here today to
testify on the economic and environmental impacts of natural
gas flaring in the United States. I am Andrew Logan. I direct
the oil and gas program at Ceres, and we are a coalition of
institutional investors and environmental organizations working
to make capital markets more environmentally and socially
sustainable. We have over 100 institutional investor members
representing over $11 trillion in total assets united by the
belief that strong environmental performance drives strong
financial performance over time. Our investor members have
significant financial exposure to the oil and gas sector, and
want to see the industry succeed.
And while Shell Oil is bringing significant economic
benefits to the United States, we believe that the way the
resource is currently being developed is shortsighted, and
fails to capture its full value, at least in certain parts of
the country. Our investors believe that flaring natural gas is
environmentally destructive, economically wasteful, and, most
importantly, almost always unnecessary. And, despite well-
intentioned and quite significant efforts by some companies,
the problem is getting worse, and will continue to get worse
until the regulatory environment changes, so that flaring is no
longer the cheapest and easiest option.
Flaring is a problem that the U.S. thought it had left
behind in the 1950s, but the rapid growth of tidal oil
production in the United States has been accompanied by a
dramatic increase in flaring that has propelled the U.S. into
the top 10 gas flaring countries in the world. And most of this
flaring, as you know, occurs at oil wells drilled in areas that
lack the infrastructure necessary to capture the gas that comes
out of the ground with the oil. And instead of investing in the
necessary infrastructure to capture that gas, companies often
choose to simply flare it off, where regulations allow them to
do so.
It is important to note, though, that lack of
infrastructure is only part of the problem. Roughly half of all
the flaring in North Dakota comes from wells that are already
connected to pipelines, so we need better planning as well. I
think we really want to see this industry plan its wells with
the idea that natural gas has value.
Flaring comes at a steep environmental cost. Flaring is a
major contributor to greenhouse gas emissions. It is the
equivalent of adding a million cars a year to the road in North
Dakota alone. But the environmental impact of flaring is not
its sole cost. North Dakota gas is so rich in valuable natural
gas liquids, like propane, that this is about the last gas in
the world that you would want to flare. In fact, over the
course of 2012, North Dakota producers flared over a billion
dollars of natural gas, a massive economic waste.
So flaring is clearly environmentally damaging, it is
economically wasteful, but most importantly, it is avoidable.
The North Dakota Industrial Commission has run the numbers, and
has concluded that it is economic to capture this gas, in large
part due to its high liquid content, but yet flaring in the
State is still north of 30 percent. And that is because, while
capturing gas produces positive economic returns, it doesn't
match the returns from drilling the next oil well. So if
regulations allow that sort of short term decision-making, as
they do in North Dakota, many companies will simply make that
choice.
Our investors take a long term view, and want to see the
value of the resource maximized, and they are deeply concerned
by the current approach to development. The Bakken Formation
has been around for 360 million years. It is not going
anywhere. If you take a little bit of extra time to develop the
resource in a thoughtful and deliberate way, it seems to me
that we should strongly encourage that.
So we are working with our investors to push the industry
to take a longer term view, and it is important to acknowledge
that some companies, like Continental and Hess, are doing so.
And yet the data are clear, the problem is getting worse, and
not better. Flaring in North Dakota hit 36 percent in December,
which is a new record. This means that more than a third of all
the natural gas produced in that State is going up in smoke at
the same time as consumers around the country are seeing price
spikes, and, in places, actual shortages of propane.
So, from my perspective, flaring is an indefensible
economic waste, but it also represents a major opportunity, a
billion-dollar-a-year opportunity, for entrepreneurs, as well
as for the industry itself. We are seeing huge amounts of
innovation going on, and there is a potential for a real
American success story here, but this technology is having a
hard time getting a foothold because it is hard to compete with
free. And right now, in North Dakota, flaring is free. So if
you take only one point away from my testimony today, it is
that it shouldn't be. Thank you.
[The prepared statement of Mr. Logan follows:]
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Mr. Whitfield. Thank you, Mr. Logan. Mr. Whittington, you
are recognized for 5 minutes.
STATEMENT OF CHARLES ``SHORTY'' WHITTINGTON
Mr. Whittington. Thank you very much. Mr. Chairman, and
members of this committee, thank you for inviting me here to
testify on the issue of propane transportation. My names is
Charles ``Shorty'' Whittington. I am president of Grammer
Industries, a for-hire trucking company headquartered in
Grammer, Indiana. I am also the former chairman of the American
Trucking Association, and I currently serve on the Board of the
National Tank Truck Carriers. My company operates 120 specialty
MC-331 transport tank trailers, 115 of those which are capable
of transporting propane. Not only do I haul propane, I also am
a large consumer of propane, as a farmer, and we have about
1,500 acres. My fleet currently employs over 200 people, and
the logistics personnel, and professional drivers.
This past year, Grammer Industries has experienced a
substantial increase in propane hauls. In an average year,
Grammer dedicated between 25 and 30 tank trucks to haul propone
in the winter months. This year, we have dedicated over 80
units to do this service. I would like to further detail
Grammer's experience this winter in hauling propane.
There are roughly 11,000 tank truck trailers in the United
States capable of hauling propane. To add some perspective to
this, each of these specialized trailers cost about $150,000,
and a new tractor costs $125,000. This is a sizable investment
for carriers to participate in this segment of business.
With the increase of natural gas production across the
nation, and the corresponding increasing demands for tank truck
services, competition for the use of the existing tank truck
trailers is at an all-time high, straining existing capacity
and new trailer production capacities at the same time. The
reality of this is, if I ordered a new tank truck to haul
propane today, I would receive it in May of 2015. These tank
trailers have a capacity of 10,600 gallons. However, because of
product expansion and government regulations, we can only fill
these tanks to 85 percent of capacity, or, in other words,
about 9,000 gallons.
Typically Grammer's average length of haul falls into the
50 to 100 mile range. That has been the way it has been for the
last 10 years. However, given the exceedingly difficult market
dynamics in play, we found ourselves making longer hauls that
have exceeded 800 miles this year. When propane shortages
occur, like this winter, companies like mine need to be able to
respond accordingly. In times of crisis, the tank truck
community has offered its capacity and services to emergency
respond teams many times, as our carriers haul essential
products necessary for the recovery, whether it is from
hurricane relief in the Gulf Coast, or a propane shortage in
the midst of a devastating Midwest winter.
As we have seen in every crisis situation, the Federal
hours of service regulations is a key obstacle that may be
waived in order to help our deliveries to the affected areas.
While waiving these hours of service regulations has been
extremely helpful, the current process of seeking this relief
can be very confusing, time consuming, and the deterrent of
both our customers and the critical service we provide.
If the President, the Governor of a State, or an FFCSA
regional field administrator declares a regional emergency,
certain regulatory constraints are suspended for drivers and
motor carriers providing direct relief to the emergency. This
is true regardless of where the driver's trip originates, even
if the emergency was only declared in one State, provided they
are offering relief to the affected area.
However, enforcement officials in distant States, or even
neighboring ones, may not be aware that drivers may legally
take advantage of this regulatory exemption which results in
the various roadside enforcement disparities. And, with today's
CSA rules, these disparities can put a carrier like myself out
of business. Exceptions provided under the circumstances are
usually in effect for 30 days. Though authorized officials may
extend the relief for another 30 days, they do not always make
such decisions in a timely manner.
To address these issues, Congress should work with the
Department of Transportation to evaluate ways in which the
emergency exemption declaration process could be improved at
regional, State, and local levels. Additionally, the Department
of Transportation and State should seek to improve
communication with enforcement officials when regulatory relief
has been granted, identifying which drivers are entitled to
that relief, and what rules are for that emergency.
Again, I would like to thank you for the opportunity to
testify at today's hearing, and I will be very happy to respond
to any questions that you may have. Thank you very much.
[The prepared statement of Mr. Whittington follows:]
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Mr. Whitfield. Thank you, Mr. Whittington. Mr. Obeiter, you
are recognized for 5 minutes.
STATEMENT OF MICHAEL OBEITER
Mr. Obeiter. Good morning, and thank you for the
opportunity to contribute to the deliberations of this
subcommittee. My name is Michael Obeiter, and I am a senior
associate in the Climate and Energy Program at the World
Resources Institute. WRI is a non-profit, non-partisan think
tank that focuses on the intersection of the environment and
socioeconomic development. I am pleased to be here today to
offer WRI's perspective on the United States natural gas
infrastructure, with a focus on the need for reductions in
fugitive methane emissions, and forward-looking planning that
takes into account the realities of a changing climate.
The U.S. currently finds itself in the midst of an energy
boom, driven by technological advances in the extraction of oil
and natural gas. Our domestic energy resources are the envy of
much of the world, yet we must also weigh the consequences of
our actions on the natural environment. The decisions we are
making will have long lasting impacts on air quality and the
climate.
Methane, the primary component of natural gas, is a
powerful greenhouse gas, at least 34 times as powerful as
carbon dioxide at trapping heat. Although natural gas emits
only 50 to 60 percent as much CO2 as coal when burned for
electricity generation, fugitive methane emissions throughout
the natural gas life cycle undermine the climate advantage of
switching from coal to gas. While we don't yet know exactly how
much methane is escaping into the atmosphere from wells and
pipelines, we know enough to recognize that fugitive methane
emissions are a significant environmental problem, and one that
we know how to address.
There are many commercially available technologies that
reduce or eliminate methane emissions, and pay for themselves
in 3 years or less. Analysis by WRI and others has demonstrated
that a one percent leakage rate system-wide is an achievable
and cost-effective benchmark. Below one percent, we can say
with certainty that fuel switching from coal to gas, or from
diesel to gas in heavy duty trucks and buses, is a net positive
for the climate.
Beyond this environmental impact, methane has economic
value, and any cubic foot that is leaked, vented, or flared is
one less cubic foot that can be put to productive use. The fact
that emissions control technologies are not utilized to the
extent they should be is evidence of a market failure that
requires policy intervention. Thankfully, there are a number of
options available to Congress to address this issue, including
tax incentives for investment in emissions control
technologies, requiring companies to perform monthly emissions
monitoring and repair as a condition for receiving the right to
drill on Federal lands, and supporting applied research and
development to the Department of Energy to drive down the costs
of emissions control technologies, and allow companies to bring
more gas to market, in much the same way that DOE played a key
role in the development of hydraulic fracturing technology.
I have included additional policy options in my written
testimony. As this subcommittee explores the challenges and
opportunities of energy infrastructure in the 21st century, I
encourage its members to propose innovative ways to
simultaneously cut waste, increase government royalties, and
combat climate change by reducing fugitive methane emissions.
Yet these unchecked emissions are merely one symptom of a
national energy landscape that systematically undervalues long
term prosperity. Climate change, and the rising sea levels,
reduced agricultural yields, and more extreme weather it
brings, threatens to alter our way of life and dampen prospects
for economic growth, including in the energy sector.
A recent GAO report found that, ``climate changes are
projected to affect infrastructure throughout all major stages
of the energy supply chain, thereby increasing the risk of
disruptions.'' This underscores the need for the private sector
to take climate into account when it makes investment
decisions. While many companies are already incorporating a de
facto price on carbon into their decision-making process, lack
of clarity complicates their attempt to seize the economic
opportunity of the transition to a low carbon economy.
Luckily, smart climate policy is indisputably compatible
with smart economic policy. Reducing methane emissions from
leaky infrastructure, for example, is good for business.
Numerous studies have made the case that inaction on climate
change will be more expensive than taking action now to
mitigate greenhouse gas emissions. Even the Defense Department
is concerned, calling climate change, ``a threat multiplier
that can enable terrorist activity and other forms of
violence.''
Taken together, these arguments point to the need to take
climate risks into account when making investment decisions on
long lasting infrastructure. The infrastructure choices we make
today will reverberate for decades. Ignoring the climate when
making these decisions risks stranding valuable assets, or
locking in dangerous levels of greenhouse gas emissions, and
potentially catastrophic climate change. We owe it to
ourselves, and future generations, to make sure we get those
choices right.
Thank you again, Mr. Chairman, Ranking Member McNerney, for
the opportunity to be here today. I look forward to your
questions.
[The prepared statement of Mr. Obeiter follows:]
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Mr. Whitfield. Thank you, Mr. Obeiter. Next is Mr. Black,
who used to run the Energy and Commerce Committee, so he is
recognized for 5 minutes.
STATEMENT OF ANDREW J. BLACK
Mr. Black. Thank you, and good morning. I am Andy Black,
president and CEO of the Association of Oil Pipe Lines. AOPL
represents the owners and operators of energy liquid pipelines
which benefit American workers and consumers. Americans use
pipelines today to fuel their vehicles, heat their homes,
harvest their crops, manufacture consumer goods, and more. In
just 2012 pipelines transported 14.1 billion barrels of crude
oil, refined products, and natural gas liquids across 185,000
miles of pipelines Nearly every gallon of gasoline consumers
put in their vehicles travels at some point through a pipeline.
Pipelines allow American consumers to benefit from new
crude oil production in the U.S. and Canada. Pipelines are also
transporting growing supplies of U.S. natural gas liquids to
chemical and plastic manufacturing facilities here in the U.S.,
which is creating new good paying jobs for American industrial
workers.
Pipelines are the least expensive, most reliable, and
safest mode of transporting liquid energy. For example,
shipping by rail costs and average of two to three times more
than by pipeline, according to EIA. In 2012 99.9998 percent of
the products transported by liquid pipelines reached their
destination safely. This safety record is a natural outcome of
the major financial investment pipeline operators make in
safety each year.
In 2012 operators spent more than $1.6 billion on pipeline
integrity management. That is evaluating, inspecting, and
maintaining their pipelines. The result is that over the last
decade liquid pipeline incidents are down over 60 percent, and
volumes released by pipelines are down more than 45 percent.
The industry recently launched the Pipeline Safety Excellence
Initiative to take these safety efforts to the next level.
Today pipelines operate in highly competitive
transportation markets, competing vigorously against other
pipeline operators, and operators of railroads, trucks, and
barges. New and expanded pipeline infrastructure is essential
to delivering the benefits of America's energy renaissance to
U.S. consumers and workers.
AOPL members have made substantial investments to link new
production and supply sources to refining and consuming
markets. Pipeline operators have been constructing new
pipelines, reversing pipelines, converting pipelines from one
type of product service to another, and expanding the capacity
of existing pipelines. More than 10,000 miles of liquid
pipelines have been placed into service in just the last 4
years.
The importance of pipelines was underscored by what
happened in propane markets this winter. As you have heard,
propane storage inventory levels in the Midwest downstream of
pipelines began this fall at abnormally low levels. Then large
supplies of propane were needed to dry crops after an abundant
and wet harvest. Next the Midwest and Northeast needed
considerable supplies of propane during a winter that started
early, and has been very cold. Liquid pipelines were asked to
help, and they responded. Pipeline operators coordinated with
government, asked shippers of other products to voluntarily
defer shipment so that more propane could be shipped, made
tariff filings at FERC to facilitate additional shipments, and
issued alerts to shippers about unused and available pipeline
capacity.
This winter's propane supply issues were not the result of
inadequate pipeline infrastructure. There is, and will be,
enough pipeline capacity to transport propane supplies to where
they are needed. Like FedEx or UPS delivering packages for
others, pipelines transport energy products for shippers, who
own the products being shipped, and decide when they are to be
shipped.
While pipeline service is available to shippers year round,
propane shippers do not ship consistent amounts of propane
throughout the year. Pipeline capacity exists during off peak
times to help propane shippers ensure field supplies are
sufficient to meet seasonal needs. If propane market
participants want to adjust their supply patterns by shipping
more pipeline offseason, more propane offseason to fill
downstream storage, pipeline operators are ready. And if
shipper expressed a need for new service by committing to use
pipelines, pipeline operators will respond by adding new
pipeline capacity.
Government can help ensure the availability of adequate
pipeline infrastructure. It is essentially that States make
timely decisions on siting requests for pipelines, that Federal
agencies process permits needed for construction, that FERC
policies support new investment, and, of course, that the State
Department efficiently decides upon requests for presidential
permits for facilities crossing our border.
The recent State Department analysis of Keystone XL found
that alternative modes of transportation would result in higher
costs to shippers, and more crude oil released in the
environment. The high profile debate on Keystone XL has shown
that more and more Americans recognize the benefits to
consumers and workers of pipeline infrastructure. I want to
thank the subcommittee for its interest in Keystone XL, and in
pipeline infrastructure generally, including by holding this
hearing today. Thank you.
[The prepared statement of Mr. Black follows:]
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Mr. Whitfield. Thank you, Mr. Black. And, Mr. Hamberger,
you are recognized for 5 minutes.
STATEMENT OF EDWARD R. HAMBERGER
Mr. Hamberger. Thank you, Chairman Whitfield, Chairman
Upton, Ranking Member McNerney. Thank you for the opportunity
to appear before you on behalf of the Association of American
Railroads. Our members account for the vast majority of the
freight railroad mileage, employees, tonnage in Canada, Mexico,
and the United States. The transportation of energy products is
a central focus of this network, and we are proud of the role
we play. By delivering coal to power plants, ethanol to fuel
blenders, crude oil to refiners, propane to local distributors,
frack sand and steel pipe to natural gas extractors, railroads
are indispensable in our nation's ongoing quest to achieve
greater energy security and higher domestic energy production.
But that would not be the case if, back in 1980, your
predecessors had not passed the Staggers Rail Act, removing
strangling regulation and releasing $550 billion of private
sector investment. By leading that fight, this committee
enabled the rail tonnage to double. The accident rate is down
79 percent, and rates are actually down 42 percent from 1980.
The massive investments, and I emphasize they are private
sector investments, would not have occurred, were it not for
the leadership of this committee, and that Staggers Rail Act
has made our system the envy of the world. Had you not done the
right thing back in 1980, we would not be the envy of anyone
today.
In recent years railroads have seen dramatic increases in
demand to transport crude oil. As recently as 2008, class one
U.S. railroads originated just 9,500 car loads of crude oil. In
2013, that number is 410,000 car loads, approximately 11
percent of the U.S. crude oil production. And that is good news
not just for the railroad industry, but, as you said, Mr.
McNerney, for the economy as a whole, as we begin to produce
more than we import.
My thesis today is that our nation cannot take full
advantage of our new crude oil resources without a safe,
efficient, financially healthy freight rail industry. But a
very close corollary to that is that our nation cannot reach
energy independence without a safe, efficient, financially
health pipeline industry, barge and towing industry, and yes,
my good friend Shorty, a tank truck industry.
The question that we have been hearing recently, because of
some high profile accidents, is can railroads, in fact, move
crude oil safely? I am here to tell you the answer to that
question is yes. Our safety record is 99.98 percent of the time
we get from origin to destination without a spill. That is
pretty good, not good enough, and we are going to continue to
try to get to 100 percent. And to that end, we reached an
agreement just two weeks ago with Secretary of Transportation
Foxx to implement a series of voluntary action items that we
will take to try to improve our safety record. These include
more frequent track inspections than required by regulation,
enhanced braking systems, speed restrictions beyond those in
the regulations, and the use of a sophisticated routing model
to assess the safest and more secure routes.
These steps are aimed primarily at accident prevention, but
the next step in dealing with risk is mitigation. And there we
are recommending new tank car standards, including a thicker
tank car, and a jacket around the tank cars to help them in the
mitigation. We also believe that existing tank cars need to be
retrofitted, or phased out of service of flammable liquids.
Emergency response is the third bucket of activities, very
critical as well. Last year we trained 22,000 emergency
responders around the country, and we have stepped up, again,
in the agreement with Secretary Foxx, to develop a very
specialized emergency response training module at our training
center in Pueblo, Colorado, the emergency response training
center where we have hands-on experience for emergency
firefighters.
You can't talk about energy in the United States without
talking about coal. U.S. coal production is focused in a
relatively small number of States, but coal is consumed in
large amounts all over the country, made possible because the
U.S. has the world's best, most efficient, and comprehensive
coal transportation system, with freight railroads leading the
way. In 2012 railroads delivered 577 million tons of coal to
our nation's electric utilities, equal to more than 70 percent
of the total coal deliveries to power plants. That happens to
be down 23 percent from our peak in 2008.
The lure of higher coal exports to Asia is the main impetus
for plans to build new bulk export terminals in the Pacific
Northwest. For China and India, if consuming more coal means
cheaper and more reliable electricity for the hundreds of
millions of people in those countries who currently don't have
that electricity, then consuming more coal is what they will
do. I submit to you that this coal could be supplied by U.S.
coal producers and U.S. coal transporters, who operate under
the world's most stringent safety and environmental standards,
or it could be supplied by producers and transporters in other
countries, who operate under more lax standards.
I apologize for running over, Mr. Chairman. Thank you for
the opportunity to be here today.
[The prepared statement of Mr. Hamberger follows:]
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Mr. Whitfield. Well, thank you, and thanks all of you for
your testimony. We appreciate it very much. I recognize myself
for questions, and then we will move forward as quickly as we
can.
Mr. Black, I think you said that 99.998 percent of your
products get to their destination safely, and, Mr. Hamberger,
you said 99.98. Both of those are pretty good, but, Mr.
Hamberger, you touched on this in your testimony, and there has
been a lot of publicity recently about some accidents hauling
oil out of the Bakken fields. And I was talking to some
representatives of Burlington Northern Santa Fe yesterday, and
it is my understanding they are moving out 700,000 barrels a
day----
Mr. Hamberger. Yes, sir.
Mr. Whitfield [continuing]. Which is a lot of oil. And
frequently we get confused about barrels versus car loads. How
many barrels of oil is in a car load? Or maybe I should say
gallons.
Mr. Hamberger. There are 30,000 gallons, which is 7,000
barrels, in a round figure----
Mr. Whitfield. OK.
Mr. Hamberger [continuing]. And 100 cars to a train.
Mr. Whitfield. OK.
Mr. Hamberger. So that would be----
Mr. Whitfield. OK.
Mr. Hamberger [continuing]. 70,000 barrels per train, a
round----
Mr. Whitfield. And, you know, of course, we know about the
Canadian accident, and there was some negligence involved there
regarding braking systems, I believe, but----
Mr. Hamberger. Yes, sir.
Mr. Whitfield [continuing]. We have heard some stories that
the oil coming out of the Bakken is more volatile. Are you
aware of any evidence of that, or scientific analysis of that
issue?
Mr. Hamberger. There is a lot of work going on in that
area. The Pipeline and Hazardous Material Safety Administration
launched what they termed back in August the Bakken blitz. I
think they now call it Operation Classification. They have not
yet issued their final report. What we have learned, just in
discussions with them, is that there seems to be more natural
gas liquids, ethane, butane, in the shale oil than some other
oil. And that has led us to then call on the same Pipeline
Hazardous Material Safety Administration, PMSA, to issue new
tank car regulations which would be able to accommodate this
more volatile oil.
Mr. Whitfield. And how are they coming along on those
regulations? Are they moving quickly, or----
Mr. Hamberger. They are still contemplating. They published
an advance notice of proposed rulemaking in September, and they
have not yet come out with a notice of proposed rulemaking. But
I am sure they are working on it.
Mr. Whitfield. Yes. OK.
Mr. Hamberger. And I should point out, not to throw them
under the bus, but we actually petitioned PMSA in 2011. And
when I say we, I mean the American Petroleum Institute, the
American Chemistry Council, Association of American Railroads.
Tank car manufacturers went in March of 2011 and asked them to
promulgate a new tank car standard. When they did not do so,
that same group of organizations got together and voluntarily
adopted a new tank car standard, effective October 1, 2011, so
that the tank cars being made since that time are dramatically
an improvement over the current Federal regulatory standard. We
think, given what we have just been talking about, that what
was agreed to in 2011 can be made even more robust going
forward.
Mr. Whitfield. So the industry is looking for some
certainty?
Mr. Hamberger. Yes, sir.
Mr. Whitfield. OK.
Mr. Hamberger. Exactly.
Mr. Whitfield. Now, I think it is great that you all are
doing this emergency response program out at Pueblo. How is
that coming along?
Mr. Hamberger. We have a tank car emergency response
training out there now, but it does not focus on crude oil. We
are looking to get 20 tank cars out there, to have them arrayed
as if there had been an accident, to have them set up so that
they will, in fact, be on fire, have foam, have emergency
response uniforms for people to work. We are hoping to provide
at least 1,500 emergency responders the opportunity to go
through that program starting July 1, and that would be on top
of the 2,000 we already train out there. And that would be an
ongoing program into 2015 and beyond.
Mr. Whitfield. OK. Thank you. At this time, Mr. McNerney,
you are recognized for 5 minutes.
Mr. McNerney. Thank you. I ask unanimous consent to include
a letter from Mr. Loebsack to the committee to be included.
Mr. Whitfield. Without objection.
[The information follows:]
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Mr. McNerney. Well, I want to thank the witnesses. I think
it was a good set of testimony. Well, one side of the aisle
wants to move forward with production, produce, produce,
produce, and the other side says, well, you know, what about
safety, what about the environment? So it is important to have
a balance between these two, and I think that is what we ought
to be aiming for.
My first question goes to Mr. Logan. I appreciate your
comments about flaring. The question I have is kind of
political. How much resistance do you think industry would put
up to regulating down the flaring levels?
Mr. Logan. Well, I think if you asked me the question a
year ago, I would have said a whole lot. I think we have seen
so much negative attention on the flaring problem over the last
year, and also the fact that, you know, the data show that the
problem does continue to get worse, so I think there is a
growing recognition from industry, as well as from other
stakeholders, that voluntary action to date has not gotten the
job done.
Well, there are companies that are taking kind of
leadership steps to reduce their own flaring, and now see that
the actions of some of their peers who aren't doing the right
thing sort of drags the whole industry down.
Mr. McNerney. So companies are saying, hey, it is probably
in our interest to move forward with a reduction of flaring?
Mr. Logan. That is right. I think the question is how far,
and kind of what the levers----
Mr. McNerney. Thank you.
Mr. Logan [continuing]. To make that happen are.
Mr. McNerney. Mr. Whittington, I appreciate your comments
about the reduction in obstacles to the Federal hours of
service regulations, and I look forward to working with you on
that. I don't really have a question, but I appreciate your
comments on that.
Mr. Whittington. Be delighted to work with you.
Mr. McNerney. OK. Mr. Obeiter, 3-year payback is possible
on reducing fugitive emissions, equipment to reduce fugitive
emissions?
Mr. Obeiter. Yes. There have been a number of case studies
through the EPA Natural Gas Star program, as well as other
programs, that have demonstrated that the vast majority of
emissions control technologies pay for themselves in 3 years or
less.
Mr. McNerney. So how serious is the problem of methane
leaks from our natural gas infrastructure?
Mr. Obeiter. It is impossible to say with precision, but we
know that it is a significant problem. We know that recent
numbers from the EPA inventory, and a survey by industry of
fugitive methane emissions likely understates the case. You
know, methane is the second most important greenhouse gas after
carbon----
Mr. McNerney. So is there good technology out there in
existence to help us detect leakage in pipelines and in
fracking wells?
Mr. Obeiter. There is. There is technology that can detect
leaks, and there is technology to go in and fix those leaks
wherever they may be.
Mr. McNerney. And is that being implemented, or is there
resistance to implementing that?
Mr. Obeiter. It is being implemented on a voluntary basis
in some places, but there has been some resistance simply
because, in a lot of cases, a 3-year payback, which sounds
great to me, does not compare favorably with a lot of the
investments made by these natural gas companies.
Mr. McNerney. And one last question for Mr. Hamberger. How
compliant are your members to the voluntary actions that you
discussed? I mean, you must have a variety of responses to
those----
Mr. Hamberger. Well, all class one railroads have
subscribed to it, and many of our short line members are as
well.
Mr. McNerney. So when you say subscribe to it, you mean
they are----
Mr. Hamberger. They have committed publicly, signed by the
CEO or the Chief Operating Officer on a piece of paper with the
Secretary of Transportation that they are committed to adhering
to these voluntary items. The administrator of the Federal
Railroad Administration has testified that he will direct his
inspectors, even though they are voluntary, to treat them as
though they were regulatory mandates, and would make public
any, you know, this is a commitment that we made in 35 days.
Mr. McNerney. Well, I want to wrap so others can question,
but the voluntary measures you identified sounded pretty good--
--
Mr. Hamberger. Thank you, sir.
Mr. McNerney [continuing]. So let us see those implemented.
Mr. Hamberger. Yes, sir.
Mr. Whitfield. Thank you. At this time recognize the
gentleman from Louisiana, Mr. Scalise, for 5 minutes.
Mr. Scalise. Want to thank the chairman for having this
hearing, and want to thank all of our panelists for the
information you have been providing.
Want to first ask you, Mr. Black, in your testimony, and
in, you know, you all are heavily involved in all the pipeline
infrastructure throughout our country. There is a heated debate
in this town about the Keystone XL pipeline. I know you
referenced it in your testimony. Legislation has been passed in
the House to approve the Keystone XL pipeline, very large
bipartisan majorities. Obviously, right now, that rests with
the President. The President likes talking about using a pen to
change laws, especially as it relates to his healthcare law,
but one thing the President could do today is actually use a
pen to approve the Keystone XL pipeline, and create thousands
of good jobs, increased energy security, and a trading partner
with Canada. And, again, you mentioned the pipeline
infrastructure between the United States and Canada in your
testimony.
There has been some debate about the types of job creation
that would come with Keystone XL. And there is some very good
reports out there, talking about not only billions of dollars
of private investment that would come in, but tens of
thousands, over 20,000 jobs that would be created. The
President often trivializes that, and tries to diminish the job
impact. Can you talk to the jobs that would be created, and the
energy security that would be created, by approving and
developing that pipeline relationship with Canada for Keystone
XL?
Mr. Black. Sure. Thank you, Congressman. The State
Department's final environmental impact statement shows that
more than 20,000 jobs would be created Keystone XL. Those are
real, good paying jobs. And you are right, the President has
the opportunity to sign that permit. And while Congress has
acted, and we support the interest of Congress in Keystone XL,
the quickest way to do this is just for the State Department to
grant a presidential permit. Tomorrow is the final day of
comments on the national interest determination, and we hope
that soon after that there will be a recognition that this has
support not just from a majority of the House and of the
Senate, but also of the American people of all parties.
Mr. Scalise. Well, let me ask you about the jobs, because
we still have a very struggling economy. I think if you look at
a lot of the policies coming out of this administration, many
of those policies, in fact, are the reason that you have such a
sluggish economy, when you talk to families who are struggling,
people that just got reduced to 28 hours that used to be
working 40 hours because of the President's laws and policies.
But let us talk about the Keystone jobs, because, again, the
President does diminish this. I don't know if you all have done
your own study, I have seen studies. What is the impact that
you have seen on what kind of jobs would be created in America?
Mr. Black. Well, I would refer you to the tremendous
support that the project has from the labor community. And when
I have been in Nebraska, I have found that the union jobs there
that will be supported are tremendous. They are some of the
best advocates for this project. There will be manufacturing
jobs making pipe, making steel. There are also ancillary jobs
in finance and in insurance. A lot of these jobs are going to
be outside of the pipeline route. There has been one study that
80 percent of the jobs will be throughout the nation. So it has
many positive benefits on----
Mr. Scalise. Any ideas on numbers, on how many jobs you are
talking about?
Mr. Black. I don't have those in front of me. I will be
happy----
Mr. Scalise. Because I have seen upwards of 20,000 jobs.
And, again, the President trivializes this, and acts as if, you
know, those aren't good jobs anyway. You know, maybe we ought
to send a copy of this testimony to the President, and maybe he
reconsiders a decision. I don't know if he is out of ink on his
pen. I will lend him my pen to sign the Keystone pipeline if he
wants to. But, you know, it is just something that people are
frustrated with. When they are struggling, they are looking at
an economy that is struggling, they want to work. They just
want to go back to work.
And you have got 20,000 jobs or more that, as you say, are
good high paying jobs that would be helping not only create
energy security for this country, but also put food on the
tables for those families, and the President continues to say
no, and then try to trivialize what, to them, would be an
important improvement in their life, and their quality of life.
So I just hope, you know, we continue this conversation. We are
going to continue pushing it, but I appreciate the testimony
you gave on it, because----
Mr. Black. Be happy to get you some information about----
Mr. Scalise [continuing]. To underscore. Anything else you
can get us, please let us know, and we will even pass it on to
the White House, and maybe they will read it.
Mr. Hamberger, I want to ask you about some of the comments
you made about the enormous growth in crude oil----
Mr. Hamberger. Yes, sir.
Mr. Scalise [continuing]. Specifically that has been moved
through rail through 2008. Can you expand on that and tell us
what you are seeing?
Mr. Hamberger. Yes, sir. In 2008, 9,500 car loads. In 2013,
over 400,000 car loads. To put that in perspective, that is
only about 1 \1/2\ percent. We move about 30 million car loads
a year. So while that is incredibly rapid growth, it is
something that we think we can accommodate. As I mentioned, our
coal franchise is down 23 percent from the height in 2008. But
it is traffic patterns in perhaps new areas, and so that is why
this year we are investing $26 billion in capex and maintenance
to try to expand the infrastructure, and be able to handle it.
We expect it will continue to grow at those rates, and we will
exceed another couple hundred thousand barrels, 10 car loads,
this year. I am being given the----
Mr. Scalise. Appreciate your answers, and the job creation
that you are bringing along with that investment.
Mr. Hamberger. Yes.
Mr. Scalise. Yield back the balance of my time. Thank you.
Mr. Whitfield. OK. Ms. Christensen, we will try to get
you----
Ms. Christensen. Right. I will try to----
Mr. Whitfield [continuing]. Before we go out.
Ms. Christensen [continuing]. Be quick. Thank you.
Mr. Whitfield. You are recognized for 5----
Ms. Christensen. I appreciate that, Mr. Chairman, and thank
you for this hearing. You know, the testimony that we have
received this morning is of particular interest to me, as our
utility in the U.S. Virgin Islands undergoes a major transition
from diesel as our sole generation source to propane, and then
eventually to natural gas, which is projected to lower our
rates by at least 30 percent. So we were particularly concerned
when we saw the dramatic shifts in the propane market, as we
wondered how that would affect our future.
So, Mr. Roldan, while I do understand that this is part of
your share, due to rapid abundance, and then a series of
demands and pressures, including the polar vortex, still, as we
go forward, this is something we have to consider. Could you
share for the record what your perspectives are, and what needs
to happen to ensure price stability in the propane market,
should this perfect storm happen again?
Mr. Roldan. Yes. Thank you for the question. It is a very
good question, actually. Because we feel under pressure as
transportation and storage assets are being taken out of
service, the best thing that we could do, as an industry, is
build year-round demand. There is no greater incentive for an
expanding infrastructure than if you were to take a season
industry and build year-round demand, but that is something
that takes place over time.
We think that the system could use a big dose of
transparency, OK? So we are studying this right now. We have
formed an industry task force, and, in a very short period of
time, we will come back with concrete policies and
recommendations, but we think that the system could use a whole
lot more transparency. And let me tell you what I mean by that.
We hit a period in the Midwest in late January where
essentially, the wholesale price tripled.
Now, to be honest with you, I don't know what happened in
that 10 day period, and I can't explain it. I have been
associated with this industry for 20 years, and I can't explain
it. And so we have joined with Senator Charles Grassley, and
other members of Congress, to ask the Federal Trade Commission
to look into the transactions that led to that. Because the six
million households that depend on our product to heat their
homes----
Ms. Christensen. Um-hum.
Mr. Roldan [continuing]. Are asking us to prove that things
are on the up and up. And not only do our customers want to
know, but our retail marketers want to know that our markets
are performing properly. I have a whole series of
recommendations on new data sets that would help our industry,
and I will give you a quick example.
Ms. Christensen. OK.
Mr. Roldan. We believe that markets function more
efficiently when transparency is there. When you lack
transparency, they perform less efficiently. And, just to give
you an example, the EIA does a wonderful job reporting
inventory data, OK? But if we are exporting one out of every
five gallons, and major foreign purchasers are signing long
term contracts, if we don't know what percentage of our
inventories at Mont Belvieu and Conway are committed by
contract, then we don't know what our available inventories are
in this country. That is the type of transparency policies we
are going to promote.
Ms. Christensen. Thank you. Let me try to get in another
question. The testimony has focused primarily today on how we
can improve, yes, oil and gas transportation infrastructure.
But any meaningful discussion of investing in new energy
infrastructure has to consider how the energy choices we are
making today will have long term impacts for our climate.
Mr. Obeiter, in your written testimony you state that the
infrastructure choices we make today will reverberate for the
next 40 to 50 years. Ignoring the climate when making these
decisions risks stranding valuable assets. Can you expand what
you mean? How can ignoring the risks posed by climate change
pose an economic risk to a company?
Mr. Obeiter. Sure, thank you for the question. If you
believe, as I do, that we need to make significant reductions
in greenhouse gas emissions in order to stabilize the climate,
and avoid the worst impacts of climate change, then we need to
be thinking long term when making energy infrastructure
decisions. The infrastructure is very long lived, and we risk
either stranding these assets, as we move away from high carbon
fuels to low carbon, or zero carbon, electricity, or we risk
locking in, essentially, catastrophic climate change, one or
the other. And so this is why I believe it is important to
think extremely long term when thinking about the energy
infrastructure decisions we are making today.
Ms. Christensen. And what measures are some companies
taking, or are they taking, to incorporate climate change into
their investment decisions?
Mr. Obeiter. A number of companies are incorporating a
shadow price of carbon into their internal decision-making
processes. These are not just the companies you would think of,
but they include massive multi-nationals, like Walmart, and
even Exxon-Mobil, which has disclosed that it is incorporating
a $60 price per ton on carbon into its internal decision-
making.
Ms. Christensen. Thank you, Mr. Chairman.
Mr. Whitfield. Thank you. I want to apologize to you all,
we have a series of votes on the floor. We were trying to get
through as quickly as possible. I think Mr. Hamberger has a
previous appointment. I think Mr. Sieminski does as well. But
for the others, I know some of the members have some additional
questions, and if you all would have time, you know, we have
two of the best restaurants in America over at the Longworth
cafeteria and Rayburn cafeteria, so if you want to go over
there and have something, and we will be back here within 1
hour. So thank you, and I do apologize, but we will reconvene
in 1 hour. Thank you.
[Whereupon, at 10:12 a.m., the subcommittee recessed, to
reconvene at 11:14 a.m. the same day.]
Mr. Whitfield. Once again, I will apologize to you all for
the delay. And this time I am going to recognize the gentleman
from West Virginia, Mr. McKinley, for 5 minutes of questions
and/or comments. He ran all the way over here, but he is so
physically fit, he won't have to have any time to recuperate at
all.
Mr. McKinley. Thank you, Mr. Chairman, and thank you for
your presentation. There were a couple questions that I wanted
to ask before we broke earlier on the oil pipeline, it was
99.9998 percent efficiency, railroads were 99.98. But I heard
some of the discussion earlier about the fugitive gas
emissions, and it looks like the amount of gas that we are
transmitting, maybe we are losing, is it right, maybe 1.4
percent, something like that, or is it better?
Mr. Obeiter. The EPA inventory, the most recent version,
has approximately 1.4 percent leakage rate. But more recent
studies that take direct measurement suggest that it could be
much, much higher than that.
Mr. McKinley. How about someone else in the industry that
might be able to comment?
Mr. Santa. Mr. Obeiter is correct that the latest EPA
inventory number is 1.4 percent. There are a variety of other
studies going on. As a matter of fact, as Mr. Obeiter pointed
out in his written statement, there is a lot of work going on
involving not only EPA, but industry, environmental groups, and
academia looking at this to get a better handle on it. And I
think, really, we are best to await the results of that to form
the basis----
Mr. McKinley. OK.
Mr. Santa [continuing]. Of making policy.
Mr. McKinley. And I just need to have a little bit more
confirmation, because sometimes we chase the wrong rabbit
sometimes in trying to improve on efficiency of 99.98, or
99.9998. How much more money should we invest to try to perfect
that?
We have heard the comments earlier about climate change. We
have heard in previous testimony and other hearings about the
dangers of climate change, and use of fossil fuels, be they
coal, oil, or gas, that it is causing premature deaths, it is
causing asthma, sicknesses. Do you agree that the product that
you are shipping is causing climate change problems around the
world? Let us start with you.
Mr. Santa. I will take the first stab at that answer, and,
yes, the point that I would make is that, you know, we have
seen reductions in U.S. greenhouse gas emissions, and one of
the factors that has been cited as a contributor to that is the
increase utilization of natural gas to generate electricity in
displacing other more carbon intensive fuels. Clearly there are
GHG emissions associated with natural gas, but cleaner than
other fuels, and also I think, you know, we can focus on ways
to reduce those emissions. But I think overall the net
contribution, both to reduce GHG emissions, and overall cleaner
air from natural gas, has been a real positive for the United
States.
Mr. McKinley. Look, I am one of the two engineers here in
Washington. I acknowledge that there is climate change as a
result of all this, but I am trying to understand how much of
it is man-made, and how much of it is natural and cyclical, and
whether or not we are pursuing an agenda that is more
ideologically intended, rather than consequential.
So I am really interested in where we go with this, because
we know that burning the tropical rain forest is far more
dangerous and threatening to the ecology and the environment
around the world than is coal fired or gas fired power plants
in America. But yet we seem to be bent on this war on coal, and
war on fossil fuels, and you all are participating in it by
transporting our gas, oil, and then railroads with coal. I am
curious to see if you feel that that is the right thing to do.
Is it indeed contributing to the environmental problems with
climate change? You have answered that. Mr. Roldan, did you
have a comment?
Mr. Roldan. Yes. If I could add the voice of propane to
that, because people talk a lot about natural gas.
Mr. McKinley. Yes.
Mr. Roldan. What is often lost is the fact that propane is
used in the very same applications as natural gas. We reduce
greenhouse gas emissions anywhere from 15 to 18 percent, to as
much as 50 percent in some applications. So we actually think
that we are part of the solution. And I would also draw your
attention to comparisons between reductions in greenhouse
emissions in Europe, where they have an economy-wide cap and
trade program, and greenhouse gas emissions reductions in the
United States, and I think the record in the United States is
considerably better than Europe.
Mr. McKinley. OK. I am afraid we are running out of time
here, so I apologize for the shortness of time, but thank you
all for being here.
Mr. Whitfield. At this time recognize the gentleman from
Virginia, Mr. Griffith, for 5 minutes.
Mr. Griffith. Thank you so much. Mr. Santa, I am going to
continue with you. I notice that, in your testimony, you
mentioned that the INGAA will be releasing an updated report on
the need for new natural gas pipeline infrastructure over the
next 15 years. You also state the report will show the need for
natural gas pipeline infrastructure will be significantly
higher than the 2011 report found. What are the reasons for
demand to be significantly higher than in the previous
estimates?
Mr. Santa. Thank you for the question, Mr. Griffith. Our
report is going to be released on March 17. What we have noted,
compared to when we did the report back in 2011, is the shale
revolution, the fact that it is of a greater magnitude than we
appreciated then, not only with respect to natural gas, but
also gas liquids and oil production, and that that is driving
the need for more pipeline infrastructure.
Mr. Griffith. I appreciate that. And you state your support
for H.R. 1900 in your testimony. Can you please clarify why
there is a need to address delays from agencies other than FERC
that issue permits necessary to construct natural gas
pipelines?
Mr. Santa. Yes. We do support H.R. 1900, and we think that
the issue to be addressed here, and INGAA, and The INGAA
Foundation have documented this, that the duration of delays
for the variety of other permits that a pipeline applicant must
get before it can proceed with construction has, in fact,
gotten longer, and that this can be very costly, both for the
pipeline sponsor, but for the market. Let me illustrate that.
In many instances, when you are constructing in an
environmentally sensitive area, there is a limited construction
window during the year. So if you are delayed by two months, if
you miss that construction window, you could be delayed by a
year, in terms of your ability to build that infrastructure. So
we feel that the discipline and accountability that H.R. 1900
would bring to the process would be a positive.
Mr. Griffith. And it seems to me that, when you have these
issues of delays from agencies in getting new pipeline laid and
out there, that that makes it that much more difficult to get
the natural gas to the places that it is needed and wanted, and
that perhaps the administration has been shortsighted in its
war on coal by attacking our coal resources, and saying, well,
we are going to use natural gas, at least as a transition, and
that natural gas is the way to go, and then start holding up
all kinds of other things, and making it difficult for natural
gas to get to the market. Wouldn't you agree with that, yes or
no?
Mr. Santa. I would agree that there is a cost associated
with delays in getting natural gas to the market, yes, sir.
Mr. Griffith. One of my arguments, and many others on this
committee feel this way, is that the EPA, on its regulations
that are basically attempting to put coal out of business,
particularly when it comes to electric power generation, that
the EPA is moving faster than the science. Other testimony
comes in and says maybe 10 years, maybe 7, but probably 10
years before the technology is available to meet the
regulations that are out there now.
And yet we find in the testimony today that, and I quote
from page two of Mr. Obeiter's testimony, that, ``although
natural gas emits only 50 to 60 percent as much CO2 as coal
when burned for electricity generation, fugitive methane
emissions throughout the natural gas life cycle undermine the
climate advantage of switching from coal to gas.''
Now, I understand that when we get those kinks worked out,
as Mr. Logan and Mr. Obeiter have mentioned today, and you
don't have methane flaring, and you don't have as many leaks in
the pipes, and you are not admitting it, natural gas may be
better, but, again, it appears that our administration
currently in power in DC over these agencies has gotten the
cart in front of the horse, and that we need to continue to use
coal for the foreseeable future, because that is actually
cleaner for the environment, until we figure out how we can get
all those pipe leaks taken care of, and we don't have the
flaring going on. So I think the testimony today has been very
interesting in that regard.
Mr. Whittington, on the propane side, you indicated that it
is generally 50 to 100 miles for transport----
Mr. Whittington. Yes, sir.
Mr. Griffith [continuing]. But your testimony also
indicates that maybe as much as 800 this last year. What was
the reasoning for that?
Mr. Whittington. The supply was not at the locations that
we generally haul from because of the problems of moving the
product into the caverns. And then what is happening in the
fracking thing, when you look at all the fracking up in
Pennsylvania, Ohio, West Virginia, in that area, they were
planning on having product coming to the marketplace a lot
quicker, and it didn't. And, therefore, the pipeline that had
been feeding that area for so many years wasn't anticipating
the need that they needed to have there, so we were forced in
shortages.
One example I can tell you, we were at Catlettsburg, which
is pretty near your area, 10:30 one night to load, and the
company we are hauling for was put on allocation. We were going
to Winchester, Kentucky. The next phone call, that truck leaves
there empty, goes to Hattiesburg, Mississippi, to come to
Winchester, Kentucky, because that is the only place we could
get the guy propane. And he had homeowners, and people that----
Mr. Griffith. I am sure.
Mr. Whittington [continuing]. Hog houses, chicken houses
that were needing that kind of thing, but we had to go to where
the supply was. But it was interrupted in so many places
because we were counting on a supply, and it didn't happen.
Mr. Griffith. All right. Appreciate it very much. My time
is up. I yield back, Mr. Chairman.
Mr. Whitfield. At this time recognize the gentleman from
New York, Mr. Tonko, 5 minutes.
Mr. Tonko. Thank you, Mr. Chair.
Mr. Roldan, how much time, and what resources, are required
to reverse the flow of propane in a pipeline?
Mr. Roldan. Well, I will give you an example. In fact, I am
probably going to have to get back to you on that question. The
best example I have right now is that the Texas eastern
pipeline, that flows from the Gulf Coast up into the Midwest,
and serves the Northeastern United States, recently reversed
part of that line, a 16-inch line, to flow southward, rather
than northward. And I will get you a specific answer to that,
how long it took to do that, but I want to make a quick point
here, because this affected the Northeast, and your
constituents. When you reverse a line, imagine that there are
products, it is a mixed batch line, that flow in the 16-inch
line, and they both go northward. If you reverse the 16-inch
line to go south, all of those products that are shipped on
that 16-inch line cause congestion on the 20-inch line, and
that is exactly what we saw happening this year.
Mr. Tonko. Um-hum. Thank you, and I appreciate anything you
can forward----
Mr. Roldan. Certainly.
Mr. Tonko [continuing]. To the subcommittee concerning
that.
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Mr. Tonko. Are the decisions about what product is in the
pipeline, or the product's direction of flow, subject to input
or review by either State or Federal agencies?
Mr. Roldan. Yes, it is subject to FERC review. And I
realize that there are different statutes that govern natural
gas transportation and petroleum products transportation, but
it is our view that there are certain standards on the natural
gas side where, if you are going to discontinue a service, the
commission takes into consideration the impact it is going to
have on end users. That doesn't really happen on the petroleum
products side, and we think that that should happen. Somewhere
in that process we have to take into consideration the impact
that those business decisions are going to have on the
consumer.
Mr. Tonko. Thank you. And does permitting for export
facilities take into account the potential of United States
shortages of propane that could result from the increased
export----
Mr. Roldan. It does not. That is sort of a big disconnect
between, again, natural gas and propane. If you export natural
gas, you factor into that equation the effect on U.S.
consumers, and whether it is in the best interest of the United
States. No such consideration is given for propane exports.
Now, I will tell you one quick point. We know that global
demand is driving production to record levels. We also know
that those very same global markets are forcing American
consumers to compete with foreign buyers. Now, we think there
is a continuum out there somewhere between completely
unfettered exports and a near export ban that similarly applies
to crude oil today. We think that somewhere between those
goalposts there are some reasonable policy options that will
allow us to continue to foster increased production, but at the
same time allow us to serve our customers reliability. And
those are the policy options that we are looking for now.
Mr. Tonko. OK. In reference to the hours of service waivers
that have been granted----
Mr. Roldan. Certainly.
Mr. Tonko [continuing]. Do these waivers apply to any truck
transport of propane, or only to delivery of propane for
heating to shortage areas?
Mr. Roldan. Any truck.
Mr. Tonko. Any truck? And could this also apply to
deliveries to refineries for feed stock propane, or to propane
delivered for export?
Mr. Roldan. I believe the answer to that question is yes,
but I would like to confirm that for you.
Mr. Tonko. Well, I would point out that, while these
waivers are necessary to deal with a serious supply problem,
they increase transportation risks. So not only are our
citizens accepting environmental costs and risks associated
with drilling, processing, and transport of these fuels, the
risk we have just increased with these waivers. As an added
cost, they have fuel shortage and high prices.
If this is what the market has provided, it is
unacceptable. We need a more strategic energy plan here that
emphasizes something more than just getting the best price for
large fossil fuel supplies in whatever market will provide it.
And I think this propane situation illustrates clearly that
increased domestic productions to not necessarily result in
domestic energy security, and is something that I think we need
to work on as a committee.
Mr. Roldan. I think you are right, and if you want to look
at the numbers, you will find that year over year the increase
in propane production here was about 1.5 billion gallons. The
increase in propane exports was two billion gallons. So this is
the first year, the first season, where propane export volumes
exceeded new production coming on line from shale development.
And that is a bit troubling to us, and we are looking at policy
options right now to propose that might alleviate that
situation.
Mr. Tonko. I thank you. And, Mr. Chair, I yield back.
Mr. Whitfield. Mr. Whittington, did you want to make a
comment? You seemed to----
Mr. Whittington. We could haul to the retailers that were
moving that product and be exempt from the hours of service.
Well, if you are going to a refinery, or you are going to an
export terminal, we did not have an exemption from the hours of
service on those trucks.
Mr. Whitfield. All right. Thanks. Mr. Shimkus, you are
recognized for 5 minutes.
Mr. Shimkus. Thank you. And, I am sorry, I am bouncing
back, and so some of this may have been asked over this
discussion, but just to the propane issue and transportation, I
know that in our area we had truckers who were usually doing a
short haul of 100, 150 miles driving, I am from southern
Illinois, going to North Carolina. So not only do you lose the
multiple runs, but, obviously, then you have this address. I am
not a great fan of my Governor, but he did well in this
process, and I think it was testified throughout that people
were really trying to respond.
And before that, it is good to see Bobby back. He has been
absent for a while, and we are glad to have him back here. And
Andy Black, you know, what goes on in the committee stays in
the committee, so we won't harass you too much, but it is
always good to see you. And he helped me cut my teeth on the
committee, so I appreciate seeing you.
No one disagrees, I would assume, and we are going to find
out, because I am going to ask it, that liquid commodity
products, the cheapest, safest way to haul a liquid commodity
product is a pipeline. Does everyone agree with that? So
everyone is saying yes, except for Mr. Roldan?
Mr. Roldan. Yes. I think the difference is, if you compare
rail rates to pipeline rates, rail rates tend to be
considerably higher, except when it comes to propane.
Mr. Shimkus. Even though I am a big fan of the railroads,
the question is posed in the way cheapest and safest. I mean, I
think the basic answer is, if you are in logistics, and I kind
of played in a little bit, moving bulk commodity products,
liquid, through pipelines is the cheapest and the safest way,
followed by then barge? This is just logistics. And then rail,
and then trucks. That is pretty much assumed to be correct. OK.
This is an infrastructure discussion, but there are places
where pipelines can't go. The waterway system is not there, and
that is why you need the whole logistics tale.
But I am concerned that we are not moving fast enough
because of these changing in commodity products in expanding
our pipeline system. I have been dealing with a local retailer,
and I am not going to name the companies or the pipeline, but
in the e-mail transactions that I have dealt with a couple
times, he says FERC allowed X pipeline to discontinue shipping
ultra-low sulfur diesel on its blank pipelines. The pipeline
testimony to FERC to remove one of the two pipelines from south
to north service, they claimed that there would be no impact in
their capacity or ability to ship refined products. FERC
allowed the line to be switched to a north-south service to
ship methane from Pennsylvania to the Gulf Coast. This is now
the X pipeline. They protested, FERC found in favor of the
pipeline. Refined products were impacted because of
discontinued ultra-low sulfur diesel shipment.
Andy, you mentioned about it. You mentioned changing the
flow based upon the need. They also have a responsibility to
meet the service of the folks who are on that line. So when you
repurpose the product, there is a risk of not servicing the
people on the line. Does that make sense to people? What is the
solution to that? Go ahead. Mr. Black, would you answer that,
please, first, and then we will see if anybody else wants to
chime in?
Mr. Black. So you have got rail, truck, pipeline here at
this hearing, and you could have barge, as you say. Liquid
energy products can be transported on any mode, and so the
transportation competition is intense. There is also no
regulation, no obligation to serve customers in liquids. So the
reversals that Mr. Tonko was asking about are a reaction of
pipeline operators to developments in the market. Right now we
had underutilized pipelines moving up that direction because
shippers weren't asking for that pipeline to be used. Pipeline
operator who can lose business like that wants to find a better
economic use of the asset. Pipeline operator finds customers
who want to ship product in a different direction, and they
will reverse the pipeline.
That is the easiest way to add capacity into a market
today. It is cheaper and quicker than building a new pipeline.
So the story of the ATEX pipeline, which had been taking
refined products north, and is taking----
Mr. Shimkus. You told----
Mr. Black [continuing]. Out----
Mr. Shimkus. You ratted me out. I was----
Mr. Black. Sure. No, I think it is fine to discuss that.
There is propane capacity available today on the northbound
TAPCO, and it is available for propane shippers to use it. And
if they will use it throughout the year, there will be more
than enough propane supply into those regions. I encourage you
all to not think that reversals are a problem. Reversals are a
way to satisfy shipper needs.
Mr. Whitfield. Gentleman's time is----
Mr. Shimkus. Mr. Chairman, if I could just say, the real
solution is to build another pipeline too, my guess would be,
because it is not just propane, it is other products.
Mr. Whitfield. His time has expired, but, Mr. Roldan, you
wanted to make a comment?
Mr. Roldan. Yes. Just very quickly, I will tell you that,
if you look at how natural gas pipelines are regulated, versus
oil pipelines, there is a big difference, because on the
natural gas side, if you wanted to discontinue a service, the
commission takes into consideration who is affected by that.
The same doesn't happen on oil pipelines. So if you look at the
Midwest, and you look at the extraordinary tightness we felt
this year, consider the fact that you have the Cochin pipeline,
that goes from Alberta and serve the upper Midwest, 40 percent
of the propane sold into Minnesota came into Minnesota from
that pipeline. That pipeline is now out of service, and has
been reversed. You look at the ATEX line, has been reversed,
and those products are moving over.
So it is having an effect, and what we are saying is we
think somewhere in the equation FERC should be able to have the
obligation to consider what the impact is of those business
decisions on the customers that depend on those pipelines.
Mr. Whitfield. Did you have a comment, Mr. Whittington?
Mr. Whittington. Storage is really important on the
pipeline. A very current example downstate from St. Louis area,
they reversed a pipeline. Two loading facilities there, because
of the current demand, the weather, and everything else, their
storage only lasted for three or four days, then we are out of
product. We have got to go 200 miles to the next facility to
pick up product to come back in. Time of the year is the other
thing. You know, it is kind of like here, when you have a
snowstorm, send your wife to the store to get the milk. If you
are 2 hours late, there is no milk. But 300 days out of the
year, there is plenty of milk on that rack for everybody to
have.
So I think we don't want to lose sight of some of the stuff
being seasonal stuff, but storage will be king. That is the
problem with all the stuff in the Northeast. They are spending
all the money to make the plants, they are going so quick, but
storage is not on their priority list. It will be in a couple
years, and then that is where you get the bottlenecks, and you
get people running out.
Mr. Whitfield. All right, thank you. At this time I would
like to recognize the gentleman from Illinois, Mr. Rush, for 5
minutes, and I would like to say, we are delighted to have you
back, Mr. Rush, and look forward to working with you as we move
forward.
Mr. Rush. Thank you, Mr. Chairman, and it is a delight to
be back again with this subcommittee, and the entire Congress.
And we have continued to work, and I missed spending every
Monday, Wednesday, and Friday of my life here in a subcommittee
hearing, so I am glad to be back in the saddle again.
My question is directed to Mr. Roldan. Mr. Roldan, we have
heard that the propane shortage in the Midwest was caused by a
sort of ``perfect storm'' of contributing factors all
converging at the same time, turned out to be a lot of distress
and a lot of heartache for many of our constituents. And here
on Capitol Hill, there were a variety of letters going out to
everyone that you can think of, from President Obama, to the
Department of Transportation, calling for a wide range of
remedies, including relaxing weight requirements on the roads
and highways, to lifting DOT's hours of service limitations for
motor carriers, as well as a host of other potential solutions.
And the question that I have for you today, are there any
legislative actions that you could recommend that we can take
to prevent these types of shortages from happening in the
future, or do the various agencies and entities that work in
this propane market have the tools necessary to prevent this
issue from happening again next year, or somewhere down the
line? Similarly, I would ask if you could comment on the impact
that exporting propane gas, which, by the way, increased
eightfold from 2005 to 2013--what impact does our exporting
propane gas have on the supply that is needed in the Midwest
and across the nation?
Mr. Roldan. Thank you, Congressman. That is a very long
question, so I am going to try to dissect it. We believe it is
incumbent upon our industry to, first of all, understand the
root causes and contributing factors of what took place this
year, and then educate our members so that we never find
ourselves in this situation again.
Now, I would like to point out that, of our 3,000 retail
distributors, the vast majority worked very hard, and did a
really good job reliably serving their customers. But we know
that we are going to come forward after our task force, an
industry task force that was put together, examines the
situation, we are going to come back with some concrete policy
proposals, and I can tell you they are going to come down in a
couple of areas. We want to increase transparency, so that we
know that our markets are functioning lawfully and
transparently. We want to put in place in statute, and in
regulation, consumer protections so that when changes are made,
and storage and transportation assets are taken out of service,
somebody asks the question, how are these affecting consumers
that rely on these products?
We are going to take a look at export policy, because, as I
said just a moment ago, there is a range of options that we
think responsibly could let us continue to increase production,
but at the same time strengthen our ability to reliably serve
our customer. And then, finally, the areas of transportation
efficiency and storage, I want to talk just a brief second
about storage. I know you are time limited here. Give you a
good example, I am sorry Mr. Tonko left, because this affects
the State of New York. We talk about public storage, private
storage. We have a company that is in the process right now of
trying to put in 88 million gallons of storage, underground
storage, in the Finger Lakes region of New York. That has been
ready to go. It is fuel----
Mr. Rush. Mr. Roldan, excuse me for interrupting you----
Mr. Roldan. Please.
Mr. Rush [continuing]. But I do have another question that
I really want to get to, so I want to get to my second
question.
Mr. Roldan. That is good. And if I can follow up for the
record?
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Mr. Rush. Mr. Santa, I have been working with the
Department of Energy and various industry stakeholders to
increase minority participation and engagement in all sections
of the energy field, including gas and oil, renewables, coal,
nuclear, and pipeline. And I want to work with your association
as well to find out how we can increase the visibility of the
natural gas industry in minority communities. And I wanted just
to let you know that I look forward to working with you in the
future. But can you kind of summarize what you think the status
of your agency's, or your association's, participation with
minorities, and women-owned businesses?
Mr. Santa. Mr. Rush, I don't know what the numbers are with
regard to the interstate natural gas pipeline industry and
INGAA's members. That is certainly something that we can
inquire about. I do know that, you know, our members are very
active in trying to promote employment opportunities across the
board, and also that, you know, overall I think the energy
revival we have had in the United States has created tremendous
job opportunities across the board, ranging from information
technology to a lot of blue collar jobs that are very high
paying. But with regard to specifically...
Mr. Rush. Are there any minority members----
Mr. Santa. Yes.
Mr. Rush [continuing]. Who are part of your association?
Mr. Santa. Excuse me?
Mr. Rush. Are there any minority members who are part of
your association? Minorities, women.
Mr. Santa. Our membership is made up of the owners of
interstate natural gas pipeline companies, so they are large
corporations, as opposed to small businesses that might be
woman or minority owned.
Mr. Whitfield. You might want to follow up by request. At
this time I would like to recognize the gentleman from
Nebraska, Mr. Terry, for 5 minutes.
Mr. Terry. Thank you, and I appreciate this opportunity to
ask a fundamental question that has kind of been hinted at, at
least in the State of Nebraska, from those that rely on
propane, so I want to ask the question directly. By the way,
Jeff Fortenberry and I were both discussing this, so I will say
I will ask it on his behalf as well as mine.
And I wanted to start with Mr. Santa, and go down the line.
Are you aware of any allegations of fraud or manipulation to
increase the price of propane during what would be, on the
surface, a unique confluence of events? Is there fraud or
manipulation in the background? Mr. Santa?
Mr. Santa. Mr. Terry, given that INGAA represents the
interstate natural gas pipelines, we have not followed the
propane situation closely, other than to note its coverage in
the trade press and the media. Based on what I have seen there,
I cannot say that I have seen anything that would alert me to
such allegations.
Mr. Terry. Thank you.
Mr. Roldan. I am not aware of any specific allegations of
manipulation, but I can tell you this. I can't explain the
price anomaly that took place at Conway, Kansas over a 10 day
period. We represent a lot of Midwestern retail marketers, and
their customers, and they are all asking the same question,
which is, how can this happen? I understand that volatility is
associated with markets, but we think our customers demand the
assurance that our markets are functioning properly and
lawfully, and so do our members. And that is why we have taken
the position to support Senator Grassley and other Members of
Congress----
Mr. Terry. Is that a yes or no? Because I only have----
Mr. Roldan. Yes.
Mr. Terry [continuing]. 13----
Mr. Roldan. I am asking----
Mr. Terry [continuing]. 3 minutes.
Mr. Roldan. I am urging the FTC to examine the transactions
related to that run-up in price to----
Mr. Terry. All right. That was actually a follow-up
question to you, so you might as well keep going.
Mr. Roldan. OK. Well, all right.
Mr. Terry. Why do you think the FTC needs to do an
investigation?
Mr. Roldan. Really, because I think that our customers saw
that price increase, and they are looking at us, saying, is
everything on the up and up? And we need to give them the
assurance that our markets are functioning properly. And the
FTC is the only agency that can do that.
Mr. Terry. All right. Mr. Logan?
Mr. Logan. I have no perspective on that.
Mr. Terry. You haven't heard anything? All right. Mr.
Whittington?
Mr. Whittington. I can tell you that we have customers that
the freight this year was almost a dollar difference between
where they generally get their propane and where we had to pick
it up. $1 in freight. Didn't make any difference what the----
Mr. Terry. So you are saying the freight charges spiked?
Mr. Whittington. Well, it takes a lot of money to go 800
miles instead of 16 miles. And so what happens there, that, you
know, the product wasn't where it needed to be, and we had to
go get it. And I can also tell you that if we hadn't been able
to enjoy the hours of service exemption, we would have had to
have twice as many trucks, and the expense would have been much
greater than that to supply the demand.
Mr. Terry. Mr. Obeiter, anything?
Mr. Obeiter. This is not an issue I follow closely.
Mr. Terry. Mr. Black?
Mr. Black. From the perspective of a transporter that
doesn't own the products being shipped----
Mr. Terry. Yes.
Mr. Black [continuing]. Short answer, no.
Mr. Terry. All right. This is a question that Mr. Sieminski
was probably best apt to answer, and I am disappointed that he
wasn't able to stay, but I will submit a written question to
him, Mr. Chairman. So at this point, that answered my question.
I wanted to follow up with the FTC question, and you answered
that in the first part, so I will yield back my time.
Mr. Whitfield. Gentleman yields back. At this time I
recognize the gentleman from California, Mr. Waxman, for 5
minutes.
Mr. Waxman. Thank you very much, Mr. Chairman. In North
Dakota and Texas, crude oil production from shale formations
has expanded very quickly. In these areas, oil wells often
don't just produce oil. They produce natural gas, propane,
butane, and other fuels as well. As oil production has boomed,
so has the amount of natural gas and other fuels produced. That
should be good news to the producers. The companies could
capture this gas and sell it, but far too often the oil
companies simply flare the natural gas. They treat it as little
more than waste. In 2012, 32 percent of the natural gas
produced in North Dakota was flared, burning gas valued at $560
million.
But more than potential profits are disappearing into the
air. This flaring creates carbon dioxide and smog forming
pollutants as well. The flaring of a valuable and finite
natural resource is nothing less than a market failure.
Something is going wrong here. Mr. Logan, is it economic to
capture the natural gas, rather than to flare it?
Mr. Logan. Certainly in North Dakota it is. I mean, I think
we have heard from the North Dakota industrial commission, as
well as from some of the industry itself, that, you know,
because of the unique nature of the gas being produced in North
Dakota, it is not a dry gas. It is not just methane that you
would get, you know, say, in the Marcellus, but it is very rich
in liquids like propane and butane. So the economics of
capturing it are actually quite good.
Mr. Waxman. Well, if it is profitable to capture the
natural gas, rather than flare it, why aren't more companies
doing it?
Mr. Logan. Well, it is really all about the relative
economics, and also the state of regulation in places like
North Dakota. So while it is profitable to capture the gas, it
is more profitable to drill the next oil well. So if you are an
oil company with a limited amount of money to spend, as they
all are, you know, it is a somewhat rational short term choice
to say, well, look, if I don't have the capture the gas, I
would rather spend that money to drill another well. When you
think of the long term, that is very short-sighted, actual
wasted value of the resource, but you can kind of see, you
know, why the market is pushing companies in that direction.
Mr. Waxman. Tell me the role of regulations on flaring in
North Dakota and other States. Does it perpetuate the problem
because the regulations are too lax? And what kind of
regulations would move them in the right direction, if----
Mr. Logan. Yes. I mean, I think if you----
Mr. Waxman [continuing]. Profit motive is not enough?
Mr. Logan. I think all you have to do is look at the
difference in flare rates between a North Dakota and a place
like an Alaska, or a Texas. You know, in Alaska, flaring is
basically non-existent because the State has mandated that you
are not allowed to flare. In Texas, the flaring rate is less
than one percent, compared to, you know, 36 percent in North
Dakota, and that is because, you know, for all the issues in
Texas, and flaring is a problem there, the regulatory
presumption is not to allow flaring, and to do so only in
limited and very time limited circumstances.
In North Dakota, you have a situation where, while the
regulations on the books are not necessarily bad, the way that
they are enforced, and the high degree of exemptions that are
granted, mean that, essentially, you know, industry has carte
blanche to flare certainly for up to a year, and often beyond
that. So I think, you know, the fact that flaring is cheap, and
free, and easy, certainly means you are going to get a lot more
of it.
Mr. Waxman. So instead of investing in infrastructure that
would be necessary to capture the gas, companies choose to
flare it off, where regulations allow them to do so?
Mr. Logan. That is right. And it is a billion-dollar-a-year
opportunity in somewhere like North Dakota, once you factor in
the value of the liquids. And, you know, as I mentioned in my
opening remarks, there is a lot of innovation going on in North
Dakota. I mean, companies from, you know, small start-ups, to
big companies like GE, coming up with new technologies to
capture the gas, to liquefy it, to move it without pipelines.
But without the right signals going to the market in the form
of regulation, you know, none of that really gets off the
ground.
Mr. Waxman. Now, Mr. Roldan, the upper Midwest has
experienced significant shortages of propane this winter. Do
you think it makes sense for oil companies to be flaring off
natural gas liquids, like propane, that Americans need to heat
their homes and farms, to dry their crops?
Mr. Roldan. Actually, that is a really good point. Consider
the irony here. You are a North Dakota propane marketer, you
are having trouble getting supply. You are driving all the way
to the Texas Gulf Coast to pick up a load of product, and you
are driving through fields as the sky is lit up with flaring.
It doesn't make a lot of sense.
Mr. Waxman. Does anybody on the panel think this makes
sense, to allow this kind of flaring? My time is up, almost, I
have a few seconds left, but, Mr. Chairman, the wasteful and
unnecessary flaring of natural gas is a serious problem. It has
no place in a modern energy infrastructure. Mr. Rush, Ms.
DeGette and I have previously requested that we hold a hearing
on this specific issue.
I still believe the subcommittee should hold a hearing to
get the facts regarding flaring, and to develop real solutions
to the problem. So I want to reiterate that point to you. And
it just seems to me there is a market failure, because even
though they can make a lot of money, they are making more, or
they are making enough, and not doing what they should be
doing. And if the market is not working, that is when
regulations step in. Yield back my time.
Mr. Whitfield. Thank you, Mr. Waxman, and thank you all for
raising this issue in the hearing today. And at this time I
would recognize the gentleman from Ohio, Mr. Latta, for 5----
Mr. Latta. Well, thank you very much, Mr. Chairman, and
thanks very much for our witnesses for being here with us. This
is a really important issue because, in my district, we have
had a real issue with propane this winter. Had a lot of
meetings, a lot of discussions, and also here in Washington
with letters for the hours of service for folks, and also we
sent letters out on the issue of how much weight a truck could
be hauling at that time.
This week we also had a bill on the floor from Chairman
Shuster from the Transportation and Infrastructure Committee
that I was on the floor with, again, that, you know, it is a
real issue. I mean, looking at the Midwest, and we have had a
very, very cold winter.
If I could start with Mr. Whittington, you know, you were
talking about some of the barriers out there for increasing
storage for capacity out there. You know, what could overcome
that problem that we are having for storage?
Mr. Whittington. From my understanding, there is some
storage that is available. It has been checked, but there are
some regulatory things that are real fine line that is not
letting that storage come into play. So there are some
regulations that may be overregulating some of that kind of
stuff. The other thing is, and I appreciate the comments from
Congressman Waxman there, we need to look at the infrastructure
that is going to be coming out of the Pennsylvania/Ohio/West
Virginia stuff that is going to be able to take care of the
Midwest. We are just not there yet. It is 2 or 3 years away
before we are going to be able to take care of that product.
The indication that we are getting, the industry has been
looking at that, and once that is up and going, you are going
to have an oversupply in the Midwest. This is all new. It has
never been here before. And that is what has really causing a
lot of problems.
Mr. Latta. Mr. Roldan, you know, if I can go back to you, I
know that the gentleman from Illinois was asking this question
to you about the Finger Lakes, and the storage potential up
there. Can you talk about how this proposed facility would
help, and what has been the delay in getting it done?
Mr. Roldan. Yes. It is private investment, private capex,
88 million gallons of storage in the Finger Lakes region. It is
ready to go right now. We have been waiting on the decision
from the Governor for quite a long period of time. I am not
here to be critical, but I just want to emphasize how different
the situation would have been this year if we had that 88
million gallons of storage. Because what the forced people to
do without it, in the Northeast, is to travel to western supply
hubs, like Sarnia, Ontario, which also supplies the Midwest,
and compete with Midwestern marketers for product in Sarnia. It
also required Northeastern marketers to go south, and compete
with Southeastern marketers for product off the Dixie pipeline.
So you are talking about storage that could have helped
alleviate the situation not just in the Northeast, but in the
Midwest and the Southeast as well.
Mr. Latta. Thank you. And also, Mr. Santa, I figured I
would ask this question. You know, we are talking about where
it is in the country you see the greatest demand for new
pipeline development, it was just brought up by Mr.
Whittington, especially in Ohio, with the Utica Shale, and over
in Pennsylvania, with the Marcellus. Where do you see in the
next 10 years that we are going to have to have a lot of
pipeline development in this country to really move that
product where it needs to be?
Mr. Santa. That is a very good question, and it is one of
the things that will be addressed by the INGAA Foundation study
that is going to be released on March 17. However, looking in
the nearer term, I note that I saw a recent financial analyst
report that noted that within the next 3 years there was going
to be nine billion cubic feet of proposed new pipeline capacity
that could enter service to transport Marcellus Shale natural
gas.
Some of that will be transporting the gas to markets in the
Northeast and the Mid- Atlantic, but a lot of it will be taking
that supply to the Southeast and the Gulf Coast, because the
Marcellus production is literally overwhelming the demand in
the Mid-Atlantic and Northeast markets. The demand is largely
industrial, some electric generation, but also some
anticipation of LNG exports.
Mr. Latta. Thank you. And, Mr. Black, also in your
testimony you stated that the country would benefit from more
pipeline capacity. What do you see that needs to be done to get
that capacity?
Mr. Black. Well, just like Don Santa said for natural gas
pipelines, there is a need for new liquids pipelines for
increased crude oil production. That is North Dakota, the
Utica, hopefully, and Texas. Similarly, natural gas liquids.
The phenomenon he is talking about, and Mr. Whittington talked
about, about the Marcellus Shale, and the overwhelming
production there, means there is a need to move more natural
gas liquid products to where industrial workers can add value
to them.
So throughout a lot of the country, because of our energy
revolution that we are having, there is more that needs to be
built. Oil and Gas Journal estimated last year $23 billion on
liquids pipeline projects, and when I talked to execs, we find
that that is probably low. There are thousands of miles of
pipeline projects that are on the books today. We would be
delighted to build some more capacity for propane shippers who
want to sign up for long term service as well.
Mr. Latta. Thank you very much. Mr. Chairman, I see my time
has expired, and I yield back.
Mr. Whitfield. Well, thanks very much. Mr. Roldan, I just
want to follow up with one question. I am not an expert in this
area, but I have been told that in Texas the natural gas is wet
natural gas, and that up in the Dakotas it is more of a dry
natural gas, and therefore there is more propane in the wet
natural gas. Can you elaborate on that, or am I----
Mr. Roldan. Actually, that is not my understanding, Mr.
Chairman. I think the natural gas in all the northern
formations is pretty wet.
Mr. Whitfield. In the northern formations it is----
Mr. Roldan. That is correct. In fact, when you look at the
commodity price of natural gas which is down here, it is
actually the value of the gas liquids, the propane, I think,
that is driving production.
Mr. Whitfield. OK. Holding the value that is----
Mr. Roldan. Value of the gas liquids.
Mr. Whitfield. OK. All right. Well, I think that concludes
today's hearing. Once again, I want to thank you all for your
patience, and it has really been enjoyable being with you the
last 3 \1/2\ hours here. And we look forward to working with
all of you as we move forward on this very important subject
matter. And, with that, the hearing record will remain open for
10 days, and if we have any additional questions, we will get
them to you, and would appreciate your response. So that
concludes today's hearing. Thank you very much.
[Whereupon, at 12:03 p.m., the subcommittee was adjourned.]
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