[Senate Hearing 112-415]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-415
 
                   SHALE GAS DEVELOPMENT: MEETING THE
      TRANSPORTATION, PIPELINE, AND RAIL NEEDS TO RENEW AMERICAN 
                             MANUFACTURING

=======================================================================

                             FIELD HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 11, 2012

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation




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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             KAY BAILEY HUTCHISON, Texas, 
JOHN F. KERRY, Massachusetts             Ranking
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey      ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas                 JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri           ROY BLUNT, Missouri
AMY KLOBUCHAR, Minnesota             JOHN BOOZMAN, Arkansas
TOM UDALL, New Mexico                PATRICK J. TOOMEY, Pennsylvania
MARK WARNER, Virginia                MARCO RUBIO, Florida
MARK BEGICH, Alaska                  KELLY AYOTTE, New Hampshire
                                     DEAN HELLER, Nevada
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                     John Williams, General Counsel
             Richard M. Russell, Republican Staff Director
           Jarrod Thompson, Republican Deputy Staff Director
   Rebecca Seidel, Republican General Counsel and Chief Investigator


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 11, 2012...................................     1
Statement of Senator Rockefeller.................................     1
    Prepared statement...........................................     4

                               Witnesses

Hon. Shelley Moore Capito, U.S. Representative from West Virginia     5
Hon. David B. McKinley, P.E., U.S. Representative from West 
  Virginia.......................................................     6
    Letter dated February 8, 2012 to Hon. Barack Obama, President 
      of the United States from Members of Congress: David B. 
      McKinley, P.E., Tim Murphy, Mike Doyle, Nick Rahall, Mark 
      Critz, Shelley Moore Capito and Jason Altmire..............     7
    Letter dated March 20, 2012 to Hon. Rodney Frelinghuysen and 
      Hon. Peter J. Visclosky from Members of Congress: David B. 
      McKinley, Tim Murphy, Mark Critz, Mike Doyle and Jason 
      Altmire....................................................     8
    Prepared statement...........................................    10
Paul A. Mattox, Jr., P.E., Secretary, West Virginia Department of 
  Transportation.................................................    12
    Prepared statement...........................................    13
Scott Rotruck, Vice President, Corporate Development and State 
  Government Relations, Chesapeake Energy Corporation............    13
    Prepared statement...........................................    14
Sheriff John Gruzinskas, Marshall County, West Virginia..........    15
    Prepared statement...........................................    16
Tina V. Faraca, Vice President, Strategic Development, Spectra 
  Energy Corporation.............................................    18
    Prepared statement...........................................    19
Nicholas ``Corky'' DeMarco, Executive Director, West Virginia Oil 
  and Natural Gas Association....................................    23
    Prepared statement...........................................    24
Randall M. Albert, Chief Operating Officer--Gas Division, CONSOL 
  Energy, Inc....................................................    25
    Prepared statement...........................................    26
Owen A. Kean, Senior Director, American Chemistry Council........    27
    Prepared statement...........................................    28
J. Keith Burdette, Executive Director, West Virginia Development 
  Office, and Secretary of the Department of Commerce, State of 
  West Virginia..................................................    30
    Prepared statement...........................................    31
Dean Piacente, Vice President of Chemicals and Fertilizer, CSX 
  Transportation, Inc............................................    33
    Prepared statement...........................................    35
Patrick J. Donovan, Director of Maritime and Intermodal 
  Transportation for the Nick J. Rahall, II Appalachian 
  Transportation Institute (RTI), Marshall University, 
  Huntington, West Virginia......................................    38
    Prepared statement...........................................    40
Steve White, Director, West Virginia Affiliated Construction 
  Trades.........................................................    41
    Prepared statement...........................................    43


                   SHALE GAS DEVELOPMENT: MEETING THE
                   TRANSPORTATION, PIPELINE, AND RAIL
                 NEEDS TO RENEW AMERICAN MANUFACTURING

                              ----------                              


                       WEDNESDAY, APRIL 11, 2012

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                      Fairmont, WV.
    The Committee met, pursuant to notice, at 1 p.m. in the 
Robert H. Mollohan Research Center, Hon. John D. Rockefeller 
IV, Chairman of the Committee, presiding.

       OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 
                U.S. SENATOR FROM WEST VIRGINIA

    The Chairman. All right. This hearing will come to order. 
This is an official meeting of the Commerce, Science, and 
Transportation Committee of the Senate, and we have certain 
jurisdictions. I want to point out to you that we're going to 
focus on those things which are within our jurisdiction because 
that's what you do when you have a hearing. You don't focus on 
other people's jurisdictions, or if you do, you tend to hear 
about it. Sometimes you don't care, but sometimes they do.
    So we're not going to be, for example, discussing fracking, 
which I think a lot of people would like to have us discuss and 
which would be of interest to me. But that's not within our 
jurisdiction. That's probably more Jeff Bingaman's Energy 
Committee jurisdiction. But we will be talking about--well, 
I'll just give my opening statement here.
    And Dave McKinley is here, Congressman McKinley. 
Congresswoman Shelley Moore Capito is on her way. She's about--
my guess is about 6\1/2\ minutes out, held up by weather. It 
was snowing this morning, wasn't it? Yes. OK.
    Everybody here is very welcome, those who are in the panel 
and those who are in the audience. More will be arriving. We 
invited over 1,000 people, and we'll see how many turn up. And 
they should know--and I'll say this again at the end of the 
hearing--that the record will remain open for a period of 2 
weeks after the conclusion of this hearing so that anybody, you 
know, the witnesses and also anybody in the audience who wants 
to submit a statement, that statement will be accepted into the 
record of the Commerce Committee.
    And this may not be our last hearing. I suspect it won't 
be. In fact, I determine that it won't be, because this is an 
evolving process.
    So I thank Congresswoman Capito, and I certainly thank Dave 
McKinley, Congressman McKinley. I thank the West Virginia High 
Tech Consortium and Jim Estep, wherever you are--over in the 
corner.
    And I thank you, Jim, in every way, shape, and form, and 
your staff and all of those who took the trouble to come here. 
I don't know from how long or--I don't care. You're here, and 
that's important.
    So we're holding this hearing right in the heart of a 
region experiencing tremendous opportunity as a result of shale 
gas development. And you're the experts, and that's why I chose 
you. And I want to know what's working, what's not working, 
what we ought to be doing either differently or more of or 
whatever.
    You know what is required to guarantee West Virginians 
maximum, full, responsible potential in this booming industry. 
That it will boom is not a question. That it will be 
responsible is a question, and it's one that we need to probe 
today while talking about the overwhelming net-plus that I 
believe exists in this project.
    Good morning, Congresswoman Capito. I gave you a lavish 
introduction.
    Ms. Capito. A tongue lashing for being late?
    The Chairman. No, no. It went on for about 10 minutes or 
so.
    And so through the Commerce Committee, I'd like to look at 
the infrastructure needs that we must meet to modernize the 
rebirth of West Virginia manufacturing down the road. Now, that 
doesn't appear to be part of a shale gas hearing, but it is. 
It's very much a part of it--the American--we have a lot of 
chemical industries. They like to point out that there's some 
part of natural gas or its components which are involved in 98 
percent of American products.
    And so I'm very interested because the Commerce Committee 
is doing a lot of work on manufacturing, so that manufacturing 
downstream is very much a part of this hearing. And I'll be 
interested about that.
    So every aspect of the development and evolution of this 
process presents us with both challenges and opportunities. In 
my experience, the only way to maximize opportunities over the 
long haul is to understand and tackle the challenges smartly 
and quickly. It's already begun. There's a lot of activity. A 
number of trucks whizzed right past me on my way up here.
    And so it's well underway. Everybody coming here today 
probably has experience with or has seen part of the process. 
And so we need to be extremely responsible. I think the way to 
do that is to be smart about it up front, to get as much put in 
place as we can up front. And that, I think, is the best way to 
protect our future and to make sure that it's good.
    We have to have best practices. We have to meet developers' 
needs. We also have to meet community needs, community angst in 
some cases and community satisfaction in some cases. But we 
have to be responsive to those interests. And when something as 
large as this descends upon us in so many places all at once 
and so quickly, we're not accustomed to that. So making sure 
that we're doing it right is just doubly important.
    The three areas that I want to talk about--and I'll try to 
hold at least my part of the discussion to this because it's 
the Committee business. I want to discuss roads, and I want to 
discuss trucks. That's the first part. I know the State and the 
industry have worked together to address local problems and 
complaints and other comments. Road damages happen, but they're 
happening on sort of a different level, as reported by some of 
our constituents here, but so do repairs and maintenance, and 
how do you time the mix of that? When do you start doing the 
repairs? Do you wait until everything is done, until the 3 or 4 
or whatever months have passed, and then come back and let 
people live with all the problems in the meantime, or do you do 
something earlier?
    We passed a bill in the Senate which has a lot to do with 
the--the transportation bill, which has a lot to do with new 
qualifications, just as we did in the airline industry. We gave 
them new qualifications. They can only fly a certain number of 
hours. They have to have a certain number of hours of sleep. 
They have to go through tests, obviously blood testing being a 
part of that. And we've changed the rules of the road, so to 
speak, in some respects for people who drive. Now, that's 
Federal, but it will be important if it is passed by both 
houses.
    So I think there are companies that are doing a good job, 
and there are companies maybe that aren't doing such a good 
job. Maybe everybody is feeling their way. But on the other 
hand, this is happening all over the country. So we certainly 
aren't doing anything new here.
    Second, I want to talk about natural gas pipelines, because 
that's within our jurisdiction, and that's very complex, 
because they're the large transmission lines, but they're also 
the feeder lines, the gathering lines. Those are small. Do we 
have a map of where they are? Can we get a map of where they 
are? Do we lay down new pipe?
    I passed one project coming up on I-79, and that was a 
feeder, and I asked myself the question: Do we know what's in 
the way? What is there underground which might conflict with 
the placing of a pipe? Or is that important? I think it 
probably is, but that's open for discussion.
    Third, I want to talk about the infrastructure needs of 
manufacturers and chemical facilities that rely on shale gas, 
including the need for rail infrastructure to support the 
viable movement of goods to market and for export. It's 
extremely important, and the railroads are very important in 
this, and I will have questions for them. And I'm glad that 
they're represented here, very, very glad that they're 
represented here.
    So the processing of ethane to ethylene is a game changer 
for jobs. There's no question about that. That's what has 
everybody so excited. Was I sorry we didn't get the big plant 
from Beaver, Pennsylvania? Was I happy about that? No, none of 
us up here were. But it's still a boon for West Virginia, and 
there's still others that could be coming. I always take that 
optimistic point of view.
    So let's get going here. We have a terrific and diverse 
group. As I say, it's restricted to these three areas. It 
doesn't include fracking, which is the subject of interest on 
the part of many. And we're fortunate to have the people who 
are here.
    [The prepared statement of Senator Rockefeller follows:]

       Prepared Statement of Hon. John D. (Jay) Rockefeller IV, 
                    U.S. Senator from West Virginia

    Welcome everyone. Thank you for being here today, Representative 
Capito and Representative McKinley. Thanks also to the West Virginia 
High Tech Consortium--Jim Estep and your staff. Welcome also the many 
familiar faces in the audience and all West Virginians.
    We're holding this hearing in the heart of a region experiencing 
tremendous opportunity as a result of shale gas development. You are 
the experts--you know what's working. And you know what it will take to 
guarantee West Virginia maximizes the full potential of this booming 
industry. Through the Commerce Committee, I'd like to look at the 
infrastructure needs we must meet to mobilize a rebirth of West 
Virginia manufacturing.
    Every aspect of shale development presents us with both challenges 
and opportunities. In my experience, the only way to maximize 
opportunities over the long haul is to understand and tackle the 
challenges smartly. Whether highway issues or pipeline safety, if West 
Virginia gets it right up front--if we find and follow best practices, 
meet developers' needs and address community concerns--future success 
knows no bounds.
    You probably saw evidence of shale development on your drive here 
today. The existence of this gas isn't new, but the technology to 
access it economically is--and it is creating an economic boom with 
far-reaching impacts.
    I would like to discuss some of the key areas that reside around 
the perimeter of the drilling process. These are larger infrastructure 
needs that are of equal importance to gas extraction itself. They're 
the areas that directly touch our communities and define our success.
    There are three main topics I'd like to talk about.
    I would like to first discuss roads and trucks. I know the state 
and industry have worked together to address local road needs, and many 
are vigilant about repairs and safety. Road damage happens, but so do 
repairs and preventive maintenance. I'd like to hear more about this 
process and what it means for transportation infrastructure and safety.
    Second, I want to talk about natural gas pipelines. Gas development 
is happening across a broad region, and my Committee has an interest in 
the safety of pipelines--which vary in size and function. We need to be 
vigilant in building and operating them to minimize impact on 
communities while assuring public safety. I'd like to hear lessons 
learned, things working well, and what we need to do moving forward.
    Third, I want to discuss infrastructure needs of manufacturers and 
chemical facilities that rely on shale gas, including the need for rail 
infrastructure to support the viable movement of goods to market and 
for export.
    Each of these three areas leads up to the creation of value-added 
products here at home. Part of that is the possibility of an ethane 
cracker, something many of us--the Governor, Legislature and 
congressional delegation--have been working to attract.
    The processing of ethane to ethylene is a game-changer for jobs, 
especially those in manufacturing and chemical sectors. This potential 
manufacturing renaissance--growing out of the shale boom--could ripple 
positive effects across our state for years to come.
    So let me kick off our conversation. We are fortunate to have a 
diverse and knowledgeable set of participants. I would like to go 
around the table and ask each of you to introduce yourself and, in 2 to 
3 minutes, tell us the most important thing we should take away from 
this discussion. We will accept all written testimony into the official 
record, so we would love to hear your top points.
    After your statements, I'll offer questions on our three main 
topics to the experts at hand. I may also ask others around the table 
to weigh in as well.
    So let's get started.

    The Chairman. I'd like to go around the table, and this is 
going to be a ``timed test,'' you know. It's going to be--we're 
testing you. How long can you hang out? And if you have to make 
discreet exits, nobody will call attention to that. But 
everybody, of course, will notice.
    [Laughter.]
    The Chairman. So I want to go around the table and--ah, the 
sheriff is here.
    Mr. Gruzinskas. Yes, sir.
    The Chairman. That's great. And I want you to introduce 
yourselves, and I want you to talk for 2 or 3 minutes, which is 
an impossibility. Look, it started out as 2. I raised it to 3. 
There was a counterattack to reduce it to 1.
    [Laughter.]
    The Chairman. I overruled that flat. But we have to do the 
mathematics on this and have the testimony and the questions. 
And I want both of our Congress folks to make opening 
statements, too.
    So try to keep your statements to the 2 or 3 minutes. I'm 
not shy about using this thing. You can hear that, can't you? 
So let's go.
    Let's go now to Congresswoman Shelley Moore Capito.

            STATEMENT OF HON. SHELLEY MOORE CAPITO, 
             U.S. REPRESENTATIVE FROM WEST VIRGINIA

    Ms. Capito. Well, thank you, Senator, and----
    The Chairman. Oh, I've got to give you the mike. See, 
that's the one deficiency here.
    Ms. Capito. Thank you, Senator Rockefeller, for the 
invitation. I'm particularly pleased to join you and 
Congressman McKinley for this hearing, because I think we all 
know the great impact that this is already having on our state. 
And we want to make sure, as you said, that we do it right, 
that we capitalize on it and that all of the different 
stakeholders are at the table, maximizing our potential.
    I have a written statement that I would like to submit for 
the record. I'll save everybody the pain of hearing me talk 
about it. Generally, I talk about the great job impact that the 
Marcellus Shale natural gas development has had on our state.
    On Monday, I actually did my first real tour of the 
Marcellus Shale. I went to--Sheriff, I went to the home of my 
birth in Marshall County, and--because we know that is a very 
active area, and it was really fascinating for me to see, you 
know, close hand, right up onto the pads, to see what's being 
done.
    We talked a lot about the infrastructure, so I think that's 
a really important aspect of it. When you get up on those hills 
up off Route 2, you realize not only the amount but the weight 
and the frequency--and some of the discussions that have taken 
place in Marshall County in terms of the community input in 
terms of school bus traffic and things of that nature, I think, 
have already been addressed in some small portion, both by the 
community and by the companies. And I think that's extremely 
useful and, obviously, helps the quality of life.
    Other issues we talked about, certainly, were the low price 
of natural gas at this point, and what is the future of that. 
So we talked a little bit about transportation, using natural 
gas as a transportation fuel, which would elongate the life, 
certainly, and would make it a much more prolific use in this 
country.
    But we also talked a bit about--and I know this is a 
subject both in the House and Senate--on the exporting or 
possible future of exporting natural gas. And then, of course, 
the future with the cracker and with the chemical industry--we 
certainly, in the Kanawha Valley, talked a lot about that and 
all throughout the state and know what kind of residual 
benefits this can have.
    And as many of you know, and the Senator well knows, my 
parents live in Marshall County, and they're not doing so 
great. So I've been up there quite a bit visiting them. And 
over the course of the year, I can see the difference that this 
industry has made in the little town of Moundsville and Glen 
Dale. And one of the big calculators, to me, has been--you 
know, you see a lot of the lots going up on the side, but the 
line at McDonald's to get coffee is so long now, you can barely 
get in. And you can't go across New Martinsville hardly to get 
across Route 2 if you're going north. So I have a great 
appreciation--certainly, David does, too, since he lives right 
in the heart of it.
    But I just want to thank you. I think all the issues are 
extremely important to us. It's a wonderful job potential for 
our state. It's going to bring our young people home, and it 
already is beginning to. I see some young faces in the crowd 
today that I know are here in West Virginia who are going to be 
able to provide for their families because of an industry that 
we've been able to grow and that we're fortunate enough to have 
the natural resource. So I appreciate you letting me join in 
today.
    Thank you.
    The Chairman. Thank you, Congresswoman Capito.
    And now Congressman McKinley.

             STATEMENT OF HON. DAVID B. McKINLEY, 
             U.S. REPRESENTATIVE FROM WEST VIRGINIA

    Mr. McKinley. Thank you, Senator. I, too, have some written 
statements. Perhaps in deference with time we won't make all of 
those right now. But, Senator, thank you very much for hosting 
this.
    And you used the words ``game changer.'' This really is a 
game changer here in this area of the state. And it's 
interesting around the country that they don't have the benefit 
of that just yet, but maybe it's our turn. So now what we have 
to do is how do we handle it? And we look at the possibilities 
of these downstream jobs from it. It's just incredible, this 
opportunity we have here, as long as we manage it properly.
    And it takes any of us that have grown up in West Virginia 
to see already the changes occurring. When you drive around and 
see the number of vehicles that are here, the jobs that--like 
you were talking about, the coffee shops are backing up, 
hotels, restaurants, people filled up, the colleges having to 
institute new programs for it. I think, obviously, it's 
thriving well.
    We look at how this is going to complement much of the work 
that's being handled here with Jim Estep and his group, with 
the High Tech Consortium here. But also look just up the road 
at the National Energy Technology Lab, the opportunities 
they're going to have. I know you said it was off limits, but 
I'm going to still work some comments in about the NETL, 
because I think that's going to be the heartbeat. A lot of our 
strength, ultimately, is how we handle our scientific end of it 
and make sure that not only our fracking but our whole 
operation, our clean coal technology and the like--how we're 
going to function with that.
    The frustrating part for many of us, however, was that the 
administration slashed the budget. Although they talked about 
having an all-of-the-above strategy, then they went ahead and 
cut the budget by 41 percent at the National Energy Technology 
Lab. With all the work that's potentially there for it to have 
that cut--fortunately, last year, thanks to the Senator and 
other members of the House, we were able to get that money put 
back in. That was last year.
    Now, we're cut again. We have to push back again to find 
out--because this truly is something that we have too many 
opportunities to be lost if we don't do our technology and make 
sure that all our operations, our fracking technology and the 
like, is done in a clean way, and our drilling and our 
transportation of the gas is done in a proper way. The working 
men and women across West Virginia are depending upon that, to 
continue that opportunity.
    And we see from ACT--you know how many jobs have been 
created with that. So, Mr. White, I appreciate very much your 
being here. Numbers of people--it's all about jobs. We have an 
opportunity to have jobs here in West Virginia. And if we just 
keep working in the right direction and having hearings like 
this, I think we're going to have an opportunity.
    I've got two letters I'd like to submit, also, calling on 
the President and our leadership in the House and the Senate, 
if we can put that in the record, Senator.
    [The information referred to follows:]

                                                   February 8, 2012
Hon. Barack Obama,
President of the United States
Washington, DC.

Dear President Obama,

    Coal is our Nation's most utilized energy source, supplying the 
United States with nearly 50 percent of its energy needs. The Energy 
Information Administration (ETA) predicts that coal, together with 
natural gas and oil, will continue to provide over 75 percent of our 
Nation's energy needs for decades to come. With your support of 
necessary funding for the Department of Energy's (DOE) Office of Fossil 
Energy (FE) in your soon-to-be-released Fiscal Year 2013 Budget we will 
be able to ensure our Nation of stability, job retention and growth, as 
well as the ability to meet our increasing energy needs.
    Despite the many challenges and concerns involved in the use of 
fossil fuel energy it is without a doubt that the innovations provided 
by our National Energy Technology Laboratory (NETL) have played a 
leading role in our country's vast improvements in solving complex 
energy problems. This cutting edge research and development continues 
to provide substantial returns on investments, and has made possible 
countless innovations in both the Coal and Oil and Gas Programs.
    To note some successes, FE Research and Development (R&D) has led 
the research to significantly reduce acid rain, as well as in other 
advanced pollution controls and mercury emissions reductions; and has 
led and/or conducted research that created technologies used in 75 
percent of our Nation's largest coal power plants. Today, FE R&D 
continues to lead the Nation's carbon capture, sequestration and 
utilization efforts; and has led efforts in combustion and turbine R&D 
that led to substantial increases in power plant efficiencies and 
reductions in harmful power plant emissions.
    As President of the United States, you have advocated on many 
occasions that the United States must be a world leader in developing 
and exporting advanced energy technologies. In your most recent State 
of the Union Address, you recognized that: ``The development of natural 
gas will create jobs and power trucks and factories that are cleaner 
and cheaper, proving that we don't have to choose between our 
environment and our economy. And by the way, it was public research 
dollars, over the course of thirty years, that helped develop the 
technologies to extract all this natural gas out of shale rock--
reminding us that Government support is critical in helping businesses 
get new energy ideas off the ground''. Mr. President, the very research 
that you spoke of was led by the Office of Fossil Energy's National 
Energy Technology Laboratory and its predecessor organizations.
    In 2011, you remarked that: ``When I was elected to this office, 
America imported II million barrels of oil a day. By a little more than 
a decade from now, we will have cut that by one third.''
    And again, in 2010, you stated: ``We've got, I think, broad 
agreement that we've got terrific natural gas resources in this 
country. Are we doing everything we can to develop those?''
    Mr. President, how can you reconcile the difference between these 
statements and the actuality that your Administration has repeatedly 
proposed reduced funding for Fossil Energy Research & Development? This 
included zero funding for the Oil and Gas R & D Program in your FY2012 
budget request, as well as a limited fossil energy R&D portfolio that 
is narrowly focused on carbon capture and sequestration at the expense 
of other promising coal research programs. We urge you to reverse this 
trend and to propose funding a suite of fossil energy programs for 
FY2013.
    Significant reductions in fossil energy funding could cause the 
immediate loss of thousands of jobs that would be felt throughout many 
regions and would harm our Nation's economy immediately. Additionally, 
the possible termination of these important programs would negatively 
impact fossil energy research and technology development for years to 
come. America's economic climate and our Nation's success in these 
technologies and industries compel us to implore you to fully support 
these programs.
    We urge you to provide necessary funding levels for DOE's Office of 
Fossil Energy and NETL in your FY2013 budget submission which will 
allow for critical fossil energy research and development. These 
efforts will help ensure that our Nation becomes more self-sufficient 
in domestic energy and help the economy sustain existing jobs and 
create new ones.
    Thank you for your consideration and time of our request. We look 
forward to working with you on this issue. Please do not hesitate to 
contact us at any time to discuss this matter.
            Sincerely,

David B. McKinley, P.E.,
Member of Congress.

Mike Doyle,
Member of Congress.

Tim Murphy,
Member of Congress.

Nick Rahall,
Member of Congress.

Mark Critz,
Member of Congress.

Jason Altmire,
Member of Congress.

Shelley Moore Capito,
Member of Congress.
  

Cc: The Honorable Steven Chu, Secretary, Department of Energy
                                 ______
                                 
                                                     March 20, 2012
Hon. Rodney Frelinghuysen,
Chairman,
Subcommittee on Energy and Water Development and Related Agencies,
House Committee on Appropriations,
Washington, DC.
Hon. Peter J. Visclosky,
Ranking Member,
Subcommittee on Energy and Water Development and Related Agencies,
House Committee on Appropriations,
Washington, DC.

Dear Chairman Frelinghuysen and Ranking Member Visclosky,

    We are writing to express our concern with the President's Fiscal 
Year (FY) 2013 budget cuts to the Department of Energy's Fossil Energy 
(FE) Research and Development (R&D) Program. America depends on fossil 
resources for over 75 percent of our energy needs and will continue to 
do so for decades to come. Research through this program focuses on 
developing affordable, safe and clean mechanisms to enhance and utilize 
our domestic fossil energy resources in the most efficient manner. We 
will be able to ensure our Nation of security, job retention and 
growth, as well as the ability to meet our increasing energy needs.
    To note some success, FE R&D has led the research to significantly 
reduce acid rain, as well as in other advanced pollution controls and 
mercury emissions reductions; and has led and/or conducted research 
that created technologies used in 75 percent of our Nation's largest 
coal power plants. Today, FE R&D continues to lead the Nation's carbon 
capture, sequestration and utilization efforts; and has led efforts in 
combustion and turbine R&D resulting in substantial gains in power 
plant efficiencies and reductions in power plant emissions. 
Furthermore, as announced in the President's State of the Union 
address, Federal research in fossil energy has already lead directly to 
the technologies being used in the environmentally sound development 
and production of a plentiful American resource: shale gas.
    The Secretary of Energy is most fortunate to have at his disposal 
an in-house collection of experts who live and work with the Utica and 
Marcellus Shale every day. The scientists at the National Energy 
Technology Laboratory possess a unique understanding of the techniques 
used to develop shale gas. DOE would be well-served to continue 
utilizing its own engineers, researchers, and scientists in pursuit of 
best practices and sound environmental processes for expanded use of 
natural gas. For NETL researchers, natural gas development is not some 
laudable goal written by policymakers in Washington. It's the reality 
happening in their backyard.
    However, the President's FY13 budget proposal does not provide the 
investments necessary for continuing NETL's research, development, and 
demonstration of natural gas, clean coal, and oil production. 
Therefore, we request that you support funding the FE R&D Program at 
$735 million. The
    President's FY2013 request was $428 million, which is almost $25 
million less than what was requested in FY 2011. America's economic 
climate and our Nation's pursuit of energy dependence will require full 
deployment of the technologies and industries being developed by the 
Office of Fossil Energy.
    Our particular requests within the FE R&D program funding are as 
follows:

   $400 million for the core coal research and development 
        program, in order to maintain current funding for coal research 
        and development to improve energy and environmental 
        efficiencies at power plants to continue carbon capture 
        utilization and storage research for existing and new power 
        plants, and to advance fuel cells and coal-biomass to liquid 
        fuels:

   $160 million for fossil energy R&D Program Direction, in 
        order to maintain current funding for salaries and the 
        operation of Fossil Energy's National Energy Technology 
        Laboratory;

   $50 million for natural gas and oil research & development, 
        in order to maintain funding to address environmental and 
        related issues associated with unconventional natural gas and 
        oil including shale gas and gas hydrates research;

   $17 million for plant and capital equipment, in order to 
        implement and maintain equipment, systems, and processes to 
        achieve federally mandated energy conservation requirements at 
        all of NETL's laboratory and office facilities;

   $8 million for environmental restoration, in order to 
        maintain and implement federally mandated safety, health, and 
        security programs and systems at all of NETL's laboratory and 
        office facilities; and

   $100 million for Clean Coal and Carbon Capture and Storage 
        (CGS) demonstrations, in order to continue funding initiated in 
        previous appropriations, and to accelerate CCS deployment 
        through large-scale demonstrations, lowering costs and risks 
        for private investment and commercial development.

    We appreciate your support you have provided for the Fossil Energy 
R&D program in the past. Your leadership and commitment to this program 
during the FY 2012 Appropriations process has saved jobs and helped to 
move our country closer to energy independence through use of our 
abundant fossil energy resources. This year we call on your leadership 
and commitment to this program, hopefully looking favorably upon our 
request to fund the Department of Energy's Fossil Energy Research and 
Development Program at $735 million. Coal, oil, and natural gas are 
essential for U.S. economic growth and national security. Thank you for 
your consideration of our request; we will try to answer any questions 
you may have.
            Sincerely,

David B. McKinley,
Member of Congress.

Tim Murphy
Member of Congress

Mark Critz
Member of Congress

Mike Doyle
Member of Congress

Jason Altmire
Member of Congress
  
  

Cc: The Honorable Harold Rogers, Chairman, House Committee on 
Appropriations
The Honorable Norm Dicks, Ranking Member, House Committee on 
Appropriations

    Mr. McKinley. We have been signed off on by numbers of 
people in the House, trying to get the funds restored for the 
National Energy Technology Laboratory so that we can continue 
the mission that has been encouraged with that.
    And I want to thank you, Senator, because you helped very 
much last year in protecting those 700 and some jobs we had in 
Morgantown. So it made a big difference.
    But we lost. We lost our first--we just had a swing at the 
ball on the cracker. I know that the Governor made it his 
number-one priority and put all his eggs in that basket, and we 
lost the first round. We'll see what's going to happen with 
that. There's going to be another one, maybe another two. But 
let's just make sure that we're prepared.
    But what we heard from that--a meeting with the 
individuals--there were three issues that they said were 
problems with Shell--rail, river, and roads. And I think that's 
what, Senator, you're talking about that's going to be the 
focus of this meeting. And I want to see how we can do better 
with it. Maybe we missed on the first one, but let's make sure 
the rail, river, and roads--that the next time that we make 
sure we're working with the railroads and make sure that we 
work more cooperatively.
    One thing we found, or at least from my perception, was 
that too many people were working independently, independently 
instead of working as a group. So we can all be together--if 
they'll hold--the Senate and House all working together to make 
this thing happen. So it was just a delay. I think that 
things--if we can address the long- term gas contracts, the 
competitive rail access, the tax policy, the utility rate, 
making sure we keep our utility rates down, to be able to keep 
it--infrastructure reform.
    So I know you're getting ready to gong me on this thing. 
But from our country roads to our interstate highways, from our 
locks and our dams, our rivers and our rails, our people are 
depending on us. So what comes out of this hearing today? I'm 
anxious to hear your remarks, and we can have some interaction 
with you, because there are jobs here in West Virginia. They're 
counting on us.
    So thank you all for coming.
    [The prepared statement of Mr. McKinley follows:]

          Prepared Statement of Hon. David B. McKinley, P.E., 
                  U.S. Congressman from West Virginia

    Good afternoon and thank you all for being here today. I'd like to 
thank Senator Rockefeller for holding this timely hearing.
    We all should recognize the importance of shale gas development for 
the state of West Virginia and this country and it how it will 
contribute to our Nation's pursuit of energy independence.
    As we access the Marcellus shale formation and start the Utica 
shale formation, we are transforming this region into the thriving job-
producing mecca that it is capable of including all the ancillary, 
downstream industries that come with this development.
    Drive throughout the state and all of us can be encouraged what we 
are witnessing: full restaurant parking lots, expanded college and vo-
tech training to develop an available work-force, no-vacancy signs on 
our hotels, and our shopping areas full of patrons in the stores once 
again.
    As a 7th generation West Virginian, I am especially encouraged that 
West Virginia is becoming this country's energy leader with its vast 
coal production and newly expanded natural gas production.
    Not too far away in Morgantown, West Virginia we have the National 
Energy Technology Laboratory, a division of the Department of Energy. 
NETL plays a leading role in solving our country's complex energy 
problems. NETL has developed the technologies that allow for our 
natural gas to be safely extracted and used to drive this Nation away 
from foreign energy sources, everything from hydraulic fracturing to 
horizontal well drilling.
    NETL accomplishes this mission in three ways: (1) through cost 
shared research with industry, academia, and governmental agencies, (2) 
through on-site research through its regional university alliance; and 
(3) through strategic partnership with other organizations such as the 
ground water protection council and the interstate oil and gas compact 
commission.
    Our staff even has been working with NETL to find research funds to 
improve the efficiency of the extraction of gas from hardened shale.
    But I am sad to say that all of this outstanding research and 
commercial development is under attack by the current administration.
    On one hand, the President, in the State of the Union address, 
touted all the public research dollars for R&D that helped developed 
technologies to extract natural gas out of shale rock; he reminded us 
that government support is critical in helping businesses get new 
energy ideas off the ground.
    However a few weeks later he then slashed NETL's budget by 41 
percent.
    Last year the administration proposed similar reductions in NETL's 
research allocation. Fortunately congress was able to restore the funds 
by working in a bipartisan manner.
    Apparently we are being challenged to do so again.
    Hard working men and women of West Virginia depend on the jobs 
provided by our fossil fuel extraction and the construction and 
manufacturing jobs related to it. They deserve better from their 
government.
    This is why we have a strong bipartisan group of supporters in the 
house, including Shelley Moore Capito, who continue to fight for 
necessary funding for NETL to keep America's energy production moving 
forward and foster these academic-government-industry relationships.
    I'd like to enter into the record a letter dated February 8, 2012 
to President Obama signed by Reps. Capito, Critz, Doyle, Murphy, 
Rahall, Altmire and myself asking for the necessary funding for NETL.
    Also, I'd like to enter into the record the Programmatic Request 
Letter dated March 20, 2012 to the House Appropriations Committee, 
signed by Reps. Doyle, Murphy, Critz, Altmire and myself regarding NETL 
funding for FY2013.
    I encourage Senator Rockefeller to work with us during the 
appropriations process to protect the nearly 1,700 plus jobs at NETL's 
laboratories across this country, including approximately 750 in 
Morgantown.
    Obviously all of us were disappointed that Shell Chemicals chose to 
pursue a site in Beaver County, Pennsylvania for their petrochemical 
cracker facility instead of West Virginia. Even the Governor had made 
the location of the shell facility his number one priority of his 
administration.
    In Congress we were told that shell preferred the rail, river, and 
road access in Pennsylvania over West Virginia. Thanks to hearings like 
this, perhaps we can correct the perceptions of these three crucial 
elements of manufacturing and make the adjustments necessary so we 
don't miss out on any subsequent petrochemical crackers. We need to 
make sure any remaining investors for cracker facilities make their 
multi-billion investment right here in our state.
    In order to help ensure West Virginia lands a subsequent cracker, 
our business and political leaders need to stop acting independently 
and start working together as a team to address any of the concerns 
such as providing:

        1. Long-term natural gas contracts,

        2. Competitive rail access,

        3. Non-burdensome tax policy,

        4. Dependable low utility rates from our power plants,

        5. Tort reform, and

        6. Any infrastructure deficiencies.

    We cannot let the potential for another 12,000 permanent and 
construction jobs go by the way-side. A united front from all of us in 
West Virginia will convey our true strength and purpose.
    From our country roads to our interstate highways, from our locks 
and dams on our rivers, to our network of rails, we need ensure West 
Virginia jobs are created, industries thrive, and our children and 
grandchildren are given a place to grow up and start a family right 
here in West Virginia.
    We can do better.
    Thank you and I yield back.

    The Chairman. Thank you, Congressman McKinley.
    And we start off now with the Honorable Paul Mattox, Jr., 
who is Secretary of the West Virginia Department of 
Transportation.

      STATEMENT OF PAUL A. MATTOX, JR., P.E., SECRETARY, 
           WEST VIRGINIA DEPARTMENT OF TRANSPORTATION

    Mr. Mattox. Good afternoon. Good afternoon, and thank you, 
Senator Rockefeller, for----
    The Chairman. You just press the gray--there's only--you 
don't have many out there, do you? Just press the gray thing, 
and the blue light comes on.
    Mr. Mattox. We got it down now. My time start now?
    OK. Thank you for the opportunity to participate in this 
hearing, Senator Rockefeller.
    In recent years, as Marcellus Shale extraction began to 
escalate, the Department of Transportation recognized that 
these operations were taking a heavy toll on our county route 
system. These routes were not constructed to withstand the 
weights to which they were being subjected to. Citizens' 
complaints became more frequent, and some roads had been 
rendered nearly impassable.
    The department and industry both recognized that the issue 
existed and needed to be addressed. In 2010, the department 
formed a committee with industry participation to develop an 
oil and gas policy that would ensure that West Virginia's 
transportation network would be preserved.
    I'd like to specifically thank from the Division of 
Highways staff, Marvin Murphy our State highway engineer, Kathy 
Holtsclaw, and Gary Clayton, as well as Scott Rotruck and Corky 
DeMarco from industry for their cooperation in developing a 
policy that doesn't hinder industry's ability to operate and is 
fair to both parties.
    Since March of last year, the Department of Transportation 
has approved over 275 permits for access to our State highway 
system. To date, approximately 3,000 miles of West Virginia 
roadways are being used in gas production. Most of the damages 
done to our roadways as a result of natural gas drilling are 
being repaired by contractors directly hired and paid by the 
gas operators, totaling more than $20 million worth of repairs 
last year alone.
    Since the oil and gas policy was implemented, more than 50 
miles of roads have been repaved. And they're not just putting 
on a little bit, like we normally do when we have to pave a 
road. They're putting back 3 and 4 inches of asphalt compared 
to an inch and a half when the state does it. And at least 5 
miles of roadway has already been paved this year.
    By agreements with the companies, we have had slides 
repaired, sight distances improved, curves widened, pipes 
replaced, and most repair projects have begun within a couple 
of days, if not the same day, that the damage is reported. Many 
operators have contractors on stand-by contracts.
    Many operators are learning that preventive work done 
before the starting of well construction is more economical and 
provides better relations with local citizens. As you can see, 
the department has received great cooperation from most of the 
gas operators in the state. And I believe that the cooperation 
has been attained by clearly stating the department's 
expectations in our oil and gas policy.
    Thank you again, Senator, Congresswoman Capito, Congressman 
McKinley. And I'm happy to answer any questions you may have at 
the conclusion.
    [The prepared statement of Mr. Mattox follows:]

      Prepared Statement of Paul A. Mattox, Jr., P.E., Secretary, 
               West Virginia Department of Transportation

    Good afternoon, and thank you, Senator Rockefeller for the 
opportunity to participate in this hearing.
    In recent years, as Marcellus shale extraction began to escalate, 
the Department of Transportation recognized that these operations were 
taking a heavy toll on our county route system--routes that were not 
constructed to withstand the weights to which they were being 
subjected.
    Citizen complaints became more frequent and some roads had been 
rendered nearly impassable.
    The Department and industry both recognized that the issue existed 
and needed to be addressed.
    In 2010, the Department formed a committee, with industry 
participation, to develop an oil and gas policy to ensure that West 
Virginia's transportation network would be preserved.
    I would like to specifically thank Corky DeMarco for his 
cooperation in developing a policy that doesn't hinder industry's 
ability to operate and is fair to both parties.
    Since March of last year the Department of Transportation has 
approved over 275 permits for access to state roads. To date, 
approximately 3,000 miles of West Virginia's roadways are being used in 
gas production.
    Most of the damages done to our roadway as a result of natural gas 
drilling are being repaired by contractors directly hired and paid by 
the gas operators, totaling more than $20 million dollars worth of 
repairs last year alone.
    Since the oil and gas policy was implemented, more than 50 miles of 
roads were repaved with a three to four inch HLBC base and a wearing 
course, ten miles received full-depth base reclamation and wearing 
course. At least five miles of roadway have already been paved this 
year.
    By agreements with the companies, slides have been repaired, sight 
distances improved, curves widened, pipes replaced and roads widened.
    Most repair projects have begun within a couple of days, if not the 
same day as the damage occurs. Many operators have contractors on 
``stand-by'' contracts.
    Many operators are learning that preventative work done before 
starting the well construction is more economical and provides better 
relations with local citizens.
    As you can see, the Department has received great cooperation from 
most of the gas operators in the state and I believe that cooperation 
has been attained by clearly stating the Departments expectations in 
the Oil and Gas policy.
    Thank you again, Senator, for this opportunity. I'm happy to answer 
any questions you may have.

    The Chairman. Thank you very much, Secretary Mattox.
    And now we'll hear from Scott Rotruck, Vice President of 
Corporate Development, Chesapeake Energy Corporation.

          STATEMENT OF SCOTT ROTRUCK, VICE PRESIDENT,

           CORPORATE DEVELOPMENT AND STATE GOVERNMENT

            RELATIONS, CHESAPEAKE ENERGY CORPORATION

    Mr. Rotruck. Good afternoon, Senator Rockefeller. Thank you 
for the invitation to speak and thank you very much for 
bringing the field hearing to West Virginia.
    Congresswoman Capito, thank you for being here.
    And Congressman McKinley, good to have you here, sir.
    I'm Scott Rotruck, a resident of Morgantown, West Virginia, 
and Vice President of Corporate Development and State 
Government Relations for Chesapeake Energy. Chesapeake is the 
second-largest producer of natural gas, a Top 15 producer of 
oil and natural gas liquids, and the most active driller of new 
wells in the U.S. We have 160 drilling rigs operating. 
Chesapeake has offices in Charleston, Jane Lew, and seven other 
locations, and we directly employ over 750 West Virginians.
    The first priority of Chesapeake Energy is safety, 
including safety of all personnel on our operations, the safety 
of the public, and the safety of our natural environment. The 
benefits of shale gas development, including all infrastructure 
to access the well pads and take the products to market, are 
powerful and growing. But safety is always the first priority.
    West Virginia's road system was not built to accommodate 
the large transportation demands of shale gas development. But 
the good news is the process, while initially inconvenient, as 
is the case with many economic development projects, will leave 
behind an enhanced system of roads for the benefit of local 
residents and the State coffers.
    Several years ago, Chesapeake hired a registered 
professional engineer with over 30 years of experience as a 
highway engineer manager. He developed a comprehensive approach 
to our road management in partnership with the department which 
has benefited local residents, State coffers, and also the 
efficiency of our operations.
    In 2011, we did rehabilitation or reconstruction of 150 
miles of road in the region and plan to do 130 miles this year. 
Our road maintenance system has evolved. We reinforce, rebuild, 
repair as the situation dictates to keep them safe and 
passable. We consistently communicate with residents who are 
using these roads through community advisory panels and other 
less formal discussions.
    We have also built staging areas to optimize truck 
dispatching to avoid long waits for local traffic while using 
traffic dispatchers to organize and orchestrate these complex 
equipment moves. Chesapeake realizes and takes very seriously 
our responsibility for safety, for communication, and for 
solution-oriented collaboration.
    Thank you all again for having me here, Senator.
    [The prepared statement of Mr. Rotruck follows:]

    Prepared Statement of Scott Rotruck, Vice President, Corporate 
     Development and State Government Relations, Chesapeake Energy 
                              Corporation

    Good afternoon Senator Rockefeller, thank you for the invitation to 
speak and thanks for bringing this Field Hearing to West Virginia.
    I am Scott Rotruck, a resident of Morgantown, West Virginia, and 
Vice President of Corporate Development and State Government Relations 
for Chesapeake Energy Corporation. Chesapeake is the second-largest 
producer of natural gas, a Top 15 producer of oil and natural gas 
liquids and the most active driller of new wells in the U.S., with 
around 160 drilling rigs operating. Chesapeake has offices in 
Charleston and Jane Lew, and seven other West Virginia locations, and 
directly employs 750 West Virginians.
    The first priority of Chesapeake Energy is Safety, including the 
safety of all personnel on our operations, the safety of the public, 
and the safety of our natural environment. The benefits of shale gas 
development, including all infrastructure to access the well pads, are 
powerful and growing.
    The Northern Panhandle of West Virginia has a very valuable portion 
of the Marcellus Shale Play, called the Wet Gas Window, where 
Chesapeake has seven rigs drilling wells producing natural gas and 
several other compounds including ethane, the second most abundant 
compound found in natural gas, which can be cracked into ethylene, a 
building block of plastics and a key to value added manufacturing.
    Enhanced Infrastructure, including railroads, pipelines, 
fractionators and compressors are essential for development of the 
shales and are also huge economic development projects themselves.
    West Virginia's road system was not built to accommodate the large 
transportation demands of shale development, but the good news is the 
process, while initially intrusive and disruptive, as is the case with 
many economic development projects, will leave behind an enhanced 
system of roads for the benefit of local residents and the state 
coffers.
    Chesapeake hired a Registered Professional Engineer with over 
thirty years of experience as a Highway Engineer and Manager, who 
developed a comprehensive approach to road management. In the operating 
area that includes northern West Virginia, we invested $61 million on 
roads in 2011, and plan to spend an additional $93 million in 2012.
    Since the first horizontal shale wells drilled in WV in 2007, our 
road maintenance system has evolved. We reinforce, rebuild, and repair 
roads, as the situation dictates, to keep them safe and passable. We 
consistently communicate with residents who are also using those roads, 
through community advisory panels and other less formal discussions. We 
work toward collaborative solutions, including accommodating school 
buses schedules, operating certain trucks only at night and using 
private security service to ensuring absolute regulatory and policy 
compliance by Chesapeake personnel and contractors. We have also built 
staging areas to optimize truck dispatching to avoid long waits for 
local traffic, while using traffic dispatchers to organize and 
orchestrate complex equipment movements, again to limit disruption to 
local traffic.
    Chesapeake realizes and takes very seriously, our responsibility 
for safety, for communication, and for solution-oriented collaboration. 
Thank you very much for inviting me to speak.

    The Chairman. Thank you very much, Scott Rotruck.
    And now we're going to hear from Sheriff John Gruzinskas. 
And you're from Marshall County.
    Mr. Gruzinskas. That's correct, sir.

             STATEMENT OF SHERIFF JOHN GRUZINSKAS, 
                 MARSHALL COUNTY, WEST VIRGINIA

    Mr. Gruzinskas. And thank you for the invitation to address 
the Committee. Thank you, Senator Rockefeller, Congressman 
McKinley, and Congresswoman Capito.
    I've most likened the situation with the Marcellus industry 
entering Marshall County as an invasion. We are an industrial 
county there. We've seen a lot of the industry come and go. 
We've seen the pipelines. We've seen coal mine expansions. But 
I don't think anybody up there was ever prepared for the volume 
and the tremendous amount of truck traffic that we are going to 
see and we have seen in Marshall County.
    It's something that our roads just are not suited for, and 
they're not suited for drivers who aren't familiar with them. 
Most of the subcontractors that are hired by the major drillers 
are from Texas, Arkansas, Oklahoma, Louisiana. And I can't tell 
you the amount of complaints that our office fields of our 
residents being run off the road day and night by trucks 
traveling to and from well sites.
    Just the size of the water trucks, the tri-axle dump trucks 
are not conducive to our county roads. And I know that all of 
you are familiar with what I'm speaking about. The roads up 
there may have a map designation of a two-lane road, but the 
practical designation is somewhat more realistic than that.
    We are incurring property damage, where these trucks cannot 
negotiate areas so they go through people's yards. They tear 
out people's fences. And for an agricultural area as well, 
people who have livestock have the trouble of having to go and 
take care of that problem as well.
    It's just that we have an elderly population. Our elderly 
people are being run off the road, and they are not maybe as 
quick on the wheel as I am. And we try and educate our 
population up there. We try and educate them to the fact--to 
try and get descriptions of the vehicles, because for the best 
part of the last year, we have enjoyed a very good relationship 
with the major drillers, Chesapeake and CN--the Consolidation 
Coals branch of the gas industry, Caiman Energy. And if we can 
identify and articulate a problem with a subcontractor, they're 
very quick to deal with that.
    But the problem is our residents, as they're trying to keep 
their car from going over the hill, are having a tough time 
trying to identify who is running them off the road. We have 
instituted some meetings up there that we engage in on a 
monthly basis with many of the pipeline companies and many of 
the major gas companies. And we have engaged in very productive 
talks over the past month and the past year, and these talks 
have led to increased cooperation. And although we're still 
having the problems with our residents and the damage to 
property, we're gaining some ground.
    Now, some of the other things that--the ancillary things, 
some of the hidden things, are just the fact that with the 
damage done by subcontractors, with my limited manpower, I may 
have to have a deputy 2 or 3 days talking with a company in 
Louisiana or Texas or Arkansas, trying to resolve damaged 
property in Marshall County. And it may take 2 or 3 days for us 
to finally hit on someone who will say, ``Well, yes, we'll take 
care of the problem.''
    Another ancillary problem that we have is the damage to our 
patrol cars. As the Honorable Mr. Mattox has addressed, the 
roads are falling apart. I've had to increase my maintenance 
budget because our patrol cars are being torn apart--broken 
tires, bent wheels, ripped out exhausts. And this is just 
something that we hope will improve over the coming months and 
the coming years.
    So we welcome the industry here, and we're working with 
them. But, as well, we want to make sure that they understand 
our problems in dealing with our residents.
    Thank you.
    [The prepared statement of Mr. Gruzinskas follows:]

            Prepared Statement of Sheriff John Gruzinskas, 
                     Marshall County, West Virginia

    TRAFFIC ISSUES I have most times likened the Marcellus shale 
discovery and its subsequent development as an invasion. It was almost 
overnight that the major companies like Chesapeake, Caiman energy, 
Chief oil and gas, CNG and others began moving their equipment into the 
county. I was either on the phone with or meeting with representatives 
of the industry that were telling me how safe they were, and what good 
neighbors they wanted to be on a daily basis.
    Since Marshall County is already an industrial county, we thought 
we have seen these surges in industry come and go. We were never 
prepared for the onslaught of heavy trucks that would monopolize our 
roads, damage our property, and destroy our roads. These trucks travel 
our roads all hours of the day and night. The drivers are not from here 
so they do not care what happens as a result of their reckless 
operation. Our roads are destroyed from these overloaded vehicles. And 
our state is a willing participant in this destruction. If there are 
trucks that are over the legal road weight of 45,000 pounds, they 
simply apply to Charleston at the Division of Highways permit office, 
and get a permit to travel with an 80,000 pound load.
    There may be up 60 or 70 trucks that are travelling our roads with 
these overweight loads going to one site.
    The majority of our complaints of traffic crashes are hit and run 
crashes, and large trucks running off the road. What we have 
experienced is that most of the companies sub-contracted by the gas 
drillers are from southern and western states. The drivers are not 
familiar with our winding narrow roads. This makes for a bad 
combination for our local oncoming traffic. Many of our residents are 
run off the road by the large trucks. Although we try and educate our 
residents to get as much information as possible about the offender, so 
we can take enforcement action, it is difficult for them to do that as 
they try to keep from going over the hill.
    For the most part the large companies work towards cooperating with 
the Sheriff's Office, other law enforcement agencies, the Department of 
Transportation, and the school board. It is the aforementioned sub-
contractors that we have problems with. They freely admit that they 
would much rather run illegally and get caught and pay the fine than 
have to hire extra men to do the job right, because it's cheaper.
    In their defense, some of the large companies realize that their 
sub-contractors are somewhat less than model drivers. They offer that 
if we can provide information about an offending driver or company, 
they will discharge that company from their employ. They have been good 
to their word. I can say that when I have been able to articulate an 
offense and the sub-contractor involved, the parent company has 
discharged them.
    I have had success in cooperating with the company liaison 
representatives. There are several of these companies that deal very 
quickly with citizen complaints. If I get a complaint in an area of the 
county that these companies are operating in, the company liaisons will 
contact the citizens directly to attempt to solve their complaints.
    Normally when our residents call us to complain of being run off 
the road, the only description may be ``a large red/blue dump truck''. 
The Sheriff's Office responds to all complaints, but in many cases with 
the sub-contractors, the suspect vehicle has already fled the scene. In 
cases of property damage, I can reference a most recent case where a 
truck damaged property by driving through a resident's yard. A good 
description was supplied by the victims of the destruction of property. 
The vehicle was tracked down to a company in North Carolina. The 
problem was resolved, but took several days and man hours to reach a 
solution. If the offender had stopped it could have been resolved more 
quickly.
    I have limited manpower. This issue with the traffic problems 
caused by trucks is just one of the hundreds of complaints answered by 
Marshall County deputies. Although I would much rather have the 
deputies devoting their time to victims of felony crimes in the county, 
they are constantly distracted by the never-ending complaints of truck 
traffic. I cannot effectively devote manpower to the truck complaint if 
deputies are working on more serious matters.
    On a regular basis I assign off duty deputies to patrol our problem 
areas. By that I mean areas where we have the most complaints. We 
instruct our personnel to be visible and take whatever enforcement 
action is appropriate. As county law enforcement officers, our deputies 
do not have the authority to stop these trucks for safety inspections, 
log book inspections or weight law violations. That is the bailiwick of 
the public Service Commission.
    The Public Service Commission also maintains a presence in Marshall 
County, and cooperates with the Sheriff's Office when they can. I do 
know that the Public Service Commission writes many many citations for 
violations of the Federal motor carrier regulations.
    To distill the truck problem down to one of its basic components, 
what I see is the disrespectful attitude and disregard for the 
residents of this county by some of these sub-contractors.
    The distrust and animosity still remains between the sub-
contractors and the citizens. It is up to Law enforcement to find new 
ways to deal with the complaints.
    One of the best ways we have of dealing with this is regular 
meetings between the industry, law enforcement, emergency management, 
school officials, and the Division of Transportation. These meetings 
continue to be an open and civil communication between state and county 
government and the gas drilling companies. We have a long way to go, 
but we make progress however little at a time.

    The Chairman. Thank you, Sheriff, very much.
    Now, Ms. Tina Faraca, Vice President of Strategic 
Development, Spectra Energy.
    Welcome.

    STATEMENT OF TINA V. FARACA, VICE PRESIDENT, STRATEGIC 
            DEVELOPMENT, SPECTRA ENERGY CORPORATION

    Ms. Faraca. Good afternoon, Chairman Rockefeller, 
Representatives Capito and McKinley. It's an honor to be here 
with you today to discuss the many opportunities associated 
with developing our abundant natural gas resources available 
here domestically.
    I am Tina Faraca, Vice President of Strategic Development 
for Spectra Energy. Spectra Energy is one of the largest 
natural gas interstate pipeline and storage systems in the U.S. 
and across 26 states, including West Virginia, where we have 
reliably operated our Texas Eastern pipeline system since 1947.
    At Spectra Energy, we believe natural gas represents a 
golden opportunity for our nation to reach energy security, 
economic, and environmental goals. Today, we know that domestic 
natural gas resources are immense, and given the versatility of 
natural gas as an energy source for power generation, 
residential and commercial use, and a feedstock for the 
industrial sector, as well as transportation fuel, the market 
for natural gas is also growing.
    And as a result, we are investing in new and needed 
infrastructure across the continent. Since 2007, Spectra Energy 
has invested about $1 billion a year in expansion capital--more 
than 50 projects. And by the end of the decade, we expect that 
we will have over $15 billion investment total.
    In addition, we are investing approximately $700 million 
this year alone on maintenance and integrity work to ensure the 
safety and reliability of our existing facilities. At Spectra 
Energy, safety is non-negotiable. It is our license to operate. 
It is our highest commitment to our communities, our customers, 
and our employees. Much of our recent projects and expansions 
in this region have been a result of the rapidly shifting 
supply picture on behalf of customers such as Chesapeake Energy 
and CONSOL, which are testifying here today.
    As my written testimony discusses in more detail, the level 
of pipeline and related infrastructure investments pursued in 
recent years and those that are on the horizon are not limited 
to Spectra Energy. Over the past decade, the interstate 
pipeline industry has constructed and placed into service 
14,600 miles of new interstate pipeline, adding over 76 billion 
cubic feet per day of new gas capacity. What's more, throughout 
the economic downturn, our industry investment in pipeline 
infrastructure was roughly $8 billion a year.
    Now, looking forward, it's estimated that approximately 
$250 billion in midstream investments will be required to 
accommodate the development of natural gas, natural gas liquid 
resources, and oil resources through 2015--I'm sorry--2035. The 
economic impacts from construction, operation, and maintenance 
will help support an annual average of over 125,000 jobs and 
$141 billion in labor income over this period.
    These cumulative midstream investments will account for 
nearly $425 billion in total economic output and generate over 
$16 billion in state and local taxes and over $41 billion in 
Federal taxes. And remember, these numbers reflect only the 
direct impacts from the midstream investment. We know the 
societal benefits from investment throughout the entire value 
chain, including the cost savings to energy consumers, are 
enormous.
    But for this opportunity to be realized, policies must be 
encouraged--they must encourage continued investment in natural 
gas infrastructure. Companies that are investing significantly 
in our energy future need certainty and predictability in terms 
of both process and timeline.
    Thank you for holding this hearing, for inviting me to 
participate on behalf of Spectra Energy. I look forward to 
answering any questions the Committee may have.
    [The prepared statement of Ms. Faraca follows:]

         Prepared Statement of Tina V. Faraca, Vice President, 
           Strategic Development, Spectra Energy Corporation

    Chairman Rockefeller, Ranking Member Hutchison, and distinguished 
members of the Committee, I am honored to be here today. My name is 
Tina Faraca and I am Vice President of Strategic Development for 
Spectra Energy Corp (Spectra Energy). I am responsible for development 
of strategic plans for the corporation and its business units.
    I previously served as president of the Maritimes & Northeast 
Pipeline (Maritimes) where I was responsible for Maritimes' natural gas 
pipeline assets in Canada and the United States.
    Prior to my role at Maritimes, I served as general manager of 
business development for Spectra Energy Transmission, where I was 
responsible for overseeing the development and marketing of all new 
natural gas pipeline infrastructure and expansion activities on the 
company's Texas Eastern Transmission, LP (Texas Eastern) and Algonquin 
Gas Transmission Company, LLC natural gas pipeline systems. I have over 
20 years of experience in the energy industry, including management 
positions in engineering, system planning, strategy development, 
marketing and business development.
    Spectra Energy is one of North America's premier natural gas 
infrastructure companies serving three key links in the natural gas 
value chain: gathering and processing, transmission and storage, and 
distribution. Based in Houston, Texas, the company operates in 26 
states and seven Canadian provinces approximately 19,300 miles of 
transmission pipeline, more than 300 billion cubic feet of storage, as 
well as natural gas gathering and processing, natural gas liquids 
operations and a natural gas utility which serves over 1.3 million 
retail customers. The company also has a 50 percent ownership in DCP 
Midstream, one of the largest natural gas gatherers and processors in 
the United States. Spectra Energy is a member of both the Dow Jones 
Sustainability World Index and the U.S. S&P 500 Carbon Disclosure 
Project's Leadership Index.
    For more than a century, Spectra Energy and its predecessor 
companies have developed critically important pipelines and related 
infrastructure connecting natural gas supply sources to markets in the 
United States and Canada. Today, we know that North America's natural 
gas supplies are immense, with a large, economically accessible natural 
gas resource base that includes significant sources of unconventional 
gas from shale, tight sands and coal-bed methane. And given the 
versatility of natural gas as an energy source for power generation, 
residential and commercial applications, as a feedstock for the 
industrial sector and as a transportation fuel, the market for natural 
gas is also growing.
    Spectra Energy's assets remain well-situated in proximity to both 
supply-rich producing areas and premium markets. As a result, we are 
investing in new and needed infrastructure across the continent. Since 
2007, Spectra Energy has invested about $1 billion a year in capital 
expansions, and by the end of the decade we expect that investment to 
total more than $15 billion. In addition, we will invest approximately 
$700 million this year alone on maintenance and integrity work to 
ensure the safety and reliability of our existing facilities. For 
Spectra Energy, safety is a non-negotiable; it's our license to 
operate, and our highest commitment to our communities, our customers 
and our employees.
    Our Texas Eastern system which overlies the Marcellus and Utica 
shale formations in Ohio, northern West Virginia and Pennsylvania has 
been reliably operating in this region since 1947. We also operate a 
natural gas storage facility just across the West Virginia state line 
in Garrett County, Maryland which is capable of storing up to 64 
billion cubic feet of natural gas.
    Much of our recent pipeline and storage expansion in the region has 
been a result of the rapidly shifting supply picture, and pursued on 
behalf of customers such as Chesapeake Energy and CONSOL Energy also 
testifying here today. The Marcellus shale formation has seen 
tremendous growth in a very short time span--and estimates point to 
continued robust development and production increases. Currently the 
Marcellus is producing about five billion cubic feet per day (with 
roughly 20 percent transported on our system) and that's expected to 
double over the next 10 years. The Utica formation, while still in its 
infancy from a development standpoint, promises to be another major 
supply contributor.

Economic Benefits
    Given a robust supply outlook and market growth, necessary 
investments in infrastructure are anticipated to be significant over 
the next two decades. A 2011 INGAA Foundation report North American 
Midstream Infrastructure Through 2035--A Secure Energy Future (the 2035 
Midstream Report) \1\ estimated that approximately $250 billion in 
midstream investments will be required to accommodate the development 
of natural gas, oil and natural gas liquid (NGL) resources from 2012 
through 2035. The economic impacts through 2035 associated with 
construction, operation and maintenance, will help support an annual 
average of over 125,000 jobs and $141 billion in labor income. The 
cumulative 2012 through 2035 midstream investments in the U.S. are 
estimated to account for nearly $425 billion in total economic output 
and generate over $16 billion in state and local taxes and 
approximately $40 billion in Federal taxes.
---------------------------------------------------------------------------
    \1\ North American Midstream Infrastructure Through 2035--A Secure 
Energy Future, ICF International, June 28, 2011.
---------------------------------------------------------------------------
    Other U.S. industries are also benefiting from access to robust 
natural gas supplies. As Mr. Kean may highlight in his testimony, 
American manufacturers enjoy the lowest natural gas costs in the world 
today, a major competitive advantage. A recently completed study from 
the American Chemistry Council \2\ estimated that a modest increase in 
natural gas supply from shale deposits would generate more than 400,000 
new jobs in the United States, more than $132 billion in U.S. economic 
output and $4.4 billion in new annual tax revenues. The ACC notes that 
``thanks to affordable and abundant supplies of natural gas from shale, 
chemistry is driving an American manufacturing renaissance that will 
lead to a stronger economy, greater international competitiveness and 
new jobs in communities across the Nation.''
---------------------------------------------------------------------------
    \2\ Shale Gas and New Petrochemicals Investment: Benefits for the 
Economy, Jobs and U.S. Manufacturing.
---------------------------------------------------------------------------
    As you know, the beneficial impact of natural gas is beginning to 
be realized in West Virginia. Importantly, West Virginia enjoys an 
existing and expandable transportation network. In addition to Spectra 
Energy's Texas Eastern system, there are four other major interstate 
natural gas pipelines located in the state including Columbia Gas 
Transmission Company, Tennessee Gas Pipeline, Equitrans, L.P. and 
Dominion Transmission. These interstate pipelines provide producers 
with direct access to premium markets in the mid Atlantic and 
northeastern United States. In addition to providing an immediate 
revenue opportunity for producers, this existing infrastructure also 
provides the ``backbone'' for expansion of existing infrastructure or 
the development of new infrastructure.
    One recent example is Hope Gas Inc. which is a West Virginia 
corporation, and a subsidiary of Dominion Resources. Hope is in the 
business of purchasing and distributing natural gas in West Virginia, 
serving approximately 112,000 residential, commercial, wholesale, and 
industrial customers in 32 of West Virginia's 55 counties by way of 
approximately 3,100 miles of in-state transmission and distribution 
facilities. Hope also interconnects with three interstate natural gas 
pipelines--Dominion Transmission, Inc. (DTI), Columbia Gas 
Transmission, LLC (Columbia) and Equitrans, L.P.
    Hope applied to the Federal Energy Regulatory Commission (FERC) for 
authorization to transport gas in interstate commerce to these 
interconnecting pipelines stating that West Virginia is experiencing a 
significant increase in natural gas exploration and production 
activities associated with the expansion of shale gas production and 
that the abundance of shale gas anticipated in the coming years exceeds 
the amount needed for Hope's LDC system, and demand for the State of 
West Virginia in general. As such, several producers located proximate 
to Hope's system expressed interest in receiving transportation from 
Hope for delivery to one or more of the interstate pipelines Hope 
interconnects with, in order to access interstate markets. FERC granted 
Hope's authorization in late March.
    This action will allow producers direct access to natural gas 
markets and provides Hope with greater system utilization while 
maintaining West Virginia's markets relatively easy access to these 
natural gas supplies as the economy and natural gas utilization 
continues to grow. Currently West Virginia's industrial sector accounts 
for approximately 30 percent of natural gas consumption in the state. 
Access to these local supplies will likely help attract further 
economic development to the state.
    Spectra Energy's 670 mile Maritimes system is another example of 
the economic opportunities afforded by ready access to pipeline 
infrastructure. The Maritimes pipeline was placed in service 
approximately 10 years ago, introducing natural gas to parts of Maine 
and other areas of the northeast that previously did not have access to 
this clean burning, reliable and cost competitive energy source. In 
2009, Maritimes placed its Phase IV Expansion in service at a cost of 
$300 million which effectively doubled the capacity of the system and 
now transports natural gas from offshore and onshore supplies as well 
as liquefied natural gas supplies. Our investment in Maritimes provides 
over $7 million annually in taxes to Maine alone and has facilitated 
subsequent infrastructure development including the creation of Bangor 
Gas Company, Maine Natural Gas, Casco Bay Energy Company, LLC, the 
Bucksport Energy Plant and the Westbrook Energy Center that now serve 
the energy needs of thousands of homes and businesses throughout Maine. 
In addition to this growth in Maine, deliveries in New Hampshire have 
grown from virtually zero to approximately 12 percent of total 
deliveries over the past decade.

Regulatory Stability and Predictability
    The significant capital requirements for natural gas infrastructure 
require long-term financing commitments which are anchored by long-term 
service agreements with pipeline customers. As such, interstate 
pipelines are significantly affected by public and regulatory policy 
affecting the availability and cost of capital. Energy, environmental 
and tax policies can all affect a pipeline's ability to raise capital 
for expansions to meet the markets requirements for access to natural 
gas supplies.
    Companies that are investing significantly in our energy future 
need certainty--in terms of process and timeline. Regulatory stability 
is critical to accessing capital, developing projects and maintaining 
and operating our systems reliably and safely. The FERC has been 
granted exclusive jurisdiction by Congress under the Natural Gas Act 
for siting interstate natural gas pipelines and the rates they charge. 
Interstate pipeline rates are based on a pipeline's cost-of-service 
plus a reasonable rate of return. These projects can take several years 
to develop and permit.
    The interstate pipeline industry has a proven track record of 
building infrastructure and providing services in response to increased 
demand from the market. Over the decades, interstate pipelines 
consistently have constructed infrastructure to deliver natural gas 
safely and reliably from supply and production areas to market. From 
January 2000 through February 2011, the interstate pipeline industry 
constructed and placed into service 14,600 miles of interstate 
pipeline, adding 76.4 Bcf/d of capacity. The capital investment in 
these projects totaled approximately $46 billion. Moreover, industry 
investments in pipeline infrastructure equaled or exceeded $8 billion 
per year in three of the past four years.\3\
---------------------------------------------------------------------------
    \3\ See North American Natural Gas Midstream Infrastructure Through 
2035: A Secure Energy Future, Executive Summary, prepared for The INGAA 
Foundation, Inc. by ICF International, June 28, 2011.
---------------------------------------------------------------------------
    During the development and permitting process, numerous activities 
take place including execution of shipper agreements with customers; 
stakeholder outreach with federal, state, local officials, landowners 
and other affected parties; environmental analysis and reviews; 
facilities design and placement of orders for long lead time equipment 
and negotiation of construction contracts and services. Efficient and 
effective completion of these activities is highly dependent on a 
consistent and certain, regulatory environment.
    The Department of Transportation's Pipeline and Hazardous Materials 
Safety Administration has jurisdiction for pipeline safety. The 
Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 
developed by this Committee is an important piece of legislation that 
provided necessary regulatory certainty for the public and industry 
regarding ongoing safety plans and maintenance programs. This 
regulatory certainty facilitates a clear regulatory environment during 
which pipeline operators can make significant decisions on capital, 
labor and third party resource intensive operations and maintenance 
activities.
    The President's Council on Jobs and Competitiveness' recent 2011 
Year-End Report \4\ recognized that optimizing the use of America's 
natural resources through energy and transportation efficiency is a 
national priority. The report further noted that promoting energy 
innovation and investment ``can fuel the prosperity Americans seek for 
the coming generation and beyond,'' but ``[t]he permitting process must 
be streamlined.\5\
---------------------------------------------------------------------------
    \4\ Road Map to Renewal: Invest in Our Future, Build on Our 
Strengths, Play To Win, President's Council on Jobs and 
Competitiveness, 2011 Year-End Report (``President's Jobs Council Year-
End Report'').
    \5\ Id. at p. 28.
---------------------------------------------------------------------------
    The natural gas industry is forecasted to add over 43 Bcf/d of new 
natural gas transmission capacity over the next 25 years to meet demand 
\6\ with approximately 1,400 miles per year of new natural gas 
mainline, 600 miles per year of new laterals, 24 Bcf per year of new 
working gas in storage, and 197,000 horsepower per year for pipeline 
compression.
---------------------------------------------------------------------------
    \6\ See North American Natural Gas Midstream Infrastructure Through 
2035: A Secure Energy Future, Executive Summary, prepared for The INGAA 
Foundation, Inc., by ICF International, June 28, 2011.
---------------------------------------------------------------------------
    The siting, construction, and operation of these natural gas assets 
require Federal permits, grants of rights-of-way, and approvals from 
various agencies, including the FERC. These Federal approvals require 
compliance with the National Environmental Policy Act (NEPA). Spectra 
Energy is committed to minimizing adverse impacts to the environment 
that may occur during development of this critical infrastructure and 
agree that the permitting for these projects should be completed in an 
environmentally responsible and timely manner while meeting the energy 
needs of the Nation.
    Before discussing the merits of this point, it is useful to 
summarize the NEPA process as it applies to the interstate pipeline 
industry.
    In order to construct, acquire, alter, abandon, or operate an 
interstate natural gas transportation facility, a company must obtain a 
certificate of public convenience and necessity from the FERC, pursuant 
to section 7(c) of the Natural Gas Act (NGA).\7\ The Energy Policy Act 
of 2005 (EPAct 2005) designated FERC as the lead agency, for purposes 
of NEPA compliance, for such facilities.\8\ In addition to the CEQ 
regulations, FERC has issued its own regulations that govern its NEPA 
process.\9\
---------------------------------------------------------------------------
    \7\ 15 U.S.C. Sec. 717f(c).
    \8\ Id. Sec. 717n(b).
    \9\ 18 C.F.R. Part 380.
---------------------------------------------------------------------------
    Specifically, FERC has promulgated regulations, including many 
activities conducted by interstate natural gas companies pursuant to 
authority granted by FERC under blanket certificates and the 
installation of certain facilities located completely within existing 
rights-of-way.\10\ For larger-scale section 7(c) infrastructure 
construction and for LNG terminal construction under section 3(e), 
further NEPA review is required, often culminating in an Environmental 
Assessment (EA) or an Environmental Impact Statement (EIS). Under 
FERC's regulations, if a project type is not categorically excluded 
from an EIS-type of in-depth environmental review, a project proponent 
is required to submit 13 resource reports \11\ with its application 
that provide environmental data and describe the anticipated impact of 
the proposed project, in order to support preparation of the NEPA 
analysis.\12\ FERC also requires the project proponent to consult with 
appropriate federal, regional, state, and local agencies during the 
planning stages of the proposed action to ensure that all potential 
environmental impacts are identified.\13\ A project proponent can also 
choose, or in instances involving LNG facilities, is required, to use 
FERC's pre-filing process, which serves to begin the NEPA analysis by 
involving relevant agencies and stakeholders and by allowing FERC staff 
to determine the scope of the NEPA review and to provide feedback on 
the resource reports, all before the project proponent files a formal 
application. The pre-filing process, when used, can help facilitate 
agency coordination and identification of cooperating agencies for 
purposes of NEPA review.
---------------------------------------------------------------------------
    \10\ 18 C.F.R. Sec. 380.4.
    \11\ Note that because Resource Report 13 applies only to LNG 
projects, the practical result is that natural gas interstate pipeline 
infrastructure projects only file 12 resource reports.
    \12\ 18 C.F.R. Sec. 380.12.
    \13\ 18 C.F.R. Sec. 380.3(b)(3). See also 18 C.F.R. Sec. 157.21.
---------------------------------------------------------------------------
    EPAct 2005 designated FERC as the lead agency for coordinating all 
applicable Federal authorizations for interstate natural gas 
infrastructure development.\14\ This provision is vital due to the 
significant coordination necessary between FERC and other agencies, 
including, but not limited to, the Army Corps of Engineers, the Bureau 
of Land Management, the U.S. Fish and Wildlife Service (USFWS), the 
U.S. Forest Service, the Bureau of Reclamation, the National Park 
Service, the Advisory Council on Historic Preservation, the Bureau of 
Indian Affairs, State Historic Preservation Officers, and numerous 
state departments of environmental quality/natural resources. The 
involvement of different agencies in the NEPA process, and sometimes 
numerous offices within the same agency, is challenging and frequently 
results in delay when those agencies do not act in concert. Spectra 
Energy believes that the FERC has done a good job facilitating agency 
coordination, within the limits of its authority.
---------------------------------------------------------------------------
    \14\ 15 U.S.C. Sec. 717n(b).
---------------------------------------------------------------------------
    However, as implemented today, the NEPA review process can become 
mired in unnecessary delay that can hinder timely infrastructure 
development. This issue has been recognized by many including the last 
two administrations which, through Executive Orders, have attempted to 
bring greater efficiency to the permitting process for energy projects. 
Most recently, on March 22, 2012, the President issued an executive 
order with the goal of significantly reducing the aggregate time 
required to make decisions in the permitting and review of 
infrastructure projects by the Federal Government, while improving 
environmental and community outcomes. Similarly, a number of Federal 
agencies have entered into memorandums of understanding (MOU) to 
coordinate cooperative agency procedures. For example, FERC and the 
U.S. Army Corps of Engineers entered into an MOU to ``streamline 
regulatory processes through early coordination to identify project 
purposes, needs and alternatives that each agency can use in carrying 
out its respective regulatory responsibilities.'' \15\
---------------------------------------------------------------------------
    \15\ See FERC, ``U.S. Army Corps of Engineers sign MOU on agency 
roles in authorizing gas projects,'' News Release: July 13, 2005.
---------------------------------------------------------------------------
    The efficient development of necessary infrastructure projects 
requires established and predictable timelines for conducting NEPA 
reviews. This requires an environmental review process that avoids 
delay and duplication, sets clear timelines, and promotes concurrent, 
not sequential, actions by cooperating and coordinating agencies.

Conclusion
    Mr. Chairman, in conclusion, natural gas holds tremendous, 
sustainable economic and energy security promise for this region, our 
Nation and all of North America. If society is to realize the long and 
lasting benefits from ample domestic natural gas resources, pipeline 
operators must be committed to delivering needed energy and 
infrastructure safely, reliably and cost-effectively. Also true, for 
the natural gas opportunity to endure, it must be built upon a 
foundation of sound public policy and a predictable regulatory 
structure. Thank you for holding this hearing and for inviting me to 
participate on behalf of Spectra Energy. I'll look forward to answering 
any questions the Committee may have.

    The Chairman. Thank you very much, Ms. Faraca. You tended 
to talk about national investments, and I would hope that the 
rest of you would try to bring yourself into the state we all 
are working for, which is called West Virginia. Investments on 
a national scale don't mean a lot to me. Investments and how 
they're done and what they're going for in West Virginia does 
mean a lot to me. That's not a criticism, because it was a good 
piece of testimony.
    Corky DeMarco? I ignore your first name.

            STATEMENT OF NICHOLAS ``CORKY'' DeMARCO,

             EXECUTIVE DIRECTOR, WEST VIRGINIA OIL

                  AND NATURAL GAS ASSOCIATION

    Mr. DeMarco. Thank you, Senator, and thank you, 
Congresswoman Capito and Congressman McKinley.
    I represent the West Virginia Oil and Natural Gas 
Association, which was founded in 1915 and is the oldest trade 
association operating in West Virginia. Shortly after George 
Washington surveyed the first gas well in now West Virginia in 
1771, our industry has been producing this commercial resource 
since the early 1800s as the primary resource of its time.
    As the shales are developed in the Appalachian Basin, 
there's a need to expand infrastructure and reinvent ourselves 
again. States such as West Virginia have been producing this 
natural gas for over 150 years, and the pipelines that we 
currently have are near capacity. With the expansion of 
drilling activity, the need has increased for the development 
of midstream, not only to move gas to the interstate pipeline 
systems, such as Spectra, but also to move gas to processing 
facilities like those being developed along the Ohio River.
    These processing facilities strip the hydrocarbons from the 
natural gas stream, and these market-based products--ethane, 
butane, iso-butane, and propane--support manufacturing. The 
natural gas is rich in its hydrocarbons in the Appalachian 
Basin, and it's going to be instrumental in bringing back the 
chemical industry and the chemical manufacturing jobs to this 
country. Our ability to meet these demands in the future will 
be based on how well we plan and develop the infrastructure 
today.
    As most of you are familiar, the challenges of building a 
pipeline in West Virginia and in this basin are difficult, 
expensive, and cutting through rock and traversing the hills of 
West Virginia and Appalachia must not deter our efforts to 
establish new and improved pipeline systems. The review of our 
current pipelines and the planning and the mapping of new 
routes goes on continually. We have six, if not seven, 
infrastructure gathering lines under construction right now.
    The Senate Committee on Commerce, Science, and 
Transportation can assist in assuring this infrastructure is 
completed in a reasonable time-frame and support these 
downstream developments. Additionally, your committee can 
provide oversight and guidance to two important agencies as we 
develop these pipelines, and that's the Corps of Engineers and 
the Environmental Protection Agency, as we need their 
cooperation in developing this infrastructure.
    It's an exciting and important time for us to work together 
to reinvent manufacturing, and the oil and gas industry is 
standing willing and able to do this. Thank you all very much.
    [The prepared statement of Mr. DeMarco follows:]

 Prepared Statement of Nicholas ``Corky'' DeMarco, Executive Director, 
             West Virginia Oil and Natural Gas Association

    I represent the West Virginia Oil and Natural Gas Association which 
was founded in 1915. WVONGA is the oldest trade association in West 
Virginia.
    As the shales are developed in the Appalachian Basin, there is a 
need to expand the current infrastructure. States such as West Virginia 
have been producing natural gas for over 100 years and have pipelines 
that are currently near capacity. With the expansion of drilling 
activity the need has increased to develop mid-stream not only to move 
gas to the interstate system but also to move gas to the processing 
facilities like those being developed along the Ohio River. The 
processing facilities strip the hydrocarbons from the natural gas 
stream and these market based products Ethane, Butane, Iso-Butane and 
Propane support manufacturing. Natural gas with its rich hydrocarbon 
base is instrumental to bringing back chemical manufacturing jobs back 
to this country.
    Our ability to meet demands in the future will be based on how well 
we plan and develop this infrastructure today. As most of you are 
familiar, the challenges of building pipelines in West Virginia and 
this Basin are difficult and expensive, cutting through rock and 
traversing the hills of Appalachia must not deter our efforts to 
establish a new and improved pipeline systems.
    The Senate Committee on Commerce, Science and Transportation can 
assist in assuring that this infrastructure is completed in a 
reasonable time-frame to support downstream developments. Additionally, 
your committee can provide oversight and guidance to the Army Corp of 
Engineers and the Environmental Protection Agency as we develop needed 
infrastructure. It is an exciting and important time for us to work 
together to re-invent manufacturing in this country.

    The Chairman. Thank you, Corky. So all we have to do is to 
take the Corps of Engineers and the EPA and tell them what to 
do?
    Mr. DeMarco. That would help.
    [Laughter.]
    The Chairman. Mr. Albert? Randy Albert, Chief Operating 
Officer, Gas Operations, CONSOL Energy.
    Welcome, sir.

 STATEMENT OF RANDALL M. ALBERT, CHIEF OPERATING OFFICER--GAS 
                 DIVISION, CONSOL ENERGY, INC.

    Mr. Albert. Thank you, Senator Rockefeller, Congresswoman 
Capito, and Congressman McKinley. I want to thank you for 
hosting this very important event today.
    Public policy matters, and we must make sound decisions 
with regard to every aspect of this shale revolution, from 
production to delivering our product to market, in order to 
truly provide energy and economic security for our country.
    I am Randy Albert, Chief Operating Officer of the Gas 
Division of CONSOL Energy. CONSOL, as you know, is the largest 
producer high-Btu bituminous coal in the United States. We've 
been named one of America's most admired companies by Fortune 
magazine. What you may not know is that with 3.7 tcf of 
reserves of natural gas, we are also one of the largest gas 
producers in the Appalachian Basin. We currently employ 9,000 
people, with over 4,300 of those right here in West Virginia.
    We are the only company that operates across all of the 
different horizons beneath our feet, from the surface 
infrastructure and processing facilities to the coal seams and 
the deeper horizons of the Marcellus and Utica Shales. It is a 
unique perspective and a unique advantage to us and the State 
of West Virginia.
    West Virginia once again finds itself at the epicenter of 
the energy debate in America. Through the many challenges we 
face from external forces, we also find tremendous opportunity 
right at our doorstep. The shale gas plays in our region and 
across the country have literally been game changing.
    The technological advances in horizontal drilling and 
fracturing have unleashed this vast new economic opportunity. 
And with over 500 tcf of gas in the Marcellus Shale alone, we 
believe that this one shale could represent a 25-year natural 
gas supply to the United States. By 2020, this revolution is 
expected to create over 200,000 additional jobs in the region, 
over $18 billion in value added, and over $1.8 billion in state 
and Federal tax revenues.
    How do we get to these numbers? Each well requires 415 
workers from 150 different kinds of companies to release and 
harness the fuel. Approximately $5 million is invested in the 
development of each Marcellus Shale well. Each mile of 
Marcellus pipeline represents a nearly $1 million investment 
into the State economy. And over the next 20 years, the 
industry will need to invest $50 billion to $100 billion in 
midstream infrastructure alone.
    With great opportunity comes even greater responsibility. 
As I mentioned at the outset of my remarks, public policy does 
matter. And regulatory certainty creates an atmosphere where 
companies can and will invest and create these jobs with good 
economic and environmental return. Last December, Governor 
Tomblin and the State legislature worked together to pass a 
comprehensive Marcellus Shale framework doing just that here in 
West Virginia, and it's something that will pay dividends in 
the state for years to come.
    CONSOL Energy's commitment to providing family sustaining 
jobs in a safe, compliant, and environmentally friendly manner 
is as unwavering today as it ever was. While our region has 
seen the benefits of the surge of natural gas production, we 
will only realize the full benefit of this critical domestic 
resource if we are able to effectively move this product and 
open up new markets for its usage. From the transportation 
sector to the manufacturing sector, we must closely align our 
policies to maximize the benefits of this shale play.
    Last year, the U.S. produced an average of 63 billion cubic 
feet of natural gas per day, a 24 percent increase since 2006. 
But over that period, consumption has grown half as fast. The 
best hope for economic renewal right here in the United States 
and the rest of the world is growth. We need a growth agenda 
predicated on creating an environment that allows the private 
sector to grow, create jobs, to lift incomes, to generate more 
tax revenue, and to regain our optimism about the future.
    I'm here today to tell you the energy industry can help do 
all that. At this critical moment for our economy, we can get 
everything else right, but still go nowhere unless we have an 
affordable, reliable supply of the energy needed to power the 
American economic engine. Today, we stand ready to be the 
industry that helps make recovery possible, a strong, lasting 
global recovery led by red, white, and blue energy and red, 
white, and blue manufacturing. If we fail to get this right, 
the implications for our economy and, by extension, our foreign 
policy could be staggering in the years ahead.
    Thank you for the opportunity, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Albert follows:]

   Prepared Statement of Randall M. Albert, Chief Operating Officer--
                   Gas Division, CONSOL Energy, Inc.

    Thank you, Senator Rockefeller, for convening this very important 
hearing regarding shale gas development. Your leadership on this issue 
is essential as our Nation and our state ponder this once-in-a-
generation opportunity. Public policy matters--and we must make sound 
decisions with regard to every aspect of the shale revolution, from 
production to delivering product to market, in order to truly provide 
energy and economic security for our country.
    I am Randy Albert, Chief Operating Officer--Gas Division for CONSOL 
Energy.
    CONSOL is the largest producer of high-Btu bituminous coal in the 
United States. Named one of America's most admired companies by Fortune 
magazine, we have evolved from a single-fuel mining company into a 
multi-energy producer of both high-Btu coal and natural gas--with 3.7 
tcf (trillion cubic feet) of natural gas reserves we are also among the 
largest gas producers in the Appalachian basin. CONSOL currently 
employs over 9000 people with 4,303 employees here in West Virginia.
    We are the only company that operates across all of the different 
horizons beneath our feet--from surface infrastructure and processing 
facilities, to the coal seams and deeper into the Marcellus and Utica 
Shales--it is a unique perspective and unique advantage to CONSOL 
Energy and the state of West Virginia.
    West Virginia, once again, finds itself at the epicenter of the 
energy debate in America. Through the many challenges we face from 
external forces, we also find tremendous opportunity right at our 
doorstep. The shale gas plays in our region and across the country have 
literally been ``game changing''. Technological advances in horizontal 
drilling and fracturing techniques have unleashed this vast, new 
economic opportunity. The Marcellus may be the second largest gas field 
in the world. Estimates show that there could be as much as 500 tcf 
underlying the Marcellus Shale. American's use roughly 20-25 tcf 
annually--hence, the Marcellus Shale alone could represent a 25-year 
natural gas supply.
    By 2020, the natural gas boom is expected to create over 200,000 
additional jobs in the region, over $18 billion in value added and over 
$1.8 billion in state and local tax revenue.
    How do we get to those numbers? Each well requires 415 workers from 
150 different kinds of companies to release and harness the fuel. 
Approximately $5 million is invested in the development of each 
Marcellus Shale well.
    Each mile of Marcellus pipeline represents a nearly $1 million 
investment into the state economy. Over the next 20 years, the industry 
will have to invest $50 to $100 billion in midstream infrastructure.
    With great opportunity comes even greater responsibility. As I 
mentioned at the outset of my remarks, public policy matters and 
regulatory certainty creates an atmosphere where companies can and will 
invest and create jobs, with good economic and environmental return. 
Last December, Governor Tomblin and the legislature worked together to 
pass a comprehensive Marcellus Shale framework doing just that here in 
West Virginia--something that will pay dividends for the state for many 
years to come. CONSOL Energy's commitment to providing family-
sustaining jobs, in a safe, compliant and environmentally-friendly 
manner, is as unwavering today as it ever was.
    While our region has seen the benefits of the surge of natural gas 
production in recent years, we will only realize the full benefits of 
this critical domestic resource if we are able to effectively move this 
product and open up new markets for its usage, from the transportation 
sector to the manufacturing sector, we must closely align our policies 
to maximize the benefits of these shale plays. Last year, the U.S. 
produced an average of 63 bcf (billion cubic feet) of natural gas per 
day, a 24 percent increase from 2006--but over that period consumption 
has grown half as fast.
    The best hope for economic renewal, here in the United States and 
the rest of the world, is growth. We need a growth agenda predicated on 
creating an environment that allows the private sector to grow, to 
create jobs, to lift incomes, to generate more tax revenues and to 
regain our optimism about the future.
    I'm here today to tell you the energy industry can help us do just 
that. At this critical moment for our economy, we can get everything 
else right, but still go nowhere unless we have affordable, reliable 
supplies of the energy needed to power the American economic engine. 
Today, we stand ready to be the industry that helps make recovery 
possible--a strong, lasting, global recovery, led by red, white and 
blue energy and red, white and blue manufacturing.
    If we fail to get this right, the implications for our economy and, 
by extension, our foreign policy could be staggering in the years 
ahead.
    Thank you for this opportunity and I look forward to answering your 
questions.

    The Chairman. Thank you very much, sir.
    Mr. Owen Kean, Senior Director of Energy Policy, American 
Chemistry Council.

STATEMENT OF OWEN A. KEAN, SENIOR DIRECTOR, AMERICAN CHEMISTRY 
                            COUNCIL

    Mr. Kean. Thank you, Mr. Chairman, Ms. Capito, Mr. 
McKinley.
    I'd like to echo some of the things that have been said 
before. We are, indeed, experiencing----
    The Chairman. Can you pull that just a bit closer?
    Mr. Kean. We are, indeed, experiencing a major 
transformation in the U.S. chemical industry, thanks to shale 
gas mostly. A few years ago, the U.S. was among the high-cost 
producers of chemical products in the world. Today, we're close 
to the low-cost producer, and shale gas and the natural gas 
that was associated with shale gas is the major reason why.
    In the U.S., most of the petrochemical industry is founded 
on natural gas liquid feedstocks, primarily ethane. In the rest 
of the world, Europe and Asia, particularly, petrochemical 
capacity is based on naphtha. Due to the large price spread 
between natural gas and petroleum, the cost of producing 
ethylene and ethylene derivatives in the United States is less 
than half of what it is in Europe and northeast Asia.
    As a consequence, demand is soaring. Exports of chemical--
basic chemicals in the United States went up--to the rest of 
the world went up 15 percent last year to $95 billion. Basic 
chemicals enjoys a $34 billion trade surplus, and as a result 
of this robust demand, we expect to see a 25 percent expansion 
in U.S. petrochemical capacity in the years to come.
    We think West Virginia is well positioned to capture some 
of that new capacity. The feedstock abundance, particularly for 
ethane, is staggering, and proximity to our major domestic 
customers is very attractive. So with the right investments, as 
been mentioned here, and infrastructure to enable the ethane to 
get to the markets, we think that this is a good place to 
invest in some of that new petrochemical capacity that is going 
to be built in the next few years.
    Thank you.
    [The prepared statement of Mr. Kean follows:)

         Prepared Statement of Owen A. Kean, Senior Director, 
                       American Chemistry Council

    Mr. Chairman, on behalf of the American Chemistry Council, thank 
you for the opportunity to address infrastructure issues related to 
shale gas development.
    The American Chemistry Council (ACC) represents the leading 
companies engaged in the business of chemistry. ACC members apply the 
science of chemistry to make innovative products and services that make 
people's lives better, healthier and safer. ACC is committed to 
improved environmental, health and safety performance through 
Responsible Care, common sense advocacy designed to address major 
public policy issues, and health and environmental research and product 
testing. The business of chemistry is a $720 billion enterprise and a 
key element of the Nation's economy. It is one of the Nation's largest 
exporters, accounting for ten cents out of every dollar in U.S. 
exports. Chemistry companies are among the largest investors in 
research and development. Safety and security have always been primary 
concerns of ACC members, and they have intensified their efforts, 
working closely with government agencies to improve security and to 
defend against any threat to the Nation's critical infrastructure.
    The chemistry industry is the foundation of U.S. manufacturing and 
the engine of our National economy. Chemistry creates the basic 
building blocks for countless products that Americans rely on every 
day, from the packaging that keeps our food fresher longer to building 
products that make our homes more energy efficient to materials such as 
high-tech composites that make our cars, planes, and electronics 
lighter, stronger and more fuel efficient. In fact, 96 percent of all 
manufactured goods made in the U.S.A. rely on chemistry.
    In chemical manufacturing it all begins with natural gas. U.S. 
chemical manufacturers use ethane, a liquid found in natural gas, as 
their primary raw material, or ``feedstock.'' Cell phones, computers, 
tires and carpeting all use chemistry, and all are made with ethane. 
The shale gas found in the western Pennsylvania and West Virginia 
portions of the Marcellus shale contain some of the most ethane-rich 
shale gas deposits found anywhere in the country. That large supply of 
ethane is attracting strong interest from ACC member companies.
    Shale gas is a game changer for the chemistry industry. It holds 
the promise of a renaissance of chemical manufacturing in the United 
States and will dramatically improve our competitiveness globally. With 
today's more abundant and stable natural gas supplies, U.S. 
manufacturers have access to lower-cost ethane. We have a big advantage 
over foreign competitors who use a different process based on a raw 
material from crude oil, called naphtha. With the global oil prices 
hovering around $100 a barrel and U.S. natural gas under $2 per million 
BTUs, America's chemistry industry is in a strong competitive position 
for the first time in years.
    The news is full of announcements of U.S. investments, new ethane 
cracking plants, production expansions and restarts, increased exports 
of American goods and the positive impacts on many industries that rely 
on chemistry and plastics--including auto manufacturing, construction, 
agriculture, health care, and technology. Recently, Shell Chemical 
announced that it is taking the next step in considering a new world-
scale ethane cracker--the first in the U.S. in more than a decade. It's 
yet another sign of expansion in the domestic chemistry industry 
through the promise of shale gas.
    Shale gas could create hundreds of thousands of manufacturing jobs 
in areas that have been hardest hit by the recession. In fact, ACC 
projects that a 25 percent boost in ethane supplies could generate 
400,000 U.S. jobs, $132 billion in U.S. economic output and $4.4 
billion in local, state and Federal tax revenue every year. These 
include direct chemical industry jobs and thousands more in our 
supplier industries and the sectors that support all those jobs.
    In West Virginia, a $3.2 billion investment in an ethylene 
production complex will generate $4.8 billion in additional chemical 
industry output and would create more than 12,000 jobs in the chemical 
industry and its supply chain.
    We were pleased to see that in his State of the Union Address, 
President Obama highlighted natural gas from shale as key to our energy 
and economic future and offered assurance that his administration 
``will take every possible action to safely develop this energy.'' He 
included natural gas as part of his ``all-of-the-above'' energy 
strategy.
    With shale gas development poised to play an important and growing 
role in the country's energy strategy, the next question is: What are 
the best ways to ensure that America develops these resources, and does 
so in a responsible way? Regulations and policies around natural gas 
production and infrastructure development will ultimately determine 
whether shale gas becomes the ``game changer'' everyone hopes for, 
generating economic growth and new jobs and revitalizing U.S. 
manufacturing.
    Robust regulatory activity is already underway at the Federal and 
state levels. Nine separate Federal agencies are considering policies 
or regulations related to hydraulic fracturing. The U.S. EPA alone is 
considering three major regulatory proposals related to fracturing 
operations. The Federal Bureau of Land Management has proposed a rule 
that mandates, among other things, 30-day advance notice and approval 
for specific fracturing fluids to be used at wells. Multiple bills in 
Congress would require a larger role for the Federal government in 
regulating shale gas development. Numerous states have already updated 
their regulations, or are in the process of doing so.
    For chemical manufacturing, we believe the U.S. needs to capitalize 
on shale gas as a significant domestic energy source while ensuring 
that we have appropriate regulatory policies to protect our water 
supplies and our environment.
    We support state-level oversight of hydraulic fracturing, and we 
are committed to transparency regarding the disclosure of the chemical 
ingredients of hydraulic fracturing solutions, subject to the 
protection of proprietary information. We oppose outright bans on shale 
gas production or the hydraulic fracturing process.
    Many states are already paving the way in developing regulations. 
Some states have implemented a mandatory chemical disclosure system 
that works--disclosing relevant information while appropriately 
protecting confidential business information. Texas, in particular, has 
a law that strikes the right balance and could serve as a guide for 
other states.
    The bottom line for us is that the full potential from shale gas 
will only be realized with sound state regulatory policies that allow 
for aggressive production in an environmentally responsible manner.
    We also need to harness the value of ethane as a feedstock that 
leads to thousands of products used in commerce on a daily basis. That 
means investing in infrastructure to separate ethane and other liquids 
from the gas supply, ship it to markets, and develop adequate capacity 
to store it before use. Today, the existing infrastructure and pipeline 
capacity is not adequate to move ethane to market. As a result, much of 
the ethane-rich shale gas in the Marcellus is shut in. Fortunately, 
businesses are moving quickly to bring ethane infrastructure to the 
Marcellus and we expect to see ethane moving to market by the end of 
next year.
    We also expect chemical companies looking to invest in new 
petrochemical capacity to continue taking a hard look at West Virginia 
as the site for a future world-scale petrochemical complex. West 
Virginia hosts an abundant supply of fuel and feedstock, it has 
excellent road, rail and river transportation networks, a skilled 
workforce, and is within 500 miles of the primary U.S. markets for 
petrochemicals and plastics. The state's rail networks also make it an 
attractive platform from which to ship plastic pellets and sheet to 
Atlantic ports for shipment to Europe and elsewhere. We believe West 
Virginia makes an excellent fit as the potential home to at least one 
of the petrochemical complexes that will be built in the U.S. in the 
coming years.
    In closing, we agree with the President that ``the United States 
has a huge opportunity at this moment to bring manufacturing back.'' 
Delivering on the promise of shale gas means that the regulatory and 
financial environment to fully develop the resource--including the 
development of the necessary infrastructure--must not impose needless 
barriers. By making the most of shale gas, we can support new 
manufacturing capacity here in the United States, good high-paying jobs 
and economic growth and prosperity for years to come.

    The Chairman. Thank you very much.
    Next will be the Honorable Keith Burdette, Secretary, West 
Virginia Department of Commerce.

   STATEMENT OF J. KEITH BURDETTE, EXECUTIVE DIRECTOR, WEST 
VIRGINIA DEVELOPMENT OFFICE, AND SECRETARY OF THE DEPARTMENT OF 
                    COMMERCE, STATE OF WEST 
                            VIRGINIA

    Mr. Burdette. Senator, thank you very much--Congressman 
McKinley, Congresswoman Capito. It's an honor to be here and be 
asked to address these issues.
    My name is Keith Burdette. I'm the Executive Director of 
the West Virginia Development Office and Secretary of the West 
Virginia Department of Commerce.
    Make no mistake. Marcellus Shale can change the dynamics of 
the West Virginia economy. Geologists are concluding that the 
Marcellus region could be the most significant shale play in 
the country. Before Marcellus, estimates were that our State 
had recoverable natural gas reserves of 3 trillion to 5 
trillion cubic feet. Now that estimate is increasing ten-fold.
    But it is the wet components of the Marcellus, especially 
ethane, that is attracting so much attention and which may hold 
out the greatest long-term opportunities for our state. Even 
today, although substantially diminished, West Virginia has 150 
companies that specialize in chemical and polymer production. 
We rank sixth among all States in the share of our overall GDP 
that comes from chemicals and polymers. Twenty-five percent of 
our international exports are still currently chemicals and 
polymers.
    Access to competitively priced natural gas largely brought 
these industries to West Virginia. We believe that abundant 
low-cost ethane-related feedstock can bring them back. Since 
2009, between $4 billion and $5 billion in new investments in 
natural gas infrastructure have occurred in West Virginia, two-
thirds of that in the last 24 months.
    For the past year, yes, our administration has aggressively 
pursued the recruitment of ethane crackers, plural, to our 
state and our region. We believe there is strategic importance 
to them being located here. And while we were disappointed by 
Shell's announcement, the location 10 miles from our border is 
still a very positive one. And I'm happy to discuss the 
specifics of that process in greater detail at the appropriate 
time.
    However, we are convinced a second and possibly even a 
third cracker could be built in West Virginia, and we're 
optimistic those decisions will be made later this year. Ethane 
crackers will serve like an anchor store in a manufacturing 
mall, attracting smaller manufacturers who can take advantage 
of low-energy feedstock and transportation costs, employing 
thousands upon thousands of West Virginians.
    West Virginia is doing its part. Governor Tomblin and the 
West Virginia legislature, as mentioned earlier, acted quickly 
and decisively last year to implement horizontal shale drilling 
rules in the state, one of the first in this region of the 
country. We've developed appropriate incentives to attract an 
ethane cracker.
    We've put our financial house in order so that businesses 
located here can plan for their expenses. We're lowering 
business taxes to nationally competitive levels. We've 
privatized our workers' compensation program, and now rates are 
10 percent below the national average. Unlike 28 other states, 
we didn't borrow money from the Federal Government to pay 
unemployment benefits.
    We're now considered by the Frazier Institute as the sixth 
best place in the world for oil and gas development. We have 
the building blocks, but there is still much to do.
    Thanks to your efforts, Senator, specifically, and those of 
CSX and Norfolk Southern, we made real progress in the 
negotiation of rail rates in order to attract a cracker. But 
captive rail rates still create concern within the industry. An 
adequate rail structure is still a concern within the industry.
    We need to prepare our workforce for the changing economy. 
We need to expand our technical education and make it relevant 
to the opportunities that are before us. We need to continue to 
expand our infrastructure to provide storage and distribution 
of critical raw materials. We have major site issues. God gave 
us a spectacular state, but not a lot of flat land.
    We need to continue to create a climate of regulatory 
certainty that properly monitors the industry, establishes the 
appropriate safeguard for our environment, but allows our state 
to pursue and develop these new opportunities. We believe it's 
in the best interest of West Virginia. We think it's in the 
best interest of the country.
    Thank you, sir.
    [The prepared statement of Mr. Burdette follows:]

   Prepared Statement of J. Keith Burdette, Executive Director, West 
    Virginia Development Office, and Secretary of the Department of 
                    Commerce, State of West Virginia

    Mr. Chairman, Thank you very much. My name is Keith Burdette. I 
currently serve as Executive Director of the West Virginia Development 
Office and as a member of Governor Earl Ray Tomblin's cabinet as the 
Secretary of the Department of Commerce. I am pleased that the United 
States Senate Commerce Committee and particularly the chairman, Senator 
Rockefeller would focus their attention on the opportunities associated 
with the development of Marcellus and Utica shale reserves located 
under much of West Virginia.
    West Virginia is an energy state. We have a long, proud history of 
providing low cost, readily available energy to this country. It can be 
dangerous and dirty work, but we have provided the essential fuel for 
the economic engines of this Nation since before West Virginia became a 
state. Our location, central to our Nation's population, makes our 
resources readily accessible to our Nation's consumers. While 
considered a coal state by most, our broad array of energy resources 
enables a per capita production of energy exceeded only by the state of 
Wyoming. We export two thirds of the electricity produced in West 
Virginia. We are number three behind Pennsylvania and Alabama in the 
amount of net electricity we put in the electricity grid. We are also 
active in renewable energy markets with 581 installed megawatts of wind 
power and 327 MW of hydro power. We remain active in oil markets. Our 
oil is paraffin based, suitable for refining into lubricating oils. But 
today, we are here to talk about another energy resource, natural gas. 
West Virginia is the only natural gas exporter among the eastern 
states. We have been a natural gas producer for 150 years. From 1906 to 
1917 West Virginia was the leader in gas production in the United 
States. Given the advent of directional drilling, we have access to a 
new source of natural gas--Marcellus Shale.
    The Marcellus resource generally extends from New York to Ohio. In 
West Virginia, most of our state overlies the Marcellus Shale. 
Marcellus Shale is a game changer for West Virginia. Geologists are 
concluding that the Marcellus resources could be the most significant 
shale play in the country. Before Marcellus, we were estimating our 
state natural gas recoverable resource at 3-5 trillion cubic feet. Now, 
that estimate could be increased by a factor of 10. Marcellus is 
located 5-6,000 feet below the surface. Marcellus wells are producing 
from our Northern Panhandle to McDowell, our southernmost county. Below 
the Marcellus at 10,000 feet we have the Utica Shale resource. This is 
undeveloped in West Virginia, but could share the same transportation/
processing infrastructure being developed for the Marcellus. Most major 
oil and natural gas companies will be active in these shale plays in 
West Virginia.
    The chemical industry in West Virginia has been our state's second 
largest employer next to coal. The first petrochemical plants in the 
U.S. were built in West Virginia by Union Carbide, first at Clendenin 
on the Elk River and then at Blaine Island on the Kanawha River 
adjacent to South Charleston. South Charleston, as does Wilmington 
Delaware, bills itself as the Chemical Capital of the World. Chemical 
research continues to be a university focus through our university 
system.
    The early days of the chemical industry focused on local raw 
materials and regional markets. Today, we are truly a global economy. 
We are not just competing with domestic industry, but we are competing 
with countries around the world, including Qatar, Indonesia, and 
Malaysia. For all industrial applications, the costs of energy is a 
critical determinate in whether or not your products can be competitive 
on the world market. Natural gas prices have had a history of dramatic 
fluctuations. Today's $2.20 per MCF is an example. While industrial and 
residential customers are benefitting from low natural gas prices, we 
anticipate prices stabilizing in the $4-$5 range. Long term stable 
prices will send the market signals necessary for the orderly 
development of our natural gas resources.
    West Virginia is home to 150 chemical and polymer manufacturing 
companies that employ over 12,000 workers. In fact, West Virginia is 
ranked 6th among states in the share of overall GDP that comes from 
chemical and polymers. Twenty-five percent of our international exports 
are chemical and polymers. Access to competitively priced natural gas 
brought these industries to West Virginia. With Marcellus, we can look 
to an expansion and diversification of our chemical industries.
    Ethane is the building block for the plastics industry. Ethane, 
along with propane and butane, are the wet components of natural gas 
production. Conventional natural gas production has 3 percent ethane. 
Marcellus could have up to a 10 percent ethane content. In our earlier 
chemical industry history, we had ethane pipelines. We had a vibrant 
plastics industry. As ethane supplies dwindled those ethane 
transportation lines were taken out of service and much of the plastics 
industry moved to the Gulf Coast in response to cheaper natural gas and 
ethane costs. West Virginia and other Marcellus Shale states now have 
an opportunity to regain a competitive edge in the chemicals and 
plastics sectors. Since 2009, West Virginia has witnessed over $3 
billion of investments in natural gas infrastructure (pipelines and 
processing plants) to get the Marcellus to market. Even in a market in 
which a glut of cheap natural gas, production in the ``wet'' areas of 
the Marcellus continues. In one county of West Virginia, one company 
will spend $750 million in production activities in the next 12 months.
    For the past year our goal has been to attract an ethane cracker 
plant to West Virginia specifically and the region in general. . A 
cracker plant converts ethane into ethylene. A local supply of ethylene 
would dramatically impact transportation costs and create an economic 
climate that could allow for a rebirth of the plastics and chemical 
industry in our state and in this region of the country. With Shell 
recent announcement that they will explore building a cracker facility 
about 10 miles from the West Virginia border in southwest Pennsylvania, 
we believe the first important steps have been taken. We are convinced 
a second and possibly even a third facility can be built in our state. 
The impact could be huge. Just from an operational picture, a world 
class cracker will likely require an investment from $3 billion to $5 
billion. It will take four years to design and build. At peak 
construction, between 7500 and 10,000 construction workers will likely 
be involved and 500 to 1000 permanent operation jobs. More important, 
the facility would serve like the anchor store in a manufacturing mall, 
attracting smaller manufacturers who can take advantage of low cost 
feedstock and transportation costs.
    West Virginia is doing its part. Governor Tomblin and the West 
Virginia Legislature have passed legislation governing the regulation 
of horizontal shale drilling, because we understand the importance of 
regulatory certainty. We've developed appropriate incentives. We've 
taken the appropriate financial steps as a state to be competitive. We 
have lowered business taxes, improved our bond ratings, expanded our 
cash reserves and enhanced our business climate. West Virginia 
privatized our Workers Compensation program resulting in rates that are 
now 10 percent below the national average. Unlike 28 other states, we 
haven't borrowed funds from the Federal government to pay unemployment 
benefits. Instead we have a stable fund with $100 million in the bank. 
We are now considered the sixth best place in the world for oil and gas 
development, according to the Frazier Institute.
    We have the building blocks, a trained chemical industry workforce, 
abundant supplies of ethane rich natural gas, and a robust 
infrastructure. There is still much to do. We need to expand the 
technical training that will be required for West Virginians to compete 
for the new manufacturing jobs that could be in our future. We need to 
develop storage opportunities and explore the creation of an ethane hub 
for this region of the country so that there is created a stable 
reliable supply of ethane long into the future. We need to be nimble 
and responsive to the changing economic opportunities around us.
    West Virginia is looking forward to increased employment 
opportunities, new markets for domestic energy, and enhanced economic 
benefits to our citizens and communities. With increased natural gas 
development in West Virginia, we feel these developments are within our 
reach. I look forward to your questions.

    The Chairman. Thank you. Thank you very much, Keith 
Burdette.
    And now Mr. Dean Piacente, Vice President of Chemicals and 
Fertilizer, CSX Transportation, Inc.

  STATEMENT OF DEAN PIACENTE, VICE PRESIDENT OF CHEMICALS AND 
              FERTILIZER, CSX TRANSPORTATION, INC.

    Mr. Piacente. Thank you, Senator Rockefeller, Congresswoman 
Capito, and Congressman McKinley for having us in attendance to 
share our comments on this important topic.
    My responsibility at CSX is handling our chemical and 
fertilizer customers, managing that customer base, and helping 
grow that business. And CSX is the largest freight railroad in 
the eastern United States.
    I'd like to cover three important points. First is the 
impact that shale drilling has had--both a negative and a 
positive impact on our business. Our domestic coal utility 
business has seen a significant downturn as a result of low 
natural gas costs and other regulatory pressures in that 
industry.
    Conversely, shale gas drilling is affording us an 
attractive opportunity to somewhat offset those losses by 
moving products for drilling, such as frack sand, pipe for 
drilling, pipe for transmission, and bringing gas liquids to 
market, and crude oil products to market as well. We're also 
finding an interesting opportunity to move raw materials to 
make pipe, like scrap materials.
    We're seeing strength in our chemicals and our steel 
business. Just a few years ago, we were faced broadly across 
our network with many of our chemical customers shutting down 
their plants because of high gas costs here in the country. And 
we're finding ourselves now competing aggressively to try and 
land new business and expansions in that sector.
    Our industrial development group has a laundry list of new 
sites in West Virginia, as well as other states, to take 
advantage of gas drilling, and there's been a remarkable 
turnaround. And for the first time that I can recall in the 8 
years I've been in this position, we're finally seeing 
opportunities to export chemical products off the east coast, 
where just a few years ago we were looking at imported plastic 
products, for example.
    The second point I'd like to make is that we're competing 
aggressively to site new businesses along our right-of-way in 
West Virginia and other states, and we've been very successful. 
We're working cooperatively with all parties to do this, and we 
know we need to. And we want to provide competitive rail rates, 
fair contracts, and, in many cases, multiyear contracts to our 
customers to give them some certainty when they're making their 
investments. Senator Rockefeller has stressed this to us in our 
meetings with him, and it's in our best business interest to do 
that.
    Our recent successes here in West Virginia include two 
natural gas plants--two natural gas liquid plants that will 
open later this year and into next year, numerous frack sand 
terminals, and we have a frack sand terminal in Benwood, West 
Virginia, one in Clarksburg, and I'm happy to announce that 
today we'll open another one right here in Fairmont, West 
Virginia, to serve the gas industry here, and that creates 
jobs. It's very fortunate timing, coming here on the same day 
we're opening the terminal. So we'll be traveling over there 
afterwards.
    We believe we're a good citizen in the State of West 
Virginia. We're very committed to the state. In 2011, our 
customers here in the state invested more than $550 million in 
rail-served facilities, more than any other state in our 
network. And CSX is also making investments in terminals to 
foster that growth. We're addressing capacity constraints.
    We've purchased new railroad cars to support the frack sand 
industry. We're addressing capacity constraints in this 
particular area. As business flows have changed over the last 
few years, we've had a very strong network in West Virginia. 
But we find ourselves in an interesting position of having a 
huge concentration of new business right in this area. And so 
we're in the process of addressing those kinds of capacity 
constraints.
    The last point I'd like to make is that we hope that state 
and Federal Government incentives will encourage development. 
We have a great transportation infrastructure here in the U.S. 
in many States as well as export terminals, but we'll need 
more. We'll need more infrastructure. We'll need things like 
prompt review of permits, and we would hope that our Federal 
and state governments carefully consider legislation and 
regulation that might hinder this growth.
    Thank you very much for your time.
    [The prepared statement of Mr. Piacente follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
                                ------                                

    The Chairman. Thank you very much, Mr. Piacente.
    Now will be Patrick Donovan, who is Director of Maritime 
and Intermodal Transportation at the Rahall Appalachian 
Transportation Institute.

          STATEMENT OF PATRICK J. DONOVAN, DIRECTOR OF

         MARITIME AND INTERMODAL TRANSPORTATION FOR THE

         NICK J. RAHALL, II APPALACHIAN TRANSPORTATION

INSTITUTE (RTI), MARSHALL UNIVERSITY, HUNTINGTON, WEST VIRGINIA

    Mr. Donovan. Senator Rockefeller, Congresswoman Capito, and 
Congressman McKinley, distinguished guests, good afternoon. I'm 
Patrick J. Donovan, Director of Maritime and Intermodal 
Transportation for the Nick J. Rahall, II, Appalachian 
Transportation Institute at Marshall University, Huntington, 
West Virginia. I'm both humbled and honored to have this 
opportunity to appear before this committee today.
    Before I begin my remarks, I'd like to take a moment to 
bring greetings to this distinguished committee from Robert H. 
Plymale, Chief Executive Officer and Director of the Nick J. 
Rahall Appalachian Transportation Institute. He could not be 
with us today but states, ``The Rahall Transportation Institute 
appreciates Senator Rockefeller inviting us to speak to the 
Committee to highlight these important issues. We appreciate 
your recognition of the important role that the Rahall 
Transportation Institute plays in the future of transportation 
and economic development.''
    Today I'll focus my remarks on the downstream manufacturing 
for the chemical sector as it pertains to maritime and 
intermodal transportation. The post-World War II national 
economy of the United States and the creation of the Eisenhower 
Interstate Highway System led to one of the longest periods of 
economic expansion in United States history.
    President Kennedy recognized that the economy of the 
Appalachian region, in general, and West Virginia, 
specifically, were lagging behind the rest of the United 
States. The Appalachian Regional Commission was formed, which 
led to the development of the Appalachian Development Highway 
System, which is a 3,090 mile road system covering 13 States 
and comprised of 31 individual transportation corridors. This 
ADHS is over 85 percent complete today.
    However, the emerging global economy of today requires a 
surface transportation system that would provide for true 
global connectivity. The global economy of the 21st century is 
driven by a surface transportation system that is reliant on 
access to export markets. The 21st century transportation mode 
of choice is intermodal transportation. The number of global 
container ports in the United States has increased from 75 
ports in 1970 to over 550 ports in 2005. Container volume 
throughput in United States gateway ports has increased from 1 
million containers in 1970 with projections of over 100 million 
containers in 2050.
    Both Utica and Marcellus Shale natural gas have the 
potential to reinvigorate manufacturing throughout the Ohio and 
Kanawha River Valleys. The legacy transportation systems of the 
national economy will continue to provide connectivity to those 
national markets. However, to fully maximize the potential 
economic development of our region, transportation projects of 
regional and national significance need to be fully funded and 
then completed.
    The September 2010 opening of the Norfolk Southern 
Heartland Corridor now allows for double-stack container rail 
service from the ports of Virginia through southern West 
Virginia and all points west. The West Virginia Public Port 
Authority recently received a $12 million Tiger III Grant from 
the United States Department of Transportation to help 
facilitate the construction of the Prichard Inland Intermodal 
Terminal. We anticipate construction of this terminal to begin 
in the spring of 2012.
    Another project, the CSX National Gateway Corridor Project, 
will improve the flow of rail traffic throughout the Nation by 
increasing the use of double-stack trains, creating a more 
efficient rail route that links Mid-Atlantic ports with Midwest 
markets. A much anticipated inland intermodal terminal to be 
sited in the Greater Pittsburgh region will be situated to 
provide direct intermodal container service for both the Utica 
and Marcellus Shale natural gas downstream manufacturers 
needing access to export markets.
    The United States Department of Transportation, Maritime 
Administration, and the Marine Highway program have the 
potential to provide those shale natural gas downstream 
manufacturers with potential transportation options. The north-
south orientation of the Ohio River Valley navigation system 
can provide shippers with all-water access into South American 
markets. There is much to be done to successfully implement 
America's Marine Highway program as the nation attempts to move 
from a transportation system built for the national economy of 
the 20th century into an intermodal global supply chain of the 
21st century.
    RTI continues to provide national leadership on these 
issues with the establishment of the Marine Highway Maritime 
Technology Consortium, partnering with organizations joined to 
form the Marine Highway Technology Consortium and include the 
Center for Commercial Deployment of Transportation 
Technologies, California State University Long Beach, 
University of New Orleans Transportation Institute, University 
of New Orleans, and the Great Waters Maritime Institute.
    The purpose of this consortium is to work cooperatively 
toward the design of the next generation inland navigation 
vessel and related activities. The consortium's activities 
support the United States Department of Marine Highway 
Transportation goals of the 21st century supply chain. We 
believe that brownfields will play a critical role in the 
economic development of our region.
    Once again, Senator Rockefeller and distinguished guests, 
thank you for providing the Rahall Transportation Institute the 
opportunity to come before this distinguished committee.
    [The prepared statement of Mr. Donovan follows:]

  Prepared Statement of Patrick J. Donovan, Director of Maritime and 
   Intermodal Transportation for the Nick J. Rahall, II Appalachian 
 Transportation Institute (RTI), Marshall University, Huntington, West 
                                Virginia

    Senator Rockefeller, distinguished guests, good afternoon. I am 
Patrick J. Donovan, Director of Maritime and Intermodal Transportation 
for the Nick J. Rahall, II Appalachian Transportation Institute (RTI) 
at Marshall University in Huntington, WV. I am both humbled and honored 
to have this opportunity to appear before this distinguished committee 
today. Before I begin my remarks, I would like to take a moment to 
bring greetings to this distinguished committee from Robert H. Plymale, 
Chief Executive Officer and Director of the Nick J. Rahall, II 
Appalachian Transportation Institute. He could not be here today, but 
states, ``The Rahall Transportation Institute appreciates Senator 
Rockefeller inviting us to speak to the Committee to highlight these 
important issues. We appreciate your recognition of the important role 
that the Rahall Transportation Institute plays in the future of 
transportation and economic development.'' Today I will focus my 
remarks on the downstream manufacturing for the chemical sector as it 
pertains to maritime and intermodal transportation.
    The post-World War II national economy of the United States and the 
creation of the Eisenhower Interstate Highway system led to one of the 
longest periods of economic expansion in the history of the United 
States. President Kennedy recognized that the economy of the 
Appalachian Region in general and West Virginia specifically were 
lagging behind the rest of the United States. The Appalachian Regional 
Commission (ARC) was formed which led to the development of Appalachian 
Development Highway System (ADHS) which is a 3,090 mile road system 
covering 13 states and comprised of 31 individual transportation 
corridors. This ADHS is over 85 percent complete. However, the emerging 
global economy of today requires a surface transportation system that 
will provide for true global connectivity.
    The global economy of the 21st century is driven by a surface 
transportation system that is reliant on access to export markets. The 
21st century transportation mode of choice is intermodal. The number of 
global container ports in the United States has increased from 75 ports 
in 1970 to over 550 ports in 2005. Container volume throughput in 
United States gateway ports has increased from 1 million containers in 
1970 with projections of over 100 million containers in 2050.
    Both Utica and Marcellus Shale natural gas have the potential to 
re-invigorate manufacturing throughout the Ohio and Kanawha River 
Valleys. The legacy transportation systems of the national economy will 
continue to provide connectivity to national markets. However, to fully 
maximize the potential economic development for our region, 
transportation projects of regional and national significance need to 
be fully funded and completed.
    The September 2010 opening of the Norfolk Southern Heartland 
Corridor now allows for double-stack container rail service from the 
Ports of Virginia through southern West Virginia and all points west. 
The West Virginia Public Port Authority recently received a $12 million 
dollar Tiger III Grant from the United States Department of 
Transportation to help facilitate the construction of the Prichard 
Inland Intermodal Terminal. Construction of this terminal is 
anticipated to begin in spring of 2012.
    Another project, the CSX National Gateway Corridor project, will 
improve the flow of rail traffic throughout the Nation by increasing 
the use of double-stack trains, creating a more efficient rail route 
that links mid-Atlantic ports with mid-western markets. A much 
anticipated inland intermodal terminal to be sited in the Greater 
Pittsburgh region will be situated to provide direct intermodal 
container service for both the Utica and Marcellus Shale Natural Gas 
downstream manufacturers needing access to export markets. The United 
States Department of Transportation, Maritime Administration and 
America's Marine Highway program have the potential to provide those 
shale natural gas downstream manufacturers with potential 
transportation options. The north-south orientation of the Ohio River 
Valley navigation system can provide shippers with ``all water'' access 
into South American markets. There is much to be done to successfully 
implement America's Marine Highway program as the Nation attempts to 
move from a transportation system built for the national economy of the 
20th century to an intermodal global supply chain for the 21st century.
    RTI continues to provide national leadership on these issues with 
the establishment of the Marine Highway Maritime Technology Consortium 
(MHMTC). Partnering organizations have joined RTI to form the MHMTC and 
include: the Center for the Commercial Deployment of Transportation 
Technologies, California State University Long Beach, University of New 
Orleans Transportation Institute, University of New Orleans and the 
Great Waters Maritime Institute. The purpose of the MHMTC is to work 
cooperatively towards the design of the next generation inland 
navigation vessel and related activities. The consortium's activities 
support the United States Department of Transportation Marine Highway 
goal of successfully integrating the inland navigation system into the 
21st century supply chain.
    Utica and Marcellus Shale natural gas have the potential to turn 
our region's post industrial manufacturing sites or brownfields into 
new growth opportunities including sites for new manufacturing and 
intermodal warehousing and distribution. The majority of these post-
industrial manufacturing sites are situated in close proximity to both 
emerging global intermodal rail service and marine highways thus 
providing shippers with transportation alternatives to ship or receive 
their products. With proper planning and coordination between both the 
public and private sectors, the Appalachian region will be an inland 
intermodal marketplace for the 21st century.
    Once again, Senator Rockefeller and distinguished guests, thank you 
for providing the Rahall Transportation Institute the opportunity to 
come before this distinguished committee.

    The Chairman. You're very welcome, and I thank you, Mr. 
Donovan.
    And Steve White, Director of Affiliated Construction 
Trades, West Virginia State Building and Construction Trades 
Council, you're up.

              STATEMENT OF STEVE WHITE, DIRECTOR, 
          WEST VIRGINIA AFFILIATED CONSTRUCTION TRADES

    Mr. White. OK. Last but not least, I hope, Senator. Thank 
you very much for the opportunity to be here.
    And my Congresswoman Capito and Congressman McKinley, I 
appreciate your being here as well.
    I represent 20,000 union construction workers in the State 
of West Virginia, 14 different crafts. We are excited about the 
opportunity--and ``opportunity'' is a word we've used quite a 
bit today. But I think opportunity is not a guarantee. So I 
bring to you two big concerns that I'd like you to consider 
focusing on.
    Of course, when we're talking about infrastructure, I think 
human infrastructure is a very important piece of the puzzle, 
that is, the skills that are needed to do the job or the jobs 
that are created. It's very important that we focus on the 
local workforce having the opportunity for those jobs.
    I can tell you from a workforce point of view that we are 
highly skilled, highly trained in all our crafts. We have a 
great infrastructure for training programs, as well as a drug-
free work force. You know, that's been quite an issue lately in 
the area. While the Nation suffers from drug problems, West 
Virginia no different. We have a dedicated drug-free program, 
testing pre-employment, et cetera. So I can tell you that we 
have the workforce to do the work from the boom, and we are 
doing a lot of the work.
    Pipeline is talked about, and our folks are the best and 
they're getting a lot of that work, and that's great. But we're 
not doing as much as we could. I think we really could do more 
in terms of employing local people, because construction 
unemployment remains high.
    Manufacturing decline is part of that. Where the plants no 
longer are, we no longer have construction opportunities. 
That's not just our work force. It's our contractors that we 
work for. So opportunities are important, but we need to do 
more to maximize the chance for our local workers and 
contractors to get onto these jobs.
    The other area I want to focus on is that we shouldn't be 
in a rush to export the raw material. We should be looking at 
the value-added products. So as the Commerce Committee, when 
you're overseeing some of these decisions about pipelines and 
export, don't be in a rush to export the raw material. Give the 
domestic and West Virginia manufacturing and other industries a 
chance to buildup the infrastructure that they'll need then to 
benefit, and then--you know, we understand that businesses have 
to get the best price. But we perhaps need a little patience 
and time to build that infrastructure.
    A couple of areas--I know I've been able to work--invited 
to be on some panels with the West Virginia Manufacturers 
Association. They are excited about the abundant raw material, 
natural gas, and the ethane that could be here. And they don't 
want to see anything exported in terms of the ethane, because 
they want to see it built right here. But they're going to need 
time to get to that.
    And the other thing that was talked about was the 
infrastructure--or the use of the natural gas for vehicles. The 
infrastructure just simply isn't there. And my concern is if 
we're in a rush or industry is in a rush--and, obviously, they 
want to get their best price--but to get the best price 
somewhere else, we're going to miss a tremendous opportunity.
    So I'll conclude to say we've got a great workforce here, a 
good contractor base as well. They need more opportunity to get 
this work. And we should focus on the value added right here in 
West Virginia.
    Thank you.
    [The prepared statement of Mr. White follows:]

             Prepared Statement of Steve White, Director, 
              West Virginia Affiliated Construction Trades

    Thank you, Senator Rockefeller, for bringing this very timely 
hearing to West Virginia.
    Development of the Marcellus Shale and the Utica Shale, across the 
river in Ohio, has the potential to create thousands of jobs for West 
Virginians. I remain optimistic about this potential, but the jury is 
still out.
    Make no mistake, this is not the gas industry we have grown up 
with; it is akin to a modern day gold rush with vast resources and 
billions at stake. Please don't confuse the new with the old.
    There has been a focus on drilling jobs, but the vast majority of 
jobs directly related to shale development are construction jobs--
building the pipelines and processing facilities.
    I am here today on behalf of the state's 20,000 union construction 
workers. These men and women are a critical part of West Virginia's 
infrastructure, no less than a road or bridge.
    Whether or not West Virginia prospers from the Marcellus 
development in many ways hinges on whether or not our local workforce 
succeeds in getting the jobs.
    We have every reason to believe they can succeed because our 20,000 
workers, representing 14 skilled crafts, are well-trained and certified 
drug free. Our workers can perform any construction task there is 
relating to Marcellus activity. They're ready to go to work today.
    Each of our member unions has a comprehensive apprenticeship 
program that lasts anywhere from 2 to 5 years. We have 32 state-of-the-
art training centers scattered across West Virginia providing an 
education funded by unions and employers. Apprentices ``earn while they 
learn'' and when they complete their training, they have no student 
loans to pay off.
    There has been a great deal of public discussion about drug issues, 
so I stress that all of our members are regularly drug-tested during 
their training and employment. They come to an employer certified drug-
free.
    Not only are these men and women drug-free and highly trained, they 
are productive members of their communities. They volunteer, pay taxes, 
raise their children and vote right here. They are the workers who have 
built the region--its chemical and power plants, manufacturing 
facilities, schools, hospitals, offices, bridges and more.
    Many are currently working on gas-related construction, building 
pipelines and processing facilities for companies such as Caiman Energy 
and MarkWest Liberty. They are employed by local contractors like the 
Chapman Corporation and Apex Pipeline Services, to name a few.
    Unfortunately too many companies are importing workers and too many 
local businesses are not given a chance to bid projects. We need to 
encourage all companies to hire locally.
    If local workers and contractors aren't given a chance for these 
good-paying jobs, then we've lost a tremendous opportunity to build 
stronger families and communities and a better future for our next 
generation.
    Our declining manufacturing base means fewer prospects for local 
contractors and workers. Unemployment remains high in the very same 
region where prosperity seems so bright.
    When a plant closes and we lose hundreds of jobs, there is a huge 
uproar, and rightfully so. Yet, when companies bring in out-of-area 
workers and we lose hundreds of local jobs, there is little outcry.
    According to a recent study by Marshall University's Center for 
Business and Economic Research, using local workers to build just one 
large gas processing facility could add $86.4 million in wages into the 
local economy. However, hiring non-local reduces that figure to $9.8 
million.
    We have an unprecedented opportunity in shale development, so let's 
make sure all West Virginians have a chance to benefit.

    The Chairman. Thank you very much, Steve White.
    We'll go now to our questioning. And we had actually sort 
of divided it up into the three categories that I had suggested 
we were going to discuss. But, you know, some of us had more 
time to prepare than others. So we're going to kind of 
freelance it, and you get the same result, and sometimes it's 
more fun.
    So what we will do is that I will ask two questions, and 
then I'll go to Congresswoman Capito, then to Congressman 
McKinley. And I get the advantage because I chair the Commerce 
Committee. So I get two questions, and they get one. But the 
point is we're each going to be--we'll just be coming at you at 
various different directions. So be alert.
    I'm going to start with you, Paul Mattox. What, under state 
law or state practice or departmental law, is the maximum 
amount of weight that a truck can carry?
    Mr. Mattox. It's currently 120,000 pounds in our coal 
resource transportation system. Off the system----
    The Chairman. Is that on a truck or a train?
    Mr. Mattox. Those are trucks. Generally, 80,000 to 65,000 
is more in line with most roads in the State.
    The Chairman. The reason I asked that is I wanted to go to 
the sheriff next.
    You had indicated that 40,000 is what you had assumed was 
the maximum weight. But what you said is that these out-of-
state folks would come in--subcontractors--they would come in. 
And you were very, very helpful in your testimony, because you 
said that they tended not really to care, maybe--you didn't say 
they didn't know what state they were in, but they were 
certainly going from one state to another state to another 
state. And therefore, they wouldn't necessarily have, one, an 
understanding of West Virginia roads, and, believe me, that's 
an art form.
    It's very interesting to bring somebody from elsewhere in 
the country and put them in a power wheel situation on West 
Virginia roads. They'll usually stay on those roads, but not 
always.
    So just the act of running a truck at 80,000 or 120,000, if 
that is what--and I don't know that for sure. I'll have to ask 
one of the companies if they have their subcontractors carrying 
that kind of weight--scares the dickens out of me, simply 
because I was brought up on Route 52, not literally, but that 
was my--and that was a pretty big secondary road. It just 
mostly crumbled into the valleys beneath it because of the 
weight of the coal trucks and so.
    And I remember with coal trucks--I mean, we had--when I was 
Governor, we had go-rounds--and probably your father, too, 
Congresswoman Capito--with--they'd go through with tremendous 
amounts of coal, but they wouldn't put a tarp on. So the dust 
just went into everybody's house, and it became a really big 
problem. We finally got them to agree to put on a tarp--a lot 
of controversy on that, but it turned out to be a good thing.
    But the amount of weight that a truck can carry when they 
have to make the enormous numbers of trips--and I've got a 
chart here that explains how many for each purpose they have to 
make to a single site, let's say, where a pad is being put in 
and a drilling project is about to start--is very, very 
important.
    So can you comment on this 120,000 pounds or on the 80,000 
pounds and how you see that with respect to the concerns that 
you expressed, which were very genuine, on-the-ground concerns 
of a practicing sheriff with a limited number of deputies and a 
limited number of dollars?
    Mr. Gruzinskas. Yes, sir. I think that that's--I think 
you've got a good grasp of that situation. Normally, our county 
roads--and I think Mr. Mattox can help me out here--is 43,000 
or 45,000 pounds out in the country. These contractors can 
apply for permits to run over weight and over length and over 
height. And you have a chart, so you know how many trucks they 
need to supply one well site with either sand or fracking water 
or whatever product that they're bringing.
    So in some cases, we have had situations where there would 
be 60, 70 of these overweight vehicles going to a well site. 
And that relentless damage or that relentless pressure on these 
roads is crushing these highways. We had some situations on 
Bowmans Ridge Road, which is--although it's a very small road, 
it's one of our major arteries, and it's east and west. A 
vehicle carrying fracking mud or the drilling mud collapsed a 
section of the highway, and that's why that road--or a vehicle 
went over the hill.
    So their own weight is their worst enemy and our worst 
enemy as well. This constant attack, this constant--and I don't 
mean that in a derogatory tone. But just that relentless 
pressure of all this weight on these roads is tearing them up.
    When they have a convoy of 10, 12 trucks, and they meet 
oncoming traffic--and in many cases elderly people that are 
driving in the opposite direction--and they side swipe a 
vehicle, they don't stop. They don't stop. They just keep 
going. And, in turn, it's very difficult for us to try and 
identify the violators, because in many cases there might be 20 
white tri-axle dump trucks. So we don't know who hit them.
    But that's a problem we're seeing. And, I mean, that's 
boots on the ground looking at this.
    The Chairman. OK. I'll just conclude by this. I think that 
if we do things right, this is a definite net- plus for the 
State in large terms and very, very exciting, particularly, 
from my point of view for the manufacturing downstream.
    Secretary Mattox, how would you respond to that secondary 
road, 40 to 45? I thought that was the limit, then also 80 to 
120? And we're talking about people here.
    Mr. Mattox. Generally, the posting of a road is controlled 
by small bridges that are posted. And it just depends on which 
road that you're on in the county route system. But, generally, 
the larger loads--we do require them to get permits. They 
generally are required to have escorts with them.
    And just listening to the sheriff speak--some of the things 
that I'll discuss with our folks is maybe imposing speed limits 
on roads that are utilized by the oil and gas industry and also 
take a look at the roads that they're utilizing and look at 
maybe some better signing for curves, where the road narrows, 
where there's some issues that we can better inform the public 
about. As you mentioned, a lot of the subcontractors come from 
out-of-state. They aren't as adept at driving on our curvy, 
narrow back roads as some of our residents.
    So I appreciate the sheriff's comments, and we'll look into 
seeing if we can make them a little safer for our citizens.
    The Chairman. OK. I'm going to turn to Congresswoman 
Capito. But that is clearly a problem that's got to be nailed 
down. That's got to be a written policy. There's got to be 
understandings of categories of secondary roads, the very rural 
ones, the less rural ones. Then you get up, eventually, to 
Route 52, which really isn't a secondary road at all, which was 
absolutely clobbered for 35 or 40 years and probably still is, 
a little less so.
    I appreciate your answers, and so I turn to Congresswoman 
Capito.
    Ms. Capito. Thank you.
    I wanted to kind of follow up on kind of a combo question 
on the--when I was in Marshall County, I guess Chesapeake is 
building a pipeline to carry the water up--or is it already--
it's already built--assuming that that will take some of these 
heavy trucks off the roads. Is that correct?
    Mr. Rotruck. Congresswoman Capito, that's exactly right. In 
fact, we built an 11-mile pipeline from the Ohio River into 
Wetzel County, and that really does help. And as to getting 
truck traffic off the roads, recycling of water has been very 
important. That has lessened the amount of fresh water we 
needed to do hydraulic fracturing, because that weight is very 
related.
    In fact, the Secretary will tell you when they did the new 
regs and they did the new policy, they looked at the amount of 
water that we'd use as a proxy for how we dealt with the roads 
in terms of bonding. So that will help us.
    Ms. Capito. OK. So I guess what I'm getting to is after the 
fracking occurs and the well is producing, would it be a 
correct assumption to think that there would be less truck 
traffic on the road? Does it continue--you know, obviously, as 
new wells are being drilled, yes, it does continue. But can the 
residents of Marshall County anticipate a time where it will 
settle back down to them and they may go back to a little more 
life as normal, at least on the roads?
    Mr. Rotruck. Yes, ma'am. I think that is the correct 
conclusion, yes.
    Ms. Capito. Well, I echo the comments of the Senator that 
this is--I mean, we were just up on those roads, so I know 
exactly what you're talking about.
    Mr. Rotruck. Yes.
    Ms. Capito. And it's extremely important that those 
residents have the peace of mind that they're not going to get 
side swiped as they're going to church or wherever they're 
going.
    Mr. Rotruck. Yes, ma'am.
    Ms. Capito. Thank you.
    The Chairman. Thank you.
    And Congressman McKinley?
    Mr. McKinley. Thank you, Senator.
    Mr. Albert, I've got a couple of questions, but, 
apparently, we're limited to one question right now. So let me 
just start with you, if you could, please. You heard Mr. 
Burdette say that economic certainty--or regulatory certainty 
would be a boon. And in your remarks, you talked about a growth 
environment to help manufacturing.
    Can you give us some examples of what we need to do in 
Congress to address that so that we can improve our 
manufacturing base here in this country and especially here in 
West Virginia?
    Mr. Albert. I think so. And I think Corky touched on one 
example I will tell you, and that's this ongoing--I'll call it 
consternation, if you might, between the EPA and the Corps of 
Engineers when it comes to stream crossing permits. It is quite 
challenging. I think--and I won't speak for Chesapeake, but I 
know Scott Rotruck's company at one point had many wells shut 
in simply because they couldn't get pipeline permits due to 
this issue.
    We face the very same thing. So it is a problem. Just one 
example of my company--in Pennsylvania, not West Virginia, but 
this is played out in every state, because it's the EPA and the 
Corps. We kept wells shut in for over 9 months to get stream 
crossing permits for areas that I would tell you that none of 
us would even consider being a stream. I'm talking about, 
literally, a depression in a hollow that, because it has a blue 
line on it on a USGS map, is now a navigable stream. And it 
requires months and months of permits and waiting on permits to 
get that. So that's just one example.
    Another one--the Congresswoman touched on getting truck 
traffic off the road. We need centralized impoundments to be 
able to do that. And we are now again--not necessarily a Corps 
of Engineers nor EPA, but it is a lot of times a State of West 
Virginia DP or a Pennsylvania DP issue--getting centralized 
impoundments so that we can have water in one place and not 
have to truck it from site to site or even pipe it from site to 
site, because you're held, on one hand, where you can't get a 
permit to do a stream crossing forces you to put more truck 
traffic on the road to be able to conduct our business.
    So when we talk about regulatory certainty, you know, none 
of us in industry want, you know, a free hand to do whatever we 
want to do. We just want to know what the rules are, and we'll 
play by them. But, you know, that's what we mean by certainty, 
just if we know what they are, we'll abide by them. But when 
they're changing literally every hour of the day, it's a very 
difficult climate to invest in.
    Mr. McKinley. Thank you.
    The Chairman. Thank you, Congressman.
    Mr. Albert, when you were making your presentation, you 
were talking about things that concern you as you plan. You 
didn't mention people. You mentioned other types of problems, 
EPA, et cetera, but not people. I repeat, again, I think on a 
net basis, this is going to be a really wonderful thing for 
West Virginia. That's what I care about.
    But in order for it to be that way, we've got to do it 
right from the start. Now, there's some things we can change. 
There's some things we can't change. We can complain about 
everything, but we have to deal in some level of a real world.
    So, I mean, I guess one question I would ask you would be 
in that there's such a--in going over the reams of comments 
that I get and these two folks get from constituents about 
overweight crushing of roads, going through yards, and 
terrifying all night long--whether or not there's a gas--you 
know, a water or gas transmission line or whatever, it's a fact 
of life.
    So why is it that you don't get West Virginia drivers? Is 
there a law that says you have to have a subcontractor from 
Oklahoma or Texas or some other place?
    Mr. Albert. No, and I will tell you----
    The Chairman. And it would be an awfully good goodwill 
builder----
    Mr. Albert. I will tell you that CONSOL Energy--we strive--
as I said before, we employ over 4,300 people in the State of 
West Virginia. So we're one of the largest employers in the 
State. And we strive, whether it's through subcontractors or 
others, that we employ West Virginians. However, I can't 
mandate to my subcontractors: You have to employ, you know, X 
percentage of West Virginians.
    The Chairman. You know what, I think you can, and I think 
most of them are not West Virginians, and perhaps all of them 
are not West Virginians, and I'm talking about the drivers. If 
you say you can't do it, maybe it's not in any written law or 
any business practice booklet, but I would think that you 
probably could do that.
    Mr. Albert. Well, you know, to rephrase, I suppose----
    The Chairman. Or else hire somebody else.
    Mr. Albert. I suppose I could do that. But, you know, the 
practice of hiring contractors is we put the work out for bid, 
and we take what's the most economic for our company and our 
shareholders to do that. And I'll tell you we don't go by where 
the people are employed from.
    Now, again, we strive to--and I wish I had the statistics. 
Again, CONSOL employs over 4,300 people in the State of West 
Virginia. We strive through our drilling contractors and our 
trucking contractors to do business with West Virginia firms. 
If we're in Pennsylvania, we try to do business with 
Pennsylvania firms. When we're in West Virginia, we try to do 
business with West Virginia firms. Those firms have to exist, 
you know. I can't create a trucking company in the State of 
West Virginia or in Marshall County, for example, if it's not 
there.
    As much as I'd like for everyone employed for a well that 
we're drilling in Marshall County to be from Marshall County, 
if those workers aren't there, I can't--hopefully, as the 
demand picks up, people will see that it's a place--as the 
Congresswoman suggested, she's seen people coming back to her 
home State and her home county to take these jobs that are 
there. But, you know, if West Virginians aren't stepping up to 
fill them, I don't know what as an employer we can do to make 
that happen.
    The Chairman. Well, I mean, you say that you have to take 
the lowest contract. I don't know if that's in the U.S. 
Constitution or not. I don't think so. But you do that because 
you say, well, you have stakeholder pressure on you if you 
didn't take the lowest contract.
    But on the other hand, here you are for the long term in a 
State where unemployment is high, where people have 
extraordinary skills, mechanical skills, driving skills--most 
any teenager can fix any kind of a car that--you know, any 
problem that it has, and everybody knows how to drive West 
Virginia roads.
    So, I mean, is it not possible that you would make an 
effort--and I could ask this of Mr. Scott Rotruck, too, at 
Chesapeake--to make an effort to make sure that the people who 
are--you know, if you've got to create something or work with 
West Virginia or whatever to make those West Virginia drivers, 
it's going to be a lot better for the roads. It's going to be a 
lot better for a lot of front yards. It's going to be a lot 
better for a lot of scared kids and people who stay up all 
night because those trucks run all night.
    Mr. Albert. Well, and before Mr. Rotruck answers, I'll tell 
you, just like Chesapeake, our first priority is safety. So, 
first and foremost, the person who's driving that truck has to 
be qualified. He has to have a CDL license in the State of West 
Virginia or whatever State we're operating in. So he has to be 
qualified.
    All we can do, sir, is provide the opportunity, provide the 
mechanism for the job to be there. I can't mandate, nor will I 
mandate, that every driver come from the State of West 
Virginia. I will tell you that we're going to have a job 
creation engine that provides the jobs and the opportunities 
for people to step up. That's part of a free market economy. 
And, hopefully, there'll be--I'm a lifelong--born in West 
Virginia, raised in West Virginia my entire life. So I am 
sensitive to that need.
    I didn't come here wearing cowboy boots from the State of 
Texas. I grew up in West Virginia. I'm proud of that. I'm proud 
of my heritage, and I will do everything I can to ensure that 
we employ West Virginians. But all I can tell you is that we 
will provide the opportunity. The person has to be there to 
fill the job, and they have to be qualified, and they have to 
be able to do it in a safe fashion.
    The Chairman. Did you think, therefore, that the sheriff 
was overstating his case?
    Mr. Albert. Absolutely not. I've been to Marshall County. I 
think the sheriff will tell you we have worked--CONSOL Energy 
has worked--we put CBs in the school buses in Marshall County 
so that school bus drivers could communicate with our 
subcontractors and our road people so they would know when our 
trucks were coming. We've been very proactive. We've spent over 
$4.5 million in Marshall County alone repairing roads and 
upgrading roads.
    So, absolutely, the sheriff is not at all talking about--if 
anything at all, he's probably underplayed the situation in 
Marshall County. It's very critical. But I'm telling you CONSOL 
Energy and, as I know, Scott Rotruck's company, Chesapeake, we 
have stepped up and we have done all that we can right now to--
and I think the sheriff will tell you that. We've been as good 
a neighbors as we can be in Marshall County.
    Do we have some subcontractors that are causing problems? 
Yes, we do. Do we deal with that in a proactive fashion when we 
find that out? Yes, we do. And are some of those people West 
Virginia drivers? Yes, they are. So, you know, I think it's a 
bit unfair to characterize it as the whole problem is just 
people from out-of-state causing the problems. That's part of 
it.
    But, you know, a part of it is the situation of the roads 
that were there to begin with. But, again, we're working very 
hard and very proactively with Marshall County to correct the 
situation.
    The Chairman. OK. Well, that's the end of me. Are you up 
or, Dave, you're up?
    Ms. Capito. I just have a brief comment on the contractor 
issue. I've been curious to know--but I don't want this to be 
my primary question.
    What kind of pre-training you do. It seems to me that--I 
know you put it out for bid and all that. But do you have, you 
know, pre-training of your drivers that come in to warn them--
you know, prepare them on the road? Or do they just--as long as 
they're getting the job done, that's what they do?
    Mr. Rotruck. Congresswoman, we're very proactive in that 
regard. Senator Rockefeller mentioned earlier, first, be smart 
up front. We have learned a lot of lessons on what works better 
and better. As to the drivers, as Randy said, they have to have 
CDL licenses. That's a good--that's a very, very valuable thing 
for a worker to have. We're going to have to have a lot of 
truck drivers for a long time. And as has been observed, this 
is a special terrain.
    It is always better for us to hire locally. For one thing, 
they become our Ambassadors. We want to hire locally. But the 
expertise is not in-house, Congresswoman. It lies in those 
vendors. But we have stand-downs and make certain that those 
venders know that they have to be absolutely compliant with the 
regulations and the rules.
    Are there problems? Yes, ma'am. Part of it is because our 
factory is spread far and wide, so it takes a lot of effort to 
manage it. But we're getting better.
    Ms. Capito. I would think this would present an 
opportunity, too, for community colleges.
    David, you mentioned that in your opening statement, that 
there's opportunities for the educational institutions to begin 
to train West Virginians to meet the challenges--to meet the 
demand and the opportunity for the jobs.
    So my bigger question is--one of my fears of the 
development of this valuable resources is that we as a state--
and, Mr. Secretary, you may help me with this--don't make sure 
that our citizens are the ones that are the most direct 
beneficiary of the riches that we have. We're suffering 
disruptions. We're making sacrifices. We know we've done this 
in other industries.
    And when I think about re-ramping up the chemical industry, 
say, in the Kanawha Valley or going up the Ohio River, you 
can't do this, as Mr. White said, in 6 months. And these 
companies are going to look for the long term to see if this is 
going to be profitable 10 and 20 years from now and, of course, 
we're going to have the supply.
    I want to make sure that--I mean, I guess what I'm 
interested in is what are we doing on the ground level now here 
in West Virginia to make sure that resource development into 
the chemical and manufacturing industry really is staying, you 
know, within our boundaries? I mean, not exclusively--and I 
understand we're in a region and all that kind of thing.
    But I think that is exceedingly important, because when I 
go to Marshall County, and I go to the hairdresser, and I say 
to the woman who's doing my mother's hair--somebody might have 
heard me tell this story, but I said to her, ``Wow. So do you 
have a well on your property?'' You know, she lives out in the 
country. And she said, ``Actually, we do.'' And I said, ``Well, 
so are you going to Disney World?'' You know, I'm thinking 
she's hitting the big mother lode. She's, you know, packing up 
and moving to somewhere else. And she said, ``No, but I am 
going to buy new carpet for my house.''
    But, to me, that tells me that the person who's selling the 
carpet, the person who's installing the carpet, the person 
who's, you know, buying the truck that used for carting the 
carpet is--you know, that's the economic development. I want to 
make sure that that's going to be in Marshall County, in Wetzel 
County, and the rest of the state.
    So I'll give you an opportunity. And then the chemical--Mr. 
Kean might want to address the--how we know that chemical 
industry is going to come back. We know it looks good now. Is 
it going to look good in 10 or 20 years?
    Mr. Burdette. Well, let me begin by saying that's exactly 
our purpose right now. West Virginia has always been an energy 
extractive State for a gazillion years, and we're blessed with 
huge resources and Marcellus being the latest. But Marcellus 
presents that unique opportunity to take a part of an 
extractive industry and create value-added opportunities for 
it.
    It has been used--I specifically struck it from my remarks 
because everybody used ``game changer.'' But it certainly puts 
us in a position to replay the game, because West Virginia--the 
first major petrochemical plant ever built in this country was 
built in the Kanawha Valley by Union Carbide in 1927 on Blaine 
Island.
    We have a long history in this. We know the value of it. We 
are comfortable with the industry. And our administration is 
focused extensively on how we build not just a plant, but the 
structure that encourages multiple opportunities to occur to 
the state.
    You know, the chatter about a cracker is important. It's a 
big project. It's a big project in and of itself. But it really 
pales in comparison to the downstream opportunities that are 
attracted to it like a magnet, because it brings to the 
Northeast--West Virginia hopefully being the center--it brings 
to the Northeast low-cost feedstock, maybe some of the lowest-
cost ethane-related feedstock in the world outside of the 
Persian Gulf.
    It places that feedstock in close proximity to its markets, 
which it's never really been. It's always been close to the 
Gulf Coast or has been for 30 years. Our challenge is to not 
just to attract the anchors. It is to also work on building the 
infrastructure. Where is it stored? Can we create long-term 
stability in not the gas market, per se, but the ethane market, 
which will drive the chemical and plastics manufacturing 
industry?
    So a lot of our focus right now is split in multiple 
directions. One, we need the anchors. We need the cracker. We 
want them all built in West Virginia. But the fact is if 
they're built in close proximity to us, we're going to benefit. 
We know that. Every other State, by the way, knows that. When 
Shell did its search, Congresswoman, all three sites they 
considered were within 50 miles of each other, 50 miles. Draw a 
circle of 75 miles and look at the impact zone for a facility 
like that.
    So we draw the anchor. The next step is to make sure there 
is a strong enough pipeline network to transport that ethane 
across the region, that there are fractionators, separators and 
fractionators, in the network--largely being built now, quite 
frankly--and that we have developed a transportation system 
that gets those products out to the marketplace at a reasonable 
cost, and that there are storage opportunities that will help 
stabilize the market, make sure that it's always there.
    Specifically, you know, we could have those discussions 
about where and what we're doing. But the bottom line is that's 
exactly how we're looking at this. We believe that's where our 
focus has to be.
    Mr. Kean. Yes, I agree with everything you said, and I 
would simply add that another opportunity for West Virginia is 
in the export market. A lot of the incremental ethylene 
demand--production that will be built in the years to come will 
be converted into products that are exported all over the 
world. So West Virginia is well positioned to participate in 
that part of the market as well.
    The Chairman. Don't take this personally. We've got to 
restrict, OK? The former president of the Senate was on a roll. 
And so what we've got to do is we're going to have 5 minutes, 
which includes both the question and the answer.
    Mr. McKinley. Yes, I do. I take it personally, yes.
    [Laughter.]
    Mr. McKinley. I've heard you all carry on with this, but 
let me--I want to go back to the very beginning that said what 
the purpose is for this meeting, the transportation, pipeline, 
and rail needs to renew American manufacturing. I hope we spend 
more time getting manufacturing and where the jobs are. This is 
the jobs--how we're going to build this economy back. And we've 
gotten off game, I think, here a little bit on that.
    So I want to go back to railroads. Next to barge traffic, 
that's the most economical way to transport products. We've 
ripped up a lot of our railroads in the Rails to Trails, which 
I, quite frankly, enjoy and appreciate that. But what can we do 
with the railroads? What can we do to help railroads? Because 
if we help railroads, then we're going to help manufacturing. 
Would you connect the two dots?
    Mr. Piacente. I would connect the two. I mean, we do a very 
good job today of investing back in our own network and 
investing in our own resources----
    Mr. McKinley. But that doesn't mean that we'll get our--
some more of our manufacturing. This thing--because we heard 
when we lost the cracker, it was rails, river, and roads. And I 
don't want to make the same mistake again, because Keith is 
right. There are going to be a second or a third cracker, and I 
don't want to miss it because of our rails.
    What do we need to do from you--from the perspective of 
rails to help out so that we will, indeed, renew our American 
manufacturing?
    Mr. Piacente. Well, I can tell you that during the Shell 
negotiation, you know, we competed vigorously, whether it was 
West Virginia or Pennsylvania or Ohio. We listened very 
carefully. We competed vigorously. It was a very tough 
negotiation. Hopefully, they will ultimately build. But for us, 
you know, giving good, fair contracts that offer stability very 
long term, that was in our best interest to do. So we think we 
did our part in trying to offer incentives to locate a cracker 
here in the Northeast.
    Mr. McKinley. Should we be trying to expand our rails 
again?
    Mr. Piacente. That's tough to do in certain areas. 
Perhaps--I mean, what Mr. Donovan was talking about, the 
national gateway that helps intermodal traffic that would take 
product to import and export. I will tell you that regulations 
like positive train control don't help. We're having to make 
tradeoffs in our capital budget to support a, you know, $1.2 
billion investment in the next 5 years on that technology 
versus, you know, making tradeoffs for other resources in our 
network. And we're going through those processes, you know, on 
an annual basis right now.
    So, you know, regulations and legislation that encourage 
development are important. Those that don't--they hurt. They 
hurt substantially. It drives our capital costs up, and we have 
to make tradeoffs at certain points.
    But in this area, particularly, in West Virginia, we think 
we're situated very well to expand business. Our network is in 
good shape. There are a few constrained points, but nothing 
that we don't think we can overcome. Building rail cars is a 
substantial investment for us. And to bring that traffic here 
to this State, we need rail cars for things like frack sand.
    Mr. McKinley. Do other states have the same issue? I'm told 
not, but I'd like to hear your perspective of it, of the 
captive rails that are down at Texas. There might be two or 
three rails nearby. And that was one of the reasons we 
understand that it was a drawback. We only had one rail in some 
locations.
    Mr. Piacente. Well, the location they selected in 
Pennsylvania is a one-railroad served location.
    Mr. McKinley. I'm sorry?
    Mr. Piacente. The location they selected in Pennsylvania is 
a one-railroad served location.
    Mr. McKinley. So if it's the same river that flows past 
West Virginia and it's the same railroad, it sounds like 
someone was trying to mislead us.
    Mr. Piacente. I'm not sure I follow that.
    Mr. McKinley. They said the reason they didn't select West 
Virginia is rail, river, and roads, and it's the same river and 
it's the same rail. And our roads, thanks to Mattox and others, 
I think are pretty incredible. I want to make sure our people 
have jobs.
    Mr. Piacente. I understand.
    Mr. McKinley. That's what we're here for--and the 
manufacturing jobs and construction jobs will stay here.
    Mr. Piacente. And we have the same interest in West 
Virginia.
    Mr. McKinley. Thank you.
    The Chairman. Good line of questioning.
    Mr. Piacente, you know that I would not be at a hearing, 
publicly or privately, without discussing the Staggers Act. And 
Mr. Kean is just absolutely on the tip of his toes because the 
American Chemical Council supported us all the way along on 
that and still do. And that's the theory that if there's one 
rail going in, that rail can charge monopoly prices. And if 
there are two railroads going in, they've got to compete with 
each other, and because it's a free enterprise competition, the 
price comes down.
    Now, you used a very interesting phrase just a moment ago 
when you were talking about working something out with 
somebody, and you talked about a discount. Now, discount says 
to me two things. One is that's good. But if it's discounted 
from something to something, that means that maybe the next one 
goes back up to where it used to be.
    So my question to you is--and I'll go further on this. 
CSX--I remember John Snow 10 or 15 years ago when he was in my 
office in the Senate, and I was going after him, as I have, you 
know, after railroads for 26 years in the Senate, 27, whatever 
it is--on the Staggers Act, that that is the way it's meant to 
be. There was a very compliant Surface Transportation Board, 
which it is now ICC, which is what it was then--always very 
compliant, always went along with the railroads.
    That's a little less so. You have a very powerful lobby. 
But the point is that he was trying to get me to back off, and 
so he said, ``Guess what''--and he and I were alone. We both 
wanted it that way. And he said, ``I'll knock $8 million off 
what I charge Weirton,'' which was at that point doing 
wonderfully. And so that was really good news. I wasn't going 
to say, ``The hell you are. You're not going to do that.'' I 
said, ``That's great.''
    But, you see, he then got up and walked out, and that was 
the deal. He placated me for the purpose--I have a huge--
invested into Weirton Steel over 30 years, more than that, 
actually. And so that was the problem.
    Then others, as they came in--chemical companies, in 
particular, came in to see me, and they would say, ``Well, you 
know, he didn't offer us any discount, any lower rate.'' He 
decided what the rate was going to be, because under the 
Staggers Act, he shouldn't be able to do that, but he did do 
that, and they do do that. And because you're always under the 
radar in the American public--although I think the American 
Railroad Association is more powerful than the National Rifle 
Association. I really do. I mean, in effect, it was because 
it's always under the radar.
    But my question to you is, are you--is this going to be a 
matter of discounts on a selective basis? Or where there's a 
single rail going in, which would seem to me to be the majority 
of the cases--I don't know, but that would seem to be--that 
you're going to have a specific policy which is constant, so 
you don't have to use the word ``discount'' because that means 
that you're dis-counting down from something up here, which 
sounds more permanent to me. Can you talk about that?
    Mr. Piacente. Well, I would tell you that we compete 
vigorously for business. And whether the customer is looking to 
locate on a location that is only served by CSX or served by 
Norfolk Southern, for whatever reason--and there's many reasons 
they choose industrial sites--utility costs, labor, tax 
incentives, whatever they might be--we're in that hunt for that 
business just as well as our competitors. And so we offer 
prices to try and compete for that business to locate on our 
railroad.
    The Chairman. But you're not competing in most--and I'm not 
talking about where there are dual railroads. I'm talking about 
where there's single railroads.
    Mr. Piacente. I understand.
    The Chairman. You're not competing.
    Mr. Piacente. Well, we're competing to land that company--
--
    The Chairman. The railroad is there.
    Mr. Piacente. The railroad is there, but we're competing to 
locate them on that industrial site. They have choices, and 
they make those choices with a whole host of factors. We 
understood that freight component of that decision was not in 
their top tier--one, two, three, four, five--of that final 
decisionmaking process, which told us we gave them a 
satisfactory package. As we've done with Dominion, as we've 
done with Caiman, as we've done with the coal companies, we've 
been landing to expand on our railroad. So we're offering 
packages to try and encourage them to spend their money on our 
railroad, where that, you know, industrial site is.
    Now, as far as some of the products they ship, they may 
have an opportunity where they're apt to truck it over to an 
intermodal terminal, take advantage of containers going through 
export terminals in New Jersey or Pennsylvania. If they are 
shipping it in a covered hopper car, and they don't like our 
freight rates, we've given them competitive prices to try and 
connect to another railroad. They also have the opportunity to 
truck to a site that is served by our rail competitor that's 
very, very close by.
    So there's multiple options that they use in trying to 
leverage us, in addition to other business that they have with 
us across the network. And again, I would go back to the fact 
that we've been very successful in landing new customers on our 
railroad here--$550 million worth of investments last year on 
sites in West Virginia. We're very proud of that. It puts our 
employees to work as well.
    The Chairman. I understand that. But you're also making a 
lot of money. I mean, you come in to the Commerce Committee, 
and you plead revenue inadequacy, and then we take out your 
annual report, and it knocks the socks off of everybody sitting 
around the table.
    So, Mr. Kean, I just want to put you on the spot. I didn't 
entirely understand his answer. Did you?
    Mr. Kean. I have to confess that transportation policy is 
out of my element.
    The Chairman. Oh, no, it's not.
    [Laughter.]
    Mr. Kean. I'm really not versed in the issues, but I do 
know that our organization has had--has been by to see you a 
lot over the years on these issues. I'm not versed in it, 
though. I'm sorry.
    The Chairman. All right. My thing says to stop, so I will.
    Congresswoman Capito?
    Ms. Capito. Thank you.
    I'd like to ask Mr. White and Mr. DeMarco a quick question. 
We've talked about shortages of CDL drivers, West Virginians, 
and I think it's a nationwide shortage, quite frankly. What 
other identified shortages do we have in our workforce now? We 
hear that we have 20,000 construction workers. Are there 
certain areas that we're lax in? And are any of the companies 
that are hiring--where are you having trouble finding folks to 
fill the jobs, and are you aggressively working with the 
educational institutions to see that we get a pipeline for the 
workers of the future in this business?
    Mr. White?
    Mr. White. Sure. I would say right now, the pipeline skills 
are in high demand, and as we----
    Ms. Capito. Welding? Welders and----
    Mr. White. Yes, welders and equipment operators and 
laborers who know how to work. Even if you're an equipment 
operator on a road, you're not necessarily suited for a 
pipeline. The terrain is very difficult, and it takes quite a 
while to get someone up to speed.
    We do have a pretty robust network of apprenticeship 
programs. And I know--for instance, our laborers in Wheeling 
were just telling me they've got 140 apprentices, which is a 
pretty big number for one local, almost all because of the 
pipeline work. So we're trying to meet the challenge, but it is 
a challenge.
    In our business, it's somewhat a tale of two cities, 
because you have high unemployment for the folks who have built 
a building like this, for instance, what we would call 
commercial construction, still is in the down--you know, in the 
doldrums, so to speak. And so it's hard to convert those folks 
over. So, you know, we have plenty of people who are ready, 
willing, and able. The pipeline right now, for us, is the short 
point.
    Ms. Capito. Mr. Albert or Mr. DeMarco first, yes.
    Mr. DeMarco. Actually, we're doing several things right 
now. We've been working with community technical colleges in 
West Virginia for approximately 6 years now, maybe a little bit 
longer, identifying different skill sets that they can help us 
with. And those aren't extended training programs. Those are 
short-term--and when I say short- term, you know, 180 days 
maybe and we're trying to develop those things, and we have 
developed them on specific skill sets, so that individuals can 
take those in the evenings and on weekends and those kinds of 
things.
    We've recently worked with the National Guard to identify 
people coming back from deployment, men and women coming back 
from deployment with certain skill sets. One of the big 
problems we've had is a lot of the people who we would use as 
adjunct professors in the community colleges, because of the 
skill sets they have, they're so high in demand it's hard to 
get their time to go in.
    We'll use welders as an example. We looked for 2 years to 
find people who had retired from our industry who knew our 
welding skill sets and put them in a community college setting 
so they could teach welding. It was impossible to get somebody, 
because once these folks retired from XYZ company, they went to 
work the next day for ABC company.
    But we were able to get some individuals who had general 
welding techniques. We were able to get them trained, so we're 
offering those programs now. It's been tough to ramp up. I 
mean, we're doing everything we can. We're doing some things 
with the K-12 program, trying to educate kids about the energy 
industry so that they don't see just the ducks with oil on them 
from the Exxon Valdez in the textbooks and ruin their thought 
processes about being able to come into this industry as a 
career.
    Mr. White. Could I follow up?
    Ms. Capito. Sure.
    Mr. White. I can get you all the welders--we have all the 
welders you need. And sometimes I think that there's a 
disconnect, and maybe those of us in this room could do a 
better job communicating about where the skill shortage is 
missing and the demand, you know, is. And so sometimes I think 
we're--not intentionally, but we're working across--not 
talking.
    Contracting--the same issue came up--I've got lots of 
contractors that I work with who are really looking for ways to 
get in on the bidding process. And I know I've talked to Scott 
Rotruck, and he's very open to wanting to facilitate that, and 
I think that's the same desire here. But we just have to do 
more to find a better mechanism to get that fixed. And we don't 
want to be training--I'm sure more welding folks could be 
trained. But I want to make sure we're training in the right 
place and employing those who--I've got welders who are 
unemployed. So I'll talk to Corky afterwards.
    Mr. Rotruck. Congresswoman, Mr. Albert earlier talked about 
415 people at well sites from 150 disciplines. One of the key 
things about our industry is that drilling companies really 
only have a small amount of people internally working on that 
pad. Most of them are contractors. And it is a problem, as 
Steve said. So we have hired two people to work specifically on 
workforce development and vendor relations.
    It is in our interest to cast the net as widely as we can 
for vendors, but it is hard. And one part is this work is so 
hard and so fast, a lot of times, once the folks find somebody 
that works for them, they don't want to re-bid. But we're 
pushing in that direction.
    Also, Mr. DeMarco mentioned a facility. It was the Pierpont 
Community Technical College facility in Braxton, now in Upshur 
County. We contributed to that. I just checked in with them 
recently and hear that they are training a lot of people. So 
there is a lot going on from high school to vo-tech to 
community colleges and to Marshall University and WVU. We are 
really trying.
    The last thing I would observe is this is really a regional 
play. Secretary Burdette mentioned that in terms of the 
benefits. We live so close to Pennsylvania and Ohio that a lot 
of times, those are not people from Oklahoma or Texas in those 
trucks--may have that license--it's somebody from this region, 
and they work back and forth across the border. That's just the 
nature of it.
    The Chairman. Thank you.
    I want to go to Corky, the infamous--or famous Corky. The 
GAO has put out a study which looks at gathering lines and 
larger lines and huge lines. And what they say is that there's 
a lack of data that exists concerning the construction quality 
and maintenance practices, locations and integrity of gathering 
pipelines. Those are the small ones. Those are what I'm 
particularly worried about right now.
    According to GAO, without data on these risk factors, the 
pipeline safety officials are unable to assess and manage 
safety risks associated with these pipelines. So the question I 
would have for you is: What is the state--I mean, I've heard 
the word ``mapping'' used several times here. But the word 
``mapping'' is kind of the benchmark, I think, from where you 
start because you don't know what you're running into, whether 
it's an aquifer or somebody's well or, you know, a buried 
septic tank or whatever it might be.
    What is the state-of-the-art in West Virginia on knowledge 
about where present lines are, which would then have some 
bearing upon where future lines are? But that would, indeed, be 
a different discipline, because you would have to have mapping 
for places which do not have lines.
    Mr. DeMarco. Well, first of all, the pipeline safety is the 
responsibility of the Public Service Commission for non-FERC 
lines, which are the non-interstate lines. So the Public 
Service Commission has that jurisdictional authority.
    The Chairman. You see, to me, that's not an answer. I'm 
asking you a question. What we're talking about----
    Mr. DeMarco. I'm getting to your question.
    The Chairman. OK.
    Mr. DeMarco. I just wanted to--you just said that--your 
comment was about who had the responsibility. They have the 
responsibility for pipeline safety. What we do is once we 
determine a line--if we want a line from Point A to Point B, 
then first of all we have to know whether we can get the right-
of-way for that line. We might have to purchase some land or 
use somebody else's right-of-way if it's able to be used.
    And then we actually have individuals who go out and they 
determine what's on those--within that right-of-way area, 
whether it's a wetlands, whether it's a rock formation that's 
going to be impossible to get through or highly uneconomical to 
try to cut through it. These individuals do those kinds of 
things. There's a lot of precursor work that goes into it, and 
then we start to develop the pipeline.
    You know, we used to share a lot of these things that now 
are more secretive after 9/11. You used to be able to get on 
the Internet and be able to find, generally, where a pipeline 
is. We're pretty restrictive about sharing those kinds of 
things. We share it within companies, but not----
    The Chairman. Restricted by whom?
    Mr. DeMarco. Pardon me?
    The Chairman. Restricted by whom?
    Mr. DeMarco. By the companies who own the infrastructure.
    The Chairman. Well, that sounds to me like a practice which 
ought to come to a rapid end. You know, that's what we're doing 
in cybersecurity with information sharing, and companies are 
going to have to and are gradually coming to understand that 
they have to share their much more complex patent information 
with each other and with the government in order to protect 
cyber attacks.
    Mr. DeMarco. And, Senator, I think we do share those with 
Homeland Security, and we do share those within the industry. 
So Scott's company would know where the CONSOL pipeline might 
be and then makes--and in a lot of cases, share right-of-ways 
for those pipelines. I mean, we try to do that as much as we 
possibly can, so that you don't have to build across lines. And 
if we can get into a right-of- way, the Department of Highways' 
right-of-way, another company's right-of-way, an AEP right-of-
way, then we try to negotiate to be able to put our pipelines 
in those right-of- ways.
    The Chairman. It still wasn't an answer, because that has 
to be--to work, you have to deal with all previous feeder 
pipelines, right? And that might be Chesapeake. That might be 
Dominion. That might be CONSOL. That might be anybody. But it 
doesn't really work if it's just some. So do you, in fact, 
share with all of those who do pipeline construction in West 
Virginia, or have done?
    Mr. DeMarco. If we know we're going to be in their area, 
yes, we do. Yes, we do.
    The Chairman. And then how do you know--if the GAO says 
that they don't have the data for this, how do you know that 
you have the accurate information about where they have put 
them in before--pipelines, which they may or may not be now 
using.
    Mr. DeMarco. Well, a lot of the pipelines are marked with 
right-of-way. And if they're not marked----
    The Chairman. You mean, a marked----
    Mr. DeMarco.--we would call around to the various companies 
and say, ``Do you have pipelines?'' The other thing that we 
also use is our--what's the utility----
    Mr. Rotruck. Miss Utility.
    Mr. DeMarco. Miss Utility. We have to report all of our 
pipelines to Miss Utility. So Miss Utility is contacted when 
we're going to put a pipeline in to see if they are aware of 
other pipelines within a particular region that we want to put 
our infrastructure through.
    The Chairman. OK. I'm over.
    Mr. McKinley. You took my spot.
    The Chairman. I took your spot? Good for me.
    Mr. McKinley. The Chairman has his privileges to be able to 
do that.
    Ms. Capito. It's your hearing.
    Mr. McKinley. Let me try it again back on manufacturing, 
because I thought that's why we were here. I'd like to 
understand, Scott, on the--with gas, we all know that the price 
of gas has dropped pretty precipitously now down to $2 and 
maybe 8 cents an MCF and dropping.
    Mr. Rotruck. Yes, sir.
    Mr. McKinley. We've got gasoline price that's going to hit 
$5 a gallon, likely, this summer. In terms of manufacturing and 
how can we use the shale gas development in manufacturing, can 
you give us some ideas? I think you all with Chesapeake are 
trying to do some things with compressed natural gas vehicles. 
I would think that we have an opportunity for manufacturing 
here in West Virginia. I know there's some efforts down in 
Charleston about that. So can you elaborate a little bit about 
some of the natural gas vehicles and other things we can do 
with natural gas?
    Mr. Rotruck. Yes, sir, Congressman. To go back in my 
history a bit, I used to work for a defense contractor, 
Hercules Aerospace, and we had a private part of that company 
called Herpel. And we were going to use the five-axis winding 
technology of Kevlar then to make irregularly configured 
natural gas tanks for conversion vehicles. Oil went to $8 a 
barrel, and the deal was done.
    I think now you've got a lot longer horizon to that. In 
fact, we are taking a billion dollars of cap-ex over the next 
10 years, really front-end loading it, and putting--we've 
already put $150 million toward Boone Pickens' Clean Energy 
company, and we're putting $155 million in Sun Drop Fuels. And 
that is an interesting deal. That is going to have a 
cellulosic-based ethanol with a natural gas to liquid combined 
to make a green gasoline, which we could use in current in 
filling infrastructure.
    We also are converting our entire fleet to natural gas, and 
we're trying to build a transportation network. The beautiful 
thing about natural gas vehicles is that one State doesn't have 
to compete with another. The best thing that can happen is for 
all the states to build the network. So we're putting money at 
that right now. And you're right. The price of it will continue 
to be very low.
    Mr. McKinley. What do you think the--well, I know 
Congressman Sullivan has some legislation there to do it, but 
it calls for some pretty heavy subsidies. I'd just assume we 
could strike subsidies from all of our processes like this. 
But, nevertheless, what do you think your cost--what would it 
cost converting that or comparing that to gasoline? What do you 
think you're going to be looking toward?
    Mr. Rotruck. Well, as you just observed, it went down--that 
ratio is going to be very good. It's probably $1.20, between 
$1.20 and $1.40 gasoline per gallon equivalent. So you're going 
to be able to fuel for a very low cost.
    Mr. McKinley. What kind of range would that allow?
    Mr. Rotruck. It depends on how large the gas tank was that 
you put on it. The real key here--and this is starting to 
happen--is to get originally manufactured natural gas vehicles, 
because they're optimized for efficiency. And I know you, being 
one of two engineers in Congress, understand that.
    But there is a good story unfolding here about natural gas 
vehicles. That's the beauty of our fuel. It is so extremely 
flexible. We can use it in so many ways.
    Mr. McKinley. Do you see a role for us in West Virginia for 
manufacturing where we can use this gas in a way? Do you think 
there's something here other than producing it and shipping 
it----
    Mr. Rotruck. Oh, absolutely. In fact, that's the beautiful 
thing, Congressman. We have the nicest slice of the Marcellus. 
We have the wet gas in the northern panhandle, a little bit 
into Pennsylvania. But we have the best slice of this. People 
are moving capital and rigs from the dry gas areas into the wet 
gas areas. This is very bullish.
    One other thing I'd like to observe in that regard in how 
we can benefit from this as a state right now, we have 
literally spent hundreds of millions of dollars in the northern 
panhandle with paying bonuses for leases. And unlike the 
history of southern West Virginia, Senator, where it was out-
of-state land holding companies that own the mineral, these 
minerals are owned by people who live there, and that money is 
there now. We need to figure out a way to capture that money 
and redeploy it and reinvest it in the community.
    These are angel investors, Senator, truly statutorily angel 
investors. That's the good story. We've got to--this is the 
only place in the world, except maybe Quebec, where an 
individual can own their minerals. The rest of the world the 
sovereign owns the minerals. So that's how we can benefit.
    In your area, I was on a radio show up there recently, and 
I was telling the guy that, that that's a--and his eyes just 
lit up. We're not thinking about that. That money is already 
there. We need to capture it before it gets to Florida.
    Mr. McKinley. Thank you very much.
    Ms. Capito. Well, I'm going to say something that's 
probably going to create a lot of relief. I don't actually have 
another question. I just want to thank the Senator and all of 
the participants today and the audience. I want to do whatever 
I can do to help. I think we all work very well together, 
because we know, as the Senator has said more than several 
times, it's all about what's good for West Virginia and the 
people here. And that's the most important thing. So I 
appreciate the opportunity.
    Thank you.
    The Chairman. Thank you, Congresswoman. Do we all have to 
abide by----
    Ms. Capito. No. You're in charge.
    [Laughter.]
    The Chairman. All right. I want to ask sort of a--just a 
pop thing to you, Secretary Mattox. All of our bridges--I don't 
mean the ones that go across the Ohio River, but the ones that 
go over such and such a creek, all throughout rural West 
Virginia and elsewhere. What percentage of them were built 40 
years ago or more, approximately?
    Mr. Mattox. Senator, about half of our bridges are about 50 
years old. And of all of our bridges, which numbers about 6,850 
statewide, about 37 percent of them are either structurally 
obsolete or geometrically functionally obsolete.
    The Chairman. And so then if your 120,000-pound truck--a 
lot of those--I remember a bunch of them in Pocahontas County 
are one way. So I'll just leave that question on the table. I 
won't ask you to answer it. But it's an interesting concept of 
120,000 pounds getting over one of those things.
    Mr. Kean. I didn't want to get that wrong. Do something 
difficult for me here. Take this discussion--we all want to see 
this thing work. We all want to see it work.
    Thank you very much, Congresswoman Capito.
    Ms. Capito. I'm coming back.
    The Chairman. You are. OK.
    Ms. Capito. But thanks for drawing attention----
    [Laughter.]
    The Chairman. I love it. I love it. OK.
    Now we have a somber moment here. Following on what Dave 
has been pushing at, which I needed to be pushing at more, and 
that is how does what's happening in this Marcellus Shale boom, 
which, if done properly and if we ask some of the questions 
that we're asking this morning, which appear to be hostile, but 
which, in fact, are trying to get a positive result so that the 
people in this State can be well treated and well served by the 
process, not just in the long term, but in the short term, 
which is what a lot of people have to deal with.
    Take me through the process, as if I were in the second 
grade, of going from what's going on now and then how that goes 
into--helps the chemical industry. And how does that happen, 
step by step, so that you can then produce the so-called 98 
percent of all products that have some aspect of that in it?
    Mr. Kean. Right. So, as you know, we use natural gas as our 
principal source of heat and power. We also use some natural 
gas as a feedstock to make ammonia and methanol and hydrogen. 
But most of our feedstock is in the natural gas liquids, and 
ethane is the dominant source of natural gas liquids.
    And the prize here is to be able to monetize this enormous 
supply of ethane that we think is here in the Marcellus. And 
that means creating infrastructure that can let the ethane get 
to market, and that just improves the economics of the entire 
natural gas supply chain, because rather than just selling the 
natural gas, a well is able to monetize the natural gas, the 
ethane, the propane, the butane. So it makes the economics of 
creating these--you know, developing these wells, the wet gas 
wells, very attractive.
    And so that process will continue to build out, and then 
downstream, we will continue to have a competitively advantaged 
feedstock that will enable us to expand our investment in 
ethylene and other propylene--petrochemical derivatives and 
export a high percentage of those products, because we are able 
to sell our products in Asia and Europe and South America at a 
better value than other competitors can.
    So it's kind of like virtuous circle, where, you know, you 
can--as you develop the wet shale, and you're able to monetize 
the full value of the well, that brings more raw material 
online for industries like ours. It makes the people on the 
domestic side that we sell to--the fabricators--it gives them a 
more competitive position, so then you see more exports of 
fabricated parts, be they auto parts or thousands--98 percent 
of all the other stuff. That expands their export 
opportunities.
    Our export opportunities expand. The producers are getting 
a good return on investment, and it just seems to cycle, you 
know. In our view, it would just continue to cycle up.
    The Chairman. All right. I think you and I will need to 
talk more about that. I'm really interested in how one step 
leads to another, because manufacturing is, on a down-the-road 
basis, what we need to be talking about for all of us.
    Mr. Kean. And, by the way, let me just add that there's 
some, you know, recent articles that Caterpillar, for instance, 
is going great guns right now and is investing in new plant and 
equipment, because they're getting--you know, they're sold out 
on some of their heavy moving equipment and excavators and the 
like that are in large measure being used in oil and gas 
development. So there's lots of rippling. You've heard about 
the steel industry and how they're investing and expanding, 
given the high degree of orders for their products.
    So, I mean, there's a lot of synergy that is taking shape. 
And this particular region of the country is almost uniquely 
equipped to take advantage of it, because of this enormous 
deposit of ethane rich natural gas.
    Mr. McKinley. You can't build an economy and the strength 
of manufacturing without a good highway system, obviously, and 
we talked about rails, and we talked about the river. And we 
have before us, as you know, is the highway funding, and there 
seems to be a conflict or a difference of opinion between the 
Senate with a 2-year plan and the House with a 5-year plan.
    So, Mr. Secretary, you've been in my office. You've talked 
about it. You were going to think back. There's pros and cons 
to both ways for transportation. How would you mitigate the 
differences between the House bill and the Senate bill so that 
we can get a plan and put our people----
    Ms. Capito. That's an easy question.
    The Chairman. Don't even try.
    Mr. McKinley.--in the construction industry back to work? 
Because we've got too many people unemployed, and we understand 
how that's going to affect manufacturing. But I'm interested--
just ignore his remark there, because some of us are looking at 
that 5-year plan just as well. So you know and I know that 
construction has 45 years in it, and if I have a 5-year plan, I 
know how to plan for construction. Two-year is a limitation 
with it.
    But how would you mitigate the difference between the two 
of them? You've read--because I know you've read both of them. 
You've talked about both of them.
    Mr. Mattox. I have, and I like the policy in the Senate 
bill quite a bit. I like that--the funding mechanism was what's 
really bothersome with the House side of the bill. Although 
it's a 5-year bill on the House side, it means a cut of around 
$91 million per year for a total of $455 million over the 5-
year life of the bill to West Virginia.
    Currently, we receive somewhere in the neighborhood of $425 
million per year for Federal highway----
    Mr. McKinley. How do we mitigate that? How do we get so 
we've got a bipartisan approach? We meet and occasionally get 
together, and we want to continue that. So we have a 
bipartisan--but right now, it's either going to get stuck in 
the House or it's going to get stuck on the Senate side. So I'm 
trying to find out what do we need to do to help our 
transportation? How do we mitigate the difference?
    Mr. Mattox. At this point in time, I would be happy with 
the 2-year bill with current funding levels to get us through--
--
    Mr. McKinley. That's not going to pass the House. So that's 
what I'm saying. What do we do to change the Senate's program 
so that we've got something we can pass and put our 
construction workers back to work?
    Mr. Mattox. On the House side, we need to find a way to put 
more money into the highway program. You're exactly correct. 
These are American projects, American jobs. It's going to 
provide employment immediately. We have projects sitting on the 
shelf, ready to go. We just need the funding to get those 
projects off the shelf.
    Mr. McKinley. So you're saying to make the difference 
between the House and Senate is to put more money in the House 
bill and you'd like it?
    Mr. Mattox. We'd love it.
    Mr. McKinley. How much money would you need?
    Mr. Mattox. As much as you can send. I think we can spend 
it.
    [Laughter.]
    Mr. McKinley. Well, that's unclear, but we'll take that 
message back to try to figure out what it is----
    Mr. Mattox. In previous bills----
    Mr. McKinley. If I can get you a couple of extra bucks, 
then that would make you happy?
    Mr. Mattox. In previous bills--and we're looking at about a 
20-year history now. Every new long-range bill, and I'm talking 
a 6-year bill or thereabouts, there's been an increase of about 
30 percent for the State of West Virginia since the early 1990s 
with the original ISTEA legislation. In every 6-year highway 
bill that's come out since then, West Virginia has received 
about a 30 percent increase in their Federal funding levels. I 
would be as happy as can be if we could get another 6-year 
highway bill with a 30 percent Federal increase.
    Mr. McKinley. If we had to eliminate--I've got a minute 
left of time here before he yells at me again. But if we 
eliminated fly ash out of our concrete--and we know that that 
would increase the cost of construction--what kind of damage 
would that do to West Virginia, if we can't use fly ash in our 
concrete? The writers of the report says it costs $110 billion 
across the country. So I'm curious what effect that would be in 
West Virginia.
    Mr. Mattox. Usually, in West Virginia, you can take the big 
number nationally, and about 1 percent is generally 
attributable toward the effect it would have on West Virginia.
    Mr. McKinley. So that could be a billion dollars, then, 
over a 10-year plan.
    Mr. Mattox. Over a 10-year plan for----
    Mr. McKinley. Without being able to use--so I know the 
House is talking about trying to amend the fly ash. And the 
Senators that co-sponsor in the Senate, we weren't able to 
get--they weren't able to get it in the Senate, but we'll do it 
in the House. And, hopefully, that'll save us some money so we 
can pave more roads and build more bridges.
    Mr. Mattox. We have utilized fly ash successfully in road 
bed stabilization as well as concrete for a number of years.
    Mr. McKinley. Thank you.
    The Chairman. Thank you, Congressman McKinley.
    I am required by my God and my soul to make an 
uncomfortable statement. The House transportation bill--it's 
not a question of money. It's a question of safety, of 
standards, of training, of standards of, you know, the hours--
the number of hours of sleep, just like we did in the FAA, 
Federal aviation bill, for people who drive school buses, who 
drive trucks, who drive, you know, everything. There's a lot in 
that bill beyond the amount of money.
    But the nasty thing that I want to say--and I may have to 
call the hearing over because if both of these two people 
attack me at the same time, I'll need help. And, Ms. Faraca, 
I'm counting on you to come over and help me. And that is that 
the Republican Secretary of Transportation has said that the 
House bill is the worst transportation bill he has ever seen in 
his career. So that's why I think you'll do well not to try to 
mitigate between the two.
    All right. Well, I'm so pleased with that that I'm quite 
ready to have----
    Mr. McKinley. Nothing like making it partisan.
    [Laughter.]
    The Chairman. No, no. You can call it partisan, but you can 
also say it's policy, because when you pass a bill, it's 
policy. And you have to look at the bill in terms of policy, 
and the policy in the House bill, to me, you know, and, more 
importantly, to the Secretary, is difficult.
    Let me conclude my questions--and I've got a quick closing 
statement--to you, Steve White, Mr. White. You have been, I 
think, clinical, analytical, and restrained today. And that has 
not necessarily comported with previous conversations that you 
and I have had about the subject of hiring West Virginia 
workers.
    Now, a statement was made by--I guess it was CONSOL--yes, 
we hire West Virginia workers, but in the sheriff's--for 
driving, but that's not your deal. But you have a lot of other 
things that are your deal. The sheriff indicated that the 
attitude of these--what he said--subcontractors mostly out-of-
state--that they have real disdain for West Virginia.
    I believe you had that in there. And I'm not putting you on 
the spot. I'm just--this is--you've written it down, OK, part 
of public record. And that they--you know, they're tired. They 
say, ``Well, we're going to get fined. Fine. We'll get fined. 
We'll pay the fine, and we'll go ahead and do what we're 
doing.''
    That is symbolic--and I assume that is true--of sort of the 
attitude about West Virginia workers, which makes me very 
angry. I mean, if you look at the West Virginia coal miner, you 
find one person on the face of the earth who works harder than 
the coal miner. You find one person who is up against it more 
than some of the people you represent, because who's going to 
do construction? You know, you're always operating in a climate 
of such total uncertainty.
    I'd like to have you sum up your feeling about the role of 
people in this public policy discussion that we're having. We 
know that there's going to be--this Marcellus Shale thing is 
going to follow through in a way which is good for West 
Virginia, or rather we hope it is. We know it's going to be 
good for the companies. What we want to be sure is, is it going 
to be good for people of West Virginia, because it's just 
like--you know, corporations aren't people. People are people. 
And so I'd like you to just--I'm handing you a gift, so make 
good use of it.
    Mr. White. Thank you, Senator. You made a lot of the 
remarks I'd like to make. I guess I'd say, again, that there's 
an opportunity but no guarantee. You've heard of the term ``the 
curse of oil,'' where countries discovered oil in other parts 
of the world, and it's turned into a curse, not a benefit.
    So there's not a guarantee that the Marcellus Shale will be 
the great benefit that we all hope that it will be. But the 
opportunity is there, and that's why it takes more than the 
invisible hand of the market to make sure that people benefit. 
It takes the involvement of all the parties.
    So I can tell you anybody who's from up in the region can 
see the out-of-state invasion, I call it. I don't know if 
that's how the sheriff referred to it. Folks who are far from 
home, and they're here to work, and we never fault anybody who 
wants to work. But we have local people who are unemployed who 
have the skills to do those very same jobs and want to work. So 
we have a real mismatch, and it is very upsetting with such 
high unemployment that the citizens of West Virginia who are 
sitting on top of the greatest natural resource find perhaps of 
the century have to watch the jobs that they want to do go to 
others.
    So it's very upsetting. I can't say enough about it. And we 
have the skill sets to do the jobs, and we have the people. You 
can't train a welder in 6 weeks. It takes us 5 years, and 
they're the best welders.
    And the companies that have come and first started on the 
pipeline--and I told you they were doing so well, because they 
brought in the folks from Texas who said they could do it for 
cheaper, and they failed miserably, because they couldn't 
handle the terrain. They didn't know the roads. They didn't 
have the expertise that our folks have.
    Hardworking people--I'm not faulting. I just think that 
there's many opportunities, but we're going to let it slip 
through our fingers to maximize it if we don't do more to 
capitalize it. And I want to also emphasize that we really are 
positive about this, not just the extraction part--the 
manufacturing part, the downstream part. I think the lynchpin 
is the cracker. Without the cracker, you're just a resource 
island that is shipping resources away.
    And I give the Governor and Secretary Burdette credit. I 
know--they kept us involved. They worked tirelessly, and we're 
excited about Shell building something within 10 miles of our 
border, because our competitor is the Gulf Coast or overseas, 
and that is the real challenge that we face.
    We have to find a way to pull together as a region. It's a 
regional approach. If a construction worker goes across the 
border and will travel to work, that's fine, as long as we get 
to stay in the region. But if we don't work together, and we 
allow the resource to get siphoned off--and there's plenty of 
people who want it--that value added--it's like cutting the 
trees and sending them overseas. You don't process it. You 
don't have a lumber yard. You don't have furniture. That's the 
component to your question about manufacturing is that cracker, 
and the cracker is just the start.
    So I credit the Governor and I credit Secretary Burdette, 
and I feel comfortable and confident that they're going to land 
the first one that's going to get built. And whatever we do, 
what might starve us from that is the ethane deals which are 
going to have to be made at some point to export that ethane 
before that deal can be consummated.
    So that's why I say--and anything in terms of the 
transportation, the exporting of the natural resources--we need 
to go slow and have a little patience, because then we can 
catch up locally and have a robust economy that will be not 
just for construction, but for manufacturing and for the 
extraction side. The gangbusters going on is the way the 
industry is geared to go. But we have to perhaps slow it down a 
little bit.
    I'm just here to tell you that the local workers are here, 
ready, willing, and able to work. Opportunities are not as much 
as they really need to be. And I think you can put some 
pressure on, and I think--I've definitely seen situations where 
people say, ``You are going to hire local.'' That is what we 
want, and that is what happens, period.
    The Chairman. I thank you very much.
    I thank all of you very much for this. Understand always 
that a hearing in Congress is to probe the soft underbelly. 
It's not to criminalize or be petulant. Sometimes it seems that 
way. But it's to try and get out in front of us what it is that 
we have to work on and what it is that we're not doing, as well 
as what we're doing.
    And we have, in the end, not only a responsibility to those 
who are taking this risk financially, but we have a 
responsibility to the people who we represent. And that is a 
very solemn responsibility.
    Thank you all, and the hearing is adjourned.
    [Whereupon, at 3:26 p.m., the hearing was adjourned.]

                                  
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