[Senate Hearing 115-522]
[From the U.S. Government Publishing Office]


                                                     S. Hrg. 115-522

 POLICY ISSUES FACING INTERSTATE DELIVERY NETWORKS FOR NATURAL GAS AND 
                              ELECTRICITY

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 12, 2018

                               __________

[GRAPHIC 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                    
30-982                  WASHINGTON : 2019                     
          
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              COMMITTEE ON ENERGY AND NATURAL RESOURCES

                    LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho                RON WYDEN, Oregon
MIKE LEE, Utah                       BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
STEVE DAINES, Montana                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
                 Kellie Donnelly, Deputy Chief Counsel
                    Robert Ivanauskas, FERC Detailee
             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

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
King, Jr., Hon. Angus S., a U.S. Senator from Maine..............     2

                               WITNESSES

Moffatt, J. Curtis, Vice President and General Counsel, Kinder 
  Morgan, Inc....................................................     4
Murchie, James J., CEO and Co-Founder, Energy Income Partners, 
  LLC............................................................    39
Hoecker, Hon. James J., Executive Director and Counsel, WIRES, 
  and Senior Counsel, Husch Blackwell LLP........................    49
Kelliher, Hon. Joseph T., Executive Vice President-Federal 
  Regulatory Affairs, NextEra Energy, Inc........................   142

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Hoecker, Hon. James J.:
    Opening Statement............................................    49
    Written Testimony............................................    51
    Responses to Questions for the Record........................   266
Kelliher, Hon. Joseph T.:
    Opening Statement............................................   142
    Written Testimony............................................   144
    Responses to Questions for the Record........................   277
King, Jr., Hon. Angus S.:
    Opening Statement............................................     2
Moffatt, J. Curtis:
    Opening Statement............................................     4
    Written Testimony............................................     6
    Responses to Questions for the Record........................   179
Murchie, James J.:
    Opening Statement............................................    39
    Written Testimony............................................    41
    Responses to Questions for the Record........................   250
Murkowski, Hon. Lisa:
    Opening Statement............................................     1
The Wilderness Society:
    Letter for the Record........................................   287

 
                    POLICY ISSUES FACING INTERSTATE
                   DELIVERY NETWORKS FOR NATURAL GAS
                            AND ELECTRICITY

                              ----------                              


                        THURSDAY, JULY 12, 2018

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 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.
    It was just one month ago today that we conducted an 
oversight hearing on the Federal Energy Regulatory Commission, 
the FERC. We had all five Commissioners here; it was good to 
see them. I don't know, maybe we jinxed the whole thing.
    [Laughter.]
    I think we recognize, clearly, the value of the FERC. They 
are the key deliberative body under our oversight. They have 
regulatory responsibility of our nation's crucial midstream, 
interstate delivery systems that move energy from where it is 
produced to where it is needed.
    Last month's hearing prompted follow-up questions about 
natural gas transportation and electric transmission, energy 
systems that are squarely within the core of FERC's 
jurisdiction. Today we will have an opportunity to dive more 
deeply into these issues, which really have a very significant 
impact on our nation's capacity to deliver energy.
    After we began planning for this hearing, we learned there 
was going to be another vacancy on the Commission. While that 
news did not prompt today's hearing, it certainly underscores 
the need for us to remain focused on the FERC in general and on 
natural gas transportation and electric transmission, in 
particular, our lifelines for affordable, clean, diverse, and 
secure energy.
    Today's hearing is also the latest in a series that we have 
held over the last two years to highlight the significance and 
outline the benefits of interstate energy delivery 
infrastructure for our nation. Those benefits include energy 
affordability and security along with job creation and economic 
development.
    As I see it, there are three common threads that run 
through the entire record that we have compiled over the past 
couple years. First, that the nation needs more robust energy 
delivery infrastructure. Second, thus far, private capital and 
a skilled workforce have been available to expand and upgrade 
today's energy delivery system assets, but I underscore thus 
far. And the third thread is that energy delivery networks face 
genuine challenges that threaten to impede progress and thwart 
delivery system improvements that are otherwise within our 
reach.
    Regulatory uncertainty brought on by delay or, even worse, 
deadlock at the FERC, is increasingly of concern. What's more, 
the denial of necessary state approvals for projects on 
political grounds, or the failure of other federal agencies to 
meet FERC-established schedules, are problems that have to be 
addressed.
    Our witnesses today include two former FERC Chairmen, one 
Republican and one Democrat, both of whom remain active leaders 
in the energy sector, and we thank you for that.
    We are also joined by a leading and very successful energy 
investor and an experienced practitioner now serving as the 
General Counsel of the company that, according to his 
testimony, ``owns or operates . . . natural gas pipelines 
constituting the largest natural gas network in North 
America.''
    My main takeaway from their written testimony is that now 
more than ever the United States needs balanced, merits-based 
energy regulation that is predictable and prompt. For our 
country to reap the benefits of the natural gas revolution and 
renewable power technologies and to keep our power supply 
reliable and secure, we must have dependable, financially 
sustainable, and expanding interstate delivery networks.
    Our witnesses can offer informed, bipartisan, and practical 
observations for building on successes and avoiding regulatory 
pitfalls. As members consider their testimony, I would hope 
that they will also ask how our Committee can encourage and 
assist FERC to move its work along thoughtfully but promptly 
and maintain a balanced non-partisan approach to energy law and 
regulation.
    I will introduce each of the panelists after Senator King 
provides opening remarks on behalf of--well I don't know if 
they are on behalf of Senator Cantwell, but we welcome you as 
you are helping lead this Committee this morning.
    Senator King.

             STATEMENT OF HON. ANGUS S. KING, JR., 
                    U.S. SENATOR FROM MAINE

    Senator King. Thank you, Madam Chair.
    I am delighted to be with you and to participate in another 
of an important series of hearings on the issue of energy 
infrastructure.
    As a former Governor of Maine, this is an issue that I have 
been thinking of, thinking about, and concentrating on for 
about 30 years. I have seen significant changes in the energy 
picture in New England and, in some cases, additional 
infrastructure constraints, which I'm sure we will talk about 
today, because New England is at the end of the pipe, 
literally. Then we have to be thinking about how energy enters 
our region.
    I have often thought in terms of Maine that it reminds me 
of the story Golda Meir used to tell that Moses tramped around 
the Middle East for 40 years and settled in the only place 
without oil.
    [Laughter.]
    In Maine, we are in a similar situation unless we can 
discover how to make energy out of granite.
    In any case, we do have significant problems in New 
England, principally because of constraints in the wintertime. 
During a cold snap which occurred this past winter, early in 
January, the price of natural gas in New England went up by a 
factor of ten. That has profound impacts on our consumers and 
on our industry. It is something that we have to continue to 
talk about.
    We need to talk about electrical line capacity as well as 
pipeline capacity, but I think we also need to talk more 
broadly about alternative solutions.
    I have a friend in Maine who says there is rarely a silver 
bullet but there is often silver buckshot, which means a 
multiplicity of solutions added together will create a solution 
to the problem.
    One of the areas that I am particularly interested in is 
the role that storage and distributed energy and demand 
response can play in creating a grid that is more balanced.
    One of the concerns I have had in dealing with these issues 
for a number of years is that the grid is like a church that is 
built for the service on Easter Sunday morning but has 
substantial excess capacity the rest of the time. How can we 
utilize the grid more efficiently?
    I think we are headed in a place where we will with 
electric vehicles, storage, and demand response. We can more 
efficiently utilize the grid without the necessity of 
necessarily investing in new infrastructure, again, to handle 
peak periods which can be dealt with in alternative ways.
    So those are some of the things that I am thinking about. I 
enter this hearing in an unaccustomed mode of not having my 
mind made up. I am genuinely seeking your input, suggestions, 
and thoughts, and I look forward to your testimony.
    I also want to commend the Chair for holding this series of 
hearings, because I think it is very important. We have to 
think about not only today and tomorrow, but we also have to 
think about the day after tomorrow. This involves economic 
considerations, energy considerations, and technological 
considerations. I look forward to you all helping us sort out 
some of those issues.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator King.
    We will begin with testimony from each of our witnesses. 
Again, we thank you for being here this morning.
    I would ask that you try to keep your statements to about 
five minutes. Your full written statements, of course, will be 
incorporated as part of the record. We appreciate that you all 
submitted your testimony in advance, on time. I always like to 
reward good behavior. Thank you for helping us be more prepared 
for this particular hearing with your statements.
    We will lead off the panel this morning with Mr. J. Curtis 
Moffatt, who is the Vice President and General Counsel for 
Kinder Morgan. We welcome you.
    Mr. James Murchie will be following him. He is the 
President, Founder and CEO for Energy Income Partners, LLC. 
Welcome.
    The Honorable James Hoecker, Hecker----
    Mr. Hoecker. Hecker.
    The Chairman. Hecker. I knew what it was, and I looked at 
it and I still said Hoecker. Hecker. He is the Executive 
Director and Counsel at WIRES, and he is the Senior Counsel at 
Husch Blackwell LLP. He is also a former FERC Chairman. He was 
appointed by President Clinton several years ago. We welcome 
you back.
    And an individual who is well known to the Committee here, 
Joseph Kelliher, who is the Executive Vice President for 
Federal Regulatory Affairs at NextEra Energy. He, also, is a 
former FERC Chairman, appointed by President George W. Bush. So 
we welcome you back to the Committee.
    We thank you all again for being here.
    Mr. Moffatt, if you would like to lead the panel off this 
morning, thank you.

  STATEMENT OF J. CURTIS MOFFATT, VICE PRESIDENT AND GENERAL 
                  COUNSEL, KINDER MORGAN, INC.

    Mr. Moffatt. Good morning, Chairman Murkowski, Senator King 
and members of the Committee. I am Curt Moffatt and serve as 
the Vice President and General Counsel of Kinder Morgan. Thank 
you for the opportunity to testify. And as you mentioned, our 
written testimony has been submitted for the record.
    Kinder Morgan owns or operates approximately 70,000 miles 
of natural gas pipelines, constituting one of the largest 
natural gas networks in North America. Our pipelines transport 
or store approximately 40 percent of all natural gas consumed 
in the United States every day. Our gathering and transmission 
assets connect the major consumer markets to every important 
natural gas resource play in the United States.
    I joined Kinder Morgan in 2014. I began my legal career as 
an Advisor to the first Chairman of the Federal Energy 
Regulatory Commission, and he was also the last Chairman of the 
Federal Power Commission. During this period, President Carter 
proposed and Congress enacted the legislation to create DOE and 
the National Energy Act which included the Natural Gas Policy 
Act of 1978. Assisting in the implementation of that 
legislation and its development laid the groundwork for the 
competitive natural gas markets that we enjoy today.
    Chair Murkowski, Kinder Morgan's take-home message for the 
Committee has three parts.
    The first is natural gas is essential to the U.S. economy 
for its industrial base, its residential, its commercial uses 
and to a certain extent, generating electricity. Pipelines are 
also a practical means to transport and distribute natural gas. 
It's the only practical means. And the current federal legal 
framework of the Natural Gas Act is essential to ensure that we 
can construct the necessary pipelines. The history of the 
continued Congressional recognition of the importance of 
natural gas development in the United States is instructive to 
the Committee's current inquiry.
    First, the Natural Gas Act in 1938. Congress specifically 
recognized the contribution that natural gas could make to the 
nation's well-being. It also recognized that the locations 
where natural gas is produced, frequently, are long distances 
from where consumers live and work; that the only means of 
transporting natural gas to those consumers is through pipe, 
pressurized pipelines that cross several states; and that a 
comprehensive federal regulatory framework is needed to ensure 
that the pipelines could be constructed and gas delivered in 
both interstate and foreign commerce. The basic components to 
that framework are certificates of public means and necessity, 
federal eminent domain and comprehensive economic regulation.
    The second is in 1978. The Congress enacted the Natural Gas 
Policy Act in the face of natural gas shortages in the 
interstate market that led to the deregulation of the price of 
natural gas and the integration of the transportation storage 
services utilizing both intrastate and interstate 
transportation systems.
    The third component is the Energy Policy Act of 2005. 
Congress affirmed FERC's preeminent regulation of LNG 
facilities and introduced a concept of a pre-filing process. In 
addition, the Act established FERC as the lead agency for 
coordinating all federal agencies involved in permitting of 
interstate pipelines and complying with NEPA by requiring that 
all federal agencies cooperate with the Commission and comply 
with deadlines set by the Commission.
    Over the 80 years since passage of the Natural Gas Act, the 
Federal Energy Regulatory Commission and Federal Power 
Commission, I believe and we believe, has consistently 
implemented the requests of Congress as embodying those 
statutes which with judicial approval. Today the Commission 
balances the objectives that are required under the Natural Gas 
Act through the 1999 policy statement.
    Kinder Morgan believes an on balanced policy statement has 
served the nation well. It reflects a process that can balance 
all of the regulatory and legal requirements required of the 
act of NEPA, and the Federal Energy Regulatory Commission, with 
the changes made in 2005, has the authority to guide the other 
agencies.
    At bottom, what we recommend is vigilant oversight by the 
Congress and by the relevant Committees of the work of the 
Federal Energy Regulatory Commission and also the other federal 
and state agencies that must consider and grant permits to make 
sure they're working together and benefiting the interstate 
commerce and the ability to build the infrastructure needed to 
move natural gas from production to market.
    Thank you.
    [The prepared statement of Mr. Moffatt follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Mr. Moffatt.
    Mr. Murchie, welcome.

   STATEMENT OF JAMES J. MURCHIE, CEO AND CO-FOUNDER, ENERGY 
                      INCOME PARTNERS, LLC

    Mr. Murchie. Thank you, Madam Chair, Senator King, members 
of the Committee. My name is Jim Murchie. I am a Co-Founder and 
CEO of Energy Income Partners. We call it EIP for short. I'm 
joined here today by my colleague, Sam Brothwell, who is 
sitting behind me.
    Founded in 2003, EIP is a registered investment advisor 
that oversees about $6 billion of client assets. Our clients 
invest primarily through mutual funds and separately managed 
accounts and are primarily individual investors seeking income 
and inflation protection.
    EIP invests this capital in equity securities of publicly 
traded energy infrastructure companies located primarily in the 
U.S. with some investments in Canada and some nominal 
investments overseas. EIP invests in companies that operate 
natural gas and petroleum pipelines and related storage and 
terminals, regulated power generation, transmission and 
distribution, as well as developers and operators of renewable 
energy selling power on long-term contracts. Our investment 
strategy seeks stable cash flows being generated by regulated 
assets with modest growth.
    EIP is unusual in that as a specialist in the energy income 
investing, it invests in both hydrocarbon infrastructure and 
electric power infrastructure. In the age of specialization and 
institutional asset allocation by asset category, specialist 
investment managers in the energy infrastructure space are 
either midstream investors, you know, hydrocarbons which today 
really means they're MLP investors or separately they're 
electric utility investors.
    Because the energy system itself does not follow these tidy 
asset allocation categories, I think EIP has a unique 
perspective on how these different areas interact.
    Our original fund which started in 2003 has generated 
double digit compounded annual returns that exceed the returns 
of the S&P 500 and most other relevant indices. The returns 
have been up of roughly a six-percent yield with a balance from 
appreciation of the underlying share prices.
    I'd like to highlight the two main points that were in our 
written testimony that we submitted earlier in the week.
    The first is that our success as investors is a direct 
result of selecting the best management teams that operate 
under regulatory regimes that are demanding but fair, 
consistent and predictable. Investors and regulated businesses 
do well when all the stakeholders involved with these assets do 
well, and we have found that means safe, reliable energy at a 
low cost to the consumers with the least impact on the 
environment. By contrast, companies that give short shrift to 
issues of worker and public safety, system reliability and 
environmental stewardship also tend to be pro-allocators of 
capital, have higher operating costs and usually have, as a 
result, poor relationships with their regulators and other 
stakeholders and from our perspective, more importantly, they 
also tend to have lower shareholder returns. We invest in a 
commodity industry where low costs win out. We try to own the 
low-cost way of transporting the lowest cost forms of energy. 
That's how we win. Our partners in this are the management 
teams of the companies we own and the regulatory regimes under 
which they operate.
    Environmental impact is the second point we made in our 
testimony. The U.S. energy infrastructure system has 
successfully attracted billions of dollars in capital expanding 
the natural gas pipeline system that has resulted in 
significant growth in gas-fired power generation which, in 
turn, has led to a 40 percent decline in coal-fired power 
generation over the last ten years and has facilitated, as 
backup power, significant growth in wind and solar generation. 
When viewed from this perspective, the construction of new 
natural gas pipelines has played a critical role in the U.S. 
reducing its CO2 emissions by over 13 percent from their peak 
in 2005. The opposition to new natural gas pipeline 
construction because increased use of gas will increase 
greenhouse gases ignores the benefit of gas-fired generation 
versus coal-fired generation, misses the symbiotic relationship 
between gas and renewables, threatens to chase away capital and 
slow the progress we've enjoyed in generating cleaner energy at 
lower costs.
    My firm and I appreciate the opportunity to present the 
testimony to the Committee today and look forward to the 
questions.
    Thank you.
    [The prepared statement of Mr. Murchie follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Mr. Murchie.
    Mr. Hoecker, welcome.

  STATEMENT OF HON. JAMES J. HOECKER, EXECUTIVE DIRECTOR AND 
    COUNSEL, WIRES, AND SENIOR COUNSEL, HUSCH BLACKWELL LLP

    Mr. Hoecker. Thank you and good morning, Chairman 
Murkowski, Senator King and members of the Committee. I'm Jim 
Hoecker. I'm here today on behalf of an organization called 
WIRES, that's a trade group that promotes investment in 
electric transmission in the U.S. and Canada.
    Thank you very much for the opportunity to address the 
Committee about these current energy delivery issues that tend 
to fall within the jurisdiction of the FERC, an agency of which 
I was a member and Chairman three Administrations ago. I remain 
an advocate, however, for FERC's pro-market agenda. Moreover, I 
support its tradition of bipartisan and predictable regulation 
of these capital intensive industries and on that much and 
probably much more Joe Kelliher and I probably agree.
    Energy policy works best when we work together and achieve 
results for consumers. Competition and markets have been the 
common threads in FERC's regulation for a generation now.
    Now, as I noted in my prepared testimony and as Senator 
King mentioned, the means of producing and delivering natural 
gas and electricity have changed enormously in the intervening 
years. These industries will experience even greater change as 
the economy relies more and more heavily on electricity fueled 
increasingly by natural gas and renewables. There remain limits 
on where and how quickly we can build infrastructure, however, 
under current law and regulation which needs to catch up in 
some ways to the realities of today's interstate power 
marketplace.
    WIRES commends the Committee, of course, for focusing on 
energy delivery networks today. That focus reinforces my belief 
that we are now ready to tackle the hard questions: Are we 
building the right facilities? Are we building them in a timely 
fashion? Are we responding in a proactive way to the potential 
of a more electrified economy and accommodating and 
incorporating new technologies? Now finally, are we fostering 
efficient development in order to create and add benefits for 
consumers?
    I can see unequivocally that the private sector stands 
ready to make needed investments in the grid of the future, but 
challenges remain. Consumers will pay up to $4 billion in 
congestion costs annually, and a substantial share of all 
transmission facilities are at the end of their useful lives. 
In regions of the country and offshore where new clean energy 
resources abound, there is limited or non-existent delivery 
capability.
    Despite several years of work, FERC's Order 1000 has been 
unsuccessful in fostering transmission between and among 
regional markets. Permitting interstate electric transmission, 
moreover, remains a complex, protracted and costly process that 
goes on for a decade or more. In addition, we are reminded all 
too often of the costs of not hardening and modernizing the 
grid and transmission, I think, offers a fuel neutral solution 
to achieving grid resilience. Moreover, the transmission grid 
must be enabled to carry the vital task of integrating new 
distributed resources and technologies into the system for the 
benefit of consumers.
    During all this, the industry continues an important quest 
for predictable and stable returns on its investments that are 
made and incentives to meet needed investments in the future.
    As we move ahead, WIRES looks forward to working with this 
Committee and FERC to build the infrastructure that delivers 
the secure, reliable and low-cost energy that we all depend on.
    Thank you for listening.
    [The prepared statement of Mr. Hoecker follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Mr. Hoecker.
    Mr. Kelliher, welcome.

STATEMENT OF HON. JOSEPH T. KELLIHER, EXECUTIVE VICE PRESIDENT-
              FEDERAL REGULATORY AFFAIRS, NEXTERA 
                          ENERGY, INC.

    Mr. Kelliher. Thank you.
    Chairman Murkowski, Senator King, members of the Committee, 
thanks for the opportunity to testify today. I'm appearing on 
behalf of NextEra Energy which is one of the largest energy 
holding companies in the United States. NextEra owns or 
operates 47,000 megawatts of electricity in 33 states. We're 
the largest electric generator in the country and we have the 
most diverse electricity supply of the largest generators. We 
also operate a large electricity transmission grid, and we have 
gas pipeline businesses that we own and operate. So we have an 
interest in both sides of the infrastructure issues that you're 
looking at today.
    I want to commend you for holding this hearing. The 
importance of energy infrastructure is not very well 
understood, but strong energy infrastructure is the foundation 
for competitive electricity and gas markets and it's necessary 
for delivering benefits to customers.
    The energy infrastructure investments that have been made 
up to this point made it possible for the U.S. electricity 
supply to evolve in recent years allowing the deploying of new 
technologies and the retirement of uneconomic generation. New 
gas pipeline infrastructure enabled the nation to secure the 
benefits of the shale gas revolution and strengthening, in my 
view, strengthening the energy infrastructure is the real 
resilience issue. The resilience associated with onsite fuel is 
insignificant by comparison.
    Regulatory policy plays an important role in securing the 
necessary investment for energy infrastructure and affects the 
risk of that investment. Regulatory policy determines how long 
it takes to approve and site new facilities. And it's important 
that energy--that regulatory policy governing energy 
infrastructure development be highly merits-based and non-
political and that there be a reasonable level of regulatory 
certainty and that those decisions be fairly predictable and 
timely. FERC, in my view, is ideally suited to make those 
decisions because of its long-standing commitment to merits-
based decision-making and its status as an independent agency.
    Very large-scale investments are needed to maintain and 
strengthen our energy infrastructure but there are challenges 
that face interstate natural gas pipeline and electric 
transmission development. Those challenges are different 
confronting those two, both the grid and the pipeline 
development. The primary challenge to interstate pipeline 
development is the siting process. Siting of pipelines is 
governed, as Mr. Moffatt pointed out, it's governed by the 
exclusive siting provisions in the Natural Gas Act where FERC 
is charged with certificating pipelines it determines are in 
the public convenience and necessity. Although FERC has 
exclusive jurisdiction to certify pipelines, there usually is a 
need for approvals from other federal agencies and state 
agencies acting under federally delegated authority such as the 
Clean Water Act.
    Pipeline siting though, however, has become highly 
litigious involving advocacy groups that are dedicated to 
blocking infrastructure development. Some states, also, have 
been very aggressive in their use of federally-delegated 
authority to effectively veto projects.
    FERC pipeline certification is governed by the 1999 policy 
statement and last December FERC announced that it would review 
the policy statement and I support that review. I think after 
20 years, it's reasonable to review whether the policies that 
are reflected in the policy statement are sound. I do believe 
that the descriptive policy statement is sound and no major 
reforms are warranted, but I think there's some changes that 
FERC could make to how it issues the certificate orders for 
individual projects that are warranted and would make those 
orders more consistent with the policy statement. Under the 
policy statement, FERC determines whether a proposed project is 
in the public interest by balancing the project benefits 
against adverse impacts and practice this balancing is not very 
transparent in the certificate orders.
    Applicants do put evidence in the record about project 
benefits. Those benefits are typically not discussed in the 
certificate orders themselves. And I think there's a need for 
FERC to be more transparent in the balancing of benefits and 
adverse impacts and in the certificate orders. I think there's 
also a need for FERC to clarify whether and how environmental 
impacts should be weighed in this balancing and whether 
environmental review is governed by NEPA or by the Natural Gas 
Act itself.
    There are different challenges that face electric grid 
development. One challenge in particular is uncertainty about 
the level of return on equity that FERC will allow for 
investment. In response to abnormal conditions in financial 
markets a few years ago, FERC reformed the methodology that it 
uses to determine return on equity, or ROE. Those reforms, 
however, were challenged in court last year and the DC Circuit 
vacated the orders where FERC adopted its new methodology. It's 
very important that FERC act in the near future to clarify its 
policy toward ROE and remove this regulatory uncertainty which 
underpins future grid investment.
    There are also challenges around the RTO transition 
planning process. There have been some concerns about Order 
1000, how well it's working. One area of Order 1000 that has 
been a success, and I think we should consider whether that 
success should be expanded, is on the competitive development. 
FERC 1000 has encouraged competition and development of 
regional projects. I think there's been some significant 
successes in some regions and perhaps that success should be 
reinforced and broadened.
    With that, I look forward to answering any questions the 
Committee might have and, again, I commend you for holding the 
hearing.
    Thank you.
    [The prepared statement of Mr. Kelliher follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank you, Mr. Kelliher.
    And thank each of you, I appreciate all you have 
contributed, gentlemen.
    I am going to start out with a broader question directed to 
all of you and I appreciate that, I think, each of you has 
referenced the need for a balanced, fair, and transparent 
regulatory approach. I think we all recognize that that 
benefits all.
    There is a lot of discussion about where we are right now 
when it comes to energy policy and our infrastructure. On the 
one hand, you have an effort and it is very, very far over to 
one side, but it is an effort that would say we have to stop 
any and all use of fossil fuels altogether, kind of the ``keep 
it in the ground'' approach. On the other hand, you have a 
direction, an approach, that says we need to support our 
cleaner forms of energy, certainly making sure that energy is 
affordable. We have issues, as you have pointed out, Mr. 
Kelliher, clearly in the siting of new pipeline and 
infrastructure.
    What I would like to hear from you is what are the issues 
or the inherent dangers, if you will, if we restrict through 
our regulatory process here, pipeline development, either 
restricting it or slowing it down? I believe it was you, Mr. 
Hoecker, that mentioned things like congestion costs. Mr. 
Murchie, you recognized the environmental benefits that natural 
gas brings to us. Can you speak to the consequences if our 
infrastructure is not allowed to keep up with not only the 
demand but the desire for affordable and clean and efficient 
energy sources? I will just start at this end, and we will go 
down the line.
    Mr. Murchie. Thank you, Madam Chairman.
    First, I'd like to emphasize that we focus a lot on the 
generation of electricity. We shouldn't lose sight of the role 
of natural gas in basic industries, residential heating and 
commercial.
    Generation for natural gas is utilized about a third of 
natural gas in the United States. Industrial sector uses far 
more. Residential is at about 17 percent, 13 percent and 
commercial is at 17 percent.
    So for years natural gas has served markets other than 
electric generation. It has external benefits to electric 
generation. When it was not as plentiful and not as low cost as 
it is today, we were the backup. We were the future for 
intermittent generation from renewable sources.
    Clearly, if we make gains on efficiency, that's the fifth 
fuel. But natural gas supports renewable development in the 
longer term but right now we are achieving significant 
reductions in emissions. But we are not here to compete with 
other fuels. The economy, economic choices, will make that 
result.
    Right now, you've got very low cost natural gas. We've 
become an enemy to many because of the benefits of our 
technology and our capital formation and our production. 
Building pipelines does not cause the production. Production 
creates the need for the pipelines.
    The Chairman. Let me try to keep everybody moving.
    Mr. Murchie, I think it was you that said there was a 
symbiotic relationship between the natural gas the renewables.
    Mr. Murchie. Yeah, so as everybody knows energy demand is 
not smooth over the course of the day or the course of the year 
and if storage is a cheaper way of bridging that gap, as it is 
with natural gas, then storage is part of that. In electricity, 
storage is expensive. The cost is coming down, but when you 
have wind and solar that generate energy when they feel like 
it, you need backup. And you can cycle up natural gas-fired 
generation much more easily and, more importantly, safely than 
you can a baseload coal plant or a baseload nuclear plant. So 
that's the symbiotic relationship.
    There's also a cannibalization effect going on. I mean, the 
lower costs of natural gas has made it more competitive in the 
electric power market, and so the coal plants that have been 
shutting down are shutting down because they have become the 
high cost way of generating electricity. So the market has 
worked.
    And in answer to your question, what's the impact if we 
don't build more gas pipelines or if we slow the infrastructure 
development? You know, again, as an investor in a commodity 
business, it always comes down to cost. If the result is an 
allocation of capital or use of resources that are less than 
optimal, then the costs will simply be higher. The question is 
from a policy statement whether those costs are worth it. One 
of the, I think everybody here used the word predictable on the 
regulatory regime discussion more than once. I did not put them 
up to that.
    But the other cost here is the cost of financing. I was 
talking to one CEO recently who described a discussion with a 
staffer, I think in the prior Administration, and they were 
looking at pipeline tariffs and couldn't understand why they 
were so expensive because it couldn't possibly cost $3.00 or 
$4.00 a barrel to move oil 1,500 miles. And he said, well the 
cost is the cost of financing the steel in the ground. But 80 
percent of the cost is the financing, the debt and equity that 
it takes to build that pipeline, not to spin the compressors 
and to employ the few people that are in the control rooms.
    The Chairman. I am almost a minute and a half over my time 
and out of respect to my colleagues I want to be able to turn 
to them, but know, Mr. Hoecker and Mr. Kelliher, I am coming 
back to you with that same question.
    Senator King.
    Senator King. Thank you.
    Mr. Murchie, I object to the characterization of renewables 
as making power when they feel like it.
    [Laughter.]
    Mr. Murchie. I didn't want to get into a religious 
discussion, who was in charge of when the wind blows or when 
the sun shines.
    Senator King. I don't either.
    I think one of the issues that is troubling me is that we 
are talking about additional expenditure, and you just pointed 
out that we are talking about significant investment in long-
term assets--20-, 30-year, 40-year assets, and significant 
capital investment. What worries me is stranded investment.
    Mr. Kelliher, you represent a company that has one of the 
most diverse energy backgrounds in the country. My question is, 
are we in danger of saddling either ratepayers or taxpayers 
with significant infrastructure long-term investments that may, 
in 10 or 12 years, turn out to be, in fact, stranded because of 
new developments in storage, renewables, or integration of 
renewables?
    I have a secondary question for you about integration of 
renewables, but give me your thoughts on that first question.
    Mr. Kelliher. Are you referring to pipeline investment or 
transmission investment?
    Senator King. Both. Either.
    Mr. Kelliher. For pipeline investment, there's not really 
that risk because their companies are putting themselves out. 
They're taking the risk of developing new projects.
    Senator King. But are they? The New England pipeline 
proposal was that the ratepayers of all of New England would 
take that risk.
    Mr. Kelliher. That was a unicorn. That was an unusual 
proposal where you had a project where the market demand for 
that project is not apparent. The New England pipeline system 
is adequate for all but 12 days of the year. The reason they 
were proposing to flow it through the ISO New England tariff is 
there's not market support for a 12-day pipeline.
    Senator King. So, generally, you would say that the risk is 
being taken by the investors.
    Mr. Kelliher. By the pipelines and the shippers, right? The 
pipeline has the large investments that they have to make to 
build the project, then there's typically shippers who will 
sign contracts of some term. It won't be life of the project, 
but they'll sign some terms of some reasonable length.
    Senator King. But on the electrical transmission side, if 
it goes in at the rate base, the ratepayers are taking that 
risk.
    Mr. Kelliher. It's--yeah, outside the RTO it's typically 
built as part of a vertically integrated company. You make a 
showing to your state regulator. It's a prudent investment. In 
the RTOs it really emerges from the planning process.
    Something I tried to speak to in my written testimony was 
there's not really a very effective check on the cost of RTO 
transmission projects currently. There's not any effective FERC 
prudence review process. Order 1000 had sought to encourage 
competition in order to police excessive costs in the RTO 
transition planning process. Some regions have really embraced 
competition like California and there's been some really 
impressive cost savings that resulted. Other regions have not 
embraced competition.
    Senator King. Talk to me a minute about your company's 
experience with integrating renewables into a larger facility.
    Mr. Kelliher. Sure.
    We are the largest wind company in the world, and we're the 
largest wind and solar company in North America. We build in 
the regions that have the best quality resource. Our wind tends 
to be, by and large, in the upper Midwest to Texas, so, the 
center of the country. We have very large solar facilities and 
we, again, tend to concentrate where the solar resource is 
best.
    We are seeking development, wind and solar, in the 
Northeast. The resource isn't as good and siting is more 
challenging.
    Senator King. What about the question of integration--the 
conventional wisdom for wind years ago was the grid can only 
take 10 percent because of the variability.
    Mr. Kelliher. Yes.
    Senator King. What has been your experience?
    Mr. Kelliher. That all of those statements have been proven 
false over time.
    There used to be a view that somehow if more than 10 
percent of the supply of a region came from wind or solar, the 
whole grid would collapse. There have been times where the 
Southwest Power Pool, the SPP region, has had, I think, up to 
60 percent of their power at points come from wind. So, there 
used to be a belief there was somehow a natural ceiling of 10 
percent, then it was 15 percent, but those ceilings have been 
shattered with no threat to reliability.
    Senator King. What about the question of the long-term 
price of natural gas? I fear that we are making a lot of 
investments and a lot of bets based upon what could be an 
anomalous period of ultra-low natural gas prices.
    I always like people that come to the hearings that I am in 
to come away with one bit of useful information. There is an 
app called ISO to Go that tells you in five-minute increments 
what is going on in the New England grid. What the price is, 
but also what is the source of power. At this moment it has 
just gone up a percent. Sixty-two percent of the electricity in 
New England is coming from natural gas.
    My question is, we are building the infrastructure, we are 
building the plants, and we are doing it during a period of 
what could prove to be anomalously low prices. What kind of 
risk is that?
    Twenty-five years ago, New England was unduly dependent 
upon oil. Now we are 62 percent natural gas. What happens if 
natural gas prices return to $6.50, $7.00, $8.00 per billion 
cubic feet? Anybody want to talk about that?
    Mr. Moffatt.
    Mr. Moffatt. Senator, first I think that it's been very 
hard to tell how much natural gas we have. When I started in 
1977, the Hugoton Field was going to stop producing, and it's 
still producing.
    When we also----
    Senator King. Stable Island----
    Mr. Moffatt. Pardon?
    Senator King. Stable Island on the other hand is not----
    Mr. Moffatt. Stable Island, on the other hand, didn't, but 
you have other production now coming from Marcellus and Utica. 
Certainly the production coming out of the Permian was not what 
was expected.
    We built the Rockies Express pipeline to move Western gas 
to the East Coast because there was not production. By the time 
we completed the pipeline, it turned around and went the other 
direction because of Marcellus.
    Senator King. I am out of time.
    Mr. Moffatt. So, technology is great.
    Senator King. You are saying going forward the price of 
natural gas is going to be close to what it is?
    Mr. Moffatt. Absolutely, absolutely.
    Senator King. Okay, we are on the record here.
    Mr. Moffatt. Yes, sir.
    Senator King. We will all know in a few years.
    Thank you. Thank you, Madam Chairman.
    The Chairman. Thank you, Senator King.
    Senator Barrasso.
    Senator Barrasso. Thank you, Madam Chairman.
    Mr. Moffatt, just to kind of follow up on a couple things. 
In your testimony you highlight issues associated with 
permitting the natural gas pipelines between states, the 
interstate, and you explain that these pipelines need approval 
from both the FERC, the Federal Energy Regulatory Commission, 
as well as the states where the pipeline is going to be 
located. Well, one of these state approvals is called the Water 
Quality Certification Authority. It is delegated to the states 
under the Clean Water Act in Section 401. In some cases, in my 
opinion at least, I believe states have abused the authority to 
block projects for political reasons not really having to do 
with water quality at all, but they are using that permit as 
basically a stop action form rather than dealing with clean 
water itself.
    Could you please explain how the Federal Government might 
be able to address some of these, what I believe are, 
unreasonable actions by certain states to block what is 
critical infrastructure for energy for our country?
    Mr. Moffatt. Yes, thank you, Senator, for that question.
    Mr. Kelliher's company and our company have suffered from 
similar situations. We've been trying to get a permit out of 
the State of Massachusetts, certainly New York has utilized 
that, is well known.
    I think that the FERC needs to be more bold in exercising 
their lead agency authority, and I believe that we recently had 
a DC Circuit case that urged them to do that and they are 
stepping up. I suggested in my testimony that the Committee in 
its oversight encourage the Committee, encourage the 
Commission, to exercise that.
    You did in the Congress in 2005, give us additional tools 
to go to court where we can go to the DC Circuit for 
unnecessary delay. We had to do that on an air permit out of 
Nashville, Tennessee, for a project. Then you gave us other 
authorities to try to truncate successive state administrative 
procedures which we did have to utilize on our Connecticut 
expansion project in Massachusetts. There are mixed results.
    I think more leadership out of the Executive Branch, from 
EPA with clear guidance to the states when implementing their 
delegated authorities, is welcome.
    I don't think there was anything more incongruous than to 
have the Obama Administration put forth the Clean Power plan, 
have Gina McCarthy go to New York and say the one thing we have 
to do is build more natural gas pipeline infrastructure and 
then have the EPA file varied disingenuous, in my view, 
comments to the FERC on a NEPA document. The Administration 
needs to be in support of the entirety of the process.
    To me, guidance from the Executive Department to the 
Executive Branch agencies, whether it's Department of Interior, 
Commerce, Coast Guard, whoever, should be in sync with the 
Administration's policy.
    Senator Barrasso. I want to follow up with you, and then I 
am going to ask Mr. Kelliher to jump in if he has anything to 
add.
    Recently the FERC began this review of approving new 
natural gas pipelines. During the 20 years that the current 
process has been in place, the pipeline industry, I believe, 
has undergone significant expansion, with thousands of jobs, 
billions of dollars of investment. I think we need to continue 
to build more capacity.
    In many parts of the country, though, I think, the 
pipelines are really needed for heating and power generation 
especially during extreme weather conditions. I mean, we saw a 
Russian tanker bringing LNG into Boston Harbor. And you talk 
about the changes in some of these prices. Well, there was a 
complete lack of ability to get the power that was needed at a 
time when people were desperate for energy.
    What changes can be made to the Commission's certificate 
policy statement that are going to enhance the ability of 
pipeline companies to build this needed pipeline capacity? Then 
I am going to ask Mr. Kelliher if he wants to join in as well.
    Mr. Moffatt. Senator, I think the situation in New England 
is not as much about the FERC process on infrastructure. It is 
really economics.
    We tried to develop, and Senator King mentioned it earlier, 
the Northeast Direct project. It was a multibillion dollar 
project. We needed 1.2 to 1.3 billion cubic feet of contracts 
to support the financing that it was going to cost. We were 
going to be putting out billions of dollars before we received 
a dime in compensation for that investment. We did have 
contracts with LDCs for traditional residential, commercial, 
industrial load for 450 million cubic feet a day, virtually 
half. We needed supply contracts for the supply from the 
producer side of it, and then we needed about 450 million cubic 
feet from the power generation.
    The structural issues with the New England ISO to provide 
the economic underpinning for the generators to make the 
contract commitments for the pipe are inherent to New England 
ISO needs to be worked out.
    We had another problem which was over supply coming out of 
Marcellus, crashed the price in 2014-15 and suddenly our 
suppliers that's had the supply contracts, they didn't have the 
credit to back up the project.
    So that project died more from economics in the very 
competitive market than it did from FERC process. I think that 
we would have been able to get through the FERC process if we 
had had the financial support.
    Senator Barrasso. Mr. Kelliher, do you have anything to 
briefly add?
    Mr. Kelliher. No, I agree with that. I don't think that the 
hurdle there was the FERC process, it was the lack of clear 
market support.
    Senator Barrasso. Thank you, Madam Chairman.
    The Chairman. Thank you, Senator.
    Senator Manchin. Thank you, Madam Chairman.
    We have an all-star lineup here, and it's good to have you 
all here with the expertise you do have.
    I come from the State of West Virginia which has an awful 
lot of energy and has done the heavy lifting for a long time. 
With that being said, people are now surmising that certain 
parts of my energy portfolio is not needed.
    I would like to get your input on all-in energy policy, and 
I know you know the President is moving on the Defense Act. I 
am very much in favor of that, and I appreciate very much 
looking at the defense of our country and the resiliency of our 
grid system. I know other people have a different take on that.
    Mr. Hoecker, can you give me your reflections on an all-in 
energy policy and the direction the President is going on this?
    Mr. Hoecker. Thank you, Senator.
    I think that, as Chairman Murkowski asked, we aren't 
gravitating toward extremes in terms of energy solutions. This 
is an evolution and one I think of as being prudently 
engineered by regulators but driven by the marketplace.
    I think that the coal still has an enormous role to play as 
baseload generation and will for the relatively near future, 
foreseeable future, whatever that might mean.
    Senator Manchin. Would you put nukes in the same position 
too?
    Mr. Hoecker. I'm sorry?
    Senator Manchin. Would you put nuclear plants in that same 
category?
    Mr. Hoecker. That's a tougher question, but I think that 
the economics there aren't particularly good right now for 
nuclear. So there are some serious questions there. Down the 
road, I think, we will see natural gas becoming more important 
and other forms of fossil energy becoming less important to the 
generation mix. Probably renewable energy and other 
technologies will increase their participation in the 
marketplace.
    Senator Manchin. The only thing I would say is that when 
you look at it, it is market driven. Everything we know in a 
capitalist society is market driven, to an extent, except when 
we need it, for the defense of our country.
    We have a situation right now. We don't produce one ounce 
of the rare earth minerals that we consume tremendously in 
every product that we use and in most of our defense products. 
Now we are getting caught in the crosshairs. We are figuring 
out if we can get back into the game so we are not dependent.
    I am afraid the same thing is happening with energy too. I 
know when I talk about having an all-in energy policy in West 
Virginia, we have been blessed with them all--Marcellus, Utica, 
and we've got Rogersville coming on. It has not even been 
tapped yet. So we have been blessed. And we still have the 
coal, and the best met coal, in the world that everyone is 
seeking.
    When people start bequeathing that out and you have a 
modern coal-fired plant with all of the pollution controls, we 
believe that it is imperative for the security of the grid 
system to have that backup and consistency for the defense of 
our country, as well as for the demand needed.
    I think during the polar vortexes and the bomb and all 
these weather phenomenons, that if it had not been for the 
backup of coal and with gas coming on strong--
    I would recommend to all of you, and Mr. Moffatt, you might 
want to speak to this. I would give you all a suggestion, being 
a former Governor, on how you can get your pipelines permitted 
much easier through the states by sharing the revenue. Give me 
an MCF mileage on your transmission cost, and I will guarantee 
you the floodgates will open. Why they won't do it is just pure 
greed. And I say that in the most respectful manner.
    [Laughter.]
    If you share a little bit of that revenue, these states can 
buy into it, they will be the greatest facilitator you have 
ever seen. The counties that get it, and all we are talking 
about is an MCF mile so every state that it passes through gets 
treated fairly. Hopefully you will take that back as a 
recommendation, because I have seen it work on grid lines.
    Mr. Moffatt. I certainly will take that back, Senator.
    We do have initial financing costs that are quite 
extraordinary on our projects, and we always stimulate a lot of 
tax base wherever we----
    Senator Manchin. Yes, but the delay of building these lines 
costs you a tremendous amount.
    Mr. Moffatt. They do.
    Senator Manchin. But you could cut that cost.
    I have seen it in a 500-megawatt line that we were putting 
in and could not get it done until they start sharing a little 
bit, and I will tell you----
    Mr. Moffatt. Believe me, we do, in siting our plants, 
engage in quite a bit of community support in those towns and 
cities and counties that we do impact.
    To be honest, in my 40 years I haven't heard the concept of 
sharing on an MCF mile basis, but I will certainly take it 
back.
    Senator Manchin. It makes sense. It makes all the sense in 
the world, and we are talking about a fraction, but it is 
guaranteed revenue. Forget about who drills the hole, just get 
a little bit of the action off of the thing that happens all 
the time--transmission.
    Mr. Moffatt. Right.
    Senator Manchin. And the states can help you through the 
permitting process. You are held up in every state right now, 
because there is no benefit or gain other than promise of jobs 
or taking the product out of their state.
    We are a production state. We are trying to keep some of 
that product in West Virginia through our storage facility 
hubs.
    Mr. Moffatt. Right.
    Senator Manchin. But with that we want to make sure we 
produce the product that the country needs, but I would hope 
that you would look at that because I can tell you we would be 
very receptive.
    Mr. Moffatt. I will.
    Senator Manchin. Okay, thank you, sir.
    The Chairman. Thank you, Senator Manchin.
    Senator Cassidy.
    Senator Cassidy. Great testimony, thank you very much.
    Three of you commented on the fact that natural gas 
generation enables the plummet of renewables, fast acting, 
relatively low cost. One of you said, safe, safer than the 
alternatives.
    Now, let me ask, Mr. Kelliher, you mentioned the experience 
you have with renewables. Does the absence of fast acting, we 
can bring it up in a second, backup inhibit the deployment of 
renewables? And I don't know the answer to this. I am just 
asking.
    Mr. Kelliher. I'm sorry, does the absence of natural gas 
facilities----
    Senator Cassidy. I am sorry, if you are going to try and 
convert your grid supply to renewables from a baseload of coal 
or nuclear, clearly, you have to be able to respond to 
increased demand. So if you are going to shut down a coal plant 
which is providing baseload to substitute in a renewable and on 
that particular day the sun and the wind decide to take a 
break, as Mr. Murchie would suggest, do you have in your 
algorithm, we have to have the presence of natural gas backup 
in order to make this conversion from baseload of coal and 
nukes to a renewable centric, more renewable centric, grid?
    Mr. Kelliher. First of all, a lot of coal plants in the 
competitive markets don't really operate as baseload units, 
right? The concept of baseload units meant, it used to mean, 
that the really cheap stuff that also happened to be very 
inflexible so it would take hours to start, hours to shut down. 
It just so happened that that cheap stuff used to be the very 
inflexible resource but it didn't really matter if you were 
running it all the time.
    But now, coal plants are not the cheap stuff anymore. So 
they don't operate----
    Senator Cassidy. I get that.
    But if you are going to deploy large amounts of renewable, 
it almost seems that you would, if you have a mandated presence 
of that backup in case the sun and wind are not cooperating.
    Mr. Kelliher. There's others. There's hydro resources. 
There's gas, fast starting gas facilities. There are----
    Senator Cassidy. So it sounds like you are answering yes, I 
accept that gas and hydro would be fast acting, but you have to 
have that backup power.
    Mr. Kelliher. Well, there used to be, when we were talking 
earlier about there was a notion that whether there was some 
natural ceiling to renewables. That's--there used to be 
another----
    Senator Cassidy. I guess I am not expressing my question 
because your answer is not coming back to my question. Does 
anybody else comprehend my question?
    Mr. Moffatt?
    Mr. Moffatt. Yes, yes, sir.
    I think if you look at the emergence of natural gas-fired 
generation back after PURPA was repealed and the prohibition on 
natural gas-fired generation was repealed, it did emerge more 
as an intermittent resource as opposed to a baseload resource. 
Natural gas-fired generation really did not deploy except in 
the State of Texas--they, sort of, moved in symbiotic. So they 
were there. They were there as peakers or there to provide that 
backup. So it did create a basis for confidence in emerging 
wind and in emerging solar. I think that now you have a strong 
force of natural gas-fired generation that is there whether 
it's going to be operated and deployed on a baseload basis or, 
you know, more wind will be built and more solar.
    I do think they work together, you know, there are going to 
be downtimes for wind and downtimes for solar. Storage may 
emerge so that you will depend less on the gas-fired 
generation. But I've been in this business since President 
Carter, 40 years ago, and we've been working on storage for 40 
years. And so, when it will come, it will come, but we need to 
be prepared in the interim.
    Senator Cassidy. Now let me ask because this is a headline 
that's out right now, ``Heat wave sparks major power outages 
around Los Angeles.'' Clearly California has been in the 
forefront in going away from fossil fuel and nukes toward both 
conservation, hydro, and renewables but this does suggest that 
they had a lack of generation capacity.
    Mr. Moffatt. I believe that one of the problems facing 
California right now is that they have relatively low flow of 
hydro so that is a restriction on the available resources.
    Also, Southern California Gas Distribution Company has a 
number of outages on their pipelines so that gas has difficulty 
getting in for the gas-fired generation in the base.
    So, there are some other externalities that are causing the 
situation right now in Los Angeles. They also have Aliso Canyon 
storage down. So there's a lot of things working against 
Southern California at the moment, but nothing is structural.
    Senator Cassidy. I guess, if you will, it shows the concept 
that if you have insufficient peak backup you can have problems 
but theirs is not necessarily due to policy rather it is due to 
a confluence of events.
    Mr. Moffatt. I believe that's correct.
    Senator Cassidy. Yes, sir.
    Mr. Kelliher. And Los Angeles is served by Los Angeles 
Department of Water and Power, LADWP. I do not think they have 
very high renewables in their electricity----
    Senator Cassidy. Got it.
    Mr. Kelliher. I'm not positive, but I think they rely less 
on renewables than the IOUs, then they----
    Senator Cassidy. Got it.
    I thank you all very much.
    The Chairman. Thank you, Senator Cassidy.
    Senator Cantwell.
    Senator Cantwell. Thank you, Madam Chair, and I thank the 
witnesses and my colleague, Senator King, for being the Ranking 
Member today and helping make this hearing go so well.
    Yesterday I was quite surprised to see that the President 
issued an Executive Order that takes the power to select 
administrative law judges (ALJs) from the Office of Personnel 
and gives it to the heads of agencies employing them.
    I have grave concerns about this across the board, but the 
one example I know best is in the area of the Federal Energy 
Regulatory Commission and the issues as they relate to the 
Power Act.
    So, Mr. Kelliher, you were Chair when we amended the 
Federal Power Act. You developed FERC's market manipulation 
authority.
    I can just tell you how many times during that process the 
State of Washington and our utilities were going to the 
administrative law judge for findings as it related to the 
damage that was being done in the Enron crisis. We depended on 
those law judges in a very, very specific way.
    They hold hearings. They weigh evidence. They find facts. 
They make initial decisions on whether the violations occurred, 
what penalties are appropriate, and then they send that up to 
you, as it related to FERC. Due process requires that they be 
fair and independent and insulated from political pressure. Are 
you concerned that if we switch this to a process where you 
would hire political people that it could create some issues 
with due process and legal proceedings?
    Mr. Kelliher. You have the advantage of me. I haven't read 
the Executive Order. I saw an article on it, but I haven't read 
it.
    But I can talk about the importance of having independent, 
qualified ALJs because when Jim Hoecker and I were at FERC, it 
varied from agency to agency. But at the agency, the Chairman 
hires, makes the decision on the ALJs. But that's after, my 
understanding is, it's after they've gone through some LPM 
screening process so they're deemed to be qualified. They meet 
some kind of qualification. And then typically the Chief LJ 
would present three or four candidates, and you would choose 
one.
    I thought that process worked very well, but the screening 
assured that you had qualified candidates to choose from, and I 
think that's extremely important given the matters at FERC that 
are entrusted with ALJs.
    There's another agency I won't name because I don't want to 
embarrass that other agency. They had a very small complement 
of ALJs. They had one that seemed to despise the agency and 
would always rule against the agency, and they had one that 
people would consider would never possibly rule against the 
agency. That could be the outcome if ALJs are chosen and 
they're not as qualified and not as independent. You could end 
up with--and that outcome is not great for a party, right? You 
would know from which ALJ got your case what the outcome of 
your matter would be. So, it should be independent, qualified 
folks that a Chairman chooses from, I think.
    Mr. Hoecker. I agree with that completely, Senator.
    We have historically, as heads of the agency, hired ALJs 
off a list, a civil service list. A lot of them come from other 
agencies like the Social Security Administration and they are 
hired based on their ability to run cases and an understanding 
of the Federal Rules of Civil Procedure and so forth. And 
that's really what you need, not a political appointee.
    Senator Cantwell. Well, I thank you for that. And I can 
tell you, I agree. I don't know if we will have to do 
legislation here, but the fact that the President thinks he can 
change this by Executive Order and put at jeopardy the notion 
that, as you just said, Mr. Kelliher, an agency would then shop 
for the employee or the Administrative Law Judge that would 
rule for them or against them, what have you, is just very 
bothersome. We want people to be selected. These issues are 
such critically important matters.
    When I think about the cases that came before the 
Administrative Law Judges in the Enron case, utilities and 
ratepayers really had to understand what was happening to them 
with such egregious manipulation. The notion that somebody 
could be sitting there who had already been hired by, you know, 
a political process that basically said, ``Oh, don't worry 
about that,'' is very concerning.
    And you want very experienced personnel. You want people 
who the Office of Personnel Management have verified to have 
the professional experience to do these jobs as well.
    So, I thank you. I thank you.
    Thank you, Madam Chair.
    The Chairman. Thank you, Senator Cantwell.
    Senator Daines.
    Senator Daines. Chair Murkowski and Ranking Member 
Cantwell, thank you very much for holding this hearing today.
    This hearing, I think, is most timely as I just lead a 
letter to FERC discussing the importance of natural gas 
pipelines to our economy and the need to make sure that any 
discussions or decisions that come from their ongoing review 
not interrupt or slow the process for approving new natural gas 
pipelines.
    This comes on the heels of a visit I just made last week to 
Russia. You know, 30 percent of Europe's energy needs are being 
met by Russia, and 50 percent of Germany's energy needs are 
being met by Russia.
    This gives America an incredible opportunity both from an 
economic viewpoint as well as national security and positive 
geopolitical consequences for the United States to supply more 
natural gas to Europe. The world will be a much, much better 
and safer place if it reduces its dependence on the Middle East 
and Russia for its energy needs.
    We are currently faced with the need to replace a 
Commissioner at FERC, and I hope we can do that expeditiously. 
It is critical for our energy independence as a state and a 
nation to have a Commission that is able to approve and move 
quickly on our nation's priorities. I look forward to working 
with my colleagues and the Chairman on this important issue.
    As I stated many times before this Committee, the energy 
sector is one of the pillars of Montana's economy. With 
Colstrip, with hydro facilities, Montana is a net energy 
exporter. That means, we need to have the ability to transmit, 
ship and pipe our energy to and through other states.
    Unfortunately, we have seen instances where one state can 
interrupt and shut down projects that are necessary to other 
states. For example, in Montana, this has become a big issue 
with the State of Washington blocking coal from the Crow Tribe 
and they cannot get coal to our allies in Japan and Asia 
Pacific. We see the same issue with states blocking pipelines 
that would deliver affordable, clean, natural gas to heat homes 
in the cold New England winters. We have seen repeatedly the 
abuse of Section 401 of the Clean Water Act to stop sensible 
projects like the Millennium Bulk Terminal and natural gas 
pipelines and Congress needs to take action on this.
    Mr. Kelliher, as a former Chairman of FERC, as someone who 
has spent decades working on these issues, would you agree that 
we need to tailor Section 401 of the Clean Water Act to focus 
on protecting water quality rather than allow it to be used as 
a political pawn?
    Mr. Kelliher. I would agree that when states issue 401 
permits that any conditions that are in those permits should be 
directly related to water quality matters that shouldn't go 
afield of that. The concern is that in some cases states seemed 
to have imposed conditions that are totally unrelated to water 
quality.
    Senator Daines. Yes.
    Mr. Kelliher. In one gas pipeline case, it was an attempt 
to change the route of the pipeline, something that by federal 
law is expressly reserved to FERC.
    So to me, the question is well if that happens, what should 
the remedy be? What should the recourse be? Should EPA--this 
came up a little bit earlier in discussion with Senator 
Barrasso.
    Senator Daines. Maybe I will focus the question. What are 
some actions that Congress could take to refocus Section 401?
    Mr. Kelliher. Well, one would be amending 401 but it would 
seem to be, almost, it would seem to be arguably an unnecessary 
amendment to say well, you're--if a state is given delegated 
authority to issue water quality permits that it would seem 
unnecessary to say and they shouldn't include conditions that 
are completely divorced from water quality permits in those 
permits.
    But it could be EPA guidance might be sufficient to explain 
what are the limits on state water quality permitting 
authority. It could be that there's a need for some kind of 
appeal say under the Coastal Zone Management Act states can 
find that some proposed activity is inconsistent with a state 
coastal zone plan, coastal zone management plan. There's 
recourse in that you can appeal to the Commerce Department. You 
can say the state is actually inconsistent with the statute.
    So, there is that appeal, you know, that would be a 
possible legislative solution of well, let's allow appeal here. 
Could there be a provision to appeal a state 401 permitting 
decision to EPA and let EPA rule as to whether the state permit 
went too far afield.
    Senator Daines. Thank you for the thoughts on that, and it 
is very helpful as a former Chairman on FERC.
    I have one last question here for Mr. Hoecker. There has 
been a lot of discussion on Capitol Hill on the need to invest 
in America's infrastructure. I have been a proponent of making 
sure that doesn't only mean roads and bridges, very important. 
In fact, we had a great hearing yesterday with the Senator from 
Maine, the Ranking Member in the National Parks Subcommittee, 
regarding an infrastructure bill we are looking at for our 
national parks.
    So we need to think more broadly what this means. I would 
argue that pipelines, terminals, transmission lines and other 
energy infrastructure is also a part of the broader 
infrastructure discussion in our nation. It is not just capital 
or money that we need the most to expand our energy 
infrastructure. What we really need is permitting reform, 
because a lot of this infrastructure that I am talking about 
there is provided within the private sector. We need less 
regulations and expedited approvals.
    My question is this, Mr. Hoecker. As a former FERC Chairman 
and now counsel to WIRES, what do you believe are the three 
most important priorities for either Congress or FERC to help 
facilitate the development of energy infrastructure?
    Mr. Hoecker. Thank you, Senator. That is a great question.
    Our focus this morning has been on a lot of natural gas 
pipeline issues, but I can guarantee you that it's much tougher 
to build an electric transmission line across multiple states 
for the very reasons that you mention. I think there are some 
modest ways legislatively to begin to remedy that, at least as 
far as promoting cooperation between the states or giving FERC 
some limited authority in the area of interstate or cross 
border, inter-regional types of transmission lines. That is 
something that the Commission, the FERC, intended to promote 
not on a jurisdictional basis, but on a policy basis in Order 
1000. It hasn't materialized.
    I think the second recommendation would be for FERC to be 
more active in improving that order and promoting and 
incentivizing the development of interstate transmission.
    The interesting thing, of course, is that we focus on the 
difficulties that natural gas pipelines are having along line 
pipelines, but FERC is the only agency that has the ability to 
determine what's in the public interest. It issues a 
certificate. It is the lead agency on NEPA review. It also sets 
the rates. And it does not have that breadth of authority for 
electric transmission.
    The siting for electric transmission resides with the 
states, and Congress' effort in 2019 in the Federal Power Act 
to remedy that with a federal backstop has failed.
    Senator Daines. Thank you.
    I am more comfortable talking about pipelines as a chemical 
engineer than I am about the law, but I will say that I believe 
our founding fathers anticipated this and had enumerated powers 
in Article 1, Section 8 on the Commerce Clause that this may be 
where this has to be finally decided.
    Thank you.
    The Chairman. Thank you.
    Senator Cortez Masto.
    Senator Cortez Masto. Thank you, Madam Chair and Ranking 
Member. Thank you for this hearing.
    Gentlemen, thank you so much.
    I am juggling two hearings today, so I appreciate the 
written testimony that you provided ahead of time to enable us 
to prepare.
    Mr., is it Hoecker?
    Mr. Hoecker. Hoecker, yeah.
    Senator Cortez Masto. Hoecker and Mr. Kelliher, let me 
start with you. In 2009 Congress gave WAPA borrowing authority 
for the purpose of constructing, financing, facilitating, 
operating, and studying construction of new or upgraded 
electric power transmission lines and facilities that have a 
terminus within WAPA's region and that deliver electricity from 
a renewable resources.
    To implement its borrowing authority, WAPA created the 
Transmission Infrastructure Program, or TIP. This program has 
proved to be beneficial to many communities across the West. 
For example, an example of TIP includes WAPA's partnership with 
TransWest to build a high voltage transmission line extending 
730 miles through Nevada which is near Boulder City over to 
South Central Wyoming, providing California, Arizona, and 
Nevada with direct access to Wyoming's high capacity wind-
generated and gas-generated electricity. However, TIP has been 
proposed for elimination in the President's budget.
    I am interested to hear your views on the benefits of this 
program and generally how programs like these have helped the 
growth of transmission infrastructure in the West.
    Mr. Hoecker. Well, the Western has been very instrumental 
in helping preserve reliability in Western markets. They owned 
Path 15 which brought electricity from Canada into California 
at a time of significant need.
    They have--both Western and other power marketing agencies 
have the ability under law to effectively partner with some 
private transmission developers and utilize their authority 
under law to site transmission that would otherwise be sighted 
solely under state authority.
    So, I think it's been important, and particularly important 
in the West, although there is an example in the Southeast 
where CEPA, in an effort to utilize that authority, was 
actually nullified because the project was withdrawn, but I 
certainly resonate your remarks. It's something that we 
wouldn't want to lose.
    Senator Cortez Masto. Thank you.
    Mr. Kelliher, do you have any other----
    Mr. Kelliher. I think there's also a lot of benefits that 
come from those kinds of approaches.
    Mr. Hoecker referred to Path 15. Path 15 was a choke point 
in California that contributed not just to the California 
blackouts, but to the manipulation of California market. It 
made the market more vulnerable to manipulation.
    And that joint venture between WAPA and the private sector 
relieved that bottleneck. And I think that's what inspired 
other legislative provisions that were in the '05 Act and 
including TIP. So I think it's positive and it's the kind of 
thing that has a lot of merit.
    Senator Cortez Masto. Thank you. I appreciate your 
comments.
    Mr. Kelliher, let me continue with you. Nevada is a big 
proponent of battery technology, and as you well know, we have 
a large battery factory, Tesla, the Gigafactory there in 
Nevada. We recently created an Energy Bill of Rights in the 
State of Nevada that actually protects home energy generation 
and storage. And thanks to the declining costs of better 
technology and the growing industry of battery storage, 
deployment at a utility scale is accelerating at a rapid pace.
    I am curious if you still see barriers, and what barriers 
there are, that exist for battery storage deployment and what 
we can do to address those barriers.
    Mr. Kelliher. NextEra is actually the number one utility 
scale storage developer in the country, so thank you for the 
question.
    [Laughter.]
    We think there are some buyers in the RTO markets in part 
because storage is a product that is very, it's unique in the 
world of FERC. At FERC you have generation and you have 
different forms, you have energy, capacity, you have 
transmission.
    Battery storage actually provides every, well all those 
products. So, it cuts across the usual product lines and so 
it's something that doesn't fall neatly within the market rules 
of the current RTOs.
    FERC, knowing that, issued a major storage rule earlier in 
the year to promote storage and lower those barriers requiring 
the RTOs to come up with platforms, market rule platforms, that 
facilitate storage deployment.
    But now the question. That's the beginning of something 
rather than the end of something. A final rule is normally the 
end of something, but now the issue goes to every single region 
and it's important that when those regions act to set up those 
platforms, those market rule platforms, they actually really be 
truly supportive of storage.
    But in terms of entry to utilities, we have, we've done a 
lot of storage deals with individual utilities outside of RTOs 
and think that that's gone well when the utility is interested 
and supportive. We've done it with for-profit investor-owned 
utilities, as well as other governmental utilities. So we think 
the barrier is more in the RTOs, but FERC is acting to lower 
it.
    Senator Cortez Masto. Okay. Thank you.
    Thank you, Madam Chair.
    The Chairman. Senator Gardner.
    Senator Gardner. Thank you very much, Madam Chair.
    Thanks to all of you for being here today.
    Mr. Moffatt, there is obviously a very significant and 
tremendous natural gas supply in the U.S. Rocky Mountains, 
including Utah, Wyoming, and Colorado. Just a few years ago, 
the U.S. Geological Survey determined that recoverable natural 
gas supplies in the Piceance Basin in Colorado is 40 times 
larger than initially thought.
    With U.S. market demand for natural gas being largely 
satisfied by supply from other natural gas producing regions, 
the only way for U.S. Rocky Mountain gas producers to 
contribute to U.S. energy dominance is to export that natural 
gas to our allies.
    In order for natural gas producers in my state to get their 
gas to overseas markets, they need FERC to approve a West Coast 
LNG export terminal. The fact is our allies are seeking a U.S. 
supply of natural gas to hedge against infills from Russia, the 
Middle East, from others. In other words, exporting U.S. 
natural gas to our overseas allies is a national security 
imperative. To be clear, our allies not only want to be able to 
import U.S. natural gas, but they are looking to diversify 
their natural gas supplies as well within the United States and 
that includes having an LNG export terminal, as I mentioned, on 
the West Coast.
    I am going to ask a series of questions. You can, kind of, 
combine the answer if you want. One, what more could FERC be 
doing to enable Colorado's gas to get to markets, both 
international and domestic? Two, what concerns do you have 
about FERC's discharge of its responsibilities with the respect 
to pipeline certificates or LNG exports that would be of 
interest to the Committee? What do you recommend this Committee 
do in our oversight role to help spur the development of 
resources in our states including personnel and employee issues 
at FERC?
    Mr. Moffatt. Thank you, Senator, for the question.
    Kinder Morgan, as you may know, has a lot of assets in the 
Rocky Mountains, moving in all directions, and we have good 
inner connectivity for the Rocky Mountain supply to go to 
markets. A lot of the issues for the Rocky Mountain supply is 
market. There are supplies from other regions in the country. 
So, you know, for example right now we're seeing our 
TransColorado pipeline because the Permian restrictions being 
utilized, but it was largely empty. And so, market shift, the 
infrastructure is there. The market will seek the transport, 
and we'll get it out.
    We also own and operate Ruby Pipeline which was built to 
take natural gas from the Rockies to Jordan Cove.
    Senator Gardner. Right.
    Mr. Moffatt. We are hopeful that it will finally move in 
the second wave of LNG.
    I believe that the Commission is doing everything 
reasonably well with respect to both the pipelines and for LNG 
siting. LNG is interesting because it's a manufacturing 
process, so we've got to interact with PHMSA on all of the 
authorizations for the safety of the process. Our LNG is using 
one type of technology. Jordan Cove has got another. The Gulf 
Coast projects have their own technologies. So, it's a 
complicated area. But I do honestly believe the agencies are 
moving with fair dispatch and are doing pretty well.
    I would think the Administration should be encouraged to do 
what it's doing in promoting natural gas. I would be remiss if 
I didn't say that the tariffs on steel are a problem for anyone 
acquiring steel to build infrastructure, including the amount 
of steel piping in LNG terminals is significant. Those kinds of 
barriers aren't helpful at the moment. I think for those of us 
have the Gulf Coast infrastructure, we're momentarily relieved 
that China has left imported LNG off of their list of tariffs.
    This is a brave new world. That's affecting, I believe, 
people signing up, not being sure what's going to happen with 
the trading between our countries for Jordan Cove. We are 
advocating to resolve those issues as quickly as possible. And 
believe me, we have many assets in the West that are now 
earning five percent a year on our assets, if we're lucky, that 
are basically because there's so much supply and so much 
competition. We support you in wanting Jordan Cove to get 
built, but I think it's not a matter of infrastructure as much 
as it's a matter of markets.
    Senator Gardner. Thank you, Mr. Moffatt. I have to go back 
to another hearing right now on the tariff matter itself. I 
thank you, Madam Chairman and thank the rest of the witnesses 
for being here.
    Thanks.
    The Chairman. Yes, I know that is an important part that 
nobody has really addressed this morning, but when you think 
about regulatory certainty, that is one thing that everyone is 
certainly hopeful. Then you have the volatility that is outside 
of that regulatory process, how you factor all that in, the 
impacts on investment and what that portends as well.
    I said I was going to be coming back to you, Mr. Hoecker 
and Mr. Kelliher, with the same question that I had directed to 
Mr. Moffatt and Mr. Murchie about the dangers, the concerns, if 
we are not looking outward when it comes to adequate 
infrastructure. If you would both care to address that. We have 
hit on it through responses in other questions, but I want to 
give you that opportunity.
    Mr. Hoecker. Certainly. I think we anticipate, and I'm 
viewing some studies that are coming out of NREL and the 
Bradley Group and others, the prospect of an enormous ramp up 
in electricity demand over the next quarter century. It's even 
predicted that electricity demand may double by 2050.
    It's something we need to prepare for and the grid right 
now is not sufficiently integrated or strong to carry the 
additional generation that will be needed to serve that demand.
    What happens if we don't build this? Well, prices go up. 
Right now, building the capital across the building 
transmission are relatively low and these are financing capital 
markets. We don't know where there are some risks that down the 
road that it will be more expensive to build the infrastructure 
we need. The benefits to consumers are not going to flow. The 
job creation benefits that come from building infrastructure 
will be delayed.
    I think there are lots of reasons to begin to move more 
proactively in planning the grid of the future and there are 
lots of folks in the industry, in academia, looking at what 
that grid should look like and what kinds of resources should 
it be able to exploit, both as a matter of natural resources 
and technology.
    We think that in anticipating a more electrified American 
economy and a more integrated North American energy economy, 
that the time to act is now and to be more proactive. I hope 
that message gets through to FERC as well, which has struggled 
over the last seven or eight years to try and turn Order 1000 
into a more productive exercise.
    The Chairman. Mr. Kelliher?
    Mr. Kelliher. It's an interesting question. I'd like to 
answer it as a, sort of a counter factual. What would things 
look like today if we hadn't made the large investments in 
infrastructure going back to say, summer of 2005?
    Summer 2005, the price of natural gas was $9.00. Now it's 
$3.00, sometimes lower. That didn't just happen. It happened 
because the natural gas supply basins changed, that that 
production only could have made it to market with really large-
scale investments into new gas pipelines.
    If we had static pipeline network and we still saw the 
improvements in shale gas technology, prices would not be $3.00 
now. They might be $6.00, they might be $7.00. I'm just, sort 
of, guessing at numbers. And we probably would have been 
thrilled, thinking, not knowing that they could have been 
$3.00. We'd have said, wow, the price of natural gas went from 
$9.00 to $7.00. That's fantastic because at the time the 
expectation was $9.00 would be, sort of been the medium. They 
might actually be higher than that.
    Now, if gas prices were $7.00 or $6.00, gas is the driver 
of electricity prices, wholesale electricity prices. Suddenly a 
lot of uneconomic generation that has now retired or is poised 
to retire would be economic.
    So, we would not have seen the changes in our electricity 
supply that have occurred in recent years. Natural gas would 
not be the number one source of electricity supply. It would 
probably still be coal. We'd have a less flexible fleet.
    You know, I think the short answer would be, gas prices 
would not be $3.00. Electricity prices would not be where they 
are today. Everything would be 25 to 50 percent higher, and the 
economy would suffer as a consequence. So, I think, the 
infrastructure investments have made all of that possible. It 
would not have happened otherwise.
    The Chairman. I appreciate that.
    Senator King mentioned in his opening statement the 
reference that sometimes we build the infrastructure out as if 
it is a church awaiting Easter mass and Christmas and that much 
of the time you have underutilized capacity there. This is the 
big problem that we face.
    We are trying to find that right spot for where we are 
today, but also anticipating the needs of the future. It is, 
kind of, the Goldilocks situation. Is it too big for where we 
are today; is it too small, or is it just right?
    Very quickly, because my time has expired, but use my 
Goldilocks analogy. Are we too big, too small or just about 
right for today and then five years from now what do we look 
like? This is rapid round.
    Mr. Moffatt?
    Mr. Moffatt. I think we are about right. I think the market 
forces that you see clearing prices and meeting supply needs is 
there.
    We do----
    The Chairman. What about five years?
    Mr. Moffatt. Five years from now, I think it's going to be 
the same.
    The Chairman. Alright.
    Mr. Moffatt. I think that the residential, commercial, 
industrial uses are not going to change. There may be on the 
margin some change in how we generate electricity, but we're 
still using electricity.
    If we have major efficiency, then yeah, we may become 
obsolete. I don't think we'll be obsolete because of 
renewables.
    The Chairman. Okay.
    Mr. Murchie?
    Mr. Murchie. Yes, and I generally agree with that, but 
Senator King's question before about stranded assets, I think, 
is an important one because behind your question is, are the 
things we're building today going to be obsolete? Who is going 
to pay for that cost? And as Mr. Kelliher said, in the natural 
gas world, it's the investors. It would be my clients if we 
were to not allocate our capital accordingly.
    And so, the issue is we're never going to get this right. 
There will be mistakes made and the question is who will pay 
the costs and are those costs going to be borne by those people 
who are best able to or who are responsible for those costs? 
So, if there are regulatory changes that were unanticipated, 
then those costs could be borne by people who, through no fault 
of their own, are now paying more for electricity and gas. I 
think investors are willing to take that risk so long as that, 
you know, the reward is commensurate.
    And so, we see enormous changes, again, on the electricity 
side because Curt's point about most of natural gas being used 
for things other than electricity. That doesn't move much.
    When you talk about storage on the grid, one of the largest 
pieces of storage on the grid in the future will be batteries 
between four wheels. That will be part of the storage on the 
grid. They will charge at certain times of the day and it will 
reduce over the 24-hour cycle of electricity.
    If markets are designed properly, the risk will be borne by 
those who can best take them and if you make a mistake as an 
investor, well, that's the system we're operating under.
    The Chairman. Mr. Hoecker, Mr. Kelliher, are we just about 
right, right now? Where are we going to be in five years?
    Mr. Hoecker. Madam Chair, I think it's especially hard to 
make predictions, especially about the future and we are 
eternally in that dilemma.
    But we, at least on the transmission side and I try to make 
the case that transmission is a special case because what it 
gives us is the ability to adapt to whether we have gas 
generation, more renewable generation, whether nuclear has a 
renaissance, the kinds of technologies that are coming along, 
storage, demand response and so forth.
    The common thread, the tie that binds is the adequacy of 
the grid. If we begin to plan five-year increments at a time 
without looking down the road at what these long-lived assets 
can do for our economy, we're going to miss some opportunities 
and apropos of what Joe said earlier, you know, we need to take 
reasonable risks, but I think where we're at is a pretty good 
spot. The lights are on today and I think they'll be 
inexpensive to turn on for a while.
    The Chairman. Hopefully they are going to be on tomorrow 
too.
    So much for my lightning round.
    Mr. Kelliher, I've got to give you the final say here.
    Mr. Kelliher. I think, in terms of, I'll give you an answer 
on the electric side and the pipeline side.
    On the pipeline side, I've great confidence that the 
investment level will continue to be right really just because 
the nature of how projects are developed. Pipelines are for 
profit enterprises. They have large scale, either national, 
regional networks. They see a market or customer interest and 
they really are very aggressive in pursuing it, typically in a 
competitive fashion. That dynamic won't change. That will still 
be there five years from now, and they're looking for economic 
benefits.
    On the electric side, the focus on, at least the RTO 
transmission planning is on reliability need, not economic 
benefit. So, I think, I'm not trying to be qualified, on the 
electric side, I think the investment will still be just about 
right to satisfy that floor reliability needs. It won't 
necessarily be just right to satisfy resiliency which is harder 
to quantify and the plant doesn't even really focus on the 
economic need. It focuses on the reliability needs. So, I think 
it's, it will be adequate for that. Will it be adequate for 
those higher purposes or greater level of investment? I'm not 
sure.
    The Chairman. Thank you.
    Senator King.
    Senator King. Thank you, Madam Chair.
    First, the most profound observation I ever heard about 
fossil fuel prices goes back to the '70s or '80s where a 
professor at the University of Maine said, ``Fossil fuel prices 
in the future will always be the opposite of what you think 
today.''
    [Laughter.]
    Because if you think they are going to be cheap and you act 
accordingly, that will increase demand and they'll be 
expensive. If you think they are going to be expensive and act 
accordingly and conserve, there will be an excess and they will 
be cheap. I think that is pretty true, that it has been proven 
true over the years.
    A couple of points.
    One, I think there will be growth in the grid over the 
future, but I don't think the growth in the grid necessarily 
will be proportional to the growth in electricity demand.
    Mr. Hoecker, you talked about how growth in electricity 
demand could be 50 percent or 100 percent. I agree with you, 
but I think it is going to be in different areas.
    Electric cars. Electric cars can come under the grid if 
they are charged at night without adding a single wire or a 
single pole, and yet, that would add significantly to 
electricity demand.
    I don't think you necessarily meant to imply that, but I 
think we need to separate the grid from electricity demand, 
because the grid does have a lot of excess capacity. I hope 
that we are headed into a future where we can talk about things 
like peak load pricing and time of day pricing to encourage 
utilization of electricity when there is excess capacity on the 
grid.
    Number two, it is funny for those of you watching this 
hearing, you can tell people from the states where they 
generate, where they make electricity. I mean, where they have 
fossil fuel and where they don't, there is a lot of talk about 
more exports and those kinds of things.
    I need to put on the record as I have in practically every 
hearing, I am gravely concerned about an exponential increase 
in the export of natural gas and LNG.
    This Congress cannot repeal the law of supply and demand. 
If we have a significant, and I mean it is proposed, there is 
something like 14 LNG terminals pending before FERC. If that 
happens, and if we get to the level of exports that people are 
now talking about, it will affect prices in the United States. 
I think we will be giving away one of our substantial 
advantages that we have over the rest of the world that has 
been brought about by the shale revolution.
    Finally, Mr. Kelliher, the question I wanted to ask you is, 
and you put a term into our lexicon that, I think, we should 
all think about, the 12 days. You mentioned the 12 days. That 
is that peak period when the gas supply into New England was 
not adequate. What would you do about the 12 days if you were 
head of ISO or czar of New England?
    Mr. Kelliher. Thanks.
    If I were king of ISO, I would, I mean, I think their 
planning has shown that the correct economic solution is more 
dual-fueled capacity. So, burn fuel oil on those 12 days. It's 
more expensive than natural gas, except it's not during those 
12 days. That's what the approach of New York is. New York has, 
relies much more heavily on dual-fueled generation than in New 
England.
    My understanding ISO New England has pointed out that more 
dual-fueled capacity actually is the economically correct 
approach. But they've also pointed out, it's an approach that's 
resisted by the states in the region. They don't want to 
license dual-fueled facilities.
    So, ISO New England----
    Senator King. Dual-fuel and storage, traditional storage 
with LNG coming in?
    Mr. Kelliher. Yeah, it's, sort of, maybe, the same level of 
LNG coming in but more dual-fuel facilities so that during 
those 12 days, you're not buying the most expensive gas, you're 
burning fuel oil that you already have in hand onsite.
    Senator King. Demand response might have a role?
    Mr. Kelliher. Sure, yeah, yeah.
    I think ISO New England has done a very good job 
encouraging demand response and I think they've, I would 
commend them for pointing out dual-fuel is the economically 
correct approach but that the states oppose it so they're left 
with the next best alternative and that's----
    Senator King. Well, I know it worked. I know it happened 
this winter, because I walked to the shore in my home town of 
Brunswick and saw on the horizon the Cousins Island oil plant 
emitting, you know, you could see something coming out of it 
and I don't think it had run for 10 years, but it was running 
in January because of that very issue.
    Well, thank you very much. This has been a very informative 
hearing.
    Mr. Hoecker. Senator, could I interject?
    Senator King. Yes, sir.
    Mr. Hoecker. I thought your point about EVs, electric 
vehicles, is a very good one and I agree completely with you 
that----
    Senator King. You can always interrupt to say you thought a 
point I made was a very good one.
    [Laughter.]
    Mr. Hoecker. Yes.
    Senator King. Perfectly okay.
    Mr. Hoecker. Well, I would have interrupted more often 
then.
    [Laughter.]
    I think that it will drive expansion of the distribution 
systems and the high voltage systems. We're doing a study this 
year that will explain that relationship.
    But I don't think it's fair to say that there is excess 
capacity on the grid everywhere. I think, it's like saying 
there's excess capacity on certain stretches of the interstate 
highway system. The fact is that it's an integrated network and 
that is its primary benefit. Some places it's very congested 
and needs to be upgraded or expanded. In other places, it's 
nonexistent. I mean, a lot of the renewable energy that is 
locked up in your state and in the Great Plains has no market 
because there's no delivery capability.
    So I think it has to do with the unique nature of the 
integrated network, and I'm glad we're using that word because 
is really what we're talking about. That doesn't mean that all 
transmission that can be conceived by the mind of man needs to 
be built, but it does mean that we need to use it as a lever--
--
    Senator King. Sure.
    Mr. Hoecker. ----to get to a different energy economy.
    Senator King. Thank you.
    Thank you very much. I appreciate it.
    The Chairman. Senator Cortez Masto, any follow-up?
    Senator Cortez Masto. No.
    The Chairman. Well, I just will end, since we have two 
former Commissioners of the FERC with us today and we know 
we're going to have this opening coming up.
    I would ask you if you have any words of advice in terms of 
characteristics that we might want to be looking for in a 
prospective nominee?
    Mr. Hoecker. Well, that's a very tough question. I've long 
advocated that the members of the Commission should include 
some seasoned economists, industry engineers, not just lawyers, 
as much as I love lawyers, but I think that those diverse 
skills have served the Commission well in the distant past, and 
I think that would be a good idea.
    I think, basically, you want somebody with a kind of 
judicial temperament, someone who doesn't have a particular axe 
to grind who can make independent decisions.
    The Chairman. More and more it seems that they need to come 
with a crystal ball, but Mr. Kelliher, what would you advise 
that we look for in terms of characteristics?
    Mr. Kelliher. I think they need someone who is comfortable 
with criticism.
    [Laughter.]
    Someone who is not, doesn't, that doesn't scare them, that 
prospect doesn't scare them, someone who is independent by 
temperament, someone who will follow the record, and someone 
who will actually try to work with their colleagues. I think 
FERC has a long history of that, but only up to a point.
    I mean, it's not supposed to be 5-0 on everything. It's 
okay to dissent, but you should try to work out a reasonable 
compromise with your colleagues. Four is a scary number, 
because four has the tendency to divide evenly sometimes.
    Hopefully the Administration will be relatively quick 
nominating someone who is independent, willing to take 
criticism for the correct decision, and will try to work toward 
compromise but dissent when necessary.
    When I dissented, I always considered it a personal 
failure, because that meant I was right, of course, but I 
failed to persuade my colleagues.
    [Laughter.]
    It was a failure of persuasion, so I was always sad about 
dissenting.
    Mr. Moffatt. Senator, if I might?
    The Chairman. Mr. Moffatt.
    Mr. Moffatt. As someone who has $35 billion of regulated 
assets, what are we looking for in terms of our regulator?
    I think it would benefit, not so much for the economist, 
but people who understand capital markets, including how we 
raise equity, and how we raise debt.
    People who understand some of what we've seen recently with 
the Commission's order, the market surprise and market 
reaction, and the potential for decisions at the Commission to 
make the sector either very costly to finance or one in which 
we're having difficulty attracting equity and debt. That's very 
problematic. So, I think we have to focus less on a 
politician----
    The Chairman. You're talking about tax----
    Mr. Moffatt. ----and more on people that understand capital 
markets informing capital.
    The Chairman. Yes.
    Mr. Murchie.
    Mr. Murchie. Yeah, I didn't put him up to that.
    [Laughter.]
    So yeah, in considering the answer to that question, I 
guess our vote would be someone with a lot of experience, 
because if you had a lot of experience, then you've been doing 
it long enough to understand that there are capital market 
consequences to the optics of decisions.
    It's one thing for us to make portfolio decisions based on 
knowledge of the companies, the industry, the management teams, 
but the movements of capital within our $6 billion portfolio 
are minuscule compared to the movements of money in and out of 
sectors by individual investors who are getting their 
information from the six o'clock news. The optics of how these 
decisions are communicated are just as important to those 
people and the way they move capital around is the underlying 
substance.
    The Chairman. Yes, I appreciate that.
    We will have an opportunity to be reviewing whomever may be 
sent forward, but I appreciate your insight on that.
    We are doing a lot of talking right now about nominees at 
different levels and different capacities, and I think about 
the role of the FERC and the significance of the decisions that 
come out of the Commission on our overall, just our overall 
national economy, the impact on jobs, the impact on really, our 
ability to engage in any level of commerce. And it is so 
important that we get these policies right. But in order to 
help develop, shape, and advance them, we have to have the men 
and the women that are in place.
    Senator Hoeven, I have been filibustering waiting for your 
arrival.
    [Laughter.]
    Knowing that it was imminent.
    We have had a very good discussion with a great panel here 
this morning talking about our infrastructure, whether it is 
our pipeline, our electric transmission, just had a little bit 
of a discussion about the upcoming vacancy on the FERC and the 
need for somebody that has experience, that has some 
understanding of the markets overall and who has a strong 
backbone and is not afraid of a little criticism.
    We are pleased that you were able to make it over from your 
other committees to share your issues and concerns with this 
panel. I will now turn to you.
    Senator Hoeven. Thank you, Madam Chairman, I appreciate it 
very much, and I know you are wrapping up. I appreciate the 
patience and the diligence of all of our witnesses today.
    It is such an important issue and, you know, how do we 
bring people together on this whole issue of interstate 
transmission whether it is natural gas pipelines, whether it is 
oil pipelines, whether it is transmission lines.
    We have gotten to the point now where whether you are a fan 
of traditional energy or renewable energy, we all have to work 
together because we have to get the energy from where it is 
produced to where the consumers are.
    Then we also have the issue of federalism, state's rights 
and then the Federal Government's ability to have the national 
infrastructure and really, international infrastructure, that 
we need.
    I guess I would just like each of the witnesses to give me 
their thoughts in terms of the one or two things that we can do 
to really get this issue moving in terms of getting that public 
support in place so that we can go ahead and build this needed 
infrastructure.
    Let's start with you, Mr. Moffatt.
    Mr. Moffatt. Thank you, Senator.
    One area that we haven't touched on today are landowners 
that we impact and communities that we impact as we try to 
build, particularly linear, infrastructure.
    I think that for the interstate pipelines we're working 
very hard on making sure we understand what our guidelines are 
on landowner rights and how we interact with landowners and 
abutting landowners and communities diligently, consistently, 
and honestly. In building a linear project we're going to be, 
we're going to go through this process for seven years, even in 
the best case, from the time we stake the right-of-way until 
the time we reclaim it. So we have to build that relationship 
with landowners which I believe we do.
    Nobody really likes a project in their backyard and with 
social media, the noise, I believe, is louder than people 
realize. We've had, over the last ten years on our interstate 
projects, over 4,000 different land agreements with landowners. 
Only 141 have gone to condemnation and compensation. Every one 
else has been negotiated. It's over time they gain more 
information. We gain more information, but from our standpoint 
the process reasonably works, if the regulators want it to work 
and, you know, it's a political issue, state and local, but for 
the most part I think it works well if we all cooperate and we 
do talk.
    Now I know with Nebraska you've had some other 
circumstances with Keystone XL for a long time. I was 
representing TransCanada, so I lived some of those battles 
before joining Kinder Morgan. Some of that, that's politics and 
other policy issues which I don't know how you resolve given 
what you mentioned about federalism and state's rights.
    Senator Hoeven. Seven years, realistically that is what it 
is now.
    Mr. Moffatt. Right.
    Senator Hoeven. Do you see that----
    Mr. Moffatt. Yeah, because if you want to just stick 
around, really quickly, we'll see a market dislocation where 
added infrastructure might work. We will then analyze the 
engineering and the routing and what the constructability is of 
the project, then we go try to find people who are willing to 
sign contracts to pay for it, then we have to develop the 
resource reports, go through the various procedures at a 
commission and under any set of guidelines can be two years--
then it's usually two years of construction and one year of 
reclamation of the right-of-way. So it's a seven-year process, 
even in the best case and that's with everybody moving 
diligently.
    Senator Hoeven. That is pretty sobering, isn't it, when you 
say it is seven years in the best case for needed energy, to 
move energy around the country. Think if somebody's got a 
problem today, and they need energy.
    Mr. Moffatt. Yes.
    Senator Hoeven. You come in and say, best case scenario, we 
can maybe get you some transportation and transmission built in 
seven years.
    Mr. Moffatt. In the intrastate market, we can probably do 
it in two years.
    Senator Hoeven. Other thoughts on that? This is the issue 
and it is a very, very important pressing issue.
    Mr. Murchie. So, picking up where Mr. Moffatt left off on, 
you know, landowners and why do we have the right of eminent 
domain when a gas pipeline gets approved.
    From our perspective, perhaps the role of regulators and 
government is to fix market failures, market imperfections. And 
the three that were, sort of, discussed today were 
diversification of energy as a separate goal, obviously, the 
cleanliness of it and the provision of reliability in surplus 
capacity. You could argue that those three things are market 
failures, that the free market would not come up with on its 
own.
    Everybody always argues that we should have an energy 
policy, but it's really because they have an axe to grind on an 
export or something like that. But if there is an energy 
policy, maybe it should be directed only to those things where 
the market fails. Maybe those three issues would go a long way 
to getting people to understand that, you know, while their 
land is being taken, it's being taken for a greater good, just 
like it is with a highway. Perhaps that's where the debate 
should focus on where the market failures are because that's 
the role of policymakers and regulators.
    Senator Hoeven. Sir?
    Mr. Hoecker. Senator, you know, to me this is a leadership 
issue and not necessarily a knowledge issue.
    We have studies coming out yesterday from the Energy 
Information Administration on the benefits of HVDC, big HVDC 
projects. NREL, the National Renewable Energy Lab, is just 
about to release a study on building transmission across major 
market seams. We've talked about electrification of the economy 
this morning.
    But all of these things are a lot of experts talking to 
each other. And you point out something that's really quite 
important and that is that in order to bring states along, in 
order to have a collaborative effort, in order to reassure the 
public that what we're talking about when we talk about 
infrastructure is not anti-environment, in fact, it's, at least 
as far as transmission is concerned, it's the other way around.
    That requires setting some goals, talking about what the 
grid needs to become, where we need to go and having 
policymakers and folks like yourselves but also FERC and the 
Secretary of Energy beginning to articulate what the grid of 
the future, what the energy market of the future needs to look 
like and why we need to invest in it.
    Senator Hoeven. Thank you----
    I beg the indulgence of the Chair. I apologize for running 
over.
    Mr. Kelliher. On the gas pipeline side, I think some 
actions that could help would be FERC to reaffirm its gas 
certificate policy statement they're conducting or review. They 
should basically reaffirm that policy, I believe. There might 
be a need for, some changes might be appropriate, but basically 
reaffirm their certificate policy statement.
    One issue on the gas side is the FERC process does take 
longer than it used to. The FERC pipeline certificate process 
used to routinely take two years, now it takes three years. The 
Chairman has identified time limits as being important to him, 
so hopefully FERC could get back to more of a two year 
timeframe, rather than three.
    In terms of other federal agencies, that does result in 
some delays in pipeline construction operation. If those 
agencies have legitimate resource concerns, like basically, 
they don't have enough resources to act in a more timely 
manner, there's a model in the FERC hydro side where other 
federal agencies can recover the cost of work they've done in 
the hydro licensing/relicensing case through FERC. So, if they, 
if the reason they're slow is lack of resources, there's a way 
that those costs could flow through FERC and be allocated 
toward all pipeline licensees.
    We talked earlier about how some states are using their 
clean water act authority, perhaps improperly, to impose 
conditions on related to water quality. We talked about some 
ideas where legislatively or through EPA guidance, that could 
be checked.
    On the electric side, I can't come up with as long of a 
list, but the biggest one would be for FERC to clarify its 
policy on return on equity so that you know what you're going 
to get when you invest in transmission.
    And part, the ownership is so different of the electric 
grid and the pipeline network. You basically have 20, 30 large 
scale, for profit corporations that have large networks on the 
pipeline side. On the electric side, you have more than 400 
owners, very few of them have even a regional, kind of, scale 
system, a third of the grids owned by non-profit entities, 
government utilities and cooperatives. So you have hundreds of 
hands yanking the levers on really what are large regional 
machines. It's hard to see that you'll ever have the siting be 
as timely on the electric side as the gas side.
    If I told someone who builds electric transmission that we 
were crying, but I was crying here today about a three-year 
FERC siting process, they would laugh in my face----
    [Laughter.]
    ----and say, I'll take that tomorrow for transmission. And 
transmission siting is done not at the federal level, but at 
the state and local level. Some states every single local 
government sites a transmission line. There's not a state 
siting body.
    Senator Hoeven. Madam Chairman, it really is a rubix cube, 
isn't it?
    I mean, we want to find solutions here, but it is 
complicated. You bring up real issues that we need to address 
the challenges because of the complexity of how we do that.
    So, thank you so much.
    Again, I really want to thank the Chair for her patience, I 
appreciate it.
    The Chairman. No, thank you, Senator Hoeven, for the 
question and I think it really does hit to so much of what we 
are dealing with. We are trying to anticipate what we need to 
build to, we need to address the immediacy of the needs today, 
sometimes the crisis needs today. There is no real silver 
bullet here, to go back to Senator King's analogy, maybe some 
silver buckshot out there, but it is complicated.
    But to hear just from the FERC regulatory process, we have 
gone from an expectation that it is going to be a two year 
process to just automatically, it is going to be three. It 
seems to me that there are some areas that we can look to very 
directly and say, there has to be a better way.
    Thank you for shining the light on some of these very, very 
important issues. We clearly have a lot of work to do, and we 
will be working together.
    Thank you, gentlemen, for the time that you have given the 
Committee. If members have additional questions that they might 
want to submit to you for the record, you should anticipate 
those as well.
    Thank you very much.
    With that, the Committee stands adjourned.
    [Whereupon, at 12:03 p.m. the hearing was adjourned.]

                      APPENDIX MATERIAL SUBMITTED

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