[Senate Hearing 114-470]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 114-470

     OIL AND GAS PIPELINE INFRASTRUCTURE AND THE ECONOMIC, SAFETY, 
ENVIRONMENTAL, PERMITTING, CONSTRUCTION, AND MAINTENANCE CONSIDERATIONS 
                  ASSOCIATED WITH THAT INFRASTRUCTURE

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 14, 2016

                               __________




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho                RON WYDEN, Oregon
MIKE LEE, Utah                       BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
STEVE DAINES, Montana                AL FRANKEN, Minnesota
BILL CASSIDY, Louisiana              JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
ROB PORTMAN, Ohio                    MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota            ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee           ELIZABETH WARREN, Massachusetts
SHELLEY MOORE CAPITO, West Virginia
                      Colin Hayes, Staff Director
                Patrick J. McCormick III, Chief Counsel
            Tristan Abbey, Senior Professional Staff Member
           Angela Becker-Dippmann, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                 Rich Glick, Democratic General Counsel
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from 
  Washington.....................................................     2

                               WITNESSES

Black, Andrew, President and CEO, Association of Oil Pipe Lines 
  (AOPL).........................................................     4
Eisenberg, Ross, Vice President, Energy and Resources Policy, 
  National Association of Manufacturers (NAM)....................    11
McGarvey, Sean, President, North America's Building Trades Unions    21
Parfomak, Dr. Paul, Specialist in Energy and Infrastructure 
  Policy, Congressional Research Service (CRS)...................    28
Peress, N. Jonathan, Director of Air Policy, Environmental 
  Defense Fund (EDF).............................................    33

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

American Gas Association:
    Letter for the Record........................................   106
American Petroleum Institute:
    Statement for the Record.....................................   113
    Supplemental Statement for the Record........................   115
Black, Andrew:
    Opening Statement............................................     4
    Written Testimony............................................     7
    Responses to Questions for the Record........................    75
Cantwell, Hon. Maria:
    Opening Statement............................................     2
Eisenberg, Ross:
    Opening Statement............................................    11
    Written Testimony............................................    14
    Response to Question from Senator Franken....................    63
Interstate Natural Gas Association of America:
    Letter for the Record........................................   120
McGarvey, Sean:
    Opening Statement............................................    21
    Written Testimony............................................    24
Murkowski, Hon. Lisa
    Opening Statement............................................     1
Parfomak, Dr. Paul:
    Opening Statement............................................    28
    Written Testimony............................................    30
Peress, N. Jonathan:
    Opening Statement............................................    33
    Written Testimony............................................    35
    Responses to Questions for the Record........................    77
    Supplemental Letter for the Record...........................   125
Stupp Corporation:
    Statement for the Record.....................................   129
(The) Williams Companies, Inc.:
    Statement for the Record.....................................   132

 
     OIL AND GAS PIPELINE INFRASTRUCTURE AND THE ECONOMIC, SAFETY, 
ENVIRONMENTAL, PERMITTING, CONSTRUCTION, AND MAINTENANCE CONSIDERATIONS 
                  ASSOCIATED WITH THAT INFRASTRUCTURE

                              ----------                              


                         TUESDAY, JUNE 14, 2016

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:09 a.m. in 
Room SD-366, Dirksen Senate Office Building, Hon. Lisa 
Murkowski, Chairman of the Committee, presiding.

  OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM 
                             ALASKA

    The Chairman. Good morning, everyone.
    The Committee will come to order so we can begin our 
oversight hearing this morning on our nation's oil and gas 
pipeline infrastructure and the economic, safety, 
environmental, permitting, construction and maintenance 
considerations that are associated with it.
    Infrastructure is one of those things that everybody claims 
to be in favor of. We all support infrastructure. Who could be 
against it?
    It is only when you get down to the details of where that 
infrastructure is located, what the infrastructure will be 
transporting and how that infrastructure will be built--that is 
where you run into the controversy.
    In the world of oil and gas pipelines, known in the 
industry as the midstream, this is actually not a complicated 
question. At point A, you have the immense resources, whether 
it is places like the NPRA, the non-wilderness portion of ANWR, 
in the Bakken, in the Marcellus or in the Eagle Ford. At point 
B, you have the refineries. You have the chemical facilities, 
the power plants and other consumers. The infrastructure that 
we will be hearing about today is necessary to move the 
resources from point A to point B.
    It is pretty simple. Without infrastructure we cannot move 
these vital resources from one place to another. While some 
would contend otherwise, we know for a fact that pipelines are 
the safest and the most efficient way to move these resources.
    In the world of economics, experts debate about direct 
impacts, indirect impacts and induced impacts. We know that 
pipelines directly create jobs in their construction, 
maintenance and operation, and we know that these are good 
jobs. We also know that pipelines indirectly create jobs 
because it is a materials intensive industries. These are also 
good jobs. We also know that all of this induces economic 
growth and additional job creation.
    So I am big into bumper stickers and trying to distill down 
all that we do here in Washington into some simplistic notions. 
If we have got to place a bumper sticker here this morning, it 
is that ``Jobs are good, energy is good and energy jobs are 
great!''
    In Alaska we are very proud of an infrastructure network 
known as the Trans-Alaska Pipeline System, or TAPS. The system 
stretches 800 miles, runs across all sorts of terrains, two 
mountain ranges, huge mountain ranges, from Prudhoe Bay down to 
Valdez. An estimated 70,000 people helped build this pipeline 
from 1969 to 1977 with the actual construction phase taking 
just over three years. I cannot overstate the positive impact 
this project has had on the State of Alaska. Without it, I can 
tell you for a fact we would not be able to fund our state's 
government.
    Energy is the lifeblood of our state. We have to continue 
to fight to boost the throughput of that pipeline which is 
vital to the energy security of this country, particularly the 
West Coast where the refineries are optimized to process North 
Slope crude.
    TAPS, in many ways, I refer to as the gold standard. And I 
question, honestly, whether or not we could build it today. 
Certainly not in three years as we were able to do four decades 
ago.
    We know new infrastructure is still the best way to deliver 
affordable energy to places that need it. We know the pipeline 
permitting process should be streamlined, yet those who opposed 
to building oil and gas infrastructure, often the same people, 
likely to be up in arms when prices get too high or service 
quality suffers.
    I think we have got some cognizant dissonance here. How we 
can expect affordable energy if we cannot move the energy? You 
have to be able to move it.
    Since I released my Energy 20/20 Blueprint in 2013 and 
follow on white papers on energy insecurity, the power grid, 
exports and the energy/water nexus, I have emphasized five 
principals that our nation's energy policy should embody. They 
are pretty simple. Energy needs to be affordable, abundant, 
clean, diverse and secure. Infrastructure is really at the 
heart of all five of those principals. Without proper 
infrastructure, energy will be unnecessarily unaffordable. It 
will be scarce. It could be dirty, limited and insecure.
    So as we welcome today's witnesses and begin this hearing, 
I will tell you all to look for more from this Committee on 
these issues in the upcoming future.
    With that, I turn to Ranking Member Cantwell, for your 
comments and I appreciate your work in getting us here as well.
    Thank you.

 STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you.
    Thank you, Madam Chair and thank you for holding this 
hearing and to our witnesses today for talking about issues 
associated with natural gas and oil pipelines.
    Domestic production of natural gas and oil has reached 
record levels, and this increased production requires a network 
of pipelines and other modes of transportation to ensure that 
natural gas and oil can be moved from the point of extraction 
to the point of consumption. In many instances, new pipelines 
will be required.
    But it is also important to note that we are talking about 
transporting toxic, highly flammable materials hundreds, if not 
thousands of miles across the United States. So new pipelines 
must meet Federal and state standards so that the public health 
and safety can be addressed.
    We can always look to improve the efficiency of the 
pipeline siting process, but we have to remember not to take 
short cuts.
    The Senate Energy bill attempts to enhance the coordination 
between FERC and other Federal agencies with responsibility for 
issuing permits before a new pipeline is built.
    In contrast, the House bill passed proposed to give FERC 
just 90 days to make a final decision on permit applications no 
matter the complexity of the proposed pipeline or the potential 
impact on people and the environment. This is something that we 
cannot do.
    In addition to the potential impacts to public health and 
safety, leaks of methane from natural gas and oil pipelines can 
also have a dramatic impact on our climate. In the first two 
decades after methane is released into the environment, it is 
84 times more potent as a greenhouse gas than carbon dioxide. 
The recent leak at the Aliso Canyon Natural Gas Storage Project 
in California is estimated to have caused more damage to the 
environment than any other leak in gas history. The project 
emitted more greenhouse gases than even the Deep Water Horizon 
explosion in the Gulf of Mexico.
    Most new interstate natural gas pipelines require multi-
billion dollar investments. These investments are recovered 
through rates charged to consumers signing on to long-term 
contracts. Obviously I am concerned that these multi-year 
contracts may delay the transition to non-fossil fuel 
alternatives.
    Natural gas is a very important bridge fuel helping to 
reduce our reliance on coal while bringing online greater 
amounts of intermittent renewable energy such as wind and solar 
power. We are in the middle of a revolution and advances are 
made every day in technologies, the way that we can create and 
use energy, that will further reduce the demand for fossil 
fuels.
    We undoubtedly will need some traditional natural gas 
capacity. I have often mentioned to the Chair my interest in 
support of a natural gas pipeline in Alaska. But as the 
Department of Energy Quadrennial Review suggests, we should 
focus on using existing pipelines more efficiently and making 
sure that the certificate process for new pipelines explores 
better ways to utilize existing capacity and mitigate issues 
and make sure that we are making the right decisions.
    I want to mention, because of the health and safety issues, 
we were unfortunate enough on June 10th, 1999 to have a gas 
line explosion in Bellingham, Washington killing three children 
who were playing in Whatcom Creek. We have made some 
improvements in pipeline safety, but we can never forget the 
importance of these issues as we continue to move forward on 
this.
    I look forward to hearing what the witnesses have to say 
today, Madam Chair, and look forward to our discussion.
    The Chairman. Thank you, Senator Cantwell.
    Again, welcome to the witnesses. We appreciate you making 
the effort to be with us today and for what you will contribute 
to the conversation.
    We will lead off this morning with Mr. Andrew Black, who is 
the President of the Association of Oil Pipe Lines. He will be 
followed by Mr. Ross Eisenberg, the Vice President of the 
National Association of Manufacturers. Mr. Sean McGarvey is 
with us as President of the North American Building Trades 
Union, welcome. Dr. Paul Parfomak is the Specialist at the 
Congressional Research Service, CRS. Mr. Jonathan Peress will 
wind up the panel. He is the Air Policy Director for Natural 
Gas at the Environmental Defense Fund. We welcome all of you 
this morning and thank you.
    I will let colleagues know that we are scheduled to have a 
vote at 11 o'clock, so hopefully our witnesses will be able to 
get through all of their testimony prior to that time. It may 
be that we jump up, go take a vote and then come back to ask 
questions.
    With that, Mr. Black, if you would like to lead off and 
welcome.

 STATEMENT OF ANDREW BLACK, PRESIDENT AND CEO, ASSOCIATION OF 
                     OIL PIPE LINES (AOPL)

    Mr. Black. Thank you, Madam Chair, Senators.
    The Association of Oil Pipe Lines represents transmission 
pipeline operators who deliver crude oil, refined products like 
gasoline, diesel fuel and jet fuel and natural gas liquids such 
as propane and ethane.
    The U.S. pipeline network plays a critical role in 
delivering energy needed by American workers and families. 
Pipelines help American drivers get the gasoline and diesel 
fuel they need to drive their cars and trucks. Propane 
delivered by pipeline allows farmers to dry crops and warm 
livestock barns and is essential to heating millions of homes.
    American workers rely upon pipelines to deliver the raw 
material feedstocks needed for good paying, manufacturing jobs. 
Just last week Shell Chemical announced it will build a multi-
billion dollar petrochemical plant in Pennsylvania. That new 
plant turning raw ethane into polyethylene will employ 6,000 
workers in construction, 600 permanent plant workers and 
provide economic benefits for the entire region. This is made 
possible by a liquids pipeline delivering 100,000 barrels per 
day of ethane to the plant.
    Pipeline operation also supports other good paying jobs. 
The TransAlaska Pipeline System, for example, employs 2,500 men 
and women delivering crude oil to world markets. Alaska's oil 
and gas production, much of it delivered at some point by 
pipeline, provides 110,000 Alaska jobs and supports one third 
of Alaska's work force.
    Pipelines are an exceedingly safe way to deliver the energy 
America needs. A barrel of crude oil petroleum products reaches 
its destination safely greater than 99.999 percent of the time.
    Liquid energy pipelines are also getting safer. Since the 
year 2000, pipeline incidents impacting the public or 
environment are down 55 percent. Since 2000, corrosion-caused 
incidents are down over 70 percent.
    Pipeline safety is spurred by a combination of government 
regulation and industry-wide safety improvement efforts. The 
U.S. Pipeline and Hazardous Materials Safety Administration, or 
PHMSA, contributes to pipeline safety by providing minimum 
pipeline safety standards, accountability for pipeline safety 
shortfalls and an independent source of pipeline safety.
    PHMSA is proposing and finalizing several new pipeline 
safety regulations. Last summer PHMSA proposed a new Federal 
rule raising training requirements for pipeline personnel 
performing pipeline safety related tasks and details on a new 
requirement for prompt notification to authorities of pipeline 
incidents.
    Last fall, PHMSA proposed a large set of new regulations on 
liquid pipeline systems to expand inspections of pipelines 
after extreme weather events, expand the number of pipeline 
segments requiring intensive inspection, shorten timelines for 
performing pipeline maintenance and expand requirements for 
pipeline leak detection.
    Congress has taken action to improve pipeline safety by 
increasing funding for over 100 new PHMSA personnel, many of 
them for inspections and enforcement.
    Congress also, just within the last few days or hours, 
passed new pipeline, bipartisan safety regulations. The Pipes 
Act, passed by the House last week and the Senate last night, 
will ensure pipeline operators receive timely, post inspection 
information from the government. Thank you to Senator Daines 
for inspiring that, to allow them to maintain and improve their 
safety efforts. It will ensure that product composition 
information is quickly provided to first responders after an 
incident and improved protection of coastal areas, marine 
waters and the Great Lakes. The bill was passed in large part 
on legislation passed by the Senate in March and negotiated in 
advance with Senate Republican and Democratic staff, along with 
their House counterparts. AOPL thanks the Senate for adopting 
this bipartisan bill last night.
    Even though pipelines are one of the safest modes of energy 
transportation, the pipeline industry believes it is important 
we are proactively improving pipeline safety further and have 
set a goal of zero incidents. Through the AOPL and American 
Petroleum Institutes' pipeline safety excellence initiative, 
pipeline operators have engaged nearly a dozen industry-wide 
groups to improve pipeline operations and safety. Together 
we're funding research and development on pipeline inspection 
technologies, enhancing our threat detection and response 
capabilities, expanding safety culture and management systems 
and boosting our response capabilities.
    Last year liquid pipeline operators developed industry-wide 
programs to improve our ability to detect cracking, integrate 
safety data, manage safety efforts holistically, manage leak 
detection programs and better plan for and respond to pipeline 
emergencies.
    This year we will complete a new program for comprehensive 
management systems, complete expansion of industry-wide 
guidance on river crossings, develop a new recommended practice 
for construction quality management and update our recommended 
practice for pipeline inspection and preventative maintenance.
    As you can see, there's a lot going on to improve pipeline 
safety, and pipelines continue to provide benefits to American 
workers and consumers.
    Thank you.
    [The prepared statement of Mr. Black follows:]
    
    
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    The Chairman. Thank you, Mr. Black.
    Mr. Eisenberg.

    STATEMENT OF ROSS EISENBERG, VICE PRESIDENT, ENERGY AND 
 RESOURCES POLICY, NATIONAL ASSOCIATION OF MANUFACTURERS (NAM)

    Mr. Eisenberg. Thank you, Madam Chair, Ranking Member 
Cantwell, members of the Committee for having the NAM here 
today to talk about pipelines and what they mean to 
manufacturing.
    Our message today is simple and direct. Manufacturers' 
already high demand for oil and gas is going to increase 
dramatically over the next ten years, and we're going to need 
adequate pipeline infrastructure to ensure that the nation's 
ample supply of these resources are delivered efficiently, 
safely and securely to the manufacturers who need it.
    We have, essentially, a math problem. Over the next decade 
natural gas demand is going to grow about 40 percent, and 
that's generally from the power sector and manufacturing, so 40 
percent increase in demand for natural gas. On the flip side, 
we're predicting about a 48 percent supply increase. So we've 
got more than enough to meet the demand which is fantastic.
    What is uncertain is the amount of pipes and really the 
geographic distribution of the pipes to get the gas from point 
A to point B to the end users who need it. We're going to need 
a lot more of those.
    Manufacturers use a third of the energy consumed in the 
United States. We've got--we've historically had an outsized 
reliance on oil and gas. Manufacturers use oil for fuel and as 
a feed stock and we use natural gas for a great many things, 
drying, melting, process cooling, machine drive and 
refrigeration, heating, ventilation, A/C, in boilers to produce 
steam and electricity and finally as a feed stock for refining 
chemicals in primary metal sectors.
    Because of this reliance our members have asked us and we 
recently retained IHS Economists to examine our oil and gas 
pipeline needs and the challenges and opportunities that exist 
for manufacturers.
    The challenges are what IHS calls a mismatch geographically 
in the growth in natural gas demand and supply in the U.S. 
lower 48. The rapid growth of low cost production out of the 
Marcellus and Utica plays has created a bottleneck as producers 
are unable to find pipeline capacity to move gas from the well 
to consumer markets.
    IHS believes that some of the pipeline capacity can be 
achieved by re-engineering the existing pipelines and changing 
the ones that are coming in and turn them and make them go out 
so that that low cost gas can go to some of these regions. 
However, the potential for reversal of these pipelines is going 
to be exhausted at some point and we're still going to need to 
build more. The only way to do that is by committing to 
building new pipeline capacity.
    And when pipelines aren't available manufacturers do 
suffer. The EPA's recent boiler MACT regulations, generally 
speaking, have forced most manufacturers to switch their 
boilers to natural gas. But several struggle to meet the boiler 
MACT imposed deadlines because they have trouble getting 
authorization and approval to get the gas to their plants.
    In the Northeastern United States, where this is happening, 
some manufacturers are basically having to turn to truck CNG to 
their facilities because they can't get a pipeline which places 
them at a disadvantage relative to other places like the Gulf, 
who could just have the gas.
    The opportunities, on the other hand, are significant. When 
pipelines are built it means jobs across the manufacturing 
supply chain. IHS estimates the construction of new natural gas 
transmission lines meant more than 347,000 jobs in 2015 with 
almost 60,000 of them manufacturing products like steel pipe, 
coatings, construction equipment, compressor motors, gauges and 
instruments and sand and gravel.
    On the oil pipeline side, at least 66 different 
manufacturing subsectors benefited from the construction of 
crude oil pipelines in 2015 and these include iron and steel, 
fabricated metal, cement, machinery and paints and coatings.
    As with most studies of the energy renaissance the numbers, 
the big numbers, are very, very big. Real GDP increased by $190 
billion and 1.4 million more jobs in 2015 because of shale gas. 
The average family had about $1,300 in their pockets that they 
would not otherwise have had because of the shale renaissance.
    But I'd like to spend a few minutes talking about the 
stories behind this which are really pretty remarkable in the 
manufacturing sector.
    Stories like ACME Brick Company, the largest brick 
manufacturer in the U.S., with facilities in Minnesota, 
Arkansas, Oklahoma, Texas and Colorado. ACME produces a product 
that is heavy bricks, so moving natural gas via pipelines to 
where the bricks are made is far more efficient than moving the 
heavy bricks long distances.
    CF Industries uses natural gas to make enough fertilizer to 
nourish ten percent of the corn planted nationally.
    Covestro uses natural gas as a raw material to manufacture 
energy efficient products like polyurethane insulation.
    UPS has more than 6,500 alternative fuel and advanced 
technology vehicles in operation, more than half of which 
operate on natural gas.
    Caterpillar and CNH Industrial, they make the equipment to 
support the construction of the pipelines and the operation of 
them, but they also use natural gas as a fuel for their own 
operations.
    And small manufacturers like Marble King in West Virginia, 
a 28-person manufacturer, and Biad Chili Company, a New Mexico 
manufacturer who grows and processes chili peppers. They credit 
local pipelines as their key to staying competitive in the face 
of growing international competition.
    As our pipeline network grows so does manufacturing 
opportunity. It's imperative that the oil and gas pipeline 
system keep pace with supply and demand growth. So much new 
capacity is going to be needed over the next decade that 
prolonged delays could cause major problems for manufacturers.
    The NAM appreciates the attention this Committee is giving 
this issue and stands ready to support any efforts to ensure 
that pipelines are built in a timely fashion to meet our 
sector's growing energy demand.
    Thank you.
    [The prepared statement of Mr. Eisenberg follows:]
    
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    The Chairman. Thank you, Mr. Eisenberg.
    Mr. McGarvey, welcome.

STATEMENT OF SEAN McGARVEY, PRESIDENT, NORTH AMERICA'S BUILDING 
                         TRADES UNIONS

    Mr. McGarvey. Thank you, Madam Chair. It is an honor to 
join you today to discuss our nation's energy infrastructure.
    As many of you know North America's Building Trades Unions 
is comprised of 14 national and international unions 
representing three million skilled craft professionals in the 
United States and Canada. On behalf of our members I welcome 
the opportunity to explain how our value-based business model 
and our world class training capacity play an integral role in 
the construction and maintenance of oil and gas infrastructure.
    But our expertise and exposure to the energy industry does 
not end there. Building Trades members can be found working in 
extraction sites, power plants, carbon capture and 
sequestration facilities and export facilities. Currently we 
estimate that 50 percent of our membership is employed by 
energy-related industries.
    I also wanted to take a moment to thank the members of this 
Committee on both sides of the aisle who have voted to retain 
prevailing wage protections in the construction industry. By 
helping safeguard these community standards and promoting 
training, we are protecting and preserving some of the few 
remaining occupations that cannot be outsourced to foreign 
countries or decimated by low road business models that are 
centered upon low wage, low skilled and easily exploitable work 
force.
    In any successful organization, labor or otherwise, being 
the best means setting high standards and maintaining and 
exceeding those standards.
    We harbor no illusions that our success is predicated on 
anything other than delivering the safest, most highly trained 
and productive skilled craft work force found anywhere in the 
world. That's why our rank and file members and our signatory 
contractors collectively fund, to the tune of roughly $1 
billion a year, a nationwide network of 1,600 local joint labor 
management apprenticeship training programs, or JATCs. They are 
regulated by Department of Labor or State Apprenticeship 
Councils and they are governed by a Board of Trustees made up 
of equal numbers of contractors and labor representatives.
    If the building trades system which includes both 
apprenticeship level and journeyman level training was a degree 
granting college or university, it would be the largest degree 
granting college or university in the United States, over five 
times larger than Arizona State University. If it was a K 
through 12 school district, it would be the fourth largest 
school district in the U.S., only behind New York, Los Angeles 
and Chicago. And there's no taxpayer money involved in this 
system. Our members contribute a portion of their hourly wage, 
and our contractors contribute out of their own pockets.
    We are successfully working with community leaders to 
leverage both public and private investments in capital 
construction projects to create structured career training 
opportunities for historically underserved communities such as 
women, minorities and veterans. Through these efforts and 
others, we now boast over 100 pre-apprenticeship programs to 
ready students for the academic and real world challenges of 
being in a union apprenticeship program.
    Specific to the topic of today's hearing I want to 
highlight the International Union of Operating Engineers 
Pipeline Training Fund. Many of the work opportunities in the 
natural gas industry require specialization within the pipeline 
crafts. For example, most operating engineers run traditional 
heavy equipment such as bulldozers, backhoes and cranes and 
excavators. However, the pipeline industry has a unique set of 
skill requirements and the operating engineers maintain a 
robust training program in partnership with the Pipeline 
Contractors Association to meet the industry's needs.
    For example, during the natural gas renaissance, the OEs 
developed a new curriculum and course work in directional 
drilling to add to their existing pipe bending and pipe lifting 
classes, maintenance and rehabilitation in rock drilling 
classes. The OE currently offers more than 130 classes in 
different areas of the pipeline sector alone.
    In real terms it means in right to work states like South 
Dakota specialized operating engineers average $35 an hour, and 
that means workers are able to provide for their families while 
receiving union provided health care and pension benefits. But 
it is not easy to make it--it's not as easy as we make it 
sound.
    Every single large energy project is subjected to years of 
regulatory environmental study. And to be sure, pipeline 
infrastructure has failed to keep pace with the increased 
production which has caused several regions of the country to 
experience shortages and severe price spikes.
    New England is a perfect example of how the lack of 
sufficient pipeline infrastructure can have an adverse effect 
on both businesses and consumers. In 2000 only 15 percent of 
New England's electric generation was from natural gas fuel-
power plants. By 2015 that number was nearly 50 percent but the 
pipelines need to feed these plants with natural gas, 
presumably from the Marcellus shale region, had not kept pace. 
It isn't for lack of trying.
    Less than two months ago New York State denied the 
Constitution pipeline after it had already received FERC 
approval and the company had been working with the state for 
three years to mitigate environmental concerns. The permit 
denial will delay about 2,400 direct and indirect jobs that 
will be created during pipeline construction generating $130 
million in labor income for the region. That decision could 
also cost local governments approximately $13 million in annual 
property tax revenue.
    Other recent delays which have essentially put the pipeline 
industry into a tail spin include the Jordan Cove LNG export 
terminal and associated gas pipeline was rejected by FERC in 
March and then granted a rehearing; in April Kinder Morgan's 
withdrawal of the Northeast Energy Direct Pipeline application 
with FERC due to opposition; the New Jersey Department of 
Environmental Protection's review of the final section of the 
Transco Leidy Pipeline is significantly delayed due to pending 
litigation; the Dakota Pipeline received revocation of its 
permit from the U.S. Fish and Wildlife Services; the Rover 
Pipeline from the Marcellus shale region to the Midwest 
continues its lethargic approval process; and Dominion's 
Atlantic Coast Pipeline route has been rerouted a number of 
times to address concerns.
    The bottom line is that pipelines are the safest mode of 
transporting natural gas and the U.S. Department of 
Transportation's statistics show that underground pipelines 
transport natural gas far more safely than ships, rail cars or 
trucks. All the major pipelines I listed above will employ the 
most advanced technology and monitoring systems to make it even 
safer with 24/7 safety measures and regular pipeline safety 
plans.
    To look at it from a different angle there are three 
components to every pipeline project: industry, labor and 
government. Industry wants to grow, labor wants to create jobs 
and the government wants safety and environmental concerns 
adequately addressed.
    But the third leg of this stool is proving to be 
adversarial. Instead of an advocate for the first two, comments 
out of the Administration such as eliminating the ``dash for 
gas'' are only superseded by the lack of support for gas to 
back up intermittent renewables and a less than ambitious 
support system for carbon capture and sequestration at power 
plants and industrial facilities and a virtual vendetta against 
hydraulic fracturing and enhanced oil recovery and of course, 
the denial of Keystone XL. Our country cannot afford an energy 
policy that is all hat and no paddle.
    North America's Building Trades Unions stand ready to work 
with this Committee and Congress to find innovative funding 
mechanisms, sensible regulations and collaborative tripartite 
relationships between government, labor and industry to bolster 
America's leadership in the energy industry and put a floor 
under the middle class while creating millions of jobs.
    Madam Chairwoman, while we talk about the various 
components of an energy project we cannot neglect to mention 
the impacts of the local community. Many of our small 
communities across the country welcome infrastructure 
investment. In just the pipeline industry alone, we're talking 
about 800,000 jobs. The income from these jobs goes directly to 
our members and local training programs and, in turn, supports 
the tax base of Main Street and those seeking employment in the 
construction industry.
    This is truly how we can invest in America without spending 
a single Federal dollar.
    The Chairman. Mr. McGarvey, I am going to ask you to wrap 
up here.
    Mr. McGarvey. I apologize, Madam Secretary.
    Thank you for your invitation and opportunity to address 
the Committee.
    [The prepared statement of Mr. McGarvey follows:]
    
    
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    The Chairman. Thank you. I am sorry to cut you off. Your 
full statement will be included as part of the record.
    Mr. McGarvey. Thank you.
    The Chairman. We are just trying to stick to our five 
minutes here.
    Mr. McGarvey. Gotcha.
    The Chairman. Dr. Parfomak, welcome.

   STATEMENT OF DR. PAUL PARFOMAK, SPECIALIST IN ENERGY AND 
  INFRASTRUCTURE POLICY, CONGRESSIONAL RESEARCH SERVICE (CRS)

    Dr. Parfomak. Good morning, Chair Murkowski, Ranking Member 
Cantwell and members of the Committee. My name is Paul 
Parfomak, Specialist in Energy Policy at the Congressional 
Research Service. CRS appreciates the opportunity to testify 
about oil and gas pipeline infrastructure today.
    In accordance with our enabling statute CRS takes no 
position on policy or legislation.
    The United States pipeline network is integral to the 
nation's energy supply and provides vital links to other 
critical infrastructure such as power plants, airports and 
military bases. Recent growth of domestic natural gas and crude 
oil production has resulted in an unprecedented expansion and 
reconfiguration of this network.
    From an energy market perspective continued expansion of 
U.S. pipelines has the potential to improve the efficiency of 
gas, oil and refined products transportation linking new 
producing regions with traditional consuming markets more 
directly with greater capacity and reliability. Such linkages 
may lower average transportation costs and may reduce regional 
price differences for energy commodities, especially in the 
case of crude oil that may also reduce the volume shipped by 
rail, truck and barge.
    Pipeline expansion may also support jobs in energy 
production and pipeline construction and may create economic 
benefits among industries that rely on oil and gas as key 
inputs.
    However, the future operation and expansion of the pipeline 
network also face significant challenges related to safety and 
security, emissions regulation, price volatility and public 
perception which I will now discuss.
    Pipelines are a comparatively safe means of transportation 
compared to other modes. Nonetheless, a single, uncontrolled 
pipeline release can be catastrophic in terms of human life, 
property damage and the environment. Uncontrolled releases in 
Michigan, Arkansas, California and other states have raised 
congressional concern about pipeline risks and increased local 
intervention in pipeline development.
    Over the last 15 years Congress has acted repeatedly to 
strengthen Federal oversight of pipeline safety and security. 
Additional safety regulations are being finalized and new 
safety legislation is pending. Congress is likewise examining 
the Federal oversight of pipeline security addressing both 
physical threats and the growing threat of cyber-attacks.
    New safety regulations and evolving security guidance are 
intended to reduce overall pipeline network risk but their 
associated costs and practical impacts have yet to be 
determined.
    In 2015 the Environmental Protection Agency finalized its 
Clean Power Plan to regulate greenhouse gas emissions from 
existing power plants. Last month, the EPA also issued new 
regulations to reduce emissions of methane and volatile organic 
compounds from the oil and gas industries including pipelines.
    The Clean Power Plan is currently under litigation. If 
implemented, it may encourage natural gas-fired generation to 
replace coal-fired generation and to firm up renewable power. 
Such an outcome could increase demand for pipeline capacity and 
could potentially increase gas and power interdependency. 
Regulations to reduce pipeline system direct emissions will 
likely effect how pipelines are operated and maintained with 
implications both for the environment and public safety.
    Energy markets are in a period of significant price 
volatility. In January, for example, the price of Brent crude 
fell below $29 per barrel, dropping over 45 percent in about 
three months. Last week, Brent crude traded back above $50. 
Likewise, since 2012, Henry Hub natural gas prices have 
fluctuated from under $2 to over $6 per million BTU.
    Such price volatility adds significant risk premiums to 
capital investment decisions for pipeline developers. One 
result of these uncertainties may be greater caution among 
developers before committing additional capital to new pipeline 
projects or the cancellation of existing projects such as the 
Northeast Energy Direct Pipeline which failed to attract enough 
customers.
    The oil and gas sectors tend to have a long-term 
perspective on infrastructure investment, often 20 years or 
more. So a short-term price volatility may not change their 
long-term plans, but the timing and location of their pipeline 
investments may have important implications for regional 
markets.
    Public perception of pipeline infrastructure has long been 
a consideration in pipeline development, but its importance 
seems to have intensified over the last several years. Public 
concern about pipeline safety has prevented new pipeline siting 
in certain localities and increased development time and cost 
in others. Controversy surrounding the Keystone XL pipeline and 
the Constitution pipeline are just two recent examples of 
projects heavily influenced by public opinion, even where there 
is Federal siting authority state and community stakeholders 
retain many statutory and regulatory avenues to affect siting 
decisions. Consequently, public perception is likely to be an 
ongoing priority in planning and policy related to pipeline 
development.
    Thank you for the opportunity to appear before the 
Committee. I will be happy to elaborate on my opening remarks 
and address any questions you may have.
    [The prepared statement of Dr. Parfomak follows:]
    
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    The Chairman. Thank you, Dr. Parfomak.
    Mr. Peress, welcome.

   STATEMENT OF N. JONATHAN PERESS, DIRECTOR OF AIR POLICY, 
                ENVIRONMENTAL DEFENSE FUND (EDF)

    Mr. Peress. Chairman Murkowski, Ranking Member Cantwell and 
members of the Committee, thank you for providing this 
opportunity for the Environmental Defense Fund to discuss 
challenges and opportunities associated with natural gas 
pipeline infrastructure.
    Pipelines play a critical role in our economy and in the 
ongoing transformation of the energy system to reduce air 
pollution and deploy renewable energy resources. In this regard 
natural gas is particularly well suited to provide flexible 
reliability services like fast ramping in response to variable 
wind and solar output.
    The challenge we face is that the natural gas market design 
is no longer in sync with contemporary supply and demand 
dynamics. Market price signals for the kinds and amounts of new 
midstream gas infrastructure are not focused and as discussed 
in my written testimony, are likely to result in more pipeline 
capacity than we need. And because pipelines are so expensive 
to build and operate excess capacity will impose billions of 
dollars in unnecessary costs to energy customers.
    At a time when energy customers have new data-driven tools 
and smarter control over energy consumption decisions, the 
natural gas market design is comparatively dumb, especially in 
comparison to the wholesale electricity markets.
    Electricity markets balance supply and demand continuously 
and they financially settle. In other words, they price and set 
the value of electricity and reliability services every five 
minutes, every 15 minutes at the most. Natural gas pipelines, 
on the other hand, are compensated based almost entirely on 
fixed charges to reserve capacity through long-term contracts, 
20 years or more for new pipelines, not fees based on how much 
gas is delivered and not the value of gas delivery services at 
times during the day when pipeline customers most need gas.
    As a consequence, pipeline operators are somewhat 
financially indifferent to whether their pipelines are fully 
utilized. Nationally, 46 percent of available pipeline capacity 
goes unused according to a recent Department of Energy study. 
In other words, almost half of the money being paid by the 
pipeline customers, often retail and energy consumers, is for 
annual capacity that they are not using. Likewise, pipelines 
have muted incentives to provide flexible delivery services in 
response to customer needs.
    Gas-fired electric power generators, now the largest 
pipeline growth customer, simply do not operate in a steady 
state. What generators and most pipeline customers desire is 
the flexibility to get gas deliveries when they need gas and 
this flexibility need is increasing in a more flexible dynamic 
and controllable system. Flexibility then, in general, is not 
offered and is not priced by the pipelines.
    In some regions it may be that what is needed is more 
natural gas storage, more LNG storage, electric storage or 
price responsive demand response or it may be more pipelines. 
Without the market creating targeted price signals, gas 
consumers and regulators can't determine the least cost 
solutions.
    We empathize with the challenges being brought to the 
Committee's attention by the National Association of 
Manufacturers. NAM needs better gas deliverability but because 
pipelines are paid for capacity, not services, the price for 
that deliverability has not been clarified. And paying for more 
annual capacity is not necessarily a cost investment, cost 
effective investment, for NAM's members to make, otherwise they 
would be making it. Those are the economic underpinnings to the 
math problem that Mr. Epstein mentioned earlier.
    FERC understands this problem. They asked the pipeline 
industry to voluntarily develop faster, more responsive 
services, but the pace of change is too slow.
    EDF, at its core, believes that well-structured markets 
efficiently allocate capital and resources and will benefit--
and will foster beneficial environmental outcomes.
    In the context of efficient outcomes, I want to touch on 
methane emissions which when leaked into the atmosphere 
constitute waste. Waste which not only adversely effects energy 
customers but also which goes to the heart of natural gas as an 
environmental solution.
    Earlier this year we had a glaring example of that waste. 
The leak at Aliso Canyon was the largest ever measured in U.S. 
history forcing thousands to flee from their homes, releasing 
enough methane to supply 60,000 homes for a year. Methane is a 
potent climate forcing agent, and this disaster was preventable 
through basic, well construction, operation and inspection 
practices. Aliso Canyon amounts to a failure of voluntary 
measures and of regulatory oversight. The extent of preventable 
leaks raises legitimate questions about the propriety of 
substantial further gas infrastructure expansion.
    Thank you for the opportunity to present our perspectives 
which my written testimony discusses in greater detail.
    [The prepared statement of Mr. Peress follows:]
    
    
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    The Chairman. Thank you, Mr. Peress.
    I thank each of you for your testimony here this morning.
    Again, I mention that we will likely see a vote around 11 
o'clock, so we will be moving in and out here but do not let 
that reflect a lack of interest. I think the fact that we have 
seven members from each side of the aisle here today indicates 
a clear interest in understanding more of our infrastructure 
issues, the capacity issues and I think really, the math 
problem that you have mentioned, Mr. Eisenberg.
    Mr. Peress, I think you are the only one here on the panel 
who thinks that we might possibly be suffering from over 
capacity. More of what I hear is a concern that we lack 
capacity, not only for the immediate term but moving forward 
and understanding what those needs will be, recognizing that 
building a pipeline today is extraordinarily expensive and 
extraordinarily costly from a time perspective.
    I mentioned the fact that the construction of the 
TransAlaska pipeline was a three-year construction process. But 
getting us to that point, I think we will recall the history, 
was much longer than that.
    Mr. Black, nobody has really talked about the permitting 
issues and some of the siting challenges.
    Maybe it was you, Dr. Parfomak, that spoke to the 
disincentive, if you will, for investment in pipeline siting 
things like the regulatory issues, the siting concerns, the 
permitting.
    Mr. Black, can you give us some discussion here on how long 
permitting is taking for an oil pipeline in the United States? 
I know we are talking a lot about natural gas here, but can you 
please talk to me a little bit about the time involved with 
permitting a pipeline?
    Mr. Black. Thank you, Senator.
    It's taking longer to site many liquids pipelines.
    The Chairman. Define longer.
    Mr. Black. I don't have that. By a period of years, 
sometimes, pipelines are taking longer. Of course, Keystone XL 
is a great example of a pipeline review process that took 
longer.
    Liquid pipelines are sited under state laws so state 
processes like in Minnesota for the Sand Piper pipeline have 
been lengthened years beyond what they should be.
    And then for Federal issues we need to go through Federal 
lands agencies if we pass Federal lands or if we need 
construction-related environmental permits. And in many cases 
we're able to get through those processes, and we've built more 
than 20,000 new miles of pipe in the last ten years but it's 
taking longer and that process adds to the cost of the projects 
and those costs can ultimately be passed on to the consuming 
public.
    The Chairman. I want to switch over to jobs for just a 
moment.
    I will probably have an opportunity for a second round 
here, but there has been some push back, if you will, when we 
talk about the jobs numbers. Several of you have laid some 
significant and some impressive numbers out there that come 
with the construction of a pipeline. But we hear repeatedly the 
challenge that you are only creating jobs for that specific 
period of construction; and therefore, these are considered 
just temporary jobs. We heard that replayed a lot with the 
Keystone XL.
    Mr. McGarvey, can you speak to the jobs issue?
    Mr. Eisenberg, you talked about, kind of, the broader 
impact when you create a pipeline it is not just the pipe that 
is bisecting an area but the implications for broader job 
creation.
    Mr. McGarvey, if you can start, please.
    Mr. McGarvey. Thank you.
    You know, that's the language that's been used around that 
has been a little aggravating. I don't--people don't really 
understand the construction industry. The Hoover Dam was a 
temporary job, the Golden Gate Bridge was a temporary job, and 
the new Freedom Tower in New York that rose in place of the 
Twin Towers was a temporary job. That's the nature of 
construction. People, through the course of 30 or 40 years, 
maintain their position in the middle class going from 
construction project to construction project. I'm not aware of 
a project where somebody starts on their first day and ends 
their career 40 years later on a construction project.
    So that temporary job thing is a real itch for us. It 
bothers us greatly. It bothers our members when they talk about 
these career construction craft professionals just being 
temporary jobs.
    The Chairman. Because they are professional jobs, most 
clearly.
    Mr. Eisenberg, can you speak very quickly to that in terms 
of the jobs impact and what it means beyond the actual 
construction of laying the pipe?
    Mr. Eisenberg. Absolutely and thank you for raising this.
    Obviously, through the Keystone process, I mean, where 
there was a lot of inflamed rhetoric from every side, it was 
frustrating to hear that there just wouldn't be many, many 
jobs. I mean, obviously, there's the jobs for the men and women 
who are going to be making the pipe and building this facility 
and operating and maintaining it and then the manufacturing 
jobs that from rolling the aluminum and the steel and the 
things like that, that actually go into the inputs here, the 
compressor stations, things like that.
    Our studies actually looked at this and added up both the--
and analyzed both the construction and the operations and 
maintenance. And so, just, I mean, I pulled up the oil study. 
In 2016 when you add those together oil pipelines, both 
construction and maintenance, will contribute 243,167 jobs. 
Twenty-eight thousand of them, 28,438, will be in 
manufacturing.
    So the operations and maintenance piece is obviously 
smaller than construction. These are gigantic construction 
infrastructure projects, but they're there and you have to 
maintain these things. You have to keep them safe, you have to 
keep them secure and you have to keep supporting them.
    Between 32 and 37 percent of that is going to be from the 
manufacturing side of it, so these are real jobs. They matter 
to our members, and obviously, we care about them continuing.
    The Chairman. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair.
    Mr. Black, oil being transmitted by pipeline, typically, is 
it treated to reduce volatility and vapor pressure?
    Mr. Black. The pipelines are designed for crude oils of all 
volatility. Many of the products that we deliver have a higher 
volatility than even light crudes, so the volatility is not 
really an issue for pipeline transportation which operates 
mostly underground and does not have the risk of the product 
coming to an abrupt stop like it does on another transportation 
mode.
    Senator Cantwell. So there is no regulation, you are 
saying?
    Mr. Black. Well there's certainly regulation about worker 
safety.
    Senator Cantwell. What is it?
    Mr. Black. And about pipeline safety, but there are not 
additional regulations dealing with product volatility----
    Senator Cantwell. What do you----
    Mr. Black. Because anything that covers gasoline would 
certainly cover a light crude from the Bakken.
    Senator Cantwell. What do you think the volatility is for 
most pipelines shipping oil? Do you know? We will follow up 
with you on a question for the record.
    Mr. Black. Sure.
    Senator Cantwell. I don't want to put you on the spot about 
vapor pressure and pipeline volatility, but it is certainly a 
subject I have gotten up to speed on in the last year.
    Mr. Peress, I want to go back to your comments about 
natural gas market changes. I don't want this Committee to get 
into a debate that we often have now about nuclear power, which 
is about we have got to change the way it is regulated because 
nothing can get built. I don't want to have the same discussion 
about natural gas, because I would actually like to see natural 
gas.
    But you are basically saying that the market has changed 
and that we need to have different signals if we want to 
improve the utilization of the pipelines that we have today. So 
what do you think those signals are? Shorter contracts? What it 
is that will allow gas to continue and flourish as a bridge 
fuel source?
    Mr. Peress. Right now the market is completely based on 
bilateral contracts between pipelines and their customers for 
capacity. Capacity does not necessarily equal deliverability.
    What customers need is they need to get fuel delivered to 
them. And because that deliverability is not priced because 
what--pipelines are totally compensated based on capacity. We 
see inefficiencies within the way that the pipelines are 
operated.
    We are suggesting that pipelines should be able to earn 
premium revenues for providing enhanced deliverability and 
flexibility services so that they're not just getting paid for 
capacity so that the market calls forth the right types and 
amounts of resources for customers to get gas when they need 
it.
    Customers don't need capacity. Customers need gas. There's 
a difference.
    Senator Cantwell. How do you think we make this transition, 
because I am assuming the companies that invested in these 
pipelines need to recoup their investments. Obviously, there 
has been a structural change in gas pipeline contracts. I do 
not know if this came about because we used to use natural gas 
primarily for heating and now it is for electricity? And the 
electricity markets are what they are today. I mean, there has 
been a big change in the market. Is that what we are dealing 
with here?
    Mr. Peress. Yes, Senator.
    It came about in the early to mid-90's when FERC, I think, 
prudently decided that they were going to turn both the 
interstate transmission companies on the electric side and the 
interstate pipelines into common carriers and take them out of 
the supply business.
    And part of the deal that they struck in order to take the 
pipelines out of the supply business, in other words, pipelines 
are not selling gas molecules, they're selling transportation 
services, was to come up with a compensation scheme that would 
keep them interested, engaged and investing capital. And that 
compensation scheme was based on the value of capacity. And by 
and large, that compensation scheme and that market design has 
been highly successful.
    Fast forward 20 years. At this point in time it's--there's 
a need for that compensation scheme to evolve. Virtually every 
customer or company that Mr. Epstein mentioned currently has 
arrangements to buy firm capacity off of a pipeline. If they 
wanted to buy more firm capacity, they can invest their money 
and get more firm capacity. But they don't want to do that. 
What they want to do is enhance deliverability. Paying for 
capacity is not a cost effective investment.
    Why? Because you're paying for that capacity every day of 
the year, 24/7 over the term of that contract whether or not 
you use it.
    What we think needs to happen is there needs to be a shift 
in the rate design so that as pipelines are incented to provide 
more flexible delivery services they can earn and garner 
revenues from those services which are actually the services 
that customers need. Capacity does not equal deliverability and 
FERC understands this.
    Senator Cantwell. Well, I know my time is about expired, 
but I will say I definitely support the Senate version that we 
worked out on siting. I am not against siting of new pipelines, 
but we have to meet safety standards in the law.
    But I think this issue that you touched on today is a 
really big issue. I want safety. I also do not want to get 
caught short in the long-term because the market has changed 
and we are not building capacity.
    I think it is a very interesting conversation here about 
how we move forward, so I hope we will continue this 
conversation.
    The Chairman. Thank you, Senator Cantwell.
    Senator Daines.
    Senator Daines. Thank you, Chair Murkowski and Ranking 
Member Cantwell for holding this important hearing.
    I come from the State of Montana. It is a place where we 
have some of the country's most pristine wild spaces along with 
an abundance of natural resources, including robust oil and 
natural gas industries which support the employment of 43,000 
people.
    At the same time our scenic mountains, our rivers, our elk, 
our trout and so forth are the main motivator one might want to 
stay in our state. In fact, tourism is an industry that is 
nearly $6 billion and employs over 53,000 Montanans.
    That is why, I think, we strike the right balance with the 
Safe Pipes Act. I was pleased to help author it, and it passed 
the Senate unanimously last night. Among other provisions this 
bill reauthorizes PHMSA through 2019. That takes some of the 
uncertainty out of the equation. It also helps safeguard the 
environment by improving inspection report turnaround times. I 
look forward to seeing the President sign this into law soon.
    Mr. Black, I would like to start with the Safe Pipes Act 
which passed unanimously last night. In your experience in the 
industry how do you see the Safe Pipes Act making our pipelines 
even safer?
    Mr. Black. Well thank you, Senator, for your role in that 
bill and in pipeline safety. I remember the field hearing you 
convened in Montana through your role on the Senate Commerce 
Committee.
    I'd like to single out the provision that you helped author 
on quicker inspection results. Pipeline operators want to hear 
for the purpose of improving safety if a PHMSA inspector finds 
something on his or her visit. Sometimes, unfortunately, we 
were having a period of even more than a year or two years for 
that safety inspector to tell the pipeline operator about those 
concerns.
    We're in the business of learning from each other and 
continually improving our pipeline safety programs, and we want 
that input quickly. I want to thank you for that provision that 
encourages/directs PHMSA to give a post inspection briefing to 
a pipeline operator much more quickly so that we can get about 
the business of addressing whatever that PHMSA inspector finds. 
That's one way it's going to improve pipeline safety, and it 
was a great bill that we were happy to support.
    Senator Daines. Thanks, Mr. Black.
    I want to shift over to Mr. McGarvey. I was struck by your 
comments about temporary jobs. I grew up in the construction 
industry. My dad is still building houses. If you keep food on 
the table in construction, it is by stringing together a series 
of temporary jobs to stay employed.
    I was struck by the inconsistency on the battle on the 
Keystone pipeline. Why is it those were temporary jobs but when 
we are building bridges and highways and infrastructure, those 
are jobs? I think it is hypocrisy, frankly. That is how you 
stay employed through a lot of temporary jobs in construction. 
Thank you, Mr. McGarvey, for that point.
    It is clear we need to invest in our energy future and 
expand our energy infrastructure in order to keep up with 
demand. Projections in the next 25 years, we are going to add 
two billion people to the planet. Energy demand is going to 
increase 85 percent from where we stand today, almost doubling 
in the next 25 years. The question is how are we going to meet 
that demand and what role will America play in that?
    However, it appears that the Obama Administration is not 
listening to the unions. I am glad to have a union leader here 
today, Mr. McGarvey. They are not listening to associations and 
the families that are most affected by these anti-energy 
policies.
    The denial of the Keystone pipeline was a big loss for 
Montana workers and families and teachers and unions. Seventy 
million dollars of tax revenues every year in the State of 
Montana because that pipeline comes into Montana first.
    By the way, it is not just about Canadian oil. One hundred 
thousand barrels a day of Montana/North Dakota oil was part of 
the Keystone pipeline. It was just one of many denials and 
delays by this Administration.
    I appreciate your comment too. You are speaking my language 
when you said, all hat, no cattle. As a Montanan, I know 
exactly what you meant by that.
    Mr. McGarvey, in your testimony you state that the denial 
of the Constitution pipeline in New York will delay thousands 
of jobs that would generate millions in income for families in 
the region. Can you elaborate on how this denial, like the 
Keystone XL pipeline and others around the country, is hurting 
our economy, our unions, our energy security and the families 
that most need it in this very lethargic economy that we have 
today?
    Mr. McGarvey. Yes, Senator, I'll do my best. These denials 
of these pipelines which are the most advanced, technologically 
advanced, safest pipelines, you know, in the history of the 
world.
    In the case of the New York pipeline, which was already 
approved by FERC, it really got bogged down which, I believe, 
was in local politics. There were very strong, anti-pipeline, 
activist groups in the State of New York. There's a--just last 
week, I think it was the State of New York just passed a pretty 
big bill on green energy which proving that pipeline would have 
been moved in the opposite direction in the view of some of 
those folks.
    But the bottom line is when it comes to our natural 
resources, oil and gas, the manufacturing that comes about once 
we get the pipeline system in place, speaking of the Shell 
cracker, you know, $6 billion project in Southwest Pennsylvania 
and New York State hasn't been able to take advantage of any of 
that. It doesn't have the infrastructure in place when it comes 
to transporting gas and oil through the state.
    On top of that, my skilled professionals that I represent, 
men and women who've gone through, you know, three to five 
years worth of training, 6,000 to 10,000 hours, to be that 
safest, most productive craft work force in the world, aren't 
getting the opportunity to apply their skills. And they're 
being told that the green energy future is where we're going to 
need your skills. And I would note that the DOE's Quadrennial 
Report pointed out that the average medium wage for a solar 
installer in the United States is $16.01 an hour.
    And my membership that I represent currently is making 
substantially more than that and their families are depending 
on those higher income levels that are paid, particularly in 
the oil and natural gas and petrochem industries, to maintain 
their place in the middle class. So it has a devastating impact 
when they don't have the opportunity to go to work and apply 
their skills. In some cases, they have to travel from their 
homes to places where work is available, be away from their 
families, their children. And that puts a separate hardship on 
a family.
    But you do what you have to do in the construction 
industry, and that's why it's called journeyman's card because 
you go where the work is. But a reasonable, rational policy in 
New York State and through the United States on energy, 
settling most of these differences and continuing the arguments 
where we need to have them.
    Listen, I'm insulted sometimes when people talk about the 
safety issue because I represent men and women, three million 
of them, and their families. And if you've ever had a member 
get killed in a construction accident and you're responsible to 
go and meet with that family and explain what happened and 
explain what their future looks like and how you're going to be 
able to help take care of them. We put a preeminent focus on 
safety. That's why we're so safe.
    And that's why the industry, also, mostly publicly traded 
companies, put that emphasis, you know, on making sure that 
they're building those safe pipelines, that they're maintained 
safely and that they continuously get good ratings and good 
returns for their investors and the people that live in the 
communities in which those infrastructure projects go through.
    So--
    Senator Daines. Yes, and to that point we are out of time, 
but I know the energy jobs in Montana pay twice, twice, what 
our state averages are.
    Thank you.
    Senator Barrasso. [presiding]: Thank you, Senator Daines.
    We will start with Senator Manchin and the roll call vote 
has begun.
    Senator Manchin. Thank you very much. Thank all of you for 
your testimony today.
    I wanted to say, Mr. McGarvey, basically, I think you know 
the State of West Virginia pretty well. We have been a heavy, 
heavy lifter for many years and produced an awful lot of energy 
for this country. We are an exporter of energy, and we have 
been heavy in fossil with coal and now we have a natural gas 
with Marcellus shale coming on and the wet gas with ethane 
which has been very instrumental in our state.
    We have very high unemployment right now because of the 
demise of the coal industry, if you will. With that being said, 
we are looking for more opportunities in jobs. I know through 
your apprentice programs you have been trying to get more of 
our labor force in there. Can you give me a little update 
quickly on what you have done so far for some of our laid off 
miners and some of these people with the skill sets because of 
the shift in our energy in West Virginia or have you been able 
to identify that?
    Mr. McGarvey. Yes, Senator, we are in one instance across 
the United States in my testimony talked about apprenticeship 
readiness programs.
    They're usually a 6- to 12-week program that's an 
introduction to the construction industry. So you would take 
women, communities of color, veterans and bring them into 
apprenticeship readiness programs, also displaced workers, for 
instance coal miners in West Virginia. We have a program just 
starting in----
    Senator Manchin. They have a high priority, I am saying.
    Mr. McGarvey. Right in Southwest Pennsylvania on the border 
with West Virginia.
    Senator Manchin. Right.
    Mr. McGarvey. Which will give opportunities for lots of 
West Virginia.
    Senator Manchin. Well, the cracker plant is going to be 
tremendous for all of us.
    Mr. McGarvey. That's right.
    Working in conjunction with Shell we put that program 
together. Just kicking it off.
    So they move from apprenticeship readiness into 
apprenticeship. They'll get credit for skill sets from other 
occupations they already had, move them further up the economic 
ladder in the apprenticeship and quickly into journeyman status 
in a new career that's self-sustaining in the middle class.
    Senator Manchin. I have been advocating for a three state 
solution which would basically be the Mid Atlantic energy hub, 
the same as the Southwest hub. The three states of West 
Virginia, Ohio and Pennsylvania should be building the loop to 
keep the ethane, to keep basically the gas, natural gas, supply 
to attract more businesses to that area. I think this would be 
a tremendous opportunity for all of us, and hopefully you all 
can support that.
    Mr. Peress, I think that your group is basically opposed to 
the XL pipeline. I would just like to hear your explanation.
    We have had a train blow up in West Virginia. We had trains 
blow up everywhere. Why are you all opposed to the line?
    Mr. Peress. Senator Manchin, I'm not aware that----
    Senator Manchin. EDF?
    Mr. Peress. EDF opposed the XL.
    Senator Manchin. Let me read it to you. Do you want me to 
read it to you? You're--you didn't know that your president?
    Mr. Peress. Well, I work on natural gas issues, Senator 
Manchin. If you----
    Senator Manchin. Well, here is what it says.
    It says, ``The Keystone pipeline was not the right path for 
America. President Obama deserves credit for rejecting the 
project. As a nation we have turned the corner and now 
recognize that we need to consider the impact of energy 
projects on climate pollution.''
    Mr. Peress. Senator, maybe I can address it in the policy 
context in which you are asserting it?
    Senator Manchin. And that was by Mr. Fred Krupp.
    Mr. Peress. Would that be okay if I----
    Senator Manchin. Sure, anyway you want to do it.
    Mr. Peress. So anytime there is a large investment in 
infrastructure that's a bet. That's a bet because 
infrastructure is so costly and so expensive, in the billions 
of dollars.
    Senator Manchin. Can I interrupt?
    I am going to have to move on because we are running out of 
time. I want to hear this, but I have never known of a company 
that would make this type of investment unless they had a 
market. You are saying they are building these projects on spec 
whether it be a pipeline or a transmission line, they are 
building on spec, hoping it will come. Build it and they will 
use it?
    Mr. Peress. No, I'm saying that companies that invest in 
infrastructure are making a bet that there's a market for that 
infrastructure over the long period of time it takes to pay 
down that infrastructure.
    And from our perspective and what we know, and I can only 
speak to this on the gas side, not the oil side because my area 
of expertise is on gas. The gas industry itself, in recent 
filings, is suggesting that renewable energy, like wind and 
solar, will be taking market share away from them, that those 
will be an increasingly lower cost energy sources.
    Senator Manchin. But the EIA basically predicts that 
fossil, as far as gas and coal, is going to be a major player 
with almost 70 percent of the play, up until 2040. Seventy 
percent of the energy produced for this nation is going to come 
from, those resources.
    Mr. Peress. The EIA also predicts increasing amounts of 
wind and solar----
    Senator Manchin. That is great, I am saying but it is not 
going to be baseload. You agree to that, right? It will not be 
baseload.
    Mr. Peress. I do agree with that.
    Senator Manchin. So you are going to have to have baseload.
    Mr. Peress. I don't agree with that.
    Senator Manchin. You do not agree about the need for 
baseload generation?
    Mr. Peress. No.
    Senator Manchin. So you like intermittent power? You are 
okay with----
    Mr. Peress. I think an optimized system uses the lowest 
cost resources in consideration of public policy elements.
    Senator Manchin. And you think those could make it without 
the subsidies that we have given?
    Mr. Peress. Are you referring to pipelines or?
    Senator Manchin. I am referring basically to renewables and 
everything else that we have done.
    Mr. Peress. I think once we start opening the door on who 
is subsidized, how much that becomes a much more assurance.
    Senator Manchin. Sure, I agree.
    I think, Mr. Black, I have one question for you here, real 
quickly.
    Do you agree that the type of hub, shale basically, with 
what Shell is doing up there in the play? Do you believe that 
type of a hub would attract greater manufacturing 
infrastructure investment to our region? How do you see 
something like that developing? It took quite a while for Shell 
to make a decision on that hub up there, the cracker hub. Do 
they have the supply in place to do that?
    Mr. Black. Well, we're going to need enough pipelines to 
move ethane to those plants. That's a tremendous decision that 
Shell made that's going to help the region, as you said.
    That's a lot of ethane coming out of the Marcellus, very 
rich, wet gas. We need enough pipelines. If the hub is the way 
to do it, that's great, because without it there are workers 
and consumers that are just not getting those benefits.
    Senator Manchin. Okay. I am sorry, we are off to go vote. 
Everyone has left. I think it is time to vote.
    Thank you all.
    Senator Barrasso. Thank you, Senator Manchin.
    Senator Cassidy.
    Senator Cassidy. Well, thank you all. I am really enjoying 
the testimony.
    I love the all hat, no cattle. People say that for jobs but 
they do not support something which clearly will create jobs.
    Mr. Eisenberg, I think it was you. You pointed out that not 
only, I think Mr. Black and Mr. Eisenberg, that part of the 
power of this is that it leverages the creation or the 
preservation of other jobs.
    Senator Franken, who is not here, has once asked what has 
the shale revolution done for Minnesota? I was able to quickly 
find something that it had done but I think you, Mr. Eisenberg, 
pointed out that ACME Brick still produces because they can get 
gas shipped there and that energy intensive, low cost input 
allows them to preserve those jobs.
    Mr. Eisenberg. That's correct.
    Senator Cassidy. Now I am sure that is one example, but 
there will be many more too, I am sure.
    Mr. Eisenberg. There are many, many more in the State of 
Minnesota and everywhere else that when you invest in 
manufacturing, a dollar invested in manufacturing, creates 
$1.40 in economic benefits across the economy.
    Senator Cassidy. Then you pointed out, going back to Mr. 
McGarvey, that the nature of these jobs are not low paid, 
service jobs. Rather, they are well paid jobs and although they 
may be temporary, that is the kind of temporary jobs that 
preserve somebody's position in the middle class with good 
benefits.
    Mr. Eisenberg. That is absolutely correct.
    Senator Cassidy. Yes, I thought that was all very well 
done.
    By the way, for the record we should point out that the 
State Department said that if the Keystone XL pipeline were 
built, it would result in greater safety to current modes of 
transportation, a lower carbon footprint and more lives saved. 
So just for the record, that is the State Department that has 
pointed that out.
    Now, I really enjoyed your testimony. It was very technical 
in economics, and it is something that although I suspect one 
to pass on in disagreement, I thank you for that analysis.
    But I could not help but thinking as you mentioned that we 
have an increased capacity, and we are specifically speaking of 
the Northeast that I gather during the cold, the polar vortex, 
they are actually shipping in LNG from the Caribbean and 
burning heating oil--very carbon intensive and a lot of 
emissions.
    So isn't part of our capacity, kind of, like an interstate 
highway system which usually it is easy to travel at three in 
the morning, but it is rush hour that we need the capacity? It 
seems as if that capacity is not just for the incremental or 
the base load, it is also for that spike when you have a polar 
vortex or when you do an economic development and you need to 
have another energy intensive enterprise move and create jobs 
to a region therefore you could say oh, yes, we have the 
capacity to provide your energy needs. How would you respond to 
that?
    Mr. Peress. Thank you very much for that question. And 
incidentally, I spent seven of the last ten years on the 
Participant's Committee of the New England Power Pool and have 
been deeply engaged in discussions around gas capacity into New 
England.
    The issue that they've--that's been addressed in New 
England is focused on getting gas during those peak days, as 
you put it. And----
    Senator Cassidy. May I also interrupt?
    We have also looked at that. It also seems that there has 
been a tremendous substitution with both petroleum oil as well 
as coal with natural gas. The amount of natural gas growth in 
the Northeast has been remarkable. I am sure that was allowed 
because there was already existing capacity.
    Mr. Peress. And indeed I think it's pretty clear that that 
shift in natural gas has provided benefits.
    But the real question and the issue that I raised in my 
testimony is when you're in a region like New England where 
you're facing a peak challenge. That is there are 15, 30, 40 
days a year when you need to get gas deliverability that 
arguably, and there's some data that suggests that the 
pipelines are being used to capacity during those days, is 
building new capacity and paying for that capacity every day of 
the year for the other 340 days, the most cost effective way to 
overcome that problem.
    Rational, commercial actors, power plants, industry have 
decided that pipeline capacity is not the most effective way to 
address that problem. And indeed, it has been relieved over the 
past several years. And it's been relieved by those actors 
making a decision that there are, just in time fuel 
availability to lower customers----
    Senator Cassidy. But that may be a more carbon intensive 
method of production, right? It would be cheaper to use 
petroleum oil to heat, but frankly if we are concerned about 
greenhouse gases that would be a worse way to do it.
    Mr. Peress. There's no doubt that natural gas, at least at 
the burner tip, emits less greenhouse gases than oil does. The 
question is when you considered the limited amount of time 
where they face these peak issues is that a material 
difference?
    And thus far, the numbers suggest that it is not a material 
difference. And in fact, LNG which is, which provides for just 
in time delivery, people are not paying for capacity. They're 
paying for the fuel that they use because the ability to get 
LNG to these power plants is not costly, unlike new power 
plants, has also been a large part of the solution.
    And what my testimony suggests is that when we call forth 
the competition for solutions to address those deliverability 
challenges, markets will provide the most cost effective 
outcomes.
    Senator Cassidy. I am over time. I yield back, and I thank 
you all for really intriguing testimony.
    The Chairman. [presiding]: Thank you, Senator Cassidy.
    Senator Barrasso.
    Senator Barrasso. Thank you very much, Madam Chairman.
    Mr. Peress, you are the Air Policy Director for Natural Gas 
at the Environmental Defense Fund. In that role you focus on 
midstream, downstream areas of the natural gas supply chain 
such as the interstate pipeline system.
    I understand you also represent the Environmental Defense 
Fund in proceedings before the FERC, the Federal Energy 
Regulatory Commission.
    Recently a different environmental group which calls itself 
Beyond Extreme Energy has engaged FERC albeit using, I believe, 
highly questionable tactics.
    For example, in February of this year this group sent mail 
protesting FERC's decisions to the homes of the FERC's 
commissioners, not to their office, but to their homes. The 
group even went so far as to hand deliver its protest mail to 
the homes of FERC's commissioners and then post the 
commissioner's home addresses online. Last month this group 
announced that it would again target FERC's four commissioners 
at their homes, directly at their homes. The group issued a 
press release saying it would, ``visit the four FERC 
commissioners at their homes to hold them accountable for their 
decisions.''
    Now, I find these tactics in today's world to be extremely 
troubling, very dangerous. Other environmental activists 
recently drove the Chairman of FERC, Norman Bay, from the stage 
at an event in Albany, New York. They reportedly stormed the 
stage and accused FERC of genocide.
    Do you believe that physically intimidating public 
officials at a time like this or any time and their families is 
an appropriate protest tactic?
    Mr. Peress. Senator Barrasso, the way that we, as a 
society----
    Senator Barrasso. Yes or no?
    Mr. Peress. Well, I'm not going to speak for the 
Environmental Defense Fund. I will speak for myself. I think 
it's highly unfortunate.
    Senator Barrasso. Then why hasn't the environmental 
community stood up to denounce these tactics? Is it waiting 
until a public official of FERC confirmed individual or his 
family or her family, if they get hurt? Is that the plan?
    Mr. Peress. What I can tell you, Senator Barrasso, is that 
any tactics that constrain civil discourse to come up with 
solutions to complex problems are not valid tactics in my 
personal opinion.
    Senator Barrasso. Because your organization, the 
Environmental Defense Fund, has worked with the group Beyond 
Extreme Energy on legal initiatives.
    Last fall, your group and Beyond Extreme Energy and other 
organizations co-signed a letter to Attorney General Loretta 
Lynch. I imagine you did not deliver that to her house. Did 
you?
    Mr. Peress. I would hope not.
    Senator Barrasso. So tell me, why is your organization now 
linking arms with a group who believes that physically 
intimidating public officials and their families is acceptable 
behavior?
    Mr. Peress. I'm not really sure what precipitated that sign 
on letter. Sign on letters go around our community all the 
time.
    Senator Barrasso. Mr. McGarvey, do you believe that 
blocking the construction of an oil and gas, natural gas, 
pipeline is a smart and effective way to regulate hydraulic 
fracturing?
    Mr. McGarvey. No.
    Senator Barrasso. Do you believe that blocking the 
construction of oil and gas pipelines is a smart and effective 
way to reduce greenhouse gas emissions?
    Mr. McGarvey. No.
    Senator Barrasso. So what happens to American workers and 
their families when environmental activists succeed in blocking 
the construction of oil and gas pipelines?
    Mr. McGarvey. Well I think our greatest example was when 
the rest of the country and most of the world was going through 
the great recession in the construction industry, we were going 
through a great depression where in many states we were north 
to 25 percent unemployment. Our unemployment is still double 
the national average, and where there was an opportunity to put 
thousands upon thousands of people to work on one pipeline, it 
was blocked. And unfortunately, many people lost their homes, 
health care, unemployment insurance ran out. In some cases, 
suicides amongst our membership spiked because of people's 
inability to take care of their most important asset, their 
family, to financially provide for them. So the effects of 
those kinds of actions in energy infrastructure have a serious, 
serious economic impact on the members that I represent.
    Senator Barrasso. Thank you.
    Thank you, Madam Chairman.
    The Chairman. Thank you, Senator Barrasso.
    Several of you made a reference to energy renaissance, 
natural gas renaissance, shale renaissance. Would we have had a 
renaissance, would we have had this uptake in the economy, to 
use your terms, Mr. McGarvey, and we were in a depression 
effectively? Would we have had that if we had not had 
infrastructure in place to avail ourselves of the technology 
that allows us to go after this resource?
    This resource just did not appear there overnight. It has 
been sitting there. It has been our ability to access it 
through the technologies that have come about. It is a pretty 
generic question to you all, but it again speaks to the 
critical issue that we are talking about here which is making 
sure that we have adequate capacity within our infrastructure.
    Mr. Black, can you speak to that? And Dr. Parfomak, given 
the research that you have done at CRS, can you also speak to 
that? So, Mr. Black first.
    Mr. Black. Thank you, Senator, for hitting the key point 
that you need pipeline infrastructure to make this happen.
    You discussed the importance of getting product from point 
A to point B, whether it's crude oil to refineries where it's 
lower costing or natural gas liquids that get to a 
petrochemical plant. It wouldn't be possible without the 
pipeline infrastructure. It's absolutely necessary and it 
wouldn't happen without it.
    The Chairman. Dr. Parfomak.
    Dr. Parfomak. There's no question that the unprecedented 
developments in shale gas were reducing the price of natural 
gas, you know, from $15, if you remember just a few years 
earlier, to $2 to $3 to $4 range created a host of economic 
benefits.
    It lowered home heating costs so folks had more money to 
spend on discretionary expenditures. It lowered manufacturing 
costs, as others have stated in the past. It made electricity 
cheaper. And so there are a host of benefits now.
    You know, economics tells you supply and demand. Cheap 
commodity, you're going to increase demand for it and we have 
this, sort of, you know, cyclical nature in the energy industry 
as we always have had.
    What is interesting to me as an analyst is that we are 
just, in my view, in the beginning of a huge transition 
infrastructure wise from an economy where natural gas is 
produced in certain regions, consumed in certain regions to a 
physical reshuffling of that, as I stated in my testimony, and 
continued transition in the way that natural gas is being 
utilized.
    From my point of view, it sort of requires constant 
vigilance as to how are things going regulatorily, construction 
wise, the price of fuels which are influenced not only by 
developments here but internationally. So it requires a lot of 
attention to all of these factors, and unfortunately, it's a 
lot more complicated that it used to be.
    The Chairman. Let me ask about that, the fact that it is 
more complicated because we speak about the benefits to 
consumers whether it be lower energy cost. We certainly 
recognize that the jobs benefit, just the overall benefit, that 
comes to the broader economy as a whole.
    Yet we have this nimby attitude where okay, I want to make 
sure that I have access to that natural gas. I want to make 
sure that I have access to this resource, but just don't put it 
within my eyesight, don't put it in my state, put it in 
somebody else's backyard.
    If the benefits are so apparent and again, I look at you, 
Mr. McGarvey, because I think from a jobs perspective it is 
just bold and in your face, why is there this disconnect? I 
think I called it a cognitive dissonance here. What are we not 
doing right in conveying to the American public, the consumer, 
that there is clear benefit here? By the way, if you want to 
have more affordable, accessible, clean, diverse, secure 
supplies, you are going to need the infrastructure. What are we 
doing wrong? Are we not conveying to the work force the 
importance of this?
    Mr. McGarvey. My work force understands the importance of 
it for sure. It's just ironic that, again, it goes back to our 
discourse. We can't have an honest conversation where, in a 
region or in a local area, we have to have outside groups come 
in and gin up the scare tactics and other things why people 
should be frightened and opposed.
    I mean, it's gotten so bad that ironically even in the 
State of Vermont, I think, in its last legislative session, I 
think the Vermont Senate passed a bill out. I don't know that 
it's made it all the way through to ban but put a moratorium on 
more windmills in the State of Vermont. We've already closed 
our nuclear plant up there. I don't know how they're going to 
do the power generation.
    But again, if we could have a rational conversation about 
the benefits, about not ceding our position as the economic 
super power to China, about real middle class jobs, families 
sustaining middle class jobs and what they mean. And for the 
most part, there's always exceptions to the rule, but for the 
most part, you know, private investment wants to work with 
local communities to make it work for them so that it works for 
all the parties that are involved with it.
    And then in my testimony I talked about the three-legged 
stool government, labor and industry all working together to 
make sure that we're building safe infrastructure. It's 
aesthetically pleasing as it can be, as far away from inhabited 
home sites as it can be and keeps the country moving forward. 
It goes back to everything else that's going on in our country 
right now. There's just not, we can't have an honest 
conversation about what's important.
    The Chairman. I would like to think that here at the 
Committee we can help move forward on honest conversations. So 
thank you for bringing that up.
    Senator King.
    Senator King. Thank you, Madam Chair.
    Sorry about the herkey jerky nature of this. When they call 
a vote we have to go.
    I have a long-term question and a short-term question and 
perhaps some of this might be for the record.
    The short-term question touches on the question that Mr. 
Peress talked about which is the capacity versus deliverability 
issue and peaking needs. It has often occurred to me that we 
build energy infrastructure, and this goes for the electric 
distribution lines as well, for the hottest day of the year or 
in the case of natural gas, the coldest day of the year. It is 
like building a church only for Christmas and Easter and on an 
off day in April there are not many people there.
    Right now in New England, 57 percent of our electricity is 
being generated by natural gas. My question is where is that 
going in New England? I know we are going to lose at least one 
nuclear power plant and probably one or two coal plants.
    Mr. Peress, you have talked about this. Isn't there going 
to be a need over the next 10 to 20 years for additional base 
load capacity? We will talk about peaking after this.
    Mr. Peress. First of all let me say that what we have seen 
in the markets is that the markets, in particular, New England, 
but throughout the country, they're getting peakier. That means 
the average load to peak load, that ratio, is growing which 
suggests that base load resources are not what is going to be 
needed in the future. And in fact, there are many trends that 
suggest that base load resources are not what's needed in the 
future.
    If you look at my testimony I speak in depth about the fact 
that few, if any, natural gas-fired power plants run as base 
load resources, less than six percent nationwide. And that's 
based on recent EIA data.
    So the question is less about whether we need to install 
capacity to meet base load needs and what are the most cost 
effective means to provide for that flexibility and that 
deliverability in a more peakier dynamic.
    Senator King. Well let's transition then into my second 
question which is about peaks.
    Mr. Parfomak, I would like you to comment. What are the 
practical alternatives to building excess capacity to deal with 
peaks? Are we talking LNG storage tanks? How can we deal with 
this issue of a peak demand in two or three weeks in the year 
and pretty adequate capacity the rest of the year? Dr. 
Parfomak, what are your comments?
    Dr. Parfomak. There are alternatives on the supply side and 
the demand side. And so, as examples in the electric utility 
world, there are programs that have been around for a long time 
to try to reduce peak----
    Senator King. Demand response.
    Dr. Parfomak. Interruptible power supplies, now the smart 
grid is putting meters on people's dishwashers and clothes 
washers to turn them off on August afternoons automatically 
without the consumer having to make a decision and compensate 
them for that.
    So there are probably a number of ways and maybe more ways 
to be thought of to try to moderate certain types of demand, 
interruptible rates for natural gas users. But some of them 
can't do that, so there's a limit to the flexibility in demand.
    On the supply side, there is that----
    Senator King. Well the demand response works for the 
electric side, but it does not necessarily work for a factory 
that needs the gas----
    Dr. Parfomak. Right, some of them can't do that, right. 
Some of them can stop a shift without penalty and make it up, 
you know, the following week. Some of them can't. They can't 
power down that way.
    But in terms of supply there are, of course, use something 
other than natural gas. We talk about it in the vehicle world 
using electricity to run cars instead of gasoline. We can use 
other fuels rather than natural gas and we can use electricity 
for a process, that sort of thing.
    Of course, it's hard to build transmission lines to get 
electricity into some of these regions too.
    Senator King. But if you charge your car at night there is 
a lot of excess capacity on the electrical transmission and 
distribution at night.
    Dr. Parfomak. That's right.
    Senator King. A huge amount of excess capacity.
    Dr. Parfomak. And that's again, that's a practice of 
capacity utilization and trying to reduce peak loads.
    LNG, as you mentioned is another option, but that presents 
its own challenges.
    Senator King. Mr. Eisenberg, your clients, your members, 
will pay for this new capacity. Are you concerned about paying 
for excess capacity?
    Mr. Eisenberg. So I'm not hearing that from my members at 
all. There's a chart on page two of my testimony that shows our 
natural gas usage. It's trending up. It's about three times 
higher than about any other fuel we've got. Manufacturers need 
always on energy and natural gas can give us that, always has 
given us that.
    So when our members are looking to invest in these 
contracts, my sense is they're looking long-term and they're 
looking for a secure fuel for a very, very long-term.
    Again, we don't really hear a lot about rates from them. 
It's not something that is a top tier issue for our 
organization because they're handling it at the state level. 
But what we do hear is that they need the pipelines to fix some 
of the geographic issues, the distribution that's going on 
there.
    Senator King. Thank you, Madam Chair.
    I will mention I have a friend in the construction business 
whose family-owned company has been providing temporary 
permanent jobs since 1928, so I understand that discussion.
    Thank you.
    The Chairman. Thank you, Senator King.
    Senator Hirono.
    Senator Hirono. Thank you, Madam Chair.
    I thank all of the witnesses.
    Mr. Peress, I found your testimony very interesting and 
talking about excess capacity and the fact that pipeline 
owners, I suppose, operators are paid for capacity rather than 
distribution or deliverability.
    You noted that there is a potential for gas and electric 
rate payers to be stuck paying the bill for pipeline 
infrastructure that may not be needed. What is the typical time 
for payback for pipeline, new pipeline, infrastructure to 
justify the cost of building the pipelines? What is the length 
of time that they generally look to?
    Mr. Peress. I don't know the answer to that question off 
hand because it all depends on what the application and use of 
that natural gas is and the circumstances in the individual 
market. But what I can say is that customers that make a 
rational decision to sign up to buy capacity for and long-term 
contracts, make that calculation and that's what drives their 
decisions.
    Senator Hirono. It could be 20, 30, 40 years and so that 
commitment will also commit the rate payers to paying for 
basically the cost of building the pipeline would go to the 
rate payers.
    Can you expand on your suggestions for what Federal and 
state agencies should do to support a more accurate forecast of 
the need for new pipelines?
    Mr. Peress. Yes. What we are suggesting and what the FERC 
is moving forward in doing is to by enhancing coordination 
between the gas and electric industries and by adding flexible 
services and pricing flexible services on the gas side. What 
they're doing is they're fostering competition amongst all 
different sorts of resources to address the individual needs of 
customers. And to the point that the gentleman to my right just 
made, there are multitude different options and alternatives 
that customers have to meet those needs unless and until there 
is a mechanism for comparing those and pricing those, then it's 
difficult to make those decisions as detailed in my testimony.
    So what the Commission is trying to do is to harmonize and 
to some extent foster competition amongst all those different 
resources so that we get a better sense of how to make least 
cost procurement decisions for long lived expensive 
infrastructure.
    Senator Hirono. This is something that FERC is undertaking?
    Mr. Peress. FERC has been moving in this direction through 
several dockets. What they most recently did was asked the 
industry to try to do this voluntarily. EDF has been deeply 
involved in that, as has the entire industry.
    I can tell you that the progress is going very slow and I 
will characterize the fact that the pipelines, in general, are 
not seeking to change the current market design.
    Senator Hirono. Thank you.
    This question is for the full panel. In Hawaii the gas 
utility, which is not the largest utility entity in Hawaii, 
it's the electric company, has proposed a project to import 
natural gas using a floating offshore terminal and an undersea 
pipeline to connect to its existing onshore pipeline network.
    None of you may be particularly familiar with the details 
of the specific proposal, but can any one of you speak to the 
performance, safety and cost of other natural gas projects 
using floating terminals or undersea pipelines? Can anybody 
comment on either kind?
    Dr. Parfomak. Actually I can deal a little bit with LNG 
issues.
    The advantages of using a facility of that type which is 
not onshore is that two fold.
    One is of safety. It removes the--a large quantity of 
volume from populated areas. LNG at sea presents much, much 
lower risk to surrounding communities than a land-based LNG 
facility would, and LNG doesn't represent a hazard to the water 
necessarily because it wouldn't work to escape it. It would 
just evaporate or burn off, unlike an oil tanker might.
    There are also cost and siting advantages. Obviously it's a 
lot simpler and faster to develop a turn type system offshore 
than to develop a facility on land where you have to secure the 
property rights and go through a FERC siting process and take a 
lot of those considerations into account.
    The primary cost then is a vessel that's capable of doing 
that, and that's considerably more expensive rather than just 
have a thermos which is moving LNG around and re-gasifying it 
onshore. You have to have all of that on a vessel that's 
capable of moving around. And that, I haven't done an analysis 
on the relative costs of that.
    But there's certainly, there have been a few LNG import 
terminals in Boston Harbor that were terminals that were not 
used for economic reasons but, you know, were sited and 
approved by the Federal Government.
    Senator Hirono. This is also not an inexpensive proposition 
because our gas company is looking to spend some $200 million 
in order to set up this system.
    Thank you very much, Madam Chair.
    The Chairman. Thank you, Senator Hirono.
    Senator Franken.
    Senator Franken. Well, thank you, Madam Chair.
    I am very concerned about the safety and integrity of our 
pipelines in the face of climate change. In coastal regions 
enhanced storm surges from sea level rise threaten the 
stability of existing infrastructure and elevates the risk of 
pipeline corrosion from sea water intrusion. In the Northern 
Great Plains extreme precipitation can lead to land subsidence 
that damages pipelines and causes devastating leaks and spills. 
And as I am sure the Chair of our Committee could tell you, in 
Alaska thawing permafrost can severely impair pipeline 
foundations.
    But what concerns me the most is that many pipelines in the 
U.S. were designed, of course, without considering the impacts 
of climate change. In fact, according to several Federal 
studies many of the pipelines in Alaska that sit on permafrost 
were designed using climate conditions from the 50's, 60's and 
70's during which time we did not have as clear an 
understanding of climate change as we do today.
    Mr. Black, you say in your written testimony, and I quote, 
``The pipeline industry believes it is important we're 
proactively improving pipeline safety.'' How does your industry 
consider climate change as you build new pipeline, or for that 
matter, repair existing pipeline?
    Mr. Black. Thank you, Senator.
    Any new and existing pipeline today needs to consider its 
operating environment. They need to understand the possibility 
of local flooding, of erosion and to take those issues into 
account whether it's in the design of the pipeline or the 
protection of an existing pipeline. So they're required right 
now to assess those risks, and if there's any hardening that 
needs to be done, to do it.
    We had the flooding in Hurricane Sandy in that area the 
pipelines continued to operate in that environment. The only 
issue there was the power was cut to terminals and to 
pipelines, but the pipelines continued to operate safely. And 
then afterwards, learned lessons to be ready for the next time 
to make sure they're ready.
    Senator Franken. Thank you.
    Mr. Peress, how can we make sure that our pipeline 
infrastructure is prepared for the impacts of climate change?
    Mr. Peress. The PHMSA, the Pipeline Hazardous Materials 
Safety Administration, actually has initiated a fairly 
significant proposed rulemaking to address safety for the 
interstate pipeline system. And in fact, one of the focal 
points of that is enhanced threat identification and enhanced 
data acquisition. It's a positive step forward that PHMSA is 
taking but far more needs to be done.
    One of my fellow panelists spoke about safety management 
systems that are evolving and advancing in the context of 
threat identification, and it is important for the agency to 
continue to focus on this aspect. And really this is the first 
time in certainly recent memory, if not ever, that they have 
brought these sorts of programmatic elements to the interstate 
pipeline system, outside of just the most populated, densely 
populated areas. So it is happening but more needs to be done.
    Senator Franken. Thank you.
    Mr. Eisenberg, I appreciate the discussion in your written 
testimony regarding the important role of steel in pipeline 
construction. In a recent study the National Association of 
Manufacturers found that natural gas pipeline construction 
contributed to 1,085 jobs at iron and steel mills.
    By the way, Mr. McGarvey, I was a member of a multi-
employer plan as a writer in the writer's guild and as an actor 
on TV, so I know those are jobs. Jobs are jobs. I, kind of, I 
got a little PO'd during the whole Keystone discussion about, 
``They're just temporary jobs.'' Well yes, of course, every job 
in construction is a temporary job.
    Anyway, I am back to you, Mr. Eisenberg. As you may know 
much of the iron ore or taconite that is used in domestic steel 
production comes from the iron range of Minnesota. 
Unfortunately for many years now our home grown steel has had 
to compete with illegally dumped steel from China. While I am 
happy the government has recently been successful in combating 
illegal dumping by imposing new tariffs on Chinese steel, we 
need to do more. Mr. Eisenberg, do you agree that we should be 
using domestic steel in new pipeline construction and not 
illegally dumped steel from China?
    Mr. Eisenberg. Well, we obviously are concerned about 
dumping as well. Our trade team, led by Linda Dempsey in my 
office, we actively engage with groups like the Iron and Steel 
Institute, the Aluminum Association, who are doing their best 
to try to level the playing field here to make sure that U.S. 
manufacturers have robust trade remedies available to them. 
We're hopeful that it will work itself out. There were some 
positive--there were some impacts there.
    The good news is that you mentioned that our study had a 
thousand jobs. Well, those are real numbers based on real 
pipelines and real jobs, so we're still creating the jobs here. 
There's a lot of upside in building more pipelines for the iron 
and steel industry.
    We'd obviously like to see as much of that in the United 
States as we can.
    Senator Franken. I obviously would like to see as much of 
that. So your answer is yes. You prefer American steel.
    Mr. Eisenberg. We officially do not have a preference on 
that. I apologize. Our trade folks can follow up with you on 
that.
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    Mr. Eisenberg. But obviously we are concerned about 
dumping, and we'd like to see trade remedies taken.
    Senator Franken. Well, I am sorry you do not have a 
position on that, and I think we should be using American steel 
in our pipelines.
    Thank you.
    The Chairman. Thank you, Senator Franken.
    Senator Lee.
    Senator Lee. Thank you, Madam Chair, and thanks to all of 
you for being here today.
    I am increasingly worried about the politicization of 
infrastructure projects. What we are seeing has allowed 
increasingly vocal anti-development environmental movement that 
has set its sights on run of the mill pipeline infrastructure 
projects.
    This does not represent everyone in the United States. It 
does not represent even most who are concerned about the 
environment. It is a fringe movement, but it is a fringe 
movement not to be ignored. It recently killed the Northeast 
Energy Direct Pipeline and the Constitution pipeline which 
would have supplied natural gas to a number of states on the 
East Coast.
    Now Utah is one of the fastest growing states in the 
country. Our population is expected to double by 2050. There 
are not a lot of states that can claim that particular 
distinction.
    I am generally worried that the endless litigation that we 
are seeing and the political pressure campaigns that we are 
seeing waged by anti-development, fringe activists will inhibit 
Utah's growth by preventing the construction of necessary 
pipeline infrastructure.
    Without that and other types of infrastructure, you cannot 
have growth, growth that Utah would otherwise be experiencing.
    So, Mr. Eisenberg, I would like to know. How can Utah grow 
if we cannot provide heat and reliable electricity for 
residents, particularly for our new residents moving into the 
state?
    Mr. Eisenberg. Well, and I would add the manufacturing 
sector as well, right? I mean, we are the foundation of 
communities and we need the energy as well.
    I mean, we all, kind of, get what's going on here. But 
there's a group of people right now meeting in Atlanta to try 
to figure out how to make this process more difficult, the 
pipeline siting process, the permitting process more difficult. 
That's not going to change.
    There are--it's just the world we live in.
    It's unfortunate because the FERC process that generally 
through laws, through the Energy Policy Act of '05 and '07, has 
gotten some remedies that will allow it to move a little bit 
quicker than some of the big infrastructure projects. But it's 
two steps forward and one step back and now we're dealing with 
some of these challenges that some of the folks in the industry 
are saying are adding years to the project. We just want to see 
them get done, right?
    We have a real--we have a math problem. We need, we're 
going to need, a lot more energy for the power sector and for 
industry in Utah and elsewhere over the next decade. We just 
need the pipes in place. You can regulate them. Do whatever you 
need to do, but let's get them built so that we don't have a 
real log jam for us. Because otherwise, you don't have 
manufacturing.
    Senator Lee. No, I think that is right.
    Well, in addition to that, we have government regulations 
like the Clean Power Plan and MATS that are forcing a 
transition away from coal-fired electric power generation to 
natural gas.
    The same groups that forced the transition to natural gas 
are now successfully scuttling the chief way to transport 
natural gas which is by pipeline. In other words, without 
pipeline infrastructure you cannot rely on natural gas as a way 
to generate electricity.
    Mr. Eisenberg, I am at a loss over this one.
    Mr. Eisenberg. We are as well. I mean, manufacturers need 
base load generation. We need power, right? And that generally 
comes from fossil fuels or nuclear power. And obviously there 
are other things taking up an increasing portion of the grid, 
but that's it. That's where you get base load power from.
    We're losing our nuclear power plants, we're losing our 
coal-fired power plants and now we're having this existential 
discussion about whether we need natural gas. We need natural 
gas in the manufacturing sector. We don't have much left after 
that to keep us going, and if we don't have it, we've got a 
real problem.
    Senator Lee. Yet this problem is particularly acute in 
states like mine where the majority of the land is owned by the 
Federal Government. Other people in other parts of the country 
are dealing with a lot of regulatory hurdles, but those hurdles 
are magnified. They are compounded to a very significant degree 
in a public land state like mine.
    In Utah, business looking to build a pipeline should expect 
to deal with some combination of the Advisory Council on 
Historic Preservation, the Bureau of Indian Affairs, the Bureau 
of Land Management and the Army Corps of Engineers in addition 
to the EPA, the Fish and Wildlife Service, the Forest Service 
and the Federal Energy Regulatory Commission.
    Mr. Black, could you walk me through what a permitting 
process in the West looks like and how this process could be 
improved, particularly within public land states like mine?
    Mr. Black. Well thank you, Senator.
    You're right. There's a lot of agencies that we need to 
work with, and we're ready to do that but we hope we can do 
that in a timely manner.
    Pipelines are subject to many of the same requirements as 
other Federal agency actions in the West such as a NEPA review 
or permitting across Federal lands, like you said. In practice, 
a pipeline has a minimal impact on the environment. A recent 
NEPA review of a large pipeline project found that the 
alternative would have less impact, the pipeline alternative 
would have less impact than all alternatives including no 
action. That's because the energy demanded by the public will 
reach market by some other mode, by truck, by train, pipeline, 
barge. They don't have barges in Utah, and pipelines have the 
least environmental impact.
    The Federal workers at local offices in the West are, as we 
understand, generally working hard to complete that review 
work. We see permit reviews slow down when maybe Washington 
outside forces get involved and/or when local field offices 
don't have the resources to process those applications.
    One recommendation is just to make sure those local field 
offices have enough resources, enough leeway to make the 
decisions that we need to be made to get those pipelines sited 
in Utah and elsewhere in the West.
    Senator Lee. Thank you.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Lee.
    Senator Warren.
    Senator Warren. Thank you, Madam Chair.
    Last month the Massachusetts Supreme Judicial Court ruled 
that the state is not on track to meet its legal obligation to 
reduce carbon emissions from fossil fuels. And while 
Massachusetts has been a leader in deploying renewable energy, 
the Commonwealth continues to rely on fossil fuels for the 
majority of our power.
    We think the path forward is clear. Massachusetts will need 
to aggressively expand renewable energy generation and increase 
conservation to meet our carbon emission goals. And yet, in New 
England big new pipelines have been proposed to bring natural 
gas into the region.
    Now, state leaders like Attorney General Moira Healy, have 
questioned the need for these new pipelines and she has said 
and I quote here that, ``the region is unlikely to face 
electric reliability issues in the next 15 years and additional 
energy needs can be met more cheaply and cleanly through energy 
efficiency and demand response.''
    In fact, even the gas pipeline companies have testified to 
FERC that a long-term shift toward renewable energy calls the 
economic viability of new pipeline infrastructure into 
question.
    So Mr. Peress, the trend toward cleaner forms of energy is 
just a fact. Given this trend away from fossil fuels, is 
investing in new, high capacity natural gas infrastructure a 
smart, long-term investment for New England?
    Mr. Peress. The evidence suggests that in New England it is 
not. And just to clarify the record, when Kinder Morgan 
canceled the Northeast Energy Direct project, they canceled it 
because they did not get enough customers to sign up to commit 
for that capacity over 20 years. It had absolutely nothing to 
do with opposition.
    And of course, the reason they couldn't get those customers 
to sign up for that capacity is because both the grid and state 
energy policy in New England and in Massachusetts are moving 
more toward more dynamic renewables, more energy efficiency and 
the resources that Attorney General Healey, through a detailed 
analytical analysis found to be the most cost competitive 
reason.
    Senator Warren. Let me pick up on that point about how it 
is that these pipelines are financed.
    Traditionally they are financed by the companies that are 
actually going to burn the gas, industrial manufacturers, gas 
distribution companies, gas-fired plants, who enter into long-
term contracts with the pipeline company. The companies finance 
the pipelines because they analyze the projected gas use over 
time and decide that the costs of the pipeline are more than 
offset by the subsequent savings in gas prices that they are 
going to get from adding this new capacity. It is just 
basically how markets work.
    Mr. Peress, have these companies been willing to pony up to 
cover the costs of big new pipelines in New England?
    Mr. Peress. They have not been willing to do so in New 
England because they found that it's not in their economic 
interest to be paying for pipeline capacity every day when 
their needs are limited and only during certain specific 
periods of the year.
    Senator Warren. Right.
    So these companies are saying they do not want to pay 
because they are not sure that these pipelines make any 
economic sense, but they would sure be happy to see the 
pipelines if the state would make the electricity customers pay 
the cost of these new contracts.
    Now in Massachusetts, the Department of Public Utilities 
authorized the electric utility companies to finance these new 
pipelines on the rate payers' dime even if they otherwise made 
no economic sense. The Department said the electric utilities 
could pass the cost off to Massachusetts families, who do not 
have the option to say no.
    Mr. Peress, does it make sense to force families to pay for 
these pipelines when we might not need them and no one else is 
willing to pay for them?
    Mr. Peress. A 1.2 billion cubic foot pipeline would cost 
customers $14 billion over 20 years. And that's money that's 
paid for by people, by businesses and otherwise, under a scheme 
that tries to impose those obligations on someone other than 
the beneficiaries of that pipeline capacity. That, in our view, 
is the definition of a bubble, imposing costs on captive 
entities that are not the beneficiaries of that, those costs. 
So we would suggest that it does not make sense.
    Senator Warren. Alright.
    And it is also very anti-market, I should add here. I 
appreciate your testimony.
    Energy costs are a big deal in New England and throughout 
the country but giant pipeline companies that cannot make an 
economic case for these projects should not be allowed to force 
someone else to pay for them. As places like Massachusetts work 
to modernize our energy system and try to keep the prices 
affordable for families and businesses, it is urgent that we 
upgrade aging infrastructure and invest in clean technologies 
of the future. But we should keep the focus on that, not on a 
big giveaway to the oil companies and gas companies.
    Thank you, Madam Chair.
    The Chairman. Thank you.
    I am so tempted to engage in debate. I do not know how we 
focus on the aging infrastructure if we cannot make sure those 
companies that build the pipelines have the certainty that they 
need to do exactly that.
    I have already done second round. I want to give my 
colleagues an opportunity.
    Senator King, you were next up if you would like to ask a 
second round of questions.
    Senator King. I think to clarify this discussion there is a 
project or, I do not know quite how to characterize it, a 
proposal in New England that the taxpayer or the rate payers of 
the utilities take up the burden of the capital cost. The 
argument is that the pipeline has become, essentially, part of 
the electrical system because so much of our electricity is 
generated with natural gas.
    I think that is what Senator Warren is talking about. The 
real question is who bears the risk?
    The Chairman. Right.
    Senator King. I think Senator Warren's point is if the 
private sector is not willing to, does that tell you something 
about it?
    In fact, our Maine Public Utilities Commission staff 
studied this question and just last week recommended against 
the state committing funds to the underwriting of the pipeline 
because they found it uneconomic.
    I do not know the details of that study, but our commission 
will be looking at it. The issue is whether these costs should 
be borne by the customers or by the electric rate payers and 
how the risk is allocated.
    The Chairman. Right.
    Senator King. It is not an easy question.
    The Chairman. Yes.
    Senator King. And clearly we need the infrastructure, but 
are there other ways to skin the cat other than building an 
entirely new pipe, such as LNG storage, demand response, again 
because of the problem of, in some cases, in New England 
anyway, we have enough capacity today. But we will not have 
enough capacity in January and how do we deal with that?
    The second question is what will we need in 20 years? I do 
not want to close the door to new infrastructure if, in fact, 
the demand in New England for natural gas continues to decline. 
That gets us to the question is what is our energy mix going to 
look like in 20 years? So it is not an easy question.
    If you guys can find a question buried in there somewhere, 
you are welcome to it. [Laughter.]
    Dr. Parfomak. Senator, the point you raised and the comment 
you made is a really insightful one. The notion that, to what 
extent is the natural gas system becoming part of the 
electricity system? And that's the interdependency issue that I 
raised in my testimony.
    Something FERC has been very, very interested in and has 
spent a lot of time thinking about in the context, in 
particular of New England, where it's particularly evident, but 
in other places. And most of the, I shouldn't say most of them, 
the major driver of future demand for natural gas growth is 
expected to be the electric power sector. And so, clearly, 
anything that happens in the electric power sector to reduce 
its requirements for natural gas in the future will mitigate 
the needs, especially peaking needs, for natural gas 
infrastructure as well.
    So I just say that to point out that things like 
electricity storage, the efficiency of renewables, the 
requirement for natural gas to firm up renewables, all of that 
has a direct relationship to the issues that we're discussing 
today.
    Going forward I mentioned earlier that this is, it's 
getting more complicated. The interdependency between 
electricity and natural gas, especially in certain parts of the 
country like the Northeast, are yet another level of 
complication that I personally have to pay a lot of attention 
to.
    If somebody comes up with an incredibly efficient 
electricity storage mechanism it could change this discussion 
radically, really affect how natural gas develops going forward 
and where it needs to go.
    Senator King. But one of the problems is we are all trying 
to predict the future and the only thing we can say with 
certainty, that we will be wrong. [Laughter.]
    But if we bet that there will be new alternatives and 
changes and then there are not, then we end up with an 
infrastructure shortage and particularly given the length of 
time it takes to permit new infrastructure. So there are no 
easy answers here.
    But I think what I want to do is have more data and more 
understanding about long-term electricity demand. You 
mentioned, I think, Mr. Eisenberg, a 40 percent increase in 
demand nationally over the next 20 years.
    Mr. Eisenberg. Next decade, actually.
    Senator King. Next ten years. But then you have to get 
underneath that and say, okay, when is that happening and what 
is the necessity for additional infrastructure?
    I keep coming back to this Christmas and Easter and the 
church. Could you build a tent on Christmas instead of building 
a church that is empty two-thirds of the time?
    Mr. Eisenberg. I mean, the only thing that I think is worth 
adding to that is that the manufacturing end user is 
fundamentally different than the residential end user. And I 
think we, sort of, get caught up in, you know, families and 
homes and we absolutely should be but manufacturers use of 
energy is very, very, very different. And so our gas needs are 
going to be pretty consistent. So if you want us there, we need 
the pipes. I mean, it's really that simple.
    All the new, you know, there's so much new manufacturing 
coming to the United States because of natural gas and because, 
particularly, of the feed stock elements of natural gas. But 
where is it happening? It's happening in the Gulf. It's 
happening in Texas----
    Senator King. But the test of that is whether your members 
are willing to step up and sign 20 year take or pay contracts.
    Mr. Eisenberg. Completely agree.
    Senator King. To support the building of the 
infrastructure.
    Mr. Eisenberg. Agree.
    Senator King. That is the issue. Thank you.
    Thank you very much, Madam Chairman.
    Fascinating hearing, thank you for calling it.
    The Chairman. Yes it is very good, thank you.
    Senator Hoeven.
    Senator Hoeven. Thank you, Madam Chairman, and thank you to 
our witnesses.
    Today's hearing focuses on the importance of oil and gas 
infrastructure and the ways in which energy is transported from 
the places where it is produced to where it is consumed. While 
energy moves via truck, rail and barge, pipelines are the most 
efficient and the safest way to transport oil and gas.
    One highlighted example. In North Dakota in September 2011 
we were supplying almost a third of the natural gas we produce, 
36 percent. The State Industrial Commission set a goal to get 
that down to nine percent by 2020. We are currently now down to 
ten percent. So we have gone from 36 percent down to ten 
percent and we produce 1.0 million cubic feet of natural gas 
per day. The biggest barrier that we had was building gas 
gathering systems and also then building the intrastate 
pipeline and then building the interstate pipeline because we 
not only wanted to capture that gas and get revenue for it, it 
also is better environmentally than flaring. So the key for us 
is getting through these barriers to building the pipelines 
whether it's gas or oil or other products.
    I will start with Mr. Black. To what extent does current 
Federal regulatory policy discourage this private investment? I 
mean, to what extent does it discourage it and what are the 
one, two or three things we can do to encourage that private 
investment, get it going?
    Mr. Black. Well, you're right, Senator, that it was a 
success building those additional pipelines to capture that gas 
that had been flared in North Dakota. There's economic value 
that helps the people of North Dakota and then those who would 
be consuming that product. And of course, it's further downward 
pressure on prices which helps consumers.
    On the liquid pipelines we face issues as well of serving 
new areas, and we know there are benefits locally including 
North Dakota, your state, when we get additional pipelines 
built.
    We need Federal Energy Regulatory Commission, FERC, 
policies that continue to encourage pipeline construction. We 
watch that closely; we need the federal agencies that need to 
give lands permits and construction permits to do that on a 
timely basis; and then we need states where liquid pipelines 
are sited under to make decisions timely.
    A key issue in your state and you know well, Sand Piper 
Pipeline going east to the--through Minnesota, that would be a 
tremendous outlet for Bakken to get to market and would help 
consumers and workers in many places. But that process has 
really been lengthened beyond how it should be. And that has 
been, frankly, distorted.
    We need states to make those decisions in order to help the 
Americans benefit like they can from pipelines.
    Senator Hoeven. Talk for a minute about some of the new 
safety features because isn't it the case if we can empower 
this investment and build the new gathering systems and 
pipelines, we are going to have new technology that is going to 
increase environmental safety?
    Mr. Black. Well, as you said the pipeline is the safest 
mode. The product isn't going to get to market if the pipeline 
isn't built.
    And like you said, rail, pipe--rail, truck, barge, some 
other mode. There are increased fatalities, increased releases 
associated with other modes, and we need to get them sited.
    Senator Hoeven. So you would say building a pipeline is a 
win in terms of more energy, a win in terms of jobs and a win 
for the environment because it is the safest way to transport 
energy?
    Mr. Black. Yes, Senator.
    Senator Hoeven. Alright.
    Mr. McGarvey, would you give me your thoughts in turn, and 
I appreciate your efforts to help us build the necessary energy 
infrastructure. Your thoughts both on what has to happen with 
Federal policy in this area, not just pipelines but 
transmission lines, road and rail. We need it all to have the 
energy infrastructure to move this energy safely from where it 
is produced and cost effectively to where it is consumed. What 
has to change, in your opinion, in Federal policy? And what are 
the ramifications for the work force?
    Mr. McGarvey. Well, I would say, Senator, and it's crossed 
the line, Senator Warren just left, but we've been trying to 
get windmills permitted off Cape Cod and Martha's Vineyard for 
20 years. We're ready, willing and able to build those. Can't 
seem to get those built or permitted either.
    Again, I think it's going to take people on this Committee, 
that the Chairwoman has talked about this Committee working 
together to come up with sensible, long-term energy policy. 
There's been some legislation that's been passed on the 
permitting infrastructure from the United States Senate, the 
House, and I believe the President signed it.
    There needs to be predictability on, you know, investments 
that the private sector is going to make, on work force 
development that we can participate in that drives the middle 
class, growing middle class economy in the United States.
    And my great fear, as this energy revolution happens for us 
in the United States, if we're not able to take advantage of 
it, you know, again, we're going to cede our economic super 
power status to China because I don't see them getting bogged 
down in the discussion, in the environmental concerns, in 
looking out for the planet that we do. And rightfully so in the 
United States and looking at the long-term interest of the 
American people and in my case, the construction industry work 
force, both union and non-union. They all need jobs in the 
United States.
    So policymakers, I think, have good ideas. I think it's 
coming to the middle, sitting down and putting together good, 
strong, long-term energy policy for the United States.
    I'm hopeful with the leadership of this Committee and the 
people on this Committee that they can be a catalyst to work 
with the next Congress and the next Administration to really 
get it done because I think we're missing a golden opportunity 
if you look through from the industrial revolution forward. 
Here's this opportunity for this generation in the United 
States. Really take advantage of our natural resources and get 
that lift that our economy so desperately needs.
    Senator Hoeven. And you see it as a significant job creator 
for the people you represent?
    Mr. McGarvey. I will just tell you, Senator, you know, the 
job opportunities in the oil and gas sector and petrochem 
manufacturing it comes.
    I mean, we never, sitting at a bargaining table arguing 
with people over the cost of wages and fringes in those 
industries because they're profitable industries when they get 
their infrastructure built. They're willing to pay. There's no 
lowest common denominator where we're scrounging for a fifty 
cent raise here or taking a ten cent cut back there.
    These industries pay. And if you look across the United 
States, I just looked at some statistics yesterday about 
different age brackets and what the medium income is for people 
in those age brackets, it's unbelievable when you compare them 
to oil, gas and petrochem in construction.
    When we're talking about where the middle class jobs in the 
United States are, they're in these industries. These people 
are willing to pay those prices and there's more than tens of 
thousands, hundreds of thousands of Americans who want to take 
advantage of the opportunities to get into the middle class 
through those industries and through those occupations.
    Senator Hoeven. And that energy production makes us 
competitive in other key sectors, right, like manufacturing, 
construction, all those other industry sectors that create good 
jobs as well, wouldn't you say?
    Mr. McGarvey. Without question we're going, we're building 
a, right now, 50 miles from here we're building a gas and LNG 
export terminal for Dominion. I've got 2,500 people on that 
site.
    Senator Hoeven. I see.
    Mr. McGarvey. Right now we're going to build the Shell 
Franklin Cracker. There's another cracker we're looking at in 
West Virginia. There's another one in that loop that Senator 
Manchin was talking about.
    Three crackers, potentially $20 billion of investment 
within 50 miles of each other that will create somewhere in the 
neighborhood of 2,500 high-paid, permanent jobs and about 
20,000 construction jobs over a three or four-year construction 
period. The opportunities are endless.
    Senator Hoeven. Good to hear. Thank you, Mr. McGarvey.
    Thank you, Madam Chairman.
    The Chairman. Thank you, Senator Hoeven.
    I would like to thank each of you for your comments. What 
you have provided the Committee here today, I think, it has 
been very informative as Senator King has said. Very 
instructive.
    I think we heard very clearly that when it comes to the 
jobs side of it, these energy jobs are good for families, good 
for our communities and good for the country.
    I think we recognize that trying to divine the future is 
not easy around here, but Mr. McGarvey, you speak about putting 
together a longer-term vision, a view of our energy policy for 
this country.
    We have been working as a Committee, I think, very 
constructively to try to move the ball on that and have 
advanced an updated energy reform piece of legislation that has 
moved not only through the Committee strongly but through the 
Senate strongly. We would like to go to conference on that so 
we can actually do more than just talk about how we move it 
through a process, but actually see some of these changes 
enacted into law.
    It does not solve all of our problems, not by a long 
stretch of the imagination, but when you recognize that we have 
not done anything to update our energy policies for close to 
nine years now, you have to get started somewhere, sometime, 
and we think that that time is now.
    I think reminding folks that we are not done with this yet, 
that we need to go to conference and we need to work things out 
with the other body so that the President has something that he 
can embrace that will be good for the whole country.
    A little bit of a self-serving comment here toward the end, 
but I think it does speak to the need to make sure that we are 
updating our energy policies on a more frequent basis, 
something that we just simply have not done. And when you don't 
do it, you get behind.
    Thank you for giving us a little bit of a forward look and 
what you are doing to help us in this decision-making process.
    With that, the Committee stands adjourned.
    [Whereupon, at 12:13 p.m. the hearing was adjourned.]

                      APPENDIX MATERIAL SUBMITTED

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