[Senate Hearing 114-118]
[From the U.S. Government Publishing Office]




                                                         
                                                       S.  Hrg. 114-118

                       ENERGY SUPPLY LEGISLATION

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   on

                       ENERGY SUPPLY LEGISLATION

                               ----------                              

                         TUESDAY, MAY 19, 2015





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







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

















                                                        S. Hrg. 114-118

                       ENERGY SUPPLY LEGISLATION

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

                                HEARING

                               before the
                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   on

                       ENERGY SUPPLY LEGISLATION

                               __________

                         TUESDAY, MAY 19, 2015



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





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

                         U.S. GOVERNMENT PUBLISHING OFFICE 

95-278                         WASHINGTON : 2015 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               
               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
                      Karen K. Billups, Staff Director
                  Patrick J. McCormick III, Chief Counsel
                    Colin Hayes, Deputy Staff Director
                    Kellie Donnelly, Deputy Chief Counsel
            Angela Becker-Dippmann, Democratic Staff Director
                  Sam E. Fowler, Democratic Chief Counsel
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page
Murkowski, Hon. Lisa, Chairman, and a U.S. Senator from Alaska...     1
Cantwell, Hon. Maria. Ranking Member, and a U.S. Senator from 
  Washington.....................................................     3

                               Witnesses

Hopper, Abigail Ross, Director, Bureau of Ocean Energy 
  Management, U.S. Department of the Interior....................     6
Kelly, Susan N., President and CEO, American Public Power 
  Association....................................................    14
Livingston, P.E., Randal S., Vice President, Power Generation, 
  Pacific Gas and Electric Company...............................    26
Matzner, Franz, Director of the Beyond Oil Initiative, Natural 
  Resources Defense Council......................................    35
Milito, Erik, Group Director, Upstream and Industry Operations, 
  American Petroleum Institute...................................    52
Sheets, Brent, Deputy Director, Alaska Center for Energy and 
  Power, University of Alaska Fairbanks..........................    65

          Alphabetical Listing and Appendix Material Submitted

Advanced Energy Management Alliance
    Statement for the Record.....................................   282
Alaska Independent Power Producers Association
    Statement for the Record.....................................   287
American Whitewater
    Statement for the Record.....................................   288
Association of Fish and Wildlife Agencies
    Statement for the Record.....................................   356
Barrasso, Hon. John
    Letter from the General Counsel of the Department of Defense 
      regarding Section 526 of S. 2827...........................   308
Beaverhead County Commissioners
    Statement for the Record.....................................    98
Bureau of Land Management, U.S. Department of the Interior
    Statement for the Record.....................................   297
Cantwell, Hon. Maria
    Opening Statement............................................     3
Clark Canyon Hydro, LLC
    Statement for the Record.....................................    95
DNV GL
    Statement for the Record.....................................   310
Edison Electric Institute
    Statement for the Record.....................................   330
Federal Energy Regulatory Commission
    Statement for the Record.....................................   100
First Energy
    Statement for the Record.....................................   338
Geothermal Energy Association
    Statement for the Record.....................................   339
Greenfields Irrigation District
    Statement for the Record.....................................    92
Heller, Hon. Dean
    Statement for the Record.....................................   344
Hopper, Abigail Ross
    Opening Statement............................................     6
    Written Testimony............................................     9
    Responses to Questions for the Record........................   118
Hydro Bills Group
    Statement for the Record.....................................   346
Industrial Energy Consumers of America (regarding S. 1215)
    Statement for the Record.....................................   350
Industrial Energy Consumers of America (regarding S. 1226)
    Statement for the Record.....................................   351
Industrial Energy Consumers of America (regarding S. 1236)
    Statement for the Record.....................................   352
International Brotherhood of Electrical Workers
    Statement for the Record.....................................   353
Kelly, Susan N.
    Opening Statement............................................    14
    Written Testimony............................................    16
    Responses to Questions for the Record........................   120
Livingston, Randal S.
    Opening Statement............................................    26
    Written Testimony............................................    28
    Responses to Questions for the Record........................   133
Maryland Department of the Environment
    Statement for the Record.....................................   354
Matzner, Franz
    Opening Statement............................................    35
    Written Testimony............................................    37
    Responses to Questions for the Record........................   139
Milito, Erik
    Opening Statement............................................    52
    Written Testimony............................................    54
    Responses to Questions for the Record........................   145
Murkowski, Hon. Lisa
    Opening Statement............................................     1
    BOEM Fact Sheet..............................................   113
National Enhanced Oil Recovery Initiative (regarding S. 1282)
    Statement for the Record.....................................   364
National Enhanced Oil Recovery Initiative (regarding S. 1285)
    Statement for the Record.....................................   365
National Hydropower Association
    Statement for the Record.....................................   367
Outdoor Alliance
    Statement for the Record.....................................   376
Scott, Hon. Tim
    Statement for the Record.....................................   378
Sheets, Brent
    Opening Statement............................................    65
    Written Testimony............................................    67
    Responses to Questions for the Record........................   279
State of Washington Department of Fish and Wildlife
    Statement for the Record.....................................   387
Sun River Electric Cooperative Inc.
    Statement for the Record.....................................    91
Sun River Watershed Group
    Statement for the Record.....................................    97
Tollhouse Energy Company
    Statement for the Record.....................................    94
Trout Unlimited
    Statement for the Record.....................................   390
Warner, Hon. Mark
    Statement for the Record.....................................   396
Western Small Hydro Association
    Statement for the Record.....................................    87
Wilderness Society
    Statement for the Record.....................................   397
Wyden, Hon. Ron
    Statement for the Record.....................................   400
    The text for each of the bills which were addressed in this hearing 
can be found on the committee's website at: http://
www.energy.senate.gov/public/index.cfm/hearings-and-business-
meetings?ID=71df493c-1c78-42bc-9d4b-ba9793fb065f.

 
                       ENERGY SUPPLY LEGISLATION

                              ----------                              


                         TUESDAY, MAY 19, 2015

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:05 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Lisa 
Murkowski, (Chairman of the Committee), presiding.

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

    The Chairman. Good morning. We will call to order the 
meeting of the Senate Energy Committee.
    We are in the third of four legislative hearings related to 
the broader energy bill that we are putting together.
    I want to thank my colleague, Senator Cantwell, and members 
of the Committee for their work as we craft what will hopefully 
be a bipartisan bill. We are building a strong foundation laid 
by members who continue to bring some good ideas to the table.
    The 26 bills that we are looking at today will bring the 
total to 70 reviewed so far. Our topic today is supply. I think 
my views are pretty clear to folks on this Committee. It can be 
distilled to a bumper sticker. That bumper sticker reads, 
``Energy is good.''
    I believe it is in our national interest to make energy 
abundant, affordable, clean, diverse and secure.
    Today's hearing, like the bill that we are assembling, is 
not designed to pit energy resources against each other, but 
instead to view energy supplies holistically and to find areas 
where we can come together.
    When it comes to abundance, few states or even countries 
can compare to Alaska. With an estimated 46 billion barrels of 
conventional oil and more than 430 trillion cubic feet of 
natural gas, Alaska is a world class petroleum province by any 
measure. Those conventional resources are supplemented by 
unconventional resources like the estimated 590 trillion cubic 
feet of methane hydrates on the North Slope, much of which is 
under existing development.
    In addition, we are the leader when it comes to everything 
else that is out there as well. I would challenge whether it is 
in the renewable areas with geothermal opportunities, marine 
hydrokinetic, ocean energy, biomass, wind, even with solar. 
People do not think about solar, but we truly are a state that 
has it all.
    In terms of the conventional resources, today Alaska has 
produced and shipped more than 17 billion barrels of oil 
through the Trans-Alaska pipeline. We have exported 2.5 
trillion cubic feet of LNG to Japan. A lot of people forget 
that we have been engaged in this for decades, and 35 wells 
have already been drilled in the Beaufort and the Chukchi Seas.
    I am oftentimes quite taken aback when I hear people ask 
basic questions as to whether or not we should allow drilling 
in the offshore, in the Arctic as if somehow or other drilling 
in the Beaufort or the Chukchi was something new. Exploration 
has occurred for more than 30 years. This was back in the 80s. 
It has been done safely, for all these years.
    The only Federal production in Alaska comes from the North 
Star field. This is a development in the Beaufort that was 
discovered back in 1984. It has produced more than 150 million 
barrels of oil since 2001.
    Despite the safe and successful development, all you hear 
is consternation in some of the press about how we cannot 
possibly be going offshore in the Chukchi. We cannot be going 
offshore in the Arctic. This is new and unexplored territory 
and the end of the world as we know it will likely come to 
pass.
    In fact, 35 wells have been drilled up there. It did not 
make the news because there was no news to report other than 
that the exploration was successful. What happens then? Prices 
go down. It is difficult. It is expensive. That is part of 
Alaska's history. Given our history of safe and successful 
development, I think that it is time to expand Alaska's 
contribution to America's energy security.
    My bill, S. 1278, provides for annual lease sales in the 
areas between three and six miles offshore, known as the 8G 
zone in both the Beaufort and the Cook Inlet. This area is 
adjacent to where the State of Alaska holds annual lease sales 
and is very close to existing infrastructure. It can deliver 
near term production from the Beaufort to maintain the Trans-
Alaska pipeline which is critical as we look at the declining 
through-put and infrastructure that is less than half full. It 
can also deliver natural gas from the Cook Inlet to Alaskans 
around the state.
    My legislation would also provide for more frequent lease 
sales than called for in the current five year plan and extend 
lease terms to accommodate the stringent regulatory 
requirements and short operating windows in the Beaufort and 
the Chukchi. The incapability of long development timelines in 
existing lease terms was identified as an issue in a recent 
National Petroleum Council study that was done at the request 
of the Department of Energy. I strongly believe that more 
predictable lease sales with more workable lease terms will 
provide more value for the treasury.
    Offshore development must also benefit states and local 
communities, and that is why my legislation supports revenue 
sharing for Alaska. That is also why I thank Senators Cassidy, 
Warner and Scott for spearheading similar legislation for the 
Gulf and Mid to South Atlantic states.
    Each area, I think we recognize, is different with specific 
needs and interests, but it is out of simple fairness that we 
should provide revenue sharing to all of them. In Alaska, 
supporting communities, science and workforce development are 
all critical components of a successful and vibrant offshore 
industry that meets our national energy interests.
    While Alaska has abundant resources, Alaskans face some of 
the highest energy costs in the entire nation. For too many 
Alaskans energy is not diverse, secure or affordable. In fact, 
energy insecurity and energy poverty are the defining issues in 
many parts of my home state, and that is one of the reasons 
that I joined with Senator Scott from South Carolina to focus 
on this issue of energy insecurity.
    In considering the importance of revenue sharing, I would 
ask all of my colleagues here on the Committee and in the 
Senate as a whole to consider the commitment that Alaska has 
made to invest the earnings from non-renewable resources into 
our renewable resources. Through just one program, for example, 
the state has allocated more than $250 million to more than 275 
renewable projects to help unlock Alaska's vast wind, biomass 
and hydropower resources.
    Among those renewable resources, one that is particularly 
important to me and to my state is hydropower. I have 
introduced legislation to recognize hydropower as a renewable 
resource throughout Federal programs. Recognizing hydro as a 
renewable resource is incredibly important as far as I am 
concerned. The Federal Government needs to improve the 
permitting process so that we can bring clean hydropower to 
more communities across Alaska and across the nation.
    From producing energy on the Outer Continental Shelf to 
generating renewable hydropower in our waterways, we have got 
an outstanding opportunity to come together around some core 
principles and build a bipartisan supply title. I am optimistic 
that we can do this in a way that builds upon the American 
energy renaissance that we are currently experiencing.
    We have a lot of bills on the agenda today, and I look 
forward to reviewing these to see which ones are going to meet 
the test as well as hearing our witnesses' perspectives on 
each.
    With that, I will turn to my Ranking Member, Senator 
Cantwell. Good morning.

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

    Senator Cantwell. Thank you. Thank you, Madam Chair, for 
this important meeting, and I thank our witnesses for being at 
the hearing today.
    Once again we have a bundle of various initiatives or 
legislative proposals before the Committee, generally related 
to the topic of energy supply. In setting the context for the 
discussion, I think it is helpful to once again review what we 
just heard recently about the current supply picture last month 
from the Energy Information Agency (EIA). First, growth in U.S. 
energy production--combined with modest growth in demand--will 
contribute to a decline in U.S. energy imports.
    Second, energy use by residential consumers in the 
transportation sector is expected to continue to decline, 
driven by improvements in energy efficiency technology. 
Meanwhile the industrial sector is expected to post its 
strongest growth. We are making strides.
    Third, electricity prices are expected to rise about 18 
percent-driven primarily by fuel costs for natural gas and coal 
which are expected to rise 88 percent and 25 percent 
respectively.
    But with renewable technology, the fuel is free. Even while 
EIA has been criticized for underestimating growth in renewable 
energy production, the agency does project a 72 percent 
increase in clean energy generation between 2013 and 2040, 
accounting for more than a third of new capacity.
    Taken together, the set of findings suggests to me that the 
trajectory is generally positive from an energy security 
perspective. It is also a good reason that the first 
Quadrennial Energy Review, on which Secretary Moniz testified 
last month, focused so heavily on energy infrastructure.
    To quote the Quadrennial Energy Review, ``This focus was 
chosen because the dramatic changes in the U.S. energy 
landscape have significant implications for . . . 
infrastructure needs and choices. Well-informed, forward-
looking decisions that lead to more robust, more resilient 
infrastructure can enable substantial new economic, consumer 
services, climate projection and system reliability benefits.''
    Based on the Quadrennial Energy Review, I think there is a 
very compelling case to be made that the most pressing issue 
for the Committee to address deals with modernizing our aging 
energy infrastructure. If there are specific priorities with 
respect to supply, they involve bending the cost curve even 
more sharply downward on carbon, given the tremendous costs our 
changing climate is already imposing on businesses and 
communities across our country.
    From a competitiveness perspective, it also seems to me 
that we should be focused on supply-related policies that 
advance energy technologies that are going to be comparatively 
less expensive in the future.
    According to the Department of Energy's 2014 Revolution Now 
Report, ``... by 2014, rooftop solar panels cost about one 
percent of what they did 35 years ago, and solar PV 
installations were about 15 times less than what they were in 
2008.'' The report outlined similar trends on wind.
    The Department of Energy expects renewable costs to drop 
another 10 to 20 percent in the foreseeable future, and these 
projections do not even take into account the rapid technology 
changes that can further drive down the cost curve.
    Another example from my home state is the innovation in 
regards to turbines that power our dams. BPA, the Army Corps of 
Engineers, and regional utilities have worked together on new 
designs that are optimizing fish survival rates and producing 
more power at the same time. Replacement turbines at one 
particular dam are achieving greater than 97 percent fish 
survival. And once all ten new turbines are updated, it is 
anticipated to result in enough power to serve an additional 
12,440 homes. So energy efficiency is all across the board.
    With these trends in mind, it is worth this Committee's 
time and attention to focus on policies and programs that help 
accelerate U.S. leadership in energy supply technologies that 
are becoming a greater proportion of the resource mix both at 
home and globally. But given the projections about domestic oil 
and gas production under current law, the need to legislate 
lease sales for Federal resources in the Outer Continental 
Shelf is not at all obvious to me. This is especially the case 
at a time when we are going to have a lot of choices to make. 
There will also be a lot of discussion on the rationale to lift 
the current ban on crude exports. But there are many lingering 
questions about the adequacy of our oil supply response 
capabilities and potential environmental impacts.
    The Chair just mentioned this issue of revenue sharing. I 
want to note that the various revenue sharing proposals before 
this Committee would give producing states a larger portion of 
money generated from the development of federal resources on 
the Outer Continental Shelf. These are not new concepts.
    But they are concepts that have brought this Committee to a 
standstill on multiple occasions, given a mix of concerns--
fiscal policy concerns, concerns from Senators from interior 
states and concerns about adequate recovery of receipts on 
certain existing leases in the Gulf of Mexico. Already, the 
harsh budget realities at the Federal level are impacting the 
efficiency of the way we go about permitting energy 
infrastructure.
    Among the findings in the Quadrennial Energy Review that 
has not yet received much attention is the fact that, ``Federal 
agencies responsible for infrastructure siting, review, and 
permitting have experienced dramatic appropriations cuts and 
reductions in staff.'' As a result, ``the overall effort to 
improve the federal siting and permitting processes have been 
stymied.''
    I do not discount the budget challenges that we face for a 
variety of reasons; but the budget challenges at the Federal 
level--which we are already impacting the way we permit energy 
infrastructure--additional revenue sharing is difficult to then 
pencil out.
    I also want to take a moment to revisit something I 
mentioned earlier, which is the rising cost of coal. While coal 
costs are projected to go up 25 percent, coal exports are 
expected to increase 70 percent from 2015 to 2040. So I raise 
that again because it is worth noting: in the West, you can 
typically lease a ton of coal from the BLM for $1 or less. That 
is $1 or less. Taxpayers get $1. Then years later we have to 
deal with almost two tons of carbon dioxide from that one ton 
of carbon of coal. And the Government's current best guess is 
that two tons of carbon pollution will cost the American public 
over $70 in damages.
    Our fossil fuel leasing laws were passed long before we 
knew all of this about carbon, but now we know. The fact that 
we are essentially subsidizing this coal that we will 
subsequently export fails a pretty simple test of common sense 
policies in the public interest.
    With that said, we do have a broad set of proposals before 
us today about hydro relicensing, about energy workforce, about 
clean energy technology. I want to thank the Committee and the 
Chair for holding this hearing and for the many witness 
testimonies we are going to receive today.
    Once again, I think we have a very broad hearing, and we 
will have lots to do to try to prioritize these various 
proposals before the Committee.
    I hope that we can come together on focusing on 
infrastructure.
    Thank you, Madam Chair.
    The Chairman. Thank you.
    Let us begin our panel this morning. We have a lot to talk 
about.
    We are joined this morning by Ms. Abigail Ross Hopper, who 
is the Director of the Bureau of Ocean Energy Management at the 
U.S. Department of the Interior.
    She will be followed by Ms. Susan Kelly, who is the 
President and CEO of the American Public Power Association.
    Mr. Randal Livingston, who is Vice President of Power 
Generation with Pacific Gas and Electric Company, welcome.
    Mr. Franz Matzner, who is the Director of the Beyond Oil 
Initiative with the National Resources Defense Council.
    Followed by Mr. Erik Milito, who is the Group Director of 
Upstream and Industry Operations for the American Petroleum 
Institute.
    Our final witness is a fellow Alaskan, Mr. Brent Sheets, 
who is the Deputy Director of the Alaska Center for Energy and 
Power at the University of Alaska Fairbanks.
    Welcome to all of you. I would ask that you try to keep 
your comments to about five minutes. Your full testimony will 
be included as part of the record. Once you have concluded all 
of the presentations, we will have an opportunity to ask 
questions. So welcome to the panel.
    Ms. Hopper, please start everybody off.

  STATEMENT OF ABIGAIL ROSS HOPPER, DIRECTOR, BUREAU OF OCEAN 
       ENERGY MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR

    Ms. Hopper. Sure. Thank you very much.
    Chairman Murkowski, Ranking Member Cantwell and members of 
the Committee, my name is Abby Hopper, and I am the Director of 
the Bureau of Ocean Energy Management which we call BOEM. I am 
pleased to appear before you today.
    I know that this hearing involves many bills that 
significantly affect a wide range of the Administration's 
energy programs and policies, and I am glad you share this 
Administration's belief that the Outer Continental Shelf, the 
OCS, which I'm sure we'll end up calling it, will continue to 
play a significant role in assuring America's energy future.
    Three of the OCS bills directly affect my bureau, primarily 
in the areas of revenue sharing and expanded leasing for the 
Arctic, Atlantic and Gulf of Mexico offshore waters. My written 
statement provides more in depth observations on those bills.
    Additionally I would like to note that the Committee will 
be receiving a written statement from the Bureau of Land 
Management regarding that bureau's position on many of the 
terrestrial bills under consideration this morning.
    Chairwoman Murkowski, I recently had the pleasure of 
spending some time in your state including on the North Slope 
where they told me it was the coldest it had been all year when 
I was there. It was the coldest I've ever been and I met with 
many key stakeholders, including Alaska's native organizations 
and tribal governments as well as representatives from the 
state government of Alaska.
    My conversations there reinforced the importance that BOEM 
has placed on carefully balancing leasing and potential 
exploration recognizing the significant environmental, social 
and ecological resources in the region and establishing high 
standards for the protection of this critical ecosystem, our 
Arctic communities and the subsistence needs and cultural 
traditions of Alaska natives.
    For all five-year oil and gas leasing programs public input 
is a critical part of our process and we encouraged citizens 
and groups to provide comments to help guide our decisions. For 
this current five-year program that we're developing now we 
held 23 scoping meetings on the draft environmental impact 
statement around the country. We received over one million 
comments and anticipate robust dialogue with stakeholders in 
the coming months that will help us prepare a program that 
emphasizes protection of the marine environments and coastal 
economies and uses the best available science and technology to 
inform our decision making.
    Regarding this revenue sharing provisions found in the bill 
submitted by Chairwoman Murkowski, Senator Cassidy and Senator 
Warner, the Administration is mindful of the long held view 
that coastal states should share the benefits of energy 
development that takes place off their shores. At the same time 
the Administration is also committed to ensuring American 
taxpayers receive a fair return from the sale of public 
resources, excuse me, and that taxpayers throughout the country 
benefit from the development of offshore energy resources owned 
by all citizens.
    As an alternative to the multiple revenue sharing programs 
that benefit individual states, the Administration proposes to 
work with Congress on legislation to redirect existing revenue 
sharing payments to programs that provide broad, natural 
resource, watershed and conservation benefits to the nation, 
help the Federal Government fulfill its role of being a good 
neighbor to local communities and support other national 
priorities.
    Senate Bills 1276, 1278 and 1279 would mandate additional 
lease sales off the coast of Alaska in the Atlantic and in the 
eastern Gulf of Mexico planning area during the 2017 to 2022 
five year program.
    The 2017 to 2022 draft proposed program which I'm sure 
we'll call the DPP, developed by the BOEM and approved by the 
Secretary includes potential lease sales in eight planning 
areas that contain nearly 80 percent of estimated undiscovered, 
technically recoverable oil and gas resources on the OCS. In 
total the DPP proposes 14 potential lease sales eight planning 
areas, 10 in the Gulf of Mexico, one in the Atlantic and three 
off the coast of Alaska.
    The Outer Continental Shelf Lands Act, Section 18, does not 
allow for a sale or area to be added to the program without 
restarting the program preparation process at the state in 
which the sale or area was not included or deleted. So while 
Section 18 does not allow the Department to expand, obviously, 
Congress has the ability to mandate additional sales via the 
legislative process.
    However, such legislation would mandate the Department 
conduct lease sales on the Outer Continental Shelf without 
regard for the consideration of the factors, the eight factors, 
under Section 18 which we believe, appropriately reflects the 
many equities involved in the leasing decision.
    So based on those factors the Administration has concerns 
about bypassing the Section 18 OCSLA provisions. It's important 
to the Department and my bureau that we explore ways to move 
forward towards energy independence by a safe and responsible 
domestic oil and gas production while ensuring that the 
American taxpayer receives a fair return for development of 
these Federal resources.
    I look forward to working with the Committee and answering 
any questions you may have.
    [The prepared statement of Ms. Hopper follows:]
 
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
    
    The Chairman. Thank you, Ms. Hopper.
    Ms. Hopper. Thank you.
    The Chairman. Ms. Kelly, welcome.

STATEMENT OF SUSAN N. KELLY, PRESIDENT AND CEO, AMERICAN PUBLIC 
                       POWER ASSOCIATION

    Ms. Kelly. Thank you very much.
    Good morning, Chairwoman Murkowski, Ranking Member Cantwell 
and other Senators on the Committee. Thank you for inviting me 
to testify. I'm Sue Kelly, President and CEO of the American 
Public Power Association.
    We commend your hard work putting together the first 
comprehensive energy package since 2005. While it may be hard 
to find consensus, APPA is ready to work with you to improve 
Americans' access to affordable, responsible, environmentally 
responsible and reliable electric power.
    I'll discuss APPA's views on hydropower licensing, 
mandatory capacity markets and a federal, renewable energy 
standard.
    Hydropower is a cornerstone of our nation's generation mix. 
It supports affordable and reliable operation of the power 
grid. 17 percent of the power that APPA members generate comes 
from hydropower. One hundred fifty public power utilities 
operate 159 FERC licensed projects with over 21,000 megawatts 
of capacity.
    The current hydropower licensing process needs to be 
reformed. Right now public power and other utilities cannot 
increase their investment in emissions free hydropower without 
protracted resource agency reviews. There is significant 
potential for new hydropower at non-powered dams throughout the 
country. Hydropower could be substantially increased at 
existing facilities and at water distribution conduits and 
canals, but there are excessive regulatory barriers to doing 
so.
    APPA therefore supports the concepts set out in Senate Bill 
1236 which reforms the regulatory process for licensing 
hydropower projects. FERC should be the lead agency overseeing 
the process, and it should be able to establish and enforce 
deadlines for other Federal and state agencies involved in that 
process.
    We also support the goals of Senate Bills 1058 and 1270. 
Increased Federal funding for research and incentives will help 
develop hydropower resources.
    Second, I'd like to discuss the mandatory capacity markets 
in the eastern Regional Transmission Organizations which we 
call RTOs.
    Senate Bills 1222 and 1272 address these regulatory 
constructs, which are often mislabeled markets. They're meant 
to make sure that generation and demand side resources will be 
there when needed to meet electricity demand. They have not 
lived up to that promise and they are constantly tinkered with, 
but they do account for a substantial share of electric bills 
that consumers and businesses pay each month.
    APPA appreciates the interest that Chairman Murkowski has 
shown in this issue which Senate Bill 1222 shows. We're 
particularly pleased to see the legislation list among its 
objectives an enhanced opportunity for self-supply of electric 
capacity resources as well as a diverse generation portfolio 
and availability of transmission facilities. But we're 
concerned the bill may lack the teeth to achieve the needed 
reforms. We're concerned it does not include cost to consumers 
in the list of objectives which could force tariff amendments. 
Finally, we fear that owners of generation in regions without 
mandatory capacity markets could use Section 1222 to advocate 
for these constructs in their RTO regions.
    We also appreciate Senators Markey and Warren's 
introduction of Senate Bill 1272. This legislation requires the 
GAO to answer the fundamental question that APPA has been 
asking for some time, whether these constructs produce just and 
reasonable rates as the Federal Power Act requires.
    Both bills kick off a much needed dialogue, but we believe 
there's already more than enough information to support 
changes. We've recommended that FERC phase out mandatory 
markets over time and replace them with voluntary, residual 
capacity markets.
    But in the meantime we propose two fixes. First, RTOs that 
have not yet implemented mandatory capacity markets should not 
do so without unanimous support of the states and their 
regions. Second, RTOs that already have mandatory capacity 
markets should not impair the ability of retail utilities or 
states to self-supply their own capacity obligations.
    Finally, APPA has concerns with Senator Udall's legislation 
to establish a renewable electricity standard.
    Many of you know that public power utilities strongly 
support renewable energy. We have been leaders in developing 
it. However, APPA believes that at this point there is no need 
for legislation to create a Federal renewable energy standard. 
State and local governments are best placed to implement these 
policies.
    Moreover, the cumulative impact of various EPA regulations 
is leading to increased retirements of coal fired power plants 
in the United States. EPA's soon to be finalized regulations to 
reduce CO2 emissions from fossil fired power plants 
are going to accelerate that trend. Utilities are already 
increasing the amount of electricity they generate from 
renewable resources and we're taking other steps to reduce 
CO2 emissions. A Federal RES is therefore, 
unnecessary.
    Thank you for the opportunity to appear today. I'm happy to 
answer any questions you have.
    I know you have a whole slew of bills under consideration 
and some of them apply to our sector. We've reviewed those and 
we're willing to work with the Committee as you move forward.
    Thanks again.
    [The prepared statement of Ms. Kelly follows:]
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
    The Chairman. Thank you, Ms. Kelly.
    Mr. Livingston, welcome.

STATEMENT OF RANDAL S. LIVINGSTON, P.E., VICE PRESIDENT, POWER 
          GENERATION, PACIFIC GAS AND ELECTRIC COMPANY

    Mr. Livingston. Good morning. Thank you.
    My name is Randy Livingston. I serve as Vice President of 
Power Generation at Pacific Gas and Electric Company.
    PG&E is one of the nation's largest combined electrical and 
natural gas utilities with more than 22,000 employees serving 
16,000,000 customers in California. We are also the owner and 
operator of America's largest, investor-owned, hydroelectric 
system. With 26 FERC licenses we're always in the process of 
relicensing. Today we have seven projects and one phaser, in 
order of relicensing.
    Our system generates nearly 3,900 megawatts of safe, clean, 
reliable and affordable power for millions of Californians, has 
been crucial in integrating other renewable energy sources. 
Additionally, it provides water supply, recreation, flood 
control, taxes and other benefits. Hydropower is an invaluable 
resource and it's one that our country can and should do more 
to capitalize on.
    We appreciate the efforts made by past Congresses to 
advance hydroelectric generation. We believe this Congress has 
taken a very important step with the introduction of S. 1236, 
the Hydropower Improvement Act of 2015 and by holding today's 
hearing.
    PG&E believes it's critical for hydroelectric power 
generators to be able to move through the relicensing process 
more efficiently and more affordably so we can implement the 
environmental protections, community improvements and facility 
upgrades more quickly than we can today.
    We believe that S. 1236 accomplishes this fairly and 
effectively while maintaining important environmental 
protections and community interests. In particular, it does 
this by clarifying FERC's exclusive authority to enforce, amend 
or otherwise administer all aspects of a FERC issued license. 
It clarifies that mandatory conditions and prescriptions should 
have a clear and direct nexus to the project. It allows FERC to 
establish the schedule for federal authorizations and providing 
findings of fact by a FERC administrative law judge be binding 
on all participants in trial type hearings.
    We believe these sensible and basic reforms can make 
hydropower licensing processes more efficient while keeping in 
place environmental protection and other benefits that we all 
agree are critical.
    PG&E places a priority on using collaborative processes to 
relicense a facility as both understanding and incorporating 
the interests of stakeholders is critical. However, as it 
stands today, the current process is very complex and 
protracted leading to higher costs, delayed implementation of 
improvements and upgrades.
    To put this in perspective, PG&E's recent experience that 
even for a medium-sized license it consistently takes over 
seven years to renew an existing license and often well over 
ten. The cost just to complete the process for continued 
operation of a facility can run over $50 million, and 
implementing the requirements of a new license routinely runs 
to $100 million. All these costs are ultimately borne by the 
energy consumer.
    The relicensing process involves numerous Federal and state 
agencies and stakeholders with interests that may not always 
align, therefore, we believe the following processes should be 
improved.
    We should assure that the environmental protections exist 
and we preserve hydropower at the same time, that we achieve 
the benefits of relicensing sooner, that we reduce cost and 
improve predictability and we enhance the collaborative process 
to be results and solutions oriented. S. 1236 would accomplish 
many of these objectives.
    Given this focus of this Committee on crafting and 
advancing an energy policy for the 21st century you and your 
colleagues have an important opportunity to bring meaningful 
change to the hydropower relicensing process and to ensure that 
it is consistent with America's needs and opportunities today 
and for many years ahead.
    PG&E looks forward to continuing our work with Congress. 
Thank you.
    [The prepared statement of Mr. Livingston follows:] 
   
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
   
    
    The Chairman. Thank you, Mr. Livingston.
    Mr. Matzner, welcome.

    STATEMENT OF FRANZ MATZNER, DIRECTOR OF THE BEYOND OIL 
         INITIATIVE, NATURAL RESOURCES DEFENSE COUNCIL

    Mr. Matzner. Madam Chair and members of the Committee, 
thank you for the opportunity to testify today. I would also 
like to thank the Chair and Ranking Member for conducting such 
thorough bipartisan outreach ahead of these hearings.
    Renewables and energy efficiency are the best long term 
solution to almost any energy resource question you can ask. 
Clean energy creates domestic jobs that can't be exported. It 
produces domestic energy that never runs out. It insulates 
consumers from the international price volatility that plagues 
other resources. It's the source of real national security. It 
promises to lower consumer costs and keep America 
internationally competitive. It requires less water usage and 
reduces toxic air emissions.
    Clean energy cuts the carbon pollution that is driving 
dangerous climate change, the greatest environmental challenge 
of our time.
    According to the overwhelming scientific consensus the U.S. 
must reduce emissions at least 80 percent by 2050 to avoid the 
worst impacts of climate disruption. Fortunately there is ample 
evidence that this is achievable if the proper choices are 
made. Clean energy from solar to wind to energy efficiency 
represents an abundant resource.
    We're already using less energy today per capita than a 
decade ago. According to ACEEE, an expert efficiency group, 
even greater savings are possible, as much as 40 percent by 
2050.
    In 2012 the Energy Information Administration predicted 
we'd have three gigawatts of solar power in 2030. Three years 
later we already have more than three times that.
    The story for wind is similar, doubling its capacity 
between 2008 and 2014, and the potential is enormous. Just one 
quarter of our nation's offshore energy potential would match 
our nation's entire existing fossil fuel based electricity 
generating capacity.
    We've also turned a corner on gasoline use, reversing many 
decades of rising consumption, and policies already in place 
will further that trend.
    This rapid expansion of clean energy is already providing 
more than 3.4 million American jobs, with more to come.
    Policy proposals should be evaluated on whether they will 
accelerate this trajectory of success. Those that reverse 
course should be rejected. A good example of the kind of 
legislation needed to move forward is S. 1264, to establish a 
Federal renewable energy standard, a strong RES with 
significantly advanced renewable energy and cut pollution.
    States that have embraced renewable energy standards have 
routinely met or exceeded the targets while growing jobs and 
reducing harmful pollution. A 30 by 30 target would secure 
America's place as a global leader in clean energy while 
reducing carbon pollution by 11 percent below business as usual 
levels in 2030.
    On the opposite side of the ledger, opening new areas of 
our nation's Arctic and Atlantic coast to oil and gas drilling 
should be taken off the table for two primary reasons. First, 
new offshore drilling contradicts the international scientific 
consensus that the vast majority of known fossil fuel reserves 
must remain undeveloped, let along new reserves like the 
Atlantic and Arctic Oceans. Second, the risk of major oil 
spills is high and the impacts would be severe. In the Arctic 
alone the Department of Interior's own assessment finds a 75 
percent chance of a major oil spill just from the existing 
Chukchi lease.
    In the Atlantic drilling threatens coastal communities and 
economies up and down the eastern seaboard. Tourism and 
recreation are major contributors to the Atlantic Coast economy 
and they rely on healthy oceans. Communities in these regions 
should not have to risk their way of life or their economic 
health due to reckless offshore drilling.
    The road map exists to craft meaningful energy legislation 
that will create jobs by cutting pollution and help create a 
safer, healthier, more stable future for all Americans. We urge 
that this road map be followed.
    Thank you very much for the opportunity to speak. And I'm 
prepared to answer any questions the Committee might have.
    [The prepared statement of Mr. Matzner follows:] 
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
       
    The Chairman. Thank you, Mr. Matzner.
    Mr. Milito, welcome.

STATEMENT OF ERIK MILITO, GROUP DIRECTOR, UPSTREAM AND INDUSTRY 
            OPERATIONS, AMERICAN PETROLEUM INSTITUTE

    Mr. Milito. Morning, Chairman Murkowski, members of the 
Committee, I'm Erik Milito, Upstream Director at the American 
Petroleum Institute. Thank you for the opportunity to testify 
on the importance of energy supply to our nation's economy and 
our energy future.
    We are pleased to see the Committee moving forward with a 
robust debate to move the country toward a comprehensive energy 
strategy. We, as a nation, truly need a comprehensive approach 
to energy shaped by reason, common sense and experience. As the 
Committee considers and debates the pillars of infrastructure, 
supply, efficiency and accountability, the U.S. is well 
positioned to lead the world in the production of all energy 
sources and particularly in the production of oil and natural 
gas.
    As both the U.S. and global economies grow, the U.S. with 
its abundant supplies can effectively provide economic and 
energy stability to domestic and global markets through 
continued and expanded development of oil and natural gas. To 
successfully pursue this path, we must plan for the future. And 
the most sensible approach is to pursue safe and responsible 
energy development here at home.
    Given the expected global economic and population growth, 
more total energy will be needed both in the U.S. and globally 
in the decades to come. The Energy Information Administration 
forecasts that U.S. energy demand will grow by nine percent 
between 2013 and 2040 with more than 60 percent of the energy 
demand expected to be met by oil and natural gas as is the case 
today. Fundamentally the facts in our energy reality 
demonstrate that our economy will rely on oil and natural gas 
for decades to come.
    Globally the change in energy demand is much greater, and 
when it comes to liquid petroleum products the U.S. competes on 
a global basis for these resources. Recent forecasts by the EIA 
estimate that growth in the global economy from 2014 to 2040 
will require additional oil production of about 28 million 
barrels per day. That is an increase roughly equivalent to the 
current consumption of the U.S., Canada, Mexico and Japan, 
combined.
    Despite significant and much needed growth of renewable 
energy and improvements in energy efficiency, more than half 
the world's energy demand will be met in 2040 by oil and 
natural gas. Again, as is the case today.
    Government policy plays a substantial role in the ability 
of the U.S. to tap its own supplies and help meet the projected 
growth in U.S. and global demand. The dramatic increase that we 
have seen in oil and natural gas production is occurring today 
on state and private lands. Production of oil and natural gas, 
when taken together, has decreased in areas under Federal 
control. The lack of growth and production on Federal lands is 
a result of policies that have effectively discouraged 
investment in those areas or simply taken opportunities for 
investment off the table.
    Fortunately three of the supply bills that are being 
discussed today will effectively move us past these self-
imposed energy prohibitions. Senate Bills 1276, 1278 and 1279 
would open highly promising areas in Alaska, the Gulf of Mexico 
and the Atlantic Outer Continental Shelf to energy exploration 
and production. It is these types of legislative proposals that 
acknowledge that we will need oil and natural gas for decades 
to come and recognize our strong capacity to safely and 
responsibly produce those resources here at home.
    These bills embrace a long term, comprehensive approach to 
energy policy because steps like these will help ensure we have 
got the necessary energy for our citizens, five, ten, fifteen 
and more than twenty years down the road. To be sure, the 
offshore energy that we produce today is available because of 
smart policy decisions made ten to fifteen years ago.
    Over the past 6 years we have seen increasing U.S. oil and 
natural gas production drive economic growth, global energy 
security and ensure affordable energy supplies. Moving forward 
we will need all the energy sources to meet our growing 
demand--solar, wind, air, nuclear, hydro, coal, but also oil 
and natural gas. Oil and gas development and the oil and 
natural gas supply chain are expected to create 1.3 million job 
openings over the next 15 years.
    We now need smart policy decisions today to secure these 
job opportunities and to secure our path to energy security for 
the decades ahead. This hearing and many of the proposed bills 
are constructive steps forward.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Milito follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you.
    And let's finally go to Mr. Sheets, welcome.

 STATEMENT OF BRENT SHEETS, DEPUTY DIRECTOR, ALASKA CENTER FOR 
        ENERGY AND POWER, UNIVERSITY OF ALASKA FAIRBANKS

    Mr. Sheets. Thank you, Chairman Murkowski and the other 
members of the Committee for having me.
    My name is Brent Sheets, and I'm the Deputy Director for 
the Alaska Center for Energy and Power. We've submitted our 
written testimony, and in there is a description of what we do.
    For many Americans, Alaska is the crown jewel of the 
nation's wilderness resources, but it's also the crown jewel of 
America's energy resources both renewable and non-renewable. 
But despite that energy abundance the state's lack of 
infrastructure and its distributed population contribute to 
extremely high energy costs for our citizens. The majority of 
the State lives off road, and unless you happen to live on the 
road system you are paying the highest energy costs of anywhere 
in the nation.
    Energy issues are where the national interests and where 
Alaskan interests intersect. The nation needs the energy 
security that is afforded on the conventional and 
unconventional fossil energy resources on the North Slope, and 
they need to be developed.
    Also, Alaskans need energy security, and for most of our 
villages that means access to reliable and affordable 
technology that allows the development of local energy 
resources, generally renewable, in a way that it can be used 
for electricity and heat generation in an environmentally 
responsible manner.
    Recognizing this need, the Alaska legislature has 
appropriated over $700 million in FY'14 alone. Much of that has 
gone for demonstration projects in geothermal and biomass and 
in river hydrokinetics, and to a lesser degree the state stands 
ready to assist in the development of methane hydrates by 
having some land set aside ready for a production test should 
that event ever happen.
    But the work that's being accomplished in Alaska, 
especially in the renewable side and in the investment, is 
gaining international and national recognition.
    For example at the Alaska Center for Energy and Power, we 
have been working to develop a technology that helps overcome 
some of the hurdles of developing the in river hydrokinetic 
energy. We've had visitors from various countries to our site. 
We've had contracts with commercial vendors to help develop 
their technology and to demonstrate it at our site, all without 
Federal investment. And then recently in January of 2015 we 
were excited when the Northwest National Renewable Energy 
Center which is partially funded by DOE invited us to join.
    Two of our scientists are also on an international 
standards committee setting the standards for in river 
hydrokinetic technology or marine technology overall.
    And in addition to that the State of Alaska has invested in 
over 29 biomass demonstration projects around the state.
    And finally, with some support from the Department of 
Energy, the Alaska Center for Energy and Power has worked to 
develop ways to assess geothermal resources in remote, hard to 
get to areas and done so successfully.
    As a former Department of Energy employee I can say that I 
believe that Alaska is the nation's energy laboratory. They're 
actually investing. They're putting their money where their 
mouth is. They're developing things. They're making a 
difference.
    We have industry at the table. We have other countries at 
the table. We have other Arctic nations at the table.
    What seems to be missing in a lot of our discussion is the 
Federal Government. They don't seem to be at the table where we 
are in Alaska.
    I'm here to support the efforts of this Committee to expand 
the portfolio of energy options that are available to our 
nation, both renewable and non-renewable. For our communities 
we believe that renewable energies over the long term can 
provide energy costs that are less susceptible to the 
uncertainties inherent with relying solely on fossil energy 
which is what our communities do now.
    Demonstration projects for hydrokinetic energy, for low 
temperature geothermal, for biomass energy and for methane 
hydrates hold the potential for developing advances in 
technology that can lead to lower energy costs for all the 
citizens of the nation. Alaska does have world class energy 
resources, renewable and non-renewable, but we lack the 
technology to economically utilize them. Let's change that.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Sheets follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Mr. Sheets. I am going to be going 
out to Egegik in about six weeks looking at some of the new 
technology they are putting in the water. So as you say, we are 
the technology lab for a lot of interesting things going on. 
Thank you for your presentation and being here today.
    I wanted to focus on offshore for my initial round of 
questions, if I may, and I will start with you, Ms. Hopper.
    As you know, we have the proposed Arctic rule, obviously 
just one example of regulation affecting the offshore oil and 
gas industry. We also have other regulations that are out 
there. We have got the well control, blow up preventer rule. We 
have got the proposed changes in the evaluation of oil and gas 
and coal that would be significant for our offshore facilities.
    Senator Cassidy has introduced a bill that would require 
that the GAO report on the cumulative impact of regulations on 
offshore development. Does BOEM consider the cumulative impact 
of these rules, not just on the operations, but on the value of 
the lease sales and the bonus bids?
    Ms. Hopper. Thank you for the question, Madam Chairwoman.
    We do, and when we issue our proposed rule there is a 
regulatory impact analysis that is included with those rules 
and we look at the impact of that rule. I do not believe that 
we look at the cumulative impact of all the rules together.
    The Chairman. So it would be important then with Senator 
Cassidy's measure to look at that cumulative impact because I 
do think that is something, again, we deal with on a daily 
basis whether it is talking about things like the hydropower 
licensing and some of the overlay that we have with these 
regulations. I think this is where some of the costs and the 
delays come from.
    Ms. Hopper, I was discouraged with your comments about the 
revenue sharing issue. Secretary Jewell came before this 
Committee in 2013 and she pretty much made a commitment to work 
with us to put together a bipartisan proposal with respect to 
revenue sharing that would bring everybody together.
    She said, these are her words, ``I'd be delighted to work 
with members of this Committee on that important proposal. I 
think revenue sharing is clearly a very important topic that 
deserves some attention from the Department of the Interior as 
well as this body.''
    So to hear your comments that, effectively, the way that 
you want to work with this is to redirect existing revenue 
payments from the revenue sharing plan that is in place for the 
Gulf, not to the states that are impacted, but basically to 
pull the rug out from underneath the promise that was already 
made is disconcerting.
    We are going to have to have some serious discussion about 
how we can make good on the Secretary's promise to work with 
members of this Committee to make sure that issues like revenue 
sharing are meaningful and do work for the people that are 
impacted while at the same time allowing for that benefit to 
the taxpayers.
    Mr. Milito, I listened to some of the comments from Mr. 
Matzner about the concern about new drilling. Again, as I 
mentioned we have been out in the Beaufort and the Chukchi 
since the 80s with some 35 wells are already in place, and no 
headlines.
    The concern was raised that there is a 75 percent chance of 
a large oil spill. Looking at BOEM's fact sheet they make it 
very, very clear that what we are talking about here is that if 
we have a hypothetical scenario over the course of more than 
three quarters of a century of oil and gas activities, there is 
a 75 percent chance of one or more spills of more than a 
thousand barrels of oil. Again, put it into context, 75 years. 
How much are we talking about?
    BOEM's actual statement here is no. Is it accurate to say 
that if Shell's Chukchi Sea exploration plan is approved there 
is a 75 percent chance of a large oil spill? No. I do think it 
is important to get the facts on record.
    This came from the National Petroleum Council's study that 
was just released at the request of the Department of Energy, 
and the study looks at different exploration and development 
timelines, particularly in these defined and closely monitored 
windows. Chukchi and Beaufort are different than anywhere else, 
probably, on the planet.
    Do you agree with the National Petroleum Council study that 
lease terms in the Beaufort and in the Chukchi need to be 
different to accommodate an operating environment that is 
different and, in my view, the additional regulatory demands 
proposed by BSSE in the proposed Arctic rule?
    Mr. Milito. Absolutely. When you have additional time in 
your lease terms it gives the industry a greater amount of 
flexibility and the ability to put more planning into the 
operations, and it allows us to look at energy development from 
a long term standpoint.
    We know that we are going to need oil and natural gas for 
decades to come, and we know that when you are moving into new 
areas like this it takes a long time to get from exploratory 
activity to production. Bills like yours are a sensible 
approach to making sure that we are not ignoring these 
opportunities, but rather seizing these opportunities in a more 
constructive way.
    The Chairman. I think people forget that it is not like 
drilling in the Gulf. You have got a window, basically you get 
the go ahead to get in the water in July and you have to be out 
by September. If ice comes in, you are out. If whales come 
early, you are out. It is an entirely different environment.
    I think it is quite telling that President Obama actually 
agrees with much of what you have said about a transition 
process, that we will eventually need to transition off fossil 
fuels. It is going to take some time and until then, we are 
going to be using fossil fuels. So, as he says, would it not be 
better that we produce our oil and gas rather than importing it 
from others?
    My time has expired. Senator Cantwell is not here, so let's 
go next to Senator King.
    Senator King. Thank you, Madam Chair.
    In preparing for today's hearing I realized I had a lot 
more to learn than to contribute. So I am going to pass on the 
questions and listen and learn.
    There is a famous saying of Golda Meir that Moses tramped 
all over the Middle East for 40 years and settled in the one 
place without oil. The people who founded Maine, in effect, did 
the same thing.
    So I am going to learn about the issues of production 
today, and I appreciate you are having this hearing. Thank you.
    The Chairman. Thank you, and I think it is also fair to 
note that in your state of Maine you are pioneering some good 
things when it comes to ocean energy. We have got some joint 
relations between Alaska and Maine with some of the 
technologies that we are looking forward to utilizing as 
coastal states that have some significant tides too. So thank 
you for also being a technology pioneer there.
    Let us go to Senator Portman, sitting there patiently at 
the end.
    Senator Portman. Thank you, Chair Murkowski.
    The Chairman. Thank you.
    Senator Portman. I have been here since 10 soaking it all 
in.
    I appreciate the great testimony and the fact that this is 
our third opportunity to put together a comprehensive series of 
energy policies, and I appreciate the Chair and Ranking Member 
doing that. I think these have been great hearings, and the 
witnesses today did a terrific job laying out the supply 
issues. I have worked with a lot of you on different issues.
    Franz, thank you for being here and working with us on the 
efficiency bill and helping us get that moving again and back 
to the Floor, maybe in a comprehensive way as opposed to the 
legislation we did get through a couple of weeks ago.
    On supply, one of the things I heard this morning a lot 
about and particularly interesting was the question of 
permitting again, and we had got into that actually last week a 
little bit also.
    But I would focus, if I could, Ms. Kelly, on your 
testimony. I found particularly interesting your discussion of 
the hydropower licensing process.
    One of your members, AMP, came to me about five years ago 
when I was first elected to give me the stories about the Ohio 
River hydro frustrations. They were trying to build three 
hydroelectric plants on the Ohio River at that time. All of 
them would have been terrific, relatively inexpensive, 
renewable energy, but they have been delayed for years by an 
inefficient and redundant Federal permitting system. And that 
got us off on this issue.
    I know that there are a number of you who have talked about 
this in a broader context. But if you could, in your 
experience, is AMP's story unique or are many of APPA members 
having to wrestle with this inefficient Federal permitting 
system? Also if you could comment on whether it goes beyond 
your hydro projects? I know you also have other sources of 
energy within your membership.
    Ms. Kelly. Thank you for those questions.
    Of course every hydro project is a little bit like a 
snowflake. They're all a little bit different. They all have 
their own issues, their own environmental concerns, and they 
all have to travel the licensing process. But you are correct 
that AMP's four run of the river projects on the Ohio have been 
a long travail for them, and it's been incredibly frustrating 
because number one, these are run of the river projects. And 
number two, these are intended to provide clean, renewable, 
non-CO2 emitting resources, you know, power and to 
be used in RTO market regions.
    They have had a lot of issues with the hydropower licensing 
process. I think they're finally coming to the, you know, 
hopefully, will be coming to the end of that. But it's been 
very protracted and has added to the years on the project and 
the cost.
    In addition I should note that after having gone through 
all that they are now facing changes in the capacity markets in 
PJM that may diminish the value of that capacity to them. So 
the investment that they thought they were getting for that 
project, they may find that they are not going to get the full 
benefit of those resources.
    So, it's--you were talking, Senator Murkowski, about the 
cumulative impact of different sets of regulations. And this is 
a perfect example of that. We have the long travail to get 
these four wonderful projects sited and built, created a lot of 
jobs, a lot of, I think it's 12 different states, 60 contracts. 
I mean, it's really been a win/win in many ways.
    And now as we finally get towards the end we find we may 
not be able to get the full benefit out of those projects. So 
you're absolutely right, and thank you for the question.
    Senator Portman. Susan, I suspect you have also had some 
permitting issues with some of your transmission and natural 
gas projects?
    Ms. Kelly. Yes. The transmission siting can be very long 
and very protracted especially if it's on Federal lands. Our 
members in the West have really experienced those concerns as 
well.
    But transmission siting is really more of a state and local 
issue right now. There was an attempt to, kind of, federalize 
it with backstop siting in the Energy Policy Act of 2006. That 
was, frankly, eviscerated by a court appeal from the Fourth 
Circuit. So we don't really have strong, Federal siting of 
transmission at this moment.
    Senator Portman. When AMP came to me we worked with them on 
trying to figure out what the best way was to address their 
problem and found out it was this broader problem on energy 
projects, but also construction permits, generally and came up 
with this legislation that was reported out just about a week 
ago, S. 280 which is the Federal Permitting Improvement Act.
    As you know, we now rank down 41st in the world now in 
terms of greenlighting projects. I know, Franz, you have worked 
with us on this and others, but I do hope we can get that 
legislation moving. I think it would affect energy projects in 
very direct ways as well as other construction projects. It has 
deadlines that have to be set. It also helps in terms of the 
litigation risk, and we think it would be appropriate to 
consider it as part of this package as well. It came out of the 
Homeland Security and Governmental Affairs Committee by a 12-
to-1 vote, by the way, after working with the Administration on 
it.
    Just quickly I've got five seconds left, but let me just 
say I would love for the record, Mr. Milito, if you could give 
us a little more information about how long it takes to get 
necessary permits to drill a well or natural gas well. As you 
know in Ohio with Utica and Marcellus we are interested in 
that. If you could just give us a little sense of the 
permitting on the natural gas and oil side for the record, that 
would be terrific.
    Mr. Milito. Yeah, on state and Federal, I mean, on state 
and private lands in states like Ohio and Pennsylvania, we have 
a permitting process that's fairly reasonable and effective. 
Companies are able to get their permits, generally, within a 
30-day time period.
    When you move to the Federal lands it can take 200 to 300 
days depending upon where you're getting the permit from based 
upon where the BLM's office is. So efficiency is key to 
maintaining and expanding our energy production.
    Senator Portman. Thanks for what you can give us on the 
record on that. We'll actually submit a question to you.
    Mr. Milito. Great.
    Senator Portman. A question to you for the record and like 
to get some more information on that.
    Senator Portman. Thank you, Madam Chair.
    The Chairman. Thank you, Senator Portman.
    Ms. Kelly. Would you mind if I just could mention that I've 
been informed by wiser heads than mine that while I did not 
study up on your bill for this hearing, we support it.
    Senator Portman. Great. Thank you, Susan, I appreciate it.
    The Chairman. Very good.
    Senator Heinrich.
    Senator Heinrich. Thank you, Madam Chair.
    Ms. Kelly, you mentioned FERC backstop authority and the 
effort in the past to create that. That obviously is not in 
place now due to the litigation that you alluded to. Would APPA 
support FERC-based backstop authority for regional transmission 
lines, transmission lines that cross multiple states?
    Ms. Kelly. We would obviously want to take a look at the 
details of that legislation as a trade association composed of 
units of state and local government.
    Senator Heinrich. Sure.
    Ms. Kelly. You know, we don't take federalization lightly.
    Senator Heinrich. Nor should you.
    Ms. Kelly. We came to support that section of EPACT 2005 
because of the really substantial problems we saw in siting 
transmission.
    Senator Heinrich. Right.
    Ms. Kelly. So we certainly would be open to considering 
that, but the details would matter.
    Senator Heinrich. Have you got a chance to look at the 
legislation I introduced to do that? It basically tries to 
accomplish the same thing as the EPACT provisions but with a 
different basis in law that would be less subject to challenge 
in the courts.
    Ms. Kelly. I will probably, if it's alright with you, have 
to get back with you on that for the record. But the more 
you're coloring inside the lines of the legislation that we 
previously supported, the more likely it is we would.
    Senator Heinrich. Right.
    Ms. Kelly. But I don't want to commit without talking to my 
members.
    Senator Heinrich. I understand. I would appreciate it, and 
we look forward to working with you on that.
    I also wanted to ask you about your position on national 
renewable portfolio standard. You mentioned that APPA believes 
that that's not necessary. Given the substantial climate 
challenges that we face at this point, what is APPA's plan to 
reduce our carbon pollution profile and to meet those climate 
challenges?
    Ms. Kelly. Well it's not necessarily APPA's plan, but the 
EPA has a plan for us. It's called 111D. The third building 
block in there calls for increased use of renewables. The state 
targets that have been set out under that incorporate that 
increased use of renewables. So assuming that survives in some 
version of the final rule and that those state limits are 
enforced, we will be doing that as part of that.
    This, again, gets back to the issue of cumulative impacts 
of regulations that Senator Murkowski mentioned earlier. I 
mean, we're just seeing so many different mandates piled on us 
that it makes it increasingly difficult for us to do what we 
feel needs to be done.
    Senator Heinrich. So, there are some conservative voices 
who have said, let's get rid of 111D in its entirety, replace 
it with some sort of carbon fee that would be revenue neutral 
on the budget as a whole.
    Have you given any thought to that kind of an approach as a 
potentially less regulatory based approach that would be more 
purely economically driven?
    Ms. Kelly. Our association does not have any policy on that 
right now. We have been focused on the 111D proposal. We filed 
very extensive comments on that proposal. We raised both legal 
and practical and technical issues with it, but right now we 
are attempting to do the very best we can to work with the EPA 
and with other agencies such as FERC to get a livable, final 
111D rule.
    Before I became CEO I was an appellate attorney for over 30 
years. I've spent a lot of time litigating cases in the DC 
circuit, and I don't necessarily count, even if I think I have 
a winning case, on actually winning in the end.
    So I think we have to live in the world of the possible and 
have to assume that this may be implemented in some way and we 
have to work forward to try and make it the most livable regime 
we can.
    Senator Heinrich. Mr. Livingston, while I've still got a 
couple of seconds here. I wanted to ask you a little bit, a 
couple of questions based on the fact that PG&E has several 
decades now of history managing now energy storage, 
historically in the case, in your case, pumped hydro. That has 
a lot of value, I think, to share with those of us looking at 
how we utilize storage more broadly moving forward, especially 
in a world where energy sources can be intermittent.
    Can you talk a little bit about how you use that storage in 
your daily operations? What opportunities you see moving 
forward for adding additional storage in PG&E system and 
whether or not you will be able to meet the 580 megawatt 
storage requirement called for by 2024 in California?
    Mr. Livingston. Yeah, thank you.
    Our Herald Pump Storage unit is 1200 megawatts. It pumps at 
900 and generates at 1200. There's three units there. Those 
units have been absolutely superb in helping to manage the 
overall electrical system in California, especially during the 
energy crisis as supplies were more intermittent. But even more 
so today as we see much larger portions of wind and solar come 
in that we're balancing in the whole side.
    All of our hydro resource helps play in that arena and 
helps provide the ancillary services to do that, but 
importantly pump storage is one that's a large and proven 
resource. It's one that there's technological advances that 
could make it even better, and is one of the few very large, 
large, proven technologies that can meet what is becoming very 
large demands for that type of service.
    And as far as meeting our requirements under increasing the 
storage requirements, those are all small blocks of storage and 
generally, you know, more suited towards development of 
batteries and so on. We do not see a problem with meeting those 
requirements.
    The Chairman. Thank you, Senator Heinrich.
    Senator Cassidy.
    Senator Cassidy. Thank you, Madam Chair. Thank you for 
holding this meeting today related to energy supply.
    I will first begin speaking about Senate Bill 1276, the 
Offshore Energy and Jobs Act, that I am introducing along with 
Senators Cornyn, Vitter, Cochran and Wicker. This bill provides 
new access to frontier acreage in the Gulf of Mexico within 
areas 50 miles from the Florida coastline by redefining the 
Eastern Gulf moratoria in 2017.
    According to current law the moratoria is scheduled to 
expire in 2022. This directs the Department of the Interior to 
hold three new lease sales in the Eastern Gulf by 2020. Our 
legislation is supported by national energy and manufacturing 
organizations. In addition, the Florida State Hispanic Chamber 
of Commerce, the Florida Transportation Builders Association 
and the Florida Retail Federation have all called for the 
inclusion of the Eastern Planning Area in the Administration's 
2017 through 2022 offshore leasing program.
    According to the Energy Information Administration, in 2014 
about 27 percent of the petroleum we consumed as Americans was 
imported from foreign countries. We, as a nation, need greater 
access to fossil fuels to strengthen our energy security and 
independence. In fact, President Obama said last week, we are 
``going to be using fossil fuels and when it can be done safely 
and appropriately U.S. production of oil and natural gas is 
important.'' Hopefully we all agree with that.
    In addition to preserving energy access, Senate Bill 1276 
brings greater equity in revenue sharing for the Gulf States 
that host offshore energy production. According to the 
Department of the Interior, royalties from crude oil production 
in the offshore Gulf of Mexico for Fiscal Year 2014 was $4.6 
billion. In the same year $3.4 million was shared with coastal 
states.
    Ms. Hopper mentioned how there is a commitment by the 
Congress to share with the coastal states. The Federal 
Government gets $4.6 billion. We get $3.4 million. Now that is 
about .07 percent. My children would be very unhappy with that 
level of sharing.
    To put this in perspective revenue shared from energy 
development on Federal shores onshore the state gets 50 percent 
of the royalties. Obviously it is different for coastal.
    For Louisiana revenue sharing is not only about fairness, 
it is about our survival. Louisiana is experiencing 
unparalleled land loss due to Federal engineering decisions 
that for nearly a century have channeled the lower Mississippi 
for the benefit of inland ports. Louisiana's 2,300 square miles 
of land loss is largely attributed to this channelization along 
with the placement of Federal levees along the river system.
    Louisiana, by our state constitution, uses this revenue 
sharing to restore our coastline. Now that is important, again, 
for the rest of the nation. Five hundred tons of water borne 
cargo pass through Louisiana's system of deep water ports and 
navigational channels every year. If present land loss rates 
continue more than 155 miles of waterways and several of the 
ports will be exposed to open water within 50 years.
    Similarly, one fourth of our nation's energy supply depends 
upon the support facilities in South Louisiana while working 
coasts create significant value benefitting the entire country. 
America cannot afford to lose what is perceived as only 
Louisiana's resource.
    To that end, Mr. Milito, just a couple questions for the 
record. Based on the recent API study what is the increase in 
Federal Government revenue estimated to be derived from the 
development of the Eastern Gulf of Mexico?
    Mr. Milito. If we move forward with development of the 
Eastern Gulf over an 18 year period, we'd be looking at about 
$70 billion going to the Federal Government.
    Senator Cassidy. How much?
    Mr. Milito. $70 billion.
    Senator Cassidy. $70 billion. So when folks suggest that 
this bill will increase the nation's deficit you have to, kind 
of, chuckle, $70 billion more.
    Mr. Milito. Yeah, this is all additive revenues coming into 
the Government.
    Senator Cassidy. How much additional revenue would be 
allocated to the Land and Water Conservation Fund if the GOMESA 
revenue sharing paradigm applied to the Eastern Planning Area?
    Mr. Milito. Twelve percent of a?
    Senator Cassidy. A lot. Billions?
    Mr. Milito. Yeah.
    Senator Cassidy. Yeah, fair statement.
    Mr. Milito. $10 billion or so.
    Senator Cassidy. Yeah, that is not bad.
    Ms. Hopper complained that my legislation takes away 
secretarial discretion on the appropriateness of leasing in the 
Eastern Gulf of Mexico when a number of factors, including 
resource potential and infrastructure are needed to support oil 
and gas. Can you tell us what the resource potential in the 
Eastern Gulf of Mexico is?
    Mr. Milito. I'm sorry----
    Senator Cassidy. Can you tell us what the resource 
potential is in the Eastern Gulf of Mexico?
    Mr. Milito. Yeah, we'd be looking at, over time, a million 
barrels of oil equivalent per day for many years.
    Senator Cassidy. A day? A million a day?
    Mr. Milito. Yeah.
    Senator Cassidy. And is there sufficient infrastructure to 
support the oil and gas development in the Eastern Gulf?
    Mr. Milito. Absolutely. You're neighboring the existing 
development we have in the Western and Central Gulf which is 
driving economic development----
    Senator Cassidy. I'm out of time. I am going to interrupt 
you just to say that this legislation would create 230,000 
working class jobs for Americans who currently are 
underemployed or unemployed, $70 billion in new revenue, $10 
billion or so for the Land and Water Conservation Fund while 
providing access to America's oil and gas for Americans. What's 
not to like?
    I yield back.
    The Chairman. What's not to like?
    Senator Franken. Maybe he'll tell us.
    Senator Franken. I'll tell you. [Laughter].
    I appreciate the Senator from Louisiana's perspective. We 
talked about this during the vote-a-rama, and I understand that 
those offshore drilling jobs are good jobs, for middle class 
jobs and we want to build those.
    And I know that the Chairwoman talked about economic and 
energy security in offshore drilling and including in the 
Arctic.
    I also am very cognizant of the fact that we have climate 
change. When we had the hearing on the Arctic, something struck 
me as kind of ironic and that is what I used to do for a 
living. I used to identify those things, and it was that we 
have the Arctic now melting. And because of the melting more 
fossil fuels being available for drilling offshore and that 
climate scientists are telling us that the vast majority of 
known fossil fuel reserves need to actually remain in the 
ground if we want to avoid the worst impacts of climate change.
    So that is what I found ironic which is that we are going 
to be able to get to more fossil fuel in the ground even if it 
is under the ocean because of climate change.
    So Mr. Matzner, how much CO2 would be released 
in the atmosphere if we exploit and burn the oil and gas 
reserves in the Arctic Ocean?
    Mr. Matzner. Thank you, Senator Franken.
    About 16 billion tons of CO2 would be emitted 
into the atmosphere. That's the equivalent to the emissions 
from all of U.S. transportation modes in the U.S. over a nine 
year time period. That's clearly a significant number.
    And what that illustrates is the point that you, yourself, 
raised is that if we're really serious about tackling climate 
change we have to make smarter decisions about where and to 
what extent we use, particularly public resources, too. And the 
best available science we have is that we've already discovered 
four times as much fossil fuels as we can safely burn if we're 
going to avoid the worst impacts of climate change and that 
doesn't even account for these new undiscovered, unproven 
reserves.
    So if we're really serious about this we're going to have 
to take something off of the table, and I can't think of 
anywhere better than places where there's also high risks, 
other ecological values or ways of life.
    Senator Franken. And what are the other risks in terms of--
--
    Mr. Matzner. Well, whether you're focused on the Arctic or 
on the Atlantic, there's risk of severe oil spills and we've 
seen what happens when we have those major oil spills. The 
impacts are economically severe, ecologically severe and 
they're persistent.
    Senator Franken. Okay. So, that's what's not to like. I 
mean, that's just, in answer to the question, which is so we 
have choices to make. I think that's fair to say.
    On the other hand, what positive impacts do we see if we 
focused on meeting energy needs by developing clean energy 
technologies instead such as say, combined heat and power which 
I think the Chair and I agree on and energy efficiency and 
using energy efficiency technologies?
    Sir, you don't have to answer that, I think.
    But I want to move on to, sort of, using combined heat and 
power and also using district energy use by using hazardous 
fuels in our forests because we are seeing also increased 
wildfires and longer seasons, et cetera.
    In my state of Minnesota, District Energy St. Paul was 
recently recognized for its leadership in using wood waste to 
generate heat and electricity for downtown St. Paul while 
providing its customers with stable and competitive energy 
prices and reducing CO2.
    Mr. Sheets, I will get right to the question because I have 
four seconds. I know that more and more Alaskan communities are 
turning to biomass as a local, reliable and clean source of 
energy. Can you talk about some of the benefits that your 
communities are seeing as a result of these biomass energy 
projects?
    Mr. Sheets. Yeah, certainly and very briefly. There's over 
29 communities that have invested in different biomass 
projects. Some have been successful. Some have been 
unsuccessful.
    The successful ones demonstrate a commitment to the 
increased manpower that's associated with that. And then within 
the communities it provides local jobs cutting down the trees, 
delivering them, stacking them and in many of the rural 
communities unemployment is huge. So any cash that you can keep 
in the economy is good.
    So we have found that augmenting our other sources of power 
with heat from wood keeps cash in the community a little bit 
longer and circulating. So those are some of the benefits.
    Senator Franken. Okay, well I want to pursue that, but on 
my time and I am out of it. So, there.
    The Chairman. Thank you. In deference to my colleague from 
Minnesota, I think some in the North, many in the North, 
believe that the irony is that the people of the North would be 
denied jobs, economic opportunities, the opportunity to access 
a resource responsibly, safely, to the benefit of the country 
and national security while people 4,000 miles away lock them 
up and put them effectively in a snow globe making them wards 
of the state and nation. That is where they feel the irony is.
    Let us go to Mr. Gardner.
    Senator Gardner. Thank you, Madam Chair. Thank you, 
Chairwoman Murkowski and the Ranking Member Cantwell, for 
holding this hearing and thanks to all of you for being here 
today. I think Senator Daines and I, at least, and I am sure 
others have been going back and forth between a couple of 
different committees. So I apologize for attending a fun 
hearing on air traffic controlling for a while before being 
able to come back to this Committee.
    Just a couple of questions for you.
    My legislation, S. 1720, the RIVER Act, is included in 
today's hearing. Of course, the RIVER Act stands for the 
Reliable Investment in Vital Energy Reauthorization Act. I was 
hoping we could name it something like driving America's 
manufacturing but I didn't like the acronym for that. I thought 
it would be fun to have one that said that.
    Included in today's hearing S. 1720 is a proposal to 
reauthorize Section 242 and 243 of the Energy Policy Act of 
2005. These sections were designed to promote the conversion of 
non-powered dams into hydro facilities and accelerate the 
addition of new generation at existing hydro plants.
    According to the new Department of Energy reports there are 
12 gigawatts of untapped hydropower development using the 
nation's existing dam infrastructure. These are dams with no 
power houses today. In my home state of Colorado there are 
approximately 30 megawatts of untapped hydropower development 
potential.
    This program was initially authorized, 242 and 243, 
initially authorized back in the EPA of 2005, but the 
Department of Energy hydropower program only recently received 
Federal appropriations in Fiscal Year 2014 and the first round 
of awards are expected to be released any day now and they have 
not even been released as of yet.
    So just as this program is beginning to finally take off, 
it is set to expire later this year, and there is a little bit 
of urgency in the passage of the RIVER Act.
    So to Susan Kelly, Senate Bill 1720, the RIVER Act, 
reauthorizes the hydraulic production and efficiency 
improvement incentives. Could you comment on the value of 
hydropower to the grid, especially as utilities grapple with 
implementation of the EPA rule 111D and early retirement of 
coal plants?
    Ms. Kelly. Yes, sir. I'd be happy to. We think hydropower 
is a very valuable resource to have in the portfolio as we move 
to comply with 111D.
    One of the reasons for that is that it is a clean, 
renewable resource and yet it has characteristics that some of 
the other ones, for example, wind and solar, do not. It can 
assist with what we call black start which is restoration of 
the system when there's a blackout. It is much more 
controllable.
    So if it's needed to back other resources like wind and 
solar, you can do that. You know, as their production goes up 
and down you can release water from over the dams to account 
for that. So it's a good complement to these other resources.
    So we strongly believe in hydropower, and we support your 
act. That's in my written testimony.
    Senator Gardner. Thank you very much.
    You mentioned, Ms. Kelly, that hydropower is renewable 
energy. Is there anybody on the panel today that disagrees that 
hydropower is not a renewable energy source? So I guess the 
record will reflect that everybody on the panel today agrees 
that hydropower is a renewable energy source.
    Mr. Matzner.
    Mr. Matzner. I think we would not categorize it as a 
renewable energy resource, but as an important clean energy 
source.
    Senator Gardner. Not renewable? Why is that?
    Mr. Matzner. Well, it doesn't have some of the 
characteristics of renewable energy and that, you know, we, 
sometimes are--others clearly affected by water shortages and 
droughts and we have to make sure that we're being careful 
about our conservation of water as well.
    Senator Gardner. What is not renewable about hydropower?
    Mr. Matzner. One of the things that we're concerned about 
is how hydroelectric power interrelates with other renewable 
resources. So I guess to clarify my point, it's just about how 
it's treated under standards like the renewable electricity 
standard.
    Senator Gardner. Okay. So it is not so much that it is not 
renewable, it is just how it is defined by law. Is that right?
    Mr. Matzner. Yes, that's correct. So I will clarify my 
comment in the record as well.
    Senator Gardner. Okay, very good. And I have a letter from 
the Western Small Hydro Association. If I could have it entered 
into the record talking about our efforts.
    [The information referred to follows:]
    
    
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
   
    Senator Gardner. I just want to finish with a comment that 
you made about jobs in the West.
    Recently a court decision in Colorado has basically called 
into question the permit for a mine in the Colowyo Mine. This 
is not the topic of today's hearing, but this court decision 
which was brought an unbelievable eight years later, has the 
potential to wipe out two communities in Northwestern Colorado.
    Two hundred twenty jobs directly at the mine, millions of 
dollars in tax revenues, 220 jobs and two communities in 
Western Colorado, gone.
    That is the impact that some of these regulations have. 
That is the impact of litigation, and I hope that as we talk 
about moving forward on energy that we will recognize that 
these jobs, these mines, are important. If we just treat them 
as pieces of paper in litigation we are doing a lot of damage 
to our fellow members of the community.
    I thank you, Senator Murkowski, for that.
    The Chairman. Senator Daines.
    Senator Daines. Thank you, Madam Chair, and thank you also, 
Ranking Member Cantwell, for holding this hearing on a very 
important topic, America's energy supply.
    I associate myself with Senator Gardner's comments. 
Certainly I scratch my head. Having spent 28 years in business, 
trained as a chemical engineer, this was the first place I ever 
stumbled across that defined hydropower as not being a 
renewable source of energy. So I appreciate the question, 
Senator Gardner, and I think, hopefully we can have sound 
science drive this discussion versus the political science as 
we look at our all of the above energy portfolio.
    Montana faces challenges to developing its vast energy 
sources on both Federal and tribal lands. Bills before us today 
help address some of these challenges.
    I firmly believe we truly must pursue an all of the above 
energy strategy in the U.S. In fact, Senator Gardner and I, 
along with Leader McConnell and a few other Senators were over 
in the Middle East several weeks ago meeting with leaders in 
Israel, in Jordan, in Iraq, in Afghanistan and coming back, I 
think one of our conclusions was the importance of continuing 
to develop an all of the above energy portfolio and more made 
in America energy, both in terms of our future economic 
security, but certainly from a geopolitical and national 
security perspective.
    There are two Montana hydro projects under review by FERC. 
One is called the Clark Canyon Dam and the other, the Gibson 
Dam. They have been facing uncertainty in the permitting 
process, though Senator Murkowski's hydropower Improvement Act 
will address these challenges on a broader scale.
    Two bills on the agenda today that I introduced, Senate 
Bill 1103 and Senate Bill 1104, would provide short term 
relicensing and extensions to these two important hydropower 
projects. I can tell you if you talk to a rancher or a farmer 
in Montana and ask him if they believe hydro is a renewable, I 
think common sense prevails and they will say, absolutely, yes.
    I introduced these bills with my colleague from Montana, 
Senator Jon Tester, my Idaho colleagues, Senators Risch and 
Crapo, and also my counterpart in the House, the lone 
representative from the State of Montana, Ryan Zinke. My bills 
would allow FERC to extend licenses for non-Federal, hydropower 
development on existing dams in Montana.
    The first bill would extend for three years a contract for 
hydropower development on the Clark Canyon Dam in Dillon, 
Montana. It would allow for construction and operation for a 
project that will power about 1,200 homes per year, replace 
18,000 metric tons of carbon each year, create 30 to 40 jobs 
during construction and generates $611,000 in state and Federal 
taxes and $37,000 in property tax contributions over the next 
five years.
    The second would provide a six year contract extension for 
non-Federal hydropower development on the Gibson Dam near 
Augusta and Choteau, Montana. Once completed the project will 
provide decades of stable tax revenues for Teton and Lewis and 
Clark Counties, the State of Montana and the Federal 
Government. It will benefit the environment as its FERC license 
requires the dam incorporate measures that would enhance fish 
and wildlife resources.
    I think one of the untold stories as an avid fly fisherman 
myself is a tremendous benefit. Frankly, the fisheries that we 
have with some of these tail water fisheries allow the water to 
stay cooler so in the hot summer months that we have in Montana 
where the waters increase in temperature and actually can 
create hardship for the fish. A dam, when built correctly to 
proper ecological standards, is a way to continue to enhance 
our fish and wildlife resources.
    It will replace 40,000 tons of carbon per year. It will 
strengthen area irrigation by providing a portion of the power 
sales to Greenfields Irrigation District to support irrigation 
improvements, operations, water conservation and urge 
enhancements.
    It generates $4 to $5 million in wages during construction 
and provides $200,000 per year in revenue for the Sun River 
Cooperative. I can tell you those are big numbers in rural 
America, in the rural counties we have in Montana.
    Hydropower development must be a key component of our all 
of the above strategy to meet our nation's energy needs. These 
bills have received robust support from affected local 
communities.
    I ask unanimous consent to submit letters of support from 
Sun River Electric Co-op, the Sun River Watershed Group, 
Greenfield Irrigation District, Clark Canyon Hydro, Toll House 
Energy and Beaver Head County Commissioners certifying these 
bills will improve the environment and help sustain local 
communities for decades.
    The Chairman. They will be entered into the record. 
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Senator Daines. Thank you, Madam Chair. FERC has also 
submitted a statement on these bills stating that they do not 
oppose. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Senator Daines. With that, I yield back my time.
    The Chairman. Senator Barrasso.
    Senator Barrasso. Thank you so much, Chairman Murkowski. 
Thank you for holding today's hearing on legislation to boost 
America's energy supply.
    Last month Senators Manchin, Heitkamp, Hoeven, Enzi and I 
introduced S. 1026, the North American Alternative Fuels Act. 
It is a bipartisan bill that would promote the production of 
alternative transportation fuels here in North America and help 
reduce our nation's reliance on energy from overseas.
    Specifically our bill would repeal a provision enacted in 
2007. This provision prohibits the Government from purchasing 
transportation fuels which emit more carbon than conventional 
petroleum fuel. While the authors of this provision were surely 
well intentioned, they have left us with a policy that makes 
little sense.
    In effect, the policy compels the U.S. Government, 
including the U.S. military, to favor energy produced in the 
Middle East and other hostile regions of the world over energy 
produced here in North America. So I think most Americans would 
find this absolutely absurd. That is why Senator Manchin and I 
are working to change this policy.
    We believe Congress should, at the very least, allow North 
American energy to compete on a level playing field with energy 
from overseas. We believe Congress should allow U.S. oil, gas 
and coal producers to sell the fuel range of their products to 
the U.S. military. This will enable oil, gas and coal producers 
to increase investments in jobs here in the United States. It 
will also allow the U.S. military to access additional energy 
resources here in North America which will enhance our nation's 
energy security.
    Mr. Milito, would you explain how Sections 526 of the 2007 
Energy Act favors energy from Middle East and other hostile 
regions of the world over energy produced in the United States?
    Mr. Milito. Yes, Senator. Fundamentally, Section 526 simply 
limits the flexibility of the military to purchase its fuels 
from reliable partners like Canada. And then by doing that, 
you're taking those partners off the table and turning the 
demand to other parts of the world, including the Middle East. 
So fundamentally, it's extremely problematic.
    Senator Barrasso. And could you explain how this Section 
526, if it is not repealed, could actually increase 
transportation fuel costs for the military?
    Mr. Milito. Yes. Anytime you're limiting supply the 
fundamentals of economics are going to lead you to a position 
where you could increase the costs of the fuels to the 
purchaser, in this case the military. You know, the military is 
the Government's largest consumer of fuels, and prohibiting the 
use of Canadian oil jeopardizes our national security and could 
increase those fuel costs for our military and it restricts the 
Pentagon's ability to get the reliable energy it needs to fight 
the war on terror. I think the last thing we should be doing is 
limiting the ability of our military to get the necessary fuels 
for readiness, training, as well as operational needs.
    Senator Barrasso. So it will also impact our ability to get 
reliable and secure sources of energy?
    Mr. Milito. Absolutely. And if you look at the recent 
Quadrennial Energy Review, there was a great focus in there 
about looking at energy from a North American standpoint and 
making sure that we're looking holistically at both Canada and 
Mexico and working together to really create that energy 
security we need. 526 does the opposite, that's why we need 
passage of S. 1026 so we can get over these hurdles and create 
the stability our military needs.
    Senator Barrasso. In your testimony you also note that 
General Martin Dempsey, Chairman of the Joint Chiefs of Staff, 
has acknowledged that geopolitical benefits of energy exports. 
Could you tell us a little bit and discuss what those benefits 
might be?
    Mr. Milito. Yeah. Last year in March, General Dempsey 
testified before House Appropriations and was asked about U.S. 
production and U.S. exports. He specifically stated that U.S. 
production and U.S. exports are a prominent tool as we move 
forward from a geopolitical standpoint, and we've seen that in 
the past four to five years where the key factor 
counterbalancing global supply disruptions has been our 
production.
    Our production has gone up over three million barrels a 
day. Global supply disruptions have been about three million 
barrels a day, so we've been able to counterbalance that. And 
we've gone beyond just counterbalancing by putting downward 
pressure on the price of oil as well as gasoline and creating 
huge benefits for consumers.
    So it's having a tremendous benefit, and it's impacting the 
ability of regimes like Iran, Russia, Venezuela to fund their 
own governments and militaries.
    Senator Barrasso. Alright, thank you very much.
    Thank you, Madam Chairman.
    The Chairman. Thank you, Senator Barrasso.
    Senator Manchin.
    Senator Manchin. Thank you, Madam Chair and thank all of 
you.
    I'm so sorry. I was in a Commerce Committee meeting and 
that made me late for this hearing, but I appreciate you all 
being here.
    Last week my good friend, Senator Heidi Heitkamp from North 
Dakota, and I introduced a package of five bills to set a clear 
path forward for coal. I am happy to have three of these bills 
considered here today.
    The first of these would establish a new program to ensure 
the continued use of domestic coal resources by developing 
technologies that will improve the efficiency, effectiveness, 
cost and environmental performance of coal. The program would 
work to preserve low cost electricity, diversify our nation's 
energy supply by keeping coal competitive and with other low 
carbon energy sources and speed up efforts to develop carbon 
emission reducing technologies.
    The second of these bills which is also sponsored by 
Senator Whitehouse, myself and Senator Whitehouse, would ensure 
carbon capture use and storage is a priority for the Department 
of Energy across the fossil program. CCUS is not just a coal 
technology but one that will be used across the fossil energy 
sector.
    The third bill, led by Senator Heitkamp, would give the 
Secretary of Energy the ability to help secure long term 
certainty for clean coal technology utilities and workers by 
allowing the Secretary to enter into private pricing 
stabilization agreements that keep the clean coal market price 
viable. This simple fix would create more incentives for 
public/private investment in carbon reducing clean coal 
projects and help remove barriers of uncertainty surrounding 
development of these critical technologies.
    I think you all know me. Coming from West Virginia we have 
an all in energy policy. We have been blessed with a lot of 
coal, blessed with gas, natural gas, Marcellus shale gas. We 
have hydro. We have wind farms. We are trying everything. We 
are just not picking and choosing. We are basically trying to 
make sure this country is energy secured, and we think the 
security of our energy basically secures our country and keeps 
it safer.
    With that, Ms. Kelly, if I could ask, how do members of 
your organization view the use of coal in their future 
generation portfolio and what technology would they recommend 
be pursued to maintain coal as a future option? Because I've 
talked to the Department of Energy, EIA, it is in the mix for 
the next three to four decades.
    Ms. Kelly. Well, first of all we do definitely want to keep 
coal on the table as a viable option for us. Every time an 
option is taken off the table we have a diminished ability to 
have a full array of resources to use to provide the most 
economical, reliable and environmentally responsible power.
    Senator Manchin. Do you believe that the country can make 
it without coal right now in the mix?
    Ms. Kelly. Not right now.
    Senator Manchin. It's not reliable. Won't be affordable, 
right?
    Ms. Kelly. It's too, well at this moment it's too large a 
portion of our generation mix. I mean, if you just look at the 
numbers. We see reducing that over time.
    We support the bills you've noted, by the way.
    Senator Manchin. Yeah.
    Ms. Kelly. Because we do believe that with new research and 
development we can find better ways to use it. And we are, but 
let me just note one thing which is if we are going to go the 
sequestration route we need to think about the impacts of the 
sequestration and the potential liability for those people who 
do do that.
    But yes, I agree with you that in the short run, you know, 
it's part of the mix.
    Senator Manchin. I would like to go on record basically 
saying I have spoken to all the utilities, major utilities of 
the United States of America. Not one of them told me that the 
portfolio they have, the diversity of their portfolio, is one 
they would accept as a good business practice. They are all 
concerned of what they are being forced to do by regulations 
and by the different directions of this Administration.
    To Mr. Hopper, if I may? Has the Bureau of Ocean Energy 
Management worked with the DOE to access the ability of storing 
CO2 in offshore geological reservoirs?
    There is a lot of oil and gas being produced, as we know, 
and developed offshore. Have you looked into potentially using 
those depleted sites as a medium for storing CO2?
    Ms. Hopper. Senator, I'm going to have to get back to you 
on that. I don't actually know the answer to that question. But 
I will get back to you on that.
    Senator Manchin. Okay. The only thing that we are trying to 
do is find a sensible way. Myself and Sheldon Whitehouse, that 
you would not suspect coming from two different spectrums. We 
both agree that we have a responsibility as humans for the 
climate and that basically they've got to find a balance 
between the economy and the environment. And we're trying to do 
that with legislation.
    I have been to Rhode Island and seen basically the algae 
that they have been using from CO2. We think that is 
doable. We think that can be expanded tremendously.
    Senator Whitehouse has been to West Virginia to see what 
coal has done for the country and what we continue to do and 
what we are asked to do every day. We are just finding it very 
hard in West Virginia working with a hostile environment in 
Washington.
    Ms. Kelly. Can I just say?
    Senator Manchin. Yes.
    Ms. Kelly. That, you know, our job as utilities is to 
provide reliable, affordable and environmentally responsible 
power supply. And we have to balance those three factors every 
day as we move forward. So I appreciate the bipartisan nature 
of the work----
    Senator Manchin. We try.
    Ms. Kelly [continuing]. You're doing with Senator 
Whitehouse. And we really do support those kinds of efforts.
    Senator Manchin. Thank you very much.
    The Chairman. Thank you, Senator.
    Senator King.
    Senator King. Madam Chair, I did discover something I knew 
something about.
    The Chairman. I knew you would. [Laughter].
    Senator King. I helped permit my first hydro project in 
1983. It was a massive 1.5 megawatt on the Cobbossee Stream in 
Gardiner, Maine. So I have been working, I have worked in hydro 
permitting for many, many years. Any permitting program that 
takes seven to ten years and costs $50 to $100 million is not a 
permitting program, it is an annuity for lawyers and 
consultants. [Laughter.]
    I want to just associate myself in the discussion of this 
Committee on the hydro relicensing provisions because it 
definitely needs to be fixed. So I want to commend the Chair 
for making that part of this discussion.
    Hydro is an enormous resource in America. Clean, renewable 
and it is one that, I think, we have to clear away some of 
these issues that make it such a lengthy and expensive process.
    One other point on this. We can talk about a $50 million 
process in seven years. What we do not know are the projects 
that never come forward because of that. It is the opportunity 
cost of companies who say, we cannot afford this.
    By the way, that is high risk money because you can do 
seven years, spend $50 million, not get one of the necessary 
permits and you have nothing. So I believe that the country is 
losing potential resources because of the in terrorem effect of 
an uneconomic, unpredictable and untimely permitting process, 
particularly in the field of hydro.
    So, I look forward to working with the Committee on this 
issue. Thank you.
    The Chairman. Well, Senator King, thank you for that, and I 
look forward to working with you on this.
    It is fascinating to me when we talk about hydro it seems 
that the assumption or the stereotype of hydro is some massive 
Hoover Dam. In Alaska most of our dams are small facilities. 
They provide for the needs of one community. They intertie with 
others to provide support in Southeast Alaska to a considerable 
degree. About 25 percent of our renewable energy comes from 
hydro in Alaska.
    But it is not the big projects. It is probably more akin to 
what you helped permit there. Again, when you think about the 
time that is involved and the time value, then that's money 
that adds to the cost. It does put off the possibilty of some 
projects that could help make a difference, bring down our 
costs, which is particularly important in our more remote 
areas.
    I wanted to ask you as a follow on to this, Mr. Livingston 
and then I will ask you, Mr. Sheets, about Alaska specifically. 
We did reforms back in 2005 in EPACT to require trial type 
hearings to allow the consideration of alternative condition 
and prescriptions, but what we understand is the reforms either 
did not take or they were not sufficient.
    I agree with you, Senator King. When you are talking about 
a relicensing of a project, not licensing first time around, a 
relicensing taking eight to ten years, costing $50 to $100 
million, it just does not work.
    I believe you said, Mr. Livingston, that you felt that S. 
1236 does take what we attempted to do, I guess, back in 2005 
and really does address the concerns that Senator King has 
raised and that we have identified. Do we, in fact, now move 
closer to a reform that will actually be meaningful for the 
licensing and the relicensing of these hydro facilities?
    Mr. Livingston. Yes, it does. I think the EPACT 2005 
created some reforms which, you know, in use today the ILP 
process works, especially at the beginning of the process but 
in between two things happened.
    One of those is how the regulations of EPACT 2005 were put 
into place. They allowed trial type hearings on preliminary 
conditions but not on final conditions so that the final 
conditions can actually look different and be submitted to FERC 
than what your trial type hearing outcome was. So that's one of 
the things that is a fix here.
    There was also a court case that left lack of clarity in 
the extent of the condition and authority of the agencies so 
that as you think about where a condition might apply, should 
it apply to just the Federal lands within the FERC license?
    Nobody doesn't think that the Federal Government for work 
done on its lands shouldn't have a say and shouldn't direct how 
those lands are treated. But right now should those conditions 
apply to private lands outside the boundary of FERC? Should 
they apply to third party lands outside of the boundary of 
FERC? Should they have a clear nexus? And those are the things 
that need better definition in the process because without that 
clarity to those conditions, those mandatory conditions, can 
become fairly far ranging.
    So I think your bill does a fine job of making sure we 
achieve the balance of looking at the process.
    We've got hard working people all trying to do the right 
things on this that helps fix the process issues we have today, 
takes a lot of things that happen sequentially and puts them 
parallel and helps better define the box. So we can get a five 
year relicensing.
    So that those hydro projects that today are relatively 
small and couldn't afford a relicensing can go into licensing 
with greater certainty. And for those new projects coming 
along, they can be permitted in a way that at least we can get 
to a decision, one way or another, yes or no, earlier in the 
process and with a lot less money.
    The Chairman. Well, we would like to think that we are 
going to get it right this time.
    Mr. Livingston. Yeah.
    The Chairman. Which is key, it is critical for that.
    Mr. Sheets, I wanted to give you an opportunity this 
morning to speak to some of what we are seeing. You mentioned 
it briefly in your opening statement. You did not say that we 
are the incubator or the guinea pig for energy projects, but I 
like to think that we really are that testing ground for some 
very innovative energy technologies on the renewable side.
    We are pioneering what microgrids are all about. When you 
recognize that most of the communities in the state are not 
attached to any grid and how you have to figure it out on your 
own, the resiliency that comes from being in a remote place and 
a high cost energy state, challenges us to be ever the more 
innovative.
    I would like you to speak specifically to our opportunities 
within geothermal. We have great prospects out in Nome. What 
more can we be doing around the state to encourage that but 
also to take this model and replicate it elsewhere?
    Also, given the fact that we have got policies back here 
that consider traditional geothermal to be this, so called, 
mature technology and as such, it is perhaps not eligible for 
certain Federal assistance. We have issues going on with our 
low temperature geothermal. We have some research and 
development projects going on with low temperature that in 
other parts of the country they would have said, it is not 
possible to even do what you are doing. Yet we know that in 
places like Chena, we have taken low temperature geothermal and 
we have powered a little resort. We have made it possible, but 
can we take what we have learned in Alaska and replicate that 
elsewhere?
    Mr. Sheets. Yes, yes, Madam Chairman, thank you for the 
opportunity to speak to that.
    Alaska is blessed with a lot of low grade geothermal, 
meaning low temperature geothermal. In other states that are 
blessed with a high grade geothermal they can build large power 
plants that feed into the grid system. In Alaska we have very 
remote locations, and it's often hard to even characterize the 
geothermal resource that we have because in some of our areas 
that are permafrost. There are hot seeps, not necessarily hot 
springs in some of those places.
    So conventional ways of determining the geothermal 
potential involves going out there, having a flow test, if you 
will, for a spring that's identified or some flowing hot water, 
that doesn't exist in some parts of Alaska. It's very marshy, 
and the whole region can be very warm and pinpointing where the 
source of that hot water is very difficult in those 
circumstances.
    So we've had the opportunity to develop some technologies 
that allow us to fly over that area with FLIR, forward looking 
infrared cameras, and kind of help define the basins. And then 
by measuring nearby lands we can figure out how much heat it 
takes in that hot area to heat the ground temperature to that 
level.
    So these are some innovative ways of just, kind of, 
reassessing these remote resources that we believe could work 
around the world in other situations that perhaps are 
underexplored for geothermal.
    Another area for us that's really key, as the Senator 
pointed out, was making things smaller. We have a small 
population. We have small microgrids. We need to integrate 
these resources into the communities that we have.
    We can't do anything with five megawatts of power. That's 
like ten times the size of many of our communities need. We 
need small technology that enables us to convert those local 
resources into useable energy, and the technology for that 
doesn't exist and the lower 48 could care less about it because 
they do have the grid system that they can rely on.
    And so in Nome, for example, we have done quite a bit of 
work to de-risk that resource. We've done quite a bit of work 
to see if it's economic to string 60 miles of transmission wire 
into Nome. Nome, if you recall, just a few years ago ran out of 
diesel fuel, and we had to bring in the ice breakers to help 
them. They need local resources. You talk about energy 
security. That's energy security for Nome.
    What happened in our case was we got to the point where now 
the private sector has taken notice and is interested in 
possibly pursuing that further. Maybe we'll see an IPP come in 
and develop that resource and sell it to the community of Nome, 
thereby providing reliable energy year round.
    But it's not just low grade geothermal too. We're doing 
that in small photovoltaics. Several years ago when Galena, if 
you recall, was flooded and nearly wiped out, there was quite a 
bit of emergency money coming to that community. A lot of folks 
looked at it as an opportunity to put PV on every rooftop, if 
you will. You know, when we rebuilt the community let's go 
ahead and do that.
    Well, the problems that you have with that is again, if you 
put too much renewable into a small grid system and a cloud 
comes over, suddenly you've destabilized that grid. So you 
still need conventional forms of energy to provide that base 
loader to follow. In our case we're using diesel generators, 
small diesel generators. And as the Senator pointed out, there 
are communities throughout the State of Alaska that have to 
make these microgrids work.
    At our center we do a lot of research on integrating 
renewables with the conventional resources in microgrids. That 
is catching the attention of the nation because the nation is 
losing confidence in the reliability of its grid sources. So 
you see military bases, you see hospitals, you see, you know, 
critical infrastructure going to the microgrid format where 
they're installing diesel generators so that if they become 
islanded by choice or by happenstance, if they become isolated 
from the grid, they can make things work.
    Alaska has had to do that for pretty much its entire life 
as a state. And so, that's why I, you know, I didn't use words 
like incubator because we're doing things. We are leading it. 
Now what we want to do is export that knowledge to the rest of 
the states and to the rest of the world, and invite them to see 
what we've done.
    We're not really looking for Federal handouts. We're just 
looking, you know, maybe for the Feds to come alongside of us 
and help us figure out on those projects that weren't 
successful but they were just really, really close. It'd sure 
be nice to see a little bit of investment to find out why we're 
that close and we just can't quite get there yet.
    The Chairman. Yeah, yeah.
    Mr. Sheets. So that's where we try to focus our attention 
is what can we do to get that extra little step? That's where, 
I think, a partnership like the demonstration projects that are 
listed in some of these bills are so important, and that's why 
I'm here today.
    The Chairman. Well, I thank you for that, and I did not 
want to cut you off from your answer because I think the 
information that you are providing is so important.
    Senator King and I are the co-chairs of the Arctic Caucus 
here in the Senate. One of my hopes is that while the United 
States is Chair of the Arctic Council for these next two years, 
one of the things that we lead on, that we help set the agenda 
on, is discussing and moving forward with some of the energy 
issues that, particularly, are lacking in the remote areas of 
the Arctic.
    The European Arctic for the most part, they have got their 
energy infrastructure grids that are built out. Not so much in 
Canada, the U.S., and Russia. How we can take some of these 
technologies and as you say, this is not just research and 
development. This is on the ground. Sometimes it is a little 
bit of duct tape and just the crazy inventor out there. But 
when you don't have----
    Senator King. Sounds like something Maine and Alaska have 
in common, duct tape.
    The Chairman. Maine and Alaska would really get together 
well here on some of these because again, you have got 
challenges with your cold. You have got challenges with not 
having anybody else to rely on. This is something that again, 
when we talk about technologies and public/private 
partnerships, we have such an opportunity here.
    I have got a couple more questions.
    I will just let the witnesses know that it is not because 
of lack of interest that Senator Cantwell is not here this 
morning. As you know, we have TPA on the Floor and Senator 
Cantwell has been very involved with that, so she has been 
pulled away to deal with issues on the Floor, otherwise I know 
that she would be here asking questions as well.
    I would like to try to wrap up within the next couple 
minutes, but I wanted to ask you, Mr. Milito, we have had a lot 
of discussion here in this Committee about the prospect for LNG 
exports and what we might be able to do from just a process 
perspective to ensure that we are able to share the abundance 
of our natural gas resource with friends and allies around the 
world. Now that subject is moving to the export of oil. Senator 
Cantwell brought it up in her opening statement. When we are 
talking about workforce issues and the nation's growing energy 
portfolio, what potential for challenges, I guess, or maybe 
there is greater opportunity there, do we see with a qualified 
and trained workforce if we are successful in advancing 
opportunities for lifting the ban on oil exports which would 
ultimately increase production?
    Can you just speak to the workforce piece of it because we 
really have not had that conversation here this morning?
    Mr. Milito. Absolutely, and it's a great topic that we need 
to discuss. I mentioned how the industry is looking at 1.3 
million new jobs, excuse me, over the next 15 years, but that's 
going to be tied to access on the one side, making sure that we 
have the opportunity to develop oil and gas so we can secure 
those jobs. But on the other side, making sure that we are 
putting our young people and our college-age students in a 
position to be able to move into those jobs from a qualified 
standpoint.
    So we are working very hard with your office and other 
offices in trying to make sure that we're engaged in this 
dialogue. We've created a website called oil and gas 
workforce.com. So anybody can go there and look at the type of 
jobs that are available.
    But in that study we noted that over 60 percent of the jobs 
are blue collar which is great. They're all well-paying. They 
pay double, triple the national average in terms of looking at 
the Bureau of Labor statistics data.
    But we need to make sure that we're putting qualified 
people in those positions, so working with community colleges, 
working with universities, working with our companies and kind 
of bridging together. And part of our effort is also creating 
outreach to African American, Hispanic communities to make sure 
that we're creating a diverse workforce which is the way the 
U.S. is moving. We're becoming more and more diverse and we 
have to really create these opportunities for all the 
communities out there who have a stake in this.
    So it's a critical issue, and the only way we're going to 
be able to be successful is making sure that we move forward in 
a strategic way to develop this qualified workforce. It's the 
great crew change that's occurring, and we need to fill that 
void with good people so they have the good paying jobs.
    The Chairman. Thanks, I appreciate that.
    Senator King. Madam Chair, before we leave the hearing.
    The Chairman. Senator King.
    Senator King. One important point for the record in our 
discussion about hydro relicensing and the licensing and 
permitting process, neither you nor I nor I think anybody else 
here is talking about lowering environmental standards.
    The Chairman. Right. Right.
    Senator King. We're talking about the process.
    The Chairman. Absolutely.
    Senator King. My goal in Maine was that we would have the 
highest environmental standards in the country and the most 
timely, efficient and predictable environmental process. And I 
don't think those two goals are in any way in conflict.
    So I think it is important that we emphasize we are not 
talking about cutting environmental corners. We are talking 
about establishing a process that makes sense and does not 
impede the development of these important resources.
    So I just wanted to----
    The Chairman. Yeah.
    Senator King [continuing]. Make that comment for the 
record.
    The Chairman. No, I appreciate you doing that, and know 
that I concur. Again, I want to work with you on some of these 
hydro issues.
    My last question is going to be for you, Ms. Kelly. As you 
know, I have focused a lot in this Committee about the concerns 
that I have in so far as making sure that there is a reliable 
infrastructure, that there is reliability and affordability 
within our energy sector here. You have not only in your 
comments but in fielding different questions here this morning, 
talked a fair amount about the RTO rules and the requirements 
for public utilities to participate in capacity markets to 
supply their own capacity, trying to find this balance forward.
    You spoke relatively favorably of my bill, S. 1222, which 
would among other things, require the RTOs to make filings with 
FERC to satisfy a set of resource adequacy objectives and 
moving then towards the self-supply. So just hopefully very 
quickly, would you agree that base load plants are critical for 
reliability?
    Ms. Kelly. We need all types of plants to ensure 
reliability. We need base load. We need shoulder, what we call 
shoulder units. We need peaking units. And in order to comply 
with coming environmental regulations, we need to have a 
diverse fleet as well.
    The Chairman. Yes.
    Ms. Kelly. For example, one of the problems we know are 
that some new nuclear, you know, old nuclear units have 
difficulty operating. They have a proper place in our fleet.
    We have new nuclear units that we would like to construct. 
We have members that are doing four new nuclear units. They're 
in Georgia and South Carolina because they cannot be supported 
in these capacity markets which are too short term in nature to 
permit that.
    So yes, we believe there needs to be all kinds of 
resources. We prefer, as I said in our discussion with Senator 
Manchin, that we have all options on the table to do that 
because we need that to meet the, kind of, triple play of 
reliable, affordable and environmentally responsible.
    The Chairman. I would assume further that you would agree 
that base load plants in RTO markets should have the 
opportunity to earn a reasonable rate?
    Ms. Kelly. Yes, they should have the opportunity to earn a 
reasonable rate.
    The Chairman. Then while self-supply may not be the answer 
that most of your members prefer as their first choice, it may 
provide a basis for enabling your members to join with others 
who care about preserving base load nuclear and other plants in 
the RTO markets. I am assuming, again, that this is where your 
members would like to go?
    Ms. Kelly. We have an abiding interest in being able to 
self-supply our resources. In the three eastern RTOs where 
these mandatory markets operate, most other utilities no longer 
have an obligation to serve their customers. That has been 
undone through retail access.
    So our business model is actually the minority model. We 
still supply our member's resources. We still try to do that at 
the lowest reasonable cost with a diverse portfolio of 
different kinds of resources.
    But that's not the business model for some of these others 
and for most of the other entities in these RTOs. That's why we 
want to be able to self-supply because we want to be able to 
serve our own loads, with our own resources, at our own 
economics. When these markets were first introduced we 
negotiated those provisions, especially in ISO New England and 
PJM. We made that deal, but then later those provisions were 
revised and taken away from us. So that, you know, we feel 
there's substantial overarching problems with these markets but 
we also want to be able to self-supply our own members because 
our business model is different than everybody else's. I hope 
that's helpful.
    The Chairman. Yes, that is helpful. Thank you.
    Ms. Kelly. And we can comment for the record if you wish as 
well.
    The Chairman. You know, I would appreciate that.
    I mentioned in the first round of questioning the BOEM fact 
sheet as it related to oil spill risk in the Chukchi Outer 
Continental Shelf. This was in reference to a comment that Mr. 
Matzner had made about a 75 percent figure, and I am going to 
include that fact sheet in the record itself.
    I think it is important to note that in the BOEM fact sheet 
their numbers assumed 500 wells producing 4.3 billion barrels 
of oil over 77 years. So through the year 2092, .00002 percent 
of the oil produced might be spilled. 99.99998 percent would be 
delivered safely to Americans while creating jobs, generating 
revenue, improving trade balance and increasing security 
throughout.
    Again, I want to make sure that when we talk about the 
figures that are out there that we give full definition to 
where those numbers came from. That BOEM fact sheet will be 
included as part of the record.
    [The information referred to follows:]
    
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  
    
    
    The Chairman. I think it is important for people to 
recognize, and I know that my colleagues on the Committee 
recognize that when we said we were going to do a supply 
hearing it was not just supply as may come out of the State of 
Alaska. Although, as I have listened to all of you, everything 
that you have touched on comes from my state. So again, I think 
it goes to prove the point that we do have a little bit of 
everything and a lot of a lot of things.
    My purpose in focusing on supply as a title is not to say 
that we are going to focus on renewables at the expense of 
fossils or we are going to focus on nuclear at the expense of 
coal or natural gas. It is to appreciate and understand that in 
this country we have an abundance of supply when it comes to 
our energy assets, and that is something worth celebrating 
because not every country has this.
    We see this from our friends and neighbors. The reason that 
I am pushing for oil exports is because we have friends that 
are truly being held hostage because they do not have a source, 
a safe source of supply that they can turn to.
    Murkowski pays attention to what goes on in Poland. Poland 
is 96 percent dependent on Russia for their oil. We have an 
abundance of supply so why would we not work to encourage that 
production in this country where our environmental standards 
are second to none, that will allow for jobs and economic 
opportunity and at the same time with that wealth of supply 
help our friends and our allies?
    So part of what we are trying to craft here in this 
Committee is a view of the energy sector that is fair and 
balanced and does have, truly, a little bit of everything, all 
of the above. People are getting tired of that phrase, but I 
think it does denote what it is that we have here.
    If we choose to sit on it or to close it off or to lock it 
up, then I think we need to answer for that. If we are going to 
lock up our oil and gas resources in Alaska's North Slope 
whether in ANWR or NPRA or offshore are we going to be 
satisfied then that we will continue to receive that resource 
from somebody else who does not have the same environmental 
standards, who will continue to provide supply?
    My colleague speaks of the irony that he sees with us 
accessing our resources in the North. I do not think that any 
of us would find it ironic when a Senator from Colorado says we 
need to access our shale gas or when a Senator from Minnesota 
says that we need to access our biomass. We have resources 
within the regions that we all represent.
    I think the challenge for us is how we access it safely, 
responsibly and for the benefit of the people who are engaged 
in that economic opportunity. That is what I am trying to do 
here within the Committee.
    I appreciate what you all have contributed here this 
morning with your views and your perspectives. I thank you for 
taking the time to travel here to Washington.
    Certainly, Mr. Sheets, you have come the furthest, but 
again, I thank you for helping to educate not only my 
colleagues here, but others around the country about some of 
the extraordinary opportunities that we have when we are 
challenged. I think we can rise to the occasion, do well and 
perhaps even surprise some folks with our abilities.
    So, with that, I have held the Committee over longer than I 
intended. I thank you for your time and again for your 
resources here today.
    The Committee stands adjourned.
    [Whereupon, at 12:12 p.m. the hearing was adjourned.]




                      APPENDIX MATERIAL SUBMITTED

                              ----------                              


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]