[Senate Hearing 112-371]
[From the U.S. Government Publishing Office]
S. Hrg. 112-371
SIEMINSKI, BURKE, CLARK, AND NORRIS NOMINATIONS
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
TO
CONSIDER THE NOMINATIONS OF ADAM SIEMINSKI, TO BE ADMINISTRATOR OF THE
ENERGY INFORMATION ADMINISTRATION, MARCILYNN BURKE, TO BE AN ASSISTANT
SECRETARY OF THE INTERIOR, ANTHONY CLARK, TO BE A MEMBER OF THE FEDERAL
ENERGY REGULATORY COMMISSION, AND JOHN NORRIS, TO BE A MEMBER OF THE
FEDERAL ENERGY REGULATORY COMMISSION
__________
MARCH 20, 2012
Printed for the use of the
Committee on Energy and Natural Resources
----------
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Washington, DC 20402-0001
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana JAMES E. RISCH, Idaho
MARIA CANTWELL, Washington MIKE LEE, Utah
BERNARD SANDERS, Vermont RAND PAUL, Kentucky
DEBBIE STABENOW, Michigan DANIEL COATS, Indiana
MARK UDALL, Colorado ROB PORTMAN, Ohio
JEANNE SHAHEEN, New Hampshire JOHN HOEVEN, North Dakota
AL FRANKEN, Minnesota DEAN HELLER, Nevada
JOE MANCHIN, III, West Virginia BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
----------
STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Burke, Marcilynn A., To Be an Assistant Secretary of the Interior
(Land and Minerals Management)................................. 11
Clark, Anthony T., To Be a Member of the Federal Energy
Regulatory Commission.......................................... 16
Grassley, Hon. Chuck, U.S. Senator From Iowa..................... 3
Harkin, Hon. Tom, U.S. Senator From Iowa......................... 3
Hoeven, Hon. John, U.S. Senator From North Dakota................ 7
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
Norris, John R., To Be a Member of the Federal Energy Regulatory
Commission..................................................... 13
Rowe, Robert C., President and CEO, NorthWestern Energy, Butte,
MT............................................................. 38
Sieminski, Adam E., To Be Administrator of the Energy Information
Administration................................................. 8
APPENDIX
Responses to additional questions................................ 41
SIEMINSKI, BURKE, CLARK, AND NORRIS NOMINATIONS
----------
TUESDAY, MARCH 20, 2012
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:05 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK, why don't we get started here? The
committee will meet this morning to consider 4 nominations.
Adam Sieminski, to be the Administrator of the Energy
Information Administration.
Marcilynn A. Burke, to be the Assistant Secretary of the
Interior for Land and Minerals Management.
Anthony Clark, to be a Member of the Federal Energy
Regulatory Commission.
John Norris, who has been nominated for a second term as a
member of the Federal Energy Regulatory Commission.
Mr. Sieminski is currently the Senior Director of Energy
and Climate Change on the staff of the National Security
Council. He previously was the Chief Energy Economist for
Deutsche Bank. He was appointed to the National Petroleum
Council by Secretary Bodman. He's been a Senior Advisor to the
Center for Strategic and International Studies Energy and
National Security Program.
Ms. Burke is currently the Acting Assistant Secretary of
Interior for Land and Minerals Management. She previously was
the Deputy Director for Programs and Policy at the Bureau of
Land Management. She is on an unpaid leave of absence from the
University of Houston Law Center where she is a tenured
Associate Professor of Law.
Mr. Clark is currently the Chairman of the North Dakota
Public Service Commission and has been a member of that
Commission since 2001. He previously was North Dakota's Labor
Commissioner, the Administrative Officer for North Dakota's Tax
Department and a member of North Dakota's House of
Representatives. He has also served as the President of NARUC,
the National Association of Regulatory Utility Commissioners.
Mr. Norris has been nominated for a second term on the
Federal Energy Regulatory Commission where he has served since
January 2010. He previously was Chief of Staff to Agriculture
Secretary, Tom Vilsack, before that he was Chairman of the Iowa
Utilities Board.
The President has nominated 4 experienced and well
qualified individuals to these important posts. I support all 4
of their nominations. I'm glad to welcome them before the
committee this morning.
Let me call on Senator Murkowski for her statement. Then we
have two of our colleagues, who are here to introduce nominees
as well.
Senator Murkowski.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. It's nice to
welcome our colleagues from Iowa here this morning and I look
forward to their comments in support of the nominee. I'd also
like to welcome the 4 nominees.
These 4 have been chosen for their key role at one of the
agencies under our committee's jurisdiction. I look forward to
hearing how each of them will undertake those jobs if
ultimately confirmed.
To Mr. Sieminski, I think it's important to recognize that
we rely on the Energy Information Administration to provide
timely and accurate data about our Nation's energy usage and
policies. He's been asked to take over as Administrator at a
very consequential moment for our Nation's energy policies. If
confirmed, we'll be counting on him to provide the facts that
we and others need to make informed decisions, particularly
when shortcomings in our policies may be harming our refining
sector and impacting gasoline prices.
We welcome Ms. Burke. We count on the Department of the
Interior to manage our public lands and to facilitate the
production of our Nation's tremendous resource base. As the
Acting Assistant Secretary clearly you've got some knowledge of
what that requires. We're going to be counting on her to boost
domestic production on Federal lands, just as we've seen with
our State and our private lands. I look forward to hearing from
her exactly how we're going to accomplish that.
To Mr. Norris and Mr. Clark, I think it's very clear that
we depend on the FERC to make sure that our electricity supply
stays reliable and affordable to enable our Nation's pipeline
infrastructure to, likewise, be safe, dependable and reasonably
priced and to regulate hydroelectric facilities, licensing new
hydro dams when the opportunity presents itself, such as may be
the case in Alaska with our Watana project.
Mr. Chairman, I have not yet made up my mind about all of
the nominees. I have several questions to ask each of them
today ranging from issues such as wild lands initiative, the
BLM/OSM merger, take on world oil markets and views on how new
environmental regs may affect electric reliability.
So we've got a lot on the plate this morning. I look
forward to questions and answers from our nominees. Again,
welcome to all.
The Chairman. Now we'll call on our colleagues. Senator
Grassley and Senator Harkin, as I understand it, are here to
introduce John Norris and make a statement in support of his
nomination. Following that Senator Hoeven would like to make a
statement, as I understand it, of introduction for Tony Clark,
in support of his nomination.
So Senator Grassley, why don't you begin or Senator Harkin,
which ever order you prefer.
Senator Grassley.
STATEMENT OF HON. CHUCK GRASSLEY, U.S. SENATOR
FROM IOWA
Senator Grassley. Thank you, Senator Bingaman and Senator
Murkowski.
Obviously I'm here to support John Norris, as I was, two or
so years ago, to support his nomination. I'm very enthusiastic
this time, as I was last time, but more so because he's had two
or more successful years already serving in this position and
his re-nomination.
Mr. Norris was first nominated by President Obama. He was
confirmed December 24, 2009. I believe Commissioner Norris has
the necessary experience and understanding of our energy
markets to continue his service as a Commissioner on FERC.
As Commissioner, Mr. Norris has pursued his objective of
ensuring the consumers have access to reliable and efficient
energy services. Prior to his appointment he was Chief of Staff
for Secretary of Agriculture, Tom Vilsack. In March 2005, John
was appointed by then Iowa Governor, Tom Vilsack, to the 3
member Iowa Utilities Board and served as Chairman for 4 years,
2005 to 2009.
It was during this period of time of Iowa service he was
co-Chair of the 2009 National Electricity Delivery Forum. He
also served as member of the National Association of Utility
Commissioners, serving on the Electricity Committee and as a
member of the Demand Response Collaborative.
Before his service on the Iowa Utilities Board, John was
Chief of Staff to Governor Vilsack as well as Chief of Staff to
Iowa Congressman Leonard Boswell.
John received a BA degree from Simpson College, Indianola,
Iowa. He graduated with distinction from the University of Iowa
Law School in 1995.
I'm pleased to support John during his re-nomination
process. Hopefully it's one of these things that will rapidly
go through the Senate because it is a re-nomination.
Thank you.
The Chairman. Thank you for your statement, Senator
Grassley. We appreciate your views on the nominee.
Senator Harkin, go right ahead.
STATEMENT OF HON. TOM HARKIN, U.S. SENATOR FROM IOWA
Senator Harkin. Thank you very much, Chairman Bingaman and
Ranking Member Murkowski, members of this committee. Again, as
my colleague said, it's an honor to appear before this
committee to introduce and support John Norris, President
Obama's nominee to serve a new 5 year term as Commissioner of
the Federal Energy Regulatory Commission. There's no question
that Mr. Norris is superbly qualified to continue his service
in this critical regulatory responsibility.
I won't go over all the things that my colleague, Senator
Grassley, said about his background and just to note that he
has had important executive positions in the past. Of course,
Chair of the Iowa Utilities Board for 4 years from 2005 to
2009. He was also a Board Member, Secretary and President of
the Organization of Midwest Independent Operator States. As
Senator Grassley said he was also a member of the Demand
Responsive Collaborative of FERC and the National Association
of Regulatory Utility Commissioners and he serves today on the
Board of Directors of the National Regulatory Research
Institute.
I've know John Norris and his family since he was in high
school in Red Oak, where he was born and raised, a small, rural
town, where he was at one time, a Golden Gloves boxer. As
Senator Grassley said he was a former Chief of Staff to our
Governor, former Chief of Staff to Congressman Boswell. I might
also add that Senator Grassley didn't mention that in 1992 he
was the Director of my Iowa campaign when I ran for President,
although I urge members of the committee not to hold this
singular lapse of judgment against him.
[Laughter.]
Senator Harkin. Again, I've known him and his family, as I
said, since his high school and watched him in all these
capacities. He's just an excellent individual, obviously,
extremely smart, but also committed to public service. The one
thing I'm interested in and commend him to you for is that he
has a profound understanding of Energy Regulatory Policies and
their impacts on ordinary Americans, especially those who live
in small towns and rural America.
That's something that's really absolutely needed there. As
we look ahead to major shifts in our electricity systems in the
years ahead it will be valuable to have a Commissioner of
John's knowledge and expertise to help ensure fair and
equitable treatment of all parties, including consumers,
utilities, generators and transmission developers. I might also
add that last year, John helped shape and support an important
rulemaking at FERC that directs electric power industry to
address the regional planning and cost allocation of
transmission to better meet the transmission needs of our
country. This new order 1000 will expedite the development of
critical transmission systems by providing the framework for
regional planning as well as rules and guidelines for
addressing cost allocation.
I might also just say that I know he's going to introduce
them, but I'll beat him to the punch. His wife Jackie Norris is
here with their twin sons, Hunter and Cole and their son, Sam.
Jackie also I've known for a long time, a former schoolteacher
in Iowa. As a matter of fact a visitor to her classroom one
time in Perry, Iowa and then later when she taught in Ames. So
a long, long history on both of them of being dedicated public
servants.
So again, Mr. Chairman, members of the committee, I join
with my colleague in recommending a public servant of
exceptional intelligence, confidence and experience. I urge the
committee to send his nomination to the full Senate with a
unanimous recommendation.
The Chairman. Thank you both very much for your statements
and strong endorsements of the nominee and we appreciate that.
We will allow you to go on with your other responsibilities.
I know Senator Hoeven was going to make a statement at this
time of introduction and support for Tony Clark and his
nomination. Did you want to go ahead and do that?
Senator Hoeven. Yes, thank you, Mr. Chairman. Are you going
to have the witnesses come forward at this point?
The Chairman. Yes, as soon as we finish all the statements
we're going to bring them forward and have them take the oath
and make whatever statements they'd like.
Senator Hoeven. Alright.
The Chairman. If you'd like to wait til after that, we can.
Senator Hoeven. Why don't we do that and then I'll
introduce Tony once he's at the----
The Chairman. Alright. Why don't we ask all the 4 nominees
to please come forward and we will administer the Oath of
Office.
It's not the, excuse me, it's not the Oath of Office,
it's----
[Laughter.]
The Chairman. I was getting ahead of myself.
[Laughter.]
The Chairman. Let me ask each of you to stand and raise
your right hand.
Do you solemnly swear that the testimony you're about to
give to the Senate Committee on Energy and Natural Resources
shall be the truth, the whole and nothing but the truth?
[Witnesses sworn.]
The Chairman. Please be seated.
Before you begin your statement I'll ask 3 questions that
I'll address to each nominee and that we, as a committee,
always address to each nominee that comes before our committee.
The first question. Will you be available to appear before
this committee and other congressional committees to represent
departmental positions and to respond to issues of concern to
the Congress?
Mr. Sieminski.
Mr. Sieminski. I will.
The Chairman. Ms. Burke.
Ms. Burke. I will.
The Chairman. Mr. Norris.
Mr. Norris. I will.
The Chairman. Mr. Clark.
Mr. Clark. I will.
The Chairman. Alright.
Second question. Are you aware of any personal holdings,
investments or interests that could constitute a conflict of
interest or create the appearance of such a conflict should you
be confirmed and assume the office to which you have been
nominated by the President?
Mr. Sieminski.
Mr. Sieminski. My investments, personal holdings and other
interests have been reviewed both by myself and the appropriate
ethics counselors within the Federal Government. I have taken
appropriate action to avoid any conflicts of interest. There
are no conflicts of interest or appearances thereof to my
knowledge.
The Chairman. Thank you.
Ms. Burke.
Ms. Burke. My investments, personal holdings and other
interests have been reviewed both by myself and the appropriate
ethics counselors within the Federal Government. I have taken
appropriate action to avoid any conflicts of interest. There
are no conflicts of interest or appearances thereof to my
knowledge.
The Chairman. Thank you very much.
Mr. Norris.
Mr. Norris. Thank you. My investments, personal holdings
and other interests have been reviewed by both myself and the
appropriate ethics counselors within the Federal Government. I
have taken appropriate action to avoid any conflicts of
interest. There are no conflicts of interest or appearances
thereof to my knowledge.
The Chairman. Thank you.
Mr. Clark.
Mr. Clark. Thank you. My investments, personal holdings and
other interests have been reviewed by both myself and
appropriate ethics counselors within the Federal Government.
I've taken appropriate action to avoid any conflicts of
interest. There are no conflicts of interest or appearances
thereof to my knowledge.
The Chairman. Thank you all for your answers.
The third question we ask is are you involved or do you
have any assets that are held in a blind trust?
Mr. Sieminski.
Mr. Sieminski. No, I do not.
The Chairman. Ms. Burke.
Ms. Burke. No, Mr. Chairman.
The Chairman. Mr. Norris.
Mr. Norris. No, I do not.
The Chairman. Mr. Clark.
Mr. Clark. No, Mr. Chairman.
The Chairman. Alright. At this point it's our tradition to
invite nominees to introduce any family members they would like
to introduce before we go on to hear their statements.
Mr. Sieminski, did you have anyone you wanted to introduce?
Mr. Sieminski. Thank you very much, Senator. My wife, Lori,
my son, Adam and my daughter, Ellen and her husband, John are
here and a bunch of friends in the back, Senator.
The Chairman. Alright, well we welcome all of them.
Ms. Burke, did you have anyone you wish to introduce?
Ms. Burke. Yes, thank you, Mr. Chairman.
I'd like to introduce my cousin, Dr. Jacqueline Henry and a
number of my colleagues from the Department. Thank you.
The Chairman. Thank you very much.
Mr. Norris, did you have anyone you want to introduce?
Mr. Norris. Yes, thank you, Mr. Chairman.
I have my 3 sons here, Hunter, Cole and Sam Norris, and my
wife, Jackie, with me today.
The Chairman. Alright. We welcome all of them to the
hearing.
Mr. Clark, did you have anyone that you want to introduce?
Mr. Clark. I understand that my kids are getting out of
school today to watch on the Internet. So they're back home in
Bismarck and weren't able to make the trip this time.
The Chairman. Alright. We hate to be the cause of anyone
missing school, so.
[Laughter.]
The Chairman. Why don't we go ahead with opening
statements? If each of you could make your opening statement,
of course your full opening statement will be made part of the
record, but if you could give us the short--oh, Senator Hoeven,
did you want to go ahead and make your statement with regard to
Mr. Clark at this point?
STATEMENT OF HON. JOHN HOEVEN, U.S. SENATOR FROM NORTH DAKOTA
Senator Hoeven. Thank you, Mr. Chairman. I appreciate that.
I'm very pleased to introduce to the committee today, Tony
Clark. Tony has a distinguished career in North Dakota. I'm
very pleased that he's been nominated for the position on the
FERC.
Tony and I have known each other for many years. I'm not
sure just how long, but he started his career in public service
in our legislature. He was elected to the legislature from
Fargo and did an outstanding job in the North Dakota
legislature.
Subsequent to that he was then appointed Labor Commissioner
by Governor Ed Schafer, who was Governor right before I was
Governor and did a fine job in that post as well.
Tony and I actually spent a fair amount of time together on
the campaign trail. He ran for office for the Public Service
Commission in 2000 which is the year that I first ran for
Governor. So we traveled the State and I got to know Tony very
well and see him not only in the context of talking to the
public and interacting with the citizens of our State, but also
in a private, one on one context as well. He's always
demonstrated great judgment, great integrity and great
character.
As a matter of fact as we'd go around we used to all give
presentations. I think that year we had about 14 candidates for
State-wide offices, something like that, maybe it was 12. I
can't remember exactly.
But we'd all make our presentations and whenever my wife,
Mikey, watched all the presentations, you know, afterwards
sometimes I'd after I finished up I'd, you know, come and ask
her, well how did I do? She'd say either, you know, OK or
terrible, depending on how I did that day, but--or good. But
invariably she'd comment on how well Tony did addressing the
public and encourage me to kind of watch him and develop some
of his techniques. That's a true story. She really did.
But he served on the PSC now for a dozen years, Public
Service Commission, in North Dakota for two full terms, two 6-
year terms including serving as the chairman of our Public
Service Commission. Outstanding job.
He has also been elected by his peers as the President of
the National Association of Regulatory Utility Commissioners
which is not only a tremendous honor, but really demonstrates
what his peers think of him. All 50 States across the country
elected him to that position. He's just finishing his service
in that position.
The other and final comment that I would make is it's not
just reflective of his abilities that he was elected the
National President of the NARUC, but it also means that he
brings to this job with the FERC a working knowledge and
relationship with regulators across the country, as well as
companies across the country that are working to produce more
energy for all Americans. I think when you think about the FERC
and what they need to do and the challenges that we face in
energy right now, I think that that is a tremendous background
and exactly the kind of grassroots background we need. Not only
that experience at the local level, but the knowledge and the
relationships that he has across the country that he's
developed in his role as the National President.
So I'm very pleased today to welcome, to introduce and
welcome, Tony Clark to this hearing.
Thank you, Mr. Chairman.
The Chairman. Thank you very much for your strong
statement. Let me also just mention that I have a statement
that Senator Conrad provided indicating that he was not able to
come today, but strongly supports this nomination as well and
wanted that to be noted.
Why don't we go ahead now?
Mr. Sieminski, why don't you make your statement and then
we'll go just down the line and hear from each of the nominees?
TESTIMONY OF ADAM SIEMINSKI, TO BE ADMINISTRATOR OF THE ENERGY
INFORMATION ADMINISTRATION
Mr. Sieminski. Mr. Chairman, Ranking Member Murkowski,
distinguished members of the committee, it's an honor and a
privilege to appear before you today as President Obama's
nominee for Administrator of the Energy Information
Administration. I'm grateful to the President and to Secretary
Chu for their confidence entrusting me with this important
assignment. I'd also like to thank my family and friends for
their constant support.
If confirmed by the Senate I will bring to this position
the experience of 40 years of energy research and analysis.
I've spent my career drawing on a wide variety of government,
academic, NGO and industry sources in an effort to understand
and be able to explain the ever changing energy markets with a
particular focus on petroleum and refined products and natural
gas. To be confirmed for this position would be the highpoint
of my career.
As a customer of EIA for virtually my entire professional
career, I can attest to the fact that EIA's mission is as
critical today as it was when it was created by Congress in
1977 as the Nation's premier source of unbiased energy data
analysis and forecasting. EIA is required by law to prepare its
products independently of policy positions taken within the
Federal Government. As an analyst in investment research I
fully understand the critical need for independence in
preparation and delivery of products like this.
Energy is a complex subject touching every aspect of daily
life and the overall economy involving a wide variety of
technologies and deeply affecting our interactions with the
rest of the world. Understanding the situation here and abroad
is critical, especially with regard to oil and gas and
increasingly diesel and gasoline trade. In the U.S. the
collection of energy information straddles numerous regulatory
authorities.
EIA is uniquely qualified to deal with the complications
that arise from this structure to make sure that the data is
relevant, timely and accurate and that the analyses are
performed with integrity, that data and projections are
available widely. I valued these qualities as a user of EIA's
output. If confirmed would do my utmost to ensure its
continuing credibility.
This is a sector where capital investments of billions of
dollars are made in long lived infrastructure projects. I'm
acutely aware of the significance of those investments that
supplies equally to mature elements of the sector as it does to
emerging technologies such as renewable energy, energy storage,
smart grids and natural gas fueled vehicles. Understanding
structural change in trends and efficiency on the part of
consumers is also key. Ensuring the quality and timeliness of
the data and focusing on EIA's finite resources on those
elements that provide the most value to EIA stakeholders will
be my highest priority.
I've watched the transition from price controls to open
access competitive energy markets that we see today. EIA
statistics and analysis have been invaluable in understanding
these shifts, particularly in the natural gas industry from the
early restructuring days to taking on the storage report which
is a national economic indicator for the current dramatic
transformation on the supply side. The resource base and
technology that revitalized natural gas is now on the verge of
playing a similar role in oil production. EIA is now being
called on to provide insights as policymakers grapple with
these changes.
If confirmed as EIA Administrator I would carry on the work
started by recent administrators to understand and assess the
interrelated roles played by fundamentals, financial market
behavior and other factors in energy price formation.
If confirmed I look forward to working with members of this
committee and others both inside and outside of government in
order to improve the information and analytical base used for
making sound energy decisions, in doing so I will draw on a
vast network of experts from energy, economic communities and
will strive to raise public understanding of these issues.
Finally, Senator Murkowski I want you to know that I got my
start in the energy sector as a draftsman for the Golden Valley
Electrical Association in Fairbanks, Alaska during the summer
of 1968. My first job in Washington was following air pollution
policy and investment issues after the passage of the Clean Air
Act in 1970. More recently I contributed to my former company's
efforts in carbon markets, renewable energy and clean energy
investment.
I understand the important roles of all of our fuels are
playing in delivering energy to consumers. I look forward to
answering any questions the members of the committee may have
either now at this hearing or in writing for the record. Thank
you very much.
[The prepared statement of Mr. Sieminski follows:]
Prepared Statement of Adam Sieminski, Nominee To Be Administrator of
the Energy Information Administration
Mr. Chairman, Ranking Member Murkowski, distinguished members of
the Committee--it is an honor and a privilege to appear before you
today as President Obama's nominee for Administrator of the Energy
Information Administration. I'm grateful to the President and to
Secretary Chu for their confidence in trusting me with this important
assignment. If confirmed by the Senate, I will bring to the position
the experience of 40-years of energy research and analysis. I have
spent my career drawing on a wide variety of government, academic, NGO,
and industry sources in an effort to understand, and be able to
explain, the ever-changing energy markets, with a particular focus on
petroleum, refined product and natural gas markets. To be confirmed for
this position would be the high point of my career.
As a customer of EIA for virtually my entire professional career, I
can attest to the fact EIA's mission is as critical today as when it
was created by Congress in 1977. As the Nation's premier source of
unbiased energy data, analysis and forecasting, EIA is required by law
to prepare its products independently of policy positions taken within
the Federal Government. As an analyst in investment research, I fully
understand the critical need for independence in its preparation and
delivery.
Since 2006 when I was appointed to the National Petroleum Council
(NPC) by former Energy Secretary Bodman, I have been engaged in the
work of the NPC, starting with the 2007 Global Oil and Gas Study, The
Hard Truths, as well as its 2011 report, Prudent Development, requested
by Energy Secretary Chu, which deals with ways to realize the potential
of North America's abundant natural gas and oil resources. As the NPC
and virtually everybody who has ever looked at these issues emphasizes,
the American people are very concerned about energy--its availability,
reliability, cost, and environmental impact.
Energy is a complex subject, touching every aspect of daily life
and the overall economy, involving a wide variety of technologies, and
deeply affecting our interaction with the rest of the world.
Understanding the situation both here and abroad is critical,
especially with regard to oil and, increasingly, diesel and gasoline
trade. In the US, the collection of energy information straddles
numerous regulatory authorities. EIA is uniquely qualified to deal with
the complications that arise from this structure and to make sure that
the data is relevant, timely and accurate, that the analyses are
performed with integrity, and that the data and the projections are
available widely. I valued these qualities as a user of EIA's output,
and if confirmed would do my utmost to ensure its continuing
credibility.
This is a sector where capital investments of billions of dollars
are made in long lived infrastructure projects. I am acutely aware of
the significance of those investments. This applies equally to mature
elements of the sector as it does to emerging technologies such as
renewable energy, energy storage, smart grids, and natural gas fueled
vehicles. Understanding structural change and trends in efficiency on
the part of energy consumers is also key. Ensuring the quality and
timeliness of data and focusing EIA's finite resources on those
elements that provide the most value to EIA's stakeholders will be my
highest priorities.
I have watched the transition from price controls to the open-
access competitive energy markets we see today. EIA's statistics and
analysis have been invaluable to understanding the shifts in the
natural gas industry from the early restructuring days to taking on the
storage report--a national economic indicator--to the current dramatic
transformation on the supply side. The resources base and technology
that revitalized natural gas now appear on the verge of playing a
similar role in oil production. EIA is now being called on to provide
insights as policymakers grapple with these changes.
As EIA Administrator, I would carry on the work started by recent
Administrators to understand and assess the interrelated roles played
by fundamentals, financial market behavior and other factors in energy
price formation. If confirmed I look forward to working with members of
this committee and others both inside and outside of government in
order to improve the information analytical base used for making sound
energy decisions. In doing so, I will draw on a vast network of experts
from the energy economics community and will strive to raise public
understanding of these energy issues.
Finally I want to note that I got my start in the energy sector as
a draftsman for the Golden Valley Electrical Association in Fairbanks,
Alaska, during the summer of 1968. My first job in Washington was
following air pollution policy and investment issues after the passage
of the Clean Air Act of 1970. More recently, I contributed to my former
company's efforts in carbon markets, renewable energy, and clean energy
investing. I understand the important roles that all of our fuels are
playing in delivering energy to consumers.
I look forward to answering any questions members of the Committee
may have--either now at this hearing or in writing for the record.
Thank you.
The Chairman. Thank you very much.
Ms. Burke, go right ahead.
TESTIMONY OF MARCILYNN A. BURKE, ASSISTANT SECRETARY-DESIGNATE,
DEPARTMENT OF THE INTERIOR
Ms. Burke. Thank you, Mr. Chairman, Senator Murkowski and
members of the committee. It is an honor and a privilege to
appear before you today as President Obama's nominee for the
position of Assistant Secretary for Land and Minerals
Management at the U.S. Department of the Interior. I have
appeared before this committee several times for legislative
and oversight hearings. I appreciate the opportunity to come
before you today for consideration of my nomination.
Before I begin I would like to thank President Obama for
the confidence he has shown in me through this nomination. In
addition I would like to express my deep appreciation to
Secretary Salazar for his unwavering support of me and his
steadfast leadership at the Department. Finally I want to thank
my family and friends for their support, love and guidance.
I was born in Raleigh, North Carolina, the second of two
children. I attended public schools in North Carolina and
graduated from the University of North Carolina at Chapel Hill.
I obtained my law degree from Yale Law School.
My parents, Doris and Johnnie Burke, who are unable to be
here with me today, spent their careers as public school
educators. At a young age I came to appreciate the value of
education both as a tool for personal growth and as a means of
helping others to achieve their potential. In addition to my
love for education I have a passion for the law. After
practicing law in a variety of areas, my interest in the law
and education merged and led to a law teaching career.
It was from my position as an Associate Professor of Law at
the University of Houston Law Center that I first came to the
Department. When called to become the Bureau of Land
Management's Deputy Director for Programs and Policy in 2009 it
was a great honor and opportunity for someone who had spent the
last 8 years teaching about the management of Federal lands.
During my tenure with the Department of the Interior I've been
able to work on a variety of complex and challenging natural
resources issues.
Diverse as they have been, these issues share certain
characteristics.
First, they almost never lend themselves to easy solutions.
Second, their resolution requires a thoughtful, balanced
approach that is informed by the needs and perspectives of our
stakeholders both here in Washington and throughout the Nation.
Third, they have real and direct consequences for the
places where people live, work and play.
I recognize and appreciate the importance of the Office of
the Assistant Secretary for Land and Minerals Management. The
Bureaus over which the Assistant Secretary has administrative
oversight span a vast geographical distance and encompass a
wide spectrum of responsibilities. I am committed to the
Administration's ``All of the Above? approach to developing
conventional and renewable energy resources in the right places
in the right way. That means that we are always mindful of our
responsibilities as stewards for other natural resources as
well as cultural resources.
I'm keenly aware of the events that surrounded the Deep
Water Horizon oil spill. I stand ready to continue to provide
leadership and policy guidance to the Bureau of Ocean Energy
Management and the Bureau of Safety and Environmental
Enforcement. As we strive to improve how we fulfill our
responsibilities to promote safe and environmentally sound,
offshore energy development.
By virtue of my tenure as the Deputy Director of the BLM, I
am well acquainted with the competing demands of our public
lands. In meeting its multiple use mission the BLM must balance
a wide array of uses and resources from mining to energy, to
grazing, to timber harvesting, to recreation, to the protection
of unique, special and sensitive cultural and archeological
resources, as well as land species and habitats.
Finally, I appreciate and support the mission of the Office
of Surface Mining Reclamation and Enforcement. As it works
closely with States, tribes, industry, coal mining communities
and public interest groups. Its nationwide program to protect
society and the environment from adverse effects of surface
coal mining operations while balancing the need for coal
production as a part of our energy portfolio is vitally
important.
The opportunity to serve at the Department of the Interior
stands alone among my professional experiences. It has been the
most challenging, rewarding and enjoyable professional
experience of my life. If confirmed, I would look forward to
working with this committee and continuing this important work
with a deep understanding of the awesome responsibility that we
have as public servants to manage the lands and waters in our
care.
Thank you for the opportunity to appear before you today.
I'm happy to answer any questions.
[The prepared statement of Ms. Burke follows:]
Prepared Statement of Marcilynn A. Burke, Assistant Secretary-
Designate, Department of the Interior
Chairman Bingaman, Senator Murkowski, and Members of the Committee,
it is an honor and a privilege to appear before you today as President
Obama's nominee for the position of Assistant Secretary for Land and
Minerals Management at the U.S. Department of the Interior. I have
appeared before this Committee several times for legislative and
oversight hearings on public land management issues, and I appreciate
the opportunity to come before you today for consideration of my
nomination.
Before I begin, I would like to thank President Obama for the
confidence he has shown in me by nominating me for this important
position. In addition, I wish to express my deep appreciation to
Secretary Salazar for his unwavering support of me and his steadfast
leadership of the Department. Finally, I want to thank my family and
friends for their support, love, and guidance. My gratitude to them
knows no bounds; without them, I would not be here today.
I was born in Raleigh, North Carolina, the second of two children.
I attended public schools in North Carolina and graduated from the
University of North Carolina at Chapel Hill with a bachelor's degree in
International Studies. I obtained my law degree from Yale Law School.
My parents, Doris and Johnnie Burke, who are unfortunately unable to be
here today, spent their careers as public school educators. As a result
of the example set by my parents, I came to appreciate the value of
education--both as a tool for personal growth and as a means of helping
others to achieve their potential. In addition to my love for
education, I have a passion for the law. After practicing law in a
variety of areas, including environmental law, antitrust, and civil and
criminal litigation, my interest in law and education merged and led to
a law teaching career.
It was from my position as an Associate Professor of Law at the
University of Houston Law Center that I first came to the Department of
the Interior. When called to become the Bureau of Land Management's
Deputy Director for Programs and Policy in 2009, it was a great honor
and opportunity for someone like me who had spent the past 8 years
teaching in the areas of property law, land use law, and the management
of Federal lands and its natural resources.
My professional experiences, both in teaching and in private law
practice, have honed in me a natural instinct to listen and learn
first, before making recommendations or decisions. These instincts are
further reinforced by my sincere belief in the value of collaboration,
consensus building, and transparency in the development and
implementation of policies governing the management of the public lands
and waters. During my tenure with the Department of the Interior, I
have been able to work on a wide variety of complex and challenging
natural resources issues. Diverse as they have been, these issues share
certain characteristics. First, they almost never lend themselves to
easy solutions. Second, their resolution requires a thoughtful,
balanced approach that is informed by the needs and perspectives of our
stakeholders, both here in Washington and throughout the Nation. Third,
they have real and direct consequences for the places where people
live, work, and play. I recognize and appreciate the importance of the
Office of the Assistant Secretary for Land and Minerals Management. The
bureaus over which the Assistant Secretary has administrative oversight
span a vast geographical distance and encompass a wide spectrum of
responsibilities. I am committed to the Administration's ``all of the
above'' approach to developing conventional and renewable energy
resources both onshore and offshore, in the right places and in the
right way. That means that we are always mindful of our
responsibilities as stewards for other natural as well as cultural
resources. And if confirmed, I would be ready to help advance Secretary
Salazar's ``Smart from the Start'' approach to the development of
energy resources, both on-and offshore.
I am keenly aware of the tragic events surrounding the Deepwater
Horizon explosion and oil spill. I stand ready to continue to provide
leadership and policy guidance to the Bureau of Ocean Energy Management
and the Bureau of Safety and Environmental Enforcement as we strive to
improve how we fulfill our responsibilities to promote safe and
environmentally sound offshore energy development.
By virtue of my tenure with as a Deputy Director of the Bureau of
Land Management (BLM), I am well acquainted with the myriad of
competing demands that are placed on our public lands. As a result of
significant population growth in the West over the past several
decades, the need for balanced, consensus-based public land management
has never been greater. In meeting its multiple use mission, the BLM
must balance a wide array of uses and resources--from mining; to
energy--conventional and renewable--to grazing; to timber harvesting;
to recreation; to the protection of unique, special, and sensitive
cultural and archeological resources, land, species, and habitats.
Finally, I appreciate and support the mission of the Office of
Surface Mining Reclamation and Enforcement as it works closely with
states, tribes, industry, coal mining communities, and public interest
groups. Its nationwide program to protect society and the environment
from the adverse effects of surface coal mining operations, while
balancing the need for continued coal production as part of our energy
portfolio is vitally important.
The opportunity to serve at the Department of the Interior stands
alone among my professional experiences. It has been the most
challenging, rewarding, and enjoyable professional experience of my
life. If confirmed, I would look forward to working with this Committee
and continuing this important work with a deep understanding of the
awesome responsibility that we have as public servants to manage the
lands and waters in our care. Thank you for the opportunity to appear
before you today. I would be happy to answer any questions.
The Chairman. Thank you very much.
Mr. Norris.
TESTIMONY OF JOHN R. NORRIS, TO BE A MEMBER OF THE FEDERAL
ENERGY REGULATORY COMMISSION
Mr. Norris. Thank you, Chairman Bingaman, Ranking Member
Murkowski, Senator Hoeven. I'm honored to be here today to
appear before this committee. I also want to express my
appreciation to President Obama for nominating me to the
Federal Energy Regulatory Commission. Thank you, Chairman
Bingaman and Ranking Member Murkowski, for scheduling this
hearing here today.
I also want to acknowledge and thank my two great Senators
from Iowa, who took the time today to introduce me and just say
how much I appreciate, admire and respect their many years of
service to Iowans and this country. It's an honor to have them
here on my behalf.
I'm also pleased to be here with my fellow nominee to the
FERC, Tony Clark. I've known Tony since I was on the State
Public Service Commissioner of Iowa's Utilities Board in 2005.
I have a great respect for both his abilities and his long time
commitment to public service. I look forward, hopefully if
given the opportunity, to serve with him at the Commission.
I enjoyed my 2 years in the Commission. I'll enjoy even
more having a full term in 5 years. So let me just say and I
know we have a lot of issues you want to talk about.
So I'll make this brief and just say, I think the 2 years
I've had at the Commission, my 4 years as chairman of a State
public service commission. As the Senators noted, I worked both
in the district and on Capitol Hill for a Member of Congress,
Members of Congress. I've worked in the executive branch of
State government and Federal Government.
I have worked for a non-profit sector during the farm
crisis in Iowa in the 1980s. I've owned my own business and ran
my own business with 20 plus employees. So I get what it means
to have government regulations.
Maybe most importantly I grew up on a family farm in Iowa
and consider my degree, the best degree, to be in common sense
where you kind of learn in the end stuff has to work. I bring
that to this experience. Those many lab experiences that I
think are an asset to being a regulator to get different
perspectives of what you do and how it impacts folks because we
can talk about policy and due process and a number of factors
in this regulatory arena, but when you throw physics on the
table as well and in the end it has to work. That's what I
strive to do at FERC is make this a reliable system that's as
cost efficient and effective as possible. I will continue to
strive to do that.
I also, since my first month at the State Commission in the
State of Iowa and to this day on my desk calendar you have on
your desk, I write at the top of that calendar, the uncompleted
sentence. This decision affects--benefits the consumer because,
dot, dot, dot. Every decision I make I want to be able to
provide a reasonable answer to that question.
So that drives my thinking. How this benefits the consumer
and how this helps maintain a reliable infrastructure for an
energy system that is so important for our economy and health
and safety of our citizens. I would greatly appreciate the
opportunity to have a full term to continue that work.
Thank you very much.
[The prepared statement of Mr. Norris follows:]
Prepared Statement of John R. Norris, Nominee To Be a Member of the
Federal Energy Regulatory Commission
Chairman Bingaman, Ranking Member Murkowski, and distinguished
members of the Committee, I am honored to be here today as a nominee
for the Federal Energy Regulatory Commission (FERC). I would like to
express my appreciation to President Obama for nominating me to this
position and I want to thank Chairman Bingaman and Ranking Member
Murkowski for holding this hearing.
I am also pleased to be here today with my fellow FERC nominee,
Tony Clark. I have known and worked with Mr. Clark since my time as
Chairman of the Iowa Utilities Board, beginning in 2005, and I have the
highest regard for his abilities and his long-time commitment to public
service.
I am grateful to have had the opportunity to serve my country the
past two years as a member of the Federal Energy Regulatory Commission.
I would be honored if allowed to serve an additional, full five-year
term. The energy issues we are working on at FERC are critical to
America's economy and to the safety and well-being of our citizens. I
believe the experience I have gained in the past two years, along with
my years as Chairman of the Iowa Utilities Board, are assets that I
would bring to further service. In addition, I have worked for the U.S.
Congress, and in both the state and federal executive branches, all of
which provided important experiences that help me weigh policy choices.
I also believe my experiences outside of government have given me
valuable perspective that I bring to the Commission. For example, as a
small business owner, I had to understand and comply with government
regulations. And, perhaps most importantly, I earned a ``degree'' in
``common sense'' growing up working on our family farm, and that
experience has always and will always ground my judgment and decision-
making. When it comes to making any decision, but particularly when it
comes to our energy infrastructure, I am grounded in the realization
that, in the end, it has to work.
While we can debate economics, due process, and other important
issues with policy implications, in the industries we regulate, physics
provides a reality check on what we can do if we want our complex,
interconnected energy infrastructure to work. I strive to find the
correct balance among economics, due process, and the limits and
reality of the physics in all decisions before me. However, every month
of my service at the Iowa Utility Board and as a Commissioner at FERC,
I write one question on top of my desk calendar to answer for in every
decision I make: ``How does this decision benefit the consumer?''
I believe, for example, that consumers benefit from a reliable and
efficient electric grid. I believe they also benefit when there is an
open and honest discussion of the costs to maintain a reliable grid.
So, I take very seriously FERC's responsibility under the Federal Power
Act to work with the North American Electric Reliability Corporation
(NERC) to develop and enforce reliability standards, and have worked to
help strengthen our relationship with NERC and its stakeholders and
foster an open and transparent dialogue of critical bulk power system
reliability issues.
I have also worked to achieve for the benefit of consumers the
efficiencies of a fair and transparent wholesale competitive market,
and to see that consumers are protected from harm through the firm and
fair enforcement of rules prohibiting market manipulation under
legislation enacted by Congress in 2005.
I believe we have made progress during my time at FERC to increase
efficiencies in the transmission of electricity to consumers, but more
work remains to be done. Open and transparent regional transmission
planning processes that include a diverse set of interests and that
find the most efficient solutions for maintaining reliability,
relieving economic congestion, and meeting public policy directives
will yield a more efficient and cost-effective supply of energy for
consumers. I also believe there are efficiencies to be gained from
increased coordination among regions to find locations where jointly
planned and constructed transmission facilities, with a fair allocation
of the costs of those facilities among benefiting consumers, will
result in a more efficient energy system.
In addition to our nation's existing energy assets, I believe the
United States has tremendous potential to make our energy supplies more
sustainable and secure. The increased supply of natural gas from shale
gas discoveries, technology advancements that are bringing down the
costs of wind, solar and other renewable resources, an abundance of
hydroelectric power, and the continued push for energy efficiency and
demand side resources all hold great promise to modernize our
infrastructure and build a sustainable energy system for the future of
America. With much of our energy infrastructure quite old and in need
of upgrading or replacement, the timing is right to seize this
potential.
At FERC, we can help seize this potential not only through the
wholesale electric market and electric transmission policies I note
above, but also by continuing to build on our impressive track record
of fairly and efficiently siting needed natural gas pipeline
infrastructure, by providing flexible licensing procedures for new
hydroelectric technologies, and taking other steps to ensure that new
energy infrastructure can be brought online at just and reasonable
rates. My continued goal will be to make sure we meet our needs for
today and the future in the most efficient way possible, for the
benefit of consumers and America's economy.
Thank you again for the opportunity to testify before you today and
I am happy to answer any questions you may have.
The Chairman. Thank you very much.
Mr. Clark, go right ahead.
TESTIMONY OF ANTHONY CLARK, TO BE A MEMBER OF THE FEDERAL
ENERGY REGULATORY COMMISSION
Mr. Clark. Thank you, Chairman Bingaman, Ranking Member
Murkowski, Senator Hoeven and members of the committee. I'm
greatly honored to be before you today as a nominee for the
FERC. I'd like to thank President Obama for nominating me and
I'd like to thank Senator McConnell for his support as well.
I'm especially pleased to acknowledge my own two Senators
from North Dakota. Senator Hoeven, thank you for your kind
words and Senator Conrad's support both means a great deal to
me.
Last, but most importantly, I want to acknowledge my
family, who has been so supportive of my career in public
service. To my wife, Amy, our 3 boys, Thomas, Alex and Michael
and to my parents, they've always been there for me. As I
indicated the distance between North Dakota and Washington
prevents them from being here in person today. But I did want
them to know how much they mean to me.
FERC does extremely important work on behalf of the
American people. Its work plays a critical role in protecting
our energy consumers and the infrastructure that provides them
with some of the necessities of life in the modern world. If
confirmed for the Senate I'd look forward to putting to good
use the experiences that I've gained over the last,
approximately, 18 years. I've had the tremendous honor of
serving the people in North Dakota since I was in my early 20s.
First as a State Legislator, then as a State employee, the head
of a cabinet level agency and for the last 12 years, as a
member of the Public Service Commission, the State's top
utility regulatory body.
Perhaps the best way to introduce my experience to the
committee is to tell the story of North Dakota over the last
decade. Since January 2001, I've served as the Public Service
Commissioner for the State and I'm currently the Senior Member
and Chairman of the NDPSC. When I first joined the Commission
our State had a regionally important energy sector comprised of
several base load lignite-fired power plants and one large
Western Area Power Administration hydro dam.
In the year 2000, North Dakota was effectively 50th in wind
energy production with no commercial wind energy. As recently
as 2006, we were the Nation's ninth largest oil producing
State. What a difference a few years has made in the life of my
home State.
Today North Dakota is amongst the top ten wind energy
producing States with approximately 1,400 megawatts of
commercial capacity. We've sited or in the process of siting
hundreds of miles of new electric transmission line. North
Dakota is a leader in clean coal and innovative carbon capture
and sequestration projects.
Hundreds of millions of dollars have been invested in oil
and gas pipelines and processing infrastructure. It was just
announced that North Dakota is now the Nation's third largest
oil producing State and is expected to be second only to Texas
within as little as a year. North Dakota has truly become an
example of an ``All of the Above'' energy State.
Much like the FERC at the Federal level, the NDPSC is the
lead regulatory agency at the State level for jurisdictional
matters related to investor owned utilities, pipelines and the
siting of energy development projects. In my tenure in office
I've participated in proceedings that have authorized
approximately $6 billion in energy infrastructure projects.
Having a hands on experience in helping to regulate and shape
energy policy during this period of rapid change has given me
insights into both the opportunities and the challenges
associated with energy development. It's this unique experience
that I hope to bring to the Commission should I be confirmed.
Another experience that I've had, and Senator Hoeven
indicated some of it, which was the, my tenure as President at
NARUC, the National Association of Regulatory Utility
Commissioners. Within NARUC, I worked hard to ensure that all
voices were heard successfully working across regional lines,
philosophical lines, party lines for consensus oriented
solutions that I hope benefited our Nation's consumers. The
experience, perhaps more than any other one that someone could
have, has deepened my respect for and my understanding of the
regional diversity that exists across this country.
If I'm confirmed, I hope to take this broad understanding
of how energy regulation works at both the State and Federal
level with me to the FERC. It's probably safe to say that
there's not a single State across the country with which I have
not had at least some interaction. Should I be confirmed I will
be a much better commissioner for that experience.
Mr. Chairman and members of the committee, the FERC has big
issues ahead of it. Developing infrastructure in the right way,
facilitating American's access to affordable, reliable,
environmentally responsible forms of energy, protecting our
Nation's critical assets, these are all top of mind issues for
me as I know they are for you. If confirmed, I look forward to
engaging with you on these important issues and would be happy
to provide whatever expertise I may have in the furtherance of
your important work.
Mr. Chairman, that concludes my testimony. I'd be happy to
answer any questions you may have.
[The prepared statement of Mr. Clark follows:]
Prepared Statement of Anthony Clark, Nominee To Be a Member of the
Federal Energy Regulatory Commission
Thank you Chairman Bingaman, Ranking Member Murkowski and members
of the Committee. I am greatly honored to be before you today as a
nominee for the Federal Energy Regulatory Commission (FERC). I would
like to thank President Obama for nominating me. I also wish to thank
Senator McConnell for his support. And I am especially pleased to
acknowledge my own two Senators from North Dakota. Senator Hoeven's and
Senator Conrad's support means a great deal to me, and I appreciate
their kind words regarding my nomination. Last, but most importantly, I
want to acknowledge my family, who has been so supportive of my career
in public service. To my wife, Amy and our three boys Thomas, Alex and
Michael, and to my parents; you have always been there for me. The
distance between North Dakota and Washington, DC keeps them from being
able to be here in person today, but I know they are with me in spirit
and are watching on the Internet and I just wanted them to let know how
much they mean to me.
FERC does extremely important work on behalf of the American
people. Its work plays a critical role in protecting our energy
consumers and the infrastructure that provides them some of the basic
necessities of life in the modern world. If confirmed by the Senate, I
would look forward to putting to good use the experiences I have gained
over the last approximately 18 years. I have had the tremendous honor
of serving the people of North Dakota since I was in my early 20's;
first as a state legislator, then as a state employee, the head of a
cabinet-level agency, and for the last nearly 12 years as a member of
the state's top utility regulatory body.
Perhaps the best way to introduce my experience to the committee is
to tell the story of North Dakota over the last decade. Since January
2001, I have served as a Public Service Commissioner for the state of
North Dakota and today I am the senior member and Chairman of the North
Dakota Public Service Commission (NDPSC). When I first joined the
NDPSC, our state had a regionally important energy sector, comprised of
several base load lignite-fired power plants, and one large Western
Area Power Administration hydro dam. In the year 2000, North Dakota was
effectively 50th in wind energy production, with no commercial wind
farms. And as recently as 2006, North Dakota was the nation's 9th
largest oil producing state.
What a difference a few years have made in the life of my home
state. Today, North Dakota is amongst the top 10 wind energy producing
states, with approximately 1,400 MW of capacity. We have sited, or are
in the process of siting, hundreds of miles of new electric
transmission lines. North Dakota is a leader in clean coal and
innovative carbon capture and sequestration projects. Hundreds of
millions of dollars have been invested in oil and gas pipelines and
processing infrastructure. And it was just announced that North Dakota
is now the nation's third largest oil producing state, and is expected
to be second only to Texas within as little as a year. When taken
together with our large biomass and biofuels potential, North Dakota
has truly become an example of an ``all-of-the-above'' energy state.
As Senator Hoeven has often said, both as our Governor and now as
our Senator, this dynamic energy economy is the result of not only
North Dakota's god given natural resources, but also having the right
legal, tax and regulatory climate in place. In my current job, I cannot
take much credit for our legal and tax policy. I can report the NDPSC
has a lot to say about regulatory policy. In authorizing projects, we
take pride in not cutting corners. In many ways, we have some of the
most comprehensive policies related to what is expected of projects in
terms of mitigating impacts on the welfare of citizens and on our
state's natural, cultural and historic resources. At the same time, we
have worked to ensure that unnecessary bureaucracy does not hold up
regionally or nationally needed projects.
Much like the FERC at the federal level, the NDPSC is the lead
regulatory agency at the state level for jurisdictional matters related
to investor owned utilities, pipelines and the siting of energy
development projects. In my tenure of office, I have participated in
proceedings that have authorized approximately $6 billion in energy
infrastructure projects. At the same time, our state's consumers pay
some of the lowest energy rates in the nation, and our environment is
among the best. North Dakota is a leader in meeting air quality
standards. And programs such as those carried out by the NDPSC's Mine
Reclamation Division, are considered world-class. Having hands-on
experience in helping to regulate and shape energy policy during this
period of rapid change has given me insights into both the
opportunities and challenges associated with energy development. It is
this unique experience that I hope to draw upon should I be confirmed.
Another experience that I have had that I would draw upon is one
that extends beyond the borders of North Dakota. In November of 2010, I
was unanimously elected by my state commissioner colleagues across the
nation to serve a one year term as President of the National
Association of Regulatory Utility Commissioners (NARUC). In that role,
I was the lead state commissioner responsible for representing the
association before numerous stakeholders. My experience leading this
organization of regulatory professionals gave me a valuable
understanding that can perhaps only be developed through a position
like the one I held.
As a leader within NARUC, I worked hard to ensure that all voices
were heard. I successfully worked across regional lines, philosophical
lines and party lines for consensus oriented solutions that benefitted
our nation's consumers. This experience, perhaps more than any other
that one could have, deepened my respect for, and my understanding of,
the regional diversity that exists across the country.
If I am confirmed, I will take this broad understanding of how
energy regulation works at both the state and federal level with me to
the FERC. Since my nomination, I have been truly humbled by the support
I have received from my state colleagues across the country, and I want
to acknowledge them at this time. Over the years, I have learned much
from them. It is probably safe to say there is not a single state
across the country with which I have not had at least some interaction.
And should I be confirmed, I will be a much better Commissioner for
that experience.
Mr. Chairman and members of the Committee, the FERC has big issues
ahead of it. Developing infrastructure in the right way, facilitating
Americans' access to affordable, reliable, environmentally responsible
forms of energy, protecting our nation's critical assets; these are all
top of mind issues for me, as I know they are for you. As someone who
first cut his teeth in public service as an elected member of the state
House of Representatives, I have a tremendous respect for the
legislative branch of government and a tremendous respect for the
sacrifices you have all made to serve your constituents. If confirmed,
I look forward to engaging with you on these important issues, and
would be happy to provide whatever expertise I may have in the
furtherance of your important work.
That concludes my testimony. I would be pleased to answer any
questions you may have.
The Chairman. Thank you very much. Thank you all for your
excellent statements. I'll start with a few questions.
First, let me ask the two FERC nominees. In your view would
it be advisable for Congress to give the Federal Energy
Regulatory Commission additional authority to have
transmissionsited?
Mr. Norris.
Mr. Norris. To have transmission siting?
The Chairman. Yes, siting authority. At the FERC level do
you think we are, under current law, able to build all the
transmission we need in this country or do we need to change
the law?
Mr. Norris. I wouldn't say we need to change the law yet. I
think the biggest hurdle in my mind for getting transmission
built in this country has been the inability to reach consensus
on cost allocation. Which is why in Iowa 1000, we gave great
deference to the regional planning entities to come up with a
cost allocation formula based on the principle of beneficiary
pace.
I believe if we can give that a chance to work that will
help remove a major barrier in building transmission in this
country. Of course with the 2005 legislation, EPACT 2005, and
the backstop siting authority there's still, I think, a fair
question out there as to what, how far that statute and that
law goes with the 4 circuit decision that it only applies if a
State fails to act. I think there's still some uncertainty
about would that be adequate if we don't resolve cost
allocation, planned entities don't move forward with
transmission build and if States begin to withhold siting
approval on much needed projects.
I would say there's a chance we would need to revisit that.
But I think it would probably be premature at this time.
The Chairman. Mr. Clark, did you have a point of view on
this?
Mr. Clark. Sure. In my role as a Commissioner on the North
Dakota Commission, I've been supportive of the Federal backstop
authority which probably places me a little bit outside. Maybe
even of some of the mainstream of State commissioners, many of
whom would prefer that it be left strictly as a State matter.
I do think that backstop Federal authority is a good idea.
As Commissioner Norris references, there may be cases where
there may be a regionally or nationally important line. I don't
know that we'd want to have a situation where maybe one State
or one township or one county in the middle of a very important
reliability line, for example, is able to block that.
So there may be, as Congress recognized in EPACT 2005 the
necessity of having that Federal backstop authority. I would be
hesitant though to go much beyond that. In my experience as a
State Commissioner it's best to at least have States and local
government have a first crack at siting electric transmission.
Electric transmission, in my experience and I've sited both
a lot of it and pipelines, is the most difficult infrastructure
to site. So I think it's important that we have that point of
local contact that ability of land owners to go directly to a
more local commission, like a State commission, first.
The Chairman. Alright.
Ms. Burke, let me ask you. Your position, as I understand
it, involves oversight or jurisdiction over the Office of
Surface Mining and the Bureau of Land Management. The
Department has announced plans to consolidate certain
Administrative and support functions in those two departments
or those two offices. Both of the agencies report to you.
Are you satisfied that the proposed reforms will improve
efficiency, but still ensure the independence of the offices
and preserve their ability to perform their statutory duties?
Ms. Burke. Thank you for that question, Mr. Chairman. In
short, yes, I do believe that the recommendations will yield
certain efficiencies and make the both bureaus more effective
while at the same time allowing them to carry forward with
their regulatory responsibilities on the OSM side as well as
the leasing responsibilities on the BLM side.
The Chairman. Alright.
Let me ask, Mr. Sieminski, if you could tell us what some
of the key areas of strength and areas that you think need
improvement in the current Energy Information Administration
programs and how you would proceed to provide improvement in
areas that you see as lacking?
Mr. Sieminski. Senator Bingaman, thank you. I've got, sort
of, 4 basic ideas, I think, that guide my efforts at the Energy
Information Administration.
First of all I think we need to take advantage of new ways
to get data faster and cheaper. I met, about 6 weeks ago, with
one producer out in Oklahoma that was still faxing information
on natural gas storage into the EIA. I think that web based
systems would be far more accurate and ultimately cheaper. I
would like to see things like that happen.
I would love to get the Energy Information Administration
to promote best practices in data collection and management by
all of our State and Federal partners. I'm struck, actually, by
one of my fellow panel members here. One of the best States in
terms of the accuracy, timeliness and comprehensiveness of its
data is North Dakota. I would like to find some way to, maybe
through NARUC and EIA working together to find ways to get
other States to adopt similar policies so that we get data on
energy production and use in a more timely basis.
I'd like to make it a big part of my tenure, if confirmed
for the EIA position, to find ways to retain good people to
analyze the data and look for insights. Over the course of my
career I've been involved in putting together award winning,
global teams. I want to, hopefully, carry on that tradition at
the Energy Information Administration.
Finally, we need to find ways to make the data in forecast
that EIA creates more readily available to its stakeholders
including the Congress, the public and others. There are some
wonderful innovations actually in the last year or so at EIA.
The daily energy briefs, the weekly energy updates that are
shorter, punchier, more market relevant and that's what I was
involved in my prior job. I'd like to see EIA carry on with
that.
Thank you.
The Chairman. Thank you very much.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Mr. Sieminski, thank you for your 4 areas where you think
that we can make some positive changes within EIA. Let me
continue on in that questioning because in addition to getting
the data or making the data readily available, which we all
agree is key, of course what we're hoping for is that you're
able to accurately forecast. I recognize that forecast means
that we don't know with exact precision.
But how difficult is it really to predict the commodity
prices, 25, 35 years out, to predict the supply and demand
trends? We're making policy decisions based on the efficiency
of the data, the adequacy and recognize, again, that these are
forecasts, these are predictions. But in your job as an
economist, recognizing what you've been able to do within the
private sector, how can you translate this into also making
sure that we've got a level of accuracy to the fullest extent
possible?
Mr. Sieminski. Senator Murkowski, as you know, there are a
huge number of factors.
Senator Murkowski. Right.
Mr. Sieminski. That impact the energy markets, the economic
activity, geopolitics, weather and then all of the supply/
demand and pricing issues that make forecasting a challenge. I
think that EIA has done and I would hope to continue to be very
explicit about the assumptions that go into the EIA analyses so
that everybody is working or understands the basic driving
factors behind the analyses.
EIA does often show variations in their forecasts.
What would happen if the economy grew faster or slower?
What would happen if oil prices or electricity prices were
higher or lower?
That is absolutely essential to do and to continue.
One of the things that EIA is now doing that basically
started on--in the financial community is to use information
available in the options markets to try to put probabilities on
price developments. This is how EIA is now bracketing the high
and low oil price forecasts and gasoline price forecasts that
they're making. It is a better way, I think, of trying to use
market based information to inform the decisionmaking process
and analyses that EIA publishes.
I think that continuing to innovate in that way is very
important. I would hope to be able to do that, if confirmed.
Senator Murkowski. Let me ask you the question that
everybody in America is asking.
[Laughter.]
Senator Murkowski. That is what can be done about the high
price of gasoline? I think we recognize that there are long
term solutions. There are those who are looking for that
shorter term solution, that silver bullet.
I don't believe that there is one silver bullet. I agree
with the President on that. But are there any regulations that,
whether it's seasonal fuel specs or regulations that target
refineries specifically, might provide some short term steps
that in your opinion could influence the price of gas at the
pump?
Mr. Sieminski. Senator, the things like fuel
specifications, of course, are under the jurisdiction of the
Environmental Protection Agency and not the Energy Information
Administration. It's certainly possible for EIA, through its
data collection analysis operations, to point out what that
means and how different specifications for fuel in different
parts of the country make it more difficult from a logistical
standpoint to supply fuels during emergencies.
Senator Murkowski. So if EPA were to deal with those regs,
it could have an impact on this?
Mr. Sieminski. It could. I believe things like that are
actually being looked at. With the closure of the refineries in
the Philadelphia area, the city of Pittsburgh is having some
difficulty associated with getting the right specifications for
gasoline in the summer time.
It's things like that that can be looked at. One of the
things that EIA, of course, could do, would be to help map out
some of that and show the logistical issues associated with
that.
Senator Murkowski. Do you know if EIA is doing that
currently? Doing this sort of charting?
Mr. Sieminski. They have and they've been pointing that
out, particularly in the East Coast Refining report that was
just issued a month ago.
On other issues, in terms of gasoline prices, how to deal
with it. It is supply and demand. Anything that could be done
to improve supply and not just of gasoline itself, but
alternative fuels and anything that could be done to reduce
demand such as fuel efficiency standards, would contribute to
the move toward stabilizing gasoline prices.
Again, not really under the jurisdiction of the Energy
Information Administration, but certainly the data and analyses
associated with understanding the supply and demand factors are
something that EIA does and will continue to do.
Senator Murkowski. Thank you, Mr. Chairman. My time is
expired. So I'll wait for a second round.
The Chairman. Senator Wyden.
Senator Wyden. Thank you very much, Mr. Chairman. I want to
focus some questions about natural gas on Mr. Norris and Mr.
Clark.
I think we all understand with natural gas prices and
abundant supply this is an area where America has got a
competitive economic advantage. This is good news. This is a
shot in the arm to the economy.
What we're going to need is sensible policies that in
effect, nurture this economic advantage. That's why I want to
ask you both about the matter of natural gas exports. Now you
can't talk about specific cases that are pending before the
Commission, but you can talk about the underlying principles
that you'd follow in addressing these cases.
Now under the Natural Gas Act, I want to be very specific
about this, because I indicated in the office when we discussed
this that we really expect some answers from you all this
morning and as part of this confirmation process. DOE approves
the exports of natural gas. But FERC approves the physical
terminals that are needed to carry out the exports and any
pipelines that are needed to connect them to gas supplies.
FERC's record on approving import terminals including the
Oregon, you know, terminals where we've had some very
passionate debates, raises real questions in my mind about how
the Commission is going to go about tackling these issues
related to export terminals. For example, FERC refused to look
at whether the terminals were even needed to serve their
markets. So it ended up approving terminals, like one in Coos
Bay, Oregon, that now wants almost overnight to convert to
exports because they don't have an import market.
So my question to both of you and this will be central to
my judgment with respect to confirming you all. Do you believe
that FERC has an actual obligation to make a finding that an
export terminal is in the public interest?
Mr. Norris, let's start with you.
Mr. Norris. Let me first say I totally agree. Our export
policy nationally is 20 years old, huge change in circumstances
from 1992 to the present. We are seeing incredible dependence
upon this new technology for extracting shale gas and the
supply.
It's providing jobs to the manufacturing sector. It's
changing our base load generation in this country where
everyone is building new base load with gas. It's maintaining
regional prices for consumers.
So I agree we need to look at this as a bigger, broader
issue that's changed. I think it's broader than the Federal
Energy Regulatory Commission. I would encourage the Congress to
take it up as well.
Senator Wyden. I understand that. But you all----
Mr. Norris. Yes.
Senator Wyden. You can't export the gas unless somebody
approves the terminals. That is your statutory responsibility.
I want to know how you're going to measure the public interest
as part of that responsibility.
Mr. Norris. So let me say that I think it's a big, broad
issue. When you look at it in terms of after the Secretary of
Energy, which is largely prescripted for the Secretary as well.
It's deemed in the public interest to export to free trade
States. The Secretary has to prove it's not in the interest to
go to non-free trade agreement countries.
Then it would come to FERC in terms of a license for the
construction and operation of a facility. Which is largely to
make sure it's a safely and environmentally safe run facility.
There is a public interest balance.
Having said that I think it would be a stretch. When you
look at our current applications before the FERC they revolve
around existing facilities. The ability to adapt an existing
facility for export really only involves minor modifications.
They certainly aren't major modifications.
So I think it would be a stretch to say that we could find
a way to analyze the public interest of this great, big,
broader issue regarding export of LNG juxtaposed or balanced
against the minor modifications for altering an existing LNG
facility. Perhaps----
Senator Wyden. But Coos Bay is not an existing facility,
for example. I mean we're going to have instances where you
don't have existing facilities. The Congress and the country
deserves to know how FERC is going to look at that.
Mr. Norris. That's the case before us. I don't want to talk
about Coos Bay directly because it's still under a hearing.
Senator Wyden. Just hearing about the principle.
Mr. Norris. But the principle of if there's a new, brand
new, facility be constructed. That may, and I don't want to
pre-judge that. But that will certainly be, I think, it would
be reasonable to think that we can weigh the public interest of
the policy when you're talking about something, a substantial
new facility.
But it's a stretch to get there for minor modification of
current facilities.
Senator Wyden. Alright.
Mr. Clark, we're making a little progress now.
Mr. Clark. Senator Wyden.
Senator Wyden. Mr. Norris indicated that there was a public
interest responsibility when we were talking about a new
facility. My time is up. I thank you Mr. Chairman, if Mr. Clark
could just respond.
Mr. Clark. Sure. As we talked about last week and thank you
for the question, coming from perhaps the most land locked
piece of land on the entire North American continent means I
haven't had to deal a lot with LNG terminals. I'm certainly
familiar with siting processes, however.
I would say that the notion of whether there exists a need
standard or a public interest standard may be one that's right
for bringing to the Commission and maybe become part of a case.
So I hesitate to pre-judge that notion. But I would simply say
that, again, not having had to take a position on LNG, I would
bring to the table a fresh set of eyes and an open mind to
those sorts of arguments.
Senator Wyden. Mr. Chairman, thank you. I hope on the
second round we can get into some issues with Ms. Burke.
The Chairman. Senator Hoeven.
Senator Hoeven. Thank you, Mr. Chairman.
Mr. Clark, if you would talk a little bit about how, as we
develop more energy in States like North Dakota, how can the
FERC and I understand you play a regulatory role. But how can
the FERC help us get that energy to market?
Mr. Clark. Mr. Chairman, Senator Hoeven, I think there are
a number of ways. Speaking to the electricity side, for
example, one of the things I think the FERC can do is to try to
support, as much as possible, a bottoms up approach to system
planning. A lot of the decisions that are made in electricity
policy have impact in other States throughout the region in
whatever region you happen to be in.
So I found and I know as you have, as Governor of our State
and now as a Senator, that things like the upper Midwest
Transmission Development Initiative to the degree that they can
be supported by FERC for information sharing, so on and so
forth. I think that can do a lot to improve regional planning
for things like transmission, transmission cost allocation.
What you develop then are coalitions of the willing who are
willing to move forward and build out needed energy
infrastructure projects.
The other thing that I would say is and I think we've had
some success in this regard in North Dakota is you have to do
as much as you can to provide regulatory clarity and certainty.
You've spoken a lot eloquently in North Dakota about the need
for legal tax regulatory structure that supports investment.
While the FERC doesn't have a lot to do with tax policy or
maybe even legal policy, it has a lot to do with regulatory
policy.
I think the notion would be that as a regulatory agency you
want to provide, as much as possible, a clear, consistent set
of rules so that all stakeholders who are involved, public
interest stakeholders, industry stakeholders, have a sense for
how the process works.
Senator Hoeven. Talk a little bit about how we or how the
FERC can drive that certainty because I agree with you. Mr.
Norris talked about pricing certainty and understand pricing
and you know, understanding pricing. But how does the FERC help
create that certainty both in terms of the current regulatory
environment, but help move us to greater certainty in the
regulatory environment.
If you would address the pricing issue which is very
complicated? Then also address a little bit, the role both in
terms of making the regulations understandable, but also how do
the regulators both enforce the regulations but empower
investment in the infrastructure development that we need?
Mr. Clark. What I have found, Senator, is that as a
regulator when you make decisions and you put out those orders
that's the one time that the Commission, be it at a State or
Federal level, really speaks as one. That you do so in such a
way that you're very tied to a strict reading of the law, that
you're not, sort of, pushing the boundaries further than it
needs to go. Because what you expose yourself to if you play a
little too fast and loose, is that you end up with situations
where you're constantly in litigation. Then the Commission is
being overturned.
To me that is, as much as anything, drives away investment
from a regulated sector. If there's a sense that they don't
ever really know that the Commission's findings are going to
stick in court. So it's been true on the State level.
I think that on the Federal level it's the same policy. You
have to be very careful in how you interpret those laws. That
you interpret them in such a way that you have, that you as a
regulator in the industry as well, has a high degree of
confidence in those rules that you promulgate, those orders
that you issue, that they'll be upheld in the courts.
Senator Hoeven. Touch on for a minute the, ``Not in my
Backyard? challenge of siting transmission or gas pipelines. I
think both you and Mr. Norris referred to it when Chairman
Bingaman asked about backstop authority. But this is a real
challenge and a real balancing act.
We have States that are producing a lot more energy. Then
we have States that are the energy consumers. We've got to link
them up.
This is an interstate issue. As a Governor and certainly
you, as a Public Service Commissioner, saw the state
perspective where they want to have, you know, a say and a
certain level of control in siting within their jurisdiction.
But at the same time, you know it's a national issue that we're
able to move this energy. So touch on how do we do this in a
way that works?
Mr. Clark. Sure. I think it's very important to get local
input. One of the things that I think I've been blessed with as
a State Commissioner is we have a State law that says when you
site a project, you have to hold a hearing in that actual
county. It can't just be in Bismarck in the capital. You have
to go out and meet with the folks who are actually affected.
So I think you have to have a high degree of local input.
That helps make the process at the end of the day, although it
can be a little more time consuming up front. At the end of the
day, I think it really saves time because you can get some
public acceptance.
By in there, of course, sometimes, comes a time when there
may be a project that absolutely has to be built because it
supports the reliability of the grid. It keeps the lights on,
so on and so forth. Then you just have to make a call.
They're tough calls. They're not always fun. But they're
ones that you have to make in order that we have safe,
reliable, affordable electricity and natural gas energy for
American consumers, but base it on a record.
Senator Hoeven. Thank you, Tony.
The Chairman. Senator Barrasso.
Senator Barrasso. Thank you, Mr. Chairman.
Ms. Burke, it's my understanding that you were a member of
the Defenders of Wildlife Litigation Committee from 2005 to
2006. The Defenders of Wildlife is one of many radical
environmental groups that tries to block access to our Nation's
public lands. The Defenders of Wildlife routinely sues the
Interior Department to stop energy production, timber
harvesting, grazing and even public recreation.
In fact, the Defenders of Wildlife uses taxpayer dollars to
block access to our Federal public lands. That's right through
the Equal Access to Justice Act, the Defenders of Wildlife uses
taxpayer dollars to prevent taxpayers from accessing our public
lands. So I look at this and I'm trying to think why we would
put someone who has spent her time blocking access to public
lands in charge of an agency with responsibility for providing
access to public lands.
Isn't this a little bit like, you know, putting the fox in
charge of the hen house?
Ms. Burke. Thank you for your question, Senator Barrasso.
Yes, I was a member of the Litigation Committee for the
Defenders of Wildlife for approximately 1 year in making
decisions about what litigation would be appropriate to bring.
Now I sit on the other side of the table from organizations
like Defenders of Wildlife defending the actions that the
agencies under my recite take. So it is, in a sense, a role
reversal.
In that instance I was part of a committee and not a sole
voice as I am at the Department, part of a group of
policymakers. What we had in common though was to move forward
with our missions. The mission at the Department of the
Interior and for all the Bureaus for which I have oversight is
to balance the need for the development and production of
natural resources including energy, resources on public lands
while at the same time making sure that we take appropriate
care for our other natural resources in the environment.
Senator Barrasso. In this role reversal, my question would
be: when you look at the legal positions that the Defenders of
Wildlife took with you involved in the decision-making process
(2005/2006), do you agree with the legal positions that the
Defenders of Wildlife took in those years? If not, what
specific legal positions do you disagree with and why?
Ms. Burke. Thank you, Senator Barrasso.
My participation to say was quite minimal on the committee
having met twice I believe to discuss litigation, none of
which, I think actually had an impact on any of the 4 Bureaus
that I deal with now. They were Park Service issues and
forests, Fish and Wildlife service issues. But I don't recall
any of the specific cases in which I was involved in the
discussion.
But I was not the ultimate decisionmaker in any of those.
Senator Barrasso. Thank you.
Mr. Norris, I'd like to ask you about your exchanges with
the Administration on the impacts of the EPA's proposed rules
on the reliability of the electric grid. Did you discuss the
EPA's Mercury and Air Toxics Standards Rule and its impact on
reliability with anyone in the Administration?
Mr. Norris. I certainly had a meeting with EPA. I can't
remember the date now, prior to the issuance of the rule to get
a briefing on what it was they were considering.
Mr. Norris. It was with Administrator McCarthy.
Senator Barrasso. She's testifying upstairs. I've been back
and forth between the two meetings.
Can you talk a little bit about what you discussed about
the impacts on the reliability of the grid with the
Administrator?
Mr. Norris. It was more of a briefing. I wanted to know
what they were considering. I think from my input to them was I
encouraged them to make sure that there's a communication with
the water division. I forget the exact name of the--so they
realized that the joint impact of the MERC and the CSPAR and
the 301B and once through coolings that this will have a
cumulative impact on liquid generation which means, from our
standpoint, it all affects reliability.
So that was my main message in that meeting.
Senator Barrasso. Ms. Burke, just a final question for you.
You previously served as the BLM's Deputy Director for
Programs and Policy. I understand that you played a critical
leadership role in the development and implementation of the
BLM's Wild Lands Policy, and the so-called onshore oil and gas
leasing reforms. Both policies were efforts by the
Administration to block access to our Nation's public lands.
The Wild Lands policy was effectively a means of the
Administration to create wilderness without the approval of
Congress. The so-called onshore oil and gas leasing reforms
added more red tape to onshore oil and gas production. So would
you agree that there's a common theme in your work at the
Defenders of Wildlife as well as at the BLM that appears to be
blocking access to our Nation's public lands?
Ms. Burke. Senator Barrasso, I would respectfully disagree
that there's not a common theme here. The common theme is that
of one of balance and that recognizing that the public lands
play a very important part in our Nation's energy future. But
there are a number of resources for which the BLM was
responsible.
With the Wild Lands policy, it was an attempt to carry out
the mandate under FLPMA, BLM's authorizing statute, to make
sure that it takes inventory of all resources on the public
lands which would include lands with wilderness characteristics
and to use that information in its land use planning process.
In which case, as the BLM does today, make a decision about
whether or not to make a decision about what types of
activities would be appropriate in those areas.
With respect to the oil and gas leasing reform, I think
that those reforms actually will do more to make the
appropriate land available for oil and gas development. At the
time of the beginning of this Administration by all accounts we
had a broken system. We had more than half of the leases that
were being sold, being protested either through an
administrative process or in litigation. So it was very
difficult for us to actually do the work.
So through the land shore leasing reforms the BLM is able
to address those issues. Do a lot of that work up front. So
that both the BLM and industry can have confidence that at the
time of a lease sale the BLM will actually be able to issue the
lease that it sold.
Senator Barrasso. Thank you.
Thank you, Mr. Chairman.
The Chairman. I think everyone has had a chance to ask a
first round of questions. Why don't we go ahead with a second
round? Let me start with Senator Murkowski.
Any questions that you have for the second round? Go right
ahead.
Senator Murkowski. Thank you, Mr. Chairman.
Let's go to Mr. Norris, if I may. This follows a little bit
on Senator Barrasso's question here.
As you know, I have been pushing the issue of reliability
and trying to get some real, clear answers as to the impact of
the new EPA rules that apply to power plants. I'm assuming that
you would agree with me that this cumulative impact has the
potential to be quite serious in terms of reliability.
Mr. Norris. Yes, it will certainly impact reliability and
anything that impacts reliability, I take seriously, yes.
Senator Murkowski. I noted your statement that whether this
decision benefits the consumer because and again, we're very
cognizant of that.
But you have received, subsequent to the technical
conference that was held in the fall, you've had testimony
there. You've had filings made in response to the Commission's
notice of that conference.
You've had assessments done by the NERC and the Planning
Authorities.
You've got staff papers.
A whole series of evidence has been gathered not to mention
the retirement announcements that we're seeing are already
greater than was predicted by the EPA.
You made a statement last fall, and I will use your words,
that the, ``Reliability of the electric grid can be adequately
maintained as compliance with EPA regulations is achieved.'' I
guess the question to you is in light of what we have seen come
forward since the November technical conference. In light of
these recent retirements, is that still a statement that you
stand by?
Mr. Norris. Yes. I think there are sufficient tools in
place to address the reliability of the grid. I think there
were, as you well know, a range of studies with a range of
predictions. I probably think the EPA's prediction is now, yes,
it's more than that. It's less than some doomsday predictions.
But it's going to land somewhere in the middle.
The main thing in my mind is we have the tools to deal with
it as it comes forward. I think most of those assessments said
we will be OK from a resource adequacy standpoint across the
region. It will be a much more localized concern which is why I
think the process is in place to have the 3 years to comply,
the additional year and then the fifth year of Administrative
order and how EPA is seeking input from both the FERC and the
industry and other stakeholders.
I believe there is sufficient tools to address reliability
concerns going forward.
Senator Murkowski. As you may know, I am working to address
that because I'm not certain that we do have the sufficient
tools. We're looking at a safety valve concept. But I want to
make sure that we're always answering that question that you
have on your desk, whether or not what we're seeing, how it
would impact the consumer there.
Ms. Burke, I would like to go to you in my remaining time
here. You've indicated in response to Senator Barrasso that
what you're trying to do is find this balance here. On some
Alaska specific issues I'm curious.
We have NPR-A planning. This is the National Petroleum
Reserve Alaska. It is the last petroleum reserve under Federal
control in the Nation. In your view what should be the priority
for NPR-A as we look at the planning?
Is it to use the lands to produce the oil and gas that is
contained within or is it to set aside acreage for purposes of
conservation?
Ms. Burke. Thank you for your question, Senator Murkowski.
Unfortunately with BLM lands it's rarely and either/or
situation. Obviously it's a petroleum reserve and so we're
looking to ways in which we can responsibly make land available
for oil and gas development. But at the same time we have to
take account for the sensitive resources that are found there.
So the planning, as you know, is well underway. We'll be
releasing a plan this spring so that we can move forward in
NPR-A.
Senator Murkowski. What about in those areas where we're
dealing with ANILCA and the no more clause?
I'm sure that you're very, very familiar with Section 1326.
That basically says that there shall be no more wilderness
within the State of Alaska. So the question that we're
wondering in Alaska is you've got this push by Fish and
Wildlife to move forward a new land management plan for ANWR
that may very well result in a recommendation for additional
wilderness created there within the ANWR region in direct
contradiction to the provisions set out in ANILCA.
So I guess the question to you is specifically what is your
view of the meaning of section 1326 that calls for no more
wilderness within that region? Then explain how the process,
the planning process that is currently underway within the ANWR
region, is not somehow then in conflict with the no more
clause.
Ms. Burke. Thank you, Senator Murkowski.
As you know ANWR, as you said, is under the Fish and
Wildlife service's jurisdiction. If there were to be any
development in that area the BLM would be responsible for
managing that development. But it is not responsible for that
planning process.
Also, and when I joined the Department I took an oath not
to practice law at the Department. So I'm very cautious about
my offering my interpretation of the statute here. We're very
mindful of the statute and the solicitors are part of this
analysis at each step of the way to make sure that we do not
run afoul of any statutes governing ANWR, in particular ANILCA,
with respect to whether or not there would be designation of
new wilderness in that area.
Senator Murkowski. We are very cognizant of the effort to
find balance while we access our resources. But we are up
against an Administration that has been, oftentimes, very
difficult to work with as we try to do just that. Sometimes it
seems that we're being shut down because the effort is more to
lock up rather than to access.
So we'd be working with you to try to find strong balance.
Thank you, Mr. Chairman.
The Chairman. Senator Wyden and then Senator Risch.
Senator Wyden. Mr. Chairman, I'd be willing
Senator Risch. I yield to Senator Wyden. I have to run to a
meeting.
Senator Wyden. You sure? If you do, I'd be----
Senator Risch [continuing]. The nominees most of them come
from Iowa, so I've had the opportunity----
The Chairman. Whichever order you folks want to ask.
Senator Wyden. I thank my friend.
Ms. Burke, I want to talk to you and I appreciated the
visit in our office about this question striking the balance.
Because I think that's so key. On this committee we try to put
together a bipartisan coalition for some of these questions and
that's right at the heart is achieving a balance to bring
people together.
Now you heard me talk about natural gas. I think,
particularly you look at these prices. You look at the supply.
This is an advantage for us. We've got to figure out how to
nurture it and build on it.
One of the areas that I've been particularly interested in
is saying that natural gas development on public lands, in
effect, is a kind of natural laboratory for us to cultivate
what amounts to best practices. In other words this is a place
we can bring together industry folks, environmental folks, the
scientists, the people that you need to strike the kind of
balance the colleagues are talking about up here in the
committee and show that we can make policy in the most, kind
of, thoughtful way.
You could, for example, use this kind of process on the
fracking, you know, issue. Where there's concern to come up
with what amounts to a model on issues like disclosure of the
fracking, you know, fluids. What do you think about the idea,
if confirmed, about trying to use the public lands on issue
like natural gas where we have an advantage and we want to
nurture it. Use that as a place to try to bring people together
and reflect the kind of balance that makes sense for the
country?
Ms. Burke. Thank you, Senator Wyden. I do appreciate the
opportunity to discuss this with you last week as well. We, at
the Department, agree that hydraulic fracturing technologies
and the advancements that have been made are integrals for our
continued ability to facilitate the expansion of exploration
and development of natural gas on public lands.
At the same time we know that the public has grown
concerned about whether or not hydraulic fracturing may cause
contamination to underground water sources. So in an effort to
facilitate development while at the same time addressing those
concerns, we have engaged in quite an extensive effort. To work
with industry, to work with environmental groups, to work with
State regulators and regional regulators to develop what we
think would be a model rule for the regulation of well
stimulation activities which include hydraulic fracturing.
So as you know those rules would include public disclosure
of chemicals used in hydraulic fracturing operations,
confirmation that the wells that are fractured meet the
appropriate construction requirements with respect to cement
and its ability to withstand pressure. Also a requirement that
operators put into place appropriate plans for managing flow
back waters from fracking operations. So in developing this
rule we tried to pull together and synthesize really the best
elements of regulation that's occurring across the States to
make sure that we have consistent oversight and a disclosure
model that will work well on the public lands.
Senator Wyden. I just hope, I appreciate the direction
you're trying to outline, that you all will really look at the
public lands as a place where we can think about best
practices. Bringing together all of the parties because what
you've heard up here is Senators talk about how we're going to
strike the balance. You've got an opportunity to bring the
parties together given what you're faced with on the public
lands.
One last question, if I might, involves renewable energy
development and how we're going to come up with a consistent
approach toward renewable energy development particularly on
the lands in your Department on BLM.
We've got geothermal energy development essentially done by
lease.
We've got solar and wind energy development done by right
of way.
You just, kind of, look at this sort of hodge podge of
approaches and you say, well, Ms. Burke, this is your
Department.
How can we figure out a way to come up with a consistent
approach that would again bring the kind of predictability and
certainty that would allow us to strike the kind of balance
we've been talking about today? So would you support a
consistent approach toward renewable energy development and
what are some of your thoughts on it?
Ms. Burke. Thank you, Senator Wyden.
As you know, the BLM is currently working under existing
authorities. They are quite varied from whether or not it's a
lease or right of way. The BLM is currently undertaking a
rulemaking to make solar and wind, to make that a competitive
bidding situation so it would make it more comparable to a
lease.
But I do agree that a consistency will be important for
industry and for the agency in order to progress even further
than we already have with respect to renewable development. If
confirmed, I would look forward to working with you to make
sure we are able to develop a consistent process.
Senator Wyden. Thank you.
Thank you, Mr. Chairman.
The Chairman. Senator Franken. No, excuse me, I think----
Senator Hoeven. I'm certainly willing to defer to Senator
Franken since he hasn't had an opportunity.
The Chairman. I thought Senator Risch was going to ask
questions, but I guess he had to leave.
Senator Franken. Has Senator Hoeven already had a chance to
ask questions?
The Chairman. He did. He had a first----
Senator Franken. Yet you called on him?
The Chairman. He had a first round of questions.
Senator Hoeven. They were very, very good questions.
The Chairman. Very insightful questions. Now if you have
similar insightful questions, go right ahead.
Senator Franken. OK. I don't. But I have some questions
nevertheless. I'll go ahead. I'm sure Senator Hoeven's
questions were stellar.
Mr. Sieminski, as you know, people are feeling the pain at
the gas pump. While part of the problem is, I guess, due to
tight supplies and I just don't think supply and demand alone
is enough to explain what's going on. That's why many of us on
this committee have supported efforts to stop speculators who
we believe are artificially driving up costs.
Just yesterday Senator Sanders, myself and others
introduced legislation that requires the Commodity Futures
Trading Commission to invoke emergency powers to curb
speculation. Yet when I look at the Energy Information
Administration's Annual Energy Outlook report, I don't see
really adequate attention paid to this issue.
What are your views on the role of speculators on current
gas prices?
Mr. Sieminski. Thank you, Senator Franken.
There are many factors that influence global oil markets
and prices in my view. Speculation is certainly one of those
things. It, price formation, involves supply, demand,
geopolitical issues and many others.
The Energy Information Administration under Dr. Richard
Newell did launch an Energy and Financial Markets Initiative
that would help to improve the understanding and analysis
associated with price formation and what drives oil, gasoline
and natural gas prices. I fully support that effort and would
hope to continue with it.
I think one of the things that I bring to this job, let me
mention, that my career in the financial services industry was
in research, not trading. But I worked with traders, very
closely. I understand the language. I think I know the kinds of
questions to ask that might help us get to a better
understanding of issues like that.
I think it's critical that we have transparency so that
everybody is operating on the same page. I would love to be
able to work with the Commodities Future Trading Commission and
other relevant agencies to try to make that understanding and
transparency more obvious to the public and others to allay
their concerns or to deal with other issues if they should be
found.
Senator, one of the things that I've found in looking at
this issue over the years is that the adequacy of the data to
actually do really good analysis is not good. The Commodity
Futures Trading Commission improved the disaggregation of its
data on trading activity back in 2008 and 2009. But some of
that data is still not available to academic and other
researchers who would love to have access to it to accurately
be able to put better numbers on this.
I would support the EIA and CFTC acting together if that's
appropriate to try to get the data available so that
researchers everywhere could----
Senator Franken. We do have, actually, some data. Some
members of public and private sector have done some. They've at
least made some statements about this. Let me cite a quote from
a Goldman Sachs study as described in Forbes Magazine.
Goldman Sachs believes that each million barrels of
speculation in the oil futures market adds about ten cents to
the price of a barrel of oil. This means that in theory the
speculative premium in oil prices due to speculation is as much
as $23, 39 cents a barrel on the price of the NYMEX crude oil.
So if there were no speculation in oil futures the price of a
barrel of oil might be as low as $74.61. The present price is
$108 a barrel.
Speculators now make up 70 percent of the open interest in
crude oil futures whereas physical end users make up less than
30 percent. I have quotes from the Research Division from the
Federal Reserve Bank of St. Louis. They're doing this research.
So I would ask you will you commit to raising the profile
of this issue at the EIA? Will you incorporate and analyze the
issue of oil speculation in future EIA Energy Outlook reports?
Mr. Sieminski. Senator, I would be happy to do that and to
do my best to carry on with the Financial Markets Initiative
that is already underway at the Energy Information
Administration.
Senator Franken. Thank you, and I thank Senator Hoeven for
his indulgence and the Chairman.
The Chairman. Senator Hoeven.
Senator Hoeven. Ms. Burke, you mentioned 3 components of
new BLM regulations pertaining to hydraulic fracturing. As I
understand it those rules are currently undergoing review by
the Office of Management and Budget and have not been formally
proposed yet. They're not public yet.
Should we consider the items you listed as a finite list of
what's contained in those rules or is there more?
Ms. Burke. Thank you, Senator Hoeven.
Those are the primary components of the proposed rule as
drafted. Public disclosure, well integrity and management of
flow back water.
Senator Hoeven. OK.
In the last 3 years we've seen increase on private lands in
oil and gas production but declining production on public
lands. Obviously gas prices going up everyday creating great
hardship for American consumers. Clearly supply, I believe, is
the most important way to help bring prices down increasing
supply both domestically and with our dependable friends like
Canada.
So are you concerned about the fact that production is
declining on public lands? What do you attribute it to and how
do you intend to address it?
Ms. Burke. Thank you, Senator Hoeven.
With respect to whether or not production is declining on
public land, we see that we are leasing, still holding
quarterly lease sales, that there are a number of APDs that
applications from permit to drill that we have approved where
industry has not taken advantage of that authorization. So the
Bureau is taking every reasonable action to make sure that we
are having sufficient development on the public lands. I think
in your State, where production is booming, most of that
activity is in fact occurring on private land. But if you take
out what is happening in North Dakota and look at the rest of
the public lands, you will see that production is not
decreasing.
Senator Hoeven. Repeat the last part again, if you would,
Ms. Burke?
Ms. Burke. I say with respect to production on public lands
setting aside the activity that is occurring on State land that
you would not see a decline in the activity on public land.
Senator Hoeven. I don't follow that statement. We are
seeing a decline on public land.
Ms. Burke. I think that it depends on the snapshot that
you're taking with respect to when you're evaluating production
on public land. That number is adjusted over time. So depending
on when you take a look at that information, you may find that
the numbers change rather frequently.
Senator Hoeven. How would you work with the industry to
increase development on Federal lands, public lands, deploy new
technologies which can not only produce more energy, but do it
with good, solid, sound, environmental stewardship?
One of the things that I've referred to in trying to get
legislation passed for the Keystone pipeline is that 80 percent
of the new development in the Canadian oil sands is in situ,
meaning drilling, which reduces both the footprint and the
greenhouse gas emissions. That means both more oil, better
environmental stewardship. We can do that but we've got to have
a regulatory regime, a permitting regime that empowers it.
How do you propose to do that, No. 1?
Are you willing to come out to places like North Dakota and
other areas with Federal lands and meet with the people that
are working on these challenges?
Ms. Burke. Thank you, Senator Hoeven.
I'll start with the second part of your question, first. I
have had the opportunity to travel to North Dakota and go out
in the field with our, the BLM's Dickinson Field Office, and to
meet with a number of industry representatives as well as
tribal representatives to discuss development and the impacts
of development in North Dakota. I would welcome that
opportunity to visit other locations and discuss that with
other stakeholders.
With respect to how I would increase development over time.
One of the things that we were doing, while the hydraulic
fracturing rule may be viewed by many as a way that dampens
development, I think that in fact the hydraulic fracturing rule
has the opportunity to allow this very important development to
continue and to move forward. Because it will give the public
the confidence that we are taking all necessary precautions to
make sure that this vitally important resource is able to be
developed in a way that is environmentally responsible.
But we continue to work with industry, for example on the
API standards working with those groups and incorporating those
into our regulations. So we're working on a number of fronts.
If I'm confirmed, I would welcome the opportunity to work with
you and your stakeholders to make sure that we are, in fact,
taking advantage of this Nation's vast natural resources.
Senator Hoeven. Do you believe that with technology
development we can produce more energy, more oil and gas on
Federal lands, on public lands and achieve the stewardship that
you want to achieve?
Ms. Burke. Yes, I do believe that.
Senator Hoeven. You're committed to helping to do that?
Ms. Burke. If confirmed, yes, sir.
Senator Hoeven. How do you see the hydraulic fracturing
rules applying on Federal lands where we have States with
primary regulatory authority? In other words when you bring
these rules forward how do you work with the States on
regulating hydraulic fracturing in a way that the industry can
understand. They can work with. They can address. That provides
disclosure, but still empowers energy development in a good,
solid, sound way?
Remember because you're talking both your rules, your
Federal rules and the State rules. This gets complicated and
difficult for people that are trying to invest and produce the
energy. So are you willing to work with the States in a way
that follows the State's regulatory regime so that the industry
is kind of working with one set of rules instead of two?
Ms. Burke. Thank you, Senator Hoeven.
Yes, we're very cognizant of the overlapping jurisdictions
in this area. We will work in concert with other regulators and
their requirements so that we won't introduce complicated, new
procedures that are difficult for industry and the public and
the regulators to understand. Our concern is that we provide
consistent oversight for the Federal lands, but we always work
with the State regulators and industry to make sure that we are
able to balance these competing interests both the need for
more energy production as well as for environmental protection.
Senator Hoeven. Thank you.
The Chairman. Ms. Burke, let me ask a couple of questions
along the same subject area on this hydraulic fracturing rule
that's being developed.
A concern I've heard from industry in my State is that they
believe it's very possible that a second permit would be
required under this new rule. So there'd be one permit to get
to drill in the first place, and a second permit if you wanted
to proceed with hydraulic fracturing.
They question the workability of this and the idea that
industry would make a very substantial investment without
having, in hand, the permits that they need to go ahead and
complete a well. So that's one question.
Also, they've questioned whether or not the Department has
the resources to staff up to deal with anything like this, if
this is required. I know this is not a public regulation yet.
But there is a great deal of concern that I've begun to hear
about what this rule might contain.
Could you give us any more insight into this?
Ms. Burke. Thank you, Mr. Chairman.
With respect to whether or not there will be a second
permit necessary in addition to the application for permit to
drill, we also have heard those concerns and have taken that
into account in the drafting of the rule. Today I would say
upwards of 90 percent of all wells, that new well starts on
public lands involve hydraulic fracturing.
So we're aware that normally, oftentimes, an operator can
submit those at the same time. But we're looking at whether or
not--one question is whether or not authorization will be
required before or could be done afterwards. Those are all
discussions that have been occurring with industry that have
come into express their concerns with us.
The second question about with respect to resources at the
Department. As you know we are operating in a very tight budget
environment. But we have taken that into account in developing
these requirements about whether or not we have the resources
in order to actually fulfill our mission.
The Chairman. Let me ask on one other subject. I was with
the Secretary, Secretary Salazar, when he visited Southeastern
New Mexico and we had a useful meeting there with
representatives of the potash industry and also representatives
of the oil and gas industry. The upshot of that meeting was the
establishment of a working group which the BLM was overseeing
composed of potash companies and some of the larger
independents in the area trying to figure out what changes
could be made, if any, with regards to those two industries
working together in that area.
He established a deadline of April first for wanting to
have a set of recommendations for what to do there. As that
date is now quickly approaching I've begun to hear from small,
independent oil and gas producers in that area saying that they
have not had a chance to have their input considered or their
point of view considered. I was just wondering if you could
assure us that you will be sure that you do provide an
opportunity to hear from all of the producers in that area, who
have a point of view that they want to have considered before
anything is finalized.
Ms. Burke. Absolutely, Mr. Chairman. I will work with the
BLM to make sure that all stakeholders? voices are heard.
The Chairman. That will be a help. I appreciate it.
Let me ask if Senator Franken has any additional questions.
Senator Franken. Yes, really just one more. This is for
Assistant Secretary Burke. It was a pleasure meeting with you
yesterday in my office to discuss your nomination. I appreciate
the work you've been doing at Interior.
We discussed this certain issue. In these difficult
budgetary times it's important to be extra careful with
taxpayer's funds. That's why I'm concerned that taxpayers
instead of oil and gas companies are funding programs that are
beneficial to these companies.
One example is a proposed $45 million program involving the
U.S. Geological Survey, the EPA and the Department of Energy to
better understand aspects of hydro fracking. So this is
research that the taxpayers are going to pay for. I think it's
needed research to make sure that this, the fracking, is done
in an environmentally friendly way.
But I'm, you know, this is a very mature industry. In my
State we have, for example, the medical device industries which
pay a user fee to the FDA when it gets its products approved.
So in other words the medical device industry pays for the
regulators to regulate them. Here is a very, very, very,
profitable industry and yet this $45 million program is being
footed by the taxpayers.
My question is when you are confirmed how will you
guarantee that oil and gas companies are the ones paying for
these types of activities?
Ms. Burke. Thank you, Senator Franken. Thank you for the
opportunity to visit with you yesterday and discuss these
important issues. I really appreciate your concerns in this
tight budget environment that the user pays, if you will, for
the use of the public resource.
So after our conversation I did talk with the BLM about the
types of fees that industry does pay today for the
administration of the programs, such as the APD fee, the
application for permit to drill for site specific environmental
analysis under NEPA, for they contribute to mitigation whether
it's air monitoring or wildlife monitoring or vegetation
monitoring. In this year's budget proposal and also as in last
year's proposal is an inspection fee so that just as we have
for offshore development that industry would actually pay an
inspection fee for that regulation.
So the study of which you are concerned about is a study
being undertaken by the U.S. Geological Survey, I believe and
EPA and perhaps the Department of Energy. If I were confirmed I
would look forward to working with you and other members of
this committee to look at the ways in which we're funding the
activities of the agency in order to support the development of
oil and gas.
Senator Franken. OK. You've listed some of the fees that
the oil and gas industry pays. But my question is does the
industry pay all the fees?
Can you get me a list of oil and gas activities at the
Department that are not paid for by oil and gas companies? I'm
talking about environmental reviews, permitting, etcetera,
leasing operations, oversight activities. Can you commit to
getting me that information within 60 days?
Ms. Burke. Yes.
Senator Franken. Thank you so much. I really appreciate
that. Again, I just want to say on behalf of the taxpayers of
Minnesota I think when $45 million may not seem like a
tremendous amount of money in our budget, but I think that it's
something. It just seems to me that these industries, this
industry, that's going to benefit from the study of how to do
fracking in a way that makes the fracking possible to do.
[Laughter.]
Senator Franken. Should be the ones that foot the bill for
the research. So thank you.
Thank you, Mr. Chairman.
The Chairman. Alright. Thank you all very much. I think
it's been a useful hearing. We will try to move ahead with your
nominations sometime in the near future.
Thank you for being here.
That will conclude our hearing.
[Whereupon, at 11:52 a.m. the hearing was adjourned.]
[The following statement was received for the record.]
NorthWestern Energy,
Butte, MT, March 26, 2012.
Hon. Harry Reid,
Majority Leader, S-221 Capitol Building, U.S. Senate, Washington, DC.
Hon. Jeff Bingaman,
Chairman, Committee on Energy & Natural Resources, 304 Dirksen Senate
Office Building, U.S. Senate, Washington, DC.
Hon. Mitch McConnell,
Minority Leader, S-230 Capitol Building, U.S. Senate, Washington, DC.
Hon. Lisa Murkowski,
Ranking Member, Committee of Energy & Natural Resources, 304 Dirksen
Senate Office Building, U.S. Senate, Washington, DC.
Dear Leaders Reid and McConnell and Senators Bingaman and
Murkowski:
I write in strong support of the nomination of Chairman Tony Clark
from the North Dakota Public Service Commission to be a Commissioner to
the Federal Energy Regulatory Commission (``FERC'').
As the Chief Executive Officer of NorthWestern Energy and (while
serving as a Montana Public Service Commissioner from 1993 to 2004) a
past President of the National Association of Regulatory Utility
Commissioners (``NARUC''), I have had the honor to know Chairman Clark
on a personal and professional level. On both fronts, Chairman Clark
has impressed me as a thoughtful public servant who maintains a
reasonable and balanced perspective on the needs of customers and
industry stakeholders. Tony's outstanding service as the NARUC
President and in other capacities, and as a North Dakota Commissioner
uniquely position him to be an effective FERC Commissioner.
Thanks to the variety of positions in which he has served
nationally, regionally and at home, Chairman Clark also brings valuable
depth in technology and meeting the evolving needs for high quality
infrastructure in more rural areas. Given the developing state of
energy policy in the United States, his experience and perspective will
be a strong asset at the FERC.
Finally, Chairman Clark has been an effective leader and member of
a multi-member regulatory body, with strong additional relevant
experience at the national level. He understands what is required to
help ensure that one of the nation's most important regulatory agencies
continues to be effective.
I commend President Obama for nominating such a qualified
individual and urge his quick confirmation.
Very truly yours,
Robert C. Rowe,
President and CEO.
APPENDIX
Responses to Additional Questions
----------
Response of Adam Sieminski to Question From Senator Wyden
Question 1. Financial speculation--Recently the Consumer Federation
of America issued a study in which it estimated that 20% of the cost of
gasoline that Americans are paying at the pump was due to speculation--
or roughly $600 a year for the average family. In the past, EIA has
been reluctant to even consider the impact of speculation and trading
on energy prices. Under your watch is this going to change? Will you
ensure that all of the factors that go into energy prices, including
the role of trading and speculation, be considered in EIA's work?
Answer. If confirmed, I will make it a high priority to continue
EIA's work on improving our understanding of the key determinants of
oil prices, including both physical and financial factors. I would also
work to increase interactions between EIA and other federal agencies
involved in energy markets.
In September 2009, EIA launched its Energy and Financial Markets
Initiative with the aim of assessing the influences of financial
activities and markets, such as speculation, hedging, investment, and
exchange rates on energy price movements in addition to EIA's
traditional coverage of physical fundamentals such as energy
consumption, production, inventories, spare production capacity, and
geopolitical risks. As part of that initiative, EIA produced the
website, ``Energy & Financial Markets: What Drives Crude Oil Prices?''
Along with supply and demand factors, EIA discussed the increase in oil
futures trading, the growth of oil as an investment, and the increase
in correlations between oil prices and other commodity prices and other
financial markets. EIA updates that website on a monthly basis. EIA
also brought together many of the leading researchers in the area of
oil price formation for a workshop in August 2011 to improve our
understanding of physical and financial market linkages, and EIA
continues its collaboration with other federal agencies and market
participants to improve its data and analysis in this area. I have been
very interested in EIA's work in this area, and over the past 18 months
I organized a series of e-mail exchanges of papers and reports among a
broad and diverse group of academics and policy analysts to provide a
forum for exchanging views on this important topic. I strongly believe
that energy economists should try to look at this issue from all
possible angles.
Responses of Adam Sieminski to Questions From Senator Murkowski
Question 1. How important is spare capacity to the price of oil? If
global spare capacity was several million barrels higher than it is
today, do you think oil prices would be lower or less volatile?
Answer. Spare oil production capacity can enhance the world oil
market's ability to respond to oil supply disruptions and a high level
of spare capacity can be reassuring to oil market participants. Low
spare capacity indicates that markets are tight and that there is
little cushion for supply to easily meet fluctuations in global oil
demand. In its analysis of oil price formation, EIA identified low
spare capacity as an important factor in the rise in oil prices from
2003 to 2008. During that period, spare capacity remained below 2.5
million barrels per day. Higher spare capacity usually provides
assurances to the market that temporary disruptions in supply can be
accommodated, and, other things being equal, would tend to lower the
oil prices and volatility. However, the reason for the higher spare
capacity is also important. If spare capacity is higher because members
of the Organization of the Petroleum Exporting Countries (OPEC) have
cut production, oil markets could still be tight despite higher spare
capacity. Although important, spare capacity is just one of many
factors that affect oil prices, including supply, demand, inventory
levels, and financial market conditions.
Question 2. As an economist and a long-time user of EIA's data, I'm
curious if you have identified anything that the agency could be doing
differently or doing better. If you are confirmed by the Senate, have
you thought of any changes you would make at EIA?
Answer. In my view, EIA is the world's premier energy statistical
agency and there are very few areas where EIA falls short in its
collection, analysis, and reporting responsibilities. If confirmed,
there are a few things that I would like to emphasize:
Take advantage of new ways to collect data faster and
cheaper with web-based systems;
Promote ``best practices'' in data collection and management
by EIA's state and federal partners;
Retain good people and deal with the ``retirement bulge''
that is impacting virtually all energy businesses and
institutions;
Find ways to make the data sets, analyses, and forecasts
more readily available to the public in different forms;
Budget permitting: improve data on railroad shipments of
petroleum and petroleum products, including ethanol and
reinstate the International Energy Outlook; and
Budget permitting, collect more timely monthly data on
domestic oil production directly from operators, as is now done
for natural gas, as well as timely data on exports of petroleum
products, which is necessary to understand changes in the
amount of products supplied to domestic consumers.
Question 3. For years there has been debate about the importance of
additional oil production and whether greater world supplies of crude
oil will not only stabilize, but can drive down global oil prices. It
has been assumed by many that to influence market prices significantly,
new supply would have to rise by more than what OPEC members could
afford to withhold from the market. and we have heard repeatedly the
misleading statement that since America only has 2% to 3% of the
world's proven reserves, increased U.S. production would have little
impact on prices. What is your opinion? How much would non-OPEC
production have to rise to be able to significantly drive down global
prices for oil?
Answer. In its analysis of oil price formation, EIA identified non-
OPEC oil production as an important factor in oil price formation.
Other things being equal, higher levels of non-OPEC supply tend to put
downward pressure on oil prices by increasing total global supply and
reducing the ``call on OPEC''. The lower the call on OPEC, the lower
its ability to influence prices. From 2005 to 2008, non-OPEC production
changed little, and in the face of rising oil demand, this contributed
to higher oil prices. If, in contrast, non-OPEC production began rising
faster than global demand for crude oil, this could put substantial
downward pressure on oil prices. Of course, non-OPEC oil production is
just one of many factors that affect oil prices, including supply,
demand, inventory levels, and financial market conditions. While higher
non-OPEC production would put downward pressure on oil prices, the
observed oil price level would be determined by overall market
conditions.
Question 4. In recent years there has been an increase in the
forecasts for the amount of oil that North America can produce.
Canadian oil sands production could rise nearly 2 million barrels a
day, and U.S. production could rise by even more thanks to the Arctic
coastal plain, OCS areas, oil sands, oil shales, tight oil, and
biofuels. New forecasts for Alaska crude oil and shale oil production
have now raised the mean estimate for total Alaska oil to 43.8 billion
barrels and the total natural gas forecast to nearly 400 trillion cubic
feet. In fact EIA now projects that total U.S. liquid fuel production
will rise from less than 8 million barrels a day today to more than 13
million barrels by 2035. If we accelerate that production through
additional leasing and exploration, what would a rise of, say, 3
million more barrels of daily domestic production, within a decade, do
to global oil prices and thus to U.S. pump prices?
Answer. Higher North American oil production, other things being
equal, would tend to put downward pressure on oil prices and would
reduce the influence of OPEC on oil markets. A three million barrel per
day increase in 2022 would represent approximately a three percent
increase in total global liquid fuels supplies, which could have a
substantial effect on world oil prices. Of course, North American oil
production is just one of many factors that affects oil and gasoline
prices, including other supply, demand, inventory levels, and financial
market conditions. While higher North American oil production would put
downward pressure on oil prices, the observed oil price level would be
determined by overall market conditions.
Question 5. How has EIA's track record been in accurately
predicting future commodity prices, both in the short-term and in the
long-term? a.How difficult is it to predict commodity prices 25 or 35
years--or even one year--into the future? b.How difficult is it to
predict supply and demand trends? c.What kind of factors impact how
these numbers move and how easy is it to predict those factors? d.Given
how successful you have been in the private sector at forecasting
trends and prices, is there anything about the way that EIA approaches
this task that you might change, should you be confirmed?
Answer. Since my experience has been principally dealing with oil
production and price projections, I will focus mostly on that area in
providing you a response especially concerning the short-term.
Crude oil prices are volatile in the short-term, in part, because
of the very slow response of supply to changes in market prices. An
unexpected disruption to existing crude oil supply or increase in world
demand can contribute to significant increases in crude oil prices.
Because of the long lead times required to drill and begin producing
from new resources, prices rise in order to ration consumption and
maintain a balance with available supplies. Storage and underutilized
or `swing' production capacity has developed in order to manage such
disruptions, but cannot remove all price impacts. Financial markets
also developed in this context, and can either dampen or enhance short-
term price movements.
Oil prices can be relatively stable during periods when few
significant and unexpected events occur. For example, in the January
2010 Short-Term Energy Outlook (STEO), EIA projected that the West
Texas Intermediate (WTI) crude oil spot price would average $79.83 per
barrel during 2010, which was only slightly higher than the actual 2010
average price of $79.40 per barrel. However, during the course of a
year prices can also change dramatically. The January 2011 STEO
projected the WTI spot price would average $93.42 per barrel during
2011, slightly lower than the final realized $94.86 per barrel average
for that year. But within this stable average price for 2011, the daily
WTI spot price ranged from a high of $113.39 per barrel on April 29,
2011, following the disruption to Libyan crude oil production, to a low
of $75.40 on October 4, 2011.
EIA has consistently emphasized the uncertainty of forecasting
short-term energy wholesale and retail prices. Beginning in October
2009, EIA began reporting crude oil price forecast confidence intervals
and probabilities of prices exceeding or falling below given levels
based on trading of NYMEX crude oil futures and options in the STEO. In
January 2010, EIA began publishing the Market Price Uncertainty Report
(MPUR) as a monthly supplement to the STEO. The MPUR also reports on
trends in financial market activity in the futures and options markets.
EIA also created a new ``Energy & Financial Markets: What Drives
Crude Oil Prices?''' web page that reports on the relationship between
crude oil prices and various market factors that influence prices, such
as world crude oil supply and demand, as well as purely financial
aspects including futures market open interest, futures contracts held
by physical participants and financial money managers, and the
correlation of crude oil prices with other commodities.
In the long term, the challenges are somewhat different, as you
don't have the rigidity of the system in responding to market
surprises, but you have the difficulty of predicting unexpected events
or trends from the perspective of today. Commodity prices are sensitive
to trends in technology, economic growth, and political decisions,
among others.
While some of the influences on energy supply and demand trends are
highly predictable, such as population or demographic trends, other
factors are subject to uncertainty from the same factors that influence
commodity prices. Of course, even the factors that are more predictable
are subject to more uncertainty the longer the projection period.
Trends in supply and demand, particularly in demand, tend to be
more easily predicted than commodity prices. EIA tracks the accuracy of
its long term projections summarizing the differences between actual
energy indicators and past AEO projections.
EIA currently uses several approaches to help to bracket the
uncertainty in energy market prices and address shifts in energy market
trends. While EIA completes numerous alternative cases, the focus of
the analysis discussion tends to be on a single, reference case. It is
important to highlight the uncertainty inherent in energy markets in
discussions and de-emphasize a single point projection. There are other
risk management tools available for dealing with this type of
uncertainty that could be applied to EIA's work. I think this is an
important issue and, if confirmed, I will want to see EIA extend its
efforts to address uncertainty in its projections and other energy
analyses, and effectively communicate about it with the public.
Question 6. In reviewing the recent EIA report about the impact of
U.S. LNG exports on domestic energy markets, I was struck by how
aggressive EIA's build-out scenarios appear to be. I wonder if you
could please explain your view on their likelihood.
a. In all of the scenarios, EIA findings about the long-term
impact of exports appear to be somewhat minimal, yet the
conclusions about short-term impact seem quite extreme. This
may be based on the very aggressive export schedule EIA
modeled, but it appears likely that industry could respond to
such a shock reasonably quickly, by producing more gas. Do you
agree?
b. How realistic is the short-term impact that EIA is
projecting, considering the low likelihood of the presumed
export schedule?
Answer. The scenarios contained in the report, Effect of Increased
Natural Gas Exports on Domestic Energy Markets, were specified by DOE's
Office of Fossil Energy. EIA has not performed an analysis of the
likelihood of these LNG export scenarios. EIA also notes that future
U.S. exports of LNG would be affected by future U.S. natural gas
prices. High U.S. natural gas prices would tend to discourage LNG
exports while low U.S. natural gas prices would encourage exports. The
EIA study did not attempt to model this relationship or other aspects
of the worldwide natural gas market.
The Office of Fossil Energy has indicated that these scenarios were
specified to capture a wide range of possible outcomes. The shorter-
term rapid increase in prices shown in the report largely reflects
expected increases in production costs due to the production of more
natural gas, which occurs relatively quickly. Domestic production
increases, on average, from 4 to 12 percent when exports are added.
Production costs increase due to the increased demand for equipment
(e.g., rigs) and labor to support the necessary drilling, as well as
for lease rights. EIA did not consider other, slower, build-out
scenarios other than those specified by the Office of Fossil Energy.
Question 7. We are all concerned about rising gasoline prices and
the impact that they have on our economic recovery. In your opinion,
what are some immediate steps that the Administration could take to
help?
a. I am particularly interested to know if there are any
regulations that could be rolled back--for instance EPA
seasonal fuel specs or regulations targeting refiners
specifically. What kind of impact do you think this would have?
b. In your opinion, what are some longer term solutions?
Answer. The impact of such changes would depend on the specific
circumstances. It is my understanding that the Department of Energy's
Office of Policy and International Affairs has a very strong capability
to provide analysis of the issue you raise. If confirmed as EIA
Administrator, I would seek to utilize the combined capabilities of
that office and EIA to provide analysis that bears on this issue.
EIA is the statistical and analytical agency within the U.S.
Department of Energy. EIA collects, analyzes, and disseminates
independent and impartial energy information to promote sound
policymaking, efficient markets, and public understanding regarding
energy and its interaction with the economy and the environment. EIA,
in keeping with its responsibility for impartial information and
analysis, does not recommend policy positions. Nonetheless, EIA has
historically worked with Congress and the Administration to help
quantify the possible impacts of well-specified energy policy proposals
on energy markets. If confirmed, I would look forward to continuing and
extending EIA's activities in this area.
Question 8. As Congress and the Administration refine our sanctions
policy towards Iran, it is critical that we have accurate, up-to-date
and non-biased information about the state of Iran's energy sector. To
that end, Congress has called upon the EIA to produce a report every 60
days, on the price and availability of alternatives to Iranian
petroleum. Currently the President is required to impose sanctions on
companies investing in Iran's energy sector, selling Iran energy
technology, or providing Iran refined petroleum. Certain sanctions are
dependent upon whether a country has significantly reduced its import
of Iranian petroleum. In the past, the EIA has issued reports on these
topics to the discomfort of the State Department which has failed to
sanction companies identified in the reports. If confirmed, will you
ensure country reports on Iran continue to identify foreign companies
working in Iran's energy sector or providing Iran with refined
petroleum?
Answer. EIA is the statistical and analytical agency within the
U.S. Department of Energy that provides independent and impartial
energy information to inform policymakers. EIA has statutory
independence with respect to its data, analyses, and forecasts. To the
extent that resources are available, if confirmed, I would plan to
continue the reporting of information related to commercial activity.
In my experience, EIA has successfully maintained that independence, a
practice I will scrupulously uphold if confirmed.
Responses of Adam Sieminski to Questions From Senator Cantwell
future coal prices
Question 1. According to Energy Information Administration (EIA)
data (Annual Energy Review 2011, Table 7.9), coal prices in the United
States rose by more than 5 percent annually, on average--from $18.93 to
$32.2 per ton--between 2000 and 2010. However, the EIA's Annual Energy
Outlook (AEO) 2012 Early Release projects rising U.S. coal production
and exports, but average annual coal price increases of just 0.9% over
the period 2009-2035.
a. What factors do you think contribute to EIA's significant
departure from historical trends in coal prices?
b. Do you think environmental regulations that effectively
limit U.S. coal use to relatively cleaner supplies are likely
to increase future coal prices?
c. From 1999 through 2010, the AEO has consistently projected
a falling price per ton for Central Appalachia (CAPP) coal.
While AEO 2011 projected a price increase of only a small
margin through 2035, CAPP coal prices have risen consistently
since 1999, and by well over 100%. Why do you think the EIA's
coal price projections have been so consistently and
significantly off and what would you do as EIA Administrator to
address this problem?
d. The National Research Council's 2010 report ``The Hidden
Costs of Energy'' showed that the average additional cost of
coal generation due to emissions of SO2, NOx, and particulate
matter was 3.2 cents per kilowatt-hour in 2005 and will
decrease to roughly 1.7 cents per kilowatt-hour by 2030. Do you
think EIA should incorporate these externalities into EIA's
models?
e. If the additional cost of coal generation estimated by the
National Research Council's 2010 report ``The Hidden Costs of
Energy'' were included in EIA's modeling how would that change
the estimate for future coal consumption and the price through
2035?
Answer. The increase in coal prices from 2000 to 2010 was due to
many factors, including declines in coal mining productivity and the
rising costs of mine equipment, parts and supplies, fuel prices,
explosives, and labor. According to the AEO Early Release (AEO2012),
the trend in coal mining productivity is expected to improve over that
of recent years. As far as regulations driving coal prices, without
details on specific requirements it is difficult to assess their
potential impact. Generally, regulations that reduce the supply of
usable coal would lead to higher coal prices. Conversely, regulations
that would lower the demand (i.e. restrictions on power plant use of
coal) would decrease the price of coal. In either case, the magnitude
of the cost impact would depend on the specifics of the regulations.
I do not believe EIA has analyzed the potential impacts of the non-
market externalities referred to in the NRC report. If externality
costs of coal were incorporated into pricing, coal plant operators
would have an incentive to abate emissions in order to reduce impacts
on generation costs. What costs and how they could be included in EIA's
modeling, at least for sensitivity cases is something I would be
willing to explore, if confirmed.
likely amount of coal consumed in the u.s.
Question 2. In an investment analysis published about a year ago
(http://www.anga.us/media/180381/deutsche%20bank%20report-
%20nov%202010.pdf), Deutsche Bank concluded that coal use for
electricity production in the United States is likely to decline
significantly in coming decades--from 47 percent in 2009 to 22 percent
in 2030. Several factors contribute to coal's decline, including
capital cost increases relative to gas, retirement of aging plants,
increasingly stringent regulation of criteria pollutants, rising ash
disposal costs, and financial barriers due to the regulatory
uncertainty associated with greenhouse gas emissions. In contrast,
EIA's Annual Energy Outlook 2012 Early Release projects that U.S.
aggregate coal use will continue to rise and that coal will still
account for 39 percent of U.S. electricity production in 2035.
a. Were you involved in this Deutsche Bank analysis and do
you believe it is credible? If you do, please explain what you
think explains the stark differences between its conclusions
and those of EIA.
b. Do you concur with the broad consensus that anticipated
plant retirements, increasing regulatory obligations, and
higher hurdles to capital finance for new coal plants will have
a profound impact on U.S. coal consumption?
c. If you do agree with the consensus of plant retirements,
increasing regulatory obligations, and higher hurdles to
capital finance for new coal plants, what is driving future
increases in U.S. coal consumption in EIA's modeling and
analysis?
d. Should EIA work with financial analysts and incorporate
what the private sector predicts will happen to coal usage?
e. Based on the AEO, the proportion of high to low-sulfur
coal going to market will worsen for utilities using APP coal.
If EIA is correct also that power plants closure will be
nothing like industry projections, these plants will have to
accommodate high-sulfur coal with retrofits, which will be
charged to ratepayers or taxpayers. How will you reflect this
in the AEO for energy prices?
Answer. The Deutsche Bank report Natural Gas and Renewables, A
Secure Low Carbon Energy Plan for the United States (November 2010),
was authored by DB Climate Change Advisors, a subsidiary of the
Deutsche Bank Group that is not part of the division of Deutsche Bank
that I worked for during my employment at the firm. My understanding is
that the report in question provided an analysis of a policy-oriented
initiative, specifically the identification of a low cost solution for
achieving a 17-percent reduction in overall U.S. greenhouse gas (GHG)
emissions by 2020 and an 83-percent reduction by 2050 relative to the
2005 level. A statement to this effect is made at the beginning of the
``Key Research Findings'' section on page 8 of the report. Those policy
goals were not represented in the Annual Energy Outlook 2012 (AEO2012)
Early Release. The AEO reference case, appropriately, does not include
policy measures not already in law.
EIA is currently projecting an overall increase in U.S. electricity
generation with other technologies, especially natural gas and
renewable, gaining an increased share of overall generation and coal's
share experiencing a decline. A number of factors could affect the
outlook for coal consumption including continuing natural gas prices at
a level competitive with existing coal plants for electric power
dispatch, slower economic growth reducing electricity demand, and new
policy initiatives. Understanding and modeling all the various factors
that affect current capacity and prospects for new generation requires
a sophisticated understanding of the current regulatory and market
environment. In my experience, this is best gained with ongoing
dialogue with the private sector, financial analysts, regulators and
other stakeholders. I know that EIA has participated in meetings and
workshops with private sector analysts as well as a wide array of
experts in the past. If confirmed, I would encourage and expand on such
outreach.
future regional demand of coal
Question 3. The Congressional Research Service documented in a 2007
study that significant bottlenecks in rail transport caused billions of
dollars in losses in previous years, and that many billions of dollars
of improvements would be required to avoid such problems in the future.
a. How much would these bottlenecks increase the true cost of
coal?
b. What do you think must be invested to ensure the national
reliability of inputs to coal-fired power plants considering
that that EIA also projects coal mining to become more
geographically constrained?
c. USGS and EIA data seem to be completely inconsistent
regarding the potential production of coal from NAPP, Central
Appalachia (CAPP), ILB, Rocky Mountain, and New Mexico/Arizona.
In each of these cases, USGS estimates that the total amount of
coal that is actually economic to mine is far lower than what
EIA projects will be mined by 2035--even as EIA projects to
increase only slightly. According to USGS, there is only 771 Mt
of economic coal left to mine in NAPP, but EIA projects 4,067
Mt will be mined through 2035; 976 Mt versus 3,435 Mt in CAPP;
1,074 Mt versus 3,326 MT in ILB; 1,078 Mt versus 1,526 Mt in
Rocky Mountain, and 214 Mt for AZ/NM versus 917 Mt in AZ/NM.
Given the importance of EIA's projections in various energy
models and public policy discussions, are you concerned about
these huge differences between EIA's projection for the
production and prices of coal from these major coal basins and
what USGS says is economically possible? Please detail what you
would do about these discrepancies as EIA Administrator.
d. USGS estimates a 200 million ton shortfall of low-sulfur
coal in the Appalachian region. This is consistent with
industry projections about coal-fired power plant closures,
such as from Deutsche Bank, Brattle Group, and ICF. Why does
the AEO contrast with USGS and industry projections about this
shortfall of coal in the East?
Answer. Coal transportation bottlenecks and reserve estimates have
not been a specific focus of my past research, and I have not analyzed
these issues in the specific context of the findings of the
Congressional Research Service and the USGS. If confirmed, I would be
willing to look at the differences between the EIA projections and
other findings with a view to attempting to reconcile them. In my
experience, reserve estimates often vary because of the exact
definitions used and assumptions made by the estimators.
Identifying and explaining changes in the regional composition of
coal demand and the necessary supply linkages, including
transportation, are certainly critical areas for EIA. While this is not
an area in which I have done analysis, I recognize that collecting and
disseminating accurate and timely data and analysis at the level of
granularity needed in the marketplace would be a priority if I am
confirmed as Administrator.
I am aware that rail bottlenecks have occurred along various coal
supply lines in the past. The growing demand for rail capacity for
crude oil shipments is adding a new dimension. In fact, I mentioned
this at the hearing. It is my understanding there is limited publicly
available data related to rail infrastructure costs and capacity needs.
The directional movements of coal and crude oil are likely to differ
and it is not clear whether or not any enhancements to the rail system
that may be needed could be managed within the normal range of railroad
capital investments.
discrepancies in coal reserves estimates
Question 4. The U.S. Geological Survey (USGS) has been updating
data on U.S. coal reserves in the last few years. The AEO 2012 updated,
and reduced, previous estimates for technically recoverable reserves of
shale gas based on new data from USGS. However, the AEO 2012 does not
mention its reference for coal reserves.
a. Do you believe the latest USGS data for coal reserves to
be reliable?
b. Do you believe that EIA is, or should be, integrating the
latest numbers from USGS for reserves, recoverability factors,
etc.?
c. Is there a reason that EIA does not use the CoalVal model
developed by USGS to analyze economic recoverability from coal
mines?
d. In 2009 USGS published an analysis that included
evaluations on how to calculate economic recoverability,
estimating that 6% of the Demonstrated Reserve Base (DRB) was
'economically recoverable' without a rise in price per ton that
is well beyond current EIA projections. If USGS estimates on
economic recoverability were included in the AEO, how do you
think the projected prices, exports, and production for all
energy types be affected?
e. If there is disagreement between USGS and EIA on analysis
of coal reserves, costs, and production, how would you work to
get that data resolved, and how can we be sure that EIA is
providing Congress with the best data?
Answer. As I mentioned in my previous answer, if confirmed as EIA
Administrator, I would attempt to pinpoint the reasons for disagreement
between the USGS and EIA on the analysis of coal reserves, and oil and
natural gas reserves as well. The best way to resolve such issues, in
my view, is to work through the specific data and assumption being used
in the analyses. EIA's mission is to deliver independent, objective,
and timely data and analyses, and to assure it is integrity, accuracy
and usefulness. If confirmed, I would do my best to assure the Congress
that the EIA was doing the best possible job and explain the
methodologies behind the findings.
impacts of fossil fuel exports
Question 5. The 2011 Annual Energy Outlook shows U.S. exports of
coal increasing annually by 1.8%, from 1.51 quadrillion Btu in 2009 to
3.24 quadrillion Btu in 2035. In contrast, U.S. production of coal is
only projected to increase by 0.3% annually, from 21.63 quadrillion Btu
in 2009 to 23.51 quadrillion Btu in 2035. This suggests that exports
will account for over 13% of coal production by 2035.
a. Do you think coal prices increase substantially more than
projected if world demand increases faster than expected? If
exports were to increase annually at twice the projected rate
such that 20% of U.S. coal production was exported by 2035,
roughly in what range would coal prices be?
b. As the rest of the world consumes an increasing percentage
of U.S. coal, do you think will coal act more like a fungible
commodity subject to prices set by the world market? Do you
think this dynamic would cause U.S. coal prices to increase and
become more volatile?
c. Do you think it make sense for the United States to export
more raw energy commodities--and the resulting environmental
impacts--across the Pacific just to have finished goods such as
solar panels imported back to the U.S.?
d. Do you think exporting coal and natural gas would make
them behave more like oil--a world market commodity, governed
by higher, more volatile day-to-day prices?
Answer. In my experience, prices respond to supply and demand.
Higher demand implies higher prices--but determining the change in
prices depends on numerous other factors including but certainly not
limited to the elasticities of supply and demand with respect to price
and the elasticity of demand with respect to income. The EIA is not
involved in the ``national interest'' determinations that are made by
policy division of relevant agencies. I believe that volatility in
commodity prices is determined by numerous market forces and that
export determinations would be more likely to impact price levels than
price volatility.
EIA's role is one of observing and analyzing these markets. I am
not privy to EIA's plans for the full AEO2012 due out in several
months, but that or future analyses could include sensitivity cases
along the lines suggested by the questions you raise.
iran
Question 6. As Congress and the administration calibrate our
sanctions policy on Iran, it is crucial that we have accurate, up-to-
date and unbiased information on the state of Iran's energy sector. To
that end, Congress has called on the EIA to produce every 60 days a
report on the price and available of alternatives to Iranian petroleum.
The first of these reports was issued last month, and I was impressed
with the detail and professionalism in which the report was done.
a. If confirmed, will you ensure the EIA's reports on Iran
are done in the timeframe established by Congress?
b. Will you ensure the Iran reports are unbiased and are free
from outside political influence?
c. Currently the President is required to impose sanctions on
companies investing in Iran's energy sector, selling Iran
energy technology, or providing Iran refined petroleum. Certain
sanctions are also incumbent upon whether a country has
significantly reduced its import of Iranian petroleum. In the
past, the EIA has issued reports on these topics but the
Administration has failed to sanction companies identified in
the reports. If confirmed will you ensure country reports on
Iran continue to identify foreign companies working in Iran's
energy sector or providing Iran refined petroleum?
Answer. I am familiar with EIA's reporting responsibilities
regarding sanctions policy on Iran and, if confirmed, would ensure any
and all reports are unbiased, free from political influence and
provided in the necessary timeframes. I understand EIA's recent budget
constraints caused the reduction, even elimination, of some of the work
it had done in the international area. To the extent that resources are
available, if confirmed, I would plan to continue the reporting of
information related to commercial activity.
open fuel standard
Question 7. Proponents of an Open Fuels Standard, such as the one
proposed by Senate Bill 1603 which I introduced with Senator Lugar,
believe it would enable millions of gallons of petroleum alternatives
to come online and effectively end the monopoly oil has on our nation's
transportation system.
a. If 20 to 30 percent of our nation's petroleum demand could
be replaced with alternative fuels such as methanol derived
from natural gas or ethanol from non-food biomass at prices
less than the current price of gasoline, what impact do you
think that would have on overall gasoline prices?
b. Do you think that having competing fuels at the gas pump
would help lower prices because consumers can switch between
fuels?
c. How much natural gas would it take to produce a million
gallons of methanol?
Answer. I believe that if alternative fuels can be supplied to
consumers at prices competitive with existing fuels that such
competition would tend to lower prices. Converting natural gas to
methanol is a complex procedure with the conversion rate depending on a
number of factors including the specifics of the process and catalysts
used. To the best of my knowledge, a method to convert ethane to
methanol has not been commercially demonstrated.
The impact of such a standard would depend on the cost and
availability of alternate fuel vehicles compatible with methanol and
other alternatives, sufficient concentration of like vehicles in an
area to stimulate fueling infrastructure investment, as well as local
codes and standards compatible with residential use and/or distribution
of such fuels. Based on 65 percent conversion efficiency, 56,800 Btu
per gallon of methanol, and 1,025 Btu per cubic foot of natural gas,
production of one million gallons of methanol would require about 82.7
million cubic feet of natural gas.
relationship between gasoline prices to supply and demand fundamentals
Question 8. There are few economic drivers more significant than
prices at the pump. Even small gas price increases can significantly
impact every family budget and the bottom lines of virtually every
American business. Many industry analysts think we are just a few
months away from $4 per gallon of gas, perhaps higher. And we'll shoot
right past that if Iran reacts to additional economic sanctions by
restricting its production or even attempting to close the Strait of
Hormuz.
While these geopolitical considerations have an understandable
impact on prices at the pump, every year the oil markets seem to be
getting further and further divorced from the laws of supply and
demand. During a Finance Committee hearing last year, I asked Exxon-
Mobil CEO Rex Tillerson what he thought the price of oil should be if
it were based on supply and demand fundamentals. His answer was $60 to
$70 a barrel, rather than the $100--$115 we see today. I've studied
this issue closely for many years now, and I think the evidence is
clear that excessive speculation in the oil futures market drives
disruptive behavior in the price of oil.
a. What do you think is responsible for our new era of
volatile and elevated oil and gasoline prices?
b. What role do you think excessive speculation in the oil
futures markets has on spot prices today?
c. EIA recently reported that U.S. demand for gasoline fell
6.7% in February relative to a year ago to its lowest level
since 2001. What do you think explains this counterintuitive
finding?
d. Are you concerned that flaws in EIA's methodology or other
unrelated mistakes undermine the credibility of its data
products?
e. Do you think Americans and the rest of the world simply
have to live with high prices and high volatility until better
alternatives allow us to run our cars and trucks on something
other than oil, or make them all run on less oil?
Answer. My research suggest that oil and oil product prices have
been volatile over the entire course of the development of the oil
industry. This volatility can be attributed to a variety of supply,
demand, weather, geopolitical and financial factors. Over the past
several months the oil market has gone through a period of rising
prices. As I indicated at my nomination hearing and in the above
answer, I believe there are a wide variety of factors involved in oil
price movements, including financial market activity and its
interaction with energy markets. Over the past few years, debate over
the role of financial investment in commodity markets has heated up.
Flows to commodity funds and commodity prices have surged in recent
years. The impact of higher commodity prices on inflation and growth,
as well as potential hardship for fuel and food consumers, have caused
analysts and policymakers to look closely at the factors influencing
prices and volatility.
EIA has identified several factors that contributed to the increase
in oil prices over the past 10 years. Strong economic growth in non-
Organization of Economic and Development (OECD) countries led to
increases in oil consumption. Slow growth in non-OPEC oil production
from 2005 to 2008 limited oil supply growth. Low spare capacity from
2003 to 2008 reduced the cushion for supply to meet fluctuations in
global oil demand. In addition to supply and demand factors, the
increase in oil futures trading, the growth of oil as an investment,
and the increase in correlations between oil prices and other commodity
prices and other financial markets also contributed to changes in oil
markets and oil prices.
Understanding the contribution of these different factors to oil
price formation is an area where EIA has been actively engaged. I have
participated in several EIA workshops over the past few years ago with
academic and regulatory economists dissecting and critiquing academic
analyses of market data. As I said at the hearing, if confirmed as
Administrator, I would continue and expand EIA's collaboration with
other federal agencies and market participants to improve access to
market data and support critical analysis in this area.
As a professional analyst I am always concerned data quality. I
understand the tremendous challenge for EIA to collect, verify and
report high quality data in a timely manner, especially as markets
evolve and the roles of market players change. The recent discussion of
the percentage decline in gasoline demand and the difficulty of
estimating exports is a case in point. EIA became aware of that the
weekly data were understating exports, thereby overstating demand so it
changed the methodology which was described in Today in Energy on the
website. In my experience, EIA has been responsive to corrections and
improving its systems when problems are discovered. I too have had my
frustrations that data series were not adjusted sooner at times, but I
do not underestimate the challenge of rebuilding the tracks while
keeping the trains running on time. As I said at the hearing, if
confirmed, my top priority will be to modernize and improve the data
collection and dissemination systems.
elevated gasoline prices
Question 9a. In 2011 we paid the highest average price for gasoline
in history, and it looks like 2012 average prices will be even higher.
Do you think there is any way that the average annual price for
gasoline will go below 2011 levels in the next 20 years?
Question 9b. Do you believe that given rapidly increasing
international demand and only marginal increases in new oil supplies
that there could be an oil shortage sometime in the next 20 years?
Question 9c. It was just a decade ago that Saudi Arabia was trying
to keep world prices in the range of $22 to $28 dollars per barrel to
discourage the development of alternatives, why do you think $100 per
barrel helping spur alternatives to gasoline?
Question 9d. Please share your suggestions on how America can break
oil's monopoly on our transportation system, and what will bring
alternative fuels online on a scale to compete with fossil fuels?
Question 9e. I understand that over the last three years the
Chinese government has loaned around $120 billion to its state-owned
oil industries to secure supplies of oil that will now not go onto the
world oil market. Can you verify this information and analyze what
impact it could have on world oil prices and U.S. gasoline prices in
the coming years?
Answer. Many analysts expect rising demand for oil in the
developing world to push crude oil prices higher in real terms over the
coming years, which would result in higher prices for gasoline and
other petroleum products. However, past experience teaches analysts to
be humble in making long-term price projections. Therefore, I think it
would be unwise to completely rule out the possibility that annual
average gasoline prices would fall below the 2011 level sometime within
the next two decades.
It is certainly possible that there could be an oil shortage
sometime in the next two decades. The balance between demand and supply
growth will determine whether or not an oil shortage occurs. The demand
for oil is likely to increase in the developing economies, but to
stagnate or decline in the traditional industrialized economies.
Efficiency improvements, subsidy reforms, and the development of
alternative fuels have the potential to slow the growth in demand for
oil, while technological developments and institutional reforms have
the potential to increase supply growth.
At present price levels, oil remains an attractive fuel for
transportation applications, but there are some indications that
alternative fuels can expand their role. Because EIA does not promote
or formulate policy proposals, I am reluctant to make suggestions
regarding measures to accelerate the adoption of alternative fuels.
However, if confirmed as EIA's Administrator, I would certainly
continue EIA's traditional role in providing analysis of specific
policy proposals in this and other energy-related areas.
Oil's high energy density and ease of storage make it an excellent
transportation fuel. The opportunities for natural gas (LNG, methanol
conversion, and compressed gas) as well as improvements in battery
technology could have a significant impact over the next decade.
The balance between global demand and global supply is a key
determinant of the future direction of future crude oil and petroleum
product prices. China's contribution to both demand and supply affect
the global balance. My understanding is that the government of China
has been building its strategic petroleum reserves for the same reason
that the United States and its IEA partners have pursued this option.
Generally, investments that help to increase global supply help to
ameliorate tightness in world oil markets, regardless of who makes
those investment and where the oil that is produced as the result of
any given investment is actually consumed.
correlation between domestic oil production and pump prices
Question 10. A recent statistical analysis of 36 years of monthly,
inflation-adjusted gasoline prices and U.S. domestic oil production by
the Associated Press shows no statistical correlation between how much
oil comes out of U.S. wells and the price at the pump. For example,
since February 2009, U.S. oil production has increased 15 percent when
seasonally adjusted. Prices in those three years went from $2.07 per
gallon to $3.58. And the AP similarly found no correlation between
domestic production rates and inflation-adjusted gasoline prices going
back to 1976.
a. The AP concluded that this lack of casualty is due to oil
being a global commodity, meaning that U.S. production has only
a tiny influence on supply. Factors far beyond the control of a
nation or a president dictate the price of gasoline. Do you
agree with their conclusions?
b. Similarly, the EIA found that even the most comprehensive
domestic drilling proposals would only decrease gasoline prices
by 3 to 5 cents--and not until 2030. Does this analysis make
sense to you, and, in your opinion, will any amount of
additional drilling lead to substantially lower prices at the
pump today, tomorrow, or any time in the next 20 years?
Answer. I have not personally reviewed the AP analysis, but I do
not find the results at all surprising. The balance between supply and
demand on a global scale is a key fundamental determinant of crude oil
prices, which are in turn the key driver of petroleum product prices.
Future prices will be influenced by trends in both demand and supply on
a global basis.
Both supply and demand in the United States are a part of the
global picture. Policies influencing U.S. supply and/or U.S. demand can
affect world markets both directly and indirectly. Indirect effects may
arise through the impact of U.S. policies and technologies on demand
and supply throughout the world. For example, technologies used to
raise the fuel economy of vehicles sold in the United States are also
likely to be applied elsewhere, as are technologies developed to
exploit new categories of resources, such as deepwater offshore
resources and onshore resources in shales and other tight formations.
The impact of drilling on prices will depend on the combination of
its direct and indirect effects and on the extent of demand responses.
Generally only modest price impacts would be expected if supply from
drilling in one area is offset by reductions in supply from other
areas, or if demand is relatively more responsive to changes in supply,
as is possible over an extended time period. However, there are many
other economic, environmental and geopolitical benefits that might
accompany increases in domestic oil development.
______
Response of Marcilynn A. Burke to Question From Senator Wyden
timber management/o&c lands
Question 1. I have repeatedly raised the issue of timber management
on the O&C lands with the Secretary and others in the BLM and we had a
chance to discuss this issue as well. I applaud the Secretary for
advancing new pilot projects. However, I still remain concerned that
the volume of timber from these and other sales remains very low and
will not support the remaining mills in my state. In order to turn this
around I think we will need leadership and engagement from the top. Can
I get your commitment that you will be engaged on these issues and help
turn the timber volume numbers around?
Answer. If confirmed, I will work to ensure that the BLM remains
committed to providing a predictable, sustainable supply of timber and
other forest products that help maintain the stability of local and
regional economies, and contribute valuable resources to the national
economy. The BLM's 2013 budget includes an increase for timber programs
in Western Oregon. Just last month, Secretary Salazar announced that we
are beginning the process of revising Resource Management Plans (RMP)
for 2.5 million acres of forested lands across six BLM Districts in
western Oregon. The BLM is seeking public input on the issues and
alternatives that the new RMPs should address. This public scoping
period began March 9 and will end June 7, 2012.
Responses of Marcilynn A. Burke to Questions From Senator Murkowski
Question 1. The BLM is responsible for completing the conveyance of
some 5 million acres of Alaska's Statehood entitlement, promised to the
state 53 years ago, and some 4 million acres of Alaska Native
Corporations conveyances, which were promised 41 years ago. The
Department, however, continues to propose lower funding to complete the
conveyances, the budget having proposed to cut conveyance funding in
half. At the current pace of conveyances of interim conveyances and of
surveys to provide final patents, it might well take the Department
another 50 years or more at the level of funding the Administration is
currently proposing to complete all conveyances. I've heard of ``due
deliberate speed'' but this seems anything but speedy.
a. Would you agree that the government has a moral and legal
obligation to comply with legislation and to implement the
conveyances?
b. Will funding for Alaska land conveyances be a priority for
you, if you are confirmed for the Assistant Secretary position?
Answer. The BLM is eager to complete these conveyances. While
funding has been reduced as part of an effort to reevaluate and
streamline the conveyance process, conveyance work has been ongoing
since the 1960s and the 2004 Alaska Land Transfer Acceleration Act has
allowed the BLM to streamline the conveyance program and reduce program
costs. The BLM is developing several procedures to enhance efficiency
and continues to work to further streamline the program so that
resources are focused on completing the goal of transferring title to
150 million acres the agency is required to convey.
If I am confirmed, I will make it a priority for the BLM to
complete the transfer process, and commit to examining funding
opportunities for the conveyance program.
Question 2. The Bureau of Land Management that you will oversee in
your new post is currently working on a new land plan for the National
Petroleum Reserve-Alaska--the last petroleum reserve under federal
control in the nation. In your view what should be the priority: to use
the lands to produce the oil and gas this nation needs, or to set aside
acreage in the area for conservation purposes?
Answer. As I mentioned when I appeared before the Committee, the
mission of the Department of the Interior and the bureaus for which the
Assistant Secretary for Land and Minerals Management has oversight
responsibility is to balance the need for development and production of
energy on the public lands with the need to take appropriate care of
our other natural resources and the environment. The Department
recognizes the provisions of the 1976 NPR-A transfer act as amended
which calls for an oil and gas leasing program while also recognizing
and providing for the protection of other resources. The priority is to
get that balance right through careful planning that gives due
consideration to competing resource values. If confirmed, achieving the
proper balance will be a priority for me.
Question 3. Congress included several provisions in the Alaska
National Interest Lands Conservation Act to preclude the withdrawal of
tracts of greater than 5,000 acres in Alaska in the future. This makes
sense, as the act resulted in the creation of 58 million acres of
wilderness and nearly 130 million acres of new parks, monuments, and
preserves just in my home state.
a. What is your view of the meaning of Section 1326 of
ANILCA, the section that Alaskans call the ``No More'' Clause?
Is it that no further studies of wilderness leading to
withdrawals should be undertaken by your department unless
prior authorization is provided by Congress, or is it that the
Administration is free to propose additional wilderness
designations in Alaska, but just not to permanently place lands
in wilderness by use of the 1906 Antiquities Act?
Answer. I am mindful of the provisions of ANILCA. The actions of
the Department of the Interior must be consistent with the Act. While
the Secretary has the legal prerogative to identify well-suited
wilderness areas, Congress alone holds the power to designate
wilderness.
Question 4. Right now the Department's Fish and Wildlife Service
seems to be progressing on a new land management plan for ANWR that may
well result, based upon the draft plan, in recommendations for more
wilderness to be created in ANWR.
a. Please explain: how is the planning that led to wilderness
proposals in the draft plan not a clear violation of Section
1326 of ANILCA?
Answer. If confirmed as Assistant Secretary for Land and Minerals
Management, the U.S. Fish and Wildlife Service would not be under my
supervision. However the Service advises me that preparation of the
Revised comprehensive conservation plans (CCP) derives from the
requirement in Section 102(A) of ANILCA that comprehensive conservation
plans be prepared and periodically updated for each refuge. The revised
plan is an update of the 1988 plan, and it is a management plan for the
entire Refuge. While it includes a wilderness review, the revised plan
is not being completed for the purpose of establishing a conservation
system unit. Rather, it is being completed as a statutory requirement
of ANILCA section 304(g) which requires the Plan revision include the
``wilderness value of the refuge.'' No wilderness can be created
without the consent of Congress.
Question 4b. The Comprehensive Conservation Plan draft concedes
that at least 40,000 acres are not suitable for Wilderness designation
due to their continuing and foreseeable occupation by humans and
motorized vehicles. The entire 1002 area has been covered in seismic
surveys as well. The 1965 Wilderness Act defines wilderness as
untrammeled by man and unoccupied by humans. Do you believe the rest of
the 1002 area--or all of it--is suitable for Wilderness designation?
Answer. If confirmed as Assistant Secretary for Land and Minerals
Management, the U.S. Fish and Wildlife Service would not be under my
supervision. However, the Service has provided the following response
to your question.
The Wilderness Act's definition of wilderness as ``an area
where the earth and its community of life are untrammeled by
man, where man himself is a visitor who does not remain'' is
part of the vision for wilderness. However, the definition is
not the standard by which lands qualify for entry into the
National Wilderness Preservation System. Congress has
designated wilderness areas that are located near population
centers and in areas that show evidence of past human use.
Three criteria derived from the Wilderness Act are used to
determine whether an area meets the minimum criteria of
wilderness: size, naturalness, and opportunities for solitude
or primitive recreation. The 1002 area arguably meets these
criteria. It is a large area, encompassing 1.4 million acres,
and it exhibits a high level of ecological integrity and
apparent natural condition. While scattered sections of seismic
trails from the 1984-1985 oil and gas exploration project are
visible, their natural recovery continues. The 1002 Area also
provides outstanding opportunities for both solitude and
primitive recreation.
Question 5. Right now the National Park Service reports that it has
several billion dollars of deferred maintenance needs in our national
parks. We have significant facility needs in our wildlife refuges. If
you are confirmed, what would your view be on spending of our
increasingly scarce dollars--should the priority be to spend on
maintenance of our existing parks and refuges, or should it be on
buying/acquiring new lands for wilderness, park or refuge designations
and additions?
Answer. If confirmed as Assistant Secretary for Land and Minerals
Management, neither the National Park Service nor the U.S. Fish and
Wildlife Service would be under my purview. However, I agree with
Secretary Salazar that we must balance the needs of existing parks,
refuges, and resources while engaging in strategic conservation that
yields measurable ecological outcomes and community benefits. As
Secretary Salazar has said, conservation is a priority for the
Administration, and we must continue to invest in land and water
projects that have the support of communities who depend on the job
creating power of the outdoor economy.
Question 6. When the Administration was preparing to attempt to
implement its Wildlands Policy, you briefed the staff of the Senate
Energy and Natural Resources Committee. At the time you were advocating
for the policy. Then the House of Representatives and the Senate
attached language to the FY 2011 Interior Appropriations bill and again
in the FY 2012 bill that prohibits spending any funds to implement the
Wildlands Policy.
a. Will you commit to me that you will not attempt to
implement any administrative land set-asides or designations
that in any way would restrict access or uses on BLM lands in
ways similar to a Wilderness restriction, if you are confirmed?
Answer. Secretarial Order 3310 was issued in December of 2010 to
provide national guidance for protecting lands with wilderness
characteristics as Wild Lands. Congress has prohibited the use of
appropriated funds to implement, administer, or enforce Secretarial
Order 3310. The BLM is in full compliance with that Congressional
direction, and has not and will not designate any Wild Lands. If
confirmed, I commit that the BLM will continue to comply with all
applicable laws.
Question 7. Is there any reason that an economic pipeline corridor
to bring Arctic oil and gas production to the Trans-Alaska pipeline
corridor will be difficult to permit across the 23 million-acre
National Petroleum Reserve? Is it in the national interest to plan for
such a pipeline corridor and to keep the Trans-Alaska Pipeline at
operational throughput?
Answer. There are a number of issues that need to be analyzed when
planning and permitting a pipeline corridor in the Arctic environment;
however, I am unaware of any particular issue that would currently
preclude a pipeline corridor across the NPR-A. The BLM's current
planning for NPR-A takes into account the possibility of future
pipelines and acknowledges the importance of the Trans-Alaska Pipeline
System as strategic infrastructure for the continued production of oil
out of the Arctic. A future pipeline proposal across the NPR-A would
require further specific NEPA compliance. The BLM also recognizes the
importance of maintaining operational throughput to the State of
Alaska.
Question 8. In your view, what is the primary purpose of the
undesignated public lands in America, meaning the 264 million acres
that BLM controls, and not the lands under the control of the National
Park Service or the US Fish and Wildlife Service? Is it for those lands
to fuel the nation's economy and produce jobs, or is it for those lands
to be preserved in their natural states? What would you see as your
primary responsibility?
Answer. Congress has not assigned a single primary purpose to the
management of America's public lands, whereas the management missions
given to the National Park Service and the U.S. Fish and Wildlife
Service are more narrowly focused. The more than 245 million acres of
public lands administered by the BLM encompass the vast array of the
American landscape, from the Alaskan tundra, to the dense forests of
the Pacific Northwest, the red rock deserts of the American Southwest,
and the sagebrush steppes of the Great Basin. Through the Federal Land
Policy and Management Act (FLPMA), Congress charged the BLM with the
mission of managing these diverse public lands for multiple use. Under
this mandate, the BLM manages public land resources for a variety of
uses including energy development, livestock grazing, recreation, and
timber harvesting, while protecting a wide array of natural, cultural,
and historical resources. Not every acre managed by the BLM is
appropriate for oil and gas leasing, just as it is true that not every
acre is suitable for wilderness designations. If confirmed, a priority
of mine would be upholding FLPMA; my responsibility as Assistant
Secretary for Land and Minerals Management would be to help ensure that
the BLM make land use decisions that are informed by an open,
transparent, and public process.
Question 9. You recently lectured the University of North Dakota's
law school regarding the decrease in lawsuits as relates to federal
onshore oil and gas leasing.
a. Some of this is due to very detailed and process intensive
work in regional management plans and lease schedules, but is
simply less activity, or less available acreage in new areas,
also a reason for less litigation?
Answer. While additional factors may have contributed to a decline
in leasing-related litigation, the oil and gas leasing reforms
announced in 2010 are a factor in that decrease. These reforms are
helping to reduce potential conflicts that lead to costly and time-
consuming protests and litigation. The BLM's current interdisciplinary
approach prior to making leasing commitments is making oil and gas
leasing more predictable, increasing certainty for stakeholders--
including industry--and restoring balance to the resource development
process.
Question 9b. Have approved APDs increased or decreased since 2008?
Answer. Oil and gas drilling and development are market-driven
activities, and demand is a function of market conditions and national
energy consumption. The number of APDs submitted by industry is an
indication of industry interest and intent to drill for oil and gas.
The table below presents the APD statistics for 2001-2011.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Industry may elect not to drill even after the BLM has approved its
APDs. As of September 30, 2011, the BLM had approved 7,226 applications
for permits to drill on Federal and Indian lands that had not been
drilled.
Question 10. Two weeks ago in our Appropriations budget hearing
with Secretary Salazar, Sen. Hoeven noted that there should be a cost-
benefit analysis before DOI formally proposes its new hydraulic
fracturing rules.
a. Would you agree that there should be cost-benefit
analysis?
Answer. The hydraulic fracturing rulemaking process includes an
estimate of economic benefits and costs, which considers a number of
factors, including employment impacts, discounted present value,
uncertainty, and a number of rule alternatives.
Question 10b. Has there been a formal cost-benefit analysis on this
proposal?
Answer. The hydraulic fracturing rulemaking process includes an
estimate of economic benefits and costs, which considers a number of
factors, including employment impacts, discounted present value,
uncertainty, and a number of rule alternatives.
Question 11. What is your position on whether royalty rates should
be raised on producers of federal oil and gas resources?
Answer. I believe that it is important for the taxpayer to receive
a fair return on the resources extracted from the public lands. As part
of that commitment, the Department and the BLM are studying royalty
rates. If confirmed, I would work to ensure that any decisions
regarding royalty rates are fair to both producers and the taxpayer.
Question 11a. Do you disagree with the study that DOI recently
commissioned, which concluded that the GAO report had failed to take
major revenues into account, and that all three federal regimes were
taking more revenue than competing regimes?
Answer. Studies thus far have not provided specific conclusions
regarding potential new royalty rates. If confirmed, I will continue to
look at all available information in order to address any potential
revision of the royalty rates.
Question 11b. If raising royalty rates were to result in increased
revenues but decreased production, would that be an acceptable outcome?
Answer. Royalty rates are only one of many factors that affect oil
and gas production levels. Oil and gas prices are the primary driving
forces. The Department would not expect royalty rate changes of the
magnitude considered to cause a significant decrease in production, as
many oil producing states have higher royalty rates than those
currently assessed for onshore production on Federal land. Recent
changes to offshore royalty rates do not appear to have had any
significant impact on industry interest in leasing on the Outer
Continental Shelf. If confirmed, there are many factors, including
production impacts, that I would consider as part of any royalty rate
evaluation so as to ensure a fair return for the American taxpayer.
Question 12. Is U.S. oil production a factor in the price of oil?
Answer. The price of oil is determined by the international market.
Producing more oil and natural gas domestically is not a solution to
high prices, but it will help reduce our reliance on foreign oil and
our vulnerability to the ups and downs of the international market.
Question 13. On January 27, 2011, E&E Daily reported that you told
a town hall meeting that you had met with 40 Congressional staff to
discuss DOI's Wildlands policy and had left most of the meetings
confident that the agency made the right decision.
a. Given the Congressional Appropriations language that
defunded the Wildlands Policy proposal, could you give me your
assessment of the statements you made to that town hall as
reported by E&E daily?
Answer. Secretarial Order 3310 was issued in December of 2010 to
provide national guidance for protecting some lands with wilderness
characteristics as Wild Lands. Congress has prohibited the use of
appropriated funds to implement, administer, or enforce Secretarial
Order 3310. The BLM is in full compliance with Congressional direction
and will not designate Wild Lands.
Question 14. On March 15, 2010, E&E Daily reported on your
testimony at a House of Representatives hearing at which you were
reported to have said, ``Opening new land to Sealaska would set a
precedent that would encourage other native Alaskan corporations to
seek new areas as well, hurting the administration's goal of quickly
resolving the outstanding conveyances.'' At the same time BLM was
beginning to construct its FY 2012 budget request that proposed to
almost zero out the Alaska Conveyance Program budget line item.
a. Let me begin by asking you to explain your agency's goal
to ``quickly resolv[e] the outstanding conveyances'' given
BLM's budget requests for the Alaska Land Conveyance line item,
which was cut in half in the FY 2012 and FY 2013 budget
requests. Can you help me reconcile your testimony as reported
in E&E Daily on March 15, 2010, with the two budget requests
BLM made in FY 2012 and FY 2013?
Answer. The Department of the Interior and the BLM are committed to
the conveyances of lands, not only to individuals and to corporations
formed under the Alaska Natives Claim Settlement Act, but also to the
State of Alaska under the Alaska Statehood Act. The 2004 Alaska Land
Transfer Acceleration Act has allowed the BLM to streamline the
conveyance program and reduce program costs. The BLM is exploring
opportunities to further streamline the program so that available
resources are focused on completing the goal of transferring title to
the remaining portion of the 150 million acres the agency is required
to convey. In FY 2011, the BLM began testing a new type of survey or
business process which, if adopted, would expedite the issuance of
final patents in Alaska. The BLM is committed to identifying and taking
advantage of opportunities to further accelerate patents to remaining
entitlements.
Question 14b. Do you understand the revenues generated by the sale
of timber from Sealaska lands is shared with the other Native
Corporations in Alaska, and if Sealaska has to shut down its timber
operations all the other Native Corporations will also suffer?
Answer. Yes, we understand the importance of these revenues for
Native Corporations in Alaska. The BLM is working closely with Sealaska
and the U.S. Forest Service to complete Sealaska's conveyance,
specifically the Frank's Lake parcel, so that Sealaska can continue its
timber operations.
Question 14c. If confirmed, will you commit to me that BLM will
propose budgets that will fund sufficient staff to complete all Alaska
conveyances within the next five years?
Answer. The Department of the Interior and the BLM are committed to
the conveyances of lands, not only to individuals and to corporations
formed under the Alaska Natives Claim Settlement Act, but also to the
State of Alaska under the Alaska Statehood Act. The BLM will continue
to utilize best practices and efficiencies to ensure that the funding
appropriated by Congress for the Alaska Land Conveyance program is used
in the best manner possible.
Question 15. Over the past several years the Administration has
testified in favor of legislative proposals that include provisions
requiring a public interest finding by either the Secretary of the
Interior or the Secretary of Agriculture.
a. Do you personally believe that Congress has the right and
responsibility to direct land exchanges?
b. Do you believe that Congress has the right to exempt land
exchanges from NEPA and/or public interest findings or other
laws?
c. If confirmed and you receive a law on a land exchange that
exempts the exchange from NEPA, other laws, and/or a public
interest finding, will you commit to me that you will
faithfully execute that law in the timelines prescribed in that
land exchange law?
Answer. Congress passes the laws that the Executive Branch
implements and administers on behalf of all Americans. The National
Environmental Policy Act is the backbone of our nation's suite of
environmental laws, and was created to ensure Federal agencies consider
the environmental impacts of their actions and decisions. If confirmed
as the Assistant Secretary for Land and Minerals Management, I will
faithfully implement all applicable laws that pertain to programs
overseen by that office.
Question 16. On January 12, 2011, the Desert Sun Newspaper from
Palm Springs, California reported that at a tribal summit on renewable
energy, you addressed tribal leaders who traveled to Palm Springs and
said the BLM is analyzing 50 projects this year and rating the impact
the projects might have on tribal, cultural, spiritual and natural
resources. You are reported to have said: ``We want to be smart from
the start.''
Given the number of the renewable energy projects that have been
legally challenged, or have fallen on financial difficulty (sometimes
partially as a result of federal government actions or inactions),
could you give the BLM and the Department a grade on whether or not
they have been ``smart from the start''?
Answer. The Department of the Interior has been ``smart from the
start'' with our renewable energy program. The BLM has permitted more
than 6,500 MWs of renewable energy projects since 2010 and is
processing applications that, if approved, would support almost 6,800
MWs of renewable energy this year.
The Department of the Interior and the BLM have been proactive in
evaluating and streamlining their siting and approval processes to
ensure that our decisions continue to be smart from the start. In
February 2011, the Department hosted a Renewable Energy Forum with a
variety of stakeholders to further discuss and evaluate lessons learned
from the first round of renewable energy projects. The BLM issued
policy guidance in February 2011 that memorialized best practices for
early coordination and careful review of proposed renewable energy
projects with Federal, state, tribal and local government agencies. The
policy has assisted the BLM in identifying and prioritizing
applications with the fewest resource conflicts and the greatest
likelihood of success in the permitting process. This smart from the
start approach is consistent with the Secretary's goal to facilitate
environmentally responsible development of renewable energy projects on
the public lands. The renewable energy projects that the BLM reviewed
and approved in 2011 and the current 2012 priority projects have
involved rigorous coordination and review, consistent with the
principles of smart from the start.
Question 17. In a University of Cincinnati Law Review article
titled ``Much Ado About Nothing: Kelo v. City of New London, Babbitt v.
Sweet Home, and Other Tales from the Supreme Court'' that you authored,
you wrote:
Because the current rhetoric about the use of eminent domain
in this country may be inaccurate at best, such rhetoric must
be challenged vigorously. For if we allow the inaccuracies to
remain unchallenged long enough, we may find ourselves
operating under the delusion that they are truths, unduly
hampering government's authority and obligation to regulate on
the behalf of the public's health, safety, welfare, and
morals.''
Do you believe that same standard should be imposed on BLM or DOI
scientists, for example, who have been found to have used false
information or data to advocate for the listing of a specific species
under the Endangered Species Act? If not, why not?
Answer. I support the Department of the Interior's policy on the
integrity of scientific and scholarly activities, which addresses this
issue. The Department's policy is contained in Chapter 3, Part 305, of
the Departmental Manual, available online: http://elips.doi.gov/elips/
Question 18. In a Notre Dame Law Review article titled ``The
Emperor's New Clothes: Exposing the Failures of Regulating Land Use
through the Ballot Box'' that you authored, you appeared to be arguing
that local or state ballot measures may not be a legitimate tool for
regulating land use.
a. If you believe that, what are your views on imposing other
environmental regulations through ballot measures?
b. Question: If a local ballot measure on land use
regulations is perhaps illegitimate for the reasons expressed
in your Notre Dame Law Review article, shouldn't we also be
suspect of the environmental regulatory ballot measures as
well?
c. Question: Given your views and beliefs, who in your mind
has the most legitimate authority and responsibility to
regulate land use: the Congress; an Administrative agency such
as the BLM; a state government; a local government; or citizens
through a ballot measure? Please explain why.
Answer. The bureaus for which the Assistant Secretary for Land and
Minerals Management has oversight responsibility promulgate regulations
in accordance with governing statutes, including the Federal Land
Policy and Management Act, the Outer Continental Shelf Lands Act, the
Surface Mining Control and Reclamation Act, the National Environmental
Policy Act, and the Administrative Procedure Act. The bureaus do not
use ballot measures as a tool for management of Federal public lands or
the Outer Continental Shelf. Should I be confirmed, I will continue to
help ensure that management is conducted in accordance with all
applicable Federal laws and regulations.
Question 19. The BLM is struggling with wild horse overpopulation
on the lands it manages in the Intermountain West.
a. Do you believe that invasive species should be given
protection under the Endangered Species Act?
Answer. The Endangered Species Act (ESA) was enacted to conserve
plants and animals that are or are likely to be threatened with
extinction in their native range or country. To my knowledge, no non-
native invasive species has ever been listed under the ESA. Moreover,
invasive species are generally increasing in number and distribution
and, therefore, are unlikely to face extinction or warrant protection
under the ESA.
Question 19b. In relative terms do you think euthanizing wild
horses that have overpopulated an area is less or more humane than
leaving the herds on the land to die of starvation when forage becomes
scarce?
Answer. If confirmed, I will support the Department of the
Interior's position that euthanasia of healthy wild horses is not a
viable or acceptable management option, even though this legal
authority is provided under the Wild Free-Roaming Horses and Burros Act
of 1971, as amended. The BLM's goal is to ensure healthy horse and
burro populations can thrive in balance with other resources and uses
on healthy public rangelands. I support the goal of putting the Wild
Horse and Burro Program on a sustainable course that benefits the
animals, the land, and the American people. Since passage of the 1971
law, the BLM has found good homes through its adoption program for more
than 225,000 wild horses and burros. Also, we are continuing to
aggressively pursue methods to control herd population growth by, among
other things, applying fertility control to mares before returning them
to the range. In instances where drought and other severe conditions on
the range result in inadequate forage and water for wild horses, the
BLM must seriously consider emergency gathers, to ensure the health of
the horses and the range.
Question 19c. Do you believe wild horse health and welfare should
take priority over other native ungulates like deer, elk, and antelope?
Answer. The 1971 Wild Free-Roaming Horses and Burros Act authorizes
the BLM to manage, protect, and control wild horses and burros. This
law also directs the BLM to remove excess wild horses and burros from
the range to sustain the health and productivity of the public lands.
If confirmed, I would work to ensure the best balance of uses and
resource protections for the public lands consistent with both the
Federal Land Policy and Management Act and the Wild Free-Roaming Horses
and Burros Act. If confirmed, I would support the BLM's commitment to
using the best science available in making resource allocation
decisions, including those affecting wildlife and wild horses. The BLM
has commissioned a study by the National Academy of Sciences to help it
move forward in addressing wild horse and burro management challenges.
Question 20. Efficiency was a stated rationale for the proposed
BLM-OSM merger, and I understood that meant DOI expected it would save
taxpayer dollars. However, we have yet to see any calculations showing
what the merger would cost--or, potentially, what it would save. What
studies, or other internal analysis, have you completed to demonstrate
that merging BLM and OSM will increase their relative efficiency?
Please provide all relevant documents to the Committee.
Answer. At the Direction of the Secretary, the BLM and OSM analyzed
a number of similar functions currently being carried out by both
agencies and the DOI Office of Natural Resources Revenue. The OSM
devotes a significant portion of its budget to maintaining its own
administrative support functions, rather than sharing administrative
services as other Departmental bureaus and offices have done. The
consolidation of certain administrative functions could make available
a larger percentage of OSM's budget for mission-critical activities to
thereby enable OSM to more effectively deliver services to the American
people. (Attached is the final Report for the Secretary on the Proposed
BLM/OSM Consolidation that includes an analysis of the various
consolidation options considered.)
Question 21. Since you first proposed merging OSM and BLM, we have
had conversations about its legality, particularly with respect to
SMCRA. The Committee staff has requested a legal opinion from your
counsel on how such a merger is legal under SMCRA. Is it your legal
opinion that transferring staff or agency functions from BLM to OSM
does not violate SMCRA?
Answer. The recommendations contained in the report to the
Secretary of the Interior, dated February 15, 2012, on the proposed
BLM/OSM consolidation were thoroughly reviewed by the Department of the
Interior's Office of the Solicitor and found to be in compliance with
SMCRA.
Question 22. Whose input have you sought in the three months since
Secretarial Order 3315 was first issued for the BLM-OSM merger? Will
you publish the comments you have received from the public?
Answer. In analyzing the proposed consolidation, the BLM and OSM
sought input from a number of stakeholders, including agency employees,
industry, tribes, the public, and Members of Congress. Together, the
agencies held four employee meetings, ten stakeholder meetings, and two
tribal consultations. DOI leadership held conference calls and met five
times with Congressional staff and Members of Congress. In addition,
Deputy Secretary David J. Hayes testified before the Senate Energy and
Natural Resources Committee to discuss the proposed consolidation. The
BLM, OSM, and the Department also solicited input via their websites
and received 220 external comments and 68 internal comments. The
Department does not plan to publish the comments it received.
Question 23. According to your biography, you previously ``served
as visiting assistant professor of law at the Rutgers School of Law in
Camden, N.J., and subsequently, at Seattle University School of Law for
its `Summer in Alaska' program.'' According to the website for that
program, students enrolled in it ``learn from experts in Anchorage,
Alaska, about important environmental, legal, and social issues that
impact Alaska Native rights and natural resource management in the
Arctic National Wildlife Refuge and wildlife preservation.''
a. When did you participate in the `Summer in Alaska'
program?
b. Please describe your involvement in this program. Please
provide a list of all courses you taught, as well as syllabi
and reading materials that were assigned for those courses.
c. Please summarize your views--as expressed by you during
your participation in the `Summer in Alaska' program--on the
``important environmental, legal, and social issues that impact
Alaska Native rights and natural resource management in the
Arctic National Wildlife Refuge and wildlife preservation.''
d. Do you believe that oil exploration and production could
be carried out safely and responsibly in the non-wilderness
portion of ANWR?
Answer. I taught the second half of an eight-week course during the
summers of 2006 and 2007, as a part of Seattle University School of
Law's ``Summer in Alaska'' program. The first half of the course,
taught by another professor, focused on laws specific to Native
Alaskans. The portion of the course that I taught focused on
environmental and natural resources laws. My portion of the course was
designed to introduce some of the statutes relevant to the management
of primarily Federal lands and waters in Alaska and to provide a
sampling of the many complex resource management issues. Enclosed are
the syllabi and the reading materials that I assigned. The course began
with an introduction to environmental law and the role of science in
environmental law. Then it focused on select statutes and issues such
as the Endangered Species Act, the Marine Mammal Protection Act,
salmon, mining, the U.S. Forest Service's Roadless Area Conservation
rule, and the Arctic National Wildlife Refuge. Also enclosed are the
PowerPoint slides that I used to present the materials in class. With
respect to possible oil and gas development in the Arctic National
Wildlife Refuge, the President and Secretary Salazar have been clear
that there are some places where such development is appropriate and
some places where it is not. The Arctic National Wildlife Refuge,
because of its unique conservation values and importance as wildlife
habitat, is a place where development is not appropriate.
Responses of Marcilynn A. Burke to Questions From Senator Barrasso
Question 1. Please provide a list of all the legal actions and
threats of legal action made by the Defenders of Wildlife in 2005 and
2006 with which you disagreed or took an opposing view. b. Please
provide a short explanation of what, if any, action you took as a
member of the Defenders of Wildlife Litigation Committee to articulate
your disagreement with the legal actions and threats of legal action
made by the Defenders of Wildlife.
Answer. I was a member of the Defenders of Wildlife's litigation
committee for approximately one year. During that year, I reviewed
legal memoranda and recommendations from the legal staff of the
Defenders of Wildlife concerning whether the organization should
initiate litigation or participate in existing litigation. According to
my records and to the best of my recollection, I voted to approve the
Defenders of Wildlife legal staff recommendations in two cases. One
involved their recommendation to file an amicus brief with the United
States Supreme Court in the consolidated cases United States v. Rapanos
and United States v. Carabell. The second recommendation I voted to
approve was to initiate litigation in Defenders of Wildlife v. National
Park Service.
Question 2. Did you receive any payments from the Defenders of
Wildlife for your work on the Defenders of Wildlife Litigation
Committee in 2005 and 2006? If so, please provide a detailed accounting
of all the payments you received.
Answer. As a member of the Litigation Committee I was reimbursed
for travel expenses to attend one meeting in 2005. I received no
payments for my work.
Question 3. Please provide all documents, including but not limited
to calendars, notes, and electronic correspondence, related to your
work for the Defenders of Wildlife.
Answer. I attended one meeting as a member of the litigation
committee, on Friday, September 23, 2005. According to my records and
to my recollection, as a member of the litigation committee I voted to
approve the Defenders of Wildlife legal staff recommendations in two
cases. One involved their recommendation to file an amicus brief with
the United States Supreme Court in the consolidated cases United States
v. Rapanos and United States v. Carabell. The second recommendation I
voted to approve was to initiate litigation in Defenders of Wildlife v.
National Park Service. I have contacted the Defenders of Wildlife, and
the organization has declined to waive any attorney-client privilege
with respect to litigation related materials.
Question 4. Please provide any existing transcripts or recordings
of all speeches and presentations you have made, including but not
limited to statements made as a participant of a panel, roundtable,
debate, conference, or symposium, since 2002.
Answer. Enclosed please find a list of the events in which I made a
speech or a presentation since 2002. Enclosed is the one transcript of
which I am aware. The following is a list of recordings of speeches and
presentations I have made that are available on the internet. The list
includes the web address where the recordings may be accessed.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Question 5. In your written testimony, you state that you have a
``sincere belief in the value of collaboration, consensus building, and
transparency in the development and implementation of policies
governing the management of the public lands and waters.'' However, it
is my understanding that the Department spent approximately one year
developing and implementing the Wild Lands policy prior to announcing
the policy to the public on December 23, 2010. a. Why did the
Department fail to consult Congress on the Wild Lands policy? b. How
does the Department's failure to consult Congress reflect the values of
collaboration, consensus building, and transparency?
Answer. Under the Secretarial Order no. 3310, no Federal land was
to be designated as `Wild Lands' until and unless there was ample
opportunity for comment from Congress, from state and local government
officials, and from interested citizens. The Secretarial Order restored
the traditional multi-use approach to managing Federal lands as
provided in Federal law.
The manuals developed by BLM to implement Secretarial Order 3310
described a process that would have included full public involvement in
the land use planning process before a Wild Land could be designated in
any plan decision.
Collaboration, consensus building, and transparency would have been
important tools in implementing the Wild Lands Policy, and I continue
to believe they are of great value in land use management decisions. It
is my commitment to continue putting these tools to good use if I am
confirmed.
Question 6. Did the Department consult any individuals or entities
outside the Federal government when developing and implementing the
Wild Lands policy? If so, please list all the individuals and entities
the Department consulted. Please include as part of the record all
documents, including but not limited to calendars, notes, and
electronic correspondence, related to the Department's consultations
with these individuals and entities.
Answer. The Wild Lands policy was developed as a result of internal
conversations within the Department of the Interior and the Bureau of
Land Management. Because the development and issuance of Secretarial
Order 3310 were internal policy decisions, there was neither a formal
process for soliciting input outside the Department nor any formal
consultations with outside groups. Views on how the Department should
manage its lands, whether for wilderness characteristics, energy
development, or some other use, are regularly received by the
Department from constituents and stakeholders.
Question 7. Did the Department consult any individuals or entities
outside the Federal government when developing and implementing the so-
called onshore oil and gas leasing reforms? If so, please list all the
individuals and entities that the Department consulted. Please include
as part of the record all documents, including but not limited to
calendars, notes, and electronic correspondence, related to the
Department's consultations with these individuals and entities.
Answer. The onshore leasing reforms were developed as the result of
internal conversations within the Department of the Interior and the
BLM. There was neither a formal process for soliciting input outside
the Department nor any formal consultations with outside groups. Views
on how the Department should manage its lands are regularly received by
the Department from constituents and stakeholders.
Question 8. You have written extensively on the U.S. Supreme
Court's decision in Kelo v. City of New London. In that case, the Court
upheld New London's use of eminent domain to condemn the home of Ms.
Kelo for the purposes of giving her land to a much larger and richer
private party. You have written that there were ``colossal
overreactions in the media and legislatures across the country'' to the
Court's decision, and that ``there is primarily only anecdotal evidence
of abuses of the power of eminent domain.'' a. Do you still believe
there is only anecdotal evidence of abuses of the power of eminent
domain? If so, why and if not, why not? b. You have a very narrow view
on the rights of home owners. What are your views on the rights of
leaseholders and permitees who use our public lands?
Answer. Other than as described in my article, I am unaware of any
studies or analyses regarding the use of the power of eminent domain.
The rights of leaseholders and permittees who use our public lands are
prescribed by laws, regulations, and the terms of the applicable
instruments conveying those rights. Should I be confirmed, I will
remain committed to recognizing those rights.
Question 9. You have criticized ``conservative and libertarian
members of Congress [for] propagating their ideology of limited
government.''
a. Do you believe limited government is an ``ideology'' or
one of our nation's bedrock principles?
b. If you believe there are limits to the Federal
government's power, please explain in detail what those limits
are?
Answer. The United States Constitution is the supreme law of the
nation and establishes the framework for the powers of the Federal
Government. Should I be confirmed, I will continue to uphold the
Constitution and comply with the laws of the United States.
Question 10. The Office of Surface Mining (OSM) is rewriting the
2008 stream buffer rule. It is my understanding that OSM's 2008 rule
took about five years to complete. I understand that this process
involved two proposed rules, approximately 5,000 pages of environmental
analysis, and took into account about 40,000 public comments.
a. How much is the rewrite of the 2008 rule costing
taxpayers?
Answer. Since 2009, OSM has spent approximately $7.7 million to
develop this rulemaking. The majority of the expenditures ($5.2
million) represent obligations for contract support to develop portions
of an Environmental Impact Statement (EIS) and the regulatory impact
analysis. The remaining $2.5 million spent thus far is for staff costs.
Question 10b. How many coal mining jobs would be impacted if the
new rule were implemented today?
Answer. OSM is in the process of developing a proposed Stream
Protection Rule and the related economic and environmental analyses.
When OSM publishes a proposed rule, it also will make available the
Draft EIS, and together those documents will contain a detailed
economic analysis, including any anticipated impacts on jobs in the
coal mining industry.
Question 10c. What steps are you taking to ensure that OSM complies
with the National Environmental Policy Act and the Administrative
Procedure Act?
Answer. OSM published an Advance Notice of Proposed Rulemaking
(ANPR) and received over 32,000 public comments. OSM conducted nine
scoping sessions pursuant to the National Environmental Policy Act
(NEPA), and received over 20,000 comments. OSM will publish its
Proposed Rule and make available its Draft EIS for public notice and
comment in accordance with the Administrative Procedure Act (APA),
NEPA, and other applicable Federal law. Prior to publishing a Final
Rule and Final EIS, OSM will consider public comments it receives on
its Proposed Rule and Draft EIS. Any Final Rule and Final EIS will be
published in accordance with the APA, NEPA, and any other applicable
Federal law.
Question 10d. What steps are you taking to ensure that OSM provides
cooperating state agencies and the public sufficient time to comment on
the new rule and participate in the rulemaking process?
Answer. Fourteen state agencies, which are acting as cooperating
agencies on the OSM's Draft EIS, reviewed and provided extensive
comments on early working versions of the Draft EIS. OSM has taken
those comments into consideration as it develops both its Proposed Rule
and Draft EIS. When OSM publishes its Proposed Rule and makes available
its Draft EIS in the Federal Register, the states, along with the
public, will have the opportunity to review and provide comments on
those documents in accordance with the APA, NEPA, and other applicable
Federal law.
Question 11. It is my understanding that OSM is rewriting the 2008
stream buffer rule to address an issue specific to the Appalachian
region. However, the rule will affect every coal mine throughout the
country.
a. Has OSM provided any documentation or evidence that there
is a nationwide problem that requires a new rulemaking?
Answer. OSM is still in the process of developing a proposed Stream
Protection Rule. The Proposed Rule and Draft EIS, when published and
made available for public notice and comment, will provide a full
explanation of the scope of the Proposed Rule, including reasons for
the geographic application of various provisions of the Proposed Rule.
Question 11b. If so, when did OSM provide this documentation and
will you include it as part of the record?
Answer. OSM is still in the process of developing its Proposed Rule
and Draft EIS. When complete, these documents will be published and
made available to the public, and will detail the basis for provisions
of the Proposed Rule.
Responses of Marcilynn A. Burke to Questions From Senator Paul
[Questions are in reference to the article, Much Ado About Nothing:
Kelo v. City of New London, Sweet Home v. Babbitt, and Other Tales from
the Supreme Court, 75 U. CIN. L. REV. 663 (2006) (lead article)]
Question 1. Do you support the use of eminent domain in acquiring
blighted property which is then handed over to a private party?
Question 2. Do you support the use of eminent domain in acquiring
non-blighted property which is then handed over to a private party?
Question 3. Are there any cases where blighted property should be
protected from eminent domain?
Question 4. Are there any cases where non-blighted property should
be protected from eminent domain?
Question 5. Do you believe that state legislatures that re-
evaluated or strengthened their private property laws following the
Kelo and Sweet Home decisions were acting in an outrageous or
irrational manner?
Question 6. Do you believe that transferring private property to
private developers in order to increase tax revenues is a legitimate
use of eminent domain?
Answer. The BLM most commonly acquires property through voluntary
transactions involving purchase, exchange, or donation. Should I be
confirmed, I will continue to comply with all applicable laws and
regulations regarding the acquisition of real property.
Responses of Marcilynn A. Burke to Questions From Senator Heller
Question 1. If confirmed, your portfolio would include management
of much of our nation's oil and gas resources development on public
lands. As I'm sure you are keenly aware, gas prices have doubled since
the beginning of this Administration and are causing strain for all
American families. I believe that alternative sources of energy are our
future. While we work to develop the technologies, we need to secure
our economy now by having an energy policy that respects the cause of
the problem--supply and demand.
Members of this Committee are well aware that domestic production
has increased, however it has largely been on non-federal lands. Do you
believe that we have a responsibility to develop our natural resources
on public lands for the American public? And, do you believe that would
help stabilize prices and secure the energy necessary to power our
economy now while we develop the technologies of the future?
Answer. I agree that alternative sources of energy are an important
part of our energy future. If confirmed, my responsibility would be to
balance the need for development and production of energy resources on
the public lands with protecting other natural and cultural resources
and the environment. Producing more oil and natural gas domestically is
not a solution to high prices, but it will help reduce our reliance on
foreign oil and our vulnerability to the ups and downs of the
international market.
Question 2. In your view, do you think there is anything DOI can do
to bring down prices at the pump?
Answer. As the President has stated, our country needs an all-out,
all-of-the-above strategy that develops every available source of
American energy--a strategy that's cleaner, cheaper, and fosters new
jobs, while protecting the environment. He has also made clear that
there are no quick fixes to fluctuating gas prices, which are subject
to cyclical spikes due to forces largely outside our control, like
international demand.
The Department is working to expand opportunities to develop
cleaner sources of energy, including renewables like wind, solar, and
geothermal, as well as coal and natural gas on public lands.
Facilitating the efficient, responsible development of our oil and gas
resources is also a necessary component of energy security. Domestic
oil and gas production remains critical to our nation's energy supply
and is a part of a broad, ``all-of-the-above'' energy strategy that
will help reduce our dependence on oil imports.
Question 3. I mentioned to you when we met last week that there was
a large energy company that told me they would never build a project on
federal lands again because of the problems associated with permitting.
And, as you know, this was distressing to me because 87% of Nevada is
controlled by the federal government and we heavily rely on access to
public lands for economic development.
Job creators need a measure of certainty and there is a lot of
uncertainty relating to permitting on public lands. What do you think
DOI should do to incentivize development on public lands and provide
more certainty to job creators?
Answer. I recognize that the public lands are important to the
livelihoods of many who live in the rural West and agree that it is
important to bring certainty to the permitting process for activities
on the public lands. One example where we have done this is through oil
and gas leasing reforms. When Secretary Salazar took office in January
2009, nearly half of the parcels offered by the BLM for oil and gas
development were protested, resulting in delays, extra costs, and
lengthy court battles. The BLM moved to develop and implement leasing
reforms that have led to a significant reduction in the number of
protests. These leasing reforms provide certainty for industry by
reducing conflict, litigation, and protests. Our current
interdisciplinary approach, which occurs prior to making leasing
commitments, is bringing greater certainty to stakeholders--including
industry--and helping ensure that jobs are available. If confirmed, I
would continue to support making public lands available for energy
development in a thoughtful and balanced manner.
Question 4. You and I have discussed previously the difficulties
associated with permitting mines on public lands. I introduced a bill
in November to give DOI 45 days to complete the Washington Office
review of certain NEPA documents with the idea that it will improve
efficiency in the permitting process without impacting environmental
analysis. You reported to me that NEPA documents are now making it out
of the Washington office in 30 days or less. I am gratified that this
simple action has been prioritized and would like you to please provide
me with instances where this has occurred.
Answer. I understand that delays in completing necessary
environmental reviews may adversely affect mining projects that are
important to the West's economy. The BLM has improved its processes for
getting critical mining-related, environmental impact statement notices
published in a timely manner in the Federal Register. Two success
stories are the publication in the Federal Register of the notices of
availability of the draft Environmental Impact Statement prepared for
General Moly's proposed Mt. Hope molybdenum project in Eureka County
and Newmont Mining Corporation's Phoenix Copper Leach expansion south
of Battle Mountain. In the case of the Newmont project, a company
official acknowledged that process that could have taken up to a year
was completed in 42 days. Making the review process as timely and
efficient as possible is not only a worthy goal in and of itself, but
also directly connected to the economic health of industries that
operate on BLM-managed lands. If confirmed, I intend to continue moving
this effort forward--without compromising the environmental review
process that is needed to protect America's public lands.
Question 5.. While DOI is working to improve the permitting aspect,
the President's Budget has proposed a gross royalty on hardrock mining
on public lands again. This ill-conceived tax will have a devastating
impact on our domestic mining industry. We discussed this briefly, but
I want to follow-up with you on it because it is such an important
issue to Nevada and I'm still not sure what your position is on the
issue.
Question 6. Why does the Administration insist on proposing this
particular type of royalty? How do you think it will impact
competitiveness for the domestic mining industry? Do you believe that
domestic mineral development is in our national interest?
Answer. Domestic mineral development continues to be in our
national interest, and it is important to provide a fair return to the
taxpayer from hardrock production on Federal lands. The legislative
proposal would implement a leasing and royalty system on a discrete
number of specifically identified minerals, including gold, silver,
lead, zinc, copper, uranium, and molybdenum that are currently covered
by the General Mining Law of 1872. This system would help ensure a fair
return to the public on the development of their resources, with half
of the receipts distributed to the states in which the leases are
located and the remaining half deposited in the Treasury.
Question 7. Because 87% of Nevada is in federal ownership, there
are many long-standing issues that impact local communities. One that I
hope you will commit to addressing is the issue of historic mining
townsites, where Nevadans have bought their land and have been paying
taxes in some cases for generations, but are considered to be in
trespass by BLM. These citizens deserve to have this issue resolved.
There are other outstanding issues that require action from the BLM in
Nevada--but they cannot be settled without more active participation
from your agency, and I would like your help. Can I count on your help?
I am happy to provide you with information on the specific cases in
Nevada that need attention.
Answer. Nevada is a state in which the BLM manages a great deal of
public land for the benefit of Nevadans and all Americans. If confirmed
I will be happy to discuss these issues with you.
Question 8. A listing of either the Bi-State or Greater Sage Grouse
population would have a devastating impact on Nevada and the entire
West. I'm not sure if you know this, but a lot of the best sage grouse
habitat in Nevada is on private lands or public lands that are managed.
This is important because it tells the story of the importance of
managing for wildfire, grazing, mitigation efforts, and good
stewardship.
Any decisions about the sage grouse should be those that are truly
the best for the species--not decisions driven by politics or threat of
litigation. What is the BLM doing to account for the needs of
communities and industries as decisions are made about the sage grouse?
What more can be done to insure that decisions made about the sage
grouse will not have a devastating impact on our already fragile
economy?
Answer. The BLM is implementing a rigorous and consistent Bureau-
wide sage-grouse strategy that accounts for the most recent science
pertaining to impacts of various land uses and stressors on sage-grouse
and their habitat. The aim of these science-based measures is to
maintain and restore viable populations of greater sage-grouse and
sagebrush habitat. The BLM is working to develop a strategy that
protects the health of the public lands, while also facilitating
multiple uses. By proactively addressing sage grouse conservation
concerns on public lands, the BLM hopes to maintain the widest possible
range of options for our neighboring landowners. The BLM is committed
to working with its partners to protect sage-grouse habitat so as to
avoid the impacts of listing on both public land managers and private
landowners. If confirmed, I will strongly support the BLM's efforts to
carry out its sage-grouse strategy.
______
Responses of Anthony Clark to Questions From Senator Wyden
lng exports
Question 1. Under the Natural Gas Act, DOE approves the exports of
natural gas, but FERC approves the physical terminals that are needed
to carry out the exports and any pipelines that are needed to connect
them to gas supplies. Under the Natural Gas Act, FERC must make a
finding of public need and necessity for infrastructure certificates.
LNG export terminals will reduce U.S. supplies of natural gas and
according to the Energy Information Administration, increase U.S.
natural gas prices. How will you apply this public interest test to LNG
export terminals?
Answer. It is my understanding that the Secretary of Energy
retained the authority under section 3 of the Natural Gas Act to
approve or deny applications to import or export natural gas. The
Secretary delegated to the Commission the authority to approve or deny
applications for the construction and operation of facilities used for
the import or export of natural gas. I would expect to examine all
public interest issues that commenters raise relating to the siting of
export facilities.
lng nepa review
Question 2. FERC is currently in the process of approving the first
export terminal conversion for Sabine Pass. FERC staff has concluded
that it can recommend approval without completing a full environmental
impact statement. Do you believe that it is appropriate to approve
construction of multi-billion facilities that will allow the export of
over 2 billion of cubic feet of natural gas a day, and consume roughly
10% of that much per day for operations, without a full environmental
impact statement? Some facilities expected to apply for authority to
build export facilities, such as Jordan Cove LNG in Oregon, have not
even begun physical construction while others such as Cove Point have
been in operation for many years. Do you believe there is a different
threshold for NEPA review for construction of export facilities at an
existing facility versus an entirely new facility?
Answer. The Sabine Pass proceeding is currently before the
Commission, and Jordan Cove LNG may initiate a new proceeding for
export facilities later this year. If confirmed, I might be expected to
rule on those cases. For this reason, it would not be appropriate to me
to comment on substantive issues that could arise in those cases,
including the extent of environmental review required under NEPA. As a
general matter, I understand that under NEPA an agency may prepare an
environmental assessment on any action in order to assist agency
planning and decisionmaking, and that it needs to prepare an
environmental impact statement if it determines that the proposed
action will have a significant impact on the human environment. In
addition, I note that I did not have the opportunity to address export
terminals for LNG in my role as a state regulator in North Dakota. I
look forward to exploring this important issue, including
implementation of any direction that Congress may choose to provide.
sec. 211a
Question 3. FERC recently agreed with wind generators that it has
authority to intervene in the Bonneville Power Administration's
transmission system rates under Sec. 211A of the Federal Power Act. I
am concerned about where FERC will draw the line on how it uses its
authority under 211A of the Federal Power Act to regulate access to
transmission systems owned by BPA, or the Tennessee Valley Authority,
or any of the other Federal and consumer-owned utilities. Do you agree
that this authority should be used on a case-by-case basis to provide
transmission customers an avenue for relief or do believe that FERC can
or should use this authority to regulate BPA and other ``non-
jurisdictional'' transmission systems on a day-to-day basis?
Answer. Given that the Iberdrola Renewables, Inc. v. Bonneville
Power Administration proceeding is currently before the Commission and,
if confirmed, I might be expected to rule on the matter, it would not
be appropriate for me to comment on substantive issues in that case. I
do note, however, that the Commission's recent order stated its
expectation that ``the need to use this statutory authority would be
rare.'' I agree with this general principle.
transmission cost--allocation and planning
Question 4. Last year, FERC issued an order--Order 1000--putting in
place new requirements for regional transmission planning and
allocation of cost for building new transmission projects. FERC adopted
a principle of allocated costs that are ``roughly commensurate'' with
benefits. I am concerned that this could lead to utility customers
paying for transmission constructions that are not directly tied to
benefits. How do you interpret ``roughly commensurate'' standard? What
assurance can you give me that utility customers are going to be
protected?
Answer. My experience as a state commissioner has convinced me that
whatever cost methodology is adopted must be grounded in the sound
principles of the user or beneficiary pays model. Simply put, those who
do not use and do not benefit from infrastructure should not be
expected to pay for it. I believe this standard can fit within a number
of definitions, including ``roughly commensurate.'' In order to
accomplish these goals, I believe an acceptable cost allocation
methodology will need to be developed in a ground-up, not top-down
manner, and it will need to be dependent on a record that specifically
attempts to quantify, within reason, why a given methodology meets the
just and reasonable standard.
hydroelectric licensing
Question 5. There is enormous interest in expanding the use of
small, low-impact hydroelectric projects in existing irrigation canals,
city water systems, and other existing water systems. Many of these
have very little environmental impact and can help pay for system
upgrades and water saving measures like replacing open canals with
pipelines. FERC, however, subjects these projects to licensing
requirements that cost almost as much as the projects would save by
producing energy. Would you support the creation of a separate process
for approving low-impact hydro projects in existing water systems?
Answer. If confirmed, I would be interested in exploring ways in
which a streamlined process might be made to work in a way that reduces
unnecessary bureaucracy while protecting statutory and procedural
rights.
storage technology
Question 6. FERC has recently come out with some very helpful
rulings that require energy storage technologies to be compensated for
the services they provide. What is your opinion on the benefit of
energy storage applications on the interstate power system? Would you
support including energy storage as an alternative to the construction
of new transmission lines in regional transmission planning processes?
Answer. I believe energy storage is not only a potential ``game
changer'' in the long term, but also has the potential to be
incrementally helpful as well. Energy storage technologies can be
helpful in shaping load curves and in interacting with the wholesale
market in innovative and helpful ways. I believe that energy storage
can and should be considered as one tool in system planning, respecting
that each region of the country will need to assess costs and benefits
given its specific circumstance. It is my understanding that for
purposes of identifying needed transmission facilities, Order No. 1000
required that regional transmission planning processes consider
proposals for non-transmission alternatives, which may include energy
storage, on a basis comparable to proposals for new transmission
development.
oil pipelines
Question 7. FERC sets the rates for interstate pipelines that carry
oil and petroleum products although it does not control the siting or
location of these pipelines. It's clear to me from the Keystone XL
pipeline debate that some of these pipelines are going to have
significant impacts on oil prices in regional markets. TransCanada
provided testimony that it's shippers were prepared to absorb billions
of dollars in increased shipping costs on its pipeline in order to earn
billions more by raising oil prices in the Midwest. To what extent
should FERC consider the impact of regional price impacts in setting
pipeline rates?
Answer. FERC does not regulate the price of oil; it regulates only
the price of the transportation of oil. Under the provisions of the
Interstate Commerce Act, FERC ensures that the rates for movements of
crude oil are just and reasonable and protect shippers by prohibiting
the exercise of undue preference by pipelines. It is my understanding
that the Interstate Commerce Act does not allow the Commission to
consider regional oil price impacts in determining the just and
reasonable rate for transportation of oil.
Response of Anthony Clark to Question From Senator Shaheen
Question 1. I was pleased to see that the National Association of
Regulatory Utility Commissioners (NARUC), where you served as President
from 2010-2011, recently filed comments on the FERC's regulatory
incentives Notice of Inquiry. NARUC's comments indicated that state
regulators had found that FERC's incentives policies have ``transferred
hundreds of millions of dollars from consumers to transmission
investors without any clear showing of need or benefit'' and that those
policies ``are in dire need of reform.'' Do you agree with NARUC's
comments? What specific changes, if any, to FERC's incentives policies
would you advocate for if confirmed to the Commission?
Answer. Given my position as a nominee for the FERC, I technically
abstained from that particular NARUC vote, so as not to prejudge any
future proceeding in which I may be asked to vote. I can report that I
do believe this is a topic that is worthy of FERC consideration. FERC
is in the position of needing to be responsive to Congressional intent
via the Energy Policy Act of 2005, which directed FERC to establish a
framework for incentive rates. At the same time FERC must ensure that
the rates are structured so as to not be overly-generous. That is to
say, incentive rates should not simply add unjust consumer-borne costs
to lines that would be built in any event. A fact-based record is the
best way to assess the matter.
Responses of Anthony Clark to Questions From Senator Murkowski
Question 1. In your opinion, what is the appropriate standard or
principle that governs who should be assessed the costs for new
transmission lines?
Answer. Whatever cost methodology is adopted must be grounded in
the sound principles of the user or beneficiary pays model. Simply put,
those who do not use and do not benefit from infrastructure should not
be expected to pay for it. In order to accomplish this goal, I believe
an acceptable cost allocation methodology will need to be developed in
a ground-up, not top-down manner, and it will need to be dependent on a
record that specifically attempts to quantify, within reason, why a
given methodology meets the just and reasonable standard.
Question 2. As a general matter, do you believe that FERC's Order
No. 1000 upholds the ``beneficiary pays'' principle that the
beneficiaries of a transmission project should bear the costs of that
project?
Answer. I believe it is too early to tell. The compliance filings
and how FERC reacts to them will be where that question is definitively
answered.
Question 3. How do you view the ``benefits'' portion of FERC's
Order No. 1000? What kinds of broad social ``benefits'' need to be
considered when looking at new transmission lines?
Answer. I believe FERC must be careful to not so broadly define
``benefits'' so as to eviscerate the principle of user or beneficiary
pays. It will be important for FERC to respect and understand the
differences between regions of the country, so that the Order 1000
planning process is a ``ground-up'' and not ``top-down'' project for
the purpose of defining benefits. Transmission plans that are developed
and approved should be supportive of state and regional efforts, not
determinative of them.
Question 4. Do you believe it is ever appropriate to allocate the
costs of transmission infrastructure over an entire interconnection
area?
Answer. Without prejudging any particular matter, an
interconnection-wide allocation seems somewhat unlikely. This would be
especially true across a very large interconnection, though ERCOT could
be an example of an exception. I would like to note, however, that FERC
has no jurisdiction over ERCOT for purposes of cost allocation under
Order No. 1000. Nonetheless, the decision would be dependent upon a
fact-based record that attempts to quantify cost causers and
beneficiaries in a meaningful way.
Question 5. In your opinion, has the Commission given appropriate
incentives to promote investments in transmission?
Answer. I believe this is a topic that is worthy of FERC
consideration. FERC is in the position of needing to be responsive to
Congressional intent via the Energy Policy Act of 2005, which directed
FERC to establish a framework for incentive rates. At the same time
FERC must ensure that the rates are structured so as to not be overly-
generous. That is to say, that they are not simply adding unjust
consumer-borne costs to lines that would be built in any event. A fact-
based record is the best way to assess the matter.
Question 6. Do you believe we are investing enough in transmission?
Where exactly is new transmission needed and why? Is building long-
distance transmission to access remote renewable resources always a
better deal for the customer or should states look at local resources
first?
Answer. I do not believe there is a one-size-fits-all answer to
that question. This is why I believe that regional planning can be a
helpful tool. In my experience in the Midwest, it is rarely the case
that the answer is all distant generation, or all local generation. We
have typically found that some mixture of both leads to a least-regrets
plan that is both cost-effective and diverse. That is why it is so
important for upfront analyses to be done, so regulators, industry,
policymakers and other stakeholders have a common set of assumptions
regarding the costs and benefits of various scenarios. More often than
not, the answers will be highly regional in nature.
Question 7. Pursuant to Section 215 of the Federal Power Act (FPA),
FERC is responsible for assuring the electric grid is operated
reliably.
a. Given this responsibility, what can FERC do to educate EPA
and stakeholders interested in the Utility MACT implementation
process about how utilities, NERC, its regional entities and
its Planning Authorities actually plan to assure reliability?
Answer. I believe FERC can play an important role by using its
position at the nexus of utilities, NERC, regional entities and
planning authorities to encourage and develop a fact-based record that
can help inform the EPA and others with regard to logistical issues
related to a widespread shutdown or retrofitting of the electric
generation fleet.
Question 7b. DOE has emergency authority under the Federal Power
Act to order electric generation facilities to operate when needed to
keep the lights on in true emergency situations. At least once in the
past, a company had to run its plant longer than permitted by its
environmental permit in order to comply with a DOE emergency order to
maintain reliability. That company faced a dilemma as to which law to
follow and which law to break. And it ultimately had to pay millions of
dollars for violating its environmental permit limitations. As a
regulator responsible for maintaining the reliability of the grid,
would you support a clarification to the law that would keep companies
from facing this ``Hobson's choice'' when the reliability of the grid
is at stake?
Answer. I would support such a clarification.
Question 7c. In your experience, how much time does it take to
build a transmission line that would be big enough to replace a power
plant? Do you agree with EPA that this can take place in less than 3 or
even 4 years?
Answer. To some degree, the answer depends on where the line would
be built. Some states and utilities have a speedier track record than
others, but in my experience, less than four years is not the norm,
especially for larger projects.
Question 7d. Can you discuss where you see reliability in light of
other topics identified as top initiatives on the FERC website (smart
grid, demand response, integration of renewables and transmission
planning)?
Answer. As a state commissioner, reliability has been one of my
very top concerns. I anticipate that would continue for me if I am
confirmed for a position on the FERC. The reason I place such an
emphasis on reliability is because the consequences of a large-scale
reliability event are an immediate health and human safety concern, not
simply an economic inconvenience. An extended energy shortage in the
dead of winter on the northern plains, or at the height of summer in an
urban area, is an immediate threat to safety, especially for our most
vulnerable citizens.
hydropower
Question 8a. Do you consider hydropower to be a renewable resource?
Answer. I do.
Question 8b. Please state your views on the hydropower resource and
its contribution and value to the nation's energy mix.
Answer. I believe hydropower is an important resource for the
nation. It has traditionally been a reliable source of clean,
affordable power for the American people.
Question 8c. What are your thoughts on the issue of reliably
integrating intermittent renewable resources onto the grid?
Answer. This will be an area of ongoing work for the FERC and all
stakeholder groups, especially states, which have a great deal to say
about generation. Intermittent sources of power such as wind and solar
can play a role in supplying electricity to the nation. In my home
state of North Dakota, we have seen nearly 1,400 MW of wind power
placed into the grid. Yet, without question, intermittency is an issue
and a challenge that will continue to be dealt with by regulators at
both the state and federal levels of government.
Question 8d. What role can both conventional hydropower and pumped
storage have to play in addressing these problems?
Answer. I believe both conventional hydro and pumped storage have a
role to play. I have seen first-hand, as a state commissioner,
utilities that have successfully ``paired'' intermittent resources with
dispatchable resources in a way that is reliable and affordable.
organized markets
Question 9a. What is the appropriate path forward with respect to
organized and bilateral wholesale markets? Can and should they co-exist
or should all utilities ultimately be in organized markets?
Answer. As a state commissioner, I have felt strongly that these
are decisions that must be made from the ground-up, as ``coalitions of
the willing'' develop. FERC should be supportive of the different
regions of the country as they work to find solutions that work for
their consumers, but should be careful to not impose one-size-fits all
solutions.
Question 9b. Is FERC's oversight of electricity markets sufficient
to ensure that the wholesale electric rates meet the ``just and
reasonable'' standard of the Federal Power Act?
Answer. It is my understanding that FERC market oversight
capability has grown greatly in the last several years. I would seek to
continue to look for ways to ensure that FERC is effective in
fulfilling its oversight responsibilities.
Question 9c. Do you believe that the wholesale electricity markets
operated by regional transmission organizations are achieving net
benefits for consumers as compared to those regions without RTOs?
Answer. I am most knowledgeable about the experiences of North
Dakota's utilities and their customers within MISO, so I can speak from
that perspective. While there have been some bumps along the way of
belonging to a market, our general view in North Dakota has been that
it has been a net positive experience, and the numbers would appear to
justify that conclusion. How this plays in different regions and with
different utilities is probably very region and utility specific. It is
important for FERC, the states and stakeholders to be vigilant in
ensuring that there continue to be a ``value proposition'' in belonging
to an RTO.
Question 9d. Do you think that there is a sufficient level of
transparency in the pricing and other relevant data from the
electricity markets, particularly those operated by RTOs?
Answer. I understand the FERC has done a fair amount of work in
recent years to increase market monitoring activities. Nonetheless, I
am always open to considering ways to improve such efforts so as to
ensure the FERC is appropriately handling its important duties under
its relevant statutes.
Question 9e. What is your assessment of the success of pricing
incentives in the RTO markets, such as Locational Marginal Pricing, to
spur infrastructure development and address transmission congestion?
Answer. As a general rule, those regions that have moved to a
market model have adopted somewhat similar features such as LMP and
found them to be useful tools in promoting efficient outcomes. There
have been some successes in promoting infrastructure investment where
needed because of this. At the same time, there can be other
intervening factors such as cost allocation uncertainty, siting
challenges, slower demand growth and changing fuel costs, that have
slowed transmission development.
Question 9f. Do you believe RTO-run locational capacity markets are
providing adequate revenue and certain for new generation while
avoiding excess payments to existing generation?
Answer. I believe this is a question that is ripe for further FERC
analysis. Not all capacity market models are the same, and some have a
longer track record than others. A fact-based record would help assess
whether capacity markets have been sending appropriate price signals to
provide adequate capacity, or whether certain models are flawed.
Question 10. How does FERC consider priorities for industry and its
costs in approving the various initiatives it reviews?
Answer. Not being an incumbent FERC Commissioner, I am unsure how
FERC internally assesses these priorities.
Question 11. FERC has many offices and many responsibilities. As
Commissioner, do you feel reviewing FERC's budget and looking for
internal efficiencies, reducing duplication, should be a priority? If
so, what areas would you target?
Answer. It is my understanding that much of the administrative and
budgetary duties flow through the Office of the Chairman from a
structural standpoint. Nonetheless, I would intend to be an
appropriately engaged Commissioner. Although the FERC is a ``charge-
back'' agency, it is still important that it set a good example of
prudent fiscal management at all times, but especially during such
trying financial times as we have now. My standards at a state level
commission have been to only ask for such resources as are necessary to
meet the agency's duties effectively and efficiently.
Responses of Anthony Clark to Questions From Senator Corker
Question 1. As you may know, last year I introduced S. 400, a bill
sponsored by 7 other Senators, including Senators Murkowski and Wyden
of this Committee. Its premise is similar to language in an amendment
this committee adopted with respect to the 2009 energy bill. Simply
put, the bill amends the Federal Power Act to state that electric
consumers cannot be charged for the cost of new transmission facilities
unless they are ``reasonably proportionate to measurable economic or
reliability benefits.'' To me, that seems completely consistent with
the Federal Power Act's existing requirement that electricity rates
must be ``just and reasonable.'' Do you agree or disagree with the
language of S. 400, and why?
Answer. On its face, I generally would find it difficult to
disagree with the goals of S. 400. I believe ``reasonably
proportionate,'' not unlike ``roughly commensurate'' could work to
facilitate sound beneficiary pays principles within the broad just and
reasonable standard. One word of caution, that I would recommend the
Senate weigh, is related to what a change in legislative language might
mean in the courts. I have learned from experience at the state level,
that seemingly innocuous changes in statutory language can have an
unintended effect in the courts. I believe it would be an unfortunate
outcome if a reinterpretation by the courts due to slightly revised
language were used to inject uncertainty into existing cost allocation
methodologies that may be working perfectly well for certain regions of
the country. Legislative changes always incur a litigation risk, one
that may bring unwanted uncertainty into the marketplace.
Question 2. Order 1000 has been criticized as going beyond existing
law, by assuming that transmission ``benefits''--a term not defined
under the Federal Power Act or in the Order itself--would be broadly
enjoyed by nearly anyone who theoretically could use a new transmission
line. Doesn't this vague use of the term ``benefits'' go far beyond
FERC's existing authority? Shouldn't the agency be asking Congress to
consider legislation which would provide such authority--as was
considered in the 2009 energy bill when my amendment was adopted?
Answer. The critical piece of Order 1000 will be the compliance
filings and the FERC reaction to those filings. While costs and
benefits are something regulators look at in nearly every case we
review, in theory, there always exists a potential for the term
``benefits''(or costs for that matter) to be construed so broadly by
regulators as to undermine the intent of the Federal Power Act and/or
sound regulatory practice. As of today, I am not certain that I would
say that this potential causes me to conclude that FERC should have,
necessarily, sought a specific statutory change however.
Question 3. With many utilities and their customers facing
increased costs from the need to retrofit power pollutants with costly
pollution control equipment to comply with a myriad of new EPA
regulations, do you think it is fair and appropriate to add yet another
burden in the form of subsidies to build new transmission to import
distant renewables?
Answer. As a general matter, I am not supportive of uneconomic
subsidies for any form of power. However, I think it would be too broad
a statement to conclude that geographically diverse renewables are
never a cost effective solution for any state or any region. I believe
there will likely be somewhat different answers in different regions of
the country. That is why it is so important that FERC respect those
regional differences and not impose one-size-fits-all solutions on
states and regions that are working towards solutions that work best
for their consumers.
Responses of Anthony Clark to Questions From Senator Cantwell
ferc jurisdiction over the bonneville power administration
Question 1. The Federal Energy Regulatory Commission recently
issued an order under Section 211A of the 2005 Energy Bill asserting
that actions by the Bonneville Power Administration (BPA) were
discriminatory in its dealing with over-generation of wind during
periods of light electric demand. I realize that this issue is still
pending for rehearing and you are therefore limited in what you can
say. I do want to emphasize, however, that the scope of FERC's decision
is a potentially troubling issue. BPA has sought clarification on a
number of critical issues, and I strongly encourage the Commission to
carefully consider this matter.
a. If confirmed, will you respect the authority and
jurisdiction that Congress granted and has historically been
provided to BPA under the Federal Power Act?
b. Please provide specific examples of any role, authority,
or jurisdiction the FERC has or should have over the decision
making of the Bonneville Power Administration.
Answer. Given that the Iberdrola Renewables, Inc. v. Bonneville
Power Administration proceeding is currently before the Commission and,
if confirmed, I might be expected to rule on the matter, it would not
be appropriate for me to comment on substantive issues in that case. I
do note, however, that the Commission's recent order stated its
expectation that ``the need to use this statutory authority would be
rare.'' I agree with this general principle.
section 5 of the natural gas act
Question 2. Section 206 of the Federal Power Act has refund
protection for complainants while Section 5 of the Natural Gas Act
(NGA) does not. Every sitting FERC Commissioner (as well as recently
departed Commissioner Spitzer) has indicated at various times that
Section 5 should to be amended to provide natural gas consumers with
the same refund protection as electric consumers.
a. Do you agree that natural gas consumers should be afforded
retroactive refund protection in cases where a pipeline has
been shown to have charged unjust and unreasonable rates?
Answer. Not having administered the NGA, I have not yet formed a
definitive opinion on the question. However, in my experience as a
state regulator, I do know that retroactive refund provisions within
regulatory practice are a common and acceptable method for ensuring
customers are not unduly harmed by ``regulatory lag.''
Question 2b. Can you think of any credible policy justification to
not undertaking this reform to Section 5 of the Natural Gas Act?
Answer. I understand the pipeline industry has suggested there is
something different about its industry with regard to the nature of its
structure and revenue model. But I do not yet have enough information
to verify whether this is a valid concern.
Responses of Anthony Clark to Questions From Senator Landrieu
Question 1. I was pleased to see that the National Association of
Regulatory Utility Commissioners (NARUC), where you served as President
in 2010-2011, recently filed strong comments on the incentives NOI,
stating that state regulators had concluded that FERC's incentives
policies have ``transferred hundreds of millions of dollars from
consumers to transmission investors without any clear showing of need
or benefit'' and that those policies ``are in dire need of reform.'' Do
you personally agree with the NARUC comments? What specific changes to
FERC's incentives policies would you advocate if confirmed for a
Commission seat?
Answer. Given my position as a nominee for the FERC, I technically
abstained from that particular NARUC vote, so as not to prejudge any
future proceeding in which I may be asked to vote. I can report that I
do believe this is a topic that is worthy of FERC consideration. FERC
is in the position of needing to be responsive to Congressional intent
via the Energy Policy Act of 2005, which directed FERC to establish a
framework for incentive rates. At the same time FERC must ensure that
the rates are structured so as to not be overly-generous. That is to
say, incentive rates should not simply add unjust consumer-borne costs
to lines that would be built in any event. A fact-based record is the
best way to assess the matter.
transmission planning for load-serving entities
Question 2. Section 217 (b) (4) of the Federal Power Act directs
FERC to exercise its authority to facilitate the planning and expansion
of the transmission grid to meet the reasonable needs of Load Serving
Entities, so that utilities with an obligation to serve will be able to
secure transmission rights needed to match their long term investments
in power supply. What is FERC doing or planning to do to ensure that
Congress' directive with regard to transmission planning is met?
Answer. In 2007, FERC established requirements for open and
transparent planning processes for electric transmission facilities.
Last year, FERC issued Order 1000, which adopts additional reforms to
improve transmission planning. FERC stated that those transmission
planning reforms are consistent with section 217 of the Federal Power
Act because they support the development of needed transmission
facilities, which ultimately benefits load-serving entities. If
confirmed as a FERC commissioner, I will work to ensure that Congress'
directive with regard to transmission planning is met.
______
Responses of John R. Norris to Questions From Senator Wyden
lng exports
Question 1. Under the Natural Gas Act, DOE approves the exports of
natural gas, but FERC approves the physical terminals that are needed
to carry out the exports and any pipelines that are needed to connect
them to gas supplies. Under the Natural Gas Act, FERC must make a
finding of public need and necessity for infrastructure certificates.
LNG export terminals will reduce U.S. supplies of natural gas and
according to the Energy Information Administration, increase U.S.
natural gas prices. How will you apply this public interest test to LNG
export terminals?
Answer. As your question notes, DOE and FERC share responsibility
under section 3 of the Natural Gas Act to consider proposals to import
or export natural gas, and proposed facilities for such import or
export. The Natural Gas Act deems that LNG exports to free trade
agreement countries are in the public interest. With regard to LNG
exports to non-free trade agreement countries, the Natural Gas Act
requires a determination that the export will not be consistent with
the public interest in order to reject such a proposal. As I testified
at hearing, if confirmed, I would expect to consider all public
interest issues brought before me in light of this statutory structure
and the particular facts and circumstances of an individual LNG export
terminal application.
lng nepa review
Question 2. FERC is currently in the process of approving the first
export terminal conversion for Sabine Pass. FERC staff has concluded
that it can recommend approval without completing a full environmental
impact statement. Do you believe that it is appropriate to approve
construction of multi-billion facilities that will allow the export of
over 2 billion of cubic feet of natural gas a day, and consume roughly
10% of that much per day for operations, without a full environmental
impact statement? Some facilities expected to apply for authority to
build export facilities, such as Jordan Cove LNG in Oregon, have not
even begun physical construction while others such as Cove Point have
been in operation for many years. Do you believe there is a different
threshold for NEPA review for construction of export facilities at an
existing facility versus an entirely new facility?
Answer. Given that the Sabine Pass matter is currently before the
Commission, and Jordan Cove LNG may start a proceeding on this point
soon, I cannot prejudge how I might decide these cases. Generally, an
agency must do an environmental impact statement if a proposed action
will have a significant impact on the human environment. If confirmed,
I will fairly consider all relevant views and comments submitted in
these cases, recognizing the possible concerns of local citizens, and
other issues within the scope of the responsibility defined by
Congress.
sec. 211a
Question 3. FERC recently agreed with wind generators that it has
authority to intervene in the Bonneville Power Administration's
transmission system rates under Sec. 211A of the Federal Power Act. I
am concerned about where FERC will draw the line on how it uses its
authority under 211A of the Federal Power Act to regulate access to
transmission systems owned by BPA, or the Tennessee Valley Authority,
or any of the other Federal and consumer-owned utilities. Do you agree
that this authority should be used on a case-by-case basis to provide
transmission customers an avenue for relief or do believe that FERC can
or should use this authority to regulate BPA and other ``non-
jurisdictional'' transmission systems on a day-to-day basis?
Answer. Federal Power Act section 211A is a tool that Congress gave
FERC to protect open access to transmission service. However, I believe
it is a tool that should be utilized only in rare instances. As a
result, I agree that this authority should be used on a case-by-case
basis when specific issues arise regarding open access to transmission,
and should not be used to regulate non-public utilities on a day-to-day
basis.
transmission cost-allocation and planning
Question 4. Last year, FERC issued an order--Order 1000--putting in
place new requirements for regional transmission planning and
allocation of cost for building new transmission projects. FERC adopted
a principle of allocated costs that are ``roughly commensurate'' with
benefits. I am concerned that this could lead to utility customers
paying for transmission constructions that are not directly tied to
benefits. How do you interpret ``roughly commensurate'' standard? What
assurance can you give me that utility customers are going to be
protected?
Answer. Order No. 1000 states clearly that those who do not benefit
from transmission facilities are not required to pay for them. The
order also includes the related principle that the cost of new
transmission facilities meeting certain criteria must be allocated to
those within a transmission planning region that benefit from those
facilities in a manner that is at least ``roughly commensurate'' with
estimated benefits. This principle draws on language used by the U.S.
Court of Appeals for the Seventh Circuit in addressing FERC orders on
cost allocation for transmission facilities. It is important to also
note that Order No. 1000 requires open, transparent planning processes
where all stakeholders are given a chance to participate, so that
stakeholders can decide how best to meet their transmission needs and
how best to pay for them.
hydroelectric licensing
Question 5. There is enormous interest in expanding the use of
small, low-impact hydroelectric projects in existing irrigation canals,
city water systems, and other existing water systems. Many of these
have very little environmental impact and can help pay for system
upgrades and water saving measures like replacing open canals with
pipelines. FERC, however, subjects these projects to licensing
requirements that cost almost as much as the projects would save by
producing energy. Would you support the creation of a separate process
for approving low-impact hydro projects in existing water systems?
Answer. I am in favor of anything that can be done to promote the
speedy approval of low-impact hydro projects, consistent with statutory
mandates. For example, over the past two years, Commission staff worked
with Colorado regulators to obtain state ``pre-approval'' of projects,
so that the Commission could act on applications within a month or two.
I note that many of the requirements imposed on licensees are
statutory, and often under the control of other agencies, so that the
Commission cannot control them.
storage technology
Question 6. FERC has recently come out with some very helpful
rulings that require energy storage technologies to be compensated for
the services they provide. What is your opinion on the benefit of
energy storage applications on the interstate power system? Would you
support including energy storage as an alternative to the construction
of new transmission lines in regional transmission planning processes?
Answer. I strongly believe that storage technologies hold great
promise to help our nation reliably and cost-effectively address many
of the challenges facing our interstate power system. Given the
enormous potential benefits of storage technologies, the Commission
should strive to ensure that our regulatory policies foster, rather
than inhibit, their growth. I have supported, and will continue to
support, policies that ensure that alternatives like storage are
equally considered in regional transmission planning processes.
oil pipelines
Question 7. FERC sets the rates for interstate pipelines that carry
oil and petroleum products although it does not control the siting or
location of these pipelines. It's clear to me from the Keystone XL
pipeline debate that some of these pipelines are going to have
significant impacts on oil prices in regional markets. TransCanada
provided testimony that it's shippers were prepared to absorb billions
of dollars in increased shipping costs on its pipeline in order to earn
billions more by raising oil prices in the Midwest. To what extent
should FERC consider the impact of regional price impacts in setting
pipeline rates?
Answer. The Interstate Commerce Act does not provide the Commission
with jurisdiction over the price of oil itself. The Commission is only
authorized to ensure just and reasonable rates for the transportation
of oil. The Commission does this by prohibiting the exercise of undue
preference by oil pipelines. In performing this analysis, the
Commission does not consider how pipeline rates may affect the cost of
oil as a commodity because we do not have the legal authority to do so.
Response of John R. Norris to Question From Senator Shaheen
Question 1. I have concerns about FERC's implementation of Order
679, which guides the Commission's decision making process on deciding
whether to grant regulatory incentives for the construction of
electricity transmission infrastructure. While I believe that
appropriate investment in these facilities plays a vital role in our
nation's energy future, I think that the current bonus rate incentives
policy has resulted in consumers, especially those in New Hampshire,
paying more than what is necessary to get transmission built.
That is why I led a letter to (FERC) Chairman Jon Wellinghoff,
signed by 10 of my Senate colleagues, in response to the Commission's
Notice of Inquiry (NOI) seeking comments on Rule 679, urging FERC to
consider a more objective approach to awarding transmission rate
incentives. For example, FERC should make a specific finding of the
necessary risk that must be undertaken before a project receives an
incentive.
Where is FERC in terms of reviewing the comments it received and
what can we expect to see from the Commission in terms of possible
changes to its incentives policy?
Answer. The Commission has received more than 1500 pages of
comprehensive and helpful comments with respect to our Notice of
Inquiry on incentives. We are currently reviewing those comments and I
am hopeful that we will move to the next step in this process soon. I
believe that it is crucial that the Commission enumerate a clear policy
that appropriately balances the Congressional mandate to provide
incentive rate treatments for the construction of needed transmission
projects with the interests of consumers who will pay for those
projects.
Responses of John R. Norris to Questions From Senator Murkowski
Question 1. Basis for your opinion regarding the potential impact
of EPA's rules on electric reliability: At the Commission's Technical
Conference held on November 30, 2011, you said you were ``sufficiently
satisfied'' that ``the reliability of the electric grid can be
adequately maintained as compliance with EPA regulations is achieved.''
At the Committee's hearing on March 20, 2012, you reaffirmed that you
continue to maintain that opinion in the light of evidence received
since then which includes, for example, testimony at the technical
conference, filings made in response to the Commission's notice of that
conference, assessments done by NERC and planning authorities, and the
scope and scale of announcements of generation retirements to date.
a. Please state all of the facts that form the basis for your
opinion.
b. For purposes of your statement quoted above, do you define
``EPA regulations'' to include the Mercury and Air Toxics
(``MATS'') Rule, and the other regulations outlined in Senator
Murkowski's letter to you of May 17, 2011?
c. If not, what rules would you add to or omit from ``EPA
regulations'' in this context? How did you define the term
``EPA Regulations'' in the context of your answer at the
hearing on March 20, 2012?
d. For purposes of your statement quoted above and your
opinion as stated, how do you define ``the reliability of the
electric grid''?
e. For purposes of the same statement, how do you define
``adequately maintained''?
Answer. I believe a reliable electric grid is extremely important
to our economy and to the health and safety of our citizens, and I take
very seriously my responsibility to oversee and protect the reliability
of our electric grid. Industry also takes reliability extremely
seriously, and has a remarkable track record of maintaining high levels
of reliability while responding to new environmental regulations.
My statements that I am ``sufficiently satisfied'' that ``the
reliability of the electric grid can be adequately maintained as
compliance with EPA regulations is achieved'' should be understood in
the broader context of the competing variables that can impact
reliability. As I noted in my testimony to the House Energy and
Commerce Committee last year, in reliability, like many other elements
of our electric power system, there is an intersection of physics,
economics, policy, law, and other factors. These factors are constantly
changing and evolving, and for that reason, I do not believe that
lawmakers, regulators or industry can ever claim 100 percent
satisfaction that the reliability of the electric grid will never be
impacted as those factors change and evolve. I strive to balance all of
these factors, as they are understood at the time, when I make
decisions on reliability matters before me. But we cannot guarantee
future outcomes, so the key is having the appropriate tools available
so we are prepared to deal with the myriad of situations that might
occur.
My views in this area are shaped by my review of the numerous
studies and reports that have been produced analyzing the potential
impact of EPA rules on generation retirements, the testimony produced
at our November 30, 2011 Technical Conference, and numerous
discussions, conferences and meetings that I have attended with a wide
variety of stakeholders. In response to your question 2, I have
provided a number of studies, reports, and other documents that I found
especially valuable as I have considered these issues. These materials
present a large amount of data and a multitude of factors that go into
analyzing the impact to reliability of environmental regulations, and
it would be impractical to identify a comprehensive set of facts
supporting my views. Rather, I have formed my views based on a review
of the totality of the evidence and factors presented to me, as applied
to the broader context of reliability that I describe above.
However, I would note a few key factors that I find particularly
relevant to my views:
Multiple entities have prepared analytical studies on the
impact of EPA rules throughout the rulemaking process, and
these studies have used a wide range of assumptions and
produced a wide range of outcomes.
A number of the early studies used assumptions of what would
be in proposed or final EPA rules that later proved inaccurate,
resulting in an overstatement of the level of projected plant
retirements. One example of this is the assumptions that were
used as to what EPA would include in its proposed Clean Water
Act Section 316(b) Rule; EPA's actual proposal includes
implementation options that differ substantially from those
assumed in the 2010 NERC EPA Assessment.
Moreover, many of the studies and reports use static
assumptions that fail to take into account the response to the
EPA regulations that we can expect from competitive wholesale
markets. FERC oversees these markets to ensure that they are
designed to respond to factors like new environmental
regulations and provide appropriate price signals for
investment in new resources when needed.
A significant cross-section of over 30 utility companies
have made statements in the last six months indicating
confidence that those companies would meet the EPA regulations
within the proposed compliance timeline.
From 2000 to 2003, electric companies added over 200 GW of
new capacity. This large-scale addition of capacity in four
years is more than any of the analytical studies suggest may be
needed in the 2011 to 2017 time period to replace capacity that
could retire as a result of EPA rules.
By 2018, NERC projects energy efficiency programs will
reduce summer peak demands by nearly 20,000 MW. Moreover,
demand response programs have expanded significantly at the
retail and wholesale levels; FERC staff recently reported that
demand response participation in RTO/ISO markets alone
increased more than 16 percent between 2009 and 2010. Demand
response and energy efficiency resources can be targeted to
address specific localized reliability issues if needed. In
regions where demand response is not widely utilized, one would
expect that such resources will have significant value in
responding to new environmental regulations.
PJM states in its August 2011 report that ``resource
adequacy does not currently appear at risk in spite of
projected retirements.'' This statement is indicative of the
opinions in many of the analytical studies that I have
reviewed.
The EPA has included a process of addressing unit specific
reliability concerns through the use of CAA section 113(a)
administrative orders.
There remains the Presidential authority to grant further
extensions where a threat to reliability continues to exist
after all other actions and precautions are exhausted.
I define ``EPA regulations'' as including the Mercury and Air
Toxics Rule (MATS), the Cross-State Air Pollution Rule (CSAPR), the
Coal Combustion Residuals Rule, and the Clean Water Act Section 316(b)
Rule. These are the rules that, to date, most analysts have focused on
as having the potential to have the most impact on the electric sector,
and are the rules included in the analytical studies that have been
conducted for purposes of reviewing the reliability impact of pending
EPA Rules. I would add that, because there is more certainty with
respect to the MATS and CASPR Rules, I have focused more of my
attention with respect to those rules when reviewing reports and
analysis. However, as new EPA rules are proposed, I intend to monitor
the impact they may have as well.
I would note that NERC and the industry are currently working to
better define terms such as ``adequate level of reliability'' through
their stakeholder processes. Without prejudging those efforts, which I
hope will arrive at more certain definitions, I define ``the
reliability of the electric grid'' to mean that the availability of
electricity on demand is maintained at a level that a reasonable person
would expect. I define ``adequately maintained'' to mean that the
availability of electricity is maintained consistent with historical
performance, and/or at a level that meets a reasonable person's
expectations.
Question 2. Evidence related to potential impacts of EPA's rules on
electric reliability: Please list all documents that you read at any
time prior to the Committee's hearing on March 20, 2012 that contain
evidence of the potential impact of the EPA's pending or recently-
issued regulations affecting power plants or upon which relied for the
purpose of forming your opinion concerning the potential impact of EPA
regulations on reliability. (For purposes of this and following
questions, please include among such regulations, the MATS Rule and the
other regulations listed in Senator Murkowski's letter to you of May
17, 2011.)
a. Please list especially studies or reports prepared by the
North American Electric Reliability Corporation (NERC),
regional reliability entities, planning authorities or regional
transmission organizations that you read on or before March 20,
2012.
b. Please provide and highlight any such document, and
especially any report or analysis prepared by any entity
referenced above, and any specific portion of any such document
that serves as a basis for your opinion that ``the reliability
of the electric grid can be adequately maintained as compliance
with EPA regulations is achieved.''
Answer. As I note in response to your question 1, numerous studies,
reports, and other documents have been prepared assessing the potential
impact of EPA regulations on the electric sector and grid reliability.
Below, I list a number that I have found valuable and probative as to
the reliability issues raised in your questions, and that have helped
form the basis of my views in this area. As you requested, I have
provided some highlights to many of these documents, but I must stress
that the documents need to be viewed in their totality. Given the
extensive nature of the materials available, however, this list is not
exhaustive.
NERC 2010 Special Reliability Scenario Assessment: Resource
Adequacy Impacts of Potential US Environmental Regulations,
October 2010
NERC 2011 Long-Term Reliability Assessment, November 2011
Potential Retirement of Coal Fired Generation and its Effect
on System Reliability (Preliminary Results), FERC OER Division
of Bulk Power System Analysis. October 2010. Graphs Pg. 24-25
November 2011 Update: Ensuring a Clean, Modern Electric
Generating Fleet while Maintaining Electric System Reliability,
M.J. Bradley & Associates LLC, November 2011. Appendix A
Overview of U.S. Environmental Protection Agency Rules for
the Electric Power Sector, Environmental Protection Agency,
February 2011
Coal Capacity at Risk for Retirement in PJM: Potential
Impacts of the Finalized EPA Cross State Air Pollution Rule and
Propose National Emissions Standards for Hazardous Air
Pollutants, PJM, August 26, 2011. Executive Summary, pg. 33
EPA Impact Analysis: Impacts from the EPA Regulations on
MISO, MISO, August 2011. Pg. 3, Pg. 6
Correspondence between Luminant, EPA, & Southwest Power Pool
--Luminant Announces Facility Closures, Job Reductions in Response
to EPA Rule, Luminant Media, September 12, 2011
Letter from Bob Perciasepe, EPA Deputy Administrator, to
David Campbell, CEO, Luminant, September 11, 2011
--Letter from Southwest Power Pool CEO & Trustees to Administrator
Lisa Jackson, EPA, September 28, 2011
Testimony of H.B. Doggett, Electric Reliability Council of
Texas, Inc. before the House Committee on Energy and Commerce,
Subcommittee on Energy and Power, United States House of
Representatives, September 14, 2011
The Clean Air Act's ``Exemption Authority'' is the
Appropriate Tool for Allowing More Than Four Years for Utility
MACT Compliance, EEI Briefing Paper, October 20, 2011
Letter & Testimony from Gerry Cauley, President and CEO of
North American Electric Reliability Corporation, to Chairman
Fred Upton and Chairman Ed Whitfield, September 13, 2011.
Testimony pg. 8
Review of the Potential Impacts of Proposed Environmental
Regulations on the ERCOT System, ERCOT, June 21, 2011. Pages 9-
11
Impacts of the Cross-State Air Pollution Rule on ERCOT Grid
Operations, ERCOT Presentation, September 14, 2011
Petition of Public Service Commission of South Carolina,
September 1, 2011
Reliability Impacts of Climate Change Initiatives:
Technology Assessment and Scenario Development, North American
Electric Reliability Corporation, July 27, 2010
Letter from Thomas R. Kuhn, President of Edison Electric
Institute, to Assistant Administrator Regina McCarthy, August
3, 2011. Pg. 5, 66-Conclusion
PJM's Comments to EPA Proposed Hazardous Air Pollutant Rule,
Craig Glazer, Vice President-Federal Government Policy, PJM,
August 4, 2011. Pg. 9
EPA Ascendant as Congress Stalls Out--Busy Year Ahead,
Baird, September 1, 2010. Pg. 13, Pg. 14
Assessment of Technology Options Available to Achieve
Reductions of Hazardous Air Pollutants, URS Corporation, April
5, 2011. Executive Summary, Introduction, Conclusion
US Utilities: Can Texas Comply with the Cross-State Air
Pollution Rule? Yes, If Existing Scrubbers are Turned On,
Bernstein Research, July 20, 2011. Pg. 2, Pg. 8
Opening Statement of Regina McCarthy, Assistant
Administrator for Air and Radiation U.S. Environmental
Protection Agency, Legislative Hearing On H.R. 2250, the EPA
Regulatory Relief Act of 2011, and H.R. 2681, the Cement Sector
Regulatory Relief Act of 2011, September 8, 2011
EPA's Enforcement Response Policy for Use of Clean Air Act
Section 113(a) Administrative Orders in Relation to Electric
Reliability and the Mercury and Air Toxics Standard, EPA
Memorandum, December 16, 2011. Pg. 5-7; Section A-D
Electric Reliability under New EPA Power Plant Regulations:
A Field Guide, Susan Tierney, Ph.D. for World Resources
Institute, January 18, 2011. Pg. 6, Pg. 8
Ensuring a Clean, Modern Electric Generating Fleet while
Maintaining Electric System Reliability, M.J. Bradley
&Associates LLC, August 2010. Pg. 5, Table 2, Pg.7 Fig.3, Pg.
8, Table 3
Ensuring a Clean, Modern Electric Generating Fleet while
Maintaining Electric System Reliability, 2011 Summer Update,
M.J. Bradley & Associates LLC, June 2011. Pg. 17, Chart
Testimony of Susan F. Tierney, Ph.D. Hearing on the Impacts
of EPA Regulations on Electric System Reliability, September
14, 2011. Pg. 19, Table; Pg. 21, Table; Pg. 23
Environmental Regulations and Electric System Reliability,
Bipartisan Policy Center, June 13, 2011. Sec. III; Sec. V
EPA's Regulation of Coal-Fired Power: Is a ``Train Wreck''
Coming?, James E. McCarthy and Claudia Copeland, Congressional
Research Service, August 8, 2011. Summary; Pg.14-17; Pg.28-35;
Pg. 39-40
Testimony from Panel III, FERC Reliability Technical
Conference, November 30, 2011.
--Written Remarks from Mark Lauby, Vice President and Director of
Reliability Assessment & Performance Analysis
--Testimony of Michael J. Kormos, Senior Vice President PJM
Interconnection, LLC
--Statement & Testimony of Carl A. Monroe, Executive Vice President
and COO Southwest Power Pool, Inc.
--Statement by Thomas F. Farrell, II, Chairman and CEO, Dominion.
Pg. 1-8
--Testimony of Kathleen L. Barron, Vice President, Federal
Regulatory Affairs and Policy, Exelon Corporation. Pg. 6
--Statement of Anthony Topazi, Chief Operating Officer, Southern
Company
Testimony from Panel IV, FERC Reliability Technical
Conference, November 30, 2011
--Written Remarks from Gerry Cauley, President and CEO, NERC
--Testimony of Nicholas K. Akins, President and CEO, American
Electric Power
--Comments of the Midwest Independent Transmission System Operator,
Inc.
--Comments submitted on behalf of the PUCO
--Statement of Eric D. Baker, President and CEO of Wolverine Power
Supply Cooperative. Pg. 3, Sec. I
Reliability Technical Conference, Docket No. Ad12-1-000,
Debra Raggio, Vice President Government and Regulatory Affairs,
and Assistant General Counsel, GenOn Energy, Inc. November 29,
2011
Letter from Chairman Donna Nelson, Public Utility Commission
of Texas, to EPA Docket Center, August 4, 2011
Proposed Language to Effectuate RTO's Proposed Reliability
Safety Valve for MACT Rule, Email from Craig Glazer, October
14, 2011
Comments of the Electric Reliability Council of Texas, The
Midwest Independent Transmission System Operator, The New York
Independent System Operator, PJM Interconnection, LLC, and the
Southwest Power Pool, August 4, 2011
Corrected Comments of PJM Interconnection, LLC, Craig
Glazer, August 4, 2011
Testimony of John Hanger before the US House of
Representatives Energy and Commerce Committee Subcommittee on
Energy and Power, September 14, 2011
Reliability-Only Dispatch: Protecting Lives & Human Health
While Ensuring System Reliability, John Hanger, Clean Air Task
Force, Exelon Corporation and Constellation Energy, September
29, 2011. Pg. 17
Revisions to Federal Implementation Plans to Reduce
Interstate Transport of Fine Particulate Matter and Ozone, EPA
Proposed Rule, October 6, 2011 (Finalized February 21, 2012)
Commissioner-led Reliability Technical Conference, FERC
Transcript, November 30, 2011. Pg.268-270
Court remands Kemper County approval; On road with CEO, Bank
of America Merrill Lynch, March 15, 2012. Pg. 1
Why Coal Plants Retire: Power Market Fundamentals as of
2012, Susan F. Tierney, Ph.D., February 16, 2012. Pg.1-13
Question 3. Do you believe that the cumulative impact of the EPA
Regulations on electric reliability has the potential to be quite
serious? Please provide the facts that support your answer.
Answer. believe that on any given day our electric grid is
vulnerable to a serious outage, given the number of variables that go
into ensuring reliability on a day-to-day and moment-to-moment basis.
The grid is a machine with many moving parts, some of them decades old.
Moreover, there are hundreds if not thousands of trained professionals
making split-second, critical decisions on system operations at any
given time. Our electric grid is vulnerable to extreme weather, cyber
attack, physical attack, human error, and mechanical failure, to name
just a few variables. A failure in any of these factors could lead to a
serious problem if not appropriately managed. For this reason,
maintaining reliability is in large part an exercise in planning to
ensure that failures or unexpected contingencies can be managed with
minimal impact on the end user.
If the EPA regulations were to be implemented overnight without
time to plan system adjustments for them, and without any tools to
address the impacts of those regulations, the result could be quite
serious. However, that is not the case. Generally, the EPA regulations
are to be phased in over time, with the possibility to obtain
extensions if warranted. There are plans to be developed,
infrastructure projects to be built, and tools available to make
adjustments to deal with reliability vulnerabilities that surface. I
believe the cumulative impact of the EPA regulations can be managed
collaboratively by industry and policymakers to avoid serious
reliability risk. I expect adjustments or changes will have to be made
as more information and further analysis is available. That is why I
have been supportive of the development of additional tools, like the
safety value proposal from the RTOs (EPA responded to this request with
the Administrative Order process issued with the MATS Rule), should
they be needed. To the extent additional tools within FERC's
jurisdiction prove to be necessary, I will advocate that we provide
them. In addition, should Congress wish to develop additional tools,
such as the safety valve legislation proposal you have described, if
confirmed, I would be happy to assist by providing my feedback.
In short, I believe there could be serious reliability concerns if
the EPA regulations were not being taken seriously. However, I believe
that these regulations are being taken seriously by all involved. I
have heard EPA Assistant Administrator McCarthy say on multiple
occasions that she and the EPA take reliability very seriously. I know
you take it seriously. I also know that FERC, NERC, states, industry,
and the many other entities involved in maintaining reliability take it
seriously. For that reason, I believe the EPA regulations can be
successfully implemented over the next several years without
jeopardizing reliability.
Question 4. Do you believe that NERC's analysis of the potential
impact of EPA's rules is flawed or its concerns are overstated?
a. If so, why?
b. In your view, are or were any of the NERC or RTO
assessments that you have reviewed among the ``doomsday
predictions'' that you referenced during the March 20 hearing?
(See Archived Webcast at 91:30 -94:45)
c. Do you accord a study or studies by the Bipartisan Policy
Center of the impact of EPA regulations on electric reliability
more, less or the same weight as the NERC 2010 and 2011
Reliability Assessments as each relates to the pending EPA
regulations?
d. Should such a study or studies by the Bipartisan Policy
Center be given more, less or the same weight as such an
assessment by the Midwest Independent Transmission System
Operator (Midwest ISO), the Southwest Power Pool or any other
FERC-approved Regional Transmission Organization?
e. What weight should be accorded to the Bipartisan Policy
Center's assessment of the impact of EPA rules on electric
reliability?
f. What weight should be accorded to reviews by the
Congressional Research Service (CRS) of studies related to the
potential impact of EPA regulations on electric reliability?
g. Should more, less or the same weight be given to the work
of the Congressional Research Service with respect to the
potential impact of EPA regulations on the reliability of
electric service than to the referenced NERC or RTO
assessments?
h. Mr. Mark Lauby, NERC's Vice President and Director of
Reliability Assessment, testified at the Commission's technical
conference on November 30 that ``Reserve Margins are not the
complete landscape. . . . Policy that changes normal operations
must be understood to appreciate overall reliability effects.
More importantly, based on input from NERC's regional entities,
NERC is concerned about the risk to reliability from
retrofitting by 2015, environmental controls in over 500 units,
representing over 250 gigawatts of capacity driven by the
utility air toxics rule.'' (Transcript at 173).
i. What facts enable you to maintain your opinion in
the face of Mr. Lauby's testimony?
ii. What ``sufficient tools are in place'' to address
the risk to reliability identified by Mr. Lauby?
iii. And which of those tools, specifically, would
reduce the risk of ``retrofitting by 2015 environmental
controls in 500 units representing 250 gigawatts of
capacity?'' or of unit retirements of the magnitude
that appear to be emerging.
iv. As to each such tool, how would that tool reduce
the risk?
i. You appeared to observe at the hearing on March 20 that
EPA underestimated the retirements of electric generating units
attributable to just one of its rules, the MATS rule. (See
Archived Webcast 91:30-94:45.)
i. In light of announcements of unit retirements
attributed to the MATS rule, what role going forward--
with respect to that rule or any currently pending or
future EPA rule--do you see for the Commission and
entities subject to its regulation and oversight for
influencing EPA's regulations or improving EPA's
analysis of potential impacts of its regulation?
ii. What are you doing or will you do to see that EPA
takes into account the Commission's views or the
expertise of those entities subject to its regulation
or oversight, e.g., the ERO, regional reliability
organizations, planning authorities or RTOs?
Answer. As a general matter, analyses of the impact of the EPA
regulations on electric reliability require numerous assumptions, and
as those assumptions change so do the results. For this reason, I do
not view any NERC or RTO assessment as flawed, overstated, or a
``doomsday prediction,'' nor do I give any particular study or report
greater or lesser weight. While I have paid particular attention to the
NERC and RTO assessments given the important roles these entities have
in reliability planning, each of the reports and studies that have been
released provide important data points to consider as we continue to
monitor and assess the impact of the EPA regulations on the grid.
Mr. Lauby's testimony at the November 30, 2011 Technical Conference
highlighted the important issue of coordinating maintenance outages for
generating units that choose to install new environmental controls to
comply with EPA regulations. In further discussion on this issue at the
technical conference, I questioned panelists representing RTOs on the
current process for coordinating maintenance outages, and whether that
process is sufficient. They each represented that they currently have
the tools they need to sequence outages, provided that they have
adequate information from generator owners and operators and additional
time to address any particular units for which maintenance cannot be
scheduled within the compliance timeframe. With regard to the possible
need for additional time for particular units to schedule outages for
retrofit, panelists pointed to a ``safety valve'' as an appropriate
mechanism to provide that extra time. (See Transcript at 268-270) As I
note in response to your question 3, EPA has provided a form of the RTO
safety valve proposal through the Administrative Order process included
with the MATS Rule. However, as I state in response to your question
22, an additional statutory safety valve tool such as the one you
describe could be valuable, and I would be happy to work with you and
your staff as you develop legislation.
Going forward, I believe the Commission can be a resource to EPA
and other stakeholders by providing our reliability expertise to their
ongoing efforts to assess the reliability impacts of new environmental
regulations. If confirmed, I would expect to closely monitor these
efforts and the Commission's interactions with EPA, and to advocate for
enhanced dialogue and communication. In addition, the Commission should
continually assess whether the tools for achieving compliance with
these regulations that are under our jurisdiction--such as the
transmission planning processes and the competitive wholesale markets--
are sufficiently robust and flexible. To the extent changes or reforms
are needed to ensure that these tools are adequate, the Commission can
and should respond quickly.
Question 5. During the hearing on March 20, you acknowledged that
EPA regulations will have an impact on reliability and that there will
be a ``localized concern'' (See Archived Webcast at 91:30--94:30).
a. Do you see these impacts as potentially serious?
b. To your knowledge, is there a formal definition of such a
``localized effect''?
c. And, if not, how do you define such an effect?
d. Would a ``localized effect'' include the loss of service
to the downtown area of a major city?
e. Have you seen instances where a ``localized effect'' on
the electric grid spreads rapidly to a broader area?
f. In your judgment, how would the ``tools in place'' reduce
the risk of a localized effect? Please be specific.
g. As you see it, would additional risks to electric
reliability, such as loss of units necessary for grid support
services such as ``black start'' or ``voltage support'' be
acceptable if the loss of those units were a consequence of
timely compliance with EPA rules?
Answer. With respect to whether localized impacts of EPA
regulations could be potentially serious, please reference my response
to question 3. Without time to undertake reliability planning and tools
to address potential impacts, the result could be serious. However, as
I state in response to question 3, there is time for planning and
infrastructure development, tools are available, and additional tools
can be developed if necessary, to ensure that reliability is maintained
and that serious impacts can be avoided.
I am not aware of a ``formal definition'' of the term ``localized
effect'' as I used it in the March 20th hearing. My use of that term
was a general reference to a point made in multiple reports and
comments from entities like NERC (``Local reliability issues resulting
from individual unit retirements'') and the RTOs (``local reliability
impacts''). I believe the various usages of ``local'' is a general
reference to a more limited geographic area where one or a limited
number of plant retirements may cause a concern that is more specific
than a regional or interconnection-wide resource adequacy concern. That
would certainly include the loss of service to the downtown area of a
major city.
Certainly, there have been instances where a local reliability
issue spread to a broader area. The best example is the 2003 blackout,
where a vegetation touch on a transmission line in Ohio is considered
to be the major precipitating cause. However, as with many broader
reliability events, other variables and factors compounded to cause
this local issue to spread beyond a more limited geographic area.
The impact on local reliability of EPA rules will be assessed by
the relevant transmission planning authorities after generation owners
make a business decision on whether to retire or upgrade a plant to
meet EPA regulations. Once that decision is made, planners will be able
to determine what reliability concerns may result, and what options are
available to address those concerns. Those options could include
constructing new generation or transmission, developing additional
demand side resources, or making other resource additions to address
reliability needs. If the identified reliability needs cannot be met
within the EPA implementation timeline, there are extension tools
available to meet specific circumstances. For example, in conjunction
with the MATS rule, EPA issued a Policy Memorandum on the use of CAA
Section 113(a) administrative orders (AOs) with respect to sources that
must operate in noncompliance with the MATS rule for up to a year to
address a specific and documented reliability concern. The issuance of
such an AO would add an additional fifth year for compliance.
I share your interest in an adequate safety valve as you stated at
the March 20 hearing. The Commission is currently considering
approaches and processes for providing advice to the EPA regarding the
December 16, 2011, Policy Memorandum and on its use of AOs for critical
units. I believe this is an effort by the EPA to address the need for a
safety valve in instances where a specific unit must operate to ensure
reliability. If confirmed, I will continue to monitor how the EPA
intends to process AO requests so it adequately addresses local
reliability concerns. I would also welcome the opportunity to assist
you with any additional safety valve proposals you are considering.
I do not believe that additional risks to reliability from the loss
of units necessary for grid support services, without adequate planning
to replace the services provided by those units, would be acceptable.
However, I believe the work of planning regions to address reliability
concerns and the multi-year process for compliance will enable these
and other reliability concerns to be addressed.
Question 6. Recognizing that the Chairman and not individual
Commissioners direct the work of the Commission's staff, how would you,
if you were Chairman, administer the Commission with respect to the
reliability impacts of EPA rules?
a. Are you satisfied that at all times during your tenure as
a Commissioner you have had access to the information you have
needed when you have needed it fully and fairly to perform your
duties as a Commissioner?
b. What, if anything, would you have done differently in the
Commission's handling of the issue of the impact of EPA
regulations on electric reliability since September 2010 when
Commissioner Moeller raised the issue at the Commission's
monthly open meeting had you been Chairman during that time?
c. Why did the Commission wait more than a year after the
September 2010 Commission meeting to convene a Technical
Conference addressing the potential reliability impacts of the
EPA Regulations? Should it have waited that long?
d. If you were Chairman, how would you expect the Commission
to interact with EPA, NERC and the planning authorities on the
question of the potential impact of EPA Regulations on electric
reliability?
e. What is your view of the NARUC-FERC process underway to
consider these reliability/environmental issues going forward?
Will you support full participation by the Commission and its
staff in that process?
f. Please provide, to the fullest extent that you have formed
them, your views on the Staff White Paper on the Commission's
Role Regarding Environmental Protection Agency's Mercury and
Air Toxics Standards. What do you see as FERC's role on the
matters outlined in the Staff White Paper? Should the
Commission defer to the recommendations of planning authorities
and NERC?
g. May I have your commitment that as long as you are serving
on the Commission you will provide prompt, thorough and
complete answers to questions that may be posed to you by
members of this committee in correspondence or otherwise? Will
you do everything in your power to assure that the Commission
provides such answers to the Committee?
Answer. I believe it is essential for FERC to work with industry,
NERC, states, other federal agencies, and all stakeholders on this and
a number of issues that fall within the scope of our Congressional
mandate. Clearly, more can always be done to better coordinate with the
many stakeholders involved in an issue as important as the reliability
of the electric grid. I also think it is essential that I, as a FERC
commissioner, stay as up-to-date as possible on the issues surrounding
EPA regulations and potential impacts on reliability. Staff has been
made available to me to discuss their analysis of EPA regulations.
Additionally, I have set up monthly briefings with FERC staff to keep
me apprised of any developments related to these issues. With regard to
the issue of the scheduling of a technical conference on EPA
regulations, I note that the Chairman sets the calendar for technical
conferences.
As a general matter, I believe that additional interaction with all
of our fellow agencies in the federal and state governments would help
us to better achieve the public good. With this in mind, I consider the
NARUC-FERC process to be a valuable forum to discuss reliability/
environmental issues. I think it is essential for federal regulators to
work with our state colleagues on these issues and I support full
participation by the Commission and its staff in that process.
I supported the issuance of the staff white paper. We are partners
in this effort with NERC, Regional Entities, planning authorities and
the states, and it is appropriate to consult with them with regard to
EPA regulations and potential reliability concerns. We have received a
number of comments regarding the approach outlined in staff's white
paper. I am reviewing those comments and expect that they will better
inform my views on the appropriate path forward on this issue. In my
early review of this record, I note that many commenters make an
excellent point that determinations regarding the reliability impacts
of the shut down of a particular plant are best made by the relevant
local planning authority, which has the best ``on the ground''
knowledge of local system needs.
If confirmed, I commit to providing prompt, thorough, and complete
answers to questions posed to me by members of this committee or
otherwise. If confirmed, I commit to do what is in my power to assure
that the Commission provides such answers to the Committee.
Question 7. In correspondence to me during 2011 you provided
answers to a series of questions. Please review your answers to those
questions and supplement your answers to the extent that you have new
information or are aware of new information that would affect your
prior answer in any material way. To the extent that you have no new
information or have no need or desire to supplement any of your
answers, please so indicate.
Answer. I have not received any information since my last letter of
correspondence to you on October 7, 2011 that would affect my prior
answers in any material way.
I would note that at the Commission's Technical Conference held on
November 30, 2011, the topic of the unfair dilemma an electric
generator can face if it is ordered by DOE to operate to maintain
reliability, and doing so results in a violation of its environmental
permit, was discussed. I committed at that Technical Conference, as I
do in my answer to your question number 17, to fully support a change
in the law to address that situation.
Similarly, I noted in my response to you in the October 7, 2011
letter that I believe the RTO/ISO proposal for compliance flexibility
``has great merit.'' I reaffirm my belief in a ``safety valve''
provision in my response to your questions number 3 and 22.
Question 8. On December 1, 2011, the Department of Energy released
a report entitled ``Resource Adequacy Implications of Forthcoming EPA
Air Quality Regulations.'' The report represents an assessment by DOE
of the adequacy of U.S. electric generation resources under air
pollution regulations being finalized by the U.S. Environmental
Protection Agency.
a. Were you or your staff consulted at any time before,
during or after the preparation of the report about its
contents or direction? If so, by whom were you contacted and
what was the substance of the consultation?
Answer. Neither I nor my staff was consulted with respect to the
contents or direction of the Department of Energy report.
Question 9. Can you please provide a list of those hydropower
projects for which FERC collects a federal land use fee under Section
24 of the Federal Power Act even where the underlying land has been
transferred out of federal ownership but for a power site
classification?
Answer. It is my understanding that the Commission does not collect
this information. While the Commission does keep track of projects as
to which the Commission charges licensees federal land use fees, and
how much federal acreage is included in each project, I am told that
the Commission does not keep track of the basis for the land charges.
In other words, the Commission does not track whether federal land use
charges are based on federal fee ownership, leases, rights-of-way,
easements, section 24 reservations, or other interests.
Question 10. In Docket No. RM 11-6-000, the Commission proposes to
revise its methodology to assess annual charges on hydropower licenses
for use of government lands. I'm concerned that some Alaskan projects
will face increase tremendous increases. Sitka's Green Lake Project,
for example, could see fees increase by a stunning 142 percent.
a. Do you believe such increases can be considered
``reasonable'' as required by the Federal Power Act?
b. In revising its methodology to assess federal land use
fees, do you think it is appropriate for the Commission to
adopt a single per-acre rate for land use fees for all federal
lands in Alaska? Do you believe a phase-in implementation
period is warranted? Do you support providing the licensee with
the ability to challenge the application of whatever formula
for land use fees the Commission decides upon?
c. In preparing comments for Docket No. RM 11-6-000, I was
surprised to learn that, under section 24 of the Federal Power
Act, FERC is able to collect federal land use fees for
hydropower projects even when the ``federal'' land in question
has been transferred out of federal ownership if that land
retains a power site classification. If the fees being
collected are to recompense the government for the ``use,
occupancy and enjoyment'' of federal lands is it fair to be
collecting such fees when the land subject to those fees is no
longer owned by the federal government? Would you support
legislation addressing this discrepancy?
Answer. I share your concerns over significant rate increases for
the use of federal lands. The Commission is carefully considering
provisions for calculating a new per-acre rental fee promulgated by the
Bureau of Land Management for linear rights of way. I will be guided by
the principles in section 10(e) that require the Commission to fix
reasonable annual charges for, among other things, the use, occupancy,
and enjoyment of federal lands. I am willing to consider a variety of
methods for implementing any new rule regarding federal land use fees,
and I have not formulated any final opinions on these matters.
With respect to collecting federal land use fees where the lands in
question have been transferred out of federal ownership, I too was
unaware of the circumstances you describe. I am still learning about
this issue, and have not formed any opinions on it, but if confirmed, I
would be happy to discuss legislative proposals with you and your
staff.
Question 11. The Cooper Lake Hydroelectric Project in Alaska,
operated by the Chugach Electric Association, recently went through
FERC's hydropower relicensing process to secure a new 50 year term
license. As part of the settlement process, the resource agencies
directed Chugach to improve the habitat for certain fish in the lower
reaches of Cooper Creek by raising the water temperature. At the time,
in 2005, the estimated cost of the Stetson Creek diversion project was
$12 million. However, with the engineering changes sought by FERC, the
current estimated costs of this license condition for this small 20
megawatt project have doubled to an astounding $24 million.
a. Does this seem like a fair result to you?
b. Do you believe that both resource agencies and the
Commission need to keep licensing costs just and reasonable for
the end consumer?
c. Given that we have a number of Alaskan hydro projects up
for relicensing in the next few years, what can be done to
avoid such a result in the future?
d. Can cost containment be accomplished administratively or
are legislative changes to the Federal Power Act necessary?
Answer. This matter was resolved by Commission staff in an
uncontested proceeding. I am aware that environmental and engineering
requirements can significantly increase project costs. To the extent
that these are matters within the Commission's control, licensees may
timely seek Commission review of any actions to which they object.
I believe that the Commission has done the best that it can to
establish collaborative licensing processes, in which issues are
developed by stakeholders as early as possible, and information needs
and study results are shared. I also believe that the Commission does a
good job of balancing competing resource needs in issuing licenses.
I believe that both resources agencies and the Commission should do
everything they can, consistent with governing statutes, to ensure that
licensing costs are just and reasonable. Under the current regulatory
structure, however, the Commission has only a limited ability to
contain certain licensing costs. Certain statutory provisions,
including sections 4(e) and 18 of the Federal Power Act, section 401 of
the Clean Water Act, and sections 7 and 10 of the Endangered Species
Act, give agencies other than the Commission the ability to impose
mandatory license conditions that the Commission may not alter in its
final license. Thus, the Commission in many instances lacks the ability
to control licensing costs.
Question 12. FERC has opened a Notice of Inquiry into its incentive
rates policy for new transmission investments. Why did you learn from
this NOI and has FERC decided on any next steps?
Answer. The Commission has received more than 1,500 pages of
comprehensive and helpful comments with respect to our Notice of
Inquiry on incentives. We are currently reviewing those comments and I
am hopeful that we will move to the next step in this process soon. I
believe that it is crucial that the Commission enumerate a clear policy
that appropriately balances the Congressional mandate to provide
incentive rate treatments for the construction of needed transmission
projects with the interests of consumers who will pay for those
projects.
Question 13. Last July, several New York City generators filed a
complaint with FERC (Docket No. EL11-50-000) asking for expedited/
emergency review of a NYISO determination in applying Buyer-Side Market
Power Rules. Leaving aside the merits of that complaint, I understand
that while nearly 9 months have passed since the filing, the Commission
has still not issued a ruling on the complaint. According to
stakeholders, the absence of a Commission decision has created so much
uncertainty in the market that New York City may be facing reliability
issues this summer. What is causing the delay? When can we expect FERC
to make a decision on this emergency filing?
Answer. The complaint filed on July 11, 2011, alleged that the
NYISO improperly applied its buyer-side market power mitigation rules
with respect to two generating facilities. After reviewing the
complaint and NYISO's August 3, 2011 answer, the Commission found that
it did not have sufficient information to address the complaint and
thus, on August 31, 2011, issued an order seeking additional
information. (Order Directing Submission of Supplemental Information
and Issuing Protective Order, Astoria Generating Company, L.P. and TC
Ravenswood, LLC v. New York Independent System Operator, Inc., 136 FERC
Sec. 61,155 (2011)). It was not until after the additional
confidential information was submitted that the Complainants and other
interested parties were able to address the issues raised in the
Complaint in detail in an extended series of subsequently-filed
comments, answers, and other pleadings. The last set of pleadings in
response to this Commission order was received by the Commission in
December 2011.
The Commission is currently reviewing the large record in this
case, and its decision will be based on the full record thus
established, including the subsequently-filed information and
pleadings. Since this proceeding in Docket No. EL11-50-000 is pending
before the Commission, I cannot further comment on the merits of the
case or the timing of the Commission's action. That being said, I
intend to consider carefully this matter, including the potential
reliability issues with regard to New York City.
Question 14. In furtherance of the Energy Policy Act of 2005, FERC
designated NERC as the Electric Reliability Organization (ERO). In
recent remarks, FERC Chairman Wellinghoff has questioned whether NERC
is still the proper entity to be the ERO. In fact, I understand that
NERC is now being audited by FERC. What is the purpose of this audit?
In your opinion, how has NERC performed as the ERO?
Answer. I am very satisfied with NERC's performance as the Electric
Reliability Organization. Audits can provide valuable information to
both the Commission and the entity under review about areas where they
can achieve better compliance with Commission policies, and where
efficiencies can be gained in performance and operation. I think with
any new entity, let alone a unique entity like NERC, there is value to
be gained from an audit and from identifying opportunities to create
efficiencies. I see our audit of NERC as an opportunity to work with
NERC and its stakeholders to achieve greater efficiencies.
Question 15. Just last week, the Department of Homeland Security
briefed members on a ``grid-attack scenario'' to highlight the problem
of cybersecurity. As the primary regulator of the nation's grid, why
didn't the Commission participate in this cyber attack scenario? How
does FERC interact with DHS, and the rest of the federal government, on
cyber issues today? Does DHS have the necessary level of expertise to
regulate the grid?
Answer. With respect to the ``grid-attack scenario,'' it is my
understanding that FERC received informal advance notice of the
exercise, but was not invited to participate.
FERC, DHS, DOE, DOD, NRC, FBI, NSA, and CIA share information about
vulnerabilities to the electric grid. This interaction includes ad hoc
meetings on specific cybersecurity topics and participation in
established forums. These forums include the Government Coordinating
Council for the Energy Sector (FERC supports DOE as the sector-specific
agency), the Industrial Control Systems Joint Working Group (organized
by DHS), and the Roadmap to Secure Control Systems in the Energy Sector
(sponsored by DHS and DOE). FERC also receives daily reports on threats
and vulnerabilities from DHS, the U.S. Cyber Emergency Response Team
(CERT), the Industrial Control Systems CERT, and the SCADA Test Bed. It
is my understanding that the federal governmental relationships are
working well.
With respect to DHS's current expertise to regulate the grid, I do
not have sufficient information to address this question.
Question 16. How important is information sharing in the debate on
cybersecurity?
Answer. Information sharing is an important aspect to protecting
the cyber security of the grid. However, while it is a necessary
component, information sharing alone may not be sufficient to ensure
cyber security.
Question 17. Pursuant to Section 215 of the Federal Power Act
(FPA), FERC is responsible for assuring the electric grid is operated
reliably.
a. Given this responsibility, what can FERC do to educate EPA
and stakeholders interested in the Utility MACT implementation
process about how utilities, NERC, its regional entities and
its Planning Authorities actually plan to assure reliability?
b. DOE has emergency authority under the Federal Power Act to
order electric generation facilities to operate when needed to
keep the lights on in true emergency situations. At least once
in the past, a company had to run its plant longer than
permitted by its environmental permit in order to comply with a
DOE emergency order to maintain reliability. That company faced
a dilemma as to which law to follow and which law to break. And
it ultimately had to pay millions of dollars for violating its
environmental permit limitations. As a regulator responsible
for maintaining the reliability of the grid, would you support
a clarification to the law that would keep companies from
facing this ``Hobson's choice'' when the reliability of the
grid is at stake?
c. In your experience, how much time does it take to build a
transmission line that would be big enough to replace a power
plant? Do you agree with EPA that this can take place in less
than 3 or even 4 years?
d. Can you discuss where you see reliability in light of
other topics identified as top initiatives on the FERC website
(smart grid, demand response, integration of renewables and
transmission planning)?
Answer. The Commission has important statutory roles and
responsibilities with respect to bulk power system reliability, and I
take these responsibilities very seriously. To fulfill these roles and
responsibilities, the Commission has developed significant staff
expertise that I believe can be a valuable resource to help educate
EPA, other federal agencies, and stakeholders with respect to
reliability planning processes. Providing information and education on
the roles of NERC, regional entities, planning authorities, and the
states in reliability planning can help ensure that EPA and others
involved in implementing the Utility MACT rule know which of these
entities are the best source of advice and analysis regarding the
potential reliability impacts of shutting down a particular power plant
or set of plants.
I understand and appreciate the unfair dilemma that an electric
generator can face if it is ordered by DOE to operate to maintain
reliability, and doing so results in a violation of its environmental
permit. As I stated at the Commission's November 30 Technical
Conference, I fully support a clarification to the law to address this
situation.
The time it can take to construct a transmission line to replace a
power plant, assuming that the relevant reliability planning process
chooses a transmission line as the best replacement solution, depends
greatly on the specific circumstances. In some cases, such as a shorter
line or an upgrade of a line in an existing right-of-way, a
transmission solution could be built in a relatively short amount of
time. In other cases, however, we have seen transmission facilities
take far too long to be sited and constructed. Reliability planning
processes should, and to the best of my knowledge do, take these timing
considerations into account when choosing the best solution to a
reliability concern prompted by the retirement of a power plant.
I view the reliability of the electric grid as a very high
priority. Fulfilling our roles and responsibilities under section 215
of the Federal Power Act has been a focus of my work at the Commission.
More broadly, however, I believe power system reliability is a factor
in nearly every decision the Commission makes, because when it comes to
our energy infrastructure, at the end of the day it all has to work
reliably and efficiently.
Question 18. Hydropower
a. Do you consider hydropower to be a renewable resource?
b. Please state your views on the hydropower resource and its
contribution and value to the nation's energy mix.
c. What are your thoughts on the issue of reliably
integrating intermittent renewable resources onto the grid?
d. What role can both conventional hydropower and pumped
storage have to play in addressing these problems?
Answer. I consider hydropower to be a renewable resource that makes
a very valuable contribution to the nation's energy mix, although I
believe that limiting its use in meeting a federal renewable energy
requirement is a decision for Congress to make. In fact, it is the
largest renewable resource in the U.S., providing about 10 percent of
the nation's electric capacity. Analysts say that capacity can double
in 30 years. FERC is reviewing more than 30,000 MWs worth of new
projects, equal to a third of all existing hydropower capacity and
enough to power the New York metropolitan area.
I believe that intermittent renewable resources will also play a
key role in our nation's energy future. This intermittency can raise
potential reliability concerns that can and are being addressed in
numerous regions around the country. Many states and regions are
already integrating intermittent renewables in large numbers. These
regions are learning important lessons that can be shared with other
entities that are similarly working on renewables integration.
Conventional hydropower and pumped storage have characteristics that
can accommodate the variable characteristics associated with renewable
resources. They are more flexible than most conventional generation in
their ability to start quickly to accommodate rapid increases or
decreases in the differences between demand and resources for any
reason.
Question 19. Organized Markets
a. What is the appropriate path forward with respect to
organized and bilateral wholesale markets? Can and should they
co-exist or should all utilities ultimately be in organized
markets?
b. Is FERC's oversight of electricity markets sufficient to
ensure that the wholesale electric rates meet the ``just and
reasonable'' standard of the Federal Power Act?
c. Do you believe that the wholesale electricity markets
operated by regional transmission organizations are achieving
net benefits for consumers as compared to those regions without
RTOs?
d. Do you think that there is a sufficient level of
transparency in the pricing and other relevant data from the
electricity markets, particularly those operated by RTOs?
e. What is your assessment of the success of pricing
incentives in the RTO markets, such as Locational Marginal
Pricing, to spur infrastructure development and address
transmission congestion?
f. Do you believe RTO-run locational capacity markets are
providing adequate revenue and certain for new generation while
avoiding excess payments to existing generation?
Answer. I believe that organized and bilateral markets can and
should co-exist. As long as FERC continues to work to improve
competition in both organized and bilateral markets, through such
efforts as open access transmission tariff reform, market based rate
reform, and Order No. 1000, FERC should not attempt to impose a single
market structure on all regions. Both organized and bilateral market
structures are capable of supporting competitive markets. With respect
to the path forward, as both the organized and bilateral wholesale
markets continue to evolve, I expect that the Commission will receive
filings that seek to modify and improve these markets to assist
consumers in obtaining reliable, efficient, and sustainable energy
services at a reasonable cost. In response to such filings or on its
own motion, the Commission will take action as appropriate to support
this goal.
I believe that FERC's oversight of electricity markets is
sufficient to ensure just and reasonable wholesale electric rates. In
addition to strengthening competition in electric power markets, FERC
closely monitors these markets for anomalous market behavior. The
Commission's Office of Enforcement protects consumers through (1)
oversight and surveillance of wholesale electric energy markets, (2)
assuring compliance with tariffs, rules, regulations, and orders, (3)
investigating potential violations and manipulation, and (4) crafting
appropriate remedies, including civil penalties and other measures.
I support the voluntary nature of RTOs and ISOs. I believe that
there are net benefits that can be achieved in regions with organized
wholesale markets. The wholesale electricity markets operated by ISOs
and RTOs are designed to enhance competition and maximize utilization
of least-cost resources. Wholesale markets provide important price
signals for needed investment in transmission infrastructure, as well
as demand response and energy efficiency. RTOs and ISOs also help
ensure continued reliability of the regional transmission system
through long-term transmission planning. Having said that, however, I
also believe that those who question the benefits of organized
wholesale markets are entitled to reasonable answers. I support
continued and enhanced efforts to assess these markets.
FERC has made efforts to increase the transparency of electricity
markets including RTO markets. Currently, prices for all power sales
within the Commission's jurisdiction are reported quarterly to the
Commission and made available to the public, and all RTOs post
location-specific prices for the public on an hourly basis. If
confirmed, I will continue to closely follow issues related to the
transparency and competitiveness of organized markets.
The organized energy markets in most RTOs rely on Locational
Marginal Pricing (LMP), which is a system that allows prices to vary at
different locations and at different times to reflect the market
conditions and costs of meeting demand in those areas. The LMP system
sends price signals to market participants regarding where generation
resources are most needed, where reductions in demand are most
valuable, and where transmission constraints are the most severe. The
transmission planning processes employed by the RTOs consider the
congestion price signals in developing transmission expansion plans. Of
course, the ability to pursue upgrades identified in those transmission
expansion plans would require a number of regulatory approvals in the
states that they traverse. So, while the price signals sent by the
RTOs' markets are an important factor in encouraging efficient resource
developments where they are needed, they alone are not sufficient to
develop infrastructure; other factors also are important.
With respect to capacity markets, there are several contested
proceedings before FERC addressing capacity market issues that I do not
wish to prejudge. Generally, however, capacity markets should be
designed to fairly compensate existing generation for the capacity they
provide to the grid, and should efficiently acquire new generation when
it is the least cost resource to meet reliability. Demand response
resources, energy efficiency, and existing generation, however, may
provide a more efficient alternative, and when this is the case,
capacity markets should acquire such lower cost alternatives. Capacity
market rules should also ensure competitive procurement of capacity
resources and protect against the exercise of market power, to avoid
market outcomes that provide either insufficient or excess revenues.
Question 20. How does FERC consider priorities for industry and its
costs in approving the various initiatives it reviews?
Answer. FERC has an open and deliberative process that provides
opportunity for industry and consumers to comment and participate. In
reviewing Commission initiatives, ensuring that we do not impose
unnecessary burdens on industry, and ultimately on consumers and our
overall economy, is vitally important to me.
Question 21. FERC has many offices and many responsibilities. As
Commissioner, do you feel reviewing FERC's budget and looking for
internal efficiencies, reducing duplication, should be a priority? If
so, what areas would you target?
Answer. Under the direction of the Chairman, FERC conducts a review
of our budget annually. I am not aware of any specific concerns that
have been raised with respect to inefficiencies or duplication of
efforts. In contrast, I have heard compliments regarding FERC's
efficient processes, especially with respect to energy projects. With
that said, internal efficiency and avoiding government waste are
significant issues that I take seriously and, if confirmed, I commit to
remain vigilant with respect to these issues.
Question 22. I am developing legislation to ensure that the Federal
Power Act contains a ``safety valve'' to protect electric reliability
in situations such as those presented since 2010 with respect to EPA
Regulations. Please provide your views, in concept, about amending the
FPA to provide authority for the Commission or entities subject to its
regulation or oversight with respect to reliability assurance to have a
formal role to ensure that EPA Regulations do not threaten electric
reliability unduly.
Answer. Protecting electric reliability as compliance with EPA
regulations is achieved requires us to utilize all the tools we can. I
believe having an additional statutory tool such as the one you
describe could be valuable, and I would be happy to work with you and
your staff as you develop legislation.
Responses of John R. Norris to Questions From Senator Barrasso
Question 1. Did you have any exchange, in person or otherwise, at
any time before March 20, 2012 with anyone in the Administration about
EPA's Mercury and Air Toxics Standards Rule and its impact on electric
reliability? If so, please provide the names and titles of these
individuals, the agencies that the individuals represented, and the
dates the exchanges took place.
Answer. I met with EPA Assistant Administrator for Air and
Radiation Gina McCarthy, on November 29, 2010. Commissioner Cheryl
LaFleur, members of our staffs, and members of Ms. McCarthy's staff
were also present. I also participated in a panel discussion that
included Ms. McCarthy at the National Association of Regulatory Utility
Commissioners (NARUC) Winter Meeting on February 14, 2011. Ms. McCarthy
and I also participated in a panel discussion at an Energy Bar
Association conference on May 4, 2011.
Question 2. What, if anything, in the exchanges you described in
question 1 serves as the basis for your statement at the Technical
Conference on November 30, 2011, that you are ``sufficiently satisfied
that the reliability of the electric grid can be adequately maintained
as compliance with EPA regulations is achieved''?
Answer. My statement that I am sufficiently satisfied that we can
protect reliability while achieving compliance with EPA regulations was
based primarily on my review of reports prepared on the subject,
comments and written testimony filed prior to the technical conference,
and discussions with industry participants. However, in my exchanges
with Ms. McCarthy, I have emphasized the need for EPA to consider
reliability impacts not just with respect to the air regulations under
her responsibility, but also with respect to new water quality
regulations. In our exchanges, Ms. McCarthy has assured me that EPA
understands the critical importance of electric reliability to the
economy and to the health and welfare of the public, and that EPA will
take reliability into account as it crafts regulations impacting the
power sector.
Question 3. On March 20, 2012, EPA's Assistant Administrator for
Air and Radiation, Gina McCarthy, testified before the Senate
Subcommittee on Clean Air and Nuclear Safety that EPA had not conducted
an assessment of the cumulative impact of all of EPA's regulations,
including proposed regulations that have not yet been made final. a.
Given that EPA has not conducted an assessment of the cumulative impact
of its regulations, please explain the basis for your conclusion that
you are satisfied that the cumulative impact of these regulations will
not affect electric reliability? b. Given that EPA has not performed an
assessment of the cumulative impact, will you advocate that the FERC
provide such an assessment? c. Do you believe that EPA should issue any
additional final rules affecting the power sector, including the
pending coal ash and water intake structure regulations and proposals
for greenhouse gas new source performance standards, before a an
analysis of the cumulative impact on electric reliability is completed?
Answer. Based on the available information that I have reviewed to
date on EPA's proposed and final regulations, I am sufficiently
satisfied that the overall reliability of the electric grid can be
adequately maintained as compliance with EPA's regulations is achieved.
However, given the importance of a reliable electric grid to our
economy and the safety of our citizens and the number of variable
factors and competing choices that impact grid reliability, I do not
believe that we can ever claim 100 percent satisfaction that any of the
numerous factors impacting the public and private entities engaged in
our electric system will not at some time impact reliability. With EPA
having finalized some of its proposed rules, and as it finalizes other
proposed rules or refines final rules, generation owners are making
their own business decisions based on their own individual
circumstances as to whether to continue to operate. As those business
decisions are made, any potential local reliability concerns that
result can be adequately studied and addressed using the tools
available to industry and regulators. It is key that we remain vigilant
in monitoring grid reliability as generation owners make their business
decisions, and that we have appropriate tools available to address
reliability concerns if and when they arise. As evidenced by
assumptions in a number of prior studies that have proved to be
inaccurate, it is difficult to do a cumulative impact study until EPA
regulations are final. However, I have encouraged EPA to consider the
cumulative impact of their regulations.
I base these views first on the extensive analyses that have been
performed to date by a wide variety of entities to attempt to assess
the reliability impact of EPA's proposed and final regulations. While
the results of these studies have varied greatly, given that they
employed widely varying assumptions regarding the ultimate requirements
EPA would adopt, the costs of compliance, and the relative economics of
different types of generation, none of the studies are unreasonable.
Each of them provides key data points for consideration as we monitor
the overall impact on grid reliability. These kinds of studies are
continuing to be performed, and I will continue to monitor their
results.
Second, to the extent reliability concerns are identified as
generation owners make their business decisions regarding continued
operation, I believe there are numerous tools available to manage
electric reliability as compliance with EPA's regulations is achieved.
FERC, state public utility commissions, and EPA all have important
tools that can be utilized. FERC's tools include its oversight of
competitive wholesale power markets and the local and regional planning
processes developed pursuant to Order Nos. 890 and 1000. State public
utility commission tools include their primary oversight of generation,
and of Integrated Resource Planning processes and other measures to
ensure that their utilities are adequately planning to meet
environmental requirements. EPA's tools include existing flexibility
under the Clean Air Act and Clean Water Act to extend compliance
timeframes where necessary. EPA has already utilized this flexibility
in its final MATS Rule, which allows a fourth year for compliance, and
also establishes an Administrative Order process to allow units needed
for reliability to continue to operate for a fifth year. In that
process, EPA will seek input on reliability issues from FERC, NERC,
planning authorities and state commissions. We recently received public
comments on a staff white paper addressing ways in which FERC can
advise EPA in this process, and I am currently reviewing those comments
and considering how we can best provide our expertise to EPA and other
stakeholders as compliance with the MATS Rule moves forward.
Question 4. I am concerned that the FERC under Chairman Wellinghoff
has underestimated the cumulative impact of EPA's new and proposed
regulations on electric reliability. If President Obama wins a second
term and you are confirmed, it is not unreasonable to assume that you
would have a strong chance to become the next Chairman of the FERC. As
Chairman, what would you do differently to assess the impact of EPA's
regulations on electric reliability?
Answer. The Commission has significant expertise in electric
reliability matters that I believe can be a valuable resource to
entities across the federal government, including EPA. It is important
to continually emphasize and strengthen dialogue and communication
regarding reliability matters such as the impact of EPA regulations, so
that our resources can be effectively utilized, and I would advocate
for even more dialogue and communication between agencies on these
issues.
Question 5. On March 20, 2011, Cass Sunstein, Administrator of the
Office of Information and Regulatory Affairs of the Office of
Management and Budget, issued a ``Memorandum for the Heads of Executive
Departments and Agencies.'' It states that ``[c]onsistent with
Executive Order 13563, and to the extent permitted by law, agencies
should take active steps to take account of the cumulative effects of
new and existing rules.'' Should the FERC insist that EPA undertake an
assessment of the cumulative impact of its existing and new power
sector regulations in order to ensure that there is no impact to
electric reliability?
Answer. As I noted in response to question 4, the Commission has
significant expertise in electric reliability matters that I believe
can be a valuable resource to entities across the federal government,
including EPA. I support strengthened communication and dialogue with
EPA as it analyzes the impacts of its regulations on the power sector,
and will assist in any way that I can. I have emphasized the importance
of considering the impact of all rules to EPA in the past, and will
continue to do so.
Responses of John R. Norris to Questions From Senator Corker
Question 1. As you may know, last year I introduced S. 400, a bill
sponsored by 7 other Senators, including Senators Murkowski and Wyden
of this Committee. Its premise is similar to language in an amendment
this committee adopted with respect to the 2009 energy bill. Simply
put, the bill amends the Federal Power Act to state that electric
consumers cannot be charged for the cost of new transmission facilities
unless they are ``reasonably proportionate to measurable economic or
reliability benefits.'' To me, that seems completely consistent with
the Federal Power Act's existing requirement that electricity rates
must be ``just and reasonable.'' Do you agree or disagree with the
language of S. 400, and why?
Answer. As I stated at last week's hearing, uncertainty about cost
allocation has been perhaps the largest barrier to the development of
needed transmission facilities. I have two concerns about a requirement
that costs of new transmission facilities be allocated only based on a
demonstration that those costs are ``reasonably proportionate to
measurable economic or reliability benefits.''
First, a limitation to ``economic or reliability benefits'' may
exclude important benefits associated with new transmission facilities.
I believe that Order No. 1000 appropriately requires transmission
planning regions to develop a cost allocation method that accounts for
the benefits associated with new transmission facilities that are
selected to address regional transmission needs in a cost-effective
manner. Importantly, Order No. 1000 provides flexibility to each region
in determining how to consider transmission needs and how to account
for benefits associated with transmission facilities built to meet
those needs. Order No. 1000 also states clearly that those who do not
benefit from transmission facilities will not pay for them.
Second, I am concerned that a requirement that benefits be
``measurable'' may contribute to confusion and litigation that would
impede needed transmission development. If ``measurable'' is read as
requiring a degree of quantification, then the term arguably is
redundant with the requirement that costs and benefits be ``reasonably
proportionate.'' Moreover, ``measurable'' suggests the benefits can be
measured with exacting precision, e.g., by meters or other devices,
which may be difficult to apply to facilities that are not yet
constructed, and may exclude certain benefits that regions, exercising
the flexibility of Order No. 1000, may wish to recognize in their cost
allocation methods.
Question 2. Order 1000 has been criticized as going beyond existing
law, by assuming that transmission ``benefits''--a term not defined
under the Federal Power Act or in the Order itself--would be broadly
enjoyed by nearly anyone who theoretically could use a new transmission
line. Doesn't this vague use of the term ``benefits'' go far beyond
FERC's existing authority? Shouldn't the agency be asking Congress to
consider legislation which would provide such authority--as was
considered in the 2009 energy bill when my amendment was adopted?
Answer. I believe that the cost allocation requirements of Order
No. 1000 are within FERC's existing statutory authority. Court
precedent makes clear that consideration of benefits must be an
important part of FERC's analysis of whether a proposed cost allocation
method produces just and reasonable rates. Although FERC could have
defined ``benefits'' more specifically in Order No. 1000, I believe
that it was more appropriate to give transmission planning regions
considerable flexibility in defining ``benefits'' in ways that reflect
their respective needs and distinctive characteristics. I also believe
that this approach is preferable to a one-size-fits-all mandate on this
issue.
Question 3. With many utilities and their customers facing
increased costs from the need to retrofit power pollutants with costly
pollution control equipment to comply with a myriad of new EPA
regulations, do you think it is fair and appropriate to add yet another
burden in the form of subsidies to build new transmission to import
distant renewables?
Answer. I do not support subsidies to build new transmission to
import distant renewables. I share your concerns about increasing costs
to consumers, and that is one reason why I support Order No. 1000.
Specifically, Order No. 1000 provides utilities, customers, and other
stakeholders, including state regulators, the opportunity to
participate in a fair, open and transparent transmission planning
process to make the decisions about how to cost-effectively satisfy
that region's transmission needs. Order No. 1000 also requires that
public utility transmission providers identify a cost allocation method
that abides by several principles, one of which is that those that
receive no benefit from transmission facilities, either at present or
in a likely future scenario, must not be involuntarily allocated costs
of those facilities. Order No. 1000 is technology and resource neutral
and does not require the building of transmission facilities to serve
specific generating resources.
Responses of John R. Norris to Questions From Senator Cantwell
Question 1. FERC Jurisdiction over the Bonneville Power
Administration--The Federal Energy Regulatory Commission recently
issued an order under Section 211A of the 2005 Energy Bill asserting
that actions by the Bonneville Power Administration (BPA) were
discriminatory in its dealing with over-generation of wind during
periods of light electric demand. I realize that this issue is still
pending for rehearing and you are therefore limited in what you can
say. I do want to emphasize, however, that the scope of FERC's decision
is a potentially troubling issue. BPA has sought clarification on a
number of critical issues, and I strongly encourage the Commission to
carefully consider this matter.
a. If confirmed, will you respect the authority and
jurisdiction that Congress granted and has historically been
provided to BPA under the Federal Power Act?
b. Please provide specific examples of any role, authority,
or jurisdiction the FERC has or should have over the decision
making of the Bonneville Power Administration.
Answer. I respect the authority and jurisdiction that Congress has
granted and carefully consider the merits of all matters that come
before the Commission including the Iberdrola Resources, Inc. v. BPA
matter. However, as you note in your question, that matter is currently
pending before the Commission on rehearing, and it would be
inappropriate for me to comment on the substance of this matter as I
might be required to rule on it. Generally, I would note that Federal
Power Act section 211A is a tool that Congress gave FERC to protect
open access to transmission service. However, I believe it is a tool
that should be utilized only in rare instances, and I do not believe
that FERC should use that statute or any other authority to regulate
non-public utilities like BPA on a day-to-day basis.
Question 2. Section 5 of the Natural Gas Act--Section 206 of the
Federal Power Act has refund protection for complainants while Section
5 of the Natural Gas Act (NGA) does not. Every sitting FERC
Commissioner (as well as recently departed Commissioner Spitzer) has
indicated at various times that Section 5 should to be amended to
provide natural gas consumers with the same refund protection as
electric consumers.
a. Do you agree that natural gas consumers should be afforded
retroactive refund protection in cases where a pipeline has
been shown to have charged unjust and unreasonable rates?
b. Can you think of any credible policy justification to not
undertaking this reform to Section 5 of the Natural Gas Act?
Answer. I support affording natural gas consumers retroactive
refund protection under section 5 of the Natural Gas Act, similar to
the protection provided to electricity consumers under section 206 of
the Federal Power Act.
Responses of John R. Norris to Questions From Senator Landrieu
joint ownership
Question 1. The implementation of policies to broaden the ownership
of the transmission grid to all load serving entities in certain areas
through Joint Ownership appears to have had a positive impact on the
development of a robust electric grid by promoting more comprehensive
planning, reducing permitting disputes, engaging more advocates and
facilitating more effective integrated resource planning. In Vermont,
this has also lowered the cost to ratepayers of building new
transmission.
The Commission has, on several occasions, expressed strong support
for Joint Ownership of transmission. Other than expressions of support
and encouragement, has the Commission taken or ordered any action to
actively promote Joint Ownership? If not, why not?
Answer. I agree that Joint Ownership of transmission facilities can
have a number of benefits, including those you noted. The Commission,
in Order No. 1000, took action that may help promote Joint Ownership of
transmission facilities. Order No. 1000 requires that public utility
transmission providers have a regional transmission planning process
that is open, transparent, aligns transmission planning and cost
allocation, and produces a regional transmission plan. These measures
may have the effect of promoting cooperation and participation among a
range of investors and thus promoting Joint Ownership of transmission
facilities. In addition, the Notice of Inquiry (NOI) on Promoting
Transmission Investment Through Pricing Reform (RM11-26), raised the
question of whether the Commission's approach to incentives has
adequately reflected the benefits of Joint Ownership and whether there
are other approaches to providing incentives that would encourage Joint
Ownership of transmission facilities. Some commenters addressed this
issue in their comments on the NOI, and the Commission is considering
next steps in that docket.
cost allocation
Question 2. Cost allocation is one of the most difficult issues
facing the development of new transmission. One proposal contemplated
in this committee is to require all costs be allocated based on
``measurable benefits''. I understand the FERC has weighed in with
concerns regarding this approach. What are the concerns that a
``measurable'' standard might create in attempting to build new
transmission?
Answer. I am concerned that a requirement that costs of new
transmission facilities be allocated based only on ``measurable''
benefits may contribute to confusion and litigation that would impede
needed transmission infrastructure development. For example, in the
context of such a requirement, if ``measurable'' is read as requiring a
measurement by meters or other devices, it may exclude certain
determinable benefits that regions might prefer to recognize. I would
note that under Order No. 1000, each transmission planning region has
significant flexibility to define the benefits of transmission
facilities in ways that account for the region's needs and distinctive
characteristics.
incentive rates (sent to sen. shaheen)
Question 3. I am very concerned that FERC implementation of its
incentive rates authority has resulted in consumers, including
consumers in New Hampshire, paying more than necessary to get needed
transmission built. I was encouraged by the May 2011 Notice of Inquiry
that FERC initiated last year, and as you know, 11 of my Senate
colleagues and I sent a letter commending FERC for this action and
urging that the Commission consider changes to its incentive rates
policies to make them more performance-based and better focused on
determining whether incentives are needed to overcome specific risks.
I also note that on March 5, 2012 a coalition of state utility
commissions; attorneys general; national and regional consumer
advocates, environmental groups and NGOs; and others filed joint
comments on the NOI, asking FERC to modify its incentive policies in
several specific ways.
Where is FERC in terms of reviewing the comments it received and
what can we expect to see from the Commission in terms of changes in
its incentives policy?
Answer. The Commission has received more than 1,500 pages of
comprehensive and helpful comments with respect to our Notice of
Inquiry on incentives. We are currently reviewing those comments, and I
am hopeful that we will move to the next step in this process soon. I
believe that it is crucial that the Commission enumerate a clear policy
that appropriately balances the Congressional mandate to provide
incentive rate treatments for the construction of needed transmission
projects with the interests of consumers who will pay for those
projects.