[Senate Hearing 114-466]
[From the U.S. Government Publishing Office]









                                                        S. Hrg. 114-466

         THE NEAR-TERM OUTLOOK FOR ENERGY AND COMMODITY MARKETS

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 19, 2016

                               __________


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


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

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

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                           OPENING STATEMENTS

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

                               WITNESSES

Sieminski, Hon. Adam, Administrator, U.S. Energy Information 
  Administration, U.S. Department of Energy......................    10
Halff, Antoine, Senior Research Scholar and Director, Global Oil 
  Market Program, Center on Global Energy Policy, Columbia 
  University School of International and Public Affairs..........    29
Lucier, Jr., James, Managing Director, Capital Alpha Partners LLC    38
Zindler, Ethan, Head of Americas, Bloomberg New Energy Finance...    58
McGroarty, Daniel, Principal, Carmot Strategic Group Inc.........    64

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Cantwell, Hon. Maria:
    Opening Statement............................................     2
    Press Release dated 1/20/2016 entitled ``The Solar 
      Foundation's National Solar Jobs Census 2015 Finds that 
      U.S. Solar Workforce Grew by More Than 20% for the Third 
      Consecutive Year''.........................................     4
    Written Statement regarding Energy-Related Job Estimates.....     9
Halff, Antoine:
    Opening Statement............................................    29
    Written Statement............................................    32
    Responses to Questions for the Record........................   106
Lucier, Jr., James:
    Opening Statement............................................    38
    Written Statement............................................    40
    Responses to Questions for the Record........................   107
McGroarty, Daniel:
    Opening Statement............................................    64
    Written Statement............................................    66
    Responses to Questions for the Record........................   116
Murkowski, Hon. Lisa:
    Opening Statement............................................     1
Sieminski, Hon. Adam:
    Opening Statement............................................    10
    Written Statement............................................    13
    Responses to Questions for the Record........................    99
Zindler, Ethan:
    Opening Statement............................................    58
    Written Statement............................................    60
    Questions for the Record.....................................   115

 
         THE NEAR-TERM OUTLOOK FOR ENERGY AND COMMODITY MARKETS

                              ----------                              


                       TUESDAY, JANUARY 19, 2016

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:10 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 this 
hearing before the Committee on Natural Resources.
    Gentlemen, thank you for joining us this morning.
    This is the first hearing that the Energy Committee has had 
in 2016, and I think it is rather auspicious that today we are 
going to be conducting oversight to examine the near-term 
outlook for energy and commodity markets. I think everybody is 
interested in what you have to say, the predictions, the 
forecasts. Hopefully your crystal balls are clear and sharp 
this morning.
    It is an issue that is not only interesting but clearly 
consequential in so many different ways as we look to the 
outlook for not only the energy, but the mineral markets as 
well.
    There are few commodities that are more foundational to the 
health of our economy than energy and minerals. Most Americans 
are certainly familiar with gasoline prices and their 
electricity bills, but I would submit that it is our 
responsibility as Senators on this Committee to do our best to 
understand the complex interplay of our nation's energy mix and 
the influences that drive key energy and resource indicators. 
Low oil prices, for example, lead to lower gasoline prices. 
Americans are certainly enjoying that.
    But what is the knock on effect with respect to our natural 
gas prices? As fossil fuel prices fall, how does that affect 
the competitiveness for renewables, as well as nuclear power? 
Also what is the impact on jobs, on consumer spending and so 
on? There is just so much that is, again, interrelated and the 
complexities are such that we require experts to come and give 
us a little bit of a forecast as to how it all plays out.
    I am reminded, however, that as we see things like lower 
oil prices in the lower 48, they are not necessarily reflected 
evenly across the United States. I was home in Nome, Alaska, 
about ten days or so ago. The prices up in Nome are in the mid-
$5 range. Down in Unalakleet, where I was the following day, it 
was about $5.40 a gallon. They are looking with some envy at 
the fact that in the lower 48 we are looking at gas prices at 
the pump just above $2.00. Sometimes things do not work to the 
benefit of all evenly and I think that is something that we 
keep a particular eye on in Alaska.
    We did some good work on the Committee here last year in 
2015, and I think within the Senate itself. We saw the return 
of regular order in the Senate a little bit.
    In energy policy we laid some foundations to modernize our 
strategic petroleum reserve, we lifted the ban on oil exports, 
and then more specific to where we are right now, we passed on 
an 18 to 4 bipartisan vote, the Energy Policy Modernization Act 
that moved out of this Committee.
    I am working to ensure that bill gets to the floor, 
hopefully as soon as possible. I think it is fitting, 
therefore, that we hold this hearing on the broad energy 
outlook shortly before the full Senate might turn to our 
broader energy bill. It is my hope we will gather critical, 
current information this morning to inform our thinking before 
we head to the floor to debate S. 2012.
    So again, I thank all the witnesses for joining us this 
morning. We have some familiar faces, Mr. Sieminski, who has 
ably led the Energy Information Administration (EIA). We have 
some newcomers as well, and we welcome you. We are fortunate 
that there are reams of data from government and neutral 
sources to help us deepen our understanding of the energy 
markets, and I look forward to hearing from you all.
    With that I will turn to my Ranking Member, Senator 
Cantwell, for your comments this morning.

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

    Senator Cantwell. Thank you, Madam Chair, and thank you for 
holding this important hearing to examine the near-term outlook 
for energy markets. I thank the witnesses for joining us here 
today on a very important and timely discussion ahead of a 
potential floor debate on the bipartisan energy bill.
    Energy markets have been changing rapidly in the last year 
and I am sure we are going to hear a lot about that, but I want 
to emphasize a few things. Utility scale wind capacity has 
grown by 677 percent from less than nine gigawatts to nearly 70 
gigawatts in the last ten years. In part, the successes were 
enabled by an all-time low reduction in the cost of wind power; 
the rates for wind power purchase agreements have fallen seven 
cents a kilowatt-hour in 2009 to two cents a kilowatt-hour 
recently. That is a 71 percent drop.
    These trends are prevalent all across the United States. 
Utility-scale wind power is deployed across 39 states, and in 
nine states, wind exceeds ten percent of the total in-state 
electricity generation. And it is not just wind. Solar 
photovoltaic technology has rapidly emerged as a mainstream 
technology over the last few years. Utility-scale PV solar has 
grown to more than ten gigawatts in 2015, and distributed PV 
systems installed on customer and business rooftops have seen 
the same level of growth. Now there are more than 80,000 
distributed PV systems installed. This is possible because of a 
dramatic decline in the price of PV systems, down 59 percent, 
over the last six years.
    But interest in renewable energy has not just been from 
electric utilities and customers. In 2015, there was a record-
breaking year for corporations such as Amazon, Microsoft, 
Google, Walmart, who purchased large-scale wind and solar 
energy. These corporations signed roughly three gigawatts of 
power purchase agreements for large-scale renewable energy last 
year. This is more than double the amount signed in 2014.
    These trends have also been benefiting my home state. 
Washington's wind industry is seventh in the nation for 
installed wind capacity and ranks 15th in the country for solar 
power capacity per person, 25th in the nation for total solar 
capacity. Recent policy changes will accelerate these trends 
creating more jobs, reducing carbon pollution and saving 
consumers money.
    Why the sudden drop in cost? In part because of policy in 
2015 in the addition of new policies that will build upon the 
success of previous support for renewable energy. For instance, 
in August 2015 the EPA finalized the Clean Power Plan Rule 
which will reduce carbon pollution from power plants and drive 
a more aggressive transition to renewable energy. Last December 
more than 190 nations reached a historic accord to address 
climate change committing nearly every country to lower carbon 
pollution and keep global temperatures from rising more than 
two degrees Celsius.
    These domestic and global commitments to reducing carbon 
pollution will create new global market opportunities and 
export opportunities for the U.S. and our technologies. In 
fact, the International Energy Agency estimates that $4 
trillion in renewable energy investments and about $8 trillion 
in energy efficiency investments will be made across the world 
in the next 15 years.
    Lastly, at the end of the last year, the Omnibus spending 
bill included long-term extensions for clean energy tax 
credits. That will also be sending a signal. According to 
Bloomberg New Energy Finance, as I am sure we will hear 
shortly, it is estimated that this will result in 76 percent 
more wind energy and 44 percent more solar energy than if these 
policies had not been extended.
    All these policies continue to accelerate the trends of 
clean energy development, reducing carbon pollution, saving 
consumers money, and creating jobs. This is a big factor for us 
to consider here. There are job creation activities going on 
here.
    A report from the Solar Foundation found that the U.S. 
solar industry employed more than 200,000 Americans in 2015 
with 20 percent growth in the solar industry employment.
    [The information referred to follows:]
    
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    For perspective, the solar industry grew 12 times faster 
than the national employment growth rate during this same time 
period, and the solar work force is now larger than the more 
well-established fossil fuel generation sectors such as the oil 
and gas extraction industry.
    The U.S. wind industry has had similar job growth trends, 
supporting over 70,000 well-paying jobs.
    It is also important to talk about the consumer in this 
equation. Renewable energy policies not only create jobs, but 
they help save money for consumers and provide consumers with 
more choices.
    In a new study by the National Renewable Energy Laboratory 
at Lawrence Berkeley National Laboratory, renewable portfolio 
standards help to lower prices saving consumers up to $1.2 
billion from lower electricity prices and $3.7 billion from 
reduced natural gas prices.
    Recent low oil and natural gas prices have also resulted in 
savings for consumers. For example, the AAA estimates that 
Americans saved $115 billion on gasoline in 2015 compared to 
2014, which was an average of about $550 per driver.
    However, these fossil fuel commodities are still 
susceptible to price swings, and I am sure we are going to hear 
about that today. Less than two years ago the oil prices were 
over $100 a barrel and EIA's short-term energy outlook states 
that, ``Oil prices could continue to experience periods of 
heightened volatility'' over the next two years. In contrast, 
renewable technologies, which use wind and solar, are not as 
susceptible to these price volatilities. Consumers should have 
choices and should not face roadblocks to being able to 
implement these choices.
    We will continue to support those policies that give 
homeowners and businesses the freedom to generate their own 
energy. Whether you are an environmentalist or a Member of the 
Tea Party, supporting distributed generation and making sure 
consumers get access to choose their own energy distribution or 
storage methods is something, I think, we will continue to be 
talking about.
    Again, thank you Madam Chair for holding this important 
hearing, and I hope that we will hear a lot from our witnesses 
today about how and what we can expect in the next few years.
    [The written statement of Senator Cantwell follows:]
    
    
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    The Chairman. Thank you.
    With that we will turn to our panel of witnesses. It will 
be led off by Mr. Adam Sieminski, who is the Administrator for 
U.S. Energy Information Administration, the EIA. He will be 
followed by Mr. Antoine Halff, the Program Director for the 
Global Oil Markets for the Center on Global Energy Policy 
located at Columbia University. We also have Mr. James Lucier, 
who is the Managing Director for Capital Alpha Partners. We 
also have Mr. Ethan Zindler, who has joined the Committee here 
today as Head of the Americas, Bloomberg New Energy Finance. 
Rounding things out is Mr. Daniel McGroarty, who is the 
Principal at Carmot Strategic Group.
    With that, Mr. Sieminski, if you would begin with the 
panel?
    I know you have a lot to say, so we will probably have to 
go over our allocated five minutes. We are good with that 
because there is a fair amount of information that I think 
needs to be imparted.

 STATEMENT OF HON. ADAM SIEMINSKI, ADMINISTRATOR, U.S. ENERGY 
     INFORMATION ADMINISTRATION, U.S. DEPARTMENT OF ENERGY

    Mr. Sieminski. Maybe just a couple of minutes, Senator. 
[Laughter.]
    The Chairman. Well, we appreciate what you will give to us 
and know that we will also have opportunities for expansion 
when we come to the Q and A.
    If you would please start off.
    Mr. Sieminski. Thank you, Chairman Murkowski, Ranking 
Member Cantwell, Senators Cassidy and Hoeven. I really 
appreciate the opportunity to provide testimony today on the 
U.S. energy outlook.
    The Energy Information Administration is a statistical and 
analytical agency within the Department of Energy, but by law 
EIA's data analysis and forecasts are independent of approval 
by any other Federal office or employee. Therefore, my views 
should not be construed as representing those of the Department 
of Energy or any other Federal agency.
    Major changes affecting energy markets have occurred over 
the past year in the areas of global commodity prices, energy 
technologies and U.S. energy and environmental policies. EIA's 
Annual Energy Outlook for 2016, which will be published by mid-
year, will include these changes.
    What I'd like to do now is talk just a little bit about 
last year and then we'll talk about the forecast.
    Crude oil ended 2015 with both Brent and WTI below $40 a 
barrel, the lowest level since early 2009. The decline has 
continued with today's WTI price trading just under $30 a 
barrel. With the fall in prices U.S. onshore crude oil 
production began to decline in early 2015 but still averaged 
9.4 million barrels a day and that was eight percent higher 
than 2014.
    Natural gas spot prices at Henry Hub in Louisiana averaged 
$2.63 per million BTU in 2015 and that was 40 percent below the 
2014 average; however, the rigs that continued drilling were 
highly productive and total dry natural gas production in 2015 
reached an estimated 74 and a half billion cubic feet per day, 
almost six percent higher than 2014.
    In April of '15 natural gas-fired electricity generation 
surpassed that of coal-fired generation on a monthly basis for 
the first time in history and did so for much of the rest of 
the year. That and lower exports led coal production in 2015 to 
fall below 900 million short tons, the lowest level since the 
mid-1980's.
    Commodity prices, weather and investment in renewable 
capacity drove changes in electricity. The wholesale price of 
electricity set by natural gas generators fell between 27 to 37 
percent at major trading hubs across the nation. Nuclear 
generation through October of '15 was the highest since 2010 
due to low levels of outages. They were the lowest on record of 
about three percent of the summer capacity.
    Hydroelectricity accounted for nearly six percent of total 
generation through October despite lower than normal water and 
snow pack levels in several regions. Wind provided four percent 
of the number.
    Net generation from distributed solar PV systems increased 
28 percent and utility scale solar photovoltaic generation 
increased by half over the first ten months of 2015 based on 
EIA's new monthly estimates of capacity and generation from 
small scale distributed solar that we are now publishing by 
both sector and state.
    Now I'm going to turn to the short term energy outlook 
which provides a monthly forecast through 2017.
    Crude oil and refined product prices in 2016 are forecast 
to be lower than in 2015 with Brent crude back up to about $40 
a barrel by the end of '16 and $50 a barrel in 2017 with WTI 
averaging $2 to $3 a barrel lower than Brent.
    A word of caution is advisable. The current values in the 
futures and options markets suggest that market participants 
see very high uncertainty in the price outlook. This is similar 
to what Senator Cantwell said, and the risk is both on the 
upside and the downside. The retail price of regular gasoline 
is forecast to average just a little over $2 a gallon in 2016 
and $2.21 in 2017. And that's down from $2.43 last year and 
down from $3.36 in 2014, so a big drop in gasoline prices.
    U.S. crude oil production is expected to continue to 
decline through 2016 and through most of 2017. So this is very 
different than two years ago when production was climbing and 
climbing rapidly. The global oil market becomes more balanced 
because of these declines in 2017. Non-OPEC production is 
estimated to fall by 600,000 barrels a day in 2016, about two 
thirds of that is driven by lower production in the United 
States.
    Outside of the U.S. non-OPEC production declines are 
relatively small because of past investments and project 
commitments made when oil prices were higher. Canada and Brazil 
are good examples of that situation. EIA forecasts a half a 
million barrel a day increase in OPEC crude oil production in 
2016 and about 0.6 million barrels a day in 2017 with Iran, 
again, accounting for most of the increase at 300,000 barrels a 
day in 2016 and a half a million barrels a day in 2017. There 
were developments there over the weekend with the sanctions 
finally being removed. EIA's forecast assumed that sanctions 
targeting Iran's oil sector would be lifted and that is the 
case.
    EIA's forecast for Henry Hub spot prices to average $2.65 a 
million BTU in 2016 and $3.22 in 2017. Current levels are near 
$2.00. That would be a fairly big increase but it reflects 
consumption growth, mainly in the industrial sector, 
fertilizers and chemicals, for example. And EIA expects a small 
decline in the power sector as natural gas prices rise and 
renewables hydro, wind, and solar, increase.
    EIA projects production growth will be slow in 2017 as 
prices rise with more demand from industrial users and exports, 
and the exports are expected to grow quite a bit. Both pipeline 
to Mexico and liquefied natural gas tanker shipments with the 
startup of Cheniere Sabine Pass facility later in the spring.
    Coal consumption in the power sector forecast remains 
unchanged in 2016 and declines slightly in 2017 while the 
forecast of higher natural gas prices helps to support coal 
generation. Expected increases in electricity from renewables 
and nuclear reduce the need for coal generation. With slower 
growth in world coal demand and lower international coal prices 
also expected, U.S. coal production is forecast to decline by 
38 million short tons in 2016 and by an additional nine million 
tons in '17.
    The change in the mix of electric generating units that 
supply the United States is expected to continue with a 
declining generation share from fossil fuels offset by the 
growth in the role of renewable resources as shown in Table 1 
in my full written statement.
    Madam Chairman, this concludes my testimony, and I would be 
happy to answer questions later.
    [The prepared statement of Mr. Sieminski follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    The Chairman. Mr. Sieminski, thank you very much. I am sure 
there will be questions.
    Mr. Halff, welcome.

    STATEMENT OF ANTOINE HALFF, SENIOR RESEARCH SCHOLAR AND 
 DIRECTOR, GLOBAL OIL MARKET PROGRAM, CENTER ON GLOBAL ENERGY 
POLICY, COLUMBIA UNIVERSITY SCHOOL OF INTERNATIONAL AND PUBLIC 
                            AFFAIRS

    Mr. Halff. Thank you very much.
    Chairman Murkowski, Ranking Member Cantwell, Senators 
Cassidy and Hoeven, I appreciate very much the opportunity to 
share some of my views here today and provide testimony. I'd 
like to focus on the oil market and take a step back on some 
numbers and try to identify some of the key drivers that I see 
as pushing the price lower.
    The selloff, the scope, and the duration of the down turn 
in prices has come as a surprise to the market. It hasn't run 
its course. There's more room for lower prices but the selloff 
is not sustainable and eventually the price will rebound and 
the market will show a recovery. I think we'll emerge different 
from the recovery from what it was before.
    This is not the first selloff in the market. There's been 
major price collapses about every ten years. This one is 
different because the market has changed in key ways on the 
supply side and on the demand side.
    On the supply side two key factors are the advent of shale 
oil in the U.S., light, tight oil production and also the wave 
of social unrest and instability that is sweeping through many 
producing countries.
    The impact of shale oil has made OPEC to give up its price 
management strategies, the practice of cutting supply to 
support prices with which OPEC has been identified over the 
last 30 years. There are three main reasons why that it so.
    One reason is that shale oil has changed the perception of 
supply scarcity into a perception of supply abundance. It has 
unlocked huge resources, not just in the U.S. but potentially 
elsewhere in Argentina and Russia, and this has likely changed 
the view of major producers like Saudi Arabia about how best to 
optimize revenue from their resources.
    The Saudi oil minister, Ali al-Naimi, for instance in the 
last 18 months or so, has repeatedly come back to the idea of 
what he calls a ``Black Swan.'' The idea that in 20 years 
demand will not be there and Saudi Arabia might sit under a 
huge ocean of oil that's not worth as much as before. So it's 
essentially seemingly incentivized the users to speed up the 
base of extraction of their resource and maximize their revenue 
by selling more now and keeping less for future generations.
    Another way in which shale oil has changed the picture is 
by shrinking the trade map for crude oil. The U.S. doesn't need 
to import as much crude as before. That is also the case of 
Europe because European refineries have found it difficult to 
compete with U.S. refineries which have increased their 
activity with the development of natural domestic resources in 
the U.S.
    So there's less crude flowing into the U.S., less crude 
flowing into Europe. The market is now heavily concentrated in 
the eastern region, east of Suez in Asia and increasingly so in 
the next few years that makes it much more difficult for OPEC 
to cut production and allocate production cuts across the world 
when, in fact, OPEC producers, as other producers are 
increasingly competing with one another in a very fine like 
marketplace in Asia.
    The third factor which limits the scope for OPEC to cut 
production is the way shale has changed the business cycle of 
the oil market. It's a much shorter business cycle. The shale 
industry, the shale companies are very different from 
traditional, conventional oil companies. They require less 
initial capital investment, they have much shorter lead times, 
much shorter payback times, and much steeper decline rates that 
are much more price responsive, at least in theory. So that 
means that if OPEC had clung to its old strategy of cutting 
supply it would, in effect, have subsidized shale production 
and enabled shale oil producers to come back in the market very 
quickly as soon as prices came back up. So it's not entirely a 
surprise that Saudi Arabia and the other OPEC members have 
given up the practice of cutting production.
    Now, other producers also have been incentivized to produce 
more by the unrest in their countries. This is the case of 
Russia, this is the case of Iraq, this is the case of Brazil. 
This is the case--all these producers have been incentivized to 
produce more and to make up in volume what they've lost in per 
barrel price.
    Now on the demand side, demand has also been very weak and 
that has undermined prices as well. The normal demand response 
that one might expect from a drop in prices has not happened 
for a number of reasons, the slow pace of the economy, the 
slowdown in China, changes in the currencies of major consuming 
countries and an effort to de-subsidize oil prices by a number 
of emerging economies.
    In addition, the deflationary or quasi-deflationary 
environment in many economies has meant that low prices 
increase expectations of deflation instead of stimulating 
economic growth. And there's concerns in the oil sector about 
the rapid pace of penetration of competing fuels in traditional 
oil markets like natural gas and renewables.
    So all these factors are changing the picture and mean that 
there's much more supply, much more downward pressure on 
prices. We are seeing now the beginning of a supply response, 
but supply continues to exceed demand. Inventories continue to 
build, and that means more pressure.
    Longer term though, there will be a correction because the 
same factors that are incentivizing producers to maximize their 
revenue also incentivize them to cut their spending and invest 
very little in future production. So there's a lack of new 
projects to make up for decline rates and the decline rates 
themselves are increasing because necessary maintenance has 
been pushed back or reduced. So we're likely to see an increase 
in decline rates, an increase in the natural drop in production 
and the lack of new projects to make up for those declines.
    So eventually we see a very steep rebound in prices when 
really would be shift in inventories which has an inflection 
points and even to restart drawing down.
    This concludes my remarks, and I'd be very happy to take 
questions.
    Thank you.
    [The prepared statement of Mr. Halff follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    The Chairman. Thank you.
    Mr. Lucier?

  STATEMENT OF JAMES LUCIER, JR., MANAGING DIRECTOR, CAPITAL 
                       ALPHA PARTNERS LLC

    Mr. Lucier. Well Chairman Murkowski, Ranking Member 
Cantwell, Senator Cassidy, Senator Hoeven, thank you for the 
opportunity to testify before this Committee. I'm honored that 
you'd request my views on the state of the electric power 
industry and the power markets. In these remarks I'll present 
high level views on electric utilities, merchant power 
producers and the critical issues of price formation and market 
structure in the wholesale power markets.
    My name is James Lucier, and I'm a Managing Director and 
Head of the Energy Practice at Capital Alpha Partners. That's 
an independent research and advisory firm that serves mostly 
institutional asset managers and financial participants in the 
power markets.
    I personally have been devoting the bulk of my time to the 
electric power industry and to the power markets since I first 
started following them as an analyst at the Prudential Equity 
Group in the California power crisis of 2001, 2000-2001 
actually. So it's been an interesting 16 years.
    If I were to characterize the state of the power markets in 
five points I would offer the following.
    First, inflation adjusted retail power prices are at 
historically low levels but also consistent with the 
historically stable range showing that the system and the 
industry, generally, have served consumers well by maintaining 
low and stable prices over a considerable period of time.
    Also, wholesale power prices are similarly at a ten-year 
low which again shows service to consumers but also reflects 
low interest rates and low natural gas prices which cannot be 
taken for granted and possible design flaws in the wholesale 
power markets which, I believe, may not be sustainable.
    In the regulated utility space, corporate management faces 
a conundrum, how to maintain or increase earnings to satisfy 
shareholders at a time when power demand, after declining year 
on year for the first time in U.S. history after 2008, remains 
flat or nearly flat as far as the eye can see which is to say 
well into the forecastable future.
    In the merchant power space generators are hard pressed to 
show a return on equity that would justify new investment in 
competitive markets that serve two-thirds of the U.S. 
population. A step change downward in natural gas prices since 
2008 which we will credit to the shale revolution is part of 
the story but so also are troublesome issues, price formation 
in the energy markets and the development of appropriate 
pricing mechanisms for reliability and ancillary services.
    Finally, as this Committee knows so well, the demands of 
the EPA's Clean Power Plan will drive the greatest investment 
cycle ever in the history of the U.S power industry, perhaps 
amounting to hundreds of billions of dollars as existing 
baseload power plants retire beginning, as we've already seen, 
with the mercury and air toxic standards, MATS, driven cycle of 
2015 and continuing through 2030 and beyond.
    The single greatest challenge in the power markets today is 
financing the technology investment and the infrastructure 
upgrade cycle needed to replace retiring base load and to 
handle new, perhaps even unforeseen, demands between now, 2030 
and beyond. This challenge must be dealt with now in a prudent, 
thoughtful and timely manner lest due to failure to act 
consumer price increases that could be managed or mitigated now 
become disruptive price shocks later.
    The power industry has been battered by a series of 
exogenous shocks, including interest rates, commodity prices 
and the lingering effects of the great recession of 2008. But 
at the same time this always evolving industry is in a period 
of rapid technological innovation.
    Policy makers should take a balanced, long-term view 
looking to maintain a diversity of options long into the 
future. New technology and innovation by all participants 
should be welcomed. But at the same time, policymakers should 
recognize that the existing infrastructure with its diversity 
of business models, fuel types and public or private ownership 
represents not just the spinning reserve or fly wheel that 
keeps power flowing, but also the deep pool of invested capital 
that keeps the system working financially as well.
    That concludes my remarks. I look forward to your 
questions.
    [The prepared statement of Mr. Lucier follows:]
    
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    The Chairman. Thank you, sir.
    Mr. Zindler, welcome.

  STATEMENT OF ETHAN ZINDLER, HEAD OF AMERICAS, BLOOMBERG NEW 
                         ENERGY FINANCE

    Mr. Zindler. Good morning and thank you for this 
opportunity today. This is my first appearance before this 
panel under Chairman Murkowski's new leadership, so thank you. 
I appreciate the opportunity to contribute.
    I'm here today in my role as an analyst with Bloomberg New 
Energy Finance, an energy market research division, a financial 
information provider, Bloomberg LP. Our group provides 
investors and others with data and insights on what we call new 
energy technologies. These include renewables such as wind and 
solar, electric vehicles, energy efficiency technologies, power 
storage such as batteries and natural gas, among others.
    I would note that my remarks today represent my views 
alone, not the corporate positions at Bloomberg LP. They also 
do not represent specific investment advice and should not be 
construed as such.
    I'd like to start by saying that these are, without a 
doubt, auspicious and exciting times for new energy 
technologies both globally and in the U.S. thanks to a 
confluence of economics and policy actions. I would argue that 
a fundamental rethink is now well underway about how energy 
gets produced, delivered, consumed and managed in many parts of 
the world, including the U.S.
    In 2015 investment in these new energy sectors achieved an 
all-time high of $329 billion globally. The volume of renewable 
energy capacity deployed into wind, solar and other similar 
power generating technologies also soared to a record globally.
    What's notable is this build out of new projects is rising 
at a much quicker pace than is investment reflecting the fact 
that clean energy unit costs have dropped very dramatically.
    In all the clean energy sector has received over $1 
trillion in new capital over the past four years and over $2.5 
trillion in the past decade. With approximately one half of all 
new capacity built worldwide in 2015 represented by renewables, 
it is fair to say that clean energy is no longer an alternative 
source but now very much in the mainstream.
    What's behind this growth? Improved price competitiveness 
for these technologies and policy support from governments. It 
should be noted that the latter, policy actions, has certainly 
assisted in achieving the former, of lower clean energy prices.
    Here in the U.S. we're seeing the power sector continue an 
unprecedented shift away from traditional higher CO2 emitting 
sources of power generation. And in that regard, last year will 
likely be remembered as a watershed year for decarburization.
    Consider that in 2015 an annual record volume of coal-fired 
power generating capacity was either retired or converted to 
burn other fuels such as natural gas or biomass, a record 
volume of natural gas was burned in power plants and gas 
accounted for approximately a third of all U.S. power, about 
the same as coal, for the first time.
    Solar photovoltaic capacity added hit an all-time high with 
a strong growth in both rooftop and utility scale subsectors. 
And U.S. clean energy investment totaled $56 billion which was 
the most in four years and the second most ever.
    Since 2007 the share of U.S. power provided by renewables 
including large hydro projects and natural gas and nuclear has 
surged from 49 percent to 65 percent with wind, gas and solar 
accounting for nearly all the new capacity that's been added. 
The net result is that CO2 emissions in 2015 fell to their 
lowest level since sometime in the 1990's from the power 
sector. Over the past eight-year average retail power prices in 
most markets remain roughly level while average wholesale 
prices have dropped.
    Regarding energy efficiency, over the past five years U.S. 
demand for electricity and for all sources of energy has 
remained basically flat, even as the economy has grown. 
Efficiency improvements to homes, buildings and automobiles 
have all made contributions. As an aside, I would just note 
that many of these trends will be highlighted in an upcoming 
sustainable energy in America fact book which we'll be 
releasing in just a few weeks.
    The achievements of the past year for clean energy came 
even as fossil fuel prices, most notably oil, but also gas and 
to a lesser extent, coal, were falling. At least thus far the 
impact on new energy technologies has been muted for a variety 
of reasons. The one area where lower oil prices did impact this 
sector was in the sale of hybrid electric vehicles which 
slipped in 2015. However, it should be noted that pure electric 
vehicle sales continued to rise and auto makers are now rolling 
out new, more affordably priced electric vehicles with longer 
ranges thanks to lower priced batteries.
    Looking ahead the growth path for clean energy technologies 
appears wider and better to find than perhaps at any time. The 
so-called Paris agreement at the end of 2015 saw over 190 
nations committing to reduced CO2 emissions. Here in the U.S. 
the EPA's Clean Power Plan has the potential to offer greater 
certainty for clean energy through the next decade. And 
finally, Congress' extension of key tax credits for wind and 
solar ensure solid short run growth for these technologies as 
well.
    Just as importantly the playing field where clean energy 
technologies compete and beat their incumbent rivals in cost 
continues to expand thanks to technological innovation and 
economies of scale. While risks and potential obstacles still 
exist the outlook overall is generally positive for continuing 
growth and change.
    Thank you again for this opportunity. I look forward to 
questions.
    [The prepared statement of Mr. Zindler follows:]
    
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    The Chairman. Thank you, Mr. Zindler.
    Mr. McGroarty?

  STATEMENT OF DANIEL MCGROARTY, PRINCIPAL, CARMOT STRATEGIC 
                           GROUP INC.

    Mr. McGroarty. Thank you.
    My thanks to the Committee for the opportunity to testify 
this morning. I'm Dan McGroarty, Principal of Carmot Strategic 
Group, an issues management firm based here in Washington, DC. 
Strategic resources are a core element to my practice.
    My advisory companies include Texas Rare Earth Resources, 
Graphite One, American Manganese, Denham Capital Management, 
and Rio Tinto, companies that are working to develop new 
sources of metals ranging from copper and graphite to manganese 
and rare earths. I also consult to the Institute for Defense 
Analyses which supports the Departments of Defense and Homeland 
Security, the Joint Chiefs and Intelligence community, on 
issues related to strategic materials and resource security. 
That said, the views I express today are my own.
    The Committee asked the single question as the entry point 
into today's hearing and that's where I will start. The near-
term outlook for the commodity markets can be summed up in a 
single word, bleak.
    We've heard this morning about the collapse in price of 
oil. The same is generally true for hard rock commodity prices. 
Look at five key industrial minerals, aluminum, copper, lead, 
nickel and zinc. In the past five years aluminum is down 36 
percent, lead 35, zinc down 40, copper down 55, nickel down 64.
    Of course it's not as if commodity cycles are novel, they 
happen. That's Econ 101. The market is self-corrective, and in 
the long run that is true. What's also true, as Keynes put it, 
that in the long run we are all dead.
    I can't answer the question how long is the long run. What 
I can discuss is what risks we run now and in the near-term 
while we wait for the long run to arrive. Those risks are real.
    When it comes to critical metals the United States is 
deeply dependent and growing more so. The U.S. Geological 
Survey has just released a useful historical snapshot. 30 years 
ago the U.S. was 100 percent foreign dependent for 11 metals 
and minerals. Today the U.S. is 100 import dependent for 19 
metals and more than 50 percent dependent for 47 minerals, 
nearly half of the naturally occurring elements on the periodic 
table.
    This dependency has serious implications for national 
security. In the most recent defense stockpile report of the 12 
materials the Pentagon recommends for stockpiling, China is a 
significant supplier of all 12.
    We are in the midst of a material science revolution and 
access to the so-called minor metals is taking on major 
implications. Unfortunately, in many cases U.S. dependency is 
severe, even complete.
    Consider clean energy. Graphite is key to EV batteries and 
energy storage. The United States produces zero natural 
graphite. We're 100 percent import dependent. Indium is needed 
for flat screen TVs and solar panels. We produce zero indium. 
Thin film solar panels are made of CIGS materials, copper, 
indium, gallium, selenium. We have a 600,000 metric ton copper 
gap at present and selenium is recovered from copper 
processing. Gallium comes from aluminum processing. We are 99 
percent import dependent.
    The list is long. We need radium for high strength alloys 
on fighter jets like the F35. Radium is dependent on copper 
processing, and we're 83 percent import dependent.
    We need rare earths in too many applications to list. Wind 
turbines, lasers for medical and national security 
applications, smart phones, smart bombs. We produce zero rare 
earths. We're once again 100 percent dependent on China. In the 
effort to reverse our resource dependency the American Minerals 
Security Act is a strong step in the right direction.
    In the Executive Branch productive work is being done at 
the Defense Logistics Agency to address strategic metal's needs 
and Critical Materials Institute at DOE. And at the White House 
the materials, the White House's Materials Genome Initiative 
which aims at supporting and I quote, ``U.S. efforts to 
discover, manufacture and deploy advanced materials twice as 
fast at a fraction of the cost.'' That's a laudable goal but 
it's going to prove difficult for American innovators to be 
twice as fast when America's mine permitting process is twice 
as slow as in many other mining nations.
    We could also do more to encourage recycling of rare metals 
from scrap laptops and cell phones, so-called urban mining. And 
we should continue efforts to find substitutes to rare metals. 
But we must recognize that the search for substitutes may 
simply swap our dependency on one scarce material for another 
equally or even more scarce.
    That's why I'm a subscriber to the all of the above school. 
Let's recycle and seek substitutes, but let's also recognize 
there's no way out of our dependency without added production.
    Going back to that commodity cycle. Pricing will come back. 
Remember the long run. But if the U.S. allows the trends making 
the long permitting process even longer, production of key 
metals is going to take place elsewhere and the manufacturing 
we want to see right here in America will be pulled where the 
metals are.
    I'll close with a comment and a question. I don't think 
there's another nation in the world that can match American 
ingenuity. We can pioneer the ideas behind wind and solar, we 
can design ever more powerful technologies for our war 
fighters, but where will the materials that make these new 
applications real come from?
    I thank the Committee for this opportunity to testify, and 
I look forward to your questions.
    [The prepared statement of Mr. McGroarty follows:]
    
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    The Chairman. Thank you, Mr. McGroarty.
    I think it is so important to the conversation that we be 
discussing minerals and those commodities. I think far too 
often we get focused on the vulnerability we have had 
historically when it comes to reliance on others for oil. That 
is understood. People know about that, but they fail to make 
that connect when we are talking about the need for our 
minerals and what it is that we use them for. So I look forward 
to that discussion with you.
    I want to ask the question that I think is on everyone's 
mind here today. As we have seen over the weekend the 
implementation day with the agreement with Iran. The fact that 
the sanctions that have been put in place on oil coming out of 
Iran have now been lifted, that those reserves that were 
sitting in tankers offshore are now able to go out and find 
customers.
    You have suggested, Mr. Sieminski, that in '16 we should 
anticipate about 300,000 barrels coming out of Iran into the 
global oil market by '17 an additional 500,000.
    Mr. Sieminski. Additional, right.
    The Chairman. That is what I would like to ask you about 
because there have been suggestions that what we will see 
ultimately is in the range of a million barrels a day coming 
from Iran. When you look to the longer term and what is 
happening with the response today from Iran getting their oil 
out on the market, the impact to the global market and to the 
price of oil, the fact that we already have a glut of oil out 
on the market, what does that mean for the short-term pricing 
of oil?
    You have indicated your estimate is somewhere between 40 
and 50 between year 2016 and 2017. Can you give me more 
certainty going beyond '17 in terms of what Iran does to the 
market?
    Also if you can, and I will ask you, Mr. Halff, to join 
this conversation, discuss the situation in Venezuela and the 
fact that you have indicated that we cannot ignore Venezuela in 
this discussion as we are looking at the international picture 
on production. So if we can have this conversation, Iran, 
Venezuela and just for good measure we can throw in Saudi 
Arabia here.
    Mr. Sieminski, if you want to start.
    Mr. Sieminski. Senator, Iran had been producing about 2.8 
million barrels a day of crude oil and other liquids. So we 
think that that could hit 3.3 million barrels a day by the end 
of 2016. So these numbers move around a lot. It depends on how 
much comes out of storage and how much comes out of production, 
and I'll come back to that in a second.
    And then we thought that the number could hit 3.7 million 
barrels a day by the end of 2017. So that's a little less than 
a million, but it's close to that million barrel a day growth 
number from where they are now to where they would be at the 
end of 2017. The annual averages would be a little bit 
different because the trend is up so the annual averages are 
going to be a little bit lower.
    In thinking about Iran there are two aspects to this. They 
have between 30 and 50 million barrels of floating storage in 
tankers that could come onto the market fairly quickly. But a 
lot of that is believed to be condensates. So it's a very light 
kind of crude oil, and the markets for that are mostly in the 
chemicals business and a lot of it was probably destined for 
China. And we'll just have to see how that works into the 
estimates for China's economic growth.
    The second aspect is how quickly production can actually 
grow. And that may depend on how rapidly foreign investment is 
allowed to come into Iran to help them rebuild their oil 
fields. And that could be a bit slow too. So there are a lot of 
uncertainties in this.
    And then layering on something that Antoine mentioned 
earlier, this relationship between Saudi Arabia and Iraq and 
Iran is very important. Iran is one of the three big players 
along with those other two countries in the Gulf area, and how 
each of those countries puts their volumes of crude oil on the 
market has a lot to do with where prices end up. And so there's 
probably going to be a lot of back and forth between those 
three countries.
    So I think we're back to that observation that says that 
the uncertainty in crude oil prices as we look out over the 
next year too, is very high.
    The Chairman. Greater volatility.
    Mr. Halff?
    Mr. Halff. Yes, I agree totally.
    I think for Iran the question is--there are four questions 
that we have to consider. The first one is how much can they 
produce now? The second one is how much are they willing to 
produce now? The third is how much is the market capable of 
absorbing now from Iran? And the fourth is how much is the 
long-term production capacity or the capacity to increase 
production in the longer term?
    The bottom line is nobody knows exactly how much they can 
produce today. We tried to look at it when I was working at the 
International Energy Institute looking at the testimony from 
people who've had access to the fields there. Our perception 
was that Iran had managed to repair some of the damage that had 
been caused under the previous President, Ahmadinejad, and it 
had the capacity to increase production fairly rapidly, almost 
instantly, by somewhere between 500,000 and 800,000 barrels per 
day.
    The question is for Iran. How much is it willing to sell 
given its price appetite? It's always been a hoggish member of 
OPEC. Since the early days of the Iranian revolution it's 
always taken the view that the west of the market should pay 
more for oil and that that oil is worth more than the market is 
paying for it.
    So not surprisingly I think Iranian dealers have made 
contradictory statements over the last few months that said 
they wanted to ramp up production immediately but they've also 
said they don't want to crash the market. They don't want to 
flood the market too quickly with too much oil and cause the 
price to fall even further.
    So the main question is how much the market can take? And I 
don't think it can take more than a few hundred thousand 
initially, two, three, maybe four hundred. And it's going to be 
a gradual ramp up for Iran to regain its market share.
    Now the capacity to increase production over the longer 
term that would depend on the willingness of investors to go 
back, the terms offered and that's much more questionable, much 
more longer term.
    The Chairman. Please, go ahead because I asked about 
Venezuela. We have not heard that yet.
    Mr. Halff. Venezuela is struggling. Its production capacity 
has been degrading over the years. Production volumes have been 
falling. It's managed to produce as much as it can, but its 
revenue has been doubly hit by the drop in volumes and the drop 
in prices. And it can sustain its production.
    Now based on the national oil company is asking for its 
foreign partners to pay for the light liquids or the 
condensates or enough of the import to blend the heavy crude to 
export it. The partners are not willing to do that. It's going 
downhill, and the social outlook, the social stability outlook 
is also looking very bleak.
    Now the question there is whether social turmoil could 
actually be, cause production to fall or to be disrupted as had 
been the case in 2002-2003 during the general strike there. And 
my view is that capacity is probably more insulated now from 
social turmoil than it had been at the time. But the outlook 
and the capacity to sustain production looks very, very dismal.
    The Chairman. Thank you for your comments.
    You know, this whole discussion about Iran is just so 
galling as a representative from a state that has enormous 
potential. We will, as a country, tell Iran go ahead, produce 
more while at the same time we are going to continue locking up 
our potential for further oil exploration and production 
whether it is on ANWR or whether it is our potential for 
offshore.
    So know that this is going to be a year where you are going 
to continue to hear me not complaining but being very 
discouraged and really quite angry at the way we have chosen to 
advance a policy when it comes to greater reliance on people, 
nations, that have not been good actors and yet continuing 
sanctions on ourselves which is what we are doing with 
certainly Alaska production.
    Senator Cantwell?
    Senator Cantwell. Thank you, Madam Chair.
    I want to, again, thank all the witnesses. When I think of 
your collective wisdom here of covering energy markets over 
your careers. It certainly must be an interesting time to now 
have your expertise asked for because certainly we are on a 
roller coaster of sorts. I am sure that it has been very 
interesting.
    I think for me you just have to understand I come from a 
hydro state where cheap electricity has rebuilt our economy 
over and over and over and over again. I appreciate not only it 
is not without some environmental cost, there clearly have 
been, but the efficiency which I think is the nom de jour in 
the context of where we are as a country, efficiency in every 
business model. Efficiency is going to continue to drive the 
energy sector as well. That is why so many people are 
interested in distributed generation because distributed 
generation, being closer to the source, automatically cuts out 
a big part of cost.
    So I wanted to ask you, Mr. Zindler--the years brought a 
significant shift in generating cost comparison between 
renewable energy and fossil fuels that is by Bloomberg New 
Energy Finance. Can you talk about how you see these trends 
moving forward and whether they will continue to compete based 
on price? And how do you see solar and battery technology and 
their trajectories in continuing to lower costs?
    Mr. Zindler. Sure. So thanks for that question.
    Well, I mean, look, the first thing to note about 
renewables and I think I hope I made this point in my comments, 
is that they are increasingly cost competitive. They're not 
cost competitive everywhere. And essentially the playing field 
in which this competition is taking place is growing virtually 
every day.
    And so, obviously the place where renewables are most 
competitive are in places where you have excellent natural 
resources and/or very high incumbent power prices. So they can 
compete against the incumbents and potentially win.
    So the places where we're seeing, let's say, wind most 
competitive often are in the center of the country, 
particularly in Oklahoma and parts of Texas, but also Iowa and 
Minnesota and elsewhere where you have some extraordinary 
winds. That combined with the fact that we are seeing bigger 
and more effective wind turbines that are being deployed that 
essentially can scoop up more of the wind and generate more 
power is making wind more competitive all the time.
    On the solar side the costs have been dropping, as you 
noted in your comments as well, quite rapidly. We don't see 
quite the same level of decline over the next couple years. 
Although we do see it declines longer term.
    And as you note quite rightly that when you're competing at 
the local level solar can be best positioned. In other words, 
as I'm sure you know, electricity is priced on a wholesale 
basis and then it's priced at a retail basis. And on a retail 
basis those prices are much higher.
    So inevitably solar can be much more competitive at a 
retail level, so-called behind the meter, because you just have 
to offset the price that the homeowner or the business owner is 
paying, the final price for electricity that they're paying 
which includes the distribution cost of getting it there. So, 
you know, those costs in the regions where this is taking place 
is expanding all the time.
    I would say this, that looking forward a big part of 
thinking about how competitive renewables will be, will be 
contingent on the price of natural gas. Gas is increasingly the 
price setter in the market. And gas trading at $2 per million 
BTU today, I think Adam was saying that they're forecasting up 
to $3 in the next several years. We do forecasting as well. 
It's probably in about the same ballpark.
    But so long as gas prices, you know, stay relatively low 
they'll be strong competition between those technologies. If 
gas prices zoom back up then we think renewables are extremely 
well positioned. But overall we think renewable costs continue 
to slope downward, not at the same accelerated pace we've seen 
recently but more gently going forward.
    Senator Cantwell. But if you were going to describe this 
inning of the ball game in reducing costs, we are probably just 
in the first or second inning.
    Mr. Zindler. Yes, we're somewhere in, I don't know, maybe 
the third or fourth. But, I mean, it's starting, you know, 
everyone thinks that one day we'll wake up and suddenly, wow, 
clean energy is cheaper than fossil energy. And it doesn't work 
like that, you know. It's a great, big, complicated world. And 
over time in different places we're seeing more and more of 
this take place.
    Last quickly just on storage and you did ask about that and 
I didn't answer. Similar, sort of, economics where power 
storage starts to make the most sense on the distributed behind 
the meter level at first because you're helping to offset the 
cost of retail power. And in some cases you're helping to 
offset if you have to pay surge pricing or you know, 
particularly high pricing or any kind of, you know, fees 
related to your excessive use of power. If you can offset that 
with power storage you're in good shape.
    So that's where we'll probably see some of this stuff come 
into the money first but there's been a lot of developments 
around utility scale power storage taking place as well and 
battery prices are--have been dropping. We anticipate will 
continue to drop as more capacity comes online.
    Senator Cantwell. On that point I want to keep making more 
investment because when I look at where this discussion has 
gone about oil and I remember Mr. Tollerson was before the 
Finance Committee a few years ago. I asked him what the price 
was just on the development. He was a very forthright, and he 
basically said $60 a barrel.
    So if we're at $30 today and $60 is the recovery cost, it 
seems to me that yes, as Mr. Halff said, there's going to be a 
correction at some point in time. I am not hoping to go back to 
$60 a barrel oil though. I want to diversify and make sure that 
we have a smoother path toward this transition.
    So thank you for that.
    The Chairman. Senator Cassidy?
    Senator Cassidy. Thank you.
    First, I think I heard Senator Cantwell mention that and I 
think I heard this, Senator Cantwell, that either wind or solar 
now provides more jobs than those which are in oil and gas? If 
that is what you said, maybe I misheard. That is not true.
    Just to point out the Bureau of Labor statistics points out 
that their direct employment under oil and gas is about 1.6 
million jobs, 1.86 million, and renewable jobs related to all 
renewable jobs in the United States is 724,000. And there is a 
greater differential if you include the indirect. Just to 
mention.
    Mr. Zindler, in your testimony you speak about how 
renewables now account for 67 percent of energy production but 
you include natural gas as a renewable. Is that in your kind of 
list of those which account for that 67 percent, was that a 
misprint or ?
    Mr. Zindler. I think I said if you include renewables with 
a definition including large hydro, if you include nuclear and 
you include natural gas. Those are not, those are different 
categories.
    Senator Cassidy. Okay. So under renewables, you are lumping 
in natural or put it this way, in that statement, renewables 
plus natural gas.
    Mr. Zindler. That may have been what I said, but I think 
what I wrote was I described these as different categories and 
that was my intention.
    Senator Cassidy. I will look at that again. I think I read 
differently but will not dwell upon it.
    Mr. Halff, I really enjoyed your testimony. I have enjoyed 
it all, but I never understood the perspective of the Saudis as 
well until I read your testimony. So, thank you for that. Let 
me ask a couple questions on that.
    You had mentioned that imports of light oil into the United 
States are increasing. Why is that if we have all this surplus 
light oil in the United States?
    Mr. Halff. So that's a function of the--thank you for the 
question. It's a function of the differential between U.S. 
prices and European prices.
    Senator Cassidy. But I presume that our Louisiana light 
sweet and West Texas intermediate is priced now similar to 
Brent but yet the transportation cost has to be less here. I 
mean, obviously, you are shipping it from Louisiana into a Gulf 
Coast refinery, so it seems that that would be a price 
advantage for a domestic producer.
    Mr. Halff. But that's the trick about U.S. transportation 
of crude oil within the U.S. It has to be done with Jones Act 
vessels or by rail and that's----
    Senator Cassidy. Or by pipeline off the Louisiana coast.
    Mr. Halff. Right. But there's only so much that can be 
moved by pipeline from east to west.
    Senator Cassidy. Okay.
    Mr. Halff. And to the markets where the imports of light 
crude have been coming in.
    Senator Cassidy. I am still not quite sure I'm, just 
because it even seems like most of the Louisiana, most of the 
West Texas intermediate is coming by pipeline. I am still not 
sure the impact of the Jones Act deployment. I can see if you 
are moving from Louisiana to Philadelphia but since most of our 
refining capacities are on the Gulf Coast I am still not sure 
unless you are saying that we are importing the light oil into 
Philadelphia.
    Mr. Halff. Yes. My understanding is the imports of light 
crude, light sweet crude, tend to go to the East Coast.
    Senator Cassidy. Gotcha.
    Mr. Halff. Of the U.S.
    Senator Cassidy. Gotcha.
    Next, Mr. Sieminski, this is not related to your testimony 
but it is something you are probably familiar with. The EIA has 
projected decreased energy consumption relative to baselines a 
little bit ago. So if there is a baseline five years ago your 
predicted energy consumption would be here. Your more recent 
forecast has energy consumption there.
    There is a tight correlation statistically, and it is 
reflected in EIA's data as well between economic growth and 
energy consumption. Is it fair to say that EIA has decreased 
its forecast for the amount of energy consumed, electricity 
consumed, because you forecast less economic growth?
    Mr. Sieminski. Our economic growth forecasts have come down 
slightly over the past few years, but I think that's just a 
reflection of some of the overall economic conditions and not 
just in the United States, but globally. To say that the ratios 
of energy consumption to GDP generally have been improving 
because of efficiency gains and some structural changes in the 
economy. So as you move from high energy consuming industrial 
activities to service sector, consumption goes down.
    Senator Cassidy. So maybe facts from energy intensive 
enterprises, if you will, offshore to China and what is left 
are service related jobs. If I may kind of, interpret that. And 
so you end up using less when your GDP is down but also you use 
electricity in a service job relative to energy intensive 
industry.
    Mr. Sieminski. I think these gains and efficiencies are 
taking place around the world including in China. But----
    Senator Cassidy. Now I have read though, if I may, that 
actually in times past when efficiencies have increased the 
amount of electricity used has likewise increased because the 
cost input, if you will, is now lower and so therefore folks 
are able to ramp up production because the cost input is lower.
    Mr. Sieminski. When EIA has done our long-term projections 
in our annual energy outlooks on the electricity side, I do 
know that a lot of the improvements are in efficiency. That's 
reduced use in households, for example, because of improved 
efficiency of lighting, improvements in the efficiency of big 
energy using equipment.
    Senator Cassidy. I am sorry, I am way over. Hopefully there 
will be a second round, so I will come back to that.
    Thank you.
    Mr. Sieminski. Happy to do that, Senator.
    The Chairman. Okay.
    Senator Hoeven?
    Senator Hoeven. Thank you, Madam Chairman.
    Alaskan water which is very nice.
    The Chairman. Alaskan glacier water.
    Senator Hoeven. Right, yes. That is great. Thank you.
    I would like to thank all the witnesses.
    We have an Administration, the Obama Administration, that 
continually makes it harder and more expensive and more 
difficult to produce oil and gas in this country through 
regulation and other restrictions while at the same time making 
it easier for our adversaries to produce and export oil and 
gas.
    An example is recently lifting sanctions on Iran. That is 
actually borne out in your projections. I think both Mr. 
Sieminski, Mr. Halff and maybe others just got done informing 
us that U.S. domestic production will decline by approximately 
600,000 barrels a day over the next several years and that Iran 
production and export will increase by 800,000 barrels a day 
over 2016 and 2017.
    I think that is the wrong approach, and I think it has 
ramifications in job creation in this country, in economic 
growth in this country and in national security from the 
standpoint of energy security.
    So my question to you, and I would like to start with Mr. 
Sieminski and Mr. Halff. I appreciate both of your testimony 
very much. I might ask Mr. Halff also to put in some projection 
in terms of what he anticipates for price over 2016 and 2017 as 
Mr. Sieminski did.
    Others can respond to this as well, but I would like you to 
give me your recommendations as to what we should do from a 
public policy standpoint so that our industry can better 
compete in this global economy. As we look at energy 
legislation, I know Senator Murkowski and Senator Cantwell have 
energy legislation they hope to bring to the floor, possibly 
even this week. What type of provisions should we advance to 
help our industry compete? I would like to start with Mr. 
Sieminski.
    Mr. Sieminski. Senator, I think I'll let Antoine talk about 
policy recommendations since EIA generally tends to stay away 
from those. And if I want to keep my job I should as well. 
[Laughter.]
    Mr. Sieminski. On the question of what has been the main 
factor driving oil production down, I would say it's the price. 
So I don't think it was a policy decision that caused oil 
production to climb.
    Senator Hoeven. That was not my question.
    Mr. Sieminski. Right.
    Senator Hoeven. My question is how do we empower our 
industry to compete rather than shackle it at the same time we 
are actually taking steps that assist our adversaries? That was 
my question.
    Mr. Sieminski. Right.
    Well, one thing that Congress and the Administration did in 
a bipartisan fashion was to agree to allow crude oil exports. 
So that would be one answer to your question. I think that 
allows for U.S. crude oil production to compete on global 
markets.
    The thing that's, kind of, limiting the impact that that 
would have in the near-term is that the Brent and WTI prices 
are very close together. And so the advantage that our crudes 
had on global markets is somewhat limited.
    Senator Hoeven. I agree.
    Lifting the oil export ban was very important and that set 
a very good example of what I am talking about. What else can 
we do that can make a difference, again, empowering our 
industry to compete? If you do not want to make 
recommendations, I understand. But then I would like to go to 
Mr. Halff. But that is specific to what I want. What can we do 
that helps our industry compete which benefits our nation? That 
is what I am looking for.
    Mr. Sieminski. I don't know whether it's necessarily a 
government function, Senator, but I think one of the big 
advantages that U.S. industry has had and is likely to continue 
to have is the technology, the technology of shale oil 
development occurred here and maintaining the improvements in 
costs of drilling and production is something that would make a 
big, positive difference for our producers.
    Senator Hoeven. Mr. Halff, do you have recommendations as 
to how we can help our industry better compete in this global 
competition, this global economy?
    Mr. Halff. I wish I had but I think it's actually doing a 
pretty good job competing. And I would agree that the lifting 
of the export restrictions is a very positive step because it 
allows oil to go where it's needed in the market and that the 
U.S. can compete in that. It's opening up new markets, 
potentially, if the financials support exporting. So that's a 
very good step.
    Another thing which I think is very good for competition is 
what Adam Sieminski has been doing at the EIA which is 
improving data transparency. The more the market knows about 
how the industry is doing, where the stocks are going, what are 
the trends in production and demand, the more investors are 
capable of providing the right response to making the right 
moves and helping the industry compete.
    But I think it's a very new world for the oil industry, you 
know, for most of its history oil companies have operated under 
some kind of price umbrella whether under the Rockefeller 
standard oil system or the Seven Sisters Texas Railroad 
Commission or OPEC. There was always some kind of protection 
against the fluctuations in prices that was provided to 
industry and enabled it to make a large, long term investments.
    Now, that umbrella has disappeared. It's gone. OPEC is out 
of the picture for now. It could come back later but it's out 
right now, and industry has to learn to live in a very 
different world.
    This is a process that will plan its course naturally. But 
my projections are that once the rebalancing of the market runs 
its course and the market starts recovering the U.S. industry 
would be in pretty good shape.
    I don't think that the oil companies in the U.S. would be 
the largest, the main victims of the price correction. OPEC, I 
think, will come out pretty good. GCC countries, I mean, Saudi 
Arabia, Kuwait, UAE and U.S. companies, I think, would come out 
on top.
    The bigger victims of the downturn would be the very heavy, 
big ticket projects, deep water, West Africa, all the very high 
investment intensive projects. Those would likely be more 
affected by the downturn in my view.
    Senator Hoeven. Any other recommendations, specifically, 
that help us compete? Alright, thank you.
    The Chairman. Thank you, Senator Hoeven.
    These are very important questions in terms of where these 
forecasts place the United States and our domestic production, 
what it means for our economy, what it means for our jobs and 
what it means for prices for the American consumer.
    It has been a tough, tough 18 months or so in Alaska. We 
have seen Shell, obviously, lay off almost all of their folks 
up north. Conoco has had major layoffs. BP just announced last 
week major layoffs in the state. Repsol canceled a winter 
project which meant contractors not moving forward with 
projects. Statoil returned their leases in the offshore. It has 
been a very, very discouraging time.
    Low prices in Alaska do not necessarily translate to good 
news. Our treasury is certainly hurting as a state that is very 
reliant on oil. But as I mentioned, low prices for the 
consumers do not necessarily line up with what you are seeing 
in the lower 48.
    I mentioned the prices in Nome. I tried to get a better 
read on what they were actually. In October they were hanging 
at $6.22. When I was there in January, they had dropped to 
about $5.50 a gallon.
    The clips this weekend have gasoline at $9.99 in Noatak, 
and they are trying to work with the Park Service to be able to 
haul some fuel across Park Service lands. I do not know whether 
we are going to be able to do that, but by gosh I am sure going 
to try because nobody should be paying $9.99 for their oil when 
people here in Washington, DC are getting it for $2.10 or 
whatever it is here.
    So there is a great deal of inequity, and that is what gets 
my dander up and gets my ire up. When I look to the 
opportunities that we have now created for Iran that we are not 
creating, that we are not allowing, for Alaska or other states 
like North Dakota or Louisiana, it should get us riled up.
    I recognize that so much of this is about price, but it is 
also about the policies that we put in place and making sure 
that you have an environment that is constructive. This is 
where I want to talk a little bit about the critical minerals 
and the situation that you spoke of, Mr. McGroarty. You said 
that the outlook is bleak when it comes to our mineral, 
critical minerals and particularly with our rare earths.
    Mr. Zindler, you have stated that 2015 will likely be 
remembered as watershed for de-carbonization. I think Mr. 
McGroarty went on to state exactly how important these minerals 
are so that we can move forward with wind and solar and all of 
the smart technologies that we want, but we really do not want 
to be even more reliant than we already are.
    I appreciate what you did in terms of outlining how, 
historically, we have been so reliant in certain areas. But 
instead of making progress it seems that we are actually going 
backward.
    Now you have indicated that there are some areas that we 
might be able to reduce this dependence. The fact that we 
produce zero rare earths and are now, again, 100 percent 
dependent on China for our rare earths should be unsettling to 
all of us.
    We have lousy permitting processes. Where, in terms of 
permitting for mines, minerals, if we are not the worst in the 
world, we are close to being the worst. I think Papua, New 
Guinea, is worse than us in terms of permitting. [Laughter.]
    But you have also mentioned prospects for recycling and 
substitutes. You have indicated that really even with that, 
unless we do something to increase our production, we are not 
going to get ourselves out of this hole.
    Can you speak a little bit to what you think our genuine 
alternatives may be when it comes to this reliance on our 
minerals?
    Mr. McGroarty. Thank you, Senator.
    Yes, there's--it's a very deep dependency, first of all. 
And in terms of bridging topics from oil and gas to hard rock 
minerals, as we look at, just from the energy side, new 
sources, new energy sources, alternative energy sources, I 
certainly would not want us to move from a dependency that has 
been difficult for us over 50, 60 years into a different sort 
of dependency for a whole series of new technologies.
    The Chairman. In fairness, aren't we there already?
    Mr. McGroarty. We are there.
    The Chairman. Yes.
    Mr. McGroarty. And that's why, as I said in my remarks, you 
know, all of the above. I mean we have to recycle. Such is our 
degree of dependency, we have to recycle. We have to reclaim 
the metals and minerals that are in, you know, the devices that 
we use every day, small and large, urban mining as they say.
    We have to look, I didn't mention one in the oral 
testimony, but a lot of waste piles from mines that are no 
longer in operation that date back 50 years, 70 years, 100 
years and the rate of extraction there is very dependent on the 
technology of the time and also, our interest in the metals and 
minerals of the time. So in many places around the United 
States we may have, we do have, opportunities to reclaim waste 
tailings by extracting the metals and minerals that are still 
there that either we did not do efficiently enough the first go 
round or we didn't learn after them at all the first go round. 
And now they're part of that periodic table that we're suddenly 
interested in.
    We should be doing all of that. We should be looking to 
substitute. But I am concerned about the easy discussions of 
substitution when you look, specifically, at what the 
possibilities are, the material scientists on these issues, 
where you're substituting for, you know, rhenium where we're 83 
percent dependent and you can substitute for this particular 
applications of vanadium. But we're 95 percent dependent on 
vanadium, you know, vanadium from Kazakhstan and vanadium from 
China.
    Are we looking at the degree of dependence that we're 
reinforcing or are we looking at the geopolitics of it? And so 
it pushes me back in the direction, we absolutely have to 
expand where we can, bringing new production into play.
    The metals and minerals we're talking about, all of the 
devices that we use, we're at the very bottom edge of that. I 
really do believe there's a revolution going on in material 
science, and it is impossible that it's not going to put a lot 
more demand pressure on us. So that we're going to have to get 
very inventive too.
    We're a very blessed nation. We're resource rich, but are 
we bringing these new resources into development or are we 
creating obstacles there?
    I just think as this whole sphere is evolving so rapidly I 
don't think our ability to, kind of, process what the 
physicality of the needs. You know, we're bringing power from 
the wind and the sun. The physicality of bringing it into the 
grid, distributing it, as we talked about today. Those take 
devices. What are those devices made of? Are we going to be 
buyers of those devices or would you rather be producers of 
those devices?
    So it's big issues for manufacturing, national security. 
And there's just a whole lot of metals and minerals where we're 
going to have to get used to treating in the same way as we've 
talked about oil and gas.
    The Chairman. Well, the good news for us is that not only 
are we blessed with amazing resources when it comes to our 
energy potential, but we have some amazing mineral resources as 
well.
    Senator Cantwell?
    Senator Cantwell. Thank you, Madam Chair.
    I want to go back to electricity for a few minutes.
    Obviously the business models are changing for utilities. I 
do not know if they feel that intensely at this moment, but I 
think future change will continue to drive that.
    It used to be that vertically integrated monopolies built 
power plants, strung transmission lines, distributed, you know, 
the customer billing and now customers or consumers and 
businesses are demanding more control and getting it. They are 
looking at cleaner sources. Clearly there is a lot of change to 
what has been the traditional utility model.
    We obviously want to continue to stir investment as well. I 
wanted to ask you, Mr. Zindler and Mr. Lucier, how do you see 
these business models evolving for utilities over the next 
several years, and how do we make sure that consumers feel even 
more empowered to get the kind of efficiency that they want out 
of their energy prices?
    Mr. Lucier. Well, the utility business model--thank you, 
Senator Cantwell, for that very important question.
    The utility business model has really been evolving 
rapidly, ever since Thomas Edison's Pearl Street Station in 
1882. And the initial concept that served us well into the 
1970's was the idea of economies of scale, to get low consumer 
prices we needed bigger and bigger operations. That broke down 
for a lot of reasons in the 1970's. It is actually the 70's, 
80's and the 90's when we heard about distributed generation on 
a big scale.
    Back then the focus was on distributed generation in terms 
of natural gas. But it still raised the issue of unbundling. I 
think that the model of cost-based regulation has been very 
helpful for providing infrastructure, but we're moving into a 
model now where scarcity-based pricing is what applies to the 
wholesale power markets.
    And that's really the fundamental issue here. You need to 
define scarcity based pricing in such a way that you adequately 
price reliability. You adequately price load following. You 
adequately price ancillary services to keep the grid going.
    And for that reason, I think, that you need to pay 
attention to a balance of industries and a balance of business 
models so that you have, not only the fly wheel, the power 
reserves that keep the grid going, but also the financial 
wherewithal to keep the entire thing flowing financially too.
    Senator Cantwell. Before Mr. Zindler answers I should just 
note we are pretty big fans of cost-based power in the Pacific 
Northwest.
    Mr. Zindler. So I would just say that I think this is a 
very interesting time for utilities. And in particular the 
question you asked earlier around distributed generation is 
what is causing probably the biggest sense of disruption and 
frankly, concern.
    Obviously when you, when a customer in your operating area 
starts generating power off their roof they don't need to buy 
as much, necessarily, from you as the utility. If you compound 
that by the fact that there may be so-called net metering where 
by effectively they can, you know, de facto sell the power back 
into the grid at a retail price, that also can be threatening. 
And so we have seen what I would say are at times 
confrontational situations between utilities and what have 
sprung up to be, you know, a relatively small industry growing 
of installers who have put these systems on peoples' roofs.
    And I guess the one, hopefully, constructive statement I 
can make about that is that I would hope that utilities would 
view this trend as something that they want to participate in 
and take advantage of and find business models whereby they can 
be the ones who can help either be directly involved in doing 
the installing or partnering with some of these players. And I 
say that only because, at least in our view, this is, to a 
large degree, inevitable.
    The costs are coming down. The technology is getting easier 
to put on peoples' roofs. It's going to happen. And so, it is 
probably better to be involved rather than being in conflict, 
necessarily, with what is an emerging industry.
    Senator Cantwell. Do you have a way to communicate that?
    Mr. Zindler. Testifying before the U.S. Senate Energy 
Committee. [Laughter.]
    Senator Cantwell. I hope you are right. I hope you are 
right because I see, as I mentioned in my opening statement, 
everybody from Tea Partiers to environmentalists coming to 
terms on the fact that they do not want to be overcharged just 
to get more energy efficiency as they participate in creating 
energy. I think utilities have to understand that.
    Mr. Zindler. And I, Madam Chair, will submit for the record 
Department of Labor statistics on green energy jobs verses 
fossil fuel jobs just to show the growth and amazing surpassing 
of that sector.
    Senator Cantwell. Yes?
    Mr. Lucier. Well Senator, I just wanted to follow up on the 
question of regulated utilities in the business model.
    I think that with regard to distributed generation one of 
the key issues is really just cost allocation. How do you price 
the power? How do you price the grid?
    And there's a lot of experimentation going on at the state 
level. And I think it's only a matter of trial and error, 
somewhat evolution until we find the answer that's going to 
work consistently across the country.
    If you look at what happened last year in the equity 
markets the S and P were down about one percent, utilities were 
down about seven percent. But on the whole, I think, utilities 
have a much more stable business market. And utilities in the 
regulated space actually have their own interests in utility 
scale solar as well.
    Where I'd really direct your interest would be the merchant 
power markets where last year we saw the stock prices of major 
merchants going down anywhere from 30, 40, even 70 percent. A 
lot of it having to do with natural gas but also a lot of it 
having to do with market price issues and policy questions 
about how markets would be structured in the future. So while I 
think that we can certainly accommodate the dynamic or 
distributed generation in a variety of ways, the area that's 
probably most urgent right now is the wholesale power market 
that serves two-thirds of the American public.
    Senator Cantwell. Yes.
    I would just note on that, that we in the Northwest, I 
think, have one of the largest deployments of electric vehicles 
just because, again, we have cheap electricity. So there is an 
upside as well to the utilities. Clearly, I think as Mr. 
Zindler said, get on the side of the consumer and see the many 
applications here that could grow the business, but grow it in 
a different way.
    Thank you.
    The Chairman. Senator Cassidy?
    Senator Cassidy. Yes, thank you.
    Mr. Sieminski, going back to where we left off our last 
conversation, whether or not the residential efficiencies can 
totally make up for this loss of projected power. You can 
explain it, if you will?
    I am looking at EIA's Annual Energy Outlook figures and 
because others cannot look, I will mention them. Your 2015 base 
case had 4,070 terawatts in 2013 increasing to 4,691 terawatts 
in 2030. A terawatt being 100 billion kilowatts, I think, a 100 
billion kilowatts.
    Now under the Clean Power Plan rule there is actually a 
savings, if you will, of 581 billion kilowatts which is to say, 
581 terawatts. Can we really save 581 terawatts on residential 
efficiencies? I mean, is that part of your projections?
    Mr. Sieminski. Well, there are three big factors that are 
driving the deployment of renewables: tax issues, regulatory 
issues and technology issues.
    Senator Cassidy. Now going back to this question.
    Mr. Sieminski. Right.
    Senator Cassidy. Is the EIA really, now granted these clean 
power plant projections, but EIA is estimating a 581 terawatt 
increase over the Clean Power Plan rule in 2030. You had 
mentioned some of those savings will come from residential 
efficiencies. Is it reasonable to assume that we can save 581 
terawatts from residential efficiencies?
    Mr. Sieminski. I'll have to get back to you with numbers. 
We have not done our final analysis of the Clean Power Plan 
overall impact. We will have that as part of the 2016 Annual 
Energy Outlook.
    Where the savings come from that would be required with the 
reduction in coal are--there was also the other side of that 
which is the possible increases in output of electricity from 
natural gas and of course, renewables.
    Senator Cassidy. Now under the Clean Power Plan will 
natural gas stay basically stable?
    It is amazing we have been looking at how much we would 
have to invest in renewables in order to make up for the 
shortfall. It is incredible, like the entire state of 
Massachusetts would be covered with the highest efficiency 
windmills sort of thing. It just does not seem practical. But 
that said, that is what the numbers show.
    Okay Mr. Zindler, by the way, I apologize. You were right 
when I read your statement again, you do read renewables, 
natural gas accounts, for most of the increase. I thought you 
were including the two, but as it turns out, of course, natural 
gas is the lion's share of that. I just misread, so I 
apologize.
    Mr. Lucier and then Mr. Zindler, distributed energy we 
speak of in terms of solar panels, but I remember being in 
California and people were putting in distributed energy 
natural gas generators at their office buildings. It comes to 
mind, Mr. Zindler, you said that an almost prerequisite for 
renewables to be competitive is for a high cost of electricity 
in that setting.
    To what degree are the distributed energy sectors, actually 
natural gas in these areas of high electricity like California, 
as opposed to solar or wind?
    Mr. Zindler. I can come back to you. I'll have to get back 
to you about exact numbers but the, at least in the most recent 
years, most of distributed phenomenon has been around solar.
    Senator Cassidy. Now is that in terms of volume of 
kilowatts produced or just in terms of installations?
    Mr. Zindler. I believe in terms, well certainly in terms of 
installations because obviously these PV systems can be very 
small. In terms of actual kilowatt hours produced it's probably 
a smaller margin. But still mostly, it's my understanding, it's 
PV.
    But you raise a good point which is there's an interesting 
opportunity there, certainly, for gas. And gas is finding its 
way into the economy in lots of different ways. There was, in 
fact, there was a good deal of talk around natural gas 
vehicles. That was before the oil price collapsed. And now it's 
going to be more challenging, of course, for gas to compete in 
vehicles. But there are more and more ways.
    I would say this that obviously when you do onsite natural 
gas generation you have to get the gas there and there's, you 
know, there can be those issues. But it's certainly not--
there's nothing about the solar distributed, you know, 
generations or revolution that we're seeing that precludes gas 
also being a distributed source.
    Senator Cassidy. Gotcha.
    Mr. Halff, you have done a really good job, excuse me, I am 
almost out of time, Mr. Lucier, I am sorry.
    Mr. Halff, you did a really good job of showing the 
international instability that is being created in some 
countries have an increase in instability because of high 
energy, two things, either high energy cost and/or low energy, 
low income from energy production, if you will.
    Now I am struck. Mr. Zindler says that for renewables to 
work the base load has to be expensive. Coal is cheap 
worldwide. India and China have clearly invested tremendously 
in coal in an effort to increase their economic growth. 
Obviously coal is cheap. It is there. They do not have to 
import it, that sort of thing.
    If we are to bring in those sorts of high energy costs that 
seems to be a prerequisite for mass scale electrification of, 
let's say, India. That almost seems unaffordable for India.
    I say that because economic growth is clearly in the 
interest of India. They are going to the Chinese to head off 
instability with economic growth. So in this context is it 
practical, is it foreseeable that those two countries, for 
example, will forego the use of their own natural resource, 
coal, for a renewable sort of grid?
    Mr. Halff. You are absolutely right that coal is very 
attractive for those countries and it's been the backbone of 
the Chinese energy sector. But we've seen some retrenchment in 
China, in coal use. Coal use has actually been declining 
lately.
    And----
    Senator Cassidy. Now is that related to the economy 
declining or is that related to----
    Mr. Halff. Well I would say it's related to the economy in 
part because there's less industrial activity but also to the 
external costs associated with coal. And for instance, 
pollution in major cities has become a top concern with Chinese 
policymakers. It's deterred, for instance,--workers from going 
to the Beijing area. It's caused social instability. It's been 
a cause of poor taste and riots and----
    So it's a top concern. And we've seen renewables take 
market share from coal in China, the margin. So it's not 
entirely just based on the domestic availability and the cost 
base. There's other factors at play.
    Also some of the coal pipelines, for instance, or coal-run 
factories in China have been very ineffective. And those are 
the ones that have been targeted for closure first by the 
government.
    In India, coal remains a very big part of the picture for 
the foreseeable future. But there the case for renewables comes 
from the idea of generated, of distributed generation and leap 
frogging some of the costs that have been associated with 
transmission and distribution in other emerging economies after 
they've gone through periods of expansion.
    Senator Cassidy. Gotcha.
    Mr. Zindler, I am sorry, I am out of time. But is that 
okay? Mr. Zindler?
    Mr. Zindler. I would just jump in and say I think on India 
in particular I'm happy to share with you, Senator, some of the 
really exciting things that have gone on around renewables and 
particularly distributed solar, as Antoine mentioned.
    There are 400 million people in India with no access, basic 
access, to electricity. And one of the most interesting 
developments we've really seen in just the last few years as a 
result of the lower cost of solar are very tiny microsystems 
that are being distributed for $100 or less into rural 
communities that provide just basic power needs to turn on a 
light, you know, a radio. These are the most basic needs that 
people have that are starting to be served.
    And frankly, if you do the math on that verses building a 
giant coal plant with the hub and spoke network, solar 
definitely competes.
    Senator Cassidy. Totally works on that. It is just the 
energy intensive enterprise that actually elevates them out of 
poverty, and that is, I guess, the more demand. Step one for 
400 million people that was just to turn on a light bulb.
    I yield back. Thank you.
    The Chairman. Thank you.
    I have got just a couple, hopefully brief, questions here. 
I want to go back just for a moment on natural gas and the 
reality that we have got to be able to move that natural gas 
and some of the opposition to infrastructure development.
    You noted this in your testimony, Mr. Lucier, and I think 
you state opposition to infrastructure development that could 
prolong the supply glut and put the timing of relief in 
question.
    So the question to you is if we have a situation where 
pipeline siting and permitting is delayed on a bigger scale 
what happens? What do you think the consequences are for 
natural gas? Could these types of impediments and we are seeing 
them, believe me, we are seeing them, particularly in certain 
parts of the country where there is a nimby attitude that while 
we want to have pipeline transmission but we do not want it 
running through our state, move it through somebody else's. 
Could we be in a situation where because of just that, kind of, 
political opposition we have a real threat to natural gas 
supply itself?
    Mr. Lucier. Well Senator Murkowski, we have too much of a 
good thing in some parts of the country. In the Marcellus, 
obviously, there's a tremendous amount of gas. And it is really 
building up there. We don't have the take away capacity.
    The Chairman. Right.
    Mr. Lucier. What that means is that the price of gas is 
lower in that Marcellus region which corresponds to PJM even 
MISO. And this is putting huge pressure, not just on power 
prices but coal-fired power plants and in particular on 
nuclear. So take away capacity for that gas is key.
    On the other hand, just three, four, five hundred miles, 
depending on where you count, we have New England. New England 
which is just totally dependent on gas for its merchant power. 
Very efficient network, but they don't have access to this 
great gas supply from the Marcellus.
    We've been fortunate this year to have warm weather. We've 
had El Nino shining on us. But we came very close to severe 
weather events during the Polar Vortex in 2014, not once but 
twice. And New England is still in a situation where they can 
still be one weather emergency away from a serious power or 
heating crisis. That shows the urgency of delivering gas from 
areas that are gas rich, in fact, oversupplied, to areas that 
are actually quite exposed right now.
    So I think in your oversight you should definitely pay 
attention to the efforts to build pipeline capacity into New 
England.
    But on the broader question of delivering natural gas to 
provide clean gas generation we're seeing a record number of 
pipeline proposals at FERC right now that is straining the 
resources at FERC. They're actually doing quite a good job to 
move forward.
    But we're also seeing FERC literally surrounded by hunger 
strikers who are demanding that FERC issue their new permits 
for anything. And the litigation is also slowing down those 
pipelines. And while natural gas is still a carbon based fuel 
it's cleaner than the alternatives.
    I was driving through the coal country of Southwest 
Virginia this time last year and noticed anti-pipeline signs. 
The State of Virginia wants to build natural gas power plants 
to reduce its overall dependence on coal, but if you can't 
build a power line in Virginia if the Atlantic coast pipeline 
is held up.
    People in my client meetings are constantly asking about 
what's happening with the Constitution pipeline, what's 
happening with any number of other projects. There is a lot of 
uncertainty among investors as to whether you can actually 
build a new power plant if you can't actually supply the gas to 
them.
    The Chairman. This is a huge issue for us, and they do not 
get near the attention. This is why I think it is going to be 
important that we are able to move some of our energy policies 
forward such as we have within the Energy Policy Modernization 
Act that we hope we will bring to the floor here very shortly.
    In this same context then about the impact of natural gas 
and what it does to other energy sources, whether it is coal or 
whether it is nuclear, I want to ask Mr. Sieminski about your 
projections on nuclear because in your chart, your table, 
number one on non-hydro renewables expected to make up nine 
percent of electricity generation by 2017. You indicate that by 
2017 actually our nuclear generation makes up less of that 
overall portfolio than it has in years past.
    If we have a situation as Mr. Lucier and I have just been 
talking about where you are not able to either move that gas to 
where it needs to get what does this do to your projections? 
How do you see the viability of nuclear as part of the energy 
portfolio going forward given what we are seeing with some of 
the constrictions on natural gas?
    Mr. Sieminski. Senator, I think in our annual energy 
outlook we have just a small amount, you know, 0.8 I think or 
it's 800, the difference between 789 and 808 billion kilowatt 
hours of generation from nuclear in the annual energy outlook. 
In the clean power plan, the proposal will have the final 
numbers out soon, but that didn't change very much. I would say 
that was nuclear is flat because we have total electricity 
consumption growing by about 0.7 or 0.8 percent per year. 
Nuclear's share is slightly decreasing.
    Back to the question that Senator Cassidy was asking. We do 
see under the clean power plan and the extension of the PTC and 
ITC for wind and solar, the tax credits as well as improvements 
in technology that have been talked about by other members of 
the panel that there will be improvements in the use of solar 
and wind as you look out. But we're also assuming that natural 
gas-fired generation goes up both in the annual energy outlook 
and in the clean power plan.
    The amount of generation under the clean power plan will 
come down a little bit. It will be replaced by more wind and 
solar and natural gas, not so much nuclear, back to your 
question, lower coal. But the total amount of generation is 
just a little lower.
    And so you don't have to have massive changes in the 
efficiency in the residential sector to make up for that. So 
basically residential users will be using more solar and wind 
capacity as well as natural gas capacity, but not nuclear.
    The Chairman. Not nuclear.
    Mr. Zindler, I am out of time, but if you wanted to add 
something very quickly, certainly we will give you that 
opportunity.
    Mr. Zindler. Yes, just very quickly back on the gas 
pipeline question.
    I did want to just note that, you know, we're looking at 
our forecasting where 2017 will probably see more capacity 
added for natural gas delivery than we've seen since 2008 with 
about 65 billion cubic feet per day being added over the next 
three years. There's a lot of pipelines that have been approved 
that are coming online that are directly related to that 
Marcellus and the Utica, and it's worth noting that I think 
that that may ease some of the bottlenecks that have existed so 
far.
    The Chairman. We are hoping so. Thank you.
    Senator Hoeven?
    Senator Hoeven. Thank you, Madam Chairman.
    I want to go back to Mr. Sieminski and Mr. Halff in terms 
of their energy, oil and gas price outlook.
    Mr. Halff, you talked about this black swan concept whereby 
OPEC and others may pump a lot of their oil now with the 
thought that later there may be less demand.
    Given the Saudi needs about $100 a barrel. In fact, Russia 
needs about $100 a barrel to cover their all in costs for, in 
terms of their spending in the budget. How does that impact 
they're continuing to produce at a high rate with prices as low 
as they are and how long do they continue that?
    Mr. Halff?
    Mr. Halff. Thank you.
    So Saudi Arabia can produce and endure on these reserves 
for some time. There's no immediate pressure there. Certainly 
they have been dipping in their reserves.
    Senator Hoeven. Are you talking about their financial 
reserves?
    Mr. Halff. Yes, yes. But they have the capacity, perhaps 
more than any other producers, to continue blending at fairly 
low prices for quite a while. However, we're seeing signs of 
pressure and we're seeing signals that they may be considering 
some quite revolutionary changes in the economy. There's talk 
of privatizing the national company to some degree. It's hard 
to say how much of that is for real, but there's signs of 
pressure and signs of a shift in the makeup in the economy and 
the mindset.
    Russia, it's a different situation because Russia has, in a 
way, benefited from the collapse of its currency. So its 
production costs have come off dramatically compared to the 
revenue which continues to be in dollars. So that, I think, 
partly explains why Russia has done so much better than anybody 
expected.
    In fact, its production has increased dramatically since 
things started looking really bad for Russia, since the 
beginning of the price drop and the imposition of international 
sanctions. Production had been expected by many to fall. And 
it's actually increased steadily. And Russia has been producing 
at record levels.
    So how long can this go on? Not forever. One advantage that 
the Russian companies have had also is that they haven't been 
affected by the price drop as much as the state revenues have. 
Their tax system is such that the companies have managed to 
keep, to hold onto, a lot of the take and the state budget has 
suffered most from the price drop.
    Now the companies go to state finances for funding. So that 
will, that's where, I think, the companies will hurt 
eventually. And that's what going to put a stop on the kind of 
steady production that was a growth that we've seen over the 
last few months.
    Senator Hoeven. Aren't those factors though going to drive 
prices higher at some point because how long, I mean, if their 
all in cost is $100 and they're selling at $30 or $40, how long 
can they sustain that?
    Mr. Halff. There's no question in my mind that the price 
will rebound and will rebound even steeply. When that will 
happen it's very difficult to time. Is it going to start at the 
end of 2016 or sometime in 2017?
    Currently the futures markets are pricing oil in 2020 under 
$50 a barrel. I don't think that's realistic. And you know, 
futures market are not particularly good forecasters of long 
term prices. Their track record is quite poor. In my view it's 
almost a given that prices would be significantly above $50 by 
2020. Now the timing is difficult to assess.
    And the capacity to grow production from many counties 
would be degraded. Russia, I don't think, will be able to 
continue producing at the kind of growth base that we've seen.
    Iraq has dramatically increased production, but it will be 
hurt by its incapacity to pay the companies operating there. So 
the dramatic increase we've seen more than one million barrels 
per day of capacity since the price collapse and the takeover 
of Mosul by ISIS. That's not likely to be sustainable to 
continue.
    And we're seeing now production drops in the U.S. in light, 
tight oil production. Those declines, I think, will continue. 
Eventually there will be a rebound. Light, tight oil is 
presumably much more price responsive, will be able to come 
back quickly when the price turns.
    Senator Hoeven. What is that?
    Mr. Halff. Shale oil.
    Senator Hoeven. Oh, yes.
    Mr. Halff. For short.
    Now one of the big questions is will shale oil when it 
comes back to the market, when both comes oils come back, will 
it come back at the kind of pace we've seen over the last few 
years or at the diminished pace?
    One key factor there would be the degree to which the cost 
deflation that companies have enjoyed since the price collapse 
whether that will stay or how much will re-inflation we're 
likely to see as demand for oil services rebounds with the 
price increase.
    Senator Hoeven. Mr. Sieminski, your thoughts?
    Mr. Sieminski. With the Chairman's permission.
    Senator Hoeven. Well, would you like to----
    The Chairman. Why don't you continue?
    Senator Hoeven. Thank you.
    Mr. Sieminski. Senator, I grew up in Pennsylvania and not 
in the great state of North Dakota but there is a phrase that 
might apply here. This ain't my first rodeo. I've seen seven 
big price declines, and I've seen six big price increases. I 
think Antoine and I agree that prices are coming back.
    I think getting at the heart of your question, let me just 
try to separate it into two parts.
    A number of countries, Iraq was in there. Venezuela was 
also in there, had numbers calculated, you know, a while ago, 
and they needed $100 to make their budgets. And in Russia's 
case the collapse in the ruble and the strength in the dollar 
have really improved their position.
    So they export oil. They get dollars for it. Their costs 
are in rubles. So that currency exchange ratio has really 
helped Russia.
    In the Saudi case they might not need $100 a barrel anymore 
either because they've undertaken price reform. They're now 
starting to look at ways to charge people a little bit more for 
gasoline and electricity and so on. So, you know, they can make 
some changes.
    But I think coming back to the heart of your question is 
can we have $30 a barrel oil continuing indefinitely into the 
future? And I think the answer to that is no. Prices could go 
lower. We could see $20. Why? Because the cash costs, there are 
three layers of costs in the oil business. There are cash costs 
and that's what you need to cover your immediate bills in a 
sense. And that's down near $20 a barrel.
    And then you've got mid-cycle costs. This is kind of like 
what you need to kind of hang on, it's like you might not be 
doing really well but you're paying some of your debts and so 
on. So you're not being shut down. That's probably in the range 
of $40 to $60 a barrel.
    And then there are the full-cycle costs. What does it 
actually take to go out and find more oil and to meet rising 
demand for oil because every forecast that I've seen assumes 
that. And those numbers are at least $50, I think, and possibly 
as high as $75, maybe even $80 a barrel.
    So at some point I think we've got to get back to that full 
cycle cost range because if we don't this big buildup that 
we've seen in inventories over the last year and a half is 
going to get drained down. And then something will happen and 
we could come back to the Senator's question. I think it was 
your first question, Senator Murkowski.
    What about Venezuela? They're exporting two million barrels 
a day on net. And that could go off the market given the 
social, political turmoil in that country. And then we wouldn't 
be talking about these layers of costs we'd be talking about, 
you know, what does it take to replace two million barrels on a 
global market where there's not a lot of spare capacity.
    Senator Hoeven. I am going to-- [Laughter.]
    I have a couple more questions but I would certainly defer 
if you have, if you want another round.
    The Chairman. No, I'm just sitting here enjoying this 
exchange.
    The Alaska legislature is convening this morning for their 
inaugural, the kickoff of their session, and the questions that 
are being raised in the discussion here is as important as 
anything for a state like mine that relies so heavily on oil 
and a state like yours that has relied so heavily. We have seen 
what happens when the price tanks and what that does to your 
economies.
    So please, continue, and I will have some when you are 
done.
    Senator Hoeven. Great. Thank you, Madam Chairman.
    The testimony really is important. If you look over the 
last several years the testimony that you and others provided, 
the information you provided was very important.
    We just recently, led by our Chairman, lifted the oil 
export ban which had been in place for 40 years. That was only 
possible because of the information you put forward that 
actually showed the benefits of doing so in terms of jobs, 
economic growth, energy security, lower prices at the pump and 
all those things. So in terms of creating the public policy we 
need this testimony, I think, matters dramatically so that we 
do create an environment wherein American entrepreneurs and our 
companies can unleash their ingenuity and compete.
    Mr. Halff, your comment about reducing the price curve and 
the ability to respond to the markets I think is an incredibly 
important key just like understanding long term, the pressures 
that will drive underlying pricing.
    It is not just important to fossil fuels. I think it has a 
dramatic impact on what happens and a realistic approach in 
terms of renewables and other types of energy.
    I want to shift, Mr. Lucier, you went to coal for a minute. 
What is the impact going to be from the Administration's three-
year moratorium on leasing coal on Federal lands? What are the 
ramifications going to be for the coal industry as a result? 
This is now in addition to the CO2 regulations the 
Administration has put forward, stream buffer rule regulation, 
many other things. Now what is the impact of this three-year 
moratorium going to be?
    Mr. Lucier. Well Senator, thank you for that question. 
That's actually an extremely important question. I haven't 
prepared an analysis of the impact of the three-year moratorium 
on coal leasing, but obviously it's going to be quite 
significant because it points to assets which are being tied up 
through extended studies and which may actually be developed in 
the future, only subsequent to, you know, increased charges, 
carbon charges, land access charges, increased royalties, 
etcetera.
    So this is interesting. The coal industry right now, as you 
know, is tremendously depressed. We actually have over supply 
in coal which is driving coal prices down.
    But I think you need to watch what the Administration is 
doing here to see what this means for all fossil sources 
because if we have to have programmatic environmental impact 
statements, looking at leasing on Federal lands for coal. This 
is clearly the first step for doing such programmatic 
environmental impact statements pertaining to leasing oil and 
gas on public lands too.
    So I think the economic significance given coal's depressed 
state is actually not a major issue right now. But the 
precedent this sets for all other fossil fuels and for public 
lands generally, is quite substantial.
    Senator Hoeven. Thank you.
    Mr. Sieminski?
    Mr. Sieminski. Senator, just some facts on this.
    In 2014, and that's the latest data, 42 percent of coal 
produced, U.S. coal production, was from Federal lands. That's 
a fairly high number. And the main states, Montana, Colorado, 
Wyoming, New Mexico, Arizona, and North Dakota, Senator, I 
think, possibly Alaska might even have some coal production 
from Federal leases. So there are issues there that in the 
longer term could be impacted. In the short-term there's 
probably enough property under lease to maintain output.
    I wonder if I could take a minute to come back to your 
question about--I'm going to risk talking a little bit about 
policy which I am not supposed to do. I want a do over on your 
question, Senator.
    The Chairman. I knew if we kept you for longer we could get 
some policy. [Laughter.]
    Mr. Sieminski. I think if you were looking to say what 
could you do to enhance U.S. energy production in the oil area, 
maybe even in a few of the other areas that the issues of 
infrastructure are really important and policy is the deal with 
the interest. I was reminded, Senator, because you were asking 
about the ability to move natural gas around. I think the 
ability to move oil around is an important one. Even crude oil 
products, the colonial pipeline which runs up into this area is 
running pretty full.
    Even issues like the electric grid which is being looked at 
by many people, including the Department of Energy.
    The Strategic Petroleum Reserve and the ability to get oil 
water borne from the Strategic Petroleum Reserve so that it can 
be moved to other parts of the United States and the DOE is 
looking at that. In fact, I think it was part of the law that 
just passed that instructed DOE to do so.
    So there are a lot of policy issues associated with 
improving the midstream, so not so much the well head. But I 
think that bit in the middle before we get the products to 
consumers that are, I think, we're really ripe for a good look 
at the policy issues surrounding that.
    Senator Hoeven. Thank you, Mr. Sieminski. I think that is 
absolutely right on, and I appreciate it.
    Mr. Lucier, I think you bring up a very important point 
when you describe how the moratorium that the Administration 
has put forward is right now on coal. But what are the 
ramifications of that for other types of energy like oil and 
gas? I think your point is very well made and it's deeply 
concerning.
    I will just wrap up with this question and that is as part 
of the legislation that our Chairman and Ranking Member are 
advancing one of the provisions included in the LNG Permitting 
Certainty and Transparency Act which Senator Barrasso is the 
lead on and I am co-sponsoring on with our Chairman and others. 
I would like some sense from, and I would start with again, Mr. 
Sieminski, Mr. Halff, but from any of you, in terms of what do 
you see, if we are able to advance that legislation and more 
readily allow for LNG export, what do you see the ramifications 
in terms of actually making a difference with some of our 
allies? For example, with creating markets here at home but 
actually making a difference for some of our allies in Europe 
and so forth in terms of reducing Russia's tremendous control 
because they are the energy supplier to Europe. Are there other 
things that would help?
    Mr. Sieminski. Right now I think that the main impediment 
to LNG exports is not the permitting which is, I mean, there 
are a number of Federal agencies that are involved in 
permitting. The two main ones are the Federal Energy Regulatory 
Commission for the engineering and environmental aspects and 
the Department of Energy Office of Fossil Energy for the 
national interest.
    Senator Hoeven. You are not just saying that because you 
are part of the Department of Energy? [Laughter.]
    Mr. Sieminski. I think that there was at one point, there 
was a view, Senator, that there was a bottleneck there. But 
that doesn't really seem to be the case. The--there has been an 
alignment between the Department of Energy and the Federal 
Energy Regulatory Commission on the permitting.
    So I think that coming back to what are the issues. I think 
that it's largely the economics. With lower oil prices the 
spread between global oil prices and lower U.S. natural gas 
prices has narrowed, and it's made it more difficult to export 
LNG or to look at the economics of LNG exports. If we should 
see a recovery in oil prices that would probably do much more 
to improve the prospects for further LNG exports.
    In EIA's numbers we do have LNG exports going up. I mean, 
it still makes sense into the Asian markets and possibly into 
Europe. So I think that things will look very different at the 
point that we get back more toward those full cycle costs 
associated with oil prices that you were asking about earlier.
    Senator Hoeven. Mr. Halff?
    Mr. Halff. Well I think the rise in the future price in 
U.S. LNG exports that's part of a game changer, the real 
transformation of the gas market. And I would just point out a 
couple of ways in which things would be different.
    One is the growth of gas as an international, global market 
with probably different pricing mechanisms looking forward and 
more international competition. That's going to be very 
important for European energy security because it would provide 
an additional source of gas supply in addition to the sources 
that Europe relies on right now.
    But also very important for Asia. And I think one key 
factor would be, one key way in which energy would have an 
impact, and it's not just U.S. LNG based or so. It's Australian 
LNG and Qatari LNG which are increasing. It would be to allow 
for more international competition between oil and gas and an 
increased use of gas as a bridge fuel in the energy transition.
    Senator Hoeven. Mr. Lucier?
    Mr. Lucier. Well Senator, you're really correct that if we 
want to help our friends, especially our gas consuming friends 
in Japan, in Asia and elsewhere, we do want to increase global 
supply. This will certainly help Europeans looking for broader 
supply.
    But it's not just our friends that we have to think about. 
We have competitors too. And in a very tight global LNG market 
right now there could be competition to see who actually builds 
the export facilities and to see who actually get the export 
business.
    So anything we can do on the margin that means that U.S. 
projects have an edge or U.S. projects have more certainty 
against last minute delays does help U.S. producers and it does 
improve our competitive position. Sure, it helps our friends, 
but I think we need to think of ourselves in comparison to 
competitors as well.
    Senator Hoeven. Mr. Zindler?
    Mr. Zindler. Just a very, very quick point which is that I 
think the LNG play, I agree with what everyone said on LNG.
    One area I would say take a look at which has been 
interested is exports into Mexico which is not LNG but just 
simple cross border stuff. And that, we think, is going to 
continue to rise. It's a very interesting area for the gas 
market. And there's major energy reform underway in Mexico as 
well that could drive even further gas demand as well.
    The Chairman. All excellent points.
    Thank you.
    Senator Hoeven. Thank you, Madam Chairman.
    The Chairman. Thank you.
    Senator Cantwell?
    Senator Cantwell. Senator Hoeven, that was the longest 
question session I think I have seen in this Committee.
    The Chairman. But it was good----
    Senator Cantwell. Well, yes, I know, I understand. I think 
it's been a good discussion and panel.
    And again, I thank the witnesses.
    Mr. Halff, to me I do not necessarily want to argue as much 
about the past as I want to plan for the future. I think your 
answers to my colleague, Senator Cassidy, about the Chinese are 
to point that part of the discussion here is also political and 
that consumers are demanding a different world and China is 
responding to that.
    So no, I don't think India is going to build coal plants 
galore when they have issues, nor do I think that China is 
going to pursue that. I do think that the President's action 
since we already have 20 years of coal under lease, I think is 
very important that we assess for the taxpayer what the 30 
years beyond that looks like and make sure the consumers are 
getting a fair price.
    My question is to Mr. Zindler on the corporate installation 
of renewables because I think this is also where consumers are 
somewhat driving behavior, but also I think corporations are 
driving efficiency. I think corporations are looking at it as a 
win/win. I think Walmart looks at it and says energy efficiency 
is a win for us. It's a win with consumers, and it's a win for 
our power. I think that is where Google and other people are. 
What do you think the renewable purchase from corporates to do 
grid scale renewables is going to look like for 2016 and into 
the future?
    Mr. Zindler. That's a good question.
    So last year I think was roughly about a third or so of all 
power purchase agreements that were signed in the U.S. for 
large scale clean energy were signed by corporations, 
essentially directly to buy the electricity themselves.
    And I think the motivation there is primarily economic 
which is that essentially it gives you the opportunity to know 
that what your price of power is going to be over a long, fixed 
period of time and essentially lock it in. It's not that 
they're buying all of their power from renewables, but if they 
can essentially lock in some chunk of it then they can offset 
the risk of fluctuations in electricity prices going forward.
    So that's been one of the main motivators I think that 
we've seen take place so far. And you're right in noting 
Google, certainly Microsoft in your state, but not just, you 
know, tech companies, but others as well. Kaiser Permanente, 
IKEA, others have been involved in different ways in renewable 
energy.
    So I think that that's how they view it is that you 
essentially eliminate one risk which is the unknown of 
electricity prices which are tied to a variety of factors we 
talked about here today including gas prices and other things 
and you essentially just lock it in. So that is an area we 
think will continue to look interesting.
    I will say this which is that it is predicated on the 
notion that you have fears about power prices rising. And if 
power prices go down then corporates might get a little less 
interested in this area because then they're not as worried 
about the fluctuation in prices because they feel like they 
could go down in the future.
    But thus far, most of the attempt has just been to lock in 
a price that you know it's going to be over a long, fixed 
period of time.
    Senator Cantwell. I think what is happening is consumers 
find out more information about pollution and particularly in 
China they are raising great concern.
    Mr. Zindler. Yes.
    Senator Cantwell. I think people are trying to respond. But 
I see it across the board even in marketing that i3 which is a 
great vehicle by BMW, who is advertising not only the fact that 
it is this next generation car, but that it is also built with 
renewable energy. Their plant run in Moses Lake is using hydro 
power. They are trying to say it is the all renewable car from 
the beginning of its origins and how power was generated to 
create it and the fact that it is recyclable material within 
the car.
    I think people are trying to win in the marketplace on this 
issue, and I think the consumers are demanding it. So I think 
it is probably both, at least for now anyway.
    I definitely think it is something for us to continue to 
look at how grid-scale renewables, solve some of the questions 
that we want answered as it relates to distributed generation. 
Moving forward I don't know if you have anything else on that 
point, Mr. Lucier, about questions that we want answered in the 
electricity grid. But obviously, you know, there is everybody 
from Elon Musk to many others who are putting lots of ergs into 
battery technology as it relates to giving us more flexibility 
on renewables and building that capacity into the grid.
    Mr. Lucier. Well that's a big--well thank you, Senator 
Cantwell. That's a big, open invitation. I'm not sure what I 
can say succinctly in 30 seconds.
    I mean, clearly, putting power storage on the grid and 
combining it with distributed generation on the edge of the 
grid is something that really could revolutionize the industry. 
It certainly does provide a lot of solutions for many issues.
    I just point out though that the grid is a totality and 
that while the grid has an edge, the grid also has a core. And 
at the moment it's the core, the core transmission that works 
the core generation assets that are keeping the grid alight, if 
you will.
    I think back to discussions of things like participant 
funding or stranded assets back in the 80's and 90's. That was 
actually part of a discussion that led into distributed 
generation too in the 90's. So these are not necessarily new 
issues.
    The key point is that power has a price. Access to the grid 
should have a price. Regulators who do cost allocation are very 
good at figuring this out. And over time in market evolution we 
do figure out ways in which you can fairly price resources 
whether it's the energy side or the infrastructure side.
    So I'm actually very confident that we'll see a very robust 
partnership develop. I think there's an opportunity for many 
thousand flowers to bloom. And I think we'll see a lot of 
innovation going forward.
    Senator Cantwell. Well I certainly like that analogy. And I 
definitely think that what we get out of the grid is a layer of 
efficiency. When I look at that ability to have that 
technology, not only utilized in the United States, but around 
the globe, now that is a major transformation.
    Thank you, Madam Chair, for this hearing.
    The Chairman. Thank you, Senator Cantwell.
    And thank you, to each of you gentlemen. I appreciate the 
time that you have given us. We have gone well over our usual 
time, but when you think about what has been discussed here 
today we really are at that point of substantial change.
    Mr. Zindler, in your testimony you say, ``A fundamental 
rethink is now well underway about how energy gets produced, 
delivered, consumed and managed in many parts of the world 
including the U.S.''
    I would think, based on the testimony from each of you that 
you would all concur with that. When you think about where we 
are, the discussion that was raised about coal. The impact that 
we will have of this three-year moratorium on leasing on 
Federal lands. The impact of the clean power plan.
    When you think about where we are with natural gas, what's 
happened with the low prices, the potential for some disruption 
because of infrastructure issues.
    When we talk about the necessity for critical minerals and 
how that will allow us to build out our renewable energy 
sources through enhanced technologies, and yet we recognize 
that we are going in the same direction with critical minerals 
that we were historically with oil.
    The oil picture we could take a week of hearing in just 
understanding what is going on in Iran and Iraq and Saudi 
Arabia and Venezuela. We did not talk about Libya. Russia. 
Layer in now in the discussion about our ability to export onto 
the global oil market and what that means.
    The impact to all of this on nuclear as we are seeing 
changes or our policy decisions made through clean power plan. 
What the price of natural gas does to nuclear, what we are 
seeing there. Distributed generation in the mix of renewables. 
The policy decision that we made last month to allow for a 
continuation of the production tax credits there. The policies 
that we are putting in place juxtaposed to the political and 
geopolitical aspects of energy. The pricing situation. 
Infrastructure.
    It begs for a modernization of our energy policies, and 
that is what Senator Cantwell and the members of this Committee 
have produced in an 18 to 4 vote moved out of the Committee in 
July. It might not solve all the problems in the world. In 
fact, I think we can guarantee that it will not. But what it 
does do is updates our energy policies from eight years ago 
which desperately need updating in all of these different areas 
whether it is permitting, whether it is how we look at our 
grid. It is how we move forward in the energy space.
    So my hope, and I think Senator Cantwell's, is that we will 
be able to move to this quickly. I think it is an imperative. 
An imperative for our economy because when we are talking about 
energy security, to me that translates to national security 
which also translates to economic security.
    So we have a lot to offer in this space. Know that we will 
be working on it.
    But we appreciate your guidance this morning. I do not know 
if you have made the crystal ball clearer or have just reminded 
us as to how cloudy and complex it really is, but we appreciate 
your wisdom.
    With that, we stand adjourned.
    [Whereupon, at 12:28 p.m. the hearing was adjourned.]

                      APPENDIX MATERIAL SUBMITTED

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