    [Senate Hearing 114-507]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-507

                       THE ECONOMIC IMPORTANCE OF MODERN,
                       RELIABLE ENERGY INFRASTRUCTURE TO
                      WEST VIRGINIA AND THE UNITED STATES

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

                                 FIELD HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                AUGUST 29, 2016

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Printed for the use of the
                   Committee on Energy and Natural Resources

               Available via the World Wide Web: http://fdsys.gov

                                       ______

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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
                        Severin Randall, Senior Counsel
                   Brianne Miller, Professional Staff Member
                Angela Becker-Dippman, Democratic Staff Director
                    Sam E. Fowler, Democratic Chief Counsel
               Scott McKee, Democratic Professional Staff Member
                     Rich Glick, Democratic General Counsel

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Capito, Hon. Shelley Moore, a U.S. Senator from West Virginia....     1
    Manchin III, Hon. Joe, a U.S. Senator from West Virginia.........     3

                                    WITNESS

    Anderson, Dr. Brian, Director, West Virginia University Energy
      Institute......................................................     6
    Deskins, Dr. John, Director, West Virginia University Bureau of
      Business & Economic Research...................................    15
    Earl, Chad, Director of Marketing and Business Development,
      ORDERS Construction Company, Inc...............................    20
    Hedrick, Steve, President and Chief Executive Officer, Mid-
      Atlantic Technology, Research & Innovation Center (MATRIC).....    25
    Keffer, Jeffery, President and Chief Executive Officer, Longview
      Power, LLC.....................................................    31
    Poling, Dan, Business Manager/Secretary-Treasurer, District
      Council 53, International Union of Painters and Allied Trades..    39

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Anderson, Dr. Brian:
        Opening Statement............................................     6
        Written Testimony............................................    10
    Capito, Hon. Shelley Moore:
        Opening Statement............................................     1
    Deskins, Dr. John:
        Opening Statement............................................    15
        Written Testimony............................................    17
    Earl, Chad:
        Opening Statement............................................    20
        Written Testimony............................................    22
    Hedrick, Steve:
        Opening Statement............................................    25
        Written Testimony............................................    28
    Keffer, Jeffery:
        Opening Statement............................................    31
        Written Testimony............................................    33
    Manchin III, Hon. Joe:
        Opening Statement............................................     3
    Poling, Dan:
        Opening Statement............................................    39
        Written Testimony............................................    41

     THE ECONOMIC IMPORTANCE OF MODERN, RELIABLE ENERGY INFRASTRUCTURE TO
                      WEST VIRGINIA AND THE UNITED STATES

                                  ----------

                            MONDAY, AUGUST 29, 2016

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                             Morgantown, West Virginia.
        The Committee met, pursuant to notice, at 2:04 p.m. in
    Courtroom 1 of the Monongalia County Justice Center,
    Morgantown, West Virginia, Hon. Shelley Capito presiding.

      OPENING STATEMENT OF HON. SHELLEY CAPITO, U.S. SENATOR FROM
                             WEST VIRGINIA

        Senator Capito. I am feeling very all-powerful up here.
        I want to thank everybody for coming and our witnesses for
    coming. Senator Manchin and I are really pleased to be talking
    about something that we have much agreement on, probably all
    agreement on, and it is extremely important to our state.
        I would like to extend the fact that we invited Congressman
    McKinley to join us today, but he was unable to be here. I know
    he is as passionate about this subject as we are as well.
        I would just like to say that a field hearing in my view is
    like we are right in Washington in our committee room giving
    the testimony. This will be part of the permanent record of the
    U.S. Senate, and I believe it is going to be online in the next
    24 hours or so. If you do not catch something you wanted to
    catch, you can listen to it. For the general public, I think
    that is important.
        The way this goes is I am going to make an opening
    statement, Senator Manchin is going to make an opening
    statement, and then we are going to have each person testify.
    If they have a longer statement, they will give a five-minute
    overview of their statement, and then we will begin the
    questioning. I do not want to make it real formal, but that is
    kind of how we are going to roll here.
        Again, thank you all very much for coming. I am going to
    gavel us in.
        I want to start by thanking the Monongalia County Justice
    Center for hosting us, and I would like to thank Judge
    Clawges--I hope I said his name correctly--Robin Bailey and the
    other justice court officers for going above and beyond. They
    greeted me and got me in perfectly fine, and I know it is a
    disruption to their day so I appreciate that.
        Again, I want to welcome our witnesses to talk about the
    economic importance of energy infrastructure in the State of
    West Virginia.
        We are now at a point, I think, where the United States is
    becoming one of the most dominant players in energy production
    in the world, which makes this hearing incredibly well-timed
    and important. There is arguably no other state where the
    discussion on energy infrastructure is more critical than in
    West Virginia.
        In 2013, the United States surpassed Russia and Saudi
    Arabia as the leading oil and gas producer in the world, and
    yet we are still woefully ill-equipped to handle this boom in
    production.
        The good news, however, is that building modern
    infrastructure will do exponentially more than just deliver
    cheap, reliable energy. New infrastructure creates jobs--and
    that is what we wanted to focus on today, boosts communities,
    adds billions of dollars to the economy, improves the safety
    and reliability of our grids and contributes to less emissions.
        West Virginia has always been one of the blocks in the
    foundation of our country's energy production, but our economy
    in many of our communities has been devastated due to the
    downturn in the coal industry. We continue to rank 10th in
    production of all energy, 10th in the production of natural
    gas, second in the production of coal, and West Virginia has
    proven time and again that we have the perfect storm in a good
    way of natural resources and skilled work force that make
    investment in energy infrastructure so valuable.
        Advanced drilling techniques have made our natural gas
    wells some of the most productive in the country. The Marcellus
    and Utica Shales have accounted for 85 percent of the growth in
    the industry. In 2014, one EQT well in Wetzel County just below
    Marshall County, home of my birth, alone provided enough gas to
    provide the power for 77,000 homes for an entire year.
        This rate of production, coupled with the fact that the gas
    demand for power generation alone in the lower 48 is expected
    to increase by almost 75 percent between now and 2025, means
    that there is a crucial need for this transmission
    infrastructure.
        The shale gas revolution has made it possible to produce
    enough gas to meet both our domestic demand and increase our
    footprint around the world in the global oil and gas markets.
    The ability to export liquefied natural gas, which I have been
    a supporter of, means more job opportunities here at home as
    well as abroad.
        The export project at Cove Point is almost online, and
    Dominion right now has 2,000 workers--they are probably not all
    Dominion workers but contractors and all--that are working on
    that job right now. It will export gas to countries like Japan
    and India, friendly countries to us, and will considerably
    lesson our reliance and their reliance on hostile countries
    that threaten the global security.
        Additionally, due to the exponential increase in natural
    gas reserves, we will see that exports do more than just
    provide trade revenue. So the need for pipelines to transport
    our abundance of natural gas is crucial. That is why I included
    language in the Energy Policy Modernization Act of 2016, which
    is actually in conference right now, which is the most
    comprehensive energy legislation we have done in years and very
    bipartisan. I know Senator Manchin and I both voted for that
    coming out of the committee and on the Floor, and, speaking for
    myself, I hope we get the chance to vote for that conference
    committee.
        My bill would help to streamline the permitting process for
    pipelines. We have learned the permitting process can be so
    broken apart and convoluted that we can streamline it, not
    doing away with any of the environmental regulations at all
    because those are extremely important, but just have it make
    more common sense.
        Pipeline infrastructure is critical for job creation. It is
    estimated that for every mile of natural gas transmission line
    pipeline, a total of 58 jobs are created. Because of our
    upstream capacity, West Virginia can have a more robust
    chemistry sector that accounts for nearly 40 percent of our
    state's manufacturing jobs and is the second-largest exporting
    industry in the state.
        Using ethane from natural gas as a feedstock means chemical
    companies can choose to operate in West Virginia due to the
    enormous benefits of being right on top of the resource. That
    is why, again, I included language in the energy bill that
    would require the Departments of Energy and Commerce to conduct
    a study to look at the feasibility of an ethane storage and
    distribution hub here in Appalachia, in West Virginia, or in
    the region.
        Congress' role in improving infrastructure is only a piece
    of what needs to be done. Innovation and private investment is
    extremely important to building safe, efficient energy
    infrastructure. Innovation, we are doing it here on the campus
    of West Virginia University and also at the National Energy
    Technology Lab, is extremely key. Senator Heitkamp and I have
    worked on a bipartisan group that focuses on carbon capture
    technology, which we are going to talk about later. We need to
    foster an environment where risks associated with
    infrastructure are vastly outweighed by the incentives to move
    forward.
        One of the greatest contributions to our energy
    infrastructure is the diversity and ingenuity of our work
    force, and we are going to talk about that today, and West
    Virginia, as an energy-exporting state, I think is a prime
    example of this.
        I hope we can accomplish a lot in the hearing today. I hope
    that this will give us some impetus as we move back to
    Washington, DC, after Labor Day, to move that conference
    committee bill and the energy bill. It has a lot to do with
    what we are going to be talking about today, and I want to
    again thank the witnesses.
        Before we move to the panel, I would like to ask Senator
    Manchin for an opening statement.

       STATEMENT OF HON. JOE MANCHIN III, U.S. SENATOR FROM WEST
                                VIRGINIA

        Senator Manchin. Well, thank you, Madam Chairman. I thank
    you for holding this hearing today.
        We both serve on the Energy and Natural Resources Committee
    which is very important to our state and very important to this
    country.
        I just want to thank all the witnesses. I know everyone is
    concerned about this right now. We are hitting some tough
    times, and it is going to be all of us pulling together to
    figure this one out and working together, and we cannot let
    politics get in between. I think you will see that Senator
    Capito and I will work across party lines and try to show a
    pathway forward in Washington that we should be doing what is
    best for our country and our state that we respectfully
    represent. That is what I think we will do here today, and we
    will continue to do that.
        I want to thank all of you again. Dr. Deskins, thank you
    and I appreciate it; Dr. Anderson, Mr. Earl, and Steve Hedrick,
    who we have worked with very closely over the years, and Mr.
    Keffer, I appreciate you all being here and, Delegate Poling,
    thank you as always for being involved.
        I also want to make a little announcement right now--
    Senator Capito and I have been working very hard trying to get
    Secretary Moniz to come to West Virginia. We finally got it
    confirmed, and he is going to be coming September the 12th. He
    will be visiting NETL. We are going to take him out to
    Longview, and we are going to show him what West Virginia does
    for this country and how well we do it.
        So we are pleased to announce today that he will be coming.
    We have worked on this long and hard. Secretary Moniz would
    have visited earlier, but the Iran nuclear discussion took him
    away from us for a while. We have got him scheduled, and we are
    happy for that.
        It is no secret that West Virginia has been economically
    challenged recently. Our economy is suffering largely due to a
    transition away from coal. We continue to experience
    persistently high unemployment rates. In fact, in some counties
    those numbers are over two times the national average.
        In our southern counties, traditionally our largest coal-
    producing region, we are consistently posting unemployment
    numbers in the double digits: Mingo County, 11.7 percent;
    McDowell, 12.5; Logan, 10 percent; Wyoming, 9.1; Boone, 8.3.
        Workforce West Virginia reports that between July 2015 and
    July 2016 we lost 4,800 mining and logging jobs; 700
    manufacturing jobs; and 1,700 trade, transportation, and
    utility jobs. The slowdown of natural gas exploration and
    production in Marcellus and Utica has dampened new hiring, as
    well as state tax revenue, as we all know. To complicate
    matters, we just experienced a once-in-a-century flood that
    took West Virginia lives, homes and businesses, a tragic event
    from which we will be recovering for years.
        More than ever, it is critical that we go the extra mile to
    examine the opportunities for jobs creation and economic
    development while ensuring we remain an energy leader for our
    nation.
        Historically, West Virginia has been an energy exporter.
    Our home state sits on abundant reserves of coal and natural
    gas which Senator Capito has just pointed out. We are the
    fourth-largest state of proven reserves of natural gas behind
    only Texas, Pennsylvania, and Oklahoma.
        In the 2016 Annual Energy Outlook, the Energy Information
    Administration (EIA) projected that, even under a Clean Power
    Plan scenario, coal and natural gas will make up approximately
    half of our electric generation mix in 2040.
        We talk about deniers. You know, there are those who deny
    there is climate change going on, and there are those who deny
    we are going to be needing fossil fuel for the next two, three,
    or four decades. Both of these groups are severely handicapping
    us from the standpoint of doing the job that we need to be
    doing, and I would hope that all those on either side would
    look at the facts. They are entitled to their own opinions,
    just not entitled to their own facts. So these are the facts as
    we bring them forth.
        Coal and natural gas are going to continue to be a critical
    part of our energy mix in our economy for decades to come. It
    is important for us, very important for us, to support the
    policies that ensure West Virginia continues to be a
    significant and sustainable participant in the energy future of
    this nation.
        Two pieces of these polices, simply put, are technology and
    infrastructure. Technology must further develop and
    commercialize carbon capture utilization and sequestration in
    order to secure a future for reliable, affordable coal energy
    both here at home and abroad. In addition, we must put the
    necessary infrastructure in place to take advantage of the
    robust opportunities that come from our abundant natural
    resources while ensuring the reliability of our electric grid.
        I would mention one thing. I have spoken to a lot of our
    state legislators, and I said we have got to start thinking in
    terms of a regional energy hub, a mid-Atlantic energy region,
    such as the Southwest. We should be looking at Pennsylvania in
    the highest part of this region, not the borders that separate
    us but basically the ability that we have to work together to
    build these pipelines that basically keep some of this product
    in this market area. They say, ``Build it and they will come.''
    I truly believe if you have it, they will come, but you have to
    have access to it.
        Transportation of energy has always been a key part of the
    energy economy and will be a key in its future. When developed
    responsibly in harmony with local stakeholders these pipeline
    projects offer our state economic benefits. The Interstate
    Natural Gas Association of America Foundation released a study
    earlier this year which noted that new investments in midstream
    pipeline infrastructure will range from $183 billion to $282
    billion over the next two decades.
        It is no secret that pipeline development in West Virginia
    is growing particularly because our region is blessed with vast
    amounts of gas and natural gas liquids. We need to ensure these
    high-value West Virginia products can reach new markets--and
    this is what we are looking at--as well as attract long-term
    investment in our state and our work force.
        Expanding pipeline infrastructure will allow consumers and
    businesses access to more affordable energy and attract new
    investments and lead to job creation. West Virginia's workers
    and businesses should have access to job opportunities
    associated with these infrastructure projects. When I say job
    opportunities, I mean high-paying, quality opportunities that
    offer West Virginians a means of obtaining the skills and
    knowledge required to cultivate a viable, long-term career
    path.
        We have seen great success in our state when industry,
    workers and local community and technical colleges can provide
    students with the skills and training they need to succeed. For
    example, West Virginia's partnership with Bridge Valley
    Community and Technical College has ensured that students are
    learning in-demand 21st century skills so that Toyota has
    access to a highly qualified work force. If you have not been
    down to our southern high-tech center, you should see that
    operation. The students are earning while they are learning,
    and they have a very, very, very good job waiting for them.
        In conclusion, West Virginia has helped power the nation
    for decades. I have said this and I said this to the President
    and I have said this to many people in the White House. I said
    if you want to know how we feel in West Virginia, we feel like
    a returning Vietnam veteran. We have done everything you asked
    us to do, we have done the heavy lifting, we have done the hard
    work, and now you act like you do not appreciate it and you do
    not respect it and you do not really think it was needed.
        Without West Virginia and the efforts that we have made
    over the last century, I assure you, we would not be sitting in
    the freest country on earth, the superpower of the world, if it
    had not been for what West Virginia has contributed.
        With that, I say thank you all for being here. Madam
    Chairman, thank you.
        Senator Capito. Thank you, Senator Manchin.
        What I am going to do is introduce you individually, and
    then you can make your statement. Dr. Brian Anderson is the GE
    plastics Material Engineering Professor in Chemical Engineering
    at WVU. He is also a native of Ripley, I found out, so that is
    a mark of excellence, and he serves as a Director of the WVU
    Energy Institute. He graduated from WVU, and he has his
    advanced degrees from MIT. I want to welcome you here, Dr.
    Anderson.

    STATEMENT OF BRIAN ANDERSON, DIRECTOR, WEST VIRGINIA UNIVERSITY
                            ENERGY INSTITUTE

        Dr. Anderson. Senator Capito, Senator Manchin, thank you
    very much and good afternoon. I really appreciate the
    opportunity to testify today.
        As you mentioned, I am Brian Anderson. I am the Director of
    the WVU Energy Institute at West Virginia University (WVU). The
    WVU Energy Institute serves to facilitate collaborative and
    innovative solutions to the energy future of West Virginia and
    the United States. And as the coordinating institution of
    energy research at the flagship, land grant university in West
    Virginia, it is central to my organization's mission to work
    with stakeholders within the university and across the state
    and region to help further that land grant mission.
        A key aspect of that mission is to assist in stimulating
    economic development in West Virginia. As you know, the economy
    of West Virginia has long been grounded in the energy sector.
    From the early development of oil and gas resources in the
    United States to the long history of the coal industry, much of
    the economic base of West Virginia is highly dependent on the
    energy resources with which the state has been blessed.
        Almost 100 years ago, in 1921, the world's first commercial
    ethane cracker was built in Clendenin, West Virginia, due to
    the proximity of liquid rich natural gas production in the Elk
    and Kanawha River valleys. This development spurred on the
    modern petrochemical and plastics industry that we have today.
        Due to the abundance and proximity to the natural resources
    in the U.S. Gulf Coast however, much of the expansion of the
    petrochemical industry and plastics industry has occurred in
    that region over the past half-century.
        However, with advances in horizontal drilling and hydraulic
    stimulation techniques first developed in part by research done
    in Morgantown, West Virginia, at what is now the Department of
    Energy's National Energy Technology Laboratory, we are again
    now realizing abundant resources of natural gas and natural gas
    liquids in this region.
        The Marcellus Shale is now the largest producer of natural
    gas in the United States, and the Utica Shale shows similar, if
    not more, prolific potential. These two Shales in the region
    are not only producing large volumes of natural gas but also of
    natural gas liquids such as ethane, propane, and butane.
        Ethane and propane are the raw materials used to make
    pharmaceuticals, industrial, chemical and consumer goods. Over
    the last ten years, production of ethane and propane from the
    Marcellus and Utica Shales have driven the cost of these very
    valuable raw materials to a price point well below global and
    national prices. Connecting this valuable resource to the
    national and global markets will take modern robust
    infrastructure, the topic of this hearing.
        I contend that the types of infrastructure necessary to
    benefit both the region and the nation is not only a reliable,
    modern network of pipelines but also a robust, regional system
    of natural gas liquid storage and distribution.
        Recently Royal Dutch Shell Chemical Appalachia announced a
    final investment decision on building a multibillion-dollar
    ethane cracker in Pennsylvania not far from the West Virginia
    border. Shell has said that constructing the plant would employ
    about 6,000 workers and provide 600 permanent operational
    positions when it opens.
        Shell, which has been pulling back in parts of its global
    operation, said that this facility was a particularly
    competitive project because it will use ethane from the
    Appalachian Basin, the lowest-cost shale gas basin in North
    America. The Shell ethane cracker will consume about 105,000
    barrels of ethane per day, producing 1.6 million tons of
    polyethylene pellets per year to be molded into consumer
    products and packaging.
        Two other companies are now examining the potential to join
    Shell in investing billions of dollars into this region and
    creating thousands of manufacturing jobs due to the proximity
    and abundance of the natural resources in the Appalachian
    Basin. Each of these other facilities would use another 50,000
    to 100,000 barrels per day of ethane. With current ethane
    production rates in the basin at around 500,000 barrels per
    day, the resource is certainly sufficient to support a renewed
    and robust chemical industry, that is, as long as there is
    modern and robust energy transportation infrastructure to
    support that.
        Last October, in a regional effort as mentioned by Senator
    Manchin, the Governors of West Virginia, Pennsylvania, and Ohio
    signed a regional cooperation agreement to enhance regional
    cooperation and job growth through the continuing development
    of shale gas in the Appalachian Basin. In this agreement, four
    primary areas of cooperation were identified: marketing and
    promotion, work force development, transportation and
    infrastructure, and research. As part of the agreement, the
    states are working together to support infrastructure like
    pipelines, railroads, and roadways critical to shipping natural
    gas and natural gas-related products.
        In addition, they are encouraging the state-sponsored
    universities such as us to collaborate on research to find
    appropriate end uses for natural gas products. They will also
    collaborate on preparing for emergency response, promoting
    recycling and environmentally friendly practices in the
    industry, as well as supporting entrepreneurship.
        The WVU Energy Institute is playing a key role in each of
    these four areas in that tri-state agreement. In particular, we
    are leading an effort involving the state geologic surveys of
    these three states as well as an industry consortium currently
    with 12 members, also funded by the Claude Worthington Benedum
    Foundation, to examine the geologic potential for safe and
    reliable subsurface storage of natural gas liquids. The goal of
    this project is to provide essential data to support the
    development of the chemical manufacturing industry, promoting
    economic development.
        As evidenced by the industry's commitment to our project,
    developing storage and transportation infrastructure is a
    critical pathway to developing the industry in the region.
    Subsurface storage and distribution and a network of pipelines
    will benefit both the raw material producers--the upstream oil
    and gas industry, as well as the chemical industry by fostering
    a readily available and reliable network and source of natural
    gas liquids and developing a predictable price point of the
    commodity in the region. Currently, there is only one spot
    pricing hub for natural gas liquids in the United States, and
    that is on the Gulf Coast.
        Thirdly, promoting regional investment and a more robust
    ecosystem for the industry, it is all critical to establish a
    reliable trading hub into which producers can sell their
    products. The primary example of an ethane storage hub and
    associated piping in the United States exists between
    Brownsville, Texas, and Lake Charles, Louisiana. The piping and
    infrastructure necessarily--this infrastructure encourages the
    growth in this region due to its interconnectivity to multiple
    manufacturing facilities in the vicinity.
        In conclusion, many projects at various stages of
    development are underway to build takeaway capacity from the
    region, moving the raw materials to the East Coast, to the Gulf
    Coast and to Canada. However, to spur on a more diverse
    national economy, a robust regional infrastructure is
    necessary. Advances in technology have provided us with an
    opportunity to implement best-in-class construction and
    monitoring techniques to ensure the safe operation of natural
    gas liquids storage facilities, as well as pipeline
    infrastructure, so regional and national collaboration is
    essential to the development of this reliable and robust
    interstate energy infrastructure.
        The States of West Virginia, Pennsylvania, and Ohio have
    already begun collaborating to erase these state borders, and
    we look forward to working with our Federal counterparts in
    this exciting effort.
        And so, Senators Capito and Manchin, thank you very much
    for this opportunity to testify today, and I look forward to
    answering any questions you have.
        [The prepared statement of Dr. Anderson follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Capito. Thank you. Thank you very much.
        Our next witness is Dr. John Deskins, and he is the
    Director at the Bureau for Business and Economic Research at
    WVU. He focuses primarily on state economic development, small
    business economics, government and tax expenditure, policies at
    the state level. He has a Ph.D. in Economics. So welcome, Dr.
    Deskins.

        STATEMENT OF DR. JOHN DESKINS, DIRECTOR, WEST VIRGINIA
          UNIVERSITY BUREAU OF BUSINESS AND ECONOMIC RESEARCH

        Dr. Deskins. Senator Capito, Senator Manchin, thank you so
    much for inviting me to appear before you today. It is truly an
    honor to be here to discuss the importance of a modern,
    reliable energy infrastructure for the West Virginia and
    national economies.
        By any measure, West Virginia is an energy state. For
    example, energy accounts for 17 percent of economic output in
    the state, making it the state's largest industrial super
    sector. Energy jobs are among the highest-paying jobs in the
    state, often by far. Coal is our largest export commodity, and
    natural gas is poised to become another key export commodity.
    Severance tax revenue from energy is vital to our state and
    local governments.
        The deep decline in coal production that has occurred in
    recent years has had a devastating effect on our state's
    economy. Coal production has dropped to an expected 70 million
    tons for this year, down 56 percent from its 2008 level. This
    has led to a loss of 13,000 coal jobs and a direct loss of $4
    billion in economic output. For 2015, West Virginia's total
    economic output was lower than in 2011.
        And these losses create a vicious cycle where we see
    continuing population loss, an aging population, drug abuse,
    and so on, making it even more challenging to attract new
    business to West Virginia, and therefore continuing that
    vicious cycle.
        Some may read the numbers associated with declining coal
    output and imagine that the losses are spread across the coal-
    producing regions of the nation. We have seen a national drop
    in the demand for coal, caused by a perfect storm of three
    factors. But the effect of this drop in demand has been felt
    most strongly in the region with the lowest coalmine worker
    productivity, Central Appalachia, which of course includes
    southern West Virginia. There we have been mining the region's
    hotter-burning and cleaner coal deposits for well over a
    century, such that the coal that remains is generally deeper in
    the ground, in thinner seams, and more expensive to extract.
        So in central Appalachia, coal production has fallen by 51
    percent since 2010, compared to a decline of ten percent for
    the nation's other coal-producing regions, 51 percent versus
    ten percent. Coal production in northern West Virginia, part of
    the northern Appalachian coal seams, has generally been stable.
    Correspondingly, nearly all of the coal job losses that have
    occurred in West Virginia have come from our state's southern
    coalfields.
        The concentration of these job losses has created a great
    depression in six counties, two of which Senator Manchin
    mentioned a second ago. But the six are Boone, Clay, Logan,
    McDowell, Mingo, and Wyoming. Job losses over the past four
    years range between 25 percent and 33 percent in each of these
    counties.
        Consider Boone County, our state's largest coal-producing
    county for many years. Their coal production and employment
    stand at around 30 percent of their 2010 levels. Statistics are
    beginning to show other losses in the county as less money is
    flowing to other local businesses--grocery stores,
    entertainment venues, etcetera. Losses in coal severance tax
    revenue have led to a severe public school layoff in the
    county.
        The industrial mix in these counties also lends to the
    crisis. In Boone County in 2010, coal accounted for 55 percent
    of all the jobs in the county, making it difficult, if not
    impossible, for many laid-off coalminers to find alternate
    employment locally.
        My point is the heavy concentration of losses in coal
    output and employment is far worse than would be the case if
    the losses were widely dispersed. The current situation gives
    rise to the question of whether these affected communities are
    sustainable over the long run.
        The natural gas boom that West Virginia has enjoyed has
    helped for sure. The boom created around 3,000 high-paying jobs
    between 2010 and 2014. Many of those jobs have been lost since
    early 2015 due to a slowdown in natural gas drilling, but a
    return to growth is expected in coming years.
        And while it is beneficial for our state in many ways,
    natural gas extraction is very capital-intensive, and as such,
    is unlikely to employ the number of workers needed to ensure
    broad prosperity. Broad prosperity associated with natural gas
    will require more downstream activity, creating more value
    added and more jobs.
        Many call for industrial diversification as the solution to
    West Virginia's economic crisis. I myself make this call
    routinely in speeches and discussions across the state. It is
    crucial for West Virginia to cultivate strength in
    manufacturing, tourism, and other industries. However,
    industrial diversification is a long-term proposition which
    requires long-term action on the part of businesses,
    entrepreneurs, government and community leaders.
        A more viable path for West Virginia in the short run is
    through strengthening our state's energy sector. As I believe
    all these figures indicate, this is desperately needed for our
    economy. And while many of the factors affecting energy in West
    Virginia are outside of the reach of policymakers, I hope the
    information provided here today can certainly help move our
    energy sector forward and our overall economy forward and help
    turn around this vicious cycle that plagues our state.
        Thank you.
        [The prepared statement of Dr. Deskins follows:]

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        Senator Capito. Thank you.
        Our next witness is Mr. Chad Earl. Chad is the Director of
    Marketing and Business Development for ORDERS Construction
    Company in St. Albans, West Virginia, and has been there since
    2013. He is a lifelong West Virginian, and he has an extensive
    background in infrastructure development. He is also a member
    of the 2016 Leadership West Virginia class. Welcome, Chad.
    Thank you.

      STATEMENT OF CHAD EARL, DIRECTOR OF MARKETING AND BUSINESS
             DEVELOPMENT, ORDERS CONSTRUCTION COMPANY, INC.

        Mr. Earl. Thank you. Yes, thank you for this invitation. It
    is truly an honor to come before you today to discuss my
    perspective and how important the energy industry and
    infrastructure development is to my family, our company, and
    all of West Virginia.
        Let me begin by saying I am a proud and lifelong West
    Virginian. I grew up in Grantsville, which is a rural community
    in Calhoun County, and started helping my dad take care of oil
    wells when I was about 12 years old. I graduated from Glenville
    State College and worked my way through college as a pipeliner
    and environmental technician there in Glenville.
        So when I think about it, the energy industry, particularly
    the oil and gas industry, has had a huge positive effect on my
    life. It gave my family the ability to support me and my
    brothers, and now it is giving me the opportunity, and many
    others like me, the ability to support their families and have
    promising careers.
        I am active in several professional organizations related
    to the construction, manufacturing, and energy industries, all
    of which are affected by a reliable infrastructure that we are
    here to discuss today.
        As I said, I am a native West Virginian. In fact, I share
    many of the same opinions and beliefs about West Virginia that
    I have heard Senators Capito and Manchin mention on several
    different occasions. I am sure they will agree with me when I
    say the beauty of our state is immeasurable, our natural
    resources are abundant, but it is the people from every corner
    of the state that is our greatest strength.
        Our people are intelligent and hardworking and very
    passionate about their communities. They are proud of the
    heritage of belonging to one of the highest energy-producing
    states in the nation. We want to live here, and we want to stay
    in West Virginia. We want to stay home, and we want the
    opportunity for our children to live here and stay home if they
    choose to do so.
        In order for this to happen, we need to create an economic
    environment that allows for growth. We need to have this
    opportunity with the natural gas industry. To be clear, shale
    gas is revitalizing West Virginia's economy.
        I serve as the director of business development for ORDERS
    Construction Company. We are a family owned business and have
    been in business since 1964 and have expanded from a bridge-
    building contractor in our early days to a trusted, reputable
    and dependable construction company that spans many different
    business segments of the economy. Our markets include State and
    Federal highways, manufacturing facilities, chemical and
    industrial complexes, water and waste plants, and energy
    companies as well.
        Our group employs approximately 400 people with very good
    jobs, and most salaries are well above the national average.
    Because of the increased activity in the oil and gas fields, we
    have been able not only to retain the labor force that supports
    us but consistently add jobs and grow our business. This is
    more than important; it is vital to our local economies and the
    families that live here, especially when you look at the
    decline of the coal industry and the economic devastation of
    southern West Virginia.
        I can point to over 50 positions within our company that
    have been created just to support the shale industry alone. We
    can continue to grow only if the energy industry remains strong
    because it impacts all businesses in West Virginia. It affects
    our tax base for roads and schools. It affects the chemical and
    manufacturing industry because it brings in raw materials and
    energy supply. It impacts other small business such as
    restaurants, gas stations, hotels, the school band, the
    football team. All of them get money from the gas industry, so
    it is no secret that in West Virginia our communities prosper
    when the energy industry is robust.
        Expanding our energy infrastructure will create jobs. It
    will strengthen communities. It will help attract manufacturing
    to the region. Above all else, it will give this region of the
    country a little hope that our elected leaders are working with
    us and not the activists who have dedicated their agendas to
    help hinder progress as they work every day to try to put small
    businesses like ours out of business.
        Each state in the country makes use of its resources.
    Massachusetts uses fishing. The Midwest and the flat fields has
    farming. Florida attracts tourists to its beaches for warm
    weather. West Virginia can harvest the massive gas deposits
    under it for the benefit of its people for decades to come;
    however, it will not happen without the support of government
    policies that allow it to be done and done properly.
        Pipelines and energy production will continue to make us
    more stable from other regions of the world. The pipelines we
    build are more than pipelines. They are highways that deliver a
    required resource to end users, families, manufacturing
    facilities, and other small businesses, as well as schools and
    hospitals. They are the safest and most economical long-term
    transportation option available today.
        Senators, make no mistake, shale is revitalizing West
    Virginia. Shale is providing small, family owned businesses
    like ours with the opportunity they need to bring this raw
    material to market and will continue to enhance our energy
    security and independence.
        The men and women of West Virginia are industry
    professionals. Our history is that of an energy-producing
    state. Please help our people strengthen the state economy and
    help us produce and transport energy in our region that we so
    desperately need.
        Thank you very much.
        [The prepared statement of Mr. Earl follows:]

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        Senator Capito. Thank you, Chad.
        Our next witness is Mr. Steve Hedrick. Steve is the
    President and CEO of Mid-Atlantic Technology, Research and
    Innovation Center, known as MATRIC, in South Charleston, West
    Virginia. He has more than 20 years in the petrochemical
    industry, leading businesses, chemical manufacturing. In his
    capacity as President and CEO, he helps MATRIC deliver market-
    driven innovation, research and technical engineering.
        Welcome, Mr. Hedrick. We are glad to have you here today.

       STATEMENT OF STEVE HEDRICK, PRESIDENT AND CHIEF EXECUTIVE
       OFFICER, MID-ATLANTIC TECHNOLOGY, RESEARCH AND INNOVATION
                                 CENTER

        Mr. Hedrick. Thank you so much, Senator. I thank both of
    you for the opportunity to appear before you and before the
    committee today.
        Good afternoon, ladies and gentlemen. Thanks for the
    opportunity to all of you. As was mentioned, my name is Steve
    Hedrick, and I am the President and Chief Executive Officer of
    MATRIC, a strategic innovation partner that provides deep,
    uncommon expertise and research and development infrastructure
    to solve the most challenging problems in the areas of science
    and technology. We are proudly based in South Charleston, West
    Virginia, and have a division here in Morgantown, West
    Virginia.
        I am also a West Virginia native, and we have been through
    good times and bad and seemingly more bad lately, but we have
    shown resilience. I am a firm believer, whether you are running
    a business, a state or a country, a certain level of resilience
    is a pivotal component to success.
        So one of the greatest ancient historians, Thucydides, once
    said, ``The bravest are surely those who have the clearest
    vision of what is before them, glory and danger alike, and yet,
    not withstanding, go out to meet it.''
        In thinking about why we are here today, we are talking
    about this region, our state, our country, the future, the gift
    of energy below our feet. We are prepared to go out and meet
    the most challenging demands that our country can face and to
    do so from a position of authority. And what generates that
    position of authority, of course, is manufacturing, which is
    the cornerstone of West Virginia's future.
        While we have seen apparent progress, we have yet to even
    begin to scratch the surface of the possibilities. But we know
    our vision. It is clear. And there is glory to be found for our
    citizens and their families, for our nation, when we achieve
    that vision.
        But first, we need to realize our own new reality because,
    frankly, if we do not, we will never get out of this rut. So
    how do we do this? Investing in innovation and R&D and key
    assets like the West Virginia Regional Technology Park is a
    must because they are the keys to high-tech jobs in the quad-
    state region represented by Pennsylvania, Ohio, West Virginia,
    and Kentucky.
        But the real reason we are all here today, of course, is
    infrastructure in energy. We cannot take advantage of the
    Utica, Rogersville, and Marcellus Shale opportunity without
    infrastructure to support the demands of the associated
    industries. The infrastructure requirements associated with new
    build-outs must be delivered by multiple parties. Now it will
    not be easy, and it will not be cheap. We will need cooperation
    and support from the Federal and State governments, private
    equity, and existing business platforms, all to their mutual
    benefit.
        Now you may be asking yourself what about Royal Dutch
    Shell's announcement earlier this month and its intentions to
    build a three-state ethane pipeline system to feed its Monaca,
    Pennsylvania, cracker. Are they not already doing this? Well,
    the answer is yes but no. This decision clearly demonstrates
    the necessity for specific infrastructure for Shell to be
    successful and that they cannot wait for a public-private
    partnership. But let me confirm it does not even begin to
    satisfy the need for infrastructure for the petrochemical
    industry to expand or to increase the demand side of the highly
    valuable and readily available natural gas liquids in this
    region.
        More specifically, this announcement does not satisfy the
    need for ethane off-take for our natural gas industry, as Dr.
    Anderson mentioned a moment ago. There is simply too much
    ethane available for this single investment to advantage our
    nation to its maximum potential.
        This cracker from Royal Dutch Shell and its associated
    pipeline has an estimated capacity of about 100,000 barrels a
    day. Rather than exporting additional ethane available via
    pipeline to the United States Gulf Coast, Europe, Asia, or even
    Canada, it could be utilized here in the Appalachian Basin here
    in America to maximize the value potential of our raw
    materials.
        According to the publication Natural Gas Intelligence,
    ethane accounts for more than 50 percent of the typical NGL
    barrel in the Appalachian region, and with exports now leaving
    Marcus Hook near Philadelphia, ethane production has been
    increasing in the region. In fact, the midstream company MPLX's
    CEO, Gary Heminger, recently said, ``With incremental ethane
    takeaway projects and the projected completion of a regional
    cracker facility, we anticipate reaching full utilization of
    our existing facilities.'' In other words, we need more
    infrastructure, and companies like Shell need more elasticity
    in the supply chain in order to maximize the benefit of ethane.
        Now, we would propose that the corridors naturally created
    by the Ohio and Kanawha Rivers be utilized as a platform for a
    substantial pipe system that will support the distribution of
    key raw material and intermediate constituents, including but
    not limited to methane, ethane, ethylene, propane, propylene,
    and chlorine, all of which are significant building blocks to
    the petrochemical industry, and hence, our society.
        We therefore must have substantial underground storage of
    the highest value and broadly used raw materials, specifically
    ethane, ethylene, and propane, and butane if we are able, and
    create a built-for-purpose Appalachian Storage Hub. This can be
    safely and efficiently done in naturally occurring underground
    caverns, in depleted natural gas extraction points, or even in
    depleted salt domes. In fact, the brightest minds in geological
    formations are currently studying the best location for the
    hub.
        It is time for this to be done and done right to enable
    growth and prosperity for our citizens, our economy and our way
    of life. It is time for leadership, even boldness, in decades
    of incredible value creation, for a generational opportunity to
    be brought to fruition.
        I urge you show your resilience and reinvest in our great
    nation through innovation and infrastructure to secure the
    success of another generation. I urge you, as Thucydides once
    wrote, to go out and meet this challenge and assure the
    investment in innovation and infrastructure by the public
    sector, by the Federal Government and supporting state
    governments that have the courage to do so as well. We should
    all do our part to make this happen, and each of you can count
    on me and on MATRIC to do our part, and thank you very much.
        [The prepared statement of Mr. Hedrick follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Capito. Thank you very much.
        Our next witness is Mr. Jeffery Keffer. He is the President
    and CEO of Longview Power located in Maidsville, West Virginia.
    He has more than 32 years of experience in the power generation
    industry. I was lucky enough to tour your facility just
    recently and was amazed to see the good work that they are
    doing, but he continues to oversee the strategic management and
    business operations of Longview Power and Mepco. Welcome.

      STATEMENT OF JEFFERY KEFFER, PRESIDENT AND CHIEF EXECUTIVE
                      OFFICER, LONGVIEW POWER, LLC

        Mr. Keffer. Thank you, Senator Capito, Senator Manchin.
        I want to start by thanking you both for bringing the
    Senate Committee on Energy and Natural Resources to Morgantown
    today to talk about such an important topic for our State of
    West Virginia. Earlier this year both of you visited our plant
    and also took the time to meet with our employees, which they
    were very pleased with. Thank you.
        I am here to report that the sunset on the coal-fired
    generation industry is highly exaggerated, and the model for
    the future of coal-fired generation in this country is a few
    short miles from here in Maidsville, West Virginia, at the
    Longview power plant.
        Longview is four years young, while the average age of a
    PJM coal-fired fleet is 45 years. The plant initially cost $2.1
    billion to build, the largest private investment in West
    Virginia history, and last year, we invested another $120
    million to make the plant highly reliable.
        Longview now reliably produces enough electricity for
    700,000 homes while being the lowest-cost coal-fired generator
    in PJM and the most efficient, as measured by the lowest heat
    rate, of any coal plant in North America. The plant also has
    exceptionally low emissions and zero wastewater discharge to
    surface waters.
        Now Longview is able to achieve these milestones through
    its state-of-the-art technology. In 2015, Longview made repairs
    and improvements to its oiler, its fuel and air controls. It
    replaced its control system and made a number of changes to its
    emission systems, all of which improved reliability. Since last
    November when we completed all that work, the plant has been
    available to produce electricity 98 percent of the time.
        With this exceptional reliability and our highly effective
    emission system, we are able to remove targeted pollutants,
    including NOx, SO2, and PM--particulate matter--to well below
    the very stringent permitted levels for our plant. We also
    reduced CO2 emissions without adversely affecting cost or
    efficiency.
        Now coal is not the only fuel required for coal-fired power
    plants to run, secondary fuel that is required to startup, and
    at Longview we use natural gas supplied from the local gas
    distribution company when it is available. And we have talked
    about the constraints that we are dealing with in this state in
    terms of the availability of natural gas where we need it.
        So at Longview, in order to ensure that we had gas
    available to startup during peak seasons like the wintertime,
    we installed a unique LNG system, the largest mobile LNG system
    in the United States, in order to startup the plant when the
    pipeline capacity is constrained. This allows us to meet very
    strict PJM capacity performance requirements. And when pipeline
    gas is available, we have been able to demonstrate that we can
    co-fire with up to 20 percent natural gas, further increasing
    the plant's efficiency and reducing its emissions.
        Longview's coal supplier is Mepco, its affiliated coal
    company, and the coal is supplied by a 4-1/2 mile conveyor.
    Through its full integration with its fuel source and combined
    through a byproducts disposal facility, Longview achieves best-
    in-class results and produces low-cost electricity while
    minimizing environmental and community impacts.
        Longview is a major employer and economic driver in
    northern West Virginia. Longview and Mepco together employ over
    600 workers, providing well-paying jobs with combined annual
    payroll and benefits of $72 million. We not only purchase our
    coal locally and limestone locally, we purchase over $105
    million per year of goods and services from local and regional
    vendors, and we made almost $8 million in pilot and local tax
    payments annually.
        Longview is demonstrating the future of coal-fired
    electrical generation with its best-in-class coal combustion
    technology and gas co-firing capability. Longview proves that
    replacing the existing 45-year-old coal fleet with modern,
    highly efficient, advanced coal plants can greatly improve our
    coal plant efficiency, reliably produce low-cost electricity,
    and lower conventional and CO2 emissions.
        New advanced coal plants in West Virginia and other coal-
    dependent states could require the hiring of thousands of
    construction workers and could incorporate proven design
    improvements and use higher BTU fuel from Appalachia to produce
    and export electricity to energy-dependent states.
        Designing new plants to co-fire with natural gas would
    further increase efficiencies and reduce conventional and CO2
    emissions to levels that would help to meet national climate
    change goals, as is being demonstrated in Germany and Japan as
    we speak.
        If we can achieve this, we do not need to retrain miners
    and workers but keep them working at the well-paying jobs they
    know well. All of the 600 employees at Longview and Mepco are
    paid highly competitive salaries. By building modern, advanced,
    highly efficient coal-fired plants, we would keep thousands of
    middle-class jobs in the region, maintain the stability of an
    electrical generation delivery system, and provide the low-
    cost, reliable electric power necessary to support homes and
    manufacturing in the USA.
        Longview demonstrates what modern clean coal-fired power
    plant design and operation can achieve. Longview should be the
    future of coal: low-cost, very clean, and highly reliable.
        I want to thank you very much, and I commend our story to
    you for your consideration in your deliberations in Washington.
    It is a great plant and we are very proud of what it is doing
    here in West Virginia. It sets a standard for not just the U.S.
    but for the rest of the world. Thank you.
        [The prepared statement of Mr. Keffer follows:]

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        Senator Capito. Thank you.
        Our final witness is Mr. Dan Poling. He is the Business
    Manager/Secretary-Treasurer of the District Council 53,
    International Union of Painters and Allied Trades. He has 43
    years of experience in the construction industry.
        Prior to his current position, he completed a U.S.
    Department of Labor registered apprenticeship class and worked
    as a craftsman for 25 years in the field before becoming an
    instructor. Welcome, Mr. Poling.

    STATEMENT OF DAN POLING, BUSINESS MANAGER/SECRETARY-TREASURER,
    DISTRICT COUNCIL 53, INTERNATIONAL UNION OF PAINTERS AND ALLIED
                                 TRADES

        Mr. Poling. Thank you. Thank you, Chairman Capito, Senator
    Manchin, for hearing this important issue to us here in West
    Virginia. Thank you for the opportunity to speak on this. I
    want to talk about the important topic we have here, examining
    the economic importance of modern, reliable energy
    infrastructure to West Virginia and the United States.
        As you mentioned, as a Business Manager for Painters
    District Council 53, I represent 1,800 painters and allied
    trades in West Virginia and the surrounding counties around the
    borders. In addition, I am here today representing 20,000
    construction workers affiliated with the West Virginia State
    Building and Construction Trades Council where I also serve as
    Vice President, and as such, I wanted to thank both of you for
    your continuing support in the trades, and we certainly
    appreciate the opportunity to work with you and to support our
    members.
        Construction jobs relating to any industrial or commercial
    project in our state are critical to the economic future.
    Energy jobs--in particular the manufacturing of electricity
    from coal, wind, hydro, natural gas, or other resources--make
    up a substantial portion of our work of our members and
    contractors year in and year out.
        Many people refer to construction jobs as temporary, and
    while that may be true in part, I would like to emphasize that
    thousands of construction workers earn their livelihood in the
    energy sector every year in occupations other than mining,
    drilling and facility operations. And as they talk about
    temporary, I myself, as you said, completed an apprenticeship--
    back in 1973 I began and completed it in 1976, and I have
    worked temporary jobs ever since and always been gainfully
    employed. I have over 70,000 hours as a temporary worker. So if
    that is temporary, I think we need maybe more of that.
    [Laughter.]
        Mr. Poling. And at that time I have had health insurance,
    you know, and have a retirement to fall back on.
        So I would like to talk about the available supply of
    skilled, drug-free construction workers, what it does for our
    state. First, this social infrastructure enhances prospects for
    new projects. Companies want to know their projects will be
    built on time and within budget. If companies are looking for
    skilled, qualified, drug-free workers in West Virginia, we only
    need to know how many and when do you want them to start.
        Second, having local workers on the job maximizes the
    economic impact from projects. Local workers spend their
    paychecks in their communities, pay into training and
    apprenticeship programs, have health insurance, retirement
    funds, and in general infuse the local economy with funds. When
    workers from outside the region are used on construction
    projects, there is a leakage of economic activity to other
    regions, and that negatively impacts our communities.
        The labor component on a typical construction project is 25
    percent. That means 25 percent of every dollar spent on a
    project like a school or a bridge goes to paying wages and
    benefits on average. On mega-industrial projects such as an
    ethane cracker that is very capital-intensive, expect the labor
    component to be a third of a third. By that I mean if a $6
    billion project is announced, we expect $666 million to be
    spent on wages, $666 million. That is a lot of paychecks, a
    lot. So paying attention to where paychecks from our energy
    projects land is critical to a healthy local economy.
        Finally, I would like to mention our robust apprenticeship
    method of training workers for the construction trades.
    Apprenticeship is more than on-the-job training. It includes
    related hands-on training at 29 training centers in and around
    West Virginia. Programs cover a variety of occupations from
    boilermakers to sheet metal workers. These programs are private
    sector partnerships between trade unions and construction
    employers. Apprentices learn while they earn and at no cost to
    the apprentice or taxpayer. Together, we have developed the
    best way to create the most productive, highly skilled workers
    in the world.
        Approximately ten percent of our work force is in the
    apprenticeship programs, which range from a three-to a give-
    year commitment. We would like to see that number increase to
    20 percent, and given a commitment to hire locally, we
    certainly would be able to accomplish that goal. Such an
    increase could mean 4,000 apprentices per year getting the
    skills for a lifetime career, 4,000. That is community and
    technical college.
        In conclusion, the energy sector remains a vital
    construction job creator for our economy. The growth of the
    natural gas industry has provided many needed jobs to local
    construction workers building pipelines and gas processing
    facilities. We anticipate groundbreaking on a new gas-fired
    electric generating facility in Moundsville later this year.
    Major pipeline projects are just a step away from completing
    their regulatory review. We are currently building a wind
    project in Grant County and recently completed a hydro project
    on the Ohio River.
        Our workers continue to work on repair and modernization
    projects at many coal-fired power plants throughout the year,
    every year. We are excited about the jobs an ethane cracker--
    hopefully two or three--in the region could bring and the jobs
    such a project would create downstream as well.
        I thank you all for inviting me here, and I appreciate the
    opportunity to be a part of this panel and to serve with these
    honorable speakers here. Thank you.
        [The prepared statement of Mr. Poling follows:]

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        Senator Capito. Thank you. Thank all of you. With that, we
    will go to the question phase. I will start and keep mine to
    five minutes, and then we will go to Senator Manchin. We will
    go back and forth.
        Dr. Anderson, let me ask you a question. I am really
    interested in this storage possibility for the Appalachian
    region. Could you just tell me and others, how many present-day
    storage units are there now for natural gas? There is one--what
    is it, in Texas or----
        Dr. Anderson. Well, for natural gas liquids is what----
        Senator Capito. Right.
        Dr. Anderson.--we are specifically talking about. Really,
    there is the large-scale storage facility in Texas, Mont
    Belvieu, Texas, just northeast of Houston. There are smaller
    storage facilities around the country, but the Mont Belvieu
    facility is the only one that is large enough to warrant a
    natural gas liquids trade price point.
        Senator Capito. Is there one in Canada too, or no?
        Dr. Anderson. Actually, I am not sure.
        Senator Capito. No. Okay. Well, in terms of the future, in
    my view to develop and create and keep the jobs in and around
    our region, we have to have something like this or all we are
    going to do is build pipelines to send it somewhere else. Would
    you agree with that?
        Dr. Anderson. That is right. That is why we are proposing
    and working on--Steve Hedrick mentioned the Appalachian Storage
    Hub geologic project, and that is what we are--we are leading
    with the three state surveys specifically to try to lower the
    barriers to private industry and the storage facilities in this
    region.
        Senator Capito. Do you know if the one that was built in
    Texas was a public-private partnership or do you know how that
    was financed?
        Dr. Anderson. My understanding it was.
        Senator Capito. Was?
        Dr. Anderson. Over the course of time and----
        Senator Capito. Mr. Hedrick, do you have a comment on that?
        Mr. Hedrick. Yes, ma'am, it was. As I understand it, the
    public-private partnerships were established after the
    Strategic Petroleum Reserve was put into place and the salt
    domes were--or the salt strata was well understood then
    northeast of Houston, and the extraction of the salt to allow
    for the storage of the liquid at that time.
        Senator Capito. According to your statement, we already
    have some of the geological--because we have some abandoned
    wells, we have some salt mines. Is this a natural fit for the
    region? I know it is not just West Virginia but for the region?
        Mr. Hedrick. It is a natural fit for the region certainly.
    As an example, there are natural gas extraction points, methane
    extraction points in the State of West Virginia that are
    utilized as elasticity points for the Northeastern U.S. During
    any given summer, you see them growing. During winter, you see
    them falling normally when it is nice and cold during the
    winter.
        There is also salt strata reaching from the Great Lakes
    across the State of Ohio down to the vicinity of New
    Martinsville, West Virginia, in fact. They could avail us with
    the opportunity to do exactly what we have done in Mont
    Belvieu. And there are other areas. I am not a geologist and
    would not want to offer----
        Senator Capito. Well, I want to be very supportive of that.
    I put that amendment into the energy bill to be supportive of
    this project because I think it could bear real fruit for the
    State of West Virginia.
        Let me make another statement about that. There is a
    movement of ``keep it in the ground'' across the country that I
    think would be crossways with what we are trying to develop
    here in terms of a storage basin. I think there are some people
    that think if you keep it in the ground, you can just bring it
    up as rapidly as you may need it. That, I guess, is an unlikely
    scenario. You need that storage basin to be able to multiply
    the petrochemical and other industries close by. Could you
    speak to that?
        Dr. Anderson. So about 85 percent of the natural gas that
    is in the ground is methane, and what we are talking about is
    the 15 percent that is not methane. And so what is necessary is
    to bring it out of the ground, fractionate it or de-ethanize
    it, separate the natural gas liquids on the surface, and then
    that is the raw material feedstock for the manufacturing and
    petrochemical industry.
        Once you separate it and you have the 85 percent that is
    methane, that is what we use to produce power to heat homes.
    And so it is necessary to bring it up, separate it, and then
    store it as the natural gas liquid.
        Senator Capito. Have it ready. Another thing that I have in
    the energy bill is streamlining on the regulatory thing. Mr.
    Earl, I know ORDERS Construction does a lot of energy work but
    also a lot of transportation work.
        Mr. Earl. That is correct.
        Senator Capito. Talk to us a little bit about the
    permitting. I know that in the transportation bill we both
    tried to streamline the regulatory regime there. Has that been
    working? And in my scenario we would have FERC be the lead
    agency. We would try to move these things side by side, have
    definite deadlines and those kinds of things in reporting,
    public reporting on how far along we are on the permitting
    process. Can you speak to that just generally?
        Mr. Earl. Generally, yes. There are so many different
    agencies that a producer has to report to. It could be
    streamlining helped out quite a bit. I mean, you have, you
    know, OPS oil and gas, DEP, EPA, water and waste. It is just a
    continuing list of just--it is almost overbearing whenever they
    have to go through and fill out all these permits and get them
    in hand before we can start work.
        Senator Capito. Right. And in that case time is money if
    you----
        Mr. Earl. Yes.
        Senator Capito.--have a permit application and you do not
    get permitted for five years, it exponentially increases the
    cost----
        Mr. Earl. Yes.
        Senator Capito.--and I think that is a consideration,
    without forgoing any of the environmental regulations. I think
    we could do a much better job.
        Mr. Earl. Yes, correct. And, you know, whenever these guys
    are building wells now, I mean, they are $7 million a pop, so
    they are regulated internally as well as externally.
        Senator Capito. Right. Senator Manchin?
        Senator Manchin. Thank you. Again, thank all of you for
    your statements.
        I will start with Dr. Deskins. Doctor, your 2016 economic
    report went into us being into a downturn, which is an
    understatement.
        Dr. Deskins. Sure.
        Senator Manchin. The downturn that we have had in energy,
    especially in our coal industry, which is a large trail of
    employment that is hard to replace even by the onslaught of the
    new gas finds that we have had. I think you acknowledged that
    in your report. When you look at basically the rapid downturn
    of the coal industry, was it market forces? Was it basically
    the EPA overreach, overregulation or accelerating that? Where
    do you put the concern? And then also, how do we get
    reinvestments back into the energy market?
        Dr. Deskins. Sure. Thanks for that question. I think what
    we saw with coal was really a perfect storm. In my report I
    said three factors. I think we have the natural gas boom, which
    is critical, of vital importance in terms of putting downward
    pressure on coal. And I think that works in conjunction with
    the regulatory climate.
        In my view, you know, coal had a cost advantage at one
    point in the past. Here is the cost of coal; here is the cost
    of natural gas. Natural gas boom lowers the cost of natural gas
    from the perspective of an electric power producer. The
    regulatory climate raises the cost of burning coal. So both of
    those together are working to tip the scale away from coal in
    favor of natural gas from the perspective of so many
    electricity producers.
        It is really hard to say how much is due to one versus how
    much is due to the other. That would really require an in-depth
    analysis at the power plant level. But the two are working
    together and the two are both very important.
        And a third piece of that puzzle is the export climate.
    Globally, economic growth is down. Europe is smaller now than
    it was in 2007 in terms of economic output. China is slower,
    Brazil, Russia. Slower economic growth globally means less need
    for steel, that means less demand for West Virginia coal
    exports.
        So those three things came together at the same time, put
    tremendous downward pressure on national demand, but then as I
    said as well, that is not spread all the way across America.
    That demand is affecting central Appalachia, southern West
    Virginia particularly hard.
        But the second part of your question was, how do we turn
    this around? I do not know all the answers but I know that it
    is absolutely crippling West Virginia. Natural gas is a
    positive obviously, but just from extraction, that is not
    creating nearly enough jobs to replace the lost coal jobs. We
    have to talk about midstream activities and downstream
    activities, bringing those in the state as well. That is the
    only way we are going to be able to get enough----
        Senator Manchin. So basically just us having all this
    wonderful find of natural gas, whether it be Utica, Marcellus,
    whatever, is never going to replace what we have had in the
    coal industry unless we are able to get the downstream
    investments?
        Dr. Deskins. That is my opinion. We have to----
        Senator Manchin. So storage that we are talking about
    basically, all these different things just leads into my next
    question to either Dr. Anderson or Steve Hedrick. Are you
    looking at gas as a baseload? I mean, the only thing I ever
    understood as a baseload was coal and nuclear because you could
    not interrupt it; it was there.
        Dr. Anderson. Right.
        Senator Manchin. Gas is still interruptible no matter what
    you do with the pipeline. So is it going to be looked at from
    transmission as a fuel for baseload generation?
        Dr. Anderson. Yes, it is. We have seen the shift of our
    neighboring states, the balance between coal and natural gas,
    and nationally, we have seen natural gas overtake coal as a
    baseload. And right now, just recently----
        Senator Capito. How does that affect the transmission,
    basically our reliability of the system?
        Dr. Anderson. Well, it puts additional load on the natural
    gas infrastructure and on the pipelines distributing our gas.
    And we see projects that are underway and taking gas from the
    Appalachian Basin across our mountains in West Virginia and
    Virginia and North Carolina to deliver the natural gas. It is
    now increasingly going into power plants in Virginia. Duke
    Energy just got into the rate base in Virginia, a natural gas
    power plant, extremely efficient and a CO2 footprint that is
    lower than the CDP standards.
        Senator Manchin. Steve, you might want to talk real quick
    on why are we located centrally for this type of storage that
    could really help bring more of that product or keep that
    product in this area?
        Mr. Hedrick. Thank you, Senator, for that question. We are
    located within two-thirds of the population of the United
    States of American and one-third that of Canada. That is a
    day's drive easy, easy travel for transportation of material
    goods, finished goods like this bottle that is sitting in front
    of me. It would be perfect for that to occur.
        It is also geographic diversification from the United
    States Gulf Coast away from natural disasters that are
    naturally occurring from hurricanes, of course. And, you know,
    I feel very sad, of course, for the people in Louisiana who
    have had to deal with a flood just like we have in West
    Virginia within the last six weeks or so.
        But it is too great a detriment to industry as well, and
    the trillion-dollar hits that we take in the economy
    sequentially every hurricane season because they have to shut
    everything down because a hurricane rolls into the Gulf. I
    guess that can be smoothed out, if you will, by virtue of
    bringing an Appalachian Storage Hub to this Appalachian Basin.
        Senator Manchin. Jeff, just to finish up real quick.
        Mr. Keffer. Senator Manchin, just to add to this because
    obviously we are producing power, selling it into PJM, who are
    closely what our competition is. Our competition really is now
    new gas-fired power plants that are being built throughout the
    region taking advantage of the opportunity that exists because
    of the abundance of gas.
        We anticipate by the time we get many of those plants, I
    think there is like 35 or whatever in the queue at this point,
    many of those get built. Plus, with the crackers in place and
    the other opportunities to use gas, the question will then be
    or the issue will then be where does gas go? Gas has been
    historically a very volatile fuel and can be very expensive
    when there are constraints such as when the polar vortex
    occurred a couple years ago. In fact, there just was not gas,
    believe it or not, during that period of time and so there were
    many plants that could not operate.
        So there is an opportunity there for baseload, and I think
    it is really part of the mix and it really needs to be part of
    a regional mix, as you were describing, in terms of power
    production. There is no reason why we cannot have gas-fired
    power plants, combined-cycle plants here in West Virginia and
    throughout the region that are supplying electricity to the
    people who need it who do not want to have those power plants.
    But we also need other sources of electricity for when the gas
    becomes expensive again, for when the gas is not available
    because of the constraints of the infrastructure, and I see
    that continuing to be pulled, as I described in my testimony.
        Senator Manchin. I will follow up later with these
    questions.
        Senator Capito. Yes, following up on that, Mr. Keffer, we
    are not building another plant like Longview in this country at
    this time, correct?
        Mr. Keffer. Unlike the Germans, unlike the Japanese, unlike
    the Chinese and people in India and across the world, no, we
    are not.
        Senator Capito. That is what I was going to ask you, where
    are they building them? Every place but here?
        Mr. Keffer. Unbelievably, because in fact some of these
    countries like Germany and Japan have very restrictive climate
    control plans in place, even more so than what we would have
    here under the Clean Power Plan, and yet their mix of energy
    will include coal-fired power plants like Longview or more
    advanced plants than Longview.
        Senator Capito. Is the reason that we are not building them
    here--is it the expense, the regulatory environment, the fear
    of the unknown, or a little bit of each?
        Mr. Keffer. Well, right now, we have got the regulatory
    environment that is clearly a block. It is not part of the
    Clean Power Plan but the carbon New Source Rule, which is an
    adjunct to it, would make it so that to build a Longview, you
    would have to incorporate carbon capture and sequestration. And
    there are not investors who are willing to take that kind of
    risk at this point in time because--and I know this is subject
    to litigation but I will just say what I think. It is really
    not commercially feasible----
        Senator Capito. Right.
        Mr. Keffer.--at this point in time. Much more work has to
    be done----
        Senator Capito. Go to Mississippi.
        Mr. Keffer. Well, that is a different type of plant----
        Senator Capito. Right.
        Mr. Keffer.--but it also shows how difficult it is to make
    big leaps----
        Senator Capito. Right.
        Mr. Keffer.--in the power industry. We made some
    incremental changes and leaps with Longview, and they were
    difficult enough to be able to make to see the results that we
    are seeing now. We had to reinvest additional amounts. But
    those huge leaps--which also people talk about renewables and
    talk about battery storage--that is another very, very large
    step into the future that we probably will not see for some
    time to come.
        Senator Capito. That is an interesting technology, too, on
    the renewable side with the battery storage.
        Dr. Deskins, you mentioned just briefly that your
    projection for natural gas is that industry will take back off.
    I do not even know what the price--I know it has been very,
    very low. There are a lot of wells that are shut in. A lot of
    our companies, unfortunately, have laid off a lot of people.
    What makes you make that projection that it is going to get
    more--does that mean the price is going to go up? Because we
    know we have the supply. Is it because LNG is going to be
    coming on?
        Dr. Deskins. Sure. What we see with natural gas is not
    surprising or not really bad, and the good thing is production
    capacity with natural gas has outstripped our infrastructure,
    which is a good thing, right, for productive capacity to grow
    that much. But over time--the result is right now we have a
    glut of natural gas in this part of the country. We are causing
    that production capacity with their infrastructure constraints.
        But as infrastructure improves to natural gas to where it
    needs to be across the country geographically, as
    infrastructure improves to get gas to where it needs to be in
    terms of industry and manufacturing, both of those are going to
    help improve the natural gas situation. And as we can move
    forward with an exported liquified natural gas to Europe, that
    is going to improve. All those things will expand--effectively,
    those three things are expanding the market for natural gas
    from this region. That will lead to price depreciation over the
    long run, and that is something that is going to benefit
    natural gas and coal both as those natural gas prices go up. As
    a matter of fact, one of our top sources of optimism in our
    coal forecast is if natural gas prices are even higher than we
    expect.
        Senator Capito. Right.
        Dr. Deskins. That is going to be a source of optimism for
    coal, too.
        Senator Capito. Right. Mr. Hedrick, both you and Dr.
    Anderson talked about the Shell investment, and I know that was
    on hold for, what, three or four years before they made the
    announcement?
        Mr. Hedrick. They made the final investment decision within
    the last six months. They are on an 18-month string. At that
    point they actually started spending significant dollars in
    their terms with regard to a multibillion-dollar investment. I
    think they are in right now more than $100 million in prep for
    the site in engineering.
        Senator Capito. What would you point to that, kind of, was
    the tipping point for them to go ahead and make that final
    decision? I know they pulled out of Alaska on a very
    significant project they had going there for, gosh, I think
    decades. I am going to ask you, Dr. Anderson, too, but, Mr.
    Hedrick, do you have any opinion?
        Mr. Hedrick. I mean, as it often is, it was the assurance
    that they had predictability of supply for the raw material and
    predictability of demand for the product. I mean, those are the
    two key attributes that they had to have to make a
    multibillion-dollar investment without making the decision to
    put in pipelines just to supply themselves and the decision to
    latch onto long-term contracts, which I am not aware of their
    long-term contracts. I do not want to imply that I am. But
    without some assurance that they are going to have long-term
    supply for the raw materials, it is a hard decision to make,
    and they appear to have those locked down now.
        Senator Capito. Dr. Anderson, do you have anything to add?
        Dr. Anderson. Well, I agree with Steve's comments. I would
    say that, additionally, Shell is investing in one step further
    downstream than just the cracker, and the final product is
    polypropylene pellets or small balls that they can sell
    directly to the market----
        Senator Capito. For plastics? Is that what that----
        Dr. Anderson. Plastics, yes, for people to directly mold.
    So that is one aspect of it. Additionally, you know, I would
    hate to say, but the Pennsylvania tax credit that they have was
    a pretty big carrot for them, which would amount to about $1.7
    billion over the life of the plant in terms of feedstock and
    knowing that they have the raw materials that would be readily
    available to----
        Mr. Hedrick. And that comes down to creating
    predictability, right? Predictability in supply, predictability
    in cost, and for the tax base, predictability in revenue
    generation substituted with a facility.
        I think that the other states, you know, Ohio, West
    Virginia, Kentucky and Pennsylvania in fact would appreciate
    further predictability with regards to PHMSA and what they
    would do across the long haul with regard to our interstate
    pipeline system and specifically, as we talked about, you know,
    a pipe from Monaca, Pennsylvania, across West Virginia and Ohio
    down to Catlettsburg, Kentucky. There has to be predictability
    or a mix of investment for the very same reasons that we are
    talking about with regards to shale.
        Senator Capito. So that is refining into gasoline then you
    are talking about at Catlettsburg?
        Mr. Hedrick. At Catlettsburg they do have a refinery. They
    also have a propane-to-propylene manufacturing facility. The--
    --
        Senator Capito. Do you want me to tell you the chemistry of
    that?
        Mr. Hedrick. Yes, ma'am. [Laughter.]
        Senator Capito. I will let Senator Manchin do that.
    [Laughter.]
        Mr. Hedrick. It is interesting that a very, very small
    underground storage facility in West Virginia that stores
    propylene and feeds that into Catlettsburg, Kentucky. It then
    feeds propylene back into Neal, West Virginia, to make
    polypropylene, which further goes into the market. I do not
    want to pretend that we have presented to you novel testimony
    really. It is proven that this works and it is proven that it
    is good for the Appalachian Basin and for the nation so----
        Senator Capito. Yes, thank you. Senator Manchin?
        Senator Manchin. It is frustrating, I know for myself and I
    am sure for Senator Capito at times, they believe because we
    come from West Virginia and we represent West Virginia that we
    do not care about the environment. You will have people, kind
    of pigeonhole you on that. We kept saying, listen, the bottom
    line is West Virginia produces coal and the rest of the world
    is still using it.
        There are utility people out here right now. I have not
    spoken to one utility person, whether it is in our region or
    around the country, that believes that electric generation they
    have the freedom to choose their portfolio. They believe that
    they have been forced because of Federal Government regulations
    to fuel-switch and put all their eggs in one basket, which
    could be detrimental to reliability but also, most important,
    to the cost of energy that keeps us competitive as a country.
        These are the things that we are talking about. Ninety-four
    percent of our electricity in West Virginia comes from coal. We
    are switching it rapidly, very rapidly. As we do that, how
    vulnerable does that make us from the standpoint to be able to
    create the stability that we would like to have in
    manufacturing bases? Why have we not expanded off of our
    chemical valley that we have?
        We have a tremendous chemical footprint in West Virginia,
    no pun meant here, but they are a shell of what they used to
    be. They are all operating at 50 percent less than their
    footprint. Why are they not expanding? I know we are starting
    to use now the new one we just talked about, Steve.
        Dan, I would then ask you, as far as on the work force,
    what are we doing to our work force? I am more concerned today
    than I have ever been in the State of West Virginia when we
    have under 50 percent of the people that are eligible to be
    working as adults working and performing.
        Mr. Poling. Well, thank you for that question, Senator. In
    the trades, we are trying several programs to----
        Senator Manchin. Your apprentice programs and all that,
    yes.
        Mr. Poling. Our apprenticeship programs, we have our
    returning vets. We get them in there. We try and develop
    technology to take those who at one time the job may have been
    too physical but to lessen that challenge so that people who
    have some minor handicaps can do something in the trade works
    and stuff so they can be productive instead of saying I am
    unable to work.
        But all of our programs have things like that in place that
    we try to work with those that have any disadvantage at all
    that can become a productive, successful tradesman. There are a
    lot of jobs nowadays with technology and stuff that are more
    using your mind, not your hands so much. You have to have the
    basic understanding of math and science and things like that,
    but there are prospects for those folks like that. So we are
    trying to get the trades to basically give those folks an
    opportunity not just saying because they are not 250 pounds,
    six foot tall, you cannot be an ironworker. That is not true in
    today's world because of technology. So our trades are doing
    that, and we hope to bring more people in, and a few years ago,
    quite frankly, who did not have the opportunity.
        Senator Manchin. Mr. Keffer, if I could ask you, on the
    Longview plant you were kind enough to have both of us and
    provide a tremendous tour of that facility. The Federal
    Government did not encourage you to build that plant, correct?
        Mr. Keffer. Oh, no. No, not at all.
        Senator Manchin. If anything, they fought you every step of
    the way and probably increased the cost by ?
        Mr. Keffer. We benefited from being located here in West
    Virginia.
        Senator Manchin. Yes.
        Mr. Keffer. For sure.
        Senator Manchin. With that being said, you are saying you
    can gas-fire that plant also?
        Mr. Keffer. We can gas-fire up to 20 percent of its heat--
    --
        Senator Manchin. So you can basically have a multi-faceted
    plant that produces off of gas, taking advantage of gas prices
    versus coal prices and is more reliable?
        Mr. Keffer. That is exactly right.
        Senator Manchin. And that is not encouraged either?
        Mr. Keffer. If it is a coal-fired plant and it has got a
    steam generator like ours, it could not be built at this point
    because of the regulation that is now in litigation.
        Senator Manchin. Got you.
        Mr. Keffer. Yes, that is correct.
        Senator Capito. And that is the Clean Power Plan?
        Mr. Keffer. Yes.
        Senator Manchin. And you are a merchant plant?
        Mr. Keffer. We are a merchant plant.
        Senator Manchin. You might want to explain just for the
    record.
        Mr. Keffer. Oh, sure. So yes, every day----
        Senator Manchin. You are on the market.
        Mr. Keffer.--we bid into the market in PJM, which is the
    area that includes West Virginia, Pennsylvania, New Jersey, a
    bit of Illinois and Indiana. And they are the--PJM then buys
    all of the power wholesale and then redistributes it to the
    utilities, to----
        Senator Manchin. So you get no guaranteed pricing by the
    PSC or any of that?
        Mr. Keffer. There is never guaranteed pricing. That is
    correct.
        Senator Manchin. And you are able to compete in the
    marketplace. What is your capacity now? What are you all
    producing, what capacity rate?
        Mr. Keffer. We are producing more than what our--we have
    said our net is.
        Senator Manchin. I got you.
        Mr. Keffer. We are 700 megawatts and during the hot days
    this summer, we have been----
        Senator Manchin. You are able to sell all of your power?
        Mr. Keffer. We are up to about 710 from time to time, just
    being able to get those extra dollars out of our generation,
    yes.
        Senator Manchin. Can I ask one more question?
        Senator Capito. Sure, go ahead.
        Senator Manchin. Dr. Deskins, the economy is what we are
    worried about and how in the world do we jumpstart this
    economy? Right now, I have been challenged by a lot by people
    saying I am not sure you are going to have an ample work force.
    Do you see that as a concern that we may have, and how do we
    turn that around as quickly as possible?
        Dr. Deskins. Well, the first part of that question is easy.
    That is a desperate concern. I constantly talk about we want
    good transportation infrastructure. We want a good tax climate.
    All these things are important, but if a firm is not confident
    that it can find the workers that it needs who are healthy,
    well-skilled, well-educated, well-trained, and drug-free, then
    all the good positive tax climate, infrastructure, all these
    other things are not going to matter if a business is not
    confident that it is going to find the workers that it needs.
        I think education, training, health, human capital, drug
    abuse, I think these are probably the most important concern
    that we have going forward, and I frequently cite this labor
    force participation rate or this employment-to-population ratio
    is the key concern for West Virginia going forward.
        But it is not easy. We have so many challenges with regards
    to the brain drain. You know, many of the young men and women
    who we have pulled out of high school in West Virginia who we
    give a good college education to, many of them just find that
    it makes more sense for them to take a job in Ohio or PA,
    Virginia, wherever.
        I mean, this all works together. We can create a healthier
    economy. Then, those young men and women will be more inclined
    to stay here, and that will help reverse many of our human
    capital, brain drain problems.
        There is no easy answer. We have to focus on the basics,
    but we do need to keep our attention on health, drug abuse,
    education and cultivating opportunities. And the clearest, most
    shorter-term opportunities are in energy to make more sense for
    our young people to stay here and for people to migrate here.
    There is no silver bullet because it is a daunting challenge
    with 53 percent of our adult population wanting to have a job,
    the lowest number in the nation. We have been dead-last in that
    statistic every year since 1976. It is a challenge.
        Senator Capito. Do you have any more questions?
        I have two quick questions. My first question is, I hear a
    lot of optimism about where we can go because we are blessed.
    We have these resources, we have a willing, I think, more
    entrepreneurial spirit now to try to look at different and new
    ways to use this.
        My concern is if we only talk about it and do not actually
    act on it in terms of the infrastructure. Getting back to the
    original topic of discussion, if we just say, yes, we do need
    some more pipelines but cannot attract the investment, yes, we
    need a storage area but we cannot attract the investment, my
    concern is, Dr. Anderson, I would ask you do you see a scenario
    where if we hesitate too long, we could again see our resource
    going somewhere else, being used all over like our coal
    basically has been for years? We use a lot of it here, but we
    export a heck of a lot of it all around the country. Can you
    speak to that?
        Dr. Anderson. Senator Capito, yes, I completely agree with
    you. If we do not act quickly in this region and in the state,
    then pipelines will be built to Philadelphia starting in
    Ontario and the Gulf of Mexico.
        And so in this region what we are trying to do to be active
    about turning this around is lowering all the barriers, having
    a predictable and consistent permitting environment. Those
    sorts of things are exactly what we need to do to lower the
    barrier for private industry.
        And then on the other side what we are trying to do is
    capitalize that private investment through showing where the
    opportunities are, and, as Dr. Deskins mentioned, we need to
    work on the work force challenge as well.
        But I completely agree with you. If we do not act now, then
    we will continue just to export our raw materials.
        Senator Capito. Right. I know there are some other
    opportunities in terms of a cracker. Obviously, the one in
    Parkersburg, which has been talked about for several years, is
    still on hold. But there is also, I think, great hope that
    across the Arch Moore Bridge in Moundsville in Ohio,
    FirstEnergy has cleared a site there of a former power plant,
    and I have great hopes that will develop. If we could grab
    those investments, I think some of these other things can
    follow.
        I do not have any other questions.
        Senator Manchin. Just out of curiosity, if you were in our
    position, if you could go back to Washington and make any type
    of a recommendation for a change and that change could happen,
    what would be your recommendation for us to do for not just
    West Virginia but for our country? Basically, if we are going
    back and looking at economic vitality, every part of the
    country wants more jobs. I do not think any other part of the
    country needs jobs as bad as we need them right now. So if you
    were going to recommend one thing to Senator Capito and myself
    and we could change that, what would we go back and change?
    What would you ask? What would your recommendation be for us to
    change? We will go down the line. Dan, do you have any
    comments?
        Mr. Poling. Yes. I would like to--and maybe part of this
    concept will not simply be about the wages and the drug testing
    and all that. I would like to somehow come up with something
    that says, when these projects come up, we put local workers on
    them. When Dr. Deskins was talking about competing with Ohio
    and Pennsylvania, that is true people go there to work because
    anybody will go to work where they can make more money. When we
    hold the wages down and expect more, then people want to go
    somewhere else.
        So I guess my question would be if there is enough money to
    invest in infrastructure from the government to make this state
    be in a position where it needs to be to bring all this
    together, then I think that is a good thing. And then if you
    put some caveat on there that we use local workers to do it and
    to be drug-free, I think that is a great start.
        I did want to make the comment, we talked about the trades
    and there was some question about drug-free workers. We have
    less than three percent failing our drug-testing programs, and
    when we go to these folks who need work, we have drug-testing
    prior to and randomly while they are there. And we have less
    than three percent failing. The reason for that I believe is it
    is a risk and reward. These are good-paying jobs. People do not
    want to lose them. They do not want to get busted on a drug
    test and lose their jobs if you are paying them a good living.
        So I think the two kind of go together, and I would have to
    ask you two if you could to invest in West Virginia from the
    Federal and the infrastructure----
        Senator Manchin. You are saying make sure that any jobs
    that we could bring here are going to be West Virginia jobs
    first?
        Mr. Poling. Local jobs for local people. I believe that----
        Senator Manchin. Yes.
        Mr. Poling.--and I believe in the drug-testing requirement
    on the project.
        Senator Manchin. Yes. Jeff?
        Mr. Keffer. I would hope that we could use the opportunity
    with a change in Administration, regardless of which direction
    it goes, to step in and settle the Clean Power Plan litigation,
    make changes to the framework of that allow us to get going on
    building new advanced coal plants but also deal with the issue,
    the very real issue that has been recognized in the country of
    climate control.
        Senator Manchin. Steve?
        Mr. Hedrick. So sometimes I am known for a little bit of
    boldness as you have known me over the years, and when I was in
    the Army I had tanks, M1A1, great pieces of gear. And the tank
    commander has at his disposal or her disposal as we move
    forward the opportunity to grab a commander's override it is
    called associated with that tank and pivot the turret on their
    own and make a decision to redirect the pathway of the gun if
    you will.
        So what I would advise, if it is even feasible and possible
    that the commander's override be grabbed by the Federal
    Government to force state government's involvement in this and
    pivot this. When you have 49 percent of this brought forward as
    part of the public investment associated with this, the private
    sector needs to come forward with 51 percent right now. And
    that is a bold shift in the manner of our thinking and what we
    want.
        But we are staring at adversity beyond that which we have
    seen in generations. Southern West Virginia and Eastern
    Kentucky are being crushed right now, and the social problems
    that come along with the declining education, increased drug
    problems and a lack of opportunity and pride to be able to work
    are very autumnal, and they go further and further and further.
        The amount of money that we are going to spend across the
    next 20 years in supporting people who want to work but cannot
    and experience all of these problems I think is going to--we
    could dwarf that by a simple investment right now between the
    four states and the Federal Government.
        Senator Manchin. Chad?
        Mr. Earl. I think we are getting regulated out of business
    to some degree. From the people I have talked to, the rules or
    all the different regulations we have are not necessarily clear
    and there is a lot of overlap and who has jurisdiction over
    what. So I think that whole process could be streamlined. I
    mean, whenever it delays construction, construction costs in
    the wintertime go up approximately 15 percent, so they are
    banking on that because of different permits and stuff that
    they have to have. So that is probably the biggest one for us
    to address.
        Dr. Deskins. I would say--I think that question--by the
    way, this is a fantastic question and I appreciate you offering
    me the opportunity to weigh in. But I would say first off, of
    course any positive regulatory policy surrounding clean coal
    technology, natural gas policies, research and development and
    those areas of course are one of our most clear short-term ways
    to carry this state.
        But let me just say I really, really appreciated your
    comment at the very beginning about returning Vietnam veterans.
    I have never heard it put that way, but that is a great way to
    think about how West Virginia has supplied the nation's energy
    for so many years but how we have not been thanked enough for
    our contribution to our fundamental--being able to pay it
    forward.
        So with that in mind, I would try to do what I can to
    really communicate the state that we really find West Virginia
    in, especially the great depression that we find in six
    counties. And I would call for any help that we can get from
    Washington with our drug crisis, with our health crisis, with
    our education crisis, and with our I would say significant
    infrastructure needs. All those are--well, those are
    essentially the problems. It is laughable for me to call it
    short-term issues, but those are--that is my answer.
        Dr. Anderson. I think with the raw materials we have in
    this region, there are really three ways to get it to the
    population centers where it is used. West Virginia does not
    have a lot of population but, as Steve mentioned, within one
    day's drive is about two-thirds of the population of the United
    States and a third of Canada.
        So the three ways to move those raw materials are either
    pipes, wires or roads. And so ultimately, what we want to do is
    upgrade the materials to where we end up stressing our road
    infrastructure because we are shipping so many end and finished
    goods. And so I think we see within the State of West Virginia
    the road infrastructure, a lot of wear and tear. And because of
    decreased tax revenues, we have seen a lot of wear on the road
    infrastructure.
        I would encourage one way to help spur the investment of
    your pipes, wires or roads is to lower the barrier for the
    regulatory environment. We have heard this message a few times
    of the unpredictability of the regulatory environment, which
    lends itself to the unpredictability and the ability to get
    capital. And so when you go to an investor and there is an
    unpredictable regulatory environment such as the one we see at
    the moment, that leads to a difficulty getting investment.
    Leveling the playing field and the predictability of the
    regulatory environment I think would be a huge barrier to
    cross.
        Senator Manchin. Let me make one final comment before
    Senator Capito wraps this up.
        The thing that I was most appalled by and why I am most
    upset about the present Administration under President Obama,
    there was no plan. There was no plan. What do you do when an
    area is absolutely economically destroyed knowing that this
    major policy shift of this moving away from fossil that he
    would like to do in such a rapid way by turning the EPA loose--
    and I know we have been criticized for saying ``war on coal.''
    I do not know what else to call it. I really do not because it
    has been singly targeted in the Appalachian region. So I am
    trying to be as respectful as I can in trying to get policies
    forward.
        I have come to the conclusion: The only way that we are
    ever going to succeed is follow the dollars, the tax credits,
    extenders. They have been pouring more and more tax credits and
    extenders into renewables, and the only thing I am going to
    say, if that is the policy direction, then we cannot
    collectively stop some of this other thing when you have an
    Administration desire to do something as they have done. We
    could at least say this that makes all the sense in the world:
    If you are going to use these tax extenders--they call them tax
    extenders--they are credits. They give them credits if they do
    certain things in certain fields. So if they are moving to
    solar or hydro or----
        Senator Capito. Wind.
        Senator Manchin.--wind in all of this, those credits should
    only be used in a germane energy where the losses are. So if
    the losses came from areas such as West Virginia and southwest
    Virginia and Kentucky, those credits have to be used there. It
    makes all the sense in the world. I am going to do everything I
    can to shut this system down the next time because, trust me,
    they love tax credits. The wind people are not letting tax
    credits go. Solar is not letting tax credits go.
        I am asking how do you argue against at least using the
    credits if you are going to get them? We will build the best
    windmills, Danny. Our guys can build windmills. We can build
    solar. We can build anything you want. Just give us a chance.
    That is what I am most upset about is that there is no plan.
    There was no plan for a major policy shift in energy, and that
    is what we have got to correct, I think, as quickly as possible
    to give us all a chance to survive in this tough area.
        Senator, thank you so much again for this hearing. And we
    are having Secretary Moniz come visit. Right now, he is
    scheduled for September the 12th.
        Senator Capito. To Morgantown?
        Senator Manchin. Yes, we are going to do this because he
    needs to see NETL, what NETL is doing. He needs to see what you
    are doing, Jeff, at Longview and basically what we can do in a
    balanced approach.
        All of you will be invited, and we hope everybody shows up.
    Thank you.
        Senator Capito. Well, thank you. I know the last thing is
    only the last thing until it is the last thing so I am going to
    say one thing about something Senator Manchin was saying. I
    have been on an effort--and I believe Senator Manchin is on
    this so I will not speak for him, but I know Senator Portman in
    Ohio is--to try to even this tax credit thing.
        If you are going to go and build a coal-fired power plant
    and you can use carbon capture and sequestration, which Jeff
    has said is not occurring right now because it is not
    economically or probably technologically feasible, but when it
    gets there, let us put them on an even tax credit playing field
    so that fair is fair. It does not exist right now, and I think
    it would also get to some of the greater goals of cleaner, more
    efficient energy production.
        With that, I would like to again thank Senator Manchin. As
    you can see, we work very well together and we have, I think, a
    unity of thought in this area. I would like to thank the
    witnesses, our hosts, and the committee. I would like to thank
    my staff, Jan Brunner and Kaylan Billingsley, for all their
    hard work of putting this together.
        I would also like to thank the Chairman and Ranking Member
    of the Full Committee, Lisa Murkowski from Alaska and Maria
    Cantwell from the State of Washington. We could not have this
    here in West Virginia without their consent, so I want to thank
    them and the Full Committee staff as well.
        Thank you all, and with that, I will adjourn this committee
    hearing.
        [Whereupon, at 3:41 p.m., the hearing was adjourned.]

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