[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]






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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

                              ----------                              
                                                                   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

                              ----------                              


                        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.]
    [Material submitted for inclusion in the record follows:]


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