[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]
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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
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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
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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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