[Senate Hearing 115-513]
[From the U.S. Government Publishing Office]
S. Hrg. 115-513
ENERGY-RELATED CHALLENGES AND
OPPORTUNITIES IN REMOTE AND RURAL AREAS OF THE UNITED STATES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
APRIL 19, 2018
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the
Committee on Energy and Natural Resources
Available via the World Wide Web: http://www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
30-280 WASHINGTON : 2020
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 JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
LAMAR ALEXANDER, Tennessee MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
BILL CASSIDY, Louisiana TAMMY DUCKWORTH, Illinois
ROB PORTMAN, Ohio CATHERINE CORTEZ MASTO, Nevada
SHELLEY MOORE CAPITO, West Virginia TINA SMITH, Minnesota
Brian Hughes, Staff Director
Patrick J. McCormick III, Chief Counsel
Chester Carson, Professional Staff Member
Mary Louise Wagner, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Spencer Gray, 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..................................................... 3
Hoeven, Hon. John, a U.S. Senator from North Dakota.............. 6
WITNESSES
Plowfield, Carole M., Director, Office of Indian Energy Policy
and Programs, U.S. Department of Energy........................ 6
Greek, Matt, Senior Vice President of Research, Development and
Technology, Basin Electric Power Cooperative................... 13
Hardy, Doug, General Manager, Central Montana Electric Power
Coopera-
tive........................................................... 20
Lyons, Andrew, Weatherization/Energy Assistance Manager,
HopeSource..................................................... 25
Venables, Robert, Executive Director, Southeast Conference....... 34
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
American Public Gas Association:
Letter for the Record........................................ 122
Cantwell, Hon. Maria:
Opening Statement............................................ 3
Greek, Matt:
Opening Statement............................................ 13
Written Testimony............................................ 15
Responses to Questions for the Record........................ 102
Hardy, Doug:
Opening Statement............................................ 20
Written Testimony............................................ 22
Responses to Questions for the Record........................ 109
Hearth, Patio & Barbecue Association:
Letter for the Record........................................ 125
Hoeven, Hon. John:
Opening Statement............................................ 6
Lyons, Andrew:
Opening Statement............................................ 25
Written Testimony............................................ 27
Responses to Questions for the Record........................ 117
Murkowski, Hon. Lisa:
Opening Statement............................................ 1
Chart entitled ``Road Belt Inter-Tie''....................... 71
Plowfield, Carole:
Opening Statement............................................ 6
Written Testimony............................................ 9
Responses to Questions for the Record........................ 96
Utilities Technology Council:
Statement for the Record..................................... 128
Venables, Robert:
Opening Statement............................................ 34
Innovation, Inspiration, & Opportunity -- Artwork submitted
by Alaskan Students in Grades 5-8.......................... 35
Written Testimony............................................ 54
Responses to Questions for the Record........................ 120
ENERGY-RELATED CHALLENGES AND OPPORTUNITIES IN REMOTE AND RURAL AREAS
OF THE UNITED STATES
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THURSDAY, APRIL 19, 2018
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The Committee met, pursuant to notice, at 10:08 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. LISA MURKOWSKI,
U.S. SENATOR FROM ALASKA
The Chairman. Good morning, everyone. The Committee will
come to order.
Welcome to our witnesses.
I want to just make a quick note that struck me when I was
looking at the background of each of you this morning and what
you will contribute. The five witnesses today who will discuss
rural and remote energy, they come from five different time
zones across the country. We used to have five in the State of
Alaska, but we decided to be more efficient, and we are now
down to just two, but we have folks from five different time
zones. So it is a group that can cover a lot of ground, both
literally and figuratively.
Robert, Mr. Venables, I don't even think the sun is up in
Juneau yet, hopefully it will be a good day there. Mr. Lyons is
from Washington State. Mr. Hardy joins us from Montana. Mr.
Greek, North Dakota. And Ms. Plowfield is representing home
court here on Eastern Time.
This diversity is a reminder that we have rural and remote
communities all over the United States. We are here today to
focus on their energy challenges and opportunities in the hopes
of moving the ball forward on more affordable, more reliable
and increasingly clean energy for all of them.
Now, depending on the definition of rural that you adopt,
anywhere from 15 to 20 percent of our nation's population lives
in a rural area. According to the U.S. Census Bureau, that
totaled 60 million people as of December 2016, with nearly 75
percent of our national landmass considered rural.
In Alaska, we paint a pretty extreme picture. We say it is
a beautiful picture, but when it comes to rural, it is more
than rural, it is ``bush''--and rural takes on a truly
different connotation.
We have 234 communities that are outside of our
``Railbelt'' area, which is an area that is a road system that
goes up, down, kind of in a triangle. Outside of that Railbelt
we have these communities that comprise maybe 20 people. Some
of the largest communities that are off the Railbelt are about
8,000 people, so very small populations.
Just over three-quarters of those communities are not
accessible by road or the marine highway system, our ferry
system. When you put it in context, about 80 percent of the
communities in the State of Alaska are not connected by what
folks down here would just assume you have to be connected by
road, because if you are not connected by road how do you get
anywhere? How do you do anything? Well, it makes things just a
little bit more expensive, a little bit more complicated.
By one measure, rural Alaskans pay more than twice as much
to heat their homes than folks in the Lower 48. Electric rates
are so high that the state has implemented what we call a Power
Cost Equalization (PCE) program, which helps subsidize energy
costs. We have discussions all the time about well, what do you
pay in the community of Haines for your energy? The discussion
is not so straightforward because if you are residential, and I
don't think Haines necessarily is, are they available for PCE?
Okay, so, if you are residential, your rate is going to be able
to be subsidized through Power Cost Equalization. If you are a
commercial entity, like a barber shop, you do not have that. So
you can be looking at some pretty considerable differentials in
terms of your rates.
We have just under 200 PCE-eligible communities. Their
average residential rate is $0.58 a kilowatt-hour. Now compare
that to Vermont which understand is about $0.15 a kilowatt-
hour. What you have are these communities that are relying on
costly diesel fuel for heat and electricity. The cost of the
energy carries over to everything else that they do.
And it is not just for those that are off the road system.
I met with folks this week about what we call our ``Road Belt''
area. Within that Road Belt area these systems are not
connected, necessarily, to one another. The little community of
Chitina is paying over $1 a kilowatt-hour, and they are on the
road system. Communities like this are just not sustainable,
and I think we recognize that.
In Alaska, Montana, Hawaii, North Dakota, any number of our
states, too many people are living on the edge of what Senator
Tim Scott and I call ``energy insecurity.'' There is real
trouble in too many households when already expensive energy
bills just keep piling up.
I have told this story many times, but I was in an interior
river community up off of the Yukon River, having a little town
hall meeting. A woman came up to me, and she had an infant in
her arms that she was providing foster care for--and she gave
me a receipt. It was a receipt for $50 for five gallons of home
heating fuel. She said, ``I had to make a decision as to
whether or not I was going to buy heating fuel to keep the
house warm or whether I could afford to buy baby formula for
the baby.'' And she said, ``I'm just going to have to stretch
the baby formula, because it's too cold right now in Aniak.''
You look at that, and I carried that receipt around. I
still have that receipt, because it is a powerful reminder of
the tradeoffs that far too often our families have to make.
Now where there is challenge, there is also opportunity.
That is part of the reason why we are seeing innovation bring
costs down in many of our rural and remote areas, often by
adding locally available resources such as hydropower, wind,
geothermal or woody biomass onto our microgrids.
I think we all recognize that rural energy is a priority
for so many members on this Committee. I think we all recognize
how important it is to tackle the challenges that these
Americans face through smart, effective policies.
That is why so many of us support the state energy, the
LIHEAP and the weatherization assistance programs. I think we
know full well the imperative of these programs for so many
families.
It is why so many of us are working on legislation to boost
and improve rural energy systems--and that includes the broad
bipartisan energy bill, pending on the Senate calendar. Senator
Cantwell and I are committed still to advancing this. We have
worked hard on this as a Committee, and I think those
provisions will benefit our remote communities.
One specific example of that in our energy bill is the
effort to open the DOE's loan guarantee program to the states
to help provide financing for a larger number of small projects
that would otherwise not be considered.
So again, I thank our witnesses for being here this
morning, I know you have all come from far away places. I
appreciate the perspectives that you will lend to the Committee
and appreciate your time.
With that I turn to Senator Cantwell for your opening.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Madam Chair. Thank you for
holding this important hearing today.
I want to welcome Andrew Lyons here from Ellensburg,
Washington, and I look forward to what he says.
You are right. This is a broad spectrum of witnesses from
across the United States. I wouldn't blame you if we had a
hearing just on rural energy costs in Alaska alone.
I think this is such an important issue. I think it is such
an important challenge for our nation.
Having toured Alaska with you and other members of your
delegation, it literally hurts my heart to see the high cost of
energy in an area of the United States of America. We have to
do better, and the technology resources are there, I believe,
to do better, but I think we have to help you and other members
of the Committee who are in similar situations figure out cost-
effective ways to do these demonstrations so we can find
scalable solutions to these issues. I pledge to you, I am happy
to have another hearing focused just on these technology
solutions and possibilities for Alaska.
I have pointed out many times, as Alaska's economy grows,
so does the Pacific Northwest's. So we have a little bit of
interest at hand as well.
That is why it is so hard to sit here and tell the other
side of the story, that more than a million Washingtonians who
live in rural parts of our state have benefited from one of the
most successful federal initiatives in our nation's history.
The electrification that came with the legacies of The New Deal
have brought us electricity rates at $.03 to $.04 kilowatt-hour
rates.
So what happened is the Bonneville Power Administration
brought that light to farmers and to rural towns across our
state, and it has paid benefits over and over again. It built
our economies on various industries, but today companies like
BMW go to Moses Lake because of cheap electricity. Our biggest
problem today is that bitcoin miners are there to take
advantage of the scrambling. Cheap electricity rates are almost
overwhelming the utilities. People are putting up bitcoin
mining sites in shacks, garages, and houses just to capitalize
on that cheap electricity.
So the calling card, the cheap electricity, is still a
beacon, and that is why it is so important that we continue to
focus on these issues in other parts of our country.
The President's proposal to abandon Bonneville Power
transmission issues is not something anybody here, I think, is
going to support and obviously, as you pointed out, when you
have high energy costs, people skip other things that are so
important, whether that is food or medicine.
So we need to focus on energy efficiency programs that are
critical to rural communities. I know Mr. Lyons is going to
talk about that. You mentioned weatherization, and I am glad
that my colleagues continue to support those efforts. I think
Mr. Lyons is also going to address that.
Obviously, rural communities need more access to reliable,
affordable energy. I know that, as you mentioned, there are
various initiatives that you have taken in the Energy bill that
we need to get done so we can continue to address this.
The fact that weatherization saves low-income families 23
percent on their energy costs is something, I think, we should
continue to focus on how we might, in the short-term, continue
to use that as a way to help communities.
Ms. Plowfield, obviously from the DOE perspective, tribal
energy programs are so important. I strongly support the
technical assistance and competitive matching grants that are
used by so many tribes. DOE support ranges from solar panels on
the Spokane Indian reservation to coastal resiliency planning
grants to places like the Makah Tribe, which is in one of the
most remote parts of our state.
I hope that we can learn today how we might be able to use
that program in a more aggressive way. As I mentioned on some
of these scalability issues, if there are ways that tribes in
Indian Country can work with DOE on demonstrating scalable
solutions that may not otherwise be able to get the technical
assistance, I think that would be a really great avenue for us
to work on.
So thank you so much for this hearing, Madam Chair. And
thank you to the witnesses. I look forward to hearing what you
have to say.
The Chairman. Thank you, Senator Cantwell.
We will think about a way to profile the issues, the high
cost issues, in Alaska, whether it is a hearing here--we had a
very successful field hearing in Cordova. I thank you for
coming out to that. But again, that was an opportunity to just
see a little bit of what microgrids do. Some of my colleagues,
I know Senator Daines and some others, had an opportunity to go
with us out to Oscarville, just outside of Bethel, and see,
along with Secretary Moniz at the time, some of the challenges,
but again, the opportunities that are out there. I look forward
to exploring that with you.
Senator Cantwell. I know you wanted us to drive a
snowmobile on a frozen river. I know that----
The Chairman. It was safe at that time. It is now spring,
so I am not going to advise that we do that.
I did have an opportunity to learn a little bit more about
the fascinating and the very great history in your state and
the contributions of other Washingtonians. Homer T. Bone--I was
a recipient of an award from the NWPPA, the Northwest Public
Power Association, and we got a little bit of a history about
his involvement as a Senator from Washington and a good
reminder of what went on there that has provided enduring
benefit for the people in the region. It is really a great
story about American energy initiative and ingenuity.
With that, let's begin with our witnesses. I would like to
welcome you all.
Ms. Carole Plowfield will begin our testimony this morning.
She is the Director----
Senator Hoeven. Madam Chair, if I may, could I do an
introduction before you have the witnesses testify?
The Chairman. Yes, yes.
Senator Hoeven. At the proper time.
The Chairman. I was going to let you introduce Mr. Matt
Greek.
Senator Hoeven. Perfect.
The Chairman. Let me begin with just noting Ms. Plowfield
is the Director of the Office of Indian Energy Policy and
Programs (OIE) there at DOE. We appreciate you being here.
I will have Senator Hoeven introduce Mr. Greek, but let me
skip over and just do the others here quickly.
Mr. Hardy is with us as the General Manager of Central
Montana Electric Power Cooperative. We like to have the co-ops
here, getting their perspective. We appreciate all that you do.
I think between what we have in North Dakota and what we
have in Montana and the impact of our cooperatives, there are
more than 900 cooperatives in 47 states serving about 42
million Americans. I think the challenges for the co-ops are
pretty unique, but we will hear a little bit from you folks
this morning.
Mr. Lyons was introduced a little bit by Senator Cantwell.
He is the Weatherization and Energy Assistance Program Manager
of HopeSource in Ellensburg, Washington.
Mr. Robert Venables has been before the Committee on
previous occasions. He is the Executive Director of Southeast
Conference from Juneau, formerly from Haines, formerly all over
Southeast Alaska. I know you rack up your Alaska Airlines miles
and this trip is just another example. We appreciate your
leadership here.
Senator Hoeven, I would ask you to introduce your
constituent from North Dakota.
STATEMENT OF HON. JOHN HOEVEN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Hoeven. Thank you, Madam Chairman.
I am very pleased this morning to welcome Mr. Matt Greek as
one of our experts providing testimony this morning. He is the
Senior Vice President for Research and Development at Basin
Electric.
You mentioned the cooperatives. Basin Electric is actually
a generation and transmission cooperative that is owned by the
rural electrics collectively and serves about three million, or
probably more than three million, customers in about nine
states. They are very innovative and creative so you have the
right person here with Matt, because they are not only doing
leading edge technology development in coal-fired electric,
they also have gas and they also have a lot of wind and
transmission which is a huge issue as both you and the Ranking
Member are so well aware.
So they are really doing some exciting things. You will get
to hear about it a little bit today. The Allam cycle, which is
carbon capture and sequestration.
Basin also owns the Dakota gasification facility which
takes coal mined in North Dakota, converts it to liquefied
natural gas, puts it in the pipeline, captures the CO2 and puts
that in a pipeline and sends it out to the oil fields for
secondary oil recovery in addition to making many different
byproducts, krypton, xenon and many other things.
And most recently, they just built a half billion-dollar
fertilizer plant to make urea and hydro from their natural gas
so that we don't have to get it from Indonesia which shows the
confluence of energy, agriculture and technology development
all together.
I will stop there, but I do have to go to a Defense
Appropriations hearing. I do want to come back and ask a few
questions of this outstanding panel, but thanks so much to Matt
for being here and to you, Madam Chairman, for allowing me to
make that introduction.
The Chairman. Absolutely, thank you.
With that, we will begin the testimony. I would ask you to
try to keep your comments to about five minutes. Your full
statements will be included as part of the record, but again,
we welcome each of you.
Ms. Plowfield, if you would like to begin.
STATEMENT OF CAROLE M. PLOWFIELD, DIRECTOR, OFFICE OF INDIAN
ENERGY POLICY AND PROGRAMS, U.S. DEPARTMENT OF ENERGY
Ms. Plowfield. Thank you, Chairman.
Chairman Murkowski, Ranking Member Cantwell and
distinguished members of the Committee, I appreciate the
opportunity to discuss the Office of Indian Energy Policy and
Programs at the Department of Energy and our efforts to
implement energy development in Indian Country as you evaluate
rural energy issues.
The Office of Indian Energy Policy and Programs serves all
federally-recognized Indian Tribes, Alaska Native Regional
Corporations and Village Corporations and Tribal Energy
Resource Development Organizations. The Office's mission is to
maximize development and deployment of energy solutions for the
benefit of American Indians and Alaska Natives.
In consultation with tribal and other stakeholders, the
Office of Indian Energy achieves its mission by promoting
Indian energy development, electrifying Indian Country and
helping to reduce the cost while increasing reliability of
Indian energy.
Our office addresses the challenges that tribal communities
face, many of them rural, through our three-pronged approach of
financial assistance, technical assistance and education and
capacity building.
Competitive grants are offered periodically for the
deployment of energy infrastructure on tribal lands. Federal
staff provide technical assistance upon the request of a tribe
regarding a specific energy topic or project concept. Education
and outreach activities include monthly webinars, a college
student seminar or, excuse me, a college student summer
internship program, periodic workshops, presentations at
conferences and other engagement activities outlined on the
Office of Indian Energy's website, where our staff inform
tribal members of all the opportunities we have available to
them.
Between 2002 and 2017, DOE invested nearly $78 million in
250 tribal energy projects implemented across the contiguous 48
states and in Alaska. These projects, however, are valued at
over $150 million as they are leveraged by over $73 million in
cost share paid by the recipient tribal groups.
The Office of Indian Energy is currently working on three
significant issues: Our funding opportunity announcement,
supporting the Tribal Energy Loan Guarantee Program, and
reviewing the organization of our office to ensure that we are
delivering our services as effectively and efficiently as
possible.
DOE announced on February 16, 2018, up to $11.5 million in
new funding to deploy energy infrastructure on tribal lands.
Coincidentally, this announcement is closing today, April 19th,
and we are excited to review the range of grant applications we
will receive since this is the first time that Indian Energy
has issued a funding opportunity announcement on an entirely
fuel and technology neutral basis which will expand the
potential for tribes to use the particular resources that are
available to them. And our selection should be made by August
of this year.
We are also working to support the development of DOE's
Tribal Energy Loan Guarantee Program which would help address
current barriers that tribes face regarding access to capital
for energy development.
The FY 2018 Omnibus funding bill enacted on March 23, 2018,
states that the Department of Energy's Loan Programs Office
retains all loan authority, and earlier this year Secretary
Perry delegated to the Loan Programs Office to administer the
program. They have completed some listening sessions as part of
an ongoing process that the Office of Indian Energy is
supporting and more are planned.
We are also reviewing the organization of our office to
ensure that we are delivering our services as effectively and
efficiently as possible. I asked our team in December to
rethink how we are delivering our technical assistance to
tribes, and we're currently expanding our network of service
providers to ensure that we are being good stewards of taxpayer
dollars.
In conclusion, I am honored to be here today representing
the Department of Energy. And I'm grateful for the hard work
the dedicated staff of the Indian Energy Office, all of them,
dedicated public servants.
I would like the Committee to know that although we are a
small office, our goal is to make a big difference to the
tribal communities that we serve.
I would also like to take this opportunity to introduce to
the Committee our new Deputy Director, Kevin Frost, who is
behind me. He brings with him a wealth of knowledge and
experience as a former tribal council member with the Southern
Ute Tribe who are known for being on the forefront of tribal
energy and economic development issues. And we're happy to have
him.
So we've made a lot of progress, but there is still much
more to do. Secretary Perry, our DOE team, the Office of Indian
Energy and all of the tribal partners we serve look forward to
working with this Committee to provide affordable, reliable and
resilient energy to tribal communities and to maximize the
development and deployment of energy projects that add new
generation capacity and provide cost savings to tribal members.
Thank you again for the opportunity to appear before you
today and I look forward to your questions.
[The prepared statement of Ms. Plowfield follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Ms. Plowfield.
Mr. Greek, welcome.
STATEMENT OF MATT GREEK, SENIOR VICE PRESIDENT OF RESEARCH,
DEVELOPMENT AND TECHNOLOGY, BASIN ELECTRIC POWER COOPERATIVE
Mr. Greek. Good morning Chairman Murkowski, Ranking Member
Cantwell and members of the Committee. As Senator Hoeven
mentioned, my name is Matt Greek. I'm Senior Vice President of
Research, Development and Technology at Basin Electric Power
Cooperative headquartered in Bismarck, North Dakota. I'm also a
member of the National Coal Council, the Lignite Energy &
Research Councils, the Carbon Utilization Research Council, a
director of the Missouri Slope Areawide United Way and a
registered professional engineer.
Thank you for the invitation to speak this morning about
rural energy. Basin Electric is a generation and transmission
cooperative that provides wholesale electricity to 141 rural
electric cooperatives who serve three million consumers across
nine states.
Basin Electric has a diverse generation portfolio
consisting of over 6,000 megawatts of coal, natural gas, wind,
recovered energy, oil, nuclear power and market purchase
agreements. Our generation resources participate in both the
MISO and SPP regional transmission organizations.
Basin Electric and its members have invested billions in
capital in recent years in fossil-based generation,
transmission and related infrastructure. I'd refer the
Committee to my written testimony for additional details on our
facilities. Basin Electric is actively engaged in ensuring that
these assets can continue to operate and add value in the
carbon-constrained future.
Basin Electric supports commonsense carbon management
regulation that recognizes improvements already made to
existing plants, sets a standard that is achievable with cost-
effective technologies that can be applied to the facility
itself, and allows for maximum flexibility to achieve.
With respect to technology, Basin is the host site for the
Integrated Test Center (ITC) that is nearing completion at our
Dry Fork Station. This test facility will provide space for
researchers to turn CO2 into a marketable commodity. The State
of Wyoming invested in this facility and will oversee its
operation. Last week the finalists that will participate were
announced, 10 teams from several different countries will
compete for the $20 million Carbon XPRIZE. Five of those using
flue gas from coal will compete at the ITC.
In addition to the ITC, Basin has been exploring options to
commercialize Allam cycle technology for future power
generation. Again, I would refer Committee members to my
written testimony for details of this technology and our
partners.
However, I would like to take this opportunity to express
our support for DOE's Fossil R&D program and stress its
importance in helping to deploy carbon capture technologies.
The DOE's continued support is critical to help prove out the
Allam cycle and other technologies.
Finally, to this end we appreciate members of this
Committee and others for bipartisan support of the 45Q Carbon
Capture Tax Credit that was recently expanded and improved with
passage of the bipartisan Budget Act earlier this year. This
tax credit will go a long way toward closing the cost gap for
potential carbon capture projects.
We also support introduction of the Utilizing Significant
Emissions with Innovative Technologies Act. This legislation
will provide further assistance to relieve the regulatory and
financial barriers to carbon capture, utilization and
sequestration technology development.
Basin Electric owns and/or maintains thousands of miles of
transmission across several states, much of which crosses
federal lands. Increasing regulatory requirements have added
complexity, time and cost to transmission line sighting,
construction and maintenance. We appreciate the Committee's
efforts to advance vegetation management and liability relief
legislation which was included as part of the Omnibus
Appropriations bill.
However, as generation continues to be built in response to
resources and transported to load, as is the case with most
renewable generation, it is important that federal laws such as
the National Environmental Policy Act, appropriately respond to
the effects of transmission and infrastructure development and
not serve as a barrier.
As I've discussed, Basin Electric is heavily invested in
both coal and natural gas generating assets. The development of
competitive, wholesale markets has provided both challenges and
opportunities for Basin Electric and its members. However, it
has become increasingly apparent that power markets could be
improved to fairly compensate all generation for the services
that it provides.
While Basin Electric believed that the DOE proposal on grid
resiliency was too broad in scope and would have negative
market impacts, we support the Federal Energy Regulatory
Commission's efforts to further explore this issue and develop
equitable market rules for dispatchable generation sources.
In closing, serving rural America with affordable and
reliable electricity is not without its challenges. However,
the cooperative model continues to evolve to serve its mission.
Thank you for the opportunity to discuss our thoughts. I
would be happy to answer any questions you might have.
[The prepared statement of Mr. Greek follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Mr. Greek.
Mr. Hardy, welcome to the Committee.
STATEMENT OF DOUG HARDY, GENERAL MANAGER,
CENTRAL MONTANA ELECTRIC POWER COOPERATIVE
Mr. Hardy. Thank you.
Good Morning Chairman Murkowski, Ranking Member Cantwell
and the other members of the Committee.
My name is Doug Hardy. I'm the General Manager of Central
Montana Electric Power Cooperative based in Great Falls.
First, I want to thank you for the honor of testifying
before this Committee. As well I'd like to thank Senators
Cantwell and Risch and several members who signed a letter to
OMB opposing the sale of the PMA assets. It's critical to us.
My last thanks is the action that was taken recently on
vegetation management. It's a big deal to the Montana Co-ops.
We appreciate that.
I'll discuss a few of the challenges in serving the rural,
and in some cases, the frontier areas of Montana, not the bush
but the frontier areas of Montana, and challenges of serving
those areas as well as the importance of hydropower in enabling
us to have affordable electricity at the end of the line.
Central Montana is a co-op of co-ops. Our purpose is to
hold the contracts, manage the contracts and arrange for the
delivery of power from Western Area Power, one of our main
sources of power, WAPA, and other suppliers. We do that to a
third of the co-ops in Montana, 25 co-ops there.
And some of the things that are difficult for my member
systems is the fact that if you look at what it takes to
deliver in Montana alone, if you take the power lines the co-
ops own in Montana and connect them end to end, you would have
a line long enough to go around the world at the equator, two
times. Now in my written testimony I had a half in there.
Strike that half. It's over two times. That was an error on
typing on a plane, sorry. But still, to go around two times for
just a few people that we serve in Montana creates some
infrastructure that's very expensive that we have to pay for.
If you look at the area of just four of my members, it's a
geographic area that's larger than the states of Connecticut,
Delaware, New Jersey, Massachusetts and one other state in
there. We'll add Connecticut. That much geographic area to
serve just 10,000 member consumers.
But my message in that is there is so much infrastructure
it takes in a rural area compared to in the city and that's
compounded. The challenge is compounded by the fact of two
things.
One of them is that in the rural areas our farmers and
ranchers have had to get bigger. They've had to take multiple
farms and put them into one ownership to even get enough to pay
for the equipment to farm it which means we have fewer people
in the rural areas to pay for the infrastructure. It also means
that some of the small communities in the rural areas, schools
have consolidated eliminating that infrastructure in those
communities. There's a lot of communities that have empty
buildings and that's all that's there now.
And that adds one more level in doing that, unlike serving
in the urban area where you have a lot of commercial load, it's
a wonderful asset to have commercial and residential load
because it gives a broader base to spread those fixed costs,
your power lines and infrastructure over. So, that's, kind of,
a double whammy by serving mainly just small farms, ranches and
homes increasing the challenge which that challenge is met
partly with the power we get from Western Area Power, in my co-
ops' case.
If you think about that when my four predecessors entered
contracts to buy the federal power, it was above what they
could buy other sources for. They looked at that federal power
as something that they could enter into in a long-term basis.
Right now, we're contracted through 2051 for that power because
it's such a critical affordability issue for our rural
communities. They may have $0.09 worth of poles and wires
charge. We have to get a fairly low-cost power to go on that to
keep them in business because those members at the end of the
line can ill afford many increases.
So when we look at that hydro, at how that works for us,
you can see why we strongly oppose FY'19 budget proposal to
sell off the PMA assets. There just isn't that room. Those
people are struggling at the end of those lines and those rural
areas right now. They don't have the head room. And we can
think about other things, whether it's--there's a lot of
different ways you can add costs on to PMA power. And we're,
kind of, at the limit of what people can afford out in the
rural areas and anything that's added on adds up and decreases
that affordability and hurts those people at the end of the
line.
We paid for the assets of those federal power in our
alliance because, through our rates, in all it pays for the
poles and wires and transmission that the PMAs had. It pays the
return, the amortized, with interest, assets of the both the
Corps of Engineers and Bureau of Reclamation and a portion of
the dam is allocated in those costs. All of that goes in. We
feel we have a covenant with the PMAs that has served the
government extremely well because it's our money that pays for
those and served our members very well because it helps their
rates be affordable.
In closing, I thank you for the opportunity to testify. I
look forward to any questions you may have.
[The prepared statement of Mr. Hardy follows:]
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The Chairman. Thank you, Mr. Hardy. We are glad you are
here.
Mr. Lyons, welcome.
STATEMENT OF ANDREW LYONS, WEATHERIZATION/ENERGY ASSISTANCE
MANAGER, HOPESOURCE
Mr. Lyons. Chairman Murkowski, Ranking Member Cantwell and
members of the Committee, thank you for the opportunity to
testify regarding the role of weatherization in energy
assistance programs in rural areas in the United States.
For the past ten years I've had the honor of working with
these programs and the privilege of seeing how they change
family's lives. I work for HopeSource, a community action
council that serves Eastern Washington.
I was introduced to the concept of weatherization early on
in my life while growing up in a rural Eastern Oregon community
that was 75 miles away from the nearest grocery store and 25
miles away from school. I graduated with a class of four and
that gives you an idea of how rural it really was.
As the youngest of six children we had limited financial
resources. We lived in a drafty, turn of the century home with
no insulation. To stay warm in the winter we burned over ten
cords of wood which, I can tell you from personal experience,
is a lot of wood to cut, haul, split and stack on a yearly
basis which is maybe why my parents had six children. I'm not
sure.
I tell you that story simply to demonstrate some of the
unique energy challenges in rural communities. Much of the
existing housing stock is not energy efficient and tends to be
older and more dilapidated.
This is further compounded by systemic poverty and higher
energy rates. Combined, these factors make home weatherization
and energy assistance programs highly relevant when discussing
energy challenges facing rural America.
The number one goal of a weatherization program is to
reduce energy in the home. A fully weatherized home can save
between 20 and 30 percent in energy costs. And for low-income
households, those savings mean a lot because their energy
burden is often five times that of a non-low-income family.
Weatherization is often seen strictly as an energy
efficient program, yet, it's impacts go much further than that.
Weatherization programs ensure that once a home is weatherized,
it's also a healthier and safer place to live.
Recently we completed a project that illustrates the
multifaceted benefits of energy assistance in weatherization
programs. Kim is a single parent whose home was heated with
electric baseboards and an old wood fireplace. Every day she
struggled to keep the house warm for her two boys. She couldn't
afford to use the electric baseboards so she was using a
fireplace instead and worried that it would cause a chimney
fire. Fortunately, she was able to receive energy assistance at
HopeSource and our AmeriCorps member, Savannah, was able to
provide her with some in-home, energy conservation education.
We then determined that Kim was a perfect candidate for our
weatherization program. We were able to replace her wood stove
with an energy efficient ductless heat pump, add attic
insulation and air seal the home. When we finished our work,
Kim sent us a letter. She said, I quote, ``I have renewed hope
living here with my kids. I don't feel embarrassed to have
others over and my kids can play comfortably in the living room
without blankets and covers. I appreciate and will remember
this always.''
As a nation we reap enormous benefits from the low-income
weatherization program and dollars saved on energy assistance,
health care costs, homeless services and the maintenance of the
country's affordable housing stock.
Oak Ridge National Laboratory found that for every
Department of Energy $1 spent, it resulted in nearly $2 in
energy savings and close to $3 in health-related benefits.
Looking at our current nation's energy and health care costs,
the savings potential as a result of weatherization programs is
substantial.
Federal funds provide the backbone of the weatherization
programs across the country. Because of our program's
structure, we're able to leverage those federal funds to
receive matching funds from other state, utility and private
resources.
This year the weatherization program at HopeSource, where I
work, we've been able to leverage close to $3 from other
funding sources for every federal $1 received.
I've spent my entire life in rural communities that these
programs serve. Every day I see the dramatic impact they have
on families.
My written testimony gives details and statistics on the
impact of such programs, but I can assure you that the support
you've given of weatherization and energy assistance programs
is making a difference in my community and the communities that
you represent.
As you know, independence is integral to the character of
rural communities. I'm extremely proud to live in a country
that seeks energy independence in part through energy
conservation. But I am even prouder that, collectively, we are
willing to give that same opportunity of energy independence to
rural Americans who need it the most.
[The prepared statement of Mr. Lyons follows:]
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The Chairman. Thank you, Mr. Lyons.
Mr. Venables, welcome.
STATEMENT OF ROBERT VENABLES, EXECUTIVE DIRECTOR, SOUTHEAST
CONFERENCE
Mr. Venables. Thank you, Chairman Murkowski, Ranking Member
Cantwell and members of the Committee for the opportunity to be
part of this conversation today.
I'm Robert Venables, Executive Director for Southeast
Conference, which is the federally-recognized economic
development district in Southeast Alaska. I've been privileged
over the years to work with the Alaska Energy Authority and
tribes and communities throughout the state on addressing some
of these challenges.
As the Chair mentioned earlier, we're a land of extremes.
Extremely large, extremely beautiful, but extremely expensive
to live and a gallon of milk in some of these most rural
communities can be $13 a gallon. It's stifling. But the
opportunities are equally great, and we're a very resilient
bunch of folks.
One thing I'd like to point you to, because I really do
appreciate the interest the Ranking Member expressed for some
of the solutions that we found, because whether it's in
Kotzebue where their wind turbines have saved $40,000 for a
local hospital or the 11 communities in the Northwest Arctic
Bureau who above the Arctic Circle has installed solar panels
to save over $190,000, it is incredible.
The story that I want to tell you about is from Southeast
with the Southeast Island School District and how biomass has
paid an extremely incredible community a life-changing
experience down there.
In your packet you see some artwork that was provided for
you today.
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Last week we had the Rural Energy Conference where close to
400 people gathered from across rural Alaska to address these
issues. And in preparation for that and the theme of
innovation, inspiration and opportunity, we asked children in
grades five through eight, what it is that you want? What is
the community's energy system? What should it look like when
you're 50 years old? Of course, the children had to wrap their
minds around being 50 years old for starters, but you see
pictorially before you some of those interpretations of what
they see as opportunities that surround them with their
resources.
And yes, we have those challenges of access where there's,
I'm sure, recited before you, many times, all the different
challenges we have. I put some of that in my written testimony
as well.
But down in Southeast, just displacing diesel at one school
with biomass, they save enough money for an entire teacher's
salary for the year. And it didn't stop there. They installed
greenhouses on the site of the schools. They'll allow the food
program to have fresh vegetables that are grown right there
onsite fueled by renewable wood energy.
It didn't stop there. The children then see as part of the
curriculum the sciences, the math, the economics, the
technology in running the systems as well as just growing the
food. And so, then they become part of the system there of
taking responsibility in caring for the system and for the
plants. By the time those students actually graduate, there's a
whole different caliber of student there.
They've learned real world economics. Students actually ran
a restaurant in town. We're using the local produce that
they've grown in the local greenhouse during school, learning
the math skills, the economic skills and then having the school
lunch program featuring the fresh vegetables that are grown
there.
So it's a real incredible opportunity when given access to
the resources that surround you to be able to solve some of the
extreme challenges that we have in our great land of extremes.
I think that one of the real issues is trying to push the
agencies that are there to really reach potential of their
mission.
You represent our landlord because Southeast Alaska is over
96 percent federally-owned. We only have 1 percent of the land
in Southeast that's in private hands.
So I applaud the work that this Committee does,
individually and collectively, on addressing these issues and
glad to be part of the conversation and the work as we go
forward.
Again, thank you and I'm prepared for any questions you
might have.
[The prepared statement of Mr. Venables follows:]
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The Chairman. Thank you, Mr. Venables, for putting that
into context and reminding us all that when we work with our
kids early on, allow them to view the energy solutions not as
what we have today, but what we can be doing tomorrow. I think
the outlook is pretty good for us with a lot of innovation
going on.
I am going to start off the questions here, some pretty
quick ones, hopefully, for you, Ms. Plowfield.
You mentioned the fact that within the Office of Indian
Energy you are a small office, but you are working on good
things. I recognize that you are small, but I also recognize
that we are really, really small in Alaska.
We have had this conversation before. I had received a
commitment from the previous Administration that we would
double the size of the Indian Energy Office in Alaska. We would
go from one to two. We actually wanted three but we were not
successful with that.
Now I understand that commitments made in the prior
Administration don't necessarily carry over, but my question to
you is what do you intend to do to make sure that the Office of
Indian Energy is as effective as possible in the State of
Alaska given the very severe limitations that we have? Again, a
lot of ground that we have to cover. I am hoping that you are
going to be able to come up to the state to visit with many of
our tribes and understand what more can be done, but just very
quickly what are the plans?
Ms. Plowfield. Thank you, Senator.
My plan for the office is to make it more effective as part
of a broader plan of modernization efforts for the Department
as a whole. And as I mentioned in my opening statement, in
December I did ask our team to rethink how we provide our
technical assistance services more effectively utilizing
provider networks, localized as you know, in 2016, we made
grants to seven Alaska entities to provide technical assistance
and we want to incorporate them. I've spoken to folks at the
Denali Commission. I've spoken to folks at AEA about helping us
with that so that we're positioned to provide technical
assistance locally and expand our capacity in that way.
And I do appreciate, Senator, I understand the history and
it's unfortunate that the prior Secretary did not keep that
promise. I can tell you that the Office of Indian Energy under
this Administration, we don't intend to make promises that we
can't keep.
And we look forward to working with you to continue to make
our staff as effective as possible.
The Chairman. Well, again, I would urge you to come up
yourself so that you have that opportunity to gain that
appreciation and understanding.
Ms. Plowfield. Thank you, Senator. I have been up to
Anchorage and we are planning some more trips in the future.
And I also understand that the Secretary is very much looking
forward to his trip with you in a few weeks.
The Chairman. Yes, yes. We are pleased that he is going to
be out there. We would like to get you out into some of the
villages.
Let me ask you about the Tribal Loan Guarantee Program. You
indicated that you have had some listening sessions already,
and you are planning on doing some additional ones. Do you have
any idea when and where you might have additional listening
sessions?
Ms. Plowfield. Thank you.
Yes, we do. The first one that we had was out in the
Reservation Economic Summit a few weeks ago in Las Vegas. It
was very helpful. They got a lot of good feedback. The
additional sessions planned are for actually next week in New
Orleans at the National, excuse me, Native American Finance
Officers Association and then NCAI is meeting in Kansas City.
We have an upcoming Indian Country Energy Infrastructure
Working Group in Albuquerque in May. And I've spoken to,
coincidentally, folks from both Ahtna and Tanana Chiefs that
were in town this week for the AFN Alaska Day. I've asked for
their input as to where and when is best in Alaska and it would
be either probably in the fall at AFN or BIA and obviously we
would welcome the input from your office as the best time to do
that.
The Chairman. Well, I was going to suggest possibly AFN or
the BIA Providers Conference, so we are all on the same track
there.
Ms. Plowfield. Yes.
The Chairman. But I think that would be an ideal
opportunity for that.
Let me ask you one more question, and then I will have a
chance for a second round here for others.
I mentioned the Road Belt and the fact that in some of
these communities the costs are just sky high. I believe you
are familiar with this proposed Road Belt Inter-Tie Project.
It is aggressive in what they are trying to do because you
are connecting about 30 different rural communities, all of
which rely on diesel-generated microgrids. I mean, these are
small, but if we can figure this out, it is substantial in
terms of the opportunities for them.
It is a big project though. They are estimating it is about
a $500 million project. But the first step to this is pretty
modest. An updated engineer's report is estimated to require
something more in the lines of $1 million.
Given OIE's mission, given that your budget actually
increased by a couple million dollars this year, are there any
opportunities or any tools that OIE has where projects like the
Road Belt Inter-Tie Project should be looking? I just met with
these folks this week and they are very keenly interested in
moving quickly to get some movement on this engineer's report.
Ms. Plowfield. Thank you, Senator.
Yes, I actually met with Jason Hoke myself----
The Chairman. Okay, good.
Ms. Plowfield. ----this week from the Intertribal, the
Ahtna Intertribal Resource Commission. We had a very
collaborative and productive meeting about what we can do. I do
happen to have a map of the Road Belt Inter-Tie Project on the
wall in my office.
The Chairman. We have one right here.
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Ms. Plowfield. There you go.
The Chairman. Amazing, isn't it?
[Laughter.]
Ms. Plowfield. And you know, we were discussing, as you
said, some of the gaps in the service there and what we could
do.
We're currently, actually, helping them with technical
assistance. We're getting them connected to some subject matter
experts to help them establish a tribal utility, and we agreed
to continue these discussions in the future.
My recollection is the estimate he gave me, and I will
check on this, was $1.5-$2 million for the study. And some of
the options we were thinking about was what other groups we can
get involved and have a group of folks that all put in some
money because that is a significant amount and----
The Chairman. It is significant.
Ms. Plowfield. ----although we do appreciate the extra $2
million that was in our budget this year.
And if I can make one other point to your, the issue of the
high cost of electricity. I really appreciated what you said
about it being a powerful reminder of the tradeoffs in your
opening statement.
You've talked to many more people up there than I have, but
soon after I came onboard the first AFN meeting I always keep
in the forefront of my mind a story from a woman, Jessica, in a
rural Alaska village who talked about how she had to go out and
pick extra berries and do extra fishing because they couldn't
afford their grocery bill because she had to pay her mother's
electricity bill.
And between that and I also keep in the front of my mind on
the high cost of energy issues is when you were kind enough to
invite me to your office last fall and you showed me the
picture of the laundry detergent that costs about $50.
So I'm keenly aware of those issues and I keep them in the
forefront of my mind as we're trying to solve these problems.
The Chairman. Let's keep working together.
Thank you.
Ms. Plowfield. Thank you.
The Chairman. Senator Cantwell.
Senator Cantwell. Thank you, Madam Chair.
Ms. Plowfield, I know the President's budget wanted to
slash your program 37 percent, but thank God Congress had a
different view of that. And as the Chair was mentioning an
increase, I think it is about 13 percent.
In looking at these projects, both in Alaska and
Washington, is there some summation here about what we have
learned? Obviously in Alaska it is a lot more focused on energy
efficiency. In my state it is a little more focused on
renewables and biomass.
Ms. Plowfield. Thank you, Senator.
I think what I've learned in the time that I've been there
is that everything is up to the tribes and the resources that
they have, and that all the tribes are different. We can't take
a cookie cutter approach.
There's large tribes, small tribes, tribes that have
resources, tribes that don't. Tribes that are in Alaska have
unique challenges from the Lower 48.
So what I've been doing in the office and the team that I
work with have been making sure that we listen to the tribes
and what do you want? They come to us and tell us what
resources they have access to and we assess how we can best
help them.
Senator Cantwell. So, you haven't seen anything that's
scalable on energy efficiency that you think we should be doing
more aggressively?
Ms. Plowfield. Not that I can think of off the top of my
head, but I will ask the technical assistance team and we will
get back to you with an answer on that.
Senator Cantwell. Would you? Because the Chair visited a
company with me in Seattle that was doing energy efficiency, so
she had a good picture of building monitoring and, in this
case, they were servicing a lot of different school districts
and understanding how to control their school district costs.
To me, efficiency is one of the big challenges. I noticed
just in looking at the Alaska applications, in the past they
have all been around that. So to me, the Indian Energy Program
should be helping us with scalable solutions.
I love the technical assistance. I love bridging that gap,
but to me we also should be learning from that what works and
what ways we can implement that.
Obviously, our energy bill, by and large, is about energy
efficiency. We are all gung ho on that, but I think having some
solutions in Indian Country--whether it is just applying
something on a broader basis, for say, all the school districts
or all the public buildings or something of that nature--to me,
would be a kind of a grand scale idea that we would love to see
if there are numbers you guys could apply to that, given your
past experience. If you could help us with that, that would be
great.
Ms. Plowfield. Absolutely.
Senator Cantwell. Mr. Lyons, thank you for your moving
testimony. You talked about how, through weatherization, every
$1 invested results in a $4.50 benefit. In fact, the majority
of these benefits are not even energy savings, they are health
and safety savings as well.
What are some of the issues that you think we should be
addressing to increase weatherization investment? What do you
think are some of the ways that we could communicate these
other energy savings and security issues?
Mr. Lyons. I think part of that is, as I said that you
know, typically weatherization is seen as strictly energy
efficiency and we don't want to get away from that. That is
very important to the program.
But I think part of it is just what we've tried to start
doing in the weatherization industry in the last five years is
really talking about healthy home programs. Washington State
recently did the matchmaker fund and was able to give us money
that is a weatherization plus health. And so, one, two
different things.
One is looking at what are those health benefits and how
can we actually document those, I think, in better ways because
once we do that, I think, we enter a whole new world of looking
at social determinants of health and figuring out the impact
that weatherization has in people's homes. We know that people
spend a lot of time in their home. In looking at those health
care costs it makes sense that we address that in the home in
addition to other areas where people are at.
Senator Cantwell. Yes.
I know my time is almost expired, but I would love to get
from you the economic impact of job creation. I note as I have
seen some of these numbers from Spokane, but there is a huge
economic benefit from job creation from more weatherization
investment.
Mr. Lyons. Right.
Senator Cantwell. Because obviously it is a win-win
situation. We make the investment and they help in the
modernization and weatherization of these homes. The homeowner
saves money, and we are also putting people to work as they
implement this. If you could share that data with us for the
record, I would so appreciate it.
Mr. Lyons. Yeah. DOE gives numbers, you know, 8,500 jobs
that are--have been able to be created through the
weatherization program.
I can just tell you, locally we probably have, I work with
five different contractors that are electricians and plumbers
and insulators. And so, we provide jobs for all those people in
addition to our own staff that we are able to do.
But yes, that is a strong component of the program as well
is that we are putting people to work to actually do this which
is often very difficult work. It's hard, that's one of the
struggles we actually have with the program is finding people
that are willing to go in crawl spaces and attics and spend
eight hours there and actually be able to do the work.
Senator Cantwell. Thank you.
The Chairman. When I left the house this morning my husband
was up in that crawl space coming down to all kinds of the
insulation.
[Laughter.]
I am not going to volunteer him, though.
[Laughter.]
Senator Smith.
Senator Smith. It has been a long time since I have seen my
husband up in any crawl space, Senator Murkowski.
[Laughter.]
Madam Chair and Ranking Member Cantwell, thank you so much
for organizing this Committee hearing, and I appreciate it.
I want to just start by saying I appreciated the
conversation about the Tribal Energy Loan Guarantee Program.
That is very important in Minnesota. I suspect I am not the
only one on this Committee that was disappointed when the
President did support a cut to this program. I would really
welcome the opportunity to work with you, Ms. Plowfield, on
this in Minnesota where it is very important.
Also, Mr. Lyons, the issue of LIHEAP and weatherization
assistance is extremely important in Minnesota. I appreciate
your comments about the connection between home and health
which is just an integral connection.
In other committees, we have many conversations about how
you can't be healthy if you don't have a healthy place to live,
if you don't have a safe place to live. This is, I think,
especially an issue in rural Minnesota where the housing stock
is older than it is in many and, you know, kind of more in the
suburban and metro parts of the state. Is that your experience
too?
Mr. Lyons. Yes, absolutely.
I mean, one of the things, mobile or manufactured homes are
much more prevalent in rural areas and they don't stand up over
long periods of time. And so, but people will continue to live
in them until they literally fall apart.
I can tell you from personal experiences, I was just in a
crawl space on Monday and there's some horrible situations that
people are experiencing in their homes.
Senator Smith. Yes.
Well this is, again, a reason why I think, why I and I
suspect others and I know others on this Committee were really
opposed to the Trump Administration budget proposal for 2019
which would have eliminated the Low Income Home Energy
Assistance Program and the Weatherization Assistance Program.
Maybe I will just take a minute more.
Mr. Hardy, how are you? Good to see you.
Mr. Hardy. Good to see you. Thank you.
Senator Smith. I am very interested in this question of
what should happen with the Western Area Power Administration,
with WAPA, which is extremely important to co-ops in Minnesota
as a source of what we are all seeking which is affordable,
reliable, and clean energy.
I am wondering if you could just talk a little bit about
your thoughts about, kind of, what should happen with WAPA,
whether it is a good idea for it to be privatized or not and
kind of how you see it coming--what role it plays for rural
electric?
Mr. Hardy. Thank you.
Well, we believe it would have a very bad outcome for us,
personally.
When we look at that, if you sell transmission lines,
there's all sorts of things that concern me from a standpoint
of cost. If somebody is buying it and somehow able to put more
levels of greater return in that, that just increases costs.
And you know, there's not a dollar that I spend or my
distribution co-ops spend that doesn't come out of the member's
pocket at the end of the line, when not for profit, that's how
it works. So the cost of that is one thing.
And from a reliability standpoint, we go through many of
the reservations in Montana and as I understand it from all my
discussions the easements for those transmission lines that are
a sole source of supply in part of our systems goes across
those lands, goes across a lot of federal lands. Some of the
reasons that lines were built by BPA in Montana were strictly
because it took a federal PMA to get the rights-of-way and
maintain them through federal lands. So on that front we see it
as bad. As far as going to market rates, that stability that it
provides. We do funding so that helps. We work with them about
which projects. Some of your people are on those committees
with me.
And we have a way of saying is this cost effective to make
this investment, to rewind this turbine, to how do we
prioritize that with the Corps and the Bureau? It works
wonderfully. To lose the ability to have the funding stream
that we're able to create for that is, for us, frightening
because at the point in time that it goes to market rates, you
don't know. Right now, markets are pretty low, maybe lower than
some of the PMA power in certain cases.
But one thing, and I've been doing this from the time I was
an energy auditor in '79 to as a general manager and I've seen
markets go this way and this way and this way. One thing we
know is however we think the markets are now, history has
proven it, that we're going to be wrong if we think that's
where they will be in the future. And to have that ride, even
the repayment of this, as we make those investments we know
we're going to be the ones repaying those costs.
So when we make the investments in energy efficiency
improvements and to turbines rewinds, we know that that's going
to cause rate creep, but we know it's important to do. To just
take it to market, you may not get enough money in to cover the
cost of those assets, you may over recover.
Senator Smith. Yes.
Mr. Hardy. We're very fearful of it.
Senator Smith. Thank you. I appreciate your comments on
that.
I know I am out of time. I just want to say that in
Minnesota we are so aware when so much of the geography of our
state has electricity provided by rural co-ops who have such a
high fixed cost with transmission lines per household served. I
think keeping this the way it is makes a lot of sense to my
rural co-ops.
Thank you very much.
Mr. Hardy. Thank you.
The Chairman. Thank you, Senator Smith.
Senator Stabenow.
Senator Stabenow. Thank you, Madam Chair. Welcome and thank
you to all of you for your testimony today.
As the Ranking Member of the Agriculture Committee, I am
working with Senator Roberts right now on writing up a
bipartisan Farm bill. And as you know, the Farm bill programs
provide critical assistance to rural energy systems through
USDA Rural Development, particularly the case for Rural
Utilities Service (RUS) which provides capital, capital
electric co-ops use to build and improve and harden their
energy systems.
So I want to specifically ask about that. Mr. Greek and Mr.
Hardy, if you could share your experience with the role that
the USDA Rural Development and, particularly, the Rural
Utilities Service has in assisting electric co-ops and
providing much needed electricity and other services to rural
communities. I would also welcome your thoughts on how RUS
might be able to partner with your members to help protect
rural electric infrastructure from cyberattacks and EMPs and
natural disasters and other threats.
Mr. Greek?
Mr. Greek. Thank you, Senator.
So, I'll talk from, kind of, the generation and
transmission perspective, and I'll let Mr. Hardy talk about the
member perspective.
We have been founded for many years on RUS financing. We do
not use RUS financing now, but it was an important part of
building the cooperative to be what it is today and, honestly,
the cooperative would not be what it is today without having
had that support.
We provide the wholesale power, for the most part, to
members, like Mr. Hardy and the consumers that he represents.
And our work there is facilitated by their being able to
successfully receive what we deliver and our, obviously,
needing to deliver what it is that they need. And RUS, as I
think Mr. Hardy will point out, plays a critical role in that.
So I will let Mr. Hardy talk from there.
Senator Stabenow. Thank you.
Mr. Hardy. Yeah, many of my members and the co-op I managed
for years and years before this was key. It was a source of
capital, just like power markets, interest rates, I'm sure you
kind of know, goes up and down.
It was a source that did two things. It not only gave us
access to capital to make the improvements to maintain the
lines that wear out, it also gave us standards. Right now, if I
send one of our crew or our members send the crew ten states
away there are fairly standardized construction things, there
are materials that are going to work in many areas of the
country. The standardization was an important part. And even
though some have bought out of RUS, having that back stop there
is a critically important thing to us.
Senator Stabenow. Great. Thank you very much.
Mr. Venables, you mention in your testimony the importance
of the USDA Rural Development High Energy Cost Program. I
wonder if you could talk more about the financial assistance
this program provides for projects that assist rural
communities with home energy costs that exceed 275 percent of
the national average, and I would also welcome any thoughts you
might share about how we might improve that program.
Mr. Venables. Thank you, Senator.
The USDA Rural Development agency has been a very important
part of the Alaska utility community. Right now, our
organization's accessing two different programs to do energy
efficiency work and also to deploy renewable energy assets into
communities and assist the business community there. It's been
a very important part of capital as well to many of the
members, most of which are co-ops in our communities as well.
So, those are programs that are very much needed for sources of
capital and for program support throughout rural Alaska.
Senator Stabenow. Well, thank you. If you have thoughts as
we move forward now on the Farm bill, certainly we would
welcome your input.
Madam Chair, thank you. This, as we move forward in the
Farm bill, we are going to have important work to do together
on these issues.
So thank you.
The Chairman. I appreciate your leadership on that, Senator
Stabenow.
Senator Heinrich.
Senator Heinrich. Thank you, Madam Chair.
Ms. Plowfield, I didn't catch exactly what you said, but in
some of your earlier responses you mention that this
Administration intends to keep its promises in Indian Country
and that has not always been the case in the past. I want to
ask you, how do you square that with the Administration's
proposed FY'19 budget that takes your program from $18 million
back down to $10 million? It just seems to me it is going to be
very hard to keep any promises with those kinds of funding
levels.
Ms. Plowfield. Thank you, Senator.
I think that with the effectiveness and the efficiency that
we are working on in the office that we can still deliver what
Indian Country needs.
Senator Heinrich. I would just tell you, I hope that those
of us on this Committee vehemently disagree with that. The need
does not begin to be met even at the $18 million funding level.
So to say you are just going to be more efficient with half of
that, I think, just doesn't recognize the scale of the problem.
Mr. Greek, I wanted to ask you. I was looking at a map of
your service territory, and part of it looks a lot like Tri-
State and I know there is some relationship there. What is the
nature of the legal relationship with Tri-State?
Mr. Greek. Tri-State is one of our members.
Thank you for the question, Senator.
And we have a, what amounts to a power purchase agreement
and a long-term wholesale supply agreement with them, and
that's the nature of our relationship.
Senator Heinrich. Gotcha.
You know, one of the frustrations in New Mexico with some
of our member co-ops with Tri-State has been the limitation on
how much renewables they can bring on, particularly in a
distributed fashion within their own service territories. And
so, we have literally had because Tri-State limited co-ops to
five percent solar penetration. For example, we have had
recently a member co-op elect to leave because they wanted to
be responsive to their own customers who wanted to see that
number dramatically increased.
Is that a practice that Basin also engages in, and what are
your thoughts on it?
Mr. Greek. So, Tri-State has its own set of policies and
approaches to issues like that.
Senator Heinrich. Sure.
Mr. Greek. Basin does as well.
We do have all requirements contracts with our members, the
basic principle upon which we're founded is that we all throw
in to together and we all do for the whole. Sometimes that
works directly to your advantage. Sometimes it does not.
There's sort of a cooperative element to the cooperative
structure.
The challenge that we face, and I won't speak for Tri-
State, but the challenge that we face sometimes is that there
are desired new developments that don't necessarily meet a
specific need that we have today. And so, there's a little bit
of, you know, are others willing to subsidize an investment
that maybe doesn't have to be made at this point in time or in
a technology that others might say is not as cost effective as
the other options out there. I think that's the debate in the
conversation, and I think that's what you're referring to.
Senator Heinrich. Obviously, there is an interstate piece
to this as well, but at a time when the rest of the state was
moving toward portfolio standards that were substantially
higher, there were a lot of you in the state that when you have
a co-op that is willing to step up and invest in their own
generation and, particularly clean generation, that should be
supported.
I wanted to ask you a little bit about energy storage,
because it is going to be playing an increasingly important
role in grid reliability as well as resilience. We have seen
battery storage prices, at least lithium-ion, decline by 80
percent between 2010 and 2017.
The indications we have from a lot of the energy industry
journalists and industry websites out there are saying that
gas-fired peaker plants will no longer be competitive in four
to five years and in some places they are actually being
outcompeted today by that technology.
I wanted to ask you broadly, with regard to just the
utility industry and then also with regard to co-ops, is
storage something that is just now being, as a matter of
course, integrated into integrated resource planning? So when
you are looking at various different ways to solve a problem,
is storage something that you run the numbers on?
Mr. Greek. Thank you, Senator.
Yes, we do run the numbers on storage. Typically, the
economics are not such that it gets brought up on occasion. We
do share the view that somewhere in the future we do believe
that that will be the case, that that will continue to be a
declining cost technology.
We would certainly agree that renewables and other forms of
non-dispatchable power need to have a partner. That partner
today is primarily gas-fired generation. We certainly believe
there will come a point where storage will compete
competitively with that. We don't see that we're at that point
today, though.
Senator Heinrich. Okay, thank you.
The Chairman. Thank you, Senator Heinrich.
Senator Barrasso.
Senator Barrasso. Thank you very much, Madam Chairman.
Mr. Greek, in your testimony you highlight Basin Electric's
efforts to ensure that its fossil fuel power generation assets
continue to operate in what you term a ``carbon constrained
future.''
In order to preserve these assets while reducing emissions
you expressed support for bipartisan legislation such as the
Future Act, the Use It Act, that will relieve the regulatory
and the financial barriers to the development of carbon
capture, utilization and sequestration (CCUS) technologies.
Could you please explain in a little further detail how the
expanded deployment of these carbon capture technologies are
going to benefit the electric co-ops?
Mr. Greek. Well, thank you, Senator.
First, I would just make mention that as a cooperative, we
do own the Dakota Gasification Company. We do sequester CO2
through enhanced oil recovery now and have for a number of
years.
We do see benefit to being able to expand that technology
to include fossil-fired power plants. There are some technical
hurdles to overcome and some cost hurdles to overcome.
We believe that a continued focus with DOE in the Fossil
Energy Group on trying to resolve those challenges will get us
to a point where we can all agree that coal-fired assets, and
even at some point, natural gas-fired assets, can and should be
a part of our future. And we think that would be in the long-
term best interest of our members and our consumers.
Senator Barrasso. Great.
Mr. Hardy, welcome. I know you currently live in Montana,
but I know you spent your formative years in Cody, Wyoming,
living down the street from former Wyoming Senator Al Simpson,
who many people will remember, but even his father, Milward
Simpson, who was a U.S. Senator, and this guy Don Hardy, who
was Al's Chief of Staff for a long, long time. Do you know of
him and have you heard the name?
Mr. Hardy. Yeah, I call him my oldest brother.
Senator Barrasso. Oldest. And he wrote the book with Al,
with Al Simpson.
The thing about Milward that is interesting is years ago
when Milward was Governor and then U.S. Senator, Milward was
asked about coal. He said, ``we will not let that coal sit in
the ground and rot,'' as only Milward or one of the Simpsons
could say it. So I want to thank you for being here to discuss
rural energy challenges which exist.
In your testimony you note your strong opposition to
proposals to sell off the assets of the Power Marketing
Administration, PMAs. You explain that the PMAs provide rural
electric cooperatives across the nation with reliable, low-cost
power at no cost to taxpayers and the Federal Government.
Could you speak about your cooperative's contribution to
the operations, the management, the maintenance and the
improvements of the electric transmission and generation
facilities at the federal dams?
Mr. Hardy. Yes, thank you for the question.
If you look at how WAPA gets the money, they do a repayment
study. And government accounting is obviously very different
than what I'm used to at my co-op. But they do a repayment
study of what, how much revenue they have to take in and
included in that repayment is how they pay the maintenance, how
they take care of running their system, the poles and wires and
the Corps and the Bureau's costs in the generation. We pay
that. We work with them on that and collaborate as far as
making sure that we agree with what they're doing. And in that,
the only place of revenue that they have is what we pay. And we
have been paying for centuries, not centuries, for decades.
We also work with them into the future on trying to get
financing options ahead, at least in the WAPA Upper Great
Plains and Rocky Mountain which would be the Wyoming/Montana/
Minnesota and that area, Pick-Sloan off the Missouri. In doing
that, through the accounting system we can front money that
then we know will go on our rates. We know we will pay for it
with interest, yet it's in the interest and we forward that
money. And it's a very, very good private partnership with the
government, private being non-profit.
Senator Barrasso. Thank you.
Mr. Greek, Basin Electric is a partner in the Wyoming
Infrastructure Authority's Integrated Test Center (ITC), which
to me is a very important research initiative outside of
Joliette, Wyoming, at Basin Electric's Dry Fork Station. The
ITC is going to allow researchers to use flue gas from the
power plant to study potential commercial uses for carbon
dioxide.
Could you talk a little bit about Basin's support for this
Integrated Test Center and how there is the research at that
facility that is going to promote the long-term use of coal and
other critical natural resources?
Mr. Greek. Thank you, Senator.
Yes, as you know, we produce CO2 anytime we burn a fossil
fuel and we believe it's important to have commercial uses for
that CO2 much like we've developed to go to gasification. And
as part of that we agreed to be the host site for the
Integrated Test Center there outside of our Dry Forks Station,
a relatively new coal-fired facility that we believe is one
that has a bright future to the extent that CCUS and other
commercial applications of CO2 can be developed and that's our
primary mission in supporting the State of Wyoming in that
effort.
Senator Barrasso. Thank you.
Thank you, Madam Chairman.
The Chairman. Thank you, Senator.
Next, let's go to Senator King.
Senator King. Thank you, Madam Chair.
First, I want to thank you again for inviting me to Alaska
a couple of years ago when we were talking about this very
subject. Going to those remote communities, I have shared with
friends in Maine my experience of driving on a river to get to
a community. I have never done that before. That was quite an
experience, seeing cars going both directions. And it was not
that deep in the winter, as I recall.
It seems to me that we are in an energy revolution, and
rural areas and islands are Bunker Hill. We are talking about
dramatic changes.
If we had been having this hearing 25 or 30 years ago about
rural telephone service, we would be talking about wires and
poles and infrastructure and all of that. Now we know that is
unnecessary. I think we need to start thinking about that in
terms of rural areas, particularly things like islands and
these little communities in Alaska where it is impossible to
build a grid.
To me, what I want to focus on, and I hope you are
discussing this in your areas, is microgrids, distributed
generation, the combination. I mean, all of the stars are now
aligning with dramatically lower costs for solar, dramatically
lower costs for battery storage, improved software to integrate
them and things like heat pumps and thermal, electrothermal
storage and heating. All those things can work in a local area.
Mr. Venables, you are doing a lot of this kind of work.
What we really need, it seems to me, is we need the private
sector to come up with a rural electric system in a box that
can be scaled, whether it is solar, wind, biomass and scale for
a community of 80 or a community of 800. Tell me about what you
are doing in Alaska.
Mr. Venables. Thank you, Senator.
You know, the Alaska Center for Energy and Power and many
of our private sector folks are really working toward that end.
Alaska is a perfect test case because we have, I mean, all
across the state are various different types of climate and
lack of infrastructure.
Senator King. Yes, you have communities that are, in
effect, islands. They are just surrounded by mountains and
trees instead of the ocean.
Mr. Venables. That is correct and sometimes the ocean as
well.
That's what Alaska is, it's really just one series after
another of microgrids. So there's opportunities for a
nationwide test site. That's what Alaska really provides and
for various applications.
So that is an ongoing exercise that I think the field
hearing also in Cordova really focused on last year as well.
And I think that as those projects come to bear, they'll
provide a lot of----
Senator King. But are you seeing, are tests being run? Are
communities doing this? Is it happening or are we just still
talking about it?
Mr. Venables. No, sir. It's actually happening. They're
designing, you know, the battery banks, the integrated wind,
the solar and finding out the ways to effectively bring the
resources that surround each community into a sustainable
microgrid.
Senator King. Because when you are talking about a
community and there are islands, but the islands in Maine, by
the way, are very, very similar. Power costs of $.30, $.40,
$.50 a kilowatt-hour. Diesel generators and having to ship in
the diesel. I mean, it is the same kind of problem.
It just seems to me if you are talking $.30 or $.40 a
kilowatt-hour that gives you a lot of running room for
alternatives which would look expensive maybe in Boston but are
dirt cheap in Cordova, Alaska, or Isle au Haut, Maine.
Mr. Venables. Yes, sir.
We're actually, our goal is to get it down to $0.30 or
$0.40 in many of the communities. It's two and three times that
amount in many of the communities where you have to fly diesel
in because there are no roads unless, until they freeze up.
Senator King. But again, the big deal is this dramatic
decline, just in the last four or five years, of solar panels,
battery storage and really creative software that can integrate
it and then other things like heat pumps and electrothermal
storage. You can have an integrated system.
You are smiling, Mr. Herds, am I on the right track?
I'm sorry, Mr. Hardy.
Mr. Hardy. Yeah, I'm responding from a standpoint of, I
mean, you pick Alaska. That's been the islanded system test bed
for years and at that, at the prices that some of those are,
absolutely. We look and think about this a lot, whether we're
changing poles, whether we're buying a high-quality cable. How
long are we going to need those distribution lines?
Now it's my belief, we're going to need them a long time.
It's my belief that they will be coupling together different,
whether it's microgrids, whether it's different types of----
Senator King. Sure. The grid itself, if it is there, can be
the battery, to some extent.
Mr. Hardy. Well, yeah, it can be the battery. It can also
be the backup because right now, if you look in Montana----
Senator King. That is what I mean, backup.
Mr. Hardy. Pardon?
Senator King. That is what I meant, the backup, when I said
the battery. The battery is the backup.
Mr. Hardy. Yeah, absolutely. It'll be the backup, but also
needs generation to go with it to do that backup because you
get in our area, you can be 20, 30 below for a week long
without any air movement, particularly, and a fairly overcast
scene. We need other generation because I don't see the future
that close to us that batteries would be able to bridge that
far. Within the hour, within the day, that's going to come a
lot closer. And I think that ability to backup and tie together
all these is going to be important.
Senator King. I think the point you make is very important
is that there is absolutely no one-size-fits-all in this area.
I mean, in Maine, on the islands, we've got wind all the time,
but in your area, you may not have that, so it has to be a
tailored solution. But the point I want to make is
technological developments in the last few years have really
given us a set of tools that we just never had before.
Mr. Hardy. I agree completely.
Senator King. On that note, I think I will sit down and
shut up, as they say.
[Laughter.]
Thank you.
The Chairman. Thank you, Senator King.
I was just talking to Senator Heinrich here. We are going
to look too to put together yet another field trip for an
opportunity to see some of these islanded systems.
I think it is important to note that we have more
microgrids, stand alones, in Alaska than anywhere in the world.
So we are pioneering. Some of them are pretty small, but these
communities are pretty small too.
When you think about the application to your islands and
being able to get off diesel, these are significant from an
affordability, from a livability, from an environmental
perspective. Doing this is just the right reason for what is
happening here.
Senator King. And the time is right.
The Chairman. The time is absolutely right.
Senator King. We have opportunities now that we never had
before.
The Chairman. Yes, you are right. It is transformative.
Senator King. Thank you.
The Chairman. Senator Cortez Masto.
Senator Cortez Masto. Thank you, Madam Chair, for this
hearing and count me in on the field trip to Alaska. I would
love to go back. I have been there before. I love the
excitement as well of my colleague because I absolutely agree
with Senator King.
One thing I also want to highlight: I have found, because I
just met with our Nevada Rural Electric Association, in Nevada
we have many rural communities, actually 17 of our 19 counties
are rural. And I have found that the co-ops are the most
innovative because you have to be. Right?
That is what is exciting about this and what I intend to
continue, and I think we all, to allow you to innovate and give
you the tools you need to bring those services.
But one thing I would love for you to talk about which I
think is also missed are your members. Those people, your
customers, are considered members and how it benefits them
because they are really part of this electric co-op, unlike you
see in some of our urban areas. They really get a benefit out
of here and they are part, an integral part, of what you are
doing. Do you mind talking a little bit about some of your
members and the benefits and how you look to incorporate them
into this electric process or your generation?
Mr. Hardy. Thank you for the question.
Yeah, I've worked for the people at the end of the line
whether I'm working for the distribution co-op, it's the people
at the end of the line. Every one of those members that I care
about, that I'm extremely protective of the affordability and
reliability for them.
We've looked at ways that we can allow them to make the
decisions they want to on, even with our all requirements
contract, if they want to put in a renewable aspect that is
greater than their loads and such, we have ways that we
purchase it and our power supplier being Basin, actually uses a
point of delivery for us.
So we've tried to work that in in ways that it can. It's
not as cost effective for where we sit right now in most of the
places, but that doesn't mean that they want to spend the money
that we haven't found ways to let them do that and push the
envelope.
Some of our co-ops have put in where they had long lines
going out to just a stock well, they use virtually no
electricity. They've worked with them to, rather than putting
thousands of dollars into changing those lines out, they've
gone with voltaics. It's a nice marriage because it has some
storage with the water and it's worked well. But everything we
do, there's a member at the end of the line.
My board is comprised of board members of my members, and I
have a tribal council member that runs her own ranch, alone.
And the people that sold it, the Earth people that form our
members, we're only there because somebody else didn't serve
them. We're not there because we went out and took territory
from somebody. They weren't served. That's why we went out. We
expand and try to find ways to compromise. It's a compromise
between the impact of existing members and the new members.
Every decision we make is a balance of how it affects the total
membership.
Senator Cortez Masto. Right.
What I have found, and I know I am running out of time, but
what I have found is that those members actually have a say,
right? They are involved in their energy, in the cost and the
resources and the technology. And it goes back to the
technology. This internet of things and smart meters and
storage, battery storage, allows your members to actually
actively participate in the use of their electricity and
whether they want to sell it back or be involved in this
process, correct?
Mr. Hardy. That is correct.
And each of those members elect our governing bodies, those
members, their neighbors, elect people to be our boards of
directors. It's not like some company somewhere else puts
people in there. It's themselves, a democratic process of
electing.
So, if I, as a manager, am not representative of my
membership, I have a nice path out the door.
Senator Cortez Masto. Yes.
Mr. Hardy. And that, I have seen with boards when you have
a board that gets a little outside the interest of their
memberships, you know----
Senator Cortez Masto. It is a great business model and that
is why I support them.
So let me jump really quickly because I am running out of
time here. A couple of things.
In Nevada, we also have large Indian tribal communities,
and in Nevada many of the tribes have plans to expand
businesses on reservations in order to provide jobs for their
members. And some of the business activity includes opening
their land to renewable energy projects such as the Moapa Band
of Paiutes. I was just visiting with them. They currently have
a solar facility created in partnership with First Solar, and
this generates energy to serve the needs of about 111,000 homes
per year.
Ms. Plowfield, what is DOE's Office of Energy's plan to
further enable electric facilities to be constructed for our
unserved and underserved tribal homes and businesses?
Ms. Plowfield. Thank you, Senator, appreciate the question.
As I said, we just finished a funding opportunity
announcement and I'm not sure if any of the tribes in your
state have applied to do that, but that's exactly what those
are meant to do.
And in addition to that, in addition to these opportunities
being able to help provide their own tribe, they can also end
up selling it to other places and provide themselves income
through that method.
Senator Cortez Masto. Can I ask you, when you say the
funding opportunities that means that is out of your existing
budget, but if there is a decrease in the budget, that
decreases their opportunities to participate. Is that right?
Ms. Plowfield. Yes, it would.
Senator Cortez Masto. Okay.
I know I am running out of time, but with your indulgence,
one quick question because I do have concerns about the Indian
Energy Loan Guarantees that the Chairwoman talked about as
well. Just a quick question.
It is my understanding DOE never promulgated rules as to
how the program would be implemented. Is that true?
Ms. Plowfield. Thank you, Senator, just if I could just go
back to the last question on the budget.
Obviously, Congress plays a role in the budget and DOE
would carry out any final budget based on Congressional action
with regard to the percentage of the budget. The Loan Program
Office is actually responsible for administering the Tribal
Energy Loan Guarantee Program, and my understanding was that
there was no new rule that needed to be promulgated, that
they're using an existing rule that----
Senator Cortez Masto. So that wouldn't hinder you
appropriating the funds or letting the funds that have been
appropriated for the program. Correct?
Ms. Plowfield. Correct.
Senator Cortez Masto. Okay, great. Thank you.
Ms. Plowfield. Thank you.
The Chairman. Thank you, Senator.
Senator Hoeven.
Senator Hoeven. Thank you, Madam Chairman. Again, thanks to
all the witnesses for being here today.
Matt, I want to ask you about the Allam cycle and where you
are in that process of getting that up and going and how it can
really crack the code in terms of carbon capture and
sequestration. And then, the things that you need to really
move forward with it.
Mr. Greek. Thank you for the question, Senator. Thank you
for the gracious introduction earlier.
For those who don't know, the Allam cycle is essentially a
super critical CO2 cycle and it offers the opportunity to
address two of the key issues that we have relative to carbon
capture, utilization, and storage. Those being leaps in
technology and in cost effectiveness.
What is different about the Allam cycle is that it allows
us to use a fossil fuel and produce a high-pressure CO2 stream
that is essentially ready coming out the back door for
sequestration or EOR or other usage. That is important to us
because right now there's a pretty good impediment to using
carbon capture systems that require refinement of flue gas into
CO2. So the ability to do that at a technical level would
substantially improve the cost effectiveness of such a cycle.
Now the CO2 enters into the conversation in terms of
getting you a higher efficiency cycle that will give you a
lower overall cost of production. Where it is today? There's
natural gas demonstration being conducted in Houston, Texas. We
expect that to be complete here within the next 12 months or
so.
At the same time, we're doing research on looking at
combusting coal in a way that would allow us to use it as feed
stock for that same cycle.
Senator Hoeven. Right, but what are the key things that,
you know, you have a group, a consortium, Basin, Elite Energy,
Energy Environmental Research Center, that is working to
advance this project to actually, instead of just talking about
carbon capture and sequestration, doing it and doing it in a
way that is not only technically viable but commercially
feasible which is what needs to happen in order for this
technology to become ubiquitous using it, not only here in our
country, but around the globe which is the real, our way, to
address the issue. What are the things that you need help with
from state and local government levels to make it happen?
Mr. Greek. Well, thank you, Senator, and thank you for your
support to this point that this helps us to do that work.
There is quite a bit of ground yet to cover in terms of
piloting the technology, taking the technology to scale. That
all presumes that the work we're doing today gives us a
successful outcome. It doesn't have to be retested and refined.
If we do have to, you know, recycle back then that will be
an opportunity for support and work with Fossil Energy at DOE
as well.
Those are, sort of, the technical challenges we still have
in front of us and would expect that we probably have another,
oh, five years, six years, maybe as many as ten years of work
to be able to deploy this on a commercial scale.
Senator Hoeven. So you need assistance from the DOE Fossil
Energy program. What other things would be helpful to you?
Mr. Greek. Well, the other things that we need and some of
them we're getting, is the ability to do sequestration without
long-term liabilities. We did get primacy recently from the
Federal Government for North Dakota that opens up some doors
and gives us a pretty good avenue to do sequestration.
There are other challenges along the way. So, as you
certainly are aware, we have the Bakken shale in North Dakota.
We would like to be able, at some future point, to be able to
use enhanced oil recovery in that shale. There's technical work
to do to advance that science and get to the point where that's
true.
So, those are some of the other areas that I would
highlight as needing additional work.
Senator Hoeven. Well, I am glad to hear that. We worked
very hard to get the regulatory primacy. I am glad that is an
important step and we know it is, but we are trying to work on
the additional steps to truly make your partnership successful.
Switching gears a little bit. Talk to me about how we
should address baseload generation in regard to the
transmission grid because you are a great example of a company
that has both baseload power, coal-fired electric, but you also
have gas and wind. How do we make sure that we have a
transmission grid that works in a way that we have power all
the time, even at peak demand time?
Mr. Greek. Well, thank you for the question.
Obviously we put a fair amount of investment into our
transmission grid over the last ten years owing to member
growth, particularly in North Dakota around the Bakken. Having
the ability to finance and execute that work, having the
ability to site it and go through the process of getting the
permits that you need is critical. Siting can be a delay.
One of the projects I worked on personally, we ended up
taking what amounted to about a six-month delay, you know, it
didn't change any of the permitting criteria, but there was,
sort of, a late set of questions that held the whole process
up. And you might say, well, what's six months? Well, in North
Dakota six months is critical because the winters in North
Dakota are a little different than the summers and a lot of
work that could have been done in the summer ended up being
done in the winter. It's important to be able to execute with
certainty any time we're doing major capital work. And so,
there's an opportunity. And we appreciate the work that's been
done to this point, but there continues to be an opportunity to
improve that regulatory reality as well.
Senator Hoeven. So as far as saying what about making sure
that baseload has access to the grid?
Mr. Greek. Well, obviously we have to be able to
participate as a whole partner in the grid. We have organized
markets in a portion of our service territory. We have areas
that do not serve, are not served, by organized markets.
It's a set of work there, maybe to do, as you're probably
aware, we're trying to be part of a more organized market on
the west side of our system. Those steps are critical to
ensuring appropriate access for the generation that we have.
Senator Hoeven. Okay.
Thanks to you and to all of our witnesses for being here
today.
Thank you, Madam Chairman.
The Chairman. Thank you, Senator Hoeven.
Senator Daines. Know that your constituent from Montana has
done a wonderful job educating us on the co-ops out there, but
it is good to have you here.
Senator Daines. Glad to be here.
Thank you, Chairman Murkowski, for holding this important
hearing. Rural America has been a focus of this Committee, and
I think that it stems from some of the states that we have on
this Committee. You don't get much more rural than Alaska,
Montana, Wyoming, and I will add North Dakota to that list here
too.
I do first want to thank Mr. Hardy for coming all the way
out to DC yet again. He was just out here with a great group of
Montanans representing our electric co-ops last week. And I can
tell you, having a Montana voice speaking of the unique
circumstances in a rural state like ours is very, very
important to bring that voice to Washington, DC.
Most of Montana's energy is generated from coal or
hydropower. That balance of affordable and reliable energy has
served our state very well. However, threats to both of these
sources have been growing for years. Licensing and relicensing
of hydro assets are taking longer and longer and they have, at
times, been so long that Congress has had to step in to
relicense certain dams. Furthermore, fringe litigation has
caused projects to be delayed or shut down. In effect, it has
resulted in the eminent closure of Colstrip Units 1 and 2.
I believe it is extremely important that we streamline
permitting processes to give security to these rural
communities, some certainty to them. They rely on these jobs
and the electricity produced from both coal and hydro.
Mr. Hardy, welcome, it is good to have you here. You
mentioned in your testimony, briefly, how rate hikes and
changes can have major impacts on rural Montana. Rural
communities depend on affordable, reliable energy. We have a
lot of seniors that live on fixed incomes. They see their
property taxes going up. They don't want to see their utility
bills going up. The smallest changes can have big consequences.
What are some of the current threats to Central Montana
that could cause rate hikes in Montana?
Mr. Hardy. Thank you.
On the hydro side, anything that stacks costs on top of the
Western Area Power is a concern. It drives Central Montana as
far as the lower cost resource that we can go in. On the other
side of our power supply, about half of it comes from the
combination of renewable and other facilities that, in our
case, Basin Electric has, and anytime they build something, you
don't put in assets in the utility world that last five years.
They better not.
But with the capital costs of whether it's going and doing
wind generation, solar, coal or anything, you need to be able
to know with certainty that if you build it, you're able to run
for the life cycle of that cost. And you need to be able to
have the permitting go through in a seamless way.
We worked hard in our state to get, for instance, a Sage-
Grouse plan, as did Wyoming and some other states, to where we
could work, protect the species and at the same time keep it
from being delisted and not harm it while we had development to
the degree that we have to redo permits.
Some of our projects don't get done as quick as you wish
for different reasons to the degree you have to go re-permit it
with a variety of agencies. It takes a lot of time and, again,
to what Mr. Greek said, our construction season, especially on
the high line, is extremely short. You go from mud season to a
few months of construction season to frozen earth season in a
hurry in Montana.
Senator Daines. Yes, the rumor is we are going to plan to
have a summer on August 15th this year in Montana, and if it is
snowing, we are going to move it indoors. We will see how that
goes.
Mr. Greek, I understand that nationally, rural areas served
by electric co-op utilities rely on coal for a big percentage,
41 percent, in fact, of their capacity. A question for you is
how important is coal to rural electric co-ops like yours and
can you give some insight into how important it is to have good
variety of power generation for customers to ensure they
receive reliable, resilient electricity at an affordable price?
Mr. Greek. Thank you, Senator.
Well, coal is very important. It still constitutes for
Basin Electric the majority of megawatt hours that we provide
to our members. In addition to the direct benefit to our
members, it also provides local benefits in employing folks in
the mining operation and the production operation and in the
operation of the power plants. Moving away from that in some
significant degree would be devastating to the communities that
rely on it as their primary source of income.
In terms of reliance and resilience, reliability, our
members request us, generally pretty straightforward--it's
reliability first and it's low cost power second, and you
better not trade two for one or one for two. And part of that
is having dispatchable power that's available to you, 24/7/365.
Coal is one of those technologies that provides that, both
in terms of the technology itself and in terms of the way we
can manage inventory. As you know, it is difficult to store
electricity. And while there have been advances in the battery
front, that is still not a commercially viable option for us
and for our membership.
And there will always be, in my mind, a need for
dispatchable power. Fossil fuels, including coal, are the
foundation upon which that dispatchable power is built today.
Senator Daines. Thank you, Mr. Greek.
The Chairman. Thank you, Senator Daines.
I have a couple more questions, and I would like to go to
you, Mr. Venables.
We talk about some of the policies here that can help
really advance some of our more clean, more affordable energy
solutions. It is good that we focus on this, but we also have
policies that we put in place that actually make it harder, in
fact, in times almost impossible to make those advances toward
cleaner, more affordable, renewable energy sources.
In Southeast Alaska, we are blessed with extraordinary
hydropower resources. We know that. We have some great assets
there. It is one thing to have the resource in an area, but you
have to be able to move that power. You have to have the
ability for transmission.
We have a situation in the Tongass where we have in place a
roadless rule which affects 9.5 million acres of land within
this area. You pointed out in your testimony, Robert, that you
have less than about one percent of land that is privately held
in Southeast in the Tongass. This has an impact on our ability
to not only build out an economy, it puts us in a situation
where we are not able to do more when it comes to development
of our renewable opportunities when it comes to energy. This
costs jobs, it increases energy costs, and it costs us
opportunities to grow. Can you speak just briefly about the
impacts that the roadless rule has had on building, not only a
sustainable economy, but what it has meant to energy prices as
a direct result of the roadless?
Mr. Venables. Thank you, Senator, for the question.
Briefly, maybe.
The Chairman. Yes.
[Laughter.]
Mr. Venables. All day, for sure.
The Chairman. Yes, yes, yes, I know.
Mr. Venables. It's really the cannonball approach to
killing a fly. It rarely hits the fly and it causes a lot of
damage. And the damage is really at many levels because it puts
so much of the lands unaccessible. There's just not access to
whether it's biomass, whether it's hydro or you know, whatever
the resource is, and not just to the industry because there's,
you know, and it really has very little, contrary to a lot of
the politically charged characterizations of the roadless rule,
the removal of that does not mean that there's roads all over
the 17 million acres of the Tongass. That is not at all the
case. It really denies, the roadless rule denies the
commonsense approach to best management practices where logging
is appropriate and should occur as a renewable industry. They
don't have access to it, just maybe because it's 65 feet off of
the wrong marker.
Even though the household level, I was just impressed as
well as last month in talking to the folks that, as I
referenced in my earlier remarks about the school districts and
the biomass heat there, well, instead of sending their check to
the Lower 48 for the fuel company, what they do is they spend
money on the local people, that one of the families that want
to bring in a quart of firewood at a time to the school, they
get paid their money. Well, a lot of times where they get that
is from the logging sales that still have a lot of fallen
timber that are laying there available for firewood. And now,
not only are roads not allowed, they're digging up the ones
that exist and that's denying families an opportunity to
develop their own household income. And the logs that are
laying there produce, you know, much more noxious gases than
carbon dioxide. So it's a very futile approach to try and
manage the forest that we have there.
It really is indicative of, I think, the fatal flaw in a
lot of the programs agencies have is that the rulemaking that
they make is not following the guidance they have from
Congress, it's just administratively what is politically, you
know, comfortable for the day and it does incredible damage
from afar. If they would empower people on the ground in the
state that would be much more effective management approach,
but instead it gets micromanaged from afar.
Even putting in a simple transmission line for the
community of Kake, which has high energy costs, $0.58 a
kilowatt-hour. We were able to get it permitted but because of
all of the kaleidoscope of different land use designations and
the rulemaking that goes into each different one, the cost of
that, of constructing that, was going to be between $50 and $60
million for just a small segment. It was only like 11 miles of
new road that would have to be built. And so, it just makes the
project impossible to construct and then they would mandate
helicopter maintenance which is impossible to maintain for a
community----
The Chairman. So when you think about that--$50 to $60
million to construct for a 10, 11 mile----
Mr. Venables. Yes, Senator, it is. It's about 60 miles in
total, but there's only about 11 miles of new road.
The Chairman. Eleven miles of new road, and the community
of Kake is how many folks?
Mr. Venables. 500.
The Chairman. 500.
Pretty tough to make something like that pencil out. The
sad irony of all of this is you want to try to help this
community get off diesel and the way to do it is to allow for
this small connect, but you can't pencil the project out so you
don't get the cleaner power source. You don't get, ultimately,
the cheaper power source. You basically condemn a small
community to a continuation of diesel power generation.
It is one of the real frustrating realities of what goes on
around here. We have a push to say well, you cannot put a road
in a national forest whether it is for timber harvest or
whether it is to allow for maintenance of a transmission line.
So in an effort to be environmentally pure and not cutting
down a tree, we are condemning people to an energy reality that
is dirty, inefficient, expensive, and it is just wrong.
My question to you, obviously, was very purposeful. I think
both of us could talk about this for a long while, but I think
it is important to recognize that the roadless rule is not just
about a timber harvest within the country's largest national
forest. This is about communities that are a part of this
extraordinary area that have been held back from an economic
perspective, held back from the ability to really have much of
an economy if we cannot get them to better energy solutions.
And it is not just the economy, but it is the ability to
develop other resources that may be there whether it is mineral
opportunities or the like. It is a challenge for us and it is
one, as you know, we continue to work and work aggressively.
I wanted to ask you another question, Robert, about some of
the successes that we have seen. You mention change out for
some of our schools, changing out from diesel boilers to our
woody biomass alternatives and some of the good things that we
have seen there. What do you consider to be the biggest
barriers to adding more efficiency solutions in the state?
Where is our holdup right now?
I want Ms. Plowfield to be listening carefully here because
I think that we should be able to make some headway through the
Office of Indian Energy, but where are we not doing as much as
we need to be doing?
Mr. Venables. Senator, thank you.
You know, tied right into the whole issue with the roadless
rule and the impacts of, you know, how federal policies are
maintained. The same applies for the opportunities for tribes
to develop the alternatives for the energy. With the extreme
levels of turnover at a lot of the agencies and constrained
budgets, it's hard for them to do anything other than find the
lowest common denominator within the comfort zone of
administrating their programs.
But the majority of projects we have on the forefront right
now in Southeast that would benefit the tribes are denied even
eligibility to respond to the notice of funding that was
referenced earlier in testimony because either the land is not
outright owned by the tribe, even though it's serving tribal
communities and members and served by a co-op that's primarily
a tribal entity. It's just, it denies them an opportunity to
attract the funding that they need to get.
In one instance, like in Angoon, the Kotzebue folks there,
they traded away a lot of their lands with the establishment of
the Admiralty National Monument, federally-owned, and in return
they were given the rights to hydro to develop for their
community which is desperately needed because there's a
microgrid, there's no hope for getting any economic dispatch
from some other places. There's no roads. There's no
transmission line. Even if you look at a map, it shows a
reserve for that project. But yet, that land is forest service
land. But they're not eligible, even though the community is
100 percent Tlingit, it's a tribal community. It's serving
Indian Country, but it's not considered Indian land and now
they do not have access to funds.
So I think just pushing agencies, whether it's the Forest
Service or DOE or, you know, whatever the federal agency is, to
really look at the goals of their missions that they're
statutorily enabled to do by law to make some exceptions for
some exceptional cases.
The Chairman. Well, the example that you have given of
Angoon is a pretty compelling one. Of course, in that community
I am pretty sure that their costs are over $0.50 a kilowatt-
hour. Yes?
Mr. Venables. Yes.
The Chairman. Yes.
Mr. Lyons, let me ask you a similar question in terms of
barriers to doing more with what we have directed when it comes
to weatherization and efficiencies because I believe, as you
have cited, that there is still plenty of opportunity to do
more. Is it just a matter of funding and resourcing or do you
also see some policy initiatives that we need to, kind of, weed
through or sort through that would allow us to do more on the
efficiency and the weatherization side?
Mr. Lyons. Obviously funding is a critical part of that, to
be sure, but I think also there is that matter of regulation as
well.
When we had our funds, we were able to ramp up and do some
amazing work with those funds, but of course, the way that
works, right, is that you receive the funds and they came back
and looked at it and they found some discrepancies in how some
of the funds were used.
But I would say that most of those discrepancies happen in
states that were simply starting their weatherization program.
And so, they were working from a ground level. States like
Alaska and Washington and Montana that have been doing
weatherization for a long time had established programs and our
error rates and discrepancies were much lower and, I would say,
relatively insignificant.
So with that change that they came back, there were a
number of changes to the program that, I think, it makes it a
more bureaucratic program. There are just a lot of rules and
regulations that we have to make sure that we implement as part
of providing weatherization services. Some of those are good,
in terms of quality control. Some of those, I think, are
unnecessary. We have, I would say, the weatherization services
that the lower income program provides is the most
comprehensive weatherization services being provided in the
nation. We have separate auditors and inspectors that look at
every single project that we do. And so, there is a lot of
admin and program support that is required as part of the
program, partly due to regulation.
I would say the other thing, the barrier that we definitely
have that I mentioned earlier is the ability to get trained
workers, both in the terms of from my side, actually auditing
buildings, and then also the physical work to be able to do it.
We have good training centers. I've been trained by people
from Alaska, actually, that have their own unique
weatherization issues, as you can imagine. But to provide, to
get people actually into the workforce and pay them wages that
makes it worthwhile over time.
In Washington State we had a unique situation in that we
have a prevailing wage requirement on the part of the State
Department, I mean, part of the state, but at the same time,
they are not willing to create a prevailing wage category for
weatherization. And so, that's made the implementation of
tracking prevailing wage in the weatherization industry
extraordinarily difficult.
The Chairman. Interesting.
Now I know, certainly within Alaska, we had several of our
tribes lead with the weatherization training. I think it was
Tlingit Haida was very involved with that. Being the
weatherization auditors, I guess, was the terminology.
I would challenge all of you and certainly for those that
are part of our co-ops, we are doing a lot of just working with
the Administration and the agencies on trying to identify those
regulations that may be redundant or just outdated,
unnecessary, considered to be unduly burdensome. We are trying
to move through some of the things that are holding us back.
I think particularly when it comes to rural energy and the
opportunities there, you mentioned, I think, both Mr. Greek and
Mr. Hardy mentioned, the vegetation issues that we have been
working on. We have made some good headway there that was
reflected in the Omnibus bill.
So things like this, I think, we can look to and we can
make some headway there. But let us know if there are areas
where within your region, in the areas that you are working,
where you have some good suggestions for us that we can share
with the different agencies in terms of how we can do more by
just cutting through some of the clutter of the regulation. It
is not that we are trying to eliminate a permitting process.
It's not that we are trying to avoid environmental process, but
I think we recognize that there are efficiencies that we can
gain if we look for them.
And you all are in a much, much, much better position to
help us identify what those are because you are living with
them day in and day out. So I would invite you to stay in touch
with the Committee here and provide us your feedback in these
areas as we move forward.
You have given us good information here today. It puts an
important perspective on the reality of energy and how our
energy assets are distributed. I think the reality is that much
of what is generated, where we get our power from, it comes
from rural America and we have just got to get it to the folks
that want to live in places like Washington, DC.
So you are where it is all happening, and we appreciate
that a great, great deal.
But oftentimes, it seems that where the resource comes from
often bears most of the burden in the sense that we are still
paying high costs, we might not see the full benefit play out.
We need to make sure that we are doing right by our rural
communities, by our families, who are part of rural America.
Let's make our energy system a more equitable system. I
appreciate the efforts that you are doing in that regard.
With that, I thank you for your time today and the
Committee stands adjourned.
[Whereupon, at 12:11 p.m. the hearing was adjourned.]
APPENDIX MATERIAL SUBMITTED
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